Committee Reports::Interim and Final Reports - Appropriation Accounts 1985 & 1986::09 March, 1989::Report

16 Meitheamh, 1987:—Ordaíodh: (1) Go ndéanfar, de bhun Bhuan-Ordú Uimh. 130 de na Buan-Orduithe i dtaobh Gnó Phoiblí, an Coiste um Chuntais Phoiblí a cheapadh; agus

(b)na Cuntais Leitreasa maille le tuarascáil an Ard Reachtaire Cuntas agus Ciste don bliain dar críoch an 31 Nollaig 1985 a chur faoi bhráid an Coiste chun iad a scrúdú agus tuarascáil a thabhairt orthu.

25 Meitheamh, 1987:— Ainmníodh Coiste dar comhaltaí na Teachtaí Gabriel de Mhistéal (Cathaoirleach), Micheál Ó hEachtairn, Áine Ní Cholla, Ciarán Ó Crothaigh, Nollaig Ó Díomasaigh, Bárra Deasún, Donncha Ó Foghlú, Liam Ó Haoileáin, Seán Ó Ceallaigh, Micheál Ó Ceit, Cathal Mac Riabhaigh agus Liam Ó Neachtain.

17 Nollaig, 1987:— Ordaíodh: Go ndéanfar, d'ainneoin Bhuan-Ordú na Cuntais Leithreasa, maile le Tuarascáil an Ard Reachtaire Cuntas agus Ciste don bliain dar críoch an 31 Nollaig 1986 a chur faoi bhráid an Coiste chuniad a scrúdú agus tuarascáil a thabhairt orthu.

4 Feabhra, 1988:—Ceapadh an Teachta Breandan Mac Gaothin in ionad an Teachta Seán Ó Ceallaigh, a scaoileadh den Choiste.

2Meitheamh, 1988:— Ceapadh na Teachtai Chríostóir Ó Maolthuille agus Máire Ní Áirne in ionad na dTeachtai Liam Ó hAoileáin agus Áine Ní Cholla, faoi seach, a scaoileadh den

ORDERS OF REFERENCE

16 June, 1987:—Ordered: (1) That, in pursuance of Standing Order No. 130 of the Standing Orders relative to Public Business, the Committee of Public Accounts be appointed; and

(b)the Appropriation Accounts, with the Report of the Comptroller and Auditor General Thereon, for the year ended 31st December, 1985 be referred to the Committee for examination and report.

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

17th December, 1987:— Ordered: That, notwithstanding Standing Order 130, the Appropriation Accounts with the Report of the Comptroller and Auditor General for the year ended 31st December, 1986, be referred to the Committee of Public Accounts, which was established by order of Dáil Éireann on 16th June, 1987, for examination and report.

4th February, 1988:— Deputy Brendan McGahon appointed in place of Deputy John Kelly, discharged.

2th June, 1988:— Deputies Chris Flood and Mary Harney appointed in place of Deputies Liam Hyland and Anne Colley, respectively, discharged.

INTERIM REPORT

The Committee has made progress in the matters referred to it and has agreed to the following Interim Report:—

The Committee reports that during the year ended 31 December, 1986 expenditure in excess of the amount voted by the Oireachtas was incurred under the Vote hereinafter mentioned.

STATEMENT OF EXCESS

A statement of the sum required to be voted in order to make good an excess on the Vote for Environment.

The sanction of the Oireachtas will be required in respect of the sum set out in column (6). The excess is due to the deficiency in Appropriations in Aid realised. This deficiency arose because of the failure of the Electricity Supply Board to pay to the Department of the Environment the full contribution in lieu of rates as required under Section 7 of the Electricity (Supply) (Amendment) Act, 1982.

FINAL REPORT

OBSERVATIONS OF THE COMMITTEE OF PUBLIC ACCOUNTS

Since the publication of the Report on the 1985 and 1986 Appropriation Accounts the Committee has considered the minutes of the Minister for Finance on its reports on the Appropriation Accounts for 1982, 1983 and 1984 and wishes to make the following comments:—

1.MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE APPROPRIATION ACCOUNTS, 1982–1983

The Committee would like to be informed as to the likely date for publication of the draft legislation on the future role of the Comptroller and Auditor General and the Public Accounts Committee.

The Committee request that where it becomes necessary to issue a letter conveying a Minister's intention to approach the Oireachtas for authority to give a financial guarantee the Comptroller and Auditor General should be consulted in advance of such action.

The Committee do not consider that significant improvements have been made to the Bovine T.B. scheme. The Committee will therefore be conducting further, more detailed enquiries into the economy, efficiency and effectiveness of the scheme.

The Committee considers that these tendering and contracts procedures should also apply to State Agencies, other than Government Departments.

The Committee would like to be advised of the current position in regard to internal controls over spending by Vocational Education Committees.

The Committee would like to be informed in detail of the outcome of the enquiry into the operations of the Office of Public Works.

The Committee would like to be informed of the outcome of the consultations with the Attorney General's Office.

2.MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE APPROPRIATION ACCOUNTS, 1984

The Committee would like to be informed of the safeguards which are now in place to prevent a recurrence of this problem.

CUID I—NÓTAÍ GINEARÁLTA

MEABHRÁN ÓN AIRE AIRGEADAIS DAR DÁTA 27 IÚIL, 1988 AR TUARASCÁIL ÓN GCOISTE AR NA CUNTAIS LEITHREASA DO 1980 AGUS 1981

1.Ós rud é gur foilsíodh na Cuntais Leithreasa do 1980 agus 1981 tamall maith ó shoin, tógann an Coiste, ag an bpointe seo, nóta den mhéid atá ráite ag an Aire Airgeadais sa mheabhrán thuasluaithe i dtaobh na gcuntas sin.

Ba mhaith leis an gCoiste eolas a fháil ó am go ham ar na hábhair luaite sa Tuarascáil nach bhfuil chríochnaithe fós agus, cibé scéal é,beidh sé de cheart ag an gCoiste tagairt a dhéanamh arís do na hábhair seo nuair a scrúdófar Oifigigh Chuntasaíochta amach anseo.

PART II — APPROPRIATION ACCOUNTS 1985 & 1986

LOCAL GOVERNMENT AUDIT SERVICE

Arrears of audit in bodies audited by the Local Government Audit Service

2.The bodies which are audited by the Local Government Audit Service — a division of the Department of the Environment are mainline local authorities such as city, county and urban district councils and other authorities such as Health Boards, Vocational Education Committees, harbour authorities, County Committees of Agricultural and other miscellaneous bodies. In the course of examination of the Accounting Officers for Environment, Health and Education, the serious position in the arrears of audit of these bodies' accounts was again discussed. A statement submitted subsequently by the Department of Finance in February 1988 showed that only 18.58% of the bodies concerned had their accounts audited for the year to 31 December 1986 and over 50% had, at best, accounts audited to 31 December 1984 only. Two Vocational Education Committees namely, City of Dublin and County Monaghan had their accounts audited to 1981 only. This clearly is an unsatisfactory situation. The Accounting Officer, Department of Health, in a note submitted subsequent to his appearance before the Committee, stated that the target is to have health board accounts available for audit within six months of the relevant financial year and to have certified audited accounts available for presentation to the Oireachtas within a further six months. The Committee agrees that this is a desirable target. It also agrees that the practice of carrying out multiple audits i.e. two to three years' audit at the one time, is unsatisfactory but recognises that it is one way of coping with the build up of the arrears consequent on the reductions in staff numbers in the Local Government Audit Service as a result of the embargo on staff recruitment in the Public Sector generally. However, it is not a solution which is acceptable in the long-term and the whole problem has to be tackled without further delay.

The Committee in its review of the role of the Comptroller and Auditor General and the Committee of Public Accounts on which it reported in May 1988 also discussed the position of the Local Government audits in detail and made certain recommendations in the Report. The Committee is also aware of the work of the Interdepartmental Committee which is examining the operation of the Local Government Audit Service. The Committee discussed the first Interim Report of that Committee with the Secretary, Department of the Environment who confirmed that the Government has agreed to the redeployment on a temporary basis to the Local Government Audit Service of five additional suitably qualified staff in order to eliminate audit arrears within three years. The Committee welcomes this move although it has reservations about the temporary nature of the redeployment and it emphasises that it is but one of the steps which need to be taken to improve the position. It will continue to monitor the progress being made in clearing the arrears.

The Secretary, Department of the Environment confirmed that the practice of 100% transaction checks by some auditors still prevailed but the Committee repeat that this is not in keeping with modern audit practice and is inconceivable if arrears are to be eliminated and future audit work completed on a timely basis.

It awaits with interest the final Report of the Interdepartmental Committee and its recommendations on the wider issues which need to be tackled.

SOCIAL WELFARE

Overpayments of Invalidity Pensions

3.The Comptroller and Auditor General drew attention in his 1985 Report to overpayments of Invalidity Pensions totalling £33,648 which had been discovered up to the date of his report. The overpayments arose because books of warrants had been issued for the payment of pensions at higher rates than the claimants were entitled to. This error should not have arisen if the departmental procedures governing the issue of pension renewal books had been adhered to viz. that a comprehensive review of Invalidity Pension files be undertaken prior to the issue of the books in order to ensure that they are issued only to those entitled to receive them and that payment is being made at the appropriate rate.

The Accounting Officer told the Committee that substantial checks carried out after the date of the Comptroller and Auditor General's Report revealed practically no further overpayments so that the total overpayments was £34,000 approximately involving 200 pensions out of a total of some 200,000 pensions. The errors arose at a time when the system was being computerised and were mostly due to a misfiling of stencils which were used to impress the claimants' names and addresses on the claimants' pension books with the rate of payment in each case being determined by the location of the stencil in the filing system. The staff, some of whom were inexperienced due to a high turnover at clerical level, were under a lot of pressure due to the computerisation and there had also been a delay in getting new pension books from the printers.

The Committee feels that in the changeover to the new system, as well as the usual procedural checks being necessary in the issuing of new pension books, extra precautions should have been taken to ensure the correct transfer of data from the manual to the computerised system as the possibility of error was high when consideration is taken of the number of pensioners involved. While it has sympathy with the Department because of the high turnover of staff, it feels that the extra precautions were not taken. The Accounting Officer told the Comptroller and Auditor General that the overpayments were being deducted from on-going weekly pensions but if there is any overall loss involved the Committee would like to be informed.

Use of computerised facilities for cross-checking purposes

4.In paragraph 52 of his 1985 Report, the Comptroller and Auditor General was concerned that a computerised facility which had been made available at certain local employment exchanges was not being used to cross-check and verify certain information regarding child dependants supplied by claimants seeking unemployment benefit and unemployment assistance with information held on the Department's computer at headquarters. The Accounting Officer had explained to the Comptroller and Auditor General that there were some technical difficulties which prevented the extensive use of the computerised facilities to verify details in this way. Besides, he told the Committee that the terminals were essentially intended for use by information officers only who would be in a position to answer inquiries from claimants who called in with particular queries. The terminals were not intended initially for cross-checking purposes as envisaged by the Comptroller and Auditor General although they would have been available for this if it was felt that there were suspicions concerning information supplied by a claimant and it could be done without interfering with the primary purpose for which they were intended.

The Accounting Officer stated in his response to the Comptroller and Auditor General and in evidence before the Committee that his Department considered that the only effective approach to verifying information supplied by claimants in these circumstances was to develop a system which would provide automatic computerised cross-checking of such information and this had to await full computerisation of the employment exchanges. The manual cross-check facility was now available in most Dublin offices but the Accounting Officer felt that the total answer was the automatic facility.

The Committee recognises the extent of the computerisation programme in the Department of Social Welfare and the magnitude of the task facing the Department. It recognises that the extent of the progress made towards full computerisation can be achieved only as the available resources permit and that this can also be disrupted through loss and shortage of experienced and skilled staff. Despite these handicaps, optimum use should be made of the facilities which are in place. Computerisation should be a help rather than a hindrance in the administration of the Department and, while the Committee appreciates the advantages of automatic computerised cross-checking, in the absence of this, the need to cross-check details submitted by claimants which might arouse suspicion should not be lost sight of because of the absence of an automatic system.

Irregularities in Employment Exchanges

5.Serious irregularities involving very large cash defalcations at three employment exchanges were reported on by the Committee in its Report on the Appropriation Accounts for 1982 and 1983. The 1985 Report of the Comptroller and Auditor General drew attention to further defalcations which the Accounting Officer told the Committee occurred in three employment exchanges — Cork, Limerick and North Cumberland Street, Dublin — and totalled £75,000. The Comptroller and Auditor General reported that the defalcations took place on a regular basis over a considerable length of time and involved the creation of fictitious UB or UA claims by employment exchange staff and the falsification of weekly lists sent from the employment exchanges to the Department and resulted in the payment of cash at the exchanges. Ten officers were involved of whom eight were in North Cumberland Street employment exchange. The irregularity in North Cumberland Street was discovered by investigations. When the first case was discovered, a thorough examination was carried out on all aspects of the work resulting in the discovery of the other cases. In Cork, the case was discovered by normal internal checking and in Limerick the one case came to light through the checks of the internal administrations section from headquarters. The internal administration section carry out general inspections as a regular matter in all 47 employment exchanges about once every two years but, on top of that, spot checks would be carried out in any case where there was reason to have suspicions of any sort.

The Accounting Officer told the Comptroller and Auditor General that managers of local offices were reminded of the importance of anti-fraud measures and had been directed to carry out certain procedures including weekly random checks of UB and UA claims. He admitted that local offices were under pressure because staff increases had not matched increases in the live register in recent years but that the number of staff responsible for carrying out inspections had been increased since the detection of these irregularities.

As a further measure to incorporate stricter controls, the Accounting Officer told the Committee that the number of employment exchanges particularly in the Dublin area was being increased because many of the present exchanges had become hard to manage with the huge increase in the live register. The policy was to reduce and make more manageable the amount of business for which managers were responsible. Local offices in Dublin increased from 4 in the early years to 13 at present and there was plans to increase this by building 3 more in the short term.

Total internal fraud in the Department in the years 1980 to 1987 including the above cases amounted to something in the region of £250,000. In the light of the number of staff employed, the number of transactions carried out each week and the amount of cash which flows through the system, the incidence of fraud is small but the Committee, nevertheless, must express concern that it happened. Constant vigilance is required to detect any possible future attempts at fraud and the continual carrying out of the prescribed checking procedures is an essential part of this vigilance.

Arrears of Social Insurance Contributions

6.The Department of Social Welfare is responsible for the recovery of arrears of contributions from employers who failed to comply with the provisions of the Social Welfare Acts prior to the introduction of the PRSI system in 1979. When all other avenues have failed, the recovery of out-standing monies is pursued through civil actions in the court. The Accounting Officer told the Committee that there were still over 300 cases outstanding and admitted that, because these were the more difficult cases, the process of recovery was taking a long time. The Accounting Officer agreed that the issuing by the courts of decrees in favour of the Minister for Social Welfare does not necessarily mean that the outstanding sums are collected.

The Committee wishes to impress upon the Department the importance of getting these cases cleared as the longer the cases drag on the more it reduces the chances of actual recovery.

Overpayments of Social Insurance and Social Assistance

7.The Committee noted that the net amount outstanding as at 31 December 1986 resulting from overpayments including fraud under the Social Insurance Scheme was £11.2 million and under the Social Assistance Scheme was £7.4 million. These figures represent a total net increase in overpayments under the two Schemes of £7.6 million since the Committee reported on the 1984 Accounts. Of actual overpayments recorded in both 1985 and 1986 which totalled £11.3 million, the Department attributed over £8 million to fraud or suspected fraud by claimants. The Accounting Officer said that these figures should be looked at in the context of the amount paid out by his Department each year, currently in the region of £2.7 billion involving 1.3 million claims. The Committee agree that total fraud detected as a percentage of total expenditure is small—only a fraction of one per cent — but when looked at on its own it is a large amount and the Committee would like to see it further reduced. Moreover, it is concerned that there is a significant degree of public disquiet that there is extensive abuse of the Social Welfare system and that the amount which the Department manages to detect does not by any means represent the full extent of the problem. It therefore urges the Department to make strenuous efforts to weed out abuse of the system by every means open to it.

With regard to the figures quoted at the outset, the Accounting Officer told the Committee that these figures represented an accumulation of overpayments since 1953 and that, whilst it was not possible at this stage to recover in many cases, there was no provision for the writing-off of these amounts.

The Committee agrees that there is no point in carrying forward ad infinitum amounts of money which have no hope of recovery and it recommends the introduction of some procedure which would allow for the writing-off of the non-recoverable amounts under these schemes.

Weaknesses in internal controls of a computerised system for the payment of unemployment assistance

8.The Committee notes the Comptroller and Auditor General's concern at what he saw as certain weaknesses in the internal controls of a newly developed computerised system for the payment of unemployment assistance in the 13 Dublin employment exchanges, the possibility of fictitious claims being introduced into the system as a result of these weaknesses and the Accounting Officer's response as reported by the Comptroller and Auditor General.

In evidence before the Committee, the Accounting Officer stated that this concern about adequate procedures and controls arose at a time when the Department was just starting to computerise the employment exchanges and the reference by the Comptroller and Auditor General to comprehensive instructions being drawn up without being issued to exchanges suggested that this was the cause of his concern on the matter. Computerisation of the work of the exchanges was a totally new experience for the staff of the offices and was dealt with by way of intensive training courses. These were a basic feature before the work of computerising any office started. At each training course staff were given training manuals which incorporated instructions for dealing with the new system. A liaison officer was appointed in each employment exchange to monitor the operation of the system as it started. When work started on computerisation in an employment exchange, staff from headquarters who were expert in the computerised system spent a lot of time there to ensure that exchange staff were familiar with instructions and so on.

With regard to fictitious claims, the Accounting Officer said that there was the possibility of setting up on the computer a fictitious claim and then destroying documents but they had now dealt with that. He said it should be appreciated that this was an ongoing process where a totally new operation was being set up that had never been tackled before. Revised manuals which incorporate up-to-date instructions were brought out and included among them was a provision whereby the liaison officer in each employment exchange would maintain a logbook which would show the logging-in of documents and logging-out of documents, so that a claim could not be generated and evidence destroyed — it would immediately come to light.

With regard to the comprehensive instructions, it had been hoped to have them issued by the end of 1987 but they were now completed and it was hoped they would be issued within a couple of weeks from the time of his examination. Suggestions made by the consultants who were carrying out the review of the Department's payments system would be taken on board.

POST-PRIMARY EDUCATION

Accounts of County Kilkenny VEC

9.The Committee referred in the first paragraph of this Report to the arrears position in the Local Government audits. The unsatisfactory position referred to by the Comptroller and Auditor General in his 1985 Report regarding shortcomings in budgetary and financial control procedures at County Kilkenny VEC could, to some degree, be attributable to the arrears in the audit of the VEC's accounts. For instance, in his 1985 Report, the Comptroller and Auditor General referred to the Report of the Local Government Auditor for 1980 and 1981 — a gap in reporting of four years — and during the examination of the Accounting Officer it was learned that the Local Government Auditor had only a short time before that issued his Report covering a period of four years, the earliest being for 1982 — a gap of almost five years. This is a very unsatisfactory situation and the Committee is in no doubt but that the shortcomings in controls highlighted by the Local Government Auditor could have been rectified much earlier if the audit reports were up to date.

The Comptroller and Auditor General told the Committee that his main concern in drawing attention in his Report to the shortcomings in budgetary and financial control procedures was that the Department of Education, whilst seemingly being made aware that County Kilkenny VEC were continually engaging in unauthorised practices which involved additional expenditure, was repeatedly giving retrospective sanction to the VEC to borrow money from the bank to finance this excess expenditure. The Comptroller and Auditor General continued that the Accounting Officer had told him that his Department was presented with fait accompli situations where the expenditure had already been incurred, the bank overdrafts has arisen and had to be met. More recently, the Department sanctioned overdraft facilities and in 1986 it was held at the minimum level necessary to avoid any difficulties in relation to salary payments for staff pending discussion with the VEC regarding the over-expenditure. This over-expenditure included payment to four teachers since September 1983, sanction for the appointment of which the Department had withheld because they were in excess of the teacher quotas, payment for minor capital works undertaken from time to time without proper authority and the employment of a second treasurer. In addition, a second bank account was opened, also without proper authority.

The Committee feels that the Department of Education and County Kilkenny VEC share equal blame in this situation. It is obvious that the Department's own controls were sadly lacking and that returns were not being monitored very carefully. It does also seem that the Department was relying on the Local Government Auditor to give a judgement on the matters rather than trying to solve the situation themselves as the Accounting Officer stated that it was a function of the audit operation to decide what payments were to be allowed or disallowed. The Committee cannot agree with this implied suggestion of onus being put on the Local Government Auditor. The Committee insists that the Department had a very obvious obligation in this matter and, if its own rules were broken, it would expect that the Department would take appropriate prompt action. This it would not appear to have done.

With regard to County Kilkenny VEC the Committee is disappointed that it should have got itself into a position where it ended up breaking the rules. If one VEC breaks the rules and gets away with it, other VEC's will be tempted to do likewise with a total breakdown in control ensuing. The Department of Education must be seen to be enforcing the rules laid down.

During the course of the evidence, the Comptroller and Auditor General told the Committee that the Accounting Officer had told him that full consideration would be given to whatever recommendations may be made by a consultative council which was set up in 1985 to examine the procedures for the allocation of funds to, and control of expenditure of, VEC's. As it was obvious from what the Committee heard that proper procedures in this area were sadly lacking and urgently needed, the Committee would welcome hearing whether the consultative council had reported as this did not become clear during the examination of the Accounting Officer in December 1987. If it has reported — and it would be disappointed if after this length of time it has not — it would also welcome hearing the response made to any recommendations it made.

With regard to County Kilkenny VEC, it wishes to be kept informed of progress made in the areas reported on.

Expenditure incurred prior to a decision not to proceed with the building of a proposed second level school

10.The Comptroller and Auditor General drew attention in his 1985 Report to expenditure incurred on the purchase of a site for a proposed second level school at Kilnamanagh, County Dublin and he informed the Committee that the Accounting Officer had recently told him that, following a review of post-primary accommodation in the greater Tallaght area, it was decided that this school would not now be needed and it was intended to dispose of the site. Total expenditure on the proposed project amounted to £248,639 including site costs and design fees and this would now have to be written off. In relation to two other sites purchased by the Department of Education which were also mentioned by the Comptroller and Auditor General, it was learned that a decision was taken to proceed with a school at Kingswood Heights, Tallaght and that this would cater for the pupils originally earmarked for the proposed school at Kilnamanagh. A decision was still pending on the site at Huntstown, Blanchardstown, County Dublin.

The Committee understands that a procedure exists whereby Dublin County Council designates sites for possible future post primary schools in areas which it proposes to develop. The Council then seek the views of the Department of Education on the matter of site suitability, number of sites to be developed, etc. In 1975, it was agreed between the Department and the Council that a site already identified by the Council should be reserved in Kilnamanagh for a second level school. From 1976 onwards, questions relating to the size, timing and need for a school on the site were periodically reviewed. By 1977, it was considered by the Department of Education that the school would be required for 1983. The site was purchased in 1979. In that year also, the Department of Education changed its view on when the school would be required — a later opening than 1983 was then considered more appropriate.

By 1980, doubts first emerged about the need for a school at all on the site. A major review carried out in the period 1981/82 gave cause for concern in that it showed that there was a large increase in surplus pupil capacity in the Greenhills/Walkinstown/Crumlin/Drimnagh areas. In spite of this, two successive Ministers for Education decided in 1982 that planning of the Kilnamanagh school should proceed. Following another review in 1983, this decision was reversed and the project deferred indefinitely on the grounds that there was adequate school accommodation available in adjacent areas and that the financial climate made a decision to proceed untenable. Following a period in which there was intense pressure for the provision of a school in the Kilnamanagh/Kingswood Heights area, a new school on the site at Kingswood Heights was approved in June 1987 and the proposed school for Kilnamanagh was to be cancelled altogether. It is the Department's contention that it was only then that it had ministerial approval to dispose of the Kilnamanagh site.

The Committee appreciates the difficulties associated with demographic forecasting particularly in the long term. It also appreciates that the final decision as to whether a school project goes ahead or not rests with the Minister of the day. However, it is not convinced that adequate demographic research was completed in the early days of the Kilnamanagh project especially when the Accounting Officer admitted in evidence that doubts first arose about the need for this development as early as 1980, only 1 year after the site was purchased. It will always be difficult to predict with complete accuracy the movements of families from one area to another particularly in a densely populated city like Dublin but the Committee, nevertheless, feels that, if adequate research had been undertaken, a trend in population movements might have shown up which would have obviated the need to proceed with the purchase of the site in the first place.

Another aspect of this case which struck the Committee was the apparent indecisiveness with which the future of the site/school was regarded. At the time of its examination of the Accounting Officer, the site was almost nine years in the hands of the Department before the decision to sell it was taken. As regards the sale of the site, the Committee will watch with interest to see if the Department recoups its total outlay on the now aborted project from the proceeds of the sale.

It would be unfair of the Committee if it were not to comment on the reduction in design fees and expenses negotiated by the Department on the abandonment of the project. The Department is to be commended in this regard.

Collection of examination fees

11.In drawing attention to the failure to collect from some post-primary school the fees for examinations held by the Department of Education, the Comptroller and Auditor General was concerned more with the fact that schools may be retaining fees actually paid over to them by students rather than with the necessity for the draconian pursuit of students who were unable to pay the fees due to hardship. The Comptroller and Auditor General pointed out that he had no way of establishing whether examination fees actually paid in by students were being held back in the schools. The Accounting Officer agreed that this was so.

In a submission afterwards, the Accounting Officer gave a detailed summary of the procedures involved in the submission of entries for examination and the collection of fees. The obligation for the collection of fees is placed on the authorities of post-primary schools. In order to reduce the hardship caused by fees in the case of necessitous pupils, the authorities can decide who should benefit from a fee alleviation scheme. This scheme, which is administered by the school authorities, provides for the allocation of funds to each school or VEC and is based on the amount granted to the school in respect of the scheme for free books for necessitous pupils. The Department says that this is the way it should be because the school authorities are in the best position to judge the extent of need.

The Accounting Officer admitted in his submission that his Department was satisfied that, where a shortfall in fees occurred, this arose because the schools were unable to collect the fees from particular candidates. The Committee is happy to know that the Department is continually examining the position in relation to fee collection so as to ensure that all fees due are received. It would not like schools to think, however, that the Department has no way of checking on whether fees actually received by them have, in fact, been paid over and, while the Committee has no desire to insist on checks which would add significantly to the work of the Examination Branch, it feels that occasional spot checks should be made particularly if a situation arises where the amount of claims for exemption under the fee alleviation scheme are well above the average.

Future of Scoil Ard Mhuire, Oberstown, Co. Dublin

12.The adequate protection of the Department's assets, in this case, a training school for boys in detention, Scoil Ard Mhuire in Co. Dublin — was the concern of the Comptroller and Auditor General when he drew the Committee's attention to the closure of the school with effect from 1 September 1988. He reported that the building had cost over £0.5 million to build in 1970 and an additional £350,000 approximately had been spent on renovations between 1981 and 1985. Much of the equipment acquired for the school had been distributed to other areas of special education and what remained had cost £19,500 but had a present day value of only £2,400. The Accounting Officer told the Comptroller and Auditor General that his Department had no long term plans for the use of the school. The future re-opening of such detention centres, he told the Committee, did not find favour in his Department as there are better ways of dealing with the problems presented by the type of boys who had been at Scoil Ard Mhuire by organising on a local basis. The Accounting Officer denied that the school had fallen into disrepair and said that, while the question of vandalism had been raised, the damage done amounted to less than £100.

Efforts were being made to dispose of the school either by handing it over to another Department or by putting it on sale on the open market.

The Committee strongly urges that this building should not be allowed to become derelict and unsaleable and it would like to see every effort made to dispose of it and recoup the State's high investment.

Aid from European Social Fund in respect of courses run by VEC's.

13.Losses in aid from the European Social Fund (ESF) and other related issues in respect of training programmes run by the VEC's were referred to by the Comptroller and Auditor General in both his 1985 and 1986 Reports.

(i)A loss of some £382,000 in aid from the ESF was reported on in 1985, sanction for the write off of which was accorded by the Department of Finance. This arose because claims submitted to the EEC in respect of CERT craft and management courses provided by 7 VEC's in the years 1979/80 to 1982/83 inclusive were underestimated and less than the actual costs of the courses.

The Accounting Officer had informed the Comptroller and Auditor General that, as it was necessary in accordance with ESF regulations to submit aid applications by September of the year preceding the commencement of programmes, estimated costs had to be submitted and were based on historical data without access to the financial data of the year immediately preceding the programmes.

The period in question was one of high inflation and escalating pay costs and it was difficult, therefore, to estimate the likely costs two years in advance. The Accounting Officer told the Committee that it was not something he was happy with but added that the money lost would have been claimed if the proper information had been available on which to present a case. He said that, if a claim was subsequently found to be understated, the EEC would not accept a revised claim. Every effort was being made, therefore, to ensure that there was no possibility of claiming less than was due.

The Comptroller and Auditor General was also concerned about the wide variation during the same period (1979/80 to 1982/83) in the per capita costs of these courses provided by the VEC's. The greatest variation — £620 to £2,751 — occurred in 1981/82 but it was extreme also in the other years. The Accounting Officer told the Comptroller and Auditor General that this may have been due to differing interpretations of procedures and/or different levels of fixed costs. His Department was concerned about such variations and had held discussions with the VEC's. Acute staff shortages made it difficult to audit all VEC's participating in ESF programmes but spot checks had been made.

In evidence before the Committee, he said that these variations could be explained by a number of factors — the difference in administrative costs depending on the size of the college, whether teachers were full-time or part-time, the size of the classes, the type of trainee. Despite all these factors, the Accounting Officer stated that he was still unhappy about the wide variation and, therefore, a cost accountant had been assigned to undertake investigation in the area. As the Committee itself was not satisfied with the explanations offered, it requested a detailed report on the results of this investigation.

In the report which was subsequently received from the Accounting Officer, it was pointed out that the per capita costs adverted to by the Comptroller and Auditor General were arrived at by dividing the number of participants in each centre into total apportioned expenditure on the programme. However, the report stated that the CERT craft programme was not a homogenous programme but was made up of a number of diverse courses, eight in all. Some of the courses required the full-time attendance of participants for the full academic year while others entailed attendance for one day per week only. The mix of courses varied from centre to centre and even from year to year in the same centre. Any comparison either of one centre with another in the same year or of one centre from one year to another, based on the per capita cost adverted to by the Comptroller and Auditor General, would be valid only where the range of courses offered was unchanged. Other factors which would have affected the per capita costs included the number of participants in each class group, the cost per teaching hour depending on the use of part-time or whole time teachers, different annual rates of pay, etc. Because of these circumstances, the report stated that these variations would not in themselves establish underclaiming or overclaiming for ESF aid. Similar variations had been adverted to in the past by the ESF authorities and they had accepted the explanations tendered.

The Committee is grateful to the Accounting Officer for this report which explains to its satisfaction the variations mentioned.

(ii)In his 1986 Report, the Comptroller and Auditor General was concerned with the failure by some VEC's to furnish returns to the Department before the expiry of the time limit for the submission of a composite claim to the EEC, thus resulting in a possible loss of aid; the necessity for the Department to submit to the EEC estimated costs of programmes resulting in what appeared to be overclaiming; the erroneous inclusion in the cost of programming of some student tuition fees paid to the VEC's by the Department and the apparent alteration of some claims for the purposes of irregularly maximising the claim for ESF assistance.

With regard to the returns by the VEC's, the Accounting Officer told the Comptroller and Auditor general that these returns were required during a period of major expansion of ESF programmes and associated works for the VEC's. The two VEC's who failed to make timely returns indicated that this was due to staff shortages and, in the case of one of the VEC's, where no return was made, the position was exacerbated by a strike during the period when the returns should have been prepared.

In the case of returns not submitted in time by VEC's, estimated costs were included in the final claim to the EEC as failure to submit expenditure figures prior to ESF deadlines would result in the loss of the aid and claims for excess amounts would not be entertained after the expiry date. When the returns were received in the Department, they were not examined in the Department due to pressure of other work and staff shortages. Final costs exceeded estimates to the extent of £528,817 in the case of five VEC's and were less than the estimates to the extent of £82,186 in the case of one VEC. Net understatement of cost was, therefore, £466,631. As the ESF grant is 55 per cent of the estimated or actual cost of each programme, whichever is the lower, the loss of aid related to this expenditure was £245,647, but this was partly offset to the extent of £68,300 aid inadvertently claimed in respect of tuition fees paid by the Department for certain students. In the case of one VEC, the estimate was higher than actual cost resulting in an overclaim of aid amounting to £5,937 which was being refunded to the EEC.

In the case of costs omitted altogether from claims, and which, as mentioned earlier, related to a VEC with staff shortages and where a strike had occurred, the Accounting Officer told the Comptroller and Auditor General that the potential aid lost as a result was £103,194.

With regard to the use by the Department of estimates rather than actual costs as stated by VEC's, the Accounting Officer said that an estimated amount of £173,004 was included even though an actual cost figure of £100,722 had already been received from the VEC. The return, however, had been received late and pressure of work in finalising the claim prevented the return from being immediately examined. Subsequently examination of the return meant that the actual costs were adjusted to £126,880 resulting in an overstatement of expenditure of £46,124. Against this, the Department offset an understatement of expenditure of £35,888 on the same programme operated by another VEC leaving a net over-statement of £10,236. Aid of £5,630 (55 per cent) was, therefore, being refunded to the EEC.

With regard to the alteration of claims by was of transferring costs between programmes, the Accounting Officer told the Comptroller and Auditor General that the major alteration involved the transfer of an amount of £612,259 between two programmes run by a VEC. He stated that the critical issue for the EEC in the acceptance of training expenditure for ESF aid was not the title of the programme but whether the training conformed to the terms of the approval and related guidelines under which the aid was being claimed. The programme titles were merely the Department's means of labelling and grouping training courses as a convenient method of identification for the purpose of claiming ESF aid for the approved type of training. It was for this purpose alone that courses were designated by the Department as part of a programme. It was on this basis that the transfer was made. He added that this particular claim was the subject of an examination by EEC officials in April, 1986 when they visited Dublin specifically for that puropse. The officials examined the back up documents in the Department on which the claim was based and also carried out an on the spot examination in the VEC concerned of supporting documentation for VEC costs included in the claim. Having satisfied themselves, they certified the claim for payment. In the case of another VEC, the Accounting Officer stated that alterations and errors by the Department and the VEC in the claims for aid for two courses would result in as further refund of aid of £4,905 to the EEC and a loss of £5,025 in potential aid. Department of Finance sanction was also being sought to write off this loss.

In evidence before the Committee, the Accounting Officer said that revised guidelines had been issued to the VECs and to schools about the completion of the forms on which they are required to furnish details of costs incurred on ESF programmes. Within the Department, some progress had been made by way of the use of computers to minimise margins of clerical error in examining claims. However, the section involved had suffered severely from staffing cutbacks and this would continue to cause problems, although the matter was being brought under control. In fact, all returns had been received on time in 1987 and pressure would continue to be exerted on VEC's to do so in future. In cases where the need for estimates arises, the Accounting Officer said that he would strive to ensure that these are more accurate and that any loss of aid would be avoided.

The Department of Finance official told the Committee that the difficulties which had occurred in this area were less than desirable and the Department of Education had been asked to tighten up. However, he said that the points made by the Accounting Officer about staffing were well founded. In addition, the work involved in processing claims was extremely complex. On a perusal of copies of the documents that schools and VECs have to complete in relation to ESF aid which the Accounting Officer made available to the Committee, the Committee agrees that the work involved, is not simple. Nevertheless, the Committee is concerned that problems should still be arising in the processing and prompt submission of claims for EEC funds and particularly as deficiencies in this area have been reported on by the Comptroller and Auditor General on a number of occasions in the last ten years or so. It is obvious to the Committee that a degree of looseness still exists in this area. It is vital that this be tightened up if further aid under the ESF is not to be foregone because the loss of aid in such circumstances is unacceptable to the Committee. The position will be monitored by the Committee.

Mechanism used by Department of Education to overcome shortfall in receipts from European Social Fund

14.The mechanism used by the Department of Education to overcome a shortfall in its receipts from the EEC Social Fund (ESF) which, in turn, affected the amount which the Department could issue from its Vote to the Vocational Education Committees (VECs) was the main point at issue in a paragraph in the 1986 Report of the Comptroller and Auditor General. According to the Comptroller and Auditor General, the mechanism was outside the scope of the legislation relating to the financing of VECs operations and outside the scope of the legislation regarding borrowing for Exchequer purposes.

The ESF provides assistance towards the cost of certain training courses provided by VECs. Payments from the ESF, whch are brought to credit as Appropriations-in-Aid and are matched by grants to the VECs from a separate subhead, were made up to 1984 on the basis of expenditure incurred during the academic year but a change by the EEC to a calendar year basis led to a deferment until 1986 of grant instalments which had been expected to be received late in 1985 and had, therefore, been provided for as Appropriations-in-Aid in the 1985 Estimate for the Post Primary Education Vote. The shortfall was of the order of £5.5 million.

Following consultation, the Department of Finance directed that the shortfall in Appropriations in Aid be met by withholding from the VECs amounts which would otherwise have been paid to them form the relevant Subhead thus achieving a saving on that Subhead which equated to the shortfall. In evidence before the Committee, a Department of Finance official said that, to overcome this temporary cash flow problem, each VEC was to use its powers under the legislation (in this case Section 49 of the Vocational Education Act, 1930) to borrow an amount equal to the funds withheld temporarily from it. He added that he was surprised at the mechanism subsequently used by the Department of Education to deal with the problem and that what happened was clearly a breach of the legislation. The Accounting Officer had told the Comptroller and Auditor General that, on the grounds of maintaining effective control over borrowings by VECs generally and to overcome the need for each VEC to separately raise a loan, the Department decided instead to authorise City of Dublin VEC and City of Cork VEC to borrow £4 million and £1.5 million, respectively, to be onlent to the Department of Education and credited to Subhead A2 from which full annual grants could be paid in 1985 to all VECs. The Department repaid the loans to the two VECs together with interest of £79,477 in 1986 and charged the amounts to Subhead A2 of the Vote for that year. A shortfall in Appropriations in Aid deriving from ESF assistance again arose in 1986 and a similar mechanism as in the previous year was used, whereby the Department authorised the City of Cork VEC to borrow £12,600,868 which, again, was onlent to the Department and credited to Subhead A2 of the Vote. The loan was repaid with interest to the VEC in 1987.

The Comptroller and Auditor General indicated that this action was questionable on a number of fronts. Firstly, each VEC had power under the legislation to borrow with the consent of the Minister for Finance only for the purposes of the Vocational Education Fund maintained by it. It appeared, therefore, that no statutory authority existed for the borrowing for on-lending to the Minister for Education by the two VECs referred to. Secondly, in borrowing from the VECs the money which they had raised at his behest, the Minister for Education did not act in accordance with the legislation regarding borrowing for Exchequer purposes as statutory authority for this was vested in the Minister for Finance only. Thirdly, as the Constitution provides that all Revenues of the State from whatever source arising be brought into the Exchequer, the crediting of the proceeds of borowings to Subhead A2 of the Vote was incorrect. Finally, the Comptroller and Auditor General said that if the VEC's borrowing itself was invalid, the subsequent servicing of that borrowing from the Vote was invalid as Dáil Éireann did not provide for the repayment with interest of borrowings by the Minister from the VECs.

In reply to the queries raised by the Comptroller and Auditor General, the Accounting Officer stated that in effect the receipts from the ESF now constituted an addition to normal sources of funding of VECs which for accounting reasons was not however channelled directly to them. He said that the aid was shown in the Estimates as Appropriations-in-Aid of the Vote for Post-Primary Education, with an equivalent amount being included in the gross estimate under the relevant subheads and, therefore, to the extent to which courses were aided by the ESF, they were not a liability on the Exchequer. If a shortfall in Appropriations-in-Aid deriving from the ESF occurred, the grants provided under Subhead A2, which were normally paid in full, would not be paid unless comparable savings could be achieved elsewhere on the Vote or a Supplementary Estimate was approved. This course of action would be justified where the shortfall was absolute rather than being due to a deferment of aid. In the instances referred to, the shortfalls were not seen as absolute as the ESF aid had been approved but the effect would have been to create cash flow problems and, in those circumstances, it was considered more appropriate to avail of the facility provided in the 1930 Act to authorise short-term borrowing by VECs to overcome the problem. However, rather than adjust the grants payable to every VEC (36 in all) and authorise each Committee to borrow an amount equivalent to the shortfall, it was decided that the most practical course from an administrative viewpoint was to adjust the annual grants payable to two large Committees in 1985 and one Committee in 1986 and to authorise these Committees to borrow the appropriate overall amount required to pay the ESF portion of the grants due to all Committees, the approved but unpaid ESF funding for all Committees when received the following year to be transferred to the Committees which had borrowed the funds.

The Accounting Officer acknowledged that in retrospect the procedure of concentrating the borrowing in one or two Committees was incorrect and outside the powers conferred on the Minister by the Act. He told the Comptroller and Auditor General that any breaches of the legislation were unintentional and that, notwithstanding what happened, the charge to the Vote in 1985 and 1986 and the funds available to the VECs were the same as they would have been had the transactions been properly arranged. He also said that steps had been taken to ensure that should this situation arise again borrowing, if it needed to be arranged, would comply with the legislation.

In summing up before the Committee, the Comptroller and Auditor General said that, if all VECs had borrowed to overcome temporary shortfall in receipts from the ESF, it would, strictly speaking, be within the scope of the authority of the Minister for Education to authorise that borrowing. However, he added that the more transparent way to have dealt with the problem would have been by way of Supplementary Estimate because the normal practice in a situation where receipts provided for in Estimates were not being realised was to have a Supplementary Estimate. The Committee agrees with the Comptroller and Auditor General in this latter regard.

On a general note, the Comptroller and Auditor General said that he had a perception that ad hoc administrative solutions to problems were beginning to creep into the system and that they seemed to be acceptable if they worked, irrespective at times of the terms of legislation. The Committee agrees that this is a dangerous and unwelcome practice and should be discontinued. Pragmatic or practical solutions which might be administratively convenient should not be countenanced at the expense of the fundamental principle of the terms of any legislation. In the Committee's view, that would weaken parliamentary accountability and control. The Committee suggests that the Department of Finance should remind all Departments that, in carrying out their financial operations, strict adherence to the terms of the relevant legislation is a fundamental principle to be observed at all times.

Accumulated deficits in Comprehensive and Community Schools

15.The Comptroller and Auditor General was concerned that the Department of Education's internal control procedures relating to the processing of information received from the 59 Comprehensive and Community Schools (whose full running costs are met by the Department) and the Department's monitoring of the schools' expenditure were somewhat deficient with the result that schools received special payments to clear their end year deficits. In making these payments, some schools were paid more than the amount they indicated they needed. Because of errors, the accumulated deficits of four schools at 31 December 1985 were overstated by £47,423 by comparison with the school records and this amount was included in special payments of £101,280 made to the schools concerned to clear their apparent deficits without establishing whether the deficits had been incurred or whether the expenditure was authorised. At the end of 1985, the Comptroller and Auditor General reported that the deficit of over £300,000 in 40 schools, represented expenditure in excess of authorised budgets which was being financed by bank overdraft, the interest on which according to the Accounting Officer was just under £20,000 in 1986.

The Accounting Officer told the Comptroller and Auditor General that some of this over-expenditure was, in fact, spent on legitimate school needs which would have had to be met later in any event and, to the extent that it was not met in that way, the later advances to the schools were adjusted. He said that the Department was at that stage involved in balancing the accounts of the various schools for 1986.

The Accounting Officer told the Committee that, if the Department, when retrospectively considering the expenditure which gave rise to the deficits, was not satisfied that any additional expenditure incurred should be charged to the Vote, it was by no means clear what powers were available to deal with such a situation. The boards of management had been repeatedly told that it was not permissible under any circumstances to undertake expenditure in excess of approved allocations and that they had no authority to finance such over-expenditure by way of overdraft, but the boards were very independent bodies and the Department was limited in any action it could take against them.

The Accounting Officer also told the Committee that, in practice, the Comprehensive and Community Schools operated very effectively. Their budgets were very tight and the fact that the Department had to accept excesses in these cases as being justified suggested that the Department's own controls were very strong over their financial arrangements.

New draft revised procedures had been prepared for keeping a check on the schools' running costs which the Accounting Officer was satisfied were along the right lines. However, further consultation within the Department and with the school managements was necessary before they could be put in place.

The Committee is concerned at the extent to which the boards of management have exceeded their authorised budgets and the lack of control which the Department seems to have in this issue. It accepts that boards of management should have a certain independence in managing their schools but it does not accept that this independence should extend to the point where the annual financial allocations given to schools can be ignored and exceeded on the mistaken presumption that the Department will have no option but to meet the extra costs eventually. The Committee would be very concerned if this attitude were allowed to prevail and breaches of financial allocations allowed to continue. It may be, as the Accounting Officer indicated, that the Department's own allocations to these schools are too tight and, indeed, the Committee recognises the need for adequate controls. However, if schools are accumulating deficits which can justifiably by shown to be legitimate expenditure and which would be so recognised by the Department, then it may be that the procedures need to be reviewed. If such accumulated deficits represented expenditure which was not legitimate, however, then the Committee would take a very serious view.

The Committee would like to be informed of any cases where the Department has a difficulty in charging to the Vote any of the accumulated deficits from the 1986 accounts of the schools.

The Committee has recently been informed that the revised procedures referred to by the Accounting Officer have now been put in place.

INDUSTRY, TRADE, COMMERCE AND TOURISM

Special Loan arrangement under Export Credit Insurance Scheme

16.The Committee has referred in previous reports to the Export Credit Insurance Scheme whereby exporters may insure against the risk of default in payment by foreign companies to the extent of 90 per cent of the value of goods exported by them on credit terms. The Comptroller and Auditor General drew attention to further losses arising on the operation of the scheme.

An unusual arrangement was entered into in a particular case when a Nigerian company defaulted in meeting payments due to an Irish exporter who subsequently lodged a claim for £1,918,500 (90 per cent of the amount defaulted on) in accordance with the terms of the Insurance Scheme. In the normal course of events, this claim would have been met by the Insurance Corporation of Ireland (ICI) making a payment to the exporter (The Insurance Corporation of Ireland acts as agent for the Minister for Industry, Trade, Commerce and Tourism in the operation of the Insurance Scheme). However, because the Nigerians, following negotiations, apparently agreed to pay the amount owed plus default interest on a rescheduled basis and also because of the impact the payment of such a large sum under the insurance scheme would have no premium rates in the future, the alternative method of payment was arranged. This arrangement involved a loan agreement between a bank, the ICI and the exporter whereby ICI whose expenditure would in due course be reimbursed by the Minister, guaranteed the repayment of and paid interest on £1,918,500 being 90 per cent of a loan provided by the bank to the exporter. In the circumstances, the loan arrangement seemed attractive as it was thought that it would only be a short-term loan in view of the rescheduling agreement with the Nigerian company.

However, the Nigerian company defaulted again on the payments, having paid only £512,394, and the claim was eventually met in the normal way when a payment was made from the Department to ICI.

The Accounting Officer told the Committee that negotiations were continuing in an effort to secure repayment of the debts but, at end 1987, nothing had been achieved. However, he was confident that, in the case of two amounts, promissory notes would issue from the company within a short period and that a further amount would be admitted for payment by the Nigerian Central Bank resulting in the issue of a further promissory note. Substantial repayments, therefore, were envisaged over the next number of years as the amounts covered by the first two promissory notes was $860,000 and in the case of the third was $730,000.

In a letter dated 16 May, 1988 to the Committee, the Accounting Officer said that his Department had since received a promissory note valued US $1,197,364 from the Central Bank of Nigeria and a first payment of US $14,936.20 (IR£9,265.77) due under this was received. Further payments were due on a quarterly basis. Efforts were continuing to secure outstanding promissory notes and final settlement.

The Committee notes the efforts being made by the Department to recover the significant amount of money in this case and the confidence of the Accounting Officer that this can be achieved. However, on the basis of a first payment of less than IR£10,000, it would take many years to repay the debt which the Committee reckon is now £2,056,312, excluding £533,745 on which the same company defaulted in another case. The Committee would like to be kept informed of progress.

In relation to the loan arrangement, it transpired that the loan itself was repayable by the exporter in US Dollars but, because of the fluctuation of the dollar exchange rate against the Irish pound, a large exchange loss accumulated. Under the agreement, the exporter would have been liable for this but the Minister for Finance agreed to the assumption by the State of liability for 90 per cent of the loss (£163,243) subject to the Department of Industry, Trade, Commerce and Tourism satisfying itself that this was permissable within the terms of the export credit insurance scheme and within the ambit of the Vote. The Accounting Officer had told the Comptroller and Auditor General that it was his Department's view that this exposure to exchange loss was properly classified as a guarantee under the Insurance Act, 1953 and that payment of the exchange loss could be seen as an honouring of that guarantee. The Department of Finance, whose stance on the issue the Comptroller and Auditor General found unusual in that it was first opposed to the idea of charging the exchange rate loss as expenditure under the scheme and then left to the Department of Industry, Trade, Commerce and Tourism to itself decide on the issue, said that they were of the opinion that acceptance of the proposal would amount to a widening of the scheme but at the same time did not regard it as going outside the legal ambit of the scheme. The Department of Finance representative said that the impression given by the Comptroller and Auditor General that the Department of Finance regarded the proposal as lacking in propriety was not seen by them in that way but it appears to the Committee that there was a certain amount of indecisiveness in the matter.

Annual Accounts of Transactions under the Export Credit Insurance Scheme.

17.Another issue which the Comptroller and Auditor General referred to under the export credit insurance scheme related to the submission of annual accounts of the transactions under the scheme. At the time of his Report (3 October 1986), the last account submitted to him and audited was in respect of the year ended 31 December 1981. In evidence, the Comptroller and Auditor General said that he had since received the 1982, 1983 and 1984 accounts and that these were being audited. The submission of accounts to the Comptroller and Auditor General so far in arrears is totally unacceptable to the Committee. Submission of accounts should be made as soon as possible in the financial year following that to which they relate and, certainly, no later than six months afterwards. The Committee expects that the outstanding accounts will be submitted without further delay and would like to be kept informed of progress.

Default in payment by two Sudanese Government Ministries

18.The matter of default in payment by two Sudanese Government Ministries which was referred to by the Committee in its Report dated 3 December 1980 was raised again by the Comptroller and Auditor General in his 1985 Report. In the years 1974 and 1975, the Ministers purchased from the Irish exporter a total of 40 ferries and structural parts for the construction of 26 barges and 6 push boats, the total value of the exports being Stg. £1,828,874.

Some payments were made initially by the Sudanese authorities but then they defaulted and during his examination of the 1978 Appropriation Accounts, the Accounting Officer at that time (20 March 1980) was hopeful that a significant part of the amount then outstanding viz. Stg. £1,669,007 would be recovered. Despite a rescheduling agreement with the Sudanese under which the debts were to be repaid over a period of 9 years up to 1989, only one further payment was received. Continuous pressure from the Department as well as from other sources for payment of the outstanding sum met with no success. The Accounting Officer conceded that there was little prospect of the amount now being recovered because the economy in Sudan was disintegrating and the country was in a very difficult position. The money, therefore, had to be written off and, accordingly, a provision of £922,446 had been included in 1988 to make good the net loss borne by the Central Fund under the export credit guarantee arrangements.

With regard to the delay in making provision in the Vote to repay the amount due to the Central Fund in accordance with Section 2(4) of the 1953 Insurance Act, the Accounting Officer told the Comptroller and Auditor General that the fact that payment was guaranteed by the Central Bank of Sudan was seen as conferring an element of security to the risk. The Comptroller and Auditor General said that this may have led in turn to the failure to make the necessary vote provision between 1977 and 1980. The Accounting Officer further stated that, when the rescheduling arrangement was signed in 1981, there was every reason to believe that this agreement was being entered into in good faith with a good propect of recovering the amounts due. The fact that the first payment was made in accordance with the rescheduling agreement gave credence to that.

The Committee regrets the course of events in this instance and accepts that the Department pursued the matter as far as it could. It recognises that this situation has developed only because of the chronic state of the Sudanese economy. It notes that export credit insurance cover has not been available for Irish exports to the Sudan since 1979.

Net losses arising on operation of Export Credit Insurance Scheme

19.The Agreement between the Minister for Industry and Commerce and the Insurance Corporation of Ireland referred to in paragraph 16 above states that, taking one year with another, the operation of the export credit insurance scheme shall involve no net loss to State funds. Despite this, the Comptroller and Auditor General reported that an examination of departmental records showed that between 1979 and 1985 the total net cost of claims paid, excluding provisions for future claims, exceeded the total net premium income by £4.25 million.

In evidence, the Accounting Officer stated that as at the end of 1987 this figure was expected to be of the order of £12 million. Of this, about £4 million represented instances where payment had been held up because there was no foreign exchange available in the local economies (the case mentioned in paragraph 15 above is one such case). About another £6 million represented claims arising from exports to the United States a country which would not be regarded as a bad risk area. Of this £6 million, the prospects of recovering about £2.5 million from one company were very slim while negotiations were continuing with another company for the recovery of £3.7 million approximately. A further £1 million approximately would probably have to be written off. The Accounting Officer stated that the £12 million deficit should be viewed in the context of business insured for a sum of the order of £4.5 billion representing a loss on business insured of only 0.3 per cent.

As regards the question of the scheme operating in a way which prevents loss to the State, the Accounting Officer said that this was merely an agreement between the Departments of Industry and Commerce and of Finance and there was no question of the deficit being a breach of any statutory provision. The only statutory limit was in relation to the net amount which could be issued from the Exchequer under the scheme and this had not been exceeded.

The Comptroller and Auditor General also referred to the exclusion of provisions for future claims — the deficit referred to above represented a cash flow deficit only i.e. premium income as against claims paid with no provision for future claims — and he quoted the auditors from the 1986 ICI report on the operation of the scheme which said that “the cash flow accounts which have historically being applied as the reporting basis for the export credit insurance scheme do not, in our opinion, suitably provide an accurate measure of the scheme's performance”.

The Accounting Officer told the Comptroller and Auditor General that, because of the nature of the operations involved and given the vagaries of international trade, a breakeven situation was sought over a somewhat indeterminate period of time but the years between 1979 and 1985 were difficult ones in relation to international trade and many export agencies in other countries had suffered losses during this period. Visits had been undertaken by departmental officials to the countries where the defaulting companies operated and the assistance of Irish agencies abroad was sought in an effort to recover the debts. Increases in premiums were introduced in 1983 and 1986 with a further increase due in 1987 to try to eliminate the cumulative deficit by the end of 1989. A new agreement with ICI, which the Accounting Officer felt would enable his Department to adequately monitor the operation of the scheme, was expected to be concluded at an early date. New accounting procedures under the agreement would take on board what would be regarded as being the accepted insurance method of accounting for contingent liability. Revised premiums will be geared towards eliminating the deficit and creating a fund which will be used in respect of future claims.

The Committee welcomes these new arrangements because it understands that the contingent liabilities in respect of exports to Iraq, Egypt, Kenya and Nigeria for which special arrangements had been made amounted to £33 million approximately. The prospect of having to meet such a sum in the event of a loss arising would have implications for our own budgetary position and it is important that proper arrangements are in place to cover all eventualities. The case involving the US companies mentioned earlier shows that even good risks can become bad risks.

The Committee would like to be kept informed of developments in regard to the new agreement with ICI and the adoption of the new accounting procedures which it will provide for. It would also like to have information on the general point of the clearing of the deficit and on the specific cases where recovery of the debts is being pursued.

ISSUES UNDER THE INSURANCE ACT, 1964.

Financial difficulties of Insurance Corporation of Ireland

20.The Comptroller and Auditor General reported on the special steps decided on by the Government in March 1985 to resolve the financial difficulties of the Insurance Corporation of Ireland (ICI) which in 1983 became a wholly owned subsidiary of Allied Irish Banks (AIB). The Accounting Officer, Department of Finance explained that in late 1984 serious losses came to light on ICI's London business which brought AIB losses on ICI, including acquisition costs, to £86 million or about 20 per cent of shareholders' funds. AIB advised the Government in early 1985 that it could not continue to support ICI. As a consequence, the following arrangements summarised by the Comptroller and Auditor General in his Report were decided on by the Government:—

(1)the acquisition, for a nominal amount, by a company controlled by the Minister for Industry, Trade, Commerce and Tourism of the total shareholding of AIB in ICI,

(2)the petitioning of the High Court to appoint an administrator to ICI in accordance with the provisions of the Insurance (No. 2) Act, 1983,

(3)the issue by the Minister for Finance, in accordance with Section 5 of the Insurance Act, 1964, of advances to the Insurance Compensation Fund to the extent which, having regard to any other payments being made out of the fund, would be sufficient to enable payments to be made from the fund to the ICI Administrator when required by him,

(4)the enactment of the legislation necessary to give effect to those decisions.

Following the Government decision the Insurance (Miscellaneous Provisions) Act, 1985 authorised the Minister for Industry, Trade Commerce and Tourism to take up shares in Sealuchas Arachais Teo. This company in turn acquired ICI which was then placed under administration by an order of the High Court.

In order to provide the funds required to implement these arrangement it was agreed that:—

(1)a loan of £70 million would be made available to the Central Bank by AIB at finest (i.e. best possible) rates for a 15 year term,

(2)£100 million would be borrowed by the Minister for Finance from the Central Bank under authority of the Insurance Act, 1964 at a rate 7 per cent below that at (1),

(3)£100 million would be issued by the Minister for Finance from the Central Fund to the Insurance Compensation Fund for on-lending to the Administrator at the same reduced rate,

(4)AIB would pay the Central Bank an interest contribution of 3.5 per cent per annum towards the shortfall of 7 per cent in interest over the full term on its £100 million loan to the Minister for Finance,

(5)the banking sector generally would pay the Central Bank a further 3.5 per cent per annum on the £100 million loan, £2 million of this to be contributed by AIB.

The sum of £100 million was received by the Central Fund from the Central Bank and issued to the Insurance Compensation Fund in December 1985, with the approval of the High Court.

The Comptroller and Auditor General told the Committee that the accounts of ICI for 1986 showed that there was a significant improvement in the results for that year compared with the results for the previous two years although at end 1986 there was still a considerable excess of liabilities over assets. He also said that the administrator had stated in his report that the company was continuing to trade with the benefit of the assurance of State support to be provided through the Insurance Compensation Fund. The Accounting Officer said that the balance sheet of the company at the end of 1986 showed that there was a deficit of £120 milion. It was hoped that this deficit would be reduced by continuing the company in a trading position. The State only became involved in arranging the transfer of the £100 million from the Central Bank to ICI through the Insurance Compensation Fund. The option was there for the State not to get involved at all and to have allowed the company to go bankrupt. However, if this had happened, it would have had serious repercussions for the banking system in general and for AIB in particular and the decision taken had to be taken to protect, and to prevent a collapse of, the banking system. He said that a bad commercial decision had been taken by AIB but the price could have been too great for the State to risk and a rescue operation had to be undertaken. It was dealt with fairly smoothly in a way which sorted out the problem. As well as the effect on the banking system, the Accounting Officer said that there was also concern that employers' liability, public liability and other areas of insurance would be left without cover, as at the time of the difficulties, the company had in the region of a 25% share of the market, being the second largest non-life company in Ireland at the time.

With regard to the level of supervision, the Accounting Officer said that it was felt that the supervisory systems for ICI and AIB were adequate for the purpose but that exceptional circumstances developed. It was important to allow the private banking sector sufficient flexibility to operate without having undue interference. He said that the supervisory arrangements had been tightened since this particular incident. In addition, the draft Insurance Bill, which was already circulated, and draft Central Bank Bill, which it was hoped would shortly be put before the Government, would involve tighter requirements in relation to the insurance and banking systems.

With regard to the action being taken by AIB against the auditor of ICI, the Accounting Officer told the Committee that there was an arrangement whereby the State would participate in any funds that would come as a result of this action.

The Committee fully understands the difficulties faced by the Government in this case and the reasons for the decisions taken and it trusts that the expectation that the company will be able to survive without any underpinning by the State will be realised. However, it cannot let the occasion pass without expressing complete dis-satisfaction at the apparent cavalier attitude of the board of directors of the bank to this potential catastrophe and yet they emerged unscathed and still secure in their positions. The subsidising of the loan to the Central Bank, was, in itself, a small price to pay for a very bad commercial decision.

ISSUES UNDER THE IRISH SHIPPING LTD. ACTS, 1947–84.

Repayment to the Central Fund

21.When Dáil Éireann by legislation authorises money to be issued from the Exchequer by way of repayable advances, typically advances to a State sponsored body, and when subsequently, for whatever reason, it transpires that the amount cannot be repaid, the normal technique for bringing the situation to the notice of the Dáil so that it can alter the basis on which the funds were provided is to ask the Dáil to vote the amount involved. This is followed through by a bookkeeping entry to show the amount as a repayment to the Central Fund and as a charge in an appropriation account. It can be regarded as a technical point but the important point of principle here is that such a matter is brought to the notice of the Dáil by this mechanism.

The Comptroller and Auditor General reported that, in the case of Irish Shipping, moneys had been issued from the Exchequer since the date of the liquidation of the company on foot of various guarantees given by the Minister for Finance in respect of the company's borrowings. The legislation authorising these issues from the Exchequer was the Irish Shipping Limited Acts of 1947 and 1982 and these provided that moneys issued on foot of guarantees be repayable within one year in the case of the 1947 Act and within two years in the case of the 1982 Act. The Acts also gave legislative support to the principle, as mentioned above, of providing that the moneys be voted, if not repaid.

The Comptroller and Auditor General added that when he was preparing his 1985 Report, about the middle of 1986, the time limit for the repayment of one of the first amounts advanced viz. £169,373 had in fact expired. There was no sign of any action being taken to make Vote provision. Since then, the time limits for the repayment of some subsequent and larger amounts had also expired without any Vote provision being made. His view was that, once the time limit expired, the obligation to bring the matter to the notice of Dáil Éireann arose and this should be as soon as was feasible.

The Accounting Officer, Department of Finance told the Committee that their reading of the legislation was that there was not an obligation to make the payment in as short a period as the interpretation of the Comptroller and Auditor General suggested because subsection 7 of Section 9 of the 1947 Act which states that:—

“Where the whole or any part of moneys advanced under subsection (5) of this section has not been repaid to the Minister in accordance with subsection (6) of this section, the amount so remaining outstanding shall be repaid to the Central Fund out of moneys provided by the Oireachtas”.

did not impose any time limit. He said that informal legal advice supported this view. The Comptroller and Auditor General said however that when subsection 6 of the Act which stated that:—

“Moneys paid by the Minister under a guarantee under this section shall be repaid to the Minister (with interest thereon at such rates as the Minister appoints) by the Company within twelve months from the date of the advance”,

was read in conjunction with subsection 7 he was not sure that it was the intention that there would be no time limit for repayment to the Central Fund. The Accounting Officer said that the timing of repayments was really a question of administrative convenience both from the point of view of the Department and of the Dáil in that it was considered better and more convenient to wait until all the Central Fund payments arising from the liquidation of Irish Shipping had been made before making Vote provision to recoup the Central Fund in one lump sum rather than on a piecemeal basis.

The Committee underlines the fact that the primacy of Dáil Éireann in financial matters is paramount, that administrative convenience doesn't override this principle and that the authority of the Dáil should be sought as soon as possible if the condition under which the Dáil provided money had subsequently to be altered.

OFFICE OF THE MINISTER FOR FINANCE

Waiving of repayment of principal and interest on special advances issued to Industrial Credit Corporation (ICC)

22.The Accounting Officer told the Committee that it was probable that approximately £4.4 million from a total of £12.967 million advanced from the Exchequer to the ICC would have to be written off because of the inability of the firms to whom the money had been on-lent to meet the repayments. The schemes under which the advances were made were basically to encourage firms to go ahead with what appeared to be viable schemes but which despite having a very high risk factor were considered to be ‘worth a gamble’. Firms who received advances would not have expected to get funds from the commercial banks on the normal criteria with the normal risk that such banks would take. The instance of losses would probably be in the region of 34 per cent which would be much higher than a commercial bank would tolerate but it was as part of industrial policy to encourage firms to try to develop their enterprises that the State agreed to guarantee to the ICC that it cover any loans written off at the end of the day.

The Committee would like to be kept informed of the total write-off when this becomes known.

COMMUNICATIONS

Proposed construction of airport at Letterkenny

23.The Committee heard evidence from the Accounting Officers for Tourism and Transport (to whom responsibility for airports was transferred in March, 1987) and for the Environment, an official from the Department of Finance and the Donegal County Manager in relation to a series of decisions and counter-decisions relating to a proposal to construct an airport at Letterkenny, County Donegal which the Comptroller and Auditor General had reported on in his 1985 Report. The Comptroller and Auditor General was concerned that a direction from the Department of Finance in December 1981 viz. that immediate steps be taken to cancel the project, was not implemented. In view of the fact that the proposal was not being proceeded with, he had also inquired about the utilisation or disposal of the land acquired as a site for the proposed airport.

The Accounting Officer for Tourism and Transport told the Committee that during 1980 a number of statements were made on behalf of the Government indicating the intention to finance the development of an airport in the Letterkenny area. This arose from a study carried out on behalf of the Irish and UK Governments and the EEC Commission in relation to cross border communications. In a submission to the Committee, the Donegal County Manager stated that in September 1980, his Council identified a site, involving about 190 acres, at Big Isle near Letterkenny as the most suitable site for the proposed airport and that negotiations proceeded to acquire the land were entered into. In April 1981, the Minister for Tourism and Transport gave his consent under Section 37 of the Air Navigation and Transport Act, 1936 to the establishment of an airport by Donegal County Council and to the maintenance of the Airport and for the necessary services. In May of that year, the Minister for the Environment gave his consent to the Council under section 43 of the same Act to acquire the neccesary land.

However, in December 1981, the Department of Finance directed that the Department (of Communications) “should initiate steps as a matter of urgency for the immediate cancellation of the project” as it was concerned that the cost of the project looked likely to cost about £2.6 million instead of £1.6 million as originally envisaged. It also seemed likely that an operating subsidy would be needed to run the service at a time when an operating subsidy was actually being paid to provide a service between Dublin and Derry which was only about 25 miles from the proposed site at Letterkenny.

The letter from the Department of Finance also stated that “…, as far as the Department is aware, there is no formal Government decision or authority to site a local airport at Letterkenny.” Therefore, the Department of Finance did not see this request as being in any way in contravention of a Government decision as it was conscious that the Government had made no decision in favour of the project and had indicated no commitment to it. The Accounting Officer told the Committee that the wording of the direction from the Department of Finance was important because to him it was a recognition by the Department of Finance that his Department did not have discretion to cancel the project on its own and that certain procedures would have to be gone through before such a decision could be taken. These procedures, involving a submission to the Government and consultations with other interested Departments were being put in train when a general election took place resulting in a change of Government. The Accounting Officer explained that the new Government subsequently reaffirmed its commitment to the project in a White Paper published in October 1982 and provision for the project has been made in the draft estimates for 1983. This was some months after the Minister for the Environment confirmed a compulsory purchase order to enable Donegal County Council to acquire the land and after Donegal County Council served statutory notice to treat on the landowners. As Donegal County Council was unable to agree compensation with the various landowners, the property arbitrator was appointed to determine what compensation should be paid.

Another change of Government occurred in November 1982. The Estimates for 1983 were reviewed and revised by the incoming Government and the revised estimates did not include a provision for Letterkenny airport. The Accounting Officer stated that the Government explained publicly that it was not withdrawing from the project, that provision was not being made in the 1983 estimates due to the severe financial position of the Exchequer but that the project would be further reviewed when the financial position improved. Taking all these circumstances into consideration, the Accounting Officer said that his Department was unable to comply with the request of the Department of Finance.

Subsequently, however, in May 1984 the Government decided to withdraw from the project but as it was conscious of the fact that there could be legal commitments on the Exchequer arising from the compulsory purchase order (CPO) proceedings, it asked for a further report on the legal obligations. The legal advice which the Department received coincided with the advice available to Donegal County Council i.e. that once the CPO was confirmed and the notice to treat issued, the Department was obliged to pay for the acquisition and disturbance and legal costs as awarded by the arbitrator.

The decision to finally withdraw from the project was made by the Government in December 1984 and the Council was informed accordingly by the Department. The Council was asked, in accordance with the Government decision, to approach the owners of the land with a view to seeking their formal agreement to release the Council from the CPO procedure and to withdraw their compensation claims. The landowners did not agree to this.

Total expenditure from the Exchequer was expected to be in the region of £740,000 [with additional expenditure of some £200,000 by Donegal County Council from its own sources].

It was evident to the Committee that there was a totally unco-ordinated approach by the various Government departments involved in this project. While it acknowledges that the Department of the Environment was involved merely as an agent of the Department of Tourism and Transport, it nevertheless cannot see the logic of, on the one hand, the holding of a public inquiry, for three days ending 3 December 1981, into the compulsory acquisition of the land and, on the other hand, the issue of a letter from the Department of Finance one day later directing that steps be taken to cancel the project. In addition, as the Property Arbitrator did not issue his findings until November 1984, the Committee fails to see why the arbitration could not have been suspended as surely doubts must have been raised about the future of the project when no provision was made for it in the 1983 estimates.

The Committee notes that, while the land acquired is now owned by Donegal County Council, the Minister for Tourism and Transport has a lien over the future use or sale of the property. The Committee also notes that the land was recently let for a period of eleven months with a total income involved of some £13,400 — a very small annual return from an investment of £750,000 approximately.

From a recent submission by the Department of Tourism and Transport, following consultations between the Department and Donegal County Council regarding the future use of the site, the Committee notes that the County Council intends to proceed with the development of an airport on the site as a matter of priority and that the County Manager has been instructed by the Council to plan accordingly. The Committee further notes that the Minister for Tourism and Transport proposes to commission a feasibility study of the proposal. The Committee would like to be informed in due course of the results of the feasibility study and on the proposed financing of the project if it does go ahead.

Visit to Connaught (Horan) International Airport, Knock.

24.As the final instalment of capital investment by the State totalling £9.858 million at Connaught Horan International Airport, Knock was paid from the Communications Vote in 1985, the Committee considered that it would be a useful exercise to see for itself how the money was spent and to get an idea of how the Airport was coping. A delegation from the Committee flew to the airport and met with directors of the Airport Development Company who are also responsible for the management of the airport.

The Committee was told that the Airport now had 27 permanent staff and this was supplemented by temporary staff as the need arose. It was anticipated that the passenger throughput numbers in 1988 would be 110,000 but the objective was to have 200,000 by 1990. There were an average of 45/50 flights per week, and if the Company achieved its objectives of a 200,000 throughput, there would be in the region of 4,000/5,000 flight movements per year.

The Airport meets all the statutory requirements in relation to security and safety standards. It has fully trained staff, including training for fire fighting, there are inspections by the Department of Tourism and Transport on a regular basis, it has its own safety committee and has a category 6 safety rating.

It was explained that, on top of the £9.8 million received from the Exchequer, approximately £2.5 million had been contributed from private funds. In addition, a grant of £1.33 million had been approved by the European Regional Development Fund. It was intended that this grant would be used to provide an extension to the existing building, to improve the lighting and to construct a new taxiway to provide access to a 93 acre site on which it was hoped to develop an industrial zone, or freeport, in a joint venture with the IDA. It was hoped that this venture would increase its cargo traffic and bring much needed employment to the area, with a target for jobs of 1,000.

The Directors explained that the Company did not intend to go back to the State for further financial assistance as its aim was to be self-sufficient. However, it was finding that the expense of recouping the cost of air traffic controllers to the Department of Tourism and Transport was proving to be a drain on its resources and was preventing the Company from developing further capital works from its own turnover. The cost was £96,000 per year and it was stated that the Company itself could provide its own controllers for one third of this cost although it was not explained how this could be achieved.

The Committee was impressed with the progress to date at the Airport. The enthusiasm of all the Directors of the Development Company and their commitment to the running of the Airport and to its further development coupled to the numbers using the Airport was evidence to the Committee of the support which the project had in the area. The Committee asks that the Minister for Tourism and Transport might examine the question of the provision of air traffic controllers for the airport to see if the claim made by the Company has merit.

Collection of TV licence fees.

25.TV licence fees are collected by An Post acting on an agency basis for the Department of Communications. The receipts are brought in as appropriations-in-aid in the Vote for Communications from which An Post are paid for the cost of collection, a small amount is retained by the Department to cover administrative costs and the balance is paid to Radio Telefis Éireann (R.T.E.) as a grant-in-aid. In 1986, the amount paid to R.T.E. in this manner was £38.387 million which represented 45% of its total income.

The Committee discussed with the Director General, R.T.E. the efficiency of the collection system. The Director General told the Committee that the R.T.E. Authority was concerned with the overall position regarding levels of evasion and the costs of collection. The present level of evasion was about 17% and the costs of collection were a little over 10% of the gross proceeds. By reference to experience in Europe, both of those figures were on the high side and it was the Authority’s view that they should be capable of substantial reduction. It would be the hope that there would be reductions in these costs over the next couple of years, in addition to what had already been achieved in recent years by An Post. The Authority’s formal position with regard to the question of licence collection was that they would wish to have responsibility for this task but they might be persuaded away from that posture if the levels of both licence evasion and costs of collection were reduced, within the next couple of years, to what they would see as more acceptable levels viz. an evasion level of 10% and a cost of collection of 8%. Assuming responsibility for the licence collection would not mean that they would want to exclusively operate the collection process. Undoubtedly, An Post would continue to be used as the principal collecting agency as it had an unrivalled network of retail outlets throughout the State and that was one asset that could not be ignored. However, more flexible methods of payment with a variety of channels of access to the individual might help the collection process.

The Director General said that, of the 1 million households in the State, it was estimated that 956,000 had a television set. As at February 1988, the number of current licences was 828,000 but as small number of these were not fully paid up to date, it was the gap between something over 800,000 licences and the estimated figure of 956,000 which represented the evasion figure, viz. of the order of 150,000 unlicensed sets. This represented lost income of the order of £9 million. Considerable progress had been made in recent years in the collection process and the evasion figures were coming down, but further progress was possible.

He said that the level of fine imposed for failing to have a licence was no deterrent but that legislation which was at that stage before the Dáil (since enacted as the Broadcasting and Wireless Telegraphy Act, 1988) provided for maximum fines of £400 for a first offence and a maximum of £800 for a second offence and this would considerably help in the collection process.

The Committee welcomes the progress that has been made in recent years in reducing the level of evasion and wishes to see the continuation of the efforts to reduce it even further.

FISHERIES

Leases for sites in Fishery Harbour Centres

26.Charges for the use of harbour facilities and rents for onshore properties vested in the Minister for Fisheries (now Marine) accrue as income to the Fishery Harbour Centres Fund from which the operational costs of the major fishery harbour centres are met in the first instance.

The Comptroller and Auditor General drew the attention of the Committee in his 1985 Report to a problem of completing lease agreements and collecting rents from tenants for properties in Killybegs and Castletownbere, two of the major fishery harbour centres in the country. The tenants, seven in all, were given access to the properties at various stages between April 1980 and August 1983 without entering into leasing agreements and, apart from one case where rent had been paid up to September 1983 only, no other rents had been collected resulting in a total of £86,508 being outstanding at end 1985. The Comptroller and Auditor General understood that this figure had risen to £95,000 approximately by the end of 1987.

The Accounting Officer told the Committee that the figure outstanding at end 1985 as quoted by the Comptroller and Auditor General had a number of estimation factors involved in it as leases or terms had not been agreed to. On reaching agreement, lower terms were agreed to with the result that the amount outstanding was revised downwards to £81,800. Progress was made in collecting much of the arrears and, at the time of the examination in February 1988, rents out-standing amounted to just less than £43,000. The Accounting Officer did not anticipate any bad debts in relation to any of the seven properties.

With regard to the fact that companies were allowed on sites without entering into leasing arrangements, the Accounting Officer had told the Comptroller and Auditor General that this was allowed because it was felt that the anticipated delays would have led to the proposed commercial projects being held up indefinitely, and in some cases abandoned, with resultant loss to the economy through extra jobs not materialising. The problem with the leases arose from the delay in vesting the properties in the Minister for Tourism, Fisheries and Forestry (as he was then) because most of the properties included areas of reclaimed foreshore and some areas above what is called the high water mark, i.e. areas above the reclaimed foreshore, had been wrongly registered due to a change in the high water mark from the last ordnance survey of the area. These problems had now been overcome and the process of vesting the reclaimed foreshore in the Minister was going ahead — the Chief State Solicitor was assisting in this regard. Of the seven cases mentioned at the outset, leases had been concluded and the rent paid in full for the period under review in two cases; of the five uncompleted leases, three had been agreed in all their details and were awaiting signature and a small number of queries had still to be sorted out on the other two. One of the conditions of the leases was that the rent arrears would be paid in full.

The Comptroller and Auditor General also drew the Committee’s attention to the recommendation of the State Valuer for an increase in rent for one of the properties in particular. The recommended increase was for £50,000 (from £9,000) per annum as from 1986 but the Comptroller and Auditor General said that this did not appear to have been taken into account in arriving at the arrears figure outstanding at the end of 1987 which the Accounting Officer had put at over £95,000. The Accounting Officer said that in this particular case, the company, which was involved in the fish processing industry, first entered the site in 1981. In a submission afterwards to the Committee, the Accounting Officer stated that, after the company was granted an extension of the site in 1983, the State Valuer recommended an increase to £22,500 effective from the date and a further increase to £50,000 effective from 1986. Negotiations were taking place with the company on the terms of the draft lease and the level of rent but cognizance would have to be taken of the basis on which the company first entered the site.

The Committee would like to be assured that these problems, which have proved very intractable over a long period, will be resolved without further delay. It can understand the desire of the Department to get projects up and running as quickly as possible but this should not have prevented the Department from drawing up some sort of temporary agreements which would have provided for the timely payment of rents, thereby overcoming the problem of arrears. It welcomes the new procedures drawn up by the Department in this regard, namely, that:—

(i)no entry to sites will be permitted prior to the finalising and execution of the necessary lease or contract

(ii)in circumstances where economic or other considerations warrant entry to be made pending the signing of a lease, a more formalised arrangement which provides for an enforceable liability for payments will be made.

DEFENCE

Irregularities in the payment of wages to civilian employees

27.The Comptroller and Auditor General drew the attention of the Committee (1985 Report) to an irregularity which was going on for more than five years in the payment of wages to civilians employed by the No. 1 Maintenance Company of the Corps of Engineers at the Curragh Camp. The irregularities occurred in the period February 1979 to July 1984 in the recording and notification of absences of 293 civilian employees and, as a result, deductions from pay were not made in respect of approximately 31,500 man hours with consequent overpayments amounting to just under £90,000. The Comptroller and Auditor General reported that the Accounting Officer had told him that the irregularities came to light in the course of a spot check of pay records by the Company Administrative Officer in July 1984 although it appeared that earlier spot checks during the period when the irregularities were taking place failed to discover them. The Accounting Officer in evidence before the Committee said that a very thorough audit was subsequently carried out by personnel of the Finance Branch of the Department and he was happy that the extent of the fraud was as reported by the Comptroller and Auditor General.

The Accounting Officer stated that the daily works reports of a foreman attached to the Company indicated that certain employees were absent from work, but these absences were not notified to the civilian pay section of the Department with the result that 293 civilian employees were paid for times that they had not been working. The records, in fact, had been adjusted by two civilian officers of the administrative section of the Maintenance Section to whom the foreman’s daily reports were submitted. The Gardaí were called to investigate the matter but the Director of Public Prosecutions took the view that the evidence did not warrant criminal proceedings because it lacked cogency on the essential element of intent to commit fraud. While there was evidence that public funds had been put to the wrong use, there was insufficient evidence that there was a deliberate attempt to defraud on the part of the people involved and there was no evidence that the two individuals themselves gained financially from it. One of the officers retired on health grounds. The second man was suspended and reduced in rank and was no longer employed on pay duties.

The Accounting Officer also stated that a military court of inquiry was convened by the GOC of the Curragh Command to investigate whether personnel subject to military law were in any way negligent in the matter.

Of the total amount overpaid, approximately £52,000 had been recovered by various deductions leaving £37,000 outstanding, the recovery of which was proceeding. However, there might be small sums which the Department would be unable to recover.

It is obvious to the Committee that adequate internal control procedures were not in operation in this instance because, if they were, this irregularity should not have taken place or, at least, should have been discovered within a short period of time. The adequacy of the spot checks was also open to question. It welcomes the assurance that the procedures have been improved and the need for stringent control emphasised.

It would welcome information on the results of the court of inquiry in due course and on whether it is necessary to write-off any outstanding amounts.

AGRICULTURE

Supply of ear tags for use in the disease eradication schemes

28.The Department of Agriculture, in November 1984, awarded a contract for the supply of 1 million ear tags for use in the Bovine Tuberculosis and Brucellosis Eradication Schemes to a new Irish company which was established in 1984 to manufacture ear tags. At the same time, a similar contact was awarded to the company which had been generally satisfactory in supplying ear tags since 1981. However, problems arose with the new company as the tags were proving to be unsatisfactory in use and, then, in September 1985, the company got into financial difficulties and production of the tags ceased.

The Accounting Officer told the Committee that there was a constant quest for the tamperproof tag and, as the tag produced by this new Irish company — all previous tags were manufactured by non-Irish firms — seemed to offer significant improvements in this regard on previous tags, it was decided, after field trials showed it to be satisfactory, to try it out on a limited scale in three counties. This way the risk was being limited. Difficulties arose, however, in that the quality of the tags which were in general manufacture did not live up to the quality of the prototypes which had been used in the field trials. The Accounting Officer said that this was not surprising as there were teething problems with the manufacturing process in its early stages but that this was not unusual as other tags which had been used over the years also had their teething problems which were usually sorted out over a period of time. He told the Comptroller and Auditor General in response to queries that his Department was satisfied that more extensive field trials would not necessarily have uncovered the defects which, as already stated, were due to imperfect manufacturing techniques and also to be weakness in the tagging implements used. The ultimate loss of tags was in the region of fifteen to twenty per cent representing approximately £30,000 which was nothing as high as originally envisaged but which was still well above the normal loss level of about 5 per cent. The Accounting Officer said that there was no evidence to suggest that there was deliberate tampering or removal of the tags. The present level of stocks of this tag was of the order of 100,000 and these would only be used in an emergency.

In response to queries concerning the identification of animals tested by means of tattoo, the Accounting Officer said that his Department was continually looking at other methods including tattooing but the cost of tattooing was sizeable and the logistics fairly difficult. One method looked at fairly recently was the possibility of implanting electronic devices into the animal which could be read automatically by an electronic scanner and, ultimately, fed into a computer. This technique was only in the early stages of development and the cost was still fairly prohibitive but it was something which would probably come about in the future.

In his Report, the Comptroller and Auditor General also referred to the possibility of the Department being able to refuse payment or obtain some redress against the manufacturer for the faulty products but the Accounting Officer explained that the prospects looked poor because of the company's limited assets. The position was further complicated by the fact that the owner of the factory, who had leased the premises to the manufacturer of the ear tags, was claiming against the Department on the basis of a lien which he claimed to have on a portion of the stock of tags acquired by the Department. At the time of the Accounting Officers' examination, these two legal matters were ongoing and had not been resolved. The Committee would like to be kept informed of developments on these matters.

Potential losses under Calved Heifer Scheme

29.A Calved Heifer Grant Scheme was introduced in 1982 to encourage expansion of the cattle breeding herd. The Comptroller and Auditor General reported, that, arising from a small sample cross-check, carried out by his staff, between documentation submitted in support of claims for grants under various incentive schemes, including some EEC assisted schemes, some apparent discrepancies came to light under the Calved Heifer Grant Scheme which the Comptroller and Auditor General detailed in a subsequent clarification for the Committee — animals accepted for calved heifer grants in 1984 had been accepted for suckler cow grants in earlier years or for calved heifer grants under the 1982 or 1983 schemes or had already been declared as the dams of calves for the purposes of 1982 or 1983 Calf Premium Schemes; cattle identity cards had not been notched by inspecting officers and the calculation of the basic herd number was incorrect. The sample check involved 263 herd files drawn from every county out of a total of 27,300 herds — a sample of one per cent. Discrepancies were discovered in 32 cases.

The Accounting Officer accepted that the discrepancies which came to light as a result of the cross-check had not been detected by the Departmental Inspectors at the physical inspection stage and that some overpayments in the region of £7,000-£9,000 arose in those cases. On the basis of the higher figure viz. overpayments of £9,000 from a 1 per cent cross-check and applying the principle of extrapolation, the Accounting Officer was asked whether the overpayments could be as high as £900,000. He stated that the operation of the scheme had to be looked at in a wider context. There were in the region of 400,000 applications in 1985, all of which had to be separately checked in the same time and by the same number of staff as had been available in 1980 when the number of applications was only 90,000. The scheme was one based on 100 per cent physical inspection of the herds of all applicants and he said that the introduction of another 100 per cent check by administrative staff would not be cost-effective in the context of the likely saving which would be achieved, even having regard to the figure arrived at by extrapolation on a national basis of the results of the cross-check of the Comptroller and Auditor General's staff. The Comptroller and Auditor General stated that he was not suggesting such an administrative cross-check should be undertaken but that, bearing in mind what the Department said about the field inspections being a vital part of the control of the scheme in establishing the correct descriptions of herds, animals, etc. the evidence produced by his officers' cross-checks could be an indication that the degree of vigilance being exercised by officers carrying out the physical inspections may have been deficient and that there was a need for the Department to remind inspecting officers of the need for greater vigilance and accuracy.

The Committee recognises that the Department inspectors discover many discrepancies themselves in the course of their physical inspections and that potential overpayments are thereby averted through this vigilance. Nevertheless, if a one per cent cross-check as applied by the Comptroller and Auditor General's staff throws up the discrepancies as reported, the Committee has to share the concern of the Comptroller and Auditor General about the possible scale of discrepancies on a national basis. It agrees with the Comptroller and Auditor General and the Accounting Officer that a 100 per cent documentary cross-check by administrative staff would not be cost effective. However, it feels that the nub of the problem, as the Comptroller and Auditor General pointed out, could lie in the degree of vigilance being excercised by the officers at the physical inspections and that, therefore, the Department should take steps to ensure that inspecting officers are aware of the financial implications of animals being incorrectly described by herdowners and that they insist that all application forms reflect the composition of the herd with absolute accuracy by reference to the precise requirements of each scheme.

Exchange Risk Guarantee Scheme on loans for Agricultural purposes

30.The Committee notes the comments of the Comptroller and Auditor General in both his 1985 and 1986 Reports regarding the operation of this scheme. There were two schemes involved — one initiated in July 1980 which terminated in October 1985 and the second scheme commenced during 1985. The first scheme involved the borrowing by the Agricultural Credit Corporation (ACC) of £50 million in currencies of the European Monetary System (EMS) for on-lending to farmers and agri-business to finance a range of specified activities. The associated banks were brought into the scheme later in 1980 on the same terms and conditions, and involving a similar amount of borrowed funds. The rate of interest payable by borrowers comprised the rate paid by ACC on the loans, a fixed rate to cover exchange risk and a fixed rate to cover the lender's operating margin. The borrowers exchange risk contribution was held in special accounts in the ACC and the participating banks. The balances in these accounts were to be used towards meeting the exchange losses incurred by ACC and the banks with any additional amounts required being provided from the Agricultural Vote.

The second scheme introduced in 1985 applied to ACC only but it was on the same terms and conditions, including the amount involved, as with the first scheme, except in one respect. While the rate of interest applicable to the special accounts under the second scheme was at the highest rate paid by ACC on variable rate deposits, the rate under the first scheme — excluding the associated banks which were to give the normal deposit interest rates — was to be agreed between the ACC and the Department of Finance. It was agreed at a lower rate than the rate which would normally be applicable to deposits of the size in the special deposit accounts — the rate applicable to deposits in the £5,000-£15,000 range—even though the deposits in the accounts at one stage were of the order of £1.8 million. The Department of Finance had told the Comptroller and Auditor General that the rate agreed with the ACC was designed to provide the ACC with a margin of 4 per cent which the Department considered justified. The Department of Finance official in evidence before the Committee said that the ACC's margin on these funds was 2.625 per cent which was considerably less than their normal margin. Taking a lower interest rate from the ACC on the special deposit accounts was to make up some of the difference between the 2.635 per cent and their normal margin. The Department official said, however, that this concession only brought their margin up to 2.675 per cent, still well short of their normal margin.

In common with the Comptroller and Auditor General, the Committee finds it difficult to understand why, notwithstanding the concern of the Department of Finance about maintaining ACC's normal margin, a special rate of interest was agreed with the ACC when—

(i)the rate charged by the ACC to its borrowers already included an operating margin as stated earlier on in this paragraph, and

(ii)the rate which the ACC gives on large deposits presumably already includes a satisfactory operating margin in so far as the ACC is concerned,

and would like clarification on these points. This is more difficult to understand seeing that the normal interest rates applied to the deposits under the second scheme which to all intents and purposes was just a roll-over of the first scheme.

The Committee notes that the exchange loss which would have had to be met from the Agriculture Vote had the normal rate of interest been paid by the ACC would have been reduced by £105,000. In the Committee's view, this treatment of the interest amounted, in effect, to a hidden subsidy to the ACC and would have been much easier to accept if it had been so described openly.

Arrears of land annuities

31.The Committee wishes to express concern at the level of arrears of land annuities which the Accounting Officer stated had risen to approximately £4 million as at February 1988. Out of a total of 140,000 accounts, 29,000 were in arrears and approximately 90 per cent of the total outstanding was owed by about 4 per cent of the people involved. The Comptroller and Auditor General explained that since the High Court ruling in 1982 that the provisions of the Valuation (Ireland) Act, 1852 relating to the valuation of land were unconstitutional, the mechanism for recovering arrears by withholding a similar amount from grants voted for the relief of rates on agricultural land no longer existed — this procedure was designed to ensure that the Exchequer would not be at a loss through failure to recover such arrears. Furthermore, since this mechanism ceased to be available to the Land Commission, the annuitants had become less willing to pay and the arrears progressively built up. The standard remedy since then was to seek enforcement through the County Registrar but this system was not proving to be successful as the County Registrars claimed that they were understaffed, due to the embargo on recruitment, and overworked due to the large increase in the number of Revenue Commissioners' warrants.

With the withdrawal of Revenue Commissioners' cases from the County Registrars consequent on the appointment by the Revenue Commissioners of 12 additional Sheriffs in July 1986, it seems to the Committee that this must have resulted in a consequential reduction in the workload of the County Registrars and that, therefore, the County Registrars must now have an opportunity to devote more time to other areas of work including pursuit of the collection of arrears of land annuities. The Committee would welcome hearing whether there has been any recent improvement in the arrears position. If there has been no improvement, the Committee would like to hear whether any other enforcement procedures are being considered.

The Committee also notes that the Comptroller and Auditor General drew attention to the fact that some arrears of annuities were reduced or in some cases cleared by offsetting the amounts so due by the making of grants from the subhead in respect of improvement works carried out by the farmers themselves following allotment. The Committee would prefer to see these matters being treated in a more transparent manner with the cost of any such concessions being clearly identified.

Export refunds payable under CAP — Appeal to European Court of Justice against EEC ruling

32.The Committee notes with satisfaction that the Department's case against the EEC Commission, who disputed the Department's application of the normal arrangements for the payment of export refunds to a particular exporter, was successfully contested in the European Court of Justice and that an amount of £2.28 million approximately charged to the Vote in 1985 was subsequently recouped from the Commission. The Committee would like to commend the Department for the manner in which it pursued the matter.

Arrears of Veterinary Inspection Fees in the Pigmeat Sector

33.The Comptroller and Auditor General had been told by the Accounting Officer that difficulties in securing payment of veterinary inspection fees, which were payable by licensed bacon curers on presentation of pigs for slaughter, had arisen primarily from the depressed state of the pigmeat industry at bacon factory level. In addition, the curers began to withhold the fees as a means of voicing a grievance which they felt they had because local pork butchers, who were catering solely for the home market, were being treated more favourably in that they were not liable for the fees and the standards required in terms of hygiene, etc. were lower than what the licensed curers themselves were required to observe.

During the period January 1981 to May 1982 the fees were waived because of the depressed state of the bacon curing industry. On being reimposed in 1982, the curers still expressed difficulty and they refused to pay. After prolonged discussions with the curers, the Government approved of a fresh agreement reached with the industry in June 1985. There were two main elements in this agreement: (i) that the bacon curers would resume payment of all current fees immediately and (ii) that the arrears of fees accumulated during the period from 1 May 1982 to 31 March 1985 would, in due course, be cleared by means of a special fee of 15p per pig. The latter charge would commence when legislation, which at that stage was being drafted, relating to the control of local/non-export slaughterhouses became operative and the question of continuing the 15p charge would be reviewed after 3 years from the commencement of payment. Subsequent to the June 1985 agreement, the bacon industry continued to experience difficulty. Their problems were resolved in March 1987 and since then the first element of the June 1985 agreement has been fully operative.

In a subsequent submission, the Accounting Officer stated that about 90% of current arrears (i.e. relating to the period post 1 April 1985) had now been paid that it was expected that all outstanding amounts would be collected. The legislation relating to local/non-export slaughterhouses had been enacted in the Abattoirs Act, 1988, which was a framework Act and which required a series of Statutory Regulations to bring it into full effect. It was envisaged that the main Regulations would be finalised later in 1988. At that stage, the plan for paying the pre-1 April 1985 arrears of close to £5 million through the mechanism of the special charge of 15p per pig would be due to come into operation. The Accounting Officer also stated that collection of the pre-April 1985 arrears would take in the region of ten years. The bacon industry was going through a process of rationalisation and modernisation — many plants had been there since the 1920s — and it was expected that this would lead to greater efficiency which would enable the industry to operate competitively in the export market.

The Committee notes with concern the attitude of the licensed bacon curers towards the payment of what, in effect, were statutory fees. It also notes the generous terms for the payment of the arrears — payment by instalment over a ten year period for arrears which had built up over a three year period and which were rightly payable during that period. It trusts that if, as expected, the rationalisation of the industry leads to greater efficiency, the review of the 15p charge after three years as mentioned earlier will be such so that will lead to a speedier recoupment of the £5 million in arrears. The Committee wishes to be kept informed of progress in this matter.

Absence of proper stock records of beef held in intervention.

34.The Comptroller and Auditor General reported in his 1986 Report that storage, etc. charges for beef amounting to £27 million approximately had been paid in 1986 even though the accuracy of the charges could not be verified — and had still not been verified by March 1987 — because of the absence of up-to-date stock records. Sales of beef of some 32,000 tonnes for the period December 1985/November 1986 failed to be entered on to the records at this date.

The Accounting Officer had explained to the Comptroller and Auditor General the difficulties which were encountered by his Department in keeping the stock records up-to-date. The main difficulty arose out of the complications attached to a new type of sales system resultant from the introduction by the EEC of an accelerated programme to allow for a more flexible operation for the disposal of stocks of intervention beef. Staff resources had to be concentrated in operating this new system resulting in a delay in inputting data on to the computer. In addition, the loss of experienced staff added to the problem.

In evidence before the Committee, the Accounting Officer said that, in spite of the records not being kept up-to-date, the risk of overpayment was minimal because payments were being made to the owners of the twenty or so cold stores on a regular basis and any errors in payments could, therefore, be adjusted in subsequent payments. In updating the records, it was the experience that the records kept by the store coincided with what the Department eventually produced. So, in fact, in relation to 1986 no errors were found. It was expected that the records in relation to 1987 would be shortly sorted out and, when this was done, the Accounting Officer stated that they would then have no difficulty in keeping up-to-date in the future providing there were no staffing difficulties.

The Committee wishes to express dissatisfaction at the manner in which the Department allowed this matter to develop without any thought of the possible consequences and at how slow the Department was in resolving the problem. It finds it difficult to accept that what on the surface appears to be a relatively simple task of keeping track of purchases and sales — which is basically what the Intervention Agency is involved in — should become so complex that another relatively simple matter viz. the keeping of records should be foregone. Satisfactory stock records are essential for the control and verification of stocks in any business and the lack of such in this case could have resulted in significant overpayments particularly if the records kept by the stores themselves had been, in any way, defective. The Committee would like to be informed when the matter has been brought up to date.

Refund to the EEC of grants paid under the Farm Modernisation Scheme (FMS).

35.The Committee noted that the Department of Agriculture agreed in July 1986 to a total of £1.09 million being deducted from current claims for recoupment from the EEC under the FMS because the EEC was sticking rigidly to the terms of EEC Directive 72/159 which provides that, in order to qualify for aid under the FMS, farmers who are developing their farms must keep farm accounts for each year of their farm development plan even though grants under the scheme might be paid to a large degree in the early years of the plan. The Department paid the full grant and in turn claimed this from the EEC without insisting on this condition being complied with prior to 1979. In evidence before the Committee, the Accounting Officer said that, in the early years after accession to the EEC, the Department relied to a great extent on informal contacts with the Commission and there were positive indications that there would be a certain degree of tolerance in relation to the regulations. However, in 1982 the EEC decided that EEC aid would not be allowable to any farmers who failed to keep accounts during any period of their development plans and recovery was sought of all aid paid to the Department from 1975 to 1982 in respect of such farmers. The Comptroller and Auditor General had set out in his 1986 Report what the Department saw as extenuating circumstances why it did not insist on accounts being kept in the years prior to 1979. The EEC were informed in December 1984 that this was because there was an absence of an accounts keeping tradition and a lack of services to help farmers keep accounts; genuine efforts were being made to keep some type of accounts and attention given by ACOT advisers to the development plans more than compensated for the lack of accounts. In addition, developments over time were leading to more accounts being kept.

These arguments failed to convince the EEC and the £1.09 million refunded by the Department represented the extrapolation to a national basis the results of a survey—carried out in County Kildare of farm accounts kept by development farms who received EEC aid — to determine how many had not kept acceptable accounts. To identify all the defaulters nationwide would have been a major task and the EEC accepted the estimate on the basis of the County Kildare survey.

The Committee feels that, while it was abiding by its own rules in acting as it did, the EEC could have been a little more flexible and understanding of the position in the light of the Accounting Officer's comments about a degree of tolerance by the EEC in relation to the keeping of accounts. The Committee wonders how much the Department was misled by the Commission. However, in the final analysis, it feels that the onus rested with the Department to formally clear with the EEC in advance the amount of leeway which it would tolerate in relation to the keeping of accounts. It is obvious now that the informal indications which the Accounting Officer described did not turn out to be the official view. The Committee feels also that the Department may have been a little lenient in its attitude towards farmers regarding the keeping of accounts and it may have too readily accepted the arguments of the farmers against this being done. In any event, the handling of the matter lost the Exchequer just over £1 million and the Committee must express itself dissatified because of this.

AGRICULTURE AND CENTRAL STATISTICS OFFICE

Reconciliation of total ewe numbers

36.The Committee heard evidence from the Accounting Officer and the Director, Central Statistics Office arising from concern expressed by the Comptroller and Auditor General that statistics produced by the Central Statistics Office showed a lesser total of ewes in the country than the numbers for which grants had been paid by the Department of Agriculture under Ewe Premium and Headage Grant Schemes with the result that there could have been significant overpayments of ewe premiums and headage grants. The difference was of the order of 400,000 ewes in 1986 — a year in which the Department of Agriculture paid premiums in respect of some 2.5 million ewes.

The premium is payable by the EEC from FEOGA on a country-wide basis to farmers who maintain at least 10 eligible ewes while the headage grant is payable from the Vote in respect of each eligible ewe up to a maximum of 200 kept by farmers in disadvantaged areas and designated mountain sheep areas. Payments under each scheme are made after a physical inspection by departmental officers who notch the ear of each ewe as it is checked. The Accounting Officer, Department of Agriculture, said that his Department was therefore more than satisfied that its count was accurate. The main reasons for the discrepancies in the two sets of statistics appeared to arise because of a difference in timing and definition and to the method and sources used by the Central Statistics Office. In effect, the Director of the Central Statistics Office told the Committee that the two sets of statistics were not measuring the same thing. The Central Statistics Office figures were taken in June at the end of the season whereas the Department of Agriculture's count was taken at the peak point at a time when the ewes were actually in lamb. In addition, the Department of Agriculture regarded a ewe in lamb as a ewe — which was not technically correct — while the Central Statistics Office did not include in its figure ewes which were not going to be included in the breeding stock in future years or which it was intended would be culled later in that season.

On the question of the methods and sources used by the Central Statistics Office, the Committee learned that its figures were based on information supplied to enumerators who carried out a sample in 600 District Electoral Divisions (DEDs) from a total of 3,000 DEDs approximately and the figures were grossed up from this national sample of 20% by linking them back to the last full census of Agriculture, which was held in June 1980, to derive overall sheep population estimates. It was possible therefore, that the DED sample had missed out on areas to which sheep production had now extended. The Central Statistics Office was now moving away from the DED sample method to a postal system of collection, the response to which was very satisfactory and the additional information gained from the postal returns suggested that the existing estimates for ewe numbers was somewhat low. The Director (CSO) stated that an indepth assessment of the statistics was continuing in conjunction with the Department of Agriculture in an effort to reconcile the figures and he was confident that the matter could be successfully concluded. He had no grounds for suspecting that the discrepancy in the two sets of figures could be due to fictitious claims under the schemes.

As the Committee was concerned at the large difference between the two sets of statistics, it asked to be brought up to date when the results of the review became available. That review was completed in December 1988. The conclusions drawn from the review confirmed the impression that the rate of growth in sheep between 1981 and 1987 had been consistently underestimated. During the review, the CSO established that classification and timing aspects do combine to give a lower figure for ewes in the CSOs June postal returns, which cover each category of sheep, than the numbers accepted for the ewe premium at the time of inspection. For some 400 of the flocks in the postal inquiry, the Department of Agriculture's inspectors, in the course of their 1988 inspection for the ewe premium, collected additional information for all other categories of sheep. Direct comparison on an aggregate basis with the CSO postal returns showed that the difference for all sheep excluding lambs taken together was much lower than for ewes. Allowance for disposals between the two periods would reduce the difference even further.

In the circumstances, the CSO concluded that the revised estimates at national level for ewes were now broadly reconcilable with the number accepted for the ewe premium in 1988 and earlier years. The revised CSO estimate for 1986 showed that the difference of 400,000 mentioned at the outset of this paragraph had now been reduced to 175,000.

While the differences between the two sets of statistics have not been conclusively proven, the Committee, nevertheless, reluctantly accepts the revised figures and the explanations therefor. However, the Committee finds that the necessity to adjust figures right back to 1981 is disturbing and feels that the divergence from the true estimates for sheep numbers might have been more quickly recognised by the CSO.

OFFICE OF THE MINISTER FOR JUSTICE

Expenditure in excess of amounts authorised to be issued from the Exchequer.

37.The Comptroller and Auditor General reported that in 1986 expenditure from the Vote for the Office of the Minister for Justice prior to the voting of the Estimates by Dáil Éireann exceeded the amount authorised to be issued under the Central Fund (Permanent Provisions) Act, 1965 by just under £1.5 million, thus breaching one of the basic principles of parliamentary controls viz. that expenditure be limited to the amount authorised by Dáil Éireann.

The Committee shares the view expressed by the Comptroller and Auditor General before the Committee that it should only be in exceptional circumstances that four-fifths of the prevous year's Estimate—the amount authorised to be spent under the afore-mentioned Act pending the voting by the Dáil of the Estimate for the following year — would be insufficient to meet expenditure in the first half of the following year pending the voting of the Estimates which is normally done before the summer recess of the Dáil. It acknowledges that there were exceptional circumstances in this case which led to commitments on hand exceeding the authorised expenditure limits, notably, compensation payments awarded by the Tribunal examining the Stardust tragedy and notes that while the Estimate was listed for debate on 20 June, it was not taken until 27 June due to the intervention of more urgent parliamentary business. However, this does not excuse the fact that the statutory limit was deliberately ignored resulting in expenditure which was ultra vires. It regrets that the Department, which appeared to have been conscious of the requirements and procedures in the first instance, should have chosen ultimately to ignore the basic principle of parliamentary control especially seeing that a postponement of payments for a period of seven days was all that was required in the end. The Department must also have been aware of the agreement to vote all Estimates in the year in question before the summer recess and as the recess commenced just fourteen days after the Estimate under review was first listed for debate, the Committee considers that a postponement of payments till then would not have been unreasonable even in the exceptional circumstances involved.

Therefore, the Committee must insist that, in the vital area of control of public expenditure, the primacy of the Dáil remains paramount and it does not want to see a recurrence of such a case.

OFFICE OF THE MINISTER FOR JUSTICE AND GARDA SíOCHÁNA

Weaknesses in internal control — payment on foot of pro-forma invoices

38.Weaknesses in internal control in the Barrack Master's Office at the Garda Depot and in the Accounts Branch, Department of Justice resulted in a duplicate payment of £6,330 for an item of computer equipment. The overpayment which was subsequently recovered from the supplier, occurred at a time when the internal control procedures both in the Garda Depot and in the Department had supposedly been reviewed. The Comptroller and Auditor General wondered, therefore, whether the review was effective. Another duplicate payment of £200,000, approximately, which involved payment in Deutsche Marks, was only avoided by what the Comptroller and Auditor General referred to as the rather fortuitous detection of the duplication at the last minute. A bank draft which had been ordered had to be subsequently cancelled resulting in a charge of £285 by the bank which, with the agreement of the Department of Finance, was written off in the 1986 Appropriation Accounts.

The Accounting Officer told the Committee that these two cases arose because pro-forma invoices had been accepted as original invoices. However, instructions had been issued that in no circumstances should payment be made on anything other than the original invoice and the Barrack Master's Office had been instructed not to certify pro-forma invoices for payment. Negotiations were continuing with the Department of Finance for a specific computer installation that would obviate the possibility of making duplicate payments. He added that a restructuring in Garda Headquarters, including the Barrack Master's Office, was taking place and, while discussions with the Garda Authorities concluded that there was nothing wrong with the procedures in existence, the restructuring would incorporate a streamlining of procedures and the issuing of clearcut instructions to everyone in the area.

A third case where payment for computer equipment was made on 31 December 1986 on foot of a pro-forma invoice dated 23 December 1986 was also brought to light by the Comptroller and Auditor General. However, while in this instance it did not lead to a duplicate payment even though a later invoice was issued by the supplier, the Comptroller and Auditor General was concerned that payment had been brought forward into 1986 as the actual invoice from the supplier which was dated 11 February 1987 stated that the equipment had not been shipped until 5 February 1987.

The Accounting Officer had told the Comptroller and Auditor General that the agreement for purchase of the equipment, which was for the central processing unit at the Garda Computer Centre, provided for payment to be made on the date of installation unless the customer elected to delay installation as specified by the supplier, in which case payment was to be made on delivery. However, as the installation of the equipment was to be arranged in order to cause the least disruption to Garda operations, the supplier could not be afforded the option of specifying the installation date so payment was made on delivery in December 1986. When the installation of the equipment commenced some weeks later, it was found to be a different, although more expensive, upgrade than that ordered and had to be sent back. The Accounting Officer told the committee that the equipment consisted of highly technical computer and software components with which an ordinary person would not be familiar and for this reason would not have been recognised as being the right or wrong equipment. The reference on the invoice dated 11 February, stating that the equipment was shipped on 5 February, related to the delivery and installation of the correct equipment.

The Committee agrees that to have a proper system of internal control satisfactory procedures must be in operation. It is obvious that such control procedures were not in operation in this instance and it is fortunate that there was no significant loss to the taxpayer. It welcomes the assurance of the Accounting Officer that the control procedures have been tightened and it trusts that the weaknesses highlighted by the Comptroller and Auditor General will not recur.

COURTS

Failure to effect payment of matured liability

39.A condition of a contract worth £189,756 for the delivery and installation of a Local Area Network to improve the efficiency and quality of communications and data transmission links between a computer based in the Four Courts and terminals located in various buildings in and about the Four Courts Complex which housed the Dublin Metropolitan District Court and the Land Registry, was that a part payment of £102,000 be made by the end of 1986. As the new Network was to be a shared facility, £27,000 was chargeable to and paid from the Land Registry Vote in 1986 but the balance of £75,000 chargeable to the Courts Vote was not paid until 1987 even though the total bill was received under the same invoice. The Accounting Officer had told the Comptroller and Auditor General that the account was either overlooked or mislaid and the failure to make payment was only noticed following representations from the supplier.

The Committee notes that, while the amount not paid was £75,000, the saving on the Appropriation Account was only £51,584, thereby raising the question as to whether the payment had been deliberately held back to avoid incurring an excess Vote. The Committee accepts the Accounting Officer's explanation on the matter but it must point out, as it has in the past, that matured liabilities must be paid before the end of the financial year and must not be postponed even at the risk of an excess Vote. The Committee would take a very serious view if this accounting principle was deliberately breached.

LAND REGISTRY & REGISTRY OF DEEDS

Staffing difficulties and delays

40.Arising from the questioning of the Accounting Officer in April 1988 about the delays in the registration of lands by the Land Registry — which the Accounting Officer said was attributable to staff shortages, the Department of Finance representative expressed his concern about the efficiency of the Land Registry in very forthright terms. Because of this, the Committee agreed that the matter necessitated examination in greater detail and, indeed, that it would be abrogating its responsibilities if it failed to follow up the concerns expressed by the Department of Finance. Accordingly, in July 1988, the Committee wrote to the Accounting Officer requesting a detailed report on the matter. When a reply had not been received by late September, the Accounting Officer was requested to attend a meeting arranged for 6 October for which the agenda was “staffing difficulties and delays in the Land Registry”. The Accounting Officer's availability to attend was confirmed but subsequently he indicated that he was unable to do so due to circumstances beyond his control. At the meeting held in his absence, it was agreed to again request his attendance at a meeting arranged for 13 October.

In the interim, correspondence was received from the Minister for Justice stating that he had instructed the Accounting Officer not to attend the meeting on the grounds that the subject matter of the agenda was outside the Committee's terms of reference and a matter for which he, and not the Accounting Officer, had overall responsibility as it covered a policy matter. Further correspondence was exchanged and the Accounting Officer appeared before the Committee on 26 January 1989.

The Committee has always accepted that it is open to any Accounting Officer to decline, during the course of a meeting, to answer any question which he can justifiably claim to be related to a matter of Government policy; there are numerous examples of this happening not just with this present Committee but also with past Committees. In this instance, it was solely with the non-policy aspects of the staffing difficulties and delays within the Land Registry that the Committee wished to examine the Accounting Officer. The Committee must assert that issues like the use of computer equipment purchased from Voted moneys, which the Department of Finance representative at the 14 April meeting stated was not being used by certain members of staff, and which must, therefore, have had implications for efficiency and economy within the Department are clearly within its remit. Likewise, staffing difficulties and delays could, prima facie, also have a bearing on the collection of State revenue by this Office which was responsible for generating approximately £8 million in fee income in 1987. In this context, the Department of Finance publication, “An Outline of Irish Financial Procedures” sets out clearly the responsibilities of Accounting Officers. It states:—

“The Accounting Officer is personally responsible for the safeguarding of public funds and property under his control, for the regularity and propriety of all transactions in each Appropriation Account bearing his signature, and also for the efficiency and economy of administration in his Department.”

This responsibility of Accounting Officers was confirmed as recently as 10 November 1988 by the Minister for Finance in Dáil Éireann when he stated, in reply to a parliamentary question, that “Accounting Officers of Departments have a particular responsibility in ensuring efficient management of resources which is the subject of review by the Comptroller and Auditor General and the Committee of Public Accounts.”

While the Committee would not have any function in relation to the actual allocation of staff and other resources which is clearly a policy issue, it would regard it as a normal function to examine the Accounting Officer on how well these resources are used. This, because of the statements made by the Department of Finance representative, would have been one of the issues which the Committee was concerned about when it wrote to the Accounting Officer on 27 July 1988. Had this been responded to to the Committee's satisfaction, it is likely that the subsequent controversy involving the intervention of the Minister for Justice could have been avoided. This latter aspect brought a political dimension to the issue which the Committee regards as unfortunate since the Committee has no function vis-à-vis the Minister or vice versa. In this context, the Committee wishes to point out that “An Outline of Irish Financial Procedures” states that “an Accounting Officer should consult the Department of Finance on any point of doubt concerning his duties and responsibilities”. The Committee is not aware that such consultation took place. Indeed, had the Accounting Officer explained his difficulties to the Committee — as he is entitled to do in his own right — it is certain that the Committee would have reassured him that it had no intention of questioning him on policy matters.

At the Committee's insistence, the Accounting Officer reappeared before the Committee on 26 January 1989 when the agenda set was to conclude the examination of the 1986 Appropriation Accounts for the Justice Group of Votes — the original examination of which brought to light the difficulties in the Land Registry. The Accounting Officer repeated to the Committee that the difficulties in the Land Registry were related to staff shortages. The staff complement of 541 in 1980 had been reduced to the present day number of 383, a reduction of 29 per cent. Computerisation in the Office commenced in 1982 and by the end of 1986 just short of £1 million had been spent. The computerisation programme was proceeding at a pace which the available staff resources allowed; approximately 20 per cent of the work had been computerised to date. When computerisation had commenced it was envisaged that it would take ten years but the programme had now fallen into arrears because of the staff shortages and it was difficult to say when it would now be completed.

In relation to the comments made by the Department of Finance representative, the Accounting Officer stated that it was not true that computers had been left unused by virtue of a decision of the staff in the Land Registry to boycott new technology. The equipment was being fully utilised and utilisation of the equipment was never used as a bargaining point by staff. The Department of Finance representative said that the information available to his Department was that, when changes in procedures involving the use of computers were being introduced in the Land Registry in 1986, there was a certain degree of acrimony towards the changes and some members of the staff decided not to utilise computers for a specific period. However, he was happy to accept the information given by the Accounting Officer who was obviously closer to the situation than he was.

The Committee is glad to get the assurances of the Accounting Officer that the computer equipment purchased to date for the Land Registry is being fully utilised and that the staff are working efficiently and effectively. However, it still has to express its concern about the long delays affecting land registration which currently exist in the Land Registry and which have been a cause of serious public inconvenience for many years. It will monitor the progress being made in the computerisation programme over the next few years and it can only hope that the recent decision of the Department of Finance to allocate an additional 36 staff to the Office will speed up this process and, ultimately, lead to the elimination of these delays.

OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

Staffing

41.Again as in previous reports, the continuing unsatisfactory situation regarding the level of staffing in the Office of the Comptroller and Auditor General was brought to the Committee's attention in the 1985 and 1986 Reports. This matter is still of concern to the Committee.

The Committee published its own special report in May 1988 on the future role of the Comptroller and Auditor General and the Committee of Public Accounts and it made 29 recommendations in relation to the Comptroller and Auditor General alone. The Committee understands that the Minister for Finance has recently agreed to the filling by redeployment of vacant posts in the Office of the Comptroller and Auditor General. However, in the context of a possible expanded role for the Comptroller and Auditor General which the Committee recommended in its special report, much more will be required and the Committee hopes that the whole question of staffing and the expanded role will be quickly dealt with by the Minister for Finance who, it understands, is close to completing his own review of the matter.

FORESTRY

Financial involvement of the State in Chipboard Products Ltd. (in receivership and in liquidation)

42.The question of the State's financial participation in the restructuring of Chipboard Products Ltd. and the subsequent going into receivership in November 1983 and into liquidation in July 1984 was reported on by the Comptroller and Auditor General in his 1985 Report and raised with the Accounting Officer and the Department of Finance. In evidence, the Accounting Officer told the Committee that the total State exposure in the case amounted to £3.371 million comprising share capital (£0.534 million), State loans (£0.466 million), State guarantees (£1.157 million), capital grants (£0.195 million) and timber supplied from State forests (£1.019 million). Investment in a previous version of the company called Chipboard Ltd. mainly through the IDA and Fóir Teoranta, brought the total State investment to over £6 million of which in the region of £2/£3 million was expected to be recovered.

The delay in finalising the matter arose because of legal complications arising from another case which was before the Supreme Court in relation to charges on companies' book debts which had a relevance to the receiver of Chipboard Products Ltd. When that judgement was delivered in November 1985, other complications arose in relation to the amounts that might be due to the Department of Finance and the banks in connection with the State guarantees.

State guarantees of the company's bank borrowings of £1.1 million were met in February 1984 by payment from the Centaral Fund of £1.157 million, including interest of £57,000. Subsequent to his examination, the Accounting Officer informed the Committee that this sum had recently been repaid by the Receiver to the Department of Finance by virtue of the Minister's Right of subrogation under common law whereby the State had adopted the rights that the Bank of Ireland, who had appointed the Receiver, had on foot of the bank's debentures to collect the moneys which the State had guaranteed and had paid over to the Bank. The Accounting Officer further stated that entitlement to interest remained to be resolved and would be the subject of further discussions between the Department of Finance and the Receiver.

The loan element in the amounts quoted at the outset was directly secured by a debenture giving the Minister for Forestry (as he then was) a fixed charge on the company's land, buildings and plant and this enabled £348,000 to be recovered in July 1987 in partially meeting the claim of the Minister. Any further amounts due to the Minister for Energy (who now has responsibility for the matter) would not be known until the Receiver furnished information on his final distribution of funds.

Monies due from the sale of timber

43.Difficulties encountered by the Department of Forestry in collecting monies due from the sale of timber were related by the Comptroller and Auditor General in three separate paragraphs in his 1986 Report.

One of the cases was previously referred to in the 1983 Report of the Comptroller and Auditor General and in paragraph 45 of the Committee's own Report on the 1982 and 1983 Appropriation Accounts. The Accounting Officer told the Committee that legal proceedings had just commenced against the guarantor who had refused to pay the sum covered by a guarantee it had given for a subsidary company which defaulted on a payment of £215,553 due for timber supplied. The Company had a credit limit fixed at £150,000. He said that he understood that legal proceedings may be initiated against the Department for failure to supply the relevant timber.

In the second case, the Department had been informed by the Chief State Solicitor that, as the company involved had no remaining assets after ceasing to trade in February 1986, it would not be practical to pursue through the courts the recovery of the amount involved viz. £42,446. Part of the amount outstanding involved dishonoured cheques and post-dated cheques which could not be negotiated. The balance represented money due under credit arrangements where the credit limit was fixed at £20,000.

The Accounting Officer had explained to the Comptroller and Auditor General that the Department now included a “Retention of Title” clause in its contracts of sale in order to allow for repossession of identifiable material removed should similar situations arise. In evidence, he said that this procedure had at one stage been identified as “the magic wand” for dealing with such cases, but his Department had not to rely on this recourse to date. The Department now had a rigorous system of control of credit, being allowed to a limited number of companies only and being guaranteed by the banks. The question of accepting post-dated cheques was not something which was normally done. He said that the amount of losses incurred was minute in relation to overall sales which was in the region of £15/£20 million annually.

The third case involved a dispute between the Department and a customer in regard to the interpretation of the terms of a contract for the continuous supply of pulpwood under an agreed pricing structure which allowed for a specified increase after the first three years of supply. The dispute revolved around the operative date of the increase. Under the Department's interpetation, a sum of £144,747 was still owing by the Company.

The Committee would like to be kept informed of the progress made in relation to the first and third cases.

ENERGY

Avoca Mines Ltd.

44.The Committee received an update on the receivership of Avoca Mines Ltd. from the Comptroller and Auditor General and the Accounting Officer. Loans totalling £9.9 million together with accrued interest of £10.7 million were written off as irrecoverable.

The Accounting Officer told the Committee that the receivership had been terminated and the Department itself was concluding the disposal of the remaining assets, for which it expected to get about £170,000. The full cost of the receivership was about £ million of which £650,000 was for fees and expenses of the receiver. He added that there was little prospect of the mines being operated again as previous attempts by the State in assisting a mining venture at Avoca proved unsuccessful.

The Committee is pleased to learn that the receivership has been terminated and that the Department itself is disposing of the remaining assets The Committee has on a number of occasions expressed concern about the duration of receiverships and liquidations involving State enterprises where the ultimate costs are being borne by the taxpayer and where the prolongation of the receivership/liquidation increases those costs, particularly the costs incurred on fees. It considers this case to be a good example on an unnecessarily lengthy exercise. It feels that the Department of Finance should consider whether any means can be found wherby costs arising in such cases can be minimised, whether, for instance, the appointment of an official receiver would be worth considering or whether, in certain circumstances, an official of a sponsoring Department could conveniently be nominated to fulfil that statutory function.

Bord Gáis Éireann — Acquisition of Dublin Gas Company

45.The Committee notes that up to 31 December 1986 the profits of An Bord Gais Éireann (BGE) from the supply of natural gas amounted to £320,410,000 of which £293,555,000 was applied under section 11 (2) of the Gas Act, 1976 as follows:— Payments to Exchequer £245,500,000, loans to Dublin Gas Company £48,055,000. The Accounting Officer told the Committee that, under the original plan, proposed funding by the State in Dublin Gas Company was to amount to £104 million by the end of 1987. However, as the Company started to get into difficulties, it went into receivership. Funds were made available during the receivership to discharge obligations to certain unsecured creditors, whose services were essential to keep the company going. BGE acquired the Company which was to continue as a separate corporate entity but, in effect, was a division of BGE and, by the end of 1987, State funding had arisen to £134 million.

The Accounting Officer said he was satisfied that there was no real alternative to the course of action which was embarked on. Banking and other liabilities of Dublin Gas amounting to £62 million became a liability of BGE on acquisition and these would be discharged in accordance with new banking arrangements which had been concluded in November 1987. The Accounting Officer expected that Dublin Gas would be making profits in its own right in a few years and that BGE, as the global enterprise, would therefore, resume paying profits to the Exchequer. No such funds had been paid to the Exchequer since 1986.

The method for application of the profits of BGE was discussed during the examination. While the Committee accepts that the application of the profits was in accordance with section 11 (2) of the Gas Act, 1976, nevertheless it feels that the extent to which BGE, and, therefore, the State, was subsidising the Dublin Gas Company would have been more transparent if Dáil Éireann had been asked to vote specifically on a matter, which related to the use of what was, in effect, public moneys.

STATIONERY OFFICE

Deficiencies in paper stocks

46.The Comptroller and Auditor General told the Committee large deficiencies in the stocks of certain types of paper held by the Stationery Office and which was estimated at £100,000 at the end of 1985 had risen to £137,000 by the middle of 1986. Garda investigations of the deficiencies proved inconclusive. The deficiencies occurred while the paper stocks were held in rented accommodation at the Dublin Docks but, since the transfer in July 1986 of the stocks to the Stationery Office's new accommodation in Bishop Street, no serious deficiencies had arisen.

The Accounting Officer told the Committee that, at the beginning of the 1980s, most of the Stationery Office's paper supplies was being supplied by Clondalkin Paper Mills Ltd. who held a lot of the stocks until they were required. However, when Clondalkin Paper Mills began to experience difficulties, the Stationery Office started to purchase from UK mills and the paper had then to be taken into stock. Because of this, temporary rented accommodation in the North Wall under the management of a Dublin warehousing company had to be acquired by the Office of Public Works and the Stationery Office occupied these premises from the end of 1981 to the middle of 1986. He said that the keys of the warehouses were retained by the management of the warehousing company who also provided night security. Whenever paper stocks were required, employees of the Stationery Office got the keys from the Company, removed whatever material was required, locked up and handed back the keys to the Company. The warehouses were deemed to be secure in the period to 1984 but when the deficiency was noticed at the end of 1985, extra security works were carried out by the Company at the request of the Stationery Office and the Gardaí were called in in January, 1986. All possibilities were looked at by the Gardaí during the course of their investigations but, beyond having their suspicions as to who might have committed the crime, nothing conclusive emerged. In the region of 30 to 40 tonnes of paper disappeared compared with purchases during the year of about 1,500 tonnes.

The Committee agrees that the security arrangements for the handling of the stocks were less than adequate. To allow access to the stocks by personnel other than employees of the Stationery Office was an extraordinarily naive decision. With regard to the end 1984 stocktaking showing up a decrepancy of £16,000, the Committee feels that this in itself should have given some cause for concern as the amount itself represents a considerable volume of paper — even though the amount is small when account is taken of the total purchases in the year — and that, therefore, greater vigilance should be exercised in the months immediately following that stocktaking. However, regular spot checks did not appear to have been carried out in 1985. The Committee wishes to express dissatisfaction that this was not done as this would have shown that the stocks were still disappearing and the problem would have been nipped in the bud much sooner. The Committee wishes to reiterate its dissatisfaction in this matter.

PUBLIC WORKS AND BUILDINGS

A series of issues highlighted by the Comptroller and Auditor General in his Reports for 1985 and 1986 regarding the Office of Public Works (OPW) made disturbing reading for the Committee. The items were dealt with on consecutive days by the Committee and, in one case, that relating to a building at No. 5 Kildare Street (Dublin), involved a special visit to the site. The items examined are dealt with the following paragraphs.

Costs associated with the purchase and renovation of a building at No. 5 Kildare Street (Dublin)

47.In his 1985 Report, the Comptroller and Auditor General cited the sequence of events from 1979 to 1985 in connection with the leasing and eventual purchase of a building at No. 5 Kildare Street. In evidence before the Committee, the Accounting Officer told of the background leading to the purchase and updated the Committee on the position. He stated that in the very early seventies the Department of Education, which was responsible for the National Library, was concerned about the future accommodation needs of the Library and they engaged a consultant to prepare a report for them. That report was then considered by an interdepartmental committee and one of the recommendations of the committee was that the Commissioners should seek to acquire all the property from the Nassau Street corner up to and including No. 6 Kildare Street and that that entire accommodation plus the accommodation in the existing premises of the Library could deal with the existing and projected future needs of the Library. The premises at No. 4 was owned by the State at the time and the Office of Public Works pursued the idea of purchasing No. 5 which was held on lease at that stage by Córas Iompair Éireann (CIE). CIE had a lease which commenced in 1961 and which was to expire in 1982. The Office of Public Works had protracted negotiations with CIE in the hope that it could take over their lease and that, by having its foot in the door, it could manage to acquire the property from the landlord or, under the terms of future legislation, it could secure an extension of the lease, under the Landlord and Tenant Bill as it was then and which became an Act in 1980. This latter assumption did not prove to be the case.

In the meantime in 1975, OPW secured Nos. 1, 2 and 3 and as it already had No. 4, it intensified its efforts to get No. 5. The leasehold interest was eventually purchased for £70,000 in 1979 when it had only three years to run. The Accounting Officer admitted that the decision to take the lease from CIE with three years to go was fraught with risk and danger. However, it was considered by the Board at the time as being an acceptable risk because it felt that if it lost the chance of getting No. 5, it would lose the opportunity, perhaps forever, of dealing with the National Library in the way it had intended. As the lease had three years to run, the question arose of making the building available to other Departments until the future of the building was decided on or until the fee simple was actually secured from the owner. It was offered to the Departments of Industry and Commerce, Labour and Justice but none of those was willing to move in without substantial alterations or renovations. Meanwhile, the time available under the lease was rapidly running out. There was a reluctance to do any work in the building since, firstly it was not going to be occupied by any of the Departments it was offered to and, secondly, if OPW secured the fee simple, the proposal was actually to gut the building or, perhaps, take it down altogether and rebuild it as part of the wider scheme. Effectively the Accounting Officer said that the management of the property portfolio in OPW fell between two stools.

Nothing was done with the building up to early 1981 when it was discovered that there had been a break-in at the premises and that lead had been stripped from the roof and cisterns and other items had been taken from inside which had led to the building being saturated with water. Remedial works were carried out to the roof and some other minor repairs were done inside at a cost of £19,296. A malicious injuries claim was lodged with Dublin Corporation on foot of which a payment of £13,000 was received. By the time the remedial and other minor works were completed, there were only about nine months to run on the lease. Again, nothing was done because, as the Accounting Officer told the Committee, officials were afraid to commit themselves to expenditure on a building where an extension of the lease or outright purchase might not be achieved.

The Office of Public Works again intensified its efforts with the owners of the property to seek to acquire it. The owner at that stage was an elderly lady resident in England but it was very difficult to establish contact and make progress with a view to buying out her interest. The Accounting Officer said that at the time the lease was secured from CIE, OPW was satisfied that it would have concluded such a deal with her because in a similar case — a property at No. 1A in Leinster Lane behind the premises in question — she also had been the fee simple interest holder and OPW had bought it out after acquiring the leasehold. She subsequently transferred the dealings with the property to one of her family and her family sold it to a property company. The property company subsequently transferred it to another property company in which the family maintained shares. This, the Accounting Officer said, was where it went wrong for the OPW in that its negotiations with the second property company did not bear fruit because, in the sale from one company to the next, it was sold for a nominal price and the eventual owners were then not prepared to sell it on to OPW and show a huge capital gain. Instead they offered a ten year lease which was not acceptable in view of OPW's long term plans for the building. Arising from all this, nothing was done and, while the lease ran out in the middle of 1982, OPW did not quit the premises until July 1983. In August 1983, the owners put in a dilapidations claim amounting to over £1 million on the grounds that lack of maintenance had led to a serious deterioration of the building and that dry rot, which the Comptroller and Auditor General reported had been discovered in the building while the damage to the roof referred to earlier was being repaired, had remained untreated up to the time of the surrender of the property. The Accounting Officer agreed that, in this regard, the OPW was in breach of the covenants of the lease agreement by not maintaining the building over the three year period. The claim was finally settled out of court in July 1985 for a sum of £550,000 plus costs amounting to £94,000. The Commissioners of Public Works own costs amounted to £28,000. Part of the settlement was that the building be sold to the OPW for an additional £50,000.

The Accounting Officer said that the out of court settlement was agreed to because it was felt there was nothing to be gained by going to court and incurring further substantial legal costs. The Commissioners had estimated the minimum settlement possible at £505,000. This figure was based on the capital value of the property, if maintained, at £480,000 less its value, as surrendered, at £100,000 plus the owner's interest entitlement at 11 per cent from July 1982. In addition, the cost of restoration works was put at £535,000 including interest. The settlement sum was within those figures.

In 1985, legal proceedings were instituted against the Commissioners by the Royal College of Physicians in Ireland, the owners of the adjoining building at No. 6 Kildare Street, on the grounds of alleged spread of dry rot to their property. The court required the OPW to undertake certain works including eradicating the dry rot and this, along with the structural reinforcement of the shell of No. 5, cost approximately £150,000. An out of court settlement was agreed with the Royal College of Physicians in the week prior to the Accounting Officer's examination but, as the matter was to be raised in Court at a later stage, the Accounting Officer was reluctant to give the exact amount of the settlement. The Committee understands that this would be in the region of £400,000 including costs.

With regard to future work on the building, the Committee understands that a contract for adaptation works to convert the building to suit the needs of the National Library was awarded in February 1988. The Accounting Officer indicated that this would cost £650,000 approximately, that the works would be completed around mid-1989 and that the building would be fully occupied before the end of 1989.

The Department of Finance official who was examined by the Committee said that his Department did not become aware of what happened until after the event and it was then faced with a damage limitation exercise. It had no discretion about allowing the charging of the amounts involved in the claims to the Vote because these involved court decisions. However, sanction for so doing did not imply in any way that the Department condoned or approved of what actually happened. He said that, as regards the operation of the procedures in the Office of Public Works for the purchase and maintenance of buildings, the case under review was a once-off situation and that it was not possible to prescribe detailed rules to cover all cases which arose in the on-going management of the property portfolio. In general, the Department of Finance took the line that there was a responsibility on the part of management of other Departments to manage their own affairs in a reasonably competent manner.

As the extent of the overall expenditure on this subject may not be clearly evident from the foregoing paragraphs, the Committee feels it appropriate that it should be summarised at this juncture. Expenditure totalling almost £2 million will have been incurred on completion of the project.

The Committee is seriously disturbed at the sequence of events which has led to this appalling misuse of taxpayers' money. The Accounting Officer admitted to the Committee that the value of the building on completion of the renovation and other works would be somewhere in the region of £500,000 and £750,000. The Committee would tend to lean towards the lower of these amounts which puts the extent of the misuse of funds into perspective. The assumptions made by the Office of Public Works that it would have no difficulty in acquiring the building on the termination of the lease coupled with the apparent doubt and indecision as to what its tactics should be when the assumptions did not turn out as expected were the contributory factors in this situation.

The Committee wishes to comment on other aspects of this case. The agreement reached regarding the purchase of the property, involving as it did a huge compensation claim and a nominal price for the property, merits further clarification. The Committee wonders how much this method of settlement contributed to the property owner legally reducing its tax liability arising on the sale of the property and whether, in fact, the compensation settlement may have been deliberately inflated so as to pitch the price of the property as low as possible thus avoiding a larger tax payment by way of Capital Gains Tax.

While acknowledging that the Accounting Officer told the Committee that the three year lease was valued at £70,000 by OPW's valuers, the Committee, nevertheless, considers that this was high considering the amount being paid by CIE on an annual basis (£1,400).

Finally, the Committee wonders to what extent CIE might have been negligent in meeting its maintenance obligations during its period as lease holder of the property. It wonders whether this possibility might have been looked at when the dilapidations claim was being settled as the extent of the repairs which was necessary could suggest that the building was allowed to run down.

The Committee would like to know what action has been taken internally in OPW as a result of this case in order to ensure that, at least for the future, the lessons learned will be put into effect. It is clear for instance that there was a serious lack of liaison between the Property Division and the Maintenance Division which must have at least been a contributory factor in this appalling incident. No doubt there are other procedures and decision-making processes within the Office which might need looking at. The Committee understands that the Government has ordered a review “to examine the present operation of the Office of Public Works in all its aspects and to recommend whether changes are necessary to ensure an efficient and cost effective service to the State”. The Committee will be interested to see the outcome of this exercise.

Leasing of office accommodation in Cork

48.Office accommodation at South Mall, Cork was leased for a period of 35 years from August 1977 even though a site at Sullivan's Quay was purchased in the years 1976 and 1977 with the intention of erecting a central office building to accommodate staff from a number of Government Departments.

The Accounting Officer explained to the Committee that the 35 year lease was the shortest that could be negotiated by the Commissioners in respect of badly needed accommodation in Cork City arising out of conditions which gave rise to many complaints by staff associations and public servants. The accommodation being occupied by staff of the Revenue Commissioners in the middle seventies had been described as frightening. In one instance, the staff were sharing toilet facilities with the patrons of a bar and restaurant on another floor. The Commissioners (of Public Works) were in breach of the Office Premises Act and industrial action had been threatened if suitable alternative accommodation was not found within a very short time. At that stage, civil servants generally were aware of the standards that were being provided for employees in the private sector — banks, building societies and insurance companies — and, not being prepared to accept substandard conditions, sought similar conditions for themselves. Under these circumstances and recognising that the Office of Public Works was operating in a seller's market, the accommodation at South Mall was leased for thirty five years at a yearly rent of £52,150 plus service charges, subject to five-yearly reviews. The arrangements were approved by the Department of Finance. The first review in 1982 increased the rent to £126,000 plus service charges. The Accounting Officer added that it was felt, at the time, that there would be no difficulty in surrendering the lease at a future date when the offices planned at Sullivan's Quay came on stream but, unfortunately, the bottom had fallen out of the property market by then. When the Sullivan Quay building became ready for occupation in 1984, staff were moved in as quickly as possible on a phased basis and any surplus accommodation was disposed of by the non-renewal of leases which expired. The Accounting Officer had told the Comptroller and Auditor General that negotiations were then opened with the lessors with a view to their accepting a surrender of the lease but this did not work out and the disposal of the Office of Public Works interest in the property by public advertisement also failed due to the depressed state of the property market generally. He told the Committee that the entire office space in Cork city was then rationalised to make the best possible use of what was on hands. The only area that was occupied in Cork city at the time of the examination of the Accounting Officer (July 1988) was one floor of the building at South Mall (three floors were leased) and that was due to be occupied within a short period by the transfer of the Department of Agriculture from rented space on which the Office of Public Works was already overholding as the lease had expired.

In relation to the site at Sullivan's Quay, the Accounting Officer told the Committee that the Office of Public Works had been trying to acquire this site for a number of years to provide accommodation that would relieve pressure on the Revenue Commissioners in Cork city. The delays in actually bringing the project to completion as explained by the Accounting Officer were set out in the Comptroller and Auditor General's Report. The Office of Public Works did not gain possession of the full site until June 1977. Various objections and proposals put forward by the planning authorities to the consulting architects designs were not resolved until October 1979. Following the obtaining of Department of Finance sanction to proceed in December 1979, the consulting architects was immediately instructed to prepare contract documents which were available in September 1980. Department of Finance sanction for expenditure on the project was obtained in March 1981 following the examination of tenders which had been received in December 1980 and the contract was placed in May 1981. The Accounting Officer had told the Comptroller and Auditor General that he was satisfied that there was no unavoidable delay by the Office of Public Works in the placing of a contract in this case.

The Committee has considered this case carefully and regards the position in which the Office of Public Works found itself as unfortunate. However, in relation to the first rent review in 1982, the Committee finds it difficult to accept that an increase of almost 125 per cent could be justified, particularly considering the subsequent depression in the property market. The Comptroller and Auditor General had stated that this accommodation was more expensive than other accommodation which the Office of Public Works was surrendering. The Committee wonders, therefore, if the fact that cheaper accommodation is still available in Cork city is one of the reasons why the owners of the building had not looked for a rent review as they were entitled to in 1987.

On a general note, the Accounting Officer mentioned during the course of the examination that the Commissioners had 5.5 million square feet of accommodation to manage with a small number of staff and numbers which were getting smaller with the effects of the embargo. His comment that the property portfolio was “being managed as best we can” could be interpreted as meaning that it was not being managed effectively. The Committee would not regard it as good financial management if, on the one hand, there is a saving resulting from a reduction in staff numbers, but on the other hand, there is an even bigger loss through an office not having sufficient time and resources to effectively carry out its functions. If this is the case, the matter should be looked at by the Minister for Finance.

Erection of new Government Offices in Leeson Lane, Dublin.

49.The Comptroller and Auditor General reported that, of the final cost of £4.223 million for the erection of new Government Offices in Leeson Lane, Dublin, just under £400,000 related to payment of a claim for compensation to the contractor for damages and loss incurred by him due to a delay by the Commissioners in furnishing design information and instructions during the contract. It also included professional fees amounting to £21,350 paid to some of the consultants, who had been engaged by the Commissioners for the project, for consultation, examination and reporting on various aspects of the compensation claim.

The Accounting Officer told the Committee that the initial claim by the contractor, in excess of £1 million, was on the basis of the delay as outlined by the Comptroller and Auditor General. He said that, in reading the files on the matter (he was not Accounting Officer when the claim was lodged in 1983), there was a serious doubt in his mind that there was any extensive delay but the illness and subsequent death of the structural engineer, who was part of the design team, may have afforded the opportunity for putting a case to the courts which would be difficult for the Commissioners to refute. Accordingly, it was the opinion of counsel that the action should be settled out of court.

The Accounting Officer explained that the structural engineer was the sole practitioner in the firm and was one of the most highly esteemed and frequently sought after. He had become terminally ill and it was some time before this became known to either the Office of Public Works or to members of the design team. As soon as the architect became aware of the illness of the engineer another engineer was employed.

In the meantime, there was some small delay but the Accounting Officer was not satisfied that the delays were such as to justify the award that was ultimately agreed on. He agreed that the engagement of a sole practitioner led to problems and he said that this would be borne in mind for the future.

As regards the adequacy of the procedures for the monitoring of progress on contracts, the Accounting Officer told the Comptroller and Auditor General that the procedures which operated for this project were those which were in general use at the time for such projects. Since then, revised procedures have been in operation which involved extensive and frequent consultation between project officials and consultants and were proving satisfactory.

The Committee agrees that the illness and untimely death of the consultant was a major factor is giving rise to the claim for damages. However, it trusts that the Office of Public Works will have learned from its experience in this case and it would like to be assured that the current procedures incorporate an early warning system which would prevent a recurrance of the delays experienced and the costs associated with such delays.

Claims against the Insurance Corporation of Ireland on foot of insurance bonds.

50.The Committee notes with concern the delay in the recovery of amounts claimed in two cases from the Insurance Corporation of Ireland by the Commissioners on foot of performance bonds arising out of the failure of contractors to complete their contracts. The total amount involved is £309,000 approximately. The Accounting Officer said that, in one case, the Company were contesting the amount it should pay and, in the second case, it was contesting liability of any sort. Both cases were now the subject of legal proceedings.

The Committee is concerned that an Office of the State and an insurance company propped up by the State cannot reach a mutually satisfactory resolution of those cases without recourse to the courts with all the attendant costs that that implies. It would like to see a speedy conclusion to these cases and would like to be informed of the outcome.

Dry rot eradication and other improvement works at six houses in Merrion Square, Dublin.

51.The Comptroller and Auditor General reported that a contractor, who was awarded a contract worth £34,000 for the eradication of dry rot and for other improvement works at three houses in Merrion Square, Dublin, carried out further works on these houses and was also given a contract to carry out similar works at three further houses in the area without the additional works going to tender. The contractor was eventually paid £427,000.

The Accounting Officer told the Committee that quotations were sought in 1982 from a number of reputable firms for the original works at the three houses and the lowest suitable quotation was accepted in June 1983 on a schedule of rates basis as the indications were that it would not cost a lot. However, when the contract got off the ground and the work developed, the extent of the dry rot problem was discovered to be much greater than originally envisaged. Dry rot was then discovered in three other houses in Merrion Square. The architect responsible for overseeing the work, conscious of the problem which had arisen in relation to the spread of dry rot in No. 5 Kildare Street (paragraph 47), was not prepared to see the buildings deteriorate further and recommended that the additional works required should be contracted to the contractor already on site without seeking fresh tenders. This was on the basis that the rates which were applying under the original contract were highly competitive and considered to be good value. It was expedient also to tackle the dry rot problem as halting the eradication works to allow fresh tenders to be sought could have led to even greater expenditure. This course of action was approved at senior administrative level within the office.

The Comptroller and Auditor General had, in fact, expressed concern that this type of administrative control and monitoring of the contract might be lacking. In response to these concerns, the Accounting Officer at the time told him that formal administrative approval did not keep step with the rising expenditure involved due to the protracted illness of the Office of Public Works senior architect and that adequate financial control was not exercised to the extent that the Office of Public Works management were not kept informed of the escalating costs. However, irrespective of the question of the controls, the eradication works could not be halted. He also told the Comptroller and Auditor General that a circular had been issued to staff pointing out the necessity for prior administrative approval to be obtained in advance in such cases.

Notwithstanding the Accounting Officer's assurance that the circumstances dictated urgent action and that the rates at which the additional work was carried out were highly competitive, the Committee wishes to reiterate its view that the public tendering system should be used save in exceptional circumstances in order that equity can be seen to have been applied in the award of contracts.

The Comptroller and Auditor General also enquired as to whether or not there was a planned approach to maintenance because the absence of such could lead to deterioration especially in the fabric of old buildings. There were some indications that there was no planned approach to maintenance — one of the houses concerned had been vacant for many years without maintenance and another had suffered severe water damage for the want of a proper fitting of a downpipe. The then Accounting Officer replied to these queries by stating that he considered that a very satisfactory maintenance and inspection programme was being implemented but, on the basis of the evidence taken, the Committee would find it difficult to agree with this. Indeed, while the reissue by the Office of Public Works of an architectural practice and procedures circular to staff putting special emphasis on the early detection of dry rot is to be commended, it would seem to suggest that something was amiss and that, what was happening in practice, fell somewhat short of what was laid down in procedures. It is clear to the Committee that neglecting or skimping on maintenance can be a false economy and can give rise to even greater costs ultimately to the State. The Committee trusts that this is recognised when cost equations are been drawn up.

Of the six houses under review, five were owned by the State and the other was on a long term lease. The Accounting Officer told the Committee that one of the houses had been sold the previous week and that there was a 100% profit over and above the amount of money that was put into it. Two more houses were also on the market and the remaining two would be put on the market on the transfer of staff to other premises at the end of the year. It was expected that there would be a substantial return on the sale of these houses also.

Deferral to 1987 of matured liability

52.The probability of an excess arising on the Vote in 1986 was averted by the decision of the then Accounting Officer to defer payment to 1987 of amounts totalling £384,000 which had been supported by vouchers which had been certified for payment between 7 November and 16 November, 1986. The Accounting Officer had explained to the Comptroller and Auditor General that he was not prepared to meet these payments as it would have meant spending more money than the Dáil had allocated to him in 1986.

As the Comptroller and Auditor General pointed out, the normal course would be to identify, if possible, the excess expenditure in good time to enable the Dáil to vote a Supplementary Estimate. If this was not possible, the liabilities as they arose should be met, thereby incurring an excess vote. Then this Committee would decide the issue on its merits and make recommendations to the Dáil. The integrity of this process has been well established and successive Committees have commented critically when it has not been complied with in the past.

The Committee feels that expenditure monitoring procedures within the Office of Public Works should have been such as to highlight the likelihood of overspending particularly so, as the Committee, in its examination of the 1983 Appropriation Account for the Office of Public Works, had reason to examine the Accounting Officer on what appeared to be payments on foot of immature liabilities. It trusts that more attention will be given in future to this fundamental requirement of financial management and control so that timely action can be taken to seek the approval of Dáil Éireann for whatever additional funds may be necessary to meet the cost of the service in the year.

REVENUE COMMISSIONERS

Collection of Outstanding Taxes

53.The Committee notes that the appointment of twelve additional Sheriffs in place of the twenty-four County Registrars outside of Dublin and Cork for the sole purpose of enforcing certificates issued under Section 485 of the Income Tax Act, 1967. In support of his claim that this new system of revenue sheriffs was working successfully, the Accounting Officer quoted the following figures for the Committees:—

Despite the apparent success rate, the Committee notes that the backlog of cases was still a major problem. At end June 1988, the number of certificates with the Sheriffs had risen to almost 135,000 and the number of referrals with solicitors was over 18,000. The face value of the certificates was of the order of £500 million, but the Accounting Officer stated that only a small proportion of this, in the region of £50/£100 million, would be collectable. In addition, some 100,000 certificates due for enforcement had not been referred to the Sheriffs because of the volume of certificates already with them.

The Committee is concerned to note the large number of certificates due for enforcement which have not been referred to Sheriffs and it will continue to monitor the progress being made in the collection of outstanding taxes and what effect the new system of Sheriffs is having in reducing the number of certificates awaiting issue and the number actually with the Sheriffs for enforcement.

Irregularities involving the fraudulent claiming of VAT repayments.

54.The Comptroller and Auditor General drew attention in his 1985 Report to a number of serious irregularities involving the fraudulent claiming of VAT repayments which were fortuitously brought to light through the vigilance of a bank official whose suspicions were aroused when a cheque was presented to him. Internal investigations uncovered other similar irregularities.

The frauds were initiated by officials of the Revenue Commissioners setting up fictitious companies constructing fraudulent repayment claims and opening bank accounts in the names of the fictitious companies to which repayments were made. The Accounting Officer told the Comptroller and Auditor General that a total of £18,000 had been fraudently obtained in this way but that approximately £11,000 had been recovered and there was legal recourse to some small amounts which were held in the bank accounts of the fictitious companies. Four officers were involved and they were charged and convicted; three resigned and one was dismissed. The Accounting Officer also told the Comptroller and Auditor General that a further similar case had been discovered involving an amount of £500 but that they had not succeeded in detecting the perpetrator.

The established procedures were geared primarily to prevent traders making fraudulent repayment claims. The Accounting Officer told the Committee that, following the report of a special investigation team, the whole staffing and organisation of the office were changed and tightened up and several security improvements and procedures were brought in. The manual system was replaced with a computer system. Individual officers were provided with individual badges and passwords to gain access to the system, thus enabling every transaction to be traced back to its origins. All new firms applying for registration for VAT were now visited by an inspector — previously there was no check on a newly registered firm if the repayment claimed was under £500 — and no repayments of more than £5 would be made until such a visit took place.

Bearing in mind that a serious irregularity involving £51,000 was perpetrated in the VAT repayments area as long ago as 1978 and that, at that time, the Comptroller and Auditor General had identified deficiencies which could facilitate such irregularities, the Committee must repeat its grave concern that controls were again found to be inadequate. It trusts that the introduction of the improved controls outlined will prevent a recurrence.

Control Procedures for collection of Customs duties and VAT.

55.The Comptroller and Auditor General drew the Committee's attention to his 1983 Report it which he noted that certain control procedures regarding the collection of customs in the Dublin collection area were not being operated and that this was leading to delays in payment and failure to establish correct amounts of customs duties payable. He said that failure to operate these control procedures was perhaps instrumental in cheques received from importers on various dates between May 1979 and January 1987 by an official of the Customs and Excise Service not being brought to account. This had been discovered by the Revenue Commissioners following an investigation of the official's actions over a period.

—goods sometimes released from customs control without duty being paid or secured;

—goods released as duty free samples when it appeared they were commercial consignments;

—failure to record on customs entry documents whether goods had been examined;

—blank cheques provided by an importer attached to entry documentation dated September 1985 (discovered January 1987);

—delays in payment varying from one day after clearance to thirty one months on one occasion;

—unlodged importers' cheques and three presigned but undated and blank cheques drawn by importers and intended to cover consignments which had already been released without entry found in a desk drawer by a supervisory officer.

The Accounting Officer had told the Comptroller and Auditor General that the irregularities had not been detected earlier because of the additional accounting duties arising from the introduction of VAT at import in 1982, which led to the withdrawal of staff from the area responsible for reconciling import entries with cargo manifests; as a result the control procedures became deficient. The Accounting Officer told the Committee that there was no fraud involved in this case. It was more a case of carelessness and lack of attention to proper control by the officer concerned. After suspension for a period, he was re-instated but downgraded from his rank of being a fixed officer at the airport and reverted to unattached status. The loss in revenue was of the order of £52,000 as one of the firms involved went into liquidation so the chances of recovery were slim. The Accounting Officer admitted that the operation of the system was faulty and that he could not stand over a continuance of what was happening. He said that the procedures were now being fully implemented.

On the broader issue of the general procedures for dealing with customs entry documentation, he said that a major consultancy study, in co-operation and in consultation with the trading community, on the question of computerising the procedures was about to be launched.

The Committee welcomes the assurances of the Accounting Officer that the control procedures are now being implemented but it must express its concern that, although the Comptroller and Auditor General had already brought to attention in 1983 deficiencies in the control procedures in the Dublin collection area, little appeared to be done in the interim. The Committee wishes to be kept informed of the progress made in the computerisation project.

Irregularities under Retail Export Scheme.

56.The Comptroller and Auditor General told the Committee that, in contravention of the Value Added Tax (Goods Exported in Baggage) Regulations, 1984, two Customs Officials, in apparently unrelated instances in Dublin and Shannon, irregularly facilitated the same Dublin company over the period July 1985 to November 1986 by certifying retail sales invoices as representing VAT free sales to visitors intending to export the items concerned. This had been done at the request of an employee of the company sometime after the visitors had left the country when it was impossible to verify the validity of the transactions. In one instance, it involved the certification by an official at Connolly Station (Dublin) of sales invoices for goods he did not examine and which had already been exported by persons departing via Dublin Airport. These practices enabled the company to substantiate what it claimed to be its VAT exempt entries in their VAT returns. In the absence of such certification, the sales invoices would not be acceptable to the Revenue Commissioners as representing VAT free transactions.

The Accounting Officer told the Committee that the initial investigations were designed to establish what exactly had happened in these cases and whether or not there was evidence to justify dismissing the officials concerned. For this reason, the GardaÍ were not brought in. He said that it was important from the Revenue Commissioners point of view to try to ensure that people who were unsuitable did not continue to serve in the office. One official resigned and the case of the other, who was suspended, was being considered by the Department of Finance.

The potential loss of VAT revenue was never fully established but the company involved agreed a settlement with the Revenue Commissioners and no outstanding VAT liability existed for 1985. The later years were still the subject of discussion with the company.

The Committee is concerned that such serious irregularities on a grand scale could continue for almost a year and a half without being detected. It notes the Accounting Officer's assurance that the scheme is now being properly operated by all traders.

Irregularity under the PAYE System.

57.Another unauthorised practice reported on by the Comptroller and Auditor General related to the deliberate amendment of the tax free allowances on the PAYE file by an official of the Revenue Commissioners which had the effect of granting tax-free allowances in excess of entitlements to two taxpayers and which had not been claimed by them.

The Accounting Officer told the Committee that the under-payments resulting from these irregularities were recovered from the taxpayers involved. The official was suspended when the matter was discovered and he had since resigned. As to the concern of the Comptroller and Auditor General with the failure of the system controls to detect the spurious data at the input stage, the Accounting Officer said that the Supervisory Officer goes through the records periodically to check the justification for the allowances but this could only be done on a limited basis. Subsequent to this irregularity being discovered, over 500 cases were checked and no evidence of further irregularity was discovered. He had told the Comptroller and Auditor General that the irregularities must be viewed in the context of the many thousands of transactions that were being processed honestly each day and that the revenue risk was not of an order that would justify the deployment of resources on the scale needed to eliminate it entirely.

The Committee agrees that the controls must be cost effective but, at the same time, it feels that special care must be taken in an area such as this where one must have regard to the potential exposure.

On the general question of what action should be taken against employees who become involved in irregular transactions, the Committee believes the full rigours of the law should be applied and that this should become the general policy. The mere threat of suspension, or being allowed to retire anonymously, is not sufficient deterrent in many cases.

Fraudulent and attempted fraudulent encashment of cheques.

58. The fraudulent or attempted fraudulent encashment of cheques sent by taxpayers to the Revenue Commissioners and repayment cheques issued by the Revenue Commissioners which was raised by the Comptroller and Auditor General in his 1986 Report and was referred to briefly by the Committee in paragraph 23 of its 1984 Report was further discussed on a number of other occasions when the Accounting Officer came before the Committee during 1987 and 1988.

The position as reported by the Comptroller and Auditor General was updated by the Accounting Officer for the Committee. As at 31 August, 1988, this was:—

Category	No. of cheques	Amount (£)
(1) No loss to Revenue	86	540,249
(2) Loss of Revenue	11	24,595
(3) Unrecovered — fraudently negotiated	33	193,528
(4) Unrecovered — not yet negotiated	6	25,433
Total:	136	783,805

Under category (1), no loss was incurred because either credit had been received from the bank which cashed the cheque or payment had been stopped and a replacement cheque received. Under the “loss” category were included repayment cheques issued to taxpayers but diverted into criminal hands and lodged to third party bank accounts. The banks have refused to compensate on the grounds that the warrants authorising payment were intercepted and altered to show false addresses which appeared on the cheques before they left the Office of the Revenue Commissioners.

Under category (3), the latest position was that in 19 cases legal proceedings were being prepared against banks for amounts totalling almost £170,000, in 12 cases the Collector General was in correspondence with the taxpayer and in the remaining 2 cases he was awaiting further information before deciding on a course of action. Under category (4), the cheques stolen had not been negotiated and payment had been stopped.

The Accounting Officer told the Committee that eight people had been charged in connection with the frauds. Four were convicted but one had lodged an appeal. The charges against two were dismissed on the grounds of insufficient evidence, one case had been adjourned more than once and, in the remaining case, the defendant had failed to appear in Court and a warrant had been issued for his arrest. None of those charged were employees or former employees of Revenue or members or former members of the Public Service. However, the Accounting Officer said that the events must give rise to the suspicion that some member or members of the Revenue staff were involved but the Gardaí had no firm evidence to indicate any such involvement. Garda Fraud Squad investigations so far had failed to show who took the cheques out of the system or how exactly it was done, but investigations were continuing.

To try to prevent a recurrance, the Accounting Officer told the Committee that they had taken a number of steps to strengthen the procedures in the Office. These included:

changing Income Tax demand forms so as to discourage taxpayers from sending payments via Inspectors of Taxes;

installation of a strong room in the Cash Office to replace the system of filing cheques overnight in steel cabinets;

supervisors in the Cash Office and Post Room constantly reminded of the need for vigilance;

cheques now stamped ‘Revenue Commissioners Account’ as soon as the envelopes were opened in the Post Room rather than, as previously, when the cheques were received in the Cash Office from the Post Room nearby. Supervisors in areas other than the Cash Office have been given stamps and directed to ensure that any cheques received by them direct from taxpayers were stamped as soon as the envelopes were opened;

the undertaking of a major study on the feasibility of introducing Electronic Funds Transfer systems for the payment of taxes and for the making of repayments.

The Committee is concerned that such a major fraud was perpetrated without, at this stage, being able to pinpoint the origin of it. For this reason, it cannot be satisfied that the extent of the fraud is as reported. It acknowledges that the steps taken and outlined in the previous paragraph will, undoubtedly, strengthen the procedures already in operation in the Collector General's Office, but it feels that it is a situation which needs to be kept under continual review. The Committee would like to be kept informed of developments in this matter.

On the general question of lodging cheques, the Committee is concerned that there may be delays in some cases in the lodgement of cheques. This is unacceptable to the Committee as the maximum use should be made of revenue accruing to the State. The Committee acknowledges that this may be happening only in cases where queries arise but it strongly advises the immediate lodgement of cheques pending the settlement of any cases on which queries arise.

OFFICE OF THE MINISTER FOR FINANCE AND AGRICULTURE

Redeployment of staff on abolition of Farm Classification Office.

59. The Committee discussed with the Accounting Officers of the Departments of Finance and of Agriculture the position of the 91 former Land Tax Inspectors who were on loan from the Department of Agriculture and Food and had completed their work on the classification of land under the Farm Tax Act, 1985 by the end of June 1987 following the decision of the Government earlier that year to disband the Farm Classification Office.

The Department of Agriculture was informed by the Department of Finance that the loan of 88 of these officers was being terminated and they were placed with effect from 1 July, 1987 on the payroll of that Department. However, it was recognised by both the Department of Finance and the Department of Agriculture that the Land Commission work on which the Inspectors had originally been deployed could not absorb the full complement of returning officers and that, in the long term, most of them would be surplus to the requirements of the Department of Agriculture. The short-term engagement on such work of any significant number depended on the stance adopted in regard to the disposal of the Commission's land bank where different options (e.g. free sale or selective redistribution) had significantly different manpower implications. The legal implications of each of these options was under consideration by the Government's legal advisers and final decisions to operate on the redistribution basis were not taken until Spring 1988.

As a result of these decisions 39 Inspectors were assigned to Land Commission work on 14 March, 1988 and 35 more on 9 May. In the interval some 12 had decided to take retirement or leave of absence and 2 had been redeployed as Managers of Fisheries Boards.

In evidence before the Committee, the Accounting Officer (Department of Agriculture) stated that the officers concerned did not physically return to the Department until January 1988. When questioned separately on the matter, the Accounting Officer (Department of Finance) stated that it was his understanding that, during the intervening period from July 1987 to January 1988, some of the officers were at home while others spent their time in the offices of the Farm Classification Office although the Department of Agriculture had no work for them. The Accounting Officer estimated that the salary costs of these officers during the period was of the order of £1 million. Various options were being considered for the officers but as the officers concerned, with a few exceptions, were graduates in Agriculture with pass degrees, there were no posts in the Civil Service or in the wider public service requiring the particular skills and qualifications held by the inspectors into which they could be absorbed.

The Committee wishes to express deep dissatisfaction and concern that a situation was allowed to develop whereby almost ninety staff were paid for a period in excess of six months without being assigned to particular areas of work. The Committee cannot accept that the only areas in the public service which were suitable for these officers were those outlined by the Accounting Officer (Department of Finance) in a submission viz. the Agricultural Inspectorate, the Valuation Office, ACOT and An Foras Talúntais, as it is aware that there are numerous officers throughout the public sector with a diverse range of qualifications and skills operating in areas where those qualifications and skills are not required. The Committee has been continually hearing from Accounting Officers over the last number of years that work in their Departments were being affected through the non-replacement of staff. The Committee cannot understand why some of the areas worst affected by staff cutbacks could not have been temporarily relieved by the redeployment of the Inspectors concerned, notwithstanding their particular qualifications. To avoid inefficient use of resources, the Committee recommends that, in the event of programmes or sections being disbanded in the future, areas should be identified by the Department of Finance where the need for staff resources is greatest so that redeployment could take place without undue delay.

HEALTH

Advances to An Bord Altranais

60.The Comptroller and Auditor General reported that advances totalling £300,000 were issued in 1986 from a suspense account to An Bord Altranais to enable it to meet its financial commitments pending the receipt of fee income as provided for under the Nurses Act, 1985. The new Board which was appointed had taken over the liabilities of the old Board and was incurring expenditure on a current basis but the mechanism whereby it could collect fee income was not in place at the time. The Department of Finance refused to allow the advances become a charge on the Health Vote, but accepted, however, that the circumstances at the time were financially difficult for the new Board. The Comptroller and Auditor General's concern related to the authority for the making of the advances.

The Accounting Officer told the Committee that, in making the advances, he had authority under Section 4 of the Nurses Act, 1961 which read in conjunction with Section 59 of the Nurses Act, 1950 suggested that, if the Board was in difficulty with its current expenditure, the Minister could assist it and, where an amount was advanced to the Board under Section 59, it was possible to spread half of that cost over the health authorities. In this particular instance, it was necessary to ensure that the Board continued to function and to keep it afloat financially as there was tremendous potential for embarrassment. There was not doubt in his mind that, under the Acts, the Board could be assisted in a situation in which it was in difficulties.

However, the advice given by the legal section in his Department was to the effect only that it was possible that the issues were covered by the legislation and, in the Committees' view, this therefore casts some doubt over the authority for the making of the issues and the manner in which this may be done. The Committee would welcome further clarification of this issue particularly in view of the line taken by the Department of Finance.

With regard to the recoupment of the advances from An Bord Altranais, £100,000 of which had been recouped, the Committee would like to be kept informed of the progress in recovering the balance.

Computerisation in the Health Sector

61.In dealing in his 1986 Report with the question of the implementation of a comprehensive computerisation programme in the Health Sector — which the Review Body on the organisation of Computerisation in the Government Services recommended in 1982 should become the responsibility of the Department of Health — the Comptroller and Auditor General's main objective was to consider whether, when the project was initiated in the early 1980's, there was a clear statement of objectives, a clear perception of where it was going and a co-ordinated plan for getting there. In addition, he was anxious to ascertain whether it was possible to quantify whether the rate of progress was satisfactory in relation to the expenditure already incurred, whether the concept of a fully integrated computerised information system for all the health services was attainable, and attainable at a satisfactory cost, and whether it would lead to greater efficiency and cost savings.

At its first meeting with the Accounting Officer on the matter, the Committee requested a special report which would set out the background, the progress to date and the approach for the future. This Special Report compiled by the Department of Health in conjunction with the Department of Finance is appended.

On the basis of this Report, on which the Accounting Officer and the Department of Finance were examined, it seems to the Committee that there is a serious question mark over the adequacy of the planning for the project. Some examples of this are:

—there was no real consensus on the approach. The Report admits that the selection of the McAuto HDC Patient Administration System did not find favour in a number of health agencies and was met with resistance from the Local Government and Public Services Union;

—the key areas initially identified as priority areas were stock control/pharmacy, patient administration and community care index but financial systems were not so identified although the Report states that subsequently “it soon became evident that the development of and implementation of computerised financial systems was essential if the Department was to carry out its function in monitoring and controlling revenue and expenditure”;

—there was no firm costing of the project until May 1985 even though the Department committed itself to hardware and software much earlier than that;

—the fact that some £511,000 worth of equipment purchased in December 1982 was still in the supplier's store in April 1986 is an indictment of the Department's purchasing policy especially when one has regard to rapid developments in the computer hardware industry which can render equipment obsolete within a short time;

—a Dublin-based software company Praxis was selected for the financial systems on the basis of a general specification of functional requirements only but prior to any examination being carried out of existing local procedures — to the Committee, this is akin to putting the cart before the horse;

—Praxis costs covered only the minimum of basic training and envisaged a level of expertise in client agencies which was not actually available within the health area and whose absence only became apparent after commitments had been entered into with the result that unforeseen consultancy costs had to be incurred in implementing and operating the selected systems. The Committee is at a loss to understand why this situation was not recognised much earlier;

—the Department's own information needs were not precisely specified so that it was difficult for health agencies to develop systems in the absence of such specifications.

The Accounting Officer told the Committee that the planning process had some deficiencies but the Department was operating within the parameters which ordained progress in the computer area generally at that time, by working through the Review Body on computerisation, which was set up in the Government Service, and the associated study and project groups. The Departments made decisions on the basis of the conventional wisdoms at the time.

On the question of a consensus regarding the approach, the Accounting Officer said that the health sector was not a unitary system comprising as it did eight health boards and many voluntary agencies and hospitals. The voluntary hospitals had traditions of autonomy and jealously guarded their own independence from the Department of Health in terms of management of the hospitals and solutions imposed from the centre were often resented and resisted. In the circumstances, he said that it would have been extremely difficult to get representation of all the agencies on any of the initial groups which were set up. This was one of the areas in which major difficulty was encountered.

However, the Committee has to share the views of the Comptroller and Auditor General that the health agencies and the voluntary hospitals, as major players in the game, should have had a significant input into the original planning process. It should have been recognised by the Department of Health that, aware as it was of the manner in which the autonomous health agencies had traditionally reacted to decisions imposed on them from the centre, planning without an input from the major participants would lead to difficulties. The better approach would have been to try to reach some consensus among all the parties involved. That a new approach had now been accepted by the Department was at least a recognition by them that a fresh start was required if further progress was to be achieved in the project. A group representative of the Department itself, the Health Boards, the Voluntary Hospitals, other health agencies and outside consultancy expertise completed a review in August 1988 of the policies and systems implementation since 1982 and this had led to a change in direction whereby the Department would be responsible or, interalia, policy formulation and would publish guidelines to be followed by the health agencies for the planning, selection and implementation of information systems. Within those guidelines, hospitals and agencies would have discretion to select their own systems.

On the question of the areas identified as priority areas for computerisation, the Accounting Officer said that, while it was understandable that the failure to identify financial systems as a priority much earlier would raise questions, one of the major concerns of the Trident Report, which was issued around that time, related to allegations of waste in the drugs area and this predisposed those recommending priorities to deal with that area and then to follow through to patient administration, etc.

While these areas are important in their own right, the Committee, nevertheless, feels that the failure to initially identify financial systems, so vital for monitoring and controlling revenue and expenditure in any large organisation, as a priority area is again a reflection of the inadequacies of the planning process.

The Accounting Officer admitted to the Committee that his Department had always acknowledged that it had less expertise than was required to manage the project fully and that this still was the position. Both the Review Body and the Study Group recognised the need to establish within the Department a computer unit which would have a general competence in computer based health systems. The Department had recently made proposals to the Department of Finance for an expansion of the expertise which was currently available within the Department, without which, the Special Report pointed out, the programme could not be fully effective.

The Committee can only conclude, therefore, that in the absence of a level of expertise which was clearly recognised as essential, the Department's plans were too ambitious and that, perhaps through no fault of its own, there was some doubt as to its capacity to plan and oversee the implementation of a project of such magnitude and complexity. That this was so can also be gleaned from the Department's admission that it was not aware of any location in Europe where there was a completely computerised Health Services system.

The selection of hardware and software generally is the area which appears to have given rise to greatest concern. This is understandable, when one considers that the Department was attempting to impose the systems, particularly that relating to patient administration (McAuto), on agencies without any real consultation. Three hospitals — the Mater, St. Vincent's, Elm Park and Portiuncula (Ballinasloe) — actually proceeded to instal different systems even though they were foregoing Exchequer funding by not going for the approved systems. Whether these hospitals had better advice in reaching their decisions to go for alternative systems is unclear. However, the Accounting Officer agreed that the Department of Health had to look helplessly on as competing computer companies incessantly approached the individual voluntary hospitals and successfully exploited the situations in those hospitals for their own commercial advantage.

The Special Report stated that the patient administration system selected as a standard for hospitals had been superseded by a more recently developed McDonald Douglas system which was not supported on the standard Digital hardware chosen. In addition, the Report says that major parts of the software designated as standard for financial systems were no longer locally supported. The Accounting Officer told the Committee that this did not imply absolescence although he knew of no guarantee against this in the computer area; the Department had, however, a commitment from the firm to continue to service the systems.

The Department of Finance official when questioned by the Committee said that he was satisfied with the procedures which were used to make the original selection for hardware and software. The choice of supplier required the availability of a range of equipment which could use the same software throughout. As it turned out, the lower range (VAX 730) was overtaken by developments but there was no evidence to suggest that, at the time the recommendation was made in favour of the VAX 730's, they were not the most viable proposition for the smaller hospital units. The Committee finds it difficult to accept the contention that the VAX 730s were ever a viable option for the small hospital units. The Special Report supports this view in stating that “the processing power of this equipment was not sufficient to cater for all the transactions which might be required even in the smaller sized hospitals.” This must surely call into question the adequacy of the pre-selection research undertaken. In addition, the Report concluded that the high maintenance costs did not make economic sense today but despite these high maintenance costs, the Committee notes that two of the three VAX 730 configurations which were purchased in 1982 were given in December 1986 to the Eastern Health Board for use in St. Brendan's and St. Mary's Hospitals. The third VAX 730 was converted into a model in the higher range of the equipment (VAX 750) at no extra cost to the Department. The Committee trusts that the two computers given to the Eastern Health Board are being put to the most cost effective use and that it was not just a case of finding a home for them for reasons other than economic ones.

The Committee was told by the Accounting Officer that the VAX 730 configurations were purchased on the advice of the consultants. The Accounting Officer said that he did not think it would be fair to blame consultants because the VAX 730's were inadequate for the smaller hospitals or because this equipment now had uneconomic maintenance costs. The Committee cannot agree with the Accounting Officer in this regard, however, since the consultants were employed because of their knowledge in this particular area. If they were unable to advise soundly even on the capacity of the chosen equipment to cater for all the transactions in the smaller hospitals — something which to experts would appear a relatively easy task regardless of developments within the computer field — then the value of their employment must surely be called into question. As to the delay in making use of the three VAX 730's, the Committee regards this as just another example of bad planning of the project.

To conclude, while the enormity of the task with its inherent complexities facing the Department of Health in its efforts to computerise the health sector has to be recognised, it is clear to the Committee that the lack of a coherent and uniformly accepted plan to achieve realistically attainable objectives created many difficulties which has seriously delayed progress on the implementation of this project. It appears that the Department was simply learning as it was going along and doing so expensively with the major beneficiaries being the suppliers and the consultants whereas the learning process should have taken place before any commitments were entered into. In addition, in an industry where technological development was so rapid, the Committee fails to understand why a decision was made to confine the contracts to single suppliers or at least not to have framed the contracts in such a way that the benefits of further future developments could be availed of. Since this expensive exercise was carried out at the expense of the taxpayer, the Committee is highly critical of the entire episode which seems to be without justification.

The Committee is glad to note, however, that its examination of the programme for computerisation which led to the preparation of the Special Report is seen by the Accounting Officer as contributing in a valuable way to putting future development of the programme on a proper footing. The Committee will continue to monitor progress on the programme, on which expenditure of £11 million has been incurred to date, in its examination of the Appropriation Accounts for future years and, if necessary, it will comment further in future Reports.

OTHER ACCOUNTS

Noting of certain Appropriation Accounts.

62.The following Accounts were noted by the Committee without calling the Accounting Officers for examination:—

Department of the Taoiseach, An Comhairle Ealaíon, National Gallery, Valuation and Ordnance Survey, Rates on Government Property, Civil Service Commission and Charitable Donations and Bequests.

Minute of the Minister for Finance on Report Dated 15 March 1988 of the Committee of Public Accounts on the Appropriation Accounts, 1984

PART I — GENERAL OBSERVATIONS

PART II — 1984 ACCOUNTS

Paragraphs 2 and 12: Public Works and Buildings — Extension to Valentia Island Radio Station and Department of Communications — Electronic Equipment.

Following the cost overruns on these projects, the Minister for Finance was informed by the then Department of Communications in May, 1986, that procedures were being introduced to ensure that there was no repetition of these problems in the future. In this regard detailed instructions were issued to offices of that Department on the procedures to be followed in connection with capital expenditure projects directly funded from the Department's Vote. These instructions dealt with the evaluation of capital projects and the monitoring and control of expenditure on such projects. They also incorporated specific instructions on the procedures to be followed where expenditure is incurred on an agency basis by another Department or Office (e.g. OPW) and recouped from the Department's Vote.

The Minister understands that revised procedures in relation to the planning and execution of capital projects have been in operation for some time. Further controls are under consideration and should be implemented soon. The Minister is also advised that all officers are under strict instructions to comply with Government contract procedures.

The Minister is assured that proper liaison is now being maintained between sponsoring Departments and the Office of Public Works in respect of construction projects.

Paragraph 3: Roinn na Gaeltachta — Scéimeanna Feabhsúcháin sa Ghaeltachta.

A full report on the Gaeltacht co-operatives was supplied by Roinn na Gaeltachta in February, 1987. Although commercial viability was by then generally improving, it was apparent that the co-operatives could not repay the loans and late in 1987 the Department of Finance sanctioned the conversion into grants of loans to co-operatives still trading.

Paragraph 5: Office of the Attorney General — Irregularity in the Office of the Chief State Solicitor.

The officer involved in this case has been dismissed. The Minister for Finance is satisfied, on the basis of material supplied by the Accounting Officer, that the revised procedures introduced immediately following the detection of the fraud will prevent a recurrence. Petty cash vouchers must now be authenticated by the Establishment Officer before payments can be made and the relevant file number noted on each voucher.

Paragraph 6: Foreign Affairs — Outstanding Balances.

The Government decided that from 1 January, 1989, the Department of Foreign Affairs would take on responsibility for all expenditure on official premises abroad. The expenditure is now charged directly to their Vote and the Office of Public Works will not be involved. The Minister for Finance understands that all balances prior to 1985 have been cleared. Arrangements are being made to have the suspense account cleared by 31 December, 1989.

Paragraph 7: Foreign Affairs — Cost of Embassy in Saudi Arabia.

While it is not normally acceptable to undertake major works on rented properties, the Minister has accepted the advice of the Department of Foreign Affairs and the Office of Public Works that the works in question were necessary and were satisfactorily carried out. The quality of the buildings available in Jeddah at the time was poor and it was necessary to undertake these works in order to make the premises habitable and suitable for representational purposes.

Paragraph 8: Social Welfare — Disability Benefit.

The Medical Referee system is recognised as one of the key elements of control in the administration of the disability benefit scheme and the Minister is informed that it is performing very effectively and efficiently at the present time. Improvements continue to be made as is evidenced by the fact that over 95,000 disability benefit claimants were summoned for examination in 1987 compared with 79,000 in 1984. Computer-aided selection techniques are now used to ensure that all claims are automatically identified for referral to the Medical Referee system at the appropriate time.

In 1984 20 Medical Referees were serving and 24 are now serving. These numbers are in addition to the Medical Adviser and the Deputy Medical Adviser.

Paragraph 9: Social Welfare — Children's Allowances.

As regards the prevention of duplicate payments of Child Benefit, the problems referred to arose when the major task of computering the records of the Department was being undertaken, a task which has since been successfully implemented. The Minister is informed that there are now wide-ranging controls in operation in relation to the payment of Child Benefit. These include:

(a)A computerised check is carried out on each claim before it is put into payment to verify that there is no claim in respect of the child already in payment. A daily report of all possible duplicates is examined before the payment is released.

(b)A baptismal certificate is no longer acceptable as supporting documentation for a claim. An official birth certificate must be supplied.

(c)All claims involving claimants returning from the UK or NI are checked with DSS to verify that no dual claiming is involved.

(d)Only long birth certificates are accepted in the cases of accommodation addresses.

Paragraph 10: Social Welfare — Miscellaneous Grants.

The Minister is informed by the Department of Social Welfare that the delays concerning the settling of the Exchequer and local authority contributions to the financing of Supplementary Welfare Allowances have now been eliminated. The Department of Social Welfare is in regular contact with the Inspector of Audits and the Health Boards with a view to ensuring that certificates of expenditure are provided within a reasonable time and is satisfied that the delays experienced in the past will not recur.

Paragraph 13: Education — Transport Services.

The Minister is informed by the Department of Education that, under an agreement made in 1975 between CIE and the Department, a payment is made to Bus Éireann equal to 13% of the total of the direct costs to cover all other costs incurred or associated with school transport. The question of amending this 13% add-on charge has been closely connected with the preparation and consideration of two reports on the service requested by Government in 1985 and 1987. A a result of these reports, the possibility that the operation of the school transport scheme would be devolved to local interests emerged. Such devolution would, of course, fundamentally alter the involvement of Bus Éireann in the operation of the system and in these circumstances negotiations to amend parts of the 1975 agreement such as the 13% add-on charge would not have been appropriate.

During the summer of 1988, it was decided to defer the question of devolution and the Government decided to reduce substantially the payments to Bus Éireann for the provision of the school transport service. That decision is currently being implemented. Payments in 1989 will amount to £26.194 million as against £30.686 million in 1988.

Paragraph 14 — Primary Education — Building, Equipment and Furnishing of National Schools:

The Minister has been informed by the Department of Education that the materials and construction techniques which gave rise to the defects in this particular instance are no longer used in school building and have not been for some time.

Paragraph 15: Post-Primary Education — Superannuation of Secondary Teachers.

The Minister is informed that legislation is being prepared to provide for the making of superannuation schemes under the Teachers' Superannuation Act, 1928 by laying them before the Houses of the Oireachtas instead of the present provision that they do not come into effect unless they have been laid before and have been confirmed by resolution of each House. The Parliamentary Draughtsman has now completed drafting the legislation. Substantial progress continues to be made in the preparation of amending schemes to give the sanction of the Oireachtas for the revised superannuation provisions being implemented.

Paragraph 16: Community Schools — Building Grants and Capital Costs.

The Minister understands that revised procedures relating to pretender planning and post-contract control have been introduced to prevent a recurrence of similar overruns and that the monitoring and control procedures laid down by his Department are being fully complied with.

Paragraph 17: Defects in Community School Halls.

The Department of Education has informed the Minister that the control of the project by the consultants came under the normal interpretation of the duty of supervision as defined in the published RIAI Conditions of Engagement. This aspect of building contracts is under review by his Department, as requested by the Committee, and the Committee will be informed of the outcome.

Paragraph 18: Comptroller and Auditor General — Staffing.

As the Minister has previously indicated to the Committee, he appreciates their concern that staffing in the Office of the Comptroller and Auditor General should be kept at a level adequate to satisfactorily carry out the important functions of that office. At the same time, however, it is not possible to exempt the Office — or, indeed, any other Department or Office — from the staffing and recruitment constraints which must continue to apply service-wide for economic and budgetary reasons with which the Committee is familiar.

With these policy constraints, the Minister has endeavoured to ensure that the level of vacancies in the Comptroller's Office is kept to a minimum through the redeployment of suitable staff from less-pressed work areas of the public service. Regrettably, it did not prove possible to obtain such staff from within the public service. However, certain proposals have recently been agreed which should bring about a marked improvement in the staffing situation in the Comptroller and Auditor General's Office. These involve a new recruitment and training system and the engagement of junior staff from auditing firms and short-term contracts to work on backlogs of unaudited non-voted accounts.

Paragraph 19: Office of the Revenue Commissioners — Revenue Account.

The Minister shares the Committee's concern about the level of smuggling and the resultant loss of revenue to the State. The Minister has been in contact with the Revenue Commissioners on this issue and notes that recent anti-smuggling activity has been very effective.

Paragraph 20: Assessment and Collection of Taxes Etc.

The Minister is satisfied that the phased move towards self-assessment for income tax payers (excluding PAYE), commencing with the 1988/89 tax year, should make a considerable further reduction in the content of estimation in the income tax charge and should speed up the collection process considerably. This will mean that figures emerging for balances will be much closer to the amounts likely to be collected. The self-assessment system will also be applied to corporation tax at a future date to be decided.

Twelve new sheriffs were appointed between mid-1986 and March 1987 to take over from County Registrars the functions of executing tax certificates under section 485 of the Income Tax Act, 1967 and they have made a significant impact on enforcement collection. All section 485 work is now carried out by sheriffs and though they are officers of the Court and bound by the strictures of the civil debt collection code, they operate under administrative guidelines laid down by the Revenue Commissioners.

Since the appointment of the new sheriffs there has been a significant improvement in the amounts collected for all taxes by way of section 485 enforcement as the following figures indicate:

* There was some inevitable disruption to the enforcement processes in 1986 in the withdrawal from County Registrars of the section 485 work and its assignment to the new sheriffs.

Paragraph 21: Non-payment of PAYE and PRSI

The Minister is informed by the Revenue Commissioners that because there are some 99,000 employers registered for PAYE/PRSI and twelve payment dates every year, the collection operation for the great bulk of cases in necessarily carried on highly automated and computerised systems. However, the bigger cases, which yield some 75% of the tax and which are relatively few in number (approximately 1,000), are worked on an individual basis so that default is immediately detected and recovery action taken. In relation to employers who do not come within the “big case” operation, systems have been developed to detect cases which are building up substantial arrears. These would be cases in which there is a sizeable monthly liability or where debts are accumulating because of delays in finalising enforcement action in the courts or by the sheriff. Cases identified through this process are prepared for sheriff action, or where this is inappropriate, liquidation or bankruptcy proceedings are initiated. The operation is confined to those cases with liabilities of £100,000 or over at present but it will be extended to a lower limit as soon as resources permit.

The Government requested the Law Reform Commission to examine and make recommendations on the system of sheriff law. The Revenue Commissioners made a submission to the Commission setting out their views and participated in a Working Group of the Commission which prepared recommendations in relation to the matter. The Commission have now issued their report and its recommendations are being studied.

Paragraph 22: Farmers- Taxation

The Minister shares the Committee's view regarding the special position of the Revenue Commissioners as the sourse of the bulk of Exchequer resources. The importance which he attached to that function is exemplified in the fact that he has continued to redeploy scarce staffing resources to that office at the expense of other Departments and Offices who continue to bear the brunt of the staffing restrictions which are being applied throughout the civil service. Since the introduction of the embargo on filling posts in March, 1987, over 150 staff have been redeployed from elsewhere in the civil service. In addition the Minister agreed that a major proportion of all technical vacancies arising from early retirements in Revenue could be filled by a combination of promotions and redeployment from elsewhere in the public sector.

With regard to the link between additional staff and increased revenue yield, it was not claimed that the cost of the former would be less than the latter but, rather, that it was difficult to establish a clear relationship because of the many other factors which affect revenue yield. The various reviews of the work of the Office of the Revenue Commissioners and the effect of staffing policies generally have resulted in the main operations of that Office being maintained at a generally satisfactory level with reduced resources. Because of the changing nature and volume of the work there is constant contact at official level with the Office of the Revenue Commissioners and all aspects of its operations — including staffing — are kept under review and necessary adjustments made within the context of prevailing government policy.

With regard to the issue of farmers' taxation, in 1987 the Government decided that farmers should be taxed in the same manner as other sections of the community, that is, on actual income. The farm tax was discontinued and an extension of the profile scheme was promised as a means of identifying farmers likely to have a tax liability. Accordingly, in 1987 the Farm Profile — Tax Return was issued to approximately 30,000 farmers with a P.L.V on their holdings in the range £20 to £30 and was completed and returned in some 14,000 cases. Following examination of the returned forms, approximately 10,000 were regarded as not having a liability to income tax and these farmers were notified accordingly. Cases identified as having a liability were notified and tax assessments issued accordingly. Farmers who fail to complete and return the Profile Form are dealt with under the new self-assessing arrangements by the issue of notices of preliminary tax. These notices cannot be appealed and the only way the tax contained in the notices can be displaced is by the farmer making a return.

The staff and other resources necessary for the successful completion of this work have been allocated and a repetition of the difficulties experienced with the earlier profile exercise is not expected.

Paragraph 23: Alleged Cheque Fraud.

The Minister understands that the Committee has been kept fully up to date on this matter with reports on 6 May, 1988 and 13 July, 1988, when the Accounting Officer was again examined by the Committee on this subject. The report of 6 May detailed revised arrangements which have been introduced to improve security.

Paragraph 25: Residential Property Tax.

The Minister has been informed by the Revenue Commissioners that the yield from the R.P.T. increased from £1 million in 1987 to £2.5 million in 1988. The Cost of administration in the earlier years, when the tax was being set up, was rather high. However, in January, 1987, a major part of the staff levied from other Departments in 1983 returned to their parent Departments and were not replaced.

Paragraph 27: Defence — Mechanical Transport.

The Minister has been informed by the Department of Defence that both voucher posting and stocktaking at the Clancy Barracks stores have been brought fully up to date. An analysis of the stock-taking results is now being undertaken. The construction of new purpose-built stores at the Barracks has been completed and the transfer of stocks is being effected. The conversion of the existing manual records system to a computer-based system is well in hand but, because of the large volume of stocks involved and the need to validate the new system with trial runs, this conversion will take some time to complete.

Paragraph 28: Defence — Central Purchasing.

The Minister is advised that in May, 1987, at a meeting of all parties concerned Telecom Éireann agreed that two warehouses including office accommodation would be made available to the Central Purchasing Unit. The functions of the Unit, formally discharged by the Department of Defence, were transferred to the Government Supplies Agency (administered by the Commissioners of Public Works) on 1 January, 1988. The Agency is now in occupation of the warehouses.

All stocks relating to the Central Purchasing Unit have now been transferred from Telecom Éireann to the Government Supplies Agency and have been taken on charge.

Paragraph 29: Labour — Training and Employment of Young Persons.

The Minister is informed that weaknesses in the Teamwork payment system as pointed out by the Comptroller and Auditor General have been rectified. Procedures have been reviewed and improved. In addition, controls in the administration of the scheme have been tightened up. These include a reduction in the size of the initial advance payment; an increased element of grant being retained until an audited statement is received; better inspection of projects and spot checks. Payments under the scheme have been computerised.

Administration of the Teamwork scheme was transferred to FAS on 1 January, 1988.

Efforts are continuing to recover the overpayments made in the period 1983 to 1985. The overpayments amounted to £58,720 or 0.32% of total payments. To date £46,465 has been recovered.

Paragraph 30: Enterprise Allowance Scheme.

The Minister is informed that improved control measures have been introduced in the payments system. These new measures include computerisation with safety features built in to avoid overpayment, defined procedures for handling paperwork, a formalised system of monitoring and devolved decision-making to regional officers. As regards capitalisation, more restrictive eligibility criteria have been introduced together with the tighter expenditure controls. The operation of the Scheme was transferred to FAS with effect from 1 January, 1988.

The Minister shares the concern expressed by the Committee about the administration by the Department of Labour of this and other employment schemes for a certain number of years. However, the Minister acknowledges the steps which were taken by the Accounting Officer to improve the administration of the schemes.

Paragraphs 31 and 32: Health — North Western and Southern Health Boards.

The concern expressed by the Committee over the failure of health board staff to comply with correct accounting procedures is fully shared by the Accounting Officer and by the Minister for Finance. The Accounting Officer has impressed upon Chief Executive Officers of health boards the need to ensure that strict accounting practices are observed at all times and has requested them to pay particular attention to this issue in their individual health board areas. It has been made very clear that strong disciplinary action will be taken in event of any further transgressions. In the circumstances, the Minister does not consider it necessary at this time to issue guidelines on the matter.

In relation to the North Western Health Board issue, the Minister has been informed by the Department of Health that the former Accounting Officer took a very serious view of the accounting irregularities involved. He interviewed the Chief Executive Officer on a number of occasions and expressed his very deep concern over these irregularities and in particular his absolute dismay at the alteration of public documents. The need to ensure that strict accounting practices are observed was also emphasised and accepted. The present Accounting Officer considers that the most effective way to ensure that such a situation does not arise in future is to have an effective up-to-date audit service in place and fully operational.

The Minister's Minute on the Committee's report covering the years 1982 and 1983 explained that, while operational procedures in the health services can be regarded as generally satisfactory, there are areas where improvements are required. The introduction of procedures to satisfy fully criticism by auditors in such areas as pharmacy stock control can only be achieved by sophisicated computer systems and these can only be provided as financial resources permit. In this connection, however, a computerised pharmacy system has been installed in Cork Regional Hospital and it is anticipated

that, when fully operational, this project will eliminate the recording deficiencies in this area. The system, if proved successful, could then be considered for implementation in other areas.

Paragraph 33: Health — Beaumont Hospital.

The position is that the transfer of services from St. Laurence's and Jervis Street Hospitals commenced in November, 1987. Beaumont Hospital, which has a bed complement of 596, has been fully operational since then.

A nurses' residence has not been built in Beaumont and student nurses are accommodated in the nurses' residence attached to St. Laurence's Hospital. A bus is provided to bring the nurses to and from Beaumont Hospital. This arrangement is being monitored and will be reviewed at a later stage.

The Beaumont residence was planned as an integral part of the overall hospital complex design. It is now estimated that payments in respect of apportionment of fees for the residence will total:—

Pending the outcome of the review referred to above, a decision to note this expenditure as a constructive loss in the Appropriation Accounts has been deferred.

Paragraph 34: Health — Auditing of Health Board Accounts.

Paragraph 35: Environment — Local Authority Audits.

On foot of a report of the Inter-Departmental Committee on the review of the Local Government Audit Service (LGAS) presented to Government by the Minister for the Environment in July, 1986, the Government approved the Committee's recommendation that an additional five staff be assigned (by redeployment, on a temporary basis) with a view to eliminating arrears within three years.

The additional staffing together with a number of measures introduced last year, including more flexible working procedures and staff reorganisation, has resulted in remarkable progress in the elimination of arrears. If the rate of progress is maintained, it is anticipated that the arrears will be eliminated by March, 1990, one year ahead of schedule.

Paragraph 36 & 37: Agriculture — Bovine TB Eradication.

The Minister's views on the progress on disease eradication and the measures required to bring about a substantial reduction in present levels of bovine tuberculosis have been made known to the Committee in his Minutes on the 1980/1981 and 1982/1983 Accounts. The new arrangements for administering the schemes mentioned in the Minutes have now been implemented.

Paragraph 38: Agriculture — Expansion of the Cattle Breeding Herd.

The Minister accepts that the inspection arrangements for the scheme were satisfactory at the time given that the scope for cross-checking data was limited as most schemes were not computerised. However, he understands that the possibility of carrying out computer cross-checks on data obtained for different schemes and operations to highlight any inconsistencies is being investigated in the context of an extension of existing computer systems in the Department of Agriculture and Food.

As regards the effects of the scheme in question on the cattle breeding herd, the Minister notes that the scheme was relatively successful in that the 88,000 extra cows in 1984 and 1985 represented a gross gain to the economy of about £90 million but he is disappointed that the increase was not sustained after the scheme terminated.

Paragraph 39: Market Intervention — Storage.

While the Minister accepts that, as part of our European Community obligations, butter must be bought into intervention and stored, he fully agrees with the Committee that the most cost-effective method of storage should be used. In this connection he is pleased to state that, as a result of an accelerated disposal programme for butter and lower purchases, more storage space has become available in Ireland and the resultant improved bargaining position of the Department of Agriculture and Food has enabled them to secure reductions in storage rates of 12% for the year 1987/88 and a further 5.7% for the year 1988/89. Further savings will be pursued where possible.

Paragraph 40: Market Intervention — Losses.

The Minister shares the Committee's concern at the circumstances which led to the Exchequer loss in this case. His Department has reviewed the matter with the Department of Agriculture and Food and he is satisfied that the safeguards now in place in the latter Department should prevent the recurrence of transactions of the kind outlined in the report.

Paragraph 41: Classification of Agriculture Produce.

The issues involved in this paragraph were the subject of High Court proceedings during October, 1987, following which judgment was reserved. Judgement has not yet been given.

Paragraph 43: Energy — Rural Electrification.

In the light of the discussions at the Committee's meeting of September, 1987, the method by which repayable advances made to the ESB for the purposes of rural electrification were repaid through the Energy Vote was reviewed and provision was made in the Electricity (Supply) (Amendment) Act, 1988 for the writing-off of the outstanding advances.

The Minister has expressed his concern on a number of occasions about the duration of the Avoca Mines receivership. He is satisfied, however, that the complexity of the issues involved has necessitated such a lengthy receivership in the interest of securing the greatest possible return to the State. He understands that, following an advance of £125,000 made to the Receiver to discharge PAYE/PRSI obligations (at no net cost to the Exchequer) in December, 1987, no further sums will be advanced. Since this advance was made the Exchequer has received £101,000 in 1988 and further payments are expected.

Paragraph 45: Valuation and Ordnance Survey — Regional Offices.

The Minister has been advised by the Commissioner of Valuation and Director of Ordnance Survey that the establishment of regional offices for the Valuation Office is being considered as part of a wider review of procedures, notably, the recent introduction of continuous revision of valuations as provided for in the Valuation Act, 1988 to replace the previous cycle of annual revision and the computerisation of records.

The Minister understands that about 50% of the Ordnance Survey staff already work and live in provincial areas. The Survey's mapping programme is being assessed at present and the scope for more regionalisation will be examined in that context.

On the question of charging for Ordnance Survey services, the Department of Finance issued a circular to all Departments in March, 1988, stating that in future the Ordnance Survey Office would impose a charge for maps and other services.

Paragraph 46: Valuation Office — Cost of Appeals.

The Valuation Act, 1988 provided for the establishment of a Valuation Tribunal to hear appeals which hitherto went to the Circuit Court. The Minister is confident that this new Tribunal, established in July, 1988, is providing a fair and cost-effective appeal mechanism to any party affected by decisions of the Commissioner of Valuation on foot of first appeals to him.

Paragraph 48: Financing of Beggars' Bush building project.

The Minister notes the Committee's concern at the level of expenditure involved in this project. However, he is assured that while the expenditure was very substantial, it was seen at the time as a necessary front-end cost for a possible financing mechanism for the State building programme and not just for one project.

Given the scale of borrowing, it was important to explore possible new avenues for financing and the Beggars' Bush project was seen as a pilot scheme for a new financing mechanism. The once-and-for-all pioneering legal costs would then have been written off over subsequent similar financings. In the event, following considerable exploratory work, this particular option did not offer a satisfactory solution for the reasons outlined in paragraph 48 of the Committee's Report.

The Minister is satisfied that due care will be taken to ensure that prospective costs arising in relation to proposed new financing mechanisms are evaluated as fully as possible in advance of any commitment in future.

The Minister accepts the principle put forward by the Committee that in deciding whether there is scope for giving guarantees under legislation which limits the total amount that may be guaranteed, the extent of guarantees already given is the sole determining factor to be observed in all such cases.

The Minister accepts also that the Irish Shipping Act, 1982 was primarily related to the financing of the Irish Spruce. However, in the course of the Second Stage of the Irish Shipping Bill, 1982, the Minister for Transport made it clear that the power being taken did not exclude the issue of a guarantee in respect of the Irish Spruce leasing arrangement. Legal opinion confirmed that the Minister was empowered by the 1982 Act to issue further guarantees.

The Minister notes the Committee's comments in relation to the expenditure on specialised cell doors for a high-security prison at Portlaoise, the construction of which did not proceed. Given that there was a policy decision to build the prison at the time, the Minister is satisfied that there was no option but to incur this expenditure.

Paragraph 52: Justice — Irregularities and Delays in the Collection of Fines.

The Minister understands from the Department of Justice that a number of measures have been taken to collect outstanding fines. A general review of the accounting procedures relating to warrants was undertaken, in the light of which instructions concerning the procedures set out in the Garda Code for the handling of warrants and cash were updated in May, 1987.

The delays referred to in the Committee's report arose in one specific Warrant Office. In July, 1987, arrangements were made to decentralise procedures in the area and authority was placed in the hands of District Officers, who are now responsible for the control of warrants and the collection of disposal of all cash due on foot of such warrants in their District. As a result of this reform a considerable improvement has been evident in the execution of warrants in this area.

GIVEN under the Official Seal of the Minister for Finance this 27th day of July, 1989.

IMEACHTAÍ AN COISTE

Proceedings of the Committee

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Diomasaigh, Deasún, Ó Foghlú agus Ó Neachtain.

Tosaíodh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Críochnaíodh an Cuntas seo a leanas:—

Ceistíodh: T. De Treo (Runaí, An Roinn Comhshaoil) agus an tArd-Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.20 p.m. go dtí 11 a.m. Déardaoin 26 Samhain 1987.

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

Consideration of Appropriation Accounts for the year 1985 was begun. The following Account was disposed of:—

The following witnesses were examined: Mr. T. Troy (Secretary, Department of the Environment) and the Comptroller and Auditor General.

The Committee adjourned at 12.20 p.m. until 11 a.m. on Thursday 26 November, 1987.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Foghlú, Ó Haoileain, M. P. Ó Ceit, agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh P. L. O Flanagáin (Runaí An Roinn Sláinte) G. O Nunáin (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.15 p.m. go dtí 11 a.m. Déardaoin 3 Nollaig, 1987.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Desmond, Foley, Hyland, M. P. Kitt, and Naughten.

Consideration of Appropriation Accounts for the year 1985 was resumed. The following Account was disposed of:—

The following witnesses were examined:— Mr. P. W. Flanagan (Secretary Department of Health) Mr. G. Noonan (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 1.15 p.m. until 11 a.m. on Thursday 3 December, 1987.

An Teachta, G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Crothaigh, Ó Diomasaigh, Deasún, Ó Foghlú, M. P. Ó Ceit, agus Ó Neachtain.

Ceistíodh: L. MacSitric agus S. MacBearthera (Oifig na nÓibreacha Poiblí) S. Mac Giolla Domhnaigh (Runaí, An Roinn Leasa Shoisialaigh) agus an t-Ard Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.20 p.m. go dtí 11 a.m. Déardaoin 10 Nollaig 1987.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Colley, Crotty, Dempsey, Desmond, Foley, M. P. Kitt, and Naughten.

The following witnesses were examined: Mr. L. McGettrick and J. Berkery (Office of Public Works), Mr. J. Downey (Secretary, Department of Social Welfare) and the Comptroller and Auditor General.

The Committee adjourned at 12.20 p.m. until 11 a.m. on Thursday 10 December, 1987.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Foghlú, M. P. Ó Ceit, agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Criochnaíodh na Cuntais seo a leanas:—

Oifig an Aire Oideachais, Bunoideachais, Meanoideachais, Scoileanna Speisialta, Ardoideachais.

Chuaigh an Coiste ar athló ar 1.50 p.m. go dtí 11.30 a.m. Déardaoin 17 Nollaig 1987.

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

Consideration of Appropriation Accounts for the year 1985 was resumed. The following Accounts were disposed of:—

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

The following witnesses were examined: Mr. D. Brennan (Secretary, Department of Education) Mr. J. McCaffrey and Mr. C Gallagher (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 1.50 p.m. until 11.30 a.m. on Thursday 17 December, 1987.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Foghlú, agus Mac Riabhaigh.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh: P. F. Ó Curraoin (Cathaoirleach, na Coimisineirí Ioncaim) S. Ó Fearghaill agus P. Ó Neabhín (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athlÓ ar 1.45 p.m. go dtí 11 a.m. Déardaoin 21 Eanáir 1988.

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

Consideration of Appropriation Accounts for the year 1985 was resumed. The following Account was disposed of:—

The following witnesses were examined: Mr. P. F. Curran (Chairman, Revenue Commissioners) J. O Farrell and P. Neavyn (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 1.45 p.m. until 11 a.m. on Thursday 21 January, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaá Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Foghlú, M.P. Ó Ceit agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Criochnaíodh an Cuntas seo a leanas:—

Ceistíodh: S. Ó Domhnalláin (Runaí, Roinn Tionscail, Tradála, Trachtála agus Turasóireacht). P. Hiobárd (An Roinn Airgeadais) and an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 2.15 p.m. go dtí 11 a.m. Déardaoin 4 Feabhra 1988.

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

Consideration of Appropriation Accounts for the year 1985 was resumed. The following Account was disposed of:—

The following witnesses were examined: Mr. J. Donlon (Secretary, Department of Industry, Trade, Commerce and Tourism) Mr. P. Howard (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 2.15 p.m. until 11 a.m. on Thursday 4 February, 1988.

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

Athchromadh ar bhreithniú an gCuntas Leithreasa don bhliain 1985. Tosaiodh ar Bhreithniú na gCuntas Leithreasa don bhliain 1986. Criochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— Mr. S. MacGiolla Domhnaigh (Runaí, An Roinn Leasa Shoisialaigh) S. O Fearghail (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.10 p.m. go dtí 11 a.m. Déardaoin 11 Feabhra, 1988.

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

Consideration of Appropriation Accounts for the year 1985 was resumed. Consideration of Appropriation Accounts 1986 was begun. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. J. Downey (Secretary, Department of Social Welfare) J. O'Farrell (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 1.10 p.m. until 11 a.m. on Thursday 11 February, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, M.P. Ó Ceit, agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. Criochnaíodh na Cuntais seo a leanas:— Teaghlachas an Uachtaráin, Oifig an Aire Airgeadais, An tSaothairlann Stáit, An tSeirbhís Shiréideach, Costais Ilghnéitheacha, Oifig Aire na Seirbhíse Poiblí, Aoisliuntais agus Liúntais Scoir, Meadaithe ar Luach Saothair agus ar Phinsin, Cuntas Taisce an Chiste Teaghmhais

Ceistíodh: S. P. Ó Cromien (Runaí, An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste

Chuaigh an Coiste ar athló ar 1.40 p.m. go dtí 11 a.m. Déardaoin 18 Feabhra, 1988.

Deputy G. Mitchell (in the Chair), Deputies Colley, Crotty, Dempsey, Desmond, M.P. Kitt, and Naughten.

Consideration of Appropriation Accounts for the year 1985 was resumed. The following Accounts was disposed of:— Presidents Establishment, Office of the Minister for Finance, State Laboratory, Secret Service, Miscellaneous Expenses, Office of the Minister for the Public Service, Superannuation and Retired Allowances, Increases in Remuneration and Pensions, Contingency Fund Deposit Account.

The following witnesses were examined: Mr. S. P. Cromien (Secretary, Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 1.40 p.m. until 11 a.m. on Thursday 18 February, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bheithniú na gCuntas Leithreasa don bliain 1985 agus 1986. Criochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— N. MacMathúna (Runaí, An Roinn Tuarasóireacht agus Iompair) E. Ó Suilleabháin agus C. Ó Gallchóir (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.50 p.m. go dtí 11 a.m. Déardaoin 25 Feabhra, 1988.

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

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Account was disposed of:—

4.The following witnesses were examined:— Mr. N. MacMahon (Secretary, Department of Tourism and Transport) E. O'Sullivan and C. Gallagher (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 12.50 p.m. until 11 a.m. on Thursday 25 February, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ní Cholla, Ó Diomasaigh, Deasún, Ó Foghlú agus Mac Gaoithín.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986.Criochnaíodh na Cuntais seo a leanas:—

Ceistíodh: F. O Muircheartaigh (Runaí Roinn na Mara), G. O Scolaí (Runaí, An Roinn Cosanta) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.20 p.m. go dté 11 a.m. Déardaoin 3 Márta, 1988.

Deputy G. Mitchell (in the Chair), Deputies Colley, Dempsey, Desmond, Foley and McGahon.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined: Mr. F. O Muircheartaigh (Secretary, Department of the Marine), Mr. G. Scully (Secretary Department of Defence) and the Comptroller and Auditor General.

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

Ceistíodh:—D. Ó Criodáin (Runaá, An Roinn Talmhaíocht agus Bia) B. Ó Brádaigh (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.00 p.m. go dtí 11 a.m. Déardaoin 10 Márta, 1988.

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

The following witnesses were examined:—Mr. D. Creedon, Secretary, Depart- ment of Agriculture and Food) Mr. B. Brady (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, Mac Gaoithín agus Ó Neachtain.

Ceistíodh:—D. Ó Criodáin (Runaí, An Roinn Talmhaiocht agus Bia) B. Ó Brádaigh agus C. Ó Gallchóir (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.35 p.m. go dtí 11 a.m. Déardaoin 7 Aibreán 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Colley, Crotty, Dempsey, Desmond, McGahon and Naughten.

The following witnesses were examined:—Mr. D. Creedon, (Secretary, Department of Agriculture and Food) Mr. B. Brady and C. Gallagher (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Maolthuille, Ó Foghlú, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Croichnaíodh na Cuntais seo a leanas:—Oifig an Aire Dlí agus Cirt, Garda Síochána, Priosúin, Cúirteanna, Clárlann na Talún agus Clarlann na nGniomhas (1985).

Ceistíodh:—T. V. Mac Fhionn, (Stiúrthóir Ginearálta, RTÉ), D. Ó Maitiú (Runaí, Roinn Dlí agus Cirt), C. Ó Gallchóir (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.40 p.m. go dtí 11 a.m. Déardaoin 21 Aibreán 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Colley, Crotty, Dempsey, Desmond, Flood, Foley, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—Office of the Minister for Justice, Garda Síochána, Prisons, Courts, Land Registry and Registry of Deeds (1985).

The following witnesses were examined:—Mr. T. V. Finn (Director General, RTE) Mr. D. Mathews (Secretary, Department of Justice) C. Gallagher (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Diomasaigh, Deasún, Ó Foghlú, agus M. P. Ó Ceit.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. agus 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— P. Ó Greidhm (Runaí, Oifig an tArd Reachtaire Cuntas agus Ciste), S. de hAlbhuidhe (Runaí, An Roinn Fuinnimh) R. Ó Bradaigh agus R. Ó Ciadhra (An Roinn Airgeadais) agus An tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.35 p.m. go dtí 11 a.m. Déardaoin 28 Aibreán 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Colley, Dempsey, Desmond, Foley, and M.P. Kitt.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. P. Graham (Secretary, Office of the Comptroller and Auditor General) J. Holloway (Secretary, Department of Energy) B. Brady and R. Carey (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ní Cholla, Ó Crotaigh, Ó Diomasaigh, Ó Foghlú, MacGaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985. agus 1986. Críochnaíodh na gCuntas seo a leanas:—

Ceistíodh:— N. MacMathúna (Runaí, Roinn Turasóireacht agus Iompair) T. De Treo (Runaí, An Roinn Comhshaoil) F. Ó Maoldomhnaigh (Bainisteoir, Comhairle Condae Dún na nGall) E. Ó Súilleabháin (An Roinn Airgeadais) agus An tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.50 p.m. go dtí 11 a.m. Dé Céadaoin 18 Bealtaine 1988.

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

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. N. McMahon (Secretary, Department of Tourism and Transport) Mr. T. Troy (Secretary, Department of the Environment) Mr. F. Maloney (Manager, Donegal County Council) E. O'Sullivan (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Diomasaigh, Deasún, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh S Ó Domhnalláin (Runaí, An Roinn Tionscail agus Tráchtála) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.15 p.m. go dtí 11 a.m. Déardaoin, 26 Bealtaine, 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Dempsey, Desmond, M. P. Kitt, McGahon and Naughten.

Consideration of Appropriation Accounts for the year 1986 was resumed. The following Accounts were disposed of:—.

Mr. J. Donlon (Secretary, Department of Industry and Commerce) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Foghlú, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1986. Críochnaíodh na Cuntais seo a leanas:—

Oifig an Aire Oideachais, Bunoideachais, Scoileanna Speisialta, Oideachais Ardú.

Ceistiodh: D. Ó Braonáin (Runaí, An Roinn Oideachais) S. MacCafraidh (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.30 p.m. go dtí 11 a.m. Déardaoin, 2 Meitheamh, 1988.

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

Consideration of Appropriation Accounts for the year 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined: Mr. D. Brennan (Secretary, Department of Education)J. McCaffrey (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Ó Foghlú, Ní Airne agus Mac Gaoithín.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1986. Críochnaíodh na Cuntais seo a leanas:— Teaghlachas an Uachtaráin, Oifig an Aire Airgeadais, An tSaotharlann Stáit, An tSeirbhis Shireideach, Costais Ilghnéitheacha, Oifig Aire na Seirbhíse Poiblí, Aoisliuntais agus Liuntais Scóir, Cuntas Taisce an Chiste Teaghrmhais, Oifig Rangú Feirme.

Ceistíodh:— S. Ó Cromien (Runaí, An Roinn Airgeadais) P. Cadhla (Príomhoifigeach, Oifig Rangú Feirme) agus tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.15 p.m. go dtí 11 a.m. Déardaoin 16 Meitheamh 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Foley, Harney, and McGahon.

Consideration of Appropriation Accounts for the years 1986 was resumed. The following Accounts were disposed of:— Presidents Establishment, Office of the Minister for Finance, State Laboratory, Secret Service, Miscellaneous Expenses, Office of the Minister for the Public Service, Superannuation and Retired Allowances, Increases in Remuneration and Pensions, Contingency Fund Deposit Account, Farm Classification Office.

The following witnesses were examined:— Mr. S. Cromien (Secretary, Department of Finance) P. Keeley (Principal, Farm Classification Office) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Diomasaigh, Ó Maolthuille, Ní Airne, M. P. Ó Ceit agus Mac Gaoithín.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Criochnaíodh na Cuntais seo a leanas:—

Oifig an Ard-Aighne, Oifig an Stiúrthóra Ionchuiseamh Poiblí, Roinn na Gaeltachta.

Ceistíodh:— M. Ó Ruiséal (Cúntóir Dlí Sinsireach, Oifig an Ard-Aighne) M. Ó Liodaigh (Cuntóir Dli, Oifig an Stiúrthóra Ionchuiseamh Poiblí) agus S. Olden (Runaí, Roinn na Gaeltachta).

Chuaigh an Coiste ar athló ar 1.20 p.m. go dtí 11 a.m. Déardaoin 23 Meitheamh, 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Dempsey, Flood, Harney, M. P. Kitt and McGahon.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

Office of the Attorney General, Office of the Director of Public Prosecutions, Roinn na Gaeltachta.

The following witnesses were examined:— Mr. M. Russell (Senior Legal Assistant, Office of Attorney General) Mr. M. Liddy (Legal Assistant, Office of the Director of Public Prosecutions) Mr. S. Olden (Secretary Department of the Gaeltacht).

An Teachta Ó Neachtain (i gCeannas), na Teachtaí Ó Crotaigh, Deasún, Ó Maolthuille agus Ó Foghlú.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Criochnaiodh na Cuntais seo a leanas:—

Ceistíodh:—D. Ó Criodáin (Runaí, An Roinn Talmhaiocht agus Bia) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.55 p.m. go dtí 11 a.m. Déardaoin 30 Meitheamh, 1988.

Consideration of Appropriation Accounts for the year 1985 and 1986 was resumed:—

The following witnesses were examined:—Mr. D. Creedon, (Secretary, Department of Agriculture and Food) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Ó Maolthuille, agus M. P. Ceit.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Criochnaíodh na Cuntais seo a leanas:—

Ceistíodh:—N. Ó Doraidh (Runaí, An Roinn Gnothaí Eachtracha) P. L. Ó Flanagain (Runaí An Roinn Slainte) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.25 p.m. go dtí 11 a.m. Déardaoin 7 Iuil, 1988.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:—Mr. N. Dorr (Secretary, Department of Foreign Affairs) Mr. P. W. Flanagan (Secretary, Department of Health) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Maolthuile, Ó Foghlú, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh: L. P. Ó Feagain (Stiurthóir Gníomhach, Oifig an Ombudsman) M. Mac Aogain (Runaí, An Roinn Saothair) S. Ó Fearghaill agus S MacCafraidh (An Roinn Airgeadais).

Chuaigh an Coiste ar athló ar 1.20 p.m. go dtí 2 p.m. Déardaoin, 13 Iúil, 1988.

Deputy G. Mitchell (in the Chair), Deputies Crotty, Dempsey, Desmond, Flood, Foley, M. P. Kitt, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined: Mr. W. Fagan (Acting Director, Office of the Ombudsman) M. Keegan, (Secretary, Department of Labour), J. O'Farrell and J. McCaffrey, (Department of Finance).

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Maolthuille, Ó Foghlú, NíhAirne, Mac Gaoithín agus Ó Neachtain.

Ceistíodh: P. P. Ó Curraoin (Cathaoirleach, na gCoimisinéirí Ioncaim) A. Ó Dunnaíon (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 5.20 p.m. go dtí 2 p.m. Dé Céadaoin, 20 Iúil, 1988.

Deputy G. Mitchell (in the Chair), Deputies Crotty, Dempsey, Desmond, Flood, Foley, Harney, McGahon and Naughten.

The following witnesses were examined Mr. P. F. Curran (Chairman, Revenue Commissioners) A. Dunning (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Maolthuille, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Críochnaíodh na Cuntais seo a leanas:—Oifig an tSolathair.

Ceistíodh:— S. O Mathúna (Cathaoirleach, Oifig na nOibreacha Poiblí) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 3.55 p.m. go dtí 11 a.m. Déardaoin 21 Iúil, 1988

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Desmond, Flood, M. P. Kitt, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:— Stationery Office.

Mr. J. F. Mahony (Chairman, Office of Public Works) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Ó Diomasaigh, Deasún, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú an gCuntas Leithreasa don bhliain 1985. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— Mr. E. Rayel (Cléireach na Dála) S. P. O'Mathúna (Cathaoirleach, Coimisinéirí na nOibreacha Poiblí) G. Ó Nunain A. Ó Dolain agus C Ó Gallchoir (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1.45 p.m. go dtí 2 p.m. Dé Céadaoin 7 Meán Fómhair, 1988.

Deputy G. Mitchell (in the Chair), Deputies Crotty, Dempsey, Desmond, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. E. Rayel (Clerk of the Dáil) Mr. J. F. Mahony (Chairman, Office of Public Works) Mr. G. Noonan, Mr. A. Dolan, Mr. C. Gallagher (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Deasún, Ó Maolthuille, Ó Foghlú, Ní hAirne, M. P. Ó Ceit agus Mac Gaoithín.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh: D. Ó Braonáin (Rúnaí, An Roinn Oideachais) N. Mac Mathúna (Rúnaí, Roinn Turasaoíchta agus Iompair) S. Mac Cafraidh (An Roinn Oideachais) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 4.05 p.m. go dtí 11 a.m. Dé Ceadaoin, 21 Meán Fómhair, 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Desmond, Flood, Foley, Harney, M. P. Kitt and McGahon.

Consideration of Appropriation Accounts for the year 1986 was resumed. The following Accounts were disposed of:

The following witnesses were examined: Mr. D. Brennan (Secretary, Department of Education) Mr. N. MacMahon (Secretary, Department of Tourism and Transport) Mr. J. McCaffrey (Department of Finance) and the Comptroller and Auditor General.

The Committee adjourned at 4.05 p.m. until 11 a.m. on Wednesday, 21st September, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Diomasaigh, Deasún, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Ceistíodh: T. De Treo, (Runaí, An Roinn Comhshaoil) agus C. Ó Gallchóir (An Roinn Airgeadais).

Chuaigh an Coiste ar athló ar 12.40 p.m. go dtí 11.30 a.m. Dé Céadaoin, 28 Meán Fómhair, 1988.

Deputy G Mitchell (in the Chair), Deputies Dempsey, Desmond, M. P. Kitt, McGahon and Naughten.

The following witnesses were examined: Mr. T. Troy (Secretary, Department of the Environment) and Mr. C. Gallagher (Department of Finance).

The Committee adjourned at 12.40 p.m. until 11.30 a.m. on Wednesday, 28th September, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Diomasaigh, Ó Maolthuille, Ní Airne, Mac Gaoithín agus Ó Neachtain.

Ceistiodh:—P. P. Ó Curraoin (Cathaoirleach, na Coimisineirí Ioncaim) agus an tArd Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 1 p.m. go dtí 11.30 a.m. Déardaoin, 6 Deireadh Fómhair, 1988.

Deputy G. Mitchell (in the Chair), Deputies Dempsey, Flood, Harney, McGahon and Naughten.

Consideration of Appropriation Accounts for the year 1986. The following Account was disposed of:—

The following witnesses were examined:—Mr. P. F. Curran (Chairman, Revenue Commissioners) and the Comptroller and Auditor General.

The Committee adjourned at 1 p.m. until 11.30 a.m. on Thursday, 6 October, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Ó Maolthulle, Ó Foghlú, Ní Airne, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

4.Bhreithniú An Coiste An Neamhlaithriú An Uas. Ó Maitiú, Oifigeach Cuntasaíochta, An Roinn Dlí Agus Cirt.

Go gceanglófaí ar D. Ó Maitiú Uasal, Oifigeach Cúntasaíochta, An Roinn Dlí agus Cirt bheith i láthair ag an gcruinniú Déardaoin 13 Deireadh Fómhair, 1988 ar 11.30 a.m.

Chuaigh an Coiste ar athló ar 12 mean-lae go dtí 11.30 a.m. Déardaoin, 13 Deireadh Fómhair, 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Flood, Foley, Harney, M. P. Kitt, McGahon and Naughten.

4.The Committee Considered the Non-Attendance of Mr. D. Mathews, Accounting Officer, Department of Justice.

That Mr. Des Mathews, Accounting Officer, Department of Justice, be required to attend the meeting fixed for Thursday 13 October, 1988 at 11.30 a.m.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Ó Maolthuille, Ó Foghlú, Ní Airne, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

6.Bhreithnigh an Cruinniú Litir Ón Aire Dlí Agus Cirt Maidir Le Neamhláithriú an Uas. D. Ó Maitiú, Rúnaí, an Roinn Dlí Agus Cirt.

Chuaigh an Coiste ar athló ar 12.45 p.m. go dtí 11.30 a.m. Déardaoin, 20 Deireadh Fómhair, 1988.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Flood, Foley, Harney, M. P. Kitt, McGahon and Naughten.

6.The Meeting Considered the Contents of a Letter From the Minister for Justice Regarding the Non-Attendance of Mr. D. Mathews, Secretary, Department of Justice.

The Committee adjourned at 12.45 p.m. until 11.30 a.m. on Thursday, 20 October, 1988.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí Ó Crotaigh, Deasún, Ó Maolthuille, Ní Airne, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1985 agus 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— T. P. Ó Luineacháin (Stiurthóir, An Phriomh-Oifig Staidrimh) agus an tArd Reachtaire Cuntas agus Ciste.

Deputy G. Mitchell (in the Chair), Deputies Crotty, Desmond, Flood, Harney, M. P. Kitt, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1985 and 1986 was resumed. The following Account were disposed of:—

The following witnesses were examined:— Mr. T. Linehan (Director, Central Statistics Office) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Diomasaigh, Deasún, Ní Airne, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú an gCuntas Leithreasa don bhliain 1986. Criochnaíodh an Cuntas seo a leanas:—

Ceistíodh:— P. L. O. Flanagáin (Runaí, An Roinn Slainte) F. Ó Glabhaí (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Dempsey, Desmond, Harney, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. P. W. Flanagan (Secretary, Department of Health) Mr. F. Glavey (Department of Health) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí, M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Ó Maolthuille, Ó Foghlú, M. P. Ó Ceit, Mac Riabhaigh, Mac Gaoithín agus Ó Neachtain.

Athchromadh ar bhreithniú an gCuntas Leithreasa don bhliain 1986. Críochnaíodh na Cuntais seo a leanas:—

Ceistíodh:— D. Ó Maituí (Runaí, An Roinn Dlí agus Cirt) C. Ó Gallchóir (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Flood, Foley, M. P. Kitt, McCreevy, McGahon and Naughten.

Consideration of Appropriation Accounts for the years 1986 was resumed. The following Accounts were disposed of:—

The following witnesses were examined:— Mr. D. Mathews (Secretary, Department of Justice) Mr. C. Gallagher (Department of Finance) and the Comptroller and Auditor General.

An Teachta G. De Mhistéal (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Crotaigh, Ó Diomasaigh, Deasún, Ó Maolthuille, Ó Foghlú agus Ó Neachtain.

3.Dréacht Tuarascáil ar na gCuntas Leithreasa an Cathaoirleach do na bliana 1985 agus 1986.

Chuir an Cathaoirleach Dréacht Tuarascáil faoi bhráid an coiste chun a bhreithnithe agus léadh í mar a leanas:—

Chuaigh an Coiste ar athló ar 1.30 p.m. go dtí 11 a.m. Déardaoin, 9 Márta, 1989.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Crotty, Dempsey, Desmond, Flood, Foley and Naughten.

An Teachta G. De Mhistéal, (i gCeannas), na Teachtaí M. Ó hEachtairn, Ó Diomasaigh, Deasún, Ó Maolthuille, Ó Foghlú, Ní Airne, M. P. Ó Ceit, Mac Gaoithín agus Ó Neachtain.

Athcromadh ar bhreithniú Dreacht Tuarascáil an Chathaoirleach ar na gCuntas Leithreasa 1985 agus 1986.

Chuaigh an Coiste ar athlo ar 12.15 p.m. go dtí 11 a.m. Déardaoin, 16 Márta, 1989.

Deputy G. Mitchell (in the Chair), Deputies M. Ahern, Dempsey, Flood, Foley, Harney, M. P. Kitt, McGahon and Naughten.

Consideration of the Chairman's Draft Report on the Appropriation Accounts, 1985 and 1986.

The Committee adjourned at 12.15 p.m. until 11 a.m. on Thursday, 16 March, 1989.

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of Public Accounts)

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

VOTE 29—ENVIRONMENT (1985)

Mr. Thomas Troy called and examined.

1.Chairman.—Good morning, Mr. Troy, you are welcome. The Committee of Public Accounts of Dáil Éireann is this morning examining the Secretary of the Department of the Environment, Mr. Thomas Troy, in his capacity as Accounting Officer for that Department. Also in attendance is the Comptroller and Auditor General, Mr. McDonnell, and Department of Finance officials, Mr. Tom O'Connor and Mr. Colm Gallagher. Paragraph 26 of the 1985 Report of the Comptroller and Auditor General reads:

Motor Vehicle Duties.

A test examination of revenue from motor vehicle duties, etc., was carried out with satisfactory results. The proceeds for 1985 and 1984 were:

£122,067,847 was paid into the Exchequer during the year leaving a balance of £806,374 compared with £1,020,950 at the end of the previous year. Driving test fees are appropriated in aid of the Vote (Subhead V).

The motor tax transactions of the 29 licensing authorities are subject to examination by Local Government Auditors whose reports are made available to me.

Mr. McDonnell.—This is what you might call a standard paragraph in my report each year, because, as you know, I must report on the collection of all State revenues, so it shows the various headings under which the 29 licensing authorities collect motor tax. It also refers to some other sources of revenue of the motor tax account. You will see that I do not audit the accounts of the licensing authorities — that is done by the Local Government auditors — but I have access to their reports.

Chairman.—I notice that the fines collected by the Department of Justice were down by £500,000 from £5.1 million to £4.5 million. Are you aware that in 1985 a district justice had occasion to write to the Select Committee on Crime, Lawlessness and Vandalism pointing out that £700,000 worth of fines had not been collected in his court alone in the county of Waterford? Would that affect the figure shown here, or would that amount of fines be credited directly to the Department of Justice?

Mr. Troy.—To begin with, the collection of fines is under the jurisdiction of the Department of Justice. The normal procedure is that fines proceed into the central motor tax at national level. I presume they were affected by that delay at the time.

Chairman.—Would you be aware if the reduction in fines from 1984 to 1985 of the order of £500,000 was due to the fact that fines imposed by courts were not collected? Would you be aware if that is the reason?

Mr. Troy.—I doubt it. Although there is, I can say, a reduction, we think, in evasion in motor tax.

Chairman.—It would be due to that. Do you consider it satisfactory that a district justice has to write to a Dáil committee because he cannot get assistance from Government agencies in collecting fines he has imposed?

Mr. Troy.—Not really. The fines are collected through the Justice machinery and then come in across to the central motor tax account.

Chairman.—Why are we examining “Motor Vehicles duties”, including “fines collected by the Department of Justice”, under your Vote then?

Mr. Troy.—It is partly historical, I suppose, from the days of the Road Fund. Also we have subheads towards the cost expenses of total local authorities in collecting motor tax.

Chairman.—You are the Accounting Officer for it, would you not think it unsatisfactory that an amount of £700,000 in one rural court could be left outstanding?

Mr. Troy.—It would depend on the circumstances and what caused it. I have no knowledge of it.

Chairman.—Let me just tell you what it is. District Justice Johnson wrote to the Government of the day and then wrote to the Dáil Committee on Crime, Lawlessness and Vandalism because fines being imposed by his court in Waterford were not being collected and the figure was £700,000. That is money which has obviously found its way into your Vote. Can the committee be satisfied that when district justices apply fines, particularly where they are of this order, that they will be collected and used in the Vote in the year to which they relate?

Chairman.—I would ask that you do that, and perhaps that you would make sure that, between yourself and the Department of Justice, this matter is clarified.*

2.Deputy Foley.—I understand you have 29 licensing authorities. Is that right?

Deputy Foley.—Subject to examination by the local government auditors whose reports are made available to you and to the Comptroller?

Deputy Foley.—What is the position with the 29 licensing authorities? Are they up to date in regard to audit?

Mr. Troy.—I have a table here. Of the 29 authorities, four are audited up to end of 1986, 15 to the end of 1985 and ten to the end of 1984.

Deputy Foley.—That must be very unsatisfactory, to find that the audit is not up to date, that you have only ten completed up to 1984, 15 up to 1985 and four up to 1986.

Mr. Troy.—It is part of a larger problem of the audit generally. This is more or less comparable with the other audits.

Deputy Foley.—Seeing there is so much money involved, are you concerned about the situation?

Mr. Troy.—We are, of course, and we are taking various initiatives. One initiative has been that we are looking into the whole question of whether other means of audit could be adopted, or whether the scope of audit could be changed. We have an interdepartmental committee looking into that. The local government auditors audit many bodies that we are not really concerned with at all — charitable trusts and so on.

Deputy Foley.—Would it not be better to concentrate on where the bulk of the work is with regard to funding?

Mr. Troy.—In fact, they do that. The health boards get the first priority as large organisations.

Deputy Foley.—Do I understand there is a shortage of local government auditors?

Mr. Troy.—Yes, since last January they have fallen again by three. They are down to 38 now.

3.Chairman.—What is the total expenditure of local authorities for the most recent year?

Mr. Troy.—It is something of the order of £1,830 million — including the Departments and local authorities together as a single item — 11 per cent of GNP.

Chairman.—Your review of the audit of local government, the report is due this year?

Mr. Troy.—The ground has been gone over. There are quite a number of issues to be considered — for example, privatisation of some of it, special means of dealing with arrears and the scope of audit.

Chairman.—Is there any reason why you should not introduce private auditors to local authority auditing?

Mr. Troy.—I would like to do it as one package, because we would have to consider perhaps whether they should be amalgamated with the Comptroller and Auditor General. This was a recommendation of the Devlin Commission long ago. A lot of questions arise.

Chairman.—The Committee has just come back from London. We have been examining this whole area, and the area of the Audit Commission and the Comptroller and Auditor General in the United Kingdom. Can you tell me, for instance, when the last audit of Dublin Corporation was done?

Mr. Troy.—We have one county borough done to 1985 — I am not sure whether it is Dublin or not — one to 1984, and three to 1983. These figures do not tell the full story, because a number of audits include a number of years together, but these are the completed years: 1983, three county boroughs; 1984, one and 1985, one.

Chairman.—Other than the Public Accounts Committee, what parliamentary scrutiny are these local government audits subject to, are they subject to public or elected representatives?

Mr. Troy.—Essentially, it was always seen to be for local scrutiny, before the time when Government grants, Government allocations and so on began to arise. The Local Government auditor, who himself is an independent auditor, is required to give notice of his audit and people can attend and object to whatever is in it.

Chairman.—I am aware of that. I was Chairman of the Finance Committee of Dublin Corporation for a number of years. What I want to find out is are they subject to examination by any public representatives after the audit?

4.Chairman.—The Committee has been examining how it might evolve into these areas because of the large amount of Exchequer spending on local government. It is an area we will be talking to you about again. In regard to the area of driving licences, the test procedures for driving licences, do you think is there a temptation to bring people back unnecessarily, or do you think the procedures which operate are satisfactory and should continue to operate?

Mr. Troy.—This is the constant complaint we receive, but I am satisfied anyway that driving tests are conducted in a professional manner by the driving testers. The Department keeps the position under review for example, the pass or failure rate under different testers in different regions is monitored and action taken when necessary when there is a large divergence from the norm.

Chairman.—Is there difficulty in rural towns where you might have a driving tester there on a regular basis?

Mr. Troy.—No, we move the testers around and the intention is that if possible nobody should know which tester he will get.

Chairman.—Recently under EC directives on 25 October changes came in as to who could hold driving licences. It clearly states that people suffering from epilepsy and chronic alcoholism are disqualified from holding a licence.

Chairman.—The Minister subsequently modified that in the Dáil to allow people who submit medical evidence to show that they have not “suffered” for two years to apply for a licence. Has that been communicated to the local authorities because they continue to issue application forms showing people suffering from epilepsy and chronic alcoholism as being disqualified.

Mr. Troy.—Well, following on the debate on that issue, which I think you raised yourself, we have been having talks with the Kidney Association and with the Epileptic Association and a kind of consensus has been established as to how we should redesign forms, and the steps to be taken. We have not yet issued the final forms on it, but we will shortly.

Chairman.—The problem is that Dublin Corporation for instance, are issuing these forms to people who might not apply for a licence because they are told they are now disqualified, so it should be communicated to people because it will affect not just the licence holders but also the Revenue.

Chairman.—Has any consideration been given to introducing a ten-year licence, a different licence, perhaps one with a photograph?

Mr. Troy.—Not at the moment but there are some further EEC changes in the pipeline about driver licensing generally. From now on we will have to keep amendments in line with EEC requirements.

Chairman.—So the likelihood is that we will see a licence with a photograph?

Chairman.—What about the question of a ten-year licence? Would it not save administration if people did not have to be constantly renewing their licence?

Mr. Troy.—It would, but there is some objection that I cannot remember. I have seen it considered in the past. It may have been from the point of view of theft, or security, or something like that.

Chairman.—One of the things which I very much supported was in regard to the renewal notices for car taxes. Has that improved the inflow of revenue to the Exchequer. Also, could you give the Committee some idea of the percentage of untaxed cars which are being driven around the country at any given time?

Mr. Troy.—On the first of these, we are now getting a response of about 40 per cent payment by post and we are hoping, within the year, to have it up to 50 per cent. The ultimate aim is to bring it to 60 per cent. There has been a noticeable speeding up in the time in which the revenue comes in. The sort of judgmental feeling of the people involved is that there is a rise in income. However, it is hard to attribute any specific quantity of the increase to this method because the Garda also have been stepping up enforcement and it may be partly due to that. On that second point,* a roadside survey was carried out by the Garda in early 1987 and prosecutions are following and so on. We will not have the full picture until the end of the year. The initial indications, in the opinion of the Garda and ourselves, are that the rate of tax evasion has been falling and is now between 10 and 12 per cent.

5.Deputy Dempsey.—In relation to tax, could you explain to me the system that is used for the collection of motor taxation. How is that sent? Is it sent to the Department? How is it transferred to the Department?

Mr. Troy.—What happens is that the tax is lodged locally in a bank every day in an account in the name of the Minister, and is cleared weekly up to the central motor tax account in the Central Bank and from there to the Exchequer.

Deputy Dempsey.—Would you see any merit in cutting out some of the bureaucracy attached to that? I find in Meath that we collect roughly £3 million in road taxation which we duly send to the Department of the Environment and they, at some stage or other during the year, send us back £3 million in road grants. Is there not a case to be made for estimating the amount of road grants that a local authority could have or should have during the year and then instructing them to use the money collected in motor taxation on an ongoing basis, rather than this bureaucracy of sending it to Dublin and having it sent back to the county?

Mr. Troy.—The point about that is that there is no necessary connection between the amount collected in a particular county and the needs of that particular county. For example, County Kildare carries much of the traffic of the whole south of Ireland but the amount collected within County Kildare would not come anywhere near what is needed.

Deputy Dempsey.—I accept the point, but the point I am making is in relation to the bureaucracy involved in actually having it collected locally, having it despatched to Dublin and then having a similar or even a greater amount being sent back from Dublin to the local authority. I accept the point that you are making. We have the same difficulty in Meath. We carry a considerable amount of traffic on our roads but we do not get nearly enough in road grants. The point I am making is in regard to the sheer bureaucracy of sending this money to Dublin, and some of it, or all of it, will be sent back to us.

Mr. Troy.—There are two stages in that. First of all, retaining the money locally and having a local facility to pay motor tax, etc. which I think it necessary and right. Secondly, sending it up is really a bank transaction. It is a simple transaction, once a week.

Deputy Dempsey.—Would it not be twice as simple for the Department just to send a letter to the local authority and say, “your road grants for this year are £3 million, the excess over £3 million has to be sent to the Department”. It would greatly facilitate local authorities as well in their cashflow situation, that they could meet their day-to-day bills rather than, as I see it, the bureaucracy. However, I can see that we are going to have to agree to differ on that particular item. Another point I would like to put to you is, what are the difficulties you see in relation to using outlets other than motor taxation offices for distributing motor tax?

Mr. Troy.—It is being considered at the moment by a group and their report is with the Minister. The only other outlets are the post offices. The banks were not interested nor were any other bodies that we approached. I do not want to anticipate what the Minister might decide on the basis of the report.

Deputy Dempsey.—In regard then to the final point — the point the Chairman made in relation to sending the applications through the post and the new system, the computerised system, that is being used in most local authorities — is there to your knowledge any great incidence of theft of these documents in the post that you are aware of. Is this a problem yet?

6.Deputy Colley.—I just wanted to bring up a small matter which has come to my attention recently and I just wonder what your attitude is in the Department and whether you might consider changing it. Those who are elderly, over 70 years, and have to apply for a certificate of fitness for a driving licence, I believe they have to apply to the Department for the certificate of fitness and then, having got that and having got their doctor also to send in a form, they may only then apply for a licence. Is there any particular reason why that whole transaction could not be handled at the local taxation office?

Mr. Troy.—In 1985 a statement was issued by the then Government of plans for devolution of various functions in local authorities. That was one of them. Other matters have taken place since, but it is still being considered. I can see no reason why it should not.

Deputy Colley.—How active a consideration is it, because I wrote to the Minister about it and I did not get the impression it was under active consideration.

Mr. Troy.—There are a number of things happening there at the moment. The driver testing and the driver licencing office is marked down for transfer out of Dublin. We are looking again at what all their functions are and what could be given directly to local authorities. This is one of the items being considered.

Deputy Colley.—How many people would be involved in that work in the Department?

7.Chairman.—Fine. We will note that paragraph and move on. You will note, Mr. Troy, that the Committee will be interested to hear what proposals you are considering for local government audit reform and also in the area of collection of taxation through other outlets, like, for instance, the Post Office. We will be coming back to that at a future date. We will turn to the Vote itself. Are there any questions? What is your position on fines for derelict sites? The city and the country generally, particularly urban areas, are really destroyed by derelict sites. What are the powers of your Department in relation to fining people for these and do the local authorities have any income from that area?

Mr. Troy.—There is practically nothing happening at the moment. We have a new Bill under consideration. Again, it is one of those things I cannot say much about just now. What falls to be considered there is perhaps the planning side, registering these sites, perhaps also penalties of some sort.

Chairman.—Could we anticipate that perhaps you might do something about these eyesores for Dublin's Millennium?

Mr. Troy.—We are under very strong pressure to get this Bill fairly quickly.

Chairman.—I will try and put you under stronger pressure. Can I ask you about pollution control and conservation? How much was spent in the year 1985 on that area?

Mr. Troy.—Very little, I think. It was £16,000, a refund to local authorities for clearing oil pollution. There was very little in that year; it was bigger in 1986 and in 1987.

Chairman.—Would the expenditure in this area normally be made directly by local authorities or by any other Government Department?

Mr. Troy.—By local authorities in the first instance. This is clearing up work, and then the Department recoups some of the expenditure in special cases, such as oil pollution coming in from the sea.

Chairman.—What would happen in a case, for instance, like the Kowloon Bridge? Who paid for that?

Chairman.—Given the number of fish kills, pollution with oil and various different things that happened during the year, and, obviously, the cost to the State of having to treat these pollutions retrospectively, do you think enough is being done? Is it not costing the State money and costing us a lot of money in tourism and environmental clean-ups and that sort of thing?

Mr. Troy.—The fundamental principle is the polluter pays. As you know, recently a Cabinet Committee have been going into the whole question of water pollution and a series of measures were announced. New legislation is being prepared, with tougher penalties, more explicit powers to recover costs by third parties, and so on. There is also power to go to court on the part of third parties where serious fish kills and so on are imminent, and a tightening up on the planning laws, as well as an educational and environmental approach in each county. Task forces have been set up in each county.

8.Deputy Desmond.—On subhead M— Grants to Local Authorities in relief of Domestic Rates — the expenditure is £169 million. If a comparable system of rates were introduced now, with a reasonable degree of rates relief in it, it would bring in about £160 million? Would you share that view?

Mr. Troy.—I think it would depend on whether you wanted the rates, or any system, to bring in marginal expenditure or a substantial part of existing expenditure.

Deputy Desmond.—Is it fair to say that there does exist within your Department sufficient working papers to enable the system to be brought in quite rapidly if a policy decision was taken?

Mr. Troy.—There are enough papers anyway, but as to whether it could be brought in rapidly, I think since you have to work through the local authorities and through their staff structures, and with notice and with looking at the local dwellings and so on, it would not be that rapid. It might be a year or two years; that kind of time scale.

Mr. Troy.—Most of them. There has been a huge clean out. They are still retained for commercial rates.

Mr. Troy.—It depends on the system adopted, but there would have to be some assessment to begin with, item by item, and perhaps methods of appeal and so on.

Deputy Desmond.—But — and this is my final question on that aspect — if a system was reinstated it would perhaps take no more than a year or two?

Chairman.—Would you be in a position to tell the Committee what, in your view, was the effect from an income point of view and from effective local government point of view, and indeed effective Central Government point of view, of the abolition of domestic rates? What is your overall view of the problems created by that?

Mr. Troy.—It is not just the loss of money and the loss and the reduction in services, but the changed position of local authorities in relation to the Department and in relation to the purpose that local government is intended to serve, which is local accountability and a measure of local democracy, which you cannot have without some form of raising money locally from your local electorate.

Chairman.—So, from that point of view the local authorities became too dependent on Central Government?

Mr. Troy.—There are, yes. Again, these are being considered by the Minister.

10.Deputy Dempsey.—In relation to the rates situation and the rate collectors, have you any estimate of how much the rate collectors cost local authorities in the period from the abolition of rates to the time that the Revenue collectors took over, which would be last year really? My understanding is that a considerable number of rate collectors refused to collect anything other than the rates and to do the job that they were officially appointed to do. I understand they were costing in the region of £17,000 or £18,000 each and the income they were collecting was considerably less than that. Have you any figures?

Mr. Troy.—I do not have figures but I know that the cost was excessively high in relation to what was being collected. They stood on their contractural rights: they had been appointed to a particular district; they would not take on another district. We prepared redundancy packages with them in agreement between managers and unions and so on, and it was a question of buying them out, over a period of a few years.

Deputy Dempsey.—Is it true to say that from the time rates on land went it was nearly four years before the rate collectors came to an agreement, or the Department came to an agreement with them?

11.Chairman.—Could you tell us, in your best estimation at historical cost rates, what in our estimation was the loss to the Exchequer since the abolition of rates in 1977 I think it was, up until 1987. In that ten years how much did the Exchequer lose by the abolition of domestic rates in your best estimation?

Mr. Troy.—I think we usually do not answer that question. In theory, the size of the two grants represents the difference. Of course, it would be a bit bigger than that.

Chairman.—Could you give some estimation of what was lost by the abolition of rates for the ten years from 1977 to 1987?

Mr. Troy.—The only official reply to that is the total of the rate support grants.

Mr. Troy.—£256 million this year. Roughly the £200 million, back a good few years.

Chairman.—So we are talking about something approaching £2.5 billion as historic cost for the ten years.

12.Deputy Desmond.—Do you have any indication of the extent to which commercial rates have gone up over the period. For example, in my own constituency there was a 23 per cent increase in commercial rates last year in the Borough of Dún Laoghaire. This year they are proposing to have another five or six. Has there been a very substantial increase in commercial rates arising from the abolition of domestic rates?

Mr. Troy.—We have. Up to the time when we ceased to control the level of rates, which was in 1983, the rise in commercial rates was below inflation. Since then, it has been very, very much above inflation every year. I think the Dublin Chamber of Commerce has circulated a report on what the figures are.

Chairman.—But the Dublin City Manager says that the increases over the ten years have been exactly the same as the consumer price index for the same period.

Chairman.—But over the ten year period he says they have been in keeping with the consumer price index.

Mr. Troy.—In Dublin Corporation it went up by 59 per cent since 1983 while inflation was 31 per cent — twice the rate of inflation.

Chairman.—But there was a number of years before that when the increase was below.

13.Deputy Desmond.—On housing grants in the year in question, the year ending 1985, the £5,000 house grant for the surrender of tenancies was beginning to come into operation then, or was it 1986?

Deputy Desmond.—As a matter of departmental assessment, was that scheme in your view meritorious in terms of developing housing stock and generally as a matter of housing policy?

Mr. Troy.—I think it was to begin with and as it was seen at the beginning, which was as a sort of adjunct to all the other policies, with a rather modest number of people availing of it. The number became very large and it left certain housing estates denuded of all the more vigorous people. It created something of a ghetto in the end, because of the very success and extent of it. It was a very cheap way of providing houses for the local authority estate, because instead of paying £30,000 you paid £5,000 and there was a vacant house for somebody. However, the social consequences became very severe and we had lots of complaints from voluntary bodies, especially in Dublin and Cork. It was fundamentally a large urban area issue.

Deputy Desmond.—As an instrument of housing policy it was a defective mechanism in the long term.

Mr. Troy.—For social reasons, because three areas in Dublin accounted for most of it — Darndale, Tallaght, I forget what the other area was. It was regretted as having unfortunate results in the end, because of the very scale of it, which was bigger than had been expected at the beginning.

Deputy Desmond.—On another aspect, what is your assessment of the substantial allocations made in respect of aspects of home improvement grants, such as for double glazing, windows, and all that, which in the year end 1985 was still to an extent in operation? was it really a benefit in terms of housing stock and housing policy?

Mr. Troy.—One of the perennial priniciples we have is that it is better to conserve the existing stock than to add to it. There have been various reports in the past such as — the capital investment advisory committee in the fifties and so on — that it is better to spend money on improvements and is cheaper than building new houses. Certainly the concept of improvement grants is a good one in itself, but whether you can afford it at a time like this is something else.

Mr. Troy.—We have a kind of a fixed view on this, that it is really impossible to apply income limits.

Deputy Desmond.—Did not the net effect mean that people of middle and upper income groups effectively availed of the particular improvement and people with relatively better housing stock effectively improved their dwelling rather than those of low income?

Mr. Troy.—Local authorities could do it for their tenants and tenants could apply for it with the consent of the local authority.

Deputy Desmond.—The extent to which they did avail of it was far less than middle and upper income groups?

Mr. Troy.—Possibly. But it is the housing stock we focus on, the real capital, and keeping it. The pre-1940 grants would have been very useful that way.

Deputy Desmond.—Would you have favoured, for example, an income tax relief system on such expenditure as being perhaps more beneficial and more conducive?

Mr. Troy.—That would favour the well-off, then, if you work it that way. It would raise other problems.

Deputy Dempsey.—Just one point in relation to that. What are the estimates at the moment for the cost of a subsidy on local authority houses?

Mr. Troy.—It varies with the rate of interest. It is £76 at the moment per week.

Deputy Dempsey.—Would you accept the viewpoint that the Department and the Government in general would be better putting forward more attractive tenant purchase schemes than forcing people who cannot afford to buy out their houses to stay in their houses under a rent scheme? Is there a case to be made for more attractive tenant purchase schemes to encourage as many people as possible to buy a local authority house?

Mr. Troy.—At the moment we are giving consideration to further changes in the sale scheme and I do not know what the outcome of that will be. It is always well to remember that the majority of tenants of local authority houses depend on social welfare for their livelihood. There are limits to what they can do.

14.Chairman.—On Subhead Q — Rehabilitation of Travelling People — could you give us some idea how that is progressing. What about halting sites, what progress is being made on that? Have we got some sort of a national programme together? Is this money being spent properly?

Mr. Troy.—All the money is never spent, and it is one area where we can say that money is no object. Money is not the deciding factor; it is local acceptance and willingness. Of the 3,000 families, by common estimation, 2,000 are regarded as settled and 1,000 are still by the roadside, which is still an appalling figure. I know that the biggest single area, County Dublin, is grappling with it. In reply to inquiries they tell us they are progressing, but it is very slow.

Chairman.—We are spending money year after year. What progress is being made? I know in my own constituency, for instance, people do not want itinerants camping where they should not be camping, but in other parts of the constituency people will not agree to camping sites being located there. What efforts are being made to come to some community education about this dual problem so that the 1,000 families by the roadside can be properly assessed?

Mr. Troy.—There are various local voluntary groups including the council officials themselves working at it. This is something which we considered a couple of years back as to whether the whole thing should be nationalised or left at local level. It was felt on balance that local acceptability could best be worked at locally, because you do need some kind of acceptability in the end.

Chairman.—In many cases it is a question of going out and convincing the community and getting the community involved. Most people, if they understood the problem, would be more rational about it; but they do not like a particular thing foisted on them. Would your Department undertake or consider undertaking trying to organise this approach to the problem? It really is a terrible problem.

Mr. Troy.—It is, yes. The fundamental thing is that, when it comes to the council, the council is put under pressure and the project is held up.

Chairman.—Some method should be found of selling it directly to people, of putting the argument directly to people and convincing them of the need. The question really does not seem to me to be addressed in a concentrated organised sort of way.

Mr. Troy.—Yes. We have Mr. Bewley, the adviser; we have constant discussions with representations of the travelling people and so on; but our view is that it is best tackled area by area in the light of the circumstances of that area. It is the people there who have to be met and won over in each area. Everyone is for it nationally in general; it is when it comes to a particular area that the problem arises.

Chairman.—It is like being against sin. Are you happy that the local authorities are organised and geared to try to go out and sell the solution to this problem to the community?

Mr. Troy.—I think I can say that the managers are all aware of the need to do this, because we talked to them a number of times. The Minister himself has spoken to them this year about it. I know that they want to push it. They have people, for example, in Dublin there are particular people working practically wholetime on it. It is a question — and I am not blaming the councillors because they have to represent the views of their particular constituents — but it is somewhere there between the council and the pressure brought to bear on them.

Chairman.—How many people in your Department work in the itinerant rehabilitation area?

Mr. Troy.—When there were separate sections we had one assistant principal and one or two supporting staff. The work has now been located within the housing area on the basis that that is the way to look at it, to accommodate people in housing more than on halting sites.

Chairman.—Do you not really need to delegate this to an assistant secretary or somebody who is going to really be motivated and get the thing off the ground and bring a bit of pressure to bear on managers and local authorities?

Mr. Troy.—This is done constantly. At least once a year the Minister of the day speaks to managers on this matter.

15.Deputy Dempsey.—In relation to that point we are talking about, the rehabilitation of travelling people, do you feel, Mr. Troy, that there is a need to make a distinction between travelling and roadside traders? There is quite a considerable number of people for their own reasons travelling around in caravans, stopping at various locations, usually highly dangerous ones because of heavy traffic, and commencing to trade. Are we including those kind of people in this question of travelling people?

Mr. Troy.—They are included in the counts that we take and the money that we spend, but I do not think they would be regarded as having the same priority as the others.

Deputy Dempsey.—How can we make that distinction, because I find on the ground that these type of traders cause a lot of resentment in the local community, whether it is in the business community or otherwise? In the business community they are generally regarded as not paying VAT or taxes or having any overheads and for the non-business people, if you like, they create a lot of problems from the point of view of rubbish left behind and so on. How do we make this distinction? When we talk about 3,000 families, are we talking about 3,000 including travellers and traders, and I do not make any apologies for making that distinction.

Mr. Troy.—That is right. They are included, but as far as I can recall there are only a few hundred of those type. There are 54.

Deputy Dempsey.—Fifty four. They sure get around the country because anywhere you go you see them.

Deputy Dempsey.—I can see how they would avoid the count. There are quite a considerable number of them in County Meath. I would say there are 54 in the county alone, so perhaps if you move for an early count you might get some more in other counties. I cannot accept that figure. I know it is given in good faith but there are considerably more than that.

16.Deputy Ahern.—In 1985 there was £2,110,000 spent under subhead Q. What was it expended on?

Mr. Troy.—In that particular year it included subsidies for the provision of halting sites, for housing for the travellers, the recoupment of 90 per cent of the salaries of social workers who work with the travellers, and miscellaneous grants towards the cost of caravans and hardship and so on.

17.Deputy Desmond.—Are you of the view that the inter-departmental and the national co-ordinating committee in relation to travellers has made a significant contribution to the rehabilitation of travelling people?

Mr. Troy.—I think it has. It has focused rather more interest than there was among the different participant bodies.

18.Deputy Desmond.—On subhead T — Waste Disposal Facilities — there has been a substantial under-expenditure in this area, largely because no central facility has been brought into operation. What are your views on this very crucial matter? Are you con-cerned that we have no central waste disposal facility in the country?

Deputy Desmond.—Are you of the view that as a consequence there is indiscriminate dumping of toxic waste and radiation waste?

Deputy Desmond.—Is there any prospect at all that there might be a national disposal facility introduced?

Mr. Troy.That is the general aim, either a national one under the control of the State, or alternative private arrangements. One of the factors that has complicated this, apart from public opposition near the proposed center, has been that the private sector has come forward with certain ideas for handling the whole thing, and an expert group in the Department prepared a review of this. That is being considered by the Minister. It is a question of providing a more economical way of doing this and one that perhaps would be more acceptable to the public.

Deputy Desmond.—Do you not feel that it is somewhat self-righteous on the part of Irish people to be berating Sellafield and other waste disposal facilities outside of the country when, within the State, there is no such pro-vision? Are we not exporting that toxic material, apart from dumping it? What do we do with hospital radiation waste, redundant X-rays, redundant isotopes and so on? My understanding is that we dump them in this country.

Mr. Troy.—I do not know about the hospitals but there are laws governing such dumping. The local authorities, as the waste authorities, have waste plans for their areas. There is a net, ultimate problem about haz-ardous waste and where it goes. It has been exported in the past and special measures taken for it, but there is no long-term solution except either to have a State centre or some kind of co-operative or other similar action by industry, on a private basis.

Deputy Desmond.—Would you not think it a bit self-righteous on our part to be berating the European Community countries, and particularly our nearest neighbour, in relation to such matters when we make absolutely no provision for any such disposal?

Mr. Troy.—I think that is going a bit far, saying that we make no provision at all. There are regulations governing the disposal of waste and there are prohibitions. There are certain dumps around the country, arranged by many local authorities, and there are land-fill sites into which a lot of that waste can be put safely. Ultimately, we still need this final step.

Deputy Desmond.—But there is material of very high toxicity and relatively high radiation produced within the country which has to be exported?

Mr. Troy.—The little bit we have is not very strong, compared with Sellafield.

19.Deputy Desmond.—In regard to the question of expenditure by local authorities on visits of their members to conferences abroad, what departmental efforts or efforts of a Min-isterial nature, have been made to control that kind of expenditure?

Mr. Troy.—Two things are done. Exhor-tations are issued and arrangements were made a couple of years ago that the accounts of local authorities would show separately the cost of travel of this kind.

Mr. Troy.—No. Local authorities were asked, as part of the general system of cut-backs, to cut the global sum for travelling expenses by 20 per cent compared with this year, as in the Civil Service and elsewhere, but no particular area has been specified as the area in which to make cuts. It is up to the local authorities to decide.

Chairman.—I think the general feeling is that whereas it is a good thing for members of local authorities to see what goes on abroad, it is the numbers who attend from smaller authorities, in particular.

Chairman.—One recent report back to a Dublin authority informed the council that the Irish delegation was the smallest delegation among the countries attending the con-ference. I suppose they have problems in other countries as well, but there is a difficulty when you have got ten people from Leitrim attending a high-rise housing conference abroad. It does not make much sense.

Mr. Troy.—There is the problem of the principle and there is the question of abuses. When it concerns public representatives — to get back to the word “bureaucratic„ which was used earlier — I think it would be wrong that there should be regulation by the Department of that. What the public rep-resentative does he does in the public eye and he can answer to the electorate for that in due course.

20.Deputy Desmond.—Successive Account-ing Officers cannot be held responsible for the policy situation. Is it not a fact even this year, in dire financial circumstances, several hun-dred such visits abroad have taken place?

Mr. Troy.—As I said, we issue exortations and our Ministers from time to time castigate them, but I feel very relucant—

Deputy Desmond.—Would you not agree that these memoranda from yourself and your Assistant Secretaries and from successive Ministers are treated with general contempt?

Mr. Troy.—I think there is some principle here that I cannot express properly. It is some-thing about the sort of autonomy that local authorities are expected to have and that their accountability should be to their local elect-orate, even in matters like that.

Deputy Desmond.—But is it not a reality as well that such delegations invariably have five or six members of a local authority together with two or three officials? Invariably, is that not the Irish delegation?

Mr. Troy.—Yes, we have been bringing to notice that the Local Conferences Order, 1947, which regulates internal conferences, restricts the number to three and that, while there is no power in relation to foreign conferences, that should be followed as a guideline.

Deputy Desmond.—And that—I conclude my comment on this — no Ministerial or legis-lative directive has ever been enacted by any Government in relation to this matter?

21.Chairman.—I thank the former chairman of the county council. Perhaps we could move on?

22.Deputy Desmond.—On Appropriations-in-Aid, item 8, the contributions in lieu of rates for the year 1985 is £23 million?

Deputy Desmond.—What will the income from contributions for 1988 be likely to be?

Mr. Troy.—No. This is for the ESB premises. The basis is the rates that the ESB, in the opinion of the Government, would have paid if their premises had been subject to rates.

Deputy Desmond.—Has the legal impasse between the Department and the ESB been resolved?

Mr. Troy.—I hope so, but there is legislation being prepared in the Department of Energy and perhaps in the Department of Finance on aspects of this.

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

VOTE 47—HEALTH.

Mr. P. W. Flanagan, (Secretary, Department of Health) called and examined.

23.Chairman.—The Committee of Public Accounts of Dáil Éireann is this morning examining Mr. Liam Flanagan, Secretary, Department of Health, in his capacity as Accounting Officer for that Department on the 1985 Appropriation Accounts. You are welcome, Mr. Flanagan.

Subhead O.—Appropriations in Aid.

1.I referred in paragraph 21 of my previous Report to the arrears of Health Contributions, Youth Employment Levy and Income Levy totalling £20 million which Health Boards had failed to collect from farmers up to 6 April, 1984; with effect from that date the Collector General of Revenue became responsible for collecting these charges. Of the arrears outstanding, £10 million, approximately, represented Health Contributions and in May 1985, the Minister for Finance agreed that the Health Boards could retain and use to fund their services any amounts collected by them in 1985 in respect of these arrears. This arrrangement, which was later extended to cover all arrears collected by Health Boards, was conditional on the Boards's collecting at the same time and to the greatest extent possible arrears of Youth Employment Levy and Income Levy and transmitting them to the Department of Labour and the Revenue Commissioners, respectively. Accordingly, the Health Contributions (Amendment) Regulations, 1985 and 1986 provide that Health Boards may retain, as supplementary revenue to meet health services costs, arrears of Health Contributions Collected by them from the farming community. Arrears of Health Contributions totalling £1,416,282 were collected by the Health Boards in 1985 together with £1,394,796 arrears of Youth Employment Levy and £727,162 arrears of Income Levy leaving approximately £16.5 million still due by farmers under the three headings at 31 December 1985.

Arrears arising since 6 April 1984 and due to the Collector General are included in the amounts shown in Schedule 8 of paragaraph 16.

Mr. McDonnell.—The only paragraph we have to deal with today is No. 58. You will recall discussing a few weeks ago the question of the collection of arrears of levies and health contributions relating to the period from 6 April 1984, that is the date from which the Revenue Commissioners became responsible for collecting them from all categories of income earners, including farmers. This paragraph refers to arrears which had accumulated up to that date, 6 April 1984, in respect of levies and contributions which the health boards had failed to collect from farmers before they handed over their responsibility to the Revenue Commissioners. It outlines also, the arrangements which were made to deal with the problem and shows what level of success was achieved up to the end of 1985. I understand that some further amounts were collected in the subsequent years, 1986 and 1987.

Chairman.—What is the current position on this, Mr. Flanagan, the outstanding £20 million from farmer income levies?

Mr. Flanagan.—The position in relation to collection is that in 1986 — I think that is the point the Comptroller is making — health boards collected a further £1.158 million in farmer's health contribution arrears. At 30 September 1987 farmers owed a total of £5.85 million to health boards. As the Chairman probably knows, health boards retained responsibility for collecting any arrears due prior to 6 April 1984. The Health Contributions (Amendment) Regulation, 1985, provides that health boards may retain as supplementary revenue to meet health services costs, arrears of health contributions collected by them in 1985. That has effectively brought a greater response in collection by the health boards. Approximately £1.5 million was collected in 1985, in 1986 health boards collected £1.158 million. Farmers owe a total of £5.85 million to the health boards. The process of collection is continuing up to and including court action. It is interesting that a court action by the South-Eastern Health Board was dismissed in the District Court mainly on the basis of technical legal submissions by the solicitor for the defendant. An appeal, however, to the Circuit Court by the health board overturned that dismissal and a decree for the sum due was awarded to the health board. Similar actions are being taken by that board against 70 farmers. The Southern Health Board are pursuing similar action, so that we would hope that the process of collection will continue.

Chairman.—The reference in this report is to health contributions, youth employment levy and income levy, totalling £20 million. The figure you refer to of £5.8 million only refers to health contributions?

Chairman.—What is the figure for youth employment levies in that £20 million? In other words, what is the comparative figure?

Mr. Flanagan.—Not offhand. I will get the information for you.* We were concerned with the raising of the money which health boards apportion to their health services expenditure.

Chairman.—Would you be aware if this money is still outstanding, or has it been collected in these difficult times? You must have some measure of that?

Mr. Flanagan.—I am aware that some amounts have been collected but we do not have the exact amounts. Presumably, it would be only the Department of Labour or the Department of Finance that would have that information.

Chairman.—Perhaps the Comptroller and Auditor General could tell us the situation on that.

Mr. McDonnell.—By my reckoning of what was collected subsequent to the years to which I refer, that is 1986 and up to September 1987, I think there would be in or about the same amount outstanding by way of youth employment levy and income levy. The Accounting Officer said £5.8 million of health contributions is still outstanding at the end of September. I think there is in or about £6 million of levies outstanding at the same time.

Chairman.—You would pay for a lot of primary school cutbacks out of that, Mr. Flanagan.

24.Deputy Naughten.—I would like to establish from Mr. Flanagan how precisely this £5.85 million was calculated?

Mr. Flanagan.—The calculations are based on a factual assessment of farmers income. The information relating to the arrears owed has been in a sense verified with the Revenue Commissioners but taken on the basis of factual income. In general the basis of assessment seems to have been accepted as may be seen from the rate of collection, and also from Court findings when court action was taken and the amounts sought were granted to the health board after the technical data was given.

Deputy Naughten.—Factual assessment would only apply in cases where farmers were already in the income tax bracket. Is that not correct? The other was an estimated income.

Mr. Flanagan.—Perhaps, I am not totally expert in that. All I am aware of is that that charge was levied. We are attempting to collect it on the basis of what is the practice in relation to assessment of the farming income. We stand the sum at £5.85 million and we will pursue the collection of that amount of money.

Deputy Naughten.—But the point I am making is that, in fact, it is the same as the Revenue Commissioners assessment in very many cases, particularly in cases where farmers are not eligible for income tax, that in fact it was an assessment issued by the health board and very many of them did not question it.

Mr. Flanagan.—That is true, but the health boards do allow farmers who dispute assessments an opportunity to argue that a health boards' assessment is overstated.

Deputy Naughten.—So the figure of £5.8 million could in fact be as little as half that?

Mr. Flanagan.—I would not care to comment on that. In the situation in which we need resources for the health services, we will endeavour to collect the amount that we think is owed, allowing the farmers' a reasonable opportunity to state their position about the assessment to the health boards. As I have said, I presume that when the standard collection process has been exhausted, health boards will endeavour to collect the money through court process.

Deputy Naughten.—Yes, but you do accept the point that quite a lot of that money was calculated on an assessment without any factual evidence as to income?

Mr. Flanagan.—No, I do not necessarily accept that. I would accept that the farmers have the opportunity to pursue the assessment with the boards and then if they dispute it, to take their chance in court with them.

Deputy Naughten.—With regard to the other levies, is it a question that the health boards have no real interest in collecting the other levies other than the health levy?

Mr. Flanagan.—No, it is an activity which is a matter for the Department of Labour. It is an arrangement between the health boards and the Department of Labour. We do not enter into it at all.

Deputy Naughten.—In a situation where health boards are establishing the liability of farmers, how do they assess their income?

Mr. Flanagan.—If there is a Revenue assessment, they will accept that and use that. If not, as far as I know, they make a notional assessment using their local know-how and comparisons with the other activities in the area. That is the way that they would operate. Again within the situation when the assessment is arrived at, there can be a discussion between the board and the person on whom the charge is levied.

Deputy Naughten.—It is not true that the Ombudsman was quite critical of the way health boards tried to assess farmers income and referred to that in his report?

Deputy Naughten.—In fact, he basically said, there was no sound basis for the way income was calculated. Is that not true?

Mr. Flanagan.—I think the Deputy is opening up a field of enormous discussion as to whether in fact health boards would require that the accounts of farmers would be audited with the consequential costs. On the basis on which the health boards operate, on the results of the court cases and on the discussions they have about assessments, I would not have the impression, despite the Ombudsman's comments, that the health boards lean unduly. Health boards, as the Deputy will know through the Chair, have a local representation in the constitution of the health boards and it is therefore open to farmers to raise the issue of the approach of health board officials and to discuss it. The process is a reasonable one. From the information I have, the sum of £5.85 million is not necessarily an overstatement. I would remind the Deputy that the sums have been owed for over three years.

Deputy Naughten.—Yes, I take the point that some of them are outstanding for quite a long time; but I also believe that, no more than in the case of the Revenue Commissioners, this £5.85 million may completely overstate the amount owed. I am also equally sure that the Ombudsman would not have made that reference in his report if he was not satisfied that there were grounds for it.

Chairman.—I think as the Accounting Officer says there is a very big field there which might not necessarily sustain one argument or the other.

25.Deputy Foley.—I think Deputy Naughten asked some of the relevant questions I was interested in. In fairness to Mr. Flanagan, the Ombudsman also pointed out that a lot of the cases presented against the health boards and the Department of Health were not well presented. He mentioned that in his report. How many cases approximately was the Ombudsman directly involved in with the Department of Health?

Mr. Flanagan.—No. It is relatively few. I have not got the precise number but I can easily communicate it to you.

Deputy Foley.—Just to follow up on the point made by Deputy Naughten, do you anticipate the money that is outstanding being collected?

Mr. Flanagan.—It is very difficult to answer that question. Some of it will be collected. Obviously, in the case where the Southern Health Board and the South-Eastern Health Board are after some farmers, they anticipate that it will be possible, but the arrears go back many years and it is extremely difficult to be certain that they will all be collected. The health boards are literally charged with making the attempt and will continue to do so.

Deputy Foley.—The process of collection is continuing. Are you satisfied that money is due in view of the assessments raised? What I am coming at is this: over a period of time this money has been accruing; has an investigation been carried out to prove that that money is really factual?

Mr. Flanagan.—Not an investigation as such, but it has been assessed. I can only answer your question indirectly. We have to, through the health boards, attempt to collect it, given that there is a process by which the farmer can discuss it with the health boards and that, ultimately, if he feels sufficiently strongly about the injustice of the situation he has recourse to the courts. I have to answer in the affirmative to you that I believe that there is not an inherent injustice in the majority of cases in endeavouring to collect the money.

Deputy Foley.—Would it be possible, rather than having the option of going to court, that an internal board could be set up in which a farmer could make his cases rather than going to the expense of becoming involved in court proceedings?

Mr. Flanagan.—It is an interesting point and one I would not close my mind to. We would have the view that we would be going down a road which might be expensive to the farmer and which might not necessarily benefit him. It is obvious that we would have to bring into the reckoning audited accounts and so on; some process of evaluation which would be more in depth than perhaps the health board is at present prepared to accept would have to be embarked on.

Deputy Foley.—I mentioned that because of the penalty clause introduced by the Southern Health Board, where if the levies are not paid up to date there is a penalty clause when you have to avail of the health services within the various hospitals. Has that proved effective?

Deputy Foley.—Could I suggest at this stage, would it be approved by the Department, in the case of a person who owed substantial arrears, that a settlement could be arrived at by negotiation? In other words, would you encourage a health board to accept assessment?

Mr. Flanagan.—Yes, health boards tend to have a certain independence in matters of that nature. We would encourage them to do so. You asked about the penalty; the sum was £100 and was increased to £150. Up to 31 December 1986 health boards collected £31,200 by the penalty clause.

Deputy Foley.—Up to 31 December 1986? Would you have it up to September 1987?

Deputy Foley.—When the penalty clause is imposed are they still liable to pay the arrears?

26.Deputy Ahern.—Most of the questions I would have had have been asked, but I would like to make one or two comments. First, as I understand it, you have two systems of assessing the contributions. You have one for those farmers who are in the income tax net, or have been up to 1983–84—everybody is in since then—but prior to that people who were liable to submit accounts had to give the amended statement of liability. What I have found, in the past year especially, is that people who were overassessed by the Southern Health Board and in respect of whom the amended liability was brought in were then reassessed on the factual figures. I know that the Southern Health Board have been bringing people to court and people are paying up. The other method of assessment, I believe, was a rateable valuation. Is that correct?

Mr. Flanagan.—That has gone; it was declared to be an unconstitutional approach.

Deputy Ahern.—Deputy Naughten has pursued that matter so there is not point in going over it again.

27.Chairman.—It is in the health board's interest to collect these outstanding amounts. Do your Department give them an incentive to do that by reducing the allocation to them annually and encouraging them to collect these amounts?

Chairman.—You would not see any point in encouraging them to collect it by such an incentive?

Mr. Flanagan.—Yes. If a health board can collect the additional money that is money which they can use to advantage. Are you suggesting that perhaps we would add to that amount of money?

Chairman.—No, I am suggesting that you might consider deducting from their allocation from your Department an amount which would encourage them to collect the outstanding levies. These levies seem to be outstanding on a regular basis.

Mr. Flanagan.—I take the point. The problem is that with the best endeavours on the health board's part there would be a time lag; and, given that they too are charged to live within allocation, the probable alternative would be some diminution of services if the amounts were significant in a particular area.

Chairman.—In relation to this, how often are the accounts of health boards audited?

Mr. Flanagan.—As far as 1986 in the case of some health boards. I can give you a statement of the position as at 1 November this year. In the case of the Eastern Health Board accounts up to 1985 are available for audit; the 1986 accounts will be available for audit. Audited accounts, where the Eastern Health Board are concerned, were submitted to the Oireachtas up to and including 1982. The position regarding audits for subsequent years is that for 1983, 1984 and 1985 audits are completed and are available to the Department for presentation to the Oireachtas and will be presented shortly. I understand that the position for 1986 and 1987 is that they will be completed in late 1988. That is in the case of the Eastern Health Board. In the case of the Midland, accounts up to 1986 — will I run through the lot, Chairman?

Chairman.—No, just the ones that are not up to date. You said the Eastern Health Board audits up to 1982 have been presented to the Oireachtas and up to 1985 about to be presented later on.

Mr. Flanagan.—I will run through them fairly fast. The 1985 and 1986 audits will be completed by the 31 December in the case of the Midland Health Board. In the case of the Mid-Western Health Board the 1985 and 1986 audits are expected to be completed by 31 December 1988. In the case of the Midland and the Mid-Western Health Boards accounts have been submitted to the Oireachtas up to and including the year 1984. In the case of the North-Eastern Health Board accounts up to 1986 are available for audit. Accounts up to and including 1982 have been submitted to the Oireachtas. Accounts for 1983 and 1984 are completed and are about to be presented to the Oireachtas. The audits for 1985, 1986 and 1987 in the case of the North-Eastern Health Board will be completed by 31 December 1988. In the case of the North-Western Health Board audits up to and including 1984 have been presented to the Oireachtas. The audit for 1985 is completed and will be presented very shortly. We understand that the accounts for 1986 and 1987 will be completed by 31 December 1988. Accounts in the case of the South-Eastern Health Board for 1986 are available for audit. Accounts up to and including 1983 have been presented to the Oireachtas.

Mr. Flanagan.—Up to and including 1983. We understand that by the end of this month or early next month the 1984, 1985 and 1986 audits will be available to the Department.

Chairman.—Does that mean that an annual audit is not being carried out, that in some cases you are carrying out two and three years at the same time?

Chairman.—So that the answer to the original question I asked is that there is not really an annual audit carried out.

Mr. Flanagan.—Yes, I take your point. The audit is being worked at each year but there is not, in your terms, an audit being carried out on a single annual basis.

Chairman.—And your Department in the year concerned, before appropriations-in-aid, spent £1.18 billion. How much did the health boards spend in addition to that? What was the global spending by health boards for health in that year?

28.Deputy Foley.—What is the position with the Southern Health Board? I did not catch it.

Mr. Flanagan.—The Southern Health Board up to and including the year 1984 has been audited and the audited accounts submitted to the Oireachtas. I understand that audits for 1985 and 1986 will be completed by the end of this year. In the case of the Western Health Board audits up to and including 1984 have been submitted to the Oireachtas. The 1985 and 1986 audits will be completed by 31 December 1987.

Mr. Flanagan.—The grants to health boards in respect of net expenditure, including the Supplementary Estimate, was £603,056,000 and the expenditure was the same amount.

Chairman.—Did that include income they would have derived from their own expenses?

Chairman.—It would not? Can we get some estimate of what the global spending figure was for the Department. Would it have been £700 million for the health boards?

Chairman.—The audit is carried out by the local government auditors under the supervision of the Department of the Environment?

Chairman.—Do you think it is satisfactory that this amount of money should be audited in the way it is, sometimes two and three years at a time, a number of years in arrears, and report not coming to the Oireachtas?

Mr. Flanagan.—No, I cannot say that I do and we have pressed the issue of updating the audits with the Department of the Environment. There have been several fairly trenchant discussions in this forum in which I have participated over the years. The short answer to your question, Chairman, is no.

Chairman.—Could I ask the Comptroller and Auditor General for his observations on the arrears of audits?

Mr. McDonnell.—Obviously, I would have to agree with the Accounting Officer that any situation such as the one he outlined would be very unsatisfactory. It has had some implications for me also over recent years because so much of the health board expenditure is only, if you like, in the Appropriation Accounts seen only as an issue from the Vote. From my audit of the Appropriation Account I have no indication therefore of how the expenditure is incurred on the provision of the Health Services. It has been my practice to rely on the reports of the local government auditors and to bring to the notice of the Dáil and this committee any matters arising on the audits of health boards which the local government auditors feel it necessary to comment on. We have the unsatisfactory situation and I can recall Deputy Crotty referring to this at a meeting here some time ago that I may be referring in a particular year’s report to the deficiency brought to notice by local government auditors in respect of two or three years earlier than that. So it is unsatisfactory all round.

30.Chairman.—We have Mr. Gabriel Noonan, Assistant Secretary of the Department of Finance, with us this morning. Perhaps, Mr. Noonan, you would like to give your observations on this. Do you think this is a satisfactory situation?

Mr. Noonan.—No, I do not think anyone from the Department of Finance can accept that arrears to that extent are satisfactory. On the other hand, we have major problems which constrain our total resources available for public expenditure and the allocation of those over the various demands is something that has been settled in a particular way.

Chairman.—Is it not a fact that this problem of local government audit had been going on long before there was any restraint in Government spending? Is there not something structurally wrong with the way these audits are carried out?

Mr. Noonan.—I agree that there is a problem. It would seem that the accounts from 1982 to 1985 have only been cleared in the relatively recent past. Clearly that is unsatisfactory.

Chairman.—And then two or three years have been taken together: £700 million on an annual basis is a lot of money. This does not apply to the health boards but to the local authorities as well. You are aware that Britain has a local government audit commission. Do we not need to modernise our situation and get away from the tatty practices we have been having to date?

Mr. Noonan.—Without subscribing to any particular description of the procedures we have had to date, there must be an improvement, if at all possible, in bringing the audit up to date. Any reasonable proposition which would advance that objective would be supported by the Department of Finance.

Mr. Flanagan.—May I make a supplementary point? I answered your question directly; it is not a satisfactory position. The Comptroller, the Department of Finance and myself would not regard it as satisfactory. There are two elements to it. In this forum, and with the Comptroller and so on bringing it to attention, it is a considerably improved position; it is an improving situation. Equally, may I just say that, so far as the health boards’ preparation of accounts for audit are concerned they are as up to date in most instances as they can be. Therefore, it is the sustained pressure that we are all trying to bring on the auditors working in the Department of the Environment in an embargo situation that has brought about an improvement, but it is not satisfactory from a control point of view.

Chairman.—But there is more than one way of doing it. You may be aware that the Public Accounts Committee are looking at the whole way in which public funds are audited and accounted for to the Oireachtas. Is it not possible, for instance, that outside firms could be brought in to assist in audits and so on; it does not have to be done within the public service embargo fixed structure? We have to be looking at other ways of carrying out these audits.

31.Deputy Ahern.—Is there an internal audit staff in operation within the Department of Health and within the health boards?

Mr. Flanagan.—There is an internal audit function at work at health board level and the Comptroller has his auditors in our Department in so far as our own expenditure is concerned.

Mr. Flanagan.—We control expenditure. There is within the Departmental a professional accountant, an Assistant Secretary assigned to the finance function and we control our activities in that way in the normal structured way. We operate, as you probably are aware, a cash management system. We maintain very close contact with the agencies’ finance activities, including the health boards. There is an internal audit within the health boards. Internally ourselves we have the presence of the Comptroller’s auditors as well.

Deputy Ahern.—In my experience any large organisations have an internal audit staff who are completely separate from any other function within their organisation. Does that operate within both the Department and within the health boards and, if not, is there any intention on your part to ensure that it comes into operation both in the Department and in the health boards?

Mr. Flanagan.—To the extent that we have improved the control of moneys allocated to us and to be expended, we will adopt every reasonable method. The prime resource of expenditure lies with the agencies. In the case of the health boards, they have an internal audit system, statutorily to be audited by the local government auditor. In the case of the voluntary hospitals, for example, the commercial auditors do the audits and we maintain a control of the situation. Overall we are constantly striving to improve and we will take advice from any source to effect that improvement. We have problems, as I said to the Chairman in response to an earlier question. We have a professional accountant and we had hoped to add to that situation internally but there is an embargo in force and it is not possible to recruit against that embargo. Nonetheless, we continue to pester the Department of Finance for such assistance.

Deputy Ahern.—I accept the points you have made. I think it is a worrying fact, as you have admitted, that you have not an independent internal audit body within the Department on the health boards. I can understand that you are striving to improve the situation and, hopefully, when the economy improves, or even before it improves, the Department of Finance will be able to help out in improving the financial management situation within this whole area.

32.Deputy Foley.—In view of what you said, would you be much happier if you did have an internal audit group within your own Department to liaise with the various health boards?

Mr. Flanagan.—I referred to the professional accountant. Our professional accountant maintains contact, so far as the health boards are concerned, with the internal audit function which is exercised. I understand your question to mean that we would like to strengthen and expand that function. If that is so, the answer is yes, we would; but that is not to admit that within the resources at our disposal there is not the most strict monitoring of the controls which we require to meet it.

33.Deputy Crotty.—Could I ask that Accounting Office if he would feel that undertaking accounts two or three years old and two or three years together is really just going through the motions of accounting?

Mr. Flanagan.—No, I would not. The function performed by the local government auditors upwards to the Comptroller is a very valuable function and we learn by it. There are vast sums of money to stake. The function is exercised meticulously and does throw up issues which are pursued with the agencies and, indeed, pursued in this forum, even at the remove of a couple of years — I am not trying to defend it as satisfactory. The process of financing, which is another issue, is, although it is on a year to year allocation basis, a continuous one. The fact that auditors are present, and even working in arrears situations, is a safeguard. Quite obviously, I have answered in response to the Chairman that I do regard the situation as unsatisfactory and we are doing, within the limits of all of our powers and assisted by some comments of the Public Accounts Committee in the past, our best to update it. I would not regard it as a wasted exercise.

Deputy Crotty.—I am not saying a “wasted exercise”; I would say “going through the motions”. From my experience dealing with auditors, even after 12 months it can be difficult to account for certain sums or decisions taken. For example, there is personnel change; the new personnel does not know exactly what happens. I would think that it is highly unsatisfactory. I would actually make a statement that it is going through the motions and that it is just fulfilling a requirement. It has really no significance because it is outdated. Would it be possible for the Department of Health to require the health boards to have their accounts audited each year and to finance that from their allocation? Could it be put in under a heading?

Mr. Flanagan.—The situation is statutorily controlled so far as the function is statutorily controlled. The function of audit is that assigned statutorily to the local government audit. Health boards do prepare their accounts; they have an internal audit function. It is unsatisfactory, but it is improving. We will continue to endeavour to improve it. The function of audit is statutorily assigned and until that is changed, health boards could not, and I think should not, expend undue money upon having accounts audited. I do not think the Oireachtas would welcome that.

Deputy Crotty.—Could I ask Mr. O’Farrell what the Department of Finance feel about the provision of finance to the health boards to carry out an audit, or what action they are taking with the Department of the Environment to provide the facilities to have these audits carried out?

Mr. Noonan.—I cannot say that I am in a position to answer that question, but I will try to find out for the Committee what the up to date position is.

34.Deputy Crotty.—The Revenue Commissioners require a commercial audit from firms, a return every year, and if they do not return they are fined heavily. Here, within Government, we have virtually no accounting. Could you comment on that?

Mr. Noonan.—As I agreed earlier with the Chairman, the position in relation to these arrears is unsatisfactory. As to the extent to which one can go to improve the position — which is the Deputy’s point — I am not in a position to say. I would have to check up on the position in relation to any proposal, to see to what extent it could be considered reasonable in present circumstances and might be supported.

Deputy Crotty.—I am asking you if the Department of Finance are prepared to live with a situation where there is virtually no audit?

Mr. Noonan.—Again, I do not think one can put it, or agree with it quite in those terms. As the Accounting Officer explained earlier, with pressure on the Department of the Environment and the local government auditors, the position is gradually being improved. It is not something that can be radically changed overnight. The Department of Finance are satisfied that an improvement is taking place here. Given the various constraints on these operations, that is far more satisfactory than if the position were stable or deteriorating.

Deputy Crotty.—If I could pursue this. Do the Department of Finance take any notice of what this Committee, who are charged with the examination of public accounts, report and comment on? This was referred to some years ago, the situation is just gradually being improved but we are still three and four years behind.

Mr. Noonan.—First of all, let me assure the Deputy that great attention is paid to the reports of the Public Accounts Committee and every effort is made within available resources to try to advance its recommendations. While we still have an unsatisfactory position, within the constraints imposed by available resources and other competing demands, the Department are doing their best to make progress in these areas. If there is something further we in the Department of Finance could do, which is not apparent to me at present, we would, by all means, be open to taking that further possibility on board.

Mr. Flanagan.—Yes. Thank you. If Deputy Crotty will forgive me, neither the Department of Finance nor ourselves ignore the Public Accounts Committee. We have both agreed that the position is unsatisfactory and, within the limits, we have pushed it. Even in the lists that I read out, the hiatus is between the final audit and presentation. As I said, the position has improved considerably. It is not satisfactory, but I do not and could not agree that there is no accounting and audit function, or a lack of control, to be inferred from that position. The Department of Health, in the activity of its finance unit working with the finance officers of health boards, maintains as tight a control as possible over the situation. The fact that the audits as such are not, on an annual basis, as up to date as any of us would like, does not mean that the auditors are not there virtually continuously. There are teams within the health boards all the time. There is also liaison between the finance unit of the Department of Health and the local government auditors, which is fairly well ongoing. We are working with them to achieve a situation where if there is likely to be delay there will be a summary of accounts audited and presented. I am not going back on what I said about the position being unsatisfactory but that is not to be read as a situation where there is no control. I do not have the impertinence to suggest that I try to influence the view the Public Accounts Committee might take of the annual situation about audit, but we have had discussions with the Department of Finance as a result of several of the meetings of the Public Accounts Committee. We do not by any means ignore the Committee.

35.Chairman.—You will be aware, as the Department of Finance are aware, that the committee are in the process of updating the whole approach to the audit of Government funds and parliamentary control. Whereas it might sound satisfactory to have people almost on a permanent basis in the health board, that almost goes against the whole theory of independent audit, because they almost become employees of the health board. They are there permanently; they are socialising and mixing with people and they might just as well be working for the health board. A reasonable argument could be put that it takes away from the independence of an audit. With regard to paragraph 47, you will be coming back to us with the 1986 accounts in the not too distant future and in the interim perhaps you would let us have a detailed note on the up to date position in this regard. *

36.Deputy Hyland.—In view of the fact that the only factual liability for health charges relates to people who are making a return to the Revenue Commissioners, would Mr. Flanagan agree that in the Department’s assessment of arrears there are two categories of people that may not, in fact, be liable at all? First of all, you have the small farmer who is in employment and is already paying his contributions through his PRSI contributions to the Revenue Commissioners. Secondly, included also, in my view, is a very large category of people who are in receipt of unemployment assistance from the State, which means that because they have qualified for this assistance they do not have a liability and yet the valuation of the land is taken into the calculation in relation to the arrears we are taking about here today. Would Mr. Flanagan agree that some effort should be made to try to establish exactly where the liabiity lies? The figures being thrown around are being used in all kinds of situations relating to many other aspects of social and economic policy also. Rather than having to go through the process of very expensive court hearings etc., a better effort should have been made by the Department and the health board to establish exact liability rather than basing it on broad calculations and assumptions.

Mr. Flanagan.—The Deputy’s questions relate to assessments made by the health boards. There is a process by which individuals can appeal the assessments. In the light of comments that have been made, including Deputy Hyland’s, I will discuss with the chief executives of the health boards some of the points that have been made. My approach is that there is broadly a protection for the individual within the approach that is adopted. I presume Deputy Hyland will not accept that view, but I will discuss the approach to it with the health boards. I would remind him that a lot of the difficulty related to arrears.

Deputy Hyland.—Just a final point, if you take the situation of a small farmer who is in receipt of unemployment assistance from the State because of the fact that he gets a demand for the payment of youth employment levy, health contributions, etc., he reacts angrily against that suggestion by not even replying to the assessment which he has received. I would submit that there is a very large sector who are not in fact liable at all. Those people should be identified and removed from the amount of arrears which is being mentioned here.

37.Deputy Naughten.—I think that figure is totally inflated, the same as the figures we get from the Revenue Commissioners from time to time.

Mr. Flanagan.—I am a little bit puzzled about it because, as I understand the situation, anybody in receipt of assistance of that nature merely has to bring it to the attention of the health board and they will be removed from that situation. I am puzzled as to why individual farmers do not do that. I will pursue the points raised, but I do not necessarily accept that there is a penal approach by the health boards to the assessments. I am quite satisfied in some respects that there are not, but there are issues you have raised that I would like to talk to the chief executive officers about.

38.Chairman.—I do not want to open up the whole discussion again and certainly one would be tempted to suggest that we might be getting into an urban-farmer divide here.

Deputy Desmond.—I will resist the temptation, Chairman, and take your stricture. May I ask the Accounting Officer how many staff had the Department of Health overall in rough terms for 1985, 1986 and 1987?

Chairman.—Is your question following on this particular paragraph, because we will be dealing later with the salary vote?

39.Deputy Desmond.—I wanted to get on to the number of staff of that unit relating to the auditing.

Mr. Flanagan.—Overall, we employ about 350 people. About 60 of them are based in the Registrar-General’s office, who takes on the function of supplying birth certificates death certificates and so on.

Deputy Desmond.—Roughly 300 staff. If one excludes, say, clerical officers and clerical assistants one is down to what one would call in crude terms an executive management staff of roughly how many?

Mr. Flanagan.—I would say of the order of 100. There are five Assistant Secretaries, 16 Principal Officers, roughly 45 Assistant Principals.

Deputy Desmond.—In terms of executive managers the finance unit of the Department of Health is confined to how many staff, roughly?

Deputy Desmond.—You would agree that that staff have been subjected to the total rigours of the embargo since 1981, the non-filling of vacancies and the very serious restrictions in the public service?

40.Chairman.—Could I refer you to the revised Estimates, Mr. Flanagan, for 1987, which says that your Department has 34 in the finance unit for 1986 and the same number for 1987?

Mr. Flanagan.—The Deputy’s question related to the executive management function. We have an accounts branch which pays the staff of the Department.

Mr. Flanagan.—It is within the finance unit. It is an accounts branch such as other Departments have and it responds to the Comptroller.

41.Deputy Desmond.—It leads me to my question, which I will put directly to the Accounting Officer. Are you of the view that the very grave restrictions imposed on you successively by the embargo and the more recent rigorous restrictions are imposing a grave burden on the finance unit in discharging their functions?

Mr. Flanagan.—Yes, Deputy, it certainly is a burden. We do not know the meaning of a 5.30 p.m. departure time. I do not want in any sense to be self-congratulatory about this, but the dedication of the officers is beyond call at this time and the strain is undoubtedly telling.

Deputy Desmond.—Is it not true to say you have made representations directly to the Minister for the Public Service that was and to the Minister for Finance in relation to the auditing situation and the inadequacy of the local government audit system and that so far your representations have not borne a great deal of fruit in terms of additional staffing at local government level, that the additional staff has not been provided?

Chairman.—The Chair is tempted to make a ruling on trading with insider information.

Deputy Desmond.—I declare my interest, but I am sure there are farmers here who declare their interest also.

Deputy Desmond.—I am seriously concerned that, as Accounting Officer, the discharge of your functions is being inhibited by no staff being provided at local government audit level and at departmental level?

Mr. Flanagan.—The Deputy is right. We are in a situation in which I have said in successive appearances before the Committee of Public Accounts — and, indeed, my colleagues from the Department of Finance have agreed — that the audit situation is unsatisfactory. We have continuously pressed for its improvement. We continue in the natural order of things, because in a curious way line Departments are a bit like public representatives; we have constituencies to serve and we hammer on the doors of the Department of Finance, but there is an embargo and, in common with all other departments, we have to live with the consequences.

Chairman.—Can we note this paragraph? Mr. Flanagan, will you let us have a detailed note, in the interim between this and your next examination, on the up-to-date situation with regard to this?

42.Chairman—No, in regard to the outstanding arrears and the breakdown. You might take into account the comments made by Deputy Hyland and Deputy Naughten as well as the other comments made. Might I also suggest to the Assistant Secretary of the Department of Finance that he might let us have, as a matter of urgency, a note on the up-to-date situation regarding local government audit of both local authorities and health boards as we might like to take that into account as part of our examination of the overall audit and accounting for public expenditure.

43.Deputy Crotty.—I think this information has been sought from the Department of Finance heretofore in previous years’ in examination. We have not had any improvement or any response. We hear a vague thing that there are improvements happening. Could I ask a direct question? Would the Department of Finance be happy to have accounts supplied for the commercial world every four or five years and that they would pay their taxes, estimates and so on? The rules must equate for Government. If Government are insisting on private practice auditing in the commercial world, why does it not hold for Government practice in their own Departments?

Mr. Noonan.—In principle, I agree with the Deputy that the same standards should apply to both the public and private sectors. As to the extent to which one can go in practice from where we are towards meeting these standards, or the pace at which one can proceed in present circumstances, I am not in a position to give a firm answer.

44.Chairman.—It is a question of giving it priority. For instance, this committee will be issuing its 1980–81 report later today, and the 1982–84 reports are in hand, but only until quite recently we had only a 1979 report because we only have a typist for two and a half days a week, which is an ongoing matter between this Committee and your Department. At the same time — not just in the present Government but in the past Government — Ministers have six, ten or 12 people working in constituency offices. There is no priority given to the auditor of the local government, the health boards or Government funds. The whole thing is totally unsatisfactory. It is indefensible.

Mr. Noonan.—The Committee is aware that the issue of how resources are ultimately allocated is not determined at the sole discretion of the Department of Finance.

Chairman.—I will put it to you this way, so that you are in no doubt. This committee is not prepared to tolerate the present situation continuing, either with regard to this Committee, or with regard to the way public funds are audited. We have taken steps to ensure that there are changes. Perhaps you would let us have an up-to-date note, as soon as possible, please, on the local government situation for both health boards and local authorities.

45.Deputy Crotty.—Perhaps we could also have a note on the attitude of the Department, and whatever other bodies are concerned, towards the auditing of public funds. We are very much concerned that public funds are accounted for properly and certainly they cannot be accounted for in this present type of operation.

Chairman.—You might incorporate a note on that in the reply and as soon as possible, please. We will note this paragraph for now. Is that agreed? Page 71 of Vote 47, items A1-G2, are there any comments on that?*

46.Deputy Naughten.—On Subhead A.2.— Consultancy Services — I notice that there is £187,000 more than granted. The note refers to computer equipment, but you are talking about £1.1 million, which is a huge sum by any standards for consultancy services.

Mr. Flanagan.—Do you want a detailed breakdown of the expenditure under the various heads?

Mr. Flanagan.—We are talking about systems, financial systems, consultancy assistance in, for example, the administration of the implementation of patient administration systems, secondment of a consultant to look at methods of costing treatments, financial systems for health boards. Also in that figure is the cost of a study undertaken by the Department of Community Medicine and Epidermiology in UCD, to childhood leukaemia as a result of some of the hazards arising from Sellafield. Also covered are community care information systems in the North-Western Health Board, a social research study undertaken by the social research centre of the NIHE into communication networks which cater for the elderly — as a result of which we are piloting some work — and studies undertaken about patient information generally. That is a very broad description — financial systems, patient admission systems, particular activities that we want to undertake, reorganisation of various bodies.

Deputy Naughten.—Did I hear you correctly in saying community care in the North-Western Health Board?

Deputy Naughten.—Why would you have consultancy costs there in that health board with regard to community care no more than any other health board?

Mr. Flanagan.—Because any management systems need to be purpose developed for the activity which they undertake and, in fact, the North-Western Health Board piloted that system. It has been extrapolated out of the North-Western Health Board and into the Eastern Health Board. We simply do not buy a piece of hardware, get a purpose adapted software and put it into being. It has to be worked into the system and staff have to be trained to it. It is an unusual feature of the system. That particular community information system has been developed on an ongoing basis in the North-Western Health Board and, as I say, has been translated out-wards from it.

Deputy Naughten.—I still am not clear about precisely what type of functions were involved, what type of expenditure was involved, and the reason for having it in one health board area and not in others.

Mr. Flanagan.—It has been pioneered in one health board to get the bug, so to speak out, of the system, to test its adaptability, to monitor the activity of the professional administrative staff, the materials used, the resources used at all levels, the use by patients of the systems and the relationships of that community system to the hospital system at both the acute and continuing care level. It required consultant design and advice to put it into place and in the year which we are discussing the expenditure level was of the order on that particular system of about £200,000.

47.Deputy Dempsey.—In relation to the report referred to in relation to childhood leukaemia, I understand that that was completed by a team from UCD. How much did it cost in total?

Deputy Dempsey.—Was that the initial costing that you got for it or was that just a contribution the Department agreed to give?

Mr. Flanagan.—The Department undertook to subvent the activities of the Department in respect of that study and that was the total amount of money it cost us.

Mr. Flanagan.—I do not think there was a delay but I will check on it. It was published fairly shortly after its preparation and presentation to the Minister.*

Deputy Dempsey.—That is not quite the question. I understood from inquiries I was making at the time that that report should have been published in April 1986. It was then said that it would be published in September 1986; further inquiries, October 1986 and then, either at the end of 1986, or very early in 1987, it was eventually published.

Mr. Flanagan.—I will have to check on the Deputy’s information. I am not aware that there was that delay.

Deputy Dempsey.—I have responses from the Department of Health to that effect. I read recently that a new study is being undertaken by the Department of Health in relation to the east coast and the possible effects of Sellafield. Why is this study being done now? Were the results of the last study not complete or not satisfactory, or are there fears in the Department of Health at the moment that perhaps the full information was not disclosed in that first report?

Mr. Flanagan.—I would like to refresh myself on the exact content of that study. The inferences to be drawn from the Deputy’s questioning are not accurate in that there was an incompleteness. As I remember, the findings of the study did not provide a direct link, as a result of the examination of the findings of that study, with the Sellafield situation, but it pointed to some increased incidences which could be statistically significant or insignificant, depending on the approach to it. In fact, there are other factors which have led to the commencement of studies in the atmosphere. There have been revelations about Sellafield which have brought about the need for further study into it. It is an area as the Deputy will be aware, about which there is a considerable amount of controversy, even within the United Kingdom mainland. There is no inference to be made that it was an incomplete study.

Deputy Dempsey.—I just find it difficult to believe that we have to have another one if it was not an incomplete study because the terms of reference and my undertaking was to investigate the incidence of childhood leukaemia and other cancer related things in relation to the plant at Sellafield. It was particularly along the east coast and I think basically the new study is going to do the same thing. I would just ask you, Mr. Flanagan, that you would ensure that that study would be completed as quickly as possible so that the fears of people along the east coast of this country could be allayed as quickly as possible.

Mr. Flanagan.—The Government have decided that that study should be undertaken and it will be processed and presented to Government very quickly. I take your point. It is a Government decision to pursue the study. As you will be aware, even in the United Kingdom situation there are a lot of questions to be answered in relation to the incidence of leukaemia. The recent association with incidents in Doncaster has raised some interesting questions in relation to it.

48.Chairman.—I want to come on from that to the question of AIDS and the expenditure that was made in 1985 on this. Perhaps you would be good enough to give the committee an overview as to your Department’s role in combatting this problem and educating people about it, particularly now that the Health Education Bureau is to be re-amal-gamated, if that is the word, with your Department. Could you tell us what the position is, how your Department is structured and what expenditure you are making in combatting this problem?

Mr. Flanagan.—First of all, starting with your comment about the Health Education Bureau being subsumed into the Department of Health, that will not in any way lessen the concentration on the promotion on health education. The Department has in existence a central strategy committee which is representative of the Department and the agencies. It is developing on a continuous basis a strategy to combat AIDS, as the Minister has said on several occasions. The concentration at present will tend to be on the area where the incidence of the disease seems to be developing at a more rapid rate than in any other segment of the population, that is, the HIV drug abusers. That will be the concentration. You will be aware that money of the order of approximately £500,000 has been allotted from the National Lottery and the intention is to spend that on combatting the severe spread of the disease among the intravenous drug abusers by using the existing agencies, by subventing them, by particularly concentrating resources in the outreach facilities, and voluntary groups in particular who are working in that area, to augment the counselling resources and the other required support resources for the community. There is an ongoing measurement of the penetration of knowledge which exists in relation to AIDS. The general information available to me would suggest that the population at large is sufficiently aware of the hazard of AIDS. Programmes will be brought into play in the secondary schools in particular and for classes of children who are leaving the educational system to educate them as to the precautions or the view they must take of the hazard of AIDS.

Mr. Flanagan.—Very shortly, within months. It is an activity which is there to some extent at present; it needs to be augmented and concentrated. The strategy in relation to it is being pursued just at this very time.

Chairman.—There was a grant for the World Health Organisation and other international bodies that year of £475,000. What is the world situation? Is there likely to be a breakthrough? Is progress being made? How much of a priority is the WHO giving to this particular problem? Is there any indication of a downturn anywhere or a miracle drug or breakthrough?

Mr. Flanagan.—It is the top priority within the World Health Organisation at present. We maintain a very close liaison and attend the various seminars which they organise. We maintain the closest contact with them. As to breakthrough, I simply do not know; but there is a research concentration in the major countries on the issue and we are in touch with it. I cannot say that I am aware that there is anything hugely significant happening. The drugs which they are using to alleviate the condition do seem to postpone the onset of death in the severely infected cases. On the basis of my reading and on the advice that we get, we are not certain. They are not suitable in all cases and they are not conclusive as to the possible reversal of the syndrome once it takes hold. There is a continuing concentration and there are many puzzling features to the epidemic. All I can say in response to you is that we are in very close touch with it and wherever there is activity a senior deputy chief medical officer of the Department is in constant communication with it. At the moment he is endeavouring to update the reporting system. The characteristic of the disease has undergone a widening of definition which is of interest.

Chairman.—Do you have any idea what the international trends are, what the increased rates have been in recent years and how that would compare to our national trends?

Mr. Flanagan.—In regard to the expansion rate in the numbers becoming full blown AIDS cases, we seem to be matching the situation. It is a very difficult question to answer. I would be more advised, if you wish to pursue it, to present you with a technical paper on it rather than to speak as a layman on the issues. As I said, where it is hitting this country most in numbers and deaths is in the intravenous drug area.

Chairman.—You are happy that the money we are spending is spent properly and wisely in identifying the priority areas? I would like to see such a report. Would any members of the committee be interested in seeing such a report? Perhaps you would let us have a copy. Mr. Flanagan.*

50.Chairman.—Before we pass off that other question, could I ask one other question. Are all deaths from AIDS recorded? Are they recorded as AIDS deaths?

Mr. Flanagan.—Yes, there is a reporting system and we are notified of all deaths.

Mr. Flanagan.—I am sorry, I think about 13 or 14 people have died from the disease but I would like to check it.

51.Deputy Naughten.—On subheads G.1 and G.2 dealing with grants to health boards, we make a substantial amount of money available to our eight health boards either by way of subheads G.1 or G.2 or indeed under the other headings. They have direct control over some; over others they have not. We are talking of a sum in excess of £1,100 million. Recently we read in the papers, or heard from other sources, of people who have been discharged from hospital and died after being discharged or in other cases reputed to have died because they could not get into hospital.

I would like to ask the Accounting Officer what and how much control and how detailed an inquiry can be carried out in cases which have been highlighted and brought, to his attention? I am talking about a particular case in Cork and another case in Roscommon, which, I understand, are being examined by your Department.

Mr. Flanagan.—The inquiries are pursued thoroughly on the direction of the Minister. In the Cork case that inquiry is ongoing. I am not absolutely au fait with the Roscommon case to which the Deputy refers. Any complaint about an unsatisfactory service which causes death is pursued fully. Indeed, many complaints about services not being available are pursued. In a number of instances, where, perhaps there are no calamitious circumstances such as death, but general complaints as to accessibility to services and so on complaints are pursued in some instances to a point where corrections are made in the situation or, alternatively, that we find in general terms, some of the complaints are without foundation.

Deputy Naughten.—In regard to the Roscommon case, the Minister of State at your Department is on record as saying that an investigation is being carried out. Who carries out this investigation? Is it medical staff or is it administrative staff? What medical back-up have the people who carry out this investigation?

Mr. Flanagan.—The Department are advised administratively by a chief medical officer and his deputies and senior medical officers. Inquiries are originated at the source of complaint, reports are got, are considered as appropriate by both administrators and medical personnel.

Deputy Naughten.—How many of those type of reports have been carried out by the Department? Are we talking about ten, or are we talking about a 100 per year?

Mr. Flanagan.—It is difficult to quantify how many. There is a process of complaint. Quite often complaints are received about services, about failure to get admission. I simply could not quantify over the range of services how many there are. They are not in huge numbers. At the level of death, or whatever, they are in tens rather than in hundreds.

Deputy Naughten.—And in the event of certain functions which should have been carried out by a health board or a health board hospital, what steps are taken by the Department?

Mr. Flanagan.—Depending on the findings of the investigation, up to and including severe disciplinary action would be contemplated, if it were to be pursued to that level. The health boards, in a sense, do not rely entirely on the Department to investigate the complaints. Many complaints are investigated and disciplinary proposals are submitted to us by health boards as a result of failure to perform services or to deliver services.

53.Deputy Naughten.—A final question with regard to audit functions. We discussed at length the audit of the health boards. Who carries out the audit of the voluntary hospitals?

Mr. Flanagan.—The commercial auditors do, and we consider their audit report and pursue any matters that they raise.

54.Deputy Crotty.—In regard to Subhead G.5 — Payments to Health Agencies in respect of balances of grants for years prior to 1985 — what agencies are involved?

Mr. Flanagan.—These are balances of payment that are paid to health boards, voluntary hospitals and direct funds to mental handicap institutions. The balances of payments due to them in respect of years prior to the year under audit.

Mr. Flanagan.—In general terms they relate to one year. We fund about 15 per cent of the grants which are outstanding. There may be one or two instances in which it goes back over a number of years but in general terms the response is the previous year.

Deputy Crotty.—Could we get details of what grants these actually covered? You can send us a note of them, if you like.

Mr. Flanagan.—This is an account of the situation — the payments made were as follows:—the health boards got £29.6 million by way of balances. Voluntary hospitals—

Mr. Flanagan.—As I said, mainly 1984. I am not precisely sure that within this there are not some small elements, but it is essentially in respect of the year 1984.

Deputy Crotty.—Maybe you might give us a note on the grants and the years they cover?

Mr. Flanagan.—£32 million, of the sum of £66 million, is for the voluntary hospitals and for the joint board hospitals it is £2,140,000. The figure for homes for the mentally handicapped £2.2 million.

Mr. Flanagan.—In broad terms for the previous year, there may be bits and pieces of material, but generally speaking for 1984.

Deputy Crotty.—Could you give us the balances to all the agencies to date? What they were and what years they covered?*

Deputy Crotty.—On Subhead M — Dissemination of Information on Health and Health Services — who are these payments made to and what services are they providing?

Mr. Flanagan.—This in a sense is the broad exercise of the information function of the Department of Health. For example, of this sum of £88,000 we spent £9,000 publishing the guidelines, in relation to eligibility for medical cards. We advertised the availability of changes in office opening hours and otherwise in relation to the registration of deaths, births and marriages. We spent £2,700 on advertising the availability of Council of Europe Medical Fellowships. We printed 50,000 general health information cards for people travelling abroad, at a cost of £3,500. We also spent moneys advising the elderly by way of TV presentation slide, particularly of how to take precautions in a cold snap in that year. It is a variety of information functions which aggregate £80,000.

55.Chairman.—Given the recent debate, with the amount of money we are spending on hospitals and health boards, can you assure the committee that, irrespective of wealth, income or status any citizen will be admitted and treated in a hospital?

Mr. Flanagan.—Yes, I can. We should exercise our function to ensure that that happens. I would remind you that on a growing basis, the public hospital sector, which is often ignored picks up in a huge way the trauma in our society. They must be available on an accident and emergency basis throughout the country. A growing proportion, probably over 32 per cent, of admissions to hospitals are traumas and patients are admitted as they require the most urgent of services. The emergency admissions, which are outside that scope, probably amount to about 50 per cent to 60 per cent of admissions. Citizens are cared for by the public hospital.

Chairman.—You may have seen in a recent debate on television where a doctor who could not get admitted to hospital himself for an operation went and bought the operation very quickly. Is there not something very distasteful about old people having to wait for hip operations, but if you have enough money you can go and buy the operation very quickly. Can we be assured that people are not being left in pain or discomfort while awaiting operations because of their economic status?

Mr. Flanagan.—The broad view I would have is that the resource available to the services should avoid hardship where there is essential need. It is very difficult to combat. It is to be accepted in relation to the specific example that you gave, orthopaedics, that we are looking at the situation to try to improve the prospects for hip operations. On the other hand, there was a lot of controversy about the availability of open heart surgery to the eligible population. In relation to the question raised earlier by Deputy Naughten, the investigation showed that the access in that case was by medical need and not by any social or any other circumstances. Our endeavours at all times would be to ensure that the resource available is spent to alleviate conditions based on medical requirement and not social circumstances.

56.Deputy Dempsey.—Just one general question in relation to this. Have you any theories as to why there seems to be little evidence that the health of the nation is improving despite the huge increase in health spending over the past ten to 12 years?

Mr. Flanagan.—Deputy, you start at a point at which you make a statement. In broad terms — and in a sense this is the difficulty of the health services — the population is growing older, living longer, which is an index of health services success, with its concomitant costs to be met at that end of the age spectrum. In my experience in the Department of Health, just to give one indication, the success of the services which have been developed over the years to cater for the mentally handicapped means that we are now having to deal with a geriatric mentally handicapped population, which is one index of success. One can be selective and argue with you. One can take the study on the state of dental health, which by the expedient of fluoridation of water supplies, shows us with an extraordinary healthy childhood teeth situation, and I presume that that would reflect itself in the standard of health of the community. But, in common with other societies — and I know it runs counter to arguments that might be engendered — we are, strongly tending to suffer from the diseases of affluence as well. The promotion of health — I know the word has an extraordinary connotation — the promotion of self-responsibility, of a more positive approach to the prevention of illness, has been undertaken for a number of years and since 1986 in particular has been a concentration in the Department.

Deputy Dempsey.—Are you saying, then, that possibly, the time has come to have a look at the areas in which we are spending money on health?

Mr. Flanagan.—That is already being done. While the shift is not dramatic, it is beginning to occur and is being attempted. It has to do so. It will, I regret, echoing the Chairman’s point about parliament, be a matter of some difficulty to attempt to shift.

57.Deputy Naughten.—How many, if any, new hospitals have been built in the last four or five years which are still lying idle?

Mr. Flanagan.—I presume the Deputy is referring to hospitals which are in the course of building. Some of them are not occupied, but Beaumont is being occupied at the present time. The equipping of Mullingar is ongoing; Cavan has not yet been formally handed over by the builders but a portion of the equipping is being done to proceed to open it; Swinford is being prepared for commissioning now; Cheeverstown is moving towards full opening, and a relationship is developing with the Eastern Health Board to take from the psychiatric services a number of mentally handicapped persons who should not have been there in the first place. There are areas of the newly built hospital in the Mater which we are working towards opening. The Letterkenny hospital still has a number of beds vacant, but we are endeavouring to more efficiently. It is an ongoing development.

Deputy Naughten.—When is it hoped to have Beaumont hospital fully opened and running?

Mr. Flanagan.—By coincidence, the patients will be admitted this weekend. The two constituent hospitals are being run down at the moment.

Deputy Naughten.—With regard to Swinford, it is completed for two and a half years now and is still lying idle. When is it hoped to have that fully commissioned, or is it the intention of the Department to ever have it fully commissioned?

Mr. Flanagan.—Yes, it is the intention. When it can be fully commissioned I am not in a position to say, but we will be working towards bringing it into play, transferring the resource necessary, adding some resource to it to bring it into play this year and running on into next year.

Deputy Naughten.—Is it not the view of Western Care, the people who have provided a lot of services for the mentally handicapped in the west, that in fact no more than half the complex should be opened.

Mr. Flanagan.—Various views about Swinford have been expressed and argued about. Nevertheless, in the modern thinking on mental handicap, and in the light of a response I made to Deputy Dempsey, I think it is about time some people began to question their approach to making a global statement of that nature. I think it probably arises from an improper view of the use of accommodation as a resource centre, both for crisis, for short term alleviation of family distress, or even of a slightly longer than short term in the case of an individual who might develop very disturbed circumstances. I think the facility can and should be used. With a certain amount of respect, I would say — it was reduced from the original number for which it was designed — that the approach of asking could only half it be used must be viewed in a situation in the Western Health Board area where, despite considerable efforts to improve their lot, there are still too many mentally handicapped patients in existing psychiatric facilities. Even in that situation, to get them to Swinford with the transfer of resource will be considerable betterment of their likelihood to lead a full life.

Deputy Naughten.—This is definitely the last question. I understand that some health boards have expressed concern to the Department of Health about people using services outside their health board which are available within their health board. This means additional costs and perhaps using private voluntary hospitals in Dublin instead of using facilities in their own health board area. I also understand that some health boards have requested the Department to prevent this practice. What are the views of the Department of Health on that?

Mr. Flanagan.—I accept the validity of the health board view. In fact the Government have decided, and it has been an on-going view of the health boards that there should be a financial — I do not like the word “penalty” but it is the one that comes to mind — a financial penalty for the exercise of choice. It was inherently part of the health system. If you remember, the 1953 Act provided a deduction for the exercise of unnecessary choice. Obviously, where the treatment can be given in the local general hospital it is reasonable to view that it should be provided there and not take up perhaps more costly space in the tertiary referral hospital. Inherently, it requires us to go very carefully in this area, because we do not want necessarily to clear space out of those hospitals, to have them taken up from the community in which they are situated. The hospitals should be used for the purposes for which they were designed.

58.Deputy Desmond.—On subhead K — Building, Equipping and Furnishing of Hospitals and other Health Facilities — in the light of changing models of mental handicap care, would you as a policy today build the Swinford or the Cheeverstown hospitals?

Mr. Flanagan.—No, I would not recommend to a Minister that they would be built on the same scale, certainly on a reduced scale. But I still would have the difficulty — it has been an ongoing one of which the Deputy will be aware — of finally determining in a very cold way that the mentally handicapped can be continued to be supported beyond a particular point in the community as their family support or as the local support changes. To answer the Deputy directly, I do not think one would embark on that scale of construction now.

Deputy Desmond.—What was the final expenditure in relation to these two complexes, was it £25 million?

Deputy Desmond.—Regarding the expenditure on G4 there is an allocation there; a part allocation of the Department of Health, to the Dublin Dental Hospital. What is the prospect of that complex going ahead, the clinical sciences complex in St. James’s going ahead and incorporating the dental hospital?

Mr. Flanagan.—I regret I am unable to give an answer. That particular facility lies within the Vote of the Department of Education. We are continuing this year to fund the Dublin Dental Hospital on the basis that it will be in existence for 1988. We are looking at the provision of services with the authorities of that hospital in a different light.

Deputy Desmond.—Would you agree that the Dublin Dental Hospital is virtually a fire hazard?

Mr. Flanagan.—I think the Deputy is asking me to hang myself. I would say it is not the most up to date of buildings.

Deputy Desmond.—Would the country have a far better and more effective system of regional health care if there were fewer health boards? Would you share that view?

Mr. Flanagan.—It is the Government’s policy that the present number of health boards would be retained and that the management structures of those boards would be improved. That is the policy with which I am at present working.

59.Deputy Crotty.—In general, are the managements of the health boards weak at the moment? Where can they be improved? Where is there general room for improvement?

Mr. Flanagan.—We are in difficulties with the management of health boards. Again I will probably have problems with my colleagues in the Department of Finance. I can answer the question in a number of ways. One, we held a competition for the vacant post of chief executive officer of the Mid-Western Health Board and the Local Appointments Commissioners failed to get a candidate. That betokens the fact that it is difficult to attract the calibre of manager necessary nowadays to manage the service of the health boards. We have lost one of the distinguished CEOs to private facilities quite recently. The improvement of the management structure is an everpresent objective with the administration of the Department of Health and with successive Ministers. The Minister has indicated that he has a view that shifting the management from programme to area management would bring about a better integration of services and improvement. There is no doubt at all that we face the situation in which we require to get a better quality of management into the system. That will be a constant endeavour.

60.Deputy Desmond.—Would the Accounting Officer agree that where secretary/managers in voluntary hospitals are paid salaries in the region of £16,000 or £18,000 a year, or where chief executive officers of health boards are in the region of £26,000 and £28,000 a year, there is no hope of dealing with a budget of this nature when people are paid such appalling low salaries, when for example we have lost the chief executive officer of the North-Western Health Baord to a private facility who are prepared to pay £45,000 a year? How can one run a voluntary hospital with a budet of anything up to £20 million a year for £16,000 or £17,000? Does the Accounting Officer feel that this is a very serious public service pay anomaly?

Chairman.—I am going to bring this to a conclusion on this because we have give two hours of consideration to this matter.

Mr. Flanagan.—In short, I could not but agree. It is an issue that is difficult. The Deputy picked up the point that the CEO of the North-Western Health Board had left the system. It is a drain that is occurring at middle management and it is occurring because it is difficult to compete at all levels, including that of assistant secretaries and secretaries, against the attractions of money which is available from the private sector.

62.Chairman.—We have a couple of matters to deal with in public session before we finish, but we are finished with the Health Estimate and with the representative from the Department of Finance, thank you. I want to refer to a couple of matters. In relation to the problems with recordings of the committee’s proceedings, I asked the clerk of the committee to get the up to date position on this. We have received the following reply from a higher executive officer in the Office of Public Works:

“I refer to your letter addressed to Mr. Brendan Slattery, dated 12 October, 1987 regarding problems with recordings of committee meetings. As you state, this office is responsible for the installation and maintenance of the recording system in Room G2. When checked as a result of your letter, the system was found to be full operational and in good working order. It also has to be said that your above mentioned letter represents the only indication that such difficulties existed over this protracted period of time.”

63.Deputy Naughten.—First of all, the meetings involved, speaking from memory, did not take place in Room G2. I know that on one occasion a meeting took place in a room in Leinster House. In fact, I think they all took place in Room 114. That is were the committee was meeting at that time.

Chairman.—I think most of the meetings took place over here. But the point I want to make is that it is most unsatisfactory as a reply.

Deputy Naughten.—The meetings that involve the missing tapes took place in Room 114, I remember the Gaeltacht was part of one that was missing. I remember distinctly what was discussed on that occasion.

Chairman.—The notice that was sent out, the Clerk tells me, had Room G2 on it. I think this is a most unsatisfactory reply and the fact that it came from a higher executive officer indicates that they are not taking it seriously. I propose we call somebody from the Office of Public Works before the committee to give us a more detailed explanation. Is that agreed?

64.Chairman.—We have already considered in private the reports for the years 1980 and 1981. The Committee will be aware that it is our intention to issue all reports up to current reports by the end of the year. I can take it now that we can approve the yellow document? You have been through it twice and it will be laid before the House and then circulatd to the press. Once we lay six copies before the House today we can circulate it to the press.

FAILURE OF TAPE RECORDING SYSTEM

Mr. J. Berkery and Mr. L. McGettrick (Office of Public Works) called and examined.

65.Chairman.—We are commencing with the Office of Public Works in relation to the malfunction of the tape recording system as mentioned at the last meeting. We have with us Mr. Larry McGettrick, an engineer, and Mr. John Berkery, Principal Officer. Good morning, gentlemen. The reason we invite you here this morning is that we have been trying to find out what happened to the tapes and why the evidence which was recorded went off the tape. Last week we got a one paragraph reply from a higher executive officer from the Office of Public Works and it was not satisfactory. The purpose of asking you here this morning is to find out what investigations have been carried out? Is there any indication as to how the tapes became erased? Where did they become erased, was it here, at the recording stage or after recording and what steps have been taken to ensure that it does not recur? Perhaps you could tell us what investigations have been carried out since the Committee raised this matter.

Mr. Berkery.—As we understand it and we are speaking purely from recollection, the recordings were made in Room 114 before this room came into operation. The equipment there was installed some time in the seventies. The equipment was bought by us and is regularly inspected by us. I presume the equipment belongs to the Leinster House authorities. We have the function of checking it and seeing that it is in order and we do that regularly. From an operational point of view we are satisfied that the equipment was in order — it was never out of order — and that it got all the regular maintenance it should have got.

Chairman.—Do you have any indication how the tapes were erased? Are you suggesting that it was not erased at the recording stage?

Mr. McGettrick.—Yes, we have no evidence that it was erased at the recording stage.

Chairman.—How would it become erased, would it be by magnetic contact or would it have to be run through a machine? Why would tapes which were properly recorded become erased?

Mr. McGettrick.—It is possible that they would have been erased accidentally in a rewind siuation. Magnetic interference could cause erasure as well.

Chairman.—You are happy that the problem did not occur at the recording stage?

Mr. McGettrick.—We have no evidence that it occurred at the recording stage.

Chairman.—This is the senior statutory committee of the House. This is a record of parliamentary evidence which has to be submitted to Parliament and to the Department of Finance and published at a later stage. Whatever the reasons for it, between the Office of Public Works and the people who operate it we want, first, an assurance that there will be no recurrence. Secondly, a one paragraph reply from a higher executive officer a month or six weeks after we made the initial inquiry indicates to me that the problem is not being taken seriously enough. That is one of the reasons why we have asked you along here. Can we take it for certain that there will be no recurrence of this?

Mr. Berkery.—First of all, on the question of taking it seriously, we do take it seriously. As I said, we provided the equipment and the equipment is regularly checked. We are satisfied from our point of view that all is in order, and all was in order. We have not the faintest idea of what happened here. It may be a matter of operational procedures; we just do not know. It certainly did not have anything to do with us, Chairman.

66.Deputy Colley.—If I could clarify something, Chairman. You have asked Mr. McGettrick whether the tape could have been erased at the time of recording and it has been stated that, as far as their evidence shows, there was not a failure at the time of recording. Is it still possible, despite the lack of evidence, that there was a failure at the time of recording without there being some particular evidence relating to the machinery?

Mr. McGettrick.—You can never, obviously, rule out that possibility. At this stage I can say that we have no evidence that there was a failure at that time.

Deputy Colley.—I suppose my question really is: what kind of evidence would be presented? Is it possible to know that there would have been a failure at the time of recording?

Mr. Berkery.—To be quite honest, our function is to provide the equipment and to see that the equipment works. The operating of the equipment is not really a matter for us and we cannot say whether it happened at the time of recording or whether it was wiped out afterwards. We honestly do not know.

67.Chairman.—We do not know how it happened. From your end can we be sure that there will be no recurrence of this, because we do pay a certain amount of money to a contractor to see that this system works and this is a formal parliamentary record. We do not want this to happen again. We have had to recall all the witnesses concerned and go over the evidence again. A one paragraph reply from a higher executive officer is totally unsatisfactory when we ask for your comments as to how it happened.

Mr. Berkery.—I can only repeat that as far as we are concerned what we have provided we are satisfied with. We are satisfied with the equipment; we are satisfied with our checking procedures. We do not know what happened. We do not know how it went wrong. It certainly is not a matter for us; it is a matter for the Leinster House authorities. Whether it happened at the time of recording or whether it was erased afterwards, we just do not know.

Chairman.—Are the people who operate the system paid for through your Vote? They are certainly hired under your supervision.

Mr. Berkery.—Our role is to provide the equipment and make sure that it is working in a satisfactory order.

Chairman.—From your point of view you suggest that we should be talking to somebody from the Leinster House authorities who operate this system?

Mr. Berkery.—I would say so. But, in fairness, if there is further advice or help that they need arising out of their meeting with you, we will be prepared to give it to them.

Chairman.—If there is any recurrence of it we are going to have to find out who is responsible for it. It is a very serious matter as far as this committee are concerned. We will leave it at that for now and we will talk to the people in Leinster House. But, between whoever is responsible for purchasing and operating the equipment, we do not want to see a recurrence of this again. The message is very clear. We want to get it across to yourselves and to those operating it. It has caused us an awful lot of problems and it has cast an awful lot of doubt in people’s minds as to what happened exactly. We do not want a recurrence of it.

Mr. Berkery.—We are aware of your difficulties and anything we can do to help we will do it.

VOTE 46—SOCIAL WELFARE

Mr. J. Downey, (Secretary, Department of Social Welfare), called and examined.

68.Chairman.—You are welcome, Mr. Downey. We have a number of paragraphs to get through. We are examining Mr. Jim Downey, Secretary of the Department of Social Welfare, in his capacity as Accounting Officer for the Department. I should say from the beginning Mr. Downey that you will not be detained very long this morning because there are a number of Votes on the Report Stage in the Dáil starting at 11.45 a.m. We will go back to the Dáil at 11.45 a.m. for those votes and they will be on an ongoing basis. Therefore, unfortunately, we will not be resuming this morning. We will have to resume another day. Paragraph 52 of the Report of the Comptroller and Auditor General reads:—

Subhead E.—Payment to the Social Insurance Fund under Section 122 (9) of the Social Welfare (Consolidation) Act, 1981.

Invalidity Pension is payable, instead of Disability Benefit, to insured persons who are permanently incapable of work and who satisfy the prescribed contribution conditions. Normally, before qualifying for Invalidity Pension, an insured person will have been in receipt of Disability Benefit for at least 12 months. Books of pension warrants are issued, usually twice yearly, to persons in receipt of Invalidity Pension. The departmental procedures governing the issue of pension renewal books provide that a comprehensive review of Invalidity Pension files be undertaken prior to the issue of the books in order to ensure that they are issued only to those persons entitled to receive them and that payment is being made at the appropriate rate.

A test examination of Invalidity Pension files carried out by my officers brought to light a number of cases in which books of warrants had been issued for the payment of pensions at higher rates than the claimants were entitled to and I inquired as to the circumstances in which this occurred, what steps had been taken to establish the full extent of the overpayments and what recovery action had been taken.

In his reply the Accounting Officer stated that the errors arose in a period of transition from a manual to a computerised system and that most were due to misfiling of stencils which were used to impress the claimants’ names and addresses on the claimants’ pension books, with the rate of payment in each case being determined by the location of the stencil in the filing system. The misfiling took place after the April 1985 renewal and resulted in books at incorrect rates being issued in the following October. Other errors arose through cases not being listed for reduction because of the entry of incorrect data on the computer files or through being overlooked. He explained that, as a result of the progressive introduction of computerised book issue, staff responsible for issuing books had been reduced and this, together with the general high turnover of staff at clerical level, resulted in inexperienced staff having to be deployed to do some of the work. In addition, at both the April and October 1985 renewals there had been significant pressure due to delays in the renewal books becoming available from the printers. Furthermore, the phased changeover from manual to computerised systems was also taking place at that time and staff were still relatively unfamiliar with it and its interaction with the existing manual systems.

The Accounting Officer informed me that overpayments totalling £33,648 had been detected to date and were being recovered by deduction from the on-going weekly pensions. He also stated that further checks were continuing in order to determine whether there were any other overpayments under the manual system and that, in addition, a full check of all data on the computer system had been carried out to ensure that renewal books issued by the new system were correct in all cases.

Mr. McDonnell.—Paragraph 52 is the first paragraph in my report on Social Welfare. It draws attention to overpayments which arose through what appeared to be a breakdown in the procedures for ensuring that invalidity pension books are issued correctly. The Accounting Officer told me that the overpayments occurred when the system was being changed from a manual to a computerised system. I understand that it has now been fully computerised. Overpayments totalling some £34,000 had been discovered at the date of my report and checks were continuing to see if there were any others. I do not know exactly the full extent of the overpayments ultimately established by the Department as a result of those checks.

69.Deputy Foley.—We had this last year on the same basis. At that period the figures were much higher. During the 1984 session approximately 81,000 people were called before the medical referee. Did you have a similar situation during the review of the 1985 accounts?

Mr. Downey.—This is somewhat different. What happened here related to incorrect pension books being issued at incorrect rates.

Deputy Foley.—I am, yes. The sum detected was £33,648. How much more would have been under suspicion?

Mr. Downey.—We did carry out fairly substantial checks afterwards and that turned out to be virtually the whole amount that was involved. There was a very small number of cases where overpayments occurred in similar circumstances. The amounts were negligible, but the £34,000 odd was the total amount involved.

Mr. Downey.—The total amount paid out at that time in invalidity pensions was about £72 million.

Deputy Foley.—Under the new procedures you have adopted, especially with regard to invalidity pension files, have you detected any further problems in the current year?

Mr. Downey.—No, we have had no problems there. The new system is now fully computerised and the computer automatically takes care of up-grading and down-grading of rates.

Deputy Foley.—You carry out a comprehensive review of the pension files. Over what period of time?

Mr. Downey.—At the particular time that gave rise to this query, all the files were reviewed at the time the pension books were being reviewed.

Mr. Downey.—Spot checks would arise if they were considered necessary. Are you talking about spot checks on the books being issued or spot checks on the claimants?

Mr. Downey.—There are two aspects to this. First of all, there are invalidity pensions and then there are the disability benefits. Disability benefit people are reviewed regularly. Invalidity pensioners are not so regularly reviewed. Only cases where we have reason to suspect incapacity would be reviewed because they are not put on invalidity pension until they have been certified by a medical doctor and by our own medical referee as well, as being permanently incapable of work. If there was any particular case where we had reason to think that they should be reviewed that would be noted and they would be sent to the medical referee again.

70.Chairman.—You have gross expenditure in your Department, of what, approximately?

Chairman.—Are you satisfied with that situation, not just in the area of invalidity pensions but in general?

Mr. Downey.—As I mentioned to you on a previous occasion, we were recruiting the accountant. He has only been with us for a very short period. The answer to your question as to whether that will be satisfactory or not is something that we will be looking at as time goes on when we see how things work out.

Chairman.—Is there not something wrong? The Comptroller and Auditor General has turned up this relatively small problem on invalidity pensions. But is there not something wrong with a system where you have a Department spending £2.6 billion and you have only recently recruited one professional accountant? Do you not feel that there is a serious weakness?

Mr. Downey.—The issue of pension books and so on are subject to various checks and controls. They are not really the subject of an accountancy type of checks as such. The accountant would be concerned with management procedures: making sure that he is satisfied that the procedurs are right and that our relations with outside bodies, banks and so on, are right. I do not think he would become involved in the day-to-day detail of checking the issue of pension books, and so on.

Chairman.—Would he not do test analyses and cost effective control examination from time to time, spot checks where he felt there were weaknesses?

Mr. Downey.—He probably would become involved in that sort of area but we already have internal auditors who do this sort of thing as well.

71.Deputy Colley.—It does not state in this paragraph how many claimants for invalidity pensions were involved.

Mr. Downey.—These all related to areas where there were child dependant’s allowances being paid. Out of a total of some 20,000 pensioners, there were 200 of these involved.

72.Deputy Crotty.—It states in the paragraph that the problem was caused by the misfiling of stencils and there was a lot of jargon used about computers and turning over to computers from manual systems, and this sort of situation. Take the last sentence of the paragraph on page 2, the phased changeover from manual to computerised systems and so on, what has that to do with what I would feel was obvious carelessness in this situation?

Mr. Downey.—The position is that up to that time the issue of pension books was done on a manual basis with a standard type of stencils. Both the invalidity pensions section, which deals with the general administration, and the book issue section, which dealt with the issue of the pension books, were being computerised at the same time. They were under a lot of pressure in trying to get the thing done. There had been some delay in getting pension books from the printers, so there was a lot of pressure to get things done on time. It was in those circumstances that the misfiling of stencils took place.

Deputy Crotty.—It is also mentioned here about inexperienced staff. The information I have here is that there are 27 people in that area. Looking at the status of the staff, they should not be inexperienced, or at least they should be intelligent enough to carry out normal filing. What educational standards are required and what would you expect from that staff? Would they be able to carry out just normal orders and normal instructions? What experience do you need?

Mr. Downey.—I think the experience you need is, essentially, familiarity with the systems, the codings and so on. When a situation arose, as it did at the particular time when they were changing from a manual system to a computerised system and when it had to be done under pressure, it was in these circumstances that the difficulties arose.

Deputy Crotty.—But you have experienced staff. You have assistant principals, higher executive officers, executive officers and staff officers right through the system in 27 people. I think it is gross carelessness that this happened and lack of attention to the job on hand.

Mr. Downey.—The staff involved here would have been relatively junior staff, clerical assistants and clerical officers, and they would have been dealing with quite large numbers of stencils, some 20,000 stencils.

Deputy Crotty.—But most of them were ongoing stencils. What was the increase in any one year? There would not have been big increases in the people getting invalidity pensions surely?

Mr. Downey.—The question that arose here did not really relate to people coming on or off. The question that arose was that the information on the stencils was being transferred onto the computer tapes and it was there that the problem arose.

Deputy Crotty.—It says here in three words “misfiling of stencils” and in my book that is carelessness.

73.Chairman.—I think we can note that. We will move on to the next paragraph. Paragraph 53 of the Report of the Comptroller and Auditor General reads as follows:—

Subhead E.—Payment to the Social Insurance Fund under Section 122 (9) of the Social Welfare (Consolidation) Act, 1981

Subhead I.—Unemployment Assistance

The weekly rate of payment to persons in receipt of Unemployment Benefit (UB) or Unemployment Assistance (UA) includes an element in respect of any qualified child dependant under 18 years. Claims for UB and UA are processed at local employment exchanges and paid locally in cash.

As stated in paragraph 59 of my previous Report computerised records are maintained in the Department of all claims for the normal children’s allowances payable under the Social Welfare Acts in respect of all qualified children in the State.

In January 1985 in the course of developing the Department’s computerised general information systems a facility was provided at certain local employment exchanges which would enable staff processing claims for UB/UA to have access, through computer terminals located in the exchanges, to the data maintained on the central record of children’s allowance claims in order to verify the information regarding dependent children given by claimants for UB/UA.

In the course of an examination carried out by my officers in November 1985 at one Dublin employment exchange it was noted that the facility to carry out such cross-checks was not being used to verify any UB or UA claims. I asked the Accounting Officer why this was so and whether it was being used at the other exchanges where it had been provided.

The Accounting Officer explained that when the Department developed a general information system in 1984 this provided, on a limited basis, a facility for interrogation of some of its existing systems and, while an instruction manual on the use of the general information system produced in November 1985 had been issued to all exchanges with computer terminals, for technical reasons, extensive use of this system by employment exchange staff was not practicable before May 1986.

Because of the technical difficulties it had been intended that the computer terminals in the exchanges would be used only by information staff dealing with enquiries relating to the Disability, Maternity and Children’s Allowance Schemes and would normally have been needed on a full time basis for this purpose so that, while some access by staff processing UB/UA claims was feasible, such access could only have been on a very limited basis.

Written instructions issued to exchange staff in May 1986 in regard to establishing the identity of UB and UA claimants included an instruction to verify claims in respect of child dependants by interrogating the Children’s Allowance computer file where there was any doubt about their validity and where computer terminals were available. However, because of pressure on staff in exchanges there was no prospect of imposing the extra work involved in using the computerised facilities at the exchanges to carry out such verification in all cases.

The Accounting Officer stated that the Department had made substantial progress in the expansion of its computer-based systems in recent years. Whereas in December 1983 some 100,000 claims were being processed by computer, more than 1,000,000 claims were now being handled and this tenfold expansion had been achieved against a background of insufficient resources, staff embargos and union difficulties.

The Accounting Officer also stated that the Department considered that the only effective approach to verifying details supplied by claimants was to develop a system which would provide automatic computerised cross-checking of such details. He stated that work was already in hand on development of a prototype system which would provide an automatic cross-check of data supplied by claimants against data held on the computer files and this system would be a more efficient and cost effective method of cross-checking than having staff at exchanges key in details in each case.

While the major initial thrust of the Department’s computerisation policy had been to increase the spread of systems and the number of claimants serviced by them, it was recognised that substantial work remained to be done on the integration of systems and this was increasingly being achieved as resources permitted.

Mr. McDonnell.—What I was concerned with in paragraph 53 was a computerised facility which had been made available at local employment exchanges and which, it seemed to me, could have been used to verify certain details of unemployment assistance and unemployment benefit claims but was not being used for this purpose. These claims are processed at the exchanges and it seemed to me that facility could have been used to cross-check certain information supplied by claimants with information held on the Department’s computer at headquarters. The Accounting Officer explained that at the time we examined it there were some technical difficulties which prevented the extensive use of the computerised facility to verify details in this way. Although these technical difficulties have since been overcome there are other difficulties because of pressure on staff and there was no prospect of imposing the extra workload which would have been involved in this type of cross-checking. It is important to say, too, that the Accounting Officer has indicated that the Department’s objective would be to develop a system which would provide automatic computerised cross-checking of details given to local exchanges by claimants. My understanding is that the Department hope to have this in 1988. I am sure the Accounting Officer can elaborate on that.

74.Deputy Naughten.—First of all, I would like to ask the Accounting Officer has he achieved this cross-check situation yet and, if not, when does he hope to achieve it?

Mr. Downey.—We certainly have not achieved the cross-check situation at yet. We had hoped, as the Comptroller and Auditor General said, to have made substantial progress by mid-1988. We are working on it. There is quite a lot of computer programming etc., involved in all of this. It will depend very much on the resources available to us. We have lost quite a lot of specialised skilled staff on career breaks, resignations etc., taking up jobs outside. This is holding us back somewhat.

Deputy Naughten.—On the cross-checks which have taken place, what percentage of irregularities were found?

Mr. Downey.—We have not got any data on that. I think I should explain perhaps that the terminals that were put in to employment exchanges, and which gave rise to the Comptroller and Auditor General’s query, were put in for information officers really. That was the purpose for which they were put into the employment exchanges. Information officers were put in there who would answer inquiries for clients who called in to inquire about what the position was about a particular claim and so on. It was for that purpose they were put in. They were not put in for cross-checking purposes, although they are available for cross-checking purposes on isolated types of occasions where they think it is necessary or urgent to do so. They would not be available full time for cross-checking. Otherwise, they would not be available to the information officer.

Deputy Naughten.—Is it intended by mid-1988 to have this information available to the officers at local level in view of the fact that, as a result of high emigration, the numbers on unemployment assistance have dropped and it should give your staff some leeway to ensure that this system is brought up to date?

Mr. Downey.—Perhaps I should say that the number on unemployment dropping from emigration is relatively small in relation to the total and whether that trend will continue is another matter. It does not have a great bearing on the actual problem we are talking about, because it is really a technical problem which depends on technical resources and technical staff being made available to us. We are working on it. It is our intention to make it available, because we see automatic cross-checking as the only real answer to this problem whereby when a claim is made and, say, somebody claims he has two children the computer will automatically check whether the details are right or not. We see that as the real answer. But as to how soon we can get it done, we had been aiming for mid-1988. I doubt if we will reach that because, for the reasons I mentioned, there is a shortage of skilled staff.

75.Chairman.—Can you tell the Committee how many claimants there are for children’s allowances and how many children are claimed for? Have you that information with you?

Mr. Downey.—Yes, there are approximately 475,000 families, or heads of family, claiming children’s allowances. There are something less than 1.2 million children involved.

Chairman.—Costing what, in the most recent year? While you are checking that would you know how many of those are unmarried claimants?

Mr. Downey.—No, we would not. We do not look for status. We pay the mother if she produces the evidence, the birth certificate.

Mr. Downey.—I hope not. The total vote for children’s allowances this year is expected to be about £214 million.

76.Deputy Colley.—I wonder would the Accounting Officer be able to tell the Committee whether the Department have any estimate of the abuse of the system that they are trying to use this computerised system to cross-check against. How urgent is it that the computerised system is brought onstream?

Mr. Downey.—We have, as you are aware, gone through this area on a number of occasions before. In 1985 we had some £4 million to £5 million roughly recorded as a result of fraudulent claiming. That would be out of a total of, say, £2,600 million paid out altogether.

Deputy Colley.—Does the Department consider that, in fact, there is a much greater amount of money disappearing through fraud that would be turned up through the use of such a system?

Mr. Downey.—The cross-checking system would not turn it up. The Comptroller and Auditor General’s question related to cross-checking where there were child dependants. When the full cross-check is in, it will not turn up anything like huge amounts of money but it will certainly make the work of administration much easier, which will make it possible to devote attention to other matters.

Chairman.—Do you have any idea how much of this £214 million is given to people in the income bracket over £20,000?

Mr. Downey.—I have not that information at the moment but I can certainly get it for you.

Chairman.—Would any of your colleagues have it in the files they have with them? Even an estimate?

Mr. Downey.—We would reckon that £12 million would be paid to people receiving salaries of over £25,000. If you go down along the scale it would be more. I would have to get that figure for you because I would be speculating.

Chairman.—Fine, if you would. People earning over £25,000 would still be paid £12 million in children’s allowances?

77.Deputy Kitt.—In regard to unemployment assistance claims, the figure for overpayments which are treated as irrecoverable is £104,501 in the accounts section. What attempts have the Department made to recover payments like that? There has been a system operating in some parts of rural Ireland in the last few years whereby the Department of Social Welfare want claimants to call in on a special day, for a common pay day. Is this system proving successful as regards fraud, or as regards people claiming at perhaps two or more exchanges? Have the Department considered the introduction of an identity card to try to deal with the question of people going to a number of exchanges? I would like to point out to Mr. Downey that there is certainly some hardship for people who might have to travel over 20 miles to an exchange rather than signing on like other unemployment assistance claimants at local Garda stations.

Mr. Downey.—The Deputy asked three questions there. First of all, in regard to the £104,000 that was treated as irrecoverable I can assure the Deputy that the Department makes every effort to recover these. We do not lightly treat anything as irrecoverable. We pursue it to the bitter end. Cases will inevitably arise which have to be treated as irrecoverable. Say, for instance, somebody dies, or somebody leaves the country. There are a number of reasons like that where the amount has to be treated as irrecoverable. We do not adopt that course until everything else has been exhausted. The Deputy also raised the question of signing on at a specific time. I presume the Deputy is referring to the arrangement whereby certain people are required to sign on between 11.30 and 12 on a Thursday.

Deputy Kitt.—It would refer to people who are regarded as homeless, travellers, people who have no fixed abode.

Mr. Downey.—Exactly, that is what I thought you were referring to. We have found that very useful. So far we have found it the only way in which we can control this matter. Up to the time we introduced that system people were making claims, and successfully making claims, at numbers of employment exchanges within a certain radius. Even when we brought in the Thursday signing we had to be careful about how we did it because even with the half an hour, some of them were able to get around to two or three employment exchanges. We have successfully countered that it has been a very useful and necessary precaution. The final question which the Deputy asked was in relation to an identity card. We have looked at it and we are looking at it still. It is a difficult problem. There is more than one thing at issue here. Another matter that we are looking at here is the question of having a single identity number, a single number for each claimant. In 1952 the unified system was introduced, unemployment, insurance, widows’ and orphans’ pensions, national health insurance and all such recipients had their own numbers. There are many situations in which one person could have more than one number. Down the years it has happened also that people, for one reason or another, have succeeded in acquiring more than one number. We are very concerned to try to clean up that situation and bring about a situation of one number. I feel if you were to go issuing identity cards to people with more than one number you could make your last situation worse than your first. That is one aspect of it. The other aspect of it, perhaps, is a broader one. It is a question of to what extent the Department of Social Welfare should lead the way with identity cards when there is not an accepted system of national identity. This would probably be a better approach to it if, as there is in some countries, there was a national system of identity. We are looking at this and we are concerned about it.

Deputy Kitt.—In situations where you have people going to a number of exchanges claiming on the double, or on the treble — you speak here about the importance of managers of employment exchanges taking certain measures — at what stage are the Garda brought into these situations? You are talking about fraud squads and you are talking about managers of employment exchanges but would not the Garda be the obvious people to investigate these matters?

Mr. Downey.—Yes, the Garda are brought into it at a certain stage. I do not think the Garda would welcome the Department of Social Welfare asking them to do what they might regard as our job in the first instance. In the first instance, we must do everything we possibly can to ensure that our systems are safe, that the claimants who claim from us are genuine and that there is no fraudulent claiming. If despite all that — and it does happen, needless to say — people make fraudulent claims, at that stage we take them to court. Our own prosecution procedures via the Chief State Solicitor’s office etc., are nearly always adequate. The Gardaí can become involved if there is a widespread conspiracy.

78.Deputy Crotty.—The Comptroller and Auditor general mentioned in the last paragraph, on page 2, that a facility to carry out cross-checks was available in employment exchanges and this was not being used. He queried this matter. He felt that they should have been used. That is what they were there for. I was not quite clear on the explanation the Accounting Officer gave us about this facility only being available to information officers and this type of situation. I wonder could we get a more full explanation. This facility was put in to cross-check the claim for children and it was not being used. Technical difficulties, union difficulties and pressure on staff are mentioned. Could we get an explanation of these?

Mr. Downey.—Yes. What I did try to point out earlier on was that the particular terminal that the Comptroller and Auditor General mentioned in his query was not put in specifically for cross-checking purposes; it was put in specifically for the use of information officers, who were put into the employment exchanges to deal with queries, so that they could access the central records of the Department and be able to tell people who came in what the particular situation was in relation to a claim. That was the primary purpose for which they were put in. The question of full cross-checking would have to await the full computerisation of the employment exchanges. It must be remembered that when this particular terminal was put into the employment exchange in question, which was the Werburgh Street Exchange, it was the only one that was there. The exchange itself was not computerised. But it was used for cross-checking purposes on occasions when it was thought necessary to do so and it could be done without interfering with the primary purpose for which it was put in.

Deputy Crotty.—The Comptroller and Auditor General obviously felt it could be used for cross-checking. He mentioned it here in his paragraph and he asked for an explanation as to why it was not used?

Mr. Downey.—With all due respect, the Comptroller and Auditor General was not fully aware of the strategy underlying all of this at the time. This was the purpose for which we put them in. They were used and are used even now, but their primary role was for inquiry purposes. If they were to be used for cross-checking there is no way that all the claims in any particular employment exchange could be cross-checked by this manner. They are not intended for that purpose, they are primarily an inquiry facility. The response time would be slow; they would not be able to check them all; you would never get payments made. The result was that they were used for cross-checking where something suspicious arose and where an officer processing a claim had reason to suspect that there was something wrong and he used it for that purpose, for cross-checking in that sort of situation.

Mr. Downey.—Yes, it is available in most Dublin offices now, because we have a lot of the Dublin offices computerised at the moment.

Mr. Downey.—Yes, it is being used. It is being used for cross-checking purposes. But, as I tried to explain earlier on, it is not the total answer. The total answer is the automatic facility that was mentioned earlier.

Deputy Crotty.—You are carrying out the cross-checks? Has it reduced the pay-outs?

Mr. Downey.—I would not say it has done anything substantial in that way, because it must be borne in mind that what you are talking about here is dependent children. Very often a person comes in, makes a claim, claims he has two children, Mary and John. He gives Mary’s age as 14 and John’s age as ten, when it should be perhaps be nine and 12. Therefore, the question of overpayment would not arise in any event. It is mainly a question of having accurate records so that at the end of the day, if the thing is still on, that is the time the overpayment could arise.

Mr. Downey.—Inevitably, when you are dealing with these things — I am sure you see from time to time in the newspapers disputes about the introduction of modern technology and so on — when you are in a transition stage from the old to the new, this can arise and this is the sort of thing that arose. It takes a lot of tedious type of teasing out and negotiations before you can get agreement to go ahead with it.

79.Deputy Desmond.—May I ask the Accounting Officer about the physical facilities for the Department? Your departmentally staffed premises are serviced by the Office of Public Works. Is that the position?

Deputy Desmond.—There has been a great deal of criticism over the years about the inadequacy of these facilities, both in terms of interview rooms and physical facilities for the staff employed. Would you feel that it would be preferable that the Department should have their own Vote in terms of regular maintenance and regular contract arrangements for premises and that it would be more expeditious and more effective if in that sense they were in a position to run their own show?

Mr. Downey.—A number of issues have been raised but, broadly speaking, certainly I would say if we had greater control over our own money, the money that is allocated to us for premises etc., I would feel that one could make better progress with updating our offices. Unquestionably, we accept that many of our employment exchanges in particular are very old premises. They were never designed to cope with the influx of unemployed they are now having to cope with. In the Dublin area particularly we have been increasing, as time goes by, the number of employment exchanges, trying to bring the services neareer to the clients. I accept the implications in the Deputy’s question that something could or should be done about the standard of our employment exchanges. The practical measures of having control of our own money — yes, I think I would like to see that situation. It would require some arrangements on the technical professional side with architects, engineers, etc. It would hardly be a cost effective arrangement for every Government Department to have their own technical staff on a large scale of that nature. But I am sure some arrangement could be made whereby the services of technical staff and expertise could be shared, provided one had control of one’s own money and could decide where it would be applied and how it would be applied.

80.Deputy Desmond.—May I ask a separate question concerning the staffing of the Department computerwise? You are now one of the biggest computer users in the country, if not one of the largest based users in the whole country. We have had a Gleeson report published yesterday. How are you managing to hold on to the computer staff of the Department when they have so many other opportunities outside in working the most sophisticated of equipment and opportunities to go elsewhere, how are you holding on to your staff or have you lost staff. Where have you lost them?

Chairman.—We might have to end up recommending the full implementation of this report yet.

Deputy Desmond.—We might convince the Accounting Officer to recommend the implementation of Gleeson and then we would not have to declare our interest. But, seriously, it must be a major question?

Mr. Downey.—Yes, the Deputy has raised a major question for us. I have already touched on it in my replies to earlier questions. He asked more directly how are we coping. All I can say is badly. We are losing a lot of highly qualified staff. It takes several years to train programme analysts. In the last six months or so, we have lost 16 highly skilled people. We have not got replacements because of the present position in relation to staffing embargoes, so it makes it very very difficult for us and this is why the general thrust of our efforts to complete computerisation of the Department will suffer. As the Deputy said, we are one of the major computer users in the country. We have, I suppose, three-quarters of the Department computerised. The only major area that is left are the local offices, the employment exchanges, but they, as can be appreciated, present particular difficulties because of the widespread nature of their locations and the need to network the whole lot. The brain drain in relation to computer skills hits us very badly.

Deputy Desmond.—You alluded, Chairman, to child benefit and the benefit paid to income earners over £20,000 to £25,000 a year. What are the real prospects of the PRSI system being integrated with child benefit? How far advanced is the integration of the revenue and social welfare computer system, or is there any real prospect of this being done? How realistic are Government Departments and the various Ministers concerned in hoping for an integration of child benefit with the tax system? Is there any real prospect of this happening?

Mr. Downey.—I think, as the Deputy will know from the time he was a Minister himself, we did look very hard at this problem. There were many problems involved and we had many difficulties. It was found to be impractical to tax child benefit because of these difficulties. These difficulties have not really diminished in any way, but the question of taxing benefits generally is something that is being looked at on an ongoing basis. There are, as the Deputy mentioned, very real problems in all of this and how soon they can be overcome is something I would not like to forecast.

Deputy Desmond.—There has been a great deal of talk about the decentralisation of the departmental functions. In the light of the major computerisation of the overall central operations of the Department, is this likely to be a major development?

Mr. Downey.—All I can say there is that the Government have taken decisions. Everybody will be aware, even from newspaper reports, that certain numbers of staff will be transferred to Sligo. Letterkenny has also been mentioned. There is no technical reason why this cannot be done. The computerisation programme will not affect the issue one way or the other, or it will not affect the computerisation programme. On the larger scenario what we would be looking for is a greater degree of — I would not call it decentralisation — localisation of services, getting more staff around the country as a whole and getting services administered and decisions made on claims and payments at local level.

81.Chairman.—We are going to move on. Deputy Colley and then we will finish on this section. The first vote seems to have passed us by so we do not know when we are going to be interrupted.

82.Deputy Colley.—The Accounting Officer mentioned that the Department were considering the possibility of taxing social welfare benefits on an ongoing basis. How active is that consideration, or has it been? Is it a matter which the Department put to the Minister on a regular basis?

Mr. Downey.—All I can say on that is that it is something that has been looked at before and it will be looked at again. At the moment there are other matters of greater priority, such as the statutory sick pay, social insurance for the self-employed. The question of the taxing of benefits is something that will depend on greater development of computer techniques, etc.

Deputy Colley.—Would the Accounting Officer not agree that it is a matter of substantial concern among the public that there are large loopholes there, where people who go on a short-term benefits which are not taxed can come out financially better off than if they were working?

Mr. Downey.—There has been a certain amount of publicity about this, but down the years we have taken measures to ensure that people are not better off drawing benefit than working. We have cut back on pay-related benefits and we have wage stops and so on, people cannot get more by way of unemployment benefit plus pay-related benefit than they were getting when they were working. We have done what we could in that area. On the broader issue that the Deputy raises, it is a very broad policy matter which will require political decisions.

83.Chairman.—Paragraph 54 of the Report of the Comptroller and Auditor General reads:—

I referred in paragraph 63 of the 1982 Report to serious irregularities involving cash defalcations which had come to light at three employment exchanges in 1982 and 1983. The defalcations took place on a regular basis and in two cases involved the creation of fictitious UB or UA claims by employment exchange staff and in the other case the falsificatin of weekly payment lists sent from the exchanges to the Department. The Accounting Officer informed me at that time that the question of material irregularities had been specially reviewed and that managers of employment exchanges had been reminded of the importance of antifraud measures and had been directed to carry out certain procedures including weekly random checks of UB and UA claims.

Further serious internal irregularities involving three officers of the Department came to light in April 1986 at two employment exchanges. These irregularities also involved the creation of fictitious claims and the falsification of payment lists and were perpetrated by two of the officers over a period of three years; in the other case the period over which the irregularities took place has not yet been established.

I sought information regarding the circumstances in which the irregularities were perpetrated and remained undetected for such a lenghty period. I also requested information as to the total amounts misappropriated in each of the cases, the steps taken to recover these amounts and the further measures proposed in order to prevent internal irregularities and to detect any that do occur.

In his reply the Accounting Officer stated that the fictitious documentation supporting the irregularities was generally carefully constructed. Investigations which were continuing had put the total amount of the defalcations in one case at £33,095 and in another case, while a definite amount had not been established, £11,000 to £12,000 was thought to be involved. In the third case it was not yet possible to estimate the amount and the evidence in this case was as yet circumstantial. Two of the officers had since resigned and outstanding salary and superannuation contributions of £542 and £800, respectively, had been withheld against the amounts misappropriated.

He informed me that because of concern at the irregularities and the length of time they remained undetected a review of the control procedures had been undertaken and a number of steps taken to help prevent further irregularities and to ensure that if fraud were attempted it would be detected at an early stage. He outlined the changes in control procedures which had been implemented and the assured me that managers of Local Offices had again been reminded of their responsibilities in the area of prevention and detection of internal fraud. He said, however, that the Local Office system was still under extreme pressure as staff increases had not matched the increases in the Live Register in recent years but that since the detection of the recent cases the number of staff responsible for carrying out inspections at Local Offices had been increased.

I understand that, since the Accounting Officer’s reply, departmental investigations have brought to light further irregularities involving two more officers employed at one of these exchanges.

Mr. McDonnell.—Paragraph 54 deals with internal fraud by staff working in two employment exchanges involved in the payment of benefit in cash for unemployment benefit and unemployment assistance. The nature of the fraud is similar to ones which I referred to in my 1982 report, in that they involved the creation of fictious documentation, the falsification of payment lists and, in some cases, the officers using outside accomplices. They are also separated from another category of fraud which the Committee discussed previously, and which was also referred to in the 1982 and 1983 reports, and involved the introduction of fictitious records to the Department’s computerised system at head-quarters for the payment of disability benefit. The ones referred to here involved the payment of cash at local employment exchanges. You will see from the paragraph that the extent of the irregularities which had been discovered when the matter came to my notice has been set out. The initial discovery was that two officers at one exchange and one officer at another exchange were separately involved. You will see from the last sentence of the paragraph that the position has to be updated at the date of my report because investigations which were still ongoing had led to the discovery that the number involved had increased from two to four at one of the employment exchanges. I should go further and say that I understand that the number involved at this exchange finally became eight. The amount involved, which was initially thought to be £11,000 to be £12,000, was almost £40,000. One officer had been perpretating the fraud for five or six years. I referred to another exchange which involved one officer and £33,000. I am not aware of any further cases coming to light at that exchange but I understand that recently another case has come to light at a third exchange. I do not have up-to-date information about the recovery position in the cases as a whole.

Chairman.—This is a serious matter, Mr. Downey. Can you tell us where these exchanges are?

Mr. Downey.—There were three exchanges involved, Cork, Limerick and North Cumberland Street. There was one case each in Cork and Limerick and there were eight in North Cumberland Street employment exchanges.

Chairman.—What is the situation with these people? Have there been prosecutions?

Mr. Downey.—Yes. All the staff concerned are gone. All of them have been reported to the Garda. Most of them have been in court. In most cases there have been suspended sentences imposed. In one case, as far as I know, 240 hours community work was the penalty finally decided on.

Chairman.—Was there any compensation for this, retribution or financial recompense?

Mr. Downey.—Yes. The total amount involved was some £75,000. Of that amount some £42,000 was recovered.

Chairman.—What rank did these people hold? Were they senior officers or junior officers?

Mr. Downey.—Relatively junior, clerical assistants, clerical officer and staff officer.

Mr. Downey.—In the employment exchange in Cork the total staff would be about 120. North Cumberland Street would be roughly the same. Limerick would be somewhat less, about 70 to 80.

Chairman.—What about these eight people? It is a lot of people and in some cases it went undiscovered for five or six years. Does that not come back to my whole question of your professional accountant, the fact that you have only one accountant in your Department? Should there not be somebody testing these situations? Year after year we are coming up with different elements of fraud. How was this fraud discovered?

Mr. Downey.—In Cumberland Street it was discovered by investigation staff of the Department carrying out investigations. One case came to light and, once that came to light, a very thorough examination was carried out of all aspects of the work.

Chairman.—We have fictitious claims and falsification of documents. How did you discover it in all the cases? Did it turn up during the audit?

Mr. Downey.—Yes, by means of a thorough investigation of all the claims in the office.

Chairman.—What about the other two offices? How were they discovered in the cases of Limerick and Cork?

Mr. Downey.—In Cork it was discovered by normal internal checking. In Limerick it was the internal administration section from headquarters who carry out checks in the local offices who discovered it in the course of a check.

Chairman.—Do you carry out spot checks? What changes have there been in your procedures since these frauds were discovered?

Mr. Downey.—What we call the internal administration section carry out general inspections as a regular matter. This year, for instance, inspections have been carried out in 22 employment exchanges. That sort of rota goes on. We have a total of 47 employment exchanges. That gives an indication that every employment exchange, on that basis, would have a general inspection once every two years. On top of that spot checks would be carried out in any case where there was any reason to have suspicions of any sort.

Chairman.—You are the biggest spending Department of State, with one professional accountant. Do you not think there is something alarming about somebody being able to abuse a position of trust over a five or six year period without being detected?

Chairman.—Are there not alarm bells ringing saying that there is something wrong when this can happen.

Mr. Downey.—This again comes back to the fact — I have been pointing this out at different times — that in that period we are talking we had very substantial increases in volumes of work. At no time have we had enough staff to cope with it. The staff available to us and the extra staff we were getting from time to time, first of all we would not regard them as anywhere near enough; secondly, it was nowhere near in time. The result is that there is always the pressure to cut corners. This happens so that payment can be made. If there are people queuing up outside the counter looking for their payments, corners will be cut, short cuts will be taken. This undoubtedly has a deleterious effect on the system.

Chairman.—Have there been any further irregularities discovered since this report?

Mr. Downey.—Yes, there was one in Werburgh Street where some butter vouchers were stolen but it was spotted virtually immediately.

84.Deputy Naughten.—This certainly is stunning information for the Committee. It is getting back as was pointed out in the paragraph, to previous years where fraud was discovered in a number of employment exchanges. The documentation refers to five officers; we now hear it is eight officers. How can we be sure there are not far more officers involved in this level of fraud that is going on in quite a few employment exchanges? We are talking here of three.

Mr. Downey.—As I mentioned, our internal administration section carry out checks on all offices on a regular basis. This is one of the safeguards we have on it. From time to time in recent times we have brought managers together, brought them up to Dublin, and have held seminars, courses, and have had discussions with them on how to look at these things, how to ensure that they look after the administration of their offices properly and the type of situation where they should be careful lest there would be any fraud.

Deputy Naughten.—You are carrying out detailed checks in each exchange roughly every two years, yet one officer was involved in this particular irregularity for a number of years! In other words, the checks had not picked him up. He had been at it for quite a number of years before he was discovered?

Mr. Downey.—In the particular case of North Cumberland Street, over a period from 1979–80, the time we are talking about, the live register virtually doubled in that period. This is what I was talking about earlier on. When that sort of situation happens it is very hard for management to keep detailed track of it. In offices such as North Cumberland Street, where there is a live register of over 15,000, it is probably too big for one man to be able to manage effectively. It is something we are looking at. It is for this reason that in Dublin at present we have increased the number of local offices from what used to be about four in the early stages to 13 at the moment and we are trying to open further ones so that we can reduce and make more manageable the amount of business for which managers are responsible.

Deputy Naughten.—This is, indeed, one of the most serious things I have seen coming before this Committee for quite some time. We are not sure now whether these irregularities are occurring in many more offices, because we cannot be 100 per cent certain. When we discussed this on the previous occasion we got the same assurance from the Accounting Officer that everything possible was being done, yet we see here that eight more officers were involved. I do not know the answer, but I would like to get a note from the Accounting Officer outlining precisely how those frauds were set up. Was it the same pattern in all of them?

85.Chairman.—We are going to have to resume on this, Mr. Downey. In any event, would you give the Committee some idea of the total amount of internal fraud in your Department over the last four or five years on all fronts. Do you have any idea?

Mr. Downey.—I would not have that information but, in relation to unemployment payments, this is what we have had.

Mr. Downey.—No. In relation to unemployment, for instance, that is it, what we have here.

Chairman.—Could the Comptroller and Auditor General give us some idea of what we are talking about?

Mr. McDonnell.—I have referred to cases which came to my notice over the last four or five years, going back to 1982–3. There have been a number of them. Taking the ten cases we are talking about now, and the ones referred to in previous reports, I come up with a figure of nearly £250,000. That is taking unemployment benefit, unemployment assistance, desability benefit, which is paid at headquarters, the other is paid in cash locally. Taking these ten officers, the eight at Cumberland Street, Cork, Limerick other ones in previous years and so on, I have about 25 officers and it involves about £250,000 which I have referred to in my reports.

Mr. Downey.—I wonder if the Comptroller and Auditor General is taking together all sorts of fraud payments to clients as well as internal fraud.

Mr. McDonnell.—I do not think so. I think I have the ten that he has, Which is £70,000 odd. There were some disability benefit cases with ten other officers involved, and there were previous cases at employment exchanges. For instance, one case in Ballina alone was over £60,000. The Committee dealt with that previously. I am open to correction but that is the list of cases on my brief which relate to cases which I have referred to in previous reports.

Chairman.—We are going to have to resume on this. The division bell has stopped now so we do not have very much time. We will not be resuming today. We will resume on this issue on the next day. We will have difficulties in the Dáil with a Report Stage from here on for the rest of the morning.

Chairman.—That is all right. We have somebody else for next week. We will come back to you for a date.

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

86.Chairman.—Good morning. This morning the Committee of Public Accounts are examining the Secretary of the Department of Education in his capacity as Accounting Officer for that Department. You are welcome, Mr. Brennan.

VOTE 32: POST-PRIMARY EDUCATION

Mr. Declan Brennan called and examined.

Chairman.—Paragraph 27 of the Report of the Comptroller and Auditor General reads:—

Subhead A.2.—Annual Grants to Vocational Education Committees

It was noted that, in his report on the accounts of Co. Kilkenny VEC for the years 1980 and 1981, the latest accounts reported on, the Local Government Auditor had drawn attention to shortcomings in budgetary and financial control procedures, the appointment of teachers in excess of the numbers authorised by the Department and the unsatisfactory standard of accounting and internal control procedures relating to works of a capital nature. It was also noted, from an examination of departmental files, that, in order to finance its excess expenditure in each quarter in the period January 1980 to December 1985, the VEC was authorised by the Department to negotiate bank overdraft facilities ranging from £75,000 to £625,000. I have sought the observations of the Accounting Officer.

Mr. McDonnell.—What I was concerned with in this paragraph was that the Department, while seemingly being made aware that a VEC were continually engaging in unauthorised practices which would involve additional expenditure, were at the same time repeatedly giving retrospective sanction to the VEC to borrow from the bank to finance the excess expenditure.

Since the date of my report, the Accounting Officer has told me that the Department were presented in the earlier years of the period mentioned in the paragraph — 1980 to 1985 — with fait accomplisituations whereby the expenditure had already been incurred and it was necessary to sanction overdraft arrangements so that the bank’s requirements could be met. Having regard to the deteriorating state of the committee’s finances and the absence of full information about over-expenditure, the Accounting Officer stated that, in recent times, the Department had sanctioned overdraft facilities without prejudice to the on-going correspondence which they were having with the VEC regarding over-expenditure and the amount of the overdraft during 1986 had been held at the minimum level necessary to avoid any difficulties, for example, in relation to salary payments for staff, until the Department would get full information from the VEC to enable further consideration to be given to their deficit position. The Accounting Officer has undertaken to have the matter brought to finality as quickly as possible and he has also told me in this context that it is the intention to give full consideration to whatever recommendations may be made by a consultative council which was set up in 1985 to examine the procedures for the allocation of funds to VECs and control of their expenditure.

Regarding unauthorised practices which were a factor in the over-expenditure, the Accounting Officer said that he had been told since that some internal control procedures in this VEC had been improved but I would have to say that I think that more recent comments by the Local Government Auditor suggest that he is still not quite satisfied about such things as budgetary and financial control procedures. He also said that all VECs, including the one mentioned, were admonished in 1981 to bring staffing into line with allocations and while the CEO in this case had stated that there was not a problem in this area, the fact was that sanction for four appointments made by the VEC since September 1983 had been withheld.

87.Deputy Foley.—This has come up on previous occasions. What are the latest reports available through the Local Government Auditor?

Mr. Brennan.—The last report we have here is dated 11 September 1987. It deals with reports for four years, 1982, 1983, 1984 and 1985. He comments favourably on certain aspects of the operation of the VEC and on the CEO’s stewardship and in other areas the auditor is not very happy. I should say that in what is reported to me personally within the Department by my financial section confirms that there have been certain improvements. To the CEO it may not mean much but it is important in terms of control. The CEO has been regularly on time with his monthly expenditure control returns. There has been a marked improvement in the financial position of the VEC as of end December 1986 over the situation a year earlier. Whereas the deficit for the year ending 31 December 1985 was close on £512,000, it was reduced in end 1986 to £298,000 and a further improvement is expected at the end of the present year. The level of overdrafts sought by the VEC in 1987 has also been considerably reduced. A new system of monitoring instituted by the Department’s financial section must be given some of the credit for this. VECs are now under stricter control and are required to produce returns more regularly, more accurately and more up-to-date than heretofore and this is having considerable effect. But the situation, nonetheless, remains not at all fully to our liking in many respects. The fact that it is improving is important and we would hope that this improvement will continue and that the matter will be finally resolved at an early date. An early date has been mentioned before I know, but still there is some hope of some improvement on this front. In so far as overdraft facilities are concerned, I am told that where there is an overdraft on the capital account, if it is not approved by the Department the bank imposes a penalty charge of something over 6 per cent; so to save the State money is one of the reasons that the overdraft facilities are recorded.

Deputy Foley.—A further point, what are the overdraft facilities for? I take it this is for the Kilkenny VEC.

Deputy Foley.—What were the overdraft facilities sought in 1985, 1986 and 1987?

Mr. Brennan.—The overdraft facility earlier this year was of the order of £250,000 in June this year. I am not sure if I can lay my hands on the earlier figures.

Mr. Brennan.—If everything was run strictly according to Cocker, according to the rules laid down by the Department, overdraft simply would not occur at all. People would operate within the limits assigned to them in their budgets and they would organise themselves accordingly.

Deputy Foley.—Is there any surcharge in a case where these procedures have not been complied with?

Mr. Brennan.—The possibility of surcharge can be raised. The surcharge is a matter for the Local Government Auditor. He has pointed in his latest report to the possibility that surcharge could be invoked in respect of certain difficulties that he has encountered with Kilkenny VEC, including the problem of the four surplus teachers for whom sanction has not been given by my Department simply on the grounds that they were in excess of their quota. They were always in excess of quota and it has not been demonstrated that they are now within quota. A surcharge would be a final act. I was inquiring about this the other day to see if there was any way of resolving this problem. I was told that we have not reached that stage yet. There is a question of order and, to an extent, discipline involved.

88.Deputy Crotty.—I wonder if the Accounting Officer could expand on the matter of order and discipline. This problem occurs in my neck of the woods and I would be fairly familiar with the situation there.

Mr. Brennan.—As is apparent to the Committee from discussions in this area in previous years, the operation of the VEC under the CEO has not always given full satisfaction. There were attempts made to resolve the issue and, I cannot put it any other way than to say, to bring the committee into line. These attempts continue and have shown some success as of today’s date. They will continue and it is hoped that they will achieve final success. We have a situation in which the committee need overdrafts all the time. That is an unhappy situation as far as we are concerned. We have a situation in which surplus teachers are employed. We are not happy with that situation. There have been situations — it is not touched upon in this report and it does not concern 1985—where a second bank account was opened, a second treasurer was employed and that was contrary to rule. There is nothing very serious about that, it was a matter of misjudgement more than anything else. In general there is a question, too, of whether authority was sought when it was required from time to time for what could be regarded as maybe minor works but, still, the requirements of the control arrangements are that sanction be sought in advance. That has not always been complied with. You ask what has been done. There have been meetings in the past, as happened in October. There was a meeting between my people’s financial section and the CEO who was accompanied by the chairperson of the VEC. A lot of matters was threshed out there and various assurances were given. By and large, the Department would be sympathetic to the plight in which the committee and the CEO found themselves, but must insist that the position be rectified. That is still the line that is being taken and it is hoped that it will prevail.

Deputy Desmond.—I am sure the Accounting Officer is aware of a special situation in Kilkenny due to an amalgamation of two services there. Are the Department at this stage prepared to give any special consideration to this link-up? It is a link-up between St. Ciarans and the VEC which has certainly brought about a situation that capital resources are used to a greater extent; they are more fruitful. I think that this needs to be offset in the teacher situation which is a real problem there. I might add, Chairman, that to the extent that recreation facilities for VEC pupils have actually been withdrawn due to this dispute, it should be resolved. I think that the Department have some part to play in the resolution of this problem. It has also caused some of the overspending and appointment of excess teachers and generally the problems which are alluded to here by the Comptroller and Auditor General. It was an experiment which, in my opinion, has not worked but the VEC are now reaping the worst end of the stick in this experiment.

Mr. Brennan.—Yes, I was aware of the experiment. Basically, I would have to be in sympathy with the idea behind the experiment. It was one of rationalisation of resources which is something we are talking about all the time and something we are anxious to promote. Unfortunately, I found when I referred the matter to another section of the Department, the teachers appointment section, that they operate under very strict rules. Whether all the blame should be carried by the VEC is a different question. It may be that the blame should be shared between St. Ciarans and the VEC. But nonetheless the appointment section tell me the bottom line is that in this area there are four heads of staff surplus to the quota. I would say to Deputy Crotty that I would like the position to be resolved. I aim to have it resolved. I would hope that this particular difficulty about the four teachers would be resolved before I appear before you again. It simply is the case that at the moment the rules have not been maintained. They have not been observed. There has been some difficulty about getting the material facts from the CEO over a period of years. Deputy Crotty said efforts should be made by the Department. I am satisfied that efforts are being made by the Department. They culminated in the meeting that took place recently after a considerable amount of correspondence, some of it in terms, not emanating from the Department I must say, which left something to be desired. A rather lively correspondence took place emanating from the Kilkenny side. That was not going to help very much but the Department do not bear any grudges. We are hopeful that the thing will work out. I am certainly committed to it.

Deputy Crotty.—May I further ask if the accounts carried out by the Department of the Environment auditor were for 1982, 1983, 1984 and 1985?

Mr. Brennan.—The report came in on 17 September. It is dated 17 September but it came to the Department sometime in October.

Deputy Crotty.—When was the audit carried out? I take it that the four years were audited together?

Mr. Brennan.—That appears to be the case, as far as I understand it. There are considerable delays in the performance of the audit function in that area as well simply, I believe, because of the fact that staff are at a premium.

Deputy Crotty.—Would this matter have come to light much earlier and possibly been resolved before it escalated if audits were carried out in the years as they proceed in 1982 or 1983? You are auditing back over years. It is not possible to audit for four years together.

Mr. Brennan.—I would have to concede that there is probably something in what you say. It is something over which we do not have any specific control. We deal with the situation as it is presented to us. There was some suggestion some time ago that possibly the problem arising from late audits might be resolved if the CEO were to report immediately to the Department when something was raised in the course of an audit which might require the attention of the Department. The Department do not favour that. They say there is provision at the present time under the audit scheme for an auditor to produce an interim report if he is satisfied that circumstances call for it. In general everyone concerned would agree — and I have some sympathy with the auditor who has to undertake such a task that it would be much better if it did not have to be done in that way, if you could have them year by year on an up to date basis.

Deputy Crotty.—Have the Department of Finance any remarks on this situation? We have had this continually.

88.Mr. McCaffrey.—We have been aware of this and there has been a fair amount of correspondence between the two Departments on this issue. There really is not a great deal that the Department of Finance can do about a situation of this sort, short of taking very draconian action. We have no direct contact with the VEC. The responsibility for ensuring that VECs adhere to approved pupil/teacher ratios is with the Department of Education and, short of trying to put pressure on the Department of Education, there really is not a great deal that we can do.

Deputy Crotty.—Perhaps the Department of Finance are not aware of my query. It is in relation to the auditing.

Mr. Gallagher.—The situation is that the audit service has some vacancies. The Accounting Office for the Department of the Environment pointed out in the last three weeks that he expects to be in a position to take decisions shortly on what should be done about the overall local government audit service and its future, in particular whether the service should concentrate on particular areas and the rest of the work be farmed out to private auditors.

Deputy Crotty.—What is the Department’s attitude to this situation continuing? We have a four year audit here. You are reporting on the attitude of the Department of the Environment. What is the Department of Finance’s attitude?

Mr. Gallagher.—We are caught, in the sense that Government policy over the last couple of years has been to effect reductions in the numbers of public servants overall. This has meant that as part of that policy particular posts in areas including the audit service have not been filled. Apart from that there have also been other problems in the local government audit service. As a result of these, an interdepartmental committee was established to sort out the future role of the audit service and to decide what the most cost effective arrangements for carrying out audits in the areas now covered by the audit service would be.

89.Chairman.—The whole thing really indicates that the Committee’s view on the need to have a major overhaul of (a) central government audit and (b) local government audit is really an essential target. It is something we are examining and we will have to incorporate closer examination of the local government audit situation. It is not at all satisfactory that three, four or five years of arrears might build up in the audit of a local authority or a local vocational education committee and then that two or three years be done together. It simply is not satisfactory, and those reports do not automatically come before this Committee either. That is a matter which directly relates to the Department of Finance and it is something which we are examining and we will have to raise with the Secretary of the Department in private session.

Deputy Crotty.—This report this morning brings to light how important it is because something that happened it is because something that happened in 1982 is not brought to light until 1986. This is just not satisfactory. If there were large sums of money misappropriated it could go on for four years. I think the Department of Finance must take a very serious view of this. They should report back to us on their up-to-date position in relation to the whole scene.

Chairman.—Will you arrange to let the Committee have a note on the Department’s view on that?

Chairman.—There are a number of Deputies offering on a point of information and Deputy Kitt has been sitting there patiently waiting to get in for a while. His colleague wants to get in on a quick point of information and if Deputy Kitt wants to give way to his colleague that is fair enough.

90.Deputy Dempsey.—On the last point, I am listening at this committee since last May or June to the embargoes in the Civil Service and Public Service being quoted for all sorts of inefficiencies. I am ten years on local authorities and ten years ago we were still getting local government audits that were three and four years out of date. I do not accept from the Department of Finance that the embargoes over the past number of years have been

the cause of all these delays. It was always inefficient and it still is inefficient.

91.Deputy Foley.—The Department of Finance made the point about vacancies for local government auditors. What is the salary scale for local government auditors?

Mr. Gallagher.—It varies. There are various grades and they run up to assistant secretary level in the Civil Service which is the top post. The lowest post would be at executive officer level, so we are talking about £10,000 to £20,000.

92.Deputy Kitt.—On the question of the appointment of teachers in excess of the members authorised by the Department we have had the situation in the past in other VECs where “phantom” pupils were used to get appointments. This is not mentioned in this comment by the Comptroller and Auditor General. On what basis were the excess teachers appointed and what is the procedure for deploying these teachers now? Will they be shared among a number of schools, or what procedure will be used?

Mr. Brennan.—First of all, in regard to the phantom pupils, I am not up to date on that situation. There are enough ghosts around the Department.

Mr. Brennan.—No. I am saying that. As to how the four extra teachers were appointed, they were simply appointed by the CEO presumably with the approval of his committee on the basis that he felt he had a need for them, but he did not consult the rules laid down with regard to teacher quotas. I must presume he did not. He has argued strenuously that he was not in excess of quota. The Department equally hold — and they have the final determination in this issue — that he did exceed the quota. As to what will be done about the four extra teachers I said I would like to see the position resolved. Properly speaking the resolution of the position will arise when, in the ordinary course, without getting rid of anyone people would leave the service and they would not be replaced until these four posts were restored properly within quota. I cannot think of any other way in which it can be done.

93.Deputy Naughten.—I should like to ask Mr. Brennan are those four officers permanent appointees?

Deputy Naughten.—Even though their appointment has never been approved by the Department?

Mr. Brennan.—Their appointment was not sanctioned by the Department but they were appointed in the ordinary way by the committee on the recommendation of the CEO. Whatever the normal system would be for VEC appointments would have taken place in this area.

Deputy Naughten.—A number of committees have supernumerary numbers of staff Is Kilkenny the same? Have they a number of teachers over and above quota as well?

Mr. Brennan.—This was explored by the Local Government Auditor and his report covering the four years 1981–85 has been mentioned. He commented favourably on the fact that the number of supernumerary staff had been considerably reduced though some still remain. That would be the case in many VECs but the general system operating in regard to teacher appointments is that where teachers are surplus to requirements the surplus is eased out of the system through non-replacement as people retire.

Deputy Naughten.—If, for example, those teaching posts are reduced by way of the new redundancy scheme, early retirement, is that not going to be a substantial cost to the taxpayer, the fact that they were appointed by the VEC, not approved by the Department but now will qualify for redundancy and early retirement allowances?

Mr. Brennan.—As to how the redundancy scheme is to operate I would prefer not to have to discuss that in detail. I did not come armed with all the necessary briefing for that purpose. Under the redundancy scheme it is not necessarily the four individuals concerned here who would be rendered redundant.

Deputy Naughten.—I appreciate that, but it would be four others, maybe members of the staff employed by that VEC, so in effect the appointment of those four could cost the State a substantial amount of money in redundancy and early retirement payments?

Deputy Naughten.—Do you not think it unfair that one VEC can go ahead and appoint and run massive overdrafts and high interest rates while other VECs try to live within their quota and their allocation? Have your Department not failed in their duty to other VECs by not ensuring that the guidelines are strictly adhered to?

Mr. Brennan.—I will say first of all that it is more than unfair; it is strictly wrong. Some things may be unfair but still be absolutely right according to the rules, but this is both unfair and contrary to the rules. As to whether the Department have erred in this, it is up to the local government auditor to report on these developments and if the degree of inequity or the degree of wrong doing is such that he sees cause for such a measure he can raise the question of surcharge. It is a very difficult one. The Department’s purpose is to correct these errors. The Department get returns on a monthly basis. The returns always came in but they are being monitored now much more carefully than ever before. The fact that the situation in Kilkenny has been so improved over the years has to be accredited in some part at least to the Department’s efforts. The Department are doing their best. Unless you take the ultimate step of surcharge when you find a committee have done something that they are not entitled to do under the rules, they do, in effect, have a fairly free ride. At the same time while we can monitor their operations within their budget month by month, we have pretty good control and we are improving this situation all the time. But I acknowledge that the VEC that gets away with it in the sense of running an overdraft may be seen to be given an advantage over others that keep strictly within budget. I cannot complain about that point.

94.Deputy Ahern.—I note that the local government auditor has drawn attention to shortcomings in the budgetary and financial control procedures. Since the report, did the Department review and assess the procedures that were in operation at that stage? Did the Department insist that controls be put into effect since that report and, second, on foot of the report with regard to the unsatisfactory standard of accounting and internal control procedure relating to works of a capital nature, did the Department insist that an examination be carried out into that expenditure to see if there was any wastage, misappropriation or if any of the capital expenditure was not proper and so on?

Mr. Brennan.—The answer is that there are three separate areas within the Department concerned in the operations of the VEC, the teachers appointment section, the financial section and the building unit, the building unit being responsible for the problems arising in respect of capital works. The whole issue has been examined within the Department and I would have hoped that before today it might have been possible to get out a composite reply, representing the distillation of the wisdom of all three sections, to the local government auditors. That has not been possible but that reply is in course of preparation. It is not actually that anybody is writing out the reply at this stage, but the process of consultation is going on to the point where a composite reply should shortly emerge. On the capital works front, the main problem arose simply because sanction was not sought in advance by the CEO for the works involved. There has been no suggestion that I am aware of that any of these works were otherwise than might have been approved if sanction had been sought in the proper way. It may reflect a degree of initiative and enthusiasm for his job on the part of the CEO which might be commended, in part, but we cannot commend it if it breaks the rules.

Deputy Ahern.—An unsatisfactory standard of accounting and internal control procedures was mentioned. Does that not imply that if you have got proper accounting and general control that there could be some——

Mr. Brennan:—In so far as the internal control accounting and financial control procedures are concerned, the meeting that took place in October was centred upon that very issue. Certain assurances have been given by the CEO and they will be followed up. I believe that these procedures should not give cause for concern after this if his assurances are implemented.

95.Deputy Colley.—The Comptroller and Auditor General’s report says quite clearly that the Department, in fact, were at fault because they authorised the bank overdraft facilities in order to finance the excess expenditure. Without this excess expenditure and the overdraft facilities these teachers could not have been paid. Even though the local government auditor was slow in coming up with the information, it seems that the Department did authorise the expenditure every quarter from January 1980 to December 1985, which is a very deliberate act on the part of the Department. That seems to be the nub.

Mr. Brennan.—I explained earlier that a problem arises in respect of premium charges imposed by banks if overdrafts are not approved by the Department. That is one aspect of it. The second aspect is that there is a system of appointment and a system of sanctioning appointments. Appointments can be made quite regularly, correctly and properly and teachers are then properly appointed. If we refused in this instance to agree to the extension of overdraft facilities, the only effect of that would be that the teachers concerned could not be paid and they were properly appointed. I accept that over the years overdraft facilities have been allowed. That is not unique to Kilkenny. They are allowed generally, in circumstances where, while the incidence of the overdraft is deplored, it seems to be the lesser of two evils to go ahead on that basis.

Deputy Colley.—As a final word, the Department have obviously contributed to this situation. The VEC may have felt that they were right in appointing certain teachers but if, in fact, they were not acting according to the rules, it should have been looked at long before December 1985. There were five full years in which every quarter it was authorised and it was authorized mostly on the basis that these teachers were being paid and they were above the numbers that were entitled to be paid.

Mr. Brennan.—Essentially, the Department would hold and I think this might be confirmed here, that it is a function of the audit operation to decide what payments are to be allowed and what payments are not to be allowed.

96.Deputy Ahern.—Do I understand that the shortcomings in the budgetary and financial control procedures have been sorted out and that a report is due on that in the near future?

Mr. Brennan: I did not say that they had been sorted out. I said that, at the latest meeting with the VEC and the CEO, assurances had been given which, if they are implemented, would mean that they had been sorted out. We will be looking for more definite word on this. We will be writing to the local government auditor about it and we will be sending the composite reply that I mentioned.

97.Chairman.—We should seek further information on this from the Department of Finance as to what they are doing to ensure that there is a tightening up with regard to local government audit generally. The Committee of Public Accounts have declared themselves totally dissatisfied with the present situation both at local government and Central Government level. We will be making our own recommendations about this. In the meantime, I think we should mark this for further information to be forwarded and ask the Department of Finance to look at the way the VECs are being audited as they relate to the Department of Education.

98.Deputy Crotty.—Are there any other VECs which have a backlog in their audit? In his final answer the accounting officer said that the audit should control this. He is pointing the finger very definitely at the audit and shedding any blame to the Department. As such, we must insist that the audit is carried out up to date and that this loophole is not available to any Accounting Officer. Could I get information on the present situation in relation to audits of VECs generally? (Appendix 12)

Mr. Brennan.—The best that I could offer to do here, as I am not armed with that information now and would have to check with the auditors and from our own files what the situation is, is to send you a note of the precise situation in regard to all VECs.

Mr. Brennan.—I would be surprised if it was not the case that others were also in arrears.

Chairman.—It may be that we will have to take up the idea of bringing private enterprise into the question of local government audit, but whatever we come up with we will have to get it up to date. We will mark this for further information to be forwarded and for the Department of Finance to let us know their situation on that.

Mr. Brennan.—One last point. I am not sure that I got Deputy Crotty’s remarks correctly when he said that I seemed to be pointing the finger at the audit system. I had no intention of pointing the finger at the auditor. I appreciate his difficulties, too, but it so happens that I represented the case as it is according to the facts.

Deputy Crotty.—We have to take the answer that you furnished to us. It is not that we want to point a finger at anyone. We would prefer not to.

99.Chairman.—Paragraph 28 of the Report of the Comptroller and Auditor General reads:—

Subhead G.—Secondary, Vocational, Comprehensive and Community Schools, Regional and other Technical and Specialist Colleges and Specialist Teacher Training Colleges—Building Grants and Capital Costs

It was noted that in 1983 the Department decided not to proceed with the building of a proposed second level school at Kilnamanagh, County Dublin for which a 12 acre site had been purchased in 1979 at a cost of £210,000 and for which design fees and expenses had been paid to consultants engaged for the project.

I asked the Accounting Officer why the project was not proceeded with and whether there were any proposals for the utilisation or disposal of the site. I also inquired as to the total amount of the design fees and expenses paid in this case and whether the Department had purchased any other sites for school buildings which have not been proceeded with.

The Accounting Officer informed me that architectural planning of the proposed school commenced in January 1979 and that the project was reviewed on a regular basis during the planning process. Such a review in 1983 revealed that there was a fall in demand for places in post-primary schools which were reasonably convenient to Kilnamanagh and that these schools would, therefore, be able to accommodate pupils from that area. As the considerable capital expenditure involved in the building of a new school would not have been justified in such circumstances it was decided to defer the project and to keep it under annual review. He stated that when an examination of post-primary school accommodation in the greater Tallaght area, which is being undertaken, is completed the Department will decide on the Kilnamanagh project and the site will be utilised for other educational purposes of disposed of if it is established that a post-primary school is not required in that area.

He told me that the total amount of design fees and expenses paid was £38,639 which represented a reduction negotiated by the Department from the full design costs of £78,250 because of the use of the Kilnamanagh design on another project for which the same design team was commissioned. He also told me that school building plans had not been proceeded with on two other sites at Kingswood Heights, Tallaght and at Huntstown, Blanchardstown, County Dublin.

Mr. McDonnell.—This paragraph deals with the expenditure on the purchase of a school site which was not needed when the decision to build the school was reversed. It also refers to the design fees paid in connection with the project and raises the question of the use now to be made of the site. I have recently been informed by the Accounting Officer that the review of post-primary accommodation in the greater Tallaght area has been completed and that it has been decided to dispose of the site at Kilnamanagh.

In regard to the other two sites referred to at the end of the paragraph, I understand that one project is apparently going ahead but no decision has been taken in the other case.

Chairman.—The 12 acre site was purchased in 1979 at a cost of £210,000. Has it been disposed of yet?

Chairman.—Why is it still in the Department’s ownership if it is not going to be built on?

Mr. Brennan.—The decision finally not to proceed with the project was taken very recently indeed and now the question of the disposal of the site will, of course, arise. I should say that the planning process goes on over a period of years. People rely on demographic projections, population movements and so on. By and large, there are not that many cases in which sites need to be disposed of so the information on which the Department base their final conclusions or their projections is generally proved to be accurate. No one wants to find himself in a situation where a school is planned and it cannot be gone ahead with for the very reason that the school is simply not required but it would be far worse to go ahead.

Chairman.—We are coming to the New Year and you already have the site eight years and will soon have it nine years. Would the decision to get rid of the site have anything to do with the fact it is coming up before the Committee of Public Accounts this morning?

Chairman.—What is the situation regarding the last line of the Comptroller and Auditor General’s report, the two sites at Kingswood Heights, Tallaght and Huntstown, Blanchardstown?

Mr. Brennan.—A decision has now been taken to go ahead with the provision of a second level school in the Kingswood Heights, that is the Castleview site.

Mr. Brennan.—No decision has yet been taken as to when the school will be provided on the site owned by the Department at Huntstown. As with all such cases, the matter is kept under continual review.

Mr. Brennan.—I do not believe that I have that information here before me. Can I let you have it?

Chairman.—Perhaps the Comptroller and Auditor General has it. Regarding the site in Kilnamanagh that you are now going to sell, do you have an idea how much it is valued at?

Mr. Brennan.—The purchase price was £210,000. Apparently there will be a problem. How this problem will be resolved I do not know. Apparently the area at present is zoned for amenity purposes only. That obviously will have a bearing upon what price may be realised. We will just have to wait and see what happens.

Chairman.—Regarding the design fees and expenses paid, £38,639 what year were they paid and what were they paid for?

Mr. Brennan.—I do not have here a statement of the various planning stages. You will appreciate that there are a great number of planning stages to be gone through before actually arriving at the point where tenders can be invited for the erection of a school. This would have been all part of the initial planning of the site.

Chairman.—Why would you have changed your mind about having the building there? Surely you did have the demographic information necessary for your planning?

Mr. Brennan.—The demographic information is not constant. It can change and in this instance it emerged that because of developments in neighbouring schools the pupils whom the Department would have expected to accommodate in Kilnamanagh could now be accommodated in three neighbouring schools.

100.Deputy Colley.—Might I ask Mr. Brennan a number of questions first of all in relation to the Kingswood site? I do not know if the Chairman asked how much that cost?

Mr. Brennan.—I thought I would have the figure here but I do not have it; I will certainly give details of these figures in a note to the Chairman.

Deputy Colley.—Could you confirm to the committee that, in fact, it was purchased, that it was not given in any way?

Deputy Colley.—In relation to that site, were there any fees paid? The note here says that the school building plans have not been proceeded with on the other two sites. It does not mention if there were fees involved?

Deputy Colley.—No. I am talking about Kingswood Heights now, at the last part of this paragraph.

Mr. Brennan.—The provision of that school is going to go ahead. I cannot answer offhand what fees have been paid up to now but it must have reached the stage where some fees would have been incurred.

Deputy Colley.—Maybe I am misreading this, but the paragraph seems to say that the building plans had not been proceeded with on two other sites at Kingswood Heights, Tallaght and at Huntstown, Blanchardstown. Presumably that means it is not going ahead?

Mr. Brennan.—That is not the most up to date information. The decision not to proceed with Kilnamanagh was taken only the other day. The decision to go ahead with the Kingswood Heights, Castleview, project was taken at the same time. Again, it is very recent.

Deputy Colley.—Am I right in thinking that the Minister wrote to the people there in about July saying that it was going to go ahead but that at the contract stage it would have to be reviewed?

Mr. Brennan.—That would fit into the general arrangements that apply to the review of projects. With every project, before finally committing yourself to taking the final irrevocable step, there is the final review. That final review leading to the decision that this school is to go ahead was taken quite recently. When the Minister spoke in July she was anticipating what decision would be taken.

Deputy Colley.—Going back to the Kilnamanagh site, you mentioned that that site has been zoned for amenity purposes. Would you agree that in 1979 a purchase price of £210,000 would represent a great deal more than one would get for such a site today?

Mr. Brennan.—I would prefer to wait and see. I honestly cannot answer that. I am no expert in this area, nor have I any expert advice on it.

Deputy Colley.—It seems that it is rather a long time to keep such a site. It is a 12 acre site. I do not know if the area was zoned for amenity purposes when it was purchased at first, but there has been much building going on there over the last eight or nine years. I would question the need to review it on a yearly basis for so long?

Mr. Brennan.—I would say that if you are planning your building scheme you get sites where you think you require them, well in advance of when required, when you think you would get a bargain. You get a site when you feel that if you do not get it then you might not be able to lay your hands on it later on when you need it. There are many considerations that arise. In this case there had been a review over a number of occasions. At different stages it was decided to suspend action on the project because it was not clear what exactly the enrolment requirements would be in the area and in adjacent areas. Finally, it is with some reluctance that a decision would ever be taken to dispose of a site and not to proceed with a project, but it is clear now that in that area there is accommodation for all the pupils who would otherwise have had to be catered for in Kilnamanagh, in Walkinstown and Greenhills. It was decided then that this other school should proceed. It caters for a different area some distance removed and makes more sense in the present circumstances.

Deputy Colley.—Could I ask whether you gave the information about when the Kingswood site was bought? I know that you do not have the information about the price, but do you have some idea of when it was bought?

Mr. Brennan.—I am sorry. I would like to have it for you straight away but I am afraid I will have to supply it with the rest. I will give you details of the date of purchase and purchase price.

Deputy Colley.—Regarding the two Tallaght sites obviously I can understand there was a population growth there in the late seventies and it was expected to continue but at some point — and I would like to establish when — it must have become obvious that that was not going to produce enough people to require two large schools. I want to know when the sites were bought, whether they were bought contemporaneously or at a good remove from one another?

Chairman.—The Comptroller and Auditor General informs me that they were bought in 1978 and 1980 for a total of £336,000.

Deputy Colley.—Finally, I would like to ask the Secretary if he could explain, in brief, what the general procedure would be to establish the need for a school and at what stage you review that. We have here two very large sites costing much money to the State and a decision put off for eight or nine years on whether to go ahead with either of them. Only the other day, a decision was taken to go ahead with one. Much money has been tied up there for a long period and I wonder about the procedures involved in decision making?

Mr. Brennan.—I will try to be brief and I hope I will be accurate. There is an institution known as the Dublin Advisory Council which is representative of local authority interests, the Department, the Archdiocese and the trade unions concerned. They meet to consider long range plans for school development. I have a document in front of me which suggests that the original decision to build a school in Kilnamanagh was taken in 1977. It was then decided, on the recommendations of the Dublin Advisory Council, that a 1,000 pupil school would be required in Kilnamanagh by 1983 to 1984. No decision was taken at that time on the provision of a school at Castleview. However, as developments took place the Department began to have doubts about the need for a school at Kilnamanagh. These doubts first emerged about 1980. It was the case that while the numbers leaving primary school in Kilnamanagh were growing there was a major decline in the numbers of primary school leavers in the adjoining areas, that is, those I mentioned, Greenhills and Walkinstown. By 1983 it was decided that the proposed school should be deferred for the present and the situation should be reviewed annually. This was always a matter of some difficulty and aggravation for the people who were expecting a school on their doorstep. There were numerous deputations to Ministers in the intervening period. It is a difficult decision to take at any time. It is taken normally by the Minister of the day. Deputations were held off by an indication that this project was not definitely cast aside but that it was in suspense. This went on over a period until we reached a stage where finally it was decided that it would not make any sense to go ahead and we would have to accept whatever losses would be incurred as a result of this decision. They would be far outweighed by the cost that would be involved in the provision of a school which would not really be required. I am afraid it is part and parcel of the scheme of things in the provision of schools and the planning of school building projects. One starts off planning a school that may materialise in five years time. You have to have a site. The site is most important.

Deputy Colley.—Finally, I accept that a five year period would be reasonable. A ten year period is not reasonable. That is what I am questioning here. We have almost a ten year period, nine years certainly coming up to the beginning of next year. I would question whether the procedures were properly followed or else I would say the procedures are not tight enough because if deputations were being put off for eight years on one or other of these schools, there must have been reasons given to them that either were untrue or else unwarranted.

Mr. Brennan.—It was not a matter of eight years of deputations being put off. While there was some doubt in the Department’s mind in 1980, it was not until 1983/84 that these doubts crystalised to the point where people were being told that it was not absolutely certain that the school would go ahead. It was not certain either that it would not. I would like to say in reference to deputations that they have been listening to this message for the past three or four years.

101.Deputy Dempsey.—As a member of a Public Accounts Committee, I find it a little strange that we are questioning an item like this where I think that the Department of Education have saved the taxpayer a lot of money. Sometimes the procedures followed can be very frustrating if one is waiting for a school in a particular area but being familiar with the system that is adopted and that has been adopted by the Department, I think we should be commending the Department for taking the decision they have taken in not spending public money just because it was thought in 1979 that a school would be necessary here. The Department should also be commended for the fact that the fees that were originally agreed on, the £78,000, were reduced to £38,000. If we had a little more of this kind of management of public funds our job might be a lot easier.

102.Deputy Crotty.—I am afraid I cannot agree with the previous Deputy. It came to light in 1983 that this school might not be required. Were there any surveys carried out in relation to the adjoining schools, Greenhills and Walkinstown? There was a reduction in the number of pupils leaving primary school. Was there no survey carried out as to what the candidates leaving primary school would do and how many would be available? Is this not normal procedure in planning? Was there a slip up here? How did this thing arise?

Mr. Brennan.—That is exactly what happened and that is what led to the final conclusion. Surveys were carried out from time to time. They do not always point consistently in the same direction. It was in 1983/84 that the Department began to entertain a suspicion that maybe it would not make sense to go on with the school in Kilnamanagh as originally planned. That would have been based on surveys. Everyone knows that there have been developments in the population area in recent years that may have had an effect on this situation and who knows but there might not be other developments in the future that would have a different effect? It is very hard to predict what human beings do when they get together closely.

Deputy Crotty.—I am not trying to predict what human beings do when they get together. I gave up that years ago. I am trying to establish that there was a cycle of primary school children of seven or eight years, and it would be quite obvious to anyone carrying out a survey how many school children would be leaving Greenhills or Walkinstown over a particular period. Why was this survey not carried out? How did this just happen to arise out of the blue?

Mr. Brennan.—I do not have the people involved here, but the people involved in making these projections are experts. Their expertise has been gained through experience over a period of years and they were looking at these figures all the time. Apart from the fact that I mentioned lightheartedly a moment ago, there have been population movements too, people move out of districts. There are houses — and the people in the Department of the Environment would know much more about this — which are abandoned. Whole families move and are no longer there. I do not know if these are the factors which led to the drop off in the expectations in the areas that have been mentioned. The people in the Department who are expert in this were monitoring the position carefully and by 1983/84 they became aware that the original predictions were not going to materialise. I am glad to say that we got some credit for taking the right decision finally. We might get some discredit for not taking it in time but even to take the right decision finally took a lot of courage considering the delay and considering the fact that these very charges would be laid against the Department. We have to face up to them. There may be some credibility in them I am not denying that, but finally the Department are doing what they thought fit on the basis of the information available to them.

Deputy Crotty.—Could we have an explanatory note on that scene and on what background surveys were carried out and the reasons? I would be very interested to know.

Chairman.—Would the Secretary of the Department of Education forward a note on that, please?

103.Deputy Colley.—I want to put on record that I am not looking for any schools to be built that should not be built. As the Secretary of the Department has rightly said, the querying that I entered here was in relation to why the decision was not taken earlier and, therefore, the State saved more money.

Chairman.—You have noted the points, Mr. Brennan, that have been put to you and we will have a note on the background as requested.* In my constituency which adjoins Kilnamanagh we have Walkinstown, Crumlin, Bluebell, Drimnagh, Kimmage, Harolds Cross, Terenure and into the inner city, Rialto and places like that. There are huge numbers of schools with falling numbers right next door in these places, quite adjacent to Tallaght and quite adjacent to other parts like Walkinstown and Kilnamanagh, good schools, heated schools, bright schools. What consideration have the Department of Education given to having transport facilities available for the school-going population? Do we need schools at every crossroads? They are very expensive items to build and then you have got teacher problems and that sort of thing. Has consideration been given to that and what has been happening there? There are schools which are literally on the verge of closing down and others which have barely sufficient numbers to sustain them, schools which at one stage had very large numbers. I can think of a number of them offhand, vocational schools and secondary schools.

Mr. Brennan.—That question is highly relevant to the consideration that goes on in the Department all the time about school building projects. They do look at what the scene is in related areas. You will remember earlier this year there was a lot of controversy, for instance, over whether an extra community school should be built in a certain suburb of Dublin on the north side. The Department had information which suggested that the need for any extra accommodation at second level for that school would not prevail for any longer than a year or two. It held out very strongly against it despite immense pressures. That is part of this rationalisation scene as the Department view it. There is no question of building a school in an area adjacent to an area where schools are undermanned in terms of public. This is a situation that is looked at all the time. The other question you raise concerns transport arrangements. Transport is also very expensive and not always very easy to organise. It is not always easy to persuade pupils to move by way of public transport to other areas, but it was a factor which was taken into account.

Chairman.—I know a school which organises two bus loads of children every day and nobody has any problems at all. It does not cost an awful lot of money and it is a very good school. In regard to these second level schools we refer to here, Kilnamanagh and Kingswood Heights, are they VEC schools or other secondary schools?

Mr. Brennan.—The decision on the type of management of the school is one of the last to be made. There are various options. You can have a vocational school, a community school or a community college. In the rationalisation scene we are normally thinking of either a community college or a community school.

Mr. Brennan.—Not that I am aware of. I will be happy to correct that if I give you misinformation but I think that is the position.

Chairman.—We are building these schools in those areas. I do not know what your demographic surveys will say, but it seems that in many areas which areas at present heavily populated that they may use those schools for one generation or maybe two but even at the design stage is thought given to providing a community usage in the buildings so that if they are not going to be used as schools at least they could be used as community centres ten or 15 years down the line? What sort of planning goes into it? Are we giving consideration to that element, are we giving consideration to adjacent areas with empty and half empty schools? Have you given any consideration to transporting children? What consideration is given to those points?

Mr. Brennan.—You mentioned three separate points. I did mention already that consideration is always given to the availability of school places in adjacent areas. Second, consideration is always given, if there is such accomodation available, to what transport services might be called for and what the cost of those services would be. I do not believe that it enters into the normal consideration of the Department as to whether you might build a school with a view to having it developed as or converted to a community centre at a later time. You generally build a school in the expectation that that school will be required over a lengthy period, a life-time. It is generally done, too, on the basis that you have a core building plus prefabricated accommodation or some less permanent building if it is anticipated that the numbers might not finally remain at the level which would require that total accommodation in the first place. I should say that it is a problem all over. I had to go to Belfat last Saturday to a funeral and the funeral was in a church alongside a big school. I was told that at one time this was the biggest second level school in Europe. I do not know if that was right —sometimes it said that the highest hill in Ireland is in Meath and that is not exactly right either. It was a very bigh school; it was meant to cater for 1,300 and now it has 500. I am not trying to justify what happens in our case. I am not going to say there were no mistakes at all because basically you build for the need you perceive to exist at the time and that you anticipate will continue. You are quite right in that maybe the other factor mentioned, of considering how this conversion might operate in the future, might be looked into. The trouble about a community is that if you do not have children you do not have a community either.

Chairman.—But the difference in Northern Ireland and other countries is that they have not had the kind of population explosion we have had here; they do not have the Tallaghts, the Blanchardstowns and the Clondalkins in big numbers, because apparently when they get together they do not do the same—

Mr. Brennan.—The trouble your Tallaghts and Clondalkins, if I may be a little bit lighthearted again, is that they explode at a certain point in their life cycle and then they stop exploding.

Chairman.—This is the very point. If you are building a school where there is nothing else in the area, maybe not even a shopping complex, should we not be thinking of other community yes for that very costly building?

Mr. Brennan.—I would say it probably enters into the relevant policy. It is an interesting idea. I would not set myself again it.

104.Deputy Desmond.—May I ask the Accounting Officer what the staffing of the planning and development uint in the Department comprises now?

Mr. Brennan.—In common with every other section in the Department I can only answer that in very general terms. I do not have a detailed breakdown here. We are severely restricted. We have suffered, as everyone else has done, and I am not making a special point about it, from the embargo which has applied over a period of years and which has resulted in the total number employed in the Department going down from something over 1,300 to just over 900 now, a reduction of 25 per cent over five or six years. Our planning branch would be equally as straitened for staff as any other branch of the Department or any other section. The head of the Planning section on the building side is Principal Officer, he has at most two, and probably only one Assistant Principal. There is relevant ancillary staff then.

Deputy. Desmond.—Would you not regard it as being extraordinary with the volume of capital expenditure involved, that the Department of the Public Service and successive administrations have never had a planning research development unit of the Department of Education headed up by, say, a Deputy Secretary or an Assistant Secretary?

Mr. Brennan.—I am all for it. If you write that into your report we will be delighted to hear it.

Deputy. Desmond.—Would you not agree that to impose the burden of demographic forecasting and all the work that goes into that at local level on a Principal Officer and perhaps a half a dozen other staff of some competence is, quite frankly, utterly inadequate?

Mr. Brennan.—I have probably understated the provision that exists in relation to planning. The planning section is headed by a Principal Officer and I am led to believe, only one Assistant Principal at the moment. Apart from that we have a statistical section which is also hard-pressed but it does compile statistics and we have a man in charge there who have achieved a certain amount of world renown as a statistician.

Deputy. Desmond.— I would accept that he has but he does not have Deputy Secretary or Assistant Secretaryship status.

Deputy. Desmond.—Therefore he cannot speak with what I would call relevant authority to the Department of Finance or to the Department of the Public Service.

Mr. Brennan.—He can speak with relevant authority within the Department because anyone who has the right thing to say will be listened to as a man of relevant authority in the Department as far as I am concerned.

Deputy. Desmond.—I assume that Ministers listen to Principal Officers as well. How many thousand vacant school places are there in Dublin at the moment? A figure has been mentioned of 30,000 but that may be completely wide of the mark. I think the Department of Finance had a figure of that order, too.

Mr. Brennan.—There can be a good deal of argument about this, about what the actual figure is. The Department of Finance might not necessarily agree with the Department of Education. When you think in terms of the provision that is made for accommodation in a school you have a classroom that will take 40 pupils. If you have a class of 35, you have a surplus of ten but that does not mean to say you could necessarily forego school building in another area even if you look at the accumulation of all these surpluses. You do not have extra rooms.

Deputy. Desmond.—The Department of Finance have alleged that there are, in the totality of the greater Dublin area 30,000 actual empty classroom seats as of now.

Mr. Brennan.—The, in practical terms, it should be possible to establish. I do not have the figure here, I am sorry Deputy.

Deputy. Desmond.—I would appreciate a note. We are sticking to that aspect.*

Mr. Brennan.—Certainly we can do that. The view of the Department of Finance is very close to that of the Chairman who believes that we should always be looking to fill the empty places before we start building more schools. We too can generally agree with that proposition but we do not always agree with the conclusion.

105.Deputy Dempsey.—I have a final question and I do not think the Secretary will have the information there so I would like a note on it. Sometime ago the design for primary schools in particular was changed to incorporate flat roofed buildings. I would like to know if the Secretary could get the information for me. How many of these developments took place? How many developed subsequent faults and what was the cost of repair or replacement of those roofs? These were flat roofed primary school buildings. I am not sure if it extended to second level schools.

106.Chairman.—We will note that paragraph and we will be looking forward to the various notes. Paragraph 29 of the Report of the Comptroller and Auditor General reads:—

Fees payable by students sitting the examinations of the Department of Education are collected from the students by their schools, paid over to the Department and brought to account as Appropriations in Aid of the Vote.

In the course of audit it was noted that in April 1986 some schools had not paid over fees relating to the examinations held during 1984/85. I have asked the Accounting Officer for information regarding the total amount outstanding in respect of the 1984/85 examinations and whether any amounts are outstanding in respect of examinations held in earlier years. I have also asked what steps have been taken to collect outstanding fees and whether the total amount of fees collected each year is reconciled with the number of students sitting the examinations.

Mr. McDonnell.—This paragraph deals with the failure to collect some of the fees due in respect of examinations held by the Department.

The Accounting Officer has informed me that the total amount of fee outstanding for 1984/85 and earlier years, based on entry, was just over £50,000. He stated, however, that, if schools were required to pay only in respect of the number of candidates who sat, this would be reduced to £38,500.

He informed me that schools had been contacted on a number of occasions and requested to submit the amounts outstanding. Some had paid the amount due and reminders were sent to all schools which were in arrears.

The Accounting Officer also said that at present it is not the practice to reconcile total fees collected with numbers sitting the examinations but that the amount paid in any year in respect of students who entered but did not sit would be more than the amount unpaid in respect of candidates who sat but for whom fees were not received. In 1985, for example, about 1,000 candidates for both the intermediate certificate and the leaving certificate did not sit the exams although they had paid the fees.

Chairman.—What is the figure for fees received for examinations by your Department? Is something in the region of £2 million?

Mr. Brennan.—It is in fact in excess of £3 million and that was the figure in 1985.

Chairman.—Why would these fees be outstanding? Why would they not be paid over?

Mr. Brennan.—There were two developments, as it had been explained to me, that gave rise to this problem. There would always be cases where fees were not paid as readily as they might be. One first development was the alleviation scheme that was brought in to ensure that people who could claim alleviation on economic grounds would be catered for. The other was the arrangement whereby fees were paid in two instalments, both developments were designed to impose less of a burden on the parents of the children concerned. Under the fee alleviation procedure, alleviation would be claimed in many cases where alleviation would not properly be allowed. That led to a reluctance of the part of those who claimed alleviation to pay the fees over to the school authorities. I mentioned also the two instalment arrangements, that meant that the first instalment would be paid put the second instalment might not be paid so readily.

Chairman.—It is not a question of the schools collecting this £43,000 and not paying it over. They have not received this.

Mr. Brennan.—There is no question of the schools not paying it over. It fact we have a problem all the time and this and this is something we are nervous about. The schools do not like very much collecting fees any more than shopkeepers like being unpaid tax collectors. They are quite likely to turn on the Department and say, “make your own arrangements for collecting fees”. Of course certain pressures could be brought on them but that would be a rather unpleasant situation. Basically, as we see it at present, we are collecting the majority of fees. A rule has been brought in since 1987 that provides for the exclusion from examinations of candidates in respect of whom a fee has not been received in the Department. One would be reluctant to resort to that arrangement but it does give you a certain power and I imagine it will have effect on non-payment.

Chairman.—The figure for 1986 was £3.3 million in examination fees for students and, for 1987, just over £4 million. What is the figure for 1988?

Mr. Brennan.—There will be a slight increase in numbers. The amount, therefore, should go up.

Mr. McDonnell.—May I make a comment, Chairman? Just in case it might appear that I was making a very draconian point in relation to the absolute necessity to go after every single fee in the case of every single student, I would not know at the time anything other than that fees were not collected in respect of students who sat for the examinations. I am not quite clear so to how it can be said that the fees might not be in the schools. They might or might not be as far as I can see. I do not know where they were. I could see the possibility that fees were collected and held in the schools. Equally I could see the possibility that fees were not collected.

Chairman.—I do not think the Committee would be too concerned if there were economic difficulties and particular problems which gave rise to this relatively small amount of money. I think it is something like I per cent of the total. There would be concern obviously if that money had been collected and was retained in the schools. That would be an improper use of the money. The point the Comptroller and Auditor General makes is very relevant.

Mr. Brennan.—I appreciate the point made by Mr. McDonnell and you, Chairman. It has never been raised as a possibility with me before now that schools would actually be holding back moneys. In fact, as I am told, the Department generally had the impression that schools, in anticipation of getting fees from pupils, paid over moneys which they had not in fact collected. We have not been aware of and we have not entertained any suspicion up to now that there may be schools who are in fact collecting the fees and holding on to them. We have no way of establishing that.

Mr. McDonnell.—That is the point I am making, that there is no way of establishing that.

107.Deputy Desmond.—When fees are paid into a school, are they lodged to the school account or lodged direct to the Department?

Mr. Brennan.—I have no intention of chancing my an but I would surmise that they are lodged into the school account and then in due course when the sums are collected they are transferred. There would be a lot of transmission involved in forwarding individual amounts direct.

Deputy. Desmond.—That is reminiscent of the allocation that was made one time to a health agency who proceeded by buy prize bonds with it and did not win.

Deputy. Desmond.—The Comptroller and Auditor General did not cop it either. It was before my time I would hasten to add. Why are they not lodged straight into a departmental account? I mean it is your money. Could you consider the point?

Mr. Brennan.—You have given me my answer. We will have to consider the point. We have no problem with the vocational schools. They are subject to audit. The private secondary schools are not. We would be anxious not to upset an arrangement which is a very cosy one from our point of view. They do operate as very effective collection agencies for us. Anything we would put in its place would be a lot more difficult. While we will consider the point you raised, only if it were not going to increase the problem for the schools in second level education would we seriously go ahead with it. We do not see what is involved as being a very major problem and really the case would be, with respect, that it is generally on grounds of need that people are dodging payment of fees.

Deputy. Desmond.—We have a situation now where people are paying £100 to do a repeat leaving certificate. That money is lodged to an account of the school, interest accumulates to the school. The popular assumption is that the money is paid to the Department of Education direct and if money is held, for the sake of argument, for four or five months the accumulated interest on it is quite substantial. I make the point that the matter might be considered by way of accounting procedures. Direct lodgement is common in State accounts.

Mr. Brennan.—Certainly we will consider it. One point about the possibility of schools feathering their own nest in this way is that it is hardly likely to happen because parents know when the fees are due, they know what the due date is. They are unlikely to arrive with the fees months in advance of the due date and by the due date they have to be sent on.*

108.Chairman.—In the case of the leaving certificate they must be in well in advance. The main concern is the question of the possibility that the schools may be retaining funds. The Comptroller and Auditor General points out there is no way of knowing whether they do, so perhaps yourselves and the Department of Finance would look at that particular paragraph. Mr. Brennan, there is a little crow I have to pluck with you and it is regarding the way your Department treat Deputies. I think we treat you a lot better than you treat us. I raise this matter particularly under this heading. If any of the Deputies here wanted to raise a question directly with your Department about examination fees, they would have to go through your office or through the Minister’s office. You may be aware that I have already complained to the Committee on Procedure and Privileges about this and that they are examining it. The practice in question is a gross waste of taxpayer’s funds. It is a practice I want to see discontinued no matter who is in office. I will give you an example. Recently, I had a case of a mentally backward child and I wanted to talk to somebody about him going to a school half a mile further down the road. I was told I would have to go through the Minister’s office. First, if I was merely Gay Mitchell and not a TD, I would get the information from the section but when I identified myself as a TD they said: “Sorry, you will have to go through the Minister’s office”. The person in the Minister’s Office who did not understand the problem had to communicate with the person in the section, obviously not communicating the compassion in the particular case, and then came back to me with a bureaucratic answer. That is a terrible waste of taxpayers’ money.

Mr. Brennan.—May I answer? You made the point that we are not nearly as nice to you as you are to us. I was very struck by that because the matter came before me only the day before yesterday and I said that we would have to be nice to the people who would be interviewing me in two days’ time. I hope we will be able to organise something that may meet with your satisfaction. If my wife rang up and the staff did not know who she was I do not believe she would get an answer quicker than a Deputy or a Senator would. There may be some certain kinks in the system but I hope they can be worked out.

Chairman.—I hope they can, too, because it is not just a matter of privilege and procedure, it is also a matter of public funds. I raise it here under the area of public funds being misused because it is a waste of time, my time and the Department’s time. The privilege matter is being raised by the Committee on Procedure and Privileges but if it continues the question of the funds will be raised here again.

Mr. Brennan.—I am aware of it because it was on the basis of the privilege issue that it came to my attention. I am certainly not anxious that the Department would be wasting time. Time is money and we have no time to waste. We must not waste the resources we have.

Chairman.—I can appreciate that you might know what the position is, but if the practice continues I will be asking that you be invited back here to explain why because it is not a practice that should be allowed. There is no reason for it whatsoever.

109.Deputy Desmond.—Is it not the position that the Accounting Officer’s hands are tied in that this was a political decision taken in 1973 by the then Minister for Education, Mr. Richard Burke? He directed that all Deputies’ communications should come through his office exclusively and all Ministers, with the notable exception of Deputy John Boland, have persisted in that practice so it is out of your hands.

Mr. Brennan.—It is in my hands to the extent that it passed through my hands the other day and has gone on to another pair of hands.*

Deputy. Desmond.—We would like to untie the ministerial knot but this is a political matter.

110.Chairman.—It is being approached on two levels. Paragraph 30 of the Report of the Comptroller and Auditor General reads:—

I referred in paragraph 37 of my 1981 Report to the loss to the Department of Education of European Social Fund Aid in respect of courses of training provided by VECs because the estimates submitted to the EEC and used by it to determine the maximum amount of aid payable proved to be considerably less than the actual expenditure incurred. In the course of a recent audit it was noted that, because the estimates submitted to the EEC in respect of CERT craft and management courses provided by VECs in the years 1979/80 to 1982/83 inclusive, were less than the actual costs of the courses, the Department suffered a loss of European Social Fund aid of some £382,500.

It was also noted that there was a considerable variation (ranging from £331 to £1,522 in 1979/80; £627 to £1,791 in 1980/81; £620 to £2,751 in 1981/82 and £1,086 to £2,531 in 1982/83( in the per capita costs of the courses provided by the seven VECs involved.

I have asked the Accounting Officer why the estimated costs on which claims were based were consistently less than the actual costs with the consequent loss of aid and why there should be such a wide variation in the VECs per capita costs of the courses. I also asked whether the loss of aid had been reported to the Department of Finance and sanction for write-off sought.

Mr. McDonnell.—This paragraph, which details a loss of aid from the European Social Fund on certain training programmes, is concerned with the repeated underestimating of the costs of such programmes with the result that amounts claimed from the ESF were being understated. In 1981 I reported a loss of aid of about £150,000. As noted in the paragraph the 1985 audit revealed a further loss of £382,500 for the years 1979–80 to 1982–83. I was also concerned about the wide variation in the per capita costs of the courses across the seven VEC’s whose courses qualified for this aid. The Accounting Officer has informed me that, as it was necessary in accordance with ESF regulations to submit aid applications by September of the year preceding the commencement of programmes, estimated costs were necessarily based on historical data without access to the financial data of the year immediately preceding the programmes. He went on to say that as the period in question was one of high inflation and escalating pay costs it was difficult to estimate the likely costs two years in advance.

In regard to the variations in costs between one VEC and another, the accounting officer stated that this may have been due to differing interpretations of procedures and/or different levels of fixed costs. He said his Department were concerned about such variations and had held discussions with the VECs about them but that acute staff shortages made it difficult to audit all VECs participating in ESF programmes and that spot checks had been made. Department of Finance sanction has recently been accorded for the write-off of the £382,500 in lost ESF aid on the understanding that procedures are now in place, in the Department of Education, which will prevent a recurrence of similar losses.

111.Deputy Naughten.—First, it is unfortunate that we should be losing out on aid from the EC under whatever heading. I find it difficult to understand why we should have lost to this extent on these particular programmes. Secondly, why did the Department of Education allow such a gigantic variation from £331 to £1,522 in 1979–80? The gap closed somewhat in 1980–81 and widened again in 1982–83. Surely somebody in the Department must have responsibility for supervising those applications for grant assistance. I find it difficult to understand how there could be such a huge variation.

Mr. Brennan.—I cannot say I am very happy about the situation. We cannot afford to lose time or money at any time. At present it is even more necessary than ever that we collect everything that could come to us. I am not trying to make a point of this but we are speaking of a “technical loss” whereas the Comptroller and Auditor General refers to “a loss”. The money did not come to us, that is a loss; it is technical in the sense that we never had it, we could have claimed it if we had the proper information on which to present our case. One thing that occurred to me in looking at this scene generally and I found it very complicated was that if you understated your claim, the people in Brussels would not accept a revised claim. So the obvious thing to do was to seek to ensure that there was no possibility that you claimed less than was your due. Something approaching that has been adopted in recent times. You mentioned the unit cost variation. The unit cost variation is extreme. I find it very hard to account for it but there are a number of factors which affect it. I have a note here which details these factors. You are making a comparison between Dublin, which had the lowest unit cost in every year for which I had the figures, and Waterford, possibly.

Deputy Naughten.—The figures in the Comptroller and Auditor General’s report quote £331 to £1,522 in 1979–80.

Mr. Brennan.—Dublin has the lowest. Anyone here from Dublin can take a bow in that regard. The factors that can cause this variation may be quite acceptable if fully explained. Depending on the size of the college, administrative costs naturally are more economically spread; the larger the college the greater the economy of scale. There is also a question of the type of teachers employed on courses, full-time or part-time staff. Part time teachers cost less. I do not want to make a point of that, but it is a fact. The size of the class groups is a factor. Each group irrespective of size would require the same staff resources. You can have very large classes or very small classes. The trainee teacher ratio would have an effect. Some colleges have a more favourable teaching complement than others and teaching costs are therefore higher. In the Comptroller and Auditor General’s report he referred to the possibility of fixed costs varying. That applies in respect of the age of buildings and depreciation whether it applies over 25 years or over 6 years or whether it applies at all. If the buildings were in existence before the scheme came into operation no depreciation at all is allowed. Depending on the time in which they were built you may have depreciation in respect of a six year or a 25 year basis. That would be a factor. The amount, type and age of equipment for depreciation purposes determine whether the write down period is one or six years. The type of trainee would also affect the unit costs. These are the factors. A detailed examination would establish to what extent each particular factor is relevant. A detailed examination would establish how it happens that you have a unit cost of £331 in one case and £1,500 odd in another. We have not been able to carry out that sort of investigation although it is something that has been afoot because VECs generally have been arguing about the moneys we give to them for what is called that discretionary non-pay provisions. The argument centres upon the wide variation between unit costs in one area and another. It is something we are concerned about. A reference was made to the fact that a consultative council was set up under the 1930 Act to consider various issues which exercise the minds of VECs and of the Department jointly. I have to admit that that committee has not been very active of late. We were hoping that the unit cost exercise would come under their purview. At the same time, within the Department we have had a management cost accountant operating in this area and hopefully something will turn up from that. I have read a lot of literature on this over the last few days and it did not really enlighten me a great deal. The main point of enlightenment that was made was that the staffing of the section concerned is so restricted that they find it very difficult to do anything other than present the claims in the ordinary way on the basis of the information presented to them by VECs. We are largely in the hands of the VECs in presenting the claims. There is no doubt — I am sure you would all concur — that presenting a claim this year in September 1987 in respect of the amount you would hope to claim in respect of courses to be run in the school year 1988–89 does present a certain amount of difficulty. The answer is to take that factor into account in making your claim and make sure that you are not caught with your pants down. It seems a somewhat ridiculous situation that the people in Brussels may accept a claim which proves to have been over-estimated but refuse to accept that a claim that is presented in good faith as an accurate claim and should be revised.

Chairman.—May I draw a matter to your attention before Deputy Naughten resumes? For instance in 1981–82, in the city of Dublin the CERT course cost £620 but in the city of Waterford the same course cost £2,751. When that variation came to light in your Department, did nobody in your Department say: “something could be wrong here; perhaps the Dublin claim was not sufficient or we are under claiming in Brussels and therefore there is a large loss to the State because we are not claiming?” There is such a variation for the same course. In both cases the numbers attending the courses in that case may not be a good one. Let me give you another example where the figures are comparable. In the city of Dublin in 1979–80 the course cost £331 but in the town of Galway it cost £1,522. That must have caused alarm bells to ring in your Department. There must be somebody examining these things and saying: “Look, there is something wrong”. It looks as if the city of Dublin VEC were not building into their costs, for a number of years things for which they were entitled to claim. How could that go unnoticed?

Mr. Brennan.—I do not believe it went unnoticed at all. Noticing it is one thing and doing something about it is another. The main issue that concerns the people in that section who see this coming in and see the unit cost figures in detail set out before them is to further that claim so that we get the money in. Of course, it occurs to them that something could be wrong but to follow it up is a time consuming operation. I have had reports and I could not guarantee even in the presence of the Department of Finance officials that something like this will be absolutely rectified this year or next year but I can say that we are bringing some improvements into operation all the time. We have a mini-computer installed in the area and it meant, and it was announced publicly yesterday, the receipt this year of ESF moneys which might not have been expected to come until next year in the ordinary way. It was very welcome. It was a Christmas gift from Brussels. The main reason for that was that the computer operation now enables claims to be speeded up and presented maybe two months in advance of the time in which that might have been done otherwise.

112.Deputy Naughten.—Listening to the Accounting Officer explain the different elements of cost I still cannot accept in any circumstances that the elements outlined by him could make up for this gigantic difference between £331 and £1,522. With all due respect the Department were naive in the extreme in allowing that variation of claims. There had to be some explanation. I take the point that your staff may be over taxed to a degree but after all there could be only approximately 40 claims. There are 40 VECs or thereabouts who would be claiming this particular grant.

Chairman.—I think there are only seven VECs involved in the CERT course. Is that all?

Mr. Brennan.—That is right but there are about 19 or 20 ESF aided programmes altogether, some of them commanding a great amount of interest and some commanding much less. Some involve large numbers of students and others small numbers. I am not happy with the situation either. As it has been represented to me, the main difficulty has been the difficulty of following up on this issue. It is just possible that Dublin was understating its case and that we should be claiming more, or it is possible that Waterford were overstating their case and that we have been claiming more than we should.

Deputy Naughten.—After the second year of this happening, was it not time for somebody in the Department to examine why there was such a gigantic variation in the costs? I put it to you that whoever was in charge of that in the Department was failing in his duty by not doing that in my opinion.

Mr. Brennan.—I was not in charge in 1981. I could not claim, however, that I am relieved of responsibility at present because finally it does come down to this. We have the embargo, we have restrictions in staffing and we have every area crying out for extra help. You might say that the only way this could be attended to, given the staffing that applies to that area, is to put other staff in there from an area which would have less important demands upon it. That is not an easy thing to achieve in administration or in Government.

Deputy Naughten.—In fairness we are not talking about a huge amount of work by any standards. We are talking about a simple explanation as to why a particular type of course cost so much more to run in one city than in another. In fairness we have not got an explanation. I know you have pointed out certain aspects of costs which of course would all be relevant, but they could not possibly make up for the huge difference that we see here before us.

Mr. Brennan.—I accept that I cannot demonstrate that it would, but there must be some reasons of that kind which bring about the situation which we are presented with. I am not happy about it. We have had various discussions within the Department on two areas of concern — where it is clear that extra staffing resources are required. One is the area of superannuation schemes which have not yet been properly brought up-to-date. We are trying to catch up on that. We have put extra staff into it. This other area, that of unit costs in ESF aided programmes is one that I have brought up myself in the Department. We have to do something about it because I fully recognise that I cannot be coming back here year after year explaining that we still do not know why the unit costs are different in one area from another. Work is being done on it. A cost accountant has been assigned to undertake some investigation of this issue. I can only hope that I will have something better to report this time next year.

Deputy Naughten.—I think that we should defer making a final decision on this paragraph until we get more information. We are entitled to more information as to exactly why there is such a gigantic variation in cost. Was there a mistake in under-claiming, or was there a mistake in over-claiming, or what? We are entitled to know?

113.Deputy Colley.—I realise that the situation is not very clear, but perhaps the Accounting Officer could say whether the per capita costs are established on the basis of a directive that comes out from the Department at any stage?

Mr. Brennan.—I understand that the basis for calculating these costs is laid down in a formula supplied by Brussels. They have not challenged any claims presented on the basis of the unit costs being astray in any way, but the claims are supposed to be dealt with strictly in accordance with that formula. If we have to come back to the committee with that formula, we can present details of it to you.

Deputy Colley.—It would seem likely that there is difference in the interpretation of the application of that formula and that that is partly what is at fault. You did mention earlier on that there was not a loss in that it was money that we never saw so we did not lose it, but I would have to say that presumably it was built into the Estimates for those given years and Ireland Inc. suffered a loss. The Department may not have seen the money but they had depended on the fact that they were going to get £382,500 more than they did.

Mr. Brennan.—I do not think that the Estimates would have been set astray. As it turns out on balance, the cases where we got more than had been estimated for would outweigh those cases in which we got less than was estimated for.

Deputy Colley.—There is a final point, which has come up about twice or three times on this paragraph, about the staff embargo and the difficulties it places on Government Departments, which I can readily understand. I would like to ask the Accounting Officer what procedures, if any, he can follow in order to go about obtaining staff on a redeployment basis from other Departments. It appears that if there are staff who become redundant or become unnecessary in other Departments, there does not seem to be a co-ordinated way — and I have made a lot of inquiries on this in the last couple of months to the Minister for Finance — in which staff can be shifted around the public service. This Department seems in many instances to be in difficulties because of that.

Mr. Brennan.—It is fair to say that we are in considerable difficulty. It is fair to say, too, that that has been recognised in the past by the DPS and currently by the Department of Finance and there has been some redeployment. I do not like to say that the Department of Finance have staff surplus to their requirements, but they have been good enough to accommodate us to a certain extent in recent times with a few heads of staff and they are being put to work in the areas where we consider they can serve the greatest needs in our Department.

Deputy Colley.—Is it strictly from the Department of Finance that these people are coming?

Mr. Brennan.—I should explain this and I do not think that I am letting the cat out of the bag. If you are an Accounting Officer in the Department of Education and you go around to the various principals and you say to them: “I want an honest, candid statement of the situation in your area. I know that John Smith is very heavily employed as is Jim Browne and that Declan Brennan is crucified, but how about the other fellows? Surely there must be some flexibility there, some slack?” With the utmost candour I will be told that there is absolutely no slack here and this would apply no matter who is Accounting Officer in the Department of Education, or in any other Department. It is a convention in every Department that you hold on to what you have because you never know when you will need it. I have tried to shake loose that particular idea and to suggest that where we do redeploy people from a section that section will have an immediate call on them when they can demonstrate that they need those people again. Redeployment was referred to long ago by an official of the Department of Finance in a memorandum as the painful art of redeployment. It is very painful.

Deputy Colley.—Could I make a suggestion? There are obviously programmes which have been discounted throughout the public service. There are definitely staff who were working on those programmes. There is no procedure in the public service now whereby those staff are being identified and a list being made of areas in various Departments where staff are needed. I am convinced that this is not happening and as a result we find 90 civil servants in the Department of Agriculture and Food wandering around the place and other Departments who definitely have staff over and above their needs and they are not giving them up because there is not a system of identifying them.

Mr. Brennan.—I am not sure that I should be answering this because it is a problem that has been exercising the minds of the Department of Finance and the Department of the Public Service over a long period. Each Department’s staff are monitored and examined very carefully by the Department of Finance, as they are now, each year at Estimate time and you have to demonstrate the need for the staff. If you cannot, your provision will be reduced and the staff will be redeployed. The Department of Finance are taking an overall interest in this to ensure that, if a scheme is abandoned, the staff concerned may be redeployed elsewhere. But there is the other side to the coin. Where a Department are asked to take on a new scheme, they may take on the scheme only on the basis, as they would represent to their Minister, that they have no option but to forego another scheme. You do not necessarily see a scheme being wrapped up simply because it is a bad scheme. It is a lesser scheme, it rates less in importance and than the new scheme which is being introduced and that may mean that the staff already are gobbled up for the new scheme which is now favoured by the Minister.

Deputy Colley.—I do not want it to appear that I am looking for the full information on the public service from this Accounting Officer, but I want to know what procedures the Accounting Officer in his situation follows in order to get staff from other Departments. I do not mean from within your own Department.

Mr. Brennan.—We would not go to other Departments as a rule but if we heard that other Departments were calling out to be relieved of the extra burden they were carrying with surplus heads of staff, certainly I would be inclined to approach that Department. But mainly we would look to the Department of Finance, who would be co-ordinating the issue and we would be putting in our claim.

114Deputy Naughten.—I would like to hear the views of the Department of Finance on the question put by Deputy Colley, because it is very relevant. It has surfaced here on a number of occasions today about the shortage of staff in this and in other Departments as well. While, as Deputy Colley points out, there are staff employed by the Department of Finance who have had nowhere to work for the last six or eight months. They turn in for work, they get their cheques every month and at time they begin to wonder what Departments are involved.

Mr. Gallagher.—The question of redeployment is something we have been dealing with over the years. It is nothing particularly new to us. Deputy Desmond can confirm from his time in office that there was substantial redeployment from various areas of the Civil Service into the Department of Social Welfare which at that period was a priority. During the lifetime of the last Government we had requests for additional staff for the particular section in the Department of Education now in question. We felt at that time that, if this area was a priority area, there were particular posts elsewhere in the Department that could have been sacrificed to deal with this problem. I understand that the matter was taken up subsequently at political level and left there. At the moment we are, as Deputy Colley suggested, making lists of staff available for redeployment as programmes end, and we have been shifting staff. We have had problems, for instance, with driver testing and we have used staff on that work who were engaged in building inspections which now have been terminated. We have a problem in relation to the staff mentioned by Deputy Colley in the Department of Agriculture and Food who had previously worked on farm tax. There are a couple of related problems there. We have made arrangements to redeploy a certain number of them. It has been complicated by the fact that the particular officers have very strong views on where they would work and I understand that they are also threatening legal action. Generally speaking, where we see a staff surplus and we are aware of other places staff are wanted, we do this sort of tangling and try to bring the two parties together pretty quickly.

115.Deputy Desmond.—Would Mr. Gallagher confirm that it would have been far more cost effective to offer redeployment, and persistent redeployment, to the 900 staff who are leaving the public service this year at a cost of £10 million, to redeploy them into, for instance, Education, ESF section, rather than to have the current spectacle of 900 of them going off with lump sum payments and seven added years for pension?

Mr. Gallagher.—That is a policy matter, Deputy. I do not think this is the place for my personal reaction to that one. I think arrangements have been made to give the Deputy an opportunity to air his views on that in another place in the next day or two.

Chairman.—We have covered this matter in some detail and Deputy Naughten has suggested that we get further information on it. Deputy Desmond indicated that he wanted to speak earlier. Have you finished now?

Deputy Desmond.—Briefly, on the ESF could you give us some indication of how many staff are actually employed in the 1985 £30 million exercise? Who is it headed by?

Mr. Brennan.—When I get a report on the matter, I get it at Assistant Principal level. The colleges section deal with the main programmes that are involved.

Mr. Brennan.—Yes. He has a principal, of course, and there is an assistant secretary with overall responsibility but the Assistant Principal is the person mainly involved.

Deputy Desmond.—An Assistant Principal would not have the competence to assess each application in terms of whether it was going to claim an enlarged amount, or should claim an additional amount, or the models of each claim. Surely his or her basic function is to simply transmit it to the Department of Labour to make the claim or to go ahead?

Mr. Brennan.—I will make a few comments on that. The first is that I do not think competence is a function of the grade in which you find yourself. I would have the utmost confidence in the competence of this officer and he would be the ideal man to carry out the exercise of examining the problems caused by the variation in unit costs, if he had time at his disposal. That is a real problem. I have a note here which I hope will give some reassurance to the committee. In preparation for the ESF audit, an analysis of expenditure for 1986 — this relates to the middle level technician programme — by college and expenditure heading was completed for the programme. That is the major ESF programme in the colleges and areas of variation have been identified. It is now intended to follow up this analysis by seeking reasons for the variations involving the spot checks, where necessary. We have had on the spot checks before and I inquired what they had achieved. Apparently, they were very useful. Again, it was a question of the staff you could afford. We could not have comprehensive checks but the on the spot checks proved useful. They were more or less random checks. Something similar is intended to be undertaken when this analysis is available. The reasons for the variations which the analysis will throw up are intended to be followed up. There is no question of my treating these issues slightly. It is a matter of great concern to me. I realise how important it is. I realise we should be getting all that money in. I do not mean to diminish the concern and the anxiety it presents to me, but the fact is that in relative terms, over the period during which we have been running these programmes we have collected a total of £115 million from the EC. The total additional money that we have not got is considerable. It is less than 1 per cent; when you put it that way it sounds small but, in fact, it is of the order of £900,000.

Chairman.—This is referred to in the Comptroller and Auditor General’s 1985 report. You were aware that you were coming here this morning and it would not be too much to anticipate that you might have come here this morning with specific proposals as to how these variations would be eliminated in future and with explanations as to how they arose in the past.

Deputy Desmond.—All I can say is that the practice indulged in by the Accounting Officer pales into insignificance in relation to the practice indulged in by other Accounting Officers at all levels in terms of ESF claims and to that extent the Department are quite exceptional. What is the windfall for 1987, the additionality from ESF moneys?

Mr. Brennan.—I am told that it mainly represents money that would have been due in 1986 and did not come. It came this year but, in addition to that, moneys that are due in respect of—

Deputy Desmond.—Am I to believe that this year your EC estimated receipts will have a surplus, or an additionality, of £18 million and that your pay vote for 1987 is £12 million underspent, a total of £30 million extra money in the Department of Education in 1987? Is that true?

Mr. Brennan.—Of the £18 million, I am told that £12 million will go out immediately on deferred grants. We would have had to wait for it. We would not have disbursed the grants until the money came in. We have a net gain there of £6 million.

Deputy Desmond.—Plus £12 million unpaid? Your pay vote this year is £12 million.

Mr. Brennan.—The £12 million was made up of a number of factors. Some of it was apparently youth employment levy moneys that came in a certain way—

Deputy Desmond.—Surely the Minister must be doing an Irish jig at the moment, having £18 million surplus money in her Education Vote for 1987?

Mr. Brennan.—The only people who would be doing this jig at the present time are the people in the Department of Finance who are going to get the surplus money at the end of the year.

Deputy Desmond.—Would not those who are currently demonstrating throughout the country be aghast to know what the Department of Education are flush with money at the end of 1987?

Chairman.—We will have to come back to this. It is time we brought it to a conclusion.

116.Deputy Crotty.—I want to know generally what is covered by the certificate in these courses which are funded from the European Social Fund?

Mr. Brennan.—The two main courses are the middle level technician course run by the regional technical colleges and the vocational preparation and training programme course which started off being run solely in vocational schools but has now spread to a great number of secondary schools, perhaps the majority of secondary schools.

Mr. Brennan.—The courses are all funded by the ESF on the basis that they represent preparation for work. In the regional colleges, certificates are given as a result of this which demonstrate that people now have the competence to take on certain specific duties in the world of work. That is the purpose of the courses.

Deputy Crotty.—Do they learn any particular disciplines under CERT? I am referring to CERT particularly.

Mr. Brennan.—I am sorry, Deputy. You want to know in respect of CERT what specifically the people doing CERT courses are taught and what jobs they can take up?

Deputy Crotty.—Yes. I would think it is in relation to catering, hotel management and that type of operation.

Mr. Brennan.—That is the function of CERT, generally. If you are looking for precise details, I have not got them here but I will be glad to let you know.

Deputy Crotty.—You would be involved in the formulation of policy in relation to the numbers of places and so on?

Deputy Crotty.—It is the one area where there is a great shortage of qualified people at every level. I mentioned at Question Time in the Dáil last week that even the employment agencies are advertising for people in the catering world to put their names on their books. They just have no names and they are going to the expense of advertising looking for people to come along and put their names down because there are so many people looking for their services. This does not add up when you have hundreds of thousands of people going to the labour exchanges and the Manpower offices weekly, looking for employment. I have personal knowledge of this. I am involved in it and I know it is impossible to get any qualified person in the chef or confectioner area at the moment. I think you should be concerned about this and take whatever action is necessary to expand the training of people in these disciplines.

Mr. Brennan.—I would certainly concur with the Deputy’s remarks. I think, looking at it from a different side, the most heartening feature of the educational scene at present is the success that has attended all of these courses. I know how difficult it is to get into the College of Catering in Dublin, the College of Catering in Killybegs, Athlone and different places, all of which can practically guarantee places for the students who qualify. That is heartening. Then you might say that we should try to do something further about it and expand the numbers involved. I agree with that.

Deputy Crotty.—I would like to make one remark. It may have been just a slip of the tongue by the Accounting Officer in relation to the funds not collected. He mentioned to Deputy Naughten that it was technical loss; it was not really money lost. I would be concerned about that type of remark and that type of attitude. I think the money should have been in your hands and in my estimation there is no case of it being technical.

Mr. Brennan.—May I say this. I did say that the Comptroller and Auditor General sees it as a loss and the Department would term it a technical loss. I would not see any difference between them. I share the Deputy’s concern that we get our hands on the money. It is real money as far as I am concerned.

117.Deputy Desmond.—Could the Accounting Officer give us some indication as to the vote moneys for 1985 onwards of Carysfort training college? How do we stand in terms of that particular situation?

Deputy Desmond.—And there will not be a departmental allocation for 1987 or 1988?

Deputy Desmond.—Are you finishing everything today? Are you not resuming the Accounting Officer’s examination?

Chairman.—The Deputy will get an opportunity to raise it in just a couple of moments. Deputy Naughten wants to put a proposal on how we deal with this Vote.

118.Deputy Naughten.—I propose that we come back to this paragraph again when we have further information. I understand that the Accounting Officer said he was carrying out an investigation as to how those courses were costed.

Mr. Brennan.—I was referring in particular to the main source of revenue from Brussels which concerns the middle level technician course.

Deputy Naughten.—I would like to have further information as to how those courses are costed because I cannot understand for the life of me how it costs £1,200 more to educate a student in Galway or Waterford than it does in Dublin. I do not honestly see any logical explanation for it. I want further information on it. I think we should recall the Accounting Officer at an early date in the New Year to further discuss this paragraph to find out if that trend is still continuing which has been reflected here in the four years mentioned by the Comptroller and Auditor General.

Mr. Brennan.—As I said earlier, I am not happy about the situation regarding the unit cost variations. I am not in a position to give any clearcut outline of the specific factors that led to the variations in the area referred to by Deputy Naughten. I have undertaken to see what I can do but I am certain that very early in the New Year would not give us much time to carry out the type of detailed analysis that is required here. It is a time consuming task. It consumes the time of a lot of staff and we would have to find the staff to do it. I want to be as helpful as I possibly can.

119.Chairman.—I want to say that I could understand that you would not have that information available if we were taking this out of the Vote but you have been given plenty of notice that this particular item was coming up today. It would not be unreasonable to suggest that you should have come well briefed on this issue. It is not often suggested that we recall an Accounting Officer. I know you may have been under pressure in recent times because of particular problems in the Department of Education but other Accounting Officers come briefed and we expect them to have the answer. It seems to me since the Comptroller and Auditor General picked it out that it would not be reasonable to suggest that you might have come prepared. It would be a bit harsh to suggest at this stage that we recall the Accounting Officer. Perhaps we should get his report and then decide whether we need to recall him. He will be coming back on the 1986 accounts soon and we may be able to deal with it at that stage. Could he leave a decision on recalling until we see the report? Is that agreed?

Deputy Crotty.—I would be a bit concerned that this is going on since 1979–80 and that is eight years. It would seem to have been put on the long finger.

Deputy Desmond.—It is not the Accounting Officer we should recall but some of the VECs.

Deputy Crotty.—Unfortunately the Accounting Officer is responsible for the VECs. I would not mind having the whole lot of the VECs here and asking them why their costs are six times more than someone else’s. That is not our function.

Deputy Crotty.—It went on for eight years. I do not want to be hard on the Accounting Officer but I think he has to take the responsibility. This has been going on for eight years and it has not been dealt with over that time.

Chairman.—In the past we have decided to call people directly from the health boards and, if necessary, we can call people directly from the VECs but could we get the report first and then we will decide how to proceed from there?

Deputy Desmond.—We must be very careful about suggesting that an Accounting Officer should inflate claims for Brussels. The proceedings of this Committee will be read in Brussels as our colleagues from the Department of Finance know only too well. We have to be very careful now. Our Accounting Officer is acting with propriety and we are not going to claim moneys which are not being expended and sought at local level. If they put up a Mickey Mouse ESF course in Kiltimagh or wherever, that is the money that they will get back.

Chairman.—Lest that line get out in the newspapers, the expression of concern is that for similar numbers attending a course in Dublin and Galway the Dublin numbers have been under-costed for a number of years and only in recent years have started to come up to somewhere near the level of the others. Unfortunately Mr. Brennan is cast statutorily in the role of Accounting Officer. He may not have been personally involved.

Deputy Naughten.—Let us put it on record. Far be it from me or any other member of this committee to suggest that we should be sending in inflated claims. What I have expressed concern about is that for a long number of years the cost of carrying out this course in Galway and Waterford was £1,200 greater than in Dublin.

Chairman.—Would Mr. Brennan let us have a further report on this and we will decide at that stage how we will proceed?*

VOTE 33—SPECIAL SCHOOLS

Mr. Brennan further examined.

120.Chairman.—Paragraph 31 of the Report of the Comptroller and Auditor General reads:

Subhead D.—Building and Equipment Grants

A training school for boys in detention, Scoil Ard Mhuire, owned and equipped by the Department of Education, and which formed part of Oberstown Youth Centre, Co. Dublin, was closed with effect from 1 September 1985 following a review of existing residential provision for boys in open settings.

In the course of a local audit at the Centre in February 1986 it was noted that a large number of items of equipment, furniture, fixtures and fittings were still in the school and that the physical condition of both the building and its contents had deteriorated and had been subjected to vandalism.

I have asked the Accounting Officer for information as to the value of equipment, furniture, fixtures and fittings in Scoil Ard Mhuire and what steps have been taken to protect the building and its contents.

Mr. McDonnell.—What I am concerned with in this paragraph was that the Department should adequately protect their assets, in this case buildings and equipment. The buildings had cost over £1/2 million to build in 1970 and about £350,000 had been spent on renovations between 1981 and 1985. The Accounting Officer has since told me that when the school closed in 1985 much of the equipment orginally acquired for it was distributed to other aeas of special education and that the cost of what was left was £19,500 with a present value of only about £2,400. He also said that the board of management of Trinity House School which is also part of the Oberstown Youth Centre is responsible for the care of the school since it closed and that the buildings are regularly checked and had been repaired and made more secure. Finally he said that, although a local national school had been authorised to use the premises temporarily for one year, the Department have no long term plans for its use and no other Departments have expressed an interest in it.

Chairman.—What is the building being used for at present? Is it still vacant?

Mr. Brennan.—Since September it has been occupied by Balrothery national school as their own building is undergoing reconstruction.

Chairman.—There are eight buildings on the site. Are they occupying the whole of the site?

Mr. Brennan.—They have tried to interest other Departments. For a while some interest was expressed by the Department of Justice but this is not a security building unlike its neighbour building, Trinity House, on the same campus. The Department of Justice’s interest evaporated and now it is a question of going on the open market. We are not saying it has to be the open market. If there was any interest shown by any Government agency we would be very happy to accommodate them. Where it is, it may not command a great price.

121.Deputy Naughten.—What I cannot understand is why in a situation like that, when the Department of Education finished with that building in 1985 or ceased to use it for the purpose for which it was being used prior to that, they did not dispose of it. Why should the onus be on you to seek out if other Government Departments wanted it? If they wanted it, was the onus not on them to contact you with regard to either leasing it or purchasing it? It is a State asset lying there unused and falling into disrepair.

Mr. Brennan.—I do not believe it is falling into disrepair at his time. The question of vandalism has been raised. There was a series of separate incidents but the vandalism was a very small portion of it. The total cost of repairing the damage done by the vandals amounted to less than £100. That is of no account at all. The Department would still be very happy to get the building off their hands at any time once they decided they no longer had any further relevant use for it. I do not think it was unreasonable to think first of all of the needs of other Government Departments and other State agencies. There seemed at the time a live prospect that the Department of Justice’s interest in it would come to something. Even if we had been very active, it is hard to see how it might have been disposed of effectively. You do not want to give it away; you want to get value for money particularly as it is the taxpayers’ investment. I do not want to say what I think will ultimately be the case but we will be trying to get rid of it.

Chairman.—There is not much to be said about this except that obviously the Committee would not like it to become derelict and unsaleable. It is an asset which we hope will be realised.

122.Deputy Colley.—Is there any consideration being given to opening such an institution again? My understanding is that it was alone in being a detention centre which was not a secure one and when it was closed there was nothing to replace it except prison-type accommodation like Trinity House. Would it be the case that the Department might, in fact, consider in the future reopening such a detention centre?

Mr. Brennan.—The present wisdom of the Department, as reported to me, would not be in favour of that course. They feel it is no longer a project that they would be interested in promoting. They feel that there are better ways of dealing with the problem presented by the type of inmates who would have been at Scoil Ard Mhuire and that it is better to organise this on a local basis. They are satisfied that that is working out satisfactorily. There will always be a need unfortunately for the more secure type of establishment as far as one can foresee.

VOTE 30—OFFICE OF THE MINISTER FOR EDUCATION

Mr. Brennan further examined

123.Deputy Desmond.—With regard to the Colleges of Education, I notice that Thomond is under D.6. but I am particularly interested in Carysfort. Could you give an update on that particular situation?

Mr. Brennan.—The position about Carysfort is that provision will have to be made for the costs arising in running the college up to the end of the academic year.

Mr. Brennan.—I cannot answer that very effectively but I would say that almost any area could be under review nowadays, not under threat but under review. The need for the products of any institution of this kind will have to be considered. I would be afraid that my words would be taken to indicate that there was a threat.

Deputy Desmond.—I am not anxious to put you in that position. There is a lot of concern that with the demise of Carysfort, St. Patrick’s might be next.

124.Deputy Colley.—May I ask Mr. Brennan concerning C.1. — higher education grants — why there should be a shortfall in expenditure in terms of the higher education grants of £531,000. It would seem that if £14.1 million are allocated it should be used for the students.

Mr. Brennan.—The scheme is administered by the local authorities and they recoup the cost of the grants one year in arrears. I was told that the saving was due to the number of grant holders being down. There are very specific conditions applying to the awarding of grants such as means testing and qualifications, and achievements in the Leaving Certificate. I cannot account for the number of grant holders being down except that a lesser number of those who are eligible and who qualified became available.

Deputy Colley.—Are we saying that within the constraints of the rules that there are not enough students in the country to take up £14.1 million in grants, or there were not in that year?

Mr. Brennan.—It is simply a case of the estimate being an estimate, the £14.131 million; the expenditure is the real figure. We overestimated the number who actually required to have their grants refunded to the local authorities.

Deputy Colley.—If you do allocate £14.131 million the rules should be made so that that full figure is taken up rather than give the money back and that the students should be educated.

Mr. Brennan.—I would not comment on that point of view but the fact is that we are operating a statutory scheme under the provisions laid down in the scheme.

125.Deputy Crotty.—Under B.1. — International Activities — what is generally covered by the £809,000?

Mr. Brennan.—There is a series of items. Expenditure on UNESCO is the main item of expenditure. The European Schools Days competition, the International Apprenticeship competitions involves expenditure of £33,000 and the College of Europe in Bruges gets a provision. There is provision for educational tours for teachers to the USA. That is a very minor contribution of £10,000 towards the overall cost of the tours. We are required by the US authorities to make some contributions. There are international conferences from time to time; the expenditure was very slight in 1985. There was expenditure involved in playing our role in the operation of the European University Institute. There is an EC study visit scheme which covered the cost of 19 education specialists.

126.Deputy Crotty.—Under E.4. — the Royal Irish Academy of Music — there is capital expenditure of £200,000. What was that capital expenditure for?

Mr. Brennan.—There was a grant given over a period of three years for the refurbishment of the academy premises.

127.Deputy Dempsey.—In relation to the higher education grants it seems that there is a certain amount of duplication in the work done in the Department and the work done in the county councils. Why is it necessary when you have a scheme that is approved by the Department, adopted by a county council and administered by the county council that applications approved by the county councils have to be sent back to the Department for further approval. Why is it necessary to go through all that bureaucracy?

Mr. Brennan.—You have a point. It is desirable that all local authorities operate in the same way on a uniform basis. Grants must not be awarded in a cavalier way in any area by comparison with the standards that might be applied in another area.

Deputy Dempsey.—I am not querying the uniformity of the regulations, and they are uniform regulations which have to be approved by the Department, but rather the duplication of the processing of applications. It is done at a local level and then it has to be sent to the Department to be redone and finally approved before the local authority can issue the grants. That is in relation to the higher education grants. The same applies to the VEC grants. If a student applies to his own VEC for the grant you can have the RTC concern to which he is applying involved in it, the VEC to which that RTC applies or is a member of and the Department. There are four different State or Semi-State organisations involved in the processing of VEC grants. It is a useless lot of bureaucracy and I do not see any good reason for it. Perhaps if the Secretary would like time to have a look at it and come back to us with a written note on it, I would be prepared to wait.*

Mr. Brennan.—I do not mind at all, but I can say this much, that I doubt very much that the same process of scrutiny and examination goes on in the Department which goes on in the local authority. When a question comes in about the award of a grant to an individual or why a grant was denied to a particular individual, what is normally said in reply is that it is a function of the local authority to determine eligibility for the grant. We are not concerned with that issue so much as with the broad parameters of the scheme to ensure, for instance, that grants are paid on a uniform basis. There is a different level of grant for a person living close to a university as opposesd to one living elsewhere. It has happened before in the case of a particular local authority, that it was paying the higher rate of grant when it should have paid the lower one.

Chairman.—I think the Deputy’s suggestion to let us have a note on that is worthy and it is something we might want to look at.

128.Deputy Desmond.—On school transport services this year, do you have with you the increase for 1987 in overall charges in school transport? I am trying to relate back to the 1985 Vote. We have spent £31.6 million for the end of 1985. What is the current situation on that Vote?

Mr. Brennan.—I do not have that information here to hand, Deputy, but I can certainly supply it to you. The question concerns the levels of charge as against those applied in 1985, or is it the increases applied in 1987?

Deputy Desmond.—How has it worked out at the moment — the 1987 outturn for charges and the increase in charges that were brought in 1987? How is the system running at the moment?

Mr. Brennan.—I am not quite clear about the thrust of your question. Is it that you are wondering whether we are working out all right?

Mr. Brennan.—Generally, it has been, but in 1985 it has generally been a very close thing to maintain that record.

Deputy Desmond.—What is the situation regarding the school transport fleet? Is it as decrepit as it appears to be?

Mr. Brennan.—It is in pretty bad shape and the Minister has announced her intention to review the entire operation. The whole operation of the service is currently under review.

Chairman.—We will have to note Vote No. 30 and we will move on to primary education, Vote 31.

VOTE 31—PRIMARY EDUCATION

Mr. Brennan further examined.

129.Chairman.—There were incidental expenses, Mr. Brennan. You paid out £41,000 more than granted. What are incidental expenses? I have seen the note. It is all right.

130.Deputy Dempsey.—Could I ask a general question in relation to C5 and you have a similar figure in other cases at second level education. Does the Secretary think that this method of applying capitation grants towards the operating cost of schools is the most efficient use of public money? I am thinking in particular where you have brand new schools getting the same capitation grant as a school that would obviously require more heating, more lighting, more repair generally. Is it the most efficient way of using the money and of financing the running costs of schools?

Mr. Brennan.—Basically, it is arbitrary, but it is fair. What is arbitrary is generally intended to be fair but sometimes it can be unfair in effect and there is a compensatory factor that can be allowed for. In disadvantaged areas where this is clearly inadequate, special provision can be made. That provision is not at all as much as an Accounting Officer in this Department would like it to be but it does serve at least to blunt the effect of the special difficulties in which these schools might find themselves. There is no question at all but that this grant is not what one would like it to be. It is not adequate. It calls for demands to be made by local communities to raise the balance of funds. It may be a very good thing in its way because it gives them a certain pride and interest as a community in their own school.

Deputy Dempsey.—What I am more interested in is, is it a fair way, irrespective of disadvantaged areas, and I presume you are talking about designated disadvantaged areas? I am talking about disadvantaged schools where you have overcrowded classrooms and children in conditions that they should not be in. Would it not be a more efficient and a better way of using money if budgets were submitted by each of these schools and the Department then allocated money on the basis of need rather than on the basis of the number of pupils in a school? I am taking the example of a brand new school where you have no major problem with repairs or maintenance. Your heating costs are likely to be less and so on. That school gets a grant, because it has 200 pupils, of £10,000 or £20,000. A school with the same number of pupils that is 10 or 15 years old, or older still, gets the same amount of money, even though the running costs would be much higher.

Mr. Brennan.—I see two factors, one of which would appeal, maybe, more to the Department of Finance than to ourselves. One is that this is a very economic way of operating the scheme. If you operated on a budget basis you would have to have a section within which the accounts of all 3,200 schools would have to be examined. That would be a time-consuming job. It would call for a heavy input of staff. The other factor — and I do not know if you see this as being relevant — is where a new school is being provided there has been already a very large contribution by the community to that school. Maybe on balance schools are not working out so badly, those that are not new schools.

VOTE 32—POST-PRIMARY EDUCATION

Mr. Brennan further examined.

131.Deputy Colley.—In relation to the expenditure at subheads D.1 and D.2 would I be right in thinking that taken together they represent the equivalent of the capitation grant to primary schools, that is, the running costs of schools?

Mr. Brennan.—That is right. Each school is given a budget for normal running costs other than pay.

Deputy Colley.—The figure there in relation to post primary schools is £114,781 and the figure relating to primary education is £13.3 million. What I have done is added the three figures together.

Deputy Colley.—Subheads C, D1 and D2 I think, in fact, I have added the grant rather than the expenditure, but the global figure is £110 million or thereabouts. It has been pointed out to me here that I have included the RTCs and regional colleges, so we could take out £44 million of that, leaving about £70 million.

Mr. Brennan.—The Deputy is making a comparison between the aggregate of subhead D and subheads D1 and C1 is it, or subhead C generally.

Deputy Colley.—I only have subhead C.I do not have C1. Without going into the figures, what I am trying to do really is ask if the grants to secondary school authorities, together with the comprehensive and community school running cost expenditure, would be equivalent to the type of expenditure that is intended, with capitation grants, towards operating costs of national schools?

Mr. Brennan.—I do not think that the comparison is exactly apt. What I am told is that the figure for the community and comprehensive schools includes pay.

Deputy Colley.—I will not delay on that now. I will do some figures on it myself.

VOTE 33—SPECIAL SCHOOLS

Mr. Brennan further examined.

Deputy Desmond.—Will the Department be making a determined effort to maintain, in particular, transport services for special schools in any change of policy?

Deputy Desmond.—It is, but it is a particular issue on which the Secretary may wish to give some reassurance.

Mr. Brennan.—Generally the position in regard to remedial teachers in special schools has been maintained and I expect the same would apply here.

Deputy Desmond.—I am gravely concerned about the transport facilities for handicapped children for special schools.

Chairman.—I wish the Department would not take such a legalistic view of the nearest school rule, particularly in the Dublin region, because often the difference in distance might be only a half a mile in a different direction, whereas in the country it could mean a considerable distance. Take, for instance, the distance between Islandbridge school and Stewart’s school for somebody living in Crumlin. I have a particular case in mind where the child has an affinity with Stewart’s school but cannot go there because the Department can only transport him to Islandbridge school. The difference in the distance is negligible. I wish the Department were not as strict in their interpretation in the Dublin region, because for that child it is very important.

Mr. Brennan.—I will report what you said and inquire about it but I know that the rules are very strict. The transport scheme costs a lot of money and people sometimes have to be hard without wishing to be hard. They only wish they could be compassionate in that area.

Chairman.—You are aware of the case I mention in relation to Stewart’s and Islandbridge schools. I would appreciate if you would look into that and let me know the outcome.

VOTE 34 — HIGHER EDUCATION

Mr. Brennan further examined.

133.Deputy Desmond.—What are the prospects of the Dublin Dental Hospital, the clinical sciences faculty, going ahead? Has there been any major change in the expenditure pattern for that long-standing project? That is subhead B, the Dublin Dental Hospital grant and, of course, the capital situation impinges substantially on that. I would take the point to the Accounting Officer that that hospital is a grave fire hazard and needs absolute replacement.

Mr. Brennan.—We are very closely aware of the considerations which led to the decision that it should be replaced. Unfortunately, as matters stand there will be no further investment in the replacement of the Dublin Dental College in 1988.

Deputy Desmond.—I have seen reports of the Dublin Fire Brigade. I have inspected the building myself on three separate occasions and it is an absolute hazard, a total fire hazard.

Chairman.—From the point of view of public finance, it is relevant. If there was a fire there and the building or people were damaged, the State would incur a great liability. If there is a fire safety question involved, it is not a policy matter, it is very much a matter which would concern this committee.

Deputy Desmond.—Through the Chair, could I ask that you would convey our representations to the Department of Finance and get the appropriate ministerial view.

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

VOTE 9—OFFICE OF THE REVENUE COMMISSIONERS.

Mr. P. Curran, (Chairman, Revenue Commissioners) called and examined.

134.Chairman.—Good morning, Mr. Curran, you are welcome. Apologies for the delay as we had an unexpected vote in the House. The Committee of Public Accounts is this morning examining the Chairman of the Revenue Commissioners in his capacity as Accounting Officer for that Department. I wish to inform the Committee that a record was set this morning: the 1986 Report of the Comptroller and Auditor General was presented to the House yesterday evening and a motion was moved this morning referring that report to this Committee. It is the first time that has happened and I know the Committee will be delighted with that, because we have really been motoring ahead, getting up-to-date and advancing the work of the Committee. I will call on the Comptroller and Auditor General and, as is usual, we will take paragraphs 12 to 15 together.

Revenue Account

12.An Account showing all revenue received and paid over to the Exchequer by the Revenue Commissioners is furnished to me annually. I am required under Section 2 of the Exchequer and Audit Departments Act, 1921 to carry out such examination as I think fit with respect to the correctness of the sums brought to account and to report to Dáil Éireann on the results of my examination when reporting on the appropriation account for the Office of the Revenue Commissioners. A test examination of the transactions shown in this account has been carried out with generally satisfactory results.

I am also statutorily required to examine the account on behalf of Dáil Éireann in order to ascertain that adequate regulations and procedures have been framed and are being implemented to secure an effective check on the assessment, collection and proper allocation of revenue. The following paragraphs refer to matters arising from this examination.

13.The net yield of Revenue for the years 1985 and 1984 under its main headings is shown in the following statement:—

	1985	1984
	£m	£m
Customs	96.8	94.4
Excise	1,313.9	1,243.5
Estate, etc. duties	0.6	1.0
Stamps	119.5	112.6
Capital Acquisition tax	19.7	18.3
Capital Gains tax	10.2	9.4
Wealth tax	0.2	0.2
Residential Property tax	2.1	1.1
Income tax (including PAYE)	2,105.4	1,967.8
Corporation taxes	217.5	209.6
Value-Added tax	1,388.9	1,374.1
Income levy	74.1	78.0
Agricultural levies	4.3	4.6
	5,353.2*	5,114.6

* Includes £72.6 million duties, taxes and levies deferred under EEC regulations (1984 — £76.7 million). £5,365.4 million was paid into the Exchequer during the year leaving a balance of £77.8 million as compared with £90 million at the end of the previous financial year.

Extra-Statutory Repayments

14.Extra-statutory repayments of Customs duties, £96, Excise duties, £141,959, Value-Added tax, £277,782 and stamp duties, £22,343, were made during the year.

Remissions and Amounts Irrecoverable

15.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 1985.

The total amount of the items included in the schedules, £1,747,433, is made up as follows:—

I have made a test examination of the items included in the schedules with satisfactory results.

Mr. McDonnell.—I think that is the usual practice. Paragraph 12 is an introductory paragraph. It sets out in broad terms my statutory function in relation to the revenue account and the obligations imposed on me by law to see whether adequate regulations and procedures have been set up and are being implemented, to secure an effective check on the assessment, collection and the proper allocation of the revenue. Paragraphs 13 to 15 give the details of the nett yield of revenue under its main headings and of extra-statutory repayments, amounts written off and so on.

Chairman.—Mr. Curran, on No. 14 — Extra-Statutory Repayments — excise duty was £141,000, value-added tax was £277,000. What would that be?

Mr. Curran: Most of those are for things which we would call “relief” under the general heading of “diplomatic privilege”. This would be anything that is excisable. Diplomats have the customary right to relief and this is done by way of extra-statutory repayment. That also would apply to the VAT. It covers, too, things like goods and services purchased by international bodies like EC bodies, the Commission and the Parliament, and bodies like that which have offices here. They are entitled under the convention setting them up to relief and it is done in this manner. It has always been done that way.

Chairman.—With regard to paragraph 15 — Remissions and Amounts Irrecoverable — I notice there is a total amount of £1.7 million there. Under the heading of PAYE there is £577,000. Would they be amounts which you simply have decided are no longer collectable?

Mr. Curran.—That is the basis of passing tax as irrecoverable. We decide for one reason or another than it cannot be collected — where a company director died or a company is in liquidation or whatever.

135.Deputy McCreevy.—This is the first time I met the Chairman of the Revenue Commissioners since his appointment and I wish to congratulate him. In regard to the amounts you collected for wealth tax — as we all know wealth tax was abolished many years ago — as far as I know there is no section within the Revenue Commissioners now for working on the wealth tax area, or at least it is not being pursued.

Mr. Curran.— There is. It is part of what we call the capital tax branch. They follow the remnants of arrears in some of these old taxes which have been abolished, like the wealth tax.

Deputy McCreevy.—Wealth tax was a self-assessment tax at the time if I remember correctly, which applied from 1975, and it was up to the taxpayer to make the return at the time and very few people did this. When the tax was abolished, I imagine all the citizens of Ireland who should have been assessed for wealth tax probably let it go. I wonder if there are cases where people who decided in 1975 to make the return and are now paying it—

Mr. Curran.—No. First of all, just to recall, what we are dealing with is the year 1985. We collected £200,000 in that year. I have not got details of the cases but if the Deputy is interested I can get them. It is winding down arrears of the old tax.

136.Chairman.—I think we could note these paragraphs unless anybody wants to raise anything else on them and move on. We will take together paragraphs 16, 17 and 18 of the Report of the Comptroller and Auditor General. They read as follows:

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, youth employment levy and income levy.

In reading these tables particular attention should be paid to the footnotes, especially to note (b), on Schedule 1.

Tax shown in Schedules 1 and 4 as under appeal does not become due until final determination of the appeal, provided an amount specified by the taxpayer has been paid (The taxpayer may specify that no tax is payable). With regard to the year of account 1985/86, much of the tax shown as outstanding is the subject of appeals made within the normal time limits following the making of assessments.

* While the amounts shown here were not, at 31 May 1986, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

† While, as the schedule shows, the proportion of tax already collected in respect of earlier years is approximately 33% of the original charge, recent experience indicates that the proportion which is likely to be collected untimately in respect of tax still outstanding for those years will not exceed 1/10th of the balance. The amount likely to be collected in respect of the years of account up to and including 1983/84 is £55 million. A higher percentage of the balance outstanding will be collected in respect of the more recent years 1984/85 and 1985/86 and the yield in respect of these two years will probably reach £150 million. It should be noted that the difference between the balance and the estimate of amount likely to be collected is largely accounted for by anticipated reductions of estimated assessments included in the balance.

Income Tax collected under the PAYE system and included in the amount of income tax collected as shown in paragraph 13 amounted to £1,830 million. Arrears outstanding at 31 May 1986 amounted to some £79 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

As end-of-year returns from employers were not due to be furnished until 30 April 1986 there was no significant underpayment established for the year 1985/86 as at 31 May 1986.

The substantial reduction in the net charge and paid figures in years to 1983/84 compared to the corresponding figures shown in the 1984 Schedule is principally due to the fact that older cleared records representing settled accounts up to 1980/81 have been removed from the current file.

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 £1.141 million was collected during 1985. Arrears outstanding at 31 May 1986 amounted to some £97 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

As end-of-year returns from employers were not due to be furnished until 30 April 1986 there was no significant underpayment established for the year 1985/86 as at 31 May 1986.

	Year of Account
	All years to 1983/84	1984/85	1985/86
	£m	£m	£m
3.Under demand	41	22	131
4.Awaiting transfer to enforcement	67	15	8
5.Under enforcement	21	6	2
6.Arrears Branch	22	2	—
Estimate of amount likely to be collected †	30	25	125

(a)* While the amounts shown here were not, at 31 May 1986, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

(b)† See note (b) on Schedule 1 (Income Tax) regarding the estimate of the amounts likely to be collected. The amount of Corporation Tax likely to be collected in respect of the years of account up to and including 1983/84 is £30 million and the yield in respect of the two years 1984/85 and 1985/86 is likely to reach £150 million.

† See note (b) on Schedule 1 (Income Tax) regarding the estimate of the amounts likely to be collected. The amount likely to be collected in respect of the years of account up to and including 1983/84 is £6 million and the yield in respect of the two years 1984/85 and 1985/86 is likely to reach £6 million also.

Schedule 7—Surtax, Corporation Profits Tax and Wealth Tax (as at 31 May, 1986)

Schedule 8—Health Contributions, Youth Employment Levy and Income Levy (self employed individuals and individuals with investment income only.) (as at 31 May, 1986)

(a)The following schedule shows the position as at 31 May 1986 of VAT liabilities | declared and payments made on foot of returns sumitted by traders.

3.Under demand	18.1	12.2	16.8
4.Awaiting transfer to enforcement	0.2	—	—
5.Under enforcement	25.5	14.6	10.7
6.Arrears branch	2.7	1.0	0.4
Estimate of the amount likely to be collected *	29.0	28.0	35.0

* The balance outstanding in the years to 1983 includes a large element due in cases in liquidation/receivership and it is likely that little of this will be recovered. There are also amounts due from other companies and individuals that have ceased to trade, many some considerable time ago and in these cases the prospect of recovery is not good. The estimate of the amount of the balance likely to be collected takes these factors into consideration.

(b)Section 23 of the Value-Added-Tax Act, 1972, as amended, provides that where the Revenue Commissioners have reason to believe that a person when submitting his return understates his VAT liability or obtains an excess VAT repayment or where a person fails to register for VAT they may estimate the amount of VAT due. The following schedule shows the position of such estimates as at 31 May 1986.

(a)Estimates: Estimates raised by the Inspectors of Taxes represent gross liability and will therefore include amounts accounted for on any return already submitted for the period covered by such estimate.

(b)Paid: Includes tax paid before the estimate was raised as well as amounts paid subsequently.

(c)The following schedule shows the position as at 31 May 1986 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 payment. While the returns remain outstanding it is not possible to quantify the liability other than by the process of making estimates.

	All Years to 1983	1984	1985
	£m	£m	£m
Estimates	178.0	78.1	146.4
Paid	18.4	3.4	3.2
Balance	159.6	74.7	143.2
Analysis of balance:
1.Under appeal or enquiry	36.8	9.9	7.1
2.Not disputed	43.5	15.2	12.3
3.Under demand	34.5	9.6	42.7
4.Awaiting transfer to enforcement	22.0	16.4	27.8
5.Under enforcement	15.3	19.7	47.6
6.Arrears Branch	7.5	3.9	5.7
Estimate of the amount likely to be collected	15.0	11.0	20.0

The following schedule shows the amount outstanding at 31 May 1986, in respect of | cases where returns have been made or assessments made in the absence of returns.

The foregoing tables show that as at 31 May 1986 the amount of Income Tax (excluding PAYE) collected and expected to be collected expressed as a percentage of the original charge is 34 per cent for all years to 1983–84, 28 per cent for 1984–85 and 36 per cent for 1985–86. Including amounts already discharged the proportion of the original charge which will ultimately be discharged is, therefore, currently estimated at 66 per cent, 72 per cent and 64 per cent, respectively, for the three periods. Likewise, in the case of Corporation Tax, the tables show that the amount of tax collected and expected to be collected expressed as a percentage of the original charge is 33 per cent, 29 per cent and 36 per cent, respectively, for these periods. Including amounts already discharged the proportion of the original charge which will ultimately be discharged is therefore currently estimated at 67 per cent, 71 per cent and 64 per cent, respectively.

Collection of Outstanding Taxes

The unsatisfactory situation in regard to the operation of the enforcement procedures for the collection of overdue tax which has been referred to in a number of previous Reports continued throughout 1985. The following statistics furnished to me by the Revenue Commissioners show the position regarding the referral of such cases to the Sheriffs/County Registrars and the results of such action.

In addition to the 81,612 cases on hands of Sheriffs/County Registrars at 31 December 1985 a further estimated 75,700 cases due for enforcement had not been referred to Sheriffs/County Registrars at that date because of the accumulation of cases already referred. The estimated face value of the charges involved is £142 million.

Enforcements by Sheriffs and County Registrars realised £22.1 million and £12.0 million, respectively, during 1985.

I understand that some action is currently being taken with a view to improving the enforcement procedures for the collection of outstanding taxes.

Mr. McDonnell.—I do not know how you want to take paragraph 16 because it comprises a series of schedules and notes supplied by the Revenue Commissioners to me showing the assessment and collection of taxes, health contributions, the youth employment levies and so on. I do not know whether you want me to take each schedule separately, but all the figures there are expressed in rounded millions and they also show in the schedule the amount outstanding under each head of tax and the amount outstanding on the basis of assessment made including — I must emphasise — estimated assessments. It also shows at the bottom the Revenue Commissioners estimate of how much of this they expect to collect. In paragraph 17 I go on to refer, on a percentage basis, to income tax and corporation tax. I refer to the percentage of the original charge. If you take account of what is already collected, what is expected to be collected and what is the percentage of total collection vis-à-vis the original charge, you will see that at the end of the day it will be expected that approximately one-third of the original charge will be collected and two-thirds will be discharged. Paragraph 18 deals with the question of enforcement, through the sheriff and county registrars system which the Committee has discussed on a number of previous occasions. Unfortunately, you will see that the unsatisfactory situation has remained at that stage. It is much the same as in previous years. These statistics are furnished to me by the Revenue Commissioners and, also, I would like to remind you that the sheriffs and county registrars operate under the Department of Justice and not the Revenue Commissioners. At the end I have referred to the arrangements namely the appointment of additional sheriffs to take over the enforcement work from the county registrars.

Chairman.—Could I just ask the Accounting Officer to take us through schedule 1? The figure for 1985–86 states that the balance of income tax, excluding PAYE, is £525 million but the estimate of the amount likely to be collected is £110 million, or 21 per cent. Quite often we read in the papers that there is a massive amount of money outstanding and recently at all the parent and teacher meetings they were saying why can we not pay for everything by collecting the £700 million or £800 million tax which is outstanding. Could you give us some estimate at the end of 1986, or the most recent years for which you have figures, what is the income tax, excluding PAYE, which is outstanding and what is that as a percentage of the tax collectable for that year?

Mr. Curran.—Yes. In regard to the amount likely to be collected, you have to add the three items at the bottom of the table together. You add them across and you get a total of £205 million. That has to be set against adding the other three figures across. You add £676 million, £377 million and £525 million so that you bring all years of account up to 1985–86. The estimate of the amount likely to be collected comes to about £205 million. Your question was: why should there be a difference between that and the balance, which is considerably bigger? The principal reason for that is, as I think we have explained before, the system of estimated assessments. These mainly arise where the taxpayer has not submitted returns or information to the inspector in time to enable the inspector to make an assessment based on information supplied by the taxpayer. Therefore, the inspector has to do the best he can on the basis of his knowledge of previous returns by the taxpayer and on the basis of whatever other sources of information he may have. He makes the best estimate he can of what the liability should be. Obviously, things come into this in relation to companies, for example, with things like depreciation. The inspector will not know what has happened in the company, what sort of claims may be made for relief against income tax, so he does the best he can. After that, under the system we have, the taxpayer is entitled to submit accounts and a specified amount and he is not legally obliged to pay any more than the specified amount until he has gone through an elaborate appeals procedure. The result of this is that some of these assessments may remain outstanding for two or three years or more while the appeals procedure goes through. As things stand at the moment, this is a legal entitlement which people have. It is questionable whether it is being operated in the spirit in which it was intended to be operated, but nevertheless this is what happens. Short of changing the whole system I do not think we are ever going to be able to improve that.

Chairman.—May I interrupt you there? On this question, when somebody says there is £525 million outstanding in income tax from the self-employed that is not correct, it is the estimated amount that is outstanding and the collectable amount is likely to be something of the order of 21 per cent?

Chairman.—One of the things I would be very anxious about, and I think the Committee would support this view, is this. When this information is being given by way of parliamentary reply to parliamentary questions in the future, I think we should make that clear, because there is a public view that there is something like £700 million outstanding in taxes which could pay for all our problems and we need not take any corrective action, which is not the case. Perhaps in the future when you are asked to draft replies to parliamentary questions you might give emphasis to the actual amount likely to be collectable. I think it would be a good public service.

Mr. Curran.—Yes, I think we did that in a very recent parliamentary question. To the best of our ability we will continue to try to emphasise the real money.

137.Deputy McCreevy.—Regarding estimated assessments, it would also be true to point out, as the Chairman of the Revenue Commissioners said, that is the reason the figure appears like that. But it would also be true to point out that, due to the lack of staff and the amount of work that individual inspectors of taxes have to do and considering that nearly all assessments issue around 20 July in any year for most districts, it is not possible always even when accounts are in — I do not know at what stage of the year the inspector decides to put the assessment into the computer but estimated assessments do come out when accounts are being submitted; it is just that nobody gets around to looking at the figures. I want to know at what stage of the year do most districts decide to put into the computer what figures should be assessed? It is my experience that if you had the accounts in on time an estimated assessment is more likely to arrive still in July, which might not be the correct figure at all. It can subsequently change.

Mr. Curran.—I think I have to explain in a general way that the difficulty here is that since the rules were changed a few years ago bringing in the current account basis and early payment and so on, it is very difficult for businesses and taxpayers to get their accounts in on time to enable the inspector to do it, so estimated assessments are almost inevitable in the system which we have. I think this is the point that the Deputy is making, and I accept it. Because of the timescale involved, the inspector has to move and get his estimates in by middle or early summer. It would be difficult for most businesses to get their accounts in by that date. We accept that. There are various possibilities for changing the system. Obviously, self-assessment is one of them and that is a matter which the Government are considering. If we decide to go down that road, hopefully, that would spell the end of that problem.

Deputy McCreevy.—It would also be fair to point out that there has been considerable change in the appeals procedure over the last few years. I think it was as a result of the Finance Act of 1985 or 1986. It is likely in the future that appeals will be disposed of more quickly. In fact, the rights of delaying it forever, like appealing and re-appealing then getting it to the Circuit Court etc, all that was changed in the 1985 or 1986 Finance Act. It will not be as easy to abuse the appeals procedure in future. I am not saying that it is always abused, but it has been used to delay a person settling the figures for years. There has been a change. I do not know whether it was the 1985 or 1986 Act.

Mr. Curran.—The 1983 Act. In addition, the inspectors have been getting through more appeals as well, listing them and moving it on. There is an improvement in the overall arrears position from that point of view. That is an improvement within the present system, but in the new year we will have to consider whether we are still dealing with the present system or not.

138.Chairman.—Before moving off these sections, Mr. Curran, you will be aware, as I mentioned earlier, that the 1986 reports have been referred to the Committee and, whereas you cannot be expected to be briefed on the various sections, I would like to raise with you the question of the alleged fraud at the Revenue. I wonder if you could inform the Committee if this involves income tax, value-added tax or which form of tax it involves and what is the up-to-date position?

Mr. Curran.—You are now talking about the thing we discussed the last day, what we call the cheques fraud?

Mr. Curran.—We have been investigating that. We have an up-to-date report. I have not had time to digest the details. In fact, we will be sending a supplementary report to the Comptroller and Auditor General in the next day or two. Perhaps I could give some overall figures as to the position as we see it as of today. The key figure to hold on to is that, as far as we can see, the loss which we can establish at the moment is of the order of £25,000. There is another figure of £285,000 where the question of whether there is a loss or not has yet to be determined. For example, that covers cases like cheques which are missing and are out-of-date and logically should not be capable of being cashed. We have to wait and see. There is another figure of £458,000 where it has been established that there is no loss to the Revenue. The face value of all these things involved would be £768,000 gross value, no loss £458,000, leaving a balance of £310,000, of which £285,000 has a question mark over it and, hopefully, the most of that should not result in a loss at the end of the day. So far, we seem to have established a loss of approximately £25,000. Those are the overall figures. What is the position about the investigation? The latest report we have from the Garda Fraud Squad who are investigating it is that the investigations are still going on and are being followed up. As of now, seven persons have been formally charged in court. Of the seven, one was convicted and there is no word of an appeal against that conviction. The second was convicted and has appealed to the Circuit Court. The other five have been charged in court and have been remanded. None of the seven is a Revenue official. That is the position about the Garda investigation.

Mr. Curran.—You asked that question the last day. I can let you have a note about that. I will inquire from the Garda Síochána. If we can get any information I will let you have a note about that.

Chairman.—I did not ask that question. They are not Revenue officials. What are we doing about the situation there?

Mr. Curran.—A few things. I explained on the last occasion that we had tightened up some procedures. I gave some details and I explained that when you do not know how the things are getting out of the system it is very difficult to pinpoint where the leak is and deal with that difficulty. We do not yet know in detail exactly how this was done or who was doing it. We have tightened up. On the question of physical security in the Collector General’s office, recently we installed an elaborate strongroom for the custody of cheques. Since I was last before the Committee we sent a special team into the office to investigate the situation in further detail, which has enabled me today to give you these up-to-date figures. We will be writing to the Comptroller and Auditor General shortly about that. We have also, as I mentioned on the previous occasion, expanded our internal audit unit. We see this as a very significant unit for the future. Finally, we have launched a project which I might describe generally as being concerned with the cash transmission system. Under the present system all remittances going to the Collector General go by cheque. The result is an enormous collection of cheques flowing into the Collector General’s office and leading to all sorts of problems about security and management and simply handling the volume. What we have set in motion is a study of how best for the future we could change this system to take advantage of modern systems of electronic transmission of cash, even direct debit systems or credit transfer systems. In other words, to enable the taxpayer, if necessary, to go along to his own bank and lodge his money there and send an advice through to the Collector General. This needs some study but I am confident that that is the direction we have to go in. It would have a number of advantages. The obvious one is to increase very considerably the security in the Collector General’s office, but it should also have a certain amount of advantage in the area of cash flow by enabling us to get payments and receipts into the system and get credit for them more quickly. The package measures which we are undertaking are all focused on the Collector General’s office to try to improve things for the future.

Chairman.—Before I call Deputy Foley and Deputy Colley, may I just get a couple of things clear, Mr. Curran? First of all, was it VAT and income tax or corporation tax?

Chairman.—The second thing I want to ask you is, with regard to the seven people was there conspiracy involved, or were there seven different cases involved? Is there alleged conspiracy involved?

Mr. Curran.—I would say you can use “conspiracy” in two ways. There is conspiracy which is a very serious criminal charge.

Mr. Curran.—All I can say, as a layman, to try to avoid the criminal word “conspiracy”, that it seems to me that there must have been some sort of collusion, or conspiracy with a small “c” if you like.

Chairman.—What I am coming to is this, are we at the end of it now? If we find seven individuals operating individually cheating the system, are there possibly others?

Mr. Curran.—I see the point. All I can say on that is that while we have turned up additional cases, which had not surfaced when I was before the Committee last, none of these would have related to events occurring after last September when we discussed it and when we brought in some changes and so on. Touching wood with both hands, nothing has occurred, shall I say, since last September.

Chairman.—It would help the Committee if we knew how it was done. Was it done by seven people allegedly co-operating, or were there seven different individuals running their own little operation? If there were seven people doing this, are there other people, perhaps undiscovered, who have been doing it? It is very central.

Mr. Curran.—Of course it is, and we are most anxious to get as much detail as we can on this but we are in the hands of the Garda Síochána in this matter. They are the ones who arrest and charge. The information I have given you today is the best that we have got so far.

Chairman.—Can I just press you on this? Are you saying that these seven people did not operate as a group?

Mr. Curran.—I am sorry, I am not in a position to make a categorical statement one way or the other. When we are talking about “conspiracy” it is a word that needs to be taken with great respect.

Chairman.—Can you tell us, finally, how it was done? Was it by intercepting the mail?

Mr. Curran.—No. This is what makes me very uneasy about the whole thing, that we have not yet pinpointed exactly how it was done. I know the Garda have arrested and charged seven people. Of these only two have been convicted, the others are still on remand, so we cannot say. Maybe when these cases are heard and things are proved and brought home, when we may be on sounder ground or, indeed, the Garda may be on sounder ground in investigating the possibility of conspiracy involving other people.

Chairman.—We will be coming back to this in the 1986 accounts. When you discover how it was done and the question of other matters raised you might let the Committee have a report on that in advance of your coming before the Committee in the coming year, if you have it by that time.

139.Deputy Foley.—I think we have a very serious situation here which has come to light as a result of the public press. We had an indication some time ago that something was wrong but you have given us figures here this morning which sets the position at £768,000 gross figure approximately?

Deputy Foley.—That is what has been detected. It is obvious from what you said here this morning that you are not satisfied with the system. As a result of that, one thing has come to light to every politician, that there has been a delay in the past in lodging cheques to the account of the Revenue Commissioners. Why has there been a delay?

Deputy Foley.—I mean cheques paid over to the Collector General’s office and not lodged within a period of two or three days. That has left itself open.

Mr. Curran.—That is correct. The system in operation is that the Collector General’s office have been concentrating on the very large payers and payments and trying to get those receipted and lodged immediately on the day that they are received. Consequently, when some smaller cheques, of which there can be considerable numbers, come along they tend to be left to one side until the major cheques are lodged. The trouble about that procedure is that after a while you end up with what you might call a permanent moving backlog of unreceipted cheques which, we will all have to admit, is a most unsatisfactory situation. It is certainly one which we cannot tolerate. We have taken immediate steps to try to eliminate this practice of not lodging cheques immediately because it has implications not only for security but also for the cash flow. Why has it been happening? The reason it has been happening is simply that the staff were snowed under by the volume of paperwork which the present manual system involves. It is quite clear that we cannot continue using this sort of system because it is very wasteful of staff resources and it does lead inevitably, where you have a peak period where a lot of cheques are lodged, to a situation where obviously some are going to be left to one side. Then when there are difficulties about overtime or difficulties about accommodation you tend to get a build-up of arrears. I agree with the Deputy that it is a very serious and unsatisfactory situation and we are doing something about it.

Deputy Foley.—The point I am making is that, seeing that you are updating your system, priority must be given to the lodgement of cheques as they come in and clearing them at a later date. If that had been done in the past you would not have this situation. The figure is frightening and, as I said at the outset, that is what has been detected. Seven people have been charged in court. What are the charges? How much money is involved in the seven charges?

Mr. Curran.—I have details of one of them here. It is a small case, where four cheques were cashed for nearly £5,000.

Deputy Foley.—How much would be involved in relation to the actual loss? you say there is a net loss of £25,000, but we have to take the overall figure of £768,000. What is the relationship between the seven people charged and the figure of £768,000?

Mr. Curran.—I do not have that information, Deputy, but we will inquire from the Garda and I could send you a note about it if that would be suitable.

Deputy Foley.—As a result of this situation being highlighted, have you introduced any further systems or have you introduced your own internal investigation within the Revenue Commissioners outside the Garda investigation?

Mr. Curran.—I think I mentioned a number of things which we did. Do you want me to go over?

Deputy Foley.—I do not. Are cheques coming in over the last two to three months lodged immediately or are they held over for investigation?

Mr. Curran.—They are not held over. When cheques come in it is not a matter of lodging them immediately. You have to allocate them to the proper tax head and the proper taxpayer. This is a step——

Deputy Foley.—In order to override that situation, would it not be better to computerise the cheques coming in, lodge them and then clear them at a later date and assign them to the different Departments? You obviously have a number of accounts?

Mr. Curran.—That is right. This is what this project I mentioned is all about: to try to bring in a whole new cash transmission system which would enable the taxpayers to deal with his own local branch of the bank or whatever and the stuff would be transmitted not by cheque but by direct credit transfer or whatever and would be reconciled in the Collector General’s office.

Deputy Foley.—The only further point is: When did it first come to light that there was a problem within the Revenue Commissioners?

Deputy Foley.—Since then have you cleared your cash transmission service or updated it?

Mr. Curran.—We have not fundamentally altered the system. This is the point I was making. We are still basically operating the same cash transmission system which we have operated for the last number of years but which, I would agree, is not satisfactory.

Deputy Foley.—Surely when it came to light that there must have been flaws in this system it should have been copperfastened at the time?

Mr. Curran.—No. There are two different things here. We do not yet know how this thing was done, so we cannot say that the present system of sending in cheques in itself was the cause of these difficulties. What I am saying about the cash transmission system is that, even if these frauds never occurred, it is something which has been overtaken by the advance of new systems and that we should adopt a more modern approach.

Deputy Foley.—Just to finish, it is very hard for the layman in the street to accept that there is a fraud within the Revenue Commissioners as a result of which cheques have been stolen. It is very hard for them to accept that, especially the ordinary PAYE sector, when they read tomorrow that instead of being £500,000, £768,000 has been detected. How much more has gone wrong is another question. I sympathise with you and I accept the point you are making, but I hold that this cash transmission service which you intend to produce should be introduced sooner rather than later.

140.Chairman.—How many cheques did the £768,000 involve? We originally were talking about 107 cheques. How many cheques has it now gone up to?

Mr. Curran.—I have that here somewhere. We found 19 additional cases since I was last here.

Chairman.—I want to get this very clear. The charges which have been preferred are in the area of theft or fraudulent conversion. Can we take it that there are no charges in the area, for instance, of burglary or anything like that?

Mr. Curran.—Not that I know of, but we will send you whatever information we can get on that about the amounts involved and the nature of the charges.

141.Deputy Colley.—I would like to ask Mr. Curran a number of questions concerning the £285,000 loss, which is yet to be determined, as to how extensive the loss within that range is. Mr. Curran stated that that amount refers to cheques which are missing, but they were out-of-date cheques. Perhaps Mr. Curran could explain to us how the Revenue Commissioners found out that these cheques are missing, if, in fact, they are out-of-date?

Mr. Curran.—What happens is that mostly these were cases where cheques were sent to the Collector General by taxpayers. The way the thing comes to light is that in subsequent transactions or dealings with that taxpayer, it transpires that the taxpayer thinks that he has sent a remittance but he has not got credit for it so obviously he asks questions and then when the matter is investigated we find that there is no record of the receipt of a payment. In those circumstances it appears that something has gone missing.

Deputy Colley.—But surely it would be quite possible, and it could be done fairly fast, to check whether those cheques have, in fact, been cashed by referring to the account of the taxpayer?

Mr. Curran.—That is absolutely correct. What I am saying is that most of them are out-of-date and have not been cashed.

Mr. Curran.—The reason we put a question mark over it is that there could still be an attempt by people to pass them, to alter the date to whatever.

Deputy Colley.—You have established that this £285,000 fully refers to cheques which are out-of-date at this stage and have not been cashed?

Mr. Curran.—Most of them are. One cheque was sent in July 1987 and that would still be in date.

Deputy Colley.—Fine. In regard to the figure of £458,000 for which you stated there had not been a loss to the Revenue Commissioners, can you explain why? Have you established the cheques are now in some place that you had not realised they were?

Mr. Curran.—No. These are cases where the taxpayer has replaced the payment or, alternatively, we have got value from the banks.

Deputy Colley.—So there could still be a loss to the taxpayer if somebody tried to pass the cheques that were previously written?

Mr. Curran.—This is a question between the taxpayer and his bank. There are also questions between us and the banks. We have taken legal advice and we are in correspondence with the banks about these.

Deputy Colley.—To your knowledge have there been any fraudulent attempts to pass some of those cheques that are among the £458,000?

Deputy Colley.—Just to get back to the cases that have been uncovered — seven people charged, two convicted, one on appeal — could I ask how it was that these people were pinpointed without also pinpointing the method that was used by those who perpetrated the fraud?

Mr. Curran.—That is precisely the question that is in my own mind. This is a question which he would have to address to the Garda.

Deputy Colley.—Sorry, I will interrupt you there. I cannot accept easily that you can pinpoint seven individual people who can be charged with fraud, in other words, there is enough evidence to do so, without also pinpointing the area which was weak and which led to that fraud being perpetrated. I would suggest that it is possible also to pinpoint the method of the fraud if you know who has perpetrated it or, certainly, a certain number of them.

Deputy Colley.—What led the Revenue Commissioners and the Garda to charge these people?

Mr. Curran.—In one case, as far as I know, what happened was that a chap went into a pub to try to cash a cheque and the publican was suspicious and called the Garda. They interviewed him and so forth, that is how that one came to light.

Mr. Curran.—The Garda also naturally have a lot of background information about people which, quite properly, they keep to themselves until they are in a position to bring charges. The Garda may very well know more about the people involved here than they can tell us publicly.

Deputy Colley.—I recall you informing us about the person who attempted to pass the cheque in a pub. Could I ask you whether it was from information received from the Revenue Commissioners that any of these people were charged?

Mr. Curran.—Of course, all the information originally came from the Revenue Commissioners.

Mr. Curran.—In the sense that we found this problem and we called in the Garda Fraud Squad, we handed over the investigation to them and gave them all the information that we possibly could. That was their starting point.

Chairman.—Could I just intervene here. There may well be a point in our asking the Garda Commissioner to appear before the committee, I would not rule that out, but I would prefer, Mr. Curran, if you got the specific information yourself. If you do not have it to hand in the report that I requested you send before your next appearance, would you give us the specific information because we would want to know that we have confidence in the system.

Deputy Colley.—Yes. That is precisely the point that I am trying to make. I do not want to labour it but I find it very difficult to accept that the Revenue Commissioners were not involved to a certain extent and cannot pinpoint the weak areas, from the fact that seven people have been charged and evidence produced in order to do that. I will not labour that point at this stage. I would like to come back to it the next time Mr. Curran is here. You mentioned that none of those charged are Revenue officials. Is it the case that any of them have been at any stage?

Mr. Curran.—I do not know. I will make a note of that and see if we can find out. That would be part of the inquiries I will make.

Deputy Colley.—I must say I recall the last time that Mr. Curran was here and was speaking about this and really there is no further information that we have today beyond the numbers of cheques and the numbers of frauds that have been perpetrated. There is no additional information. I feel that we could have some additional information today, particularly about the kind of people who have been charged and whether they have any connection with the Revenue Commissioners.

Mr. Curran.—We have no information about them today. I will find out what I can about them and let you have a note about it.

Mr. Curran.—When our people ask the Garda Fraud Squad for information they get whatever information the Garda feel they wish to give them.

Deputy Colley.—Presumably you have the names and addresses of those who were charged?

Deputy Colley.—But the Revenue Commissioners are aware of the names and addreses of those who have been charged? It would seem to me, if I were heading up an organisation, I would immediately go and check through my lists of officials and former officials to see were they among those.

Mr. Curran.—We will deal with that fully in a note which we will construct and send on to you. If you wish we can come back to it when it comes up on the 1986 accounts.

142.Chairman.—We may come back to it a bit sooner than that. As you know, we have undertaken an examination of the role of the Revenue Commissioners and we may look at the systems and these weaknesses as part of that examination. In any event, in order to allay public fears it would be as well if that information could be spelled out as soon as possible and in as much detail as possible.

Deputy Colley.—The last thing I would like to ask Mr. Curran is somewhat related. I know he mentioned the fact that people were snowed under with work in the Collector General’s office and I can well understand that. I can see that, generally, problems in the Revenue Commissioners can relate to a lack of staff. Can he tell us whether or not he is to be allocated staff redeployed from other Departments to alleviate that?

Mr. Curran.—I understand that some such moves are afoot. We have got a few heads of staff here and there in recent times from other Departments. I understand that the general policy is to reallocate some people to the Revenue.

Deputy Colley:—Would this be in the Revenue Commissioners or the Collector General’s office?

Mr. Curran.—We are in the middle of a very unusual situation which has to do with early retirement, redundancy and whatever. At the moment the picture is anything but clear. It seems to us that a number of Revenue officials will be able to take advantage of this early retirement scheme not, I would hasten to add, in the technical areas but in what one might call the general service areas, which would be relevant to the Collector General’s office which is staffed by general service staff. If these people are going to go, then I think inevitably the vacancies will have to be made good by redeployment. As far as I understand policy, that is what is to happen.

144.Deputy Crotty.—I will not touch on the fraud as it has been adequately dealt with. I am a bit concerned about these cheques that are not lodged and, as a result, the State is not having the benefit of having the cash in the bank. This is the most serious aspect of the lot, because there could be a greater loss to the State in having cheques not credited to the State than even the fraud. It is extraordinary to hear the Accounting Officer say he has not the staff to lodge the cash that is given to them. Could you elaborate on that? How much funds would be lying around not actually lodged? Why I mention this, I expect the State would be operated on commercial lines and I am horrified at the lack of urgency regarding the collection of funds in certain areas. I am even more horrified still that here we have funds collected and they are not lodged. From that point of view, could you give us some idea of what amounts of funds are there and how it can be justified that funds are lying in the office of the Collector General and not lodged to the benefit of the State?

Mr. Curran.—The first thing I think I would like to say on that is that I do not think we would be talking about a very large amount of money because of the way the Collector General operates, that is, that he gives absolute priority to the largest remittances. The second thing is that it is not just a matter of getting a cheque and lodging it. You must reconcile it, receipt it and allocate it to the proper heading. This is the way they are operating at the moment. It is basically a clerical manual system which I think has to be changed as soon as possible. I completely accept the Deputy’s point. In fact, I possibly made it early in the meeting when I had an opportunity myself to look into these things. I agree, I identify this as one of our problems. The way to approach it, rather than try to put more staff in and try to tinker with the present system, is to make a fundamental change in the whole cash transmission system with the object, as the Deputy has rightly said, of getting the money in, improving the cash flow and getting away from this situation where cheques have to be held for perhaps a few days before they are lodged. I agree that that is not a business like way to go about matters and it has to be changed.

Deputy Crotty.—Could you explain to me how this arose? You say you do not want to tinker with the present system, that you are investigating a new system. Why was the system not run on commercial lines?

Mr. Curran.—It has been going on for years. This was the way it grew up. This is the traditional way of dealing with it. If you are familiar with the VAT system, the whole VAT business was constructed on the basis that a cheque formed almost a part of the VAT return. The idea was that the person would send in his return with his cheque and the whole thing would be reconciled and dealt with that way. At the time when these systems were constructed, the normal way of sending remittances in business was to send a cheque. We have moved on now. In a lot of other areas the basis of payment has been changed and I think we have to do the same.

Deputy Crotty.—No matter when or what sort of system was involved, it involved getting that cheque into credit of the State immediately. That is what business is about. Your office did not do this?

Deputy Crotty.—You allowed it to continue. There could have been a substantial loss to the State over the years, either in loss of interest on lodgements or interest which the State was required to pay because it was in an overdraft situation. It is extraordinary that this could be allowed to carry on and to continue, that the State, which is the fundamental unit, could not even run in a businesslike manner.

Mr. Curran.—There were problems, as I said, with peaks of work, accommodation and industrial action, with staff working overtime and problems with whether we had the total amount of staff available. The people at the time who were allocating staff and trying to deal with that seemed to be the most urgent job they took a certain view of what the priorities would be and they did the job in a certain way. I am not criticising that. Perhaps the other things they did were possibly more urgent. What I am saying is that the result of all that was that there is a certain arrear in the business of allocating and receipting cheques and lodging them to get value. We are tackling that. The Collector General has already written to the financial institutions to initiate discussions and planning for this new system.

Deputy Crotty.—I do not want to labour this, but I feel aggrieved about it. Was there any question of getting the staff to handle these cheques and get them into credit? I certainly would feel that there was cost benefit in having the staff to lodge the cheques, that the State would be in a credit situation after paying those staff. Was there any application made to the Department of the Public Service for staff to deal with this very important aspect of the work in the Collector General’s Office? Were they refused?

Mr. Curran.—For the last two or three years, as you know, in common with most other Departments in the Civil Service, we have been subject to these embargoes and staff reductions, ban on recruitment and so on. It is a very tight staffing situation and the people available were used to the best advantage. If the staff had been available and if they had been willing to work overtime they could have got on top of the problem. That is not fundamentally the right way to approach it. It is just trying to keep an old system going.

Deputy Crotty.—I agree with you that it is not fundamentally the right way but it was the system you had. Were the Revenue Commissioners in touch with the Department of Finance in relation to this, that there was an actual loss to the State because cheques were lying there and not lodged? It is an extraordinary situation. We are very concerned about the late collection, or that tax is not collected on time, that there is no pressure but it is unbelievable that cash be in the office and not lodged. I do not think anyone could accept that. I would ask for a comment from the Department of Finance on this.

145.Mr. O’Farrell (Department of Finance).—It is fair to say we did not have a specific proposal on that particular issue. It is also fair to say, and I think the Chairman would accept, that within the overall embargo situation that we all operate under, nobody gets a higher priority for the reallocation of such staff as become available, and they are very limited, than the Revenue Commissioners and the Collector General’s office in particular. We have been able in the course of a year, tight and all as things were, to reallocate a certain number of staff who became available for redeployment in other areas. That will continue to be the policy, that nowhere gets a higher priority but we have to operate within the context of reducing the Civil Service overall.

Deputy Crotty.—Are you saying that you did get a request from the Revenue Commissioners, or that you did not get one?

Mr. O’Farrell.—Not in relation to that particular point that has been made about the non-lodgement of cheques.

Deputy Crotty.—So it would appear to me that there was no urgency in the Revenue Commissioners regarding this matter. There was no request for extra staff. It is extraordinary.

Mr. Curran.—I think I have to accept the Deputy’s point that this particular point, which I mentioned today, of cash transmission system, had not in the past been identified as a problem, which it is. We have now identified it and we are moving forward.

Chairman.—One moment, Deputy. I think you should refer specifically to that point when you are making the report, the question of the efficiency with which cash and cheques are lodged to the credit of the State and why cheques are left lying around. That is something which you might incorporate in the report.

Deputy Crotty.—I think it is fundamental that cash belonging to the State which has been collected should be lodged. It is unbelievable.

146.Chairman.—We will look at that when we get the report from Mr. Curran. We will come back to it on the 1986 accounts which we will be doing shortly. We have been on this for a very long time and Deputy Desmond is offering and now Deputy Dempsey is offering.

Deputy Desmond.—You are currently responsible for a cash flow of £6.5 billion?

Deputy Desmond.—How many of those staff are interfaced with cash transactions, crudely speaking?

Mr. Curran.—The Collector General’s office has 650 people. They would not all be in the cash office. The cash office would be a smaller group of about 50 people. We also have officials in the Customs and Excise collectors offices who are also——

Deputy Desmond.—But would it be fair to say that 1,000 would have access to cash and cheques?

Mr. Curran.—In a general way, a lot of people would. A large number of people would.

Mr. Curran.—Between the Accountant General’s office and the stampting branch, I would agree.

Deputy Desmond.—Therefore, you would agree that the fact that there are seven people known, out of well over 1,000 people, is a remarkable tribute to the integrity and the honesty of Revenue staff?

Mr. Curran.—Sorry, Deputy, but I must disagree fundamentally with what appears to be an implication in your comment, that is, that these seven people who have been charged have some connection with the 1,000 Revenue people who have access to cash. I have to disagree.

Deputy Desmond.—I am not implying that in any way but I am very concerned, through the Chair, that the particular tenor of the discussion would inevitably reflect on Revenue staff. I am very anxious to clear the role of Revenue staff, particularly in relation to the handling of cash.

Mr. Curran.—I think it has been made clear — perhaps before you came in — that there was no Revenue official involved. That has been dealt with.

Deputy Desmond.—I know that. You would agree that the level of incidence of fraud relating to Revenue staff is very, very small?

Deputy Desmond.—You would also agree that the number of staff who have been brought directly to the attention of Government for dismissal purposes in recent years has been very small?

Deputy Desmond.—I am anxious to put that on the record, more than the personal basis. Relating to the £6.5 billion of cash flow, have you any idea of the amount which would not be involved in a daily lodgment? Would there be, of the total cashflow, a £500,000 awaiting lodgment? Hardly. If we are talking about a problem I think we should know that. Any idea?

Mr. Curran.—I could not give you that figure offhand. It is a very large figure per day. Mostly these things come in a peak. VAT payments come every two months. PAYE payments every month. These would be large payments on a particular day in the month.

Deputy Desmond.—You would agree, leaving the system aside — the staff are not responsible for the system, the Revenue Commissioners may well be and, more broadly, the other Departments — that with the shortage of staff and the inadequacy of the system it is not physically possible to lodge all cheques on a daily basis?

Deputy Desmond.—You would also share my view that for the past 20 years the commercial banks have been able to have a daily lodgment system of all cheques?

Mr. Curran.—It is not so much the commercial banks that I am thinking of, but I am thinking of other large businesses and State corporations and large concerns which use the commercial banks network to transmit the cash rather than have cheques sent to a central receiving point.

Deputy Desmond.—Why is it not then that if a cheque is received in the post, or being either opened in the office or being handed over a counter, that a receipt if not issued there and then immediately and that the cheque is not lodged on a general account basis immediately and the reconciliation and distribution to take place subsequently? Why is there not immediate lodgment?

Mr. Curran.—Practically all the large ones accounting for the bulk of the money are done that way.

Deputy Desmond.—It is a question of taking a cheque off a lodgment and putting a receipt on it which might issue that day or subsequently but the cheque is lodged immediately on a daily lodgment basis. Most undertakings do it?

Mr. Curran.—You get a cheque in. Other undertakings perhaps can just accept a cheque and lodge it and ask questions later. In our system the cheque has to be associated with the taxpayer and with the tax for which it is sent and with the year. Then an official receipt has to be made out and, finally, some cheques come in which perhaps you should not accept at all, because the case is out with the sheriff perhaps, or you would be predjudicing yourself if you accept it because it is a lower payment than you have been looking for. Things have to be looked at.

Deputy Desmond.—That may well be, but the Revenue Commissioners have never been prejudifced, to my knowledge, by accepting a cheque in relation to a case in dispute or where the sheriff is in action. Why not issue a direction to staff now that a receipt is placed on the lodgment statement irrespective of where it comes from, and the cheque is lodged.

Mr. Curran.—What we have done recently in the last couple of months is to issue a direction that all these arrears of cheques lying around are to be lodged forthwith, if necessary by working overtime. We have put additional resources into that area to try to eliminate that problem as far as possible, that is, to try to do the best we can with the existing system and to try to lodge the money as soon as we can. We have made a special effort in that area. As I say, the fundamental solution is to change the system.

Deputy Desmond.—Could I ask a final question of our colleagues from the Department of Finance? Why is redundancy — early retirement being offered to Revenue staff?

Mr. O’Farrell.—It is being offered on a service-wide basis. It is not, by any means, being totally applied to all Revenue staff who ask for it. It is a voluntary early retirement scheme both ways. In so far as there are staff who could conceivably be replaced by redeployment from elsewhere, the Revenue Commissioners will be a priority area for redeployment. This situation has obtained for some time. Whereas the Revenue Commissioners did not ask us specifically for posts in connection with lodging cheques, I would not fault the Revenue Commissioners on that they have asked for staff and do ask for staff. Subject to the constraints applying service-wide, we do what we can for them. It is a very high priority area, none higher.

Deputy Desmond.—Would you not agree that this policy measure — it is nothing to do with you but it is there — is going to result in great strain, uncertainty and even confusion?

Deputy Desmond.—I am asking for the observations of the Department of Finance. Is it going to place a particular burden on the shoulders of the chairman of the Revenue Commissioners and his staff in trying to run the system with this intrusion?

Mr. O’Farrell.—He has to make his case and he has made it. Obviously in regard to the problems it poses when any staff member leaves, we have got to do what we can for him within the constraints of overall policy.

Deputy Desmond.—A final question. Would you not agree that the redeployment into Revenue has been minimal?

Mr. Curran.—I would not say minimal. We have been able to redeploy, even this year, approximately 80 head of staff. It is not as many as we would like, but you cannot make bricks without straw, you have got to take what becomes available.

Mr. Curran.—It probably does not, but, on the other hand, it is better than nothing.

Chairman.—I am going to bring this to a close. We are getting far too much into policy.

147.Chairman.—We will note paragraphs 16 and 17. Mr. Curran, you are in no doubt as to the grave concern the Committee have about the matters we have been discussing. Could you let us have as much detail about the report as soon as possible? With regard to paragraph 18, Deputy Dempsey has some matters he wants to raise on this. I propose we move on to No. 19 and come back to No. 18 in a short time. Paragraph 19 of the Report of the Comptroller and Auditor General reads:—

Value Added Tax

Section 12 of the Value Added Tax Act, 1972 provides that if the computation of the VAT liability of an accountable person for any tax period shows that the tax which may be properly deducted (i.e. the tax paid on his purchases) exceeds the tax due by him (i.e. the tax collected on his sales) the excess shall be repaid to him. Reference was made in paragraph 17 of the 1978 Report to deficiencies in the procedures for establishing the authenticity of claims from traders for VAT repayments and to the possibility that such deficiencies could facilitate the perpetration of irregularities. At that time the Committee of Public Accounts expressed grave concern regarding these deficiencies and was given certain assurances that controls were being improved.

During 1985 a number of serious irregularities involving the fraudulent claiming of VAT repayments came to light, fortutiously. It appears that the frauds were initiated by officials of the Revenue Commissioners first completing registration forms for non-existent traders and then constructing fraudulent repayment claims for amounts which were within the limit of £500 per two monthly period to which automatic repayment applies. They also arranged to have the fraudulent repayments made to bank accounts opened by themselves in the names of non-existent traders. They later created fictitious evidence that the non-existent traders’ first claims had been satisfactorily verified by local inspection of their records thereby allowing the limit on automatic repayment to be raised from £500 to £6,000 per two monthly period.

I have sought information from the Accounting Officer regarding the irregularities and I have asked whether the internal control procedures for the prevention and detection of irregularities proved deficient in these cases and what steps have been taken to improve these procedures. I also sought information on the total amount involved and the steps taken to effect recovery.

Mr. McDonnell.—This paragraph deals with an internal fraud in the Office of the Revenue Commissioners and a fraud which was similar in type to something which the previous Committee expressed serious concern about some years ago and were given some assurances about the tightening up of systems. I have outlined the main features of the method which was used to perpetrate this fraud. As I said there it came to light fortuitously. The fortuitous aspect was, as the Accounting Officer since told me, through the vigilance of a bank official whose suspicions were aroused when handling one of the cheques, and in the course of an internal investigation the other ones came to light. He also told me that the established procedures were geared primarily to prevent traders making fruadulent repayment claims but it is now apparent that they were inadequate to prevent internal fraud, that a working group had been set up to examine and approve the security and that some interim security arrangements had been put into place on the recommendation of this group. They had recommended further development of the computer system to enhance and incorporate additional security features and that the interim ones which were operating at the moment would remain in place until that was done. In relation to the particular frauds that have been referred to, the Accounting Officer has told me that there was a total of £18,000 involved which had been obtained fraudulently and that approximately £11,000 of this had been recovered. As well as that they have legal recourse to some small amounts which are held in the bank accounts which were opened in the fictitious names to negotiate fraudulent cheques. Four officers have been charged and convicted; three of them resigned; and one was dismissed. Incidentally, he also told me that, in the course of the investigation, a further similar case was discovered involving a small amount of about £500 but they had not succeeded in detecting the perpetrator in this case; they had in the other cases. It is an internal fraud, setting up fictitious companies.

Chairman.—Mr. Curran, you will be aware that the 1987 report referred to deficiencies in the value-added-tax section. We were given to understand in the minute of the Minister for Finance on the report that tightening up procedures had been put in place. I am relying on my recollection, but I think it is true to say that I raised with your predecessor the fact that it was brought to my attention by a VAT expert that the VAT section was wide open for one of these internal frauds. Can we take it now, finally, that the VAT section has been tightened up so that this opportunity for fraud no longer exists?

Mr. Curran.—Yes. I think you can take that. We sent a special investigation team in to compile a report. Following that, the whole staffing and the organisation of the place were changed and tightened up and several security improvements and procedures have been brought in. The former manual system has been replaced with a computer system and individual officers have individual badges and passwords to get into the computer system, so that everything can be checked right back to individuals. More checking is done. The computer prints out lists of transactions which are checked. The particular weakness in the system was that there was no check on a newly registered firm if the repayment claimed was under £500. That has been changed. All new applicants for registration are now visited by the inspector and no repayments of more than £5 will be made until a visit to the concern has taken place. We will keep that going as long as we can. It consumes a lot of staff time but we are doing that for the time being.

Chairman.—May I ask the Comptroller and Auditor General if he is happy with the changes in view of the fact that we reported on this previously?

Mr. McDonnell.—We were examining this particular area recently and we would agree that considerable improvements have been made which, hopefully, will eliminate the possibility of this kind of thing happening again.

148.Mr. Dempsey.—Very briefly, in relation to the fraud we were talking about earlier on, can you tell me, Mr. Curran, if there are any cases where a person’s assessments were referred to the sheriff or the task force, even though they had paid cheques and these cheques were subsequently stolen? In other words, the records would have shown that the tax was still outstanding. The person would believe he had them cleared. Do you know of any cases where this has occurred.

Mr. Curran.—I do not know of any cases, Deputy. I think it would be unlikely because if the Collector General was awaiting a payment and did not get it, he would undoubtedly send a reminder or ask the taxpayer again, or his agent more likely, if it was a company. Because of these questions it would rapidly come to light that something had gone wrong.

Deputy Dempsey.—If any such cases arise, how is it proposed to deal with them?

Mr. Curran.—You mean if something goes to the sheriff and it turns out that a cheque——

Deputy Dempsey.—Had been paid previously? As you know, the Revenue Commissioners have now become much more efficient with sending things to the sheriff in particular. I am concerned that if somebody paid a large sum of money in a particular year and it was stolen, but because it did not appear in the Revenue Commissioner’s accounts it was referred to the sheriff, the person would have to meet that payment again at some stage. Will the Revenue Commissioners look on those cases with a certain amount of clemency? Will they give time to sort it out?

Mr. Curran.—Oh, yes. We will give time to sort it out obviously, if there is a difficulty of that kind. However, it seems to me to be an extremely unlikely occurrence. If the cheque has not been cashed, if it just went missing, as happened in a lot of cases — they were stolen but not cashed — the taxpayer would inevitably see from his own bank returns that the cheque had not been cashed. There would be questions asked. But I take the Deputy’s point. We would look very sympathetically at any such case that might arise.

Deputy Dempsey.—On paragraph 18 specifically, can you tell me what is the legal basis for the appointment of the Revenue sheriffs?

Mr. Curran.—They are appointed by the Minister for Justice under section 12 of the Court Officers Act, 1945. Effectively, what happened was that the powers which up to that had been vested in the county registrars in relation to these income tax certificates, were transferred to the new sheriffs. They are officers of the court. They work under the courts, not under the direction of the Revenue Commissioners.

Deputy Dempsey.—Can you tell me the legal basis for the expenses and fees they charge?

Mr. Curran.—That is a matter for the Minister for Justice. In a rough and ready way, the sheriffs are entitled to a certain fee or poundage where they seize goods. Their remuneration is a matter for the Minister for Justice. They get a small fee, a retainer, but in addition they get poundage on what they collect by way of seizure.

Mr. Curran.—That is a matter to be discussed with the Minister for Justice. It is a matter which is being looked at, I understand.

Deputy Dempsey.—You mentioned that the sheriffs are completely independent of the Revenue Commissioners. Would that be true?

Mr. Curran.—Yes, in the execution of their functions. They are not under our direction. We give them information about the taxes and the background and the general legal situation, but we do not tell them what to do or how to do it. They do their own thing.

Chairman.—They really do not answer to anybody. They are really independent, so to speak.

Deputy Dempsey.—Can you withdraw demands that you have sent out to the sheriff? Have you any legal entitlement once you send the list of people you want the sheriff to follow? Can you withdraw those or call them back?

Mr. Curran.—I think in very exceptional cases where there would be a misunderstanding such as the case you referred to earlier, or when something has obviously gone wrong, in those cases we could but, as a general rule, we do not and we will not. Once the thing goes to the sheriff that is it.

Deputy Dempsey.—Right. You say that the Revenue Commissioners have no control of the manner in which the sheriffs proceed against individuals?

Mr. Curran.—It is not for me to say whether I am happy with it or not. They operate under the same powers and functions as the county registrars, or any officers of the court. We do not get ourselves involved in that situation. It is not a question of washing our hands of it; it is simply that we have no function.

Deputy Dempsey.—You are aware though that the Revenue Commissioners are getting a rather bad press in relation to the activities of some of the sheriffs?

Mr. Curran.—This is unfortunate, for two reasons. The first reason is that the Revenue Commissioners, as I have explained, do not direct the sheriffs in detail about how they wish to carry out their duties. The other unfortunate thing about it is that, in so far as it is a bad press because the sheriffs are actually enforcing things, it is the old story that when enforcement was very lax there was a lot of criticism and now that enforcement is moving into a higher gear there is equally a lot of criticism.

Deputy Dempsey.—I am not particularly referring to the criticism. I know that people will complain when they have to pay tax; all of us do. I am not particularly concerned about that. I am concerned about the criticism of the methods being adopted by the sheriffs for the collection. I understand your position. You have told me you cannot make a comment on that. I accept that. Do you actually get to scrutinise the bills for expenses that the sheriffs submit to the taxpayers? You do not at any stage either?

149.Deputy McCreevy.—On paragraph 18, regarding the collection of the amounts that were referred to the sheriffs. There are comparative figures for 1984 and 1985. They say they have them every year. If you add up in 1985 the numbers that were on hand at the start of the year and what were referred during the year you get a figure of 156,000 cases. Those returned paid by the sheriff were 6,360. It is a very small percentage. But since those figures would have been compiled there is now a new kind of Revenue sheriff and there is now a totally different procedure pertaining. Those figures would refer to the old county registrar system and the sheriff system. In lots of counties, to be honest about it, it was not enforced like normal civil debts. Now that the Revenue sheriffs are operating, it is totally different. This brings me to the point Deputy Crotty made earlier, and which I have experienced, that cheques are lying around in the Revenue Commissioners and not being cashed. That happens. It is due to the staffing problems there and it has been dealt with at length. But an amazing system had grown up in the past year. If a taxpayer sends in his PAYE, VAT or income tax to the Collector General for, say, the month ended, and such-and-such was PAYE and if in the meantime it has gone to the sheriff for collection, it will take three weeks or a month before someone in the Collector General’s office will get around to dealing with it. They will not handle the cheque at all. They will send you back the cheque and say “Pay it to someone else”. People end up getting back the cheque and they have to pay it for whatever month it was. Then it might be another three months before it will end up coming from the sheriff. He will send out a demand from his office. The demand from the sheriff’s office will probably be based on an estimated assessment for that month, whether it is a PAYE estimate, a VAT estimate, or income tax. Take a simple case like PAYE for a month. The Revenue Commissioners can be done out of the money. No one will accept the cheque, and then it all gets into a rigmarole with the sheriff. I think that when people send cheques to the Collector General made out to the Revenue Commissioners, they should take the money and be glad they can cash it, like any normal person in business would. It has been getting worse in the past couple of months. Since the process of referring things to the Revenue sheriff has been speeded up people are sending in cheques for PAYE for the month ended 5 June say. After a month you will get back the cheque saying they cannot take it now. It is causing all kinds of problems. It is the agreed amount, anyway. It is probably the right PAYE return. I am talking about the normal multi-PAYE return, or VAT, or whatever is the case. I ask the Revenue Commissioners to take the money and lodge it. By sending back the cheque to the taxpayer, he might end up by not paying it at all then?

Mr. Curran.—Yes, in fact just recently I have become aware of this point and I have asked that the problem be studied specifically to see what is the best thing to do. It is not just quite as simple as accepting the money, because there can be other issues involved. One possible thing to do would be to send the cheque immediately to the sheriff. The sheriff would then at least have a cheque. It is better than sending it back to the taxpayer.

Deputy Desmond.—What happens if he lodges the money to his own account? You might get a cheque off him from his account some months later?

Deputy McCreevy.—I will just give a simple example of what I mean by this. We will take the PAYE, just to make is simple. For the months 5 January, 5 February, 5 March and 5 April, say a person’s business was in a financial position to pay in those returns at the time. If they are not in by a month or two, estimated assessments are raised for that period. It will eventually end up that the demand for the estimated assessments will go to the sheriff for collection. Suppose in the month of December the taxpayer, without having heard from the Revenue sheriff, decides to complete the returns, send in the cheque with the P30 or the VAT form for the right amount. It will end up going to the Collector General’s office. The right amount is probably a lot less than the estimated assessment. At any rate, a month used to pass before anyone in the Collector General’s office would get around to doing anything about it at all. They send back the cheque and say “We cannot take that cheque”. At this stage the sheriff might not have got on to you at all about it. I was advocating to Mr. Curran that they take the money rather than sending it back. The taxpayer thinks he has paid the amount. Then he finds out it has not gone through his bank yet; he probably does something else with the money anyway, and ends up not paying it at all. I am just advocating that they take the money.

Mr. Curran.—As I said, there is a difficulty there which we are studying. I would be glad to come back to you later when we have concluded on what is the best way to handle it. It is not just as simple as that when the thing has gone to the sheriff. However, we will investigate and will produce guidelines for dealing with these sort of cases.

Deputy McCreevy.—Since the process has been speeded up in referring things to the sheriff, more and more the Collector General’s office has washed its hands of all collections — it has gone to the sheriff and that is it. This brings me to another point. With the advent of the Revenue sheriffs, and the speed at which now things are going to and from the Collector General’s office, in trying to make a settlement for arrears of taxes by way of stage payments now if it has gone to the sheriff you can get no one in the Collector General’s office or the Revenue Commissioners to make any agreement whatsoever. If you go to try to make a settlement with the Revenue Commissioners to pay it over whatever the period they might give you — and they have been pretty generous by and large — now they say; “We cannot touch that anyway because that has gone to the sheriff.” I agree with Mr. Curran that the advent of Revenue sheriffs is a good procedure for speeding up the system. But it is making life quite intolerable now in lots of other areas particularly where taxpayers or their agents are trying to reach a settlement. Now, if it has gone to the sheriff, as most of it would be, you cannot get that brought within the settlement system at all. That is a shortcoming in the present procedure.

Mr. Curran.—All I would have to say on that is a general comment and it is this: for years past there was the real difficulty about enforcement, because we all know what the problems were. With the advent of the new sheriffs we hope that the whole enforcement system will become much more active. It is going to take a while for the message to get abroad in the country that this new system actually has a cutting edge and that the new system means what it says, and that people will sooner rather than later come to realise that it would be much better for them to come to the Collector General early and quickly. If they have a problem the Collector General will be as sympathetic as possible about agreeing arrangements for instalments to cover arrears. But they will have to get the message that in the end it is going to be more expensive to deal with the sheriff than if they came and dealt with the Collector General. This is part of the whole policy in relation to the sheriffs.

Deputy McCreevy.—I agree with what the Revenue Commissioners are doing, that it is speeding up things and it is going to improve things. I predict that this time two years the amount that will be down as not collected will be a totally mythical figure. It will not even be 10 per cent or 20 per cent because the system will have speeded matters up so much.

Deputy McCreevy.—I have been saying that for the last six months. I presume we are finishing soon?

Deputy McCreevy.—There is another point that perhaps we could deal with on another day. If you refer to previous reports about the question of interest on over-due taxes, and looking back at the 1982 account when the then Chairman, Mr. McMahon, was before the body, you will see that it was discussed at that time. It is the whole question of interest. It is too late in the day to discuss it now but I would like to take the opportunity to raise it again. I think the Revenue Commissioners rightly used to operate the system previously that they had discretion under the general matters of care and management. As a result of the Committee of Public Accounts, more than anything else, they ended up by doing away with that good system they had regarding the waiving of interest etc. The problem now is that the Collector General’s office will tell you that they have no statutory power to remit interest. It is too wide an issue to go into now, but I wouuld like an opportunity to raise it again. I would not agree with the views of some of the then members of the Committee of Public Accounts. I think the system the Revenue Commissioners used to operate was by far the better system. It was more practical and more beneficial in the long term than what is applying at present.

Chairman.—Over the next three months the committee will be undertaking an examination of the Office of the Revenue Commissioners, and certain matters related to that, so it might be an opportunity for the Committee to look at that particular area.

Deputy McCreevy.—I am not thinking about the present Chairman or any of the previous Chairmen. I think it was as a result of what was said by the Committee of Public Accounts and what was interpreted, and by the Comptroller and Auditor General, that they went back to interpreting the law just as it was.

150.Deputy Crotty.—There are just a few points I want to raise. First of all, I want to say that most taxes are paid and collected on time. A small element of taxation causes problems. I am talking in particular about the taxes that employers collect, PAYE, VAT, PRSI. I was glad to hear the Chairman mention that he would like people who have a problem to approach the Collector General and discuss it. That is the way it should happen. Basically, from a human point of view this does not happen and I think cannot happen. The step we have to take from that is: would it be possible for the Revenue Commissioners to have a local officer to contact people who have not returned? I am talking about people who pay their VAT and PRSI on a regular basis and for some reason returns are not made. That firm, business, company are usually running into problems. It is my experience that many good firms have gone into liquidation and receivership because the problem was not tackled usually by the owner, for one reason or another. The problem had gone beyond them before the Revenue Commissioners moved in. Would it be possible to appoint a local officer to approach this type of firm — the number is not that great — the majority of people pay up — to say “Let us talk about your problem and see if we can sort it out”? I have one particular firm in mind about which I made representations, where a man ran a very successful firm for many years, he became old, and the business went beyond him. All these taxes had accumulated before he handed it to his son and wife who ran it very successfully. I might add that I had a grave task with the Revenue Commissioners to get concessions for them so that they could continue in business. Now they have a very successful business, employing 25 male people in first class work. It would cost the IDA a lot of money to have that done. I have no doubt whatsoever that, if an officer of the Revenue Commissioners had approached the father when the problem arose, it would never have arisen. There must be cost benefit there, from two points of view. First, it saves the loss of jobs, secondly, it will bring in revenue on time, because the problem is tackled and, thirdly, it saves the final loss of revenue through a liquidation or receivership to the Revenue Commissioners. From three points of view there is cost benefit there. It is vital that this area should be tackled.

Mr. Curran.—You have in mind a local representative of the Collector General? You are not arguing about the assessment; you are arguing about the actual collection process?

Deputy Crotty.—Yes. I am suggesting that where a firm does not make its normal return a local officer is designated. If the firm has not made its return would you approach them and have a friendly discussion rather than go in and make a demand? Just as you mentioned, you would like firms to come to the Revenue Commissioners to discuss their problems, but that will not happen.

Mr. Curran.—There are two aspects to this. There is the question of a firm approaching the Revenue Commissioners, in the person of the inspector of taxes, to try to agree on what the liability is, what the accounts are, or whatever. We have already a lot of local tax offices around the country. The other aspect to it is the Collector General, the collection process which we all know is a different process. That is completely centralised at the moment in Dublin. If I understand the Deputy correctly, he is referring to the collection process and, on that, all I can say is that we will certainly look at it. Offhand, I think if you wanted to set up a network of people who would give individual attention to firms it could be quite costly in staffing, but we will have a look at it.

Chairman.—We have given this a good airing. You are going to have a look at that particular point.

151.Deputy Crotty.—One other item Chairman, it is something that came to my notice this week. It is in relation to the capital acquisitions tax. Is an effort being made to collect capital acquisitions tax, inheritance tax, this type of taxes? What efforts are made to collect taxes due?

Mr. Curran.—I do not have any specific comment to make on that. We make the same effort as we do in relation to other taxes. If you have a particular case or difficulty I would be glad to look at it.

Deputy Crotty.—Would you be surprised to hear that a return that should have been returned in 1977 has not been returned yet and the people concerned have been contacted three times regarding the collection of this? I found it extraordinary that taxes were due and that the last contact before 1987 was in 1983 when they received a demand? The result is that the interest is now more than the original sum. I feel it is extraordinary from two points of view. First of all, it is not fair to the people concerned that this tax was not pursued and that this penal interest was allowed to accumulate. This interest would not be as severe if taxes were collected on time. I agree with the measures that are being taken. I know that difficulties are arising about the sheriffs, but in the longer term it will be to the benefit of the taxpayer because you are doing nobody a service to leave tax there and have this penal interest accruing on it. Secondly, this was tax due to the State which would have been paid and it was not pursued. I find that extraordinary. I will give the Accounting Officer details privately. I feel that it should have been raised publicly here because it is another aspect — perhaps you have not the staff, and that is what I am told in the office. But if we have not the staff it is not a reflection on the collection that ten years could go and three reminders in ten years?

Mr. Curran.—The best I can do is, if the Deputy would kindly send me a note or let me know the case or the details. I would be very interested personally to go into it.

Deputy Crotty.—You might as a result investigate the complete collection in this unit?

Chairman.—A brief question from Deputy Dempsey and then we are finishing on this.

152.Deputy Dempsey.—How often do the sheriffs actually submit returns to the Revenue Commissioners?

Mr. Curran.—They are supposed to submit reports at monthly intervals. They are supposed to remit the money as soon as they get it.

Deputy Dempsey.—Would Mr. Curran be able to furnish me or the Committee with an account of the total warrant for each sheriff since they came into existence and the monthly returns made for each sheriff.

153.Chairman.—We will note paragraph 18. You have noted the various comments of the Committee, Mr. Curran, and we will be coming back to that. We have also dealt with paragraph 19. Paragraph 20 of the Report of the Comptroller and Auditor General reads:—

Suspense Account

In the year under review an official of the Revenue Commissioners contrived to have payment made in respect of a number of travelling and subsistence claims constructed, processed and passed for payment by himself. I sought information as to the circumstances in which the irregularity was perpetrated and whether internal control procedures had proved deficient in this case. I also inquired as to the outcome of the investigation into the case and the steps taken to recover the amount involved, £2,605, which, meanwhile, has been charged to a suspense account.

Mr. McDonnell.—This was just a one-off situation. It was a question of controls which I was concerned about.

Chairman.—We will turn to Vote No. 9. What are the subscriptions to international organisations — subhead H?

Mr. Curran.—I am glad you asked me that one because it came up at the last meeting too and I was able to spend time on the first item there. In the meantime I have explained the Customs Co-operation Council. The other one is the membership of the International Union for the Publication of Customs Tariffs. I have to tell you, frankly, that as far as we are concerned we get no value whatsoever from this organisation. We made an effort a few years ago — I was personally involved — to terminate our association with it. It costs quite an amount of money. It costs more than the Customs Co-operation Council. In the end I think the decision was largely taken on the basis of advice from the Department of Foreign Affairs that this organisation, which is based in Brussels, is looked on by the Belgian Government as something important. They are sensitive on the subject, and it would have been difficult for us to get out of it. I have raised the question again.

Mr. Curran.—Take, for example, the national tariff of a South American country. It translates that from the original Portuguese into German, English, French and Spanish. It then circulates those translated tariffs to various member countries around the world. We have recently taken an initiative and have suggested to the Department of Finance and the Department of Foreign Affairs that this is no good to us and that it is time that we terminated our association with it.

Mr. Curran.—Currently, it is nearer £15,000. In the year we are dealing with here, December 1985, it cost £12,792.

Chairman.—Could Finance look into that and see what could be done about terminating this if the Revenue feel we should?

Mr. Curran.—Correspondence has already been initiated and I feel sure that Finance are looking into it.

154.Deputy Crotty.—On subhead F — Law Charges, Fees and Rewards — what are the law charges, fees and rewards there?

Mr. Curran.—Counsels’ fees, seizure rewards, revenue legal expenses in respect of legal documents, service of summons, fees to external solicitors, things of that sort.

Mr. Curran.—They would be concerned with seizures made by the Customs and Excise.

Mr. Curran.—No, they are seizure rewards. But we do pay rewards for information.

Deputy Crotty.—How much is that? What does it amount to? Is it not documented?

Mr. Curran.—We do not have it detailed. We have £197,000 for rewards, including illicit distillation and Customs and Excise seizures.

155.Chairman.—What is the present situation between the Revenue Commissioners and the European Community regarding the restrictive practice of access to the Republic — people who have not been out of the country for more than 48 hours? Has that been raised with the Revenue Commissioners by the European Community?

Mr. Curran.—Yes. The Commission has written to us asking our views, which is the normal first step in a process which would eventually lead to the Court if they pursue it to the end.

Mr. Curran.—It has been very successful in stopping what one might call the coach loads of day-trippers going North for shopping trips. It has almost completely eliminated that traffic. It has also stopped the day trips on the sea routes.

Mr. Curran.—That is a matter for the Government and I have not heard that they have any change in mind, but that is a policy matter.

156.Deputy Desmond.—Would you agree that the community’s actions are likely to reach finality within, say 12 months?

Mr. Curran.—I could not say. Sometimes these procedures take longer than others.

Deputy Desmond.—Now that they have written to you and initiated the third stage of action——

Mr. Curran.—That is the first stage of action — not to prolong it. Technically it will be a matter for the Minister for Finance to respond to the Commission in relation to this.

Deputy Desmond.—But the most you would hope for is another year’s respite?

Mr. Curran.—It could be one or two. I do not know. This is a bit of guesswork. You must reckon that in the end if it does go to the Court, the Court could conceivably come to the view that our interpretation is correct and that these people are not, in fact, bona fide travellers.

Deputy Desmond.—But the likelihood of that, with respect, on the basis of your own submissions is rather remote. Could I ask you a final question? Where you provide duty free facilities in particular installations, does the operating authority — for example, duty free in Dublin Airport — pay you a fee for your supervision of their duty free facility? Or, say, the B & I boat?

Mr. Curran.—What happens is, that if we have staff there for other purposes, as we normally have, where we approve a port or an airport, then, as part of their normal functions they will supervise the operation of that. There are two groups of staff involved. There are the staff who check the records. These relate essentially to small warehouses. It is operated on that system. They check the records, both in and out. The other part of the control is the preventive control of people, physically watching, to make sure that the stuff goes out and does not come in. There are two legs to the control.

Deputy Desmond.—Suppose Sligo Airport want to operate a duty free and they have a shop, your services into that are effectively free of charge?

Mr. Curran.—No, not necessarily. It depends. We have different categories of airports. Depending on the volume of traffic if the traffic seems to be of a certain level, we say it would then be justifiable for us to base some staff there, in which case we will approve the thing and we just do that as a normal trade facilitation measure. We do not charge. But, for most of the small airstrips around the country, we do charge for attendance.

Deputy Desmond.—As a matter of interest, do you charge for the international airport at Knock?

Mr. Curran.—For the reason that I gave you. The volume of traffic enabled us to justify the stationing of customs staff at the airport. We had to take a decision on this last spring on the basis of traffic figures. A short time previously we had approved a duty free facility at Waterford Airport on the basis of traffic figures, scheduled services, or whatever. We looked at the figures for Knock and we said: “Well, at least they are up to Waterford, whether they are going to continue or not”. We took the decision and we said that on the basis of these figures we would do it. In fact, the figures turned out to be far greater.

Deputy Desmond.—It is rather interesting. I just wanted to get confirmation. How many duty free outlets are there in the country now?

Mr. Curran.—At airports? Dublin, Cork, Waterford, Knock, Shannon. That is five airports. You do not have duty free shops at ports, because the ships are big enough to carry the stuff themselves. There is no duty free facility at the Border — that we know of!

157.Deputy Crotty.—On Appropriations-in-Aid, the proceeds of customs sales, were more than double what you expected. Was that because there was more smuggling in that year, or had you put more officers on, what was the explanation?

Mr. Curran.—No, I would call it a casual variation. It just depends on the quantity and value of the seizures.

Deputy Crotty.—But obviously the £156,000 would relate to what you were realising in the previous year.

Chairman.—I suppose we can take it that income derived from political quiz-books will not be exempt from tax in the coming year?

Chairman.—It just remains for me to wish you and your staff a very Happy Christmas and the same to the staff of the Department of Finance. Thank you very much and we look forward to seeing you again in the New Year.

Mr. Curran.—Thank you very much. I would like to reciprocate the greetings on behalf of my colleagues and myself and to thank you for the way you dealt with our business today.

Chairman.—Thank you very much, we have some matters to deal with in private session.

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

VOTE 40: INDUSTRY, TRADE, COMMERCE AND TOURISM

Mr. J. Donlon called and examined.

158.Chairman.—You are welcome. We are sorry for the delay, but we had another matter dealing with taxation to deal with in private session. Paragraph 46 of the Report of the Comptroller and Auditor General reads:—

Section 2 (1) of the Insurance Act, 1953 (as amended) authorises the Minister for Industry and Commerce, subject to the approval of the Minister for Finance, to make arrangements for the giving of guarantees in connection with the export, manufacture, treatment or distribution of goods, the provision of such services as are specified by order by the Minister or any other matter which appears to the Minister conducive to the encouragement of exports. Under Section 2(4) of the Act any amount required to meet a liability incurred by the Minister arising from a guarantee given under Section 2 (1) must be initially advanced out of the Central Fund and subsequently repaid to the Central Fund out of voted moneys.

At present the Minister’s function under the Act is exercised mainly through the operation of an export credit insurance scheme approved by the Department of Finance under which exporters may insure against the risk of default in payment to the extent of 90 per cent of the value of goods exported by them on credit terms. Under an agreement drawn up between the Minister for Industry and Commerce and the Insurance Corporation of Ireland (ICI), the insurance company, acting as the Minister’s agent, issues policies of export credit insurance and collects premiums on the Minister’s behalf, out of which it retains an agreed percentage to cover its administrative costs and provide an agreed level of profit. The balance is surrendered to the Department and brought to account as Appropriations in Aid of the Vote (Subhead Z).

The cost of each claim is met as it arises by ICI which is also responsible for seeking recovery from defaulters. Periodic advances are made from the Central Fund to recoup ICI the net cost incurred by it in meeting claims in respect of default and provision is later made in the Department’s Vote to repay to the Central Fund the amounts advanced.

Section 3 (1) of the Act requires that an annual account of receipts and expenditure relating to the Minister’s function under the Act be audited by me and presented to the Oireachtas. The last account submitted to me and audited was in respect of the year ended 31 December 1981.

Arising from default by a Nigerian company in meeting payments due to an Irish exporter a claim for £1,918,500 (90% of the amount defaulted on) matured on 30 December 1982 under a policy of export credit insurance issued by ICI in 1981. However, instead of meeting the insurance claim in the normal way, which would in turn have required an advance of that amount to be made from the Central Fund, the Department agreed in January 1983 that a loan arrangement be entered into between a bank, the exporter and ICI whereby ICI, whose expenditure would in due course be reimbursed by the Minister, guaranteed the repayment of and paid interest on £1,918,500 being 90% of a loan provided by the bank to the exporter.

In 1983 a sum of £512,394 was recovered from the Nigerian company and offset against the loan, thus reducing the amount guaranteed to £1,406,106.

The loan was repayable to the bank by the exporter in US dollars but, because of the fluctuation of the dollar exchange rate against the Irish pound, a large exchange loss accumulated. Under the terms of the loan agreement the exporter was liable for the full loss but in October 1984 the Minister for Finance agreed to the assumption by the State of liability for 90% of this loss, subject to the Department of Industry, Trade, Commerce and Tourism ascertaining whether this was permissible within the terms of the export credit insurance scheme and was within the ambit of the Department’s Vote.

The loan agreement was terminated in January 1986 when the Department paid £1,569,349 to ICI comprising £1,406,106 in respect of the balance of the loan and £163,243 in respect of the exchange loss. Interest totalling £496,229 paid by ICI during the period of the loan had also been met by the Department making the total cost incurred £659,472.

I have asked the Accounting Officer why the loan arrangement was entered into in January 1983 instead of meeting the insurance claim in the normal way and whether any other similar arrangements which had the effect of deferring payment of valid claims and incurring additional expenditure had been entered into. In addition. I enquired whether it had been ascertained that the State’s assumption of the exchange loss came within the terms of the export credit insurance scheme and within the ambit of the Department’s Vote and I have expressed my concern to the Department of Finance that it should have sanctioned this part of the arrangement while apparently being doubtful of its propriety.

I have also sought information regarding the action taken to recover from the Nigerian firm the expenditure totalling £2,065,578 incurred in this case as well as £533,745 on which it also defaulted and which was the subject of another insurance claim by the same exporter in January 1983.

Mr. McDonnell.—There are three paragraphs in my 1985 report on this Vote and they all deal with the same subject. It would be sensible to take them separately. They deal with the export credit insurance scheme. Paragraph 46 is a long paragraph which gives an outline of how the scheme operates and its implications for the Exchequer. It goes on to refer to the annual accounts which I get of the operation and the transactions under this scheme. I have since received the outstanding 1982 and 1983 and 1984 accounts. The audit of those accounts is almost completed. The latter part of paragraph 46 goes on to deal with a specific loan arrangement, which ICI, the Insurance Corporation of Ireland, as the Minister’s agent under this scheme, entered into with a bank and an exporter. This was an alternative to the normal procedure of paying a claim which had matured. A claim normally matured following default by the customer abroad. The paragraph outlines the extra cost incurred as a result of interest payments and exchange losses. Since the date of my report the Accounting Officer has told me that this loan arrangement was entered into following negotiations with the Nigerian company, because they agreed apparently in these negotiations to pay the amount owed on a rescheduled basis, and offered default interest. The loan was arranged in the expectation that it would be a short term arrangement. The Attorney General and the Department of Finance were consulted and they did not raise any objection. The Nigerian company, did not honour their commitment and the claim eventually had to be met in the normal way. I refer there also to the question of whether other similar arrangements might have been made and the Accounting Officer told me that there were two similar arrangements made but that the insurance company have been told that they should not do so any more without the approval of the Department. A specific point there relates to the exchange loss, because this arose in this case and would not arise in other cases if the claim was paid when it matured. In regard to that, the Accounting Officer said that it was the Department’s view that this exposure to exchange loss was properly classified as a guarantee under the 1953 Act and the payment of the exchange loss could be seen as the honouring of a guarantee. In this regard, I refer there to the sanction of the Department of Finance. It seemed to me that the terms of the sanction given by the Department of Finance in this case were a little unusual, because when requested to permit this new category of expenditure under this scheme, the Department of Finance seemed, at first, to be opposed to it. What struck me as unusual about it was they then more or less left it to the requesting Department to decide for themselves if the expenditure was covered by the terms of this scheme. When I put it to them, the Department of Finance said that when they were initially opposed to the proposal they were of the opinion that its acceptance would amount to a widening of the scheme, but they did not at the same time regard it as going outside the legal ambit of the scheme. They were later told by the Department who had requested this sanction that it came within the terms of this scheme and within the ambit of their Vote. The important point for the Committee would be the recovery of the amounts paid out under this scheme. The Accounting Officer outlined the action taken there. This included visits to Nigeria by Department officials, getting legal advice on litigation and considering legal action against the Nigerian company outside of Nigeria. To date, none of the amount outstanding has been recovered.

Chairman.—Are there any further accumulated interests, or costs on top of that?

Mr. McDonnell.—I do not think so, but perhaps the Accounting Officer would confirm if that is true.

Chairman.—The total loss was put at £1.5 million. Have the Department of Finance any comment to make on the comments of the Comptroller and Auditor General on the circumstances in which they gave approval for this?

Mr. P. Howard.—The Comptroller and Auditor General has referred to it as unusual. I would not regard it as unusual. It was turned down originally and subsequently sanctioned. There was an impression taken by the Comptroller and Auditor General that the Department of Finance regarded the proposal as lacking in propriety. We did not see it that way. We saw it as widening the terms and the scope of the scheme and eventually it was approved by the Minister on the basis indicated.

Chairman.—Why was this situation allowed to develop and what was the objective of the Government in allowing this to go ahead. What was their ultimate objective?

Mr. Donlon.—Basically, it can be explained on the basis that it was the first significant claim that had arisen on the scheme, and it would have given rise to such a charge that it was considered that the resultant increase in premium which would be necessary would have been quite substantial and in many instances might have been unacceptable to industry. The objective of the scheme, obviously, was to facilitate the export of goods and as a matter of general policy, we would be doing such things as would facilitate such exports. Additionally, there were contacts with the Nigerians which gave us every reason to believe that an arrangement could be reached with the Nigerian buyer, under which repayments could have been effected within a short period of time. Our initial experience in that regard was such that we had every reason to believe that it would work out like that. We did in fact receive a payment in excess of a half million pounds within the coming into force of the arrangement.

Mr. Donlon.—It was considered to be so. The company was owned by a person of high standing in Nigeria.

Mr. Donlon.—I cannot say whether the specific entity is still trading but the proprietor is still running business in Nigeria.

Mr. Donlon.—Yes. We have been in negotiation with the company in question or rather the proprietor for some time, most recently at the end of 1987. The Comptroller and Auditor General in his report referred to the fact that the company — and this is the subject of a separate paragraph — negotiated with the buyer with the result that the debt was construed as an uninsured debt. Efforts were made to seek to ensure the repayment of those debts. Nothing was achieved up to the end of 1987, when further such meetings took place. We are now confident that in the case of two amounts which were covered, promissory notes will issue from the company within a short period, that a further amount will be admitted by the Nigerian Central Bank for payment and we would expect that a promissory note would issue in this case. As to the final amount, we are unclear at this stage as to what the outcome will be but we envisage that on foot of current contacts we will have substantial repayments over the next number of years.

159.Deputy Kitt.—I wish to ask a question on the number of Irish exporters involved. The amount of State funds involved was £4.5 million. There was supposed to be no net loss.

160.Deputy Foley.—I would like to ask Mr. Donlon about the export credit insurance scheme which was approved by the Department of Finance under which exporters may insure against risk of default in payment to the extent of 90 per cent of the total amount exported. In regard to the figure mentioned, how many companies have made claims for loss under that scheme?

Deputy Foley.—How many exporters made claims in the period under review in paragraph 46?

Mr. Donlon.—Again I do not have the information. This paragraph is concerned with the transactions of one particular company and that company would have constituted the major loss.

Deputy Foley.—After the first shipment, if the funds were not forthcoming — payment was on a credit basis — surely the second shipment should not have gone through?

Mr. Donlon.—There would have been a credit period in existence and we would not have known for some time that the amount was not forthcoming.

Mr. Donlon.—It varies. In some cases the credit period is 18 months. Then we have a claims waiting period, following the expiry of the credit period, wherein the amount might be overdue but we would not actually pay the claim until the expiry of another period.

Deputy Foley.—As a result of that case, has the export credit insurance scheme been updated?

Mr. Donlon.—In a number of respects the arrangement between the Department and ICI, who operate the scheme on behalf of the Minister, has been addressed. We have continuously delisted countries which are regarded as bad risks. There was also the introduction of a special scheme where it was recognised that exports to certain countries had an attendant risk which ordinarily would not be covered under the standard scheme and special decisions were taken in respect of those.

Deputy Foley.—As a result of this experience have the periods of credit been reduced?

Mr. Donlon.—The actual credit facilities in each transaction vary depending on the country to which the product is being exported or the risk assessment etc.

Deputy Foley.—I accept that but as a result of this experience have you reduced the period of the credit time?

Deputy Foley.—Have the insurance company amended their legislation with regard to credit facilities?

Mr. Donlon.—It is not governed by legislation; it is governed by an agreement between the Department and the company. The period of credit varies and it is difficult to set a standard, but in special cases the Department decide what period of credit should be offered.

161.Deputy Colley.—From which party did the suggestion as regards the loan arrangement come? I note that in the paragraph it says “the Department agreed”.

Mr. Donlon.—As to who precisely suggested it I do not think I am in a position to say but it was something that emerged by virtue of contacts between the Department, the company and the buyer. This arrangement was made because of the very good chance that we were going to achieve repayments within a short period and in order that there should not be such a draw on the Exchequer. Basically we considered that the decision was to the benefit of the State at the time.

Deputy Colley.—Could it not be said that the same result could have been achieved by simply allowing the ICI to pay the claim and if there was recovery, which of course the Department should have pursued, it could then be repaid to the insurance company or to the central fund?

Mr. Donlon.—In every case there is a requirement that every effort be made to ensure repayment, even after claims have been made. That would not have given rise to any difference from what was standard practice, but it was felt in this case that we should not go down the road of standard practice because of the real possibility of getting the repayment within a short period. In many other cases we would not have that indication.

Deputy Colley.—I am puzzled by that because if there was such a chance of getting the repayment within a short period why move away from standard insurance practice and go for a loan arrangement which involved foreign currency and perhaps fluctuations which was more complicated.

Mr. Donlon.—The payment at that time would have given rise to a charge against the account and it would have been voted for in the following year. We felt that first of all it should not be necessary for the State to provide that money in circumstances where it was believed that we would obtain the money through a different route. Secondly, the impact that payment, given our brief that we should operate at no cost to the Exchequer, given one year with another, would have been quite a substantial increase on the premium for the operation of the scheme and, therefore, an increased penalty for industry in exporting. Thus it was decided not to make the payment.

Deputy Colley.—What you are saying is that the scheme was not sufficient to cover the kind of expenditure that might be expected to arise. Obviously in this case you had to enter into a different arrangement.

Deputy Colley.—The scheme for the premiums allowed for in that year would not have been sufficient.

Mr. Donlon.—The premiums are not based in anticipation of claims. It is a retrospective balancing effort.

Deputy Colley.—You mentioned that there had been negotiations with the purchaser in Nigeria. I think you said that there had been talks with the Nigerians. I would be interested to know if there were any contacts between the Department here and the Nigerian Government to sort out the matter, given that such a large sum was involved?

Mr. Donlon.—The contacts, as I understood at that time, were between the buyer, ICI, the exporter and the Department. I am not aware that the Nigerian Government were directly involved. It was understood at the time that the buyer in question was closely associated with the Government.

Deputy Colley.—That is why I am wondering if any consideration was given to Government-to-Government or Department-to-Department contact in order to try to resolve the matter.

Mr. Donlon.—I cannot say whether consideration was given at the time to this type of Government-to-Government contact, but I am sure it was believed that the contacts that were in existence at that time were——

162.Chairman.—I am sorry to interrupt you, Mr. Donlon, I just want to draw a matter to the attention of the Committee. This room was not selected, as you will be aware, with my approval this morning. In fact I threatened to adjourn the meeting if we had to go ahead here but since we had Mr. Donlon and Dr. Miriam Hederman-O’Brien lined up I agreed to the meeting going ahead. There is either a row, a party or some sort of raucous event going on in the room next to us, it is certainly unparliamentary and if it continues I am going to bring this meeting to a conclusion because it is totally unsatisfactory. I have already asked the Superintendent of the Houses to come over and observe the situation. I am totally dissatisfied with it. Please continue, Mr. Donlon.

163.Deputy Colley.—Therefore, you are not aware of whether any consideration was given to that.

Mr. Donlon.—No, but I suggest that the nature of the contacts at that time were such that there was no reason for doing anything other than continuing the contacts that were in existence.

Deputy Colley.—You mentioned that it is expected that some promissory notes will issue in the near future. What company or person are to issue these?

Mr. Donlon.—The promissory notes will be issued by the Nigerian Central Bank against the company or the proprietor. As I have said, I am not clear as to whether we are dealing with the same entity but it is certainly the same proprietor. In this area, in so far as uninsured debts are concerned, and this was classified as an uninsured debt in the light of the contacts we had made, Nigeria is at the moment involved in rescheduling agreements relating to its uninsured debt. This entails quite a detailed check procedure by the Nigerian Central Bank and an international bank which is acting on its behalf. In cases where claims are agreed between the buyer and the authorities in Nigeria such claims are admitted by the Central Bank and indications of the issue of promissory notes are given by the Central Bank. In this case, we understand that two promissory notes are about to be issued. We believe also that in respect of a third amount we have a very good chance of an early indication that a promissory note will also be issued. As regards the amounts covered by these notes, in the case of the first two we are talking about $860,000 and in the case of the third $730,000.

Deputy Colley.—Therefore, at present the first two are more likely to issue than the third.

Mr. Donlon.—We believe there is a very good chance of a third as well. In so far as the balance is concerned the person in question indicated as recently as four weeks ago that in the event of those particular transactions not being admitted by the Nigerian Central Bank he will enter again into discussions with us with a view to reaching an amicable solution. At this stage, I am not in a position to say what might or might not be an amicable solution.

Deputy Colley.Can you give me some indication as to the type — I am not asking exactly what was being exported — of goods we are talking aoubt here?

164.Chairman.—We are talking about something fishy, I think. Can you tell us the name of this company?

Mr. Donlon.—We would not normally disclose the information and the detail is such in this case where, as we go on, we refer to possible threats to the existence of the company etc. that I think it would be undesirable to do so.

Chairman.—That is something the committee will have to decide on for itself but if people are continuing to trade and they owe this State some money we would have to be satisfied as to who these people are and why the State is not pursuing them. If they do not want to meet their liabilities to the State it is their problem. We have had this problem before and I do not think there should be any difficulty in naming the company concerned.

Mr. Donlon.—First, we are pursuing the matter with the people in question. It is not a question of the State not pursuing it, we are in there and we expect to have early repayments. We would be hopeful of further progress over the next period.

Mr. Donlon.—As I have mentioned, we expect early issue of promissory notes in respect of a sum in excess of $800,000 and we are confident that another promissory note will issue in the amount of $700,000 plus. That will leave a balance of about $2.1 million. As I have indicated, the buyer in question has indicated that if these amounts are not cleared by the Nigerian Central Bank he will be willing to enter into further negotiations with us with a view to reaching an amicable solution.

Mr. Donlon.—I could not gauge with any degree of accuracy what impact the publication of the name of the Nigerian company might have in so far as they are concerned. We are interested in maintaining good relations with them until such time as we can get as much money as possible from them.

Mr. Donlon.—Yes, but so far as we are aware they are not doing any business with this country, certainly nothing under the insurance scheme.

Chairman.—I am in the hands of the Committee, should we seek the publication of the name of this offending company or not?

Deputy Naughten.—I think that if Mr. Donlon circulated the name of the company to the members of the Committee, that would be adequate.

Deputy Naughten.—If the normal procedures were adhered to in this case, how much would the premiums which exporters have to pay have increased by?

Mr. Donlon.—I understand that if the money was recouped within a period of 12 months the increase would have been of the order of 300 per cent.

Deputy Naughten.—A 300 per cent increase on the cost of insurance to exporters?

167.Deputy Colley.—Have the Department given consideration to the idea of going back to basics and allowing the ICI or the State to take this on as an insurance debt? I have not thought this through, so it may not be feasible. We have now entered the realm of it being a loan. The first thing that occurred to me was whether the US dollar’s fluctuation recently had affected the repayment of the amount to be repaid or whether it had reduced the currency loss.

Mr. Donlon.—The loan arrangement has now been terminated and the currency exchange loss which has been referred to has been disposed of. No further charge will arise there. In the context of our relationship with the buyer and the question of repayment, such agreements as will be reached with him will provide for an exchange rate.

Mr. Donlon.—By virtue of a decision to treat this arrangement as a claim against the scheme.

Deputy Colley:—In fact the first part of the question asked whether you had done that?

168Chairman.—If there is nobody else offering, I think what we will have to do is to mark it for further information to be forwarded.* Therefore, you can let us know the up-to-date position regarding the outstanding amounts you are pursuing and we can examine progress under the 1986 accounts later this year. Is that agreed? We will now move on to deal with paragraph 47. Paragraph 47 of the Report of the Comptroller and Auditor General reads:—

The Agreement between the Minister for Industry and Commerce and ICI referred to in the previous paragraph states that, taking one year with another, the operation of the export credit insurance scheme shall involve no net loss to State funds. While the rate of premium charged to exporters availing of the scheme is periodically reviewed, an examination of departmental records showed that in the years 1979 to 1985 the total net cost of claims paid, excluding provisions for future claims, exceeded the total net premium income by some £4.25 million. I have asked the Accounting Officer why such a material shortfall has been allowed to accumulate. I have also sought information on the action proposed to eliminate the shortfall and when it is expected that this will be achieved.

It was also noted that in a number of cases in which insurance cover up to a maximum of £142 million could be provided under the export credit insurance scheme in respect of exports to Iraq, Eqypt, Kenya and Nigeria, the Government decided that special arrangements, not involving premium increases, should be made to meet any losses which might arise. I have asked what is the present contingent liability of the Minister in respect of the policies relating to these exports and whether a claim has been made under any of them because of default in payment to the exporter.

Mr. McDonnell.—Paragraph 47 is a more general paragraph and is concerned with the losses arising on the operation of the scheme as a whole. It, first of all, raises a question in regard to the requirement that the scheme be self financing and whether this is being met in the light of the apparent deficit in premium income. It goes on to raise the question of possible losses which were to be regarded as being in a separate category and to be financed by other means which at that time had not been specified. The Accounting Officer referred to this in passing in his comments on the earlier paragraph we were talking about. About the deficit, the Accounting Officer has recently informed me that, because of the nature of the operations involved, a breakeven situation is sought over a somewhat indeterminate period of time and, given the vagaries of international trade, there is a fine line between pursuing that objective and preventing a material deficit from accumulating. He has also pointed out that the years 1979 to 1985 were difficult ones in relation to international trade and that many export credit agencies of other countries had suffered losses during that period. He has outlined to me actions taken to eliminate the deficit and these include attempts at recovery such as visits by departmental officials to the countries where the defaulting companies operate and also seeking the assistance of Irish agencies abroad. He pointed out that the deficit includes a sum of £4 million for claims paid but where the payment is held up because of being blocked in the central banks of the foreign countries as a result of foreign exchange shortages. He suggested that these amounts should be viewed in the medium term at least as assets and of course it would be their intention to pursue recovery. He went on to tell me that there had been increases in premiums in 1983 and 1986 to try to eliminate the cumulative deficit by the end of 1989 and that it was intended that new accounting arrangements would be made which would enable the Department to examine the relationship in a better way between premiums, claims and recoveries. The last part of the paragraph deals with those cases which were regarded as being in a special category because of the countries involved, and where there was to be a limit of £142 million in regard to the policies which could be written for exports to those countries, that became a figure of £222 million in September 1987. The actual total value of policies written or approved up to very recently for those four countries and within that over-riding limit was about £175 million. All of those have not been taken up and at present I understand that there are contingent liabilities of about £32.6 million in regard to policies which have been written and where the payment has not yet been received. In the case of Iraq a claim was paid but it was subsequently recovered. I hope I have not confused the committee with too many figures but that is a brief summary of the Accounting Officer’s reply.

Chairman.—Taking one year with another the operation of the export credit insurances scheme shall involve no net loss to the State funds. That is the agreement between the Minister and the ICI. Given that that is the case, why between 1979 and 1985 did the total net cost of claims exceed the total net premium income by £4.25 million and by whose authority did that take place?

Mr. Donlon.—As the Comptroller and Auditor General mentioned, out of that figure there was a sum of approximately £4 million which represented instances where payment had been made by the buyer but where, for reasons of currency exchange difficulties the exporter from here did not receive payment. Claims were made. We have suggested that these could be regarded as assets. Giving our best shot at this stage, I think the position would be that of that £4 million we will perhaps have to decide in the near future that an amount approaching £1 million will have to be written off. We will have to view our chances as being absolutely nil. In so far as the remaining moneys are concerned, we are still confident of obtaining those. That leaves quite a slight deficit of the order of £.5 million. Perhaps it might be as well to bring the situation up to date. The cumulative deficit figure at the end of 1987 is expected to be of the order of £12 million. We still have in the pipeline that £4 million which is tied up. There was an additional substantial claim which was not due to a political risk and which was paid in 1986–87. Therefore, since the scheme was introduced we have a figure of the order of £12 million deficit on business which was insured for a sum of the order of £4.5 billion. We are talking there about a 0.2 or 0.3 per cent of business insured in respect of which losses arose. That figure compares very favourably with experience elsewhere. On the specific point as to how we can achieve a situation where there is no net cost as such to the State, the decisions taken in 1986 were such that we expected that with the premium increases then envisaged, we should have reached a balancing situation by 1989.

Chairman.—What does the Comptroller and Auditor General have to say about that?

Mr. McDonnell.—In regard to the updated figure and in relation to the figure of £4 million I gave I want to say that that, as the Accounting Officer said earlier, is, if you like, the deficit on a cash flow basis, in other words, the premium income as against claims paid currently. You will notice that I referred in the paragraph to the exclusion of provisions for future claims. That was something I wondered about. I am not by any means an expert in the insurance field but I thought it was normal that the loss on an insurance operation, would have to have regard to making provisions for future claims because, after all, some of the premiums received are in relation to risks which may still be out there to be met at a future date. In support of that I want to quote something which was in the report provided to the Department by the ICI on the operation of the scheme for 1986. They said that, “as stated in previous annual reports, the cash flow accounts which have historically been applied as the reporting basis for the export credit insurance scheme do not, in our opinion, suitably provide an accurate measure of the scheme’s performance”. I just wondered about the provision element in regard to this type of insurance.

Chairman.—Perhaps the Department of Finance could comment on that. What is the situation regarding these provision elements?

Mr. McDonnell.—What I am wondering about is, if you are assessing whether you are breaking even on the insurance arrangements over a period, does one simply do what seems to be done in this case, take premium income as of today and equate that with claims paid as of today in assessing your loss, or does one on the basis that you have, after all, collected insurance premiums in respect of risks which are still out there — and some of which you may incur a loss on — make provision against future claims? I understood it to be a normal practice of the insurance business that any insurance company in showing its outturn for a year would provide in its accounts for future claims. I wonder if the same considerations apply in this situation, if we want to determine the realistic level of loss——

Mr. Howard.—As has been pointed out already, this scheme is operated on the basis that taking one year with another there should be no net cost to the Exchequer. It is on that basis that the relationship has been judged. As Mr. Donlon pointed out earlier, the premiums are determined by reference to what has gone on in preceding years, both in respect of claims which had to be met and premium income which had been got in. It appears that the operation of this scheme is not exactly analogous with what insurance companies do for their own good reasons and that if one were to look ahead and try to form a judgement on future claims where there is much uncertainty as regard current claims, one might face a situation where the level of premium that would be required and which would be borne by the exporter would be of such magnitude that the scheme would no longer be a viable proposition from that point of view. As Mr. Donlon pointed out also, the purpose of the scheme is to facilitate trade for our manufacturers and exporters.

Mr. Donlon.—Pursuant to the new agreement we have signed with ICI, a new accounting procedure in respect of the scheme is being introduced and that scheme is at present being discussed in detail between the Department and ICI. It will in future years take on board what would be regarded as being the accepted insurance method of accounting for contingent liability, projected claims or whatever. From now on, revised premiums will be geared towards eliminating the deficit and creating a fund which will be used in respect of any future claims.

Chairman.—The point is that the authority was exceeded here. The agreement sets out quite clearly that as between one year and another they should break even but between 1979 and 1985 they accumulated a deficit of £4.25 million. That is a lot of money at a time when we are cutting back £50,000 from hospitals and £100,000 from other areas. We will at least require a progress report on what steps are being taken to recover this money and, if it has not been recovered, why the amounts outstanding were not recovered.

Mr. Donlon.—In respect of recoveries, I have mentioned in so far as one case is concerned the efforts which have been made. We signed the bilateral rescheduling agreement in respect of insured debts with the Nigerian Government at the end of 1987. The Nigerian Government are at present engaged in a round of bilaterial agreements with countries around the world. Under that agreement the amount in question was £1.87 million. The agreement will provide for repayment of that amount within the duration of the agreement, which in this case is of the order of six to ten years. In the case of the uninsured debt, which was of the order of £2.13 million, I mentioned the arrangements that have been entered into by way of promissory notes from the Nigerian central bank, regarding what we would hope to achieve in so far as the balance is concerned. Those are the efforts which have been entered into. We would suggest that we have not yet reached the stage where the amounts should be written off.

Chairman.—Can you tell me how, for instance, this compares with the situation at the end of 1987. We do not want it to be taken by any Accounting Officer — with no disrespect to yourself — that all he has to do is to exceed agreements and authority, spend a morning here discussing it and it will then be forgotten. We are taking the attitude in these very difficult financial circumstances that taxpayers’ money has to be handled with greater care. Can you tell us, by comparison, what the situation was at the end of 1987 and if it has improved?

Mr. Donlon.—As I mentioned, at the end of 1987 the cumulative deficit was of the order of £12 million. We are talking basically about the £4.25 million that has been referred to by the Comptroller and Auditor General. We also had a claim arising in an area which would not have been regarded as a bad risk area. That claim was in respect of an amount of £6 million. The reason for that claim is that the buying companies in the United States have gone into Chapter 11 situations which allow for the resuscitation of a company. We have had on-going contacts with the companies in their Chapter 11 situations and we understand that as of today an offer is about to be made to us by one of the companies in question. I cannot say, in the absence of seeing what the offer is, what we might expect to recover or, if the offer will be acceptable to us. We are in there with a chance at this stage and we certainly could not consider that that amount should be written off.

169.Deputy Colley.—I wish to return to a matter that was mentioned earlier in relation to the £4.25 million deficit. I think Mr. Donlon mentioned that there were some problems relating to currency difficulties. Was that in relation to the exporting of currency in order to pay for goods in Ireland? Could you expand on that?

Mr. Donlon.—This has arisen mainly in the context of Nigeria. There have been some other small claims in Tanzania, Sudan and maybe one or two other countries. In Nigeria the economy essentially collapsed with the fall in oil prices. They had no foreign exchange income. There was no foreign exchange available within the Nigerian economy. While the amounts may have been paid in Nigeria in naira they have not been able to purchase the necessary foreign exchange.

Deputy Colley.—Is it an on-going problem and is it going to continue to be a problem?

Mr. Donlon.—No, on the basis that the Nigerian economy will improve. The Nigerian economic difficulties are being addressed at the moment under the auspices of the IMF and the World Bank. Over the last year or 18 months they have put in place such measures as they believe will get them back on their feet within, I think, a period of ten years. As part to those arrangements they have been rescheduling, with countries around the world, their existing debt and we fall into a category of that.

170.Deputy Kitt.—Between 1979 and 1985 there was a deficit of £4.25 million. Can you say how many exporters were involved during that period and in relation to the accumulated deficit of £12 million, how many exporters were involved up to the end of last year? The Comptroller and Auditor General talked about special arrangements which did not involve premium increases that were to be made. Could you give me some details on those?

Deputy Kitt.—I do not want to know about the premium increases; it is other arrangements I want to know about.

Mr. Donlon.—In so far as the operation of the scheme is concerned we have entered into a new agreement with ICI which we believe will enable us to adequately monitor the operation of the scheme by ICI. It requires a new accounting mechanism which, as I mentioned, is the subject of discussion between ICI and the Department. We expect to conclude this at an early date. The agreement allows for detailed access by the Department to ICI’s records and so on and it provides for the computerisation of the operation of the scheme within ICI. We are confident that we will have a very good fix on the administration of the scheme. We have also introduced certain limits as to where the insurance company can take decisions and when decisions will have to be referred to the Department for final arbitration. Premium increases have been put in place. We have had increases over the past three years and the most recent of the order of 10 per cent will come into effect this year. The last increase of 15 per cent was in 1986. Of the numbers of exporters who have been involved, I do not have that information available to me but we are talking about a number of substantial claims in the context of the overall total. We are talking mainly about four or five companies — it may be a little more but the amounts differ. There are also figures included in the cumulative deficit at this stage where we will have received repayment. In regard to the figure of £12.5 million cumulative deficit at the end of 1987, we have received a payment within the last day or two which will be netted off against that figure when it appears in 1988.

171.Deputy Crotty.—The Chairman asked a question which has not been answered, on whose authority were the limits exceeded? I do not think that question has been answered.

Mr. Donlon.—The only limit that there is in legislation is the overall credit limit. That limit has not been exceeded. The arrangement whereby the scheme would operate on a no cost to the Exchequer basis taking one year with another was an agreement between the Departments of Industry and Commerce and Finance. There is no question of our being in breach of any statutory provision in this regard. As I have suggested, we are not conceding that we are in breach. We are working towards a break even position. That has been the determination and that has been the manner in which the scheme has been operated all along. Of the £4.25 million, we have mentioned that we are confident of getting a substantial part of that back.

Deputy Crotty.—It was an agreement between the Department of Industry and Commerce and the Department of Finance and I should like to know if Finance have cleared it? Are they happy that this loss is accruing?

Mr. Howard.—No, Chairman, we are not happy with it and we would wish that the deficit could be eliminated and eliminated as quickly as possible. We have to recognise, on the other hand, the requirements of the exporters; their needs, what they can finance and the efforts which are being made continuously by the Department of Industry and Commerce, and other parties, to eliminate or avoid loss. We will continue with the Department to monitor the situation, to tighten procedures and increase premia to the extent that traders can accept with a view to eliminating it over the shortest possible time but we are not happy with it, we could not be.

Deputy Crotty.—Is there an interest element in the figures that we were given? There are substantial sums outstanding and I should like to know if interest has been taken into consideration.

Mr. Donlon.—Where we show a cumulative deficit figure a payment has been made and there is no interest charge arising. If one goes to the extreme end of the operation, presumably on the basis that the Exchequer is borrowing money, there might be an interest charge at the end of that, but in so far as the operation of the scheme is concerned there is no interest charge accruing.

Deputy Crotty.—How are firms which are accepted for this scheme monitored? It would appear that there are people who are actually being subsidised by the State in that they were chancey exporters because otherwise you would not have these deficits. What type of guidelines are laid down for acceptance and is there any particular area of exporting where there are continuous losses?

Mr. Donlon.—I should repeat again that in so far as the scheme is concerned, if we just take the cumulative deficit situation or figure which I do not concede at this stage is an amount which can be written off, we are talking about a loss in the operation of the scheme since the scheme was initiated of the order of .2 per cent of the business which was covered by the scheme. In our case it is a figure of £12.5 million. In the UK the deficit figure is of the order of £3 billion.

Deputy Crotty.—We are examining the accounts of the Department of the Irish State; we are not examining the English accounts.

Deputy Crotty.—It just does not justify it and, certainly, does not bear any weight with me at all. We are dealing with the situation that is presented to us by the Comptroller and Auditor General.

Mr. Donlon.—The scheme is regarded as being there to facilitate the export of goods. If one wants to regard it as a subsidy, it may be regarded as such in that favourable terms may be made available to companies who are exporting. It is an aid which is regarded as absolutely essential in exporting to many countries around the world. Our exporters are going into different markets and are being confronted by exporters from other countries who have the benefit of much softer schemes than the one we operate. We do not regard the scheme we operate as being an easy touch. In so far as the premium charge is concerned, we compare very favourably with other States. In so far as losses are concerned we also compare favourably. In so far as the type of firm who benefit from the operation of the scheme is concerned, it is across the whole spectrum. We have exports to different categories of countries classified as A, B and C where you have no political risk at all and the risk is regarded as being minimal. Such countries would be our main trading partners, the United States and most of the European countries. We have a second ranking where countries of a slightly higher risk would be involved. We do not have a list of countries which we do not provide cover for in that they are delisted. Decisions on delisting are based on both experience with the particular country in question and on the basis of our knowledge of that country’s economic situation. The risk is assessed in each case the premium in respect of a particular transaction is set having regard to the level of risk involved. Additionally, the actual conditions, the amount of cover that is granted, the credit periods, claims waiting periods, all reflect the nature of risk involved.

Deputy Crotty.—I did not get any information as to whether there is any particular area where problems have been shown in relation to bad debts.

Mr. Donlon.—The main problem we have experienced has been in the Nigerian market. Cover is not now provided for the Nigerian market. It was regarded at one stage as being a sound market. It was developing, it was booming during the times of oil price increases and so on and everyone was looking for business in that market. It went sour and we are not now covering business in that market.

Deputy Crotty.—That would relate to the £4.25 million — the Nigerian scene. That was accumulated from 1979 to 1985. Since 1985 it has increased to £12.5 million. It would appear that the situation is deteriorating rather than improving even though the Comptroller and Auditor General referred to it in a note.

Mr. Donlon.—As I mentioned earlier, the major claim that has been incurred in the scheme in the period since then has been that which has arisen in a country which would not be regarded as a high risk country from a political viewpoint. From a commercial viewpoint the buyers in that particular country were checked out to the best of our ability. The normal credit check procedures were operated. That figure was £6 million. One does not normally anticipate that in countries of the lowest risk we are going to incur claims. For that reason the premium in respect of exports to those countries is the lowest of the levels of premium we have. I should also mention that in so far as that amount is concerned we are in contact with the company and there is no question yet of having written off any of that £6 million.

Deputy Crotty.—What type of produce is this concerned in the £6 million deficit?

Deputy Crotty.—That would not be an everyday export. I think that would require special examination. I am not surprised maybe that we have run into this——

Mr. Donlon.—I disagree. In fact during a period of increasing petroleum costs there were certain interests in the United States at least, and I am sure worldwide, who set out to provide alternative energy sources. As I understand it, the actual use of windmills in the United States, in Calfornia in particular, is quite a thriving industry. There was absolutely no reason to question the commercial validity of the particular transaction. Indeed, only within the past week I read in one of the financial papers of quite a substantial billion dollar project being launched in Calfornia, setting up windmill parks. It was not regarded as a risky venture.

Deputy Crotty.—It is tilting at windmills, but in a very rapidly expanding area which was not a tested area, you get a number of chancy firms and as a result they require special consideration. I feel there is some accountability here.

Mr. Donlon.—The most thorough credit checks were carried out on these companies before any agreements were entered into. Those credit checks obviously proved to be valid and did not suggest any difficulty where the companies were concerned. The fact that the companies subsequently ran into financial difficulties has nothing whatsoever to do with the product in question. The product in question is operating and the Committee may wish to note that in the particular park in which they are operating they are the only windmills which are operating successfully. They were a top quality product. There was no reason whatsoever to believe that this was a risky venture.

Deputy Crotty.—I am not questioning the product. I am questioning the standing of the companies who are buying it because in an expanding new area you will get every sort of chancer — if you want to go that far — who will jump in there and see if there is a quick buck to be made. It would appear to me that this is the situation we find ourselves in now.

Mr. Donlon.—To use the Deputy’s analogy, there are many quick buck situations in which Irish companies have managed to develop and thrive by grasping the opportunity when it was there on the basis of the best judgment at the time. There was no reason to believe that the companies in question, who were then regarded as being companies of integrity, would run into financial difficulties a few years after the business was placed.

Deputy Crotty.—I do not wish to go any further on this. How long were the companies who purchased these in operation in America?

Mr. Donlon.—I do not have the precise answer but I understand that they were certainly in operation for a period of years before they acquired or entered into this arrangement with the Irish company.

Mr. Donlon.—I would suggest at this stage that they were perhaps in operation for six or seven years.

Deputy Crotty.—I am surprised at that information not being available. Could we have that information supplied?

Chairman.—Mr. Donlon, we will return to this matter when we examine you later in the year on the 1986 accounts. I ask you to let us have a note in the meantime on the matters raised and in particular on what progress has been made to recover any amounts outstanding.*We will move on to No. 48, Deputy Naughten.

172.Deputy Naughten.—I wish to make one comment. We should remember when dealing with this paragraph and any of those paragraphs that we are dealing with international trade. I do not think the loss is as yet a total loss, the deficit is 0.2 per cent and the State should not be over-worried about it. Our exporting companies generally have an excellent record, and many people in my constituency in the west would be very happy if all they were down was 0.2 per cent after two meat factories collapsing in the last five years.

173.Chairman.—Paragraph 48 of the Report of the Comptroller and Auditor General reads:—

Reference was made in paragraph 50 of the 1978 Report to default by two Government Ministries in the Sudan in meeting instalment payments for equipment supplied to them by an Irish exporter. At that time it was stated that under policies of export credit insurance issued to the Irish exporter, the Minister’s maximum potential liability in respect of all instalments due in the period 1977 to 1980 was £1,069,007 sterling. In the event, the Sudanese authorities failed to meet any of the instalment payments with the result that claims for the full amount totalling IR£1,104,762 were paid in the period 1977 to 1981 and, as stated in the 1978 Report, each successive instalment payment, when defaulted on, was made the subject of legal process in order to secure recovery. Funds required to meet these claims were advanced from the Central Fund.

Under the terms of the insurance policies which require the exporter to bear a portion of the amount defaulted on, a sum of £139,641 was received from the exporter in the period 1978 to 1980 and paid over to the Central Fund. A sum of £42,675 received from the Sudanese authorities in August 1981 under the terms of a rescheduling agreement made with the Irish Government in July 1981 and providing for the repayment of the debt over a period of 10 years was also paid over to the Central Fund. This left £922,466 due to be repaid to the Central Fund and a sum of £1,062,087 due from the Sudanese authorities. I have asked the Accounting Officer why a Vote provision has not been made to repay the amount due to the Central Fund in accordance with Section 2 (4) of the 1953 Act. I have also inquired as to what further action has been taken to recover the amount outstanding from the Sudanese authorities in view of the apparent failure to comply with the terms of the rescheduling agreement.

Mr. McDonnell.—Paragraph 48 is concerned with a specific case of a large claim following default in payment by two Sudanese Government ministries. This was referred to in a previous report and dealt with by a previous Committee in 1980 and at that stage the Accounting Officer was hopeful that they would recover a significant part of the amount. That has not happened. The paragraph also makes the point that the 1953 Act requires that a Vote provision be made to recoup the Central fund when amounts are not recovered. The Accounting Officer has told me that this case differed from the others in that in this case payment was guaranteed by the Central Bank of Sudan and this was seen as conferring an element of security to the risk. This may have led in turn to failure to make the necessary Vote provision between 1977 and 1980. Again in 1981 a rescheduling arrangement was entered into here which would provide for the repayment of the amount over ten years and the Accounting Officer felt that, while it was possible that something might be received under this arrangement, it would be more realistic to recognise that this would not happen and that arising out of that the necessary Vote provision is being made in the 1988 Estimates. Vote provision technique is designed to bring this kind of thing to the notice of Dáil Éireann. In effect it is the mechanism whereby Dáil Éireann authorises the write off of this amount.

Chairman.—Are we to understand from this that two ministries of the Sudanese Government made no attempt whatsoever to make any payment when they received the goods concerned?

Chairman.—They signed contracts and never made any payment. Were they dissatisfied with the product they got? What was the product?

Mr. Donlon.—It came under the capital goods scheme. I understand it was barges.

Chairman.—What was the reason for them making no attempt to make any instalment of payments?

Chairman.—So it was not to do with the product not being successful. They just simply had no money and did not pay it over.

Mr. Donlon.—That is right. I mention that we had difficulties with Nigeria. They do not compare at all to the difficulties in The Sudan, as every one is aware. We will perhaps be acknowledging now that there is little or no hope of getting a return on this sum. This is the transaction I referred to earlier when I said we would probably have to write off a sum of this order.

Chairman.—Had the trader concerned checked the credit worthiness or stability of the Sudanese Government before he entered into these contracts?

Mr. Donlon.—It would not only have been the trader concerned but the Insurance Corporation as well would have satisfied themselves that it was a good risk. In addition we had guarantees from the Central Bank of the country concerned.

Chairman.—What happened between the time of signing the agreement and the default? They never made any attempt to make any payment. What happened to the country? Was there a military coup or was there some sort of situation in the intervening period that changed the whole status of the Government that they could not meet their debts? They made no repayment. Did they intend at any stage to make any repayments?

Mr. Donlon.—We would have to accept that the arrangement was entered into in good faith in the earlier days. The earlier response from the Sudanese was the introduction of a series of reasons as to why they could not pay at a particular time but the reality is that the economy was disintegrating and it is now apparently a lost cause.

Chairman.—Can you tell me what type of Government were in power then? Were they a civilian or a military Government at that time?

Mr. Donlon.—I cannot but I can endeavour to establish what the situation was.

Mr. Donlon.—We do not think so. The reality is that there is a rescheduling agreement between the two countries in place there, but the situation in the country is such at present that we do not expect it, and a number of other countries have written off quite substantial debts as regards Sudan.

Chairman.—What about the moneys repayable to the Central Bank and the sum due from the Sudanese authorities? Are we to take it that since that time supplemenatary estimates have been introduced in the House or how has that been dealt with?

Mr. Donlon.—The claim was paid in the normal way, as the Comptroller and Auditor General pointed out. When claims are paid, in the following year, the amount concerned is voted by the Oireachtas. In this case, because it was anticipated that the repayment would be made, we did not make such a provision. The provision has been made now.

Chairman.—Is the provision for one year, or is it intended that a provision will be made over a number of years?

Mr. Donlon.—The specific amount has been provided for in the 1988 Estimates.

Deputy Crotty.—In this sort of situation where a Government are concerned, was there any possibility of repossession, or would it be worth while? Could they be sold to some other neighbouring countries out there, having been repossessed? Was that idea pursued?

Mr. Donlon.—First of all, there was in place between the Government, the rescheduling agreement which provided for repayment of the amount. Additionally, a visit was made to the Sudan in order to ensure that payment would be forthcoming. That was not successful.

Mr. Donlon.—Obviously every effort would have been made both by the supplier and the Insurance Corporation to ensure recovery if that was possible. I can only conclude that it was not possible to recover.

Deputy Crotty.—I can only conclude that there is a large debt there. It behoves us to recoup or salvage anything we can get out of it, even if it is only £100,000. We could build a school here with that amount. Could we get a note on that?*

Mr. Donlon.—The reality is that there was a rescheduling agreement in place. If the Sudan ever reaches a stage where it can stand up and honour its debts, we will then be repaid. I am merely expressing the opinion that I do not see that happening any time in the near future.

175.Chairman.—Could I ask the Department of Finance what is the standing of the Central Bank in the Sudan?

Chairman.—At the time we accepted their undertakings, were they considered to be as sound as other central banks might be considered to be?

Chairman.—Is there any question that from the beginning there was doubt as to whether this sum was ever intended to be met. Is there any question that these items were ordered by the ministries concerned with the support of their Central Bank in the knowledge that they had no intention whatever of paying for them. What was the situation?

Mr. Howard.—In dealing with a soveriegn state one would have to start from the premise that the transaction was being carried out on their part in good faith.

Mr. Donlon.—After the coming into place of the rescheduling agreement, we had the first payment in accordance with the agreement. If one could just operate on that basis, one might perhaps suggest that there is every reason to believe that everything was being entered into in good faith.

Chairman.—The Sudan is certainly a very difficult area, but if there is any question that from the beginning there was never any intention to pay any of the instalments, then that is quite a separate matter.

Mr. Donlon.—I accept that completely, but we have no reason to believe that that was in the minds of the Sudanese at the time, Credence is given to that, by virtue of the fact that the first payment was made in accordance with the rescheduling agreement.

176.Deputy Naughten.—When did the transaction take place and when was the first payment made?

Mr. Donlon.—The claims were paid in the period 1977 to 1980. I imagine that the goods were perhaps delivered in 1975 or 1976.

Chairman.—A sum of £42,675 was received in August 1981. Was that the first payment?

Chairman.—We should think of ordering a few things for this country from some of these places. There is not very much we can do about this at this stage. It is obvious that the Accounting Officer is pursuing it to the best of his ability. It is a situation which would alarm us all, particularly if there is any question of the State being taken for a ride, so to speak, where there was never any intention to pay. That would create a lot of problems for us.

Mr. Donlon.—Our debt in the Sudan does not compare with the debts generally which were incurred in that area.

177.Deputy Colley.—Mr. Donlon said that the rescheduling of the debt happened in July 1981 and mentioned the fact that he felt that all efforts to recover either the barges or the payment for them were made. Was an effort made before the rescheduling agreement was in place or after? If the rescheduling agreement was in place, it would have precluded attempts by us to repossess the barges because there would have already been an agreement there.

Mr. Donlon.—Prior to the signing of the rescheduling agreement I am sure that efforts made to ensure repayment would have had regard to the recoverability of the product in question.

Deputy Colley.—A further question arises if the agreement was made in 1981 and one payment was made on it, and the rest has been defaulted on. Surely that agreement now is null and void, or certainly we can go in now and look for the repossession of the barges?

Mr. Donlon.—The reality of the position is that there is nothing in the country at the moment. I doubt very much that the barges are there either.

Chairman.—We will have to note this. The Accounting Officer is aware of the views of the Committee. It is an unusual situation.

Mr. Donlon.—It was also an unusual situation in that there was a Central Bank guarantee and in the ordinary course of guarantees from Central Banks one would never expect that they would be defaulted upon.

178.Chairman.—We can only hope that the situation recovers in the Sudan sufficiently for them to prosper, and perhaps at that stage we will get something back. I just want to raise a matter that has been brought to my attention. The draft report of the Committee from 1984 says:—

The Committee also learned that a sum in excess of £70 million had been paid from Exchequer sources to Verolme Cork Dockyard Limited over four years for two ships. In view of the Committee’s concern about the level of State involvement in the dockyard, it was finally agreed that the liquidator should be called to give evidence before the Committee. As this did not occur during the consideration of the 1984 Appropriation Accounts this matter will be further considered during the Committee’s examination of the 1985 accounts.

We are on the 1985 accounts and we did not have the information from the liquidator at that time. Can you tell us if the liquidation is finished and if the liquidator is now in a position to provide us with the information?

Mr. Donlon.—I do not know if the Committee made any approaches to the liquidator. The liquidation has not been concluded.

Chairman.—We should approach the liquidator and ask him to appear before the Committee, as we agreed in the 1984 report, because a long time has passed since then. When is it hoped to have this liquidation concluded?

Mr. Donlon.—At this stage I understand that the liquidator is exploring a number of avenues with a view to disposing of the assets in question. Clearly, the conclusion of the liquidation process will depend upon his ability to achieve realisations.

179.Deputy Naughten.—What is the ongoing cost per annum to the State while the liquidator is there?

Mr. Donlon.—I do not have a figure on the liquidator’s fees. I understand he was appointed by Fóir Teoranta.

Deputy Naughten.—Have the Department of Finance any comment on the ongoing cost to the State since this liquidation has not been wound up?

Mr. Howard.—The charge would be against the assets of the company as opposed to the State.

Deputy Naughten.—Have the company sufficient assets to meet their liabilities?

Mr. Howard.—I do not have a figure for the ongoing cost but I understand that in the last few months the receiver has been getting income from the lease of assets which is sufficient to meet his current outgoings over those months.

Chairman.—What would happen in the event that the realisable assets of the company were not sufficient to meet the liquidator’s costs?

Chairman.—It is not a matter of speculation; it is a matter of law. Who engaged him? Would Fóir Teoranta have to pay his fees or would the State have to pay them?

Mr. Howard.—Fóir Teoranta. Clearly someone would have to pick up the tab, Chairman, and one would have to look at the organisation which appointed the receiver in the first instance, which is Fóir Teoranta.

Mr. Donlon.—On the question of availability of funds to the liquidator, there is no reason to believe that if the liquidator is successful in the disposal of the assets there will be funds available. I doubt very much also that liquidators work for the good of their health in performing this task.

Deputy Naughten.—We should seek a note from the Department as to what the ongoing cost of this is to the State. There must be costs since the assets have not been unloaded, even though it has been stated that the income from leasing is sufficient to meet these costs. What is the incentive to wind up this liquidation or is there any incentive?

Mr. Donlon.—There is a statutory incentive for the liquidator to do the job that he is there to do. In so far as charges against the State are concerned, Verolme of course was not a wholly-owned State operation. It was roughly 48 per cent or 49 per cent State owned. The other party is, I believe, in receivership in Holland. Payment of the charges arising in so far as the liquidator is concerned should not give rise to any additional charges against the State, except that perhaps the realisable value of the assets may be reduced by that amount. In so far as the Department are concerned there is a charge against certain of the assets but it is most unlikely that these will be met.

Mr. Donlon.—Since the end of 1984. There has been a change of liquidator in that company as well.

Mr. Donlon.—The reality is that he is trying to dispose of the assets in such a manner as to enable them to be worked again but he has not been able to dispose of them to date.

Chairman.—Will you let us have a background note* on this matter, including the up-to-date position on costs and we will then call the liquidator and get the details from him?* Page 132, Vote 40, Items A1 to F2.

Mr. Donlon.—They would have ranged over the Department’s whole areas of activity. The services would have been carried out in the areas of the Registrar of Friendly Societies, the National Prices Commission, insurance industry control, the Office of the Director of Consumer Affairs, Patents Office, Companies Registration Office, a study undertaken in connection with the installation of a new telephone system in the Department and other consultancies where the Department have been acquiring advice.

Chairman.—On what basis were the consultants taken on? Was it by advertisement or competitive tender?

Mr. Donlon.—It would vary between cases. The standard practice is that there should be competition by invitation of tender. Perhaps in some cases that did not take place because of particular circumstances.

Chairman.—Would you get Department of Finance sanction for each individual consultant?

Mr. Donlon.—My understanding is that all consultancies are approved separately. There was a stage when we had clearance up to a certain level but I do not think it existed in 1985.

Mr. Donlon.—Again it would be difficult to answer that fully in that the expenditure of the Registrar of Friendly Societies would have covered a number of activities. For instance, in the Registrar’s case the position is that he does not have access to the Attorney General for legal advice; he has to engage his own legal expertise in prosecuting actions etc. and payment of those fees comes under that heading. The next largest payment, and for the greater part it was an individual payment to one firm of consultants, was in relation to NET where certain advice was obtained prior to the entering into negotiations by NET with ICI.

Deputy Crotty.—What sort of consultancy service was involved? You mentioned consumer affairs.

Mr. Donlon.—That would be in the case of the Office of the Director of Consumer Affairs. He has to engage mainly legal advice but he would have obtained technical advice in one or two cases.

182.Deputy Naughten.—Sorry, Chairman, I read the note and I am satisfied with it but I would like clarification on subhead F4, housing subsidies.

Mr. Donlon.—We circulated a note to the Committee on that issue following my last appearance before the Committee. I set out the full detail of how the scheme was administered etc. Basically the idea was that Shannon was a new town and it was necessary to attract not alone industry but people to work in the town. Certain subsidies were given to those people. The range of subsidies varied according to the circumstances of the individual and the type of housing concerned etc.

Mr. Donlon.—The Government have decided that responsibility for this activity should be taken on board by the local authority in the area. Negotiations are proceeding between the company in Shannon and the local authority. The transfer has been delayed because of requirements on the part of the local authority that certain things be done before a transfer takes place. It is not an unusual situation.

183.Deputy Crotty.—Subscriptions to international organisations were over-expended. What were these subscriptions?

Mr. Donlon.—The greater part of the subscriptions were in the science and technology area. The largest individual contribution was to the European Space Agency which is something I think we discussed in this forum previously. We then subscribed to some international organisations in the patents area. The balance is accounted for by virtue of subscriptions to international commodity agreements or councils, which we are required to participate in by virtue of our accession to the Treaty of Rome.

Chairman.—I asked about the subscription to the European Space Agency in the past. There was some suggestion that they were going to put something into orbit. Did that come about?

Chairman.—I made it on the basis of something I had read to the effect that there would be some European——

Mr. Donlon.—The European Space Agency is involved in activity which could lead to that happening. There was discussion on it but I have no indication at this stage as to whether they are about to launch anyone into space.

Chairman.—So, we are not going to see an Irishman in space this year for the Millennium?

184.Deputy Crotty.—In regard to subheads E2, E3 and E4 — Grants-in-Aid—can we have an explanation as to how this money is granted, who gets it and how it is accounted.

Mr. Donlon.—Payments under Subhead E2 which totalled £600,000 in the year of account, were in respect of the provision of bedroom improvement grants to mainly hotels and guesthouses. The main objective of the scheme at that stage was to provide bathrooms in bedrooms which did not have that facility. It was introduced as an incentive for proprietors to develop and modernise accommodation.

Mr. Donlon.—The percentage of grant varied between rural areas and urban areas but we were talking about a range of the order of 25 per cent to 35 per cent of expenditure.

Mr. Donlon.—The figure of £600,000 was in respect of the bedroom improvement grant scheme, first of all, secondly, a caravan and camping grant scheme. The full amount was expended between the two schemes. The level of grant in respect of the caravan and camping grant scheme ranged from 40 per cent to 60 per cent.

Chairman.—I do not want to delay you, Mr. Donlon, as we already have had a session earlier this morning and you will be coming back later in the year in regard to the 1986 accounts. On that occasion I would like us to spend some time talking about Córas Tráchtala, so perhaps you might come particularly well briefed on that area of Government expenditure. Is there anything on page 134 that anybody wants to raise?

Chairman.—We have dealt with page 133 although you brought us back to page 132.

185.Deputy Crotty.—There is, in respect of grants to industrialists. Could we have some insight into what these are all about?

Mr. Donlon.—The provision to industries in the area was in respect of grants to industries establishing in the area.

Mr. Donlon.—By virtue of the fact that we had our own resources. There was a sale in that year of a building which brought in a sum of money in the order of £2 million.

Chairman.—The aggregate amount of grants paid to the company reached the limit of £60 million that year as well.

Mr. Donlon.—I imagine that information is contained in the company’s annual report.

Deputy Crotty.—I want information about that. I am glad you reminded me about it, Chairman. What checks do the Department carry out on the efficiency of this company?

Mr. Donlon.—The normal checks would apply in this case. A board has been appointed by the Minister and it is its function to carry out the functions with which it has been charged. There are additional contacts by way of direct contact between the Department and the executive of the company and its operations are closely monitored.

Deputy Crotty.—What is the design content within the company at present? It was set up as a design workshop.

Mr. Donlon.—Its brief has been broadened. It has now gone beyond design alone but that is a function which it still exercises. It is now engaged in retail operations. The breakdown of expenditure between the two different areas would be that the design area accounts for somewhere in the order of £500,000 while retail trading accounts for somewhere in the order of £2.9 million.

Mr. Donlon.—The information I have is that they were employing 25 designers.

Mr. Donlon.—Earlier this year. We provided the information to the Committee earlier this year.

Deputy Crotty.—Have any reservations about its operation in the retail field been expressed by people who earn their living from the retail business?

Mr. Donlon.—Some concern has been expressed about the success of its retailing operations, as a result of which a number of fresh looks have been taken at the operations. They have been and continue to be under review.

Deputy Crotty.—It would appear that this is becoming a retail organisation. Is it fair to have a State retail organisation which is grantaided competing directly with the private sector?

Mr. Donlon.—The direction of the organisation was changed following a Government decision to the effect that there would be an emphasis on the commerciality of the operation. This is reflected in the Estimate provisions which are now in place in that State support for the operation is being phased out over a three year period. It is expected that the design function will be funded by way of the proceeds from the operation of the retail operation.

Mr. Donlon.—The London enterprise was launched just over a year ago and I understand that its early days were rather difficult in that it had missed out on the Christmas season of that year but the company is confident that it will have returned a satisfactory performance in 1987.

Mr. Donlon.—The shipbuilding subsidy was in respect of subsides provided for the building of ships at Verolme Dockyard. There was a provision of £2.5 million in that year which was not expended.

Mr. Donlon.—It breaks down into two parts essentially, firstly, advice in the industrial relations area and, secondly, advice to small companies in a management consultancy sense.

Mr. Donlon.—It is not furnished free but the range of charges would vary depending on the customer or the client in question. Again, the Government have decided that that aspect of the operation should be operated on a commercial basis and to that end the State support is being phased out as well.

187.Deputy Colley.—I wish to return to the question of Kilkenny Design workshops, the trading subsidy of which is £696,000 according to the Appropriation Accounts. What is the overall cost of running the trading part of the organisation?

Mr. Donlon.—The overall expenditure, as I understand it, by the company was £2.9 million.

Deputy Colley.—How many employees are there in the retail part of the business?

Mr. Donlon.—The accounts for the company have not yet been concluded. The audit has not been completed.

Mr. Donlon.—I think the 1986 accounts have not been signed off yet. Is that correct?

Mr. McDonnell.—No, the 1986 audit report has not been signed yet. I expect it to be signed shortly. I would not like to say any more at this stage about the audit report.

Chairman.—Was there a trading loss or a trading profit or what exactly was the situation from the point of view of the trading element of the company?

Mr. McDonnell.—Trading income was £2.8 million. There was a small loss of about £30,000 in 1985.

188.Chairman.—On page 134, N to T2, are there any matters anybody wants to raise?

Deputy Crotty.—What is it now? It seems to have a very low profile. We do not hear too much about it.

Mr. Donlon.—It may be considered that it has a low profile. Its profile changed quite substantially by virtue of a decision of the European Court of Justice where it ruled that the activities of the Irish Good Council were in contravention of the Treaty of Rome. Its activiies were re-ordered and re-organised but certainly within the industry it does not have a low profile. Its activities would range over assistance in the organisation of finance and financing of retail and trade promotions of Irish products, the provision of market research and marketing advice to small industry, the dissemination of consumer and trade information on Irish products, industrial import substitution which would be a question of trying to arrange for producers here to obtain or to source their supplies within this country rather than importing them. They also have an involvement in the promotion of quality and marketing of Irish products.

Deputy Crotty.—How many firms would they have consulted in relation to import substitution in the relevant year, 1985?

Mr. Donlon.—I do not know if that detail is included in their report but if it is not I am sure it can be provided if it is available. I am sure that their contact has been of a nature that it might perhaps be difficult to put a definite figure on it but we can make an effort at that.

Deputy Crotty.—On subhead 02 — Capital Expenditure — for the Irish Film Board — what was that capital grant in aid?

Mr. Donlon.—It was in respect of loans to firms who were making films involving film production.

Mr. Donlon.—Yes, it was classified as capital expenditure. It was towards the cost of producing a product.

Mr. Donlon.—The funds would have contributed towards the cost of production but I do not know what the precise breakdown was.

Chairman.—So even if they used the funds, for instance, on wages would you still call it capital expenditure?

Deputy Crotty.—Usually a capital expenditure is expended on something one can see and which is there after the expenditure. How would you account for this here?

Mr. Donlon.—Did you ask if the product was there. The film that was produced is there.

Mr. Donlon.—Assistance would have been made available towards the cost of production of particular films. It would only have been a contribution, it certainly would not represent the cost of production of any one film.

Mr. Donlon.—It has been classified as such and I would regard it as an input into the production of a product.

Chairman.—I suppose in the strictly accountancy sense it might not always be described as such but in the situation in public finances what is the procedure?

Mr. McDonnell.—It is a grant to the Film Board. In the Film Board’s accounts it would be seen as capital expenditure, the creation of an asset towards which the Film Board was contributing. I think that is the Accounting Officer’s perception of it too.

Mr. McDonnell.—It could be spent on the wages of the film crew, for instance, but it would be capitalised expenditure in the accounts of the Film Board. It would not know what precisely it contributed to but it could have been broken down into any area. The Film Board generally pay out grants.

Chairman.—So it is an accounting term rather than the amount that is actually spent on some capital asset.

Mr. McDonnell.—It is a grant to the Film Board to enable them to incur capital expenditure on the production of films.

Chairman.—If it is for capital expenditure in the normal sense Deputy Crotty is right. If they did not spend it within the company on capital expenditure it can be spent on current expenditure. I presume they are at liberty to spend it on either capital or current expenditure even though it might be shown—.

Mr. McDonnell.—Sorry, Chairman. The Irish Film Board—Administration Expenses (Grant-in-Aid) provides for the day to day expenses of the film board. The Capital Expenditure (Grant-in-Aid) would be spent by the Film Board on the production of films, and to the extent to which they did not spend it, they would have it in their bank account and on the balance sheet as an asset in the form of cash.

Chairman.—That is the point. Did they purchase a specific asset or assets of a capital nature with this £550,000?

Mr. McDonnell.—They could have done various things. They could have assisted in the production of films or they could have made, for instance, repayable advances to film makers to assist them in their expenditure on making films. In the accounts of the Film Board it would have been seen as an asset. They might not necessarily have owned the film.

Mr. Donlon.—As far as I know they did not but there was provision for repayment of loans etc., which were advanced and some repayments were made.

Chairman.—It is getting on in the day so perhaps we can have a note on that.

Chairman.—Will you explain it as it is set out and if necessary we can arrange for further questions?

Mr. Donlon.—The main issue is the question of classification of the expenditure.

189.Deputy Crotty.—There is a lot of money involved under subhead R — Clondalkin Paper Mills. What became of that money?

Mr. Donlon.—The moneys were provided as part of an agreement under which the State, having acquired the assets in Clondalkin Paper Mills, freed those assets to the comapny which moved in over the past number of years. The company have since gone into liquidation.

Mr. Donlon.—No, that could not be the case. The asset in question was tremendously enhanced by virtue of these expenditures. These expenditures went towards refurbishment of the asset. The liquidator in place is now endeavouring to dispose of that asset.

Deputy. Crotty.—The cycle is that these funds were made available from your Department. To whom are they made available?

Chairman.—There is a paragraph in the 1986 accounts which we will examine in relation to this matter. We will move on to subheads U1 to Z on page 135.

190.Deputy Crotty.—Subhead Y — Bread Subsidy — was examined fairly minutely last year and we asked for a note on it. I have the note but the question I asked was not answered. I have a record of the question I asked at that time in relation to the recording of the checking of bread sales at retail and wholesale level; how sales at retail outlets are monitored; how van sales are monitored; how a sale is monitored and whether it is a cash or credit sale. That question was not answered in the note which was supplied by the Accounting Officer. The answer to that question last year was that it was possible to supply all that information and you would let us have as much detail as we required. We did not get too much detail.

Mr. Donlon.—We did supply information to the committee and we had no indication that the information which was supplied was not adequate.

Deputy. Crotty.—I did not get the opportunity to say it was not acceptable so I am now saying it was not acceptable. I am prepared to give you an opportunity to supply further detail because the detail you supplied did not answer the questions.

Mr. Donlon.—The detail which we provided endeavoured to deal with all of the questions which were asked.

Deputy. Crotty.—It did not answer my question at all. It went right through a rehash of the evidence which was given at the Committee. Specific questions were not answered.

Mr. Donlon.—We did give detail of the types of checks that were operated by the inspectorate. If there is any particular aspect of those on which you require further information——

Deputy. Crotty.—I could stay here for an hour because it is a very detailed matter.

Deputy. Crotty.—I have in depth knowledge on it and there is a lot of cloud hanging over this issue which I am very unhappy about. This was referred to also by the Comptroller and Auditor General in the paragraph on bread subsidy in his report on the 1982 accounts. This was not referred to last year when I queried it. Certainly, there are questions there that need to be answered. If you want to sit another hour, I have another hours questioning to do.

Chairman.I do not think we can take any more time. We have already exceeded the time. We agreed we would normally terminate at 1.30 p.m. and it is now after 2 p.m. I know the Deputy is anxious to have this matter resolved and perhaps Mr. Donlon has a suggestion on how it can be resolved?

Mr. Donlon.—Merely to suggest that we have done our best to comply with the request that were made at the last Committee meeting and if perhaps that response could be examined and an indication given to us as to what elaborations are required, we would willingly do so.

Deputy. Crotty.—I do not want any elaboration at all. If you read the question as I put it and read the answer given you will see the question is not answered.

Deputy. Naughten.—I know of Deputy Crotty’s interest in this matter. It is one of the items he raised the last time, we discussed this problem in great depth. Obviously he is not satisfied with the replies we received from Mr. Donlon. I suggest that he would take up the points Deputy Crotty has raised with the Department of Industry and Commerce.

Deputy Crotty.—When he was asked last year, the Accounting Officer said he would have no problem.

Deputy Naughten.—We should seek a further reply from the Department of Industry and Commerce on it and discuss it then.

Chairman.—Perhaps Mr. Donlon might look over the original question which was asked last year and see if there is any information missing that he could supply and he can then discuss the matter with Deputy Crotty. He might let me have a reply on that and we will see where we proceed from there.

Mr. Donlon.—I will certainly do it but I thought I had done so already. We will look at it again.

Deputy Crotty.—If he thought he had answered it already, he must not have read the question.

Chairman.—There is a difference of opinion and we will try to get it resolved. If you would look at the question again and give us whatever additional information you have, we will try to get it resolved in that way.* Thank you very much. That concludes the public session.

Mr. P. L. McDonnell (Comptroller and Auditor General) and Mr. J. O’Farrell (Department of Finance) called and examined.

APPROPRIATION ACCOUNTS, 1985 (Resumed) and 1986

VOTE 46 (1985) and VOTE 48 (1986)—SOCIAL, WELFARE.

Mr. J. Downey called and examined.

191.Chairman.—Good morning, Mr. Downey. You are welcome. We are resuming on paragraph 54 of the 1985 Report. For the benefit of members, we are taking the remainder of the 1985 and all of 1986 together. The 1986 report was only presented to the House in December 1987, because obviously the Comptroller and Auditor General has to spend the year auditing it. We are very much up to date. Since this is the biggest spending Department of State, we should try to make progress today with Mr. Downey. With the agreement of the Committee, what I would like to do is to give preference to Deputies who have not been in on the preceding paragraph in order to try to let everybody in. As we might not all wish to come in on every paragraph we might get through it more speedily. Is that all right?

Chairman.—I want to make an opening statement to put us in the picture since we had to adjourn in the middle of the examination of the paragraph. I would also like to inform the Committee that Dáil Éireann this morning discharged Deputy John Kelly as a member of the Committee and appointed Deputy Brendan McGahon to replace Deputy Kelly. We are commencing today’s session with the examination of paragraph 54 of the 1985 report of the Comptroller and Auditor General. The Committee had already commenced examination of this paragraph when Mr. Downey appeared before the committee on 3 December last but we had to adjourn due to a series of votes in the House. To avoid going over the same ground I will summarise the position as it was outlined to the Committee that day and perhaps we can take it from there. The paragraph concerns internal fraud by staff working in a number of employment exchanges involving the creation of fictitious documentation and falsification of payment slips. The Accounting Officer indicated that the number of staff involved had risen to ten — the paragraph mentions only five — one each in Cork and Limerick Exchanges and eight in North Cumberland Street — and that the amount involved was £75,000 approximately, of which £42,000 was recovered, and that the staff involved had left and had been in court. The Accounting Officer also said that the Department’s internal administration section carry out general inspections on a regular basis, roughly once every two years for each employment exchange, and additional spot checks in cases where there are suspicions. He added that the number of local offices in Dublin had been increased from four to 13 so that the amount of

business for which managers are responsible would be reduced and made more manageable. Is that a fair summary of the situation, Mr. Downey?

192.Deputy Naughten.—Has the situation changed since the last day you were here? Have any other cases of fraud come to your attention and has the amount involved increased from £75,000?

Mr. Downey.—There were two further cases of fraud. One was in the employment exchange in Werburgh Street where some butter vouchers disappeared. The amount involved was about £300. In the disability benefit section recently fraud has come to light involving two officials who have been suspended and the matter is at present being investigated. We have not come to final conclusions on that yet. The amount involved in the case of the two officials concerned is likely to be about £7,000 but we have not concluded our investigations.

Deputy Naughten.—What worries me about this is that it is an on-going thing. First in this paragraph there were five cases, then it developed into ten, and now it has gone to 12 or 13. How tight are the regulations and what form of continuous on-going checking system has the Department set up to try to eliminate these cases of fraud?

Mr. Downey.—The controls are quite tight. In the case of disability benefit there are a variety of controls which try to ensure that individual officers cannot process claims on their own. In this case it happened because there was a centralised section dealing with telephone queries. This is an emergency arrangement whereby if people ring up and say “I did not get my cheque today” they make whatever inquiries they can and they issue a cheque as an emergency arrangement. In this case the officer concerned repeated the issue of the emergency cheque and it was caught up the checking which we carry out in those cases.

193.Chairman.—Before we move off from this paragraph, it is mentioned that the number of local offices in Dublin had been increased from four to 13. I understand there are new offices being built or some offices being refurbished. Could you give the Committee some information on that?

Mr. Downey.—Yes. It is our policy to reduce the size of the offices, because at present offices catering for 10,000, 12,000 or 13,000 claimants are very big and it is very hard to keep control of those, both from the point of view of internal control and external control. We are opening a new office sometime this year, I hope, in Nutgrove. We are also building offices in Ballyfermot and Finglas. That is the immediate programme.

Mr. Downey.—No. We have Ballyfermot, Nutgrove, Werburgh Street and Victoria Street on the southern side.

Chairman.—It seems to be the only growth industry in Government in the coming 12 months?

Chairman.—Is it also proposed to refurbish the existing employment exchanges?

Mr. Downey.—Yes. We are doing the best we can within the limits of the funds allocated to us.

Chairman.—I think it would be for the benefit of both the employees and the unemployed if the Employment Exchanges could be made as pleasant and as presentable as possible. I do not think this Committee would raise any objection to that.

Mr. Downey.—Certainly, we accept that. In our newer offices, we have paid particular attention to that. In the existing offices we will be able to do something more with them when we reduce the numbers, because many of them at present are overcrowded and it is difficult to do anything with them.

Chairman.—Some of them are very bleak and are not very attractive places for people. They would not exactly raise the spirit.

194.Deputy Colley.—May I ask Mr. Downey whether there are any ongoing discussions between his Department and the new FÁS authority as regards combining the services which would be provided by FÁS with those in employment exchanges?

Mr. Downey.—Yes, we are in regular contact with FÁS, continuing what we were doing before the National Manpower Service and AnCO in regard to training. We refer people to them and we are in contact with them from the point of view of job replacements.

Deputy Colley.—Perhaps I did not explain myself clearly enough. I really mean in terms of physical buildings. If the Department of Social Welfare are going to build new offices for employment exchanges and FÁS are also looking for accommodation in certain area, or if FÁS have accommodation and the employment exchange needs new space, are there discussions between the two bodies to amalgamate or to centralise their activities?

Mr. Downey.—When new buildings are being built we try to make provision so that FÁS will have facilities there for interviewing. FÁS have a lot of very good buildings around the country. They are relatively new, but there is no way they would be capable of taking in an employment exchange. I do not think it is that necessary because with electronic links nowadays it is easy to maintain contact.

Deputy Colley.—You would be saying that in the future you would see employment exchanges availing of the computerised system of job placement or training vacancies. Those vacancies would be known in the employment exchanges?

195.Chairman.—On the last occasion the Comptroller and Auditor General gave as his estimation that cumulative internal fraud in your Department was something of the order of £250,000. You seemed to dispute that figure at that time. Have you had occasion to check it since?

Mr. Downey.—At that time I misunderstood the Comptroller and Auditor General. I thought he had said in the last few years, but I checked with him afterwards and he had covered from 1980 to 1987. In those years there would have been a little over £250,000.

Chairman.—Your Department had a consultant's report carried out, was it by Price Waterhouse?

Mr. Downey.—In the main, they had an overall examination of the Department, its procedures and things like that. They paid particular attention to the local office system and to disability benefits. They made some reports on that which we are examining at the moment.

Chairman.—Have they reported on your accounting procedures and your management control?

Mr. Downey.—Not specifically. That was not really their mandate. However, needless to say, it comes into it. They did draw attention to the fact for instance, that in our local offices—something which I mentioned earlier — many of the local offices were much too large and that there should be some attempt at breaking down the numbers which would enable better management and control to be achieved.

Chairman.—Could you expand broadly and tell the committee what the terms of reference of the examination was?

Mr. Downey.—I do not have them with me, I did not anticipate being asked about this, but I can certainly send them to you.

Chairman.—Could you, from memory, tell us what you can recall of the terms of reference?

Mr. Downey.—Broadly speaking it was to examine the structures and practices in the Department, to see whether they were efficient and what improvements would be necessary to make them more efficient.

Chairman.—You will be aware that the report would be of interest to this committee. Could you tell the Committee what the findings of the Price Waterhouse report were?

Mr. Downey.—In relation to disability benefit, for instance, they did suggest a variety of things relating to computerisation which would tighten up the procedures, such as matters dealing with passwords and that sort of thing. It is a highly technical business, the recommendations which they made in that area, and also to ensure that there was a division of functions between officials so that one person would not be in a position to process a claim right through the system.

Chairman.—I think it would be a good idea if the Committee were to receive a summary of the report. Would you arrange that?*

Mr. Downey.—I can, of course, because we are examining it at the moment and we hope to have something ready very shortly.

196.Deputy Desmond.—In relation to that paragraph, may I ask Mr. Downey roughly how many staff would, in the course of their normal duties, have access to cash or cheque transactions, out of the total staff of the Department?

Mr. Downey.—It would have to be roughly, because you cannot be precise in a thing like that. The staff in the Department have many functions, they are switched around a lot, but we have a total staff of about 3,800, and I would say somewhere around 2,000 of those would be in one way or another directly involved in activities which would generate payments.

Deputy Desmond.—Therefore, as Accounting Officer, you will agree that the fact that some 13 staff, over a period of recent years, out of 2,000 who could have had access to that prospect in relation to internal fraud, is a very small number of people. What is your relative perspective in relation to that matter?

Mr. Downey.—It certainly is a small number and all I can say is that perhaps in one way it is a tribute to the vast majority of staff that they have such a large degree of integrity, because if people want to defraud any system, no matter what it is, they can do so and they will get away with it for a while, so that fact that there were only 13 over that period is a tribute to the integrity of the vast majority of the staff.

Deputy Desmond.—In a typical Dublin employment exchange, what is the hard cash flow in a week or in a year? In the disability benefit cheque system, for instance, what is the cash flow there? I am trying to put the fact that between 1980 and 1987 internal fraud amounted to £250,000, but what is the total flow of hard cash passed across the hatches and out from the office? Could you give us some information?

Deputy Desmond.—Even for the current year, in a typical employment exchange.

Mr. Downey.—I have some figures here which show the cash generated by some of the Dublin exchanges; in Gardiner Street, for instance, the amount is £584,000 to £585,000 virtually every week; Cumberland Street, £712,000 a week; Werburgh Street, that was another one of the offices, £433,000 a week; Cork £632,000 and Limerick £478,000 a week.

Deputy Desmond.—His biggest problem was protecting the staff from subversives who wanted to get into those offices and take the money, that was our biggest problem, not the staff inside.

197.Deputy Foley.—In March 1987 we were circulated with documentation. It gives us the figures in 1985, the most recent year for which complete figures were available. Payment of benefits and assistance paid by the Department amounted to £5.7 million, this represents 2.5 per cent of the total expenditure of £2,291 million by the Department that year. Of that amount, £4.074 million, or 0.18 percent of total expenditure is attributed to fraud on the part of recipients. What is the position in 1986 in comparison with 1985?

Deputy Foley.—I am talking about fraud, on paragraph 54. I will let it go to the next paragraph.

198.Chairman.—I think it relates more to paragraph 57. You might note the question and we will come back to it later. Paragraph 55 of the Report of the Comptroller and Auditor General reads:—

Subhead O.—Anti-Poverty Programme

The charge to the subhead includes £104,000 in respect of eight grants paid on 30 December 1985 to organisers of community based projects to combat poverty. The grants were to be used for the purpose of employing research or development workers, the purchase and maintenance of equipment and the adaptation of local premises, etc.

However, as it appeared that the grant payments were in respect of projects, which were not due to commence until 1986 and, therefore, did not represent a proper charge to the Vote in the year under review I sought the observations of the Accounting Officer.

He explained that an interim board of the Combat Poverty Organisation had been appointed by the Minister for Social Welfare to advise on poverty matters pending enactment of legislation for the establishment of a permanent Combat Poverty Agency. The Board made a submission to the Minister in respect of projects which had not been selected for assistance under the EEC Poverty Programme. A great deal of preparatory work had been done on these projects and the organisers had been awaiting a decision on funding by the Department since February 1985. The projects in respect of which the £104,000 was paid were considered by the Board to be worthwhile and deserving of support and the Board considered that if they were left without resources there was a danger that some of them would not survive.

The Accounting Officer also stated that the Minister for Finance had sanctioned the projects on 30 December 1985 and that it was considered important that the payments should be made out of the 1985 grant.

Mr. McDonnell.—The question that arises here really is whether certain payments were properly chargeable against the 1985 Vote or was it simply that they were paid because the money was available in the Estimate, even though the relevant projects did not really get underway until the following year. That was my point in the paragraph. The Accounting Officer has explained why it was felt necessary that these payments should have been made and charged in the 1985 Vote.

Mr. Downey.—The problem here really was that this related to the anti-poverty programme, moneys had been requested, help had been requested early on in that year, it dragged on and eventually, coming towards the end of the year, it still had not been made available. The projects were there, the money was there and it was sanctioned by the Department of Finance. I raised the issue with the Minister at the time, because we got the sanction on 30 December. The Minister told me that this matter had been discussed at Government and that it was following that and his agreement with the Minister for Finance that the sanction was issued.

Deputy Desmond.—I declare my interest and I defend it up to the last. If you want the relevant documents I will send them to you.

199.Chairman.—We will not prolong the agony for the former Minister for Social Welfare. We will note that. The Comptroller and Auditor General of course, has to draw it to the attention of the Committee. Paragraphs 56 of the 1985 Report and 53 of the 1986 Report of the Comptroller and Auditor General reads:—

Social Insurance

I have been informed that during 1985, 5 employers were prosecuted for failure to comply with the provisions of the Social Welfare Acts and convictions were secured in 4 cases. 30 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 65 cases and that decrees in favour of the Minister for Social Welfare were obtained in all cases, the total amount of decrees being £37,797. A further 28 cases were disposed of when arrears totalling £15,363 were paid on issue of civil bills.

The Department of Social Welfare is responsible for the recovery of arrears of contributions from employers who failed to comply with the povisions of the Social Welfare Acts prior to the introduction of the PRSI system in 1979. In 1986 17 cases were refered to the Chief State Solicitor for the institution of civil proceedings to recover such arrears and a number of cases are still awaiting referral.

I have 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 £41,852. A further 15 cases were disposed of when arrears totalling £13,397 were paid on the issue of civil bills.

I have also been informed that during 1986 5 employers and 2 employees were prosecuted for failure to comply with the provisions of the Social Welfare Acts and convictions were secured in all 7 cases.

Mr. McDonnell.—I have not really any comment. As you will see, the paragraphs are for information and they are more or less standard paragraphs in the report each year. They are concerned with the prosecution of employers for not complying in one way or other with the provisions of the Social Welfare Acts. They refer to the number of civil actions taken to recover arrears of contributions.

200.Deputy Naughten.—Would the Accounting Officer be able to inform the Committee how many more of these cases are still outstanding?

Mr. Downey.—There are something over 300 cases outstanding. They are all with the Chief State Solicitor's office.

Deputy Naughten.—Have those cases not dragged on for a long time? We are talking about a nine year lapse?

Mr. Downey.—Undoubtedly, they have dragged on for a long time. They are obviously the more difficult ones. In the case of some of them, undoubtedly we will never recover anything on them, because witnesses will have died, the people concerned will have died, and this sort of thing emerges. The legal process in the normal course of events is slow and in the more difficult ones it gets even slower still. That is all I can say.

Deputy Naughten.—But the longer it goes the more it reduces your opportunity to recover funds outstanding?

Mr. Downey.—Undoubtedly it does. But we are still getting in money. That is the nub of the matter. It is worth pursuing them, even no matter how long it takes.

Deputy Naughten.—I think, Chairman, the Committee should try to impress upon the Department the importance of getting those cleared and getting them out of the way as soon as possible. I cannot for the life of me understand how they have dragged on for so long.

201.Deputy Colley.—The total number in those two years of decrees that were issued in favour of the Minister for Social Welfare amounted to something like £80,000. Has that money been actually collected and has it been paid to the Department? Just because there is a decree there, I realise it does not mean necessarily that the money has come in?

Mr. Downey.—I have not the precise figures, but the Deputy is quite right when she says that issuing a decree is not necessarily the end of the story. It has to be collected. A lot of it is collected, but some of it would be outstanding still.

Chairman.—This would be of great concern to the committee if it affected the rights of employees to subsequently claim. What is the position there, Mr. Downey? I presume the Department take a very liberal view of the employee's predicatment?

Mr. Downey.—From the employee's point of view there is no problem because there is a statutory provision whereby, if an employer defaults in payment and if the employee is in no way involved in complicity, he is credited with contributions the same as if they had actually been paid, so he will not lose any benefit.

Mr. Downey.—This sort of thing normally arises when somebody claims benefit and there is a blank record. It is investigated at that stage. It is verified that the person was employed for the period concerned and they are allowed credit contributions.

Chairman.—Presumably a number of these companies fall into the fly-by-night category and have gone into liquidation or whatever?

Mr. Downey.—In fact, some of them would have gone into liquidation. This is the sort of thing that does happen and represents a fair percentage of the sort of cases that arise in this area.

Chairman.—I think the committee's view would be that we would want to ensure that the rights of the employees are not adversely affected and are protected?

Mr. Downey.—I think I can assure you, Chairman, that they are fully protected.

202.Deputy Dempsey.—In relation to those civil cases and so on, what kind of legal expenses are the Department having to meet in pursuing those cases and indeed, other expenses in relation to them? It seems the amounts are very, very small. We are talking about decrees of £41,852 in 1986. It strikes me, if this is going on so long, that between legal expenses and expenses involved in investigating really you are making a loss on the whole thing?

Mr. Downey.—The Department, as such, do not incur any legal expenses because it is handled by the Chief State Solicitor's Office. They are the people who deal with that end of it.

Deputy Dempsey. 2014;Would it be possible to get a costing to the State? It is all taxpayers money that is being spent in pursuing these things. Would it be possible to get from the Chief State Solicitor the cost, or from your Department the cost of investigating it?

Mr. Downey.—I doubt it. I think it would be very difficult. I cannot speak for the Chief State Solicitor, but I would imagine it would be very difficult for him to sort out these things in relation to individual cases or individual Departments, when probably the solicitors there and in the Attorney General's Office will probably be dealing with a whole lot of cases together.

Deputy Dempsey.—Perhaps I would just ask Mr. Downey would he have any idea of the cost to the Department of Social Welfare of investigating these matters so that they can be brought to the State Solicitor?

Mr. Downey.—I really could not tell the Deputy offhand about that. It would be very difficult again to get out particulars of individual cases, because we have an outdoor staff who, as part of their job, deal part-time with all of these things. In that way I think it would be a fruitless exercise to try to break it down.

203.Deputy Colley.—The cases that have been mentioned here in these two paragraphs refer to cases where employers failed to comply with regulations. It occurred to me, when we talked about those firms that went into liquidation owing PRSI payments, that presumably they are not included in these figures. Would Mr. Downey have figures for the amount outstanding from liqidated companies?

Mr. Downey.—I think a lot of this would be in the hands of the Revenue Commissioners. They would be dealing with the liquidation aspect of it; we would not.

Deputy Colley.—The point I am making is that this is not anything like the total figure of amounts outstanding. This is only those that were followed through the courts and decrees obtained?

Mr. Downey.—Certainly, the Deputy is quite right. These relate solely to the court cases.

204.Chairman.—I think we can note this. Paragraph 57 of the 1985 Report and paragraph 54 of the 1986 Report of the Comptroller and Auditor General read:—

Overpayments of Social Insurance and Social Assistance

57.I have been furnished with the following information regarding overpayments of Social Insurance and Social Assistance:—

118 individuals were prosecuted for irregularly obtaining or attempting to obtain benefits and convictions were obtained in 110 cases. Of the £2,525,374 recorded for recovery in 1985 the Department attributed £1,273,470 to fraud or attempted fraud by claimants.

57 individuals were prosecuted for irregularly obtaining or attempting to obtain assistance. Convictions were secured in all cases. Of the £3,175,078 recorded for recovery in 1985 the Department attributed £2,800,462 to fraud or suspected fraud by claimants.

Overpayments of Social Insurance and Social Assistance

54.I have been furnished with the following information regarding overpayments of Social Insurance and Social Assistance.

66 individuals were prosecuted for irregularly obtaining or attempting to obtain benefits and convictions were obtained in 57 cases. Of the £2,648,173 recorded for recovery in 1986 the Department attributed £1,241,603 to fraud or suspected fraud by claimants.

71 individuals were prosecuted for irregularly obtaining or attempting to obtain assistance and convictions were secured in 66 cases. Of the £3,177,872 recorded for recovery in 1986 the Department attributed £2,783,287 to fraud or suspected fraud by claimants.

Mr. McDonnell.—I think these paragraphs are self-explanatory. They simply set out the position with regard to the overpayments under both social insurance and social assistance. I have no comment to make.

Chairman.—In regard to the amounts of overpayment arising in your Department — take, for instance, the area of social insurance — the figure not disposed of at 31 December 1985 was £9.2 million. The following year that had arisen to £11.1 million. That is for Social Insurance alone. The Estimate for the whole of the Houses of the Oireachtas and the European Assembly for that year was £13 million. The deficiency in your Department in the overpayments not disposed of had arisen to an amount almost equivalent to what it takes to run the whole parliamentary system. Why is it continuing to rise?

Mr. Downey.—First, Chairman, may I say that the figure of £9 million is a cumulative figure which has risen since 1953.

Mr. Downey.—Nothing has been written off. It is not an annual figure. The £2 million is the figure for 1986.

Chairman.—But it is climbing. It is up to £11.1 million in 1986, and in the area of social assistance the over-payment figure has gone up from £6.8 to £8.6. It is climbing all the time. Between the two, the overpayments have risen to almost £20 million, between social insurance and social assistance.

Mr. Downey.—My view is that these should be written off year by year as it becomes clear that it is not possible to recover, but there was no provision made for that, so that is why you have the accumulation from year to year. I know it looks serious when you look at the totals, but in fact they stem from going way back many years, going back to 1952.

Chairman.—Let us take 1986. There was £2 million in 1986 under social insurance and almost £2 million under social assistance. That is £4 million in one year alone, which was an overpayment. That seems to happen every year. It is a very substantial amount of money.

Mr. Downey.—It is, but you have to look at it in the context of the amount we pay out every year. This year you are talking about £2.6 to £2.7 billion, so it is in that context. Also the fact that every year we deal with over, say 1.3 million claims. Inevitably some of those, with the best intentions in the world, will get through. People will defraud and get money they are not entitled to.

Chairman.—In the area of overpayments of social insurance and social assistance we are talking about overpayments of £4 million for 1986 and external fraud for that year was almost another £3 million. You are asking us to look at everything in the context of the expenditure. Did you ever think of looking at it in the context of the fact that you have only one accountant employed in your Department? Is there not something very lax about this whole thing?

Mr. Downey.—In 1986 the total overpayments were £5.8 million, of which £4 million was the fraud element. On the question of the accountant, I do not think having a lot of accountants is going to help. The controls that have to be exercised have to be exercised at ground level and you cannot have sufficient accountants at ground level to deal with all of these matters. Accountants can advise and guide as to procedures, and we have been continually refining our procedures.

Chairman.—Between over-payment and fraud for the year 1986 you are talking about something in the region of £8 million.

Mr. Downey.—No, Chairman, the total there is £5.8 million. The figures you are talking about are included in the £5.8 million.

Chairman.—Let us just take the overpayment in the area of social insurance. From £9.2 to £11.7 million that is £2 million. Is that right?

Chairman.—From £6.8 million to £8.6 million that is almost another £2 million. Would you agree with that?

Chairman.—That is almost £4 million. Let us take the case then of the fraud. Of the £3.177 million recorded for recovery in 1986 the Department attributed £2.7 million to fraud.

Chairman.—If you add those together that comes to £7 million. I am sorry, it is not £8 million, it is £7 million but that is a very considerable amount of money. That does not include the internal fraud you referred to earlier.

Mr. Downey.—The figures for assistance are £2.7 million fraud, £394,000 non-fraud, giving a total of £3,177,872.

Chairman.—So £5.8 is the figure? It is still a very considerable amount of money, Mr. Downey.

Mr. Downey.—I can only agree but we are doing everything we can to cope with it having regard to the size of our operation — as I mentioned, we get over a million claims every year, 750,000 or so claims are being paid every week in one way or another.

Mr.Downey.—They looked at all aspects of the Department's operations. The one thing that they did point out to us was that in terms of the size of our operation, the amount of money we were spending and the number of claims we were dealing with, we were over-ambitious — I think that was the phrase they used — in relation to our administration costs.

Chairman.—But is it not fair to say, Mr. Downey, that what we are talking about here is known fraud. Is that not right?

Chairman.—It does not include the sort of case of the woman who is collecting for 87 children and was discovered by the Garda and not by our Department?

Chairman.—That sort of thing would not be known to your Department? What we are talking about here is known fraud. There is a lot of obviously unknown fraud going on that your Department has not been able to tap.

205.Deputy Naughten.—The last point was one I wanted to ask because these are cases that have been discovered. But there could easily be as many more cases which are undiscovered. Is that not correct, Mr. Downey?

Deputy Naughten.—Let us put it this way. Some of those cases that came to your attention in 1985 and 1986 may have been going on for three or four years. Is that not correct?

Mr. Downey.—When they came to our attention we would know for how long they had been going on and they would have been going on for perhaps more than a few years. Some of them would have been.

Deputy Naughten.—So, in fact, the figure could be much higher than £5.8 million. With regard to the social insurance, what is the most common type of irregular claims there?

Mr. Downey.—I would say undoutedly the most common type would be somebody working and claiming benefit at the same time.

Deputy Naughten.—Is there any crosscheck done to identify the number of contributions, either credited or paid, to people who are in receipt of disability benefit or sickness benefit or whatever at the end of each year. Is there any on-going check?

Mr. Downey.—Yes. That is one of the features of the system. It is in that way that we catch out a lot of people. If the number of contributions paid and credited exceed 52, then there is something wrong somewhere and these are investigated. Many of them may be due to administrative errors or could also be due to the fact that a person is genuinely sick, genuinely entitled to disability benefit, but the company also operates a sick pay scheme and they continue to pay the contributions, so there would be a double counting and there would be nothing wrong about it. But in other cases, we do pick up where the number of contributions and credits exceed 52 for any particular year. We do pick that up and that leads to a lot of what you have seen here, the recording of fraud over-payments.

Mr. Downey.—We always prosecute where the evidence is regarded as satisfactory by the Chief State Solicitor's Office. He is our adviser in that matter.

206.Deputy Foley.—Most of the questions I intended to ask have been asked. There is one point I would like to ask Mr. Downey. In March of 1987 we got a report and it pointed out that the commonest cause of fraud is caused by working and signing. You also mentioned the question of the unmarried mothers' allowances scheme where marriages have not been notified, the deserted wives schemes and non-disclosure of means in the case of assistance generally. As a result of the setting up of your fraud squad, have you concentrated on those lines?

Mr. Downey.—Yes, in our control operations, as far as we can possibly do so, we always target in on the cases we think are most likely to lead to fraud. Therefore, the answer to your question is that, yes, we do home in on those areas where the question of fraud is most likely to occur.

Deputy Foley.—Over the period of the last three or four years, particularly 1986, have you been able to concentrate, especially in regard to particular schemes, with regard to fraud?

Mr. Downey.—Yes, we have. For instance, in regard to the unemployment schemes, we have set up external control units. We have people in each employment exchange specially dealing with the control of claims and linking up with the outdoor staff — the general investigation unit. Therefore, we have homed in that way.

Deputy Foley.—Have you see an improvement in the situation in 1986 over 1985 and 1984?

Mr. Downey.—There is no doubt whatever that as a result of concentrating on the high risk areas we are definitely getting better results.

207.Deputy Colley.—There are a couple of questions I would like to ask. There is one specific case that has arisen in the papers recently concerning some miners in the Arigna area and I gather also in the Greenore, County Louth, area. The thing that concerns me about those cases is the length of time during which the fraud was continuing without it being discovered. I wonder would Mr. Downey like to comment on that.

Chairman.—Before you do, Mr. Downey, maybe you would comment also on the reported frauds being investigated by the ESB? Is that connected to Arigna or is it a separate matter?

Mr. Downey.—The Arigna mines was a particular case where, as a result of what we had been saying earlier on, we were homing in on special areas. We have not the resources really to maintain intensive surveillance all over the country, but in this particular area we homed in on this in the Arigna mines situation and these cases are before the courts at the moment.

Chairman.—I think the same question applies to both and the Deputy can ask a supplementary then, but if you would comment on the ESB situation, Mr. Downey?

Mr. Downey.—In the case of the ESB, I think the headlines are rather exaggerated; they refer to very high levels of fraud. In fact, they are not anything near as high as they said. We are concentrating on that area at the moment. We are carrying out investigations. What we are doing is again homing in on what we regard as the high risk areas, so that inevitably the result we get there should appear fairly high. But if we did not home in on the high level areas, if, for instance, we homed in right across the board, the level of fraud would be far less. It would be a very simple matter to take 100 cases, investigate them and find nothing was wrong. Then you would say that there is nothing wrong at all. What we do is home in on what we regard as the areas where fraud is most likely to be and inevitably then the result will be that you will get a high level of detection.

Deputy Colley.—I still find that my original question has not been answered, which was: how long was the fraud continuing, both in the Arigna cases and in the Greenore case?

Chairman.—Do you have any idea of the extent of the fraud in the case of Arigna?

Mr. Downey.—No. In the case of the ESB you are dealing with a facility which is simply cut off. There is no provision for recovery, so far, of amounts. We are contemplating making some statutory provision whereby we could recover amounts.

Chairman.—In the case of Arigna, are we talking about disability benefit or unemployment assistance?

Chairman.—Will there be any prosecutions against persons involved in signing certificates?

Mr. Downey.—At the moment this whole area is being investigated, the doctors who signed them and that sort of thing. Normally, if we are dissatisfied with explanations, we would report doctors to the Medical Council.

Deputy Colley.—I wanted to ask Mr. Downey whether he is satisfied with the system that operates whereby it is a doctor who signs the certificate and whether he thinks that that is effective?

Mr. Downey.—As you are probably aware, this whole area of disability benefit or sickness benefit is being examined at the moment and the Government have expressed an intention to introduce a form of statutory sick pay for 13 weeks or so, which would dispose of a lot of the need for certification. That is part of the answer. The remainder of the question the Deputy asked is whether I am satisfied with the system. One is never entirely satisfied, but at the same time I cannot think of any alternative. People have suggested self-certification, but I think that that is not really on.

Deputy Colley.—There was reference earlier on to the fact that there was only one accountant in the Department of Social Welfare. Mr. Downey himself referred to the usefulness of having accountants, in that they cannot be at every level and they cannot go right down on the ground because there simply would not be enough. But, nevertheless, you acknowledge, Mr. Downey that that benefit to be had from accountants is in the devising of schemes and the systems in operation. It does seem to me that, with a budget of £2.6 or £2.7 billion, one accountant who is responsible for devising all the systems of checks and so on is simply utterly inadequate. Can you comment on that?

Mr. Downey.—I certainly did not mean to give the impression that one accountant is responsible for devising all the systems of checks and controls in the Department. We have a whole lot of ways of checking on this. In the case of the Unemployment Branch, we have the internal administration section who are experts in the system. We have an internal audit of about ten people. The accountant is primarily an adviser.

Deputy Colley.—Do you not think that you could do with more advising, that there is an acknowledged amount of undiscovered fraud in the system?

Mr. Downey.—We could certainly do with more, but I am sure the Deputy is aware of the constraints at present on recruitment of staff and the appointment of additional staff.

Deputy Colley.—I am also aware that there are possibilities for redeployment throughout the public service.

Deputy Colley.—Yes. Would Mr. Downey consider that it is appropriate that he should be looking for further help in this line?

Chairman.—With everybody offering, I am going to take them in a certain rotation — Deputy Naughten, Deputy Dempsey, Deputy Desmond — and then we will move on.

208. Deputy Naughten.—First of all, I would ask the Accounting Officer if he can confirm to the committee that all of the cases of fraud mentioned by Deputy Colley are before the courts, or are in the process of being brought to court?

Deputy Naughten.—If in the case of convictions being proved in the court, is there a certain automatic withdrawal from those employees of being able to avail of disability or sick benefit for a period of six or 12 months? Is that correct? That is normal procedure?

Deputy Naughten.—If a conviction is got. Effectively, what you are saying to the committee is that in this particular industry we are talking about 150 employees de facto who will not be insured if the convictions are secured, for a period of six months.

Mr. Downey.—They will be insured because they will be paying contributions but they will be disqualified from sickness benefit.

Deputy Naughten.—But that could effectively close down a whole industry in so far as that those workers, if injured — and in that type of industry the level of injury is fairly high — would not be insured and this could end up closing the whole industry.

Mr. Downey.—Well, it would be a coincidence if the whole lot of them became sick or were injured, but that is the law.

Deputy Naughten.—But that is the risk that the employer on the ground must recognise and acknowledge, that three-quarters of his workforce will not be insured if convictions are secured.

Deputy Naughten.—I am coming on to my next point. I understand that in discussions with the Department there was an offer made to the Department that all of this money would be refunded on the grounds that court cases did not proceed. Is that true?

Mr. Downey.—I believe there were some offers made. But it is not for the Department to bargain with the law. The matters were reported to the Chief State Solicitor. If the law is broken the law must take is course.

Deputy Naughten.—But it is a unique situation in so far as I have pointed out you could be closing a whole industry.

Deputy Naughten.—Again, I would like to ask the Accounting Officer why, when certain cases of the exact same nature came to the attention of his Department four years ago, in the self-same industry, prosecutions were not taken or steps to recover the money outstanding were not taken.

Mr. Downey.—I do not know the particular details of the case the Deputy is referring to, but if we have evidence we prosecute, or if we have evidence we disallow. It may be that we had not got the evidence at the time.

Deputy Naughten.—I would like to get the details from the Accounting Officer of the particular incidents I referred to. I know that there were cases and in fact those employees thought it was the order of the day that they could do this. They had done it. The Department discovered it and took no proceedings in a number of cases and I would like if we could get a note on that.

Mr. Downey.—I am not sure what cases the Deputy is talking about, but it I can get information on this specific case I will certainly give the information.

Chairman.—Could I just ask you did the employer in this case deduct tax and PRSI contributions and forward them to the Department in the normal way?

Chairman.—So the employer was not at fault, there is no question of collusion, is there? Is that the point that is being made?

Mr. Downey.—I understand there were three employers involved, but the question of collusion by the employers has not arisen, as far as I know.

209.Deputy Desmond.—Would the Accounting Officer agree that one of the major problems in this area is the time lag between the reconciliation of the RSI receipts from Revenue and their marriage with the DB payments, or the RSI numbers, in headquarters which would show then that a person was credited with, say, 65 or 68 payments, whereas they were drawing DB in the period? It is only then that it comes to light that there is an incentive time lag in that situation.

Mr. Downey.—Yes, this is so. There is a time lag. The records from Revenue start coming in about July to December.

Deputy Desmond.—In your period as Accounting Officer any information received in relation to any aspect of fraud, either by employee or employer, was immediately acted on and dealt with without fear or favour to anybody.

Mr. Downey.—Yes, this is so. We have always done that. This is why we have a special investigation unit which concentrates on this sort of thing so that it can be dealt with urgently.

Deputy Desmond.—Would Mr. Downey agree that what may be regarded as a fraudulent over-payment is a simplistic definition? For example, the Accounting Officer would agree that in relation to those accounts, to take one of the subheads, £300 million of old age non-contributory pensions, and that when people come up in the ordinary course of events for routine revision of their means by a social welfare officer, that quite frequently an over-payment emerges on the basis of a means assesssment and that that is recovered and that that is not what one would call conventional fraud arising on a very major subhead. Could I have the Accounting Officer's observations on that, that a great deal of the £5 million is not due to fraudulent practice?

Mr. Downey.—The whole area of pensions payable to the elderly is a delicate one. It is very difficult to know what fraud is or is not. There is no doubt that in situations that the Deputy has referred to, where people get a pension at a certain rate, they are not alert to the fact that they are supposed to notify changes in circumstances. It is very hard to expect them to, because all of these people are elderly people, they do not fully understand the regulations. A lot of people, even the experts, claim that our Acts and regulations are very complex and very difficult to understand. It would be very difficult to expect old people to understand them. This sort of situation does arise and it is difficult to expect people to understand them, but in accordance with the practice these are categorised as fraud. I would have to agree with the Deputy that it is not the worst type of fraud.

Deputy Desmond.—Would the Accounting Officer also agree that with payments to 246,000 claimants, plus 15,500 small-holders, that if one segregates the over-payment made in any one year one is talking about, out of 260,000 claimants, one is talking about at most, a few thousand over-payments and that frequently in relation to pay-related benefit and disability that in a relative context out of 1.26 million claims, if one takes an average of £3,000 or £2,000 of an overpayment, the average number of overpayments is a fraction of the total payment made? There is this massive public opinion that there is rampant social welfare fraud and I think it is incumbent on this committee to say to the Irish people that 98 per cent of those claiming social welfare are honest upright citizens who do not defraud the system. I am very concerned that the Accounting Officer should give us his observations on it before asking him a final question which relates to the staff involved?

Mr. Downey.—There is no doubt that the total numbers involved in fraud and over-payments of one kind or another is only a minute fraction of the total number of people who claim from us. There is no doubt about that. We get headlines very often about fraud being rampant, as the Deputy said; but very often it is based on particular cases where the circumstances are spectacular and which tend to lead to that sort of situation where you get big headlines.

Deputy Desmond.—My final question is this. The number of staff in the Department of Social Welfare at the moment is around 3,800. The number of social welfare unemployment claims have doubled. The live register in the past six or seven years has doubled. Could you confirm that you have made repeated representations to the Government seeking extra staff over that period, and that perhaps you have got 300 or 400 extra staff, but that the workload has doubled in a five or six year period, particularly in relation to unemployment related expenditure and that, with the operation of the embargo on recruitment of staff and the non-filling of vacancies in your Department, it is a wonder at all that revisions of administrative structures have been able to be undertaken? I would like your view on that because we regard it as a major issue in the public service?

Mr. Downey.—Certainly, the live register went up. I did some figures — I have not got the figures here with me — but I calculated that the live register has gone up since 1981 to the present time about two-and-a-half times whereas our staffing complement has not gone up even a fraction of that. I am talking now from memory, but I must have at least six, seven or eight times put up memoranda to Government on this question of staffing in which we tried to highlight the increased workload we were having to bear, the pressure that was on us, the effect it was having on the quality of the work of the Department and the controls. We got some additional staff. Needless to say, we never got what we wanted entirely. We are doing the best we can to meet the situation by extensive computerisation and we are starting in local offices at the moment, but, again, resources are scarce there, because overhanging everything is the embargo on additional staff.

Deputy Desmond.—Finally, where staff at the moment retire, do the full rigours of the non-filling of vacancies apply to your Department?

Mr. Downey.—We have had in the last 12 months or so — I have not got the figures with me — quite a lot of people departing not alone on retirement but on career breaks as well. These have not in the main been replaced.

210.Chairman.—May I take up this point before we go on to a different point with Deputy Dempsey? The income tax collection for 1986 was £2.4 billion and your Department spent about the same amount of money, something probably slightly larger, £2.6 million. I think the same argument which Deputy Desmond makes about social welfare could apply to income tax as well, this very large amount of money and the outstanding amounts probably not as big as are claimed. Can I refer to last Sunday's Sunday Press — and you spoke about headlines — and this particular headline here which says “£260 million welfare fraud claim too big — Minister”. In this it says, and I will quote it for you and we can ask your comments in the context of what Deputy Desmond has been saying. It reads:

A shock claim by Department investigators that social welfare fraud could cost the country as much as £260 million this year was described by Social Welfare Minister, Michael Woods, last night as totally exaggerated. The claim was made by the Chairman of the Social Welfare Officers Branch of the Public Service Executive Union, Gerry Kennedy, at the branch's annual conference in Kilkenny. His members include those in the Department's special investigation unit. Mr. Kennedy claimed that consultants had found fraud running at between 5 per cent and 10 per cent which, in relation to the Department budget of £2.6 billion, would mean fraud could be costing th State between £130 million and £260 million. The Minister, however, who attended the branch's annual dinner last night, told The Sunday Press that Mr. Kennedy was mistaken.

Dr. Woods added “I have uncovered through our operations last year the biggest amount of fraud and abuse ever and this amounted to £42 million”.

Could you comment on that in the context of what Deputy Desmond has been saying?

Mr. Downey.—Firt of all, the figure of 5 to 10 per cent was quoted and £2.6 billion, and 10 per cent of that is £260 million. This, obviously covers the administration, the whole lot. It is really a totally speculative sort of thing. That sort of calculation has no credibility whatever.

Chairman.—Why would the Chairman of the Social Welfare Officers Branch of the Public Service Executive Union, who represents the special investigation unit, want to highlight fraud by approaching it in this way? Presumably, the members operating that unit are concerned about the extent of fraud?

Mr. Downey.—I do not really know why he is highlighting that. Perhaps he likes to get headlines. Perhaps he would like to be a politician one day or something like that.

Chairman.—What about the question of the £42 million which the Minister refers to?

Mr. Downey.—I do not think the Minister referred to that as fraud. I have asked him about that. What has happened there is that, as a result of various things that happened last year, a lot of people for one reason or another signed off or were transferred to schemes of one kind or another. It is not necessarily all fraud.

Chairman.—So you think perhaps this Social Welfare trade union official is exaggerating the case and that an examination of his members' investigations would show that the actual fraud is a minute part of what he claims?

Mr. Downey.—Certainly, as I tried to demonstrate, the figure of £260 million is totally false.

Mr. Downey.—I have never tried to put any figure on it because I would be speculating and I really do not see the point of it.

Chairman.—Has your special investigtion unit ever looked at it and estimated what it might be?

Mr. Downey.—I have never looked for figures of that sort because I do not see the point in trying to indulge in speculative exercises.

Chairman.—So this £260 million is a bit like the infamous £700 million outstanding in taxes, it is a load of bunkum? Is that the extent of it?

Mr. Downey.—You can see for yourself, Chairman, when you take 10 per cent of everything, even things that are not involved in fraud at all — administration and that sort of thing. It is really not an accurate figure.

211.—Deputy Dempsey.—My question is generally in relation to frauds as well. Mr. Downey, could you outline the procedure that the Department follow when a claimant informs the Department that a cheque that has been issued to him has not been received? What investigations take place?

Mr. Downey.—The first thing we would do in a case like that is that we would put a stop notice on the cheque. Secondly, our Accounts Branch would check to see whether the cheque was cashed and we would take it from there.

Mr. Downey.—If it was found that the cheque was cashed, we would have to try and find out how it was cashed, where it was cashed and, if possible, by whom. It is not unknown for a cheque to go out in those circumstances to a house and for another member of the family to cash it unknown to the proper recipient.

Deputy Dempsey.—That is precisely the point I am getting at. If the cheque has been cashed, you try to find out who cashed it and so on. Is a second cheque issued to the claimant then?

Mr. Downey.—If we were satisfied that the person to whom it was sent was innocent, in those circumstances we would issue a second cheque.

Deputy Dempsey.—And what would it take to satisfy you that he or she was innocent?

Mr. Downey.—Well, we would investigate it as best we could. This is a subjective matter where you have to come to a conclusion one way or the other.

Deputy Dempsey.—Have you any idea of the amount of money that is issued or reissued in such circumstances within the Department?

Mr. Downey.—The amounts are small. I could not give you a figure but I would say in any year it would be a few hundred cases.

Deputy Dempsey.—Would you agree that the system at present is very loose in relation to the cashing of cheques, that it is only a matter of time, possibly, before this becomes a widespread means of defrauding the Department of Social Welfare. Would you think that there could be a need at this time to sit down and work out some kind of a scheme where the Department would issue identity cards or some type of system whereby the person cashing a social welfare cheque would have to produce some form of documentary evidence that he or she is that person? Is it not a case at the moment that a social welfare cheque can be cashed practically anywhere?

Mr. Downey.—The Deputy seems to imply that this sort of thing is likely to get out of hand. On the contrary, we can claim that it has been tightened up and that the amount of abuse in this area has been very greatly reduced in recent years, mainly through the computerisation of our cheque reconciliation system. It is not a serious problem at the moment. We are looking to the future in various ways as we develop our computer systems to have such things as electronic transfers of funds directly to people's accounts. All those things taken together would help to keep a fairly tight lid on this sort of thing.

Mr. Downey.—It can happen, yes, but the number of cases in which people get away with it is not very great. The number of occasions where we would have to issue duplicate cheques and so on, has been reduced considerably.

Deputy Dempsey.—If Mr. Downey has them, I would like to have the figures for that.

212.Chairman.—It would be fair to say Mr. Downey that the committee would not like to take a moralistic attitude towards individuals who are probably in the lower socioeconomic groups. None of us knows what we would do if we had to survive on the sort of income they have. But in the area where a whole industry is possibly surviving, or the employees, of that industry are possibly surviving by working and drawing social welfare, that is something which would worry the committee and would be a serious matter. I know it is a difficult situation. We do not want to see the Department of Social Welfare becoming a blood hound. That is not what we would like to see, because most of those individuals as Deputy Desmond said, are honest people and most of them are in the lower socio-economic groups. I do not think that in the whole question of subsidy to industry and people subsidising their salaries by drawing something, would be of great concern to the committee, we could note both paragraphs 57 of 1985 and paragraph 54 of 1986. Before we move on, I would like to propose that we write to Mr. Gerry Kennedy who is chairman of the social welfare officers' branch of the Public Services Executive Union and ask him if he has any information to assist the committee to substantiate these claims he made. Is that agreed? Thank you very much. Paragraph 52 of the 1986 Report of the Comptroller and Auditor General reads:—

Subhead I. — Unemployment Assistance

A computerised system for the payment of unemployment assistance in the Dublin area was gradually introduced between 1984 and 1987. It provides for the weekly listing of claims at the Department's headquarters from data input from terminals located at the 13 exchanges which process the claims. The listings are distributed to the exchanges where payments are made in cash. Some 40,000 claims are currently being paid each week.

An examination carried out by my staff of the internal control procedures in operation at one of these exchanges indicated that these procedures were not such as would prevent fictitious claims being introduced into the system or would ensure that, if introduced, such claims would be detected. It appeared for instance that officers inputting new cases could suppress evidence of the addition of a fictitious new case.

Furthermore, although comprehensive instructions on the checks and controls to be applied in the operation of this system had been drawn up they had not been issued to exchanges.

I brought these internal control deficiencies to the attention of the Accounting Officer and I asked what steps were being taken to eliminate them.

In his reply the Accounting Officer stated that because of the nature of the computerisation project it was considered that the appropriate method of implementing the system's procedures and controls was by means of training courses for all staff involved in the conversion to and operation of the new system accompanied by the provision of instructions contained in a comprehensive training manual. He stated that as part of the computerisation programme it was planned to have a major post-implementation review of the system and it was intended that this review would include an examination of the effectiveness of the control procedures particularly in the light of operational experience in all 13 exchanges. It was also expected that the review of the Department's payments system currently being carried out by consultants would provide significant input into this examination.

In relation to the specific control deficiencies brought to his attention the Accounting Officer informed me that as part of the ongoing development and review of the system a revised and expanded training manual which incorporated additional checking and control procedures had been issued to employment exchanges. In addition, the adequacy of the existing procedures and instructions would be examined in the context of the post-implementation review of the computerised system and revised instructions incorporating the recommendations resulting from this review would be issued to exchange managers, before the end of 1987, covering all aspects of security and controls in the computerised payments system.

Mr. McDonnell.—What I was referring to here was what we saw as certain weaknesses in the internal controls in what was a fairly newly developed computerised system for processing unemployment assistance claims in the 13 Dublin exchanges. The Accounting Officer told me that some action had been taken to improve the controls and that a further look was being taken at their effectiveness to eliminate any other deficiencies which might exist. This is what I might call the second phase of improvement, that is, the action which he said would be taken before the end of 1987 and I am not sure that that has actually taken place.

213. Deputy Desmond.—May I ask the Accounting Officer how successful he has been in bringing in the quarterly signing on for unemployment assistance by claimants aged 60 upwards, and then aged 55 upwards? I understand there may be a substantial number of persons involved who are never likely to go back to work but who could be paid on a book basis, reducing the volume of cash in the Department and if there is any great progress in that regard bearing in mind the industrial relations problems that are faced in the exchanges. May I have the Accounting Officer's observations on that?

Mr. Downey.—I am afraid I have to admit that we have not made a lot of progress in that area. As the Deputy mentioned, there were industrial relations problems in trying to get this brought in. We are now looking at the area of tackling the over sixties. We are looking at some new ways of paying them by, perhaps, giving them something equivalent to pension books. They would not have to sign on at the employment exchanges except very infrequently. We are just looking at that at the moment.

214. Chairman.—The question of programming to prevent fictitious claims is reported on here. What steps have been taken to prevent fictitious claims from being computed?

Mr. Downey.—First, I might explain that this question deals with a situation where we were just starting to computerise the employment exchanges. Perhaps the impression is given in the Comptroller and Auditor General's Report that we were not concerned about controls or anything of that sort. I think he refers to instructions being drawn up and nothing further being done.

Mr. Downey.—Not been issued: this is far from the case because computerisation of the work of the exchanges was a totally new experience for the staff of the offices. We dealt with it by way of intensive training courses. These were a basic feature before the work of computerising any office started. At each training course staff were giving training manuals which incorporated instructions for dealing with the new system. We appointed a liaison officer in each employment exchange to monitor the operation of the system as it started. When we started work on computerisation in an employment exchange staff from headquarters who were expert in the computerised system spent a lot of time there. We did take a lot of trouble to ensure that they were familiar with instructions and so on. With regard to fictitious claims, what is referred to there is the possibility of setting up on the computer a fictitious claim and then destroying documents. We have dealt with that. As you can appreciate, it is an ongoing process when you are starting off doing a big operation like this that has never been tackled before. We brought out revised manuals which incorporate up-to-date instructions. Included among them was a provision whereby the liaison officer in each employment exchange would maintain a logbook which would show the logging-in of documents and logging out of documents, so that a claim could not be generated and evidence destroyed — it would immediately come to light.

Chairman.—That is now being dealt with and the comprehensive instructions have been issued?

Mr. Downey.—We had hoped to have the comprehensive instructions issued by the end of the year. We were not able to do that because we were still working on them and trying to bring them as much up to date as possible. They are now completed and we hope that in the next week or so they will be going out.

Chairman.—It is also expected that the review of the Department's payments system currently being carried out by consultants would provide significant input into this examination. Has this review been completed and what is the outcome?

Mr. Downey.—The consultants have submitted reports, but they have not dealt specifically with this because this computerisation project was only underway when they were doing their report. What we are doing there is taking on board any of the suggestions made by the consultants in relation to this.

Chairman.—These revised instructions, the Comptroller and Auditor General says in his last paragraph, “incorporating the recommendations resulting from this review would be issued to exchange managers before the end of 1987”. I take it that is still your target and that you are on target?

Mr. Downey.—No. As I mentioned a few moments ago, we had hoped to issue them before the end of 1987 but we were not able to do so because we were still working on them.

Chairman.—This says “before the end of 1987”. Sorry this is 1988. I meant to say this year.

Chairman.—Noted. We will turn now to the Votes themselves, Vote 46 (1985) and Vote 48 (1986). Any questions on these?

215.Deputy Dempsey.—On subhead A1 — Salaries, Wages and Allowances — does the figure included here in 1985 include overtime?

Deputy Dempsey.—You mentioned the figure earlier on of the number of people employed in the Department of Social Welfare, what number is it?

Deputy Dempsey.—According to this, 2,262 of them received overtime payments?

Deputy Dempsey.—A very high proportion of staff to be receiving overtime payments, is it not?

Mr. Downey.—Needless to say, we would prefer if we had more staff, but that is not possible under present constraints. Overtime is necessary from time to time. It does not mean that they are on overtime all the year around, but at peak periods, special tasks and so on.

Deputy Dempsey.—Did you ever make a submission to the Department of Finance pointing out the amount of overtime that was being paid and the number of extra staff that could be provided at normal rates?

Mr. Downey.—I think the Department of Finance would be well aware of the amount of overtime that we are doing at present. This is a matter that would come up for consideration in terms of the Estimates each year.

Deputy Dempsey.—Perhaps the Department of Finance might like to justify an economic grounds the number of staff that have to go on overtime in the Department of Social Welfare. The Department are denying extra staff to the Department of Social Welfare and still Social Welfare have to provide the extra money for overtime.*

216.Deputy Colley.—Just to add to that — in fact, that was also my question — but I would like to point out that there are staff in other Departments who have nothing to do.

Mr. O'Farrell.—On the first point about the overtime, we have not ever had that specific proposal from the Department of Social Welfare. Both the Department of Finance and other Departments would agree that very often the most cost effective way to get work done is by overtime, the seasonal nature of some work and work that is just of a specific nature. As the Accounting Officer says, most of these staff would not be on overtime by any means all the year. If you have particular peaks of work that you have to get done for a period, without saying that you would have work for the staff for the rest of the year, the obvious thing to do is to get that done by way of overtime. Coming on to the second point, there has been a very intensive redeployment programme operating throughout 1987, and still operating, whereby staff are redeployed from other areas of the Civil Service into Departments, including the Department of Social Welfare. That is the reason why the staffing of the Department of Social Welfare was able to increase in 1987 by 140 as against an overall decrease in the Civil Service since March of the order of 640, because we did redeploy serving staff from other areas of the Civil Service into the Department of Social Welfare. We have also done it in respect of the Revenue Commissioners and other areas. The redeployment process involves relocating from areas where the Department of Finance feel staff can be spared — few Departments would agree with us — but where we feel staff can be spared we have redeployed and will continue to redeploy them into the high priority areas. This has included and will continue to include the Department of Social Welfare.

Deputy Dempsey.—Mr. Downey informed us earlier on that he could do with a lot more staff. I know that the staff may have been increased over the last year but, obviously, with this kind of overtime, I see the figure for 1986 is 2,446 people who received sums ranging from £401 to £11,963 for the performance of overtime. Certainly, some number of those could be taken on a full-time basis and it would work out a lot cheaper.

Mr. Downey.—May I make a comment there on what the Department of Finance official mentioned about redeployment of staff? Lest it be thought tht we got these in addition to our existing force for existing work, that is not quite the case. We did get a lot of new work last year and the vast majority of those were for what is known as the Jobsearch programme.

Mr. O'Farrell.—Absolutely, it is fully accepted that the Jobsearch programme was taken on and that the figures we are talking about do incorporate the Jobsearch figures.

217.Deputy Colley.—I would like to ask the Department of Finance representatives what numbers do they expect will be available in the Civil Service in the coming year. The number of 640 which the Civil Service has been reduced in the last year is very small compared with the numbers by which the wider public service has been reduced. I would be looking for much more attempts at redeployment to areas that are acknowledged to have a greater need. I am still not satisfied that there is a central system operating as between all the Departments. I have brought this up at this committee a number of times. There seems to me to be no central system for identifying areas of need and identifying numbers that can be re-allocated. How many people do the Department of Finance feel this year will become available for redeployment?

Mr. O'Farrell.—It would not be possible to predict it at this stage in respect of an ongoing process like redeployment. As the Committee would be aware, there is also the voluntary early retirement scheme. That has to be taken in conjunction with it, that if people are leaving through other schemes that will affect the number of staff available for redeployment in respect of certain grades and certain age groups, but there is certainly going to be substantial redeployment from the lower priority areas — the areas where staff can be identified as surplus and this is centrally co-ordinated by the Department of Finance into the high priority areas where staff can be most usefully employed in the scale of economic and social priorities.

Chairman.—You are a Principal Officer in the the Department of Finance, formerly on the Department of the Public Service, and your Department would look and measure from time to time the staff and other requirements of various Departments. Have you looked at your own Department since the amalgamation with Finance?

Chairman.—We will have the Secretary of the Department of Finance here next week and we might take it up with him since it is his function.

218.Deputy Dempsey.—On a point of clarification, the extra staff provided last year for the Department of Social Welfare were provided because of the Jobsearch scheme. Is that correct? It was not extra staff?

Mr. O'Farrell.—No, it was not exclusively because of the Jobsearch scheme but the figure includes taking on board the Jobsearch scheme. The number concerned is bigger than what is employed in Jobsearch but it includes that.

Deputy Dempsey.—May I ask Mr. Downey if he would prepare the figures for the number of people he needs in the Department, vis-à-vis the amount of overtime that is being done in the Department of Social Welfare? Perhaps at a later stage he would let us have something on that?

219.Deputy Colley.—Is the staff that was redeployed to the Department of Social Welfare, to a large extent for the Jobsearch scheme, going to remain in the Department of Social Welfare, as the targets for interviews in Jobsearch have been reduced for the coming year?

Mr. Downey.—Yes, they will, because the level of work for the employment exchanges is still going up.

220.Deputy Desmond.—Your live register figure on average for 1987 was 246,000. Is it reasonable that your live register figure for this year will be officially at least 253,000 as in the Estimates, but could hit 256,000, an extra 10,000? It is now agreed, at least postbudget, that the figure will not be less than 253,000.

Mr. Downey.—Yes, 253,000 is the figure that was provided for in the Estimates. I should mention, perhaps for the information of the committee that we do not calculate those figures ourselves. We are given them by the Department of Finance.

Deputy Desmond.—But it is equally true that with 9,000 more people to be paid on a monthly average — at least 9,000 more, most likely it will be 10,000 or 12,000 — that no provision for extra staff has been made for you in 1988?

Deputy Desmond.—May I ask, finally, if the Accounting Officer can give us a breakdown of the cost of the Jobsearch programme, including the cost of paying the 120 people who have been allocated to operate this programme, the cost of the various inputs into it and the effectiveness of this, because some wild claims have been made about £20 million to £40 million savings which, on examination in my view, do not stand up at all? I would like to have the real cost of the Jobsearch administration brought before us by way of an additional note.

Mr. Downey.—No, needless to say I do not, it is a difficult one to tackle but we will have a shot at it.*

Chairman.—Mr. O'Farrell, you might forewarn the Secretary of the Department of Finance who will be with us next week that we will be raising with him the question of staffing and the allocation of staff. I think he should come prepared.

Chairman.—And generally the redeployment of surplus staff throughout the Public Service.

Deputy Desmond.—Why, at the moment, is there a substantial number of staff in the Farm Tax Classification Office? Why have they all been at home for the past six months, with no office to go to, and being paid, and why have they not been redeployed?

Chairman.—We will have the Accounting Officer from the Department of Finance in next week and we could raise that question with him. We will stick with Social Welfare this morning.

Deputy Desmond.—The Accounting Officer for the DPS — there are a lot of secretaries over there.

Chairman.—We will have the Accounting Officer for Finance next week and we can talk about it then. It will include the DPS.

Mr. O'Farrell.—May I say that I am aware of this, but it is not actually my area. The farm classification office does not come within my particular ambit.

Deputy Desmond.—They are all at home and being paid every week. The cheques are being posted out to them. They are not working at all.

221.Chairman.—We will raise it next week. May I raise the question of consultancy services with you, Mr. Downey? You spent £600,000 in 1985 and almost the same again in 1986. Do you spend that amount of money annually, or was it on something in particular in these two years?

Mr. Downey.—The level of consultancy money being spent by us has been increasing because we are indulging in fairly intensive computerisation programmes and a lot of it is going in that area.

Chairman.—How much did you pay for the Price Waterhouse Report? You must have some idea.

Mr. Downey.—I would be guessing. It would be in the 1987 account. I have a figure of about £300,000 in mind, but I could not vouch for that.

Chairman.—Were those contracts put out to tender or how was Price Waterhouse selected?

Chairman.—There is an investment return figure here under F. What is investment return? What investments do the Department of Social Welfare have?

Mr. Downey.—Actually, that is probably the last time that item will appear in the accounts. It related to the building Aras Mhic Dhiarmada which is an asset of the social insurance fund and the Vote had to pay to the social insurance fund an amount equivalent to what they would get on the value of the building as an investment. It was a very notional thing which did not have any real meaning so it will not appear, as far as I am aware, in any future accounts. We have been discussing this with the Department of Finance.

222.Chairman.—To come on to the question of children's allowances. In 1985 the figure was £172 million and in 1986 £205 million. Is that the figure?

Chairman.—The figure for children's allowances in 1985 was £172 million and in 1986 was £205 million.

Mr. Downey.—The figures you have given are correct. There was a fairly big increase in numbers.

Chairman.—The question I wanted to ask you is this: you could literally be the heir to the greatest wealth of a family in the country and still claim or be claimed for in the area of child benefit. Is that not a fact?

Chairman.—You could really find that there are some very wealthy people being paid child benefit for maybe more than one child every month?

Chairman.—Your Department have given consideration to putting an upper income limit on this from time to time. What are the considerations against applying an upper limit?

Mr. Downey.—It is a matter really of policy. I have seen some figures in recent times that the birthrate has been declining dramatically in recent years and has now reached the stage where the population are likely not to be replaced. This has happened in a number of continental countries where the birthrate declined so much that governments began to worry about the population, and in places like France they introduced very big child benefits of one kind or another. One would have to look at that. As well as looking at the ceiling aspect of it, we have also looked, with the Department of Finance into the question of taxation of the benefits. That might well be a more equitable approach to it, but there are lots of technical difficulties in trying to achieve that.

Chairman.—Do you have an approximate figure for the number of people whose income would be in excess of £25,000 who claim child benefit?

Mr. Downey.—At a £30,000 level there would be about 12,000 people — people who would be knocked off if there was a limit of £30,000.

223.Deputy Desmond.—Would the Accounting Officer not agree that, of the 25,000 people with income in excess of £25,000, the money of course is paid to the spouse, the non-money earning spouse in the vast majority of those cases?

Mr. Downey.—I would say in virtually all cases. Under the laws at present it is the mother who is entitled to the child benefit.

Deputy Desmond.—I think you would also agree, in regard to enhancing the rate from £12 to £15 and the abolition of the tax allowance, that that was redistributed by and large to mothers who did not have a direct income?

Mr. Downey.—This is so. It was the purpose of the increase to compensate for the child tax allowance which was abolished under the tax code.

Deputy Desmond.—You are aware that the child benefit has not been increased in the past two years?

224.Deputy Colley.—May I ask what would the percentage be of the total number of families for those 12,000 earning over £30,000? What percentage of claimants would that represent?

Deputy Colley.—It is calculated on the family income, not necessarily on one or other spouse?

225.Chairman.—I was going to move on to page 167 of both Votes, if we are finished with page 166. All of those matters on page 166 are noted. We are on to page 167, items J to U on both pages. Any questions on those?

Deputy Colley.—On Subhead J — Widows and Orphans Non-Contributory Pensions — there is a figure of £61,000 more than granted in 1985. How did this arise? Was it simply an under-calculation or what? The point I was going to bring up concerned where the Ombudsman requested the Department to make an ex gratia payment for a contributory widows' pension. I see this deals with non-contributory. I am mixing up the two. What was that figure referring to?

Mr. Downey.—No. It was simply a slight under estimation of the average number of pensions that would be in payment. This is the way we would calculate it for the year. We slightly underestimated the average number in payment.

226.Deputy Dempsey.—On subhead T — Losses — the note refers to “assistance paid in error and irrecoverable”. The respective figures are £66,276 in 1985 and £68,720. Could that be explained a little bit further? It seems a remarkably consistent amount of money to be paying in error?

Mr. Downey.—I think what I could best say about this is that this is a sort of technical type of subhead where certain assistance payments which are paid in error are put into this suspense account rather than charged to the Vote. At the end of the year it is simply written off, treated as irrecoverable and put into this Losses subhead.

Deputy Dempsey.—Is this in addition to overpayments that have been made and fraud and the various other things that we mentioned earlier on? It sounds a bit more than technical to me, when there is a sum of nearly £70,000 involved, apparently, in those two years; I do not know what it has been in previous years?

Mr. Downey.—No, it is not in addition to; it would have been included in the overpayments; but, with Department of Finance agreement, we treat it in this way.

Mr. Downey.—It is likely to be around the same figure every year, because you are looking at things from year to year and making up your mind which is going to be treated as irrecoverable or not. You try to clean out the original subhead.

Deputy Dempsey.—What you are saying is that it is portion of this over payment that we were talking that it is written off in that way?

227.Deputy Colley.—On subhead O — Anti-Poverty Programme — I see that, first of all, there was a grant of £1 million, £500,000 was taken away from it and then in the end £287,237 was not spent. Is this referring to the paragraph that we had earlier?

Mr. Downey.—No. This simply related to the fact that there was a provision made for the setting up of the anti-poverty programme and there were delays in establishing the board and setting it up. Legislation had to be passed and the board set up on a statutory basis. There was a delay in setting it up. That is why not all of the money was spent.

Deputy Colley.—So it did not become established until mid way through the year or sometime later?

228Chairman.—On the question of the Combat Poverty Agency, Mr. Downey, I note the note we have here on the question of equipment purchased for use in the Combat Poverty Committee's central office being written off. Do you know how much of it went astray or what sort of equipment they are talking about.

Mr. Downey.—This was equipment from the old Combat Poverty Agency which finished up in 1980.

Mr. Downey.—We do not have a breakdown on that. I think it was all pretty ancient stuff. It had a nominal value of £2,000. That was retained for use by the newly established Combat Poverty Agency.

Mr. Downey.—I do not have a figure. There was not a lot, but I can get it for you.

229Deputy Desmond.—In relation to the pre-occupation of our committee here about over-payments, you did recover £562,000, bottom of page 168. These were moneys recovered from claims and you are happy with the extent of social assistance overpaid actually recovered?

Mr. Downey.—Yes, I think it is a fairly good recovery rate having regard to the fact that you are dealing with assistance payments which are means tested. Even though people at times get payments irregularly in one way or another, most of the time when you are dealing with the assistance classes you are dealing with people who have not any substantial means. Once they get the money and spend it, it is very hard to get it back. That is a substantial amount that was recovered.

Deputy Desmond.—They would be recovered by way of very small deductions of £5 or £6 per week, or even less?

Mr. Downey.—They would be recovered in a variety of ways. You would have small deductions. You could also recover, say in the case of pensioners, from the estate of a deceased person or this sort of thing.

230.Deputy Colley.—This is the item I was referring to earlier. It is in the notes. It is the third item there — an ex gratia payment totalling £4,000 on the recommendation of the Ombudsman. Could I ask Mr. Downey did that represent an individual payment or did it have repercussions? Did it go beyond that individual payment and did it have repercussions on payments for other pensioners?

Mr. Downey.—No, that was an individual case, a particular case, and a most unusual case. It has no repercussions otherwise.

231.Chairman.—Right. Mr. Downey you are the biggest spending Department in the State and you are also the most-up-to-date because you are the first one we have completed for 1986. We have concentrated, as we normally do, on losses and faults and problems which we find in the system, but it would be only fair, because of the enormous amount of money you do spend and the enormous amount of transactions, to express the appreciation of the committee for the general manner in which your Department is conducted. If we concentrated on faults it is only because we want to see those eliminated. I do not think the committee would like to see the good work done by your Department and others, overshadowed by the fact that we do concentrate on these. You have a difficult task given the number of recipients there are at this particular time. I want to express our appreciation for the manner in which, as usual, you have been well briefed and dealt with the inquiries put to you this morning. Thank you very much indeed.

Mr. Downey.—Thank you, Chairman. I appreciate very much what you have said and I will be only too glad to convey what you have said to the officials of my Department.

GENERAL REPORT OF THE COMPTROLLER AND AUDITOR GENERAL

Mr. S. Cromien called and examined.

232.Chairman.—Good morning. The Committee of Public Accounts of Dáil Éireann is this morning examining the Secretary of the Department of Finance, Mr. Seán Cromien in his position as Accounting Officer for that Department. You are very welcome, Mr. Cromien.

Chairman.—Paragraphs 2 to 7, inclusive, of the report of the Comptroller and Auditor General reads:

Outturn of the Year

2.The audited accounts are summarised on pages lviii and lix. The amount to be surrendered as shown in the summary is £127,381,701 arrived at as follows:—

Údarás na Gaeltachta Act, 1979	4,707,796
Bretton Woods Agreements Acts, 1957 to 1977	2,917,894
Industrial Alcohol Acts, 1938 to 1980	250,000
Fóir Teoranta Acts, 1972 to 1983	14,900,000
European Communities Acts, 1972 to 1979	159,805,320
British and Irish Steampacket Co. Ltd. (Acquisitions) Acts, 1965 to 1982	5,000,000
Insurance Act 1964, Section 5	100,000,000
Irish Shipping Ltd. Acts, 1947 to 1984	14,744,014
Irish Steel Holdings Ltd. Acts, 1960 to 1985	19,000,000
Postal and Telecommunications Services Act, 1983	4,000,000
Kilkenny Design Workshops Ltd. Act, 1982	261,597
	661,457,861

Issues for the Redemption of Public Debt:—	£
Ways and Means Advances	7,681,795,828
Exchequer Bills	1,194,963,014
Prize Bonds	4,401,000
Savings Certificates	15,704,000
National Instalment Savings	21,819,439
Index-Linked Savings Bonds	48,562,000
7½% Investment Bonds	212,000
Tax Reserve Certificates	53,748
6% Exchequer Stock 1980–85	104,534,358
11½% Funding Stock 1985	240,000,000
12% Exchequer Stock 1985	300,000,000
12¼% Finance Stock 1985	300,000,000
Variable Rate Exchequer Stock 1985	140,000,000
Finance (Variable Rate) Stock 1985	235,000,000
Other Borrowings	1,952,741,552
	12,239,786,939
Total Issues	21,110,425,017

Chairman.—We will take all of those together. We will not be calling the Comptroller and Auditor General until we get to paragraph 8. Under these paragraphs, Mr. Cromien, I note under the heading in paragraph No. 6 — “Money Raised by Creation of Debt” that under the Insurance Act, 1964, section 5, £100 million was borrowed from the Central Bank in relation to ICI. We will be coming to that later in paragraph 9, I understand, so we will leave it. Are there any other comments anybody would like to make on these standard paragraphs? We will note these.

Central Fund Services

Post Office Savings Bank

I referred in paragraph 9 of my previous Report to the issue of £1.8 million from the Exchequer in 1984 under the Finance Act, 1983 to meet a deficiency which had arisen on the operation of the Post Office Savings Bank (POSB) up to 31 December 1983. A further deficiency of £1.8 million arose in the year ended 31 December 1984 and this sum which was issued from the Exchequer in 1985 to meet the deficiency is included in the charge of £10,350,506 in respect of Annuities, Pensions, Salaries, Allowances, Returning Officers' expenses and Miscellaneous in paragraph 7 above.

I also stated in my previous Report that following the setting up of An Post, whose accounts are not audited by me, it would be necessary to make revised arrangements to enable me to exercise my statutory function to audit the POSB accounts.

I report on my audit of the POSB accounts to the Oireachtas only. However, An Post itself required independent assurance on its POSB operations and, furthermore, its auditors require to be satisfied that the transactions of the POSB are correctly stated within the overall financial transactions of the company. I am currently considering how best to integrate my audit of the POSB transactions carried out by An Post with the audit of the company.

A comprehensive internal audit of POSB operations for 1984 and 1985 was carried out by An Post's internal auditor with the assistance and advice of the company's auditor. As an interim measure my audit of POSB transactions of An Post for 1984 and 1985 is being carried out on the basis of a limited test check of transactions and a review of the results of the internal audit.

Mr. McDonnell.—There are two parts to this paragraph. The first, as you see, reports on the fact that the Exchequer had to again, as it did in the previous year, make good a deficiency of £1.8 million which had arisen on the operation of the Post Office Savings Bank up to the end of 1984. A deficit arises, as you know, when, after allowing for the capital gain or loss on the sale of securities, the interest earned on investments is not sufficient to cover the interest paid or credited to the depositors, and management expenses, of course. The position was reversed in the following year and the accounts showed a significant surplus. Regarding the second paragraph, you will remember, my having explained in connection with my 1984 report that I was considering how my statutory obligations to audit the Savings Bank might best be fulfilled in a situation where An Post, whose accounts are not audited by me since it was set up as a separate State body, is nonetheless responsible for the management of the Post Office Savings Bank. I just want to tell you, Chairman, that I have recently formalised arrangements with the auditors of An Post where by they will carry out an audit of the bank on my behalf commencing with the accounts for the year ended 31 December 1986. They will be doing immediately two years together. I have, of course, ensured that I will be fully informed of and satisfied as to the extent of their audit tests and I have also reserved my right to undertake any further examination which I may consider necessary. I have informed the Department of Finance of these arrangements that I have made. Finally, I want to say that my audit of the accounts of 1984 and 1985, which are referred to in the end of the paragraph and which were carried out under the arrangement as explained previously, were completed with entirely satisfactory results.

233.Paragraph No. 9 of the Report of the Comptroller and Auditor General reads:—

Issue under the Insurance Act, 1964

The Insurance Corporation of Ireland (ICI) which in 1983 became a wholly owned subsidiary of Allied Irish Banks (AIB) was subsequently found to be in financial difficulties and, as a consequence, in March 1985 the Government decided on the following arrangements:—

(1) the acquisition, for a nominal amount, by a company controlled by the Minister for Industry, Trade, Commerce and Tourism of the total shareholding of AIB in ICI,

(2) the petitioning of the High Court to appoint an administrator to ICI in accordance with the provisions of the Insurance (No. 2) Act, 1983,

(3) the issue by the Minister for Finance, in accordance with section 5 of the Insurance Act, 1964, of advances to the Insurance Compensation Fund to the extent which, having regard to any other payments being made out of the fund, would be sufficient to enable payments to be made from the fund to the ICI Administrator when required by him,

(4)the enactment of the legislation necessary to give effect to those decisions.

Following the Government decision the Insurance (Miscellaneous Provisions) Act, 1985 authorised the Minister for Industry, Trade, Commerce and Tourism to take up shares in Sealúchas Árachais Teo. This company in turn acquired ICI which was them placed under administration by an order of the High Court.

In order to provide the funds required to implement these arrangements it was agreed that—

(1)a loan of £70 million would be made available to the Central Bank by AIB at finest rates for a 15-year term,

(2)£100 million would be borrowed by the Minister for Finance from the Central Bank under authority of the Insurance Act, 1964 at a rate 7 per cent below that at (1),

(3)£100 million would be issued by the Minister for Finance from the Central Fund to the Insurance Compensation Fund for on-lending to the Administrator at the same reduced rate,

(5)the banking sector generally would pay the Central Bank a further 3.5 per cent per annum on the £100 million loan, £2 million of this to be contributed by AIB.

The sum of £100 million was received by the Central Fund from the Central Bank and issued to the Insurance Compensation Fund in December 1985, with the approval of the High Court.

Mr. McDonnell.—This paragraph, which I included here for the information of the committee, deals with the steps taken in 1985 to resolve the financial difficulties of the Insurance Corporation of Ireland, and it shows how funds were channelled through the Exchequer for this purpose — that is the £100 million that you were referring to a moment ago, Chairman. Looking at the accounts of ICI I saw that there was a significant improvement in the results for 1986 compared with the results for the two years to December 1985, although at that date, at the end of 1986, there was still a considerable excess of liabilities over assets. I also just noted that in his report for that year the administrator stated that the company was continuing to trade with the benefit of the assurance of State support to be provided through the Insurance Compensation Fund.

Chairman.—Would you explain, Comptroller, what the term “finest rates for a 15 year term” means?

Mr. McDonnell.—This was the loan given by the AIB to the Central Bank, which was onlent then as part of the £100 million, which would be at the bank's best possible rates.

Chairman.—Mr. Cromien, could you tell the committee what was the full exposure of the State in this venture?

Mr. Cromien.—Could I go perhaps very briefly into what happened in this case? In late 1984 serious losses came to light on ICI's London business which brought AIB losses on ICI, including acquisition cost, to £86 million, or about 20 per cent of shareholder's funds. AIB advised the Government in early 1985 that it could not continue to support ICI. It was decided to separate ICI from the AIB group, have it taken over by a company owned by the Minister for Industry and Commerce and put under an administrator. On 4 October 1985, the Central Bank announced arrangements for the advance of £100 million at very favourable rates. This was transferred to the company via the Insurance Compensation Fund on 6 December 1985 in the form of a loan for 15 years with an interest subsidy of 7 per cent provided by AIB and the banking system generally. This was the extent of the exposure of the Central Bank. The taxpayer has not been involved.

Chairman.—How much is this situation likely to cost the State? How much did it expose the State to at any given time. What was the maximum exposure?

Mr. Cromien.—Basically, what is involved here is that the company has been continued in existence. At the end of 1986 there was a deficit in the balance sheet of £120 million. That is the extent of the exposure of the company. It is the intention of the administrator to continue the business in operation, making a profit, as he hopes, to reduce that liability. The State, in fact, has only become involved in arranging the transfer of the £100 million from the Central Bank to the Insurance Corporation through the Insurance Compensation Fund.

Chairman.—So, it is your expectation that the company will trade out of the situation and that it will not cost the State anything in the long run?

Chairman.—But it could have cost the State if the company had gone under, presumably?

Mr. Cromien.—The State could have allowed the company to go bankrupt without becoming involved at all.

Chairman.—Could not the company have gone bankrupt after the State became involved?

Mr. Cromien.—When the administrator took over there was certainly a substantial liability there, but the purpose of putting in the administrator was to help to deal with that problem.

Chairman.—The point you are making is that the State is not likely to have any exposure because it will trade out and the loans will be repaid. That is the likely outcome, but was there any time when the State could have had exposure and could have been caught for a substantial amount of money and, if so, how much?

Mr. Cromien.—As I say, the deficiency in the accounts was quite substantial. It was over £200 million. At that stage, the Central Bank advanced £100 million for working expenses which enabled the administrator to continue the company in operation.

Chairman.—Was there any guarantee for that £100 million? Was there anybody likely to pick up the chit for it if it went astray?

Chairman.—The Central Bank had lent on this money but the Central Bank then presumably was exposed to the extent of this £100 million if anything went wrong.

Mr. Cromien.—It had received the £70 million from AIB which was then on lent so that the net amount it had to find from its resources was £30 million.

Chairman.—Yes, but if they had not got back the £100 million, they still would have had to repay the loan of £70 million to AIB, is that not right?

Chairman.—Is not the whole reason why the AIB did not lend the money to ICI directly that they did not want to be exposed? They wanted the State to be exposed. Is that not the point?

Mr. Cromien.—There was a serious problem for AIB as a bank with a subsidiary which was in danger of going into liquidation. If the

Insurance Corporation of Ireland had been allowed to go into liquidation, it would have been a case, in effect, of a default by a subsidiary of a bank which could have had serious repercussions on that bank and on the banking system. This is why the AIB informed the Government that it could not continue to support ICI.

Chairman.—Do you think to some extent the Government of the day were panicked by this approach by this private company?

Mr. Cromien.—No, I think it was a decision that had to be taken to protect the banking system. Banks are in a particular category in that they have a very substantial amount of money on loan from people who can come and ask for that money back at a very short notice. They are concerned then to protect their credibility. The slightest hint of suspicion can generate a run on a bank.

Chairman.—Mr. Cromien, is there not something extraordinary incompetent about a bank which purchases a company which very quickly builds up this sort of liability and brings the whole banking system in the country into jeopardy? Is the Central Bank or your Department now taking steps to ensure that the whole banking system of the country cannot be threatened again in the future like this, thereby threatening the whole State financial system.

Mr. Cromien.—On the first part of your question, in relation to the banks own operations, it would be a matter I suppose in the first instance for its shareholders to determine who is responsible. I understand that the bank are, in fact, taking an action against an accountancy firm in this matter. In relation to supervision, there is a problem about State supervision. It is important to have regulation of the banking system and of the insurance industry to ensure that the events that you are suggesting are not likely to happen but you cannot have undue interference. So we have to strike a balance between these two. In this particular case, there was a feeling that in relation to both the insurance company and AIB, the supervisory systems were adequate for the purpose but exceptional circumstances developed. The whole question of supervision of the banking system and of the insurance companies is being looked at at the moment, particularly with the establishment of the financial services centre here.

Chairman.—Mr. Cromien, is there not something alarming and very worrying for this Committee if the gnomes of Ballsbridge in this case can bring the whole State into such a threatened situation without proper controls by the State on their operations. Why should an individual bank have the power to come in and panic the Government into guaranteeing a £100 million loan to them because of their private transactions? Surely your Department and the Central Bank should have this situation tidied up by now?

Mr. Cromien.—I think, Chairman, the problem is one of allowing private sector banking sufficient flexibility to operate. There were exceptional circumstances in this case. The supervisory arrangements have been tightened since this particular incident.

Chairman.—My last question, Mr. Cromien, is with regard to the action being taken by the bank against the advice it received from the auditors presumably, there is a substantial amount of money involved there. Will that money go as repayment against the capital loan from the State?

Mr. Cromien.—There is an arrangement that the State will participate in any funds that come as a result of this action.

Chairman.—They are very gracious to allow the State. I think we should move Government Buildings out there to Ballsbridge if this is the sort of decision they can make.

234.Deputy Naughten.—First of all, in reply to one of your questions, the Accounting Officer said there were serious repercussions for the bank if the State did not take the action it took. Could he outline to the Committee precisely what those serious repercussions would be or could be?

Mr. Cromien.—I have mentioned the question of confidence. If a bank were looked on as not safeguarding the assets of the company adequately it could be threatened with a run on its deposits. AIB is the biggest bank here. It and the Bank of Ireland and their subsidiaries probably are engaged in about 85 per cent of banking activity here. It would be very difficult to isolate the effect of any panic just purely on one bank and the likelihood would have been for it to have spilled over to other banks and to the banking system generally. That was the fear that was there.

Deputy Naughten.—So, in actual fact, what you are saying is that had the Government not taken the decision it took at that point in time the banks could have collapsed?

Deputy Naughten.—Again, getting back to the point made by the Chairman, is there a danger or likelihood that the same situation could develop tomorrow with another banking group and/or another venture? And what steps have the State or your Department taken to prevent the like of that? Obviously, AIB made an extremely bad investment when getting involved in ICI. What guarantee have we that the same situation is not going to happen tomorrow?

Mr. Cromien.—First of all, the fact that a bank of that size has got its fingers burnt has been a salutary example to all the banks in the country. Secondly, in relation to the insurance area, there is, as Deputies know, an Insurance Bill going through the Oireachtas at the moment which will provide tighter supervision in relation to that area. There is also a Central Bank Bill, which is being drafted at the moment, which will cover banking.

Deputy Naughten.—Were there any legal proceedings taken against senior staff in ICI for allowing this situation to develop?

235.Deputy Crotty.—In relation to the banking system, you mentioned that two banks control 85 per cent of the bank trading here. Have the Department given any consideration to encouraging the diversification of the banking system? Are there any impediments which inhibit the banking system? Why should our finances be controlled by two banks, one of which showed itself to be very incompetent to say the least of it?

Mr. Cromien.—Again there is a problem of balancing advantages. Nowadays there are economies of scale in a very large bank. Remember we are moving into new conditions of international competitiveness, and you must be large to compete. There is a difficulty in having a lot of small banks; the larger the bank, the safer. Where you have two banks in very strong competition with each other you have a reasonable degree of protection for the individual. There is a good degree of competition.

Deputy Crotty.—That is a contradiction of what actually happened. There was not protection for the shareholders funds, as it turned out; and, but for Government action, the bank could have gone under, which they should have gone under. It is extraordinary that no heads fell in that sort of situation. In other words, have the shareholders any say or any control, or do the controllers of the banking system control the whole bank? This is a very serious question.

Mr. Cromien.—There is certainly a problem in relation to a bank as distinct from other companies. The State, in the normal way, would have no requirement to go to the rescue of a private firm that made a mistake in the market place. In this case the State had to look at the effects on other people. This is a responsibility the State has. The onus on banks is recognised by very tight conditions in comparison to other companies. There are strict ratios that are traditionally enforced by the Central Bank in the supervision of banks. As I said earlier, it is a question of striking a balance between allowing a bank freedom to discharge its duties and controlling it. This was a very exceptional situation which had to be dealt with. It was dealt with fairly smoothly in a way which sorted out the problem.

Deputy Crotty.—It did, but it certainly did not bring any credit on our banking system here. As you mentioned earlier, you need large banks and you need competition between large banks. But it would strike me, thinking back on the situation, that the competition developed irresponsibly in the banks in that one set of directors or executives wished to overtake another and took undue chances. Have we no way of controlling that, or has the Central Bank no input into controlling irresponsible action, which this was, for commercial gain and to bolster up their own ego? That is what I would think.

Mr. Cromien.—I think that the problem is probably a bit more complex than that in that there is now pressure to reduce barriers between the different forms of financial activity. It is the current wisdom that the world economies will benefit by a reduction in the barriers between the different forms of financial activity. I think in general this would be looked on as a good development. The fact that this bank moved into the insurance business, as in fact, banks have been moving into stockbroking recently, was looked on in itself as not undesirable. A bad commercial decision was taken, as the Deputy has said, and that is the risk that is taken in having free competition, that is the price of competition. The difficulty in the banking area is that whereas in the normal way with a company, if it makes a bad commercial decision, it must pay the price for it itself in a case such as this. In this case the price was too great for the State to risk and a rescue operation had to be put into operation.

Deputy Crotty.—Did the Central Bank involvement in this cost the State anything?

Mr. Cromien.—No, because £70 million of the money has come from the AIB and the other £30 million from its own reserves, so it has not affected the surplus income, which the State receives from the Central Bank. The banks income continues to be supported by the interest that is paid on the loan from ICI.

Deputy Crotty.—You mentioned that the Insurance Corporation of Ireland had an involvement. What was their involvement in this?

Mr. Cromien.—It is the second largest non-life company in Ireland. It had, at the time of the difficulties in 1985, something like 25 per cent of the employers' liability and public liability insurance in the State together with significant motor and other insurance business. At that time it also had a very substantial operation in Britain and internationally. That has been cut back. It was in that area that the difficulties arose.

Deputy Crotty.—Has this had any effect on the cost of insurance in Ireland? Has it inflated premiums or had effect on premiums?

236.Deputy Dempsey.—If I could just go back to the business of the £100 million and the assurance we are getting that there was no State involvement and no cost to the taxpayer. Reading through this I see that Allied Irish Banks made available a loan of £70 million to the Central Bank at the finest rates and there is mention of £100 million being borrowed by the Minister for Finance and £100 million being issued by the Minister for Finance from the Central Fund to the Insurance Compensation Fund. There is a gap there of £30 million. If I understand what you said a moment ago, Mr. Cromien, you are saying that that came from reserves of the Central Bank? Is that correct?

Deputy Dempsey.—Is that not a cost to the State or the taxpayer? Where would that money normally have gone?

Mr. Cromien.—It would normally have generated income which would go into the surplus income coming to the Exchequer. It is in fact generating income from the Insurance Corporation of Ireland. It is being remunerated every year. The Insurance Corporation of Ireland is only paying a fraction of that amount itself because there is a very substantial subsidy by the banking system. Initially in 1985 the rate the Central Bank was getting was 9 per cent of which 7 per cent came from the banking system. Within that figure 5 ½ per cent — £5.5 million — came from AIB. So the Insurance Corporation had to pay only £2 million, which was moderate enough. The Central Bank was getting £9 million in every £100 million — 9 per cent — so it was and is in fact being adequately remunerated. The only question that you might ask would be if that £30 million had not been invested there, where else would it have been invested? That is a very hypothetical question because the money could have been invested at a higher or a lower rate of interest at that time since the Central Bank would have its money spread in different ways. This would seem to me to be a very reasonable and sensible investment for it to make if it is helping to maintain the stability of the banking system.

Deputy Dempsey.—But the point is it could have been invested somewhere else and it could have gained higher returns for the taxpayer if it had not to be tied up in this particular investment. Is not that so?

Mr. Cromien.—I think it could equally have been at a lower rate of interest depending on the pattern of investment at the time. A bank, the Central Bank, particularly, will have its funds spread. It will not obviously go for the highest earning assets all the time. It will have assets, say, in low yielding Swiss securities which are very stable and very dependable. You are getting security there but a low rate of interest. In a sense that is what this is. It is an investment in the stability of the country. It is hypothetical to suggest that the £30 million could have been put into something else.

237.Deputy Colley.—I might start by, in fact, continuing that line of discussion because I am puzzled by the sequence that is set out here. It seems to indicate that the AIB lent £70 million to the Central Bank at finest rates, we will say triple A rates, whatever. Then the Central Bank lent on effectively to the administrator at rates that were 7 per cent below finest rates.

Mr. Cromien.—No. I am not quite sure what the finest rates were; I have not got that figure. It would not be that different, I suspect, from the 9 per cent the Central Bank is getting.

Mr. Cromien.—It was a reasonable rate. As I said, I have not got the exact figures here but with regard to the £70 million, the Central Bank is not out of pocket in relation to paying AIB because it has been receiving 9 per cent on the £70 million it passed to ICI. It is remunerating the £70 million from AIB at roughly the same rate, I suspect.

Deputy Colley.—You see, Mr. Cromien, you did mention that the banking system is subsidising to the tune of approximately 7 per cent. I see in the report of the Comptroller and Auditor General here that the AIB agreed to pay an interest contribution of 3 ½ per cent towards the shortfall of 7 per cent in interest that they would have got extra. So, that does leave a shortfall of 3 ½ per cent according to the Comptroller and Auditor General?

Mr. Cromien.—I should explain that the Central Bank in 1985 were getting 9 per cent on their loan to ICI. Of that, 2 per cent was to come from ICI itself, leaving 7 per cent; that 7 per cent was divided into two three and a halves. One 3 ½ per cent came from the banking system including AIB.

Mr. Cromien.—It is. AIB had to pay 2 per cent of that 3½ per cent. So, the whole 7 per cent is being paid by the banking system, with the AIB paying 5½ per cent and the other banks paying 1½ per cent.

Deputy Colley.—I see. If I could go back to an earlier reply, you mentioned that supervisory arrangements have been tightened up. I would be interested to hear in what areas. Is it to do with the Central Bank policing of banking? Is it to do with the operation of the ICI or the operation of the AIB investments, or is it in the Department of Finance?

Mr. Cromien.—I am not an expert on the Insurance Bill because it is another Accounting Officer who is concerned with that. But that Bill is going through the Oireachtas at the moment with tighter requirements in relation to insurance companies. The Central Bank itself, following this experience, has understandably been watching very carefully any applications by the banking system for changes in their operations. There is a general question, as I said, of supervision in this area which arises in the fact that there is now a new world developing with barriers being broken down between banks, insurance companies, stockbroking firms, and so on, and that is being examined in the Department of Finance at the moment in consultation with the Central Bank and others. It is obviously clear that this happening in relation to ICI was the first warning of what can occur when you begin to break down barriers between the different institutions and that there are dangers as well as benefits in it.

Deputy Colley.—So, in reality there are not any stipulated or real changes in supervision as yet. There are certainly some suggested or proposed in the new Bill on insurance companies and the Central Bank is looking at things more carefully, but, in structural terms, there are no real differences as yet?

Mr. Cromien.—Could I just take the second part of that. The control by the Central Bank of the banking system is very tight in that the banks have to go to the Central Bank for approval to do anything novel. In a sense, you do not need any structural change there. What you need is an appropriate degree of supervision by the Central Bank, in other words, an administrative change, if that were needed.

Deputy Colley.—Perhaps not structural changes so much as the criteria the Central Bank use. Have they effectively changed them?

Mr. Cromien.—Basically, what you are saying is if the same situation developed again, if, say, a bank wished to become involved in an insurance company how would they look on it? Would they look on it with favour? I think they would look at it very, very carefully after what has occurred. It has happened one of the banks in fact that has been given permission to establish a life insurance company. The ICI case involved a bank taking over a non-life insurance company and the Central Bank would discourage that. In that way there has been tightening up.

Deputy Colley.—Could I ask, really moving on to the status of the ICI now, what exactly is its status at the moment? I understand there is an administrator there.

Mr. Cromien.—That is its status, that it is operating under an administrator who has been appointed by the High Court. That can continue indefinitely and the State is willing to allow it to continue indefinitely because it is helping to solve the problem that is there. There was a very substantial deficit in the balance sheet when the administrator was established and that deficit has been reduced by the profitable operations of the company in 1986. I understand also, in 1987 although the accounts have not been published, that that improvement will presumably continue.

Deputy Colley.—So, it is really at the will of the State that this continues and at any point the State can say: “We would like to change the status of the ICI as it stands. We would like, perhaps, to return it to private hands.”

Mr. Cromien.—I think this would probably be in the first instance a matter for the administrator. The High Court has asked him to operate this company. It would be for him to pursue options there. If he got a buyer for it, I think he could go back to the High Court and indicate what he had done. Whether that is feasible at the moment with the very high liability I, personally, would be doubtful about but that would be a possible option in a few years if he reduced the liability further.

Deputy Colley.—I was going to come to that, realising that possibly the company is not at the point where one could offer it for sale effectively. At what point does it look likely to reach that stage in the next few years rather than 15 years? It has, as the Comptroller and Auditor General stated, returned a surplus in the last year. From the committee's point of view I would be interested in looking at the possibility of the return of all moneys that the Central Bank has laid out, if possible, if the company could be sold on. I do not know what the possibilities are?

Mr. Cromien.—Again, it would depend on who would buy it. Could you get a buyer for a company with this liability. Giving a personal view, I think it would be unlikely at the moment. It depends on the progress that is being made. It has to be acknowledged that the administrator has made very considerable progress. He has slimmed down the business very substantially. Most of the business is now in Ireland. It has generated a substantial profit in 1986. My understanding is that 1987 will also show good results. So, in a number of years time it should be possible to consider this.

238. Deputy Kitt.—Just briefly to follow on from those questions: Mr. Cromien mentioned that there was a liability of £120 million, £86 million of a liability with the AIB. Is that correct?

Mr. Cromien.—Sorry, that was the loss written off by AIB. Roughly £90 million, in fact, was the loss they had to write off in 1985 when they disposed of the company.

Deputy Kitt.—On the question of the deficit of £120 million, could Mr. Cromien tell us how long is it envisaged before that total figure would be put back on an even or a trading position? Also, could I ask him, in the situation where the AIB has been according to their accounts, making profits, has that over a number of years, including 1985, been taken into consideration by the Central Bank?

Mr. Cromien.—Just on the question of when will ICI be free of its liabilities, I could not answer that except to say that they have a 15-year loan. So, in theory they have 15 years to get the matter in order. They do not have to repay the money to the Central Bank until the end of the 15 years. I would hope it would be before that, given the progress that has been made in recent years. It is really impossible to tell how this will go on. One would hope that a company like that, as it is slimmed down, becomes more and more profitable, that profitablility accelerates.

Deputy Kitt.—On the question of banks being involved in ancillary activities like insurance, what is the Central Bank's view on this? You have so many brokers, agencies, insurance companies, and yet the banks are getting so much involved in insurance?

Deputy Kitt.—You mentioned that there was a big tightening up in the banking system.

Mr. Cromien.—Yes. There is a tightening up of supervision. I have already used this phrase of striking a balance, which I think is necessary. You have to allow the private sector freedom to operate. You also have to ensure, in the case of areas like banking and insurance, that there is a general protection for people. You strike a balance between these two, but that balance changes from time to time. You have to ensure that, given ordinary reasonable criteria of behaviour, companies are free within those criteria to operate. There is a worldwide move to reduce the barriers between all these formerly different types of activity. It is generally accepted that that is going to be beneficial. It will be beneficial to the individual here who can go to one body and get a range of services instead of having to go to a number of bodies. It will increase competition. A number of the areas perhaps have been rather traditional and could do with a breath of fresh air from competitors coming in. But it does carry risks and the risks have to be examined. It is not absolutely clear in this new situation what the limit of the risks is. That is what the Central Bank and the Department are looking at. It will be necessary to change the supervision of these bodies. Some of them are supervised at the moment by the Central Bank; some of them are supervised by the Department of Finance. Others are not supervised at all to any extent. That really has to be looked at.

239. Deputy Desmond.—May I ask Mr. Cromien can he confirm that there is draft legislation in the Department of Finance since about 1978–79 relating to the banking system which has not been brought before the Dáil.

Mr. Cromien.—There is a draft Central Bank Bill, which, it is hoped, very shortly to put before the Government and the Dáil.

Deputy Desmond.—Would you not agree that it is an extraordinary state of affairs that that legislation has been drafted for a decade and that yet successive Ministers for Finance and successive Accounting Officers, excluding yourself, have failed to put that legislation before the Government?

Mr. Cromien.—I can certainly say that that legislation will be coming very shortly before the Dáil along with a Bill in relation to building societies. You are aware, as I mentioned, that the Insurance Bill is before the Oireachtas at the moment. These in a sense all go together.

Deputy Desmond.—Could I ask you your view — this is not a policy matter but it is the impact of the presence of commercial banking directors on the board of the Central Bank — would you agree with me that in the circumstances as happened the presence of a substantial number of commercial banking directors on the board of the Central Bank meant that they could not be regarded as disinterested parties?

Mr. Cromien.—I think really this is a question of policy as to whether there should be banking directors on the board of the Central Bank or not. I will limit myself to mentioning. There are very substantial benefits in having bankers on the board of the Central Bank and thus having experience of the working of the banking system and direct liaison with the banking system. It would be a matter for the Government to decide in the context of a new Bill whether the present arrangement would continue to whether it would be changed.

Deputy Desmond.—Would you agree that in the circumstances of ICI the Central Bank seemed to be unaware of what was happening until there was a crisis approach by AIB to the Minister for Finance, to the then Accounting Officer in the Department of Finance and to the Taoiseach, in fact, at the time?

Mr. Cromien.—The Central Bank had no supervisory authority over the Insurance Corporation of Ireland. There was a problem in relation to that body which, as the committee are aware, is a matter of a dispute between the bank and an accounting firm. I could not comment on who is to blame.

Deputy Desmond.—But you are aware that there was a major banking crisis at that time. I am not sure that that is not an under-statement — and that the Government of the day were not sure whether the underwriting losses were £150 million, or £200 million, or £250 million, or £300 million and that the Department of Finance did not know either and it was of that kind of dimension. That is not an unfair observation, is it?

Mr. Cromien.—Again, that is a question that may be relevant to the impending court case.

Deputy Desmond.—Would you agree that there seem to have been some allegations made that in the process of rescue there was some trading in shares which was called into question?

Deputy Desmond.—It will come out in due course, I hope. It does raise very serious questions. My final comment is, you are aware that the administrator is endeavouring to dispose of ICI?

Deputy Desmond.—Is there any prospect at all in those circumstances of the State insisting on getting some compensation for the quite extraordinary endeavours that had to be gone to at the time to prevent a run on the banking system and I am sure you will agree with me about the cavalier attitude adopted by certain individuals in relation to the efforts of the State and of the Oireachtas to resolve that situation? Is there any prospect of getting any money back?

Mr. Cromien.—I have, I think, explained the problem in relation to the very substantial liability that is there. I think it will be some time before the question of disposing of it would be effective — I am giving a personal opinion. I could not speculate on what would happen at that time. It would depend on circumstances.

Deputy Desmond.—Could you speculate at all on the fact that it is extraordinary that a loss of £85 million could occur in relation to one particular bank, that the State exposure would be, at the time arising out of Government decision, anything up to £300 million which fortunately it was not subsequently, and that the board of the bank in question adopted an attitude, “it is your problem” and that all emerged unscathed and almost unreprimanded and secure in their positions. It is extraordinary that for a banking system which regards itself as so separate and so independent, the taxpayers could have had the bill foisted on them.

Mr. Cromien.—I do not think I have to be a defender of Allied Irish Banks but the incident had a severe effect on the Bank. The chairman of Allied Irish Banks in a letter to shareholders described it as a traumatic experience. It certainly is a very traumatic experience for any bank to find its profit for the year turned into a loss as a result of writing off a sum of £90 million, 25 per cent of shareholders' funds. The bank have also had to contribute the money lent to the Central Bank. They have had to subsidise for 15 years the interest on the loan to ICI.

Deputy Desmond.—Could I ask a final question? You would agree that in perspective one of the gravest concerns of the Department of Finance and the Department of Industry and Commerce was the fact that up to 300,000 industrial workers and their employer liability was at total risk in that exercise?

Mr. Cromien.—Yes, this was an important consideration. I have stressed in my replies the possible effect on the banking system but equally there was concern that the employer liability and other areas of insurance would be left without cover.

Chairman.—Mr. Cromien, it seems to me an extraordinary situation that a board of directors can put the State in a position where they can do more damage to it than ten IRAs or ten bands of subversives and yet these people can walk away and continue in their job and even in 1988 there still is not in place legislation to prevent a recurrence of this happening. It seems to me at the very least the board of directors of Allied Irish Banks should have been cleaned out and that there should be some legislation to disqualify people from holding directorship of banks if they expose the whole State banking and financial system to this sort of potential catastrophe. I hope consideration will be given to that when you put your final draft of the Central Bank Bill before the Dáil. Are there any dramatic changes in the situation and, if so, please advise the Committee of Public Accounts of those. I propose we express ourselves dissatisfied with this whole situation which is our penultimate strongest condemnation which we can give. Is that agreed?

240.Chairman.—No, with the situation. it is not Mr. Cromien's fault fortunately. We will express ourselves dissatisfied with that.

Issues under the Irish Shipping Limited Acts, 1947 to 1984

I referred in paragraph 13 of my previous Report to the requirement that advances from the Central Fund on foot of guarantees given by the Minister for Finance under the Irish Shipping Limited Act, 1947 and the Irish Shipping Limited Act, 1982 be repaid to the Minister by ISL within one year and two years, respectively, and that if not so repaid any amount outstanding must be voted by the Oireachtas as a repayment to the Central Fund but remain as a debt due by the company to the Minister. I have asked the Accounting Officer why a Vote provision has not yet been made to repay the sum of £169,373 which, as stated in paragraph 12 of my previous Report, was issued from the Central Fund in 1984 under the 1947 Act. I have also asked what action has been taken in regard to claiming this amount from the liquidator of ISL.

Mr. McDonnell.—When the Dáil by legislation authorise money to be issued from the Exchequer by way of repayable advances, typically advances to a State sponsored body, and when subsequently, or whatever reason, it transpires that the amount cannot be repaid, the normal technique for bringing the situation to the notice of Dáil Éireann so that it can alter the basis on which the funds were provided is to ask Dáil Éireann to vote the moneys. This is followed through by a bookkeeping entry to show the amount as a repayment to the Central Fund and as a charge in an appropriation account. It might be regarded as a technical point but the important point of principle is that a matter such as that is brought to the notice of Dáil Éireann by this mechanism. In the case of Irish Shipping moneys have been issued from the Exchequer since the date of the liquidation on foot of various guarantees given by the Minister for Finance in respect of the company's borrowings. The legislation authorising these issues from the Exchequer are the 1947 Irish Shipping Act and the 1982 Act and these provide that moneys issued on foot of guarantees are repayable within one year in the case of the 1947 Act and within two years in the case of the 1982 Act. The Act also gives legislative support to the principle, which I explained, of providing that the moneys be voted, if not repaid.

When I was preparing my 1985 Report, about the middle of 1986, the time limit for the repayment of one of the first amounts advanced had in fact expired. There was no sign of any action being taken to make Vote provision. Since that time the time limits for the repayment of some subsequent and larger amounts has also expired and, as far as I can see, no Vote provision has been made as yet. My view was that, once the time limit expires, the obligation to bring the matter to the notice of Dáil Éireann arises. The question then is: when should this obligation be complied with? I would have thought that it would be complied with as soon as is feasible. The Department of Finance view, as expressed by the Accounting Officer in a reply to me subsequent to the date of my report, is that, while the subsections of the Act requiring the company to repay specify the time limits for repayment, the immediately following subsections requiring the moneys to be voted in the event of them not being repaid does not fix any time limit for actually voting the money. In other words, the position is totally open-ended and the Vote provisions can be taken at any time in the future. From reading the two subsections together, I am not too sure that that was the intention. I have to say that we have a somewhat different perception of the situation. I thought I should draw it to your attention so that what the Dáil expects in such a situation perhaps could be aired or clarified. I would like to make one final report. When you do vote the money in that kind of situation it does not mean that you are, so to speak, irrevocably writing it off because it still remains a debt due and can be pursued, though in this particular case it transpired that it could not because it was interest accruing after the date of liquidation and as such could not be claimed in a liquidation. But the point that I wanted to air was whether, when the legislation provides that the moneys be repaid in two years and, if not so repaid, voted, does that mean that you must vote them or at any time in the future that you may care to decide on?

241.Chairman.—Mr. Cromien, is there still a company called Irish Shipping Limited in liquidation or has it been liquidated?

Mr. Cromien.—Not the figure of £169,373 which is mentioned in the paragraph. There are interest payments which, we understand, cannot be claimed in the liquidation.

Mr. Cromien.—This is a question of convenience of administration. The sum mentioned here and the other figures mentioned by the Comptroller and Auditor General are only part of the total payments which have been made on foot of these guarantees. It was considered better to wait until all the Central Fund payments arising from the liqidation of Irish Shipping had been made before making Vote provision to recoup the Central Fund. The alternative would be to recoup the Central Fund piecemeal as payments were made. It was felt to be administrively more convenient to do it this way. We would feel from our reading of the legislation that there is not an obligation to make the payment in as short a period as the interpretation of the Comptroller and Auditor General suggests. We have some informal legal advice to that effect. But, broadly, it is a question of convenience for the Dáil as well as for ourselves.

Chairman.—When is the total amount paid from the Central Fund in this regard likely to be known?

Mr. Cromien.—There is very little outstanding now. There is only about £200,000. I hope that it would be settled within the next year or so.

Mr. Cromien.—We would aim for something like that, if we can get it cleared by then. These processes are very slow. They are legal processes which take a lot of time. But it is not foot-dragging, if I may say so, by the Department. It is an attempt to do it in a sensible administrative way that would be useful to the Dáil and to ourselves.

Mr. McDonnell.—As I said earlier on, my purpose in bringing it to attention was really to get an idea of what the Dáil would expect in such a situation. I was interested in what the Accounting Officer said because looking back on some old legislation — I looked back over some of the old Insurance Acts where there were similar types of provisions — I noticed that in one of them in particular, I cannot remember which it was, it actually said in the subsection requiring the money to be voted:— “shall be voted at such times as may be fixed by the Minister for Finance”. I thought, significantly or otherwise, that the Irish Shipping Act did not in fact say “shall be voted at such times as may be determined by the Minister for Finance”. It said: “if not repaid in accordance with subsection (1) “ — or whatever it was — “shall be voted”, Subsection (1) required it to be repaid in two years and, if not repaid in accordance with that, it must be voted—but when is this open-ended, so to speak?

Chairman.—It is really an accounting matter and, since you are our Comptroller and Auditor General, would you give it as your opinion that in general these things should be replenished as soon as possible?

Mr. McDonnell.—I would see it as my function to always have uppermost in my mind the primacy of Dáil Éireann in financial matters and that the authority of Dáil Éireann should be sought as soon as possible if the condition under which Dáil Éireann provides money have subsequently, to be, for whatever reason, altered. In this case Dáil Éireann provides money which is repayable under the legislation. If it is not being repaid, Dáil Éireann has to be informed. The mechanism for doing that is to vote it, I would say, as soon as is feasible. I can see that, as the Accounting Officer has said, administrative convenience may enter into it. But, on the other hand, I would see it as perhaps something to be carefully watched that administrative convenience should not be seen as justifying, shall I say, a departure from the precise provisions of legislation. I think that they are imprecise.

Mr. Cromien.—In speaking of administrative convenience I was also thinking in terms of the Dáil itself in that it might be useful for the Dáil to have the whole thing taken together rather than a piece now and a piece the following year. It would strike me as convenient in that way.

Mr. McDonnell.—I can readily see that. It was a question of how do you interpret the Act: what was the intention of Dáil Éireann. I can readily see the sense of what the Accounting Officer is saying. But what is sensible and what is provided by the Act may not necessarily always coincide. Are you then free to adopt what you see as a convenient arrangement even though it may not coincide?

Chairman.—Without tying your hands, Mr. Cromien, I think you can take it that it is the view of the Committee that in general we would like these sort of things to be tidied up and replenished as soon as possible.

242.Deputy Colley.—There is a particular point that I am concerned about. This paragraph implies that the moneys that are not repaid are reimbursed to the Central Fund. Mr. Cromien is speaking about repaying moneys as they become available. I think that this paragraph is referring to a situation where the moneys are not being repaid and there is no authority — I think that is the area the Comptroller and Auditor General is talking about — for that money to be outstanding past one year or two years, depending on the Act, and that immediately that one or two years is up that money becomes repayable to the Central Fund and that it should in total be paid back to the Central Fund. Administratively, that seems to be a fairly simple thing to do: that the Department concerned votes immediately to repay it to the Central Fund and it recoups the money bit by bit as a debt owing to the Minister.

Mr. Cromien.—I think our interpretation differs from the inference in this paragraph. The Comptroller and Auditor General does not quite say what the Deputy has said. The Act says that the moneys must be repaid to the Central Fund by the company within the period mentioned. The company cannot do that because it has gone into liquidation. But the following paragraph, which refers to the repayment to the Central Fund from the Exchequer, does not have that limit. It is not there in the wording. What the Comptroller and Auditor General is raising is the question of whether the Dáil intended that the limit in relation to payment by the company to the Exchequer should also apply to the question of the Central Fund being recouped. In the Department it is our view that this is not so.

Deputy Colley.—With respect, I would submit that we are not here talking about time limits. What we are talking about here is authority and there is no authority once those time limits are up. There is no authority for that money to be outstanding and that it should be repaid immediately to the Central Fund. That is what the Comptroller and Auditor General is drawing our attention to and does on many occasions, the fact that the Vote is not there so the authority is not there.

Mr. Cromien.—Our authority would be under subsection (7) of section 9 of the Act which says:

That where the whole or any part of the moneys advanced under subsection (5) of this section has not been repaid to the Minister in accordance with subsection (6) of the section that amounts so remaining outstanding shall be repaid to the Central Fund out of moneys provided by the Oireachtas.

That is the statement there. They will be repaid but there is no obligation in that paragraph to see that they have to be repaid at this time. In other words, there is authority to continue to keep the moneys outstanding until it is appropriate to pay them. That would be our view, supported by informal legal opinion.

Deputy Colley.—As a final comment if I could say that if that interpretation is based on the feeling that it is administratively more effective to pay it at the end in one lump, I would suggest that it is just as administratively effective to pay it at the beginning in one lump and recoup as soon as possible.

Mr. Cromien.—That would be an alternative, except that it would be a very substantial sum to have produced at the particular time. In effect our interpretation of that section is that there is freedom there to do this. We would wait until we had the whole thing clear. We have not got the whole thing clear until we find out where we stand at the end of the period.

243.Chairman.—We will note this. There is a view, Mr. Cromien, that again, without tying your hands, in general, as a matter of good housekeeping, the Central Fund should be replenished as soon as possible and the authority of the Dáil sought for such funds.

VOTE 7—OFFICE OF THE MINISTER FOR FINANCE

Subhead K.—Repayment of Advances

To enable the Industrial Credit Corporation (ICC) to discharge its functions the Minister for Finance may, under Section 4 of the Industrial Credit (Amendment) Act, 1959, make repayable advances to the corporation on such terms as to repayment, interest and other matters as may be determined by him.

Between 1970 and 1980 ICC received Exchequer advances totalling £12,967,000 to finance certain loan schemes intended to provide working capital and fixed asset loans to undercapitalised small and medium sized enterprises. Because these schemes involved ICC in making loans in excess of the amounts justified by normal banking criteria it was agreed that the additional amounts would be provided at the risk of the Exchequer and that ICC would be liable to repay only the principal and interest recovered by them in respect of such additional amounts.

The statutory authority to enable the Minister for Finance to waive the repayment of principal under these arrangements was provided by the Industrial Credit (Amendment) Act, 1983 which also provided for the amounts waived to be repaid to the Exchequer out of moneys voted by the Oireachtas.

Of the total of £12,967,000 advanced from the Exchequer £5,102,000 has been repaid by ICC up to December 1985. The sum of £1,565,000 charged to the subhead together with a sum of £500,000 charged in 1983 represent an accumulation of uncollectable balances of principal of such loans up to 31 December 1984 and I understand that a further sum of £372,000, approximately, due up to 31 October 1985, is regarded as uncollectable. The Accounting Officer has informed me that it is estimated that ultimately £3,943,000 of the total amount advanced will not be repaid and also that interest totalling £1,406,000 due up to 31 December 1985 has been waived.

Mr. McDonnell.—This paragraph deals with the waiving by the Minister for Finance of the repayment of principal and interest on special advances issued to the ICC and, indeed, the subsequent voting as we have just been talking about the amount of principal waived. I thought I should explain the figures in the second half of the paragraph because they might be a little confusing. I hope the Accounting Officer will agree with the way that I shall put them. If you look at the second half of the paragraph you will see that a total of £13 million was advanced from the Exchequer and £5 million was repaid to the end of 1985, leaving £8 million outstanding at that stage. This £8 million, of course, would not all have become due at that stage but of the amount which had become due at the end of 1985 — the date my report relates to — £2.4 million had already been recognised as uncollectable. That is to say there are three figures mentioned, the £1.565 million, £500,000 and £372,000. So £2.4 million of what was due to the end of 1985 had already been recognised as uncollectable. It was recognised that further amounts might be uncollectable later which would bring the total to just under £4 million. If I could summarise, £13 million was advanced; it was expected ultimately that £4 million would be uncollectable, £5 million had already been collected, so the expectation then was that they would collect a further £4 million, I understand that they have collected about a further £327,000. Of course, it is not all yet due. I do not know what the expectation of the ultimate write off is. That is probably what would be the Committee's concern, how much of the £13 million will ultimately have to be written off.

244.Chairman.—Presumably the amount is somewhere between £4 million and £8 million. I note that the report says these schemes involved ICC in making loans in excess of the amounts justified by normal banking criteria. What criteria were used? Would marginal Dáil constituencies be a consideration?

Mr. Cromien.—I am not sure, Chairman. You will appreciate what this scheme is. There were two schemes in fact, a special loan scheme and the finance for under-capitalised concerns. It was basically to encourage firms who had viable schemes but where there was a high risk, to go ahead. These firms could not in the normal way have got funds on the normal commercial criteria with the normal risk that a bank would take. So to encourage them to develop their enterprise, the State was prepared to guarantee to the ICC that it would pick up the tab if there were loans written off at the end of the day. The amount outstanding at the moment or the likely write off is probably about £4.4 million rather than the £3.9 million, thereby leaving about £3 million to be repaid.

Mr. Cromien.—It is hoped that the £3 million will be collectable. The ICC make every effort to collect it. I may add, that these are bad debts just like in any other bank except that they are even more so because of the risks that were necessarily undertaken at the time.

Chairman.—I still do not understand the criteria used. If it is not marginal Dáil constituencies or whatever it happens to be, is it the Minister that makes the decision?

Mr. Cromien.—No, it is the ICC. They are very skilled in this area. They would examine a particular proposal and would say: “Well, this is somewhat beyond the risk that we would take in the normal way but it is worth a gamble”. It is, I suppose in a sense, taking a gamble, in order to encourage some novel idea that may come off.

245.Deputy Colley.—Am I to understand, Mr. Cromien, that the £13 million was the total amount of money that was advanced under these schemes?

Deputy Colley.—We have a very high deadweight in that. What would normally be the risk factor? What would normally be the bad debt factor?

Mr. Cromien.—I do not know. I cannot give you that figure but there is no doubt that it is higher than it would be in the case of a normal bank. The instance of losses is about 34 per cent. That would certainly be higher than a commercial bank would tolerate. On the other hand, as you are aware, in recent years all the banks have had substantial bad debts. This probably would not be that much out of kilter with those, particularly when you accept that these were particularly risky loans. They are meant to help people with a good idea where there is a gamble. It is a problem in this country that small enterprises find it difficult to get loans from the banking system. You have that all the time. Banks naturally are concerned about their depositors. They will press money on those who do not need it quite so much whereas those who are taking a serious risk find difficulty understandably in getting loans because of risk involved. This was meant to get over that.

Deputy Colley.—It does seem to me to be a very high bad debt rate and that it seems like the State is more or less throwing good money after bad and very little guarantee of a return and even the return that they get has obviously necessitated quite an amount of effort in recouping it?

Mr. Cromien.—It is, as I say, part of industrial policy, and I am a bit handicapped in talking about policy. These schemes are under review at the moment in the Department.

Mr. Cromien.—The particular schemes involved here were terminated in 1980, but rather similar schemes were started after that.

Deputy Colley.—What is the up-to-date position? Are further funds being advanced under those schemes that would carry such a high bad debt factor?

Mr. Cromien.—There are further schemes at the moment, of which, I am afraid I have not got up-to-date information. It does not arise under these accounts specifically. The conditions of these are certainly being looked at.

246.Deputy Dempsey.—I would just like to ask Mr. Cromien if he could get a list of the projects helped under this particular scheme and the number of people employed. I realise, as Deputy Colley has said, it is a very high risk factor. But we have the problem that commercial banks here just will not take risks. They will advance loans and, as you say yourself, Chairman, push loans on people who do not really need them, but they will not take any risk themselves. Somebody has to encourage enterpreneurial skills in this country. I certainly would not have any reservations about continuing a scheme like that. However, if you had figures I would be interested in relation to the number of projects, the number employed and so on, if that is possible to get. I think the banks are a little like the insurance companies. They want to insure you provided you are not going to claim against them. As soon as you claim against them they do not want to know you.

Deputy Crotty.—That covers my question. Could we get the names as well as the numbers of the firms?

Mr. Cromien.—I will certainly raise this with the ICC. I presume they would have it on their records.

Deputy Dempsey.—If there is a difficulty about getting the names, as there might be because it is a commercial transaction, then certainly the numbers and the numbers employed.

Chairman.—I think we are entitled to know, Mr. Cromien. We have to have that information. It is a perfectly reasonable request.

247.Deputy Colley.—Just as an addendum to what Deputy Dempsey was speaking about, could Mr. Cromien say whether the review of these schemes would include substituting such direct loans with interest guarantees or low interest loans — in other words, looking after the enterpreneurial spirit that is needed but on quite different terms? What strikes me most about this is that one seems to be just handing out money and then saying goodbye to it. Obviously, that cannot continue. Perhaps you could give us some idea as to what alternatives are being considered?

Mr. Cromien.—I will take a note of that idea. I have not got the detail here at the moment. On the general question, I do not think it is quite fair to describe it as just handing out money. The ICC are very experienced in this area. I am sure they are concerned to ensure, in so far as they can, that the project is viable. In other words, the fact that the State is helping them does not mean that they will take any old scheme. They must still make an effort themselves to ensure that the scheme is reasonable.

248.Deputy Crotty.—In situations where the ICC make funds available, where there is high risk, is there any direction provided from ICC in relation to administration or expertise in the particular schemes? Is there any follow-up on the lending of funds particularly where there is a high risk? Obviously, there is a very high risk in many of these cases.

Mr. Cromien.—I cannot answer that in detail, but I know ICC are very professional. They have a very wide range of professional expertise. This is the business they are basically involved in —providing funds for small and medium sized industry. This particular scheme is very much in line with what they would normally do except it is a case where the risk is greater.

Chairman.—We can note that. Before we move on to the accounts I just want to raise a question with you about your Annual Finance Accounts. Would the Committee agree to asking Mr. Cromien, perhaps in consultation with the Comptroller and Auditor General, to have a look at this book to see if it could not be made more user friendly, particularly for members of the Committee, and for the Dáil? Perhaps, when you have had a chance to do that you might let us have your observations.

VOTE 1—PRESIDENT'S ESTABLISHMENT

249.Chairman.—This does not include the remuneration of the President himself?

Mr. Cromien.—No. That is borne on the Central Fund along with £15,000 expenses.

Mr. Cromien.—The President's travel within the country would mainly fall on the Garda Vote because of the security element. The President's expenditure on State entertainment, where he would be involved in visits by foreign Heads of State would be met from State entertainment subhead of the Miscellaneous Expenses Vote which we will be coming to later.

Chairman.—Do you have any idea of what the Presidency costs in total? Would it be £1 million?

Mr. Cromien.—I would not have that figure, but I am sure we could get it for you.

Chairman.—Unless anybody really wants it. I take the view that it is value for money.

VOTE 7—OFFICE OF THE MINISTER FOR FINANCE

Mr. S. Cromien further examined

250.Chairman.—The Committee decided at its meeting last week to raise with you under this heading — and I think you have been given forewarning — the question of reallocation of staff, particularly of staff who were in the old DPS, to perhaps the area of Social Welfare or Revenue since there are problems in those areas. I presume you have had time to consider this matter. What are your observations?

Mr. Cromien.—I am not quite sure where I should start, but I think the first point I could discuss would be whether there are further staff available from the Department for transfer to other Departments. The Committee are aware that the Department of the Public Service and the Department of Finance were merged last year. There may be a slight misunderstanding about this. The Department of the Public Service was abolished but its work was not abolished. Its work has continued very substantially in very important areas such as pay, the whole area of early retirement, redundancy, management services and so on. The work of the Department of Finance has to continue to be done. In effect, there is no surplus staff now available in the Department of Finance. In spite of the large volume of work that has to be done, I am glad to tell the Committee that the combined Department has reduced staff by what, I think, is quite a remarkable figure. In March 1987, when the two Departments were put together, there were 768 staff there. The January 1988 figure is 662, a fall of 106 or 14 per cent, which is well above the average in the public service of 3½ per cent. In that total, senior posts have been very significant. We have left unfilled two Deputy Secretary posts, three Assistant Secretaries, eight Principals and 19 Assistant Principals. Down to Higher Executive Officer, roughly half of the figures I have mentioned have been within the category of Deputy Secretary to Higher Executive Officer. I would just like to make clear that we have done our bit, and more than our bit, in providing staff. The Department at the same time must continue to do its work. As I have mentioned, pay and related matters are still very important. The conciliation and arbitration scheme continues. The early retirement and redundancy package has generated enormous interest across the service. We have had an unprecedented volume of telephone calls about this and so on. As regards management services, the Committee are interested in the use of that part of the former Department of the Public Service in investigating areas to ensure that efficiency is encouraged. There is also training of staff and the development of the computer side. All that area of work must continue to be done. So also must the traditional areas of the Department of Finance in relation to budget and economic work. The control of public expenditure which the Committee would be concerned with must continue as must Government borrowing.

Chairman.—You will be aware that there is a shortage of staff in the Department of Social Welfare and may I add in the Houses of the Oireachtas where a lot of us have to carry workloads without assistance — including committees of the House. Would you tell the Committee when the Department of the Public Service was set up and could you tell us the growth and number employed in that Department since its creation?

Mr. Cromien.—I would not have that figure offhand but I can get it for you, Chairman. But remember the work also has grown very substantially in that Department.

Chairman.—Is it not an octopus that has been growing tentacles at a rare rate since its creation — this particular Department?

Chairman.—It used to be looked after by a Parliamentary Secretary and it became a structure with Assistant Secretaries, Principal officers and staff. Really did it not grow out of proportion?

Mr. Cromien.—As I say, the work has to be done. What has happened is that we have left two Deputy Secretary posts unfilled and three Assistant Secretary posts unfilled. These are very substantial savings. Eight higher scale Principal Officers, 19 APs — these also are very substantial reductions.

Chairman.—How did that Department ever grow to the extent that it had so many APs, Assistant Secretaries and Deputy Secretaries?

Mr. Cromien.—All I can comment on without having been in the Department is that it grew in line with the work.

Chairman.—There is good reason to suggest, Mr. Cromien, that a lot of that work could quite easily be done and it is duplication, because of the numbers now in the merged Departments of Finance and the Public Service. I really think it is something that should be looked at. I feel there are good grounds for redeployment. I will call Deputy Colley who wants to come in on this.

Mr. Cromien.—Can I comment on your remark there Chairman. I have to say as an Accounting Officer that I am absolutely 100 per cent satisfied that the staff that I have at the moment are fully occupied in doing work that is absolutely essential for the Department. I must put that on the record. I have personally been very involved in ensuring that staff are made available to other Departments in slimming down the Department. I think that what we have done has been very dramatic and that there is no more fat there at all.

Chairman.—Could they not be more constructively used in other parts of the Public Service? I take the point. I am sure they are occupied. But, could they not be more constructively occupied?

Mr. Cromien.—I think that what they are doing in the Department of Finance is very important. Let us look again at the areas I have talked about — control of public expenditure — is that not very important? This Committee would be very concerned about that. Government borrowing — who can we give that to other than doing it ourselves? Management services, investigation of Departments or improve efficiency? Surely the Committee would be concerned that that should continue. If you go through every area, it is the same.

Chairman.—Have they investigated their own Department and your Department for efficiency?

Mr. Cromien.—I would assume that our expertise in that area is adequate to ensure that we are being efficient. The fact is that we can continue to operate with a 14 per cent reduction in staff. It is not easy, Chairman, and it is one of my personal headaches that there is continual pressure on us to do work and I have not got the staff that I would like to have. However, I think we have to be leaders in the Department in slimming down our numbers.

251.Deputy Colley.—I take the point that Mr. Cromien is making, that the Department of Finance merged with the Department of the Public Service, has reduced its staff by 14 per cent as opposed to 3 per cent in the overall public service. What I would like to know is of that 14 per cent, what Departments have they gone to?

Mr. Cromien.—The Department of Social Welfare and the Revenue Commissioners have had the bulk of the transfers.

Mr. Cromien.—I may not have them here now, Chairman, but I will certainly let Deputy Colley have them.

Deputy Colley.—We are talking presumably about the revenue task force that came from Public Service as one part of that?

Deputy Colley.—I can understand why the Departments of Finance and the Public Service should be leaders in terms of shedding as much staff as possible and being as effective as possible but I still think there is a great question mark about the systems that are in operation via the Department of Finance to effect real economies in the rest of the public service. I do not know what is the system in operation and is it effectively pointing out where there are gaps and pointing out where there are staff and just moving them and not taking the word of each Department that really they cannot do without them?

Mr. Cromien.—I think what has happened in the last few years in Departments has been quite dramatic in relation to the non-filling of vacancies. That itself, speaking personally, I feel has made a very considerable contribution to increased productivity in Departments. It is a great concentrator of the minds of management to find that they have not got the staff to do what they would like to do. They then have to re-order priorities and they have to look at systems. I know this is what has happened in Departments. Although in some ways it has been a blunt instrument, it has forced management in Departments to operate in the way that a commercial firm is faced very often with, to look at how exactly they are running the Department. While I take the point that maybe the merged Finance and former Department of the Public Service should encourage productivity in Departments, the best way to do this very often is to encourage management or force management on the spot to do it in this regard. I have been struck by how commercial firms operate. They very often have to operate on a reduced budget. A particular branch will be required to perform the same tasks with a 10 per cent less budget. In effect, this is what is happening in the public service in relation to numbers. It is very good discipline to force you to look at your operations. Management of a Department would know their own operations very well and they would know the priorities that their Minister would require and so on.

Deputy Colley.—You see, whereas I am very concerned about the morale in the public service and I am very concerned about the effectiveness of it, one can obviously see large gaps where, for instance, in Social Welfare or in Revenue, there are large numbers of staff required even now and that there is a blunt instrument being used to reduce staff and to reduce funds available. There is no doubt that each Department is not of its own bat doing the cost cutting. It is only when it is forced on them. It is a responsive thing and they only respond when Finance or Public Service comes in and says, “you only have so much to spend”. That to me is not planning and is not making sure that the priority areas are really dealt with. Going back to the question I asked earlier, what are the structures in place that pinpoint the people who are available and that pinpoint the areas in which they are really needed — the structures there?

Mr. Cromien.—Could I just mention on this question of redeployment because that is in a sense what is vital to this, that the Government decided last March that no vacancies could be filled except with the approval of the Minister for Finance. Along with this situation that I referred to where vacancies arising would generate their own pressure on the Department, the Department of Finance itself assesses needs in Departments. The staff in that area in the Department, although they are small in numbers, are very experienced about what they would consider each individual Department's need and priorities would be. The Department assesses these needs and redeploys. You have therefore that particular element in it, namely that the Department, with the Minister's approval, is determining priorities. The Chairman mentioned Social Welfare as a priority. Social Welfare and Revenue have been given the main priority. Revenue have received 128 staff since March last; Social Welfare have received 129 staff. These are by far the biggest areas that have got staff. New Departments like Roinn na Mara would be looked on as a priority as well. There is, therefore, actual pressure on Departments from vacancies arising and the knowledge that it is very difficult to get the vacancies filled and, secondly, there is what we would look on, broadly as planning in relation to filling the vacancies in certain Departments.

Deputy Colley.—I would like to draw Mr. Cromien's attention to the fact that I asked a question some months ago regarding the redundancy package that was on offer to the public service. At the time it was remarkable that the Department of Finance was the only Department that had any substantial numbers taking up that offer, that many Departments said they had nobody who was available to do it or nobody who was actually going to take it up. Most of them had no more than three or four, whereas the Department of Finance actually had a substantial number. That is what I am afraid of: that Finance may be leading the field but nobody is following?

Mr. Cromien.—We do our best to encourage the other Departments by redeployment. We can redeploy out of Departments as well as into Departments.

252.Deputy Dempsey.—Just briefly on this business of redeployment, has any study been done by the Department of Finance on the cost effectiveness of reducing numbers, or just letting numbers dwindle in Departments, and then Department having to make huge overtime payments to their existing staff? We had an example of that last week in the Department of Social Welfare? It was explained to us last week also in relation to that particular Department that most of the extra staff — indeed, I think the figure we were given at that time was 140 — was made available to the Department of Social Welfare purely because the Jobsearch programme demanded an increase in the number of people being employed. Has any study been done on the cost effectiveness of reducing numbers in some Departments and then paying substantial overtime?

Mr. Cromien.—The question of overtime is an important one. Broadly, policy should be that overtime should only be paid where there are exceptional circumstances. There are occasions when you must have overtime, where there are great pressures at a particular time of the year or, because of the technical nature of the work, where you have a limited number of people who are able to do it. The situation that the Deputy is suggesting would not certainly be encouraged by the Department, that Departments would go and look for overtime. They would not be given it, in effect, for these purposes. There are controls on overtime payments.

Deputy Dempsey.—There was considerable overtime in the Department of Social Welfare?

Deputy Dempsey.—They did. They said that they could not get staff sanctioned from the Department of Finance?

Mr. Cromien.—That would not be a justification for paying overtime, but they must have had another stronger justification that they gave the Department at the time.

Deputy Dempsey.—Basically, they had not enough staff to cope with the amount of work they had on hand. What struck me about it — there is overtime in all staffs, and I accept the point you are making that things will occur at particular times of the year and there has to be some overtime — was that there was a considerable amount of exceptional overtime. You are talking about perhaps £3,000 or upwards paid to a considerable number of people in the Department of Social Welfare. I am speaking off the top of my head, but it strikes me that it would pay better and would be more cost effective to actually give them a number of extra people, redeploy a number of extra people. There is another thing I wanted to ask about. There is a question of some 90 people who were involved in the land tax assessment who seem to have disappeared. The Department of Finance do not know where they are and the Department of Agriculture do not seem to know where they are either. Have they been located? Is it true that they are actually in their homes drawing salaries or wages, or is this another myth that has been perpetuated in the media? It appears that it is commonly accepted now that there are upwards of 90 people who were working in that office and who are now no longer working in the office and neither the Department of Finance nor the Department of Agriculture know where they are, even though it appears that they are being paid?

Mr. Cromien.—I think the Department of Finance knows where they are, because they were, transferred to the Department of Agriculture. That is where they are at the moment.

Mr. Cromien.—That would be a matter for the Accounting Officer for the Department of Agriculture. While I do not want to give that as my sole answer, I have to start by saying that they are paid by the Department of Agriculture. The Accounting Officer for the Department of Agriculture is the person who is responsible for their present employment. I am not going to stop my remarks there, but I have to say that just to put it on the record. Perhaps what the Committee would like to know is what is going to happen to these people or what is happening to them. They have been offered the voluntary redundancy package. A number who have expressed interest in appointments as Inspectors of Taxes have been interviewed. The remaining surplus inspectors will then be covered by new arrangements which allow surplus staff in the Civil Service and certain State bodies to compete for Civil Service posts vacated by the early retirement scheme. We would hope that this problem will be disposed of. All this problem of redundancy is totally unprecedented in the Civil Service, in its nature and size, and it inevitably takes time to get every aspect of it into operation. This is the explanation of why these people have disappeared into a limbo.

Deputy Dempsey.—With due respect to you, Mr. Cromien, we are talking here in relation to the Department of Finance and the control that they have in relation to staffing, redundancy, redeployment within the public service. You have been telling us how effective and efficient this has been so far. What I am asking is: is it true that 90 people paid by the State, irrespective of whether it was the Department of Agriculture or the Department of Finance, have not been working for the best part of a year? Is that true?

Mr. Cromien.—They have been transferred to the Department of Agriculture. I think you should ask the Secretary of the Department of Agriculture that question.

Deputy Dempsey.—With due to respect, I am asking you, because we are talking here about redundancy and redeployment and using the manpower that we have in the public service effectively?

Mr. Cromien.—Sorry, what you are saying is that this is the function of the Department of Finance. In the case of these particular officers, they are in fact on the payroll of the Department of Agriculture. Whether the Department of Agriculture are using them or not, I cannot answer in relation to their work. I would assume on the same information you are basing your judgement on, that they have not got very much to do. This is part of the problem. This is why they have been offered redundancy.

Deputy Dempsey.—Why are we talking over the last 12 months about redeployment, about using staff effectively? Why has the Department of Finance been refusing sanction for all sorts of positions from school caretakers right up to Principal Officers? Why has it allowed, in those kind of circumstances, 90 people to sit in the Department of Agriculture or in their own homes — I am not quite sure where they are sitting — paid by the State and why have they not been redeployed. Why has the Department of Finance not insisted on redeployment for those?

Mr. Cromien.—There is certainly a problem that the Committee will recognise in redeploying technical people. That is a reality that is there; that is part of the difficulty, part of the delay, in sorting out the problem. As I said, this is totally unprecedented. If general service staff are redundant, if these 90 Land Commission inspectors were general service staff, they could have been transferred to Social Welfare or to the Revenue Commissioners. There is a question in the case of technical people like Land Commission inspectors whether you can transfer them to the Department of Social Welfare. What would they do down there with their technical expertise? Would they be suitable, would they be willing, how would you use them? We have identified the Revenue Commissioners as a place where the expertise of some of them would be useful. It takes time, particularly with the technical problem that is there. I hope the problem will be solved in the coming months.

Deputy Dempsey.—With due respect, Mr. Cromien, I would say that you could do a lot more with them in the Department of Social Welfare whether they were willing or not than you can do with them sitting at home and being paid at the same time. Why is it taking so long for this study or whatever is going on to find out where they can put these 90 people? This is a problem that is going on for the past year. People have been aware of it for the past year. Why is it taking so long to fit them in somewhere else?

Mr. Cromien.—There are problems about negotiations with the union representatives, and so on, which must be gone through. There is a question formality about this, particularly where there is a question of technical people being transferred to general service posts. I understand the Deputy's concern.

Deputy Dempsey.—What you are saying then is that they are operating under a different contract than the people that were transferred from some other section of the public service to the Department of Social Welfare last year or to the Revenue Commissioners. They have a different contract?

Mr. Cromien.—I am not sure exactly what the Deputy means by a different contract.

Deputy Dempsey.—If 129 people could be transferred from somewhere to the Department of Social Welfare last year with no problem union or otherwise, 128 to the Revenue Commissioners, why cannot these 90 be transferred somewhere else?

Mr. Cromien.—As I say, it is a technical problem. These are technical officers. They are qualified Land Commission inspectors and it is a question for discussion, negotiation and arrangement whether they can be shifted to work that is not related to Land Commission inspectors. This is the reality under the arrangements with staff associations.

Deputy Dempsey.—I would like to have some information on it because it seems very strange to me. Is this particular problem arising because of the grades they are at, because people do not want to upset other people? Is that the problem?

Mr. Cromien.—I do not want to particularise about the Land Commission inspectors about which I have not full detailed information. There has been a problem about transferring technical staff to other posts but my understanding is that this is now going to be overcome by this new arrangement which I mentioned under which surplus staff in the Civil Service, no matter what their grading or character, and also certain staff in State bodies who also are very technical and have a different contract will be allowed to compete for Civil Service posts vacated by the early retirement scheme.

Chairman.—Mr. Cromien, just before I call Deputy Crotty I wonder would you tell us what are the qualifications of these inspectors that they are so technically qualified?

Mr. Cromien.—I would not have that information. They are specially recruited. I think they are basically Batchelors of Agriculture and they would have experience in that area. That would be their career expectation.

Chairman.—It seems to me that there would be a tremendous amount of work for them in the agricultural area of revenue or in the Houses of the Oireachtas, for instance?

253.Deputy Crotty.—I must congratulate the Accounting Officer on reducing his staff so effectively in such a short time. I think it was a wonderful accomplishment to get it down 14 per cent. When you see reductions like that you must also ask questions, how these people were occupied or how you can operate with that type of reduction? To me it does not seem possible. The conclusion you come to is that you were grossly overstaffed.

Mr. Cromien.—I suppose that is always the danger in being too dramatic about these reductions. I do not look at them as making a judgement about whether there was overstaffing before, but rather that we have new priorities now that have to be established. The Exchequer position is so serious that all Departments have to cut back their activities. I would give the opinion that all the officers who are being transferred were all busy at their work. There was no one sitting around doing nothing. Eventually you have to look at the work to see can all that work be done now or can some of it wait until a later time. You must establish priorities. That is the pressure that is there. I would be worried that some of the work that should be done will not be done. There is always the danger in cutting back that you are letting something go that in the long term perhaps it would be better to do. If you had more staff in certain areas you could carry out more investigations with Departments, perhaps you could have increased expertise on the borrowing side and so on but at the end of the day it is just that you establish new priorities within present resources.

Deputy Crotty.—In reply to the Chairman you mentioned that in your Department you were carrying out a lot of essential work, which I agree is very important work and you were doing it very well. I was very pleased to see the Department commended as one of the top Departments in the financial management of State funds. I must give credit where credit is due. I was very pleased, and I am sure everyone was glad to hear that, but having said that and I suppose this is the “but” part of it — there must have been a question of how many people were employed in each of these Departments. Have these Departments been reduced in number? The functions have not been reduced it, it is numbers in the Departments. What I am coming to is one of the duties of your Department, particularly as you have personnel under your wing, is how efficiently is the staff employed and is that number of staff necessary in each section?

Deputy Crotty.—And all the other Departments. You are responsible as the Department of the Public Service for all the other Departments?

Mr. Cromien.—As I mentioned earlier in reply to Deputy Colley, the very fact of having this very substantial reduction in numbers across the Civil Service and particularly in the Department of Finance brings its own pressure to be efficient. In other words, if management are faced with having less staff to do things, and this was my own experience over the past two years, you look very carefully at what you have been doing. Most operations can be justified in some way but you look at the operations and if you have a choice between two operations you have to drop one rather than another or do less of one than another. That is the pressure to be productive and to be efficient. It is probably the best way to do it rather than to have somebody coming in to look at it who does not know the system as well as you, for instance. Management in Finance would know what is needed in the different areas of the Department. We would decide that such and such an area might be cut and another area might not be cut. If you do certain things in one area, if you need increased attention given to one area, then you must sacrifice another area. That is a reasonable management judgment and I think that is what management are for.

Deputy Crotty.—There is one area in particular on which I want to get an opinion from the Accounting Officer and that is in relation to audit staff for auditing different Departments, local government, health boards and these type of people, we have been presented recently with a scene where audits over a four year period are not available. Back at that stage, in the late seventies or early eighties, there was actually a policy by the Government to create a lot of jobs in the public service. It was the opinion of quite a few people that the public service was very much overstaffed. At the same time we have this recurring situation that we had not people available to do very essential duties. The representative from the Department of Finance was queried on this matter on a regular basis. Are you satisfied, as Accounting Officer, that these audits were not carried out? How can it be justified that very essential Departments, or sections of Departments of State, went for four years without any audit being carried out? Would that be tolerated by the Revenue Commissioners in the private sector if companies did not send in their accounts for four years? I do not think it would be.

Mr. Cromien.—I am not quite sure if the Deputy is referring to the local government service and the auditing there.

Mr. Cromien.—There is a Committee looking at the auditing arrangements there. It is chaired by the Department of the Environment. I understand they expect to report at an early date. The Chairman is also carrying out an inquiry about the role of the Comptroller and Auditor General.

Chairman.—The advisory group which is preparing a report for this Committee met with the Secretary of the Department of the Environment yesterday and referred to the matters which Deputy Crotty has mentioned and will be reporting to this Committee on those matters.

Deputy Crotty.—I am asking if the Department of Finance have responsibility to see that these sectors of the public service, even if is at a local level, are audited and if they have been what is the explanation for a four year lapse?

Mr. Cromien.—As I say, in the first instance the Department of the Environment are looking into this. I think it is better to wait for their review. Their committee would advise us on how they would consider the matter should be done.

Deputy Crotty.—Let us be more straight-forward about it. Were you aware that no audit was taking place?

Mr. Cromien.—We are aware of this all right, but we have not a great direct link with the health boards or with the local authorities.

254.Deputy Desmond.—The staff of auditors has been halved. You all want reductions in public expenditure. You cannot have it both ways.

255.Deputy Crotty.—Was the Accounting Officer aware that it was halved and, as a result, is he prepared to accept that large areas of public expenditure are not being audited? That is the kernel of the problem.

Mr. Cromien.—We are certainly concerned about delays in auditing, but there are problems about the provision of staff in every area of activity at the moment.

Deputy Crotty.—We are going back to 1982, where there was a surfeit of staff, where the public service had been steamed up with staff? They were pushed into the public service. It was Government policy at the time to bring down the unemployment figures by taking extra people into the public service. How is that explained then?

Mr. Cromien.—I am not really able to answer about what happened in those early years, but I am saying that at the moment there is the problem of constraint all over the public service in relation to activities. The question of the audit of the local authority areas is certainly one that is very important at the moment and that we are looking at it.

Deputy Crotty.—From 1982 to 1986 the health boards and local authorities were not audited and this would not be acceptable anywhere in relation to deployment and redeployment of people, the Accounting Officer mentioned that the position of the land tax staff was an unprecedented situation. Would the same situation have arisen when the price control was removed?

Chairman.—May I intervene? There are some people visiting the country from the Audit Office in Canada. The Comptroller and Auditor General was hoping to have lunch with them. I am sure the Committee would not mind excusing him now and his colleague will stand in for the remainder of the meeting.

Deputy Crotty.—In regard to the price control scene, and when the food subsidies were withdrawn, it is suggested that these officers just like the people in the land tax office, were not redeployed for anything up to 12 months. Would that be a fact?

Mr. Cromien.—May I just say that my remarks about the unprecedented nature of the present operation did not refer specifically to the problem of the farm tax people? All I was saying was that the whole area of redeployment and the substantial numbers of vacancies that are being created and of redundancies, all that area is novel because of its size and because of its difficulty and because there are so many technical grades at different levels, including people outside the Civil Service or, in the Public Service. That is the unprecedented element I was talking about. I am sorry but I am not familiar with the details of the closing down of the prices section. Again, it would depend on how technical the people were there. If they were general service people they would be transferable.

Deputy Crotty.—And the food subsidies? They are not technical people surely?

Mr. Cromien.—I was making a distinction between the transfer of people who are general service grades, because they are movable. If it is an Executive Officer or a Higher Executive Officer who is found to be unnecessary in a particular Department, he can be shifted somewhere else easily. If he is a person whose whole career has been spent on one particular technical type of operation, the Committee would accept that that is more difficult to do.

Deputy Crotty.—I do accept it may cause a problem for a short while; but I do not accept that it should be nine or 12 months, and I do not accept that staff in any Department for whom the taxpayer is paying should be left unemployed. This is the inference here, which is very disturbing particularly in the light of where we had not audit for four years. There was not audit in local government or the health boards, and here we have staff with no work to do.

Mr. Cromien.—That might be an example of the problems. These are not transferable from one to the other.

Deputy Crotty.—I wonder could we get a particular note on this. I would like to get information on the land tax people, the price control people, the food subsidy people to know when they were disbanded, where they were redeployed, how long it was before they were redeployed and everything else, because it is very disturbing. This is coming from the general public and I think that this Committee particularly should have this information.

256.Deputy Dempsey.—And, if the Accounting Officer would not mind, I would like a note on the cost of keeping them on the books without paying them.

257.Deputy Desmond.—To go back briefly to the farm tax, you would agree that, in relation to the farm classification office, several hundred staff were recruited and redeployed and put into offices? There were around 300 staff?

Mr. Cromien.—In addition to the 90 staff, there were also temporary employees.

Deputy Desmond.—Very substantial numbers of people were involved. Offices were rented throughout the country and several million pounds was spent on equipment, very valuable, essential equipment for farm surveys, land mapping and so on? All that money was spent to the extent of about £6 million?

Deputy Desmond.—You would agree that the current situation arises out of the policy decision to abandon all of that, to close down the farm classifications office?

Deputy Desmond.—Are not these professional staff redundant arising out of the termination of the land tax?

Deputy Desmond.—Our sympathy lies with you where an appalling policy decision was taken which cost £6 million to set up in the first instance and the incoming Administration decided to abandon the whole thing.

Deputy Dempsey.—Maybe the appalling policy decision was made by the previous Government in trying to impose that kind of system on people.

Deputy Desmond.—I make the point, Chairman, that it was the abandonment of the land tax which now gives rise to a situation where professional staffs are staying at home. I understand, and you are posting out pay cheques. They are without work and you are desperately trying to redeploy them. I will not ask you to comment on it but for the record we must state that this was a policy decision of appalling public scandal, no more and no less.

Deputy Dempsey.—I do not think we can allow that to go unchallenged. We are getting into the area of policy decisions here. I could equally say that the original decision by the previous Government was equally appalling to introduce such a system. For the record, the 90 people who are being paid without working were there prior to the setting up of the land tax.

Chairman.—I do not think we should go any further into this. It is relevant where a policy decision has affected finance that it be raised but the Committee has always tried to avoid the area of party politics.

258.Deputy Desmond.—The total staff in the Department of Finance is now 662. How many of those are in the public expenditure area of the Department? Take, for example, a classical Vote. A Principal Officer would be in charge of an area — the one I am familiar with, the Health Vote or the Social Welfare Vote. That would be headed at operational level by a Principal Officer.

Deputy Desmond.—Under that principal officer how many staff would be working to him on that major Vote, roughly speaking?

Deputy Desmond.—To put the whole thing in absolute perspective, in the Department of Finance, with responsibility for a vote of £1,300 million net Exchequer expenditure, there is an Accounting Officer, a deputy secretary, at very much remove, and a principal officer with perhaps four or five staff. In that framework, could I ask for your opinion — there is no surplus staff in the Department of Finance handling public expenditure?

Deputy Desmond.—And equally I think you would share my view, but I will ask you to confirm it, that with a principal officer handling the Social Welfare Vote, which is £2.5 billion gross, it is headed up by on day to day management, a principal officer and would there be six or seven others?

Deputy Desmond.—That would be a principal officer, an assistant principal officer—

Deputy Desmond.—Say two APs, three HEOs or two and two or three clerical assistants. I am aghast at the superficiality and the nonsense with which we as politicians talk about the role of public servants within a Government Department. I would strongly urge that this Committee should get up off their chairs, go into the Department of Finance, walk from corridor to corridor, see who is doing what and we would find out quite rapidly that, in fact, far from being an overstaffed Department, that Department and a lot of other Government Departments are grossly under-staffed and are incapable of doing any more than fire brigade control of what happens in particular Government Departments. Could I pass on to one final Department — because I am more familiar with Health and Social Welfare — in the Department of the Environment, the entire Vote is headed up by another principal officer and perhaps four or five other staff. In those circumstances, I put it to the Accounting Officer, that with the application of the embargo since 1981— the continual embargo, the one in three application and now the total non-replacement of staff — in fact in the Department of Finance it is no more than a holding operation and no more than prospect of what I would call, with due respect to the officers involved, superficial fire brigade analysis of expenditure subheads in the hope that the situation can be contained and policy decisions emerge from within the system. I am perhaps over-stating my case but I think you would agree that the prospect of fundamental analysis by officers of the Department is extremely limited because of their day to day management of the system.

Mr. Cromien.—I would hope that the situation would not be as bad as the Deputy puts it. I do not think that you need to have very large numbers in the Department of Finance in relation to a particular Department because it is the function of the Department of Health and the Department of the Environment, largely, to run their own affairs. I would be against Finance second guessing everything that these Departments do. What one has to try to achieve is that management in those Departments is efficient and effective. They are senior civil servants of great ability and they should, in the first instance, be involved in preparing decisions on policy. The Department of Finance would, I should hope, then take a broad and long-term view in relation to these policy matters and have an input.

Deputy Desmond.—I think you would share my view that it is quite impossible for a particular officer to be responsible for a particular Vote when he would not even have time to get out of his office and find out the difference between a general hospital and a psychiatric hospital, perhaps never having been within one by way of inspection. On that basis officers cannot make proper decisions. That is why we have the ICI situation and that is why we get the other critical situations.

Mr. Cromien.—Could I just comment very briefly on that? Last year, as the Committee are aware, I was involved in expenditure reviews with the Secretary of every Department and with his senior officer, and I found that the officers of the Department of Finance dealing with the specific Votes were absolutely on top of their job and very clear in their presentation of broad policy issues to me and to the other members of the group. They struck me as being fully able to contribute to these reviews in the way which I thought the Department of Finance should contribute, in other words, on broad policy matters rather than on details. That is what I would encourage the Department of Finance to do rather than to get involved in second guessing.

Deputy Desmond.—I will not dispute the observation of the Accounting Officer because it is a matter of opinion. I want to ask a final question in relation to the overall position of the Department. A principal officer in the Department of Finance is currently paid a maximum of about £28,000 or £29,000?

Deputy Desmond.—After how many years service is the maximum scale reached — 13 year or over?

Deputy Desmond.—And an assistant principal officer, who would be responsible for a Vote as well, is paid a maximum salary of £23,000 or £24,000 a year?

Deputy Desmond.—You are aware that some very senior officers of your Department, both in Revenue and in Finance, have resigned and gone to outside employment?

Deputy Desmond.—And to expect senior public servants to be responsible for major expenditure Votes, major issues of taxation administration, major issues of expenditure reform and to give them, say, for a principal officer, after tax, a salary of £18,000 or £19,000 or an assistant principal, a salary of £14,000 or £15,000, the impact of the non-implementation of Gleeson, the total deferment of it and the non-availability of promotional outlets and despite the heroic efforts of yourself, which I acknowledge readily, and the very great improvement in morale within the Department that has occurred relatively recently, nevertheless, the situation is very critical within the public service, particularly and within your Department, if you are going to hold on to expert staff who have walked out of the place.

Deputy Desmond.—As a fundamental issue of public expenditure and the control of public expenditure, may I ask for the observations of the Accounting Officer?

Chairman.—These poor civil servants who are nearly as badly off as TDs, what do you have to say about them, Mr. Cromien?

Mr. Cromien.—It would be inappropriate for me to comment in relation to the Gleeson Report on which there is a Government decision as announced in the budget. There is certainly concern in the Civil Service at the level of salaries in relation to salaries outside. There are certainly key people who will be tempted to leave. On the other hand, you have the problem of the Exchequer difficulties which are there and which are recognised by management in the Civil Service.

259.Deputy Colley.—May I ask, Mr. Cromien, of the 106 persons who were redeployed from the Department of Finance, is the figure of the 90 tax officers included in that 106?

Deputy Colley.—Secondly, on what grounds were they transferred to the Department of Agriculture, because it seems to me that that is very basic to the whole idea of redeployment and the criteria involved in finding Departments that need staff and finding staff that can be redeployed? Why, in fact, if they now have no work to do, were they transferred to the Department of Agriculture?

Mr. Cromien.—They were returned to the Department of Agriculture. They were Land Commission inspectors in the Department of Agriculture who were transferred to the farm tax office.

Mr. Cromien.—I think they were on loan, so they went back to their parent Department. There was no work for them in the Department of Finance. The farm tax office was abolished. They went back then to their Department and it became a matter for the Accounting Officer there — he would have a large number of persons there with experience in the agricultural area. He had to see then whether they could be used or not.

Deputy Colley.—I would have to say to you, Mr. Cromien, that that in fact is completely against the trend of what you have been saying to the Committee you are trying to do, which is to identify areas where there are needs and put staff into those areas. Here is a case where 90 staff are returned, willy-nilly, to a Department. There was no work for them. There was no inquiry into whether there was work for them. It was just a case of hand them back. Here was 90 staff that at that stage could have been grasped and sent in various directions. As you say now, they may be offered jobs with the Inspector of Taxes. That is the other area I want to come to. The qualifications that are needed for that, are they going to be in managerial positions or are they going to be investigative staff? It seems to me their qualifications would be quite other than to be investigative staff.

Mr. Cromien.—It would be a matter for the Revenue Commissioners to satisfy themselves that these officers would be suitable for use in Revenue.

Mr. Cromien.—I am not quite sure. I think it would be as inspector of taxes, to do some of the work of inspectors of taxes. But I am not sure of that, to be quite frank.

Deputy Colley.—Presumably, if they do that, they then reduce the chances of promotion for those who have been working all along in the Revenue Commissioners as inspectors of taxes?

Mr. Cromien.—This is the dilemma that is there in relation to transfers, which is why I was explaining to the other Deputies on the Committee here that it takes time to arrange these sort of transfers. But at least we are doing our best, given the difficulties that are there, to do this in a way which will last and which will not provoke unnecessary discontent.

Deputy Colley.—As a final word, it is most regrettable that the redundancy package was not offered to them immediately last year when they became available and that the whole thing was not set in train at that stage.

260.Chairman.—Before passing off this, with regard to what Deputy Desmond had to say on staffing, you will be aware that this Committee, with all the overseeing work it has to do — the only statutory committee of the House — has available to it at most a staff of two and a half. I wonder if you would direct your attention to the question of the half typist that we have and try to make it into a whole typist, because it is putting terrible pressures on us? I am not going to mention the pressures put on me as Chairman of the Committee without one jog of extra assistance to prepare for the meetings. I think you could look at that particular area.

Chairman.—With regard to the rest of the Votes we will be having the Accounting Officer back again very shortly to look at the 1986 Vote. Unless anybody wants to raise any particular matter, I propose to note these. But if anybody wishes to raise any matter arising from them they can raise them when Mr. Cromien is next before us. Is that agreed? We will note them for now.

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

APPROPRIATION ACCOUNTS, 1985 and 1986 — Communications

Mr. Noel McMahon, Secretary, Department of Tourism and Transport, called and examined.

261.Chairman.—We are examining the 1985 and 1986 Appropriation Accounts for Communications, so I will call in the Comptroller and Auditor General on paragraph 49 of the 1985 Report.

Subhead P.—Grants towards the cost of Regional/Local Airports Development

In April/May 1981 the Minister for Transport and the Minister for the Environment agreed to the establishment and maintenance of an airport near Letterkenny by Donegal County Council and to the acquisition by the County Council of the land required for this purpose.

However, in December 1981 the Department of Finance directed that immediate steps be taken to cancel the project. Nevertheless, in May 1982 the Minister for the Environment confirmed a compulsory purchase order to enable the County Council to acquire the land for the airport and in June 1982 the County Council served “statutory notice to treat” on the landowners.

The arbitrator's findings in regard to the compulsory acquisition of the land were presented in November 1984, under which £452,860 and costs was awarded to the landowners.

The charge to the subhead in 1985 includes £81,898 paid to Donegal County Council in December 1985 to enable it to pay compensation and certain costs to one of the landowners. Further payments totalling £390,219 were made up to May 1986 in respect of compensation and costs due to the remaining landowners.

In addition, prior to 1981, the County Council had incurred expenditure of £151,000, mainly on design and consultancy fees, and has estimated that, up to June 1985, public inquiry and arbitration costs amounted to £100,000 and road construction, drainage and fencing costs to £150,000.

I asked the Accounting Officer why the Department of Finance direction of December 1981 was not complied with and I inquired as to the total cost of the project and the amount being borne on State funds.

As the project is, apparently, not being proceeded with I also inquired as to the present proposals for the utilisation or disposal of the land.

The Accounting Officer has informed me that, having considered the direction of the Department of Finance that the project be discontinued, his Department took the view that this required the support of a Government decision. In May 1984 the Government decided that the commitment to provide an airport at Letterkenny should be withdrawn and subsequently decided to authorise the making of financial provision to meet expenditure incurred by Donegal County Council in relation to the acquisition of land for the project and the making of payments to the landowners involved.

He stated that the cost to be borne by the Department of Communications relates only to land acquisition and related costs and has been estimated at £724,000 of which £470,406 had been paid up to August 1986.

He also stated that the latest available estimate from Donegal County Council had put the total cost of the project, had it gone ahead, at £2.66 million and that the Department was not aware of any proposals for the utilisation or disposal of the land.

Mr. McDonnell.—Paragraph 49 of the 1985 report recites the sequence of decisions and counter-decisions relating to a proposal to construct an airport at Letterkenny, on which expenditure has been incurred both by the Department and by the County Council. At one stage, as you will see, Chairman, it appears that a direction given by the Department of Finance was not implemented. You will also see, Chairman, at the end of the paragraph that the Department's share of the expenditure which had actually been incurred was estimated at that time at £724,000. I should explain that this included two of the three main items referred to earlier in the paragraph as having been initially borne by the County Council. What happened was that the public inquiry and arbitration costs of £100,000 and the drainage and fencing and roads construction costs of £150,000 were borne initially by the County Council. The Department subsequently agreed to reimburse the Council for those. I am not sure how much the County Council has spent so far. I just want to say neither am I sure what the present stage of the proposal is or what is proposed to be done now.

Chairman.—The site is still there. I take it that it has not been sold by the County Council?

Mr. McMahon.—It is held by the County Council subject to an inhibition which is being registered against the title on behalf of the Minister for Tourism and Transport which requires the Council to consult with the Minister for Tourism and Transport in relation to any future sale or use of the land.

Mr. McMahon.—The costs incurred in its acquisition, including legal fees and certain accommondation and fencing works, will gross to about £720,000.

Chairman.—Is the site worth that? If you were to dispose of it what would you recover?

Mr. McMahon.—That obviously would depend on the market at the time. The price paid by the Council for the land was determined by findings of an arbitrator whose findings were binding.

Chairman.—I presume you would be talking about something less than the £450,000 compensation and the amounts that were paid under the arbitration awards.

Mr. McMahon.—That could well be the case, but I suppose it would depend on the demand for the land and the use to which it was going to be put.

Chairman.—It is accurate to say that the Department of Finance directed in December 1981 that this should not continue?

Mr. McMahon.—The Department of Finance in December 1981 asked the Department of Communications, as it then was, to take the initial steps to secure the cancellation of the project. The Department at that stage did, in fact, take such initial steps. You will probably be aware that during the following month, the Dáil was dissolved and a new Government took office in March of 1982. In that situation it was difficult to secure clarification of Government intentions in relation to the future of the project. I should say that during 1980 a number of statements were made on behalf of the Government indicating the intention to finance the development of an airport in this area. This arose from a study carried out on behalf of the Irish and the UK Governments and the EC Commission in relation to cross-border communications and, arising from that, a commitment was made by Government and published, to the establishment of this airport. That commitment was not withdrawn until some years later.

Chairman.—Is it a fact then, that this situation was in train and that the Minister for the Environment confirmed the compulsory purchase order in May 1982, simply because this project could not be stopped at that stage? Is that the reason for it, or why did it get to that stage?

Mr. McMahon.—It got to that stage because the Government had made a public commitment to the development of the airport. The acquisition of lands by the County Council was put in train as part of the implementation of that project and there was no decision to withdraw or to cancel the project until May 1984.

Chairman.—What was the status of the direction from the Department of Finance in December 1981 to take immediate steps to cancel the project? What status did that have?

Mr. McMahon.—I would see that minute as representing a request by the Department of Finance, on behalf of the Minister for Finance, that we should take steps to bring about the cancellation of the project. I think the manner in which it was put was in itself a recognition that the Department of Tourism and Transport — the Department of Communications as it was then — did not itself have the discretion to cancel the project because it was one to which the Government was publicly committed. The steps which were open to us to take, in order to bring ourselves into compliance with the wishes of the Minister for Finance, required that the matter be reconsidered by Government and we initiated the necessary procedures to have the matter considered by Government.

Mr. E. O'Sullivan.—At the time we wrote the letter we were concerned that the cost of project looked likely to be far higher than the £1.6 million which was initially envisaged. It looked more like £2.5 million or something of that order. We felt that before irrevocable commitments were made a review of the project should be undertaken. It was in that context we wrote the letter and, as Mr. McMahon said, we asked the Department to initiate steps to cancel the project. I can appreciate that Mr. McMahon felt it was a matter that needed Government decision and he has outlined the difficulties of obtaining a Government decision at the time.

Chairman.—Anybody listening to that would think you were not both servicing the same Government. The Comptroller and Auditor General's remarks do not say that you asked anybody to initiate steps. He said that you directed that immediate steps be taken to cancel the project in December 1981. It was not until May 1984 that the Government decided that the commitment to provide an airport in Letterkenny should be withdrawn. Was your letter as specific as that? Was it a direction that immediate steps be taken to cancel the project?

Mr. E. O'Sullivan.—Yes, Chairman, it said the Department should initiate steps for the cancellation of the project.

Chairman.—It seems extraordinary that one Department should take steps of this kind and another Department should ignore it on the basis that they are awaiting some sort of Government directive. What scientific examination of the suitability of this site was carried out before it was chosen, Mr. McMahon?

Mr. McMahon.—Before I answer that I wonder could I comment further on the Chairman's exchanges with Mr. O'Sullivan. I do not think it is a question of any Department ignoring the wishes of another Department. We are both subject to Government and the decision was taken by Government and published as a commitment by Government and financial provision was made in the Estimates of the Department of Finance for this project. Subsequent to the request, direction, instruction, whichever phrase is appropriate to apply to it, which we received from the Department of Finance — I would like to draw your attention to the wording of it, it was:— that the Department should initiate steps as a matter of urgency for the immediate cancellation of the project. I believe this was a recognition that certain processes would have to be undertaken and gone through before it could be cancelled because of the Government commitment. I would like to draw your attention to the fact that Government subsequently reaffirmed publicly its commitment to this project after the Department of Finance minute had been written. That was done in a White Paper published with the authority of Government at the end of 1982. The selection of the site was undertaken by the County Council. The County Council identified three sites provisionally. They sought the technical advice of the aeronautical services of the Department of Communications. That advice was given and the County Council then opted for the site, which is at a place called, I think, Big Isle, near Letterkenny.

Chairman.—Was it the advice given by your Department that this site was suitable?

Mr. McMahon.—I would have to look back at the papers. I believe that is the case. Yes, I can confirm that the site was regarded as suitable for an airport development.

Chairman.—Why was a local authority chosen in this case as the managing authority for an airport?

Mr. McMahon.—The position about airport development is that the State itself operates the three State airports, Dublin, Shannon and Cork. The development of other airports is really the responsibility of any other interest which wishes to undertake such a development whether it be commercial interests, local authorities or other. The local authorities do have statutory power in law to establish and maintain airports subject to the agreement of the Ministers concerned. Donegal County Council sought and obtained such permission.

262.— Deputy Naughten.—Just two brief questions. I find it difficult to understand why the decision made by the Department of Finance in December 1981 was allowed to roll on for a considerable length of time before, obviously, the Department of Communications decided to withdraw from the project. You mentioned that the decision to build the airport was a Government decision. I interpreted that as your reason for not taking immediate steps in December 1981 to discontinue that project. Are you suggesting that the circular sent out from the Department of Finance in December 1981 was sent out without Government approval?

Mr. McMahon.—I am not sure I can answer that question because that question will need to be addressed to the Department of Finance. I am not making any such suggestion. The situation was that in December 1981 there was a firm Government commitment, stated publicly, to finance the building of this airport.

Mr. McMahon.—The commitment was made in 1980, so that at the time the Department of Finance wrote their minute to us that commitment was in place. That obviously posed a dilemma for the Department of Communications because they had to take cognisance of the content of that minute written on behalf of the Minister for Finance. They were also in the situation that they were faced with a Government decision which appeared to be pointing in a different direction. There was a clear onus on the Department of Communications to seek clarification of that situation. That was recognised in the request of the Department of Finance that we should take the initial steps to secure such clarification and, as they expressed it, to secure its cancellation. The problem of securing such clarification was compounded by the fact that the Dáil was dissolved in the following month and a couple of months later a new Government took office. The commitment to the airport remained in place during 1982 and was repeated publicly in Dáil questions and other pronouncements and was formally re-affirmed in a White Paper published in October 1982. It was further confirmed by the inclusion in the draft Estimates for 1983 of financial provision for the implementation of the airport project; so that during that period it was clearly impossible for the Department of Communications to cancel the project when the Government, who, after all, take the overall decision in this area, had clearly reaffirmed their commitment to go ahead with the airport. To bring the question further, there was a further Dáil dissolution at the end of 1982. During 1983 the financial provisions which had been included in the proposed Estimates for that year were reviewed by the incoming Government and a number of changes were made. One of the changes was the deletion from the provision for regional and local airports of the portion of the allocation which was earmarked for Letterkenny. That deletion was undertaken in the context of the financial problems of the time. The Government did not withdraw from the project itself but explained publicly that the omission of financial provision in 1983 was due to the financial problems of the Exchequer and that the position would be further considered when the financial position improved. During the same period, I think it is not irrelevant to mention, the practice of assisting the development of regional airports was maintained through 1983 and moneys were allocated and expended on other regional airports. Letterkenny itself did not receive an allocation in that year for the reasons I have given; so that during all of that period the Government commitment to the construction of an airport in Letterkenny remained in place and we, in the Department of Tourism and Transport, felt naturally bound by that decision and therefore unable to comply with the request of the Department of Finance. That was clearly not a very satisfactory situation, but for reasons we should understand because of the successive changes at political level, it was 1984 before we succeeded in getting a definitive decision from Government about the future of that airport, and that was that the commitment should be withdrawn. I hope that explains the position in which we found ourselves.

Deputy Naughten.—Could Mr. McMahon tell us when in 1984 the situation was clarified?

Deputy Naughten.—Yet the CPOs went on and were not decided on until November 1984. How come in May 1984 that the Department of the Environment or Donegal County Council did not decide to discontinue with the CPOs and not allow this huge additional cost to mount up?

Mr. McMahon.—I am not as familiar with the detailed operation of the county council activity as I am with my own Department, but I know that the arbitration process had been invoked prior to that. It was established through legal advice subsequently that, not-withstanding the cancellation of the project, the Exchequer had a commitment to the county council in respect of the funds which it had expended in the acquisition of the land.

Deputy Naughten.—I am not talking about the funds that the county council had spent in acquiring the land. What I am talking about is that the compulsory purchase orders were confirmed in November 1984, is that correct?

Mr. McMahon.—The Government decision of May 1984 was a decision to withdraw from the project. There remained a problem about the extent of the commitment which might have been taken on in the name of the State, and the Government at that stage requested clarification of the financial and administration implications of withdrawing from a commitment which had been made and which had been partially implemented in the sense that the land acquisition had been put in train and had reached a stage where apparently it was not possible to withdraw. Efforts were made by the county council to secure their release from the obligation to take on the land and there were negotiations between the county council and the land owners as to whether the owners would be prepared to take back the land or to refrain from proceeding with the process.

Deputy Naughten.—My experience of Compulsory Purchase Orders is that they are issued where landowners refuse to sell. As I see it, it was November 1984 before agreement was obtained between the representatives of the landowners and the arbitrator as to the value of those lands. Is that not correct according to what we have here before us? I cannot understand why in June, July, or August, when the landowners were not prepared to sell, and obviously that was the reason the CPOs were served, Donegal — I take it in this case it was Donegal County Council — did not just simply withdraw and leave the landowners their land and not involve the State in a £500,000 additional expenditure.

Mr. McMahon.—It is my understanding that the problem between the county council and the landowners was not an unwillingness to sell, but was a dispute about the value of the land and the price which should be paid. I should also say that, while the initial Government decision to withdraw from the project was taken in May 1984, the decision to convey that to the county council and to take the necessary steps to recoup either the expenditure which was committed, or to seek a withdrawal from the acquisition proceedings, did not take place until December 1984 by decision of the Government.

Deputy Naughten.—So it took six months for a Government decision to operate on the ground, in fact.

Mr. McMahon.—I would not like to say that it took six months. That was the time the decision was taken by the Government.

Deputy Naughten.—I think we should seek further information on this from the other bodies involved. One last question I would like to ask Mr. O'Sullivan. It is in regard to the decision by the Department of Finance in the directive in December 1981. Was that a Government directive?

Mr. O'Sullivan.—No, it was a minute issued from our Department to the Department of Communications. It was essentially based on our view of the project at the time and the fact that the costs seemed likely to be far in excess of what was originally envisaged for the project. That was essentially why we asked to have steps initiated to review the project and to seek its cancelliation.

Deputy Naughten.—So the Department of Finance, in December 1981, decided to cancel that project which the Government had decided to proceed with, without the approval of the Government.

Mr. O'Sullivan.—I would not put it that bluntly. There was a general review of regional airports going on at the time. This particular one, we felt, especially in view of the likelihood of increased costs and the possibility of an operating subsidy being needed, was one that should be viewed primarily.

263. Chairman.—Was the original decision, Mr. O'Sullivan, a Government decision?

Chairman.—But was it a Government decision? What Mr. McMahon has set out is not very clear to me. Was the original decision a Government decision?

Mr. O'Sullivan.—I understand that in 1980 an announcement was made on behalf of the Government, which was a commitment to this project.

Chairman.—Do you know if a Government decision was taken? I am trying to find out what was the authority for your directive in December 1981. If there was a Government decision presumably your Department had no authority to issue that directive?

Deputy Naughten.—That is exactly the point I was getting around to. I am rather amazed at what I have heard here today, that a circular went out from the Department of Finance, after a Government decision had been taken, cancelling that Government decision, obviously without the approval of Government. I must say I am absolutely stunned.

>Mr. O'Sullivan.—My understanding, Deputy — I was not personally involved at the time — was that there was an announcement made by the Government, or a commitment made by the Government. It may not have have been in the terms of a formal Government decision.

Chairman.—Unless we can be very specific about it I am going to bring this to a halt and we will have to come back to it and, it necessary, send for the County Manager in Donegal. We are not getting very specific replies here this morning.

Chairman.—You knew you were coming here and you should have come here briefed to answer this sort of question.

264. Deputy Dempsey.—If we are going to review it again I am not going to detain the meeting with a lot of questions. Many queries have been raised there. I would just like to ask, in relation to Deputy Naughten's point, what would the valuation of this land be at agricultural rates. Did anybody get that?

Mr. McMahon.—I am not sure if the question is addressed to me, Chairman, but I would have to confess that I am not an expert in land values. I would not volunteer a figure.

Deputy Dempsey.—Can we get that information? It strikes me that the figure that was arrived at must have been much higher than the actual value of the land, if the farmers from whom it was being compulsorily purchased would not agree to back out of a CPO deal in November 1984. I would like to know what the valuation of the land was at agricultural rates, when we are coming back to this, and compared to the price that was awarded by the arbitrator which I reckon was nearly £2,500 an acre.

Mr. McMahon.—I might venture an informal and possibly not very well informed opinion, that the land might be valued roughly at somewhere around £400,000 but I venture that not as an expert opinion.

Deputy Dempsey.—I would like the figure as accurately as possible. I accept that it is only a stab in the dark, but it strikes me that farmers never let go of land unless they have to. The point Deputy Naughten was making in relation to them not wanting to take the land back in November 1984 strikes me as being very strange if we are just paying ordinary rates for the land.

265 Deputy Crotty.—I wonder could we ascertain what was the total expenditure on this project by the Department and by the county council? Further, what is the position in relation to the lands? What is happenning to them now?

Mr. McMahon.—The expenditure by the Department of Communications, and subsequently Tourism and Transport, on the lands up to a very recent date was £648,000. We expect that there will be further expenditure of the order of £80,000 to £100,000, still to be met.

Mr. McMahon.—It is for the settlement for the acquisition, for certain fencing and other protective works which are necessary and it probably also includes some legal costs.

Mr. McMahon.—I understand that their expenditure, apart from the figures I have given you in relation to the Department, was about £200,000.

Deputy Crotty.—So you are talking about a little short of a £1 million? What is the position regarding the lands now? What is happening to them?

Mr. McMahon.—The lands are held by Donegal County Council. As they were acquired for airport purposes from funds from the Estimate for the Department of Communications we have a lien on these lands and any future use or disposal by the county council would be subject to clearance with the Minister for Tourism and Transport.

Deputy Crotty.—Have the Department been in consultation with Donegal County Council with a view to realising these lands and refunding the Department whatever portion of the outlay? Is there active negotiations?

Mr. McMahon.—I am not aware of any active negotiation proceeding at the moment. The Department of Tourism and Transport have no project which would require the use of these lands for purposes relevant to the Department's functions.

Deputy Crotty.—Are the Department not concerned that the lands should be realised and the expenditure refunded to the Department? What are the lands being used for? Are they left lying there? Are they let? If they are let, are the Department getting their share of the letting fees; or have the Department forgotten about them?

Mr. McMahon.—The Department at this stage do not have any role in relation to these lands except to the extent that they retain a statutory right to have a say in their future use or disposal. We are not getting any income from these lands.

Deputy Crotty.—You have a right and a say in their use. What use is being made of them? Have you exercised your right?

Mr. McMahon.—Our exercise of right would only arise in relation to a proposal by the county council to dispose of the lands or to develop them in some way. We have no such proposal before us.

Deputy Crotty.—Would it not be your concern? I imagine it would be a concern, seeing that the Department have invested substantial funds in this, to inquire as to what is happening the lands, are they being used gainfully, are they being maintained properly?

Mr. McMahon.—First of all, I should say that this project was one to be developed by the county council. The role of the State in the matter was to provide financial support for it, and this was done. The withdrawal of the commitment led to a situation in which the land had been acquired, but the project did not go ahead. The land which would have been used for the airport would always have been in county council ownership, because it was the county council which was to establish and operate the airport. I should add also that some of the costs I mentioned were for fencing and accommodation works designed to protect the land. That is the purpose of that expenditure.

Deputy Crotty.—I find it extraordinary that the Department have made substantial funds available, £648,000, and they are not aware of what is happening the land. They are not aware if it is going to be disposed of or if it is being gainfully used. Would that not be a normal procedure for a funding Department to be aware of?

Mr. McMahon.—Our funding activities were related solely to the project for the development of an airport.

Deputy Crotty.—Are the Department not concerned about getting a refund of the funds involved?

Mr. McMahon.—We would be concerned that public moneys were put to proper use and, if there is a way of recovering it, that that should be pursued. The Department are not the owner of the lands. We merely provided financial support for the public body who were deputed by Government to be the developer of this airport and therefore the owner of the lands.

Deputy Crotty.—Let us follow this one. The airport project has been dropped, what is the Department's situation then? Have they washed their hands of the lands because the airport project has been dropped, or what is their interest in it?

Mr. McMahon.—We really do not have any authority in relation to these lands except, as I have explained, a right to be consulted about their future use or disposal.

Deputy Crotty.—You must have authority. The lands were not used for the airport. You provided the funds to purchase them. It is a departmental responsibility. The largest part of the finance was made available by the Department; as a result, you must have responsibility for that fund which purchased it.

Mr. McMahon.—The situation is that these lands are properly and legally in the ownership of Donegal County Council.

Deputy Crotty.—For the provision of an airport, which has not been provided?

Mr. McMahon.—It is a matter for the county council to decide whether it wishes to retain them, to use them or to dispose of them. We have an interest in how they go about that process. But, at the moment, because there are works to be done, there are accommodations and improvements to be undertaken, I do not know if the county council has a specific proposal. It may very well be that the council still retains some ambition to develop an airport there. All I can say is that the State, the Exchequer, has withdrawn its support for an airport in Letterkenny.

Deputy Crotty.—I find this an extraordinary scene. I cannot understand how a Department could make that type of expenditure and have no lien on what the land should be used for. Can you tell us what the lands are being used for now? Are they being left there, are they being set for grass, ploughed, or what is happening to them?

Mr. McMahon.—The lands are, as the Deputy said, being left there, pending, I presume, a future decision by the county council as to what they want to do with the lands. We do have a lien, I have to make that point to the Deputy, we do have a lien on the future use of these lands.

Mr. McMahon.—No, there are fencing works and gateways and so on to be done before they will be in a position to decide on their future utilisation.

Mr. McMahon.—The moneys which the Department of Communications issued would have covered those works.

Mr. McMahon.—I am not aware that they have any funds in hand. The situation was that the county council undertook this work and claimed against the Department on foot of the Government commitment to finance the airport project.

Deputy Crotty.—Chairman, I do not think there is much point in pursuing this. We would want the County Manager or the council people here to get this sorted out.

266. Deputy Naughten.—If Deputy Crotty is putting that in the form of a proposal I would second it, because — this is not cutting across anything Deputy Crotty said — I think we have not got the overall total cost of the project, the total cost of the lands vis-à-vis that of agricultural lands, consultants' fees, what is happening with the land at the present time. It is far from clear what is happening with the land. After all, the State bought that land in 1985, why the period between the time the Government decision was taken in 1984 and the arbitration findings in November 1985? Why was that six-month period there? Why were not proceedings to acquire this land stopped and not leave the State with £500,000 worth of land? I second Deputy Crotty's proposal that we call the Donegal County Manager in addition to calling back the Department of Communications on it.

267.Deputy Colley.—Could I start by asking Mr. McMahon to perhaps tell the Committee what kind of communication occurred in early 1982 on foot of the directive from Finance? What kind of communication took place between the two Departments concerning this directive?

Mr. McMahon.—Yes, Deputy. The Department of Finance minute was received in the Department of Communications in December 1981. As you know, it was a request that we initiate steps to lead to the cancellation of the project. The project could only be cancelled by Government because it was Government that had made the commitment in the first instance. A Government decision on an issue of that kind can only be taken on the basis of submission made by a member of Government, by a Minister, and therefore our proposal at that stage would have been to invoke the process of bringing that topic before Government. That involves, under Cabinet procedure instructions, the preparation of a draft proposal in consultation with other Departments who are interested in or affected by it. That is the process we would have put in train on receipt of the Department of Finance request or instruction. That procedure did not come to fruition on the dissolution of the Dáil in January, the holding of an election and the taking office of a new Government. In 1982 the matter was under review in the Department.

Deputy Colley.—Specifically, could I ask Mr. McMahon did they respond in the Department of Communication to the Department of Finance minute?

Mr. McMahon.—No, we acted on the Department of Finance minute. The response would take the form of a proposal to the Government on which the Department of Finance would have been requested to give their views, but that point was not, in fact, reached.

Deputy Colley.—At what point was the submission to the Government, to the Cabinet, made on foot of that minute?

Mr. McMahon.—No submission was made to that particular Cabinet because of the change which took place.

Deputy Colley.—So even though a minute came from the Department of Finance in December 1981, between then and November of 1982, which was the election that is relevant, no submission was made to the Government on foot of that?

Mr. McMahon.—A submission to the Government can only be made by a Minister. I cannot say any more than that.

Deputy Colley.—Effectively what we are talking about is one Minister ignoring another. Is that right?

Mr. McMahon.—Not at all, no. The situation was that on the taking of office by a new Government at the beginning of 1982, naturally this was a matter which the Department were anxious to have clarified. The situation that emerged was that the Government remained committed to the commitment which they had made in 1980 in the first instance and, therefore, the Department and I, as Accounting Officer, had no authority but to act in accordance with the Government decision.

Deputy Colley.—Could I just pursue that a little more for a moment because it seems that if there were a Government decision rather than a ministerial decision — if the initial decison was a Government decision — no minute from the Department of Finance would have the effect of negating that. What I suppose we should be asking is: was there a Government decision or a ministerial decision in the first place to commit the Government to building an airport near Letterkenny?

Mr. McMahon.—There was a series of announcements made on behalf of and in the name of the Government by various Ministers and also there was a White Paper.

Chairman.—I think both the Committee and you, as Secretary of the Department of Tourism and Transport, know what a Government decision is. It is not a ministerial announcement. Was there a Government decision? You know that you cannot act without the authority of these in many cases. Was there a Government decision prior to this directive from the Department of Finance or not?

Mr. McMahon.—There was a series of acts by the Government one of them being the publication of a White Paper which is entitled, “Investment Plan, 1981” which was laid by the Government before each House of the Oireachtas in January 1981. There were Books of Estimates, which can only be published on the basis of Government approval, which contained provision for the building of an airport in Letterkenny.

Chairman.—So we will conclude from that that there was a Government decision.

Deputy Colley.—What I wanted to come to, Mr. McMahon, was there in your opinion, any real need to resubmit that to the Government for a further decision?

Mr. McMahon.—The need to resubmit it arose because the Department of Finance requested us to take the initial steps to secure the cancellation of the project.

Deputy Colley.—Right. I will leave that angle because I know we will be coming back to it again. I have a couple more questions.

268.Deputy Dempsey.—Really, we will have to have somebody back from the Department of Finance. The core of this, of people beating around the bush here, is that the Department of Finance, or some official in the Department of Finance, decided to overrule and override a Government decision and issued an instruction to the Department of Communications to cancel this project. The word we have in the Comptroller and Auditor General's report is that in December 1981 the Department of Finance directed that immediate steps be taken to cancel the project, not to review it or anything else. We need to have somebody back here from the Department of Finance, whoever was responsible for that, and we need to see the exact instructions that were given and on whose authority that instruction was given, because it seems that some civil servant decided to overrule a Government decision and I certainly, as a Member of the Dáil, would like to know who it was.

269.Deputy Colley.—Moving to the arbitration issue, how many landowners were involved?

Mr. McMahon.—I am sorry I do not have that information convenient to me, Deputy.

Mr. McMahon.—There was a relatively small number of landowners involved. Probably about seven or eight altogether.

Deputy Colley.—To move on to the actual inquiry which was undertaken to decide on the figure they should be compensated, I see that the cost of the public inquiry and arbitration was £100,000 and that the figure that was awarded was £452,860. Does that not seem to be a very high cost for the actual public inquiry and arbitrator of £100,000 on £452,000?

Mr. McMahon.—I am not sure I can comment on that. We were not a party to the acquisition. Our role was in accordance with the Government decision and in accordance with the provisions made in our Vote to fund the county council for the cost which they incurred. The actual legal and other processes for the acquisition of the land were conducted entirely by the county council.

Deputy Colley.—You are saying your role was to finance the expenditure which the county council incurred, but surely your role extends to querying whether this expenditure is correct, whether it is not excessive? It does seem to be excessive in relation to the amount of money which was awarded. When I hear that there were only seven or eight farmers involved I am even more appalled at the idea that the whole process should have cost the State so much. I do not think it is good enough just to wash one's hands of it, as a Department, and say it is the county council.

Mr. McMahon.—I really cannot comment in detail on that. The acquisition process was undertaken by the county council in accordance with well-established procedures which they follow and under the general supervision of the Department of the Environment. As far as we were aware, these were in fact the costs incurred and were certified to us as such and, therefore, paid out of our Vote.

Deputy Colley.—Would the Department of Communications not have some yardstick whereby they could say: “This is a reasonable cost”, or “This is an unreasonable cost”, or, “We would like to refer it for further examination? We are not convinced that £100,000 must be spent for every £452,000 of an award that is made”?

Mr. McMahon.—In dealing with these costs, of course, we would have been in touch with the Department of the Environment and also the Chief State Solicitor's office through whom these costs would have been routed to us. There was certainly no reason why we would have challenged them on the basis of the information given and the certifications made available to us.

Deputy Colley.—Is it your understanding that this was a particularly difficult arbitration case?

Deputy Colley.—Perhaps the Department of Finance would care to comment on this aspect of it.

Mr. E. O'Sullivan.—Obviously we would have been keen to keep the cost to a minimum, but I think the position was that there was legal advice to the effect that these costs would probably have to be borne by the Exchequer. Mr. McMahon may endorse this.

Deputy Colley.—So there was some query as to whether they should be or should not be paid and legal opinion was sought?

Mr. O'Sullivan.—Obviously, the costs were gone into at the time the submission was made to Government. I understand there was legal advice to the effect that there may have been a liability for these costs.

Mr. McMahon.—I cannot comment on that. I am not commenting on the arbitration costs.

Deputy Colley.—But, presumable, if legal opinion was sought, it was felt that to some extent there was an excess in the costs of the arbitration compared with the award being made?

Mr. McMahon.—I was not talking specifically about the arbitration costs when I mentioned the legal position. I was speaking generally.

270.Deputy Crotty.—Could we get a note giving the breakdown of the costs of the inquiry? It seems to be extraordinary.

271.Deputy Colley.—A couple of last questions. Was the idea of putting a levy on the county council ever examined in relation to recovering some of the costs that the Department had expended?

Mr. McMahon.—As far as the Department of Communications were concerned, we would certainly have been anxious to recover these costs and not have to expend them out of our Vote, particularly as the airport project was not continuing. That matter was considered by Government and the decision was that they should be borne on the Vote of the Department of Tourism and Transport. It would be my understanding that the financial situation of the county council was not such as to enable them to carry these costs themselves.

Deputy Colley.—I feel that we have a situation here where Donegal County Council felt that they had almost carte blanche, that they could continue with it, that they could continue with the arbitration, that they could continue with the compulsory purchase of this land and that they would not have to pick up the tab. My next question relates to the arbitration itself and why it was not abandoned. Even though it had been set in motion, I do not understand why it had to continue right to the end, if the commitment to build the airport had been withdrawn. Why could we not have seen that inquiry and arbitration abandoned midstream rather than continuing right to the end, costing the taxpayer a huge amount of money and the county council ending up with a whole lot of useless land?

Deputy Colley.—To the county council and to the State? It is not doing anything of any use at the moment?

Mr. McMahon.—The county council acquisition procedures on behalf of the Department of Tourism and Transport were cancelled by the Department immediately we had authority from Government to do so. There was no delay.

Deputy Colley.—I must refer to an earlier question that was asked and the answer to it. My understanding was that the decision not to proceed with the project came midstream when the arbitration was in progress and that there was also a decision taken to continue with the arbitration at that point?

Mr. McMahon.—I do not think it is correct to say that there was a decision, certainly not within my jurdistiction, to continue with it. The situation was that in mid-1984 the Government arrived at a position where it decided it ought to withdraw the commitment to the airport. It then had to consider what the implications of that decision were. The authority given to the Department of Tourism and Transport to communicate to the county council that the project now no longer enjoyed Exchequer support was not given until December 1984, at which stage I think the Rubicon had been long since crossed.

Deputy Colley.—I am not satisfied that this should have been necessary. To use Mr. McMahon's words, the Rubicon need not have been crossed until the money was finally awarded. I am not certain that that was the case. For future reference, if a decision is taken not to proceed with a project and we have an arbitration in progress, it should be an immediate step that the arbitration is suspended.

272. Chairman.—I think it is time we brought this to a close, because we have been discussing this for an hour. There are two things I want to say. First of all, I do not accept that 190 acres of Donegal land could be worth £400,000 at today's value unless it is extremely good land. That is something we might want to look at at some stage ourselves — a visit there. We are talking about a figure of £720,000. How much did the county council spend on the airport on top of this and what was the source of that income?

Mr. McMahon.—My understanding is that in addition to the £724,000 which the Department paid to the county council, the council itself incurred costs of about £200,000 in connection with the airport project.

Chairman.—Where did they get that money from? From the Department of the Environment?

Mr. McMahon.—From funds at their disposal. I would not be able to identify which stream.

Mr. McMahon.—I can only say that the money which they received from my Department was £720,000, or it will arrive at that when full payments are made.

Chairman.—The problem we have this morning is this. The kernel of it is that we are not getting any specific answers, either from your Department or from the Department of Finance. That is a most unsatisfactory situation. I am sure you knew for quite some time that you were due to appear before this Committee. There is a proposal that we summon the County Manager. I think we should also have here the Secretary of the Department of the Environment, yourself and Finance. We will have to come back to this matter again. Perhaps it can be cleared up to our satisfaction. For the future, will both yourselves and the Department of Finance please bear in mind that when you are appearing before the Committee of Public Accounts of Dáil Éireann we expect that you will come briefed with the information relating to the matters you are appearing about. There was notification that this was coming up. There is a paragraph there. The information is unsatisfactory. The answers to a number of questions asked by Deputies are very vague.

Mr. McMahon.—Chairman, if I may comment on that. I cannot accept at all that I have not been specific in my answers in relation to matters within my responsibility. A number of the questions which have been addressed to me related to transactions by other bodies which are not my responsibility and to which I can only give an answer by relaying secondhand or thirdhand accounts. I have answered all the questions you have put to me specifically. If there are particular questions which you think have not been satisfactorily answered I will repeat them. I have given all the facts at my disposal and I have prepared myself thoroughly for it. I will be very happy to appear again.

Chairman.—You do not know the value of the 190 acres and you gave £400,000 as your estimate. I do not accept that. It took about ten or 15 minutes to find out whether there had or had not been a Government decision.

Mr. McMahon.—My very opening remarks made it clear that in my opinion there was a Government commitment formally and publicly stated. I repeated it quite a number of times and I was never vague about that and I am not vague now.

Chairman.—A Government commitment is not a Government decision. It took a long time to find out whether there was a Government decision or not. It is unsatisfactory. We are charged with the position on behalf of the Dáil of finding out exactly where Government spending goes. This need not have been adjourned to a further meeting if that information had been available this morning. In the circumstances we will have to accept the proposal and to call the County Manager, the Secretary of the Department of the Environment, yourself and Finance back again to consider this matter.

273. Deputy McGahon.—Could I just ask, if it was not a Government decision, who did make the decision?

Chairman.—It was a Government decision, according to Mr. McMahon at this stage.

Deputy McGahon.—It states here that the Department of Finance decided that immediate steps be taken to cancel the project. Have we not been told whose decision it was?

Chairman.—We have not been told the authority for the Department of Finance directive in 1981, which is why we need to call back the Accounting Officer and the other people mentioned.

Deputy McGahon.—You mentioned a visit. What mode of transport had you in mind? A helicopter.

Deputy Crotty.—I would add to what you have said that the information about the present position of the land — how it is being used and what is happening to it — was non-existent. When the paragraph was there, that information should have been freely available.

274. Chairman.—We will pass on to paragraph No. 50. We will mark that: Accounting Officer to be recalled and the people mentioned to be recalled as well.

Subhead V.—Payments for Bulk Carrier

I referred, inter alia, in paragraph 10 of my previous Report to payments amounting to £376,631 made from the Central Fund and £1,132,725 made from the Vote for Communications to meet essential maintenance costs, etc. of the Irish Spruce in the period December 1984 to September 1985. I also referred to the absence of statutory authority for charging the amount of £376,631 to the Central Fund and to the undertaking given by the Department of Finance to regularise this transaction (see also paragraph 10 of this Report). Further expenditure totalling £1,523,229 has since been met from the Vote, £382,240 in the period to 31 December 1985 and £1,140,989 in January, February and September 1986. This represents £1,232,729 to meet care and maintenance costs, etc., of the vessel up to the date of its disposal and £290,500 to meet termination and other payments to the crew. The ship was sold in June 1986.

Mr. McDonnell.—At previous meetings the Department discussed some aspects of the Irish Shipping liquidation. This deals with another aspect of the financial consequences of the liquidation, that is, the costs incurred on the care and maintenance of the Irish Spruce, up to the date it was sold. These costs had to be incurred apparently in order to protect the State's interest in the ship. They total just over £3 million. That was slightly reduced later because there was some small refund from the liquidator. All these care and maintenance costs have now been charged to the Vote for Communications in the years 1985 and 1986. They include the regularising, if I could call it that, of a charge of £376,000, which had been previously made against the Central Fund and which I questioned and it was found to have been wrongly charged against the Central Fund. I might add that in my 1986 report, dealing with the Central Fund — because that is where most of the expenses ultimately rested — I have given a full summary of the total cost to the State in connection with the construction and the disposal of the Irish Spruce.

Mr. McDonnell.—It is two things. It is referring to the charge on the Communications Vote which bore the costs of care and maintenance. You said an accounting arrangement. It embraces so to speak, an accounting arrangement to regularise a charge which had been previously made on the Central Fund. A small amount of the initial care and maintenance costs was initially charged there and then it was found that it should have been charged to the Vote. So the full charge of care and maintenance finally rests on the Vote for Communications in 1985 and 1986 and that accounts for £3 million. The bulk of the expenses borne by the State arising out of the Irish Spruce situation will rest on the Central Fund — I have referred to that in my 1986 Report. Here we are talking about care and maintenance from November 1984 to June 1986.

Chairman.—We will be returning to the whole Irish Shipping area when we have the Secretary of the Department of Finance in again. Is that not correct?

Mr. McDonnell.—Yes, Chairman, you will. In any event, you will be returning to it with the Secretary of the Department of Finance on my 1986 report.

Deputy Colley.—Just a quick comment. I would like to draw the attention of the Committee to the fact that I was particularly concerned when paragraph 10, which is referred to here, came up recently. I see another example here of the lack of authority for spending in Government. After all, that is what we are about here in this Committee. We are making sure that there is authority and that the different Departments follow that. We have here a situation where from the Central Fund a payment of £376,000 was made and there was no authority for that. I want once more to draw the attention of the Committee to the fact that I think it is a wrong accounting procedure to follow and that the authority should be got before it is done, or if the authority runs out it should immediately be charged to the Vote.

Chairman.—Is this simply a matter that it was a mistake in charging it to the wrong place and you subsequently corrected it?

Mr. McMahon.—The situation was that the payment was made by the Department of Finance at a time of extreme urgency and on the basis of the legal advice available at the time. Subsequently, the legal situation was corrected and it was then established that this particular payment was not properly covered by the guarantee given by the Minister for Finance in respect of the lease on the Irish Spruce and should have been charged to the Vote for the Department of Communications. The necessary Dáil Vote to rectify that situation has since been taken. Perhaps it might have been appropriate for the Department of Finance to give that explanation, but that is my understanding of the situation, unless Mr. O'Sullivan wants to add anything to it.

Mr. E. O'Sullivan.—No, Chairman. Essentially what happened was that we had legal advice that after the liquidation the future of the Irish Spruce had to be safeguarded. We had legal advice that these payments could be properly charged to the Central Fund. The Comptroller and Auditor General subsequently questioned that and we sought further legal advice in early January 1985. The subsequent legal advice was that the amount should be paid from voted moneys rather than the Central Fund and measures were taken to correct the situation.

Chairman.—O.K. It has been regularised now. I think we can note this. We will be going into it in some detail with the Secretary of the Department of Finance.

275.Deputy Naughten.—We are talking here about the period from December 1984 to September 1985. We are talking about £3 million for, basically, care and maintenance and some additional costs such as crew etc. That is a gigantic sum of money by any standards. Who authorised the payment of this? Obviously your Department did not. Was it the Department of Finance? Would the Department of Finance have had the expertise or were they equipped to do that?

Mr. E. O'Sullivan.—The position was that the Irish Spruce would become the property of the Minister on payment of the stipulated loss value which was basically related to the outstanding lease payments. In that situation, the vessel had to be protected. It would have been irresponsible just to abandon the vessel. It had to be protected because it was an asset of the Minister for Finance, potentially. The liquidator of Irish Shipping was asked to manage the Irish Spruce and to look after the care and mainenance arrangement. Obviously that made sense because he was looking after a number of other ships in the Irish Shipping liquidation situation.

Chairman.—It looks a very large sum of money. Are we satisfied that all of that expenditure was absolutely essential? Who was in a position to say if it was? Who monitored the expenditure?

Mr. E. O'Sullivan.—In the first place, the liquidator. He had the onus of monitoring expenditure on the other Irish Shipping ships on behalf of the creditors and was answerable to the courts. So obviously he had a very good grasp of expenditure and was obliged to keep expenditure to a minimum on those ships. He applied similar standards to this particular ship.

276.Chairman.—I think we can note this. We will be returning to it when we have the Secretary of the Department of Finance in and we will be going into it in some detail at that time.

Subhead S.—Dublin Transport Authority—Administration and General Expenses (Grant-in-Aid)

Subhead S.2. — Dublin Transport Authority—Capital Expenditure (Grant-in-Aid)

The Dublin Transport Authority was established on 12 November 1986 by Statutory Order made under Section 4 of the Dublin Transport Authority Act, 1986. The Authority's general functions are to ensure as far as possible the proper and efficient planning and operation of road and rail transport in the Dublin area and to advise the Minister for Tourism and Transport or the Minister for the Environment on any matter relating to these functions. The Act provides that grants may be paid to the Authority out of moneys provided by the Oireachtas. Grants totalling £230,383 were paid to the Authority in 1986, £48,010 from Subhead S and £182,373 from Subhead S.2.

Mr. McDonnell.—This is self-explanatory, really. It deals with the Dublin Transport Authority, as you can see. The Authority ceased to function with effect from January 1988. Before the dissolution there was another sum of about £665,000 issued to the Authority the following year, in 1987.

VOTE 41 (1985) and VOTE 43 (1986) — COMMUNICATIONS

277.Chairman.—Could I ask you a question, Mr. McMahon. I was talking recently to a publican from Galway and not so long ago I was talking to some people from Donegal who tell me that the old situation which pertained where we had a very large number of tourists from Northern Ireland is no longer the case. I was told in Donegal that the traffic was in the past bumper to bumper, you literally could not cross the road because there were so many streaming from the North down. Similarly in places like Galway there was a very large number of Northern Ireland tourists from both traditions. This seems to have dried up. I wonder if you can say why that is and what, in your view, the loss of revenue to the State has been in relation to the security situation over the last 20 years in revenue from tourists from Northern Ireland?

Mr. McMahon.—I think it is correct to say that there has been a change in the mix of our tourist traffic. The Northern Ireland market, was very important for many resorts in, as you mentioned, the north-west area and the west, but these areas do not receive as many Northern Ireland visitors as they did. It would be very difficult to quantify what that might have meant in numbers or revenue over such a long period. It should be borne in mind also that both the official agencies, like Bord Fáilte, SFADCo, the regional tourism organisations and the people in the industry would have reoriented their particular marketing to take account of the lack of buoyancy in a particular market and would therefore have more vigorously attacked other markets, such as the ethnic market in the UK., the North American market generally and the French, German and other continental markets which have greatly increased their contribution to our tourist industry. I would suggest that the question is not quite so simple. The mix of our tourist industry changes quite a bit from time to time. In 1986, for example, there was a very large influx of US visitors because of the favourable currency rate. In 1987, because of Chernobyl and terrorist reports in Europe, that traffic fell. Both the agencies and the industry have to change their particular marketing strategies from time to time to take account of that. It is not just a question of trying to identify the loss from a particular market but what compensatory strategies they adopt to balance that situation. I do not know whether that is a satisfactory answer. I would also have to say that Bord Fáilte, of course, who are the designated State agency and the statutory agency in this area, might be able to make a more scientific calculation than I would, because we are concerned with the broad policy being pursued rather than the actual detailed statistical analysis.

Chairman.—The question really is: should we not have been able to maintain a steady stream of Northern Ireland visitors and improve our foreign tourists at the same time? Have we lost the Northern Ireland tourists because of the security situation? Is that why?

Mr. McMahon.—I would not say the market is lost, but certainly there has been a considerable reduction. I am not quite sure that it is due entirely to the security situation. There are other reasons why markets can change. The increased competition in the Northern market, say, from Greece, Spain or Turkey. Perhaps the imbalance in costs across the Border have had their effect from time to time. I am not quite sure that it is attributable entirely to the security situation, but I do believe that the reports and the manner in which incidents on the Border or those connected with the Northern Ireland situation are reported would certainly have been a significant factor.

Chairman.—Would the fact that there is greater opulence on the island generally mean that people in Northern Ireland can travel further afield?

Mr. McMahon.—Certainly, I think all tourists horizons have widened in recent years and there are more destinations competing for the market.

Chairman.—What is the ratio of visitors from Northern Ireland to the Republic compared with visitors from the Republic to Northern Ireland? I think it is something like 10:1, is it?

Mr. McMahon.—There would be a considerable imbalance, but whether you have the right figure I am not quite certain.

Chairman.—So there would be something of the order of 10 Northern Ireland visitors here for every one that goes North?

Mr. McMahon.—I have not seen such a figure, but the preponderence of traffic is from North to South.

278.Deputy Dempsey.—I should just like to ask a few questions in relation to RTE. Could you outline as briefly as possible the role of your Department in overseeing expenditure in RTE? Do you have any role on that?

Mr. McMahon.—Maybe I should preface my remarks by saying that I am dealing with the 1985 and 1986 Estimates for the Department of Communications and there has been a considerable change in the allocation of departmental functions since then. The responsibility for RTE and the other State bodies in that area is now with the Department of Communications rather than with the Department of Tourism and Transport. On the question of monitoring of expenditure, it raises the question generally about the relations between a Government Department and a commercial or trading or revenue-earning State body. One of the important criteria is the net result on the year's activities, whether they return a net profit or a loss. RTE is a statutory body with its own responsibilities to provide a broadcasting service, to recruit its own staff and to organise its own affairs. The Department's role is to maintain an overall supervisory relationship. We do this not by very detailed questioning of individual items of expenditure but rather requiring the State bodies to submit strategic plans to the Department from time to time which are updated on an annual basis. These plans would contain their strategies as to how they are to discharge their functions, what the costs would be, what their capital investment proposals are and what results they project for the future. We monitor these not only on an annual basis but we get reports — I am not sure in the case of RTE but in the case of most bodies we get quarterly reports as to how their revenue and expenditure matches their proposals for the year with explanations as to any deviations. We also maintain a control over their capital investment, which forms part of the Public Capital Programme. These are set criteria and target rates of return to which any major project must conform. In addition to that the Minister meets with the board of these organisations from time to time to review their activities. The supervision is not at the detailed level, it is more about the policy pursued, the overall cost of their activities and how they are performing in relation to their forecasts.

Deputy Dempsey.—If I understand what you are saying, in relation to 1984 and 1985 RTE was under the Department of Communications at that stage. Do I take it that you no longer have responsibility?

Deputy Dempsey.—In relation to those two years and the strategic plans you referred to, RTE initiated moves and discussions with Radio Luxembourg in relation to a project called Radio Tara, a long wave commercial pop station to beam pop music and so on into Britain. Is that true?

Mr. McMahon.—There were proposals for such a partnership. I cannot verify your dates but I accept what you say.

Deputy Dempsey.—Do you know what the basis of the agreement between RTE and Radio Luxembourg was?

Mr. McMahon.—I am not familiar with the commercial provisions of that proposed agreement.

Deputy Dempsey.—I accept what Mr. McMahon has said. I was going to raise this matter under private business at one of our previous meetings and I decided that when the Department of Communications was to come here I would wait until then. I would ask the Committee here to call the Secretary of the Department of Communications as quickly as possible to discuss this project and the public money that is being spent on it. It is my understanding that at this point in time RTE has spent nearly £100,000 in purchasing a site for a Radio Tara transmitter, a site in respect of which no planning permission has been granted yet and is the subject of an appeal to An Bord Pleanála. They have also spent a considerable sum of money in doing a PR exercise around the locality. Perhaps Mr. McMahon can tell us what the viability was or on what basis it was decided to go ahead with the project but I think serious doubts have been cast on the viability of the project at the moment. I am afraid that we are going to end up in two years time as the Committee of Public Accounts reviewing this and saying that public money should not have been spent on it. On this basis that over £100,000 of public money has been spent on it, I am asking the Committee to call in the Secretary of the Department of Communications to discuss this matter as a matter of urgency.

Chairman.—I had this in mind in any event. I want to make this observation under the same heading of Radio Telefís Éireann. I would like the Committee to invite in the Director General of RTE to discuss the collection of these licence fees. Perhaps you might like to raise it on that occasion with him and then if you still feel the need to send for the Secretary of the Department of Communications we can do that at that stage. Would you be agreeable to that?

Deputy Dempsey.—I would be agreeable to that provided we are inviting in the Director General very quickly.

Deputy Dempsey.—I second that. Can Mr. McMahon give us any idea of what viability studies were carried out in 1983, 1984, or 1985 in relation to this project and has there been any update on the actual proposal since then, in view of all the things that have happened in the last three to four months?

Mr. McMahon.—I am sorry I am not able to give a more informative reply to Deputy Dempsey. RTE is financed partly by advertising revenue which is raised commercially and partly by the proceeds from the licence fees, and not directly from Exchequer moneys or from taxation. It is, therefore, treated somewhat as a commercial State body and, therefore, the degree of control reflects that situation and is exercised in the general manner which I described earlier. I ought to have mentioned — this is not an answer to the particular points which Deputy Dempsey was asking — that as part of our general supervision of the activities of RTE, we did commission external consultants a couple of years ago to undertake a very comprehensive examination of all their activities. They made many recommendations, most of which were accepted and have been implemented by RTE. I just mention that as a supplement to my earlier answer.

Deputy Dempsey.—I understand fully Mr. McMahon's position in this with regard to maybe not having the facts before him, and I did not mean to spring it on him. I accept his explanation.

279.Deputy Colley.—Would Mr. McMahon tell us how many staff there are in the Department of Communications, sorry, in the Department of Tourism and Transport?

Mr. McMahon.—I will answer both if you wish. In the Department of Communications in respect of the years which we are studying the total staff was about 1,250 approximately.

Deputy Colley.—Right. That is in what would now constitute the two Departments.

Mr. McMahon.—It is not quite so simple, because early in 1987 the communications functions of the Department were vested in a separate Department of Communications; the shipping policy and shipping safety and port responsibilities were transferred to the Department of the Marine, a newly formed Department; and responsibilities for tourism were transferred into this newly formed Department, so there was a sequence of a number of moves. The net result is that the present staff of the Department of Tourism and Transport is of the order of 1,000. I should add that the vast majority of those are technical, professional or operational people providing air traffic control services, holding examinations for pilots, supervising airlines, maintaining facilities at airports. The actual administrative corps of the Department is about 200.

Deputy Colley.—The administrative corps is about 200. Would it be fair to say that the efforts in the public service to reduce numbers over the last year has affected the Department of Tourism and Transport — I am now just referring to your own Department — as any other, or what has been the effect?

Mr. McMahon.—If I might, I would have to correct the Deputy. These efforts extend not only over one year but over the past five years because it is now quite some years since the Government adopted a policy of filling only one vacancy in three and we were subject to that discipline. Over the past year the more rigorous programme for the reduction in numbers has affected the Department to the extent that vacancies by and large are not being filled and these vacancies are growing because of the incentive provided by the Government in the form of early retirement, career breaks and so on.

Deputy Colley.—On subhead 1 — Transport of Staff — I do not understand what it refers to. There is a sum of nearly £43,000 less than granted expended and the explanation says “Savings arose from a fall in demand for bus tickets”.

Mr. McMahon.—Yes, if I could try to clarify that. For a number of years now staff who work at Shannon airport, or the Ballygirreen radio station and who live some distance from their place of work, have enjoyed subsidised transport facilities from places such as Limerick, Ennis and so on. The arrangement is that Aer Rianta, who administer the scheme on our behalf, purchase bus tickets and sell them to the staff at a subsidised rate. They then recover the cost from this Department under subhead 1 and the expenditure by the Department in 1985 was £66,000, as against an original estimate of £109,000. The difference arises because from time to time, depending on perhaps the cost of petrol, or the cost of bus fares, people will increase or decrease their usage of the transport system and perhaps engage in their own private transport. It may also have been affected by the fact that the Revenue Commissioners now regard this facility as attracting their attention and this has made it somewhat less attractive to the staff.

Deputy Colley.—To follow up on that, you mentioned the Ballygireen radio station. My understanding is that there have been problems there over the last eight or ten months in staffing, and that at times there has been less than adequate staffing for the maintenance of the service which we, as an island, are not the only people to depend on. I believe that air transport in the Atlantic also depends on this. Would you care to comment on any difficulties that the Department is experiencing?

Mr. McMahon.—As we have touched on earlier in relation to reduction of public service numbers, these services have not been immune from the same discipline. All our services, whether they are air traffic control, meteorology or communications have had to cope with reductions in staff. It is necessary, because of the importance of these particular services and Deputy Colley is right in that we provide a service not only for our own airspace but for translantic operations generally. We have had to re-order the rostering and the deployment of staff from time to time to ensure that our international obligations are complied with. It would be wrong to say that we have not had difficulties in that regard, but I believe we have always provided the necessary services for the safe and regular flow of air traffic across the Atlantic.

Deputy Colley.—It is true to say that this is a self-financing service, that the fees that are paid by the airlines cover the full costs?

Mr. McMahon.—Certainly we recover from the users, that is from the airlines, a high proportion of the cost of providing the services. I believe that in relation to this service we probably recover about 80 per cent of the cost.

Deputy Colley.—In that event, a very strong case should be made for the maintaining of full staffing levels that are internationally approved, on the basis that one can, if necessary, increase the costs to pay for it.

Mr. McMahon.—I can only say that I would like to have the discretion and authority to act in that way.

Deputy Colley.—Perhaps the Department of Finance would like to comment on it.

Mr. C. Gallagher.—I would just like to say two things about this. It has not been a case of simply going out to reduce staff numbers in the aviation and radio area on a very crude basis. We have always had worries, particularly over recent years, about changes in traffic patterns, changes in demand, the need for change in equipment, basically how to get more efficient use of staff. We had in consultants who were familiar with the international operation of airports looking at this area quite recently. They came up with a report which suggested a different ordering of staffing to provide a better service with somewhat less staff. Mr. McMahon's Department are at the moment having discussions with unions about implementing that report. Part of the staffing reduction that has taken place is a contribution to that. In relation to the user charges question, this is a general question and it crops up in a number of areas, not just in the Department of Transport and Tourism. We get very strong proposals from Departments and Mr. McMahon's is not unusual in this, saying “this is a service which brings in money. It pays for itself, ergo let us have the numbers of staff and let us have staff at a higher level because at the end of the day this service is going to be paid for substantially or totally by the users or by the public”. We do not think the fact that the public or an airline company are footing the bill means that we should take a relaxed approach to the staffing. You could have a situation where the Land Registry, which is self-financing, could keep increasing its fees to the point where the fees would be higher than the price of the house, and you keep pouring staff in. You have to maintain a level of efficiency irrespective of how the service is paid for and we are using the staffing restrictions to do that.

Deputy Colley.—I would simply like to say that, while I agree with the observation that we cannot keep employing staff just because the money might be there, nevertheless on a number of occasions in the last year there have been near to dangerous situations in Ballygireen, because in holiday times and peak periods there has been a real shortage of staff which may have led to disasters. I do not think that is good enough.

Mr. C. Gallagher.—There are a number of things about this. We could provide staff on a contingency basis. When you take account of everything that might conceiveably go wrong——

Mr. C. Gallagher.—No, holidays are not an unusual contingency, but there are other factors as well, sick leave situations and so on. We are operating a roster system which has certain built-in inefficiencies. This happens in other areas as well. We have been changing that. Naturally enough, when you have that situation there are people who can actually make a gain from having inefficiencies. People may find that it suits them to have a situation where there is over-manning or where there is excessive overtime. That is natural. It is not something that arises uniquely in the State sector. It arises all over Irish society, and managements have to do something to try to curb that. One of the counters to that, usually from the people who are losing out or from their unions, is to mount a pretty good campaign in the newspapers or on the radio and hype up incidents that in other circumstances would go unnoticed, purely to put the frighteners on the public and to create pressure on management to cave into them. Because we were commencing these negotiations with unions and the unions knew we were commencing these negotiations, we had over the summer months a situation where, if you turned on the radio on any sort of regular basis in the afternoon, you had union officials coming on making this pitch. But basically this was a psychological warfare on their part to get management to pull back from the sort of things that management needed to do to provide a more efficient service.

Chairman.—O.K. the point has been well made. I think we have travelled it quite a bit.

Mr. McMahon.—Might I add a brief word because I think it might be misleading if I were to accept what Deputy Colley said about there having been near disasters or serious discrepancies in standards?

Mr. McMahon.—May I say that I am quite satisfied that safety standards have been maintained at our State airports and at all our navigation facilities throughout, despite any problems we have had about staff.

Chairman.—Are there any other matters under this Vote? Thanks, Mr. McMahon. We will leave it at that.

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

VOTE 35—FISHERIES (1985).

VOTE 36—FISHERIES (1986).

Mr. F. Ó Muircheartaigh called and examined.

280.Chairman.—Good morning. Paragraph 32 of the Report of the Comptroller and Auditor General reads:—

Subhead C.3—Fishery Harbour Centres Fund

The provision under this subhead is intended to meet the deficit on the Fishery Harbour Centres Fund which shows the operational costs of the major fishery harbour centres. The accounts of the fund are audited by me. Charges for the use of harbour facilities and rents for onshore properties vested in the Minister for Tourism, Fisheries and Forestry accrue to the fund as income. In the course of audit it was noted that a number of properties at Killybegs and Castletownbere which are available for letting had been occupied for a number of years but the lease agreements had not been completed nor had rents been collected except in one case where it had been paid up to September 1983 only. I asked the Accounting Officer why the agreements had not been completed and what steps were being taken to do so and to collect the rents due. I also inquired as to the total amount of rent outstanding at 31 December 1985.

The Accounting Officer has informed me that the leases had not been completed due to unavoidable delay in vesting the properties in the Minister for Tourism, Fisheries and Forestry because most of them include areas of foreshore.

He stated that available ordnance survey maps for the area are not accurate in relation to high water marks which are most important in connection with the leasing of reclaimed land and that, in addition, there were long delays in some cases in obtaining the State Valuer's report. He also stated that the total amount of rent due to 31 December 1985 was £86,508 and he assured me that the Chief State Solicitor, the State Valuer and the Ordnance Survey Office as appropriate in the various cases had been asked to expedite conclusion of outstanding matters.

The Accounting Officer explained that lessees had been permitted to enter on sites before execution of the leases because it was felt that the anticipated delays could have led to the proposed commercial projects being held up indefinitely, and in some cases abandoned, with resultant loss to the economy through extra jobs not materialising. In such cases written agreement was obtained that the rental as assessed by the State Valuer would be accepted and would be payable from the date of entry on the site. He stated that the leases when executed will provide for the payment of arrears.

Mr. McDonnell.—This is the only paragraph in my report on this Vote for this year. Here we have a problem of completing lease agreements and collecting rents for properties at two of the major fishery harbours. The seven occupants concerned had been given access to these properties on various dates between April 1980 and August 1983. You will see the Accounting Officer's explanation of the problem there in the paragraph and the difficulties that the Department had. Since the date of my report I understand that leases have been completed in two cases and some rent has been paid but further rents would be accumulating in the meantime. The amount reckoned to be outstanding in the seven cases was approximately £95,000 at the end of 1987. I understand that in the last month or so, two other cases have paid rent totalling £35,000 in advance of signing the leases. The amount outstanding does not take account of some increases recommended by the State Valuer for some of these properties quite a while ago.

Mr. Ó Muircheartaigh.—I agree with all the comments the Comptroller and Auditor General has made. The problem arises in that a number of properties in Killybegs and Castletownbere, seven in all, had been occupied prior to a lease being executed and, consequently, rent had not been paid. We have tried to operate on this on three fronts. The first thing we tried to do was to expedite the conclusion of the leases. In that regard two leases have been concluded and the rent in relation to them has been paid in full for the period under discussion and two of the leases have been completed and signed: three have been effectively completed and agreed in all respects and are about to be signed, and there are some remaining difficulties with the other two of the seven leases. We anticipate that these will be sorted out over the next few months. I can go into them one by one if you wish, but that is the position in relation to the leases. The second issue is in relation to the payments. As soon as I became aware of this we adopted a procedure of pursuing all the companies involved for payment in advance of execution of the leases. I am glad to be able to say that of the money owed at the end of 1985, a total of £62,954 has been paid. I have assurances in relation to the only other significant one that payment in full will be made over the next few weeks. This whole problem arises and indeed the “indebtedness” arise due to the procedure which was adopted in this case in that there was entry into these sites without the completion of a lease. In order to deal with this situation, I have instructed all the staff of the Department to follow a procedure I have set out, a copy of which I will be glad to give to the Committee. Generally, there should be no entry permitted prior to the finalising and execution of the necessary lease or contract. However, there might be circumstances where economic or other considerations warrant entry to be made, such as the provision of jobs. In these cases we need a more formalised arrangement which provides that there will be a liability for payments, an enforceable liability for payments. I have asked that in the future entry onto the site should not be permitted unless an interim rental agreement, which was missing in some of these cases, is concluded and agreed with the person who is to enter into the site.

There is one other point I would like to comment on and it arises from remarks the Comptroller and Auditor General made and which I had intended to mention at the outset. On reviewing the reply made by the then Accounting Officer on this issue, the amount which was entered as owing to the Department, £86,508, had a number of estimation factors involved in it. As the Comptroller and Auditor General pointed out, leases had not been actually agreed in relation to these sites nor had the terms been agreed to. In three cases, lower sums were agreed to at that time than were put into the estimate which gives rise to the figure of £86,508. On the basis of the figures that were agreed to, the figure which we now have in the leases, or the draft leases, that would have been owing to the Department at the end of 1985 would be £81,800. The Comptroller and Auditor General has referred to the amount that is outstanding at the end of 1986 and 1987. I would like to give the up-to-date figures in relation to that. The amount owed at the end of 1986 was £100,654. Of the £100,654 outstanding at the end of 1986, £71,867 has been paid and £28,787 remains due. The up-to-date position in relation to the 1987 situation is that at the end of 1987 the Department was owed £95,483.

Mr. Ó Muircheartaigh.—There are five uncompleted leases. Three have been agreed in all their details and have been sent to the leaseholders for signature and they should be completed within the next three or four weeks depending on when they are signed. In relation to the other two leases where there are a small number of outstanding technical queries and steps to be gone through, I would anticipate that within two to three months they should be completed. We are concentrating on trying to tidy up the situation.

Chairman.—When the leases are executed, they will provide for the payment of arrears?

Mr. Ó Muircheartaigh.—They will. It will be one of the conditions of the lease that the assessed rental will be paid in full.

Chairman.—We can take it that within two or three months of the execution of these leases the arrears will be sorted out?

Chairman.—What were the unavoidable delays in vesting the properties referred to and what are the technical problems you referred to?

Mr. Ó Muircheartaigh.—Maybe if I gave the details of the most complex case. In Killybegs, a company had accepted the terms of a lease in 1981, but having accepted the terms of this lease which was for a fish processing plant, they encountered planning difficulties due to the requirements of Donegal County Council. They had to alter the alignment of the building. This meant that the site spilled onto an area of reclaimed foreshore. New maps of the site were needed. This required the involvement of ordnance surveyors. A problem arose with the high water mark and the registration of title to the foreshore, that is, the area below the high water mark, and the title of areas above the high water mark, which had already been wrongly registered by certain people. Those registrations had to be gone into.

Mr. Ó Muircheartaigh.—By people who owned the properties above the high water mark. The Foreshore Act came into effect in 1933 and foreshore leases are determined by reference to the high water mark. It was pointed out when the title document was being completed that the high water mark had changed from the last ordnance survey. In order to establish the limit of the title of the people who own the land and the area of State foreshore which was to be the subject of the lease, a new high water mark had to be established. That was a lengthy process. The present situation is that the new high water mark has been determined and we are now in the process of transferring the State foreshore which is vested in the Minister of Finance to the Minister for the Marine so that he can issue a foreshore lease.

281.Deputy Foley.—I wish to ask the Accounting Officer how many properties are involved between Killybegs and Castletownbere?

Mr. Ó Muircheartaigh.—There are seven properties in all, five in Killybegs and two in Castletownbere.

Deputy Foley.—Do I detect from the statements you have already made that as a result of tenants taking over possession of these properties that they are now in a position to dictate their own terms — they are in possession — with regard to enforced liability for payments?

Mr. Ó Muircheartaigh.—No, I do not think that is correct. I was not trying to convey that message. In our discussion with all these interests they have agreed to expedite payments before the conclusion of the leases.

Deputy Foley.—I will just take the case you have given with regard to the company which accepted the terms of the lease in 1981 and then ran into problems with planning, should that not have been resolved before taking possession of the particular site?

Mr. Ó Muircheartaigh.—The answer is, of course, we would prefer that there was a finalised and executed lease before people entered into properties. In the case of that company, there are over 100 people employed in it and given the difficulties that beset this case a judgment had to be made by the people there at the time about whether the development should be allowed to go ahead or not. What I have done in the new procedure which will operate from now on is that there should be some kind of formal written agreement in relation to the rental. All the parties involved have agreed that when leases are executed they will pay in full any rentals due.

Deputy Foley.—I accept that. I do not wish to cut you short but listening to you this morning it is hard to accept that this is a Government Department dealing with substantial amounts of taxpayers' money where there is an excess of £100,000 involved. People have been able to take possession of these sites without having leases signed and have been in the position to run up substantial arrears. You are at their mercy now in order to recoup these arrears because there is nothing signed, you are depending on their goodwill to honour commitments previously made with nothing in writing. If this was private enterprise the people involved would have gone into liquidation. The fact is that we are here this morning examining you as an Accounting Officer and we are responsible and have to make responsible reports but I fail to see how we can accept the explanation being offered here considering that the moneys are outstanding. I accept that you are new, you are now drawing up further conditions, but the fact is that this has happened and it involves taxpayers' money. We are very fortunate that the Comptroller and Auditor General has brought this to light. We have to make a stand on it because we know that on this occasion there is over £100,000 involved. These people were allowed to go into these properties without having leases signed. I accept the point made this morning but there are still substantial amounts outstanding. I am convinced from what you have said here this morning that there is no guarantee that you can get this money because nothing has been signed. These people, while they are now in possession, when they are signing leases can dictate their own terms because possession is nine points of the law. This is happening in various Departments but it has been highlighted by your Department. I accept that you are now trying to draw up certain conditions with regard to future leases but this has happened and it should not have happened because there are well paid officials to look after this. Have any steps been taken to remedy this or to have the people who were involved in this surcharged.

Mr. Ó Muircheartaigh.—There are two points that I would like to come back to. The first point made was that there is nothing in writing. It is not true that there is nothing in writing. The Deputy could be excused for believing that because I did not make this clear, I was not asked. There was extensive correspondence between each of these parties and the Department of Forestry and Fisheries which, in my view, and in the view of the people concerned, amount to an agreement to pay rental on these properties. The difficulty has been, and the difficulty which the new procedure is designed to address is when should that rental be payable? We believe in Roinn na Mara that it should be payable from the time people go into the site. If there are any adjustments to be made later then they should be made at the time the lease is signed. That should be an explicit part of the arrangement but it would not be true or fair to say that there was nothing in writing.

Deputy Foley.—I accept your point but the point I am trying to make is that there must have been complete inefficiency within the Department to allow these people in and now to discover that there are substantial amounts of money due to the Government. It is taxpayers' money. There was in excess of £100,000 due at the end of 1986. You made the point that at the end of 1987 there was £95,000 due but due to the advance payments it is now down to £42,000. Of the £95,000 due you are only taking off the figures that were paid in advance. What of the £95,000 — is it dead money now?

Mr. Ó Muircheartaigh.—We do not anticipate any bad debts at the moment in relation to any of these seven properties.

Deputy Foley.—Over a period of three years there have been substantial amounts of money due at the end of December. The only point I want to make is that there must have been complete inefficiency within the Department to allow that to happen. I accept the point you are making but I have to say that because these moneys are outstanding and are due.

282.Chairman.—Mr. Ó Muircheartaigh, you mentioned that the rents had been decreased in certain final arrangements but the State Valuer recommended increases in certain cases. What happened to those?

Mr. Ó Muircheartaigh.—There were substantial increases in the case of the largest of these which is Gallagher Brothers. The original site in Killybegs for the fish processing plant was valued by the State Valuer at £3,000 or £5,000 — I will confirm that figure in a minute. When the site had to be realigned, and when a bigger site was needed, the site was valued again. A revised rental of £9,000 was received from the OPW valuer. In that case the higher valuation was adopted. The original site was an area of 6,500 square metres and the annual rental was £3,000. The firm's plan for development of the site had to be altered and we were glad to see it altered because it involved a large expansion of the facility there and was necessitated because of planning requirements of Donegal County Council as I mentioned earlier. This change in the site necessitated the obtaining of the new maps to which I have referred. The OPW valuer was called in again and re-evaluated the site. As far as I can recall he recommended a rental of £9,200 for this extended site. Therefore, in that case, the rental actually went up. There were three cases in which the rental was reduced. I can refer to each in turn. The first one was——

Chairman.—Perhaps the Accounting Officer would revert to the point — some of the rents were decreased but the chief valuer recommended certain increases. Were the increases applied?

Mr. Ó Muircheartaigh.—If the Deputy wants to refer to specific increases I will comment on each.

Chairman.—As this arises from the comments of the Comptroller and Auditor General he might like to comment on that.

Mr. McDonnell.—I said at the end of my comment that the rents did not take account of increases recommended by the State Valuer. As I understand it, the increases about which the Accounting Officer is talking in the case of the bigger property — the initial increase of £9,000 on the remapping of the site was taken into account. What I was actually talking about was something which happened subsequently. I have a note which says that in respect of that site the State Valuer, in February 1987, recommended an increase from £9,000 to £50,000. That is the one that is puzzling me. I did not think that £50,000 had been taken into account in arriving at the arrears figure to which the Accounting Officer was referring as existing at the end of 1987.

Mr. Ó Muircheartaigh.—In my research into this matter I found no reference what-soever to such a figure. I was not there at the time myself so I cannot recall it directly. But I will certainly have it researched as that is the best that can be done.

Chairman.—We will get the Comptroller and Auditor General to quote from the document to which he is referring so that the Accounting Officer will be aware of the reference.

Mr. McDonnell.—I was quoting from a document dated 13 February 1987. It is a letter addressed from the engineering branch of the Office of Public Works to the Department of Fisheries, Forestry and Tourism as it was then. It referred to that site at Killybegs, the Gallagher site. It says at the bottom of page 1:—

I estimate the rental value of the property as and from 1986 at £50,000 per annum. An initial review of rent of £55,000 might be suggested.

Mr. Ó Muircheartaigh.—Could I just say that I was in here with the 1985 and 1986 figures. The lease does provide for a review of rent. It may be that that letter was written in the context of the review of rent for which the lease provides. Is that possible?

Mr. McDonnell.—That is possibly correct. But I was concerned that the committee should have perhaps a clear perception of what might be the upper limit of the arrears at the end of 1987. If, for instance, the review recommended by the State Valuer was adopted and there was a rent of £50,000 obtaining instead of £9,000, as and from 1986, the figure of arrears obviously at the end of 1987 would be that much higher.

Mr. Ó Muircheartaigh.—Certainly I will be happy to pursue that point. I would like to draw a distinction — not having seen the document I cannot comment on it definitively and I would not try to — but we must distinguish between the terms on which people entered into the site, the agreed basis on which they entered into the site, which should be respected, if it was in line with the valuation at the time they did enter into the site. I would submit that it is a separate issue — the issue of what the rent should be when it is reviewed. That appears to be what that document is referring to. It is saying: OPW re-evaluated the rent subsequent to a request from the Department of Fisheries — I think at the end of 1986 — and the OPW valuer suggested a higher figure when the rent is reviewed. We should distinguish between the two things. I am very anxious to do the right thing.

Chairman.—Perhaps the Accounting Officer would let the committee have a detailed note on it and we will decide where we go from there.*

Deputy Foley.—On a point of clarification in regard to the point made about the increase from £9,000 to £50,000: was the lease signed on the basis of £9,000 with a review?

Mr. Ó Muircheartaigh.—This is one of the two leases that has not yet been fully completed. But there was an agreement before the people entered into the site that they would pay, on the signature of the lease, a rental in accordance with the then valuation.

Deputy Foley.—No. Do you honestly accept the fact that you will get an increase from £9,000 which was mentioned to £50,000 when the lease is signed?

Mr. Ó Muircheartaigh.—That is a matter which, from what I have heard from the Comptroller and Auditor General's quotation, will arise in the context of the review of the rent; that was the context in which that letter was written. That is what it sounds like to me. When the rent is being reviewed that will be a major factor in that review.

Chairman.—We will come back to it, if necessary, after we receive the detailed note of the Accounting Officer. We have the Secretary of the Department of Defence waiting outside so we will move on to the vote. We go to Vote 35 for 1985 and Vote 36 for 1986. Items A1 to H in both cases. Are there any comments?

284. Deputy Foley.—How many staff were involved in the salaries, wages and allowances in 1985?

Mr. Ó Muircheartaigh.—At 1 January 1985 there was a total of 163 staff, 92 administrative and 71 technical. At the end of the year there were 96 administrative and 71 technical staff, a total of 167, an increase of four in the year.

Deputy Foley.—You overspent. The Grant-in-Aid was £1.9 million approximately, the expenditure was £1.99. There was a difference of £77,000. Is that correct.

Mr. Ó Muircheartaigh.—In 1986 there were 163 staff on 1 January and 160 on 31 December with aproximately the same breakdown. That was a decline of three during the year.

285. Deputy Colley.—On Subhead E — Inland Fisheries Development — there was an overspending of £352,692. I see from the note that the excess was due to salary increases to the staff's of the Central Fisheries Board and the Regional Fisheries Boards for which provision had not been made and statutory payments to local authorities. Could the Accounting Officer give us some idea of what exactly was involved there? Why were the salary increases not anticipated? Also does that include the expenses of regional fisheries officers on top of salaries? I am referring to travelling expenses.

Mr. Ó Muircheartaigh.—When the fisheries boards were set up they absorbed 17 regional boards of conservators; they were not called regional boards then but conservators. The idea was to rationalise the arrangements that dealt with inland fisheries and to organise them in seven regional boards. The statute that set up that — the Fisheries Act of 1980 — provides for the payment of Exchequer grants to the Central Fisheries Board to cover the wages, costs, salaries and expenses of both the Central and the Regional Fisheries Boards. That statute also provided for and placed a responsibility on the central board to provide for a uniform staff scheme that would apply to all the employees of the Central and Regional Fisheries Boards. Some people were paid badly; others were paid well and so on. They spent the period between then and 1985 negotiating that staff scheme. The scheme was agreed about that time. The implementation of that scheme which was a statutory requirement, was approved by the Government and involved some increases in pay to some of these people. That was the exceptional nature of that increase. That is the main and first point the Deputy raised.

Deputy Colley.—In relation to that pay, does that include the travelling expenses of those inspectors who work for the regional fisheries boards?

Mr. Ó Muircheartaigh.—First of all the grant certainly includes pay, expenses and every other disbursement by the Central and Regional Fisheries Boards. I would imagine although I am not familiar with it at first hand that the staff scheme also lays down the terms on which people travel and qualify for expenses. I would like an opportunity to confirm that in writing.*

Deputy Colley.—What interests me is the question of whether regional fisheries inspectors are being paid salaries but because there is no money available for their travelling expenses — or certainly has not been over the last number of months — they are unable to carry out their duties and have been unable to carry out their duties and they are being paid salaries for effectively doing no work, for sitting at home.

Mr. Ó Muircheartaigh.—In relation to 1985 and 1986 I was not aware that this had arisen.

Deputy Colley.—I am talking about 1987. What I was trying to find out was what was involved in this part of the Vote and whether it would be intended also to cover expenses.

Mr. Ó Muircheartaigh.—It is intended to provide the central and regional fisheries boards with a budget which it is their responsibility to manage. In providing them with that budget there is an estimate of what the staff costs are. When there are things like national wage agreements, or in this case a staff agreement which was a statutory obligation of the boards to introduce and which was then approved by the Minister and the Minister for Finance, the Department of Finance incremented their grant to enable them to put that scheme into effect.

286. Deputy Desmond.—Are you dealing with the final page of Vote 35, page 103?

Chairman.—No, we have not gone on to that yet. We are turning to pages 102 and 104 of 1986.

287. Deputy McGahon.—My question was concerning a sum of £700,000 on page 103.

288. Chairman.—We will come back to that. Pages 102 of the 1985 Appropriation Accounts and 104 of 1986 show the Appropriations-in-Aid. Could you tell the committee what substantially the Appropriations-in-Aid are?

Mr. Ó Muircheartaigh.—For example, let us take 1985. The largest element of them is proceeds of fines and forfeitures in respect of fisheries offences. These could be mainly sea fisheries offences, the seizing of gear and catch mainly of foreign vessels. In 1985 these accounted for £841,000 of our Appropriations-in-Aid. That was what was estimated but we had a good year that year and we realised £1.6 million. The second is the lettings of fishing rights. These are fishing rights that the Forest and Wildlife Service own and which were let by the Fisheries Department and came in as an Appropriation-in-Aid.

Chairman.—How much income did your Department have that year from confiscation of fishing assets under that heading?

Mr. Ó Muircheartaigh.—From sea fisheries we had £1.567 million. This has been adversely affected by the accession of Spain to the Community.

Chairman.—It was a bad year for the Spanish. I presume most of that was Spanish fishing?

Mr. Ó Muircheartaigh.—And cases that came over from other years. The number of arrests for illegal fishing increased from 30 in 1984 to 65 in 1985. Fifty of these were Spanish vessels.

Chairman.—Did your Department have any income in that year from rod licences?

Mr. Ó Muircheartaigh.—Our Department do not have an income from rod licences. It is an income to the fisheries boards.

Chairman.—Will the existing new rod licences go to the boards as well or to the Department?

Mr. Ó Muircheartaigh.—Yes, all the money from the rod licences goes directly to the boards who sell the licences.

Chairman.—Is that money being collected? Is it your view that that money will come into the Department?

Mr. Ó Muircheartaigh.—It will because they sell the licences through their agents and directly and they have already been doing so.

Chairman.—Have you any reason to believe that the anglers will not apply for these licences?

Mr. Ó Muircheartaigh.—I was speaking to the Chief Executive of the Central Fisheries Board last evening and he assured me that many anglers are buying the licences. This I would expect because the vast majority of anglers respect the law.

Chairman.—Would an unemployed man say, from St. Theresa's Gardens, wanting to fish on the canal have to get a licence?

Mr. Ó Muircheartaigh.—I think you may have had a parliamentary question on this issue recently. There is some misinformation about these licences. There are three different kinds of licences, for salmon fishing, trout fishing and coarse fishing and there is a composite licence. In addition, there is a licence for a 21 day period and for the entire season. The kind of fishing which traditionally has been done along the canals of Dublin would be for coarse fish. The licence fee there is £5 for a 21-day licence and £10 for a full season licence. Certain exemptions were included in the legislation for people under 18 and over 65. The difficulty about extending exemptions beyond that is that it can make the operation and enforcement of the arrangements ineffective. The real concern is of course, to get resources for the development of fisheries so that their potential can be realised.

Chairman.—As a matter of interest — and it is a matter of interest because we are all aware that there are certain practicable difficulties — what happens? Who is going to police the man or the young lad fishing on the canal to see has he got his licence?

Mr. Ó Muircheartaigh.—Let us take the young lad. The young lad does not need a licence.

Mr. Ó Muircheartaigh.—That is the law as passed by the Oireachtas and it is the functional responsibility of the central and regional fisheries boards and their officers to sell the licences and then to monitor and enforce their implementation. That is their statutory duty.

Chairman.—This is a matter of public interest and I think it is important to raise it, but I will not press it. A young lad of 18 and a day from the inner city wanting to fish in the canal would not know where to get a licence. He would not know where to approach anybody for a licence because for all his growing up years he has fished in the canal. If he is now unemployed he has a great deal of time to himself. Are we to take it that somebody is going to stop him on the canal now and say, “have you got your licence?” Will it actually be policed at all?

Mr. Ó Muircheartaigh.—The laws of the country are made by the Dáil and the Oireachtas. It is the function of the executive agencies and the Civil Service to carry out and uphold those laws.

Chairman.—Do the people in the fishery boards have any discretion in cases like that?

Mr. Ó Muircheartaigh.—The approach to this is that we have a new enactment. It is there to help the development of fisheries and it really is in the interests of all people who are interested in angling that there are resources available for the development of angling. I would see it as a co-operative endeavour between the State and those who are interested in the environment and in angling.

289. Deputy McGahon.—In telling us that there has been a steady application for licences, Mr. Ó Muircheartaigh has given us a fishy story. I do not believe that and I think that the rivers of Ireland have always run free and have provided many a poor man's dinner. You are scraping the bottom of the barrel by imposing this ridiculous fee. Is it true that Department officials and water bailiffs are paid a premium or bounty for catching pike?

Mr. Ó Muircheartaigh.—The Department do not have water baliffs. The regional boards have them.

Mr. Ó Muircheartaigh.—I cannot comment on that but I will get a note for you to illustrate it for you.

On one hand we have people paid by regional boards to catch pike and now you are going to ask anglers to pay for the privilege of catching them. This is a rough sort of justice. Would you agree?

Mr. Ó Muircheartaigh.—I think you must distinguish between the management of the fisheries and recreational uses of fisheries. The reason pike are netted by regional fisheries boards is, as I understand it, to protect other stocks which pike would prey upon in certain rivers and lakes. It is done in the interests of sport angling. It is a cost to maintaining trout fisheries.

290.Deputy Dempsey.—In fairness, Chairman, you started the discussion and you moved into policy. We have a set agenda before us and you obviously moved into a very interesting discussion from your point of view with regard to the inner city. You moved away from the agenda and set a bad precedent.

Chairman.—I reject that entirely. This Committee, under my chairmanship, set very many good precedents. One of them is that we should consider whether the collection procedures by the Department and its agencies are adequate and I think that is quite relevant. I would ask Deputy McGahon not to get any deeper into the area of policy. This is a matter of public interest.

291.Deputy McGahon.—Could I ask Mr. Ó Muircheartaigh if he is aware that many guesthouses in the south and west of Ireland had already sent out brochures advertising the benefits of coming to Ireland and enjoying the free fishing? Would he like to comment on that?

Mr. Ó Muircheartaigh.—I have not seen any such brochure but I would accept your assurance that there are such brochures. It is a fact that many people in the angling fraternity have been anxious to see the development of our fisheries. Nobody in this room needs any reminder about the financial position in the country at the moment. The licensing scheme is part of an arrangement which enables some money to be invested by those who benefit from the provision of the services of the central and regional fisheries boards. We have been talking about the trout and coarse fish licence. Somebody who goes on an angling holiday of any length will have to look at the size of his licence fee in relation to the cost of the holiday. If the payment of £10 is going to be the decisive factor, it has to be looked at in the context of the cost of the entire holiday.

Deputy Dempsey.—I would make one comment that might allay your fears. I travel up and down the canal in the city area quite frequently and I have not, prior to this, noticed huge numbers of inner city youths sitting on the banks fishing. I think it should not be too hard to police. As we are into the area of policy we might as well point out, as it has been pointed out over the last two to three months, that the Department spent in 1985 a total of £5.128 million on inland fisheries development and £5.579 million in 1986 in inland fisheries development which belies the stories that are being circulated by some people that the Department have no input into inland fisheries. I do not think we should go down this road. It is not even relevant to 1985, 1986 or 1987. Perhaps in 1988 we can discuss it in more detail.

292.Chairman.—To get away from this point may I ask about the suggestion that there is a problem with the netting of pike on our lakes for export? Is your Department aware of such allegations?

Mr. Ó Muircheartaigh.—We referred this matter to the fisheries boards and the Gardaí and we have been unable to get any concrete evidence in our investigation of it. We would be happy to follow up on any specific instance of which any member of this committee or any member of the general public can provide us with evidence.

Chairman.—As far as you are aware, there is no evidence to support this suggestion?

Mr. Ó Muircheartaigh.—The representations made to us have been followed up through our executive agencies and they and the Gardaí were unable to get any evidence of this being true.

Deputy McGahon.—To follow up on that, who do you have difficulty in finding evidence?

Mr. Ó Muircheartaigh.—To get evidence you have either to catch somebody in the act or somebody must be prepared to give evidence in relation to an event or there must be some manifestation left on the scene that something has happened. What I am saying is that nobody has come forward to these agencies with evidence that can be followed up. If they do, and if they are aware of it, we would call on them to let the fishery board know at the time it is going on, so that the perpetrators can be prosecuted.

Deputy McGahon.—I understand there is a Mr. Cahill who describes himself as a private detective in Dublin. Maybe he could throw some light on the subject.

Chairman.—Do you have any grounds to believe that the netting of pike takes place? I was very surprised to hear it.

Mr. Ó Muircheartaigh.—Quite frankly we do not. We have no reason to believe it to be the case.

293.Deputy Desmond.—May we have the name of the company to whom £700,000 was requisitioned in December 1980 as a down payment on the fisheries research vessel? When did the company go into liquidation and what company was it? Was there any question of a construction bond entered into in relation to the contract concerned?

Mr. Ó Muircheartaigh.—The answer to the first question is Verolme Cork Dockyard Limited, which was placed in receivership, not in liquidation, about three years ago by Fóir Teoranta. Regarding the £700,000, no bonding or other arrangement was entered into in relation to that sum.

Deputy Desmond.—Was it not fair to say that at the time there were considerable doubts about the overall viability of Verolme Cork Dockyard and that before the Department handed out £700,000 they should have ensured that the money was protected?

Deputy Desmond.—Was this for the planning and development of it, or for design work. Did we ever recover the design papers so that it could either be sold off or retained in the, Department if we ever went ahead with a fisheries research vessel?

Mr. Ó Muircheartaigh.—As far as I am aware, this payment arose more in the context of the state of Verolme Cork Dockyard at the time and the anxiety at the time to try to secure a future for the company. It was a down payment. No assurances or safeguards were sought or received by the Department at that time. Verolme Cork Dockyard were to prepare a tender for construction and the Minister was then to negotiate on the final price, but while this was being done the dockyard ran into difficulties and eventually was put into receivership.

Deputy Desmond.—Would you not agree that it was an extraordinary situation that a Government Department would hand over on a quite separate basis, £700,000 — which in December 1980 was a substantial sum — without having first got even a letter of intent or a basis tender document?

Chairman.—I should like to point out before this proceeds much further that we have referred to this in the report on the accounts for 1980 and 1981. The liquidator of Verolme Dockyard will be called before the committee when the Secretary of the Department is due to appear. That was agreed at a recent meeting of the committee.

Deputy Desmond.—The final views of Mr. Ó Muircheartaigh on this would be of great interest.

Mr. Ó Muircheartaigh.—I cannot disagree with the Deputy on anything that he said.

Deputy McGahon.—I should like to express my concern about this. It seems incredible that a sum of £700,000 was issued as a down payment. Were you unaware that Verolme was ailing, or do not feel obliged in circumstances like that to make inquiries as to the financial state of any company, particularly when such a large sum of money is involved?

Mr. Ó Muircheartaigh.—If there were any question of this type of transaction going on in any area that comes under the auspices of the Department of the Marine, it would be done before there would be any question of a payment of this kind.

Deputy McGahon.—Has another fisheries research vessel been brought into service or built since that time?

Mr. Ó Muircheartaigh.—No fisheries research vessel has been built, but Roinn na Mara now have a fisheries research vessel, the Lough Beltra which is a converted trawler.

Mr. Ó Muircheartaigh.—I do not have that information but it would not be of the order of that was envisaged here.

Deputy McGahon.—Can you give us an assurance that that type of activity will not happen again?

Deputy Colley.—What percentage of the total purchase price was that £700,000?

Mr. Ó Muircheartaigh.—As far as I am aware, the total purchase price was not finalised at that time. The estimate was of the order of £7 million. I will confirm that figure for the Deputy.

Mr. Ó Muircheartaigh.—It was not exactly £7 million but the estimate was of the order of £7 million.

294.Deputy Colley.—Why is it that you have some doubt as to what the price was to be if that figure is being mentioned? Is there some doubt as to whether it could have been built for that cost?

Mr. Ó Muircheartaigh.—I am a little reluctant, since there was never any negotiated contract for a final price, to say what it would cost. You should really only stand over a figure if you know the basis of it and what it is going to cover. The estimate, as I gather from the report of 1980–81, is given.

Deputy Colley.—Is it not unusual, to say the least of it, to make a down payment against a price that has not yet been agreed?

Chairman.—We are now re-examining on 1980–81. We can deal with this when the liquidator comes before us.

Chairman.—That is a terrible pity and the fact that the Deputy was not a member was a great loss to the committee.

Deputy Foley.—The figure mentioned in the 1980–81 accounts was in excess of £7 million and a figure of 10 per cent as a down payment was mentioned. I am surprised to hear the Accounting Officer say that there was not a price. I accept that he was not Accounting Officer at the time but a down payment of 10 per cent was mentioned in the 1980–81 report.

Chairman.—We will be examining on this shortly and we also will have before us then the minute of the Minister for Finance on this issue. We asked Mr. Ó Muircheartaigh for a note earlier and I should like to tell him that the Committee may wish to recall him, depending on the content of the note.

VOTE 42: DEFENCE

Mr. G. Scully called and examined.

295.Chairman.—We have with us Mr. Gerry Scully, Secretary, Department of Defence, who is appearing as Accounting Officer for that Department. It is Mr. Scully's first visit and he is very welcome. Paragraph 51 of the Report of the Comptroller and Auditor General reads:—

Subhead F.—Civilians attached to Units: Pay, etc.

Civilian employees of the Defence Forces are mainly attached to the four maintenance companies of the Corps of Engineers. An administrative section in each company maintains attendance records compiled from foremen's daily work reports and informs the civilian pay section of the Department of the total weekly hours of absence from work of each employee in order that appropriate deductions from pay may be made in respect of such absences.

It was noted that irregularities occurred in the period February 1979 to July 1984 in the recording and notification of absences in respect of 293 civilian employees attached to the No. 1 Maintenance Company of the Corps of Engineers at the Curragh Camp and that as a result, deductions from pay were not made in respect of approximately 31,500 man hours with consequent overpayments amounting to approximately £89,000.

I have sought information as to how these irregularities came to light and I have asked whether any action has been taken to ascertain if similar irregularities may have occurred at other locations. I have also inquired regarding the failure of the internal control procedures to detect these irregularities and the steps taken to recover the amounts overpaid and to prevent a recurrence.

Mr. McDonnell.—This paragraph refers to an irregularity which was going on for more than five years in the payment of wages to civilians employed in one of the four maintenance companies of the Army Corps of Engineers. You will see the amount involved. Since my report, the Accounting Officer has told me that the irregularities came to light in the course of a spot check of pay records by the company administrative officer in July 1984, although it appears that earlier spot checks during the period when the irregularities were taking place failed to discover them. He also told me that all branches of the Defence Forces had been alerted to the possibility of this kind of thing happening and that no other irregularities of that nature had been discovered, but that the people in charge had been advised of the need for stringent control. He also said that since then, the procedures had been improved and they were considering the installation of computerised time clocks. Of the total amount overpaid, just under £90,000, my information is that approximately £52,000 has, in fact, been recovered by various deductions from the amounts due to the people concerned for wages, superannuation and so on. Recovery was still proceeding by deduction from those from whom deductions could be made and it was being demanded from those from whom deductions could not be made.

296.Deputy Foley.—I understand this has been going on for five years, that there were previous spot checks and that it was never detected. What was the format for the spot checks?

Mr. Scully.—The spot checks were carried out by the OC of the maintenance company or by the administrative Army officers and I suppose it is a feature of spot checks that they do not always turn up what they should. This aspect of the case is being investigated further by a court of inquiry convened by the GOC of the Curragh Command. I would rather not comment on or pre-empt the findings of that court of inquiry, which is in progress at the moment.

Deputy Foley.—At the same time there was a case of £89,000 of taxpayers' money over a period of five years. Were you satisfied that there could be no more than this involved?

Mr. Scully.—I am satisfied that a very thorough audit was carried out in respect of these five years. The audit was carried out by personnel of the Finance Branch of the Department over a period of several months, and I am quite happy that they have found the end result of what happened during that five year period. However, I agree with you that it is very disturbing that these overpayments should have occurred but I suppose this is a feature of life and these things happen. There appeared to be collusion between two people.

Deputy Foley.—How did it benefit these two individuals if it was going on for five years? It must have been fairly common amongst employees.

Mr. Scully.—That aspect is very interesting. The Gardaí were called in and investigated it. There was a question of criminal proceedings against the people involved. However, the Director of Public Prosecutions took the view that the evidence did not warrant criminal proceedings because it lacked cogency on the essential element of intent to defraud. There was not sufficient evidence to bring the people involved to court.

Deputy Foley.—That is amazing. At what stage was that decision made by the Director of Public Prosecutions?

Deputy Foley.—And he maintained that there was no evidence there involving 293 civilian employees attached to the maintenance section of the Curragh?

Mr. Scully.—Unfortunately there was evidence that public funds had been put to the wrong use but there was not sufficient evidence that there was an attempt to defraud on the part of the people involved. Whether there was fraud I do not know but the evidence was not sufficient.

Deputy Foley.—And it had been going on for five years and the same two individuals were involved over the period of five years?

Mr. Scully.—We have no evidence that they gained financially from it. This is the point.

Chairman.—Could you tell us exactly what did happen, Mr. Scully? It is a bit vague. Who did benefit and what did happen?

Mr. Scully.—Three things happened. The records of the foreman indicated that certain employees were absent from work. However, these absences were not notified to the pay section and, as a result, these employees were overpaid. The same thing happened regarding casual sick absences and other occasions of absence without authority. They were paid for absences which were not reported to the pay section. Over the period 293 civilian employees were paid for times that they were not working.

Deputy Foley.—Could I just conclude, Chairman? I understand from Mr. Scully that the Gardaí recommended criminal proceedings in this case and that the Director of Public Prosecutions decided there was not sufficient evidence.

Mr. Scully.—I do not know what the Gardaí recommended but the report of the investigation was sent to the Director of Public Prosecutions who advised that there was insufficient evidence to warrant criminal proceedings on the grounds that the evidence would lack cogency on the essential element of intent to defraud. In a fraud case, it seems that you need to prove that the people involved actually benefited from it, and that there was intent to defraud. According to the Director of Public Prosecutions the evidence was lacking on that essential point.

Deputy Foley.—All I want to say is that I fail to understand the reasoning of the Director of Public Prosecutions in failing to proceed with criminal prosecutions against these two individuals because over a period of five years they were responsible for depriving the taxpayers of in excess of £89,000. We certainly take a very poor view of the decision of the Director of Public Prosecutions in this case.

Chairman.—I just want to try to get this thing in perspective. Is there a suggestion that negligence would have been used as a defence rather than fraud? Is the suggestion that the people concerned would have considered themselves to be more negligent than fraudulent?

Mr. Scully.—I cannot definitively say that it was; I do not know. I am sure this is a problem the Director of Public Prosecutions faced. The evidence was not such that he could say there was intent to fraud. What he meant by that, I assume, is that he could not prove that there was intent and they actually benefited.

Mr. Scully.—One retired on health grounds and the other man was suspended for a time and reduced in rank. It went to the Rights Commissioner and he is no longer employed on pay duties.

Deputy Foley.—There is no evidence to suggest that they did this for personal financial benefit?

Mr. Scully.—It came to light as a result of a spot check by the administrative officer of the Maintenance Company Corps of Engineers.

Deputy Foley.—What status does this court of inquiry have? Is it a military court?

Mr. Scully.—It is a military court of inquiry convened by the GOC of the Curragh Command to investigate whether personnel subject to military law were in any way negligent or in any other way responsible.

Deputy Colley.—So, there is no suggestion being made that the absences of these people from work was not noted correctly?

Deputy Colley.—Nevertheless, I am horrified by the number of man hours, 31,500, which this represents.

Mr. Scully.—Yes, it is considerable. Of course, there were a lot of people involved. There were 293 people involved over a period of five years.

Deputy Colley.—Was there an average number of hours that benefited all individuals alike, or some of them particularly?

Mr. Scully.—Some benefited more than others. I have not the exact figures exactly.

Deputy Colley.—Would some have benefited to a much greater extent? Would there have been some individuals whose benefit out of this would have stood out?

Mr. Scully.—Some got up to £2,000 or £3,000 and they would have stood out.

298.Chairman.—Was any action taken against the people who received this money? Presumably, they knew they were not in order?

Mr. Scully.—It is being recovered from them. A total of £52,000 has been recovered leaving £37,000 still outstanding. Recoveries are proceeding normally.

Chairman.—If one were to average it out, one would find that on a 40-hour week this 293 people got three weeks pay each.

Mr. Scully.—We hope to recover by far the most of it. There will be some sums which we will not be able to recover mainly because people have died.

Chairman.—When will the court of inquiry have completed its examination, Mr. Scully?

Chairman.—You might advise the Committee of the outcome. We will note that now.

299.Deputy McGahon.—Under subhead D — reserve Defence Force: Pay etc., to what does the £5,396,000 refer. Is it the FCA?

Mr. Scully.—The £5 million there refers to the pay of first line and FCA personnel on annual training.

Deputy McGahon.—Was that a decreased strength? What was the strength of the FCA in previous years?

Mr. Scully.—The strength is different from the number that attend annual training, because attendance at annual training is related to attendances at weekend camps and weekly training parades during the year. Members have to undergo a certain number of days training during the year before they are eligible for the annual camp. The strength of the FCA is around 15,600 but those who qualify for attendance at annual training would number about 9,000.

Mr. Scully.—No, they are not used on the Border. There at at the moment about 150 FCA now on full time duties, but they are used in barrack duties throughout the country.

300.Chairman.—Under Subhead O2 — aircraft. How many Dauphin helicopters were purchased, at what price and when?

Mr. Scully.—If the committee will permit me, I would like to talk about the helicopters because there has been an amount of misinformation about them. It is something that has to be put right. This is a very difficult subject particularly with reference to night flying. During 1986 between June and December five helicopters were delivered from Marignane. They were flown in by air corps pilots and the last of them came in in December 1986. The first rescue by a Dauphine helicopter was on 9 March 1987 when a seaman was rescued 80 miles off the Aran Islands. We could not have done that without the Dauphins because the Alouettes which we had up to then were incapable of flying over the sea because they were single engined. The Dauphins are twin engined. The training for the Dauphins started immediately. In fact some of the training was done over in Marignane before the helicopters were delivered at all. Thirteen pilots were sent out as part of the contract, along with 50 technicians, to be trained in the factory. This was part of the contract for the purchase of the Dauphins. They were flown in by air corps pilots and then the training started. There has been a lot of criticism of the failure of the Air Corps to fly the helicopters at night. In this context, I would refer to what happens in relation to the French and British air force pilots who fly Sea King helicopters. In the French and British Air Forces, they fly between 2,000 and 3,000 hours and one has to have 500 hours night flying before one is qualified as a mission commander. We had no opportunity of night flying until such time as we got the Dauphins because the Alouettes were incapable of night flying. We can take the training of the helicopter pilots for night flying in a search and rescue role under three headings. First, they learn how to fly from airfield to airfield at night where they take off with all the landing aids with traffic control, beacons and the rest of it and they fly to another airport. The Air Corps are doing this at the moment. The second stage is when they take off from Baldonnel or Cork Airport and they fly at night to a rendezvous maybe a 100 miles out in the Atlantic, a point on a map. They come to hover 60 feet over the water. They do this totally by instruments. There are two pilots and there is very close collaboration between the two of them. While they are doing that, they have to monitor the system to make sure there are no malfunctions. If there is a malfunction they have got to recognise it quickly, agree on what remedial action to take and fly the helicopter at a suitable height back to base. I should explain that these helicopters have automatic navigation in the sense that one can punch in, in Baldonnel, the co-ordinates of the Tuskar Rock and the helicopter will fly to the Tusker Rock and hover over it automatically. This, done by computers and by radar, has to be monitored the whole time and is subject to malfunction. So during that phase they have to study this. The third phase is the search and rescue phase when they rescue people from the deck of a ship. During that period they have to be able to fly not only visually but automatically. When they come to hover over the ship they turn on the searchlight to see the ship. They navigate completely by instrument until they arrive at this black hole out in the Atlantic. It is a very dramatic thing to have to fly in a helicopter at night. Last month we were very conscious of the lack of knowledge generally. We invited the media out to Baldonnel and took them on flights over Dublin Bay at night. I took the opportunity to see what it was like to fly at night and I can assure you that my mind was concentrated nearly as much as it is concentrated now. Certainly, it shows one how totally dependent we are on our senses. If anybody on this Committee is in any way interested, I am sure the Minister would be more than glad to bring them out and show them what night flying in a helicopter is.

Mr. Scully.—We bought five helicopters. We do not generally broadcast the cost of contracts. I do not mind telling the Committee what it cost but we do not generally broadcast it.

Chairman.—The cost is known. It is reported in The Irish Press this morning.

Mr. Scully.—There are eight Alouettes, five Dauphins and two Gazelles — they are helicopters. In fixed wing aircraft there are Marchetti and Fougas, Cessnas, Beech and the HS 125–27 in all.

Chairman.—The main contention is that Dauphin helicopters cannot fly because the pilots have not checked out the various flight paths and they are anxious to have this information available to them before they fly at night. Is that so?

Mr. Scully.—The main problem is that it takes time to train pilots. It takes the Belgian Air Force five years to train a mission commander for a Sea King helicopter.

Chairman.—Does that not mean that we depend on RAF helicopter assistance in certain emergencies?

Mr. Scully.—No doubt that is true. We will always depend on the RAF for certain areas because in a search and rescue operation under international agreement the helicopter station that is nearest to the incident is asked to co-operate.

Chairman.—Why is it that the RAF pilots can fly at night and know flight patterns while Irish pilots cannot? What is the reason for that?

Mr. Scully.—We had no capability to fly at night up to a year and a half ago because we had Alouette helicopters. We had no helicopter which was capable of flying at night and therefore we had no way of building up experience among our pilots. Until such time as that experience is built up we would not regard ourselves as competent to fly at night.

Chairman.—I can understand the point you make about flying at night being difficult but I do not understand that a British pilot who has never set foot in this country can fly these flight patterns in a helicopter. The reason given by the Irish forces for not flying these helicopters is that they want to fly them in daylight first to get used to all the routes so that they know where they are. I do not understand that. Perhaps I am missing something.

Mr. Scully.—Perhaps I did not explain it properly. All of the rescues as far as I know by the RAF are carried out over the sea. You do not have to worry about flight paths because you are flying above sea level and that is easy enough because there are no mountains or anything else like that. The Air Corps pilots are capable at the moment of flying from any of the airports in this country to any other airport. They are capable of flying over the country, provided the weather conditions are good. However, it can be freezing at 2,000 or 3,000 feet and if there is icing at 2,500 feet you will not fly over my home, County Kerry, too handy. With the Sea King helicopter there is de-icing equipment aboard the helicopter — this is extremely expensive and the Dauphins do not have it — and you are not tied down in the same way as with the Dauphins.

Deputy McGahon.—How dependent was the Irish State on the availability and the willingness of the RAF to effect air-sea rescue? Were we totally dependent on them?

Deputy McGahon.—Were we totally dependent on the RAF until the purchase of these Dauphins?

Mr. Scully.—We were totally dependent on the RAF for rescue at sea outside three or four miles from shore, day time or night time.

Deputy McGahon.—And you always found a willingness on the part of the RAF to respond to a call?

Mr. Scully.—In search and rescue the person being rescued is not interested in who rescues him; he is interested in being rescued.

Deputy McGahon.—Very true. Is a helicopter bringing an injured person back to Ireland allowed to land on Irish soil?

Deputy McGahon.—So if somebody is rescued off the East coast the British RAF helicopter can land at Gormanstown. Is that correct?

Mr. Scully.—As far as I know, yes. Otherwise it would affect the person being rescued.

Chairman.—Similarly, an Irish Air Corps helicopter which had to refuel in Northern Ireland in a rescue would be facilitated?

302.Deputy Colley.—When does Mr. Scully expect the Dauphin helicopters to be fully operational, with our pilots?

Mr. Scully.—As the Minister has said in the Dáil, we expect that they will be fully operational towards the end of this summer. At the moment, as I explained, the second phase — that is flying out 100 miles off the Aran Island, coming to a point on the map, verifying you are there, observing your instruments and coping with the emergencies that are automatically introduced to make sure you know you can cope with them, and flying back — is completed. The Air Corps are starting the winching operation which is, as you will understand, a very tricky operation indeed.

Mr. Scully.—Thirteen pilots went out to Marignane before the delivery of the helicopters for training, but more are being trained at the moment, as far as I know.

Deputy Colley.—So it is not knowing the flight patterns that is the problem. It is experience, dealing with emergencies and unforeseen problems?

Mr. Scully.—Yes, and also there is an internationally recognised period of experience needed before they are regarded as being mission competent.

303.Chairman.—Could you give us the total number of planes and helicopters again?

Mr. Scully.—Yes. We have eight Cessnas, nine Marchetti and six Fougas. We also have the HS125 and three Beech King Air, two of which are engaged in fishery protection.

304.Deputy McGahon.—What would be the total asset value of the entire Air Force?

Chairman.—What value would you put on the Chief of Staff? I think the Deputy means the value of the equipment.

Mr. Scully.—I wonder would I be subject to a court-martial if I answered that? I would hesitate to put a total value on the equipment because the question of depreciation applies in a big way to aircraft, but it would certainly be tens of millions of pounds.

Deputy McGahon.—I wish to refer back to the rescue operations. Are most of the RAF craft used in air-sea rescue off the Irish coast based in the North of Ireland?

Mr. Scully.—Very often in Wales — Brawdy is a base there — and a lot of them are based in Scotland.

Deputy McGahon.—Many of the rescues off the Donegal coast would be effected from the North of Ireland?

Mr. Scully.—The number of rescues by the RAF is very small for the simple reason that the Air Corps do all daylight rescues now with the Dauphins. The number of night time rescues is quite small and the RAF craft involved would be based in the North of Ireland or Scotland — I am not sure which.

Chairman.—For the record, the Committee wishes to express their satisfaction with and support for the Air Corps and the RAF in their joint air area rescue missions. From time to time there is a lot of danger involved for the people flying those missions.

305.Deputy Desmond.—What would it cost to have one of the modern helicopters based in, say, Galway or Donegal? If one had to open up a particular pad down there, would it cost £1.5 million or £2 million?

Mr. Scully.—That is a very interesting question. It introduces the question of policy but from the cost end of things, first of all, the helicopters need a lot of maintenance and the down time is very heavy. The Air Corps maintain that you need to have three helicopters in order to have one always in readiness. Sometimes all three helicopters are flying; at most times two are flying and there will always be one flying. Therefore, if you want to have a helicopter available 24 hours a day you need to have three. One could be in for maintenance and one could have a malfunction. Therefore, you are left with one. The helicopters are very expensive, so if you were to base three of them in Galway you would have to pay the cost of the helicopters, the cost of their maintenance and backup. You would be talking of tens of millions of pounds I would think.

Mr. Scully.—Yes. You would be also talking about a couple of million pounds a year in current expenditure. If you talk about a search and rescue role you would want to balance it against the benefits you would get from it. Eagle Island is one hour and ten minutes flying time in a Dauphin from Baldonnel. Therefore what you would gain by having a helicopter in Galway is less than an hour’s flying time. You would need to carry out a survey of the emergencies in which an hour would make that much of a difference and balance that against the very considerable cost involved in having helicopters based there.

Mr. Scully.—Yes, there is one based in Finner Camp which is used in co-operation with the Army. Again, as it is the only one there it is not always available.

306.Deputy McGahon.—Are there any bases in the Border region and are there any bases in County Louth? Do you feel there is a need for one to be built in Dundalk.

Mr. Scully.—That is a question in regard to operations and I feel I would not be competent to answer it. I know there is one based in Finner Camp and that sometimes there is one based for operational reasons in Dundalk.

Deputy McGahon.—Are helicopters used for Border surveillance? The action is taking place in the Border region and not in Galway. Surely there is an overwhelming need for them in the Border region.

Chairman.—We are in danger of getting into the security area here and I do not think the Secretary should answer that question. I do not want us to get into where these helicopters are located. I do not think it is in anybody’s interest that that should be discussed. Can you tell us what the current strength of the Air Corps is?

Mr. Scully.—The other rank strength of the Army at the moment is about 11,700. There are about 1,500 officers and a small number of cadets, numbering maybe 60. There are roughly about 850 in the Air Corps.

Mr. Scully.—The Naval Service and the Air Corps are very similar and are about the same strength. There are about 900 in the Naval Service.

307.Deputy Dempsey.—Under Subhead C — Permanent Defence Forces Allowances — can you tell us what exactly that includes?

Mr. Scully.—Several allowances are covered under Subhead C, including children’s allowances — uniform allowances; extension of service gratuities where people extend their service and get a lump sum; Border duty allowances; security duty allowances, which are paid to those who go out on detail to Portlaoise Prison or on cash escort duty, patrol duty allowances which are payable to Naval Service personnel while on duty on ships and overseas allowances which are paid to the battalion in Lebanon.

Deputy Dempsey.—It strikes me that there are a lot of these allowances which result in a lot of administration.

Deputy Dempsey.—Are you aware of any proposals to try to slim this down a little bit?

Mr. Scully.—The difficulty is that the number of activities the Defence Forces are engaged in is very considerable. There would be great difficulties in cutting it down. It might even cost more to cut it down than to keep paying for it.

Deputy Dempsey.—That could only happen in the Army. In regard to the overseas allowances, how much do the United Nations owe this country at the moment? As I understand it, there was a debt outstanding a few years back.

Mr. Scully.—Let us take the UNIFIL forces in Lebanon and qualify what you mean by “owe”. There are two things that we have got to differentiate here — how much extra it costs us to send them out and how much is due to us. Strictly speaking, the amount due to us from the start is about £65 million. We have received about £45 million, which leaves about £20 million owing. The total cost to us of keeping them out there is about £40 million. Therefore, it depends on which way you look at it.

Deputy Dempsey.—If you were an optimist, you would say that we were making a profit of £25 million?

Mr. Scully.—A profit of £5 million, and if you were a pessimist you would say we were losing £20 million. It is a bit like having the glass except that it is not half full.

308.Deputy McGahon.—To follow up on that. As I understand it, an ordinary foot soldier is not paid overtime for Border duty.

Mr. Scully.—That is correct. Overtime is not paid in the Defence Forces. He is paid a Border duty allowance.

Mr. Scully.—That again is a question in regard to operations and I would not be competent to answer it. As I understand it they generally work 24 hours on and 24 hours off but I may be wrong in that.

309.Deputy Dempsey.—On Subhead A1 — Office of the Minister for Defence: Salaries, wages and allowances — that is for departmental personnel. Then we have under Subhead W — travelling and incidental expenses. Does that include Department expenses or is it all Army expenses?

Chairman.—Before you answer that Mr. Scully, on the question of travel, I have been meaning to reply to your invitation. The Committee at some stage might take up your offer of a night time flight in a Dauphin helicopter.

Chairman.—I do not know whether we will be able to incorporate that with a visit to somewhere we might be looking at installations. The clerk of the Committee can make contact with you. Now, to Deputy Dempsey’s question.

Deputy Dempsey.—It related to Subhead W on Vote 42. Subhead W relates totally to office staff. The travelling of military personnel would be under Subheads U and C. Can I have a breakdown of travelling expenses of military personnel under Subheads U and C? The Accounting Officer may not have it now but I certainly would like to have it.

Mr. Scully.—I have, yes. For 1985 £3.5 million was spent on military subsistence. Military travel under Subhead U was £1.6 million. Under travel for horse shows there was £151,000, giving a total of £5.3 million on military travel and subsistence in 1985.

Deputy Dempsey.—I beg your pardon, the figure I have here is £1.04 million under Subhead W.

Mr. Scully.—Yes, it includes advertisements. Subhead W is a miscellaneous subhead. I was giving the travel portion of it only. There were incidental expenses such as advertisements and treatment of members of the Defence Forces in hospitals, as well as funeral expenses and a whole miscellaneous collection.

Deputy Dempsey.—I just thought that the figure was rather high for travelling.

310.Deputy Desmond.—On page 158 Subhead G — Special Allowances under the Army Pensions Act to persons who served in Easter Week and to persons awarded medals — how many recipients of those allowances are there at the moment?

Mr. Scully.—Dependents allowances are 569 at the moment. Then we have widows and special allowances people.

Deputy Desmond.—They are separate from the persons awarded medals? They are also medal holders?

Deputy McGahon.—On page 150, Vote 42, under Subhead F — Civilians attached to Units, pay, etc. the grant is £15 million. How many civilians are there?

311.Deputy McGahon.—Under Subhead GG — Central Purchasing — there is a very large under expenditure there. Are goods all purchased under one central body?

Mr. Scully.—Yes. We had responsibility for that in 1985. We were buying as the agent of other Government Departments. Actually, our involvement was as a sort of broker rather than anything else.

Mr. Scully.—From I January 1988 it went back to OPW under a Government decision of October last year. They are now responsible for it.

Chairman.—Provided we approve the change in estimates in about five minutes time, it will.

312.Deputy Dempsey.—In relation to purchasing, I understand that a very time consuming procedure has to be gone through, to actually get equipment or to get stores for Army Camps. Is it true that it has to go through six or seven different stages of checking. If, say, Gormanstown Camp wanted to buy equipment, stores or whatever, what is the normal procedure?

Mr. Scully.—The normal procedure is that the people who want the equipment would submit a requisition for, say, six landrovers or whatever. It would come up on the Army side, and would be referred to the contracts side.

Deputy Dempsey.—Can I interrupt you there? When you say that it will come up through the Army side, how many different stages?

Mr. Scully.—I would say, two. The people locally would make out the requisition and then submit it to the QMG’s branch of the Army, who would take into account what was available countrywide for the Army, and sanction it. Then they would requisition it from contracts section which is a civilian side. So you could say that there are three sections involved.

Deputy Dempsey.—How many stages does it go through on the contracts side? Does it just come in and the order is filled?

Mr. Scully.—The requisition would be integrated with further similar requisitions and a bulk order placed with the supplier.

Mr. Scully.—Within contracts you would have the ordering stage and the delivery stage. Then of course there is the payment stage.

Mr. Scully.—It is inevitable. When one goes in to buy a packet of cigarettes one goes through the same procedure. One decides to buy it, one decides how many cigarettes one has, one goes into the shop, one orders it and pays for it.

Deputy Dempsey.—Would it be less costly administratively to give various camps and units their own budgets to operate under, and then for special equipment, go through that particular procedure?

Mr. Scully.—It probably would when information technology is more developed than it is at the moment.

313.Chairman.—I understand that in Clancy Barracks there is a custom built stores building, and adjacent to it, there is another building where part of the roof is off and rain is leaking in on stores and in particular on landrover parts and that that has been the subject of representations to your Department by the union concerned. If such repairs are required will you ensure that they are carried out, or at least that the stores concerned are preserved. Perhaps you might be good enough to drop me a line on the matter?

Mr. Scully.—I was concerned about that. Most of those stores are going into the new stores at the moment. For the last four or five months there has been a special task force involved in stocktaking down there and transferring the stock to the new stores. Certainly we will write to the Chairman about it.

Chairman.—That concludes the examination. We have a number of matters in private session which we will deal with very quickly.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. B. Brady (Department of Finance) called and examined.

APPROPRIATION ACCOUNTS 1985

VOTE 38—AGRICULTURE.

Mr. Donal Creedon called and examined.

314.Chairman.—Good morning. The Public Accounts Committee of Dáil Éireann is examining Mr. Donal Creedon, Secretary of the Department of Agriculture and Food, in his capacity as Accounting Officer for that Department. You are welcome, Mr. Creedon. I am sorry for the delay. We were considering our 1984 report, among other things. I note we have a paragraph on the bovine and brucellosis eradication schemes, paragraph No. 34. Before calling in the Auditor General on that, may I just point out that we have a very long agenda to go through here and we have already completed a thorough examination on this area and we will be reporting on it. Therefore, unless anybody has any particular contribution to make, I think we should note it and we will await the minute from the Minister for Finance on our report. I would also like to point out that, since there is a very long agenda, Mr. Creedon, we will be dividing this into two sessions as we will not get through it all today. I propose that we set a closing time for today’s examination, 1 o’clock. Paragraph 34 of the Report of the Comptroller and Auditor General reads:

Subhead C.2.—Bovine Tuberculosis Eradication

Subhead C.3.—Brucellosis Eradication

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 £7,493,625 to 31 December 1985 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 1985 was, therefore, £340 million. Receipts by the Department of Agriculture up to 31 December 1985 arising from the operation of the schemes were as follows:—

*Up 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.—I have not anything to add to paragraph 34. It is a standard one which, as you say, has been debated before by the Committee. It is for information.

315.Chairman.—We will note that. Paragraph 35 of the Report of the Comptroller and Auditor General reads:

Every animal tested under the BTE or Brucellosis Eradication Schemes must be identified by a numbered ear tag inserted by the departmental officer or veterinary surgeon carrying out a test. The tags are provided by the Department of Agriculture and in November 1984, following field trials undertaken by the Department’s veterinary service, a contract for the supply of one million ear tags for use in the disease eradication schemes from January 1985 was awarded to an Irish company established in 1984 to manufacture ear tags. At the same time another contract for the supply of a further one million tags was awarded to the company which had been generally satisfactory in supplying ear tags since 1981.

In the course of BTE testing in the summer of 1985 the Irish made tag was found to be unsatisfactory; it appears that the proportion of these tags lost from animals’ ears was 30 per cent to 40 per cent while the normal level of loss would be in the region of 5 per cent. In September 1985, following doubts about the financial viability of the Irish company, production of these tags was suspended. When production ceased a stock of 200,000 tags then on the company’s premises was acquired by the Department bringing the total number supplied under the contract to some 800,000. As these tags continued to prove unsatisfactory it was decided in November 1985 to withdraw them from use. 586,000 tags costing £102,000 have been paid for while a dispute has arisen regarding payment of £35,000 for the remainder.

The Accounting Officer has informed me that field trials of sample tags from three firms undertaken before the contract was placed showed the Irish made tag to be the most satisfactory as regards legibility, security, weight and balance compared with both the tag then in use and the other tags tested and it was, therefore, introduced on a trial basis in three counties with the intention of extending its use over the entire country in due course. The Department had carefully examined the deficiencies which led to the subsequent withdrawal of this tag and was satisfied that more extensive field trials would not necessarily have uncovered the defects which had subsequently been established as being due to imperfect manufacturing techniques at the factory coupled with a weakness in the tagging implements used. He also stated that advantage was seen in having available an Irish manufactured product which would have a central place in the disease eradication schemes in the years ahead. The one million tags contracted for represented little more than the expected usage in the three counties concerned over one round of testing and, following the limited level of testing in 1984, it was anticipated that usage of tags in the intensive 1985 round would be exceptionally high and would place considerable strain on the existing supplier’s ability to supply the Department’s full requirements.

As to why, in the light of the difficulties being encountered in using these tags, it was decided to accept the company’s stock of 200,000, the Accounting Officer told me that, when the Department learned in September 1985 that production of tags had been suspended, it appeared that difficulties would arise in getting alternative supplies, with the consequent risk of failing to provide for an essential element in the eradication schemes. In these circumstances it was decided that the acquisition of the stock of 200,000 would provide time to enable requirements to be assessed and inquiries initiated with other potential suppliers. While, at that stage some dissatisfaction had been expressed about the tags, it had not been established that the deficiencies were such as to require their withdrawal and the indications were that the deficiencies could be rectified.

In the event, alternative supplies of tags were secured from the main supplier and the Accounting Officer has told me that the cost of retagging animals because of the loss of ear tags would not be significant; the indications were that the level of actual losses were considerably lower than the 30/40 per cent initially quoted by the Department and, moreover, many of the herds concerned were tested twice during the course of the round and practitioners would in most circumstances have replaced missing tags during normal visits to farms to carry out second-round testing.

The Accounting Officer also told me that since January 1986 the Department had been in consultation with the Chief State Solicitor about its right to refuse payment for some tags and the legal remedies available to it against the company which supplied the faulty tags. However, the prospects of a successful action were doubtful as it was understood that the company had lost a considerable amount on the venture and that its assets had a very limited value. More recently the owner of the factory premises leased by the manufacturer had instituted proceedings against the Department to recover amounts allegedly owing to him on the basis of a lien which he claimed to have on a portion of the stock of 200,000 tags acquired by the Department.

Mr. McDonnell.—Paragraph 35 is a long paragraph outlining some problems encountered by the Department when it agreed to have the ear tags which are required for the disease eradication programme manufactured and supplied by an Irish company. As you can see, it ran into unforeseen difficulties, firstly through the tags being unsatisfactory in use and the company then going out of business.

One of my concerns was why the Department decided to take the last lot of 200,000 tags which were available when there was already some evidence that they were proving to be unsatisfactory. You will see the Accounting Officer’s explanation for this in the report. He said that it was not even then anticipated that they would be as unsatisfactory as they ultimately proved to be. Of course, there was also the problem of the Department maintaining adequate stocks.

Another question which I touched on was whether the fact that the tags proved to be unsatisfactory had led to any duplication in having to have animals tagged a second time, but the Accounting Officer assured me that this would not have been signficant.

Finally, there is the question of whether the Department may be able to refuse payment or obtain some redress against the manufacturer, but this is a complicated question. It is complicated by the fact that the owner of the factory, who had leased the premises to the manufacturer for the purpose of this venture, is, in turn, claiming against the Department. As far as I know, that particularly complicated legal question is still unresolved.

Mr. Creedon.—The present position is that there are legal proceedings pending against the Department for the 200,000 tags that were taken up. We are in the process of taking legal advice about the possibility of legal proceedings for the unsatisfactory nature of the tags that we acquired and paid for. The legal advice is not clearcut as yet. As the Comptroller said, it is a complicated situation because the company is gone.

Mr. Creedon.—I think perhaps it would be useful to go back a little bit on this. This tag, and all the circumstances surrounding it, arose from what is a kind of a constant quest for the tamperproof tag. No year goes by that somebody is not coming to us offering a better tag than the one that was there before. When this one appeared on the scene it certainly seemed to offer significant improvements on the ones we had had before that. It had very attractive features because of the tamperproof nature of it. We did some which now, in hindsight, probably were limited field trials, but they were the kind of field trials we always do when we are trying out a new tag. Some of the problems that arose with the tag were not all associated with the tag itself. The problem is that when you change from a tag that people are used to using for a long time and you introduce not only a new tag but new equipment — new taggers for the insertion of the tag — then teething problems are always inevitable. Some of the problems that arose were not all attributable to the tag. There was a human element in that people used to using a tagger in a particular way when faced with a new piece of equipment do not always use it in the right way. But to answer your specific question we did learn lessons from it. In future in this sort of a situation we would approach field trials more extensively. We did the same kind of field trials as we had done before with other tags and felt that the results were sufficiently satisfactory to encourage us to use this tag. You will note that we did not go for a tag to cover the whole country at the time; we tried it out only on three counties, so we were in a sense limiting our risks.

Chairman.—With regard to the lien that the company had on the 200,000 tags, are they no longer pursuing that lien?

Mr. Creedon.—No, the proceedings are still alive in relation to those 200,000 tags.

Mr. Creedon.—We used a share of them. We still have some left, about a quarter of them.

Chairman.—How much would have been the cost to the State of any bad stocks, what is the measure of the loss?

Mr. Creedon.—The ultimate loss of tags in the actual use in the field was lower, initially it was very high in one county, Cork, in particular; but the ultimate loss was about 15 per cent. Out of 1,000,000 tags, that would have been about 150,000 tags, which is probably something in the order of about £25,000.

316.Deputy Crotty.—Was there a spin-off effect? Did it cause other problems? I imagine it would have.

Mr. Creedon.—No, it did not cause other problems. We had had a tag in use, before this one came on the scene, which was satisfactory except from the point of view of the tamper proofness of it. In other respects it was quite a good tag. The big attraction of this one was that it was tamperproof. The danger was visualised at the time, when the problems with this became critical, was that we would be left in the three counties concerned without any tags. But the supplier of the conventional tag we had been using came good and was able to supply us at relatively short notice, so we did not have any problems. It was in the early stages of the TB campaign for that year. So there was not any serious problem otherwise.

Chairman.—Who was requested to design tags, or what sources were tapped in this regard?

Mr. Creedon.—The position as far as new design tags are concerned is that people come to us with designs. In European terms, it is well known that we are in the market for a better tag. As I said initially, we have people approaching us — there are always two or three in the year — with a different kind of tag. Most of them have nothing to offer. In fact, nearly all of them are discarded without tests and are not even considered. But this one was different. When it comes to placing a contract we go through the normal contract procedure. Because this one was different — it did have advantages — it was agreed we would try it out on this limited scale.

Deputy Crotty.—Do we have a national design institute in Ireland? Was this consulted? Rather than waiting for people to come up with a design, should the Department not have consulted the national design source, with a view to designing a suitable tag?

Mr. Creedon.—Yes, over the years we have had regular contact with people like the IIRS and various other design institutions. We have had designs produced. None of them is better than what we have at the moment. We have tried out some of them and they have not proved satisfactory. We have also had people coming through the agency of the IDA, for example, with new designs. In effect, nothing has proved completely satisfactory up to now, surprising enough. You will get well designed tags in many respects. Where the design falls down as far as the TB operation is concerned is in the tamperproof aspect of it. There always seems to be difficulty there. It is useful to be clear as to what we mean by tamperproof. You do not mean a tag that cannot be removed. You mean a tag which possibly can be removed but cannot be re-used or, if it is re-used, it is easily observed as one that has been re-used or abused. In effect, if you try to remove it it has to break when you are removing it. This was the first tag that ever seemed to offer that possibility.

Chairman.—I have been remiss, Mr. Creedon. This is your first visit and normally I point that out to the Committee. You are particularly welcome for that reason. I am sorry I did not record that at the beginning of the meeting.

Mr. Creedon.—As far as this operation is concerned away back since 1954 when the TB operation started.

317.Deputy Desmond.—Do you not consider it quite extraordinary that the Department of Agriculture — particularly in the past ten years with the accelerated work since 1978, but particularly going back to 1954 — has not yet perfected a manufacturing technique capable of keeping a tag on the ear of an animal?

Mr. Creedon.—It is surprising. I mentioned that it is not for want of trying. Keeping the tag on the ear of an animal sounds basic but the ear of the animal is very fragile and tags can come off for all kinds of reasons, apart from doubtful reasons. Tags can be caught on fencing, they can be caught on silage pits where animals congregate together. Tags, in fact, are torn-off, very often quite legitimately. That is not the kind of tamperproof aspect we are concerned about.

Deputy Desmond.—Would it not give rise to a serious questioning of the professional competence of the veterinary staff of the Department of Agriculture that they have not been capable of coming up, over the best part of 34 years, with a tag that is both tamperproof and secure? Is it not extraordinary.

Mr. Creedon.—No. It is no reflection at all on the veterinary staff of the Department. This is a design problem, it is an engineering problem, it is not a veterinary problem. The veterinarian’s job is simply to insert the tag.

Deputy Desmond.—Is it not true that the field trials concerned are supervised by the professional veterinary staff of the Department?

Mr. Creedon.—That is a different question. That is not a question of the design of a tag. That is a question of how the tag behaves in field conditions. It is very hard to duplicate field conditions unless you do it on a wide scale. There was a limited field trial, as there always is with a new tag. Sometimes what you are using are prototype tags, which are made as prototypes, under ideal conditions and using ideal equipment. They are used by veterinary surgeons who are not the ordinary private practitioners out in the field who are using tags under pressure. So, field trials, of their nature may not necessarily duplicate the actual conditions under which the tag comes to be used subsequently.

Deputy Desmond.—But putting a tag on the ear of an animal, with a tagging implement, is a relatively uncomplicated process. Furthermore, do you not consider it a matter of extraordinary interest that the tagging implement, as well, appeared to be incapable of doing its work?

Mr. Creedon.—That would not be correct. I did not say it was incapable of doing its work.

Chairman.—If I may refer you to line 5 on page xxxvi, it says that it had been established subsequently as being due to imperfect manufacturing techniques at the factory, coupled with a weakness in the tagging implement used.

Mr. Creedon.—Yes, but you have to realise that this was an initial stage of a manufacturing operation and an initial stage in the use of a new tagger. It is not, to my mind, surprising that you will have teething problems with the manufacturing process in its early stage. We have had the same teething problems with the tag that we now have in general use, and we have had it with other tags over the years. These are usually sorted out over a period of time.

Chairman.—Were these tags subjected to intensive trials at, for example, the IIRS premises?

Mr. Creedon.—Yes, they were examined by the IIRS at the time. I do not know what tests were done on them, obviously, but they were deemed to offer the kind of qualities we asked for at the time. I have to stress that at that stage we would have been using prototypes. Those in general manufacture subsequently did not, it seems, live up to the quality of the prototypes.

Chairman.—In regard to the loss of 30 per cent to 40 per cent of the tags, is there any indication that they were deliberately removed, as distinct from being lost in a conventional way?

Mr. Creedon.—First, the loss eventually was not anywhere near 30 per cent or 40 per cent. That was a loss incurred very early in the first weeks of the use of this tag, particularly in one county. The losses in the other two counties concerned were never as high as that. The eventual loss was in the region of 15 per cent to 20 per cent. To answer the second question, there is no evidence that any of the losses were due to the deliberate removal of the tags. In fact, some of the tags which were lost were probably those that got broken while being inserted or came adrift after being inserted. There was no question at all of deliberate removal.

318.Deputy Foley.—First of all, I should like to endorse the Chairman’s sentiments and congratulate Mr. Creedon on his appointment as Accounting Officer. I just have a few points to make. How many firms actually tender for the supply of these tags? Three are mentioned here. Are there more than three?

Mr. Creedon.—No, there are not that many people in the tag market. I think it is usually about three.

Mr. Creedon.—No, this was one of the attractions of this particular tag, although not by any means a deciding factor. This was the first prospect we have had of a tag being manufactured in this country. While that was a consideration, it was not a deciding factor. The other tags on offer are not manufactured in Ireland.

Mr. Creedon.—I cannot honestly answer that question off-hand. I think in any event there would be a question of comparing the advantages of this tag with the other tag which would not have those advantages, so it may not have been a question of price at the end of the day. I cannot confirm that at this stage.

Deputy Foley.—In connection with these tags, was there a net loss to the Department financially?

Mr. Creedon.—If you discount the experience gained, there was a financial loss. I think the ultimate loss was about 20 per cent of the tags, if you allow for that, which would have been about £30,000 or £33,000, something of that order.

Deputy Foley.—You are carrying substantial stocks of these tags, is that still the position?

Mr. Creedon.—Not of these particular tags. We have only a very small stock left.

Mr. Creedon.—They could always be used in an emergency if we had to. It is a very small stock to the annual usage. We use about two million tags a year and we have something like 100,000 of these left.

Deputy Foley.—As regards the use of these tags, did the final say rest with the veterinary section of your Department as a result of these field trials?

Mr. Creedon.—We would be guided by the advice of our veterinary officers, who will in future do more extensive trials on a much wider geographical basis if we are faced with this kind of situation again.

319.Deputy Naughten.—First, I want to join with yourself, Chairman, in welcoming Mr. Creedon and wishing his predecessor, Mr. O’Mahony, every good luck and best wishes in his retirement. I have a couple of short questions. In reply to Deputy Desmond you stated that you were using tags since 1954. As I understand it, when the scheme was introduced it was by way of tattoo rather than by tag and that continued on up to the sixties. Would that be correct?

Mr. Creedon.—Not that I am aware of. I cannot say yes or no, to be quite honest. Tattooing has certainly been considered since then, and is always one that we look at; but the cost is fairly sizeable and the logistics are fairly difficult. What we have been looking at more recently is the possibility of some electronic devices, and these are developing fairly rapidly, as all electronic matters are. At the moment the cost of an implanted electronic device is still, in money terms, fairly prohibitive; but the cost is coming down and it may ultimately be the answer to the tamperproof quality that we require. The idea would be a small device, a chip of some kind, implanted in the animal which could be read automatically by an electronic device and, ultimately, ideally be fed into a computer. We are some way from that yet. I am reasonably sure that within some period of years this will come and will be at a cost that might be reasonable. The problem with tattooing is cost and logistics. It would be more expensive that what is there at the moment. One of the attractions of the ear tag is that it is relatively inexpensive.

Deputy Naughten.—I would put it to you that the cost of the scheme has been a huge cost to the taxpayer. Of course, not all of it — some of it has done by way of compensation, other by way of cost of carrying out the schemes. I would put it to you that, if the Department had stayed with the tattooing, which they started off with we would have eliminated TB long ago and that it was the changeover to the tag that created a lot of the problems. While Deputy Desmond touched on the problem, there is no question about it — I think your veterinary inspectors would acknowledge this — that there was a considerable amount of interfering with tags and that, in fact, that did lead to outbreaks in certain parts of the country. While you state yourself it will probably be some years before the chip will be of commercial use, even at this stage would the Department not consider switching back to the tattooing system in the absence of a tamper free tagging.

Mr. Creedon.—Alternative systems are always under review. Certainly the tattoo system has been considered regularly and has been ruled out for a variety of reasons. It will, I can assure you, continue to be kept under review as an alternative. Any other system which offers itself as a better system will always be considered, but cost factors will have to be taken into account.

Deputy Naughten.—Is it not a fact that, if the veterinary profession got the additional cost of the tattooing, the animals would be tattooed? Is that not the big barrier?

Mr. Creedon.—I do not think that is the entire problem. It is part of the problem but not necessarily the whole problem. There are logistical problems as well and there is the fact that in some animals the tattooing is difficult to read and so on. There are physical problems as well. But it is looked at regularly.

Deputy Naughten.—Again, in reply to earlier questions, you mentioned the cost of the loss of tags and you said it was not a very big cost, which I accept, that it was not a major cost in the overall cost of the scheme, but was there not a major cost to the herd owners in so far as that, if an adult animal lost its tag, a card would not be issued for that animal until it had a second test in that particular herd?

Mr. Creedon.—I do not think that would be the case. Even if it did have to have a second test, of course that would be paid for by the State anyway. There may be some inconvenience to herd owners, because there is difficulty in selling an animal without a tag, you have to have a tag and a card. So he may have had to have a second test in that situation. Apart from inconvenience I do not think there would be an actual cost to the herd owner in that case. I stress that this was being done. It was a problem that arose at a very early stage. If you take the 20 per cent loss and the fact that we have some of the tags left, only about 700,000 animals would have been tagged anyway. So it was not on a wide scale. If there was inconvenience it would be quite limited in that respect. There were possibly problems for individual herd owners.

Deputy Naughten.—There could be a sizeable cost on herd owners who would be having a 30-day test, private test, and would have to retest again in 60 days because the beast had lost its tag. A new card would not be issued without having a second test, therefore it could hold a man up from selling?

Mr. Creedon.—I think in the areas where we were using this, which was Cork, Limerick and Kerry, primarily dairying areas, that problem would be very limited, if it arose at all. You are talking about dairying areas and it was in the month of September when calves would have already moved out. I do not think that would be a serious problem. I am sure it was a problem, as the Deputy put it for individual herd owners, but I think it would have been very limited.

320.Chairman.—Noted. Paragraph 36 of the report of the Comptroller and Auditor General reads:—

Subhead D.2. — Scheme of Assistance for the Expansion of the Cattle Breeding Herd

Reference was made in paragraph 41 of my previous Report to a Calved Heifer Grant Scheme introduced in 1982 to encourage expansion of the cattle breeding herd. The total paid from the Vote in respect of the scheme up to 31 December 1985 was £22.8 million representing grants for more than 325,000 animals.

In the course of audit of payments made in 1985 in respect of additional calved heifers retained by herdowners in 1984 it was noted that grants were paid in respect of animals described as heifers although they had already been grant aided or declared as cows under this scheme in 1983 or under a number of EEC incentives schemes prior to that date. It was also noted that grants were paid for some animals for which grants had already been paid in previous years and that the calculation of the basic herd number which determines the number of animals qualifying for grants was incorrect in a number of cases.

Moreover, while the control procedures provide that when verifying claims for grants, inspecting officers should perforate the identity cards of all eligible animals in the herd being inspected in order to ensure that they cannot be presented by more than one applicant, a review of identity cards indicated that this control procedure was not being carried out in some instances.

I sought the observations of the Accounting Officer as to why the checking procedures and field inspections did not detect the discrepancies in grant applications and whether checking and inspection procedures for the scheme were considered adequate. I also asked what steps were being taken to recover any overpayments which may have been made.

The Accounting Officer explained that without excessive and unreasonable extra costs the checking procedures and field inspections could not have been expanded in scope to prevent all discrepancies discovered on audit and that the discrepancies noted involved an element of human error which was unavoidable even under the most rigid control systems.

He stated that he considered that, given the growth in the scale of the schemes, the need for economy in administration, time constraints and pressure on staff resources, control procedures for all premium and headage schemes were adequate and were more comprehensive than procedures operated in other countries for similar schemes. Moreover, the temporary nature of the Calved Heifer Scheme precluded the refinement of the control systems and the introduction of more elaborate measures.

The Accounting Officer accepted, however, that for the premium and headage schemes some random cross-checks of current claims with earlier applications and test reports should be carried out in future but the extent to which this would be done must be determined on a cost benefit basis. He assured me that all cases where descrepancies had been noted on audit were being followed up and that it was the intention that any overpayments would be recovered by seeking refunds or offsetting them against future grant payments.

Mr. McDonnell.—On paragraph 36 you will recall that this question of differences in the description of animals by farmers, as shown in different sets of departmental records, was discussed by the committee in connection with my 1984 report. At that time you were talking about differences between grant application records and disease eradication records. This paragraph this year outlines some apparent discrepancies which came to light when we carried out a small sample cross-check between documentation submitted in support of claims for grants under various incentive schemes, including some EC assisted schemes. The type of discrepancies which we noted are set out in the paragraph. Also there seemed to be the question of some failure by the Department on some occasions in implementing the essential control of indelibly marking the identity cards of animals and so on. My concern quite simply, which I am sure the committee will share, would be with the possibility, and I stress the possibility, of abuse of these incentives schemes. The Accounting Officer has explained those and the Department’s difficulties in making schemes like this watertight, but has undertaken to do some random cross checking of grant applications details in future and to follow up cases where there seems to be the possibility of abuse.

Mr. Creedon.—I do not have the precise figure but we have recovered the overpayments in a number of the cases and all the others are being pursued. We are confident that we can get the money back. Most of these cases involve applicants for various schemes anyway, so we are in the position to recover the money.

Mr. Creedon.—We expect to recover it all. We have recovered a lot of it already.

321.Deputy Naughten.—First, I find it very difficult to understand how cows could be tagged as heifers. Anybody dealing with a scheme daily should be in a position to know. What I cannot understand is the difficulty about the basic herd number. If, for example, a herd owner had 20 cows and was claiming for five additional calved heifers, it would be evident that he would have to have 25. A simple check on a file was not carried out and this is something I cannot understand.

Mr. Creedon.—I think we have to put this operation in a wider context. The essential problems really, is one of the volume of work that has to be done on the field. Just to quantify that slightly — for example, in 1980 we had a couple of schemes which involved 90,000 applicants approximately. By the year we are talking about that was in the region of 400,000 because of the addition of various other schemes, particularly the EC schemes. We were dealing at that stage with 400,000 or more separate applications and we were carrying out checks on those 400,000 applications in the same time and with the same staff as was the case some years earlier. There has been an enormous increase in productivity, enormous pressure on field staff to get through the work, and it is understandable that occasions will arise where human error will intervene and mistakes will be made when you are dealing with that volume of work. That is the fundamental problem. What Deputy Naughten mentions, of course, is correct in a sense that what looks like very simple errors are quoted. These are human errors. The checks will not always, no matter how intensive, cover 100 per cent when you are dealing with that kind of volume of work. The number of errors involved are quite small when you are relate it to that kind of operation.

Deputy Naughten.—These are the simplest of errors, because when an inspector goes out he has the file from last year. He knows how many animals were in that herd last year, he knows how many qualifying cows were in that herd last year. When he fills up his form he is expected to sign that there are so many additional animals in the herd. Obviously he was not even carrying out his basic minimum check.

Mr. Creedon.—It is not quite as simple as that, because we are talking about comparisons with TB tests, for example, on last year’s file, and dates enter into it. Numbers are up and down on particular dates. Herds can vary from one day to another. At the end of the day all human errors are simple, anyway. In fact the scale of the errors is quite small. You do not exactly compare like with like when you are comparing with last year’s file because there are different dates and so on involved, particularly when you are comparing with the TB test because it fluctuates. It is not on a specific date or even on a specific time of the year in all cases. There are those difficulties.

Deputy Naughten.—Honestly, I do not want to delay too long on this, but all of the applicants for this calved heifer grant would previously be applicants under the beef cow or the suckler cow scheme. To qualify for the calved heifer grant they would have to have additional numbers. That was the whole purpose of the scheme. I simply cannot understand how anybody could approve payment without having checked last year’s reading. Regardless of what date it was, that would be the operation date of the scheme.

Mr. Creedon.—The Deputy is not quite correct. A lot of the people under this scheme would not have been applicants under other schemes because the other schemes basically apply in certain areas. This applied nationally and also applied to herds which do not qualify for other schemes, for example, dairy herds. You would not, in all cases, have the records under other schemes.

Deputy Naughten.—I accept that in the case of dairy herds it would not have applied but in all of the country farmers qualified either for a beef cow or suckler cow grant, so it certainly should not have happened in those herds.

Mr. Creedon.—It should not, and I would be surprised if it did happen in those herds, but there are other herds apart from those where there would be applicants under this scheme as well.

Chairman.—Are you happy that adequate action was taken to prevent fraud and that there are sufficient checks and balances in place now in this area?

Mr. Creedon.—Yes, I am. The scheme we are talking about, the calved heifer scheme, was terminated in 1985. I am satisfied that having regard to the volume of applications we have to deal with that the checks are 100 per cent in the field. Obviously I cannot rule out the occasional human error. We have tried to improve the checks. Where there is any suspicion of anything out of the ordinary we check with the TB herd test file but that is a costly operation and time consuming. However, it is done where there is reason to believe that there might be a good case for it. I am satisfied that within the volume of work involved the checks are very thorough and very comprehensive.

322.Deputy Crotty.—The Comptroller mentioned that control procedures were not being carried out. This is in his report. Lack of staff and this sort of thing are mentioned. Is it acceptable that schemes of this nature should be introduced if you have not got control procedures?

Mr. Creedon.—It is not so much a question of lack of staff. It is a limit to the productivity you can get from the staff that are available. It will become a problem if we are faced with any additional schemes, as to whether it will be possible to administer them satisfactorily with the staff resources available, but that problem has not arisen yet. We have done a couple of things. We have extended the inspection system over a longer period of the year and that has helped. To answer the Deputy’s question, while the time has not come yet when schemes cannot be satisfactorily administered that time may well come. I am quite satisfied that they are being well administered and well checked at the moment. I now have the figure for the amount of money involved. It seems that there are 38 herd owners involved and the figure is about £9,000.

Deputy Crotty.—The Accounting Officer mentioned that there are adequate controls now. Have you had extra staff into introduce these controls? Could you explain why you have adequate controls now and you could not have them at this time?

Mr. Creedon.—It is a question of learning what to look for as you go along. To learn from experience and from the type of error that is liable to be made and to improve the checks that can be made. I stress that 100 per cent of the applicants are inspected in the field. One cannot go much beyond that at the end of the day. It is a question of using the staff to best effect.

Deputy Crotty.—I am not quite clear on how these discrepancies were discovered. Could you explain to me how they were discovered?

Mr. Creedon.—I think it was the Comptroller who discovered the particular ones we are talking about. Let me stress that we discover a lot of these ourselves in the process of doing the checks. These were discussed by the Comptroller in the course of his audit.

Deputy Crotty.—To what extent was the check carried out by the Comptroller? Did the Comptroller check every case?

Mr. McDonnell.—We did a sample of 1 per cent, which was 263 cases out of a total number of 27,300 herds.

Mr. McDonnell.—We only did a sample of 1 per cent of the total number of herds. This was done by—

Deputy Crotty.—On a total check, if that was the average, you could have up to 2,000 cases? This is very unsatisfactory. You did not pursue this any further, Comptroller?

Mr. McDonnell.—Other than to report it. We would have done this manually. You will appreciate that what is involved is looking at the application forms from a herd owner for one particular scheme with the application forms for the same herd under another scheme. It has to be done by visual manual inspection, taking the application forms for the current year on two different schemes or the application forms for previous years. To pursue it to the point, if that is what the Deputy is suggesting, of looking at all of the cases, I do not think that would be on. What we did then was simply to ask the Accounting Officer on the basis of that whether it was something which might indicate that there were significant discrepancies, taking the total national herd. That is what is set out in the report and the Accounting Officer’s response is there.

Deputy Crotty.—Maybe the Accounting Officer would explain this to me. The sum mentioned by the Accounting Officer is £9,000. Is that right?

Deputy Crotty.—On a 1 per cent check. If this was right across the board we are talking about £900,000. Did the Department do a crosscheck to ensure that this was not a sample of what was happening right across the board? It is extraordinary that a 1 per cent sample could come up with something like this?

Mr. Creedon.—Yes. As I mentioned earlier, there is a 100 per cent field check, then a subsequent office check. I keep stressing — we should not talk about this scheme in isolation, because it is only one particular scheme — that this is part of a much wider operation which involves seven or eight schemes and where the total volume of actual forms to be dealt with is of the order of 400,000. Clearly, your first obligation is to have a good system in place. That is covered largely by the fact that 100 per cent inspections are made in the field. That is as thorough as you can get at that level. When you are subsequently faced with a volume of 400,000 applications and reports, you can do a sample check. That would be the limit. To check every one of 400,000 applications individually, which has to be done manually, is an enormous and costly operation. I do not think you can extrapolate that because there is a number of questionable herds in this scheme, which at this stage was only one of a number, you are going to get the same level in other schemes. I would not accept that.

Deputy Crotty.—I wonder would the Accounting Officer feel that it was undesirable that the Comptroller should take this sort of sample? Could I ask the Comptroller if it was unreasonable that he should make this type of check?

Mr. McDonnell.—I would not think so. I do not think the Accounting Officer would take issue with my practice of examining a scheme on a sample basis like that.

Deputy Crotty.—Maybe I am not getting to grips with this. It appears that it could possibly be reflected from the sample that there is £900,000 of a loss to the Department. It is possible that that could have happened?

Mr. Creedon.—First of all, I clearly do not object to the Comptroller doing the sample checks he does. We should be clear that in some of the cases we were talking about there were discrepancies involved but they were not strictly money discrepancies. These discrepancies did not cost money.

Deputy Crotty.—There was £9,000 in money, so there were other discrepancies as well as that?

Mr. Creedon.—Technical discrepancies of a kind which did not involve any money. I have lost the Deputy’s question, Chairman.

Deputy Crotty.—I will put it again. The Comptroller took a sample which involved £9,000 of discrepancies, and that was 1 per cent of the total. Could we take it then that there could actually be a £900,000 discrepancy involved if the full sample was inspected by the Comptroller?

Mr. Creedon.—No, I do not think you could take it like that. I am satisfied that the checks are such that that scale of error would not arise.

Deputy Crotty.—Why can you take that? Did you check it since? Has it been checked right across the board in the same way as the Comptroller has checked it?

Mr. Creedon.—First of all, we do the checks, but I stress that there is a limit to the amount on the physical checking and manual checking you can do because of the sheer volume of the staff. I do stress that, for the nature and the extent of the checks we do, the scope for error is as limited as it possibly can be.

Deputy Crotty.—What the Accounting Officer is saying is that there can be a discrepancy of £900,000 but we cannot do anything about it? That is not acceptable.

Mr. Creedon.—No, I did not acknowledge that at all. I said that, arising out of this experience, checks have been kept up and intensified. Where now there is any shred of suspicion at all, crosschecks are made or if there is any reason to believe there is any doubt about a particular application. This scheme where you were counting extra numbers over a particular base was a bit more complicated than some of the other schemes we operate. That does not arise in other schemes. It did arise in this one and there was certainly some more scope for discrepancies in this scheme that there would be in the normal schemes we operate. I am satisfied that in all the other schemes which are currently in operation the physical and the manual checks are such as to virtually eliminate errors.

Deputy Crotty.—We are talking about this scheme. That is what we are examining here. Was the £9,000 that was discovered by the Comptroller recouped to the Department?

Deputy Crotty.—Do you feel that it would have been a worthwhile exercise to carry out the same examination as the Comptroller carried out, in that it could have yielded quite a substantial refund? As I said, it could have been up to £900,000 or £1,000,000.

Mr. Creedon.—In fact, we have checked all cases fairly thoroughly. I have said that a number of times already.

Deputy Crotty.—You have carried out the same check as the Comptroller carried out?

Mr. Creedon.—We believe that our checks are as good if not better than the ones the Comptroller carries out.

Chairman.—Could we come to the kernel of this? Perhaps the Comptroller might tell us? Is the point Deputy Crotty is making essentially right, that the potential loss to the State could have been as high as £900,000? Could it have been of that magnitude based on the sample?

Mr. McDonnell.—As I said, that was a 1 per cent sample in cases involved. It involved £9,000. The question of extrapolation, to the national herd in total is a difficult question. You cannot absolutely say that. If you accept the principle of extrapolation then that is probably the conclusion you would come to, but extrapolation is a difficult thing—

Deputy Crotty.—We live with opinion polls and I suppose this is very much related to a sample of an opinion poll. From that situation you can only take it that it is correct. We are talking about a sizeable sum of money and are we going to leave it at this?

Chairman.—We are going to resume on the rest of the examination of 1985 on another day, Mr. Creedon, so perhaps between this and then you would look at this and we will come back to the question and see if we can get a better measurement of what exactly the potential loss was?

323.Deputy Naughten.—Could I get clarity on one reply Mr. Creedon gave with regard to the number of irregularities and the amount of money picked up by his Department. You mentioned the figure earlier.

Mr. Creedon.—There were 38 cases. Not all of the 38 cases would necessarily have involved money. We are talking about various discrepancies.

Deputy Naughten.—That was your check. In other words, you are saying that in only 38 cases money was owed to the Department out of the 263?

Mr. Creedon.—To clarify that, I think the number involving money picked up by the Comptroller was fewer than 38. We picked up a number ourselves. We will clarify that at the next meeting.

Deputy Naughten.—It would be interesting if the Comptroller could give us a breakdown in regard to the irregularities he discovered in the 263 cases. What would concern us if moneys were involved. If technicalities are involved, not costing the Department money, I think we should not be overly concerned about it.

324.Chairman.—We will return to that question at the next meeting. Paragraph 37 of the Report of the Comptroller and Auditor General reads:—

The conditions of the scheme provide, inter alia, that animals for which grants are being claimed be in the applicant’s ownership on 15 June of the year in which the claim is made, that the applicant be registered under the BTE Scheme and that not more than 40 animals may qualify for grant in any one herd. A limited test examination of grant applications carried out by my officers brought to light an instance in which a number of animals listed in the application of a herdowner having more than 40 animals were simultaneously listed as part of the herd of another applicant, suggesting the possibility that an interchange of animals may have taken place in order to obtain grants in excess of the maximum limit of 40. Moreover, the second applicant was not registered under the BTE Scheme at the date of his grant application.

The Accounting Officer informed me that the duplicate claims arose because one of the applicants was a newcomer to farming in June 1984 and had purchased heifers from the other applicant early in that month, subject to the animals being tested. He had taken delivery of 10 of these sometimes around 22 June 1984, which was immediately after the disease test had been carried out on the seller’s herd, and had applied for Calved Heifer grants at the same time. The herdowner selling the animals had, on the other hand, shown some of these heifers on the application submitted by him on the day following the test because he did not know how many the new herdowner would take from him eventually.

The Accounting Officer stated that it was a matter for value judgement as to whether this was a case where the ownership of the heifers concerned was genuinely indeterminate as between the two herdowners on the reference date of 15 June 1984 because of having been bought from one on condition that they tested satisfactorily, but had not yet been delivered to the other, or whether there was a conspiracy between the two herdowners to obtain more than the maximum 40 grants allowed under the Scheme. However, the Department’s local officer who investigated the case in 1984 was well experienced and in his judgement it was a genuine case of a newcomer to farming setting up a new herd rather than a conspiracy to circumvent the 40 grants maximum.

The Accounting Officer also stated that, because of seasonal pressures and staff shortages in local offices, delays in completion of registration under the BTE Scheme are inevitable and, accordingly, the rule specifying that an applicant must be a registered herdowner is not enforced rigidly. In this case the applicant had asked on 21 June 1984 to be allocated a herdowner but his registration was not completed by the District Veterinary Office until 7 January 1985.

Mr. McDonnell.—As we were discussing paragraph 36 it occurred to me that we could really have taken in 37 as well, because the problem there arises out of the same sample check that we did. It was put there separately because in the first case, in 36, we were talking about the possibility of a herd owner claiming, and perhaps, some discrepancies in regard to the description of the animals. Here we are talking about the possibility of a number of herd owners getting together, so to speak, to get over the question of the maximum number of grants which could be paid. As you see, I refer to the possibility of an interchange of animals, that is to say, the possibility of a herd owner whose herd was within the maximum number allowed claiming in respect of the excess animals of another herd owner who had more than the prescribed number. I want to emphasise that it is all part of the same scenario.

325.Deputy Naughten.—Just one question on that paragraph. Could the difficulty have arisen as a result of the enormous delay by the Department of Agriculture in issuing herd numbers to new applicants?

Mr. McDonnell.—I think we could possibly dispose of this one today because it is an isolated one. It was obviously one in million, I was going to say, but one in whatever number of cases we were involved in at the time. The change of land and change of animals occurred around the critical date, 15 June, which has made us aware of the need, where there are critical dates, to look out for this sort of thing in future. To answer the Deputy’s question, I would have to agree that part of the problem arose from the fact that there was a delay in issuing herd numbers. It is another matter we were made aware of. I hope it is now better than it was at that time.

Deputy Naughten.—In fairness to landowners, I think it is unacceptable that somebody should be held up. This is a clear example of what I, and every rural Deputy, come up against occassionally of where people are held up for six, eight and maybe even in cases 12 months, to get a herd number for land that is legally registered in their name or that they are legally working. It is an unacceptable delay by any standards.

Mr. Creedon.—I do not know, Chairman, if you want to get into the question of the issue of herd numbers. The issue of a separate herd number is not automatic. The local office has to be satisfied that certain conditions are fulfilled before a separate herd number is issued. In doubtful cases, or if certain conditions can be met over a time, then the farmer is given a chance to put things right before the herd number is issued. I would accept that if there are long delays, that should not always be the case, but there may well be situations where delays would be justified.

326.Chairman.—We will return to paragraphs 36 and 37 at the next meeting. We will dispose of them both then. Paragraphs 38 and 39 are related and we will take them together. Paragraph 38 of the Report of the Comptroller and Auditor General reads:—

Subhead F.2. Payment under Exchange Rate Guarantee on loans for Agricultural Purposes

The exchange risk guarantee scheme on loans for agricultural purposes was initiated in July 1980 when the Agricultural Credit Corporation (ACC) was authorised to borrow £50 million in currencies of the European Monetary System (EMS) for onlending to farmers and agri-business to finance a range of specified activities. The rate of interest charged by ACC to borrowers comprised the rate paid by it on the loans, a fixed rate to cover exchange risk and a fixed rate to cover its operating margin. The scheme was to operate up to 31 October 1985 and any exchange loss over and above the borowers’ fixed exchange risk contribution arising up to that date was to be meet by the Exchequer. In late 1980 the scheme had been extended, subject to the same terms and conditions, to the associated banks which were, between then, authorised to raise a further total of £50 million in EMS currencies.

The borrowers’ exchange risk contribution was to be held in special accounts in the ACC and the participating banks. These accounts were to be credited with interest, the rate in the case of the banks being the normal deposit interest rate while in the case of ACC the rate was to be agreed by the Department of Finance. The balances in these accounts were to be used towards meeting the exchange losses incurred by ACC and the banks with any additional amounts required being provided from the Vote.

It was noted that, while the balance in the ACC account was £315,000 in December 1980, and had reached £1.1 million by June 1982 and £1.8 million by December 1984, interest was credited to the account by ACC only at the rate applicable to deposits in the £5,000 — £15,000 range. As it appears that considerably higher rates of interest are payable by ACC on deposits in excess of £15,000 I sought the observations of the Accounting Officer. He has told me that the details of this scheme, as arranged between the Department of Finance and ACC, provided that funds in the special account should bear interest at a rate to be agreed with the Department of Finance and that it was understood from that Department that, in response to a request from the ACC, it had been agreed that the same rate of interest as that allowed on deposits in the £5,000 — £15,000 range might apply to the special deposit account.

In the light of this reply I have sought the observations of the Department of Finance as to the circumstances which led to the agreement to accept this rate of interest and I have asked what extra cost to the Vote for Agriculture was incurred as a result.

It was noted that over the period of the scheme the total amount charged to the Vote in respect of exchange losses incurred by ACC over and above borrowers exchange risk contribution was £8.6 million compared with £3.8 million for the banks. In reply to my inquiry as to why the exchange losses in respect of ACC loans were higher than for the banks the Accounting Officer stated that the exchange risk contribution by borrowers was greater in the case of the banks (2%) than in the case of the ACC (1.375%). If it had been the same in both cases the difference between losses on ACC loans and those on bank loans would have been reduced to about £2.7 million. This remaining difference was due mainly to the fact that ACC borrowed its entire allocation of £50 million in foreign currencies in the early stages of the scheme and the loss applied to the full amount up to the date the scheme terminated. On the other hand, the associated banks, which were not included in the scheme until about six months after its commencement, did not reach the full £50 million in total at any time, even at peak borrowing levels for the individual banks.

Mr. McDonnell.—You could conveniently do that because paragraph 38 outlines how the scheme was to operate and it refers specifically to the cost falling on the Department through its commitment to make up the shortfall in the borrowers contribution to the exchange losses. It questions why the funds representing this exchange risk contribution, which were held by the ACC, as you see there, did not attract the normal rate of interest paid by the ACC. If it had, that would have had the effect of reducing the shortfall which would have had to be made up from the Vote. You will see, too, that there is a reference to the Department of Finance, because they decided on this arrangement with the ACC. They have told me that the rate paid by the ACC was designed to provide the ACC with a margin of 4 per cent which that Department considered justified. I have to say I find it difficult to understand this, or why it had to be done. In the first instance you will see that the rate charged by the ACC to the borrowers for the loans included an operating margin for the ACC; and, secondly, I would have assumed that the rate which the ACC gives on large deposits, which is what is at issue here and which they did not give in this case, presumably already includes a satisfactory operating margin in so far as the ACC is concerned. The Department of Finance also told me that, if the top rate had been paid by the ACC, the exchange loss which would have had to be met by the Department of Agriculture would have been reduced by about £105,000. Indeed, I might go on to say that, when you come to consider my 1986 report and when a similar scheme was introduced, the rate appropriate to large deposits was paid by the ACC. That is paragraph 38.

Paragraph 39 raises a question as to why the amount which had to be paid from the Vote—that is the net amount of the exchange loss after taking account of the borrower’s contribution and the interest earned on it — was so much greater in the case of the ACC than in the case of the banks because they were both, so to speak, dealing with a package of £50 million, but the explanation for that is set out in the paragraph.

327.Deputy Desmond.—Could we ask Mr. Brady from Finance to comment on that situation? Is he satisfied as to the observations of the Comptroller and Auditor General on the matter?

Mr. B. Brady.—The point at issue in paragraph 38 is the rate of interest which the ACC paid effectively to the Department of Agriculture on foot of exchange risk contributions by farmers. This was paid into a special account. It was a lower rate than the rate normally applicable to deposits of that size. The reason was simply that the ACC’s basic margin on those funds was 2⅝ per cent. This was considerably less than their normal margin. Taking a smaller interest rate from them on the deposit account, made up some of the difference between the 2⅝ per cent and their normal margin. In fact, the difference the extra interest amounted to was .05 per cent on their margin. In other words, ACC’s margin went from 2.625, which is 2⅝ per cent to 2.675 per cent. They were still considerably short of the normal margin, notwithstanding this small concession that was made to them.

Deputy Desmond.—Are you satisfied about the general management of the general strategy followed by ACC in terms of its control over its exchange losses in that period?

Mr. B. Brady.—The ACC had no control whatever over its exchange losses. Exchange losses arise because of changes in the marketplace, exchange rate movements in the market place. ACC were passive.

Deputy Desmond.—True enough. But the extent of its borrowings in foreign currencies?

Mr. B. Brady.—ACC borrowed the original sum which the Government decided should be borrowed, £50 million.

Mr. B. Brady.—That is what the Government’s decision was — to borrow in foreign currencies in order to give farmers effectively the benefit of lower interest rates which then pertained for Deutschemark borrowings.

Mr. B. Brady.—I am afraid I cannot comment on the wisdom of any particular decision.

Mr. B. Brady.—Again, there is a problem here in that ACC is a commercial organisation. We are in open forum and I do not think it is appropriate to say what ACC’s margin is; but the Comptroller did mention a figure earlier relating to the margin in 1980 which I think is relevant on this question.

Mr. McDonnell.—What I said was that the rate which was paid by the ACC on this particular deposit was such — as I understand the Department of Finance response — as would have provided them with a margin of 4 per cent which the Department considered justified.

Deputy Crotty.—Is it normal for the Department of Finance to consider a 4 per cent mark up for handling foreign currency? Do the Department of Finance consider that is acceptable?

Mr. B. Brady.—It was a question of trying to give ACC a margin close to what they would normally get.

Deputy Crotty.—I realise that, but obviously the Department then feels that a 4 per cent mark up is acceptable?

Deputy Crotty.—To the ordinary viewer looking in it seems to be a very large mark up?

Mr. B. Brady.—Not particularly. That is a gross margin. Administrative costs have to come out of that, provisions for bad debts and so on.

Mr. B. Brady.—Because there was an estimate made of the amount of demand round at the time, and it was decided that the scheme would be operated through the ACC, and that estimate was £50 million. They were told to go out and borrow £50 million on the Deutschemark market.

Chairman.—Their risk loss was £8.6 million compared with £3.8 million for the banks?

Mr. B. Brady.—There were a number of factors involved. One of the factors was that the exchange risk contribution by ACC customers was less than the exchange risk contribution by the banks. Secondly, the banks did not utilise the scheme fully and consequently not all of the money was out and effectively exposed to exchange risk for the full period. Those two factors accounted for the difference.

Deputy Naughten.—Why did the banks not utilise the scheme fully and was the Department of Finance not able to influence them to do so?

Mr. B. Brady.—It is a question of demand. If bank customers are not demanding the money the banks cannot lend it. There may have been another factor: that the banks’ margin on the scheme was 2 per cent and that was not a very attractive margin to the banks. They would prefer to lend their normal funds, so I imagine they were not pushing it at the time.

Deputy Naughten.—That is the nub of the problem. It should be highlighted at every opportunity that the banks did not push the scheme and that, in fact, banks customers found it extremely difficult to get into the scheme. In fairness to the ACC, they did utilise the funds for the purpose which the Government approved the funds. The Government made this money available, the ACC used it but the banks did not.

Chairman.—It is hard to follow why £1 million on deposit from the Department of Agriculture did not get the same rate of interest as any other depositor in one year and then did the following year. What was the reason for that?

Mr. B. Brady.—I think I explained that this was a way of giving the ACC an extra margin.

Mr. B. Brady.—Not the following year. That was in another scheme referred to by the Comptroller and Auditor General which was in place from the end of 1985 to the end of 1986. It was quite separate from this particular scheme and the figures were different. The ACC’s margin was different, and so on. The ACC got a more normal margin on that particular one. It was a different scheme, effectively.

Chairman.—Can we note this paragraph? Agreed. As Deputy Naughten wants to ask some questions on a document circulated by the Department of Agriculture regarding the expansion of beef cow numbers — this was promised by the former Accounting Officer — I propose that we recommence on paragraph 40 the next day. Is that all right.

329.Deputy Naughten.—Just a couple of short questions in regard to the document circulated by the Department of Agriculture regarding the additional incentives for the beef cow scheme. In that scheme, I notice with regard to the dairy herds an interest subsidy of 5 per cent or 4 per cent; depending on the financial institution involved. Could the Accounting Officer explain what precisely is meant there?

Mr. Creedon.—First of all, I should stress that this scheme that is referred to here is not actually in place as yet.

Deputy Naughten.—Could the Accounting Officer inform us when it will be in place?

Mr. Creedon.—It would be dangerous to speculate on that because it is at a critical stage at the moment. In regard to paragraph (b), I am not sure what precisely you want me to say. Is it why 5 per cent applies in one case and 4 per cent in another?

Mr. Creedon.—The explanation is that one banking organisation is prepared to make a bigger contribution to the scheme than others. That is the simple explanation.

Deputy Naughten.—Can I take it from that reply, that one of the major financial groups is prepared to pay a subsidy of 5 per cent on money borrowed under the scheme, or prepared to lend money at a 5 per cent subsidy on it and the other one is only prepared to pay 4 per cent?

Mr. Creedon.—No, that is not quite correct because the cost of the interest subsidy will not come from contributions by the banking sector alone. Money is being subscribed by other sectors as well, which will make up the fund from which the interest subsidy — whether it be 5 per cent or 4 per cent — will be derived.

Deputy Naughten.—What is the percentage from the different sectors? How is this arrived at, or what are the figures involved in the different sectors of the industry involved in this and what is the contribution of the banks to this scheme?

Mr. Creedon.—I would prefer, since the absolute final details are not copperfastened at this stage, not to go into those figures because I would, to a great degree, be speculating. Apart from the banks, money is being contributed by the dairy co-ops, for example, and by others. So, in case it would in any way prejudice the final amounts that might be forthcoming from particular quarters, it might be dangerous to start talking about figures at this stage.

Deputy Naughten.—Which of the financial institutions subsidise the money at 5 per cent or at 4 per cent?

Mr. Creedon.—The asociated banks are subscribing money and, hopefully, some will be coming from the ACC as well.

Deputy Naughten.—Which groupings are doing it at the 5 per cent or which groupings are doing it at the 4 per cent?

Deputy Naughten.—We are circulated here with a scheme — expansion of beef cow numbers — that is not yet in place. We do not know when it is going to be in place. We do know that one financial house is prepared to give a subsidy of 5 per cent and the other 4 per cent, but we do not know which ones. Was it not totally premature to circulate this document when the scheme is not in place and there is no starting date on it?

Mr. Creedon.—No I think the document says that this is envisaged, and then goes on to say that techncial aspects of the scheme have been under discussion and have been clarified very recently and that the final details of the scheme have now more or less been clarified and it is only a question of wrapping up some details. That is the situation. That is what the document says. I do not think it was misleading in that sense. All we cannot put on it is a date. It is not — I make quite clear — one bank giving a 5 per cent interest subsidy and the other giving a 4 per cent interest subsidy. It is not like that, because the 5 per cent interest subsidy and the 4 per cent interest subsidy will come from a fund part of which will be subscribed by the banks and part of which will be subscribed by other people.

Deputy Naughten.—Well, let us re-phrase it. One particular banking group is prepared to pay or contribute 1 per cent more to the cost of the funds than the other. Is that not correct?

Deputy Naughten.—And this is demarcation between AIB and the Bank of Ireland. Would that be correct?

Deputy Naughten.—But in fairness, if constituents meet myself or Deputy Crotty over the weekend and they ask us which financial institution is operating this scheme, and which is the most advantaged to apply to for this scheme, what are we going to tell them?

Mr. Creedon.—If and when the scheme is announced, that will be fairly obvious I would think. At that stage you will be in a position to tell them, I am sure. It will be public knowledge, I would hope.

Mr. Creedon.—I am sure the Deputy would not expect me to answer that question.

330.Deputy Crotty.—The question which has been pursued by Deputy Naughten certainly is going to cause problems before the scheme is announced. A 1 per cent subsidy. Would it not be possible to equalise these and have a 4 1/2 per cent subsidy? Would that not be a bit of common sense?

Deputy Naughten.—What is happening, Deputy Crotty, is that one particular banking group has a greater commitment to farming than the other.

Deputy Crotty.—I know, but could they not bring about an equalisation in some manner? You will have problems enough with the scheme without having this type of situation arising.

Chairman.—This is a very interesting discussion for an urban Deputy to listen to, but this is getting away from the main examination and since we have reached 1 o’clock now I think we will call it a day at that and resume the examination next week. The document was circulated before the meeting as a result of our previous examination.

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

VOTE 34 (1985)—AGRICULTURE (resumed).

Mr. D. Creedon further called and examined.

331.Chairman.—Our apologies for the delay in bringing you in. We were caught up in another examination. You were to circulate a note regarding paragraph 36, the cattle breeding herd scheme of assistance for expansion. Do you have that note?

Mr. Creedon.—Yes, we have a note. I should apologise for having it only now but I was in Brussels until very late last night.*

Mr. McDonnell.—On paragraph 36, we were dealing the last day with the question of potential cost of—

Chairman.—We are to finish on paragraph 35 and 36. We said we would come back to these first today. Then we are going on to paragraph 40. We are just circulating a note now that Mr. Creedon has brought along with him.

539.Deputy Colley.—Would it not have been a good idea if we had had a chance to look at the note before we discuss it?

Chairman.—We have done a lot of examination on it. The only chance we are going to get to look at the note is if we call Mr. Creedon back a third time. But we have done a lot of examination on it and it is really a question of what is the cost. We knew it was more than £9,000 but we did not know exactly how much it was. So perhaps you can give us some measurement of what the cost was?

Mr. Creedon.—I can summarise very quickly what is in the note. The first part of the note deals with the extent of the checks made by the Department and the extent of the disallowances made as a result of those checks. Then we go on to look at the problems raised by the Comptroller and Auditor General’s checks. The outcome of those was that queries were raised relating to 407 animals and a possible overpayment initially of £28,000. When these queries were examined subsequently in minute detail by the Department, the extent of the queries was reduced from 407 animals to 101 animals and a possible overpayment, eventually, of £7,070. The reasons for the changes between the 407 as disclosed by the Comptroller and Auditor General’s queries and the 101 which were subsequently established as a result of our own checks, arise from a number of reasons which are mentioned in the second paragraph. The third question, which was raised by Deputy Crotty the last day, was the question of the extrapolation of those results. That is dealt with subsequently. Initially, it would suggest that there was a possible saving of £707,000 if we extrapolate the £7,070 disclosed. That has to be balanced against the time that would have been taken to do a 100 per cent check of every file and every claim that was lodged. We reckon that that would cost more than the possible — and I stress it is only a possible £707,000 that might have been involved. On the question of extrapolation, the advice we got is that this is unreliable because there are statistical problems involved. For example, one would have to be satisfied that the initial sample of the Comptroller and Auditor General was properly representative in terms of, for example, the size of claim, geographically and otherwise. So it is rather dangerous to extrapolate in that fashion. Very briefly, Chairman, that is a summary of what is in the note.

Chairman.—So really we do not know what the final cost will be because the cost involved in checking the cost would be excessive and you cannot extrapolate.

Mr. McDonnell.—Not very much, because like yourself, I have only got the note in front of me this very second. The whole question of extrapolation as I said the other day, is a very difficult area. I would have to study this note more carefully before I could comment in any kind of meaningful way on it.

Chairman.—If I might just make a proposal on how we might deal with it today. We will be bringing the Accounting Officer back for the 1986 Accounts at some stage in the not too distant future. Perhaps we would reverse the procedure and suggest that the Comptroller and Auditor General might circulate a note on his comments on this document and we might return to this matter at that stage if necessary. Is that all right?

Deputy Crotty.—Just one query, Chairman, in relation to this and the Comptroller and Auditor General’s comment. Is he happy or satisfied that this general type of attitude might be adopted in relation to checking departmental expenditure? I have grave doubts about this explanation. First of all, the extrapolation might reveal that there was less involved. But it could reveal that there was a lot more involved. How is the cost of checking computed to arrive at the £707,000? How is that computed? Further, are the Department of Finance satisfied with this type of attitude to controls? I have grave reservations, as a member of this Committee, that we should accept this type of situation and that we should leave it until we have another note from the Comptroller and Auditor General.

Mr. Creedon.—I do not think this is a reflection of an attitude. The attitude is that you check in so far as is absolutely practical. I think I did stress the last day that at the field level we do a 100 per cent check. You can recheck and recheck but at the end of the day there will be human error. There is no system, I think, that will totally eliminate human error. It was established in this case that some at least were human errors. In fact, most of them were. It is not at all a reflection of an attitude. Out attitude is to go as far as is practical, subject to cost factors in doing complete checks. We do that, but there does come a time when you have to balance the cost of doing that against the likely savings. In this case, we are satisfied that the cost in terms of staff time and administration would exceed and likely savings.

Chairman.—I propose that we get a note from the Comptroller and Auditor General and, if necessary, raise the matter again in a few weeks’ time.*

Deputy Crotty.—What is the attitude of the Department of Finance to this type of situation? Is it acceptable to them? I would also like a further expansion of this from the Comptroller as I am not happy about this at all.

Mr. B. Brady (Department of Finance).—All I can do is to repeat the words of the Accounting Officer that there has to be a limit to the amount of checking one can do and it has to be related to the cost of such checking and the likely results to come from it. There is no particular evidence available that would give us cause to worry at this stage anyway.

Mr. McDonnell.—My concern was that the checking procedures used by the Department in advance of the allowance of claims should be such as to ensure the maximum possible accuracy. As the Accounting Officer has said, the Department did field inspections in all cases. We did a cross-check of the descriptions in the departmental records under one scheme and under another scheme and discovered what appeared to be these discrepancies in descriptions. What we were concerned with, therefore, was why, if there were such discrepancies, they could have got through the field inspections which took place before the claims were allowed. I would have to accept that it would be virtually impossible to do the type of check we did, by taking a set of records for one incentive scheme and another incentive scheme or perhaps the disease eradication record, on a 100 per cent basis. But my basic concern was this: was the result of our checking an indication that there was the possibility of abuse of these kinds of schemes.

Chairman.—I think we are going to have to return to this question when we get a note from the Comptroller and Auditor General. That is the only way we can deal with it today. Perhaps that could be circulated in time. We have an enormous agenda so I am really going to have to insist that we move on at this stage.

333.Deputy Naughten.—Just one point, I think that we have discussed this at length and I am satisfied with the documents submitted. In fairness, when one considers the huge number of schemes involved — the calved heifer scheme, the one about which questions were raised the last day, the suckler cow scheme, the beef cow scheme, the headage scheme, the ewe premium schemes, calf subsidies and so on — the amount of money involved, when one considers the overall payments from that particular fund, is very small. I think that the Accounting Officer would agree that some of those irregularities arise where — in the suckler cow scheme for instance — a farmer is expected to retain that animal for 12 months. Very often in a random check, done perhaps three months after the first inspection, it is occasionally found that the farmer has for one reason or another disposed of those animals, even though he is supposed to keep them for a 12 month period under the suckler cow scheme. That is probably one of the areas where a certain number of irregularities have shown up. He has kept the cow, she has had her calf, which is the whole purpose of the scheme, but perhaps for one reason or another he had to dispose of her, and in such case a refund of the money is sought if it is paid, or if it is not paid, it is stopped. Would the Accounting Officer accept that that is one of the areas where there is a number of irregularities?

Mr. Creedon.—Yes, Chairman, I accept that by and large what Deputy Naughten has said is one of the difficulties. It is six months’ retention we are talking about. Also, in relation to the particular scheme we are talking about here, there was the added difficulty that we were measuring over a base whereas with most of the other schemes we simply count bodies, on the ground so to speak. In some case we were measuring two years afterwards, so there are complications in this scheme which would not apply in other schemes.

Chairman.—The Comptroller and Auditor General will circulate a note and we can consider then if we want to come back to this when you are in with us again in some weeks time.

Subhead L.1. — Legal Expenses

MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Section 24 of the Land Act, 1923 provide that the Land Commission may acquir lands compulsorily for the purpose of resal to persons or bodies as defined in the Lan Acts — generally to relieve congestion. T Land Acts also provide that the owners lands which are the subject of compulse acquisition proceedings have a right appeal to the Courts. In 1978 the Supre Court ruled that if the Land Commiss acquired compulsorily any lands for the purpose of resale and a resale to one or more of the permitted persons or bodies did not thereafter take place within a reasonable period the Land Commision would be liable to have the compulsory acquisition declared invalid by the Courts.

However, during 1981–82 the Land Commission instituted proceedings for the compulsory acquisition of some 350 acres in County Leitrim where it then had some 3,600 acres of lands on hand which were being resold at the rate of about 300 acres per annum. The owners objected to the acquisition but their appeal to the Land Commission Appeal Tribunal was dismissed. They then appealed to the Supreme Court which, in December 1984, ruled that a special statutory provision would be needed to confer on the Land Commission power to build up a stockpile or reserve of compulsorily acquired land. In the opinion of the Court the Land Commission had failed to show that it had acted within its powers in acquiring these lands and the owners appeal was allowed. Costs were awarded against the Land Commission and £52,649 in respect of these costs was charged to the Vote in 1985. The Accounting Officer informed me that the total costs incurred in this case amounted to £68,000.

He also informed me that, subsequent to the Government decision in August 1984 to abolish the Land Commission, the Commission sought to withdraw from all cases then under compulsory acquisition proceedings and, by June 1986, only three cases, involving some 100 acres, were still the subject of active proceedings because in these cases the owners were not willing to allow withdrawal and legal advice was that the Land Commission must proceed with acquisition or face claims for damages.

The Accounting Officer stated that in June 1986 the Land Commission had on hand about 18,000 acres of agricultural land together with about 100,000 acres of bog which were being disposed of in the traditional way with every effort being made to effect disposal as quickly as possible. However, with the transfer of the bulk of the Land Commission Inspectorate to the Farm Classification Office, it was unlikely that all the lands would be disposed of before the Commission was abolished. Accordingly, in the proposed Bill for its abolition the Minister for Agriculture was being authorised to introduce alternative arrangements for disposing of any lands still on hand.

Mr. McDonnell.—In paragraph 40 there is a number of points raised. First, there is the question of the Land Commission going ahead with a compulsory acquisition not-withstanding the Supreme Court decision in 1978 from which it might have seemed, at least, that there was a risk that compulsory purchase proceedings could be successfully challenged by the owners in the circumstances which seemed to exist in this case — that is to say, that the Land Commission already had a large pool of land in the area and the land acquired did not seem to be needed for reallotment. In fact, the action for the compulsory acquisition was successfully challenged and, as you can see, cost £68,000. The second part of the paragraph refers to the problem for the Land Commission in a situation where the owners take the opposite attitude — where the Land Commission want to withdraw from compulsory purchase proceedings and the owners are not agreeable. Finally, I referred to the general question of how much land the Land Commission have on hand now and how they propose to deal with that in the light of the proposal to abolish the Land Commission.

Chairman.—Mr. Creedon, why did the Land Commission pursue the question of adding to their pool when the 1978 Supreme Court decision was there?

Mr. Creedon.—This is the first time, in fact, that there was a ruling: that the Land Commission should not acquire land in an area where they already had a pool of land — in other words, it is no function of the Land Commission to build up a land bank. When that ruling was made in December 1984 the decision had already been taken not to acquire any more land anyway. In fact, nothing counter to the Court’s decision has happened since except for the few cases that were already in the pipeline.

Mr. Creedon.—Not quite. In December 1984 the Supreme Court ruled that a special statutory provision would be needed to confer on the Land Commission power to build up on a stockpile or reserve of compulsorily acquired land.

Chairman.—What you are suggesting is that the 1981–82 proceedings which were instituted by the Land Commission were not affected by the 1978 Supreme Court decision?

Mr. Creedon.—That was the view taken by the Land Commissioners themselves at the time.

Mr. Creedon.—In the light of events it was not, but I stress also that it was the Land Commissioners, as such, who took that decision.

Chairman.—The person against whom you were making the compulsory order took the opposite view, it was found to be correct and it cost the State £68,000.

Chairman.—Why did they go ahead in 1981–82 if the Supreme Court decision was there?

Mr. Creedon.—The first ruling, if you read it again, says that the Land Commission would have to get rid of the land within a reasonable period. They did not define what was a reasonable period at that time. My information is that, subsequently, the intention of the Land Commission in acquiring the lands in County Leitrim that are at issue here was that they would have been able to dispose of them in at what they considered to be a reasonable time. What constituted a reasonable time, I stress was not defined at any time by the court.

Chairman.—Was there competition for this land between the Land Commission and others at any time?

Mr. Creedon.—Clearly there was competition between the Land Commission and the people who wished to acquire it for other purposes. The issue at the time was that this land was being sought after by private interests who were concerned to acquire the land for afforestation and there was also pressure from local congests for the Land Commission to acquire the land for redistribution and relief of congestion. There was that competition for the land.

335.Deputy Naughten.—Could the Accounting Officer tell us how much lands are currently in the hands of the Land Commission? In 1986 they had 18,000 acres together with 100,000 acres of bog.

Mr. Creedon.—The figures I have now are in hectares but it is easy enough to convert them. We had 5,690 hectares and if you multiply that by two and a half, you will get roughly the number of acres. Most of that is in western counties. There are roughly 1,000 hectares in Cavan, 520 hectares in Galway, 700 acres in Longford and another 700 acres in Leitrim.

Mr. Creedon.—In regard to bogland and what the Land Commission term as unlettable land there are about 100,000 acres.

Deputy Naughten.—Could the Accounting Officer give us a note on that, as to the exact breakdown of the land in the different areas?

Deputy Naughten.—Yes, if that is possible. What arrangements are being made to dispose of those lands at present? According to the paragraph here it said alternative arrangements for the disposal of the land are still being considered. What are the alternative arrangements?

Mr. Creedon.—The position in the last few years is that because of the transfer of Land Commission staff to the other activities we had a very reduced quota of staff to handle the land on hands. With the return of the Land Commission staff to the Department, as from the middle of January, the staff have now been reassigned to the allocation of the land on hands and the plan would be to have this allocated within two years. That is the target.

Deputy Naughten.—That brings us to another point which I referred to earlier and that was the transfer of staff and the re-allocation of staff to your Department. Could you tell me how many staff have been re-allocated to the Department?

Mr. Creedon.—Originally 91 Land Commission staff were seconded to the Department of Finance for the purpose of the farm classification operation. Of those, 87 came back. A number of those have since retired. There are 74 of the original 91 back with the Department of Agriculture and Food and 52 of those have been reassigned to the work of re-allocating the lands on hands. They have been given this two-years target. There are 22 other officers remaining, some of whom have applied for the posts and depending on whether they are successful or otherwise in their applications for the other posts, other duties will be found for them.

336.Chairman.—There are a lot of weighty items on the agenda this morning. Perhaps we could finish with Deputy Naughten’s examination and then move on.

337.Deputy Naughten.—I have a couple of questions I would like to ask. Out of the 91 staff 74 came back; 52 have been reasigned to the distribution of land. Could the Accounting Officer tell us what were the criteria used for re-admission to the Land Commission and how were there 52 officers selected out of the 74?

Mr. Creedon.—I am sorry; I do not have that information readily at hand. I could let the committee know, if that information is required.

Deputy Naughten.—Could you also tell us why were those officers left for nine months walking around with their hands in their pockets, getting paid and not checking into any particular office? Why were they not taken back to get on with the process of getting rid of this land and getting it out to the farming community so that it could be brought into production?

Mr. Creedon.—I would not like to comment on the first part of the question. On the second part, they were reassigned to the Department of Agriculture and Food only on 15 January this year.

Mr. Creedon.—They were not under the control of the Department of Agriculture and Food during that period.

Deputy Naughten.—They were the responsibility of the Department of Finance. Could the Department of Finance comment on why 90 officers were put in the very difficult situation of drawing salaries and having nothing to do and not even knowing where they were employed?

338.Mr. C. Gallagher (Department of Finance).—The situation, as the Department of Finance see it, is somewhat different from the way the Department of Agriculture and Food see it. I think that has been made clear to the committee previously. I understand there is a letter on the way from the Secretary of the Department of Finance to the committee in regard to this issue. My understanding is that the alternative methods of disposing of lands were probably still under consideration until quite recently. Other methods of dealing with the Land Commission inspectors were also under consideration. They had been offered early retirement and so on. The take-up was not as great as had been expected. Our understanding from the Department of Agriculture and Food was, until quite recently, that there was no work which the Department wished them to do.

Deputy Naughten.—In other words, that was the reason why they were paid and not allocated any work?

Mr. C. Gallagher.—I think the Committee have asked the Secretary of my Department this question. I do not want to pre-empt the reply which he is making at the request of the Committee. There were various options considered. We were trying to find jobs for them. I think the Committee asked specifically of the Secretary of the Department quite recently if he would explain in some detail what their qualifications were and what the difficulties were in relation to the jobs. I understand a letter on that topic will be issuing to the committee shortly.

Deputy Naughten.—What is proposed to be done with the 22 if, for example, they do not take redundancy?

Mr. Creedon.—We are looking at certain options at the moment. I have no doubt that we will find appropriate work for them.

Mr. Creedon.—That is a separate question which I would not like to deal with today. That has not arisen at this stage. We would hope to accommodate them without necessarily redeploying them.

Deputy Naughten.—But they have been back in your Department for two months and they are being paid. Surely at this stage the Department must know what they are going to do with those people.

Mr. Creedon.—As I said, we are looking at certain options which I am sure will materialise fairly quickly.

Chairman.—This is a matter which, of course, is of interest to the Committee and perhaps more correctly would arise under staff payments. It does not directly arise under this paragraph but since it has been and needs to be raised I will allow Deputy Crotty——

Deputy Naughten.—I respectfully suggest it does, in so far as the Comptroller and Auditor General in that paragraph refers to alternative arrangements for the disposal of land. Now we are talking about the staff who will dispose of that land.

Chairman.—I think it would arise normally under staff payments but since it has been raised I will let Deputy Crotty ask a question and then we will move on.

340.Deputy Crotty.—It is my recollection, when we examined the Accounting Officer from the Department of Finance, that he said these people were the responsibility of the Department of Agriculture and Food and as such this Committee should inquire from the Accounting Officer from the Department of Agriculture and Food about the non-payment of these people. We are asking that this morning and we are being shifted back to the Department of Finance. How can we get this resolved? There is certainly a conflict of evidence here and we must devise some method of ——

Deputy Crotty.—I accept that, but there was land to be divided and people were left there for nine months. The question must be answered.

Deputy Crotty.—We do not examine policy here, it is not part of our brief. Responsibility is being shifted from one to the other. Could we have it resolved?

Chairman.—We are getting a letter from the Department of Finance. If we are not happy with that we will call together both the Secretary of the Department of Finance and the Secretary of the Department of Agriculture.

341.Deputy Colley.—Just before you finish, to clear up a matter of fact, my understanding from the paragraph and from what has been said here today is that the 90 or so individuals who had been with the Farm Classification Office were, in fact, employees of the Department of Agriculture and they were seconded to the Department of Finance. They remained all the time staff members of the Department of Agriculture. Could we have confirmation of that?

Deputy Colley.—In that case, as the Comptroller and Auditor General says here, he actually refers to the fact that, with the transfer of the bulk of the Land Commission inspectors to the Farm Classification Office, it was unlikely that all of the lands would be disposed of before the Commission was abolished. There was an amount of work waiting to be done that they had been taken away from. It was not a matter of finding work for them; that work was already in being. This is exactly what the Comptroller and Auditor General is referring to in this paragraph. Could I ask the Accounting Officer in the Department why it was that they could not simply be reinstated in doing that work?

Mr. Creedon.—I can only repeat they were not reassigned back to the Department of Agriculture and Food until 15 January 1988.

Deputy Colley.—With respect, I think the reason they were not is that the Department refused to take them back?

Mr. Creedon.—No, I do not think that was the case. The point made by my colleague, Mr. Gallagher, initially is correct. There were alternatives being looked at. The alternative ways of disposing of lands, for example, without resorting to the old allocation system was more attractive in terms of staff demands and so on. There was also the question of the provision for the pay of these officers which, incidentally, has still to be resolved for 1988. Until those matters were resolved we were not in a position to take these people back. Even the date of their reassignment to the Department was resolved only at the beginning of January. The date of their reassignment remains 15 January. That is a fact.

Deputy Colley.—There are two points there I would like to take up. Is Mr. Creedon saying that, because there were alternative ways of disposing of the land being examined, all had to stop in the old method of disposing of it before one took on the new one? Therefore, could it not have been continued in the old way? My second point relates to the payment of these individual staff members. Am I to understand that there is a dispute in the 1987 allocation as between the Department of Finance and the Department of Agriculture to pay these staff members?

Mr. Creedon.—There was no provision in the Department of Agriculture and Food Vote for 1987 for payment of these officers. I am not in a position to say whether there was such a provision in the Department of Finance Vote. The simple fact is that there was no provision in the Department of Agriculture and Food Vote for 1987.

Deputy Colley.—The earlier comment I made about continuing the old system while examining new altenative methods?

Mr. Creedon.—The old system continued with the limited staff resources that were available. It was going on all the time.

Deputy Colley.—Are we really saying that the nub of it is that the Department of Agriculture Vote did not include payments to those members and, therefore, they were not willing to take them back until that was cleared and that is why they were not returned until January of this year?

342.Deputy Crotty.—Getting back to the actual Vote under Land Commission services, subhead L.4 — Deficiency of Income from Untenanted Land.

Deputy Crotty.—I know, but it relates to it. There is no point in coming back to it again. Deficiency of Income from Untenanted Lands, £1,835,000. What would that refer to?

Chairman.—Just a second. Paragraph 41 refers to the deficiency of income from untenanted land. It is the next paragraph.

Deputy Crotty.—O.K. We can refer back to it. It refers to this in that if these people could have been doing something worthwhile on that, there was a lot of money to be brought in if land was tenanted.

Chairman.—We will take it in the next paragraph. I will call you first, Deputy.

343.Deputy Dempsey.—Just in relation to the point we were making. Could I ask the Accounting Officer how many or, if any, staff were redeployed in the Department of Agriculture in the past year?

Mr. Creedon.—I am not sure what the Deputy means. Does he mean redeployed out of the Department?

Deputy Dempsey.—Either out of the Department or internally, staff shifted from one section to another?

Mr. Creedon.—As far as the internal management of staff is concerned there is continual movement of staff internally from one place to another. That is part of day-to-day management of the Department. I do not immediately recall any redeployment out of the Department.

Deputy Dempsey.—Could we have a note on that before we get a re-examination?

Mr. Creedon.—I would like to be clear on what exactly you want a note on Chairman. I have said that as far as redeployment within the Department is concerned, that is a day-to-day function. There was nothing new in 1987 as compared to any other previous year. I can confirm that there was no redeployment.*

Deputy Dempsey.—You can confirm that if that is the case. The reason I asked the question is that there seems to be some terrible problem in relation to redeploying these 87 or 91 people within the Department of Agriculture. It is my understanding that within the Department staff can be moved around quite easily. I want to try to find out why these staff members were not redeployed, or why there is such a problem arising between the Department of Finance and the Department of Agriculture.

344.Deputy Naughten.—One last question. The Accounting Officer has informed us that 52 of the 91 staff who were transferred to the Farm Classification Office have now been redeployed in what was formerly the Land Commission.

Mr. Creedon.—Fifty-two out of 74; some have retired and some left for other jobs.

Deputy Naughten.—Out of the original 91, 74 of which are at present on the payroll. What does that bring the strength of the former Land Commission to?

Mr. Creedon.—With the 74 we have 24 who were retained during the period when the 91 were with the Farm Classification Office. Apart from one or two of those who have retired, nearly all of them are still there.

Deputy Naughten.—If we could have a note on how much land is to be allocated it would be very interesting.

345.Chairman.—We will note Paragraph 40 for now. We will be getting a letter from the Secretary of the Department of Finance. We may have to recall him. Paragraph 41 of the Report of the Comptroller and Auditor General reads:—

Subhead L.4.—Deficiency of Income from Untenanted Land, Land Purchase Accounts and Land Bond Fund—Collection of Annuities

The Collection Branch of the Department of Agriculture collects land annuities and rents in respect of land acquired by the Land Commission for allotment.

When the land is acquired by the Land Commission through the issue of Land Bonds, the annuities paid by the persons to whom the land is allotted are paid into the Land Bond Fund to be used towards the cost of servicing and redeeming the Land Bonds. When land is acquired for cash, the annuities collected are brought to Account as Appropriations in Aid of the Vote. Rent received by the Land Commission for such land while allotment procedures are being completed is similarly treated. In all about 140,000 collection accounts are maintained, collection takes place twice yearly and enforcement procedures for the recovery of arrears are undertaken by County Registrars. Pending their recovery, any arrears of annuities proper to the Land Bond Fund must be made good from the Exchequer and arrears of rent are made good from the Vote.

Prior to the High Court ruling in 1982 that the provisions of the Valuation (Ireland) Act, 1852 relating to the valuation of land were unconstitutional, arrears of land annuities were recovered by deduction from the grants paid to local authorities for the relief of rates on agricultural land. This procedure was designed to ensure that the Exchequer would not be at a loss through failure to recover such arrears.

In the course of audit it was noted that arrears of annuities and rents had increased from £700,000 at 30 November 1981 to £2.2 million at 30 November 1985, due by 18,000 farmers of which £2 million represented the arrears in 800 cases. While 309 warrants representing arrears of £700,000 were issued to County Registrars in August 1984 for enforcement, only 81 warrants representing £140,000 had been returned paid by November 1985 and virtually no warrants were issued to County Registrars in 1985.

I sought the observations of the Accounting Officer on the increase in arrears and on the adequacy of collection procedures in view of the significant increase. I also inquired as to the steps being taken to collect arrears and the effectiveness of the County Registrar system for enforcing collection and whether the possibility of collection of arrears by other means had been considered.

The Accounting Officer stated that the increase in the arrears was caused by high land prices and interest rates in the late 1970s and early 1980s with correspondingly high annuity repayments which many annuitants could not meet, the unfavourable economic situation in agriculture after 1980 compounded by the poor weather conditions in recent years, overborrowing by some annuitants adversely affecting ability to pay, expansion of production by some annuitants being restricted because of the milk superlevy and the issuing of warrants of County Registrars becoming less effective as a means of recovering arrears.

Regarding the steps being taken to collect arrears, the Accounting Officer informed me that a series of written reminders was followed, if necessary, by a visit from a Land Commission inspector. If a genuine reason existed for non payment, an arrangement to repay arears over a period of a few years would be accepted; otherwise warrants were issued to County Registrars and if this proved unsuccessful repossession of the land was sought. There had been only seven cases of repossession in recent years because of the major difficulties involved in repossessing land without the agreement of the defaulter and the even greater difficulty of re-allocating it to other farmers subsequently.

The Accounting Officer stated that the issue of warrants to County Registrars had been the traditional way of dealing with chronic arrears cases and in previous decades 80 per cent or more of warrants issued were executed successfully. Following the most recent issue in August, 1984, only 28 per cent of warrants issued were successfully executed representing only 7 per cent of the arrears outstanding. The County Registrars had explained this low rate of return by claiming that they are understaffed due to the embargo on recruitment and overworked due to large increase in the number of Revenue Commissioners’ and other warrants. Furthermore, County Registrars are reluctant to seize goods and defaulters no longer fear the consequences of refusing to pay on foot of warrants.

The Accounting Officer also stated that, while the County Registrars were no longer as effective in enforcing collection as in previous decades, the possibility of collecting arrears by other means had been investigated but none of them offered any prospect of greater success. It was accordingly intended to continue the existing procedures but to concentrate on the larger defaulters already identified and to seek to impose even greater pressure on them.

Mr. McDonnell.—This paragraph refers to the problem of collecting arrears of land annuities which seems to have become more acute since the High Court ruling about the constitutionality of rates on agricultural land. In the first place, the mechanism for recovering arrears by withholding them from grants voted for the relief of rates on agricultural land no longer exists. In the second place, since this remedy ceased to be available to the Land Commission those liable for the annuities have become less willing to pay and the arrears seem to have built up progressively. As you will see there, the standard remedy available to the Land Commission in these circumstances is to seek enforcement through the County Registrar. That does not seem to be very effective. I mention a figure of arrears at 30 November 1985, of £2.2 million. More than 90 per cent of the total is owed by less than 4.5 per cent of the total number of people involved. The total arrears have now gone over £4 million but I am sure the Accounting Officer will have a more up to date figure on that.

346.Deputy Ahern.—I would like to take this opportuity to congratulate Mr. Creedon on his appointment, as I did not do so on the last occasion. I note from the reply that the Accounting Officer stated that the increase in the arrears which went up alarmingly has gone up further still. According to the Comptroller and Auditor General’s remarks, this resulted from the high land prices, interest rates, the super-levy and so on. I would just like to ask the Accounting Officer in that context if the imposition of land tax was unfair considering that the people had not got the ability to pay their land annuities and that their land tax really would have crippled them?

Chairman.—We are in danger of getting comments on policy here. Deputy Crotty wanted to ask about the deficiency of income.

347.Deputy Crotty.—In L.4 a deficiency of income from untenanted lands amounting to £2 million is listed. Could we get an explanation why there is this very large figure for land that is untenanted? Is there any remedy for it or what is the situation?

Mr. Creedon.—The main cost arises from the fact that once the land is acquired it has to be paid for in land bonds and once the land bonds are issued they have to be serviced. In addition to that, there are some losses from the letting of land on hands. There are costs involved there. The main cost arises from the servicing of the land bonds relating to the lands.

Deputy Crotty.—How long is land held before it is tenanted? We had situations where land was held for three, four, five, six, seven or up to ten years. It reverts back to the staff we mentioned previously. There was plenty of work to be done to tenant land. We had staff there with their hands in their pockets doing nothing. There is a loss of nearly £2 million in one year alone.

Mr. Creedon.—I should explain that by “untenanted land” we mean land which is held by the Land Commission and which has not been reallocated. We do not mean that it is untenanted in the sense that it is not let on a short term basis. There is always an interval between the acquisition and the allotment of land and this was one of the problems the court ruling addressed, as to what was a reasonable time for holding land. There has always been a time interval. The acquisition and the reallocation period varies from place to place and from time to time, and has tended to get longer since the trend for acquisition in recent years has been to acquire smaller pieces of land as compared with the old days when one could acquire bigger estates and reallocate them fairly quickly. Because the Land Commission had to depend on smaller estates it was almost inevitable that you had to acquire a few of these before you could start reallocating. That is largely where the interval arises. To go back to the specific point Deputy Crotty raised, as to whether, had the staff been there, there was work to be done, that is the case.

348.Deputy Dempsey.—In relation to the arrears of annuities, has any study been done as to the particular type of farmer who has fallen into arrears? I note from what the Comptroller and Auditor General states that it is a very small percentage of those who actually have to repay annuities. Has any study been done to find out if there is a particular problem? Is it farmers who bought land or took land from the Land Commission at a particular period of time? Has any study been carried out on that?

Mr. Creedon.—Yes, we have broken down the figures in considerable detail. I can confirm the position is as the Comptroller and Auditor General stated. A very small number of the people in arrears account for the bulk of the total. Of the people who are in arrears to the tune of, say, £1,000 or more, you are talking about between 3 and 4 per cent of the total. If you take anything over 15 per cent interest on land bonds as reflecting high land prices, about 60 per cent of those acquired land for which the price was high.

Deputy Dempsey.—Arising from that, I guessed the problem is that small farmers who were looking to expand in the late seventies, early eighties, had to get their land from the Land Commission at very high prices. That is really the reason why this problem has arisen, especially with the unfavourable situation in agriculture over 1983, 1984 and 1985. Have the Department studied any ways in which these farmers could be helped out by rescheduling — I am not saying by writing off the losses — the payments possibly by borrowing Euro currency, or allowing them to borrow Euro currency to pay off the Land Commission and then they themselves pay off a loan to the banks or commercial institutions. Has any study been done to try to resolve this problem? As I see it, it is only going to increase.

Mr. Creedon.—I do not want to get into the area of Euro currency and Euro currency loans. That is a policy area in a sense. Yes, every individual case is looked at. The Department falls over backwards to try to accommodate people who are in arrears, as the Deputy, who seems to be nodding his head, I think agrees. It is a difficult problem for some farmers who acquired land at very high prices. I would stress that no farmer acquired land blindly. He was well aware at the time of what he was taking on. The land annuity is not a bill that comes out of the blue. Any farmer accepting land on allocation from the Land Commission knows precisely what he is letting himself in for. Any farmer who comes to the Land Commission with a reasonable proposition for clearing the arrears is not turned away. Whether there is a need for something more general on the lines that the Deputy suggested is another day’s work and would involve other questions. In general the attitude is to try to accommodate people who are genuine about making an effort to tackle their arrears problems.

Deputy Dempsey.—Just one final question in relation to the disposal of land, now that we have these Land Commission staff back into the Department of Agriculture. You mentioned that it is hoped to dispose of the land within two years, in this correct? I would express the hope that that period would be adhered to and that it will not be on-going just to maintain people in a particular area of employment. We should recommend very strongly that it should be finished within two years. I agree with the Accounting Officer that the Land Commission are facilitating as far as they can those people who have fallen into arrears.

349.Deputy Desmond.—What is the current extent of the arrears? A figure of £4 million was mentioned.

350.Chairman.—Would somebody like to make a proposal as to how we deal with this? Will we get a further report or will be note it?

351.Deputy Desmond.—I think we should note it. The Department is not responsible but we have to express concern about the level of arrears. Nobody is paying anything these days — health contributions, youth employment levies, they pay nothing they are liable for.

Chairman.—We will note it. Since we still have a number of issues to deal with in private session, we will have to postpone the rest of the examination and take it with the 1986 examination.

COLLECTION PROCEDURES FOR T.V. LICENCE FEES

Mr. T. V. Finn (Director General, RTE) called and examined.

352.Chairman.—The first witness this morning is Mr. T. V. Finn, Director General of RTE, concerning the collection of TV licence fees. The position at present is that An Post collect the fees which are paid over to the Department of Communications who, in turn, pay these over to RTE, having paid a fee, first of all, to An Post for so collecting. You are welcome, Mr. Finn.

Chairman.—I will quote from a minute of the Minister for Finance dated 11 June, 1984 in reply to the Committee of Public Accounts in which he stated that the work of TV licence fee collection has now been assigned to An Post. He also said that the programme for carrying out this work will be agreed between An Post, RTE and the Department with a view to having the work done efficiently and economically. Mr. Finn, is there an agreement between yourselves, An Post and the Department that the system is working efficiently and economically?

Mr. Finn.—I would like to say at the outset that the authority has a concern with regard to the overall position regarding levels of evasion and costs of collection. The present level of evasion is about 17 per cent and the costs of collection are a little over 10 per cent of the gross proceeds. By reference to experience in Europe, both of those figures would be on the high side and it is the Authority’s view that they should be capable of substantial reduction. It would be our hope that there will be reductions in these costs over the next couple of years, in addition to what has already been achieved in the past couple of years by An Post. I should say as well that the Authority’s formal position with regard to the whole question of broadcasting licence collection is that they would wish to have responsibility for this task but we might be persuaded away from that posture if the levels of both licence evasion and costs of collection are reduced to what we would see as more acceptable levels. As I have said, the present level of evasion is about 17 per cent and the costs of collection are somewhat over 10 per cent of the gross proceeds. What we would like to see achieved within the next couple of years is an evasion level of 10 per cent and a cost of collection of 8 per cent.

Chairman.—You mentioned a figure of 17 per cent evasion but research has shown that RTE’s view in the past was that 75 per cent of households have a TV licence, 8 per cent of households have no set and 17 per cent of households are without a licence. That is 17 per cent of 92 per cent, not 17 per cent out of 100 per cent, and, therefore, if that is correct, the evasion rate is higher that 17 per cent. Am I correct in saying that?

Mr. Finn.—Let me give you the basis on which we arrive at the figure of 17 per cent.

As at February the television set count was 956,000. Our figures suggest that there are about one million households in the State and obviously the vast majority of them have a television set. This figure of 956,000 is not one that we have calculated ourselves, it is one which is independently computed by an external agency. At the same date, February 1988, the number of current licences — I would like to amplify and clarify the term “current” in a moment — was 828,000 so there were approximately 130,000 sets which were not covered.

Mr. Finn.—February 1988. I said I would clarify further the figure of current licences. A small number of that 828,000 would not actually have been fully paid up-to-date and it is the gap between something over 800,000 licences and 956,000 which, in our view, is the evasion figure.

Chairman.—Therefore, there are about 150,000 TV sets unlicensed in the State.

Chairman.—In regard to efficiency of collection, you would like to see the cost of collection down to 8 per cent from the existing 10 per cent and the evasion rate down from something over 17 per cent to 10 per cent. At present the estimates for 1988 are that £49.37 million is collected in TV licence fees, of which £5.18 million will be retained by An Post for collecting the fees on your behalf or, to be more accurate, on behalf of the Department of Communications. You are suggesting that that figure could be cut substantially. What do you think that fee of £5 million that An Post are at present charging the Department for collecting the fees could be reduced to?

Mr. Finn.—On the basis of experience in Europe, we believe that it would not be expecting too much within the next two to three years — by 1990 — to have what is now somewhat over a 10 per cent collection figure reduced to 8 per cent. In a number of European countries the cost of collection is a good deal less than 8 per cent. If that were achieved it would obviously mean that the £5 million figure, representing something over 10 per cent would be reduced by one-fifth so it would mean a saving of an extra £1 million per annum or so. It would be a figure of that order.

Chairman.—Therefore, we could save £1 million if the collection costs could be reduced to the figure you suggest?

Mr. Finn.—One has to refer at this point to the legislative arrangements and the fines which apply with regard to broadcasting licences because they have a bearing on the matter. There is legislation, Chairman, as you know, going through at present which will very substantially increase the maximum fines for default in this regard. At present the fine is very low in relation to the licence fee. The new legislation proposes that for a first offence there could be a maximum fine of £400 and for a second offence, a maximum fine of £800. Assuming this legislation goes through — as far as I understand Second Stage has been passed in the Dáil — that alone would help An Post considerably in their licence collection efforts because the related publicity could accurately say that if you do not have a television licence you are leaving yourself open to a maximum fine of £400 or possibly £800. The figures show that the vast bulk of the public pay their licence but it is that important element of 15 per cent or so who do not pay that makes all the difference. If this legislation goes through it would help to speed up the responses to requests for payment. Secondly, matters such as additional computerisation, which An Post are engaged in, would help considerably in reducing costs as well.

Chairman.—The number of licences bought in 1983 was 698,000. That had increased to 797,000 at the end of 1987, an increase of almost 100,000 over that four year period. Would that not indicate that the system of pursuing TV licence defaulters is efficient? Would you agree that, taking the figure of £49.37 million for 1988 and dividing it by 800,000 and taking the 17 per cent you suggest into account, those who pay their TV licences are paying in the region of £14 each to subsidise the spongers who are not paying their TV licences? Is that a reasonably accurate assessment?

Mr. Finn.—Considerable progress has been made in the matter of licence collection. The evasion figures have been coming down and one has to record that fact, particularly with regard to An Post’s efforts in the last few years. We are not saying that the system is inefficient; we are saying that there is room to make it more efficient. Considerable progress has been made in the last few years but our contention is that future progress is possible in the ways I have mentioned. Undoubtedly, it is the case in any situation like this where there is a statutory responsibility for people to pay their fair share that if some do not pay, in an indirect sort of way those who pay are subsidising or subventing the defaulters and that is not fair or proper. If everyone paid their share, the need for increases from time to time in the future would be diminished by that amount.

Chairman.—The fact is that the present licence payer is paying about £14 on average to subsidise the person who is not paying.

Chairman.—If at present you were able to collect from all of those who have a TV licence and you were still to have the same revenue, £49.37 million, you could reduce the fee for existing payers by about £14 per household.

Chairman.—There are other Deputies offering but I just want to put on record that the whole system is very cumbersome. An Post collect the fees, pay them to the Department, the Department pay 90 per cent to you and pay £5 million to An Post as a fee for collection. You have not indicated what you think should be done, first of all, to make the system less cumbersome and, secondly, to make it more efficient and to get the collection costs down to 8 per cent which you refer to.

Mr. Finn.—With regard to the system being less cumbersome, I said at the outset that our formal position was that the Authority would wish to have responsibility for licence collection but that is not to say that we would want to exclusively operate the licence collection system or process. If we had responsibility for it, undoubtedly we would use An Post as the principal agency. They have an unrivalled network of retail outlets throughout the State and that is an asset that one could not ignore. From the point of view of the individual, the facilities which are available at present for more frequent payment on an instalment basis are not in the system and that is a difficulty. There is a scheme of saving stamps in operation so that it is possible on a voluntary basis to save up for your next licence and you can, therefore, spread the outlay over a period of time. Perhaps more flexible methods of payments with a variety of channels of access to the individual, whether it be through banks with standing orders, the Post Office or a whole range of other outlets, would help. There is a point of diminishing returns in relation to the number of instalments per annum that one can pay because if the number of instalments is large the administrative costs in processing the more frequent payments might erode the benefit from the fact that one can pay smaller amounts more frequently. The system at the moment provides for the payment of fees from An Post to the Exchequer and from the Exchequer to us via the Department of Communications. That is a bit cumbersome and if we were the responsible agency for collecting fees I assume the arrangements would be that all the funds would go directly to us. If we were the responsible agency we would like to see greater facilities available to the individual to pay with sonewhat greater frequency but that is not the whole answer because administrative costs have to be taken into account as well.

353.Deputy McGahon.—I would like to refer to what I consider to be a malpractice by a State body, An Post. Before I refer to it I would like your comments on the fact that there are 150,000 unlicensed TV sets. I would suggest that most of them are sets that have been smuggled into this country, of which you are unaware. The level of smuggling of electrical goods and TV sets has been horrific along the Border region in recent years. Last Christmas An Post distributed a colour brochure on behalf of a Newry electrical goods retailer advertising the undeniable attractions of buying TV sets and videos in the North of Ireland. This brochure was delivered, wrapped in an appeal for Christmas funds for St. Vincent de Paul. Are you aware of this and do you accept that An Post are acting as agent provocateur in telling people where to buy their TV sets and electrical goods outside this State? You will be aware that an agent in the South is required to inform RTE that he has sold a set to Mr. X. This does not apply to retailers in the North of Ireland. Therefore, the State is losing excise duty on the one hand and is also losing £62 per annum per television set. An Post are riding two horses at the one time: they are collecting £5 million in this State and they are also advertising the wares of North of Ireland contractors. Do you think that is fair? Are you satisfied that will continue or will you take steps to ensure that that practice is discontinued? Are you aware that people in parts of the country cannot receive RTE? People in the Carlingford area in my county cannot receive RTE and yet they are being charged £62 for a television licence. In that respect would you agree that you are leaving yourselves open to a charge of being called “spongers”?

Mr. Finn.—As the Deputy said, there is an obligation on a dealer in the Republic to advise the Department of Communications about sales of receivers so that they can be followed through. I am not aware of the practice you referred to. I do not know about it all and for that reason I cannot comment on it. With regard to any television set that is sold in the Republic, one would hope that the dealers would discharge their responsibilities fully and advise the central authority on that; otherwise there is the possibility of a loss of revenue to us.

Deputy McGahon.—I accept you are unaware of that practice but if the circumstances I have outlined are correct, would you be concerned about it and would you take steps to ensure that it does not happen again? Do you accept my suggestions that An Post cannot ride two horses at the one time?

Mr. Finn.—We have a very close working relationship with An Post. Their performance in relation to sales in monitored very closely by us. We have very regular review meetings with them if things do not seem to be working out according to budget. We have a particularly close working relationship. We will have an early opportunity of discussing with An Post the point you raised. Because you have drawn this to my attention we will raise it with An Post at our next liaison meeting.

Deputy McGahon.—In relation to those people in different parts of this country who, for technical reasons, are not receiving a service from RTE, do you feel it fair that people should pay for something they are not receiving? Would you agree that you are leaving yourselves open to a charge of being called “spongers of the airwaves”.

Mr. Finn.—The situation which the Deputy has described is one we would be concerned about. The formal legal position is that the licence is paid for possession of a receiver whether it is in working order or whether the signal can be received. That is the formal legal position. In practice people feel, as is reasonable to expect, that if they are paying money to RTE they should get a service from us even though that is not the legal basis of the licence. The number of areas and households which cannot now receive RTE television signals is very small. It is less than one per cent but these areas are still a matter of concern to us. I regularly get letters from Deputies pointing to reception difficulties or the impossibility of reception, as happens in a few areas in the country and we do follow these up. Although we have virtually 100 per cent coverage people in some areas still have reception difficulties. If the people in these areas or any of their public representatives write to us the matter will be followed up.

354.Deputy Foley.—In regard to the method of collection, you spoke about the payment of fees from An Post to the Exchequer to RTE and that if you were the responsible agency greater frequency with regard to the method of payment would be in operation. Do you think you would be in a position to improve the method?

Mr. Finn.—I believe we would. With regard to the business generally of dealing with the public and collecting money from them, as Deputies will know we have a major share in a cable company and the annual subscription that is required from subscribers can be paid in a variety of ways. It can be paid annually, semi-annually or quarterly and there are also a variety of channels through which it can be paid. We have substantial experience through our cable subsidiary of collecting significant sums of money, well over £10 million per annum, from the public in small sums. We have that experience and if we had responsibility for licence collection we could bring that experience to bear on the question. I am not suggesting that if we had responsibility for it we would be the actual collection agency. There are many efficient agencies such as An Post and a variety of other financial institutions, who could be used as appointed sub-agents. We do have experience in this field.

Deputy Foley.—It is accepted that approximately 15 per cent of television sets are unlicensed at present and approximately £5 million has been paid to An Post by way of commission. If you were to change, the obvious people to handle the collection of these fees would be the local authorities who are starved of finance and who already have a system for the collection of funds. It would mean a boost in income for them if they got the opportunity of collecting these television licence fees. There is an obvious system already set up within each local authority because they are already involved in the collection of money.

Mr. Finn.—That is an interesting suggestion. In any of the thinking we have about this we have not drawn up a list of eligible institutions and that, therefore, all others are ineligible. If given the responsibility, it is along with other suggestions, an interesting possibility.

Mr. Finn.—I do not know enough about it to be able to recommend it but I can say that we would look at them to see whether they could provide the service we want at a cost that is possible. They would be looked at as possibilities.

355.Deputy Colley.—Let me come back to what you said about the difference between the percentage of defaulters here and in other countries. You said it was higher here. Has any research been done on why we have a substantial number of people who are defaulters?

Mr. Finn.—We have not carried out any detailed research on this. I think a lot of it has probably to do with the legislative arrangements in other countries. In some countries the fines are quite heavy and very soon after the expiry date of licence, if it is not renewed, there is a very immediate follow-up by the police. I think that in Norway the police can enter a household and take away the set. The apparatus of the legislative system in other countries is more stringent than it has been here. I am not saying that the way other countries do it is good and the way we do it is not good; I am simply saying that there is a difference. Perhaps some of the legislative arrangements in some of the European countries might not find favour with the Irish public. In relation to the level of fine, just to consider that alone, there is no doubt at this stage that the fine is no deterrent at all and that it urgently needs to be updated. As I mentioned earlier, the legislation on that is going through and my belief, assuming there is continued improvement in An Post’s operation and with the new legislative provision for £400 and £800 maximum fines, is that there will be a further advance. In our experience it is very difficult to accurately compare like with like with other European countries but the figures in some of them are remarkably low. For instance, the number of defaulters in Switzerland is one of the lowest — the last figure I have is about 1 per cent — but the broadcasting licence there is tied in with the telephone system and the billing of the telephone system. Virtually every household apparently has a telephone and the whole thing comes together quite nicely. In Ireland it is only now that, say, telephones are becoming more common in households and I dare say if Ireland had the Swiss situation we, too, could have a 1 per cent level.

Deputy Colley.—I want to follow through on the possible research that has been done. Obviously you have done research regarding legislation in other countries but not necessarily on those who are defaulters. Is there any evidence that there are particular groups who are prone to default and, if so, would it be suitable that the advertising campaigns that go on from time to time about the obtaining of licences would be directed in a particular way at those groups?

Mr. Finn.—An Post are the body who have the records of who actually have licences and who do not so our knowledge of the situation is inadequate. In relation to advertising, the overall impression I have is that defaulting is not necessarily confined to any single socio-economic grouping. The impression I have is that defaulters are as likely to be found among the better-off as among the poor and on that account the advertising which we do has a fairly general thrust to it. It is not angled in a particular way, and this is in my own view, defaulters are spread right throughout society but An Post might have better information.

Deputy Colley.—Finally, in relation to the licence take-up being increased, the Chairman referred to the subsidisation of those who do not subscribe at present by those who do subscribe. Is it RTE’s view that a drop in the licence free would be possible if they were closer to a 100 per cent take-up or would they see it as a possibility to increase their own funding.

Mr. Finn.—We are talking about fairly theoretical possibilities but that is the arithmetic of the situation. There is no system in which there is no evasion and our belief is that if that came down to 10 per cent in the next few years, and perhaps a bit below that, we would be down to a more generally respectable level. I think the 100 per cent proposition is a very theoretical one.

Deputy Colley.—Forgive me, but I used that somewhat expansively. Nevertheless there is substantial room for improvement.

Mr. Finn.—I hope the reality is that evasion will progressively decrease and that in practical terms instead of it being possible for everyone to have a lower licence fee, because these things take time, that the evasion rate will gradually come down and that improvement will mean that the kind of occasional increases we would need would be spaced further out. There is no doubt that if everyone paid their licence fee overnight we would be £8 million or £9 million per annum better off and that would certainly enable us to pay off debts and so on. The reality is that the 100 per cent collection rate is theoretical, but that is not to say that one should not continually try to reduce the level of evasion. I think that is the way the public will benefit and the need for increases will be much less.

356.Deputy Naughten.—First, I want to refer to the remarks made by Deputy McGahon earlier on. I am horrified that a semi-State body would distribute literature which encourages the illegal importation of goods and this deprives the State of vast revenue. By advertising the goods this encourages people to illegally import them. The Committee must view this very seriously. I listened to Mr. Finn explain the number of defaulters and level of evasion. As the Chairman rightly said, everybody could buy a licence much cheaper if the level of evasion was reduced. However, I am around long enough to know that licence fees will not be reduced but if the level of evasion was reduced this would eliminate the need for increases for a number of years. Mr. Finn referred to the increased fines and felt that the new Bill now going through will deal with the problem of evasion. Have RTE and the body who are doing the collection sat down and discussed how the level of evasion or number of defaulters could be reduced substantially?

Mr. Finn.—Yes, we do that all the time. As I said earlier, we have a very good and effective working relationship with An Post and the achievements of the last few years have been quite significant. The licences current at the end of February 1986 were 766,000 and the comparable figure at the end of February 1988 was 828,000. There is an improvement of 62,000 licences in two years which, because they are not all colour licences cost around £60 each. An Post and ourselves, working together, have paid considerable attention to this. We have put a lot of effort into improving this evasion figure and that process will continue. We work regularly and targets are set. One has to note that An Post achieved their sales target for the financial year 1987 and their performance this year — this is the first quarter — suggests they are on target. It is a matter of major concern to us because it represents about £45 million and about 45 per cent of our income. There is a continuous review of the areas in which sales are not coming up to target. An Post pass the word down the line and they expect and get a response from the post offices. It is a continuous process.

Deputy Naughten.—We are talking about one household in five not having a licence. With that huge level of evasion and having regard to all those who are unemployed, has a once-off sweep of the country ever been considered to eliminate evasion once and for all.

Mr. Finn.—The process is a continuous one and there have been special campaigns from time to time which have been effective. It may be a little early for a blitz on the hard core because — and this is a matter of judgment — I feel that a blitz on about 15 per cent of households might be a bit unrealistic. In a few years time when the evasion level has come down to 10 per cent or maybe a little less one could begin to focus very hard on the hard core because they would account for the residue that would remain and one could commence an all-out onslaught on them. Progress has been made in the last couple of years and as I have said an additional 60,000 households or so have been brought on. It might be better to allow this continuous process to continue for another couple of years as it has produced results and if it continues to do so we should proceed in that way. However, I would agree with you that the time will arrive when, I hope, one will be looking at a hard core of a good deal less than 10 per cent. Perhaps, that might be the time to undertake the blitz.

357.Chairman.—The Secretary of the Department of Justice is waiting and we have another matter to raise with Mr. Finn.

Deputy Naughten.—I have not taken up too much time so far, Chairman, and this is my final question.

Deputy Naughten.—I put it to you. Mr. Finn, that now when the level of evasion is 15 per cent is the time to undertake the blitz campaign rather then when you have it down to 10 per cent?

Mr. Finn.—As I have said, An Post are after that money. There are regular more intensive campaigns. Certainly it is something we will consider.

358.Chairman.—I am calling on Deputy Dempsey to be followed by Deputy Desmond and then we will move on to the second item because the Secretary of the Department of Justice is waiting.

359.Deputy Dempsey.—I would like to ask one brief question in relation to the collection of licence fees. Are you aware that a problem could arise for a person who goes into a post office other than his own post office to purchase a licence? I know of a number of cases where post offices have refused to take the licence fee from somebody because it was not their local post office. Are you aware of this problem or has it ever been raised with An Post?

Mr. Finn.—No, I am not aware of it but, as you have described it, obviously it exists. In fact, I thought one of the strengths of the present system was its flexibility in that you could pay your licence fee at any post office. I spoke earlier about the need for flexibility in collection and I understood, whatever about its other defects at present as regards inflexibility, that that was one of its assets. That is something that we can ask them about in our regular review discussions.

360.Deputy Desmond.—Do you have any figure for the number of new television sets bought each year?

Mr. Finn.—I do not have an accurate figure but I could hazard a guess. I could be quite wrong but I have a figure of about 40,000 or 50,000 in my mind as being the likely figure. In general, the figures we have suggest that people do not regularly renew their receivers. They tend to hold on to them. I say that on the basic of some figures we got in regard to the number of selector buttons on various sets. A substantial number of sets still have only five or six collection buttons which means that they are quite old. Some years ago we phased out the 405 television line system and now broadcast only on the 625 line system. The 405 line system was used when television started in Britain and we used it initially as well. Soon after that the writing was on the wall for the 405 line sets but yet they were still there ten years later. I think the figure might be somewhere between 30,000 and 50,000 but the trade would be able to give you a more accurate figure. These figures have been more difficult to get in the last couple of years because, unfortunately, there has been a certain amount of cross-Border traffic which does not come into the official statistics.

360.Deputy Desmond.—Do RTE have any figure for the number of video sets in the country?

Mr. Finn.—We do but it is even more difficult to get a correct fix on this. I have seen wide ranging figures but I would guess that between 20 per cent and 25 per cent of television households have videos. I have seen widely differing figures quoted in that regard but I think that is the order of it.

Deputy Desmond.—That would mean that there are between 150,000 and 200,000 videos in the country.

Deputy Desmond.—Technically a house-hold which has a number of sets is supposed to have a licence for each one but in practice this is almost impossible to police.

Mr. Finn.—This is a matter we raised a few years ago with the then Department of Posts and Telegraphs as it was then. We raised the possibility of instead of having a uniform licence for a receiver or a number of receivers that there would be a range of broadcasting licences. For instance, if there was a commercial advantage for a hotel to have 300 receivers in 300 bedrooms perhaps something further should be added by way of licence and so on. We were looking at it more from the commercial side rather than on ownership of multiple sets. We discussed it with them some years ago but they felt because of administrative difficulties such a scheme would not be feasible. At the moment a unitary licence is issued.

Deputy Desmond.—Therefore 120,000 houses out of a total of 900,000 would have multiple sets — colour and a black and white.

Deputy Desmond.—With the amount of video material that is available, such as computer games, video games, home fax machines and electronic games, is the idea of having a single licence for a black and white or a colour television set rather outdated? Would it not be far better to put a VAT rate on electronic receiving equipment, be it portable personal telephones and all that kind of material, and give RTE a specific increment as this would and the need to chase after individual licences, both for television and motor vehicles?

Mr. Finn.—I have two comments to make on that. First, if it were incorporated into the VAT system it would represent once-only income to us and obviously we need regular income. Secondly, to refer back to the position in Norway, it used to be the case, though it may not be the case at the moment, that a certain element of the sales tax on radios, televisions and related equipment went to the broadcasting organisation for development of the service and so on. The use to which it could be put was carefully regulated. That is one option for us but it should be remembered that it would represent once-only income and to run this service you need annual income.

361.Chairman.—There is one other matter we wish to move on to, so if you have information on the evasion rates in other countries perhaps you might forward it to the Committee. We are using a figure of 17 per cent. As far as I can make out, 75 per cent of households have a licence, 8 per cent have no set and 17 per cent have a set but no licence. That means that we are not talking about 17 per cent out of 100 per cent but rather 17 per cent out of 92 per cent. Therefore, the evasion rate is one in five or something of that order. That means that about £11 million or £12 million in TV licence fees is not being collected. That is a very substantial figure and is something of a scandal. It is not your responsibility but it is an enormous amount of money.

Mr. Finn.—Let me make one quick response without getting into details or figures. I would differ with you on the percentage of households which have no television sets. The figures we have suggest that there are 956,000 television households. There are about a million households in the country. Therefore, we would say that your figure of 8 per cent should be about 5 per cent. I do not think the precise figures are important, as overall there is very substantial evasion.

Chairman.—We are talking about an evasion rate of one in five and about £10 million. I have estimated it at between £11 million and £12 million but it is of that order?

Chairman.—We may come back to this again when we meet with officials of the Department of Communications and we may wish to discuss it with An Post. Would you let us have a note in the meantime?* We will move to deal with the other matter we wish to raise with you. The Secretary of the Department of Justice who is due for examination is waiting outside.¹

362.Deputy Dempsey.—I want to raise with Mr. Finn the purchase of a site by a joint venture company, involving RTE and Radio Luxembourg, at Clarkstown, Summerhill. I understand that the purchase price is in the region of £100,000 but as yet planning approval has not been received for the site. I would like to hear Mr. Finn’s comments on the spending of this kind of money — it is public money — on a site for which planning approval has not yet been received.

Mr. Finn.—First, RTE is one of two shareholders in Radio Tara. The other shareholder is CLT, generally known as Radio Luxembourg. Secondly, I am not an executive of Radio Tara — I am a non-executive director on the board; thirdly, because Radio Tara is a private company the amount of information that I can provide or the range of comments I can make is very limited. Generally, funding for Radio Tara will come from three sources; from a loan from the European Investment Bank, from a loan from CLT, which is in effect Radio Luxembourg, and from leasing arrangements for equipment with Irish financial institutions. Any indebtedness on these three accounts will be repaid from the cash flow generated by the project. With regard to the expenditure to date, whether on land or anything else, all the funds for those purposes have been provided through the Radio Luxembourg loan that I mentioned as an element of the total financing, so RTE have not expended any money on the acquistion of assets to date. It is all being done through loans from our partner.

Deputy Dempsey.—If the company were to go bankrupt for one reason or other, would RTE have any liability in respect of loans or anything else?

Mr. Finn.—I am not authorised to speak, for the reasons I have mentioned, to any great degree on the Radio Tara project. It is a private company funded in the way that I have described. No public funds are going into it.

Deputy Dempsey.—How are RTE going to get £2 million to £3 million profit out of it if it is a private company and if RTE will have no input?

Mr. Finn.—Because of the contractual arrangements that we have made with Radio Luxembourg those possibilities exist.

Deputy Dempsey.—What you are saying is that this is really a Radio Luxembourg station and because of the contractual arrangements made the profits will go to RTE as a payment for allowing Radio Luxembourg to use the long wave band that Ireland have been allocated under the 1975 agreement?

Mr. Finn.—No, Radio Luxembourg will not be using the long wave band, Radio Tara will be and we envisage that this project will be very successful commercially. It is very unfortunate that comments have been made recently to the effect that it will be a loser as it is difficult enough in these days to get a project together which will make money for Ireland and which will add to employment in Ireland in a competitive field. It is difficult enough to get these projects together. We have been working on this project for about four years. Very careful and detailed discussions have been held with a variety of people including Radio Luxembourg. All the evidence suggests that it will be successful financially. Radio Luxembourg believe that there is considerable interest in advertising agencies both here and in Britain. You may have seen recently that a media group in Britain expressed considerable interest, even at this stage, in acquiring a substantial stake in the operation and it is unfortunate that there should be these suggestions that it is going to be a loser. All the evidence suggests and our experience in this business tells us that it will be very worthwhile and significantly profitable. We will share in those profits and so will our partners.

Deputy Dempsey.—You did not answer my question. Obviously, Radio Luxembourg are not going to pay £2 million to £3 million per year to RTE if they have no financial stake in it and if this is the profit that is eventually going to be made. They are not going to pay that for nothing. Is it not true that Radio Luxembourg, through this company, are going to use the long wave band that this country has been allocated that it is not an RTE venture at all but rather a back door operation by Radio Luxembourg to try to further penetrate the British market? Is that not essentially what it is?

Mr. Finn.—No, it is not essentially what it is. I have explained it already. This frequency was allocated initially to Ireland but then it has to be alloted to some user. Ireland cannot broadcast. It has to be through some operation and the operation is Radio Tara in which RTE have a majority share. I have answered the question about the money for the land. The answer is that no public funds were involved. The money for that acquisition came from a loan to the company from Radio Luxembourg. I am not at liberty, because of the particular circumstances, to say any more than that.

Deputy Dempsey.—Let me put this to you because you are still evading the point that I am making about the wave band that we have. I will finish on this particular one. Is this another means by which Radio Eireann or RTE are trying to establish a national radio station to avoid the recent legislation where they have been excluded from opening a third broadcasting station?

Mr. Finn.—No, that is not the purpose, to try to circumvent the present legislation. In fact, this project — as I have said we have been working on it for four years — was approved in principle by the previous Administration and it is now part of the national recovery plan which has been put together by the present Government. It had been approved for quite a long time and was in existence as a project long before the present legislation was introduced in the Dáil last November.

Deputy Dempsey.—Can you tell us when were the studies carried out into the prospective viability of this? Was it three or four years ago?

Mr. Finn.—That is when they were first carried out but it is a continuous process. The objective analysis of this project indicates that it will be commercially successful.

Deputy Dempsey.—Have any studies been done since the announcement of the setting up of three commercial stations in the UK?

Deputy Dempsey.—What you are telling us, Mr. Finn, is that this is not an RTE project at all?

Mr. Finn.—I did not say that. I said we had not paid any money. Obviously we had to put a small amount of money in for the initial share capital, that is, £15,000.

363.Chairman.—We have pursued this as much as we can. Thank you very much Mr. Finn. I do not want to part on a sour note but behind you there is a correspondent from the national newspapers and, indeed, a correspondent from RTE, but because RTE have not kept to their agreement with the House, unfortunately we cannot broadcast the proceedings going on here today. You know about that, of course, because we have had an exchange of letters. I do think the Oireachtas should not be taken for granted and that when you make an arrangement with the Oireachtas to broadcast committees you should broadcast committees. I have already written to you about that. I do not think we should be taken for granted because there are other alternatives which will open up to the Oireachtas. I would just ask you to give some thought to that. I do not expect you to respond to it now, but there is an agreement which gave you the right to broadcast the House which included a duty on your part to broadcast committees which you have not done.

Mr. Finn.—I agree that it would be unfortunate if we finished on a sour note. We do not take the House for granted. I must say that first of all. Secondly, the question of coverage of committees is a logistics problem. In fact, it is more a logistics problem than a matter of principle. Finally, I think there is something of an open question about the matter of privilege at proceedings such as this and our legal people felt we needed some further guidance.

Chairman.—The same question of privilege applies to all those journalists at your back. I am not asking that you broadcast live the proceedings of the Committee, just that they be broadcast. That is the agreement that you have with the Houses of the Oireachtas and you have not kept to that. However, we have the Department of Justice waiting outside and this is not a matter which is on the agenda this morning. I would ask that you give some consideration to it. Thank you for your very frank exchange and for the information you have supplied here this morning. It will be very useful to us. We may have to talk to An Post and we will certainly be talking to the Department about the TV fee collection again. Perhaps you would let us have the information you agreed to send on.

VOTE 26—COURTS

Mr. P. L. McDonnell (An tArd-Reachtaire Cuntas agus Ciste) and Mr. C. Gallagher (Department of Finance) called and examined.

Mr. D. Mathews called and examined.

364.Chairman.—Sorry for the delay. We had the Director General of RTE whose examination went on a little bit. We will go straight into the paragraphs. Paragraph 25 of the 1985 Report of the Comptroller and Auditor General reads:—

Circuit Court Office

Outside the cities and counties of Dublin and Cork, Sheriff duties involving the execution of court orders, etc. are the responsibility of County Registrars acting as Under-Sheriffs.

It was noted that irregularities totalling£4,711, perpetrated between February and September 1985, by an officer operating the Under-Sheriff’s account at a Circuit Court Office came to light fortuitously rather than as a result of the operation of the system of internal control. As the amount falls to be made good from voted moneys I inquired why the system of internal control failed to uncover the irregularities, whether the system had been reviewed and, if so, the outcome of such review.

The Accounting Officer has informed me that the failure to uncover the irregularities earlier was due to the reduced level of supervision in the Under-Sheriff’s Office as a result of the Post of Chief Clerk remaining vacant since June 1982 because of the embargo on the filling of certain vacancies. The officer found responsible for the irregularities was one of three Clerical Officers, each with separate financial responsibilities, whose supervision would normally have been primarily the responsibility of the Chief Clerk. It was not possible for the County Registrar himself, in the absence of a Chief Clerk, to provide an adequate level of supervision over a long period as he was already fully engaged in carrying out his normal court and other statutory duties.

The Accounting Officer stated that sanction to fill the post of Chief Clerk was given recently but that in the meantime the County Registrar exercised supervision at the expense of other work appropriate to his function.

Mr. McDonnell.—What arises here is that the Vote has had to make good moneys mis-appropriated in the courts which were not really public moneys but belonged to one or other of the parties in civil actions and were, so to speak, passing through the court and under its control. The Department of Justice which is responsible for the staffing of the courts and for ensuring that internal controls are adequate have, in fact, recognised that the operation of the internal control procedures in this particular area was not as good as it might have been at the time. The Accounting Officer has explained the difficulties which gave rise to that and with which the Department were trying to cope. The critical post which was mentioned of chief clerk has been filled and the Department, I understand, are undertaking a review of the accounting and control procedures in this area and taking steps to ensure that they are properly carried out. I hope that this will result in this kind of thing not arising again.

Chairman.—I do not think we need spend too much time on this. Has the money been recovered?

Mr. Mathews.—No, the officer responsible was prosecuted and subsequently dismissed but the money was not recovered.

Mr. Mathews.—Yes, the proper supervisory structure has been restored. It is a small office. The Registrar is the titular head of it but the key supervisory job is that of the chief clerk. At the time this happened the chief clerk’s post had been vacant for a year or two. That post has been filled so that the normal supervisory structure is restored there.

Mr. Mathews.—We are as happy as we can be given the staffing position. We have a system of inspectors who go around to see that every court office is examined on a regular basis and also on a random basis.

Mr. Mathews.—We have. What happened here related to one individual. There was nothing wrong with the procedures. If one person takes it into his head to kick over the traces, there is very little you can do about it except to catch the thing as soon as it happens.

VOTE 24—OFFICE OF THE MINISTER FOR JUSTICE

Mr. D. Mathews further examined.

365.Chairman.—Paragraph 27 of the 1986 Report of the Comptroller and Auditor General reads:—

“Expenditure in excess of amounts authorised to be issued from the Exchequer

To enable the services of public departments to be carried on pending the passing of the annual Estimates by Dáil Éireann, Section 2 of the Central Fund (Permanent Provisions) Act, 1965 authorises the Minister for Finance to issue from the Central Fund in any financial year for such a service a sum not exceeding four-fifths of the amount appropriated for that service in the preceding financial year. It is the responsibility of each Accounting Officer to see that expenditure from each Vote under his control is limited to that amount until the amount provided in the current year’s Estimate is voted by Dáil Éireann.

Reference was made in paragraph 6 of the Report for 1974 to instances where expenditure from Votes in excess of that authorised by the Act had been incurred and following consideration by the Public Accounts Committee at that time, the Department of Finance emphasised to all Accounting Officers their responsibility to ensure that at all times expenditure is kept strictly within the amount authorised by Dáil Éireann. The Accounting Officers were instructed to set up adequate monitoring arrangements in respect of payments from Votes for which they are responsible so that when payments are approaching the limit authorised under the 1965 Act they would take steps to avoid an excess by the timely presentation of the relevant Estimate to Dáil Éireann.

It was noted in the course of audit that the amount authorised to be issued under the Central Fund (Permanent Provisions) Act to meet the exenditure from this Vote pending the passing of the 1986 Estimate was £15,060,000, but that expenditure of £16,544,410 had already been incurred before the Estimate was passed on 27 June. I asked the Accounting Officer for his observations.

He informed me that the excess expenditure was unavoidable as the amount of £15,060,000 expendable up to the passing of the Estimate proved to be inadequate to discharge the abnormally heavy liabilities which arose in the first six months of 1986 in relation to the Stardust Compensation Tribunal and the Kerry Babies Tribunal. The provision for these two exceptional items in the 1986 Vote of the Office of the Minister for Justice increased the Estimate for the Vote from £18.4 million in 1985 to £29.1 million in 1986, while the sum expendable up to the passing of the Estimate was based on the 1985 Estimate of £18.4 million.

He stated that the Department of Finance had been advised as soon as the possibility arose of expenditure in excess of the authorised issue being incurred. In the circumstances surrounding the Stardust tragedy, delay in making compensation payments awarded by the Stardust Tribunal was not considered an option. While every effort had been made by the Department of Justice to have the Estimate taken in the Dáil at the earliest possible date and it was listed for debate on 20 June, it was not taken until 27 June due to the intervention of more urgent business.

The Accounting Officer also stated that the circumstances in this case were entirely exceptional and that he did not expect a recurrence. Departmental expenditure was monitored on a monthly basis and while it was not feasible to do so more frequently at present, this might become possible with the implementation of planned computer developments.”

Mr. McDonnell.—I am drawing attention here to a breach of the basic principle of parliamentary control, that is to say, that expenditure is limited to the amount authorised by Dáil Éireann. The Accounting Officer’s explanation, which is incorporated in the paragraph, outlined the exceptional circumstances relating to that particular vote in 1986. As you know, if the Estimates are passed before the summer recess it should only be in exceptional circumstances that four-fifths of the previous year’s estimate would be insufficient for a period of half of the following year. Notwithstanding that, the level of expenditure should in any event be monitored just in case there are exceptional circumstances such as arose in this case. This was all regularised and overtaken by events when the estimate was passed in June, 1986, but it is a question of a breach of the principle that you must not incur an excess vote.

Chairman.—Mr. Mathews, you have assured the Comptroller and Auditor General already that the circumstances in this case were entirely exceptional and that you do not expect a recurrence. There has not been a recurrence, I take it?

Mr. Mathews.—As far as I can ensure it. The Department of Finance instruction for dealing with something like this, if it is seen to be arising, is that we should take every step to have the Estimates presented on time. In this year we made every effort to have them presented in time but, due to other extremely urgent parliamentary business we were not successful. We exceeded the limit for a very short while before the estimate was actually passed. We are aware of the seriousness of what happened the thing and we will do everything possible to ensure that it does not happen again.

VOTE 25—GARDA SÍOCHÁNA

Mr. D. Mathews further examined.

366.Chairman.—Paragraphs 28 and 29 of the Report of the Comptroller and Auditor General reads:—

Subhead B.2.—Office Machinery and other Office Supplies

The notes to the Appropriation Account for this vote include reference to a sum of £285 written off due to a duplicate certification for payment by the Barrack Master’s Office at the Garda Depot in January 1985 of an invoice for the supply of computer equipment. The cost of the equipment was DM 633,059 (£200,000 approximately) and the amount written off represents the charges agreed with the bank for the cancellation before issue of a duplicate bank draft for this amount which was purchased by the Garda Claims Section of the Department’s Accounts Branch. When sanctioning the write-off in May 1986 the Department of Finance, while nothing that the Department of Justice intended to review the internal control and accounting procedures in the Barrack Master’s Office, directed that the internal control systems in the Garda Claims Section of the Department’s Accounts Branch should also be examined.

It was noted in the course of audit that a pro-forma invoice for £6,330 for an item of computer equipment was approved for payment by the Barrack Master’s Office on 31 December 1986 and that an invoice for the same equipment was approved for payment by Garda Planning Division of the Department also on 31 December 1986 and that both of these were paid simultaneously by Garda Claims Section in a payment of £128,502 made to the supplier on that date.

As such duplication indicates that the weaknesses in internal control have not been eliminated I asked the Accounting Officer for his observations and for information on the review of internal control procedures which was to have been undertaken. I also asked why a pro forma invoice was approved for payment and what action was being taken to recover the amount overpaid.

The Accounting Officer informed me that the duplicate payment of £6,330 arose when an item of computer equipment which was intended to be delivered to a Garda premises was instead delivered initially to the headquarters of the Department where the invoice accompanying it was certified and passed to Garda Claims Section for payment. The Garda Barrack Master’s Office separately received a pro forma invoice and, having confirmed the delivery of the goods, certified it and also forwarded it to Garda Claims Section for payment. That section included the amounts covered by the certified invoice and the pro forma invoice in the payment of £128,502 to the supplier on 31 December 1986. The over-payment of £6,330 was recovered from the supplier on 7 August 1987.

The Accounting Officer stated that the Garda Office concerned has been directed not to certify pro forma invoices, and that procedures in the Garda Claims Section have been altered to ensure that payments are made on foot of original invoices only and not on foot of copy, duplicate, photostat or pro forma invoices. The Department was planning to acquire a computerised Accounts Payable System incorporating a facility designed to prevent payments on foot of duplicate invoices. The Accounting Officer considered that the inadequate checking and scrutiny which were applied in this case resulted from pressure and anxiety to discharge what were seen to be matured liabilities before the end of the financial year.

The Accounting Officer also informed me that the examination of internal control systems identified certain weaknesses and that, while a number of the recommendations made to tighten up procedures had been implemented, others were still the subject of consultation with the Garda authorities.

The balance of the payment of £128,502 made on 31 December 1986 which is referred to in the previous paragraph represents the cost of computer equipment which was to be supplied on foot of an agreement dated 16 December 1986 and which was designed to upgrade the central processing unit at the Garda Computer Centre. The agreement provided that payment in full be made to the supplier on installation of the equipment.

It was noted, however, that the payment made on 31 December 1986 was based on a pro forma invoice dated 23 December 1986 and that the supplier did not invoice the Department for the equipment until 11 February 1987 then stating that it had been shipped on 5 February 1987.

I asked the Accounting Officer why the equipment was paid for prior to installation and on the basis of a pro-forma invoice.

The Accounting Officer informed me that the agreement for the purchase of this equipment provided for payment to be made on the date of installation unless the customer elected to delay installation as specified by the supplier, in which case payment was to be made on delivery. As the installation of such equipment requires their computer to be out of operation for a period, the Gardaí insist on specifying a time, such as a week-end, when the non-availability of the computer would cause least disruption to Garda operations. Accordingly, as the supplier could not be afforded the option of specifying the installation date, payment was made on the day following the delivery of equipment which was assumed to be the equipment ordered.

The Accounting Officer stated that, in view of the nature of the material delivered, there was no means of checking whether it was suitable for the purpose intended but that there was no reason to suspect that it was not what had been ordered. However, when the installation commenced, it was discovered that the equipment delivered constituted a different, albeit more expensive, upgrade than that ordered. He also stated that the correct equipment was shipped by the supplier on 5 February 1987 and installed on 8 February 1987 and that when the supplier subsequently invoiced the Department for the delivery and installation of this equipment, it was realised that payment had been made in December 1986 and no duplicate payment was made.

The Accounting Officer also informed me that the Garda officials concerned have been directed not to certify pro forma invoices and that a revised form of certification is being introduced which will require delivery and, if necessary, installation to be certified prior to payment.

Mr. McDonnell.—While both paragraphs are fairly lengthy, they are both concerned with the operation of satisfactory internal control procedures in the processing of payments for computer equipment supplied to the Gardai. In the case of paragraph 28, reference is made at the beginning of the paragraph to the write-off of a very small amount, but underlying this is the fact that a fairly significant duplicate payment was only avoided by the rather fortuitous detection of the duplication at the very last minute. Arising from what I might call this near miss, a direction was given to review the internal control procedures both at the Garda end and in the Department. The paragraph goes on to question whether this review was effective, because in the course of audit my staff noted subsequent duplication of payments for more computer equipment. The Accounting Officer’s explanation of how this happened is set out there together with information on the action to ensure that this kind of thing should not happen again. At the end of paragraph 28 there is a reference to recommendations for tightening up procedures. Some of these are still being discussed with the Garda authorities. In paragraph 29 you will see that, while payment was also made initially — again for computer equipment — on a pro forma invoice, it did not in fact lead to a duplicate payment even though a later invoice was submitted by the supplier. What I was really concerned with in the second case was whether payment had been made in advance of delivery of the equipment and had been brought forward into 1986 because the actual invoice from the supplier said that delivery of the equipment did not occur until 1987. The Accounting Officer explained that this was due to a combination of circumstances including the requirement that installation of this equipment should be arranged in order to cause the least disruption to Garda operations. Unfortunately the equipment apparently was not inspected when delivered but the invoice was nonetheless certified as correct for payment. The equipment which was delivered was the wrong type but the fact that it was not inspected on delivery and the postponement of installation meant that this was not discovered until later and it had to be replaced in 1987. This is what led to the confusion about when the equipment was supplied, when it should have been paid for and when it should have been charged and so on.

Chairman.—With regard to the internal control systems and the weaknesses that have been identified in the ongoing discussions with the Garda, have they been completed and have you tightened up the system?

Mr. Mathews.—Yes. The two items referred to in paragraph 28 arose really from the completion of pro forma invoices. In one case the original invoice was lost in the Garda office.

Mr. Mathews.—Yes. We have issued instructions that in no circumstances is payment to be made on anything other than the original invoice. We are also negotiating with the Department of Finance for a specific computer installation that will obviate the possibility of paying on a duplicate of this nature.

Chairman.—On paragraph 28, have discussions with the Garda come to a conclusion and have you identified all the internal control weaknesses, and are they sorted out or are they in the process of being sorted out?

Mr. Mathews.—They have been sorted out. We had discussions with the barrack masters office and the conclusion come to was that there is nothing wrong with the procedures in existence. It is a question of people carrying them out. Provided people carry out the instructions, things should go right. Even at the present time a restructuring is taking place in Garda Headquarters including the barrack masters office. Incorporated in that will be a streamlining of procedures and the issuing of absolutely clearcut instructions to everybody in this area.

Chairman.—Why did it take so long to recover this amount of money — 7 August 1987?

Mr. Mathews.—Apparently not. The supplier did not notice it and did not contribute the refund until we asked for it.

Chairman.—We will note paragraph 28. On paragraph 29, the payments really were brought into the wrong year and there was not an accrual?

Mr. Mathews.—I would not agree. Technically yes, but equipment was delivered in December of 1986 and paid for in that year. It was only when it came to be installed some weeks later, that anybody became aware that this was the wrong equipment for which other equipment had to be substituted.

Chairman.—A pro-forma invoice dated the day before Christmas Eve suggests that you were really trying to get this expenditure into the wrong year.

Mr. Mathews.—No. As we understood it, the equipment delivered was the proper equipment that we needed. We were, admittedly, trying to get it into the year and pay for it in the year when we had money, but we had no way of checking. The material consisted of highly technical computer and software components and the ordinary person would not know whether it was the right or the wrong material. It was only when the technicians began to install it in the computer that it was found to be a different upgrade to what was required. That had to be sent back. New material was delivered in replacement and when this was delivered the firm sent a request for payment and we said: “No, hold on. This was already paid for”.

Chairman.—What you are saying is that it was an accidental departure from the normal financial procedures?

Mr. Mathews.—Had the equipment been right, it would have been in the right year.

VOTE 27—COURTS

Mr. D. Mathews further examined.

367.Chairman.—Paragraph 30 of the Report of the Comptroller and Auditor General reads:—

Subhead B.2—Office Machinery and other Office Supplies.

The Dublin Metropolitan District Court and the Land Registry occupy a number of buildings in and about the Four Courts complex and, through terminals located in the various buildings, have access to a computer located in the Four Courts. A contract in the amount of £189,756 was placed in December 1986 for the delivery and installation of a Local Area Network to improve the efficiency and quality of communications and data transmission links between the computer and the terminals. A condition of the contract was that a part payment of £102,000 be made by 31 December 1986. As the facility was to be shared between the Courts and the Land Registry, it was decided to apportion the costs between Vote 27 (Courts) and Vote 28 (Land Registry and Registry of Deeds).

It was noted that while an invoice for £102,000 dated 17 December 1986 was received from the supplier only £27,000, the amount chargeable to the Land Registry Vote, was paid in 1986.

As this clearly indicated that the total amount of the invoice represented a matured liability payable in 1986, I asked the Accounting Officer why the charge of £75,000 to Vote 27 was deferred. The Appropriation Account for this Vote shows a saving of £51,584.

The Accounting Officer has informed me that while the amounts chargeable to each Vote were certified for payment and forwarded to the Finance Division on 22 December 1986, the account for payment from the Courts Vote was either overlooked or mislaid due, at least in part, to an extraordinarily high number of claims being processed at the time and to the Christmas holidays. Following representations from the supplier the account was located and payment was made on 2 January 1987. He stated that the staff involved were aware of the importance of making payments in respect of matured liabilities in the appropriate year, particularly in a case such as this where the failure to do so also had implications in terms of financial allocations for the following year. The Accounting Officer also stated that while steps were being taken to avoid a recurrence the new system for the computerisation of all accounts payable, which was expected to be in operation within the next six months, would ensure that all invoices outstanding for payment would be highlighted for attention and that this would prevent any similar lapse in the future.

Mr. McDonnell.—This is something of the same nature, because matured liability may not be postponed even at the risk of an excess vote. It is the opposite situation in a sense to that referred to on the previous paragraph. I suppose on occasion there may be some slight room for doubt as to whether liability has actually matured for payment but I do not think you could say there was any doubt in this case as the liability was being apportioned between two votes and the part relating to one of the votes was paid and charged in 1986. In this case, had the charge to this vote been included in the 1986 account, an excess vote would probably have arisen with a consequent obligation to seek the approval of Dáil Éireann, if this committee so recommended. The Accounting Officer’s reply is included there. He outlines proposals to prevent a similar lapse.

Chairman.—Were the Department trying to bypass this Committee, Mr. Mathews, in not having an excess vote? You knew the liability was matured and you did not pay it?

Mr. Mathews.—No, certainly not, Chairman. The liability was for payment of £102,000 in 1986. This was apportioned between two votes. The computer being bought served two different offices, part was the Courts and part was the Land Registry. The cost apportionment was £27,000 from the Land Registry and the balance of £75,000 from the Courts. Both payments were certified in the Department in the appropriate divisions and passed to accounts for payment before the end of the year. It was certainly the intention of everybody concerned that they should be paid before the end of the year. Through an error only one payment was made. When the supplier got the one payment he said:“Where is the rest of my money”? The matter was immediately looked into, and he got the balance of £75,000 on 2nd January, 1987. It was purely, I am assured, a case where a statement was mislaid for a matter of days in the accounts branch. The intention was to pay it in 1986.

Chairman.—The invoice did represent a matured liability for 1986 so it should have been in the accounts branch?

VOTE 23 (1985) AND VOTE 24 (1986)—OFFICE OF THE MINISTER FOR JUSTICE

Mr. D. Mathews further examined.

368.Chairman.—Vote 23 of 1985—Office of the Minister for Justice—can be taken together with Vote 24 for 1986 —Office of the Minister for Justice. Items A1 to G3.

369.Deputy Naughten.—I have one query with regard to subhead B2 in 1985 and also in 1986 — substantial increased expenditure over what was intended?

Mr. Mathews.—What is at issue there is the provision of a computer for use by the prison service. Provision is made in the prison service Vote for supplying that computer. The relevant subhead shows a saving of virtually the same amount. This was a financial arrangement with the agreement of the Department of Finance. That computer was in fact to provide a service to the headquarters of the Department rather than to the individual prison institutions. It was decided that it was more appropriate that the charge should come under the Office of the Minister for Justice than under the Prisons Vote. There is an excess in the amount under the Office of the Minister for Justice but a comparable saving under the Prisons Vote. It is just an accounting arrangement.

Mr. Mathews.—It is the same thing. It is a transfer of a charge from the Prisons Vote to the Office of the Minister for Justice.

Deputy Naughten.—It was bought over a two year period, is that it? How did this over-expenditure occur in both years?

Mr. Mathews.—As I understand it, it is not over-expenditure. It is simply that the provision was originally put under the prison side, and it was decided to transfer it to the Minister for Justice Vote. this was the agreed cost of the computer installation.

370.Chairman.—Is there a practice in the Department whereby if TDs call up, they are not put through to the section but have to go through the Minister’s office or through the departmental secretary’s office?

Chairman.—If I wanted to ring, say, a welfare officer in the Department tomorrow, would I be put through? Is there any difficulty with that?

371.Deputy Desmond.—There appears to be such a policy. I will give a very simple example. I rang about an emigration matter on Monday. I spoke to the officer in question in the section who said, when she realised I was a Dáil Deputy, that any matter of that nature would have to be handled by the Minister’s office and very courteously and acting obviously in accordance with instructions, she put me through to the Minister’s private secretary. She clearly said that that was a policy matter.

Mr. Mathews.—I must accept what you say, but up to now I have been unaware that that was the situation.

Deputy Desmond.—As far as I know that is the procedure. There seems to be only two Departments involved, Education and Justice.

Chairman.—I raise it because I am not too sure whether it applies in this Department. I see Deputy Desmond’s difficulty. Certain sections are affected.

Deputy Desmond.—For example, emigration which is understandably a very sensitive matter. It seems to be a policy decision, perhaps by the Minister’s office.

Mr. Mathews.—I am virtually certain that whatever policy is there has emanated from the Minister’s office but I did not know about that before now.

Chairman.—I want to raise it because it obviously costs a lot of money. We had this situation in Education and the present Minister has discontinued the practice and wrote to the Committee to say so, we raised it at a Committee meeting. It is a nonsense that my wife could ring a Department and speak to somebody and I could not ring, which did happen in the Department of Education. If it is happening in your Department would you please do something about it?

Mr. Mathews.—I will certainly look into it, now that it has been brought to my notice.

372.Deputy Naughten.—On the question of overtime £6,800 or more was paid in one particular case. This related to Vote No. 24. There were overtime sums varying from £409 to £6,819. That was a huge amount of overtime?

Mr. Mathews.—It appears that it relates to a HEO in the computer division, but I am not absolutely sure.

Deputy Naughten.—It is a large amount of overtime for one individual to earn, is it not?

Mr. Mathews.—I am surmising now that this was a person with very specialised knowledge who was required to be in attendance most of the time to deal with material which was being put on computer. In the normal way overtime is spread more evenly than that. This would have been a specialist officer.

373.Deputy Foley.—Let me add a rider here. Was that all by way of overtime or did some of it include expenses?

374.Chairman.—Are we clear on A1 to G3? I wonder would the Accounting Officer send us a detailed note regarding the Stardust situation?

Mr. Mathews.—I can give a fair amount of information on it now, but I will put it in a note if you like.

Chairman.—That will do. Do you have individual pay outs, what amounts were paid to individuals and so on?

Mr. Mathews.—I can give the total amounts. I do not know that it would be appropriate to give what each individual claimant got.

Chairman.— We do not want the name of the person but the number of people who received money and so on.

Mr. Mathews.—I can tell you the total numbers and the total amounts today but if you would prefer I will give it in a note.

375.Deputy McGahon.—Could you tell us the total cost of the Stardust tribunal?

Chairman.—Is there anything arising on Subhead H and I of the Vote from the Office of the Minister for Justice? We will move on to the Garda Síochána.

VOTE 24 (1985) AND VOTE 25 (1986) — GARDA SÍOCHÁNA

Mr. D. Mathews further examined.

376.Chairman.—In relation to Vote 24 for 1985 and Vote 25 for 1986 have you any idea what Border security is costing or has cost us in terms of extra cost which we would not have if we did not have this emergency situation, or whatever term you might apply to it?

Mr. Mathews.—Figures have been worked out on that but I have not got them with me at the moment. Again, I can give you a note on that.

Chairman.—Will you, please? I take it that we do not get a contribution from any external source towards this?

Mr. Mathews.—No. It is difficult to calculate the full extra cost. You can look at a Border division and look at an equivalent division away from the Border and see that there is a disparity between the resources allocated to one rather than the other. It is possible to work out extra costings in this way and this can be done. It is not however a particularly exact way of doing it.

Chairman.—But is there not also the extra cost of actually having to have that extra division? It must be a major drain on the resources of the State.

Mr. Mathews.—It is and it is not sufficient just to look at extra costs arising from what is in the Border divisions because a lot of the security effort in general — if this is what you are talking about — and the cost associated with it occur far back from the Border. If you look only at the Border divisions you do not get the whole story.

Chairman.—Can you give us some idea of what it has cost over the years? Can you include in that Army costs in consultation with the Department of Defence?

377.Deputy McGahon.—I wish to ask Mr. Mathews if he is satisfied that value for money is being obtained in relation to the Garda duties in the Border area? Does he accept that the stereotype form of roadblock in the same place night after night is unlikely to deter anybody and does he feel that the system is giving a good return for money?

Mr. Mathews.—I will have to be excused from answering this type of question which relates to a Garda operational matter. I do not think that is an area which I should get involved in.

Chairman.—You surely look at the question of value for money. If the gardai want to put up roadblocks, surely the cost of putting them up is kept to a minimum. Could you answer the part of the question relating to value for money? Is it reviewed?

Mr. Mathews.—Yes, certainly I can answer that. There are regular discussions between the Minister and the Garda Commissioner on what is going on. There is a clear distinction between the responsibilities of each. The Commissioner, as you are aware, is responsible for the day-to-day operations of the force but that does not debar a Minister who has ultimate responsibility for the financing of the force from asking pertinent questions about what is going on and this happens regularly. There is a regular interest by the Minister in just how efficient and effective any particular Garda procedure is. That does happen.

Deputy McGahon.—Until about three years ago there was a greater use of the Army people who were not paid. Soldiers on duty, even on night duty, do not receive any overtime. The bulge in the expenditure undoubtedly came from the change to the use of increased numbers of policemen who had to be paid extensive overtime. The use of Garda personnel on the Border is certainly leaving the road open for increased opportunities for criminals in the country. The people who should be used, at a cheaper cost to the State, are the Army. The very significant bulge in expenditure in the last three years arose from the use of police in that area. While I accept that a policeman has to be present, the Army should be used with one garda, not nine or ten gardai manning a checkpoint. A significant saving could be achieved if the Army were used for that particular role and that is the role they are best suited to.

Mr. Mathews.—This whole matter is kept under review. The Minister is only too well aware of the massive drain on resources which the Border procedures involve for the Garda. Nevertheless the basic tenet is that the preservation of law and order along the Border, as well as everywhere else, is basically a Garda responsibility and that the Army are only there in support of the civil power and when requested to do specific actions and searches or back-up and providing armed presence at checkpoints and so forth. As far as the Minister is concerned, he certainly appreciates the value of what you are saying, that the more Army personnel are involved, the more Garda resources are available for the job for which they are particularly skilled and trained. We are only too conscious of the cost involved and the whole matter is kept under review to make the best possible arrangements commensurate with value for money.

378.Deputy Foley.—On overtime payment, how many people received overtime payments in the higher bracket ranging up to £11,305? An advance of £120 to an exdetective garda was written off as irrecoverable and a sum of £1,181 was written off in respect of loss of money paid in respect of warrants. Furthermore, sums of £14,500 and £29,800 and £19,700 were charged to subhead C in respect of postal services availed of by the Association of Garda Sergeants and Inspectors, the Garda Representative Association and the Garda Medical Aid-Benevolent Society. Are you liable for that expense?

379.Deputy Dempsey.—Deputy Foley has reminded me of a related question. Under those particular headings, the AGSI, the GRA and the Garda Medical Society receive about £150,000 from the Department for postage and for personnel seconded to these organisations. Is that normal, or what arrangements were made to allow that to happen?

Mr. Mathews.—The first question relates to the levels of overtime earnings. What exactly can I tell you about that?

Deputy Foley.—I am referring to sums of about £11,000. How many people were involved in that type of overtime?

Mr. Mathews.—Five people got close to £10,000. Most of these were ministerial drivers.

Mr. Mathews.—Yes, One got £11,000 one got almost £11,000 and three got amounts bordering on £10,000.

Deputy Foley.—The other point relates to the advance of £120 to an ex detective garda which was written off. That is down under the notes, No.7.

Mr. Mathews.—This relates to a long-standing accounts problem. There were a number of old suspense accounts, going back for many years, relating to people who had got advances of money to cover expenses and these accounts had never been cleared up. After a number of years some of these accounts went back to 1977 — it was decided to clear the books.

Deputy Foley.—Just above that, £120 paid to an ex-detective garda was written off.

Mr. Mathews.—That was written off — it related to an old uncleared suspense account.

Mr. Mathews.—He was an ex-garda by the time it was written off. He had gone.

Mr. Mathews.—I do not even know if he was still living. It was decided after ten years that more time was going to be lost trying to resolve the matter than could be justified.

Deputy Foley.—The only point I am making if he had pension rights is why the sum was not deducted over a period of time.

Chairman.—The Comptroller and Auditor General tells me he had not. Deputy Dempsey’s question—

Mr. Mathews.—Since the force was founded there has been a statutory provision for the existence of Representative Bodies. They are not like ordinary voluntary staff associations other people have.

Mr. Mathews.—For very many years the public service regarded postage as a free service — that was when it was provided by the Post Office and postal charges did not have to be accounted for. The custom grew at that stage where all Representative Body postage was paid for, for all purposes. When An Post was set up billing for postal charges was brought very much to our attention. It was decided there that the Representative Bodies had acquired certain rights and that by virtue of their statutory existence they had rights of communicating with their members and so on. It was decided at that stage in negotiations with the Representative Bodies, to give them a particular financial subvention each year in respect of their postage costs. They get this amount and it is upgraded every year so often in line with inflation or postage charge increases. Above and beyond that they pay their own postage. The subvention which we pay relates to their telephone costs and their postage costs.

Deputy Foley.—I am not disputing that but you mentioned postal services. I was averaging £1,200 a month up to £2,500 for the Garda Sergeants and the Inspectors. I thought it was colossal but I accept the point you make.

Mr. Mathews.—It is based on history going back to the foundation of the force. You also asked about the payment of Representative Body staff. That also goes back. There is statutory provision that the officers of Garda Representative Associations must be serving members of the force. It was always the practice right from the foundation of the force to pay one or two members to act as full time Association officers.

Deputy Foley.—Let me make one further point regarding the payment for postal services and the telephone accounts. Has that to be certified or is it a fixed sum?

Mr. Mathews.—It is now a fixed sum. We came to an agreeent with the Associations when the billing became matters for An Post and Telecom Eireann, that one would circulate so much towards their costs, on the basis of experience of their costs in previous years.

380.Deputy Desmond.—On page 60 on the statement of Garda vehicles, the final item, could you comment on the fact that 300 cars were damaged and it was determined that the damage was maliciously caused in 1985 at an average cost of £300 damage to 300 cars? Does that strike you as being exceptional?

Mr. Mathews.—It is. If you tot up all the cars damaged in the different categories, whether a garda was responsible or not — the figure appears quite high and indeed it is quite high. But it has to be remembered that these cars are on the road 24 hours a day, 365 days a year, and they are going into situations where the ordinary motorist would not go, from which the ordinary motorist would stay clear. The cars must go into areas on occasions when this type of damage is liable to happen. The figure for malicious damage did strike me as abnormal but it can only be accounted for by the fact that these cars are at the scene of rows and trouble; they are used to convey prisoners and a fracas can occur. This is the only way in which it can be accounted for.

Mr. Mathews.—The Vote for that is not administered by the Department of Justice. I am not the Accounting Officer for it.

382.Deputy Dempsey.—In relation to overtime, I have raised the point with other Departments and I would be interested more in a comment from the Department of Finance. We paid 10,914 members of the Garda overtime in this particular year. If there was an increase in Garda strength we could still save money by cutting back on this overtime. I would like a comment from the Department of Finance on that. We seem to come up against this in every single Department, that huge numbers of people are being paid overtime. I accept some of the explanations in some of the other Departments but surely in this one which concerns security and the gardaí the workload could be spread evenly over the year and you could increase your number of gardaí and cut down on overtime.

Mr. Mathews.—I will be glad of any assistance the Department of Finance gives me on this but I think part of it is really for the Department of Justice. Every effort is made to cut down on overtime but in a force like the Garda Síochána a certain quite high amount of overtime is inevitable because invariably the police will become involved in some major investigation or in the policing of some unusual mass assembly of people or something like the things that occurred in this particular year — the Guinness kidnapping for example. Getting in extra police at that stage is not the answer. You must have a reserve there because when a major investigation or incident happens you have to pull out all the stops. This for example could mean that several thousand or several hundred men must go on overtime over a weekend. The cost of that can be horrendous when they are paid double time for Sunday work or bank holiday work. This is what gives rise to it. It is not possible to say, “There is £10 million there, that would give employment to so many extra gardaí”. Our experience some years ago was that bringing in extra gardaí sent up the overtime bill. Quite a high level is, unfortunately, inevitable.

Deputy Dempsey.—Are you saying that the overtime paid is not really as a result of the strength of the gardaí, it is just because of the extraordinary circumstances under which they work?

Mr. Mathews.—Exactly. I can assure you overtime comes under scrutiny all the time. Scrutiny that took place last year has us in the Supreme Court. Despite all that, if a special investigation or major search comes up, many Gardaí must go on overtime. Even if an extra 100 or 200 were recruited to the Garda force — I would not necessarily make the same case in relation to the prison service — it seems that a high reserve of overtime is inevitable.

VOTE 25 (1985) and VOTE 26 (1986) — PRISONS

Mr. D. Mathews further examined.

383.Chairman.—We will go on to the Prison Vote, Vote 25 in 1985 and Vote 26 in 1986. We might as well take items A to J in both cases.

384.Deputy Foley.—Compensation totalling £37,500 was paid in respect of a claim arising out of the abandonment of a contract, reference (S.13/6/85). This relates to last item listed on page 65.

Mr. Mathews. —My information on this contract is not very detailed but this was a contract which was in progress under the Department of Defence, at Spike Island when it was abandoned by the Department of Defence. It was agreed that when we took over Spike Island we would also take over the liabiity which was associated with a building contract which had been in progress there. It was decided not to proceed with it. It was commenced and terminated by the Department of Defence but when we took over Spike Island we also took over this liability.

385.Chairman.—What is the current position as regards Spike Island? Is your Department still using it? Is it being used for any purpose?

Mr. Mathews.—Yes, it is being developed and current developments on it are due to be completed in June.

Mr. Mathews.—Yes, I think I am right in saying that it will have places for 80 prisoners.

386.Deputy Naughten.—Sums varying from £400 to £20,300 have been paid in overtime. How can somebody earn that kind of money in overtime? How many officers earned more than £5,000 in overtime?

Mr. Mathews.—In relation to the one very large amount the Deputy referred to, the position in the prisons, up until fairly recently was that overtime was widely available and there was pressure on prison officers to work it. The man, in the particular case the Deputy referred to, was willing to work every hour that came. Since then overtime——

Mr. Mathews.—The individual amounts varied. In depended on the individual if he was prepared to work day and night and on Saturdays and Sundays. He volunteered while others stood back and did not take as much. Overtime in 1986 amounted to £13.4 million. In 1987 that figure was reduced to £10.3 million and in the current year it is down to £6.3 million. It is now less than half of what it was in 1986. That reduction has not been achieved without a certain amount of pain and suffering. As you may be aware, we are threatened with an industrial dispute to start this week end but I hope that it can still be averted. In order to get it down to £6.3 million we recruited 200 extra staff. This is the point that was also made earlier in relation to the Garda Síochána Vote. It was decided that it was possible on the prisons side, by the introduction of a new roster, to do two things: to create 200 extra jobs while, at the same time, to effect very substantial savings in overtime.

Deputy Naughten.—That situation should never have been allowed to develop. Is it any wonder there is unease in the service? A huge source of revenue is now no longer available to them.

Mr. Mathews.—As I have said, the change has been made possible because of a Government decision to recruit 200 extra staff at a time when I believe the embargo is still applying in virtually every other service.

Deputy Naughten.—I find it very difficult to understand how anybody can earn up to £28,000 in overtime. We are talking about £28,000 on top of a normal salary. I do not believe that there is anyone who can work that number of hours — he must be working around the clock. It is little wonder there is unease in the service when £6 million has been cut off the overtime budget, a budget which should have never been allowed to develop in the first place.

Deputy Foley.—Let me add a rider to that. What was the salary paid in each case?

Deputy Naughten.—The salaries of those who received £28,000 and £30,000 in overtime?

Mr. Mathews.—He was an Assistant Chief Officer and as an Assistant Chief Officer he would have been on a scale ranging from £240 to £270 a week. Sorry, that is slightly misleading because the scales I am giving you now are the up-to-date, January 1988, scales which would not have applied in 1986.

Deputy Naughten.—He would end up being on a higher salary than the Minister.

387.Deputy Desmond.—We should refer the case to the Gleeson review body. What will it cost in a full year to pay the 200 extra prison officers?

Mr. Mathews.—In very rough terms, it was decided that £4 million could be knocked off the overtime bill by recruiting 200 staff. The cost of employing 200 staff in round terms is £2 million. Therefore, you are left with a saving of £2 million in overtime and 200 additional staff.

Deputy Desmond.—You have now gone on to the roster. For example, the roster would finish at 8 o’clock in the evening.

Mr. Mathews.—Up until now the position was that all of the recreation period in the prisons, from 4 p.m. until 8 p.m. was paid for in overtime with the extra staff and the introduction of the new roster it is possible to do it on a much more economic basis.

Deputy Desmond.—An officer who finishes normally at 8 p.m. will not get overtime?

Mr. Mathews.—I understand so but I am not absolutely familiar with the roster details.

Deputy Desmond.—What does it cost per week to keep a high security prisoner in, say, Portlaoise?

Mr. Mathews.—I am sorry but I do not have that figure readily available. I have not got an up-to-date figure, but I can let the Deputy have a note on it.

Chairman.—Perhaps you might let the Clerk of the Committee have a note on it.

388.Deputy McGahon.—In relation to the very highly paid gent, I would question his physical ability to make an alert contribution if, as you say, he was working day and night. I think he was looking after his own interests primarily and not those of the prisoners. Why was it necessary to have so much overtime available in the prison service? Was the prison service seriously understaffed? Why was it necessary to have so much overtime available?

Mr. Mathews.—I can only answer that in general terms. It is hard to say it was due to lack of staff because 186 extra staff were recruited in 1986. We have a very serious problem in regard to prisoner numbers which have gone up by 500 or 600 in the last couple of years. Our prisons by and large are small institutions, widely separated and not particularly effective from the point of view of control or manning. We have roughly a total of 2,000 prisoners.

Deputy McGahon.—How many warders have we got? What is the pupil-teacher ratio there?

Deputy McGahon.—One for one. Would it not be easier to let them out on Blasket Island? It might be cheaper.

Deputy McGahon.—The proposed new marina off Dún Laoghaire would be more appropriate.

Mr. Mathews.—The total prison staff involving clerks, trades officers, industrial trainers and all the rest was 1,713 at January 1987. I was talking about 1,500 to 1,600 officers.

Mr. Mathews.—Yes. The 200 are now in and working, the figure was 1,713 at January 1987 and since that the 200 has to be added on. They are in and working since 1 January. It is conceivable that you could manage 2,000 prisoners in one prison and the ratio of officers to prisoners and the effectiveness of the whole system would be made better. We are stuck with a situation where we have about 13 institutions. In addition to that, in Portlaoise there are very high grade security prisoners. They are not all of the one faction. There are various groups there that must be kept totally apart which creates major problems for us. AIDS is also creating problems.

391.Deputy Naughten.—You mentioned the AIDS problem. What percentage of prisoners are potential AIDS carriers?

Mr. Mathews.—I am wary of answering that question because as I understand it there are a number of different stages of infection. I believe I would be safe in saying around 30 out of 2,000.

Chairman.—We will now move on to the courts, Votes 26 of 1985 and 27 of 1986.

VOTE 26 (1985) and VOTE 27 (1986) — COURTS

Mr. D. Mathews further examined.

392.Deputy Naughten.—Here, again, the question of overtime arises, upwards of from £400 to £4,200 and it is something that is running right across this whole series of Votes here. I wonder how much of this overtime is absolutely essential? I recognise that the gardaí in their search in the Guinness case or in the O’Grady case of course you have to be paid overtime. However, I question the amount of overtime that has been spent in the prison service and indeed again here. I also wonder at the need for overtime in the Vote for the Minister’s office.

Mr. Mathews.—Every effort is made with the supervisory people involved to keep overtime under control, certainly in our headquarters where we have direct sight of it. Nobody puts in an hours’ overtime unless it is absolutely necessary. In some of these cases, strangely enough, the people getting the highest amounts of overtime per year are service attendance messengers. The reason for these undoubtedly long hours; they are the people who attend first thing in the morning to open up the offices and to turn on the heating. They are probably there last thing at night to let the last cars out of the car park and lock up for the night. It would not immediately strike you but quite often these are the grades that are doing best on overtime. The attendance messengers may on occasion have to come in on a Saturday or Sunday to turn on heating, lock and unlock etc. when other staff are using the building.

Deputy Naughten.—While I accept that point, can that not be arranged with time off or in the long term employ somebody else? We could take somebody off the dole queues rather than paying overtime to officers who are in a permanent pensionable post.

Mr. Mathews.—I have every sympathy with the point the Deputy is making but I doubt if it is feasible in most of the cases we are talking about. I appreciate the point the Deputy is making. I can only assure the Deputy that everything is done to keep overtime under control.

393.Deputy Colley.—I have one question. In Vote 26 (1985) at Subhead BI — travelling incidental expenses — there was an excess of £92,291. It is blandly put here in the note to us that it was a higher level of travelling by the Judiciary and court staff and a greater increase in rates for travelling and subsistence than estimated. What number of people were involved in that excess?

Mr. Mathews.—I do not have that information. I will have to give you a note on that. As stated there, it is due to an increase in the travel rates and an increased amount of travelling. We have no control over where court venues are held and the frequency. There are other things apart from travel; training goes in there, also cleaning services and other things, but most of the cost comes under travel. I have not got a figure for the number who received it.

Mr. Mathews.—They get the same rates that apply throughout the whole public service.

Deputy Colley.—Not to be able to anticipate a higher level of travelling by the Judiciary and court staff is strange because surely they sit on a regular basis in various venues around the country? It will not change substantially from year to year.

Mr. Mathews.—The only explanation I can give is in relation to the rates. We estimated for an increase in rates of 5.5 per cent and in actual fact they increased by 8.5 per cent. I cannot help the Deputy very much in relation to the increase in travel.

394.Chairman.—Let us move on to deal with Land Registry and Registry of Deeds, Vote 27 of 1985 and Vote 28 of 1986.

VOTE 27 (1985) and VOTE 28 (1986)—LAND REGISTRY AND REGISTRY OF DEEDS

Mr. D. Mathews further examined.

395.Deputy Naughten.—Could the Accounting Officer explain to the committee the unbelievable delay that exists in the Land Registry with regard to the registration of lands? This is not something new, it is something ongoing over the last number of years.

Mr. Mathews.—Very simply, the delays are attributable to reductions in staff. Over recent years staff in the Land Registry decreased by 16 per cent and every effort is being made to compensate for that as far as possible by improving procedures and by the introduction of computerisation. Very simply, the reason is the reduction in staff, combined with the inflow of work. I am not sure whether the inflow of work is remaining constant; it certainly is not decreasing.

Deputy Naughten.—This is one particular area that pays for itself from Land Registry fees. It is rather strange that you cut that particular section by 16 per cent and clogged up the whole works. Every member here is well aware of the huge delays on the ordinary transfer of a farm, for example, from father to son. If you contact the Land Registry they say they are sorry, but that it could be 12 months to two years by the time that particular property is registered. That is totally unacceptable.

Mr. Mathews.—We are conscious of the unsatisfactory position there but nevertheless we are constrained by the conditions imposed by the Department of Finance on the recruitment of extra staff. It is not for the lack of looking for them that we have not got the extra staff. A question was addressed to me earlier where it was thought that the Department of Finance might be of some help. I declined the help then but maybe this is one area where the Department of Finance could help.

Deputy Naughten.—Has the administrative arm of the Department been cut by 16 per cent?

Mr. Mathews.—Yes, there is no doubt about that. I can give you a figure on that. During the past three or four years the Accounts Branch have lost something like 23 or 24 members out of a staff of about 120.

Deputy Naughten.—I would put it to you that this is one section of the Department that pays it way—the people who get the service there, pay for the service. You collected £6.6 million in Land Registry fees in 1985 and the cost of the Land Registry Vote was £5.7 million.

Mr. Mathews.—We are constrained by the staffing policies which exist throughout the whole public service.

Deputy Naughten.—Could we have a comment on that from the Department of Finance representative?

396.Mr. C. Gallagher.—It is very easy to take the line that all you have to do is throw staff into the Land Registry and all the problems will be solved. The situation is more complicated than that. The Land Registry are an organisation who have a very significant impact on a lot of vulnerable people. For example, they can keep people who are buying houses on bridging and so on. The staff know that. Simple problems can be dealt with with some ease and co-operation from staff in other organisations but over a period of ten years any change suggested by management to improve the efficiency in the organisation has been met by the staff with a price tag. The price tag generally is not for more staff at particular levels down at the bottom; it is for more staff up the line. Deputy Colley usually asks about redeployment. I would love to try it in the Land Registry. However, you would be complaining after a bit about the lack of a Land Registry service because if we put people into promotion posts from somewhere else we would probably walk into an industrial dispute. To give a simple example: at the end of 1986 our then Minister of State who came from a rural constituency and had encountered the same problems as Deputy Naughten. We had staff who were looking for higher grade posts and to get them they said they would boycott new technology. They had computers which would allow applications to be dealt with a lot faster but because they were not getting what they wanted they decided they were not going to use these and were going to go back to using nice 19th century methods of work — the pen and pencil, put everything on paper and so on — and they slowed things up. If the message goes out to people who can hold the public by the short and curlies, to put it crudely, that by acting the maggot they will generate pressure to get more staff and more of what they want, it will buy more trouble. We did a compromise deal during the last year or two with the Land Registry staff which gave them some of the upgradings they wanted. The unions — the one which was holding us up to ransom on the computers — have since co-operated but we still have a certain amount of trouble from time to time with one other union.

The picture of the losses given by the Accounting Officer can be misleading in the sense that new technology has changed one of the large components of the workforce down there, the mapping draftsmen. Copying maps with a pen and pencil can be very time consuming indeed. If you move over to doing them by using the new technology, it can be very quick. If people instead of drawing a fresh map, which is a copy of a map they already have, the Land Registry staff use a photocopier, it saves time and reduces the need for staff. A lot of improvements of that kind have been made in recent years but every attempt to speed up things—and the Department of Justice have put a lot of effort into trying to achieve this — runs up against a situation where a price tag is put on it. If we could look at the Land Registry in isolation, perhaps we could do business from time to time but every union in the Land Registry is represented elsewhere in the public service and as soon as something is given to meet the unique problems of the Land Registry, we are confronted with five, ten or 15 equally unique situations somewhere else—when claims following from the Land Registry arrangements, end up at arbitration.

397.Chairman.—At this stage I do not think we want to go into this in greater detail but nonetheless I feel it does not augur well for efficiency or economy. Maybe it is something we should look at in greater detail at another time.

398.Deputy Naughten.—I am rather stunned at what I have heard in so far as that it now appears that the Land Registry staff are choking the system and blocking it from working. It is something we will have to go into in greater detail at some later stage. I appreciate the time constraints we are working under.

Chairman.—I will ask the Clerk of the Committee to bring this to my attention.

Deputy Naughten.—I am sure that if you were from a rural constituency, as some of the members here are, you would realise the inconvenience and the unbelievable and unparalleled delays involved. God knows, one often gets the feeling that pleasure is taken in blocking the transfer of land.

399.Chairman.—I will ask the Clerk of the Committee to bring this to my attention outside the meeting and we will come back with some suggestion as to how the committee might look at it in greater detail. We will note the Votes for today. That concludes the examination of Mr. Mathews. Thank you, Mr. Mathews.

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

VOTE 8—COMPTROLLER AND AUDITOR GENERAL.

Mr. Graham called and examined.

400.Chairman.—Paragraph 1 of the 1985 Report of the Comptroller and Auditor General reads:

In my Reports on the accounts of previous years I referred to the effects on the work of my Office of the embargos on staff recruitment. In July 1986 I was informed by the Department of the Public Service that staff numbers in my Office, which had fallen to 92 by that time, would remain at that level for the future. The number of staff assigned to me to carry out my constitutional and other duties has now been fixed, therefore, at a level considerably below that agreed by the Department of the Public Service in December 1980 following a full examination of the staff needs of my Office. With the optimum utilisation of the resources now available, in my opinion, it will not be possible to achieve an adequate level of audit examination in all areas of departmental expenditure and revenue on a continuing basis and the timely completion of the audits of the accounts of some State-sponsored bodies and Departmental funds.

I have stated in previous Reports that the scope of my audit of departmental expenditure and the capacity of my Office to achieve the timely completion of the audits to the accounts of some State-sponsored bodies is adversely affected by staffing constraints. The Minister for Finance, in determining the extent of the resources to be available to me under Section 4 of the Comptroller and Auditor General Act, 1923, has applied the terms of Government policy on staffing and recruitment in the Public Service. My Purpose in drawing the attention of Dáil Éireann to the consequences of this is to fulfil the obligation which I have to make Dáil Éireann aware of the position so that it is recognised that the assurance which my audit is expected to provide continues to be subject to the reservations which I have expressed.

Should the position regarding the extent of audit coverage now being achieved change significantly in the future I will again report to Dáil Éireann as the occasion arises.

Chairman.—I note from the general comments in the report that the staffing problem is continuing. Are you satisfied that the audit provisions are adequately catered for in terms of resources in your office?

Mr. Graham.—As the Comptroller and Auditor General’s report says, the embargo has continued to be applied to our office and our numbers are down considerably on the number authorised in 1981. Our current staff number is 87. We are concerned that our audit work is not being maintained at the level it should be and we believe staff and financial resources should be made available to enable us to carry out our responsibilities to the proper level.

Chairman.—We are not going to detain you too long this morning Mr. Graham because, as you know, a major review under my chairmanship, of the Office of the Comptroller and Auditor General and, indeed, of the Committee of Public Accounts is going on at present and a report will be made to the Committee of Public Accounts shortly. Is it not a fact that the statutory audit provisions in your office are out-moded and you are essentially operating under legislation that was passed in 1866?

Mr. Graham.—That is correct. I imagine the chairman probably knows this better than I do. The legislation which established the Office of Comptroller and Auditor General in the Irish legislation was passed in 1923 but, in fact, we are operating under legislation which was passed in 1866. That is the governing legislation which determines the audit carried out by the Comptroller and Auditor General at the moment and his statutory responsibilities are really set out there. We are pleased that an examination is being carried out at the moment and we feel we should bring ourselves up to date in relation to the modern standards which are applied elsewhere.

Chairman.—The advisory group on public financial accountability who are operating under my chairmanship will, on behalf of this committee, be carrying out the single biggest review of our audit and accounting provisions since the foundation of the State so we will not anticipate that report which will be coming out shortly. We will move to the Vote. Subhead A, salaries, wages and allowances, covers for both 1985 and 1986, the 87 staff you referred to. In other accounting offices around the world, not all the staff are accountants or auditors per se and in many audit offices there is a tendency to employ engineers, economists, statisticians, quantity surveyors and professionals of that kind. Are there any people of that kind employed in the Comptroller and Auditor General’s Office at present or are there likely to be in the future?

Mr. Graham.—At present we have nobody with, say, engineering expertise. We would be looking for finance-type staff, in other words, accountants or people with a good economic background. Basically we would be looking for accounting staff and people with financial disciplines.

Chairman.—Therefore, at present you are doing an administrative and financial and regularity audit but you are not keyed up to do value for money audits. For instance, in the case of the Portlaoise prison officer houses which cost £78,000 each, leaving aside the site costs which probably cost £80,000, your office are not equipped to actually go in there and say: “We have measured this and the real value of those houses is only £30,000. Therefore, something has gone astray with the remaining £52,000”. All you are equipped to say is: “This is what it cost and it has overrun the budget”. Is that all you are equipped to say at present?

Mr. Graham.—I think it would be fair to say that we are not in a position to second guess the cost. We would be in a position to review the control procedures, the placing of tenders, the control of cost during the construction period but not to second guess the actual project itself.

Chairman.—In this day and age do you think it is desirable that value for money audits should be the standard practice in your office?

Mr. Graham.—It is desirable that in the eighties we should have the statutory power to carry out value for money audits.

401.Deputy Foley.—Mr. Graham said that they have only 87 staff at present. Under the Act, what should be the total number of staff? Should it be 112?

Deputy Foley.—In fact you are down 14 staff at the moment. I note that in his report the Comptroller and Auditor General said he finds he is seriously affected by the staffing constraints. I am glad that point has been highlighted by the Comptroller and Auditor General because, like the Chairman, I believe it is essential that that office should be excluded from the Government’s embargo because their work is very important at this point in time. Over the past couple of years a number of issues have been highlighted and it is now obvious that because of the constraints the Comptroller and Auditor General will not be able to pursue those issues as he would like to do. Am I right in my interpretation?

402.Chairman.—We will not be going into the affairs of your office in great detail because it will be the subject of special consideration later in the month when we will be looking at the overall report. Thank you very much.

VOTE 36 (1985) AND VOTE 37 (1986)—FORESTRY

Mr. J.C. Holloway called and examined.

403.Chairman.—I am sorry for the delay but we had to deal with the Comptroller and Auditor General’s Office first.

Chipboard Products Ltd. (in receivership and in liquidation)

I referred in paragraph 39 of my Report for 1981 to the participation by the State in the formation of Chipboard Products Ltd. and also to the provision to the company by the State of £534,000 by way of share capital, £466,000 by way of loan, up to £1,012,000 by way of repayable grants over a three year period and a guarantee by the Minister for Finance under the State Guarantees Act, 1954 in respect of bank borrowings of £400,000.

A receiver was appointed to the company, also in November 1983, and in February 1984 a payment of £1,157,054 including interest of £57,054 was made from the Central Fund on foot of the State’s guarantee of the company’s bank borrowings of £1.1 million. A liquidator was appointed to the company in July 1984.

Under Section 6(3) of the State Guarantees Act, 1954 the amount issued from the Central Fund to meet the liability of the Minister for Finance under the terms of his guarantee of the company’s borrowings remains a debt due by the company to the Minister and if not recovered within 12 months must be voted by the Oireachtas as a repayment to the Central Fund. I sought information regarding the recovery of this amount.

I also sought information regarding the recovery of £981,774 due to the Minister for Tourism, Fisheries and Forestry at 31 December 1985 in respect of the loan made to the company and interest thereon, in respect of the repayable grants and in respect of timber supplied from State forests.

In regard to the recovery of the amount issued from the Central Fund the Accounting Officer has informed me that such recovery is the responsibility of the Minister for Finance, who in February 1984 had informed the bank that he had decided to rely on his rights of subrogation under common law to the rights possessed by the bank in respect of the debt to which the State guarantee relates. Accordingly, the Minister and the bank had already agreed that the moneys recovered on the Minister’s behalf by the bank’s receiver would be remitted at the appropriate time to the Exchequer.

In regard to the amount of £981,774 due to the Minister for Tourism, Fisheries and Forestry, the Accounting Officer informed me that the distribution of funds had been delayed pending the outcome of a Supreme Court decision on the matter of fixed charges on a company’s book debts which had relevance to the receiver of Chipboard Products Ltd. He stated that the Supreme Court judgment had been delivered in November 1985 and that the receiver was currently awaiting a response from Counsel on the correct distribution of funds. The receiver was also pursuing questions relating to outstanding accounts and pension claims and, pending resolution of these matters, it would not be possible for him to furnish to the Department a definitive reply as to the distribution of available funds.

Mr. P. L. McDonnell.—This deals with the State’s financial participation in the restructuring of Chipboard Products Limited which went into receivership in November 1983 and into liquidation in July 1984. It raises the question of the recovery of approximately £2 million owed in respect of guarantee payments, loans, grants and raw materials supplied, apart from about £500,000 in share capital. There is a figure of £981,000 mentioned in the middle of the paragraph covering various things, mainly the loan. The loan element in that figure, including interest, was about £790,000 and it was directly secured by a debenture giving the Minister for Forestry a fixed charge on the company’s land, buildings and plant. This enabled £348,000, approximately, of that loan to be covered in July 1987 and a balance of about £580,000, including interest, was still outstanding at the end of 1987. The guarantee payments which are the biggest element, have since been voted, — I mention that requirement in the middle of the paragraph. They were, as I understand, similarly secured by a fixed charge in favour of the Minister for Finance on the same assets. As I said, the assets were used in full to partly satisfy the claim of the Minister for Forestry. The banks which provided the loans which were the subject of the guarantees held a fixed charge on the companies book debts in respect of those loans which the Minister for Finance repaid to the banks. In those circumstances, it was agreed that the bank would pursue its claim on the basis that the right to any amount which it would recover would be used to repay the Minister the £1.1 million, or whatever, which would be capable of being repaid out of that sum. I am not sure what the present position on that aspect of the case is, but obviously the outcome will determine the final cost to the State of the support provided for this exercise.

Chairman.—Does the amount outstanding, leaving aside the share capital, include accrued interest?

Mr. McDonnell.—As far as I understand, the answer is yes. The figures I gave includes the accrued interest on the loan, but the £1.1 million was the amount paid to the bank in satisfaction of its claim on foot of the guarantee. As you see in the paragraph, the amount of the guaranteed loan was £1.1 million and the payment to the bank was slightly more than that at that stage because the guarantees were called in fairly quickly. There was a £57,000 interest element in it. I am not sure what the interest is now vis-à-vis the recovery by the Minister, if it is capable of being recovered on foot of the bank’s claim, and the Minister’s position, so to speak, standing in the shoes of the bank.

Chairman.—We are talking about Chipboard Products Limited. Leaving aside the share capital of £534,000 what was the State’s exposure in this case, including accrued interest?

Mr. Holloway.—You said to leave aside the share capital, but I will mention it anyway. The figures I have are £0.534 million for share capital, State loan £0.466 million, State guarantee £1,157,000, capital grants £0.195 million; and timber supply £1,019,000 giving a total of £3.371 million. That was for the project in this its second existence — as you know it had an earlier existence and now it has a third existence. I am speaking of the amounts that were invested in the second existence of the project only. That comes to about £3.371 million.

Mr. Holloway.—That is right. The difficulty, as mentioned before, was that there were some legal complications arising in relation to charges on book debts and the receiver did not want to make any distribution of the available funds until that had been settled in another case. When it was settled some other complications arose especially in relation to the amounts that might be due to the Department of Finance or to the banks in connection with the State guarantee. That matter is the subject of direct negotiations between the Department of Finance, the banks and the receiver at the moment.

Chairman.—You use the term “receiver”. It says “Chipboard Products Limited in receivership and in liquidation”.

Mr. Holloway.—There is a liquidator there as well and his views on the subject also have to be taken into account. That was another complication. My understanding is that there is a possibility of some agreement being reached between the parties which would avoid the necessity for protracted litigation.

Chairman.—Let us get the terms right. Why is there a need for both a receiver and a liquidator?

Mr. Holloway.—It does sometimes happen. A receiver goes in to protect the interests of particular creditors under whose instrument he is appointed, but he does not necessarily represent all the interests. It frequently happens that some people decide if they are to be protected they had better have a liquidator there as well. The appointment of a liquidator, even an appointment by the courts, does not displace a receiver. He still has his function.

Chairman.—They will have their fees thus reducing what is available to the State?

Chairman.—I notice you used the term “the Minister for Finance decided to rely on his rights of subrogation under common law”. Could you explain that for the Committee please?

Mr. Holloway.—I think it means standing in the shoes of the banks. They had certain rights as lenders to the project. The debts of the company were guaranteed by the State and, when the guarantee was called, one would expect the State to endeavour to step into the shoes of the party who was being rescued by virtue of the State guarantee.

Chairman.—The receiver is acting for the bank? The liquidator is acting for the creditors?

Mr. Holloway.—In fact, the liquidator would be acting on behalf of the corporate entity as a whole, its creditors and shareholders.

Chairman.—What sort of assets are likely to be left for distribution at the end of this liquidation?

Mr. Holloway.—It is very hard to say and it probably would not be desirable to go into too much detail because it might upset the negotiations which are being conducted by the Department of Finance.

Chairman.—This is 1988, and it has been in the Report of the Comptroller and Auditor General since 1981. How long is this negotiating going to go on?

Mr. Holloway.—My belief is that it should be concluded fairly soon and I think the amount of money that will be recovered will be fairly respectable.

404.Deputy Foley.—What payments have been made to date to the liquidator and the receiver?

Mr. Holloway.—If we had appointed the receiver ourselves obviously we would have some check on his personal expenses and the cost of the receivership, but he was not appointed by us.

Deputy Foley.—Do you get any reports on the up-to-date position, and are you kept informed of the progress every six months?

Mr. Holloway.—Yes. Much more often. We are informed daily because we are trying to straighten out this business.

Deputy Foley.—Is there any reason for prolonging this in view of the fact that it is in the record book since 1981 when it was referred to first by the Comptroller and Auditor General?

Mr. Holloway.—We have to recognise that it is a fact of life that professional people like receivers and liquidators do not believe in taking any personal risks. If they have any doubts about the propriety of some action which they may be contemplating, whether it is a sale of the assets or a distribution of the available funds, they proceed with very great caution and usually go to the courts looking for directions in order to ensure that they are covered and that they are not exposed to any personal risk. If things do go wrong and they have not behaved properly, they can be personally accountable for very large amounts of money.

405.Deputy Ahern.—Mr. Holloway has answered my question in connection with the amount of money he expected to get.

406.Deputy Colley.—I wonder if Mr. Holloway will tell us what is the situation in the company at the moment?

Mr. Holloway.—In its third existence — I do not know what kind of funds have been provided by the State — with the Spanish interests, a company called Finsa but it is doing quite well.

Deputy Colley.—Specifically, I am interested to know how this company has resurrected itself and continues to trade when, apparently, the same company, or certainly a concern that is carrying on the same business, has not dealt with its previous debts to the State as well as to others.

Mr. Holloway.—They were different corporate interests of course. The first one that existed was a company called Chipboard Limited in which something like £3.24 million was invested by the IDA, Fóir Teoranta and, I think, the Forest Service were caught as well for some timber that was not paid for. We were speaking about the second attempt, Chipboard Products Limited, and now we have the third one. They are all different corporate entities. There were two failures up to now. It is a scene which was a singularly unhappy one in the late seventies. There were quite a number of forest product enterprises in this country which went wallop at that time and not a great deal could be done except to provide assistance where it was necessary to keep them going. They failed and were resurrected because it was of some interest, presumably, to the forest enterprise to see if they could get this offtake for their output. We are now trying with this third enterprise which is doing well and which is of considerable interest not just in terms of being an employer but is of interest in a financial way to the Forest Service because it provides an offtake. I am not suggesting that we should go to the ends of the earth to prop up, or rescue, or recreate enterprises just because they buy stuff from the Forest Service. I think it is an area in which one cannot look with equanimity on a situation where you are left with no option but to forego thinning in the forests or else to export the material. There must be a future for these forest industries. The two major ones that we have now, Finsa and Medite, are going well and we are planning for the third major output industry, the capital of which will be about £100 million — happily to other people’s money — which will provide additional employment. As we expand we would hope at intervals to assist in the creation of new enterprises.

Deputy Colley.—Perhaps you could give us a brief resume of the kinds of lessons that you feel the Department, and others, have learned through the failure of the first two companies in Scariff.

Mr. Holloway.—It is very hard to distil any simple rules out of it. I know there was a great deal of agonising about the second enterprise, if we may call it that. Special provisions of the Forestry Act, 1946, were relied upon in that case to provide the funds. Apparently, the conclusion was reached that the IDA, and Fóir Teoranta, had done enough in the first enterprise. I do not think that so far as officers of the Forest Service are concerned there was any undue magnanimity. The arrangements for the supply of timber were generous but it was felt that that was necessary if the enterprise was to survive.

Deputy Colley.—Finally, what is the total amount to date that the State has expended on the first two enterprises? I realise you say you do not have the figures for the latest one.

Mr. Holloway.—About £300,000 and we expect to recover in all a couple of million.

407.Chairman.—Are the Department of Finance happy with the situation here, Mr. Brady?

Mr. Brady.—As the Secretary said, negotiations are going on between the bank and the Department of Finance on the amount to be recovered by the Department of Finance in respect of the guarantee payment which it made. Incidentally, this has not been going on since 1981; the company went into receivership at the end of 1983.

Mr. Brady.—In fact, negotiations have only been going on in recent months. It was only last autumn that the legal problems which were holding up the resolution of the matter — there were two legal cases which had a bearing on this case — were settled. Negotiations with the bank have been going on for a few months and we are hopeful to get a reasonable settlement for the State out of this.

Chairman.—Will you explain this subrogation under common law which the Minister has agreed to, for the record? I do not think it came out quite clearly.

Mr. Brady.—Yes. The Bank of Ireland appointed a receiver to recover their loans. They used debentures which they had in order to do this. The Bank of Ireland also called on the State guarantee which was honoured. By virtue of honouring the State guarantee the State had a right, and exercised that right, to step into the shoes of the bank vis-à-vis the receiver. So the state adopted the rights that the bank had on foot of the bank’s debentures to collect the moneys which the State guaranteed and paid the bank.

Chairman.—When will you be in a position, Mr. Holloway, to let us know the final situations here?

Mr. Holloway.—Certainly if we are meeting next year it will be well settled by then.

Mr. Holloway.—I did not expect to be seeing you later this month. It is very hard for me to answer the question because the negotiations are being conducted by the Department of Finance but the signs are good and I would expect things to be straightened out within a month.

Chairman.—Will you write to the Committee as soon as they are and let us know the up to date position? Appendix 39.

408.Deputy Colley.—Reference was made to the payments being made to the receiver and that this was not something the State had an interest in and, therefore, the State would not know what payments were being made but, with the business of the subrogation and the State stepping into the bank’s shoes in regard to the receiver’s role, should the State not have some idea of what moneys are being paid?

Mr. Holloway.—The answer I gave earlier was that if the receiver had been appointed by us, presumably, we would have had a running tab on his expenditures. He was not appointed by us. But that does not mean we have no interest in his costs because it does reduce the amount that is available. I can only guess on this. Mr. Brady probably can answer in more detail. In the course of the negotiations with the bank, the receiver and the Department of Finance to finalise this business, I guess they will be looking at the expenses of the receiver. But he is still not a receiver appointed by the Department of Finance.

Mr. Brady.—Yes. It is reasonable to say at this stage that the amount paid to the receiver will not affect the major amounts which the State will receive by way of payment because there are gradations of rights in a receivership. The State’s rights have high priority. The receiver’s payments therefore will affect the thing at the margin, as I read it.

Chairman.—Would it not reduce the size of the cake available for distribution?

Mr. Brady.—The total cake but, within the total cake, there are people’s names on certain sections, as it were. There are people with prior rights to sections of that cake. It is the people at the end of the scale who will be affected by it, in effect, the unsecured creditors.

Chairman.—Therefore, it will not reduce the State’s fixed interest in this cake?

Mr. Brady.—Certainly, it will not reduce the major amounts on which we have prior claims.

Chairman.—We have spent enough time on this. When the Accounting Officer is writing to the Committee shortly to tell us the good news about this £2 million almost we will receive for the State perhaps he would also include some details of fees paid to the receiver and the liquidator?

410.Chairman.—We will note this and we will be returning to it in our next examination.

VOTE 37—FORESTRY

Mr. Holloway further and examined.

In paragraph 47 of my Report for 1983 I referred to an amount of £215,553 owed to the Department for timber purchased on credit terms by a company then in receivership although the company’s credit limit had been fixed at £150,000 guaranteed by its parent company. Claims were subsequently made against the guarantor and the receiver and, while it has been established that no part of the amount due would be met by the receiver, no payment has yet been received from the guarantor. I therefore asked again what action was being taken to recover the debt guaranteed.

The Accounting Officer informed me that the guarantor had refused to pay the sum covered by the guarantee. Consequently the Chief State Solicitor had initiated proceedings to enforce the guarantee and recover the amount due and had issued a Summary Summons which was being served on the company.

The Accounting Officer assured me that it was intended that the legal rights of the State in this matter would be pursued with the utmost vigour.

Mr. McDonnell.—The Committee will recall that we discussed this question in November last at a reconvened meeting on the Forestry Vote. The committee will also recall that it was the Department’s clear intention to pursue the claim against the guarantor — which I understand is being done but I do not know exactly what the rate of progress has been. All I can say is that, as far as I know, the guarantor has not paid anything.

Mr. Holloway.—As regards the recovery of the money I should say that the legal proceedings have just commenced. There was to be a hearing the day before yesterday but it was adjourned until May 10. We understand that the other side may be initiating some proceedings against the State for failing to supply the relevant timber. The committee may recall that we discussed that last year. Our conclusion at that time was that there was not any exposure on the part of the State. Therefore, we are proceeding to enforce our rights, to procure payment, if we can. I am afraid I could not say how long these legal proceedings might take or, indeed, what the outcome would be. The issue seemed to us to be fairly straight forward.

Chairman.—Does the Comptroller and Auditor General want to say something on paragraph 39 before we do that? Paragraph 39 of the Report of the Comptroller and Auditor General reads:

A timber processing company whose credit limit had been fixed at £20,000 owed £42,446 to the Department when it ceased trading in February 1986. The amount realised on the disposal of the company’s assets was fully used to discharge its liability to a bank which held a charge on the assets.

I inquired regarding the circumstances in which the company was allowed to exceed its credit limit and also regarding the steps take to recover the amount outstanding.

The Accounting Officer informed me that the amount outstanding comprised £20,500 in respect of timber removed under the credit arrangements, two dishonoured cheques to a value of £10,000 in respect of earlier removals and £11,946 in respect of post dated cheques held by the Department in respect of the balance due for timber to the value of £33,946 which had been sold to the company on a deferred payment basis which the Department did not regard as a credit transaction.

The Accounting Officer stated that the Department had been advised by the Chief State Solicitor that, as the company had no remaining assets, it would be pointless to register a judgement because the Department’s judgement would rank with the unsecured creditors and if the Department put the company into liquidation it would be liable for the costs of the liquidator. It was therefore considered that there were no practical steps which could be taken to recover the outstanding moneys.

The Accounting Officer explained that the Department now includes a “Retention of Title” clause in its contracts of sale in order to allow for repossession of identifiable material removed should a similar situation arise.

Mr. McDonnell.—Paragraph 39 really refers to a company which it appeared, as the committee will see, had been allowed to exceed its fixed credit limit. The paragraph summarises the Accounting Officer’s explanation on that, in which he suggested that it was not a clear cut case of granting excess credit, though I would have to say I am not too sure about accepting post-dated cheques, and whether that should not be seen as a form of allowing credit. At the end of the paragraph the committee will see that Department have, very wisely, adopted what is becoming a common practice by firms in dealing with their trade debtors, of having a “Retention of Title” clause. It appeared to be a case of excess credit having been granted. Really it is self-explanatory.

Chairman.—I think we could take paragraph 40 also since all three paragraphs refer to the sale of timber. Paragraph 40 of the Report of the Comptroller and Auditor General reads:

An agreement made in 1981 between a timber processing company and the Department of Fisheries and Forestry provided for the continuous supply of pulpwood to the company under an agreed pricing structure which provided for a specified increase in the price per tonne after the first three years of supply. First supplies of pulpwood took place in 1983 and the Department therefore interpreted the agreement as providing for the specified increase in price to become effective from 1 January 1986. This interpretation was supported by legal advice.

The company, however, disputed the application of the increase from this date, contending that 1 January 1987 was the operative date. In the event, the company paid at the increased rate for material supplied from 1 July 1986 onwards but a sum of £144,747 remains due to the Department in respect of material supplied in the period 1 January 1986 to 30 June 1986. I inquired regarding the steps being taken to recover this amount.

The Accounting Officer has informed me that the outstanding account had been pushed through discussions and correspondence between the Department and the Chief State Solicitor on the one hand and the company and its solicitors on the other but that the company’s solicitor had not responded to an inquiry, made by the Chief State Solicitor in July 1987 on the instructions of the Attorney General as to why it was contended that the Department’s interpretation was in error.

Chairman.—Perhaps the Comptroller and Auditor General would comment on paragraph 40.

Mr. McDonnell.—Really, I have nothing to say on paragraph 40. It is a question of a dispute between the Department and the customer, if you like, in regard to the interpretation of the terms of the supply contract. As the Department see it, they are owed £144,747. Apparently the customer does not quite see it that way. Apparently, it is not as simple as it might appear.

412.Deputy Ahern.—In relation to paragraphs 38 and 39, in both cases it seems that the credit terms were exceeded. That would imply that there was a breakdown in the internal controls — which I presume there are — with regard to the credit limits. Do the Department now stick strictly to the credit limits and carry out examinations to ensure that these credit limits are not exceeded?

Mr. Holloway.—Yes, indeed. We now have quite a rigorous system of control of credit. In fact, we extend such credit to a limited number of companies only. The quantum of credit allowed is measured in relation to their sales and assets. In the case of most of the companies who qualify for credit, a significant part of the credit allowed to them is guaranteed by the banks. I have been looking at the overall figures. Really it is quite significant to note that over a long period of years, the amount of losses incurred in this way by people who are purchasers of timber, who did not pay for it, is tiny in relation to overall sales. We have sales every year of something approaching £15 million to £20 million. Obviously sales were not of that size in the past but it is a growing figure. Defaulters are minute, amounting overall to a couple of hundred thousands of pounds only. It is a rigorous constantly monitored system. The people who qualify for it are given an initial examination before they are put on our list at all.

413.Deputy Dempsey.—As a follow-up to that question, are post-dated cheques now regarded as credit?

Mr. Holloway.—I do not think we would agree to accept post-dated cheques except in very unusual circumstances where there appeared to be no alternative. It happened in one of these cases in respect of a small amount of money. It bounced but, again, I must repeat my earlier remarks about occasions when some enterprise will be in difficulty. One pushes out the front in those circumstances occasionally to try to keep them alive. Whatever may have been lost on this post-dated cheque here in terms of the State and the economy, it is probably a very small amount of money in relation to the damage done by the closure of the enterprise. I do not think I can give the committee a more specific answer except to state with some conviction that I doubt that post-dated cheques form part of the everyday business of the forestry enterprise. It is a very unusual thing done in extremis in particular cases.

414.Chairman.—The question of retention of title which you now write into contracts, how practicable is that?

Mr. Holloway.—As you know, Chairman, there has been a fair amount of debate on that for a number of years. At one stage it was identified as a magic wand that would enable people to get out of all their problems. I have seen comments to the effect that it may have its own complications. Unfortunately, I am not an expert on it. We got onto this bandwagon when we saw that other people were doing it.

Chairman.—We can note these paragraphs. We will move on to the Vote. Mr. Holloway is not the Accounting Officer for the two headings G — Game Development and Management and H — Wildlife Conservation, so we will take those when the appropriate Accounting Officer is in. We will take everything on page 106 of the 1986 Accounts from A.1 to J. excluding G and H and the same for 1985, both years together. What is the situation at present with regard to tree felling? If people fell a tree in their front garden are they obliged to replace that tree?

Mr. Holloway.—Yes, they have to get permission to cut it and if they do it without permission it is an offence under the Forestry Act, 1946.

Chairman.—If you find that a tree in your front garden is dangerous or is blocking the light, you have to get permission from the Forestry Department to move that tree.

Chairman.—Is there also some rule of thumb when you give permission for felling trees that you require four to be planted?

Mr. Holloway.—I do not know what the exact number is but it is a multiple of the number of trees cut down. Presumably, it has to do with the fact that for different species you can expect a failure rate for a start off and then they do not seem to grow well unless they have local support and they have to be thinned out later on.

Mr. Holloway.—There is no particular multiple, I am told. I am not an expert on that part of it.

415.Chairman.—Regarding Subhead CI — Payment to Grant-in-Aid Fund for the Acquisition of Land, what is that for?

Mr. Holloway.—This is the land which is required by the forestry enterprise for the planting of trees. It was decided many years ago that it would be provided in the form of a grant-in-aid. It means that we have the benefit of any moneys which are unexpended at end of the year and we can carry them over. I presume that the rationale for that is that very often the procedures for the acquisition of land are not concluded and there is a midstream situation at the end of the year. It is quite a significant heading of expenditure. Last year we carried out an analysis of our total reserve or land bank and we were able to cut down purchases significantly to £700,000. That saving enabled us to put up the planting target. It is a game that you cannot play indefinitely. You cannot reduce the land reserve below a certain point because the purchasing procedures are so cumbersome that you could find that you did not have enough land for your planting programme at a particular point.

Chairman.—With regard to the general state of forestry, what is the current situation. Are we improving as a forestry nation?

Mr. Holloway.—We expanded the target significantly for 1988 and I presume that if you continued with that kind of planting you could reach some kind of respectable figure in due course in terms of the number of hectares planted in the country. At the moment in terms of international comparisons you could only say it is a country that is denuded of trees. There are all kinds of historical reasons for that. It would take many years to plant what has been identified as the total area of land in Ireland which is suitable for forestry and probably better suited for forestry than for any other activity.

Mr. Holloway.—We have not an ultimate objective because it is, unfortunately, the subject of annual debate and annual wrangle.

Chairman.—You must have some objective. What would you want in ten years’ time?

Mr. Holloway.—I heard the Minister of State talking about one million hectares as a dream he would have.

Chairman.—Is there a population of trees? What number of trees are there in the 400,000 hectares?

Mr. Holloway.—Yes, indeed, but when we are selling timber, whether it is immature or mature, there is a very careful analysis done practically on a tree by tree basis, a measurement of the quantum of timber and so on.

Chairman.—Let me ask one final question. You are aware that in urban areas like Dublin, which I am most familiar with, there has been a very active campaign by Dublin Corporation to plant trees in schools and housing estates and generally to improve the knowledge of children in schools of tree planting. Do your Department keep in touch with local authorities? The corporation’s plans and investment are now succeeding since fewer and fewer trees are being vandalised. Are your Department behind that drive through local authorities, or do you have any relationship with local authorities in that regard?

Mr. Holloway.—We give them advice. I know the Minister of State has been very active on every conceivable aspect of the forestry front and has been in touch with every conceivable kind of organisation in the country whether it is local authorities, farming groups, co-operatives, the pension funds and other people, all with a view to promoting the forestry interests. May I answer an earlier question I was not able to answer? I will give you some information when you are talking about the number of trees. We plant 25 million trees per annum.

Chairman.—With regard to forestry education, £175,000 is granted here. Do you not think that targeting schools, getting children interested in the environment and in forestry, is the way to educate public opinion towards the need to develop more forestry? Do you target schools? What is that used for?

Mr. Holloway.—Subhead E has to do with the training of foresters in Mountrath and in Avondale. Mountrath trains people in the use of machinery such as saws and so on. Avondale is further up the scale. That is basically training our own people. I do not think that we are doing anything in relation to promoting forestry in schools.

Chairman.—Do you not see a role for yourselves in prompting local authorities or VECs or some educational institutions into doing this in schools? Is it not a desirable objective?

Mr. Holloway.—Yes, I agree with that, particularly since it is a declared objective of the Government to promote private planting. Up to now we have been talking substantially about State forestry but we have been trying for some years to promote private forestry. It is beginning to take off now but at considerable cost. The grants are very generous but there is a significant EC contribution. I would agree that as part and parcel of preaching the gospel of private planting if you could include some educational activities in the schools it would seem to be a good thing.

416.Deputy Colley.—With regard to salaries, wages and allowances, what is the ratio of foresters to labourers within the forestry service?

Mr. Holloway.—I have the 1986 figures here — secretariat 238, accounts 78, inspectorate, engineering and mapping staff 210, foresters 496, making a total of 1,022. That does not include the forest workers, of whom there are approximately 2,000.

417.Chairman.—Is that figure of 2,000 fairly static, or has the ratio changed over the last number of years?

Mr. Holloway.—I have not got the exact figure because some of these people are not permanent employees. There is a certain amount of flexibility there, but the number has come down slightly overall, despite the fact that the volume of planting has gone up. There has been an improvement in productivity.

Chairman.—Some of these labour costs are paid under headings C1 and C2, as well as the salaries, wages and allowances. Is that correct?

Mr. Holloway.—That is right. In subhead C2 in particular there is a significant amount of labour costs in that.

418.Deputy Colley.—The point I am getting at is that there seems to be a ratio of about one manager to every four workers in the field.

Mr. Holloway.—I have not had responsibility for forestry until very recently so my knowledge of these past events and these past statistics is not great. The exercise that we are at present involved in which is launching our legislation to set up the new State forest company, has a direct bearing on the kind of questions you are asking because we expect that organisation, once it is launched, to tackle these kinds of questions. The reason the forest company is being set up, or any State agency is set up, is that it is recognised that they will have more flexibility and more commercial freedom to settle questions of this kind. I am not suggesting that it is a total straight jacket at the moment but we would expect the State forestry company to do a very thorough analysis of all aspects of its operations, including the different kinds of staff. It is recognised that there are too many grades, that there is over elaboration in terms of the inspectorate, management and so on. Some rationalisation will have to be carried out there.

419.Chairman.—On the sales of houses to foresters — I realise it may be getting into the nitty-gritty for yourself — I am interested to see that there was an estimated figure of £158,000 which would come in from the sale of the houses. That was reduced because of delays in completing sales. Could you give us some idea how many houses were involved in that and is there a policy of selling houses to the foresters?

Mr. Holloway.—That policy has existed for quite some time and the sale programme is now practically completed. Almost all the houses have been disposed of. At the moment we are looking at other assets that we can sell. We carried out an analysis of all the possibilities throughout the country of plots of land which might be more suitable or more valuable for purposes other than forestry. That survey to identify those areas has been concluded and we will now embark upon those sales. I would expect that we would generate an income of many millions under that heading. We are also interested in identifying things like gravel deposits. We see very distinct possibilities there which will produce, in my expectation, very significant amounts of money.

Chairman.—That would be for the Department, or to sell with an interest because there is a gravel deposit?

Mr. Holloway.—I doubt very much if we would be allowed to retain the money. I think it would go to some other account.

Chairman.—Should the Department of Forestry be entering into the business of trading gravel deposits?

Mr. Holloway.—It is a question of disposing of assets with a view to concentrating on forest work and reducing the burden on the State.

Chairman.—On the question of the supply of chain saws to your Department, would it be accurate to say that the same company have been supplying these for a number of years?

Chairman.—You have the assistant secretary of the Department of Forestry there beside you. Could you perhaps find out?

Mr. Holloway.—I will certainly ask him that question but I would like to get in this statement first because obviously it is a matter in which I would be interested. I would be very much surprised if any purchases are made by the Department otherwise than on the basis of competitive tenders.

Chairman.—That is what I am trying to get on the record. Is it true to say that the same company have supplied them for a number of years?

Mr. Holloway.—The answer is yes, but it is always subject to tender competition.

420.Deputy Foley.—Under the heading Miscellaneous Appropriations in Aid there is a note on a refund of salaries, which is only a tiny figure. To what does that refer?

VOTE 50—ENERGY

Mr. Holloway further examined.

Subhead L. — State Support for Mining Operations

Reference was made in my 1982 Report to loans totalling £9,908,849 made to Avoca Mines Limited in the period 1979 to 1982 and to the issue of £2,825,000 to the receiver of the company in 1982 to enable him to meet the net estimated expenses of the receivership.

As stated in a note to the 1986 Appropriation Account the loans totalling £9,908,849 together with accrued interest of £10,737,677 have been written off as irrecoverable with effect from 5 December 1986 as it was apparent that the remaining assets of the company would be insufficient to repay any part of the amounts due.

In December 1986 also a further sum of £29,000 was issued to the receiver bringing the total amount issued to £2,854,000. I understand that the receivership is still in progress.

Mr. P. L. McDonnell.—This deals with the Avoca mines. The Committee have discussed this matter previously. The only thing I wish to add to the information in the paragraph is that I understand that since the date of my report a further £125,000 has been paid to meet the costs of the receivership, but I understand that that is in the context of the possibility of recovering some amount of money at the end of the day, so to speak.

Chairman.—So the State is writing off £9.9 million together with accrued interest of £10.7 million in this case. Is the State likely to recover anything from this on-going receivership?

Mr. Holloway.—Nothing really of any significance. The Comptroller and Auditor General has referred to the fact that we had to advance some additional amount, but we have terminated the receivership and we are concluding the disposal of the remaining assets ourselves. We would expect to get about £170,000 in for those assets but there will be no significant recoveries from this enterprise and that was quite clear from day one.

Mr. Holloway.—Yes, travel and accommodation expenses came to about £22,000. There were also other overheads of £349,000.

Mr. Holloway.—The only figure which I can identify here is that overheads figure. That was about £349,000. That would, when added to the fees and expenses, come to over £600,000.

Chairman.—The balance of the £3 million will have been paid for labour and for keeping the doors open?

Mr. Holloway.—Basically on safety matters because the State, unfortunately, is saddled with the responsibility of making old mines safe.

Mr. Holloway.—It is gone: it has disappeared. People have had a look at it since it went into receivership but I think there is no prospect of this operation being resuscitated. I think it is the second or third time the State had made an attempt to assist a mining venture at Avoca. Certainly, it is the second time and both of them have been unsuccessful.

Mr. Holloway.—Yes, the State will own the lands and whatever other bits and pieces have not been disposed of.

Chairman.—And whatever assets may be discovered later in the mines ar under the lands? Is there any gold there?

Mr. Holloway.—I am not aware of it. I would have to say that I hope we will not have a third effort at looking for copper.

422.Chairman.—Are there any other comments? We will note that for now. Paragraph 61 of the Report of the Comptroller and Auditor General reads:

Exchequer Extra Receipts

Payments from Chevron Corporation as part of agreement on transfer of Whiddy Oil Terminal to the State

Subhead R.—Payments to Irish National Petroleum Corporation Limited for Maintenance of Whiddy Island Oil Terminal

The Gulf Oil Terminal at Whiddy Island, Bantry, Co. Cork was erected by Gulf Oil Terminals (Ireland) Limited in accordance with the terms of a foreshore lease granted by the Minister for Transport and Power in October 1968. The jetty at the terminal was badly damaged in the Betelgeuse tanker disaster in January 1979. Following negotiations regarding the discharge of certain obligations which Gulf had under the foreshore lease, agreement was reached in February 1985 between the Minister for Energy, the Minister for Communications and Gulf under which Gulf agreed to reconstruct the jetty to a design specification acceptable to the Minister for Communications at an estimated cost of $60 million and to pay $2 million to the Minister for Energy. The performance of Gulf’s commitments under the agreement was guaranteed by the Chevron Corporation of which Gulf was a wholly owned subsidiary.

The payment of $2 million (£1,955,990) was received by the Minister in June 1985 and transferred to the Exchequer as Exchequer Extra Receipts.

During 1985 Gulf concluded that there was little prospect of a commercial future for the terminal and made alternative proposals to the Minister for the discharge of its obligations to the State under the agreement. Following further negotiations a new agreement was entered into in May 1986 between, on the one hand, the Minister for Energy, the Minister for Communications and the Minister for Finance and on the other hand Gulf and Chevron.

(1)Gulf would transfer to the State all the assets of the Company at Whiddy free of charge but would remain responsible for all redundancy payments,

The Irish National Petroleum Corporation Limited assumed ownership of the terminal on behalf of the State on 18 June 1986 and payments totalling £450,000 for the maintenance of the terminal have been made to the Corporation from Subhead R of the Vote in 1986.

Mr. McDonnell.—This paragraph is essentially for information because it was a novel situation. It outlines the financial arrangements involved in the transfer of ownership of Whiddy Oil Terminal from Gulf Oil to the Irish National Petroleum Corporation as agent for the State. It also refers to the payments from the Vote made to INPC in 1986 in respect of the maintenance costs of the terminal.

Chairman.—The situation is that after the Betelgeuse tanker disaster, Gulf Oil agreed to rebuild the jetty at a cost of $60 million and to pay the Department of Energy $2 million in both cases?

Mr. Holloway.—Under the first agreement, they agreed to reconstruct and to pay us $2 million.

Chairman.—That is all right. It is just for the record. A figure of $60 million is what they agreed. They said they would build it and that it would cost about $60 million. They subsequently paid the $2 million to your Department but then came back and said there was little prospect of a commercial future for it and they wanted to get out of their contractual arrangements. Is that correct? They then transferred all the assets.

Chairman.—To the State and, as part of the agreement, paid the State $40 million?

Mr. Holloway.—Yes, and they handed back the assets unencumbered and also sold us some oil which at a discount and that discount had a value to us of $2 million.

Mr. Holloway.—Well, you might have been watching a television programme last night.

Mr. Holloway.—In effect, there is not anything happening. The place is not operational except with some risk. We have taken oil out of it, but it is a risky operation. It could not in its present state function as a depot. Various estimates of the cost of making it operational have been put forward. There is a figure of something like $10 million. There have been discussions with various parties about Whiddy, Whitegate pipelines and matters of that kind.

Chairman.—Is there anything in the pipeline? Will anything happen to this site and is it safe at present?

Mr. Holloway.—Whiddy is quite safe. There are no dangers there at all. It is just a very valuable asset — at least a very large amount of money was spent on it. If you were to construct it today, the cost would be about £100 million. That is with the tanks and so on. Unfortunately, the original rationale for it has disappeared with the opening of the Suez Canal and other factors of that kind, but it is still very valuable. We believe that sooner or later we will be able to do some good business in relation to it. Whether in association with Whitegate or on its own, I do not think it matters, but I will be very disappointed if we cannot do business in respect of it. That was one of the purposes of getting it back into State ownership. If these people were not able to guarantee some kind of future for it. We thought it better to release them and get the money for the Exchequer and then see what we could do about making it operational.

Chairman.—Given the Iran-Iraq conflict and the instability in certain parts of the Middle East, do your Department actively promote this as a desirable future venue for an international oil terminal? Are you out selling this idea internationally?

Mr. Holloway.—Unfortunately we were not able to do it as enthusiastically as we would have liked. We did start knocking at certain doors but the fact that it is not operational at the moment was seen by a number of the parties we approached to be rather off-putting. The situation in relaton to planning permission was not clear either and that was another negative factor. After the Betelgeuse disaster, there are many sensitivities and the Knowloon Bridge business has not helped things. We believe now that we would be able to get planning permission on reasonable terms without smothering the enterprise with too many burdensome obligations. We have made inquiries. If these negotiations fail we will certainly be trying to do business with other parties.

Chairman.—Was the question of compensation for loss of life, injury and damage to property, the responsibility of Gulf? Have all the obligations been met and agreed?

Mr. Holloway.—My understanding is that the obligations owning from the different commercial parties in this business have been settled. They had legal proceedings which were called off, but that is all I know.

423.Deputy Colley.—I see that in the final agreement made with Gulf, Gulf transferred to the State all the assets at Whiddy free of charge but remained responsible for all redundancy payments. How much was owing on redundancy payments and have they been fully discharged?

Mr. Holloway.—Yes, they have. I could not give you the numbers. I did hear the figures at one stage but it was only of incidental interest to us. We just wanted to make sure that if there was a burden in relation to redundancies it would be borne by Gulf. We wanted to get these facilities back, absolutely unencumbered in any way. They were made liable for the redundancies. My understanding is that the payments made were very handsome.

Deputy Colley.—Are the Department actively negotiating with more than one party in relation to this?

Mr. Holloway.—No, not at present. It quite often happens in situations of this kind, not only in relation to the State’s business but in the commercial world, that where there are negotiations which would involve the parties in considerable expenditures by way of consultancies etc. there is a request for what might be called a temporary reserve on the facilities. That would hold until such time as it became clear that there was no real prospect of business being done. The reason people ask for that kind of exclusivity is that they do not like to be used as pawns at great expense to themselves, pawns who might simply assist negotiations being conducted with other parties.

Deputy Colley.—Is the temporary reserve in existence at the moment for a particular period of time and, if so, when does it run out?

Mr. Holloway.—It is not for a particular period but we would have the right to decide when it came to an end because we would have the right to decide whether there was a real prospect of business being done. Obviously we would not put our heads into an indefinite halter which would prevent us from opening negotiations with other parties.

424.Deputy Desmond.—What is the position regarding the current reports relating to the Nigerian negotiations whereby there seem to be some considerable problems or a particular problem within the Department. Newspaper reports referred to internal representations being made to various Ministers or politicians about what one officer, for one reason or another, seems to have regarded as a development which was undesirable. Can you enlighten the committee? I am only going on newspaper reports.

Deputy Desmond.—It relates in so far as the particular facility in Whiddy could become embroiled in the negotiations.

Mr. Holloway.—I have some knowledge of that business and I read the newspaper accounts. Since it concerns an employee of a State agency rather than of the Department, I do not think I would be free to discuss it in any detail. There is a newspaper account of that particular event and that is as much as I can refer to.

Deputy Desmond.—I can appreciate the extreme constraints which the Accounting Officer must follow in this regard. However, do you not regard it as disturbing that an officer would have such reservationions about the manner of those negotiations that he or she would put his or her job in jeopardy by communicating such grave reservations to——

Chairman.—I am at a loss because I have not read any newspaper reports and there is nothing before us.

Chairman.—What are we speaking about because I have not seen these reports? Perhaps you could spell it out?

Deputy Desmond.—For such a perspicuous chairman who is all knowledgeable on all issues I am amazed.

Chairman.—Deputy Desmond I am about to move on to the next subject and I am trying to find out what you are talking about.

Chairman.—Yes, but the committee are not aware of it. What are we discussing here? I do not know whether we are leaving ourselves open to libel for instance.

Chairman.—We might be libelling somebody. I do not know what the question is and I am Chairman of the committee.

Deputy Desmond.—In recent weeks there was a newspaper report that a particular officer or employee of either the INPC or related to the Department had been in communication with senior political figures expressing reservations about the manner of the negotiations, particularly the Nigerian negotiations and that, as a consequence, an investigation ensued in recent weeks. The reason I raise the matter is that Whiddy Island has been specifically embroiled in the particular negotiations to an extent and that that officer has been suspended or has been subject to an investigation. I can appreciate the constraints on the Accounting Officer but it is a matter which should be put to him. Is he entirely happy with the negotiations relating to the Nigerian project? To what extent did that officer express reservations of merit and of consequence?

Mr. Holloway.—I am conducting the negotiations with the assistance of other people and I am quite satisfied about the way we are handling the business but, in relation to the incident you have in mind, my understanding of the newspaper account is that the representations being made by the individual concerned were favouring the project, pushing the project rather than criticising it.

Deputy Desmond.—I appreciate your enlightenment. Perhaps we may be able to discuss the matter further.

Chairman.—You are assuring the committee, Mr. Holloway, that there is no impropriety in this matter.

Mr. Holloway.—What I am saying, is that I am aware of certain events relating to an officer of the INPC, not of the Department. I would find it extremely difficult to discuss it in any detail, since he is not one of my officials.

Chairman.—This is the first time this has been brought to my attention. If there is any suggestion of impropriety in your Department or in anything relating to your Department, in public funding, it is a matter for this committee.

Mr. Holloway.—It is not a question of impropriety in relation to funds. This is really a disciplinary matter relating to staff.

Chairman.—That is why I asked if you can give an assurance that there is no impropriety.

Mr. Holloway.—Well, it all depends on what you mean by impropriety. If an officer of the INPC does something which is not in keeping with his conditions of employment and gives offence to his employer, we have to stand back and let the board of that company take what action they deem appropriate, because they have obligations resting on them as directors of the company.

Chairman.—What I am really referring to is the question of impropriety in the negotiations.

Mr. Holloway.—We expect to receive, fairly soon, a detailed project proposal. All we have had up to now, is an outline proposal which was the subject of a good deal of discussion. We now want to get down to cases, so what we need for that purpose is a detailed project proposal and we expect to get that very soon. Obviously, it is a major piece of business, and we will have to make up our minds about it before we put our recommendations to the Minister and the Government. I make that point just to underline the fact that the mere receipt of this detailed project proposal does not mean that we can hand it to the Government to decide. We will have to analyse it and to underline all the pluses and minuses in this thing. It is a very grave obligation that will rest on us, because it is a very serious business.

Chairman.—You are satisfied that the outline assurances received so far will not expose the State, in any agreement, bearing in mind the history of some similar negotiations?

Mr. Holloway.—At this point, I would have to refer to some of the remarks which Minister Burke made yesterday to the effect that when one is involved in commercial negotiations of this kind, it is a well established convention that one is precluded from revealing too much or indeed any relevant information until such time as the business is concluded. It would not be possible to conduct negotiations of this kind, if we were revealing in public half way through the process, what our views were on particular parts of the proposals. We would have to look at the business as a whole, analyse all the risks involved as well as the advantages and identify the things which we regard as being most important for the Government to concentrate on.

425.Chairman.—We have gone as far as we can go on this today. We will note that paragraph and move on to Paragraph 62. Paragraph 62 of the Report of the Comptroller and Auditor General reads:—

Bord Gas Éireann

Following the discovery of natural gas at the Kinsale Head reservoir, Bord Gáis Éireann (BGE) was established under the Gas Act, 1976 to develop and maintain a system for the supply of natural gas. Under Section 11 (2) of the Act the Minister for Energy may, from time to time, with the consent of the Minister for Finance, direct how the profits of the Board shall be applied (including applications for the benefit of the Exchequer). Up to 31 December 1986 profits of the Board amounted to £342,410,000 of which £293,555,000 has been applied as follows in accordance with directives made by the Minister under Section 11 (2):

Year	Exchequer	Loans to Dublin Gas Company	Total
	(£000)	(£000)	(£000)
1983	63,000	—	63,000
1984	54,000	17,000	71,000
1985	80,000	3,750	83,750
1986	15,500	27,305	42,805
Total £	245,500	48,055	293,555

I understand that the assets of the Dublin Gas Company will shortly be acquired by BGE.

Mr. McDonnell.—This paragraph is straightforward. It is for information and it simply refers to the application of the profits of Bord Gais for the benefit of the Exchequer and in loans to the Dublin Gas Company as clearly set out in the table at the end of the paragraph.

Chairman.—This is an information paragraph. The profits of An Bord Gais Éireann up to December 1986 were £320.4 million. Was that from 1976 or from 1982? It was set up under the Gas Act 1976 but when did it get trading and start making profits?

Mr. Holloway.—It made a loss of a couple of million pounds in the first year? I think it started making profits in 1979.

Chairman.—Of these profits, the lion’s share went to the State. We know it went to the Exchequer between 1982 and 1986, but what profits have gone in total to the Exchequer since the formation of this company? Is £245 million the total amount or did they get anything before?

Mr. Holloway.—In 1979 the company made a loss. In 1980 it made a profit of £2.3 million, in 1981 a profit of £17.4, in 1982 a profit of £44.4 million and paid £15 million corporation tax. In 1983 it made a profit of £68 million; in 1984 £81 million; in 1985 £94 million; and in 1986 £33 million. Its profits have come down significantly in the last couple of years because of a variety of reasons, including the decline in the price of oil. For every dollar drop in the price of crude oil, BGE loses about £5 million. Although the economy may be benefiting from significant reductions in crude oil prices the profits available to BGE and to the State take a hammering.

Chairman.—Between 1982 and 1986 Bord Gais Éireann paid £245.5 million into the Exchequer and perhaps more last year?

Mr. Holloway.—Yes. I am hesitating a little about the figure for 1987. On reflection, I don’t think BGE paid any surplus to the Exchequer last year.

Chairman.—There were loans to Dublin Gas of £48 million in 1984, 1985 and 1986. Were any further loans made in 1987?

Mr. Holloway.—Yes. I can give a general picture of the overall involvement of the State in Dublin Gas.

Mr. Holloway.—I can pick out figures, or if the committee like I can send the more detailed table?*

Chairman.—You can sent us a detailed table, but perhaps you would give us a quick summary of the situation.

Mr. Holloway.—What was to happen under the original base case was that at the end of 1987 it was expected that £104 million of State money would be involved in the project. That comes under a variety of headings — conversion rebates, development rebates, accelerated rebates, bulk credits, loans etc. What actually happened was that at the end of 1987 a total of £134 million of State funds, under all these headings, was invested in the project and meant that in comparison with the original base case of 1982 we were burdened with an extra £28 million. The reason for that was that when the enterprise started getting into difficulties it involved us in some additional expenditures. There were quantities of gas that could not be paid for by the company, etc. In the period up to the receivership £27 million of the excess of £28 million was over-expended. The excess that arose out of the receivership was about £1.5 million. That adds up to a total excess of about £28 million and a total involvement of the State of £134 million under one heading or another.

Mr. Holloway.—Yes, including what you could call grants as well as loans. We classify the conversion rebates as grants because in effect BGE were selling gas to Dublin Gas at favourable prices.

Chairman.—So at the time BGE took over Dublin Gas they had already invested £134 million by way of loans and grants, presumably irrecoverable loans, to Dublin Gas. Is that the situation?

Chairman.—With the take over of Dublin Gas and the investment the State has made, the Exchequer has had to forego money it would otherwise have had coming in. Leaving aside this £134 million, which is obviously a very substantial amount of money, what did the take-over of Dublin Gas cost?

Mr. Holloway.—With the liabilities attaching to the assets. One could not take them, unfortunately, without the charges that were on them. Dublin Gas continue as a separate corporate entity. Thye owe a large amount of money to BGE as well as to other parties but there is no prospect of that money being paid.

Chairman.—When BGE took over Dublin Gas that net reliable assets or net liabilities were there?

Mr. Holloway.—The charges attaching to the assets belonged to banks and certain other institutions and they amounted to £62 million.

Chairman.—The State was another creditor. Were there other major creditors apart from that?

Mr. Holloway.—No. In the course of the receivership we gave the receiver funds to discharge obligations to certain unsecured creditors, contractors and people in the business whose services were essential to us. If we had not paid them Dublin Gas would simply have foundered because they were in the middle of this conversion exercise and those contracts had to be completed. We had to pay those debts to enable the business to survive. We were also conscious of the fact that if we did not pay those debts those contractors would go bankrupt because the amounts owing to them were very significant.

Chairman.—The amount of liabilities attaching then to this takeover would have been in the order of £200 million.

Mr. Holloway.—That is a liability. That is not money that has been paid. That is now a liability of BGE which came attached to the assets they acquired and will be discharged by them in accordance with the new banking arrangements which were concluded at the beginning of November.

Chairman.—The company will trade out of the situation and cover that liability in time. Is that what you are hoping?

Chairman.—Will they trade out of the situation sufficiently to refund the State?

Mr. Holloway.—Dublin Gas, as an enterprise, as far as we are concerned, is now a division of BGE. We expect that Dublin Gas enterprise will be making profits on its own in a couple of years time. Even as matters stand we expect BGE, as the global enterprise, to resume paying significant surpluses to the State very soon.

Chairman.—Is it not a fact that if Bord Gais or your Department had not made their investment in Dublin Gas and you did not have to take on the liability of the banks, Bord Gais Éireann, your Department and the Exchequer generally would have a liability of some £200 million less than is now the case?

Mr. Holloway.—There is no doubt that this exercise has cost a great deal of money but the alternative was to allow the company to go into liquidation and to leave 150,000 people and several thousand industrial enterprises without gas. Furthermore, those people would obviously have to have some replacement energy form and in the vast majority of cases that would have been electricity. We did calculations which showed that the cost to the economy of putting consumers and industrial and commercial users to that expense would have been in the region of £200 million.

Mr. Holloway.—I am not aware of that because the receiver was appointed by BGE and it is they who are keeping checks on his costs and expenses.

Mr. Holloway.—I am. The Minister has published very detailed reports on the progress that has been made in implementing the recommendations of the various reports, Cremer and Warner, Veg, the Building Task Force and others. In my view it is a job that has been very well carried out by BGE with assistance from some people in the Department. One particular officer of the Department, an engineer, was specifically enjoined by the Minister to oversee this matter. I am satisfied that remarkable progress has been made and that there are quite different attitudes prevailing in that company now. One always has to cross one’s fingers, of course, about gas. A lot of money has been spent on dealing with these safety problems and I believe it is money well spent. The holes have practically disappeared and the number of complaints received and worries expressed by people about gas leaks have gone down dramatically. The amount of unaccounted for gas, gas leaking out of pipes, which one always worries about both from a safety point of view as well as from a financial point of view, has been reduced very significantly. Over a period of 20 years the old Dublin Gas Company renewed 47 kilometres of pipeline. This year alone we will be renewing between 80 and 100 kilometres and this renewal programme will be continued in the future. New standards have been drawn up, new rules of procedure for the gas operatives have been introduced and new training schools have been set up.

That is only half of the list. We have done everything that we could conceivably have done to bring about an improvement and I believe that it is a job very well done.

Chairman.—So, we will not be competing with Jerusalem for the title of Holy City in the future.

426.Deputy Desmond.—What will it cost to complete the conversion programme in Dublin?

Mr. Holloway.—It has been completed. What is taking place at the moment is development work.

Mr. Holloway.—I do not know what the exact cost of relining a kilometre is but I think the Deputy can take it that to reline between 80 and 100 kilometres in 1988 will probably cost about £10 million. That is a guess but I do not think that it is a wild guess.

Mr. Holloway.—Yes, but that is part and parcel of conducting a well run gas enterprise. One must keep examining the lines. They have all now been mapped in great detail for the first time. One must keep examining the lines and one should always have in mind that it is the older ones which give rise to leaks and that it is better to replace them. By putting down plastic inserts relining can be done nowadays much more cheaply than in the past.

Chairman.—I take it that the relining programme, which I suppose is euphemistically being used as a cover for the completion of a conversion programme, will cost about £20 million or £25 million.

Mr. Holloway.—Taking all of the exercises relating to safety, including the relining or replacement of lines, into account, the total cost will amount to around £20 million but one would not expect it to continue at that figure in the future or anything like it.

Mr. Holloway.—They are now in one single enterprise. Dublin Gas is a division of BGE.

Chairman.—The State will ultimately pick up the tab. Therefore one is talking about overall State expenditure in two or three years time of about £160 million.

Mr. Holloway.—The costs that will be incurred in the years from this point onwards should properly be regarded as the costs of running the enterprise. As I have said, taking those costs into account, we expect that Dublin Gas — that particular division of BGE — will be profitable and that it will no longer be a burden on BGE. BGE itself, having had to endure these burdens over the last couple of years, should be able to return to the paying of surpluses to the Exchequer.

Chairman.—I think you would agree that it would not be very difficult to run any enterprise on an operational profit basis if one got a write-off of £150 million worth of capital investment. What is your view on the State becoming involved to that extent? Would it have been better to give the 150,000 consumers £1,500 cash each and industrial users substantial compensation rather than to do what was done? Would it have been better to have upfronted Dublin Gas at the time, bearing in mind that in the greater Dublin area there was an over-capacity of electricity of 40 per cent at the time the decision was made?

Mr. Holloway.—When the initial project was launched I did not have responsibility for energy matters but I have been around since the time of the receivership. I am quite satisfied that the best decision that could have been made was made. Considerable disruption would have been caused if it had been allowed to go. As I indicated earlier, the costs which would have been involved in pursuing an alternative course would have been greater than the cost of the exercise that was carried out. We looked at what was done in the North of Ireland where a decision was taken to run down the gas industry and to pay compensation to people. My information is that the ultimate costs of that course of action will be far greater than originally contemplated. The disruption that was caused in homes and industries was considerable, despite the fact that they received money to buy new apparatus.

Chairman.—I want to call in Mr. Carey from the Department of Finance on this question.

Mr. Holloway.—Let me add, being the owners of Kinsale Gas, it was also a matter of considerable importance to us that we had an outlet for our gas. The main consumers of prime gas in Ireland are the consumers of Dublin city and its environs. It is a matter of some importance to us that that outlet should not disappear.

428.Deputy Desmond.—It is fair to say that tens of millions of pounds worth of a scarce natural resource, namely, Kinsale Gas, was pumped into the area at enormous cost, and this is a finite resource, which has many industrial uses and downstream prospects. The Kinsale Head reservoir does have severe limitations although it is a little better than we thought originally. In a situation where we had generating capacity in the ESB over-provided again by State investment to the tune of not less than 30 per cent, in capacity and up to about 40 per cent, including surplus generating capacity in the Dublin area, there was an extraordinary mis-match of capital resources for which I do not hold you responsible.

Mr. Holloway.—As I said, I was not in on this project at the beginning. There was a great deal of debate about it and there was a good deal of political acrimony as you know. That acrimony was all about putting these very significant resources into Dublin Gas and doing it in a particular way. So far as the story as a whole is concerned, Chapter 2 opened up in the receivership because the earlier exercise embarked upon simply failed. People have attributed the fault, to a large extent, to the way in which the project was managed and, in particular, uncomplimentary things have been said about the Old Dublin Gas Company. But in so far as the events relating to the receivership are concerned, the events of 1985 and 1986, I am satisfied that there was no real alternative to the course which we embarked upon, which was to keep the enterprise going and to bear this burden because it was going to be less than the burdens that would otherwise accrue.

429.Chairman.—We have developed that point already. I want the Department of Finance to come in on the question of financing of Dublin Gas. In taking the money that would normally flow into the Exchequer by way of profits from An Bord Gáis and then subsidising the Dublin Gas operation, surely the correct procedure would be for those profits to be paid into the Exchequer and for Dáil Éireann to vote this subsidy. Is the Dáil being by-passed in this procedure?

Mr. Carey.—I do not know if the Comptroller and Auditor General has commented on this. It could be said that another way of doing this would have been to vote the money, but the Government decision was to proceed in this manner.

Chairman.—Is that in keeping with good public accounting policy and practice? Is your Department happy with that?

Mr. Carey.—The advice that we gave on this question is something which I could not go into now. The advice we gave Government on this question is confidential. The fact is that the Government decided to go this route and once they decided to do that we confined our activity to determining that every penny that was directed to Dublin Gas under the terms of section 11 (2) of the Gas Act was properly payable and was the minimum necessary to do what was required.

Chairman.—Leaving aside what you advised the Government of the day, this Committee is to satisfy Parliament that the correct procedures are being met and that the Dáil can control disbursements from the Exchequer. This is a way of by-passing it. Could I ask the Comptroller and Auditor General if he is happy with this? Is this the correct way to do it or should this money not come into the Exchequer as profits in the normal way and then any subsidy to Dublin Gas be voted by the Dáil?

430.Mr. McDonnell.—Mr. Carey referred to the question of whether or not I commented on this method. I did not because the Act allows the Minister for Finance to direct how the profits of BGE may be used but I would have to share your sentiments, Chairman, in regard to the question of transparency in regard to the use of what is, in effect, public moneys. I certainly share your views that it would be more transparent if it was done in the way in which you are suggesting.

Mr. Holloway.—I do not think it is a black and white situation. I have been involved in discussions about this business. As far as I am concerned, the supreme authority in relation to public money is the legislature and the legislature passed that legislation — section 11 is part of that enactment — and the legislature, with its eyes open, empowered the Minister for Finance and the Minister for Energy to dispose of these surpluses in that way. It is important to bear in mind that the description of these surpluses as being money rightly owing to the Exchequer is not correct.

Chairman.—Nobody described it as money rightly owing to the Exchequer, but money which would, in the normal course of events, flow into the Exchequer, as is evidenced between 1982 and 1986.

Mr. Holloway.—I am speaking in technical terms now but these powers were given by the Oireachtas to the Ministers and they have exercised them to deal with surplus funds of BGE.

Chairman.—Nobody is suggesting that the Ministers are behaving illegally or that your Department is behaving illegally. Of course the law is there. The suggestion is that is the accounting procedure used was one of receiving the profits in the normal course and the Dáil having to vote annually, the Dáil could then see precisely the extent to which it is subsidising Dublin Gas and there would be greater transparency. That is the consideration of this Committee. This Committee has an audit and accounting function.

Mr. Holloway.—I certainly would not disagree with that. I can assure you that in the days when we were negotiating this contract with Marathon we were looking forward to the day when significant benefits would accrue to the Exchequer but section 11, which was enacted at a time when I did not have responsibility for energy matters, is there. If one was faced with a similar situation today one would probably not ask the Dáil to pass section 11.

Chairman.—We will not this paragraph. Would the Department of Finance let us have a note on their views on this accounting procedure when they consider the matter?*

432.Deputy Desmond.—NET is a major consumer of BGE gas production. Can the Accounting Officer confirm that the gas sold at NET is about one-third of the commercially related cost per therm of gas and certainly is at least half of the commercial-related cost, for example, to other major users and that, in fact, there is an enormous subsidy of gas into NET.

Mr. Holloway.—I do not think that we have ever revealed the precise numbers but people have made certain assumptions about it. The situation in relation to NET is even more complicated now since the merger with ICI. In very brief terms, the effect of the new arrangement is that gas is now being priced at more realistic terms but there are mechanisms under which a certain part of that extra price is retained for the purposes of paying off the NET loans. Indirectly, that means that gas is still being sold at favourable prices. I was not there in the early days but I have a very good knowledge of those events because I had to read up on them. When the Marathon field was found, a committee was established consisting of representatives of all the relevant State agencies, IDA, IIRS and several others to identify the best utilisation for this gas deposit and how you would get it on stream. It was universally accepted at that time that a very good usage for natural gas, indeed, it was identified as the best usage for natural gas, was its conversion into fertiliser. That was how the Marino Point project came into being. If it had not been done, the Marathon field could not have been developed and there was an obligation upon the State to assist Marathon in finding customers for it. The two major ones identified by this committee were fertilisers, NET, and electricity power stations.

433.Chairman.—I think we have developed that point sufficiently. I will note this and move on to the Vote.

434.Deputy Desmond.—I will not press the matter but I do enter the reservation that again it was a very limited, finite resource, which has been disposed of — not necessarily because of the policy decisions of the Accounting Officer — in a manner which, in retrospect, is very much open to question. That is my personal strong view on that matter.

Chairman.—Your views are now on the record. I am going to take all the subheads together A.1 to R.

435.Deputy Colley.—I refer to what I see as remarkably efficient housekeeping on the part of the Accounting Officer, because there seems to be a great proportion of the headings which have come in under budget and, in fact, in many cases well under budget. I am looking at, for instance, the geological survey, minerals development and energy conservation. It seems to me that if money is voted in these areas, it is for the purpose of developing our energy uses or energy conservation. I would have thought it was a good investment. I am puzzled as to why it is not being used.

Mr. Holloway.—So far as energy conservation is concerned, I think that what we are doing at the moment in Ireland differs significantly from what is happening in other countries who are increasing their expenditures on conservation. When I came back into energy matters in 1984, I have to have a very hard look at what was happening under the heading of energy conservation, and things like new and renewable energy forms and all the rest of it. It was not very impressive. I could not see great value for the money that was being spent. We have tailed off an awful lot of the projects which were in existence at that time. We are concentrating now on the services that can be provided by the IIRS and in 1985 £237,000 out of a total of £274,000 for energy conservation went to the IIRS. We believe they are in a position to contribute in a very realistic way. They have a number of programmes that have to do with the real coal face of energy conservation. They have staff, they are a member of various groupings with people in the private and the public sector who are exchanging ideas about energy conservation. We can measure the savings that are achieved which are very considerable and we regard those programmes as being worthwhile. I have to say that the rewards for the other forms of energy conservations did not look terribly tangible.

436.Chairman.—It seems to me that at the beginning of the year in the Vote was included under the heading N — new and renewal sources of energy — a sum of £146,000 out of which only £80,000 was used. Surely it would have been known at the beginning of the year that that was going to be the extent of the expenditure?

Mr. Holloway.—These projects take time to mature and it takes time for the bills to come in. Obviously we do not hasten the bills coming in. We did not spend as much as was contemplated. At the time the initial entry was our best calculation as to what kind of bills we would be confronted with from the various expenditures that we were assisting under that heading.

437.Deputy Dempsey.—There are items here which involve the accounts for 1985 and 1986 — under the heading statement of advances repayable to the Department under agreements etc. — on page 179 Bula Limited, a sum of £899,535 plus interest accrued of £399,789. How does this arise?

Mr. Holloway.—There were a series of transactions over six or seven years in all. They had to do with commitments entered into with the banks to see that their interest would be paid for particular periods of time to stave off receivership on the different occasions in question. Negotiations were being conducted with other parties which held out the prospect of getting this particular project off the ground but the banks began to demand their money and to threaten a receivership which would have put an end to all that business and the Government decided on a number of occasions to stave off the receivership by agreeing to accept responsibility for the interest accruing for particular periods. At the end of the day, unfortunately, it was not a very happy exercise because despite our best endeavours in 1985 when we organised a deal that would have kept that enterprise alive or would have solved this problem in a satisfactory way, the private shareholders did not accept the deal and the receiver was then appointed. It is at present in receivership and there are three or four different sets of legal proceedings going on and what the outcome of that will be I do not know, except that I do believe that the State's interest in this business and the State's investment in this business has not necessarily disappeared.

Chairman.—There is a detailed paragraph on it in the Comptroller and Auditor General's report for 1984.

Deputy Dempsey.—What were the State getting in return for the guarantees they put forward?

Mr. Holloway.—Just staving off the receivership in the hope that the projects that were then under discussion with other parties could be brought to a successful conclusion.

Chairman.—Thank you very much, Mr. Holloway. That concludes the examination for 1985 and 1986.

APPROPRIATION ACCOUNTS 1985 – 1986

VOTE 41—COMMUNICATIONS (Resumed).

Mr. N. McMahon, Mr. T. Troy, Mr. F. Moloney, (Donegal County Manager), Mr. E. O'Sullivan (Department of Finance),

Mr. P. L. McDonnell (Comptroller and Auditor General) called and examined.

438.Chairman.—Sorry we are late in starting. We have with us this morning Mr. Noel McMahon, Secretary of the Department of Tourism and Transport, and Mr. Thomas Troy, Secretary of the Department of the Environment. We also have Mr. Frank Moloney, County Manager, Donegal County Council. You are all very welcome and you are particularly welcome Mr. Moloney on your first occasion. We also have representatives from the Department of Finance. I want to read out an opening position and then we can ask for comments.

The Committee is resuming its examination of paragraph 49 of the 1985 Report of the Comptroller and Auditor General which sets out the sequence of decisions and counter decisions relating to a proposal to build an airport at Letterkenny on which expenditure has been incurred by the Department of Communications and Donegal County Council. At its examination of the paragraph on 18 February last many questions had not been answered to the Committee's satisfaction. For this reason the Committee decided to recall Mr. Noel McMahon, Secretary, Department of Tourism and Transport, who was Accounting Officer at the time and Mr. Eugene O'Sullivan, Department of Finance. It further agreed to call Mr. Thomas Troy, Secretary, Department of the Environment, and Mr. Frank Moloney, County Manager, Donegal County Council. Following the last examination members have now received a note which the Committee requested from the Secretary, Department of Tourism and Transport, giving details of the value of the land and the cost of the public inquiry and arbitration hearing relating to the acquisition of the land. The sequence of events is as follows, and if I make an error perhaps somebody would come back at the end and tell me. During 1980 a number of statements were made on behalf of the Government indicating the intention to finance the development of an airport in County Donegal. In April-May 1981 the Minister for Transport and the Minister for the Environment agreed to its establishment and maintenance and to the acquisition of land by Donegal County Council. In December 1981 a letter from the Department of Finance stated that the Department of Communications should initiate steps as a matter of urgency for the immediate cancellation of the project. Shortly afterwards there was an election and change of Government. In May 1982 the Minister for the Environment confirmed the compulsory purchase order to enable Donegal County Council to acquire land for the airport. In June 1982 Donegal County Council served statutory notice to treat on the land owners. In October 1982 a White Paper from the Government reaffirmed their commitment to the project and provision is included in the draft Estimates for 1983. The Estimates for 1983, as revised by the incoming Government, do not include the provision for Letterkenny. The Government explained publicly that they were not withdrawing from the project but that provision was not made in 1983 because of the financial problems of the Exchequer and that the position would be kept under review. In May 1984 the Government withdrew their commitment to the project and requested clarification on the financial and administrative implications of withdrawing from the project. In November 1984 the arbitrator's award was signed in relation to the value of the holdings in dispute, seven of the 17 holdings representing 182.2 acres out of a total of 183.635 acres. In December 1984 the Government decided to convey their withdrawal from the project to Donegal County Council and for the necessary steps to be taken to recoup either the expenditure which was committed or to seek withdrawal from the acquisition proceedings. Now, I understand that the site was chosen by Donegal County Council having sought the technical advice of the aeronautical service of the Department of Communications. Initially, three sites were identified. The actual legal and other processes for the acquisition of the land were conducted by Donegal County Council. The lands are now owned by Donegal County Council. The Department of Communications have a lien on the lands in that any future use or disposal by the county council will be subject to clearance by the Minister for Communications. The Department of Communications paid £720,000 approximately to Donegal County Council to cover the acquisition of the land, arbitration costs and fencing works. The Department of Finance officials stated that a Government commitment was in the form of a public announcement, not a formal Government decision.

The questions which arise are as follows from my point of view and the view of the other members who want to come in. Why did the Department of Finance issue a letter which would have reversed a Government commitment? On what authority did that arise?

Mr. O'Sullivan (Department of Finance).—Could I explain briefly the circumstances in which the letter issued. In the view of the officials dealing with it at the time, the financial circumstances had changed considerably from the time the initial commitment was made in 1980 in the following respects. First, the cost was estimated at about £2.5 million rather than about £1.6 million in 1980; secondly, it seemed likely that an operating subsidy would be needed to run the service if an airport were put in place; and, thirdly, since mid-1981 an operating subsidy was actually being paid to provide a service between Dublin and Derry. This, in the Department of Finance view, was particularly relevant because the airport in Derry is no more than about 25 miles from the proposed airport in Letterkenny. That was the financial background to the Finance letter. As far as the commitment to the project was concerned, the Finance officials dealing with it at the time were conscious of the fact that the Government of the day, who came into office in mid-1981, had made no decision in favour of the project and had indicated no commitment to it. Therefore, the officials dealing with it felt there was an onus on the Department of Finance, as the Department responsible for control of public expenditure, to critically review the project and on the basis of that review the letter was issued. It was not seen by the Department of Finance as in any way a contravention of a Government decision or commitment, since the Government of the day had taken no decision or made no commitment.

Mr. O'Sullivan.—4 December 1981. It was not seen as contravening a Government decision at that time because the Government at that time had made no decision, or made no commitment that the Department of Finance were aware of, in favour of the project. It was not seen as being the case that the previous commitment was a continuing one, in view of the particularly significant changes in the financial circumstances.

439.Chairman.—Let me hold you there. Mr. Troy, could I just bring you in on this question. The compulsory purchase order was submitted to the Minister for confirmation and, there being objections thereto, the Minister directed the holding of a public inquiry. That inquiry was held on 1st, 2nd and 3rd of December, three days before the Department of Finance issued their circular directing that it be cancelled. Why were the Minister for the Environment and the Departments of the Environment and of Finance not going in the same direction? It seems extraordinary that the Department of the Environment should have confirmed a hearing and that hearing was held on 1, 2 and 3 December 1981 and on 4 December the Department of Finance gave a directive cancelling the hearing?

Mr. Troy.—We were not aware that we were following a different course. The Minister made the order for the holding of the inquiry in August and at that stage the project was still in place — in August 1981. This is a sort of legal procedure. Dates are fixed, an inspector is nominated by the Minister, notices are served, solicitors are hired and so on. Up to that point, as far as any Department knew, we were coasting along on the project. The inquiry was held from 1 to the 3 December, as you have said. Then a new situation arose when the Department of Finance minute came. Up to that point there was no problem.

Chairman.—Do you not accept the evidence given by the Department of Finance, Mr. Troy, that there was no Government decision? Your Minister confirmed this hearing to go ahead, presumably based on there being a Government decision.

Mr. Troy.—No. We came into this as an agency, Chairman. This is a common practice whereby the Minister for the Environment, because of the various powers he has for the acquisition of land, is brought in by different Ministers, really as an agent. The substantive decision was: should there be an airport or not? That was decided by the Minister for Transport, and, once that was decided, then it was over to us to get the land.

Chairman.—What we are trying to get at here is this. Finance say there was no Government decision made. Your Minister sanctioned a hearing which took place on 1, 2 and 3 December. Finance issued a directive on 4 December cancelling the airport and still everything went ahead. You are telling me now that there was not a Government decision, Finance tell me there was not a Government decision. Perhaps Mr. McMahon could tell us on what date.

Mr. Troy.—Sorry, Chairman. I am not saying there was or was not. In this kind of situation, where we are acting as an agency for another Minister he must say what is the policy, what is going on. When that Minister gives a statutory decision as he did, to provide the airport, we came in under another section of the same Act to acquire the necessary land.

440.Chairman.—May I ask Mr. McMahon, Secretary of the Department of Tourism and Transport, what was the statutory authority his Minister had to do this? Was there a Government decision?

Mr. McMahon.—Yes, the initial announcementn by Government that it intended to support the airport project was made in June 1980. That in itself was no more than a statement made publicly. But that was given more formal status by the publication of a White Paper by Government in January 1981. This is the document entitled “Investment Plan, 1981,” which is described as a paper laid — and I stress by the Government — before each House of the Oireachtas, January 1981. That contained a commitment by Government to proceed with the Letterkenny airport. In addition to that, the Department of Finance Estimates for that year contained provision for £500,000, which was part of a wider Border fund for the financing of projects along the Border. This included half a million pounds for Letterkenny. We did not have any doubt, nor do I have any doubt now, that there was a firm Government commitment to go ahead with that project as at the time of the Department of Finance letter of December 1981. May I add also that I think there has been some reference to the fact that the Department of Finance cancelled the project. This is not a correct representation of what the Department of Finance said and did. They had reservations about whether the project should go ahead. They requested the Department of Communications, as it then was, to take the initial steps to secure the cancellation of the project. I interpreted that, and I still interpret it, as acknowledging that the Department of Finance itself could not cancel the project and that the Department of Communications could not cancel it either. It carried to me an inference that its cancellation would be an act by the Authority which made the initial commitment, which was by Government.

Chairman.—Very well. Just to try to untangle this thing. What you are saying is that there was Government authority for this and the Dáil had been notified through the White Paper and through the Estimates.

441.Chairman.—Your Minister was going ahead with the airport and the Minister for the Environment was acting in good faith as agent as well on this authority. Coming back to the Department of Finance, on what authority did you issue this circular requesting that the cancellation of the proceedings go ahead?

Mr. O'Sullivan.—Formally it was issued as an official minute so it carried the authority of the Minister for Finance.

Chairman.—Would that have had a Cabinet sanction? Was there a Government commitment for the Minister to override the Government of the day?

Mr. O'Sullivan.—No, as I said carlier as far as the Department of Finance were aware the Government of the day had made no decision — that is the Government which took office in Mid-1981 and was in office until early 1982. As far as the Department of Finance were aware there was no decision or commitment by that Government in favour of the project. The position was that the Government of the day at that time had made no decision.

442.Chairman.—This is an extraordinary situation. What we cannot get to the bottom of here is that different Government Departments seem to have been working in different directions and presuming themselves to have the authority of the Government to work in these different directions. Meanwhile public money was spent acquiring sites for an airport which does not get built. Your letter suggesting that the Department arranged to cancel this airport went out dated 4 December and the 1, 2 and 3 December 1981 were the days of the public inquiry which had been sanctioned by the Minister for the Environment. Are we not all working in the same direction, Mr. McMahon?

Mr. McMahon.—Yes, I would like to try to add some clarification on that. I do not think it is correct to suggest that the Departments were working in different directions. The Department of Finance raised with the Department of Communications the desirability of taking steps to secure the cancellation. The Department of Communications acknowledged that that was a legitimate position for the Department of Finance to take. We did not feel that we had the authority at that stage to cancel the project, but we did recognise that the Department of Finance had reservations about it and we in turn were faced with a Government decision of a precious administration, which had not been withdrawn. There was a position which needed to be clarified. Because we were the Department who would be seen as having perhaps a central role, we took it on ourselves to seek such clarification. What happened in practice was that the Dail was dissolved shortly afterwards and it became impossible to bring the process to a point where clarification had been obtained until the Government changed office. The Government who assumed office renewed its commitment to the project.

Chairman.—Let me try to nail down the situation for you so that you will understand why I say that in my view you were going in different directions, which is certainly not the way Departments of State should operate. You say that there was Government authority for the project and the Department of Finance say there was not Government authority for the project. What does the Comptroller and auditor General have to say? What did that Department of Finance minute have to say?

Mr. McDonnell.—As you are aware, I report the facts as I see them. I interpreted the Department of Finance letter as being a direction to cancel the project. The best that I can do from my point of view in regard to the question you are asking is to say what the Department of Finance letter said and which I interpreted as a direction to cancel the project. There is lead-in and it goes on to say:—

Since under the Special Border Areas Fund, Exchequer contributions must match EEC contributions it now seems inevitable that the Exchequer will be asked to contribute the excess capital cost of the project as well as ultimately providing some form of operating subsidy for it. In the prevailing financial circumstances there can be absolutely no question of the Exchequer providing further grants for the construction of this airport, of an operating subsidy, if it is built. I would also point out that in this regard that as far as this Department is aware there is no Government decision or authority to site a local airport at Letterkenny. Your Department should therefore initiate steps as a matter of urgency for the immediate cancellation of this project.

Chairman.—It cannot be any clearer than that, Mr. McMahon. There is a clear conflict and the Departments were operating in different directions at the taxpayers’expense.

Mr. McMahon.—I would have to maintain my position that they were not acting in conflict. There might have been a different view as to what should be done and the ultimate authority to resolve a difference of view is the Government. We took it on ourselves to seek clarification from Government; Unfortunately the Political changes which took place made that impossible.

Mr. O'Sullivan—When the Department of Finance letter issued it clearly was open to the Department of Transport to recommend to its Minister, if it disagreed with the Department of Finance line, to bring the matter to Government and get a definitive decision.

Chairman.—There is a clear conflict. I do not think there is any question about that.

443.Deputy Naughten.—Could I seek further clarification on that? What Mr. O'Sullivan is saying is that you sent that letter as a result of a direction from you Minister Is that correct?

Mr. O'Sullivan.—It was an official minute issued by the Department of Finance and as such it carried the authority of the Minister for Finance. It was based on a review of the project on the basis that the financial circumstances had changed considerably and that in so far as the Department of Finance was aware the Government of the day had taken no decision in favour of the project.

444.Chairman.—Was the Minister for Finance of the day aware of this letter going out from his Department to another Department?

Mr. O'Sullivan—I really could not comment on that. It is an internal matter within the Department which I could not comment on.

445.Deputy Naughten.—Withdrawing a £2 million project which was of major interest to that part of the country, surely a letter did not go from the Department of Finance basically withdrawing from this project without the authority of the Minister?

Mr. O'Sullivan—It is a matter I could not really comment on; it is an internal matter of what transpired between the Minister and an official. The formal position was that it carried the Minister’s authority. It was an official minute, so it has to be taken as such.

446.Chairman.—As far as I can gather, the Department of Finance issued this letter, obviously without having any clear direction to do so, to withdraw from this project, which was a decision taken by a previous Government which had not been reiterated by the Government from June on in 1981. I am amazed that the Department of Finance would take this action without having a clear direction from the Minister of the day, and secondly, if they had a clear direction from the Minister and Government of the day, that the Department of Transport did not act immediately on the letter.

Mr. O’Sullivan.—Could I comment on that. It was clearly open to the Department of Transport, if they disagreed with the line Finance was proposing, to bring the matter to Government by their Minister, who was the Minister responsible in this area. It was not a matter which the Minister for Finance would bring to the Government. It was not in his direct area of responsibility.

Chairman.—The Committee will have to take it that you would not have issued a letter like that without your Minister’s knowledge.

Mr. O’Sullivan.—All I can say is that, as an official minute, it carried the formal authority of the Minister.

Chairman.—The Committee have the power to send for papers and records; I do not want to get down to that but we have to establish that some official in the Department of Finance did not override his own Minister and every other Minister at the same time. I presume we can take it that this issued under the authority of the Minister for Finance and with his knowledge?

Mr. O’Sullivan.—It would have been a matter for the official concerned to make sure that what he was doing was not contravening his Minister’s wishes on this matter.

Chairman.—What we really want to establish is this — and it is very central to the whole question — did some official in your Department decide to cancel this project over and above the heads of the Government of the day or the Minister of his Department of the day? That is a central question.

Mr. O’Sullivan.—What the official did was that he examined and reviewed the project and concluded that the financial circumstances had changed very considerably since the initial commitment was made. He took into account that the Government of the day had made no decision in favour of this project and he issued a letter, as the Comptroller and Auditor General had indicated. That clearly left the matter open to the Department of Tourism or the Minister for Tourism to seek Government decision.

Chairman.—Did that letter issue with the consent of the Minister for Finance of the day?

Chairman.—We can adjourn the proceedings. You can go off and consult the file and come back, but it is very central to the consideration of the matter here today. Is there some official there who has been overriding the decision of the Government on that?

Mr. O’Sullivan.—The position, as I have outlined, was that the official examined this project and issued the letter. He did not see it as overriding any Government decision of the day because there was no decision by the Government of the day.

Mr. O’Sullivan.—I could not give you a definitive answer. I could come back and tell you subsequently, but as of now I could not give you a definitive answer on that.

447.Deputy Colley.—In order to throw some light on what happened prior to the decision by Finance being made, would Mr. O’Sullivan be able to tell the Committee whether the Minister for Finance of the day had directed his Department to institute a review of this policy or project?

Mr. O’Sullivan.—The position was that a review was underway of the financing of local and regional airports. A committee was set up in mid-1981 to review the question of financing local airports. The Department of Finance were represented on that committee. It was underway at the time this particular letter issued.

Deputy Colley.—There was no particular directive from this Minister for Finance at the time to undertake a very thorough review of this particular project?

Mr. O’Sullivan.—I do not think there was a specific directive on the particular project. There was a review going on of public expenditure—generally a critical review. As I mentioned, there was a review of local airport financing.

Deputy Colley.—Were there other letters that emanated from the work of that committee relating to other projects?

Mr. O’Sullivan.—The Committee reported some time in 1982 and it set down new guidelines for the financing of any future proposals for a local airport.

Deputy Colley.—So, in fact, this letter emanated from the Department of Finance relating to the work of a committee that did not report until 1982, but the letter came in 1981?

Mr. O’Sullivan.—That is right. It was based on our assessment of this particular project where the cost seemed to be going to increase quite dramatically compared with the original estimate.

Deputy Colley.—But the report had not emanated from the committee, and, therefore, presumably the Ministers of the day had not seen the report?

Chairman.—We will have to take it from the evidence given so far that the different Departments were acting in different directions, and that seems to be very clear. There can be no question but that letter issued from the Department of Finance with the authority and permission of the Minister and the consent of the Minister or Finance of the day. That is very clear.

448.Deputy McGahon.—Listening to the lack of co-operation between various Departments it is astonishing. It is nearly like a Brian Rix farce. It is no wonder that some people think we are a banana republic without the ability to grow bananas. The lack of consultation and liaison between Departments is staggering. Surely on a major project of this nature there should be a series of consultations between heads of the Departments so that each knows what is happening. The story unfolded here is unbelievable and cannot be justified. The two Departments were going in different directions, each blissfully unaware of the intentions of the other. That is laughable and nobody can justify that. How do you justify it?

Mr. McMahon.—I would have to say that is factually incorrect. There was full consultation between the Departments concerned and there was no lack of information in one Department as to what the other Departments were doing. The situation was and this is not very unusual—that the Department of Finance held a view which was not necessarily shared by another Department. That is not a unique situation, as you might very well appreciate.

449.Chairman.—But included in that view, Mr. McMahon, is the view that you had not got Government authority and you viewed it that you did have Government authority?

Chairman.—The Department of Finance minute was read out by the Comptroller and Auditor General and it is quite clear that they thought you did not have Government authority. That is a different question.

Mr. McMahon.—The suggestion was made that the Departments were acting in different ways. I would have to say that is not correct.

Chairman.—Could I put it to you that the Department of the Environment sanctioning a hearing for a public inquiry to take place on 1, 2 and 3 December 1981 followed by the Department of Finance directive, dated 4 December 1981, cancelling the project show two Departments clearly going in two different directions?

Mr. McMahon.—I would have to dispute your use of the word “directive”, as I did the last day. The Department of Finance did not give a directive; they requested the Department of Communications to take the initial steps to secure the cancellation of the project.

Chairman.—What does the minute say, Comptroller, is the directive a request or what is it?

Mr. McDonnell.—“Your Department should, therefore, initiate steps as a matter of urgency for the immediate cancellation of this project.”

Mr. McMahon.—To initiate steps, Chairman. This is what we did and this is the basis of my statement that the Departments were acting in cohesion. The Department of Finance wanted our Department to take initial steps to secure a certain result. We took those initial steps. The reason they did not come to fruition was because the administration of the day did not last long enough. Could I add a second, more general point? I do this in the interests of trying to be of help to the Committee. It is not an unusual situation, when a change of administration takes place, that a period of some uncertainty might exist as to whether the new administration wishes to continue with the policies and decisions taken and announced by the previous administration. Given the pressure of work which arises for Government and for Ministers, it may take some little time to establish what the new Government wishes to do. In this particular case, and on the prompting and request of the Department of Finance, an effort was made to secure clarification as to what the exisiting Government wished to do in relation to Letterkenny airport. The Departments concerned did not get that clarification within the life of that Government.

450.Deputy M. Ahern.—Accepting that there was bound to be a bit of a hiatus on the change of Government before new decisions are taken, nevertheless, taking the fact that the directive was given in December 1981, in May 1982 the Minister for the Environment confirmed the compulsory purchase order to acquire the lands. Would it not be reasonable to think that a period of five or six months is an excessive period in which to have this problems cleared up?

Mr. Troy.—We go back to the Finance letter dated 4 December. We were sent a copy of that by the Department of Finance on 7 December and we did two things. We wrote to our lead Department, which was the Department of Transport, asking what the position was and, secondly, we considered whether we should ask the inspector to report on the inquiry or to hold off. We felt we should ask the inspector to at least complete his report for two reasons. One could not leave a half-finished CPO inquiry hanging over a lot of private property and, secondly, the inspector might as well finish it while everything was fresh in his mind. We reckoned that this would take a couple of months and that at the end of that time we could either confirm or annul the order. So the inspector was directed to get on with the work and we wrote to the Department of Transport. They were on the phone to us explaining their difficulties. Then the inspector’s report was submitted in April and we submitted it to the Minister at the end of April. I am in a bit of a dilemma here because there is a lot of case law about what you submit to a Minister on a CPO. He is acting in a semi-judicial capacity; the Department is not supposed to intrude itself between the inspector and the Minister, but we felt we had to in this case, especially as it could be seen to be supporting the objectors, in fact. We drew attention to the Finance minute in our submission to the Minister. We said that this put a question mark over the financing but then we explained what the general position was and our understanding of the general policy. We do not know what considerations the Minister took into view but he decided to confirm the CPO with an amendment that the inspector had recommended.

Chairman.—Six months after the Department of Finance sent their minute asking that the Departments get out of the project.

Mr. Troy.—That is right. There is one thing I would say about that generally. We often get letters from the Department of Finance and we do not always agree with them.

451.Deputy Ahern.—Would that not suggest that there was an original Government decision to go ahead with it and that, therefore, the letter of 4 December was a decision of the Minister for Finance?

Mr. O’Sullivan.—I think there was a different interpretation of what the Government’s commitments or decisions were in this case. The Department of Finance took a restrictive interpretation of what the position was. The Department of Transport presumably took a less restrictive interpretation. It was clearly open to the Department of Transport to bring the matter to Government and to get a ruling or a definitive decision, taking account of the changed financial circumstances at the time.

452.Chairman.—It seems extraordinary, to say the least, that different Government Departments should take different views in this way. When we get the minute of the Minister for Finance and the evidence that has been given here this morning we can then look at it again. How much was paid by the Department of Communications to Doengal County Council for this project?

Mr. McMahon.—The amount paid to date is £648,000. There are some further payments to be met. The precise amounts involved have yet to be determined, but we expect to have to pay a sum ranging between £80,000 and £100,000.

Mr. McMahon.—For the legal commmitments which fall to be borne by the State arising from the compulsory purchase acquisition activities of the county council on this project.

Mr. McMahon.—There are some further parcels of land, I believe, which have not been finally acquired.

Chairman.—With regard to the question of disturbance, I note that claims for compensation included, and I quote, a claim “for injurious affection and disturbance to the remainder of the lands arising from the construction of an airport”. In other words, that people who continue to have lands adjacent to the airport were compensated for the noise levels coming from this airport. Regarding the remaining £80,000 or £100,000 that you are paying out, in view of the fact that there is no noise arising from this airport at present, is there compensation included in that £80,000 or £100,000 for this injurious disturbance?

Mr. McMahon.—I am not sure that I could answer that question in advance. Obviously any accounts that are submitted to us by the county council will be vetted very carefully to ensure that we meet only legal obligations which are properly within the ambit of Government decisions in the matter and also properly certified to us by our legal advisers.

453.Chairman.—Mr. Moloney, you are the County Manager for Doengal. Can you tell us if Doengal County Council spent more moneys on top of the money which you got from the Department of Communications?

Mr. Moloney.—Yes. I have taken the liberty of trying to assist the committee by giving you a report this morning. On page 10 of that report, as of now, Doengal County Council anticipates submitting a claim to the extent of £195,740 for recoupment on the basis of the commitment which Doengal County Council accepts and believes exists with the Government for the provision of an airport in Letterkenny.

Chairman.—Is this in addition to the £80,000 to £100,000 that Mr. McMahon spoke of?

Mr. Moloney.—No, that would cover what is expected at this stage for the accommodation works and the lands outstanding to be acquired.

Chairman.—But the £80,000 spoken of in your view is included in your £195,000 or is that in addition to that?

Mr. Moloney.—That is my view, unless Mr. McMahon has other figures in his mind.

Chairman.—On top of that has the Department of the Environment expended any moneys or is that the total commitment?

Mr. Troy.—No. Chairman. It would not be proper within the ambit of our Vote to spend any money on an airport.

Chairman.—Mr. Moloney, when did the county council first learn that the Government was withdrawing its commitment from the project?

Chairman.—Did the Department of Communications instruct Doengal County Council to cancel its acquisition proceedings, or was it the Department of the Environement?

Mr. Moloney.—It was the Department of Communications. I do not know what they are called now.

Chairman.—Did you then, Mr. Moloney, seek to secure your release from the obligations or did you continue, as you have suggested, trying to develop the site as an airport?

Mr. Moloney.—Efforts were made, in accordance with the requirements of that letter from the Department, to seek that the landowners would withdaw from the negotiations and from the proceedings to acquire their lands. One of the landowners verbally indicated that he was willing to withdraw, but subsequently that very landowner instituted proceedings against the county council to compel the county council to comply with its contractual obligations which now existed. Further to that other proceedings were instituted. The council recognised that they had a contractual obligation. In fact, my council directed me under section 4 of the City and County Management (Amendment) Act to proceed with the purchase.

Chairman.—You have anticipated the question I was going to ask you. There are three conditions for section 4. Could you tell the committee what those conditions are?

Mr. Moloney.—First of all, the requirement in section 4 must be a specific requirement. Secondly, it must be legal. Thirdly, the funds must be available.

Chairman.—Did you consider that the section 4 met all of those requirements?

Chairman.—Could I draw your attention to a report in “The Derry People and “The Donegal News” dated Saturday, 20 April, 1988? in which it said:

“The site for a new airport at Letterkenny will be bought with Government money after all, Doengal County Council has decided. In a controversial move at the annual estimates meeting last weekend, the Council voted to use a large sum of money owed to the Office of Public Works to meet the £461,000 bill for the sale.”

Mr. Moloney.—No, they have been paid. That matter has been settled between OPW and the county council.

454.Deputy M. Ahern.—I note on page 6 of your submission,* Mr. Moloney, that on 17 January 1984 there was a deputation from the county council who met with the then Minister for Communications and that you were assured by the Minister that the Government would consider all the representations made and that the council would be informed of the financial arrangements for the airport within one month. I also note further on that it was 18 December 1984 before you received a letter as a result of that meeting. I would like to ask the Accounting Officer — it would be Mr. McMahon — why, on foot of the assurance given by the then Minister, whoever, he was, it took until December 1984 before there was any reply to the council. This left the council in a bit of a spot.

Mr. McMahon.—Yes, I will endeavour to answer that. First, I am not quite sure that it is a fact that the Minister promised an answer within a month. I think that is the perception which the deputation took from the meeting. Certainly, the Minister was anxious to clarify the position for them at the earliest possible date. Again, because of circumstances we have already related, any clarification required consideration by Government; and consideration by Government requires consultation by the Minister concerned with other Ministers who might have an interest in the subject. In fact, the Government considered the matter in May 1984. If the Deputy wishes me to comment why they did not do it earlier, I am afraid I would have to decline to answer that because I cannot command the Government to take a decision by any particular date. It was, in fact, the case that in May 1984 the Government came to a conclusion that it should withdraw from that project. That left a certain amount of unfinished business because the Government was conscious of that fact that, by the virtue of the CPO proceedings and the earlier procedures, there might very well be legal commitments on the Exchequer which would fall to be considered and possibly met. Therefore, the Government asked for a report on what had transpired to date and what were the legal obligations and the legal advices available to Government. Finally, in December 1984, the Government confirmed that it wished to withdraw totally from the project. It authorised the Department of Communications to convey that to the county council and to request the county council to take what steps it could to withdraw from the project.

455.Deputy Naughten.—Getting back to the earlier part of the discussion, I am not at all satisfied that the Minister for Finance was fully aware of the letter which was issued by that Department in December. I have heard nothing here today that has convinced me of that. Getting back to the decision of the Government to withdraw in May 1984, could the Donegal County Manager inform the Committee as to why the council proceeded on its merry way to acquire lands once the Government had decided to withdraw from the project. Why were the CPO proceedings not discontinued when the Government decided not to proceed with the project?

Mr. Moloney.—As from the date of the notice to treat, the notice of entry, a contractual obligation existed between Donegal County Council and the landowners. Let me emphasise clearly to the committee that my council are as determined now as they were then that an airport should be provided in Letterkenny. There seems to be a conflict of interest between the Government and my council, but my council are determined that that airport shall be built. It was their decision to proceed with the acquisition of the lands. We had gone beyond the point of no return once we have served the notice to treat. We were obliged in law to pay compensation in accordance with the arbitrator’s award.

Deputy Naughten.—Listening to the manager’s reply, he would seem to indicate that he and his council were prepared totally to disregard the Government decision and that they were prepared to proceed to acquire land for an airport because they felt they needed an airport. Every county council in the country might have that view. The Government of the day decided to withdraw from the project in May 1984, yet you and your council proceeded along in the full knowledge that, whatever financial commitments you entered into, it was the Government of the day that was going to have to pick up these financial commitments and not the county council.

Mr. Moloney.—The commitment had existed legally at that point. It was not a question of deciding to go further. We were obliged in law to do as we did and we acted quite legally. The Government’s decision at that time was too late as far as the law was concerned.

Deputy Naughten.—Had you legal advice along those lines? If so, from what source?

Mr. Moloney.—We had legal advice at all stages from our own county solicitor.

Deputy Naughten.—I am still — again getting back to the last day — confused about this. I understand that a compulsory purchase order is usually, if not always, served on people who for one reason or another are not prepared to sell their property. Is that not correct?

Deputy Naughten.—Can we then assume that when the compulsory purchase orders were issued on those properties, those landowners did not want to dispose of their land? They were prepared to continue on with their farming or whatever. Yet, when the Government of the day decided to go no further, you and your council still proceeded to acquire this land even though the landowners were not prepared to sell. Why not just let the thing lie at that stage?

Mr. Moloney.—I have to repeat this. It was not possible legally at this stage. The decision was irrevocable after the service of the notice to treat in 1982. The Government’s decision was made in 1984. It was conveyed to us in December 1984. We were in a contractual and obligatory situation with the landowners. They, at this stage, required the county council and the law required the county council to proceed to the fulfilment of the contract that existed.

Deputy Naughten.—These were all landowners who did not want to sell their property. That is why the CPO was served on them in the first place. For a council to be under a legal obligation to them, they would have to go to a court of law and prove that?

Mr. Moloney.—The landowners at this stage required the county council to institute proceedings to acquire the lands.

456.Chairman.—I am anxious to make progress on this. Would you just confirm for the record, Mr. Moloney, that the claimants were paid between £1,900 and £2,750 per acre?

Mr. Moloney.—I have submitted to you as an appendix to my report, the arbitrator’s award and that is what is paid to the landowners. I have tried to assess in my report what the valuation per acre is but, as you will see from the arbitrator’s award, he covered the question of the valuation of the interest of the owner, he also covered the question of injurious affection and severence and compensation for disturbance.

Chairman.—You have put together a very good report. The only problem is that we only got it just as you arrived, but it does cover quite a lot of detail which will not appear on the minutes of this meeting unless we draw it out.

Deputy Naughten.—What is happening with the lands at present? Are they leased and what do the council or the Department propose to do with those lands?

Mr. Moloney.—The lands have been let as from 1 March 1988 in conacre and the council are determined that the lands shall remain in their possession for the purpose of providing an airport in Letterkenny.

Mr. Moloney.—The lands for acquisition as determined or confirmed by the Minister and the CPO, were severed in such a way that they could not be let without having been fenced properly and gates erected. So the fencing and erection of gates took place after 1986 when the Department decided to put up the money for that purpose. Those works were undertaken and completed early this year and the lands were subsequently let by auction straight away.

Mr. Moloney.—The lands were let by public auction and some people who had owned the land are occupying them and are paying the rent.

Chairman.—But there would be a number of people, some who were former owners and some who were not?

Chairman.—That was some weeks after the Committee discussed the project here.

Mr. Moloney.—My first awareness of the Committee’s discussion of this was when this appeared in the paper — under a somewhat unpleasant heading I might add.

Chairman.—I am sure you will take that up with the person who wrote the heading.

457.Deputy Dempsey.—In relation to the section 4 motion that the manager referred to, section 4 was passed on 28 January 1985. Was that prior to or after your estimates meeting for 1985?

Mr. Moloney.—That would have been virtually during the consideration of the estimates for that year. My estimates meetings run to maybe ten or 12 and I cannot give you the date of the estimates meetings offhand.

Deputy Dempsey.—But what you are telling me is that it would have been provided for in the 1985 Estimates and that the estimates would have been passed prior to 28 January 1985?

Mr. Moloney.—If figures were provided in the estimates there would have been a contra item, because it is the county council’s clear understanding that all expenditure on this project was to be borne by the Government.

Deputy Dempsey.—But what I am trying to find out is whether it was actually included either as a contra item or any other kind of an item in the estimates because a section 4 would not be legal unless it was. Finance has to be specifically provided or specifically available for the purpose of section 4. Finance could have been provided by way of loan. The fact that it was not included in the estimates did not preclude this section 4 from being legal. Section 4, as I understand it, must be legal, it must pertain to a particular activity and funds must have been provided for it.

Deputy Dempsey.—The normal place in which you provide funds is in the estimates.

Deputy Dempsey.—Passed by the members and everything else and taken into account at estimates time. Do you not have to take into account the interest payments on loans?

Mr. Moloney.—Not necessarily at one estimates meeting. You can subsequently take them into account because the interest may not arise until later in the year.

Chairman.—My manager would be delighted to have that said to him because I have been trying to get several items passed in the council. I would like to say in relation to the matter that I take fully the point that the manager is making in relation to the CPO, that once they had gone so far there was really nothing he could do about it. We should note and concede that point.

458.Deputy M. Ahern.—Just two questions to Mr. Moloney. First, how important is the airport to Donegal, taking into consideration the geographical position of the county and, secondly, the council has this land, but if it did not have the land, and at some future date if there was a decision to develop the airport, would the site be available at such a reasonable price to the council?

Mr. Moloney.—In reply to the first question, my council considers the provision of an airport at Letterkenny as vital to the development of the county, having regard to the fact that you may only enter and exit from the county by road and virtually at all times you must go through the Six Counties. The public transport services consist of a bus from Letterkenny to Dublin and that always has to go through the Six Counties. It is very important to my council to see that there are proper communications with the county. This is borne out by the study I have referred to on page one of my report, the inter-Government EEC cross-Border study of 1977. Secondly, on the question of the land that has been acquired, the council gave that very deep consideration, considered it to be the most suitable land and I do not think the question of looking for other land should or will arise.

459.Deputy Crotty.—What is the total cost of all the procedures in this area to date from all aspects? What has been expended?

Mr. McMahon.—The amount expended by the Department of Communications, and subsequently the Department of Tourism and Transport, as I mentioned already amounts to £648,000 and we anticipate further expenditure up to a maximum of £100,000. We would envisage the final cost of the recoupment of land acquisition costs, which is the area my Department is concerned with, to arrive ultimately at somewhere about £720,000 to £740,000.

Chairman.—But that does not take account of the other £95,000 that the county manager is talking about. Does it take account of the cost of the legal proceedings?

Deputy Crotty.—What I am looking for is the total expenditure from all aspects and we have that figure. This is a matter of which due notice was given. I want to compliment the county manager on his document, but unfortunately I have not read it. The county manager went to the trouble of putting together a very comprehensive document and I think we should have had it at least a couple of days before the meeting. While I compliment him, at the same time the document is a waste of time, as far as I am concerned as a member of the committee.

Mr. Moloney.—May I just say in relation to that, that what I received from the committee was a request to attend here. I was given no indication whatsoever what problems might arise here, other than from a short extract from the Comptroller and Auditor General’s report. I spent some time preparing this in order to assist the committee in any way I could.

Deputy Crotty.—That is why I am complimenting the county manager, but the point is, it was a waste of time and effort when we did not get time to consider it.

Chairman.—To be fair to the county manager, he is not used to appearing before the Committee of Public Accounts.

Deputy Crotty.—At the same time, it is a valid comment because this happens not alone here but also at other meetings we attend. You are supplied with a document when you sit down.

Mr. Moloney.—May I say that if the committee had an explicit request to make, I would have been delighted to get it and to supply the Committee with the information. I have done what I thought was the best way to assist the Committee.

Chairman.—Are we talking about something approaching £1 million? It is not in excess of £1 million?

Deputy Crotty.—I asked a specific question and I want a specific answer. What is the total cost? There was adequate notice that this question would probably be asked and it should be readily available and we should have it.

Mr. McMahon.—If I may amplify my previous comment, first of all I have said we expect that, when all the liabilities which are a proper charge on my Department’s Vote have been paid, our total expenditure should not exceed £740,000 and it may well be some what less. I have heard here today from the manager that there are other expenditures which the council has undertaken which, presumably, he aspires to have recouped from Central Funds, presumably through my Department. We are constrained by the sanctions available to us from the Department of Finance and by the decisions taken by Government. It appears to me, without having the opportunity to study them, that some of the costs which the manager has mentioned are not a proper charge on my Department. I can only answer you in relation to voted moneys and what I am saying to you is that we expect the total cost from voted moneys for which my Department are responsible to be not more than £740,000.

Deputy Crotty.—Are there any funds then from any other source — from the Department of the Environment, from Donegal County Council or from the Department of Finance?

Deputy Crotty.—The submission by Donegal County Council for further funding will be considered by your Department when it arrives?

Deputy Crotty.—Funds were provided for fencing this by the Department of the Environment recently, or was it the Department of Transport?

Mr. McMahon.—Yes, some of the funds which were paid by the Department were used by the council for protective purposes in order to secure the site for the future.

Deputy Crotty.—In other words, the Department are agreeing that this should be retained for an airport? It would be my feeling, from a directive recently to local authorities, that lands should be realised. What is the Department's policy or the Government's policy on this?

Mr. McMahon.—I am not so sure there is a difference. The position of the Government in relation to this particular project is that as from 1984 the Government have decided to provide no further funds towards the development of an airport in Letterkenny.

Deputy Crotty.—There were funds provided in 1986 for fencing. How can that be explained.

Mr. McMahon.—Those payments were made in discharge of liabilities previously incurred.

Deputy Crotty.—When previously incurred? If the fencing had not taken place, how were they incurred previously? The fencing did not take place until 1986.

Mr. McMahon.—The manager has already explained that, as from the time the compulsory order was confirmed and the notice to treat was issued, there was a legal commitment on the Exchequer to pay for the costs incurred. I would have to confirm that the legal advice available to the Deparment coincides with that. Therefore, the Department were obliged to pay for the acquisition costs, the disturbance costs, the legal costs, as awarded by the arbitrator, and I would have to say that, given that these public moneys were expended for these lands, it would not have been unreasonable to ensure that the lands were properly protected. Therefore, there were some elements of fencing included in the payments which were claimed by the council and accepted by the Department.

Deputy Crotty.—What is the Department's view on the lands at this stage? There is a lot of Government funds invested in these lands, £750,000. What is the view of the Department?

Mr. McMahon.—The expenditure by my Department took place at a time when there was a Government commitment to build the airport. That commitment has been withdrawn. We have an inhibition on the title of this land to ensure that it is not used or disposed of for any purpose other than an airport. As regards the other dimension of the Deputy's question, I think he is asking me to speculate as to what some future Government might do at some future time. I would not be in a position to do so.

Deputy Crotty.—Sorry, I am not asking you to speculate at all. I am asking what is the position in relation to these lands. Are they going to lie there and be let? There is a Government decision not to build an airport. There is a heavy investment in lands, about 188 acres costing £750,000. What is the situation now? What is the letting value? What did the lands realise for letting?

Deputy Crotty.—So you have an investment of £750,000 yielding £13,400. That is not good economics in anyone's view. There must be some active thinking as to what will happen to these lands from the Department's point of view because Department money has been invested?

Mr. McMahon.—Yes, but I have to point out that the land is not owned by the State and not owned by the Department. It is very clear that the lands are owned by the county council and we have heard today that the county council retain the intention of developing an airport on these lands at some time in the future. I cannot contribute towards the question as to where the funds would come from. I can only say that there are no provisions in my Department's Vote to assist the council in developing an airport; but then the county council as an airport authority, which it now is, would not need any new authority from the Government to develop an airport but, it would have to address the question as to where the funds were to come from and there are no funds available as of now from my Department for that purpose.

Deputy Crotty.—In other words, the Department paid for the land and handed the land over to Donegal County Council. That is the factual situation?

Mr. McMahon.—The lands were acquired by the county council. We never had them to hand over.

Deputy Crotty.—From the Department of the Environment, is there any view in that Department as to the realisation of lands held by local authorities and particularly that very large lump of land?

Mr. Troy.—In relation to lands for which we are the appropriate Minister, there is a general view that as much as possible we should realise the value of lands. There are quite large quantities of lands available to local authorities, but I could not express a view on lands other Ministers have responsibility for.

Deputy Crotty.—This is land owned by the local authority, not by another Minister?

Mr. McMahon.—But coming within the jurisdiction of another Minister. As you know, different Ministers are appropriate for different services run by local authorities and this is just one appropriate Minister. We only express views about our own functions, our own services and the land held in connection with our own services.

Deputy Crotty.—Is there an airport tag on this land? It is not local authority land, is that what you are saying to me?

Mr. McMahon.—No, all I am saying is that I only express a view about land required for the purposes of my Minister. I would not express a view about land held for the purpose that come within the jurisdiction of other Ministers. It is a long-established practice we have, because for many years we have this position where a number of Ministers deal with local authorities.

Deputy Crotty.—At this stage is the land the property of the local authorities?

Mr. Troy.—My point is that, as you know, local authorities are multi-purpose bodies with many functions. Different functions come under the jurisdiction of different Ministers and the local authority deal directly with these several Ministers. Just because we are the Department of the Environment we do not come in.

460.Chairman.—Mr. McMahon, perhaps you could answer that question. Can Donegal County Council use that site for anything other than an airport?

Mr. McMahon.—Not without consultation with the Minister for Tourism and Transport and his consent.

Chairman.—Fine. The second question is this. How did Donegal County Council become an airport authority? Did it require legislation?

Mr. McMahon.—No, they required permission from the Minister for Tourism and Transport under an act which they sought and they got that permission.

Chairman.—Do your Department share in the income, this £13,400 which Donegal County Council are getting?

Mr. McMahon.—No, we do not share in the ownership of the land and we do not have a share in the income.

Chairman.—Right. Now, the future use of the land. Quite frankly, the whole thing is a fiasco. There are four or five different people going in different directions, different agents of the State. This is not something the Committee of Public Accounts would like to see repeated too often. The Departments of Finance, the Environment and Communications, together with the county council should be looking collectively to see what is to be the future use of these 190 acres. There is no point in leaving a State asset lying there. There should be some consultation as to what happens to that asset. We should get a note from you when you have completed those consultations, as soon as possible.*

Mr. Moloney.—My council are adamant that these lands have been acquired by them, now as an airport authority, for the provision of an airport. That is the future use which Donegal County Council see for those lands.

Chairman.—Perhaps Donegal County Council might be able to realise that aim, but the function of this committee is that we are out to ensure that State assets and funds are properly accounted for and properly used.

Chairman.—We will get the note in this case from the Secretary of the Department of Transport and Tourism. He would be the appropriate person.

Mr. McMahon.—May I confirm that we will certainly initiate such consultations but what the manager has said has clearly forecast what the outcome will be.

Chairman.—You will communicate back to the Committee and we will take it up again at that stage.

461.Deputy Naughten.—Maybe at some stage we should retain the right to visit the site and see for ourselves what we have got for £750,000.

Chairman.—Thank you all very much. We have other examinations with the Department of the Environment to continue. I hope, Mr. Moloney, that at some stage you will be able to fly back to Donegal, but unfortunately you will not be able to do that today.

APPROPRIATION ACCOUNTS 1986

VOTE 30 — ENVIRONMENT

Mr. T. Troy (Secretary, Department of the Environment) further examined.

462.Chairman.—Paragraph 30 of the Report of the Comptroller and Auditor General reads:—

This Appropriation Account shows excess expenditure of £15,147,359 over the net estimate. There was a saving of £643,491 on the gross estimate but due to a deficiency of £15,790,850 in Appropriations in Aid excess expenditure of £15,147,359 occurred. The Accounting Officer has informed me that the excess arose from the failure of the Electricity Supply Board to pay to the Department the full contribution in lieu of rates as required under Section 7 of the Electricity (Supply) (Amendment) Act, 1982. The Board paid only £8 million out of the £24 million due in 1986. He stated that it was understood that the Board did not make the full payment in 1986 because the legal advice available to them raised doubts as to the legality of the payment under the 1982 Act having regard to the provisions of the Electricity (Supply) Act, 1927. However, following discussions on the matter between the Minister for Energy and the Board in March 1987, the outstanding £16 million was paid to the Department on 20 March 1987.

This deals with an excess Vote and it will require that statutorily, as Chairman of the Committee, I must move a motion in the Dáil. I call on the Comptroller and Auditor General.

Mr. McDonnell.—That is the position. It just explains the circumstances in which the excess Vote was incurred. As you have said, it requires bringing the matter to the notice of the Dáil by way of interim report from the Committee recommending that the sum be voted, that is if the Committee have no objection to that course. The amount which caused the excess vote, the ESB contribution in respect of rates, was actually paid in 1987. There is legislation now to clarify the situation and this is being processed at the moment.

Chairman.—Mr. Troy, does this £16 million all refer to 1986 or was it an accumulation?

Chairman.—Why did the ESB resist paying it until the Minister finally twisted their arm to do so?

Mr. Troy.—There is a history behind it. The ESB resisted every year since 1982. They usually paid under protest. They maintained that the sums we were demanding were excessive in relation to their property. In fact, there were discussions over a couple of years between our valuers and their valuers. The valuers could not agree. The vital point is that under the Act it is the Government who form the opinion as to the amount. The Government decide and then that is served on the ESB. When 1986 came the ESB apparently decided now is the time to make a stand. On 25 November they informed us that they would not pay the full amount and that in their view only £8 million was due, not the amount the Government had formed the opinion on.

Chairman.—It is an extraordinary situation that as Chairman of the Committee of Public Accounts I am now going to have to move a motion on an interim report in the Dáil and that the National Parliament will have to vote an excess Vote in the House simply because an agency of the State decided that they had more authority than the Government of the day. What is happening in this country? We have agents of the State telling the Government what to do.

Mr. Troy.—We could not believe it when we heard. We had various meetings and at least every second day we sent a letter. The then Tánaiste and Minister for Energy met the ESB in mid-December and again at the end of December. Also, there were two board meetings on the subject, just before Christmas and just after Christmas and on each occasion the ESB refused to pay.

Chairman.—It is totally unsatisfactory. I would ask you to communicate to the ESB the view of this Committee that it is unsatisfactory that we should have to go through the procedure of moving a motion, an excess Vote, and that the authority of the Dáil and the Government should be called into question by any agents of the Government is totally unacceptable.

463.Chairman.—We agree to move a motion on the interim report as required. Otherwise we would have to surcharge the Accounting Officer. Paragraph 32 of the Report of the Comptroller and Auditor General reads:

A test examination of revenue from motor vehicle duties, etc., was carried out with generally satisfactory results. The proceeds for 1986 and 1985 were:

£130,781,440 was paid into the Exchequer during the year leaving a balance of £1,286,482 compared with £806,374 at the end of the previous year. Driving test fees are appropriated in aid of the Vote (Subhead X).

The motor tax transactions of the 29 licensing authorities are subject to examination by Local Government Auditors whose reports are made available to me.

In one case the Local Government Auditor's report indicated that a total of £21,508 had been misappropriated by an official in a motor tax office who had altered documentation to indicate that the amount of duty payable was less than the amount actually paid and had misappropriated the difference. I understand that the amount misappropriated has been fully recovered and that steps are being taken to improve control procedures at all Motor Tax Offices and the Vehicle Registration Unit in order to prevent a recurrence.

Mr. McDonnell.—The first part of this paragraph is standard each year, showing the sources and distribution of motor tax, driving licence fees and so on. The second part draws attention to irregularities arising in the motor tax office which came to my notice through the local Government auditor's report. You will also see the amount has been recovered and that apparently steps are being taken to prevent a recurrence.

Chairman.—In regard to the question of standing fines being collected by the Department of Justice, you will recall that I raised with you in the past that, I think it was District Justice Johnson, had to write to the Select Committee on Crime, Lawlessness and Vandalism because £700,000 worth of his fines had not been collected.

Chairman.—Are you happy that the collection system is operating satisfactorily?

Mr. Troy.—I am, if only for fortuitous reasons. When a lot of these offences were struck out recently apparently they were able to catch up.

Chairman.—I see. Is the system not a bit cumbersome? If somebody puts a parking ticket on my car in the morning and I take it off and forget to pay it eventually I get a reminder. Therefore, the incentive really is to wait for the reminder.

Chairman.—And you still pay the amount of fine. Has your Department ever given consideration to graduating the fine? In other words, paying something higher for the first notice and something higher again for the remainder?

Mr. Troy.—In relation to fines on the spot we were very timid to begin with, because there were constitutional doubts about the whole thing — a sort of policeman, if you like, imposing a fine. Because of that more than anything else we kept the amount small at first and described them by different names and so on. I have a feeling that if we carried it too far we might be in trouble with the courts.

Chairman.—Could you not charge, for instance, an administration cost? It costs a lot of money to send out notices and certainly reminders, going into the third stage. Very few people are going to pay the fine until they get the reminder.

Mr. Troy.—We will certainly consider that point, adding it as a cost instead of a fine.

464.Chairman.—I think it should be looked at because money would come in much quicker. Paragraph 33 of the Report of the Comptroller and Auditor General reads:

Subhead D.7. — Grant to Housing Finance Agency

The Housing Finance Agency (HFA) was established as a limited company under Section 2 of the Housing Finance Agency Act, 1981. Section 5 of the Act provides that the Agency may, subject to conditions approved by the Ministers for Environment and Finance, make loans for the acquisition or construction of houses and advance moneys to housing authorities to enable them to make loans. These conditions relate to the types and amounts of loans to be provided, to loan repayment terms and to eligibility of borrowers by reference to income and need. Section 10 of the Act, as amended, empowers the HFA to raise funds by the creation and issue of bonds, debentures and other securities bearing such rate of interest and subject to such conditions as to repayment, redemption or otherwise as the HFA thinks fit and provides that the amount of such borrowings outstanding at any time may not exceed £500 million. When the Agency was established it was intended that it would raise funds on an index linked basis to fund income related loans. However, due to changed conditions in the financial market, index linked bonds became unattractive to lending institutions and, in order to ensure the continued availability of funds, the HFA had to rely disproportionately on short-term borrowings, guaranteed by the Minister for Finance, the cost of which could not realistically be recouped from borrowers. Additionally the Agency was encountering a significant bad debts problem.

Because of the financial difficulties of the HFA, the Government decided in May 1986 that a special grant of £6,911,760 provided by way of Supplementary Estimate should be issued to the Agency. This represented accumulated losses of £3,517,000 to 30 June 1986 and a provision for bad and doubtful debts of £3,394,760.

As Section 14 of the Act requires the HFA to secure that, taking one year with another, all its costs are met from its operations and as the Act does not make any provision for grants to be made to the Agency from voted moneys, I inquired as to the statutory authority for the payment of this grant to the Agency.

I also drew the Accounting Officer's attention to the views of the Public Accounts Committee that if, for reasons of urgency, it is necessary to provide financial assistance from voted moneys which is not authorised by the relevant legislation this should only be done on the clear understanding that an appropriate amendment of the legislation will be introduced at the earliest opportunity and the intention to do so should be clearly stated when the necessary Supplementary Estimate is being introduced.

The Accounting Officer has informed me that it was intended that a relevant amendment to the Housing Finance Agency Acts, 1981 to 1985 would be included in the Housing (Miscellaneous Provisions) Bill, 1985 which was at the Second Stage in the Dáil when the Government decided in May 1986 that the special grant should be paid to the Agency.

While the Second Stage of the Bill was passed in November 1986 the Committee Stage, at which the relevant amendment had been prepared for introduction, had not been taken by December 1986 when the Supplementary Estimate for the grant was voted. The Accounting Officer stated that the views of the Public Accounts Committee had, however, been noted and would be borne in mind in the future.

I have asked when it is intended to provide the necessary legislative authority for this grant.

Mr. McDonnell.—In paragraph 33 I am drawing attention to the fact that the Department paid grants totalling about £6.9 million to the Housing Finance Agency which were provided by Supplementary Estimates, but nevertheless were not authorised by this specific legislation governing that agency. In this context you will see that I have adverted to the recommendations of a previous committee in relation to such payments as this in matters of urgency. As the Committee will see at the end of the paragraph, it was apparently recognised that legislative authority was necessary to regularise the situation. The Bill, which had passed Second Stage, lapsed on the dissolution of the Dail at the end of 1986 and when I saw that at the date of my report it had not been revived I asked about it again. The Accounting Officer has, since the date of my report, told me that the Housing Finance Agency (Amendment) Bill of 1987, which contained a retrospective provision in relation to this particular payment, was presented to the Dáil in October 1987 and passed in February 1988. So, as far as I am concerned, it has been regularised. But the point I was making was that, strictly speaking, ideally, you should have the statutory provision there initially, and, if not, that having regard to the previous recommendation by the Committee of Public Accounts, the Dáil should have been informed at the time the Supplementary Estimate was being brought before it that it was in fact a payment which was outside the statutory scope and that statutory provision would be made as soon as possible. That is the accepted practice.

Chairman.—There was no legislative authority at the time, Mr. Troy. You will be aware from the previous 1974 Public Accounts Committee's report that—

Where such an emergency arises the fact that the proposed Vote overrides an existing statute should be clearly stated on the face of the Estimate, with the reasons for adopting the course, so that no doubt can exist of the deliberate intentions of the Dáil:

Chairman.—In the minute in response to that, dated 6 December 1977 from the Minister for Finance, he said:

The Estimates should make it clear that grants at variance with the existing statutory provisions are proposed. The Minister considers further that the necessary legislation should be introduced before the end of the year in which the payments are being made.

Mr. Troy.—It was a question of overlap between two processes going through the Dáil at the one time. The Housing Bill was making very slow progress. We intended when it came to Committee Stage—we had the amendment ready—to move it and we were quite satisfied that that would be moved before the other need arose for a Supplementary. But I am afraid that it made very slow progress and the Supplementary came first. It was a question of rescheduling.

465.Chairman.—We will turn now to the Vote. On the question of the local government audit, what progress has been made regarding the local government audit examination? Obviously, there is very serious arrears of audit in local authorities, VECs and health boards. In regard to this interdepartmental committee which is reviewing the situation, what is the progress?

Mr. Troy.—What we have done now is this. We have circulated within the last week two interim reports which represent a consensus of the committee, one dealing with arrears, which is the urgent problem, and the second dealing with where the overall audit fits into the State audit. We expect all Departments to sign those two interim reports. So, we will be submitting our report to Government within a week or two.

APPROPRIATION ACCOUNTS 1986

VOTE 42—INDUSTRY AND COMMERCE

Mr. J. Donlon called and examined.

466.Chairman.—We have before us this morning the Secretary of the Department of Industry and Commerce, Mr. Donlon, for examination on the Appropriation Accounts for 1986, including paragraphs 48 to 50 of the Report of the Comptroller and Auditor General. Before I go into the session, I welcome Mr. Donlon. I would point out to you, however, that we have received some correspondence from you dated 16 May and some other correspondence only yesterday regarding matters which were raised with you when you attended in January. We do not intend to deal with these this morning because we have not had the chance to digest them. If, when we have digested them, there are questions arising from them we may have to ask you to come back.

Mr. Donlon.—Thank you, Chairman. On two counts. I wish to apologise first, for causing you to reorganise your days, which I regret, and, secondly, for the delay in submitting that material, but unfortunately we had been otherwise engaged in urgent activity for some time.

Chairman.—Thank you. Paragraph 48 of the Report of the Comptroller and Auditor General reads:—

P.1. — National Enterprise Agency Limited — Administration and General Expenses (Grant-in-Aid)

P.2. — National Enterprise Agency Limited — Capital Expenditure (Grant-in-Aid).

Q. National Development Corporation — Administration and General Expenses (Grant-in-Aid)

Following the enactment of the National Development Corporation Act, 1986 the Minister for Industry and Commerce by statutory order fixed 11 June 1986 as vesting day for the National Development Corporation Limited which was established under the Act for the purpose of investing in and securing the establishment and development of industrial and commercial enterprises.

The administration and general expenses of the Corporation up to 31 December 1986 have been met from a grant-in-aid of £644,000 provided from the Vote for Industry and Commerce. Funding for capital investment has been by way of share capital provided from the Central Fund and amounted to £4.5 million at 31 December 1986.

In accordance with Section 32 of the Act the National Enterprise Agency Limited, established in June 1981 on a non statutory basis for the purpose of promoting the development of new commercially viable business ventures, was dissolved at the vesting day of the National Development Corporation Limited and its assets and liabilitities transferred to the new body.

From the date of establishment of the agency up to its dissolution £1,131,500, to meet its administration and general expenses, and £3,844,150 net, to fund capital expenditure had been provided from the Industry and Commerce Vote.

Mr. McDonnell.—Paragraph 48 is for information really. As you will see, it refers to the arrangements for financing the non-statutory National Enterprise Agency and its successor, the statutory National Development Corporation.

467.Deputy Naughten.—If I could ask one or two short questions. With regard to the Agency, the cost of administration was £1.1 million whereas the capital expenditure was £3.8 million. I would say that in my view the cost of administration there would appear to be very high vis-á-vis the amount of capital investment.

Mr. Donlon.—That would seem to be the case. One can only attribute such figures at this stage to starting up problems, the need to engage in certain expertise which may not have been available within the agency in its earlier days. I think you will find that in the operation of its successor company the relationship is a healthier one.

Deputy Naughten.—Could you give us to date approximately what is the administrative cost of the National Development Corporation as against its capital investment and how much capital has it invested?

Mr. Donlon.—In 1986 the grant-in-aid on the administation side was, let us say, £650,000 compared with a capital allocation of £4.5 million. In 1987 the grant-in-aid was £900,000 compared with a capital allocation of £7 million and in 1988 £700,000 compared with a capital allocation of £6 million. I use the words “capital allocation”, that is by way of taking up equity in the company.

Deputy Naughten.—What is the total investment in the National Development Corporation in capital to date?

Mr. Donlon.—Including 1988 the sums allocated on capital would have been £17.5 million compared with £3.8 million.

Deputy Naughten.—Some of those projects have been up and running for a number of years and capital investment has gone into them. How are those projects doing or is it envisaged that any of them would be sold off in the near future, or what is the position?

Mr. Donlon.—I think the position is that the Corporation itself will be judging the most opportune occasion in which to dispose of its assets. I am aware that certain disposals have occurred and are proposed. The details of those will be included, in so far as they have arisen in 1987, in the company's annual report, which we would expect to see shortly. Generally, one could say that one could reasonably anticipate an upward revaluation of their investments. We would expect that this would appear in their annual report and I think one would have to express satisfaction with the manner in which their investments have been performing on a general scale. One would expect that over the short term we will see substantial realisations by the Corporation. We are aware of the determination of the Corporation itself that within a space of four to five years it should in essence become a self-financing corporation. We have no reason to believe at this stage that that should not be the case.

Deputy Naughten.—I think that is very good news. I must say I am delighted to see that the National Development Corporation is up and running and achieving what it set out to achieve.

468.Chairman.—We will note that. Paragraph 49 of the report of the Comptroller and Auditor General reads:

Reference was made in paragraph 78 of my Report for 1983 to Government approval in February 1983 for the purchase by the Minister of the assets of Clondalkin Paper Mills Ltd. (CPM) for a sum of £1.75 million and to an agreement made in November 1983 by the IDA with a third party to establish a paper conversion undertaking at the mill with an option on a paper making project if the IDA considered this to be viable. The agreement committed the Minister to carry out a refurbishment of the mill and to transfer the assets to the third party for a nominal sum if the paper making option was exercised.

In June 1985 the Government agreed to allow the third party — then FMI International Ltd., but renamed Leinster Paper Mills Ltd. in June 1986 — to exercise its option to commence paper making following an assurance given by the IDA as to the viability of the proposals put forward by the company. Under a contract between the Minister and the company dated 12 July 1985 the company agreed to carry out the main refurbishment work on the Minister's behalf at a fixed cost of £2.97 million (excluding VAT). The Minister also agreed to have additional refurbishment work carried out at an estimated cost of £450,000.

On 19 July 1985 the assets of CPM were transferred to the company for an agreed nominal sum of £1,000.

Up to 31 December 1986 payments from the Vote in respect of the mill amounted to £6,273,651 analysed as follows:—.

*£1.75 million less certain adjustments arising on apportionment account at the date of purchase.

Further expenditure totalling £28,888 was incurred from the Vote to April 1987 in respect of additional refurbishment costs and other expenses.

Expenditure on this project was also incurred by the IDA (£0.3 million) and Fóir Teo (£1.0 million). A receiver was appointed to the company in March 1987.

Mr. McDonnell.—Again, paragraph 49 is for the information of the Committee. You will recall that I referred to this matter in an earlier report in 1983. Including some minor amounts spent in 1987, the total Vote payments on this exercise to the end of 1987 were just over £6.3 million.

Chairman.—In regard to the total amount of public money spent on the Clondalkin Paper Mills project, in addition to the £6.3 million voted money, there was £.3 million from the IDA and £1 million from Fóir Teoranta — that is another £1.3 million — bringing the total to £7.6 million. Was that the total investment of public funds in this project?

Chairman.—What is the current position with regard to Clondalkin Paper Mills?

Mr. Donlon.—The present position is that the receiver who was appointed is in the process of seeking to dispose of the property. We did have a situation some months back where it was believed that the receiver had entered into an agreement for the sale of the property, but unfortunately the acquiring company was not able to deliver within the term of the contract. That deal has now been closed and the deposit forfeited by the prospective purchaser at that time. The receiver as of now, I understand, is in contact with a number of further prospective buyers and I can only express optimism on all our behalfs that these contacts are successfully concluded.

Mr. Donlon.—My recollection is that it was of the order of slightly over £.5 million.

Chairman.—What is the possibility of Clondalkin Paper Mills getting up and running and creating employment and manufacturing output again.

Mr. Donlon.—The view is widely held that, as a result of both the States's investment in the period at which we are looking now and the expertise acquired over the years and more recently through retraining etc. of the workforce, there is a good saleable product there. The plant is regarded as being a top quality plant and we are hopeful that we will see it in operation within the short term, giving employment and producing paper.

Chairman.—Is there a particular investor interested in this particular project at present?

Mr. Donlon.—I am aware that there have been certain visits to the plant in recent times.

Chairman.—So, the possibility of Clondalkin Paper Mills opening again is very real?

Mr. Donlon.—In the sense that the receiver is speaking at this stage to people who seem to be interested in the operation.

Chairman.—So, hopefully the State will get something for its £7.6 million investment?

Mr. Donlon.—We would be hopeful that we will see a restoration of manufacturing activity there and employment.

469.Chairman.—We will note that. Could I ask Deputy Naughten to take the Chair for a few minutes as I have an urgent phone call to take?

Acting Chairman.—Paragraph 50 of the Report of the Comptroller and Auditor General reads:

Subhead Z—Provision to meet closure costs of Ceimicí Teoranta

In July 1985 the Government decided to phase out the operations of Ceimicí Teoranta which had been established under the Industrial Alcohol Act, 1938 to manufacture and sell industrial alcohol. The Government also decided that the arrangements for the phasing out of the company should be such as would ensure the payment of all creditors in full. Accordingly, in August 1985 at the request of the Board of the company, the Minister for Industry and Commerce with the consent of the Minister for Finance, undertook that sufficient funds would be provided from the Exchequer to the company to enable it to pay off all its legally enforceable obligations.

On 30 July 1986 at an extraordinary general meeting of the company it was decided that the company should be voluntarily wound up and a liquidator was appointed. In December 1986 an advance payment of £1.1 million towards liquidation costs was made to the liquidator from the Vote.

Mr. McDonnell.—This paragraph is for information. It deals with the cost to the State of meeting the liquidation expenses of Ceimicí Teoranta. I do not know when the liquidation will be completed. I have no information on that.

Acting Chairman.—Have you any information for the Committee as to when the liquidation will be complete?

Mr. Donlon.—Unfortunately, I have nothing definite. There are a number of outstanding matters remaining to be resolved. I do not regard them as being insurmountable and I am hopeful that — I have no reason to suggest this but on the basis of my reading of it — we might see a conclusion of this before the end of 1988.

Mr. Donlon.—We would expect the total cost to the State to be in the order of £1.3 million.

470.Deputy McGahon.—What was the rationale behind the decision to wind up Ceimicí Teoranta? Have they completely ceased trading? Where were their factories located?

Mr. Donlon.—First of all, the company had three operations in three locations, Carndonagh, Corroy and Cooley. Difficulties began to emerge with the operation of the company some years back. As far back as 1979 a Joint Committee on State-sponsored Bodies concluded inter alia that the viability of each of the company's operations was left open to doubt. In 1983 the production of glucose by Ceimicí at Corroy in County Mayo ceased. This was regarded as being a totally uneconomic production unit. Additionally, Ceimicí at that time entered into a joint venture operation for the production of glucose in Cork. In 1985 the financial position of the company reached such a critical stage that the Government decided to phase out their operations and asked the board at that time to seek an investment partner for the Cooley distillery. Following prolonged negotiations in so far as the Cooley distillery was concerned, they failed to enter into any arrangement with any potential joint venture partners. Their research at that time was quite widespread but, unfortunately, the production unit and the offer were not found to be attractive to any of those who expressed even an outline interest in it.

Deputy McGahon.—Where are we receiving this from now? Who is manufacturing it? Are we importing it now?

Mr. Donlon.—Alcohol is made within the State. At the moment we have a number of distilling companies, who are making alcohol. I do not know what the statistics are but I am quite certain we are not importing any alcohol at this time. Secondly, the Cooley plant itself was disposed of. The new occupiers of the plant are, at present, examining the feasibility of manufacturing potable alcohol. That is where that particular project stands at the moment.

471.Deputy Naughten.—Could the Accounting Officer inform us of the total State investment in this company?

Mr. Donlon.—By 1986 the company had received £4.97 million in equity from the State, £500,000 in IDA grants and dividends were received over the period to 1976, when dividends ceased to issue, of the order of £323,00.

Mr. Donlon.—No. It may be that, at the end of the liquidation process itself, some of the funding to which we refer here today made from this Vote may be made available. At this stage it would be too early to indicate to what level. Certainly we are not talking of anything that would look substantial in the context of £5.2 million.

Chairman.—Do you know what the total investment has been over all of those years?

472.Chairman.—We will note that. On subhead J — Kilkenny Design Workshops Limited—in evidence you gave to the committee in January this year, you said that the London enterprise was launched just over a year ago and “I understand that its early days were rather difficult in that it missed out on the Christmas season of that year, but the company is confident that it will return a satisfactory performance or will have done so in 1987”. Later on when asked about the design costs you said the profits from the retail end would contribute to covering this. It seems that the reverse is what actually happened in 1987 and it is certainly the reverse of what has happened since. I wonder why that evidence was given to the Committee in January when the position in 1987 seems to have been much different and, in fact, the Kilkenny Design Workshops seem to be in a very difficult position with their retail outlet and, in particular, with their London retail outlet, which was the subject of the question at the time?

Mr. Donlon.—First of all, I should say that in so far as the operations of Kilkenny Design Workshops were then envisaged by us, it was one to self-financing within a period of years. It was believed in the context of that scenario that the extent to which the design function might have proved something of a drain on the company's resources, the retailing end would make that good. You quoted from my statements in January. In fact, I think the words were “the company were confident”.

Mr. Donlon.—That would have been in advance of presumably final figures for what would have been regarded as the prime retailing period, etc. The reality as we now know it, is that they did not have a good year. In fact, they incurred quite substantial losses following on which, we are now aware of the decision, which was taken by the company in so far as the London operation was concerned.

Chairman.—I am not suggesting for one minute that it was done deliberately, but the impression given to the Committee was the opposite of what actually transpired. We were given to understand that this company were going to do well in 1987 and that the retail profits were going to contribute towards the design costs. In fact, that is not what happened at all and the retail areas, particularly in the London case, are out of control or certainly in a very serious loss situation. Before coming to the question of what the situation in the company at present is, we want to find out how the Committee were given an impression which was not correct.

Mr. Donlon.—What I stated the last time, as you acknowledge, is that the company were confident that 1987 would be a good year. Obviously, the major selling period in the year would have been that period leading up to Christmas. I can only conclude that the information regarding Christmas sales was not available at that time. I would doubt very much that it was. The reality proved to be otherwise and for that reason certain decisions were taken. I regret if the Committee were misled in any way but what I did say was on the basis of the best information available to me.

Chairman.—I will not pursue it any further but it is not satisfactory. The Committee ask questions and expect to get factual replies. If you do not have the replies we should get a note on them afterwards or you should come briefed sufficiently well to give us those replies. I do not want a situation to develop where anything can be said at this Committee and withdrawn a few months later. We were misled, whether it was deliberate or not. The information given at the time was not accurate, and that is not satisfactory. The purpose of these hearings is to find out where money approved by Dáil Éireann went and what the position is with regard to that expenditure.

Mr. Donlon.—So far as I am concerned, we are not and were not responsible for the day to day activity of the company. The best information I had at the time from the company was that they were confident they would weather the initial storm and they would be able to turn the operation in London into a profit making operation.

Chairman.—Would you tell the committee what the position is with the company at present and what the State's likely or possible exposure is with regard to the difficulties they find themselves in now?

Mr. Donlon.—I do not have accounts up to today, firstly. Secondly, the matter is being considered by the Government at this stage. I am not in a position to comment on it.

Chairman.—What the Government consider is a matter for the Government, but this is a parliamentary committee and it is up to us to find out what happens to funds voted by Parliament. Parliament voted funds for the Kilkenny Design Workshop as a subsidy. It seems to me that the company are in difficulty and that all and sundry in the press are being told that retail outlets are being closed down. If you are not in a position to tell us here this morning, I propose that we adjourn and send for somebody in Kilkenny Design Workshops because I think we are entitled to know what the position is with regard to this company.

Mr. Donlon.—The position as of this morning, in so far as I am aware, is that decisions were announced in so far as the London retail operation was concerned by the board of KDW. That same board made proposals to the Government as to the future operation of the remaining parts of the company. Those proposals or recommendations are being considered by the Government at the Moment. No decisions have been taken or announced as regards the disposal of any other retail outlets or properties.

Chairman.—With regard to this £727,000 grant-in-aid to the Kilkenny Design Workshops Limited, what is that applied for? Is it for a specific purpose?

Mr. Donlon.—The expenditure of the organisation arose in the areas of designer training, design advancement and administration and overheads totalling £737,000 in 1986.

Chairman.—There is an annual subvention of this order to Kilkenny Design Workshops Limited. Is it all for design use, or is any of it for retail use, or does it just go into their general funds?

Mr. Donlon.—It was for design activity. There was no question of the funding going into the retailing activities.

Chairman.—Could you tell us how many people are employed in Kilkenny Design Workshops Limited.

Mr. Donlon.—At the end of 1986 Kilkenny Design Workshops had a staff of 124, of which 89 were in Kilkenny and 35 were in Dublin.

Mr. Donlon.—I understand that the figure in London was of the order of 15 to 20 people.

Chairman.—So, it is the future of their jobs which is being considered at present?

Mr. Donlon.—The future of Kilkenny Design Workshops as a whole on the basis of proposals made by Kilkenny Design Workshops.

473.Deputy McGahon.—May I ask Mr. Donlon, given the extent of State involvement in this company, if the Government have a person sitting on the board? Have we a representative to see how that money is being spent?

Mr. Donlon.—We do not have any direct representative on the board. Obviously, the board is appointed, under its articles of association, by the Minister. We do have the normal checks with the company. We do have the annual reporting mechanism, etc.

Deputy McGahon.—Nobody specifically relates back to you? You seem to be a little short of information as to the current difficulties despite the news in today's paper?

Mr. Donlon.—No, Deputy, I did not say that I was short. What I said was that a report had been made by the company. The up-to-date information on the company's performance etc. is before the Government at the moment and I am not free to discuss it.

Mr. Donlon.—The total grant-in-aid to the company in the period 1980 to 1988 was £5.8 million. On my rough calculation, £7.7 million since 1975 was the total grant-in-aid. There was £1 million capital injection.

Deputy McGahon.—So, over £8 million has been used to bolster the employment of the 140 people. Is it viable at all? It is certainly no advertisement for State investment. It is a very big price to pay.

Mr. Donlon.—The operation was regarded as being viable in two senses. What the position is today obviously awaits determination. On the one hand, it did provide a design service, a training activity and a design consultancy activity, which is regarded as being of great benefit to industry in the country as a whole. It has also led to the spawning off of a number of design consultancy activities in the country. Indeed, questions have been asked as to why, when you had these private designers in place, the service should also be provided by Kilkenny Design Workshops. But it has been recognised as providing a very worth while design service to industry. On the other hand, when it did go into the retailing area it seemed in the mid-eighties that the retailing activities of the company were going to be viable. In that activity quite obviously they were buying in services and products from industry throughout the country.

They would have made an economic return to the State over that period. I am not in a position to say just now what the ratio was between economic return and investment but it is a figure that I can make available to you. That was the position as of the mid-eighties, when the retailing activity did seem as if it was going to deliver in the sense of being a profitable organisation.

Deputy McGahon.—Nevertheless, an industry employing as few as 140 people, that has to get an annual injection of the order of the money they are getting, can it be termed as viable? I would regard this industry, despite the prestige attached to it, particularly in London, as being a lame duck. The Government should take another look at this.

Mr. Donlon.—In so far as the London operation is concerned we are aware that certain decisions have been taken by the board of Kilkenny Design and in so far as their delivery of the design brief is concerned, it would be regarded as having been beneficial to industry. We are talking about a period when the design area was very badly wanting. We have seen that area brought absolutely up to date and one would have to accept and acknowledge that Kilkenny Design Workshops played a major role in that area. They were, after all, a support service to industry and were not expected in their design activity to be a profit making organisation.

Deputy McGahon.—Nevertheless, as a retail business they must be expected to show a profit if they are to continue.

Mr. Donlon.—As I mentioned, it was the expectation that together with their retailing activity they would become a self-financing operation. Difficulties have emerged in the retailing end which have led to the Government's deliberations at this stage on foot of proposals from the company on the company's future.

474.Deputy Naughten.—Mr. Donlon appears to be reluctant to give certain information to the Committee here today because of the matter being discussed by the Government. Maybe we should defer further discussion on it. We have further papers which were circulated earlier today which, as you stated, we could be calling Mr. Donlon back on. If we discuss the matter at that stage we may be able to get more information. There are certainly questions I would like to ask but it would appear that, because of the present situation, it is difficult for the Committee to discuss it and get all the information we would like to get here today.

475.Chairman.—Could we agree that arising from the Government's announcement after they have considered the matter if we then feel we need to go into the matter we may recall Mr. Donlon? Is that agreed?

Mr. Donlon.—I will be willing to come whenever I am requested and to answer questions to the best of my ability. I am aware that there is a series of questions down for answer by the Minister and one would expect that there will be a number of communications by the Minister over the next period.

Chairman.—We may have to come back to this matter. Are there any matters arising from the remainder of the Vote that anybody wishes to raise?

476.Deputy Dempsey.—In relation to the Department's role in supervising insurance companies, is Mr. Donlon aware that there is serious concern about the under-provision being made by certain insurance companies? Is he satisfied that his Department are on top of the situation, that they know exactly what is going on in the insurance business?

Mr. Donlon.—I do not think I could accept initially that there is serious under-provisioning in the insurance industry at the moment. We are aware of certain difficulties relating to companies which were dealt with in 1983 and 1985 but, in so far as the industry as a whole is concerned, we are not aware of there being any serious under-provisioning, nor am I aware of any suggestion to that effect. Secondly, in so far as the two companies whose problems came to light in 1983 and 1985 are concerned, we are aware of deficiencies remaining on the balance sheets there, but the current or day to day activity of both of those companies is being conducted, we are satisfied, subject to tight controls and with the greatest of prudence by the administrators in both cases. Thirdly, in so far as the general industry is concerned and its position on provisioning, by virtue of the returns and the regular contacts between the Department and those companies we have no reason to believe that there is a serious problem of under-provisioning in the Irish market at the moment. It will happen every now and then that you will have issues arising in examining the accounts of insurance companies which will require certain follow up action etc., but I have no basis for accepting that there is serious under-provisioning in the Irish insurance industry at the moment.

Deputy Dempsey.—The last report from your Department, for 1985, indicated that quite a number of insurance companies operating in Ireland were under-provisioning. The Irish National Insurance Company had an under-provision for that year for employers' liability of 40 per cent and for public liability of 5 per cent. These are Department figures. The American International Insurance Company had an under-provision of 37 per cent in employers' liability and 49 per cent in public liability. The PMPA had an under-provision of 24 per cent. The ICI have been the subject of quite an amount of controversy. They had under-provisions of 16 per cent in EL and 35 per cent in PL. IBP Mutual had a 60 per cent under-provision for EL and 64 per cent for public liability. They are Department of Industry and Commerce figures. Are you not concerned about them?

Mr. Donlon.—I presume you have got the Blue Book there with you. I do not have that with me here at the moment. I do not know what column you are reading from. Is it losses in those particular areas, losses in the particular year?

Deputy Dempsey.—I am reading from an extract that I have taken from that particular Blue Book, that was the subject of articles in a number of financial magazines.

Mr. Donlon.—In the insurance industry going back over many years we have had unfortunate situations where figures were taken out of context. I am not suggesting that there is anything of that going on here today, but figures have been taken out of context and cases have been proven all over the place where insurance companies were in difficulty or as can be seen from these particular figures or whatever that this particular insurance company are in major difficulty. That has not been the case. It emerged in one or two, as I mentioned, that there was a serious problem. I would like, if I could, to take those figures you have with me and I will come back to the committee on those specific figures. As far as the generality of the insurance industry is concerned, at the moment we have no basis for agreeing that there is serious under-provision in the market at this stage.

Deputy Dempsey.—Any suggestions that have ever been made in relation to the underprovision in the Irish insurance market always seem to highlight the fact that it is Irish companies that seem to be “guilty” of any under-provision. The English based companies like General Accident, Shield, etc. do not seem to have this problem. It never seems to arise with them. Would you have any comment on that?

Mr. Donlon.—It is difficult to make comment without causing scare rumours etc. The reality is that over the years we have had occasion to deal, as I mentioned earlier, with specific problems in specific companies and we have been able to turn things around. It would be very unfair for the word to go out that our contacts involved Irish companies in this way. We have become involved in companies of non-Irish nationality. It is not true that problems in the Irish insurance industry over the last number of years have pervaded the market as a whole.

477.Chairman.—There is one other question in the insurance area I want to ask you about. You will be aware that the Dáil had to pass a special Insurance Act because of the problems being faced at that time by PMPA. I read recently a press report that there is some suggestion that the PMPA may be sold off. Are your Department aware of any suggestion and can the Committee take it that your Department would be kept fully briefed on any possible sale of a company of that kind because of the obvious possible consequences if anything went wrong?

Mr. Donlon.—Under the terms of the 1983 legislation there are a number of scenarios set out for the termination of administration of an insurance company. One of those relates to disposal of the company. The disposal of that company has to be approved by the High Court and with the consent, as I recall it, of the Minister for Industry and Commerce. I can assure the Committee that, whatever course of action is decided, in relation to any of the insurance companies under administration will be one in which the Department will have had an input.

Chairman.—Are you aware of any impending takeover or any negotiated possible takeover of PMPA?

Mr. Donlon.—As I understand it, there are contacts being made with the PMPA and, indeed, with the Insurance Corporation of Ireland. One could only describe those as exploratory at this stage. no decisions have been taken to dispose of either of the companies to any particular company.

Chairman.—Can I move on to the more general question — obviously this whole area has a financial effect on the country generally — of the completion of the European market in 1992? There is a unilateral declaration by Ireland in the Single European Act, as you are aware, about the special position of the insurance industry here. Is the advent of the Single European market likely to see cheaper car insurance in Ireland?

Mr. Donlon.—One would hope that well before 1992 we would see cheaper car insurance here in Ireland. As you are aware, there are a number of actions being taken by the Government at the moment in areas which are pertinent to the levels of insurance charged. One would expect that the Courts Bill would be enacted by the summer recess. We will see action in the juries area and other associated courses of action taken. The Government have made it quite clear to the insurance industry that, on foot of delivery in these areas, which the insurance industry has argued are the major cost factors in the computation of premiums, etc., they expect to see a return from the insurance companies. This is a situation which the insurance industry itself accepts. So I would suggest to you that we should see some quite substantial improvements in the motor area long before 1992. In fact, we have seen over the last while a number of areas where ratings have improved. I will accept that there is a problem still in that area, but I do not expect that we will have to wait until 1992 to see the position reach a satisfactory stage. It cannot be denied, when that particular sector becomes fully open to competition from external sources, that the competitive effect would be, one would have to expect, that one would see greater competition in the premium area. That is something that one cannot set aside. The position at the moment, however, is that we did see foreign companies coming into the market and establishing here over the last number of years. One might have had expectations that they would be able to compete on a better level, etc. The reality was that they rated their premiums having regard to the risk, and the risk in the motor area in this country was regarded as having been high. The reality was that, even with the advent of foreign companies into the market, we did not see any appreciable change in the rating level. But we would be confident that, on foot of actions which are now being taken, that we will see such improvements.

Chairman.—You might be aware that I chaired a sub-committee on motor insurance in the last Dáil. One of the problems we came across — and I would ask that their case be borne in mind in particular — is the fact that that young drivers find it very difficult to find a quote and therefore are sometimes forced into the position of breaking the law, which, of course, cannot be defended. It is a serious matter to drive without insurance. But, if they were able to get a reasonable quotation, many people would not drive without insurance. Do you have any idea since the survey was carried out by the Garda what is the current rate of uninsured driving? Secondly, can we take it that the improvement in insurance premiums will also be passed on to motorcyclists, who are usually young and quite often are literally screwed into the ground with some of the insurance premiums they have to pay, because sometimes the premium is more expensive than the motorbike itself?

Mr. Donlon.—As you will have learned, the reality in the insurance area is that a risk has to be rated. In so far as the younger driver was concerned, all of these statistics showed quite clearly that the young driver/cyclist was the highest risk area. Having said that, I am aware that a number of schemes have been launched within the past year which are steps in the right direction in so far as the younger driver is concerned. Secondly, we have not spared any effort in seeking to devise means by which the lot of the younger driver could be eased. Again, we are faced with the reality that, if you reduce quite substantially the rating for the younger driver, you are spreading the risk in so far as the insurance company itself is concerned and perhaps penalising to a greater extent that sector of the motoring public who are not regarded as high risk motorists. We would hope that, with the coming into place of the changes that we see taking place over the next year, we will see an improved situation for the younger driver. As to your first point on the precise figure, it is very difficult to get a precise figure and I do not have one here with me at the momemt that would be anywhere near a degree of precision. Certainly, figures have been bandied all round the place as to the level of uninsured driving. I can let you have this afternoon the figure that we do accept within the Department as being the relevant figure.

Chairman.—You might send that on to us. The point is that, if young insured drivers could get an insurance policy at a reasonable rate, you would be actually bringing additional people into the insurance area. You would not be so much spreading the cost; you would not be so much spreading the cost; you would be including additional contributions. What about the motorcyclists? Is the motorcyclist going to get a better deal under these new proposals as well?

Mr. Donlon.—I would include the motorcyclist — although we would have to accept again that the motorcyclist is an even greater risk than the young motorist — but clearly we will be looking for reductions in all areas.

478.Deputy McGahon.—The rates of insurance in this country are an open scandal when compared with that which are obtainable in the Six Counties and the UK generally. Is it not a fact that cartels are operated by companies operating in this country that are not beneficial to the Irish citizen? Is there no way in which those cartels can be broken by the Department and more realistic premiums asked of the unfortunate Irish motorist?

479.Deputy McGahon.—Have you ever looked? Do the Department monitor that area of insurance?

Mr. Donlon.—On my perception of the insurance industry you could put them all sitting around the table and you could spend two years there and I do not think they would disclose the detail of their individual rating capacities and so on. The reality is, as we understand it, that there is no cartel in operation. If there were, quite clearly we would be very concerned about it; but there is no basis for accepting that there is. There is competition within the area. You can contact a range of insurance companies at the moment and you will find that you will get competitive quotes over those insurance companies. We are not aware of the existence of any cartels. We are, of course, very concerned about the high cost of insurance, not just to the motoring public but to industry. In the Department of Industry and Commerce we regard it as quite a significant penal cost carried by industry in this country at the moment and we are seeking to ensure that the utmost is done to reduce that burden for industry. I can assure you that, if there was any reason at all for believing that there was a cartel in operation which was operating adversely in so far as industry or the consumer in this country as a whole was concerned, we would by virtue of restrictive practices legislation, have taken such action as would have been considered necessary to deal with it. But we are not aware of the existence of any such cartel. The reality in the early eighties was that in the EL and PL areas you had a highly competitive market in this country. In so far as standard ratings were maintained at all, the reality of the market place was that the ratings were less than what would have been regarded as a standard.

Deputy McGahon.—One can in conscience understand why insurance companies are reluctant to take on extra business given the standard of driving on Irish roads. Your comments are interesting in relation to insurance and industry. Can you give us a reason as to why rates should be high in industry?

Mr. Donlon.—There would have been a number of factors. First of all, there was concern about the award levels in this country. That might have been the dominant concern of the industry. It was in order to anticipate the levels of awards that might have been granted in the event of accidents and so on that one saw ratings going up. It was believed by a broad grouping of people that the major factor in the high level of awards was the existence of juries in this country as opposed to other countries with which we are comparing our rates. As I indicated earlier, my understanding is that the Courts Bill should be enacted by this summer recess and we will see certain actions flowing by virtue of that in the area of juries, quantum books of damages etc.

480.Deputy McGahon.—In the European insurance table, how high would we figure?

Mr. Donlon.—It is a serious question, but I would have to suggest that if we are not the highest we must be very close to it.

Chairman.—In soccer parlance it would be a walk-over. We would have no problem. Are there any questions on the Vote? There is one matter under private session which will not take a minute.

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

1986 APPROPRIATION ACCOUNTS

VOTE 33—POST-PRIMARY EDUCATION

Mr. D. Brennan, Secretary, Department of Education, called and examined.

481.Chairman.—The Committee of Public Accounts of Dáil Éireann are this morning examining the Secretary of the Department of Education, Mr. Declan Brennan, in his capacity as Accounting Officer for the Department on the Appropriation Accounts for the Education group of Votes for 1986. You are welcome, Mr. Brennan. Paragraph 34 of the report of the Comptroller and Auditor General reads:—

Subhead A.1.—Secondary Teachers — Incremental Salary Grant

Principals, Vice-Principals and certain other teachers in Secondary Schools receive posts of responsibility allowances in addition to their basic scale salaries.

In course of an examination carried out in February 1987 of allowances currently being paid it was noted that five teachers who had ceased to act as school principals were still being paid principal's allowance although the Department had been notified of the cessations.

In reply to my inquiry the Accounting Officer informed me that the allowances continued to be paid in the five cases mentioned due to errors in interpreting and processing information contained in school returns and that the total amount overpaid was £12,935 which was being recovered by regular deductions from salary. He stated that all posts of responsibility files had been checked and that no further cases of over-payment had been found. He also stated that, within the constraints of staff resources available, arrangements were being made for more stringent checking and that the particular return on which the information is received was being reviewed with a view to ascertaining whether greater clarity could be achieved in the presentation of the facts by school managements.

Mr. McDonnell.—Paragraph 34 refers to the failure of the Department to discontinue the payment of post of responsibility allowances to some teachers even though they should have been aware, from information furnished by the schools, that the allowances were no longer payable. As you see, too, the amount has been recovered. I just want to say that the five cases which did come to light in the course of our examination were, apparently, the only ones in which this oversight, if I may call it that, Chairman, occurred.

Mr. Brennan.—Yes. I am satisfied that the system is working properly. I have satisfied myself, too, that there will be no further cases of overpayment. The situation has been that it was possible, apparently, to misinterpret the information supplied on a particular form, Responsibility Form 2. An official might learn from the form that a person had ceased to hold the post of principal, then he would discover that the person concerned, was still in the school. He would assume that there had been a mistake, that the person concerned must still be principal. This happened in a particular instance. I am not saying it should happen; I am saying it should not. But that is what happened. We are now satisfied that the procedures have been tightened and people are being more careful. The review of the form R.F.2 is also at an advanced stage, so there will be absolutely no doubt what the actual position is in the future.

482.Chairman.—I think we can note this. Paragraph 35 of the Report of the Comptroller and Auditor General reads:—

Subhead A. 2. — Annual Grants to Vocational Education Committees Subhead L. — Appropriations-in-Aid

The EEC Social Fund (ESF) provides assistance towards the cost of certain training courses provided by VECs. Grants are paid to VEC's from Subhead A.2 of the Vote towards the costs incurred by them in providing the courses and the amounts received from the ESF are brought to credit of the Vote as Appropriations-in-Aid.

Up to 1984 ESF assistance towards the cost of training courses was paid in instalments on the basis of expenditure incurred in the academic year but a change by the EEC to a calendar year basis of payment led to the deferment until 1986 of grant instalments which had been expected to be received late in 1985 and had therefore been provided for as Appropriations-in-Aid in the 1985 Estimate for this Vote. Following consultation, the Department of Finance directed that the shortfall in Appropriations-in-Aid be made good by withholding from the VECs amounts which would otherwise have been paid to them from Subhead A.2, thus achieving a saving on that Subhead which would equate to the shortfall, and that each VEC would use its powers, under Section 49 of the Vocational Education Act, 1930, to borrow an amount equal to the funds temporarily withheld from it.

On the grounds that it wished to maintain effective control over borrowings by VECs generally and that it would therefore be inappropriate to ask each of them to raise a loan to cover its shortfall in voted moneys, the Department of Education decided instead to authorise City of Dublin VEC and City of Cork VEC to borrow £4 million and £1.541 million, respectively, to be on-lent to the Department of Education and credited to Subhead A.2, thus enabling their full annual grants to be paid in 1985 to all the VECs. In 1986 the Department repaid the loans to the two VECs together with interest of £79,477 and charged the amounts to Subhead A.2 of the Vote for that year.

A shortfall in Appropriations in Aid deriving from ESF assistance again arose in 1986 and, following the same procedure as in the previous year, the Department authorised the City of Cork VEC to borrow £12,600,868 which was again on-lent to the Department and credited to Subhead A.2 of the Vote: it, in turn, was repaid with interest to the VEC in 1987.

There are a number of aspects of these transactions about which I communicated with the Accounting Officer:

(a)As statutory authority to borrow for a supply service is vested only in the Minister for Finance, the Minister for Education had, in my opinion, no authority to borrow from the VECs;

(b)As the Constitution provides that all revenues of the State, from whatever source arising, be brought into the Exchequer (subject to such exception as may be provided by law) the crediting of the proceeds of the borrowings to Subhead A.2 of the Vote was incorrect;

(c)Each VEC has power, under Section 49 of the Vocational Education Act, 1930, to borrow, with the consent of the Minister for Education, only for the purpose of the Vocational Education Fund maintained by it. It appears, therefore, that no statutory authority existed for the borrowing for on-lending to the Minister for Education by the two VECs referred to in this paragraph;

(d) Dáil Éireann provided funds under Subhead A.2 for the payment of annual grants to VECs and these could include amounts to cover the cost of servicing their own borrowings. Dáil Éireann did not, however, provide funds for the repayment with interest of borrowings by the Minister from the VECs.

In reply to my inquiry, the Accounting Officer stated that, in effect, the receipts from the ESF now constitute an addition to the normal sources of funding of VECs which, for accounting reasons, is not, however, channelled directly to them. Instead, the aid is shown in the Estimates as Appropriations in Aid of the Vote for Post-Primary Education and an equivalent amount is included in the gross estimate under the relevant subheads and, therefore, to the extent to which courses are aided by the ESF, they are not a liability on the Exchequer. If a shortfall in Appropriations in Aid deriving from the ESF occurs, the grants provided under Subhead A.2 which are normally paid in full may not be paid unless comparable savings can be achieved elsewhere on the Vote or a Supplementary Estimate is approved. This course of action would be justified where the shortfall was absolute rather than being due to a deferment of aid. The Accounting Officer said, however, that in the instances referred to, the shortfalls were not absolute. The ESF aid had been approved but the effect on the VEC financial schemes as approved and on the Vocational Education Funds as a whole was to create a cash flow problem and that in those circumstances it was considered more appropriate to avail of the facility provided for in the 1930 Act to authorise short-term borrowing by VECs to overcome this problem. In order to implement the borrowing arrangements with full precision it would have been necessary to calculate the amount of the overall delayed payment which was appropriate to each individual Committee, to reduce the annual grant payable to each by that amount and to authorise each committee to raise an equivalent loan. In the event, it was considered that the most practical course from an administrative viewpoint was to adjust the amount of the annual grant payable to two large Committees in 1985 and one Committee in 1986 and to authorise these Committees to borrow the appropriate overall amount required to pay the ESF portion of the grants due to all Committees, the approved but unpaid ESF funding for all Committees when received in the following year to be transferred to the Committees which had borrowed the funds as additional annual grants, approved by Supplementary Estimate as required.

As the transactions which took place and which are reflected in the Department's records indicate that this was not in fact the course adopted in that the funds borrowed by the two VECs were lent to the Minister I have further communicated with the Accounting Officer.

The Accounting Officer had already acknowledged that, in retrospect, the procedure of concentrating the borrowing in one or two Committees, was incorrect and outside the powers conferred on the Minister by the Act and he stated that steps were being taken to ensure that should such short-term borrowing be required in future to make good a temporary shortfall in ESF aid, the borrowing would be apportioned across Committees as appropriate.

In regard to my query on charging the loan repayments and interest to the subhead the Accounting Officer said in his reply that capital and interest payments in respect of approved loans under Section 50 of the 1930 Vocational Education Act and interest payments in respect of approved overdraft facilities under Section 49 of the same Act are a normal charge on the Vocational Education Fund and, as such, form part of the financial scheme to which the amount of the annual grants is related. Since these charges, however, represent the cost of servicing borrowings by the Minister from two VEC's rather than the costs incurred by all VEC's in servicing their own borrowings and since the Accounting Officer has accepted that the borrowing arrangements made were outside the powers conferred on the Minister by the Act, I have again communicated with the Accounting Officer on this matter.

Mr. McDonnell.—Paragraph 35 is a very long paragraph, as you will see, dealing with what I would call a mechanism used by the Department of Education to overcome a shortfall in their European Social Fund cash flow which, in turn, affected the amount which the Department could issue from their Vote to the VECs. As I saw it, Chairman, the arrangements made were outside the scope of the legislation relating to the financing of VEC operations and outside the scope of the legislation regarding borrowing for Exchequer purposes. I have set out in the paragraph a number of issues which were of concern to me. They are indented in the paragraph. Essentially what I am saying is that the Minister's action was questionable on two fronts: one, in authorising a VEC to borrow other than for the purpose of its own vocational education fund — this is covered at (c) in the paragraph — two, in borrowing himself from the VECs the funds which they had raised at his behest and this is covered in (a) and (b). A further point follows from these and it is covered by (d) in the paragraph, that is to say, if the VECs borrowing itself was invalid the subsequent servicing of that borrowing from the Vote was invalid. In his reply, which I have summarised in the paragraph, the Accounting Officer accepted that the transaction which was central to the whole arrangement, that is of having one or two VECs borrow the amount equivalent to the total ESF shortfall, was not the type of borrowing by a VEC which the Minister was empowered to authorise under the Act. Since the date of my report, the Accounting Officer has acknowledged also that the servicing of that borrowing, which I may say he had originally said was normal, could not in fact be regarded as normal. In regard to the second half of the transaction, that is to say the passing of the funds borrowed by the two VECs to the Department so that all VECs could receive their ESF grants, the Accounting Officer, since the date of my report, has given me a further reply. I must say that I find a certain difficulty with it. He states, if I understand him correctly, that the amount received from the two VECs in 1985 was not borrowed by the Minister from them, but could be regarded as a refund of grants already paid to these two VECs in that year. In regard to 1986, when one VEC borrowed, he states that the transaction should be seen as representing borrowing only to the extent that there was a net inflow of funds to the Department. I assume he means that the remainder, as in 1985, could be regarded as a refund of grants already paid to that VEC. As I see that, it means in effect, that two VECs two in 1985 and one in 1986, were asked, if you regard it as a refund, to refund out of their total grants the equivalent of the European Social Fund grants that are paid to all other VECs, so that all VECs could in fact get their ESF grants. In my examination of the transaction, I saw no reference in the departmental records to moneys being sought from the two VECs by way of refund of grants. My interpretation of what was on the departmental files was that the Department in effect, if I may say, borrowed through the VECs. Finally, Chairman, I want to say that the Accounting Officer had told me that any breaches of the legislation were unintentional and that, notwithstanding what happened and should not have happened, the charge to the Vote in 1985 and 1986 and the funds available to the VECs were the same as they would have been if the transactions had been properly arranged. He also said that steps were being taken to ensure that, should this kind of situation arise again borrowing, if borrowing had to be arranged, would be arranged in such a way as to comply with the legislation. I know, Chairman, I have made a long comment on that and it seems a very complex arrangement, but essentially what I said at the beginning is my position on it, that I saw that, first of all, the VECs were authorised to borrow in a sense outside the provisions of the legislation and then the moneys were passed to the Department. You may argue as to whether that was a refund or whether it was a borrowing by the Department; as I saw it, it was borrowing by the Department and the only Minister authorised to borrow for the Exchequer is the Minister for Finance.

Chairman.—Before I call on the Accounting Officer, what does the Department of Finance have to say about this?

Mr. McCaffrey.—On this issue, we would take much the same view as the Comptroller and Auditor General does of what happened. When the shortfall in funds from Brussels arose we had discussions with Education and we arranged with them that in effect committees would be left short of part of their grants for the year in question and the total amount by which they would be left short would be £5.771 million, which was the amount Brussels had left us short in 1985. The committees would then be asked to borrow an amount equivalent to that, to make sure that they would not have a cash shortfall in the year. We were surprised, when we found that rather than the borrowing being undertaken by committees throughouty the country, it was undertaken by one or two committees. The same thing happened in 1986. I am afraid we were not aware of that and, as I said earlier, our view would be much the same as the Comptroller and Auditor General's, that it was regrettable and I think Education confirmed it will not happen again.

483.Deputy Naughten.—As a result of that reply, could the official from the Department of Finance explain how the type of borrowing that you envisaged, each VEC borrowing itself, would come within the remarks here of the Comptroller and Auditor General at (a), (b), (c) and (d)?

Mr. McCaffrey.—As I see it, there is no problem of any sort about that. Committees were given an authorised programme of work for a year, and an authorised level of spending for that. Because of the fact that Brussels had left the Exchequer short, the committees collectively were left £5.771 million short. There was no problem, as I see it under the legislation, in authorising the committees to go out and borrow on a short term basis to meet a cashflow problem which had arisen and that is what we organised.

Deputy Naughten.—In fact you do not see any difficulty with what has happened?

Mr. McCaffrey.—No, I am not saying that at all. It seems that in principle there was no difficulty about the committees collectively going out to borrow £5.771 million; that was within the legislation. If that had been done on the basis that each committee borrowed only the amount of money by which its grant had been reduced — let us say the town of Bray VEC had been left £20,000 short from its grant as a result of Brussels leaving us short and Bray then went out and borrowed £20,000, that would be perfectly within the legislation. The difficulty it seems to me is that the borrowing in two cases was away in excess of the shortfall in the grant and there was not a legal mechanism for distributing to the other committees the borrowing which those two committees had undertaken. What happened was a breach of the legislation quite clearly. If the borrowing by each committee had been limited to the amount of money that each committee had been left short by the Department, then I do not think we would be discussing it today.

484.Chairman.—Okay. We had better hear Mr. Brennan. The Department of Education and the Minister did not have the authority, the VECs did not have the authority but it happened. Why was there not a supplementary vote in the Dáil and why was the Dáil by-passed for this £12 million particularly?

Mr. Brennan.—Well, it is a pretty long story and a complicated one. As the Comptroller and Auditor General said, what happened by way of non-compliance with the full rigour of the law by the Department was unintentional. It is also regrettable as we ourselves said. It is mainly, as the spokesman from the Department of Finance said, a technical issue. What happened was that ESF funding was delayed. The position therefore was that the grants to VECs would have had to be reduced by the amounts by which the funding was delayed. Each individual VEC should have suffered a reduction in its grant by reference to the individual amount of ESF funding to which they were entitled. Then, seeing the situation that developed, the Department of Finance had consultations with the Department of Education and an understanding was reached, that borrowing would be resorted to by VECs, strictly in accordance with the Vocational Education Act, to make up the difference to cover their outgoings. Within the Department that was taken a stage further. At the time, as I understand the position — the question of the application of the relevant provisions of the statutes was not addressed — and the borrowings it was decided on mainly as a matter of practical convenience. There were a number of difficulties besetting the Department at the time in their relationships with VECs generally because of new controls that were being imposed upon VECs, a new form of control with which they were not entirely happy, and there was difficulty also about guaranteeing borrowing. It was decided that an arrangement would be made with two VECs where by the total amount which would be required by individual VECs would be raised through them and that amount would be remitted to the Department. I would not care to cross swords with the Comptroller and Auditor General on the issue of whether this was borrowing or refunding, borrowing from the VECs or refunding by the VEC of grants. Obviously, in the case of the 1986 arrangement with the City of Cork VEC, some element of borrowing has to be admitted to having been involved because the borrowing exceeded the total amount of the grant available to Cork VEC. That was not an issue — we are thinking now with hindsight about these issues — that presented itself to the departmental officials at the time. They organised what appeared to be the most practical arrangement. I mentioned some of the background problems they had but I would quote here from my original reply last July: “In order to implement the borrowing arrangement with full precision it would have been necessary to calculate the amount of the overall delayed payment which was appropriate to each individual committee while also taking account of the funding from the Labour Vote in respect of the youth levy. It would have been necessary then to reduce the annual grant payable to each committee by that amount and to authorise each committee to raise an equivalent loan. In the event — and this is what happened — “it was considered that the most practical course from the administrative viewpoint was to adjust the amount of the annual grant payable to two large committees in 1985 and one committee in 1986” — they were the City of Cork and City of Dublin VECs in 1985 and City of Cork in 1986 — “and to authorise borrowings for the appropriate overall amount, the approved but unpaid ESF funding being regarded as a corresponding asset to be transferred to the committee in the following year as additional annual grants matched by additional appropriations-in-aid in the form of the delayed ESF receipts”.

Chairman.—But, Mr. Brennan, we know all of this; we want to know why. Can you answer the question — why the Dáil was not presented with a Supplementary Estimate. Why was that not done?

Mr. Brennan.—Consultations took place at the time between the two Departments, the Department of Education and the Department of Finance, and it was decided that this recourse was not necessary. What is clear is — I think it has been said by the Comptroller and Auditor General and also by Mr. McCaffrey — that the actual out-turn on all of this as far as the Exchequer was concerned, as far as the Department of Education Vote was concerned, was exactly the same as if the correct procedures had been followed to the letter. The amounts would have had to be borrowed one way or the other by someone; it would have been quite proper to have them borrowed by individual VECs. I am not trying to excuse what happened or to palliate it in any way. As the Comptroller and Auditor General has said, it will not happen again. We will adopt the more cumbersome method and we will have regard to the provisions of the acts. It was due to an oversight that that was not done the last time.

Chairman.—The purpose of this Committee is to find out on behalf of Parliament how funds which Parliament has voted have been used. I would not like it to go abroad that it is somehow cumbersome or somehow a difficulty to be gone through to bring before the Dáil for authorisation, £12.6 million to be spent. That is the correct procedure. Was the Dáil not in session? Or what was the problem that it was not brought before the Dáil?

Mr. Brennan.—I do not think that was the issue at all at the time. The issue that arose for the Department was whether — and it would not have been necessary to bring this matter to the Dáil — individual VECs should each raise the loan appropriate to its own circumstances or not. That was not done through inadvertence and not through lack of regard for the actual letter of the law. If that had been done there would have been no question of going separately to the Dáil about the issue. There was no question of seeking to mislead the Dáil or withhold information from the Dáil. There was no intention of that. What was adopted was a device — it will not be adopted again — which made life a little easier for those administering the scheme.

485.Deputy Foley.—Mr. Brennan, there are just a few points I would like to make. Discussions took place between the Departments of Finance and Education in connection with this problem at the time. Was it agreed that the money would be borrowed rather than coming back to the Dáil with a supplementary estimate?

Mr. Brennan.—Yes, it was approved at official level. What was approved by the Department of Finance was not actually what happened. What the Department of Finance approved was borrowing from each individual VEC as its circumstances dictated.

Deputy Foley.—Can I take it that in 1985, approximately £5.41 million was borrowed by two VECs — the City of Dublin, £4 million, and the City of Cork £1.54 million — and that money was in turn credited direct to the Department. Is that correct? What I am saying is that two VECs were used to borrow this money rather than the Department themselves seeking this funding.

Mr. Brennan.—In effect, that is what happened. It would have been appropriate for VECs to borrow because there was a shortfall in their funding.

Deputy Foley.—I accept that, but two VECs were used by the Department to borrow £5.41 million in 1985.

Deputy Foley.—And in 1986 there was a sum of £12.6 million borrowed. Is it not the usual procedure that where there is a shortfall in any Department they would come back with a Supplementary Estimate for the Department?

Mr. Brennan.—Let me answer you this way, Deputy. That was one possibility. The other possibility, which was agreed with the Department of Finance, was — I am not seeking to put them behind the £12 million — that the borrowing would be effected by each individual VEC to met its shortfall.

Deputy Foley.—The only point I am making is this — and I am not holding you responsible — both the Departments of Finance and Education decided on a certain procedure to borrow money.

Deputy Foley.—Certain VECs were utilised for that purpose and the money in turn came back to the Department. It was definitely an unusual procedure. The normal procedure is that where there is a shortfall it comes back to the Dáil by way of Supplementary Estimate.

Mr. Brennan.—I am told that it would have been quite consistent with the powers of a VEC to allow them to do this.

Deputy Foley.—I accept that, but that did not happen. The point I am making is that it was an agreed decision between the Departments of Education and Finance to adopt this method.

Mr. Brennan.—At all times there was the alternative to go to the Dáil and seek a Supplementary Estimate or to do what was done in the appropriate way; it would not have been wrong for the VECs to arrange to raise the appropriate loans. It is agreed that this will not happen again. The position has been reviewed and the next time around it may be a lot simpler to resort to the Supplementary Estimate arrangement if it becomes necessary.

486.Deputy Crotty.—We agree that there was an agreement between the Department of Finance and the Department of Education on the procedures and that they were in order, under legislation. Why were these procedures not carried out, and who decided that the borrowing would take place under the umbrella of two vocational committees rather than of all the vocational committees that had shortfalls?

Mr. Brennan.—Well, why in the first place. I have attempted to give an answer to that by reference to the statement to which you are already privy that was made in the original reply last July. It was simply seen as being a more practical arrangement and at the time I am afraid no advertence was made to the fact that it did not conform to the laws governing borrowing. As to who, it was decided within the section concerned, within the division of the Department concerned, that this would be done and the negotiations that were arranged with the two VECs proceeded within the Department, I have to carry the responsibility for that happening.

487.Deputy Crotty.—Who was the co-ordinator? Who decided that two VECs would be borrowing? Was it the VEC group, somebody in the Department of Education, or in the Department of Finance? Who set this situation up?

Mr. Brennan.—This initiative was taken within the Department and the approach was made to the two VECs who agreed to co-operate.

Deputy Crotty.—So it was the Department who took the decision and not the VECs.

Deputy Crotty.—It was not quite clear as to how the arrangement came about. The Department then adopted procedures that were outside the statutory legislation. Is that what you are saying?

Mr. Brennan.—That is right. Again, I would have to stress that what has happened cannot be condoned and will not be repeated but, the net effect of this was not to change the overall position of the Exchequer or of the VECs. There is a problem for the Department about controlling VEC expenditure at any time. I am not faulting the VECs but the Department see it as being necessary to exercise strict control over overdrafts and over borrowing by VECs and that has raised problems in the past in many cases. This seemed to the Department to be the most appropriate and most effective way of securing that definite control was exercised over the overdraft position. Instead of having to deal with 38 VECs you dealt with two. You kept them on a tight rein and the arrangement that was operated, while technically deficient, worked out very satisfactorily in the end.

Chairman.—Did the VECs in Cork in 1986, and in Cork and Dublin in 1985, authorise this expenditure?

Mr. Brennan.—I cannot answer that now, but one would presume that they were informed.

Chairman.—Was the overdraft or the borrowing guaranteed by the Minister? Did the banks require any guarantees?

Mr. Brennan.—A special guarantee arrangement had to be implemented, certainly in the case of Dublin.

Mr. McDonnell.—There are one or two things I would like to say, Chairman. I have been listening to both the Department of Finance representative and the Accounting Officer. What Mr. McCaffrey says in regard to the example he gives, for instance, if the town of Bray had been left short £10,000 in its ESF grants and borrowed £10,000, and if all other VECs had done the same thing, that, strictly speaking, would be within the scope of the authority of the Minister to authorise that borrowing, though one would have to say that the more transparent way to deal with the problem, as you yourself said, would be by way of Supplementary Estimate because the normal practice in a situation where the receipts provide for in the Estimates are not being realised is to have a Supplementary Estimate. However, strictly speaking, if each individual VEC had borrowed the amounts of the shortfall it would have been within the scope of the legislation. What happened is that one or two VECs borrowed the sum of all those ten thousands or hundred thousands and then passed them to the Department and they went out to the VECs. Whether it was borrowing by the Department or a refund, I would like to quote you something from a departmental file in relation to 1986. It says:—

“Following a general discussion the representative of the Department of Finance requested the Department to arrange the raising of a loan in the sum of £10.6 million as a temporary offsetting against the non-receipt of ESF aid in the same sum in 1986. It was intimated that the above loan should be arranged via the VEC system”.

Apparently there was a VEC system of borrowing which had come into being. I would also like to make a more general comment. It has been said that the end result was the same, that it was a technical question and so on and so forth. I have been concerned for some time, not just in the Department of Education but generally, because I have a perception, that ad hoc administrative solutions to problems seem to be acceptable if they work, irrespective sometimes perhaps of the terms of legislation, and that if you can justify something on a pragmatic or practical basis — a solution which, as I say, may be pragmatic or practical but may not even have been envisaged when the legislation was enacted — it is all right as long as it works and you do not have to have too much regard to the terms of the legislation. That is a very dangerous practice. I have a perception that that kind of attitude is creeping in here and there. I would hope the Committee would agree that while solutions may be practical and pragmatic and they may work administratively, the fundamental principle that the terms of legislation should be observed is one to which there can be no liberal attitude taken. I am glad to have had the opportunity to say that.

Mr. Brennan.—I also welcome the opportunity to say that I stand for the fundamental principles. I did not intend to give any impression that I in any way condoned or sought to justify what was done, but I was simply explaining that it did not have any ill-effect. I am not saying that there should have been any departure from the fundamental principles. I should say also that there would have been no departure from fundamental principles — Supplementary Estimates were taken as indeed the Department of Education originally intended, or if the other device of allowing the VECs to raise moneys were adopted. Neither of these arrangements would have worked and either of them should have been adopted. I am not saying otherwise. The Department did originally put the case for a Supplementary Estimate. The Department of finance were not enthusiastic about that arrangement and they felt that the other arrangement of borrowing by individual VECs would be the appropriate one. It is possible if this happens again that we would both agree in the Department of Finance and the Department of Education that the supplementary estimate arrangement should be the one resorted to. I think it is accepted, however, that there is nothing irregular or illegal about having the borrowing arranged by individual VECs to meet their own needs.

Chairman.—What would concern the Committee is if any ad hoc malpractices are creeping in anywhere they should creep back out, please, because we do not want a repetition of this. I do not think we need spend all morning at it but the Dáil is there to authorise expenditure and I think the Committee would be dissatisfied with any ad hoc or poor procedures which would take away from the procedures which are laid down because that weakens parliamentary accountability and control.

Mr. Brennan.—I accept that totally and you may take it that this case sets a headline for the Department of Education at least, a headline for what is appropriate to be followed in future.

488. Deputy Desmond.—Very briefly, may I ask the Secretary if there was an authorised level of deficit for each VEC established towards the end of 1986?

Mr. Brennan.—I am sorry, Deputy, I am not absolutely clear about what you are after. I am sure you understand that there is a financial scheme approved each year for each VEC. The limit of the grants available to them is defined in that scheme and it was to ensure that they were able to draw upon this scheme in full that the borrowing arrangement resorted to in this instance was adopted. I am not sure I understood your question.

Deputy Desmond.—When provision for the draw-down is exhausted, does a VEC as a matter of normal accounting practice at local level seek an overdraft from its bank accommodation?

Mr. Brennan.—They would if they were absolutely convinced that they needed the funds to carry out their normal responsibilities. They would have to prove that point to the Department of Education. They would not be allowed to run away and resort to borrowing or overdraft facilities on their own without the approval of the Department.

Deputy Desmond.—Could I impose on the Secretary and ask him, through the Chair, for a note as to the level of deficit incurred by each VEC at year end or on 1 January 1987?

Mr. Brennan.—Yes, certainly we will give you the note. We will give you what is available to us at the moment. The final position in that regard is not known until the accounts are audited, but we will certainly supply a note and explain ourselves.*

489.Chairman.—I think we have heard the comments of yourself, the Department of Finance and the Comptroller and Auditor General. I think you will note that the Committee is dissatisfied with this practice. We will just express that dissatisfaction and move on to the next item. Paragraph 36 of the Report of the Comptroller and Auditor General states:

Subhead D.1. — Comprehensive and Community Schools — Running Costs

The full running costs of the 59 Comprehensive and Community Schools are met by the Department. The schools receive quarterly advances to meet their net expenses based on agreed annual budgets. The schools are required to furnish monthly statements of receipts and payments to the Department. Following examination of these statements the Department disallows expenditure which is not in accordance with the approved budgets and enters the allowable expenditure in the ledger record which it maintains for each school.

It was noted that due to errors and delays by the Department in recording receipts and payments by the schools the accumulated deficits of four schools at 31 December 1985 were overstated to the extent of £47,423 by comparison with the school records and, as a result, overpayments totalling this amount were included in special payments of £101,280 made to the schools concerned to clear their apparent deficits at that date. These payments were made without establishing from the school returns whether such deficits had been incurred and if so whether the expenditure in question was authorised.

It was also noted that according to their monthly statements to 31 December 1986, 40 schools had incurred deficits totalling £312,137 at that date and had exceeded their authorised budgets by that amount which they appeared to be financing by way of bank overdraft.

I have asked the Accounting Officer why up to date reconciliations between the school statements and the Departmental records are not carried out and how it is proposed to recover the £47,423 overpaid. I have also asked him what authority the schools have to incur deficits and obtain bank overdraft facilities, how the deficits amounting to £312,137 at 31 December 1986 were cleared and what was the amount of bank interest charged to this subhead in the year.

Mr. McDonnell.—What I was concerned with in this paragraph was that the Department's internal control procedures relating to the processing of information received from Community and Comprehensive schools and the Department's monitoring of the schools' expenditure were somewhat deficient with the result that schools received special payments to clear their year-end deficits. In making these additional payments to clear their year-end deficits. In making these additional payments some schools were, in fact, paid more than the amount which they indicated they needed. You will also see that a number of schools were apparently incurring expenditure outside the limits of their approved budgets and were financing them by expensive bank borrowings. Since the date of my report the Accounting Officer has told me that arrangements were being made to improve the procedures for processing the information received from the schools. In regard to the amounts which were acknowledged to have been over-issued in March 1986, he said, in fact, that some of this was spent on legitimate schoool needs which would have had to be met later in any event and to the extent that it was not spent in that way the later advances to the schools were adjusted. He also told me that it has been repeatedly impressed on school boards of management that it is not permissible in any circumstances to undertake expenditure in excess of approved allocations and they have no authority to finance such over-expenditure by way of overdraft. I mentioned a figure of £312,000 in the paragraph. With regard to that he told me in October 1987 that the overdraft interest for 1986 on those unauthorised bank overdrafts was just under £20,000. At that stage the Department was engaged in balancing the individual schools accounts for 1986 — that was in October, 1987 — and they would seek explanations from the boards as to why they had incurred unauthorised expenditure. He said that if the Department was satisfied that the expenditure which was in excess of the allocation and which was financed by the overdraft was justified the amounts, of course, would be charged to the Vote in 1987. Interestingly he has not indicated what action will be taken if the Department is not satisfied that the expenditure was authorised. I do not know if the exercise has been completed.

Mr. Brennan.—I can confirm generally what the Comptroller and Auditor General has just said in regard to the procedures for keeping a check on the running costs of community and comprehensive schools. It is evident to me that they could be improved and a draft revised procedure, currently under review at a senior level, has been prepared. I hope it will offer a way out of any problems we have here. I could read at length the document we have sent recently.

Chairman.—Please do not. Can we take it that this situation has been tightened up?

Mr. Brennan.—That position has not been finally determined. As the Comptroller and Auditor General says — the Department are currently engaged in balancing the 1986 accounts of the individual schools. When this has been done explanations of any over-expenditure will be sought from the boards of management, if necessary. If, as we would hope, we can be satisfied that the additional expenditure was justified the amount will be charged to the Vote in connection with the 1987 allocation. It has to be admitted that there is a problem in that it is by no means clear what powers we have to deal with the situation, where we are not so satisfied. To resort, say, to the power of restricting the grant below what we see as being necessary to ensure that the schools can operate effectively does not really make sense. In general, we have no reason to believe that expenditure was incurred even in the cases that have been taken up by the Comptroller and Auditor General which was not proper to be incurred and was not proper to be approved. We have a problem with overdrafts and borrowings. We lay down the law. As the Comptroller and Auditor General said, it has been repeatedly impressed that it is not permissible in any circumstances to undertake expenditure in excess of the approved allocation, nor have boards of management any authority to fund such deficits by way of overdrafts. We do not, however, have the absolute detailed control over boards of management that would enable us to take action if they do resort to overdrafts. In effect, we tell them they must not do it but we acknowledge their capacity, at least, to do it by taking account of what they raise by way of overdraft and refunding the amounts in question where we are satisfied that the amounts have been legitimately expended for the purposes of the schools.

Mr. Brennan.—I raised that question only a short while before I came here this morning. It is something that we will have to consider in terms of the new procedures. At the moment there is an imprest arrangement for funding the operations of the schools. Under the new procedure that has been advocated, if it is considered likely to be a success, we will move to a grant system. I asked that same question, whether under the grants system we would have any greater control over their raising overdrafts than we have under the imprest system. The answer is that we do not. We can, as the parish priest would, exhort boards of management to stick to the rules. if they break the rules, we do not have that control over them. Hopefully, boards of management, which are composed of very responsible people, will never depart from the principle that the money they expend is intended solely for the purpose of the school and solely for purposes which are approved of by the Department.

Chairman.—I really think that what we might hope for is one thing, but there should be conditions laid down. Surely it is possible to advise the banks that a certain level of overdraft can only be——

Mr. Brennan.—Yes, that possibility was raised with me. That is something that could be resorted to. It is a very extreme measure. You would need to have pretty serious grounds for resorting to that. It is an aspect of the case that will have to be fitted within whatever revised procedures are adopted and I hope that these revised procedures will be in place before I will be speaking to you again.

490.Deputy Naughten.—First of all, I am rather surprised that the over-expenditure in 1986 has not been sorted out yet. I find it difficult to understand why it is dragging on for so long. I was absoloutely amazed to hear the Accounting Officer say that he was not quite sure what controls he had or what could be done with schools that had an over-expenditure. Surely in the terms of reference setting up those schools the Department of Education should have provided adequate safeguards against over-expenditure and over-borrowing.

Mr. Brennan.—I would say in reply, what are adequate safeguards? We have laid down the rule that they may not incur deficits, they may not borrow, they may not incur excesses, they must approach us for approval. But as their operations go on throughout the year they may reach the stage where they find it absolutely necessary to incur some extra expenditure. Unless we adopt some such device, as the Chairman has mentioned, of drawing the attention of banks to the fact that overdrafts are not condoned by the Department and that they will not be covered by the Department, it is difficult to see what else you can do. I am not responsible for the terms and conditions under which boards of management were set up, but I have seen from the file that boards of management are, as was intended under the legislation, very independent bodies, that the power to remove members of boards of management, or to take action against them, is very limited, unless it is clear that they are in a state of transgression. The best I can say is that we would hope, within the revised procedures to make assurance as sure as can possibly be that we will have controls which the boards of management will see have to be recognised by them and must be upheld by them.

Chairman.—It is a matter of concern to the Dáil if anybody thinks they can spend taxpayers' money without accounting to the Dáil for it. That is the essence of what we are dealing with here.

491.Deputy McGahon.—Is it not a fact that there is a tacit acceptance by the Department to allow VECs to exceed their limit? Surely the fact that 40 schools have incurred deficits indicates that there is a tacit acceptance by your Department that VECs can exceed their limits.

Mr. Brennan.—Well, it is difficult to answer that directly. The Department have been successful in bringing the deficits — of the boards of management of community, comprehensive schools down over the years — while I would not seek to understate or underrate the significance of the figure involved. It applies, as I gather, from the query, to some 40 schools having deficits amounting to £300,000.

Mr. Brennan.—It is a relatively small figure over that great number of schools. We would be determined to reduce it to nil. Under our new procedures we will be trying to do that. There are two factors involved. One is the overall question of maintaining our rules and ensuring that the boards of management comply with them in accordance with the principles stated by Deputy Naughten. The other is that we must recognise that, where we find that they have incurred excess expenditure of which we have to approve, we have to accept that the grants to that extent were inadequate in that particular year.

Deputy McGahon.—Does it suit the Department to have that system in operation?

Mr. Brennan.—I could answer that truthfully in two ways. I could say that it does not suit the Department to have their rules set aside. That is the main answer I would give.

Deputy McGahon.—But you do accept that there is a tacit acceptance that in many cases it does suit you.

Mr. Brennan.—I could not say that. On occasion we have to recognise that the excess was justified, in fact in nearly all cases. If that is a tacit acceptance — I am not saying that it is——

492.Deputy Dempsey.—Unlike Deputy McGahon, I am a member of a VEC and I know that the Department keep a very strict control on the spending and over-expenditure and if members of a VEC indulge in any unauthorised expenditure they can be charged with the amount they over-spend. Is it not the same for members of the boards of management?

Mr. Brennan.—No, in fact I inquired about that again when I was looking through these papers recently. There is specific legislation for surcharging on the accounts of VECs. There is no such specific legislation in the case of boards of management. Maybe, as Deputy Naughten says, that should be considered.

Deputy Dempsey.—In other words, the public representatives elected to VECs publicly elected and so on can be surcharged and people who are appointed to boards of management of comprehensive or community schools cannot be surcharged at the moment?

Deputy Dempsey.—Would you agree then that comprehensive and community schools are in a privileged position vis-á-vis VECs in the education system if they can incur expenditure over and above what the Department had budgeted for them basically?

Mr. Brennan.—The situation is that they are in a different position, whether it is a privileged position or not I would not care to say. Their budgets are very tight and the fact that the Department has had to accept expenses in these cases as being justified suggests that the Department's controls are very, very strong over their financial arrangements. In practice they operate very effectively. This particular difficulty is something which under the new procedures we will have to try to iron out but I cannot declare that there is any intention on the part of Government to amend legislation in order to make people on boards of management subject to surcharge.

Chairman.—We would like to see them before you come back so, could you give us a time scale for supplying them to the Committee in advance? Would you have them next month?

Mr. Brennan.—No, I would not think so. While a draft procedure has been worked out, and I am satisfied that it is along the right lines, there has to be consultation with a great number of interests within the Department and with school management before it can finally be put in place. There are several months work involved. It could be three or four months before this would be finally resolved.

Chairman.—Can we say before the end of the summer you would be in a position to supply them to the committee?

493.Chairman.—OK, we will note that — as soon as possible because it is something we must tighten up on. Paragraph 37 of the Report of the Comptroller and Auditor General reads:—

Subhead L. — Appropriation in Aid

The VEC training programmes eligible for ESF aid referred to in paragraph 35 are planned in conjunction with Departmental inspectors whose estimates of the cost of the programmes form the basis of the applications for grant aid. The EEC Commission is informed initially of the estimated cost of each programme and a final composite claim for all programmes based on actual cost certified by each VEC is later submitted by the Department. The ESF grant is 55 per cent of the estimated cost or of the actual cost of each programme whichever is the lower and payments of 50 per cent (1983–84 — 60 per cent) of ESF grant aid are made to the Department by way of advances. Final claims must be submitted to the EEC Commission within prescribed time limits.

It was noted in the course of an examination of claims for grant aid on foot of which the Department of Education received final payments from the ESF in 1986 that two VECs had failed to furnish to the Department details of a total of nine programmes before the expiry of the time limit for the submission of the composite claim to the EEC. In six of these the Department included estimated costs of £3,561,505 in its composite claim, which they stated to be the actual costs (the actual costs were later shown to be £3,150,205) while three of them in which final costs were later shown to be £187,627 were omitted altogether from the final claims.

In the case of another VEC an estimated amount of £173,004 was included in a claim although details already received from the VEC showed the actual cost as £100,722; in some other cases course fees paid to VECs by the Department on behalf of certain students were added to the cost of the programmes in error and in some further cases details of actual costs certified by VECs appear to have been altered by the Department, with costs incurred by some whose costs exceeded their estimates being shown as having been incurred by others whose costs were less than their estimates, apparently for the purpose of irregularly maximising the claim for ESF assistance.

I have asked the Accounting Officer why claims were not received in time from some VECs resulting in a possible loss of ESF aid, why payments in respect of student fees were added to the costs of a claim and why some claims certified by VECs were altered by the Department.

I have also asked whether the EEC Commission is aware of the alterations to, omissions from and inclusion of estimated costs in the final claim for some programmes and whether it may seek recovery of amounts which are considered to have been incorrectly claimed.

Mr. McDonnell.—You will recall that the Committee has, in the past, been concerned about omissions from claims for ESF grants or delays in their submission to the European Commission. In this paragraph I have raised a number of questions relating to ESF grants for VEC training programmes. The questions which I have raised are stated at the end in the last seven or eight lines and they arise from actions by the Department and some of the VECs which are set out in the earlier part of the paragraph.

One of the things is failure by the VECs to furnish information before the expiry date. In regard to that, the Accounting Officer has told me that the returns of expenditure were required during a period of major expansion of ESF programmes and associated works for the VECs. Two VECs were mentioned and the two in question indicated that they were unable to submit their expenditure returns due to staff shortages. The position in one VEC was also exacerbated by a strike of staff during the period when the expenditure returns should have been prepared and subsequently apparently, extra staff were allocated on a temporary basis to VECs which were under this kind of pressure. In regard to the matters raised in respect of other VECs, that is to say the erroneous inclusion of tuition fees and the alteration of claims and the atttude of the EC Commission to this, he stated at that time that they were being examined in conjunction with the VECs concerned and with the Department of Labour and that he would provide me with a full response later.

I have just seen the response this morning. It arrived in my office yesterday and I have not had time to analyse it fully. It runs into seven or eight pages and three or four schedules. On a cursory examination it seems to me that there has been a significant loss of European Social Fund aid and indeed that loss, at a quick glance at the schedules supplied to me, involves a certain amount of netting of under claims and over claims, so to speak, and I would not be absolutely certain that the EC people would accept the netting the Department has done, but I would like more time to examine it. It also seems to me from the explanations given for what happened, that there seems to be a serious lack of accuracy in the formulation of claims and a serious lack of communication between the Department and the VECs in regard to the courses being run and the costs of the courses. There is also the question of delay in preparing the claims but there is a serious problem of accuracy in claims and communication about courses which are run and so on.

Chairman.—This reads very badly. We had a significant loss in ESF aid and, at the same time, it says here very clearly that your Department put in estimated costs of £3.5 million and the actual costs were £3.1 million. In regard to what the Comptroller and Auditor General calls action taken “apparently for the purpose of irregularly maximising the claim for ESF assistance”, would the word “fraudulently” not fit in there? What is going on here?

Mr. Brennan.—The full detailed reply, running into seven or eight pages with various schedules, that has now been supplied answers to these points in some detail. I apologise for the delay in furnishing the reply and in processing this case generally. I know it is of no real interest to you if I plead that the section concerned has been greatly understaffed. Its primary concern and my primary concern is that what has happened in the past does not happen again in the future. Our primary concern is to ensure that claims are properly presented, that returns are received on time and accurately from VECs and properly and accurately processed then to the European Social Fund. This is their primary responsibility but they also have a serious responsibility to satisfy the Comptroller and Auditor General and this Committee about the way in which they operate. The Comptroller and Auditor General said he had only time to give a cursory glance to the material in the reply. I believe that when he has a chance to read it and give it his full attention he will find at least that a good deal of disquiet that might have been felt when he made his original inquiry should now have been allayed.

Chairman.—Was there fraud involved? Did the Department fraudulently adjust these documents?

Mr. Brennan.—No, there is no fraud and I do not think there is any irregularity. The claims that are the subject of this report here have, in general, now been vetted by the EC, by the ESF people. They sent officials over here to consult with the Department: the Department of Labour was also involved in this because finally it is through the Department of Labour that claims are presented to ESF. In general, understandings have been reached and in particular, in regard to this business of compensating for over-estimation in some instances by reference to under-estimation in other instances, there has been no problem raised for the Department on that score. The ESF appear to accept the Department's contention that the way to look at this situation is to consider not the exact locations in which programmes are carried out but the overall scale of the programmes. The ESF approve programmes: they do not approve programmes for individual places. It is up to the Department, to the administration here, to decide where the programmes should be carried out and to satisfy themselves that the programmes are appropriate under the ESF guidelines.

Chairman.—Mr. Brennan, could you answer simply one question for me? Why did the Department include estimated costs of £3.5 million when the actual costs were £3.1 million and why did the Department alter some costs certified by VECs? Deputy Naughten on a point of order.

494.Deputy Naughten.—Fairly strong words have been used in discussing this paragraph, such as “fraudulent claims”. The Comptroller and Auditor General has stated that he received a document which he did not have time to go through. In fairness to this Committee, before we discuss this paragraph any further we should have a synopsis of that document and we should recall the Accounting Officer when the Comptroller and Auditor General has had an opportunity to go through that document and give a synopsis of it to the Committee. As I said fairly strong words have been used and it would appear that, for some reasons, there are some irregularities with regard to the amounts claimed and the amounts which should have been claimed. It is not fair to discuss this paragraph further without having the full facts before us.

Chairman.—I do think we should recall the Accounting Officer when we have read the document which he supplied to the Comptroller and Auditor General only yesterday, or get a synopsis of it but there are Deputies offering and I think we should tease it out here this morning first. The paragraph is very stark and very clear.

Deputy Dempsey.—If it is of any assistance to you I was going to propose the same thing. I formally second what Deputy Naughten has said because we have what the Comptroller and Auditor General said here. We do not have the Accounting Officer's reply and he is only going to be repeating bits and pieces from the old document. If we could get the whole thing together and recall the Accounting Officer it would be of assistance to everybody.

Mr. Brennan>.—Before Deputy Naughten raised his point of order you asked me a question about why the claims were over-estimated.

Chairman.—No, why they were altered after they were certified in the first place.

Mr. Brennan.—Well, firstly, the over-estimation. Simply, the estimates had to be prepared because we did not have the returns in good time. There was a deadline for making claims. In each of the cases concerned here that deadline had passed by the time the returns were in from the VECs. Therefore, there was no alternative to submitting estimates. I would suggest too, for your consideration, that we were in the early stages of this ESF operation. This was almost a pilot operation. I am not saying it was carried out on an experimental basis, but it was a new operation. It imposed great strains on VECs and these were reflected in the delays which took place, and it imposed great strains on the Department. From now on we will be in a position to build on the body of experience which has been built up within the Department and in VECs in the operation of these schemes. But it is simply the case is that the best possible estimates were made by reference to the courses that we knew to be ongoing, but without the returns having been furnished of the actual operation of the programmes by the individual VECs.

Chairman.—It says here that “costs certified by VECs appear to have been altered by the Department, with costs incurred by some whose costs exceeded their estimates, being shown as having been incurred by others whose costs were less than their estimates, apparently for the purpose of irregularly maximising the claim for ESF assistance”. There is a proposal that we should recall you on this. It has been put and seconded and I think we are going to have to do that when we have digested the comments of the Comptroller and Auditor General. I am going to have to put that proposal to the meeting.

Deputy Desmond.—On a matter of elaboration, could we have a note on the extent to which you have staffing to deal with those claims?

Deputy Dempsey.—I presume that is accepted. Could we also have a copy of the document that the schools and VECs have to fill out in order to claim this? I think this would be an eye-opener as well.

495.Deputy McGahon.—Could I just refer to the lateness of the claims, which indicate very loose management by the two VECs. Could I ask the Accounting Officer if there has ever been any instances in which late claims were disallowed and the entire grant was lost? Was there a danger in this case?

496.Deputy Naughten.—Are we going to discuss this matter? Either we are going to discuss it or we are going to defer it.

Chairman.—I have a proposal to defer it. I think we will have to accept that proposal until we have digested your note and we will have to recall you to discuss this further, if that is the view of the Committee.

Chairman.—We do no need to go into it any further. If that is the views of the Committee we can do that.

497.Deputy Desmond.—In regard to the more recent decision relating to vocational preparation and training and the decision effectively to abolish the £30 payment a month for some 14,000 young people, could I ask the Accounting Officer to give us a note on the effect of that now on your appropriations-in-aid for 1987 and, as this is an ongoing matter, how you see it? This is a matter of considerable concern to us.

Chairman.—We will be coming back to that paragraph. We will leave it for now. We will turn now to the details of the Votes.

VOTE 31—OFFICE OF THE MINISTER FOR EDUCATION

Mr. D. Brennan further examined.

498.Deputy Dempsey.—The expenditure on higher education was less than granted during the year. Was there any particular reason for that?

Mr. Brennan.—First of all, there is a difficulty of estimation, but what I have been told is that the number of applications from those people who qualified for grants was less than expected. The saving was due to there being a lower number of grant holders than expected.

499.Deputy Desmond.—Has there been any research done, on a statistical basis, on the £17 million spent on higher education grants as to the regional and socio-economic breakdown of the giving of those grants? Has any work been done on that on an ongoing basis, as to who benefits from higher education grants?

Mr. Brennan.—I am afraid what I have here only deals with the grants to the universities and the actual grants payable per student. There has been a great deal of public discussion about this. There have been seminars and people have been reported as being critical of the allocation of grants over different parts of the country, as between what might be termed privileged areas and under-privileged areas. I do not know if these conclusions are well founded. The basis for the grants has to be the possession of the requisite qualifications and a means test. We have to operate in accordance with the system laid down but I am not really in a position to answer the question very fully.

Deputy Desmond.—Within the Department of Education you have your own statistics branch, as such and ——

Mr. Brennan.—I would not mind giving you a note on the size of that branch. That is a very small branch, too. Perhaps Finance would give us a few more——

Deputy Desmond.—I would give you all my sympathy on that. Is there any breakdown produced for Government or for the Department of Finance in regard to who precisely are benefiting from those — Dublin, the self-employed, PAYE, the farmers. All the forms are available. Each form is available at local level. I know it would require a lot of manpower analysis and a lot of time, but we have a higher education branch system and I am very curious as to who is benefiting from this £17 million.

Mr. Brennan.—I noted a recent reply to a Parliamentary Question by the Minister where she indicated that she, too, was concerned about the disposition — she used that expression — of these grants. The people who benefit from these grants are known. The scheme is administered by the local authorities so it is not being done within the Department at present and to get it done would pose problems for us with the resources available to us. It is something that it should be certainly possible to do. I mentioned the Minister's concern about the issue and, to follow up on that concern, we would need to know exactly where the grants are going and to whom they are going to be paid.

Mr. McCaffrey.—We do not have the raw data to process this. It is with the local authorities and it goes into the Department of Education.

Deputy Desmond.—Admittedly it is a policy matter but in terms of fundamental education information being available, this committee should recommend that the Department of Education should get the resources to do this type of research.

VOTE 32 — PRIMARY EDUCATION

Mr. D. Brennan called.

VOTE 33 — POST PRIMARY EDUCATION

Mr. D. Brennan further examined.

500.Deputy Dempsey.—Perhaps it is appropriate at this stage in relation to the staffing for vocational education committees, would I be right in saying that the Department of Finance now make the decision on staffing levels or replacement of staff in VECs and other educational establishments?

Mr. Brennan.—That Department give general guidelines and directives to individual Departments. They have the support of the Government for these guidelines and directives so we have to be loyal to them too and it is for us to implement them. We are responsible departmentally for the implementation of these directives in regard to all agencies operating in the educational area.

Deputy Dempsey.—Could I then direct the question to the Department of Finance? When they get a request through the Department of Education from a VEC, for example, do they go solely on economic and financial grounds or do they take educational grounds into consideration in deciding on particular applications?

Mr. McCaffrey.—We obviously try to take everything into account, all relevant considerations including educational ones. Otherwise, you would get lopsided decisions. Obviously from our point of view and that of the Minister, financial considerations are uppermost but other factors, of course, are taken into account.

Deputy Dempsey.—It seems very strange. We talked earlier on about VECs and control and getting returns back in. In the VEC with which I am familiar in County Meath they have been left with practically a skeleton staff, three members of staff, the CEO, a senior clerical assistant and one other. They are administering a scheme with eight schools and they are expected to keep tight controls on expenditure etc. The rigid stance being adopted by the Department of Finance in relation to staffing — certainly in the case of Meath; I cannot speak for any other VEC but other Deputies may — is actually counter-productive in that you will end up having more problems created by adopting this kind of an approach. Again in the area of adult education — other Deputies may have this situation also — we lost our adult education officer. We had an excellant adult education scheme going and over the next two to three years that is going to collapse simply because we cannot get approval for an adult education officer. It does not make educational sense to me: it may make financial sense to the Department of Finance. Is there not a case — maybe I am not addressing it to the right person — for a little bit more flexibility particularly in the area of education? We have another situation where the Department have spent £2 million or £3 million in providing a VEC school in the county but there is no caretaker and the school will not be able to open. That, as far as I am concerned, is carrying everything too far. It does not seen logical. Is there any way in which the Department of Finance and the Department of Education can loosen these stringencies and apply more practical rules?

Mr. McCaffrey.—Obviously, there is no possibility with the sort of staffing we have that we would get involved in individual cases of a caretaker in an individual school. We try to avoid it to the maximum extent possible. We are all experiencing the sort of problems you referred to. It is not only VECs. The Civil Service have the same sort of problems. In relation to education, nearly one-fifth of the public sector are employed in the education sector. There are 54,000 people employed in the education sector. We try to stay out of individual cases and the effective deployment of 54,000 people throughout the whole system is a matter which we try to deal with at that level rather than get involved at micro-level or in individual cases. The Department is a huge employer. We accept that they have got severe problems in trying to redeploy from one sector of the Education system to another and so on. There are severe problems attaching to that. But that is the context within which the Deputy's problem would be solved. There is no way in which every individual problem can be dealt with by the Department of Finance. As individuals, we would all be bogged down with paper in no time if we were to do that.

502.Chairman.—Any questions on Subheads H2 to L? If not, we will note that and pass on to Vote 34.

VOTE 34—SPECIAL SCHOOLS

Mr. Brennan called.

VOTE 35—HIGHER EDUCATION

Mr. Brennan further examined.

502.Deputy Desmond.—May I ask the Accounting Officer what is the current position regarding Carysfort, particularly the capital expenditure of the State in the premises so far and is there any prospect of further usage of that complex?

Mr. Brennan.—The current position is that use of the college as a teacher training college ceases as from 30 June. I am not in a position here before the Committee to go into details of the arrangement that may be made — it is certainly a case of “may” rather than “will” because it is by no means definite at this time — for the use of the campus. It would be the earnest wish of the Department that these facilities which were provided, largely at State expense, for educational purposes should continue to be available for educational purposes. I hope the Deputy can bear with me. I am not really able to go beyond that. The matter is at what is termed a very delicate stage.

Deputy Desmond.—Do you think the authorities in Carysfort will bear with you?

APPROPRIATION ACCOUNTS 1986

FINANCE GROUP OF VOTES

Mr. S. Cromien called and examined.

503.Chairman.—Good morning. The Committee of Public Accounts is this morning examining Mr. Sean Cromien, Secretary of the Department of Finance, in his capacity as Accounting Officer for that Department. I understand Mr. Peter Keeley, former principal of the office of the Farm Tax Commissioner and currently accountant at the Department of Finance, will be here at a later stage. Can we go straight into paragraphs Nos. 2 to 8. We have already dealt with No. 3 by way of a special report and the remaining items are more or less for noting. Paragraphs 2 to 8 of the Report of the Comptroller and Auditor General reads:—

Outturn of the Year

2.The audited accounts are summarised on pages lx and lxi. The amount to be surrendered as shown in the summary is £56,124,426 arrived at as follows:—

This represents 0.85 per cent of the supply grants as compared with 2.07 per cent in 1985.

Excess Vote

3.An excess vote will be required in the case of Vote 30 — Environment. While there was a saving of £643,491 on the gross provision made by the Oireachtas there was a shortfall of £15,790,850 in appropriations in aid realised resulting in a net excess of £15,147,359. (See also paragraph 31 of this Report).

Exchequer Extra Receipts

4.Extra receipts payable to the Exchequer, as recorded in the Appropriation Accounts, amounted to £55,187,535.

Surrender of Balances of 1985 Votes

5.The balances due to be surrendered out of votes for the public services for the year ended 31 December 1985 amounted to £127,381,701. I hereby certify that these balances have been duly surrendered.

Stock and Store Accounts

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

7.Statement of Receipts into the Central Fund in the Year ended 31 December, 1986.

Money Raised by Creation of Debt:—
Ways and Means Advances	6,440,121,521
Exchequer Bills	1,200,263,781
Prize Bonds	7,500,000
Saving Certificates	191,564,000
National Instalment Savings	28,329,822
Savings Bonds	135,399,000
Tax Reserve Certificates	23,880
7¾% Capital Stock 1997	53,580,000
8% Capital Loan 2001	44,925,000
8½% Capital Stock 2010	93,350,000
8¼% Capital Stock 2008	7,175,000
7¼% Capital Stock 1988	46,525,000
7½% Capital Stock 1999	6,580,000
7% Capital Stock 1994	7,135,000
8¾ Capital Stock 2012	6,885,000
Dutch Guilder 100m 7¾% Public Bond Issue 1992–96	29,083,261
Swiss Franc 100m Loan due January 1995	38,801,800
6⅞% DM 200m Public Bond Issue due November 1995	65,429,143
5.97% Swiss Franc 70m Fixed Rate Loan due November 1995	27,132,835
DM 100m Fixed Rate Loan due January 1996	32,724,655
8⅞% ECU 50m Public Bond Issue due October 1995	35,620,147
$300m Floating Rate Notes due November 2000	80,098,824
Yen 10 Bn. Fixed Rate Loan due October 1995	40,749,796
6.7% Yen 20 Bn. Public Bond Issue due February 1996	82,850,042
6⅞% DM 150m Private Placement due February 1996	49,532,741
5¼% Swiss Franc 150m Public Bond Issue due February 1996	59,408,293
9⅜% $150m Public Bond Issue due February 1996	109,963,437
5.75% DM 300m Public Bond Issue due May 1996	97,952,353
7.125% ECU 100m Public Bond Issue due May 1996	71,024,735
$300m Floating Rate Notes due June 1998	216,606,498
6½% Dutch Guilder 200m Public Bond Issue due June 1996	58,455,361
DM 750m Floating Rate Notes due July 1998	252,567,772
5⅛% Swiss Franc 150m Public Bond Issue due September 1994	66,674,112
$500m Floating Rate Notes due September 1998	220,732,604
6.2% Yen 20 Bn Public Bond Issue due November 1998	66,023,114
Other Borrowings	3,248,643,284
	13,219,431,811
Total Receipts	£20,156,129,582

8.Statement of Issues from the Central Fund in the year ended 31 December, 1986.

Mr. McDonnell.—No, Chairman. Paragraphs 2 to 8 are what might be called standard paragraphs for the information of the Committee by way of introduction to my report. I have nothing to add to them.

504.Chairman.—I think we can note those. Any comments? Paragraph 9 of the Report of the Comptroller and Auditor General reads:—

Irish Shipping Limited

Construction and Sale of Irish Spruce

I referred in paragraph 10 of my 1984 Report to the liquidation of Irish Shipping Limited (ISL) and to the expenditure met from the Central Fund and from voted moneys up to 31 December 1984 in respect of theIrish Spruce constructed for ISL by Verolme Cork Dockyards Ltd. as provided by Government decision of June 1980. The vessel was delivered to ISL in August 1983. The expenditure comprised:—

(1)payments made before the liquidation of ISL in respect of the direct subvention of the construction costs of the vessel and the State's agreed share of the half-yearly leasing charges, and

(a)to Orient Leasing Ltd., the leaders of the Japanese syndicate which financed the construction costs of the vessel under a sale and lease back arrangement with ISL whose obligations under this arrangement were fully guaranteed by the Minister for Finance,

(b)in respect of the essential care and maintenance necessary to preserve the vessel which would become the property of the Minister on his discharging his full liability under the guarantee.

Following a Government decision in August 1985 the vessel which had been detained at Marseilles was sold through the French Courts in June 1986 for French Francs 33,350,000 (approximately £3.6 million). The proceeds of sale were paid into the Exchequer in 1986.

The total costs incurred by the State in connection with the construction and disposal of the Irish Spruce can be summarised as follows:—

	£	£
1.Payments made prior to liquidation:—
(a)Direct payments made to Verolme Cork Dockyard:—
Shipbuilding subsidy and cost overrun	2,684,865
Delivery Incentives	1,625,000
Payment of shortfall at the date of appointment of liquidator to Verolme, between its current assets and current liabilities attributed to Irish Spruce contacts	143,383	4,453,248
(b)State's agreed share of first three half-yearly instalments of leasing charges		4,409,540
		8,862,788
2.Payments made following liquidation:—
(a)Issues from Central Fund under guarantees (Irish Shipping Ltd. Act, 1982)
—Stipulated loss value of charterhire contract	42,956,882
—Accrued interest from 11 July 1984 to 1 July 1986	8,872,506	51,829,388
(b)Payments from Vote for Communications in respect of cost of maintaining the Irish Spruce until eventual sale at court auction and costs related to disposal	3,032,585
Less refunds	143,118	2,889,467^*
		63,581,643
3.Proceeds of Sale		3,623,650
Net Cost		59,957,993

^*£100,000 of this amount is currently held by the liquidator to meet contingent liabilities in respect of the Irish Spruce.

Mr. McDonnell.—You will recall that I have referred in some previous reports to the various costs connected with the construction, care and maintenance and the eventual disposal of the Irish Spruce. In this paragraph I summarise the total costs involved. As you see from the paragraph, these amounted to almost £60 million, which was, I think, the single most significant item in the overall costs which fell on the State following the liquidation of Irish Shipping. It deals exclusively with the Irish Spruce.

Chairman.—There are no further assets to be realised and no further income to the State to reduce that?

Mr. Cromien.—There is still £100,000 held as a reserve against certain contingencies.

Chairman.—I see that in the footnote. But still the cost would be more or less £60 million, give or take a very small amount of money comparatively?

Chairman.—Are you happy that the State's resources were properly managed in this case?

Mr. Cromien.—The reason for the very substantial cost of this vessel was, first of all, because of the construction cost. It was built at Verolme at a cost which was more than twice the world price. I understand this was to support employment at Verolme. That was one significant factor in the cost. The second was that the lease under which the ship was held by Irish Shipping was denominated in Japanese yen, as was appropriate for the arrangement. Over the period the Japanese yen appreciated by about 40 per cent. A further factor was that the liquidation of Irish Shipping itself meant that Irish Shipping's 25 per cent share of the lease cost had to be borne by the Exchequer under the leasing arrangement. These are the costs on one side of the account. When eventually the ship was sold it was at a time when the market for this type of bulk carrier was poor. This is the explanation of the substantial amount lost to the State.

Chairman.—There is a figure of £42.9 million for stipulated loss value of charter hire contract. Will you explain that?

Mr. Cromien.—Yes. The charter agreement provided for the payment of a specified amount, which was known as the stipulated loss value, in the event of termination of the agreement at any time before its normal expiry of 15 years. The agreement provided a schedule of payments which would have compensated the owners of the vessel, indeed the providers of finance for the vessel, for their investment over the period. They would have expected that over the period they would have received a certain sum. The contract provided that if this agreement were terminated, as it was by the collapse of Irish Shipping, this sum would still be provided under this arrangement, which is common in this type of contract.

Chairman.—Would it be fair to say that this contract was entered into at a time when the costs of such charter hire were about to decrease dramatically and the State got itself involved in a contract hire at a very high rate?

Mr. Cromien.—At the same time the arrangement was based on rates of interest which were competitive. It could not have been forseen that these rates would change. It is very difficult to predict international rates of interest.

Chairman.—But they dived dramatically very shortly afterwards. Is that true?

Mr. Cromien.—We are talking now about the cost of the charter hire arrangement, not about the arrangements in respect of Irish Shipping itself. There were substantial losses in Irish Shipping because of the contracts entered into by Irish Shipping, but that is really a different matter.

Chairman.—What then was the main reason for not going ahead and fulfilling the contract?

Mr. Cromien.—The immediate cost in this case arose because of the collapse of Irish Shipping. The basic reason for that was a decision by the State. If Irish Shipping had continued in existence, the cost would have been phenomenally large to the Exchequer. A total of £220 million would have been the cost. Instead, the State decided it could no longer continue to support it. The reason for that loss was that Irish Shipping had entered into charter agreements.

Mr. Cromien.—That is what triggered off the liquidation of Irish Shipping and that, in turn, then triggered off the payment of this specified amount known as the stipulated loss value.

Chairman.—You say that if Irish Shipping had not been liquidated it would have cost the State £220 million. What was the final cost, given that the liquidation went ahead?

Mr. Cromien.—It was £50.6 million of expenditure as a result of the liquidation specifically.

505.Deputy Crotty.—The Accounting Officer mentioned that the construction was financed in Japanese yen. Would it have been reasonable to anticipate the appreciation of the Japanese yen? Should we have expected that this finance should have been provided through Irish currency? Would it be reasonable to expect that?

Mr. Cromien.—This was an arrangement with a group of Japanese bankers and they were concerned, naturally, to protect the finance that they were providing for this purpose. It was a reasonable arrangement with a relatively low rate of interest. If other currencies had been used the rate of interest would have been much higher. But, as in any type of State borrowing, you trade off a lower rate of interest against a strong currency and you take the chance of the stronger currency appreciating. The size of the increase of 42 per cent over a three-year period was totally unexpected. It arose because of the weakness of the American dollar and it was crammed into an exceptionally short period.

506.Chairman.—There is just one question. The £50.6 million you mentioned, is that in addition to this £59 million loss on the Irish Spruce?

Mr. Cromien.—No. They are two different figures. The cost of the Irish Spruce would have taken place anyway, if the agreement had continued to go ahead, with the exception of one amount which was £12.9 million. With the collapse of Irish Shipping, the Exchequer took over 25 per cent of the lease cost which had been attributed to Irish Shipping. The other 75 per cent was to be met anyway from the Exchequer. It is an additional element as a result. The £50.6 million that I am referring to was the cost resulting from the liquidation of Irish Shipping, not the cost of continuing to run Irish Shipping over the period.

Chairman.—But you would have had a ship and an asset which could be used to generate funds to pay the cost?

Mr. Cromien.—That was the commercial transaction that was involved but, as we say, the actual asset only realised £3.6 million when it was sold in 1986.

507.Chairman.—We have been down this lane a number of times and I do not think there is much point in going over old ground again this morning. I propose we note this paragraph and move on. Paragraph 10 of the Report of the Comptroller and Auditor General reads:—

Post Office Savings Bank

I referred in paragraph 8 of my previous Report to the arrangement which I had made with the auditors of An Post under which my audit of the Post Office Savings Bank (POSB) transactions of An Post for 1984 and 1985 was being carried out on the basis of a limited test check of transactions and a review of the results of an internal audit of POSB transactions for the two years by An Post's internal auditor with the assistance and advice of the company's auditor. My audit has since been completed with satisfactory results. The accounts of the POSB for 1986 were furnished to me for audit in July of this year.

The results of the operations of the POSB for 1985 and 1984 are shown in the following statement:—

		1985		1984
	£m	£m	£m	£m
Deduct—
Interested paid and credited to depositors	81.9		73.3
Management Expenses	6.6	88.5	5.6	78.9
		7.1		(5.7)
Net capital gain on the sale of securities		27.7		3.9
Surplus/(Deficit) at 31 December		34.8		(1.8)

The balance including interest due to depositors at 31 December 1985 was £870.4 million and at 31 December 1984 was £704.7 million including £482.7 million and £347.4 million, respectively, due to the Trustee Savings Banks. The estimated market value of securities held was £911.7 million at 31 December 1985 and £704.4 million at 31 December 1984.

Mr. McDonnell.—Paragraph 10 reports on my audit of the Post Office Savings Bank for the two years 1984 and 1985. It has a small table there which shows the results of the operations of the savings bank over the two years. You will recall, Chairman, that at a meeting in February of this year when you were dealing with my 1985 report I said that I was making arrangements to fulfill my statutory function to audit the accounts of the Post Office Savings Bank by having the auditors of An Post, which manages the savings bank, carry out the audit on my behalf and furnish me with information on the scope of their audit. That arrangement commenced with the accounts for the year ended December 1986 and, of course, the arrangement is subject to my retaining my right to undertake any further work which I might consider necessary. I expect that the auditors of An Post will be reporting to me shortly on their audit of the 1986 and 1987 accounts which they are undertaking on my behalf. It was the only practical arrangement, Chairman, to make a situation where An Post had auditors who were concerned with the transactions of the savings bank and I was the statutory auditor of the savings bank. I made this arrangement and I think the committee agreed with my action in that.

Chairman.—There is a dramatic increase in interest due to depositors there. Presumably a very dramatic increase in deposits is the main contributing factor there, Mr. Cromien?

508.Chairman.—Paragraph 11 of the Report of the Comptroller and Auditor General reads:—

VOTE 7—OFFICE OF THE MINISTER FOR FINANCE

Mr. Cromien further examined.

Subhead B.2. — Office Machinery and other Officer Supplies

Article 11 of the Constitution provides that all revenues of the State from whatever source arising shall, subject to such exception as may be provided by law, form one fund.

It was noted that during 1986 the proceeds of three loans totalling £98,890, negotiated by the Department of Finance with a Merchant Bank in order to finance the purchase of computer equipment for the Department, were not paid into the Exchequer. In two cases the amounts were credited to a suspense account from which the cost of the equipment was paid to the supplier and in the third case the amount of the loan was paid directly by the Bank to the supplier. The Appropriation Account does not, therefore, reflect the cost of this equipment. Two of the loans are repayable over five years and the third over three years.

As these loans appeared to have been arranged outside the normal Exchequer borrowing process, I asked what was the legal authority under which they were negotiated and utilised without being paid into the Exchequer. The Accounting Officer has informed me that the loans were negotiated under the powers to borrow for Exchequer purposes granted to the Minister for Finance by Section 54 of the 1970 Finance Act as amended and that the failure to bring the proceeds into the Exchequer was due to an oversight. He also informed me that steps were being taken within his Department to remind officers of the proper procedures to be followed in all such cases.

Mr. McDonnell.—In paragraph 11 I am referring to what I, in any event, saw as an annual arrangement whereby three loans totalling just under £100,000 were negotiated by the Department with a merchant bank in order to purchase computer equipment. The concerns which I had about this are set out there and you will see that the Accounting Officer has said that failure to pay the proceeds into the Exchequer was due to an oversight. To me that implied, I have to say, that the loans were part of some kind of a planned Exchequer borrowing programme and that somehow the intended payment into the Exchequer was overlooked. As far as I can see from the papers it never started out as an Exchequer borrowing exercise. As I saw it, it was initiated and executed in a section of the Department which I did not think had anything to do with Exchequer borrowing, as a means of financing equipment which that section needed but for which moneys were not available in the Estimate. I accept of course, Chairman, without reservation that it can be said that the Minister had power to negotiate these loans under section 54 of the 1970 Finance Act, though I would have to say that I had not visualised the power being used by sections of the Department in this way. While the amount involved is not by any means significant in the context of Exchequer borrowing, I did see the arrangement as some kind of an ad hoc administrative one designed to get over a difficulty, certainly without advertence to the requirements of the legislation or without complete advertence to the requirements of the legislation. The amounts were subsequently transferred to the Exchequer and, in fact, they were repaid almost immediately to the merchant bank but it was an unusual ad hoc arrangement as I saw it.

Mr. Cromien.—No. I would like to explain the background to this. Up to 1983 most purchases of computer equipment were financed by means of leases. In 1983 it was decided that if the cost of the tax element of leasing were taken into account the costs of making this arrangement by way of leasing were more expensive than direct borrowing. The finance companies were using the tax arrangements in relation to leasing to reduce their taxable liability. So, from 1983 the policy was changed to one of direct borrowing. In 1985 in the Department of Finance it became necessary to replace the Department's word processing system. The old system had been financed by leasing and it was decided in acquiring new equipment to look for loans from a number of banks and leasing companies. The banks and leasing companies produced loan agreements which they had devised for this operation. These agreements were incorrectly regarded by the person involved in this transaction as covered by the same arrangements as had covered the leasing. As the Comptroller and Auditor General has said, the payments were actually statutorily covered but the money borrowed by the Department of Finance should have been paid into the Exchequer and not, as the arrangement here was, given directly to the computer sale companies concerned. We are satisfied in the Department that the officer concerned acted in good faith. What he was concerned about was to do the job he was required to do in a commercial way. This would have been acceptable commercial practice but he did not realise that it did not fit in with the Civil Service accounting procedures. To prevent its recurrence, all Departments have been advised that all borrowings for Exchequer purposes may only be undertaken by the Minister for Finance and that under no circumstances should Departments enter into a loan agreement for the purchase of equipment. So we would hope that the position in that way has been regularised.

VOTE NO. 1—PRESIDENT'S ESTABLISHMENT

Mr. Cromien further called.

VOTE NO. 7—OFFICE OF THE MINISTER FOR FINANCE

Mr. Cromien further examined.

509.Deputy McGahon.—Grants for county development work — what exactly does that entail?

Mr. Cromien.—The costs cover the administration of the county developments teams, travelling, subsistence, salaries and the contributions to county councils towards the costs of providing facilities for team secretaries.

510.Deputy McGahon.—So there is involvement of the county councils in the spending of this?

Mr. Cromien.—That is right. The county development teams are chaired by the county manager.

VOTE NO. 11—STATE LABORATORY

Mr. Cromien further called.

VOTE NO. 12—SECRET SERVICE

Mr. Cromien further examined.

512.Chairman.—You increase the Vote every year on this and I note that you always return a sizeable surplus?

Mr. Cromien.—In fact, the figure varies from year to year. It has tended to be static for a period and then has increased somewhat. In 1986 it was £250,000. The previous year it had been £170,000. In 1987 it was £250,000, but in 1988 it is back to £150,000. This is just a rough estimate of what we think might be needed. The convention is to provide a margin in the Estimate so as to avoid having to introduce a Supplementary Estimate in the Dáil. It is better to make the provision in this way even though there is usually a substantial margin unspent.

Chairman.—It is not meant substantially to meet any salaries for the security services which are normally met by the Defence and Justice Votes.

VOTE NO. 15—MISCELLANEOUS EXPENSES

Mr. Cromien further examined.

Mr. Cromien.—In 1986, 52 were paid. It is very difficult to predict, because you cannot be sure that your estimate will be fulfilled.

514.Deputy McGahon.—Are Irish people living abroad paid on reaching a century?

Deputy McGahon.—Not particularly, I think I can answer it myself: they are not.

VOTE NO. 20—OFFICE OF THE MINISTER FOR THE PUBLIC SERVICE

Mr. Cromien further examined.

515.Chairman.—I want to raise with you here, Mr. Cromien, this note we got regarding the farm tax professional staff. You sent us in a detailed note on the matter. We also got a very brief note — it could not have been any more brief — from the Department of Agriculture and Food. What happened to the 91 staff who are on loan from the Department of Agriculture between June 1987 and January 1988?

Mr. Cromien.—The staff of the office from 1 July 1987 were placed on the payroll of the Department of Agriculture and have been in that Department ever since.

Mr. Cromien.—From 1 July 1987 they were placed on the payroll of the Department of Agriculture.

Chairman.—The Department of Agriculture in their note say: “87 of the 91 former land tax inspectors who had been assigned to the Farm Tax Office in 1985 returned to this Department in January 1988”. There is a conflict of evidence being given by that Department and your Department. Where were these people between 1 July 1987 and 1 January 1988? Where were they for the full six months?

Mr. Cromien.—My understanding is that the farm tax inspectors were paid from 1 July 1987 from the Department of Agriculture Vote and, therefore, would be the responsibility of the Department of Agriculture.

Chairman.—So when the Department of Agriculture say that they returned to their Department in January 1988, does that mean that they actually sat at home from 1 July 1987?

Mr. Cromien.—Well, all I know is that from 1 July 1987 they became the responsibility of the Accounting Officer in the Department of Agriculture. They may very well have been at home. I do not know that for certain.

Chairman.—Somebody should know. The Department of Agriculture say they did not go back to them until January 1988. It appears there were about 90 staff paid by the State who did nothing for six months except sit at home and watch television or whatever they did to fill in the six months. Nobody seems to know where they were. Your Department say they were with the Department of Agriculture. The Department of Agriculture say they were with the Department of Finance. It is very clear that the evidence conflicts, and there were approximately 90 well paid staff doing nothing for six months and nobody knows where they were.

Mr. Cromien.—Remember that what happened in this case was that the farm clasification office was abolished. The people allocated to the farm classification offices around the country were then available to the Department of Agriculture. The formal position is that they were on the Department of Agriculture books from 1 July. The Department of Agriculture are saying, equally formally, that they returned physically to the Department of Agriculture at the end of 1987. I think it is a question of semantics.

Chairman.—So, it cost £1 million and they did nothing for the whole six months and nobody will take responsibility for where they were for that six months. We have a running battle here to get one or two staff for this Committee to carry out all of its work. Somebody should come up with a clear, crisp explanation as to where this staff of 91 people were.

Chairman.—I am asking where they were deployed. Somebody should know where they were deployed. Where were these people for that six months?

Mr. Cromien.—My understanding is that they were in the offices in which they had been in as farm classification officers, physically, but they were the responsibility of the Department of Agriculture who had not got any work for them. It was a question of deciding what work they should do. I think it is explained on the first page of my note that different options were being considered.

Chairman.—In the offices they were in, who was their landlord? What Department owned the office?

Chairman.—Why then did the Department of Agriculture claim that they only physically returned to them on 1 January 1988? Can we take it that these people were actually at their desks with nothing to do or were they at home or did they report or does anybody know?

Mr. Cromien.—I understand in some cases they were at home and in others they were in their offices.

Chairman.—It is an appalling way to run the State. When the Committee of Public Accounts come to inquire about it from two senior officials of the State we get conflicting information. It is an appalling way of accounting for State spending. I am sure you would not accept that within your Department if somebody gave you this sort of report. It is not satisfactory at all. Somebody should come along here and explain the situation to us. We should not have to be dabbling around like the mayfly trying to see if we can raise a trout. These people were there and somebody should know what happened to them. It should be explained no matter how embarrassing it is.

Mr. Cromien.—The reality behind this was that with the closure of the farm classification office there was no work for these officers. The question then was what work should they be given. There were two ways of dealing with them. One was that the Department of Agriculture would provide work; they had come from the Department of Agriculture and were returned to the Department of Agriculture payroll. It was a matter for the Department of Agriculture to see whether there was work for them in that Department. The alternative was redeployment. My note explains the difficulties about redeployment. Redeployment would be the concern of the Department of Finance. We have been attempting to arrange this, not just in the case of the Farm Tax Office but in a much larger area, as you are aware. There were difficulties in redeploying officers of this nature who had qualifications and experience which were limited to the particular work that they had been on as Land Commission inspectors and also in the Farm Tax Office. That is the difficulty. There was a problem in finding suitable work for officers of this nature. That is only part of what is a wider problem of allocation of professional and technical staff.

Chairman.—Before I call Deputy McGahon, I want to say that it seems extraordinary, what you tell the committee, that is with effect from 1 July 1987 they were returned to the Department of Agriculture and the Department of Agriculture say clearly in their note that they did not go back to them until January 1988 and that nobody will take responsibility for these 91 officers and £1 million expenditure in the intervening six months period. That seems an extraordinary situation.

516.Deputy McGahon.—I would like to ask the Accounting Officer why were they taken on in the first place. If there was no work for them, is the State obliged to continue to pay them? Could they not be laid off, like people in the private sector? At a cost of £1 million to the Irish taxpayer, for people to stay at home sitting at the fire, is it any wonder we are going down the river in the wrong direction? Is this not a classic case of pampering of public servants?

Mr. Cromien.—Just in relation to the Deputy's first question, they were taken on because they were considered suitable for the farm classification work. That was work appropriate to them and they were doing that work and were fit to do that work but with the closure of the farm classification office as part of Government policy they then had no further work in that area. The choice was to return them to the Department of Agriculture where that Department attempted to see if there was work for them. In fact, as we explained in the note, they are now working in the Department of Agriculture in relation to the disposal of the Land Commission's land bank. So, there was work for them. In the intermediate period there was the question of what to do with them. The Deputy raises the question of terminating their employment. That was not immediately possible under the contract which as with all permanent civil servants is for service to ages 60 or 65. We felt obliged to seek other work for them. That is the difficulty. If they had been let go without our attempting redeployment it might have prejudiced our position if they sued the State for the balance of their contract.

Deputy McGahon.—In other words, their lack of activity cost the State £1 million and gave them in effect a six month holiday?

517.Deputy Crotty.—Could we have explained to us under what account the officers concerned were paid? Was it the account of the Department of Finance or of the Department of Agriculture? What account paid them for this period from July 1987 to January 1988?

Mr. Cromien.—For the period from July to date they were paid from the Vote for the Department of Agriculture.

Deputy Crotty.—In that situation I think we would have to request that the Accounting Officer of the Department of Agriculture would come back to us, because he is accountable. Could I ask in that time was there any request from the Department of Agriculture for staff for, say, disposal of Land Commission land? There is quite a vast amount of Land Commission land to be disposed of. We receive explanations that this did not happen or that did not happen on account of shortage of staff. Taking this into consideration, it seems a ridiculous situation that we have staff here and there is nothing for them to do.

Mr. Cromien.—There was no request from the Department of Agriculture for additional staff during that period.

Deputy Crotty.—Had there been any requests for additional staff before that period in the previous year or two years?

Mr. Cromien.—When the farm tax work was in full swing I think there had been a request from the Department of Agriculture for additional staff.

Deputy Crotty.—Had there been any request from the Land Commission for additional staff to deal with the land bank, which in some cases was in State hands for up to six, seven or eight years?

Deputy Crotty.—There is no point in pursuing the Land Commission. In my view, these people should have been delegated to handle the Land Commission land bank. It is certainly a reflection on the Public Service that people were under-employed or not employed at all for six months when there was substantial work to be undertaken. Would this be an issue for the Public Service Accounting Officer or would it be the Department of Agriculture?

Deputy Crotty.—I know that. I do not want to pursue it. It is the Department of Agriculture we should be pursuing.

Chairman.—We are caught between two Departments. The Department of Agriculture are due in on 23 June and perhaps we could defer further consideration of this until then. There will be somebody from the Department of Finance present at that meeting and we might try to have the matter reconciled then.

Deputy Crotty.—As a final question, could we have an explanation from the Public Service Accounting Officer as to whether he has sought any explanation from the Department of Agriculture as to why these people were not gainfully employed?

Mr. Cromien.—The Accounting Officer would be accountable himself for the deployment of his staff.

Deputy Crotty.—Is the Public Service Accounting Officer not responsible if there are staff — 91 staff — who were not employed at all? That must be a concern for the Public Service, surely?

Mr. Cromien.—It would be a concern but it would not be a responsibility, if I may put it like that.

Deputy Crotty.—I think it would be a responsibility. The Department of the Public Service are the people who allocated staff. There are requests in the Public Service for staffing. They allocate staff and, as such, I think it is the responsibility of the Public Service and they should have a reasonable explanation for this Committee. If they are not directly accountable, they should have the answer from the Accounting Officer who is accountable.

Mr. Cromien.—I would consider that a very great widening of the remit of the Accounting Officer of the Department of Finance.

Deputy Crotty.—No, it is the Public Service I am talking about, not the Department of Finance.

Mr. Cromien.—I am thinking of the Department of Finance as now embracing the Department of the Public Service.

Deputy Crotty.—It is their responsibility as such and we are entitled to a reasonable explanation of what action was taken. Obviously there was no action and they should explain to us why there was no action taken.

Deputy Crotty.—You explained, but why was action not taken? We, in this Committee, deserve to have explanation made to us.

518.Chairman.—Could I suggest that the best way to deal with this is to return to the matter on 23 June, when we will have the Secretary of the Department of Agriculture in. I wonder could yourself and the Secretary of the Department of Agriculture try to arrive at some reconciliation of your views by that stage so that the Committee may be in a position to dispose of this matter once and for all. I know he will be present and we will have the Department of Finance present on the same day. That is probably the best way to deal with it.

519.Deputy McGahon.—Could I ask Mr. Cromien how many people in the Public Service took career breaks that year?

Chairman.—We will come back to that question in just a moment. We just want to dispose of this matter.

520.Deputy Dempsey.—I just want to ask a question in relation to these 91 people we are talking about. Were they actually specially taken on for the Farm Classification Office?

Mr. Cromien.—No. These were Land Commission inspectors. They were recruited with conditions of service as Land Commission inspectors. They were taken in then to deal with the farm classification work and transferred back again to the Department of Agriculture.

Deputy Dempsey.—They were already permanent staff and the reason they could not be put back to Land Commission work was because there was no decision taken on the disposal of Land Commission land. Is that not basically the problem?

Chairman.—Right, we will return to that on 23 June. Could we have Deputy McGahon's question on the Public Service generally.

521.Deputy McGahon.—I would like to know how many people took career breaks and how many people took maternity breaks or paternity breaks?

Mr. Cromien.—In relation to career breaks, the figure was roughly 800 in that year.

Deputy McGahon.—Those 800 people, what would be the average span of their break?

Mr. Cromien.—At that time the limit was three years and most people took the break probably for a year. The three-year limit has now been extended to five.

Deputy McGahon.—Lovely. It is a wonderful profession to get into. I wonder how one gets in? Five years is wonderful. Have more people availed of that facility? Has that figure increased in the interim?

Deputy McGahon.—So, these people can go away, drop their jobs, come back and demand their jobs back on returning to the country? What happens when they are away? Who does their job?

Mr. Cromien.—Just taking the first part of the Deputy's question, they have to be given a job provided there is one available. They may have to wait for up to a year. Under the present system their job is not fillable so it is part of the retrenchment in the Public Service.

Deputy McGahon.—So basically, we could do without these people? There is no work for many of them?

Mr. Cromien.—A lot of them leave and do not come back. The career break, I suspect, is an insurance in their early period of taking on a new job. The arrangement is used at present to encourage staff to leave so as to reduce the numbers in the Public Service. There is a policy of reducing numbers in the public service at the moment and tightening up on work programmes. What it means in effect is, not that they were doing nothing, but that new work priorities have to be established. Work has to be dropped if they are not there to do it.

522.Chairman.—We will note the rest of the Vote for the Office of the Minister for the Public Service.

VOTE NO. 23—SUPERANNUATION AND RETIRED ALLOWANCES

Mr. Cromien further called.

VOTE NO. 51—INCREASES IN REMUNERATION AND PENSIONS

Mr. Cromien further called.

CONTINGENCY FUND DEPOSIT ACCOUNT

523.Chairman.—That brings us to the contingency Fund Deposit Account. It amounts to £20,000. You might explain what that is about, Mr. Cromien. I think we get this explanation every year.

Mr. Cromien.—This fund is available to defray urgent or unforeseen expenditure which is not covered by an ordinary Vote. It was not used in 1986. Essentially, in recent years it has been used to pay the salaries of new Ministers pending the passing of a Vote.

Chairman.—With a bit of luck, one of us might be drawing from that sometime in the future. Thank you, Mr. Cromien.

VOTE NO. 19—FARM CLASSIFICATION OFFICE

Mr. P. Keeley called and examined.

524.Chairman.—Good morning, Mr. Keeley. We are not going to delay you because we have gone through the whole question of the staff from the Farm Classification Office situation with the Secretary of the Department, but you are the Accounting Officer so we have to discharge your responsibility here this morning. On the question of the appropriations-in-aid, it was estimated that you would have £1,000, but you actually had £17,000. What were the Appropriations-in-Aid in that particular year?

Mr. Keeley.—The Appropriations-in-Aid were entirely in respect of fees submitted by persons assessed for farm tax who wished to appeal against the assessment. There were 249 who appealed; and for an appeal to be valid it had to have a fee of £70, which was prescribed by the Minister for Finance under the Act.

Chairman.—You paid out almost all the salaries under the Vote but only half the travelling expenses. I presume that this is because they were not travelling for half the year?

Mr. Keeley.—No. The reason for that was that 1986 was the first full year of the farm assessment exercise. It had started in the previous year but 1986 was the first full year. So, we were a little bit in the dark when we were preparing the Estimate. One factor which contributed to the reduction in travel was that we did not cover as much ground as we thought we would and this was mainly due to legal difficulties which arose in the interpretation of the Act, such as the definition of a “taxable farm”, “connected persons” and so on which actually slowed down the rate at which farms were assessed under the Act and it reduced the amount of travel.

525.Deputy Dempsey.—Could I ask Mr. Keeley in relation to the work done by the office, how much of the country was covered in the period that you were in operation? Have you any idea of the acreage?

Mr. Keeley.—Yes, I can give you that. At the end of 1986, 4.734 holdings had been assessed. These consisted of 1,376,000 statute acres which produced an adjusted acreage of 869,000. At the end of the entire exercise, which was 31 March 1987, 6,900 holdings had been assessed. These holdings comprised 1,767,000 statute acres, which produced 1,104,000 adjusted acres.

Deputy Dempsey.—What was your estimation of the total number of holdings that you would have had to cover over your period? Have you any estimate on that?

Mr. Keeley.—Yes. The office had a statutory life of five years, which meant up to 1990, and we had estimated that we would have covered 3.7 million adjusted acres by 1990. That would have been approximately 5 ½–6 million statute acres.

Deputy Dempsey.—I notice from a note here that you concentrated initially on certain areas. For example, you decided to ignore the west and the north — west at some stage. Was there a particular reason for that?

Mr. Keeley.—Yes. The way the Act operated was that the Minister prescribed a threshold acreage each year. This occurred only once. In 1986, there was a threshold of 150 adjusted acres prescribed and in order to cover as many holdings as possible within that category it was decided to concentrate on the eastern part of the country where the preponderance of those farms would be greater. There would be very few farms in that category in the west but there are some and those which could be identified were inspected and were on the classification lists published in September 1986.

Deputy Dempsey.—Could I just ask one final question in relation to this? Were there particular problems with farmers or with anybody you came in contact with in reaching your assessment of the adjusted acreage and were there many appeals? Did everybody appeal or what was the level of appeal? Did you have difficulties in obtaining access to the land and so on?

Mr. Keeley.—No. In general farmers did co-operate. There were very few people who actually refused admittance. The Act did provide for the commissioner to have a right of entry. There was a particular formula set out in the Act which he could have invoked at any time in order to get onto land where the owner was refusing permission. But, in fact, this never had to be used. It was always possible, after maybe discussion on a few occasions, to get onto the land. You asked about appeals, there were 260 appeals lodged to the farm tax commissioner. That is out of 2,140 holdings which were assessed. Of the people assessed, 260 appealed to the commissioner. He decided those appeals and I understand that about a dozen of those are appealing further to the farm tax tribunal.

Deputy Dempsey.—Have you any indication of the level of success of those appeals?

Mr. Keeley.—The only indication I have is in a note from the Department of the Environment stated that at least £50,000 of the amount collected in tax by local authorities was refunded on foot of appeals.

526.Chairman.—Was your parent Department the Department of Agriculture or the Department of Finance?

Chairman.—Thank you. Before we conclude the public session I would like to welcome Deputy Mary Harney, who was appointed a member of the committee this morning in place of Deputy Anne Colley who has been discharged as a member of the committee. You are very welcome, Deputy Harney. That concludes the public session.

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

VOTE ACCOUNT NO. 13 (1985) AND VOTE ACCOUNT NO. 14 (1986) — OFFICE OF THE ATTORNEY GENERAL

Mr. Matthew Russell called and examined.

527.Chairman.—The Committee of Public Accounts are examining Mr. Matthew Russell, Office of the Attorney General, the first accounting officer this morning. You are welcome Mr. Russell.

Chairman.—There are no paragraphs from the Comptroller and Auditor General, there are just the 1985 and 1986 Votes. May I ask you about the question of fees to counsel? I note that in 1985 the expenditure which was under the grant was only £393,526 whereas in the following year, 1986, you overspent in that area. The expenditure was £602,425. That is a lot of money. Why was there such an increase from 1985 to 1986 in the fees to counsel?

Mr. Russell.—In 1986 there was a number of large cases, cases of great importance to the State, which necessitated the employment of counsel over a number of days in court and, in addition, of course, in that year we were paying counsel for work done in 1985 in a number of large cases. The amount of fees paid to counsel depends upon both the number of cases and the magnitude of the cases, the difficulty of them and the length of them, and it is not possible ever to know with precision how many large cases — or indeed how many small cases — will arise in the forthcoming year because that depends on the number of people, members of the public generally, who consider that they have been damaged in person or in property by the State or its servants and who choose to initiate litigation against the State. The vast bulk of the litigation to which the State is a party is initiated by other people against the State rather than by the State against other people.

Chairman.—There was a dramatic increase in your Estimate, yet you overspent the Estimate. Was there some particular case in that year that was responsible for the bulk of these fees or the bulk of the increase?

Mr. Russell.—Certainly, there were a number of cases of importance in 1986 and I suspect that quite an amount of the fees paid in that year related to the previous year where there was a number of long drawn out proceedings, some of which indeed spilled over into 1986.

Mr. Russell.—I do not think there was a tribunal, I am open to correction there. There might have been a carry over of the Kerry Babies Tribunal.

Chairman.—For the year 1986 can you tell us the greatest amount paid to any individual under this heading?

Mr. Russell.—Less. I see here that one counsel got £52.50 in that year. There is an obligation imposed on the Attorney General by the Prosecution of Offences Act to distribute work among the Bar as much as possible but by reference in particular to abilities in different types of cases. There is, of course, a very large number of barristers, something of the order of 800, and some of them are specialists in some particular areas and sometimes such a specialist will have what one might call a good year because a lot of that type of case came up in that particular year and a couple of years later it might fall away.

Chairman.—How many of the 800 barristers were recipients of fees from the £602,000, roughly?

Mr. Russell.—In 1986, 45 senior counsel and 102 junior counsel were instructed and in 1985, 59 senior counsel and 143 junior counsel were instructed.

Chairman.—May I come back to the question of how they are chosen. I appreciate that, as you said, you must spread the work across the Bar depending on particular skills. How are they actually chosen? What is the procedure for picking counsel in a particular case?

Mr. Russell.—The Attorney General nominates, that is to say, selects the counsel. He uses a number of criteria for this purpose. The first of them is, of course, that the counsel must be competent. That is something one discovers by observing the counsel over the years. There is a rough rule of thumb that unless he is some four years in practice he is not considered unless he has demonstrated very exceptional talent, but generally speaking unless he has been practising for four years, he is not considered. That, in effect, rules out quite a proportion of the number of people at the Bar at the moment, because over the past three or four years, unprecedented numbers of young men and women have commenced practice at the Bar so that a sizeable proportion, much more than in previous years, of the people at present at the Bar, are junior people. Another criterion is, of course, the availability of counsel. Many cases are conducted on circuit in the country and on each of the various circuits there are barristers who practise on that circuit and nowhere else. Consequently if there is a Circuit Court case in, say, Kerry one instructs the counsel on that circuit and one does not select a counsel who practises only in Dublin, for example. That, therefore, narrows down the number of barristers or the pool of barristers there. If one ignores those who are less than four years in practice and chooses only those who practise in County Kerry, one has now a much smaller pool to draw from, and from that pool, then, the Attorney General selects the barrister he thinks will most effectively deal with that case.

Chairman.—In 1986, of the 800 members at the Bar, only 147 were actually given briefs to share in this pool of fees of £602,000.

Mr. Russell.—When I say 800, I should say that is the approximate figure now. I have precise figures for 1983. One can hazard a guess then as to what the figures of available barristers would have been in 1985/86. In 1983 there were 97 senior counsel at the Bar and 387 junior counsel, which makes a total of something of the order of 485. In 1985/86 those figures would have gone up somewhat because the tendency is for them to increase every year. Many of those counsel would have been ineligible for work because of their junior status, their lack of experience. As regards the others, if one finds a good barrister who does a particular type of case very well, it would appear to be — the Attorney General believes — in the public interest that he be given more work rather than experiment with unknown quantities.

Chairman.—Without any reflection on the present incumbent of that office or, indeed, on any of his predecessors, what controls are there to prevent these fees being given to people on the basis of friendship or personal acquaintanceship rather than on the basis of ability?

Mr. Russell.—Apart from the statutory obligation which prohibits that sort of thing, there is an even more potent control over the Attorney General's selection and that is the force of public opinion. There is only one way really of knowing whether counsel has done his work well and that is to watch him doing it. One cannot rely on third hand reports which are almost invariably wrong. The Attorney General is conscious that once or twice in the course of any year, it is possible that the conduct of a State case may be criticised by somebody or other. He must always be on his guard. If people were to ask if it were true that, for instance, the barrister chosen in a particular case was 90 years old or that he was someone who had never had another case before being given that large and important one, the Attorney General must ensure that he does not have to answer “yes” to any such question. Therefore, he guards against risk by not selecting barristers on the basis of friendship, if they are not competent.

Deputy McGahon.—Mr. Russell is competent at giving very plausible explanations, but to my way of thinking, it is a question of barristers being given work on an “old boys” network basis. Only 147 people were used. I would like to see more young people given the opportunity. While I accept Mr. Russell's explanation as to the need for highly competent people in serious cases, many people have reaped a rich harvest from legal fees from your Department. Young people — particularly struggling barristers — should be given an opportunity in minor cases rather than feathering the nests of elderly people who have had the benefit of drawing large sums of money from your Office for many years.

528.Chairman.—If I may ask about the Law Reform Commission, what happens to the reports when they go into the Attorney General's Office? Are they acted on? Is there somebody specifically responsible for going through them and trying to get them on the legislative agenda.

Mr. Russell.—Under the Law Reform Commission Act, the Commission make two types of report. One type of report goes to the Government and the other type goes to the Attorney General, the distinction being that in the case of the latter the Attorney General is the person who asked the Law Reform Commission to study the particular topic whereas in the case of the former type of report, it forms part of the programme of the Law Reform Commission which has been approved by the Government and laid before the Dáil. In the case of any report, whether it has been delivered to the Attorney General or delivered to the Government, the particular Government Department who had carriage of the subject matter of the report and invited to consider it and offer their views on the feasibility or practicality of the various suggestions made by the commission and contained in their report.

Mr. Russell.—Any criminal law topic would be referred to the Department of Justice for their views. The Minister for Justice would have carriage of any legislation deemed necessary.

Chairman.—The Law Reform Commission reports both on civil law reform and criminal law reform, is that correct?

Chairman.—Would the bulk of their reports be in the area of civil law reform?

Mr. Russell.—The Ninth Report of the Law Reform Commission, which was issued quite recently lists all the reports they have produced to date. I am looking at that report now to see which items relate to criminal law. It is certainly the case that the majority of their reports have related to civil law matters but they published in 1980 a working paper on the rule against hearsay evidence, which would be both criminal law and civil law. In June 1985 they published a report on vagrancy and related offences which was a criminal law topic. In June 1985 also they published a report on the Hague Convention on the civil aspects of international child abduction.

Mr. Russell.—They have issued a total of 23 documents, most of them reports but some of them working papers in which they seek the views of the public on topics on which they think the public would have something to contribute.

Mr. Russell.—They were set up in 1975 and the present members took office at the beginning of 1987.

529.Deputy Flood.—I would like to query Mr. Russell on another issue of the report in relation to postal and telecommunications services, I see expenditure in 1986 was £87,700 approximately and in 1985, £112,000. Would Mr. Russell explain how the decrease was achieved in 1986? Secondly, I want to concur with the comments of Deputy McGahon in relation to the spreading around of the briefs by the Attorney General. The numbers involved in doing work for the State were limited. If you take the figure of £36,000 as being the highest payment in 1986 and the lowest payment to an individual as being £52.50, somewhere in there is an element of unequal distribution. I would like to make the case that it should be spread around further. I must take the point made by Mr. Russell in relation to the need for the State to put up a good case, to be properly and adequately represented because if the State was poorly represented one would find very great public criticism of the performance on behalf of the State. I would like to see every effort being made to move it around further. I would also like to ask a question in relation to the expenditure of £7,808 under the heading, Defence of Public Servants. Perhaps Mr. Russell would explain to us precisely what that means.

Mr. Russell.—Yes. The Attorney General has the responsibility of considering cases where public servants are sued by members of the public for alleged acts or omissions on the part of public servants in the course of their duty. There are different types involved. Alleged assaults by members of the Garda Síochána or by members of the prison service is an example and is, in fact, the largest category. The practice and rule for many years is that if a member of the public sues a public servant for what is alleged to be an act committed in the course of his employment, the public servant, if he is vindicated in the proceedings, can apply to the State for the recoupment of his reasonable defence costs, and these will be met. This type of case is not a very frequent one in numbers hence the small amount of money involved. Of course the largest category of negligence by public servants is not covered by it at all, namely where a driver of a State vehicle is negligent in the driving of the vehicle. In such cases the Minister for Finance is the defendant, not the public servant himself. Therefore, such cases are not dealt with under this particular heading. The cases dealt with under this heading are those where the public servant is sued personally but in respect of an act which he is alleged to have committed in the course of his employment. The amounts involved are not very great individually. I am looking at the year 1985, for instance. In that year there was a total of six cases involving a total of ten public servants. The total amount paid to public servants under that heading in that year was £1,695. In the following year, 1986, the total paid was £7,807 and there was a total number of nine cases involving nine public servants. The amounts are not very great. In the two years, for example, the smallest amount was £61.50 and the largest was £2,750.

Deputy Flood.—I asked about Telecommunications, how was the decrease achieved?

Mr. Russell.—And your question was why the amount was less in 1986 than in 1985?

Mr. Russell.—I do not really think there was any particular change of policy. Most of these charges arise in the Chief State Solicitor's office rather than in the Attorney General's office. I do not think there was any directive that if a member of the Chief State Solicitor's office was telephoning the State Solicitor in Cork, let us say, he had to make sure the conversation ended within the first three minutes of the call.

Chairman.—“You have three minutes to put your case starting from now”— that type of thing?

Mr. Russell.—Yes I do not think there was such a directive. It was just the luck of the draw depending on the volume of business and depending on the proportion of that business which had to be conducted in the country as opposed to the city involving postal and telephonic communications with the numerous State Solicitors throughout the country which is an important item. A great deal of the State's legal business is transacted by the local State Solicitor in the relevant county, for example, the Circuit Court business and the District Court business. In many of these instances they have to get directions and material and assistance from the Chief State Solicitor's office, for example, the statements of witnesses who may be public servants in the city.

530.Deputy Harney.—May I go back to the question of covering the costs for legal actions being taken against public servants, may I first ask if I understood correctly that it is only when they win the case that the costs are covered?

Mr. Russell.—If they are vindicated in the proceedings, generally speaking that means if they win, more correctly, if the plaintiff loses.

Deputy Harney.—In the case of public servants suing outside bodies, newspapers or whatever, for libel, are costs covered there?

Mr. Russell.—The Attorney General does not conduct such cases nor are funds provided for his Vote for such cases. It is a matter for individual Departments.

Chairman.—We can Vote No. 13 for 1985 and 1986. Thank you, Mr. Russell, for your help.

OFFICE OF THE DIRECTOR OF PUBLIC PROSECUTIONS

Mr. Michael Liddy called and examined.

531.Chairman.—The next witness for Vote No. 14, 1986 is Mr. Michael Liddy, who is Accounting Officer for the Office of the Director of Public Prosecutions. This is Mr. Liddy's first time to appear. You are welcome Mr. Liddy.

We have just been discussing the question of fees to counsel with the Attorney General's office. I see that in 1985 your office spent £760,482 and in 1986 it spent £692,555. How many cousel shared in that and what was the largest amount paid to any individual under that heading? Let us take 1986 as the year.

Mr. Liddy.—I have with me a list of the fees paid to counsel for each of those years which I could give you.

Chairman.—Could you give us the maximum amount paid? What was the highest payout to any individual.

Mr. Liddy.—In 1985 Fergal Foley, a junior counsel, was paid £27,874 by us. That was exclusive of VAT.

Chairman.—You may give us the amount; I am not really interested in the names. What was the smallest amount paid?

Mr. Liddy.—There were 71 junior counsel and 28 senior counsel. That was for 1985.

Chairman.—We have been talking to the Attorney General's Office. Would some of these also have received fees from the Attorney General's Office?

Chairman.—Would it be fair to say that many of the leading recipients in your office would also be dealing with recipients in the Attorney General's Office?

Mr. Liddy.—I do not know. I just cannot say who they brief. I would guess that some of those people to whom we paid significant amounts also got significant amounts from the Attorney General's office. I cannot put it further than that.

Mr. Liddy.—They are selected by us following information we have personally about their abilities, or information we have got about their abilities from the Chief State Solicitor's Office who come across these barristers in the course of their day to day work and on the assumption that those barristers have earlier indicated their willingness to work for us.

Chairman.—Would the Chief State Solicitor's Office also brief lawyers themselves or would they require the DPP to do that?

Mr. Liddy.—They would require the DPP to nominate the barristers in question.

Mr. Liddy.—The fee would come out of our Vote, but the role of the Chief State Solicitor's Office would be to relay our instructions to the barristers in question and to attend on the barristers while they were appearing in court.

Chairman.—There is not another large amount in their Estimates for briefing counsel like that?

Chairman.—Some concern was expressed by the Committee that the system of sharing out the briefs should be fair and the people picked on ability rather than on knowing somebody, on the basis of friendship. What safeguards are there in your office to ensure that there is a fair system of selection?

Mr. Liddy.—First, there is in the Prosecution of Offences Act, 1974 a section setting out what is required of the DPP — and, indeed, the Attorney General — in regard to the briefing of barristers and how he will choose the barristers to act for him. We are anxious to spread the work out among those barristers in accordance with the section in the Act, while on the other hand ensuring that certain barristers get a certain amount of work, so as to attempt to ensure that they will remain loyal to us and be available when we need them.

Chairman.—It might be as well if you leave a copy, because one counsel has been mentioned. We will be able to circulate it to members. I would like to ask one other question before I call Deputy McGahon regarding security at the DPP's office, there was a serious breach of security in 1987. What steps have been taken to prevent a recurrence and how was there such a lapse? Did the lapse prevent any case from going ahead?

Mr. Liddy.—The lapse did not prevent any case from going ahead and did not impede our work in any way. We were able to get duplicate files for those files that were removed. The break-in was the result of some misunderstanding between our office and the bank that shared the building with us. We had thought that their security arrangements would ensure that break in to the building was not possible.

Chairman.—Was the attack on your office a bank raid that went wrong or was it somebody specifically looking for something in the DPP's files?

Mr. Liddy.—I just do not know the answer to that. A significant number of files were taken.

Chairman.—The reasonable suspicion is that the objective was to interfere with files in your office?

Chairman.—With regard to the security of your premises now, have special steps been taken to ensure that they are secure?

Mr. Liddy.—We have a very sophisticated burglar alarm system which was the result of careful study as to what system should be used. Since then there has been no difficulty.

532.Deputy McGahon.—To the man in the street there is a certain air of mystery surrounding the Director of Public Prosecutions. I am mystified as to what you do. Can you describe the purpose of your office? What is the difference between your office and that of the Attorney General. Is there any duplication?

Mr. Liddy.—The DPP is in charge of the prosecution of crime in all courts. This means that in the Circuit Court, the Central Criminal Courts and the Special Criminal Courts, prosecutions will not go on without the Director's prior direction. In the District Courts gardaí will often initiate prosecutions and, indeed, those prosecutions may often proceed without being known by the DPP's office. They will be taken in the DPP's name and will often, in one way or another, come to his attention so that he would have control over those prosecutions when he comes to hear about them.

Deputy McGahon.—While many prosecutions are taken in the name of the DPP is it not true that the local superintendent actually decides whether a case should be sent on to the DPP?

Mr. Liddy.—I think it is fair to say that all prosecutions are now taken in the name of the DPP.

Mr. Liddy.—The local superintendent makes the decision in a very big number of cases. In certain circumstances he must refer the case to our office. Where, for example, there is a larceny of over £200, the DPP's consent is required before the case proceeds, if the case is to be dealt with in the District Court. There are various other statutory requirements as to when our office must be contacted in cases by gardaí. Where there is no statutory requirement relating to particular prosecutions, for example, drunken driving prosecutions, or other road traffic prosecutions the superintendent will take the decision and will proceed with the prosecution often without reference to out office.

Deputy McGahon.—Is there any duplication in your role and that of the Attorney General?

Deputy McGahon.—In regard to the recent break-ins, can you give us any indication of what type of files were taken?

Mr. Liddy.—I think they were the more high profile files — files relating to famous cases or infamous cases in the main. They ranged over a large variety of offences and over a number of years. It is difficult to establish the nexus between the various files that were taken.

Deputy McGahon.—Were they related to activities connected with terrorism or were they more specifically related to Dublin gangland activity?

Mr. Liddy.—Neither. I think they were related to various serious offences committed by various types of criminals, not specifically gangland or terrorist at all.

Deputy McGahon.—And you are quite happy that the security measures you have implemented are sufficient?

Mr. Liddy.—Yes. As you can imagine, the matter was carefully studied and the decision was taken after that study.

533.Deputy Harney.—May I ask you to confirm that in the break-in to the DPP’s office over 100 files were taken. May I further ask whether you believe the security at that time was lax at the DPP's office and whether you would agree that criminal gangs could get very valuable information, even if the files were closed, from the files taken?

Mr. Liddy.—Over 100 files were taken. Yes, the security was lax. It was a misunderstanding between the bank and ourselves but that should have been clarified. As far as information to be got from the files is concerned I would have thought very little information of use to gangs could have been got.

Deputy Harney.—Could they not have got the nature of the evidence that was available to the State? May I also ask you whether you believe it is appropriate that in cases that were finished, the files should have been left lying around a number of years later?

Mr. Liddy.—They could have got details of evidence that was given in cases but they could have got that from reading newspaper reports of cases or attending court themselves. As far as keeping files after the cases have concluded is concerned, those files are often needed for one reason or another. We keep them for a certain number of years for that purpose and we dispose of them thereafter.

Deputy Harney.—Was all the information available on the files also the information produced in the Book of Evidence, or was there additional information in the files that would not have been made available in the Book of Evidence?

Mr. Liddy.—There would have been additional information over and above what appeared in the Book of Evidence. Often a file consists of information that is not quite relevant to court proceedings and the Book of Evidence will be confined to the evidence that is relevant to court proceedings.

Deputy Harney.—Might that information not contain the nature of the source of the evidence available to the Garda or to the State authorities that would not have been produced in the Book of Evidence?

Mr. Liddy.—In regard to the source of the evidence, the Garda rarely, if ever, go into details as to how they have come about apparently solving a crime. They certainly would not give us information about informants. I cannot see what real help could have been got by anybody from taking these files.

Deputy Harney.—During the period we are talking about, there was a case taken by the DPP involving the death of somebody where the trial judge gave a direction to the jury. It was open to the DPP to appeal that direction to the High Court on a point of law. May I ask you why the DPP did not choose to appeal that decision? It was the Molloy case.

Mr. Liddy.—The DPP carefully considered what was open to him following the decision in that case. If I am correct, the decision was a direction by the trial judge to the jury to acquit. I think there is an appeal open on a point of law. I am not——

534.Chairman.—I do not think we want to retry the case here this morning. It is not our function. I will allow a brief reply but it is not our function.

Mr. Liddy.—I think the provision Deputy Harney is referring to did not cover the situation that arose in the case. The section in the Act in question was not appropriate to the evidence in the case.

535.Deputy Harney.—In relation to the payment of fees, how up-to-date are the payments? How soon after a case is taken by a barrister are they paid their fees?

Mr. Liddy.—They are paid very quickly. We rely on the offices of the two State solicitors to send us up a note of what fees are due, the appearances by the barrister and so on. Depending on the demands on their time this comes up very quickly or not quite so quickly, but it is never appreciably delayed. Often fees are paid within three months.

536.Deputy M. Kitt.—I agree with what Deputy McGahon says about a certain air of mystery regarding the Office of the DPP. I wonder if in a situation where there has been a particular case of genuine public concern the DPP’s Office would explain some of the situations that have obtained and some of the actions that have been taken in the past, obviously without getting into the whole security aspect which I know the office would not get involved in. The kind of deafening silence we have had is adding to the mystery of the office. I wonder if Mr. Liddy would agree that, where there is a case of genuine public concern, there should be some statement from the office and some explanation as to what is going on in different cases?

Mr. Liddy.—We reply as fully as possible to persons who are personally affected by decisions of ours. We get letters in and we are determined to do as much as we possibly can in reply. As far as issuing public statements is concerned, we often feel that we are limited in what we can say because we have to be careful of the laws relating to libel. We have to worry about the precedent that might be involved, whether if we do it on one occasion we would have to do it on further occasions. Perhaps some kind of formula could be worked out, some legislative enactment that would enable us to go into details where appropriate, but as things stand at the moment we have to be very careful with the present state of the law before giving any public information.

537.Deputy Flood.—In relation to the security of the building, is Mr. Liddy satisfied with the present security system? Could he also tell us if there are any security personnel in the building during times when it is not being used by staff? Would it not be a good idea to look for a more secure building that might be used exclusively for the purposes of his office? It seems to me, Chairman, that a building with a multi-tenancy arrangement, as it were, is not the most ideal of situations. Clearly, this particular case which has given rise to so much concern arose precisely from the fact that there is another tenant in the building. Therefore, I would like to suggest that a more secure single-use building should be looked for in the long-term interests of providing added security. Also, if possible, security personnel should be in the building at all times, particularly when it is not in normal use. I am surprised that Mr. Liddy says he is not aware of the sums of money involved in handing briefs out to individual counsel. He is not aware of the relationship between the Office of the Attorney General and the Office of the Director of Public Prosecutions. That leads one to the conclusion that the more successful a barrister is in one Department the likelihood is that the more successful he or she would be in terms of obtaining briefs from the other office. This brings us back to what we have said to Mr. Russell, previous to Mr. Liddy coming in here, about being anxious to see the work being spread more fairly around, provided there is adequate and proper representation. The final point I want to make concerns the security aspect so as to try and make sure that such a situation does not arise again. Can Mr. Liddy tell us, in relation to the files that were removed without authorisation, how many of those files were covering cases which were pending, as opposed to cases which were completed?

Mr. Liddy.—It has occurred to me that maybe I could answer the question about the relationship of counsel working for our office with counsel working for the Attorney General’s office. I am satisfied that counsel who work for our office to a large extent — that is to say, the higher earners on the list of counsel — are persons who do not work significantly for the Attorney General’s office. Any work they might do for the Attorney General’s office would be small. On the question of files taken from the office — files relating to pending cases as opposed to files relating to past cases — the great majority of files related to past cases. I am satisfied now that the office is secure. We would dearly love to move to a self-contained or a separate building. We have been negotiating with the Board of Works in the hope that we will get such a building. I am sure it will come about at some stage. On the question of security, we have a good burglar alarm system. We have close relationship with the Garda. We have somebody designated for the office with whom the security firm and the Garda keep in touch. I would be satisfied that in the event of any attempted break-in the future, we would have a quickly organised scheme to combat it.

538.Deputy McGahon.—Can a person initiate an action against the DPP? Has any action ever been successfully taken against the office of the DPP?

Mr. Liddy.—Yes. An individual can initiate an action, for example, where there is a private prosecution and for indictable offence and where there has been a return for trial by a District Justice. By law it is for the DPP to decide whether that case should go on. A private individual can and has taken an action against the DPP to compel him to go on with that prosecution and that action is in being at present — when I say “in being” I do not think it has come to court yet, but it is at a stage preliminary to coming to court. That kind of action could be taken against the DPP.

Deputy McGahon.—I would like to come back to a point that Deputy Flood raised. While I realise you are speaking in a general way, may I ask if there was any significant case pending that was taken from your office in the 100 files?

539.Deputy Harney.—In relation to senior counsel prosecuting for the State, are they paid a retainer to take a case? If so, how much and how much per day for each day the case goes on in court are they normally paid?

Mr. Liddy.—They are not paid a retainer. They are paid a fee for the brief in the case which will cover the first day’s appearance in court. Thereafter, they will be paid a refresher which will be, very probably, half of the brief fee. That could vary from 400 guineas up to 1,500 guineas in cases.

Mr. Liddy.—Not necessarily half, but very often half. Where there is a high brief fee the refresher will almost certainly not be half. It will be much less than half.

540.Chairman.—There is one other matter I want to raise. We have got a long agenda this morning so I will do it briefly. I would be very concerned if your office pursued any case against any individual in the State because of the job that he or she holds. I would like to ask you if we can be assured here this morning that people in public life, whether they be TDs, Senators, trade union leaders, judges or anybody else, get exactly the same treatment in your office, no more and no less, in the case of personal prosecution as every other citizen of the State?

Chairman.—In cases which have been pursued in the recent past — I have in mind a case which involved a trade union leader — is there any doubt in your mind that that case would not have been pursued if that person had not been a trade union leader?

Mr. Liddy.—I do not know the case you are referring to, but I would have no doubt that we apply the law equally to everybody.

VOTE ACCOUNT NO. 37 (1985) and VOTE ACCOUNT NO. 39 (1986)—ROINN NA GAELTACHTA.

Mr. Seán Olden called and examined.

541.Chairman.—Thar ceann an choiste cuirim fáilte roimh an Uasal Seán Olden, Rúnaí Roinn na Gaeltachta, atá anseo mar Oifigeach Cuntasaíochta do Roinn na Gaeltachta. Mar is eol duit, táimid inniu ag scrúdú na gcuntas leithreasa do na blianta 1985–1986. Más mian le haon chomhalta ceist a chur i nGaeilge nó as Béarla tá súil agam go mbeidh an tUasal Olden lánsásta í a fhreagairt. Tá fáilte romhat.

Mr. Olden.—Go raibh maith agat. Failteoidh mé roimh cheisteanna i mBéarla nó i nGaeilge.

Deputy M. Kitt.—Tá ceist agam faoi scéimeanna feabhsúcháin sa Ghaeltacht, uimhir E. Ceist agam faoin méid airgid do na bóithre, uisce agus séarachas i 1985 agus 1986. An féidir leat a insint dúinn cé mhéid airgid a bronnadh ar na Gaeltachtaí áirithe sa tír seo, agus cén bhaint atá ag na comhairlí contae sna Gaeltachtaí sin agus Údarás na Gaeltachta?

Mr. Olden.—Tá briseadh síos agam do na contaetha éagsúla. Tógfaidh mé 1985, b’fhéidir, ar dtús. Ar na bóithre, tabharfaidh mé iad mar atá siad agam anseo: Co. Dhún na nGall, £16,000; Co. Mhaigh Eo, £19,793; Co. na Gaillimhe, £13,000; Co. Chiarraí, £13,670. Agus an t-iomlán ansin: £63,063. Anois, ar na bóithre don bhlain 1986: Co. Dhún na nGall, £49,340; Co. Mhaigh Eo, £62,763; Co. na Gaillimhe, £44,663; Co. Chiarraí, £25,207; Co. Chorcaí, £6,500; agus Co. Phort Láirge, £3,200.

Deputy M. Kitt.—Chuir mé ceist ort faoin cheangail atá idir na comhairlí contae agus Roinn na Gaeltachta maidir leis na scéimeanna feabhsúcháin sin ar na bóithre.

Mr. Olden.—Dúirt tú ar dtús “Údarás na Gaeltachta”, measaim. Níl aon cheangal ag an Údarás leis an scéal ar aon chor, ach is iad na comhairlí contae a dhéanann an obair thar ceann na Roinne. Cuirimid muidne an t-airgead ar fáil agus déanann siadsan an obair.

Deputy M. Kitt.—An bhfuil na figiúirí agat do na scéimeanna sin le haghaidh 1987 agus 1988?

Mr. Olden.—Athraíonn sé ó bhliain go bliain. Measaim go raibh níos mó i 1987, ar aon nós, ar na bóithre. Níl figiúirí cruinne agam, ach d’fhéadfainn iad a chur ar fáil duit, más mian leat, aon am.

542.Chairman.—Do you believe that the money which has been spent on the promotion and revival of the Irish language has been well spent?

Mr. Olden.—That is a very large question and I am not so sure that I am the person best qualified to say. It is a question after all of policy and mainly a question for Ministers and for the Government. We take the view, and it is only a personal view within the Department, that it is reasonably well spent. The most recent publication which dealt with the progress in relation to the revival of the Irish language since the foundation of the State has just been published. While it is quite critical in many respects of what has been done, there is a recognition that the efforts that have been made over the years have, in fact, resulted in a position which is far better than it might have been. That is faint praise perhaps but at least it is praise. To that extent the efforts that have been made, and they have been fairly calculated efforts from the beginning, have in fact achieved a position which is a good deal better than it might have been.

Mr. Olden.—The first question to ask in reply to a question — I am sorry if I have to put it like that — is what does speaking Irish mean? The consensus of opinion appears to be, again with reasonable justification, that the number of people who have a certain competence in Irish has increased and is increasing. More people can hold conversations in Irish without being terribly fluent. That is an achievement in itself.

Mr. Olden.—The lastest census figures suggest that something of the order of 30 per cent of people have a goodish knowledge of Irish and a larger percentage have some knowledge in the sense of being able to stumble along in it.

Chairman.—I would very much like to be one of those 30 per cent. My own children attend an all-Irish school. I have been pressing for a long time for facilities for Members of the Oireachtas. Why is there not a public service intensive Irish course for Members of the Oireachtas? We all come in touch regularly with large numbers of people. Many of the TDs and Senators would like to use Irish in their correspondence, at public meetings or in interviews on television and radio. Why do your Department not — I understand that the Comhcoiste don Ghaeilge recommended this recently — identify people like Members of the Oireachtas who are interested and set up these public service courses?

Mr. Olden.—I cannot say why not. We have no budget which would allow us to help with that. We would take the view — and I am not so sure that the members of the Committee on Irish would not take the view — that it is largely a matter for this House and for the authorities of the House to provide whatever facilities may be needed. I understand that some facilities have been provided. There is a special room where there are tapes. If they are not provided already they are to be provided. That is something in the way of a first step.

Chairman.—They are very meagre. Could I suggest to you that you might consult with the chairman of the Committee to see if together you could do something about it because I think it would help the revival of the language.

Mr. Olden.—Thank you for the suggestion. If we can be of any help — and we will talk to the chairman at your suggestion we will try to do so.

Chairman.—Have you any idea of the number of organisations which exist for the promotion of the Irish language?

Mr. Olden.—I cannot say because there are probably quite a number that I have not even heard of. All we can give you is a list of the number of those that receive funding either from ourselves or from Bord na Gaeilge. Eleven receive funding directly from us. The annual reports of Bord na Gaeilge will indicate another few, perhaps six, which receive funding from them. Fifteen or 16 is about the number. Some receive very little.

543.Deputy Dempsey.—Nil an Ghaeilge ró-mhaith agamsa, ach déanfaidh mé iarracht. Cén fáth nach bhfuil aon scéimeanna feabhsúcháin sa Mhí. Tá Dún na nGall, Maigh Eo, Gaillimh, Ciarraí, Corcaigh agus Port Láirge luaite agat ach níl aon scéim ann don Mhí.

Mr. Olden.—Is dócha nach raibh aon togra oiriúnach ar fáil ó Chontae na Mí. Níl a fhios agam. Ní fhéadfainn a rá an bpointe seo an bhfuair siad aon chúnamh aon am, aon bhliain. Measaim go bhfuair siad. Tá Comharchumann sa Mhí agus faigheann siad táille uainn chun tuarastail a íoc. Is Gaeltacht anbheag, dáiríre, í Gaeltacht na Mí agus Gaeltacht Phort Láirge mar an gcéanna. Is tearc airgead a fhaigheann siad i bPort Láirge, mar go bhfuil an áit an-bheag. Sin é an chúis, agus an t-aon chúis amháin. Níil aon chlaonadh againne i gcoinne Chontae na Mí nó i gcoinne Chontae Phort Láirge.

Deputy Dempsey.—Cad iad na rialacha atá ag baint leis na scéimeanna feabhsúcháin sin?

Mr. Olden.—Tá saghas scéimeanna ann chun cabhair a thabhairt, mar shampla, chun páirc imeartha a fhorbairt nó a chur ar fáil, chun cúirt leadóige a chur ar fáil, agus rudaí den saghas sin, an chuid is mó, is é sin áiseanna chaitheamh aimsire agus rudaí mar sin.

Deputy Dempsey.—Cad mar gheall ar an scéim sin a luaigh tú cheanna mar gheall ar na bóithre?

Mr. Olden.—An scéim sin faoi na bóithre, tá sí teoranta do bhóithre portaigh agus bóithre áise, agus ní bhíonn mórán acu i bPort Láirge nó i gContae na Mí. Dála an scéil, fuair an comharchumann i gCo. na Mí £50,000 mar bhronntanas speisialta, mar bhí an caoga bliain curtha isteach mar áit chónai do lucht na Gaeltachta ag an am, agus ba mhór an chabhair, measaim, an méid sin a fháil.

Deputy Dempsey.—It may be very small but it is probably one of the most active Gaeltacht areas.

544.Deputy Flood.—I would like to ask Mr. Olden, first of all, in relation to the growth and development of all-Irish primary education, leading on to substantial growth in all-Irish second level education, what are the Department doing to develop this interest in the every day use of the Irish language outside the Gaeltacht areas?

Mr. Olden.—As will be understood, we in the Department have not got any direct responsibility — in fact, we have no responsibility at all — for education in Irish. That is a matter for the Department of Education. I think your question was: what are we doing apart from that and outside the Gaeltacht areas? It is not easy to put that in a few words, but the whole thrust of the operations of Bord na Gaeilge, for example, are directed largely to areas outside the Gaeltacht. They have an annual budget of about £1 million. That is money which is spent on the promotion of Irish. It will be known to members of the committee that a substantially-funded programme of publicity has just been announced. In fact, at the moment we are in the final few days of waiting for tenders from qualified people who are experts in this field to enable us to promote Irish as a spoken language among the community at large. There is £500,000 available this year for work of that kind. It is an example of the kind of work. Apart from that, various organisations which are funded either by ourselves or by Bord na Gaeilge, such as Glór na nGael, are very active up and down the country forming committees, getting people active in their local areas and stimulating them to speak Irish, read Irish books, form Irish groups and so on. That kind of work is continuing.

Deputy Flood.—The point I am making, and you led on to that, concerns picking up the post-school Irish speaker. When they are finished primary or secondary school they have a fair fluency in the Irish language, particularly if they come through the all-Irish school system. They tend at that point to be abandoned. The Department, therefore, have an increasing role to play in developing facilities for the language to be used thereafter.

Once the students have left school, they should develop recreational facilities and other environmental areas where they can converse with ease through the medium of the Irish language. They will have to develop a thrust in that regard, I would like to see that type of thinking coming from the Department. In the note on expenditure, I want an explanation in relation to the grants paid for those who accommodate recognised students of Irish. Is this referring to the system whereby young people from primary schools go to the Gaeltacht areas and live in farmhouses, and so on, in pursuit of development of the language? Is that precisely what we are talking about?

Deputy Flood.—That type of grant, therefore, is confined specifically to Gaeltacht areas?

Deputy Flood.—You do not see a situation where a household, for example, in an urban area because of the development of the all-Irish school system, could apply for a grant for such accommodation? Take, for example, an area such as Tallaght where there has been a tremendous growth — I represent the area so I know it — in families using all-Irish schools. There are already two schools there and another post-primary school is planned nearby. Many of the households involved in sending their children to those schools are using Irish as their daily language within the household. Where, for example, a student from the city area might not be able or wish to go to the Gaeltacht areas, could the policy not be changed and grants be given to those households in urban areas who might be prepared to offer accommodation to such students?

Mr. Olden.—That is an idea that is worth thinking about. As you said, all credit is due to Tallaght where we had a celebration quite recently and where magnificent work is being done. If I can make a personal interjection, I can recall being in the church for Mass on the Sunday and listening to people whispering around me in Irish. These were all ordinary working-class people. They were talking in Irish. I thought this was a very encouraging sign. As a gloss on that, perhaps I should explain that there are a number of boarding schools outside the Gaeltacht areas which receive grants, for accommodating pupils during the summer months when these courses are afoot. There is one in Balbriggan. It is a very good school.

Deputy Flood.—Would you look at the question of grant-in-aid to homes outside Gaeltacht areas?

Deputy Flood.—Is there a mechanism by which that information can come back to us?

Chairman.—You might let us have a note when you have had a look at it, Mr. Olden.*

545.Deputy McGahon.—I have to strike a discordant note here and be totally out of touch with all my colleagues, including yourself, Chairman. I have to look askance at the money that is spent on what I have to term a dead language. I realise that it is part of our heritage and that a certain amount of money should be spent on it but nobody has come to me in six years as a TD living in a town of 30,000 people and put a problem in Irish. That is the reality of life. Irish, internationally, is a dead language. The Catholic Church have recognised that Latin is a dead language and are speaking in the language that people understand. May I ask the Accounting Officer what the overall cost is to the Exchequer for the promotion of the Irish language?

Mr. Olden.—I could not give you a figure easily. In fact, it would be rather difficult to quantify. The figures for the Department of the Gaeltacht are plain enough. We can take it that every penny there is, in fact, spent directly or indirectly on the promotion of Irish. There would be considerable expenditure in the Department of Education. Therefore, it is not so easy to quantify.

Deputy McGahon.—I think much of that money would be more meaningfully spent by including French and German studies. Many young people have to emigrate. We should equip them to be proficient in international languages. While I do accept that Irish is part of our heritage and should be preserved, I am not going to pay any particular lip service to it. It should not be used in the Dáil proceedings.

546.Deputy Dempsey.—Could I ask for a comment in relation to the Department of the Gaeltacht? It appears that the Department seem simply to be a grant giving body to various groups. They no longer seem to be at the forefront of the actual promotion and spread of Irish, is that a fair comment to make?

Mr. Olden.—We are a very small Department, we have not got very many people who can properly devote themselves to direct promotional work. To that extent the work of Bord na Gaeilge complements the work of the Department. They are closer in a sense to the actual work on the ground. That is not to say that we are not active. We have branch offices in Donegal, in Galway and in Kerry. We have people there we call stiúrthóirí, local directors, whose job it is to go out and who spend a lot of their time dealing directly with the people. Since I became acquainted with the people involved I know that each and every one of them is in fact an enthusiast, as it happens. They might not be so but they are. They bring their enthusiasm with them. They complement work being done by Udarás in that area and between them they are, in my opinion, very worthy flagbearers of policy in relation to what ought to be done in the Gaeltacht for Irish. They do a considerable amount of work.

547.Deputy Flood.—I cannot let this occasion pass without saying that I hold the very opposite view to that of Deputy McGahon. We see many young people now learning Irish voluntarily because they and their parents appreciate the language, the culture and so on. That is the great difference from the old days when the learning of Irish tended to be compulsory and therefore the people, generally speaking, took a negative attitude. Like any national identity, it is something that there is great pride in. If Ireland wins a football match, there is a sense of pride, a national pride. If someone wins a cycle rally there is a surge of national pride. I think there is also pride in our national language so I could not agree with Deputy McGahon.

Chairman.—Deputy McGahon has a point of view, but I think the vast majority of the committee would not support that viewpoint.

548.Deputy M. Kitt.—Mar a dúirt an Teachta Flood, ní aontaím féin leis an Teachta McGahon ach an oiread, ach ba mhaith liom ceist a chur faoi cheol agus dráma agus fiúamháin damhsa. Tá sé sin an-tábhachtach freisin. Táimid ag caint anseo ar maidin faoin teanga. Ba mhaith liomsa a fháil amach cén chaoi a ndéann an Roinn iarracht an ceol agus an dráma agus an damhsa Gaelach a fhorbairt, agus ceist eile agam faoi scéimeanna uisce agus séarachais: cé a dhéanann an obair sin? An iad na comhairlí contae a dhéanann an obair sin sna Gaeltachtaí freisin?

Mr. Olden.—Chun an dara ceist a thógaint ar dtús, go hiondual is iad na comharchumainn nó dramanna éagsúla áitiúla a dhéanann an obair iad féin nó a fhaigheann conraitheoirí chun i a dhéanamh. Ní bhíonn an chomhairle chontae sáite ann de ghnách. Faoin cheist eile, ar an gcéad dul síos, tugaimid cúnamh sách fial — bhí sé fial thar na blianta ar aon nós — don Chomhaltas Ceoltóirí Éireann. Thugamar £120,000, in 1985 agus an méid céanna, measaim, in 1986. Sin é an príomh-rud a dhéanaimid, ach cabhraímid go logánta leis nuair a bhíonn, arís, na stíúrthóírí a luaigh mé, i dteangmháil le daoine sa Ghaeltacht; agus lasmuigh di, tagann iarratais chugainn ó Ghlór na nGael nó eagrais mar sin, agus tugaimid cúnamh an-bheag chun uirlisí a cheannach agus rudaí mar sin. Táimid sásta é sin a dhéanamh aon am a gcabhróidh sé leis an gceol Gaelach.

Deputy M. Ahern.—I would like to ask about Appropriations-in-Aid. There were repayments of loans. What do you make loans for and to whom? Is it normal procedure?

Mr. Olden.—It is normal procedure in relation to housing but the amount involved is quite small. It goes with the housing scheme. Your main question arises from a rather substantial amount in loans that was made available to certain co-ops, comharchumainn over the years. They are no longer being made. They have now been converted into grants and have ceased.

550.Chairman.—Mura bhfuil aon cheist eile ag aon chomhalta is féidir linn deireadh a chur leis and scrúdú don Iá seo. An bhliain seo chugainn ta súil agam go mbeidh i bhfad níos mó Gaeilge againn go léir nuair a fheicfimid arís thú.

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

VOTE 38—AGRICULTURE.

Mr. Donal Creedon called and examined.

551.Chairman.—Good morning, gentlemen. We have here this morning Mr. Creedon, Secretary of the Department of Agriculture and Food. We welcome you, Mr. Creedon. I will be chairing this session in the absence of the Chairman. We have to deal with paragraphs 42 to 45 of the 1985 Report which we did not get finished on 10 March and paragraphs 41 to 47 on the 1986 Report. There are a couple of points which were not completed on 10 March and I propose to get them wrapped up now. One of them was the report of the Comptroller and Auditor General on the 1985 accounts which was dealing with the potential losses under schemes of assistance for the expansion of the cattle breeding herd, paragraphs 36 and 37 of the 1985 Report. We got a document, circulated by the Department, on 10 March but were unable to deal with that at that meeting because we had only got the document and the Comptroller and Auditor General subsequently submitted a report to the committee. I would ask the Comptroller and Auditor General if he has any comments to make?

Mr. McDonnell.—Just to say that that note of mine was submitted in response to the request of the committee. There was some misunderstanding in regard to what I was saying vis-á-vis what the Department was saying in regard to the discrepancies in the description of animals under this calved heifer scheme. There was the question of the extrapolation of the results of the cross-check which my officers had done which suggested that there had been some overpayments made in respect of some herds. The question of extrapolation of that on a national basis arose and I think I am right in saying that the Department was making the point that if the type of cross-check which my officers had carried out, a documentary cross-check of departmental herd files, were carried out on a 100 per cent basis, it would not be cost effective at all. I want to make it clear that I was never suggesting that that kind of documentary cross-check should have been carried out. You will recall that the Department said that the field inspections were a vital part of the control of this scheme and the establishing of the correct description of herds, animals and so on. What I was suggesting was that when a cross-check, which we undertook, showed these results it was perhaps an indication that the field inspections might not be as precise as they should have been and perhaps there was scope for suggesting to field inspection officers that they should be vigilant in ensuring that the description of animals was correct. I was never suggesting a 100% documentary cross-check; I was simply suggesting vigilance on the part of inspecting officers.

552.Deputy Foley.—Sorry, Chairman, just on a point of clarification, what are we discussing now?

Chairman.—We are merely completing business which was discussed on 10 March. We hope to complete the 1985 Report.

Deputy Foley.—It is not on the agenda. We are dealing here now in public session this morning with paragraphs 42 to 45.

Chairman.—We are trying to complete the 1985 Report. This is a hangover from the 1985 Report.

Deputy Foley.—That was a report circulated after the last meeting. If we were told it would be discussed this morning, we would have our copies here and could get involved in this discussion. We have not got them. That is why I am saying that we should stick to the agenda for this morning.

Chairman.—I have no objection but I think that it is just a question of winding up that particular paragraph. I just want to get it finished because we have gone through it in detail in March.

Deputy Foley.—I would take it that the three of us here now had no indication that that was coming up this morning.

Chairman.—It was not a question of its coming up; it was just a question of getting finished with that particular paragraph. I do not intend to delay on it very long.

Deputy Foley.—I am not going to dispute it with the Chairman but I am saying that we have an agenda here this morning. If it was going to come up or if there had been any indication of it, it should have been on the agenda.

Chairman.—My idea was to just get rid of that paragraph which we had not completed. We dealt with the paragraph. It was only just a question of getting this report finished.

Deputy Foley.—There is nothing wrong with it. I do not dispute it. All I am saying is that if it was to come up, we should have had prior notice of it so that I could have my copy of the document.

Chairman.—If it is the Deputy's wish, I have no hesitation in leaving it over. We have discussed the paragraph involved. It is only a question of discussing the report which the Comptroller and Auditor General issued to the Committee.

Deputy Foley.—I accept that. I would be much stronger in disputing this if the other Chairman were in the chair. It is unfair to you. We are lucky we have not seen it in the press this morning. I am only just making a point. If you want to discuss it, I will not dispute that but it is unfair to the three of us. We have not got the report in front of us.

Chairman.—Basically all I wanted was to get Mr. Creedon's comments on the report.

Mr. Creedon.—The Comptroller and Auditor General did me the courtesy of sending me a copy of his notes which he also sent to the Chairman. That has clarified the situation quite satisfactorily for us. We have taken on board and obviously will take to heart the suggestions he made about checks. The only qualification I would enter on that is that there is obviously a limit — and the Comptroller and Auditor General acknowledges this by implication at least — to the extent to which you can do these cross-checks because they are extremely time consuming but, subject to that qualification, we accept totally the point made by the Comptroller and Auditor General.

553.Deputy Crotty.—Could I ask the Accounting Officer what point does he accept from the Comptroller and Auditor General.

Mr. Creedon.—What the Comptroller and Auditor General suggested was that random cross-checks should be done more or less systematically to support the 100 per cent field inspections. The type of scheme we were talking about was the calved heifer scheme which is a type of scheme we do not have any more.

We do have other headage payment schemes where the same problems do not arise in the sense that you are not talking about extra or incremental numbers to be checked and the scope for errors is not quite as obvious as it is in the particular scheme that we are talking about.

Deputy Crotty.—The fact that the scheme is not in existence now does not concern us here. We are examining a report where the scheme was in operation. What I took from the Comptroller and Auditor General was that the cross-checks would not be cost effective. I accept that but he did certainly question the field inspection aspect. Why was not the field inspection aspect attended to at the time to the extent that it could check on this? We discussed this at length. I feel that built into the scheme should have been a field inspection which could indicate areas where people did not qualify.

Mr. McDonnell.—I think we are at cross purposes. What I said was that 100 per cent documentary cross-checks would not be cost effective. I think we all agree on that. What I said was that we did a random, very limited, documentary cross-check. I suggested that the Department might consider doing that kind of thing on occasion but that the bottom line as far as I was concerned was that if such a random cross-check does throw up errors, perhaps the nub of the problem is that there could be a greater degree of vigilance in the field inspections.

554.Chairman.—I think the point has been accepted by Mr. Creedon. We can move on and deem that paragraph dealt with. Since that paragraph was unfinished, Deputy Foley, that was the reason why it was included today. Paragraph 42 of the 1985 Report and paragraph 46 of the 1986 Report may be taken together. Paragraph 42 of the Report of the Comptroller and Auditor General 1985 reads:

Subhead M.4.— Market Intervention — Incidental Expenses Subhead N. — Appropriations in Aid.

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.4 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 1985 the total expenditure met by the Department exceeded the amount received from the EEC by £64,293,921. The corresponding figure at 31 December 1984 was £55,280,526.

Subhead M.4 — Market Intervention — Incidental Expenses Subhead N. — Appropriations in Aid.

	£m
Handling, freezing and storage, etc.	46.1
Transport	0.7
Deboning allowances	8.1
Financial charges*	46.5
	101.4

* Includes £19.6 million in respect of exchange losses on borrowings in foreign currencies to finance the capital cost of intervention purchases.

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.4 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 1986 the total expenditure met by the Department exceeded the amount received from the EEC by £105 million. The corresponding figure at 31 December 1985 was £64 million.

Mr. McDonnell.—They can be taken together because they are both for information and give details of the costs borne on the Vote as against the amount recovered from the European Commission under the various headings, in connection with intervention buying, storage and so on. You need only look at the 1986 report because it updates the information and you will see that the net result is that the total expenditure on overheads related to intervention buying exceeds recoveries by a considerable amount and it had built up at the end of 1986 to an accumulated total charge of over £100 million.

Chairman.—The cost of intervention to the State has risen by £50 million in the last two years. This is a gigantic increase in the cost of storage of intervention. Do you see this as an on-going thing, that the cost of intervention is going to continue to increase?

Mr. Creedon.—I wish I could give you a “yes” or “no” answer to that. The probability is that the costs will decrease for a number of reasons. The volume of intake into intervention will certainly go down for a variety of reasons. It is going down on the dairy side because of the buoyancy of the market which will mean that less and less will be sold into intervention. In the beef sector, where there is a big volume of material involved, the intake into intervention will go down partly because there may be a reduction in volume anyway but, secondly, because there is no doubt the intervention system is being chipped away, to put it mildly, and the probability is that this will be the trend in the future. Thirdly, interest rates are coming down and, fourthly, there is a certain competitiveness entering into the cold storage business. Because of the reduction in volume there is now competition for the sale of storage space. Therefore, from this year onwards the cost of intervention is likely to decrease.

Chairman.—The large cost seems to be with regard to the shortfall in handling freezing and storage as well as with regard to financial charges. They seem to be the two areas where there are massive losses. Why can we not recover more of our costs from the FEOGA funds?

Mr. Creedon.—The fact is that we get only 75 per cent of the costs back from FEOGA.

555.Deputy Foley.—I am just making comparisons with other years. In 1984 the cost was in the region of £65 million; in 1985 it was £71 million; and in 1986 £101 million. The amount received from FEOGA funds in 1984 was £53 million against an expenditure of £65 million; in 1985, £62 million was received as against an expenditure of £71 million; and in 1986, £61 million was received as against an expenditure of £101 million. You say the normal figure was 75 per cent. Should that figure not be greater?

Mr. Creedon.—I was talking in response to your question. Chairman, in relation to the handling, freezing and storage. The big cost arising in 1986 as compared with 1985, for example, arises on the financial side. The financial charges were £46 million and the receipts were £28 million. A substantial amount of the gap there was due to a devaluation of the Irish pound by 8 per cent, in August which we do not recover, the effects of which, in terms of exchange losses, came into the 1986 accounts. Secondly, as regards financial charges, we are recouped at a standard charge, whereas we pay the actual charge. For example, interest rates were recouped at 7 per cent whereas, of course, interest rates at that time were much in excess of that.

Deputy Foley.—Am I right in saying that in 1986 intervention cost the Irish taxpayer approximately £40 million?

Deputy Foley.—But is it not a fact that this cannot continue on the basis that each year there is an exceptional subsidy towards intervention, going back for year and it seems to be continually increasing? I accept the point you are making about the refund of FEOGA funds but the gap there in 1986 was £40 million. What will be the picture at the end of 1987 approximately?

Mr. Creedon.—The gap for 1987 will be of the order of £27 million on a gross cost of £105 million.

Deputy Foley.—Is there any alternative or is this going to be on-going? Is intervention going to cost the taxpayer this type of money on an on-going basis? Is there any comeback?

Mr. Creedon.—I am being asked to speculate which is always a dangerous exercise but I think I did respond to that in answer to your initial question. The probability is that the net cost and the overall cost will decrease certainly from 1988 onwards unless, of course, some unexpected devaluations or currency changes occur which can affect the situation more drastically than the normal charges.

556.Deputy Crotty.—Is there any move by the meat barons, to sell their meat direct rather than putting it into intervention, in other words, to get markets for it or do we require them to be more active in this field?

Mr. Creedon.—The trend certainly is away from intervention and it is going to have to be away from intervention. The meat industry is, in fact, endeavouring to move away from intervention. It is a slow process but it is going in the right direction and they are going to have to go that way willy-nilly in the future.

557.Deputy Flood.—There has been a reference to the possibility of reduced costs through comptetion in the storage space available and that it would appear now to be moving towards a situation where there will be a surplus available. Does that mean that, because of the shortage up to now, we have been paying inflated costs or much higher cost than would normally be expected? It seems extraordinary that the suggestion might be taken up that there is almost a deliberate attempt to have a limited amount of cold storage space available and that that benefited those in the market of supplying that type of space. Is it because of the falling amount going into intervention that the situation has charged or has the supplier of that type of space in the market decided to supply more space or make more space available?

Mr. Creedon.—It is a combination of two things. The cost of storage, energy, in particular, which is the high cost element of storage, had decreased in the last two years, but there is also a reduction in the volume which means that it is no longer a seller's market, as far as storage space is concerned. The storage rates in comparison with rates elsewhere are not out of line having regard to the costs, particularly in relation to energy, that prevailed here. We never had any indication that they were seriously out of line. It is a natural trend of supply and demand now combined with a reduction in costs.

558.Chairman.—Would there not have been a vastly increased area of storage space available over the last two years as well?

Mr. Creedon.—Not so much over the last two years but up to about two years ago storage space was being increased fairly dramatically and was being filled. As you know from the accounts, we were storing abroad at times.

559.Chairman.—Paragraph 43 of the Report of the Comptroller and Auditor General reads:

Subhead M.5.—Market Intervention—Losses by Deficiency, Accident, etc.

In the member states of the EEC expenditure on the Common Agricultural Policy (CAP) is disbursed through Interventioin Agencies set up under EEC reglations. In Ireland the Minister for Agriculture acts as the Intervention Agency. It is a principle of EEC financing of the CAP that the authorities in the Member States are required to make good to the EEC amounts established as incorrectly paid by their intervention agencies, irrespective of whether they can in turn recover these amounts from the beneficiaries.

Under EEC regulations, export refunds payable under the CAP (i.e. subsidies on the export of agricultural produce to countries outside the community) may be paid by the Intervention Agency in advance of export, subject to customs formalities being completed and a security being provided to guarantee repayment of the amount received plus 15 per cent in the event of failure to comply with the terms of the EEC regulations. These regulations further provide that if the necessary proof of import into a third country (i.e. outside the EEC) is not received within 12 months of customs clearance or if the goods do not leave the territory of the EEC within 60 days of customs clearance the security is to be forfeited.

In 1973 the Community Transit Committee of the EEC agreed that, where goods are transhipped through another EEC port, the date of shipment at the first port of loading could be certified for export refund purposes as the date of leaving the territory of the EEC.

In 1981 export refunds were paid in advance by the Intervention Agency to an Irish exporter of dairy products. Documentation proving import to a third country which was submitted by the exporter within the 12 months time limit showed that the goods had left Ireland within the sixty day limit and had been transhipped through Rotterdam where they had been stored for varying periods. They had been finally exported outside the community more than sixty days after customs clearance in Ireland. As the Intervention Agency considered that the exporter had complied with the terms of the EEC regulations the securities, apart from £68,000, were released. The EEC Commission, however, subsequently disagreed and indicated that the amount involved would have to be made good by the Department of Agriculture. As a result a sum of £2,281,956 has been charged to the subhead in 1985 but the matter has been appealed to the European Court of Justice whose verdict is awaited.

Mr. McDonnell.—The paragraph explains the procedures under which an exporter can be paid his EC export refunds on completing certain customs formalities. It also explains what conditions he must comply with subsequently. I drew this to attention because at that stage the European Commission had disputed the Department's application of the arrangements and it had resulted in a charge at that stage of about £2.3 million on the Vote, which the Department were contesting. I am glad to be able to say that I understand the Department were successful in contesting that decision of the Commission.

Chairman.—We note with satisfaction that this issue has turned out successfully and I do not think there is any need for comment on that.

Mr. Creedon.—Yes, Chairman, and the money has been credited to our account at this stage.

560.Chairman.—Paragraph 44 of the Report of the Comptroller and Auditor General reads:

Subhead M.10.—Scheme for Cessation of Milk Production

Under EEC Regulations a quota system was introduced from 2 April 1984 under which a superlevy is payable to the EEC by milk producers on the quantities of milk delivered by them to creameries/dairies in excess of their quotas. The quota for each producer is fixed by reference to the quantity delivered by him in 1983. The regulations also provide that Member States may provide compensation to induce producers to discontinue milk production, thus allowing their individual milk production quotas to be added to a special national reserve quota from which allocations can be made to increase the quotas of producers whose deliveries in 1983 had been substantially reduced by animal disease or other exceptional factors.

Accordingly, a scheme to encourage cessation of milk production was introduced in 1984 to provide for payment of a premium to producers who had delivered milk in 1983 and who undertook to discontinue milk production for as long as the superlevy system would operate.

The premium is 70p per gallon of the quota freed and is payable in five instalments of 14p per gallon in the years 1985/1989. The first payments totalling £475,850 arose in 1985 and were charged to this subhead.

Mr. McDonnell.—This paragraph is simply for information because it was the first year in which expenditure was incurred under this scheme. I felt it would be of interest to the committee. As I understand it, it was a national scheme without any EC subvention and the full costs were being borne on the Vote. It is just for information.

561.Chairman.—It is just an information paragraph and there is no need to discuss it. Paragraph 45 of the Comptroller and Auditor General's Report reads:—

Subhead N.—Appropriations-in-Aid

Under the Pigs and Bacon Act, 1935, pigs slaughtered at the premises of licensed bacon curers must be presented for examination by departmental veterinary inspectors and a fee must be paid to the Department in respect of each pig. The rate of fee is fixed periodically by statutory order. Since May 1982 the bacon curers, in protest against these statutory controls not being applicable to local pork butchers have refused to pay the statutory fees and, at 31 March 1985, some £4.7 million was outstanding.

In December 1984 the Government authorised the Minister for Agriculture to introduce legislation to provide that local slaughtering premises catering solely for the home market would be subject to the same statutory controls, including the payment of fees, as licensed bacon curers. The Government also authorised the reduction of the statutory fee from £1.10 to £0.75 per pig and the recovery of the substantial sums then owed to the Exchequer through, if necessary, statutorily increasing this to a fee which would include an element in respect of the arrears.

Following the Government decision the trade organisation representing the bacon curers, in September 1985, accepted an arrangement under which payment of veterinary inspection fees would be resumed. This provided for payment of the reduced fee of 75p per pig from 1 April 1985 by the 20 curers involved, all such payments to be made promptly in the future; payment of a further 15p per pig towards the arrears at 31 March 1985, payment to commence on the enactment and implemention of the legislation on local slaughterhouses; suspension of court proceedings initiated in July 1983 for the recovery of arrears, provided the other provisions of the newarrangement were observed.

It was noted in the course of audit in April 1986 that some £472,000 in respect of the reduced fees due for the period April to December 1985 from 17 of the 20 curers had not been paid. I therefore asked why the terms of the agreement made in September 1985 were apparently not being adhered to and what steps were being taken by the Department to ensure prompt payment of the fees due. I also inquired as to the present position regarding the drafting of the proposed legislation so that collection of the levy of 15p per pig towards the arrears of £4.7 million at 31 March 1985 could commence.

The Accounting Officer informed me that difficulties in securing payment of the veterinary inspection fees had arisen primarily from the depressed state of the pigmeat industry at bacon factory level. Because of structural weaknesses, the industry had not been able to adjust to increased competition on export and domestic markets and, as a result, had encountered serious cash flow problems. The bacon curers' overall situation had been worsened by greatly increased competition from local pork butchers who, for the most part, were not liable for inspection fees and who had expanded their throughput very considerably at the curers' expense.

He also stated that during 1985 the Department had repeatedly impressed on the curers the importance of complying with their agreemennt with the Department in regard to the fees. However, because of legal doubts about the success of proceedings against any individual bacon curer in a situation where most pork butchers were not paying fees and in view of the overall position of the pigmeat industry, it was considered that legal action would not be appropriate and would be likely to lead to the termination of the agreement. The very difficult circumstances in the industry had in fact already resulted in the closure of a number of plants and rescue measures involving Fóir Teoranta were being negotiated for others. Against this background the option of ending the agreement was not considered as appropriate or opportune. Indeed, because of the grave situation in the industry, the Government had decided in July 1986 on a number of further relief measures including a temporary reduction (from 75p to 50p) in the veterinary fee with effect from 1 July 1986 and, as part of this arrangement, it was the intention to seek a reasonable commitment from the curers in regard to the arrears.

Regarding the proposed legislation relating to the local slaughterhouses, I was informed that, although this was a complex task involving the amendment of legislation dating back to the 1840's, detailed heads of a Bill were approved by the Government in July 1986 and the aim was to have the Bill introduced in the next Dáil session.

Mr. McDonnell.—This long paragraph recites the difficulties which were encountered by the Department in getting the 20 licensed bacon curers to pay the statutory fees for which they are liable. The problem was compounded by the fact that the curers claimed that they were withholding the fees in order to seek redress of a grievance which they felt they had because local pork butchers were more favourably treated than they were by not being liable for the fees at that stage. The Department made considerable efforts to reach agreement with the industry about the payment of the fees arising from 1 April 1985 through various reductions in the rate of fee. They have also tried to arrange that the £4.7 million arrears will be paid by way of additional fee over a period. I do not know if the problem has been resolved yet. I know that a considerable amount of arrears are still outstanding. Neither do I know how long it would take to clear the arrears if the curers were to comply with the formula put to them by the Department for clearing them. I think the amount outstanding at the moment is of the order of £5 million. You will be aware that legislation to impose obligations on the local slaughter houses, which is apparently crucial to resolving this problem, has recently been put through.

Chairman.—First, one would have to ask why was this situation allowed to develop that so much arrears and fees were allowed to build up. Everybody knows that when stock is presented for slaughtering any abattoir has to pay veterinary fees. Why were these fees not collected and passed on to the Department? Why were the arrangements the Department entered into not adhered to? There seems to be some carelessness with regard to the approach to collecting those fees?

Mr. Creedon.—As the Comptroller and Auditor General said, it is a long paragraph and it reflects a very long saga in this area and that in turn reflects the extraordinary difficulties which the pigmeat industry has had over the last decade or so. To answer your specific question as to whether there was carelessness or not, I would not accept that there was carelessness. I think there were times when extraordinary pressure was put on the industry. The industry had genuine difficulties. The pigmeat industry is an old industry and it has been recognised that it needed modernisation. It has not been exactly the most efficient industry in the country. It had genuine difficulties. The unfortunate part is that each time agreement was reached on a schedule for either the level of fees or the repayment of outstanding debts the industry backed off subsequently from a number of agreements until the latest one. They had genuine complaint on two counts with regard to what they felt was discrimination against them vis-à-vis the non-export slaughtering premises; first of all, as the Comptroller and Auditor General said on the basis that the other abattoirs did not have to pay the fees and, secondly, that the standards required in terms of hygiene and so on in the non-export premises were lower than what they were required to observe. The Abattoirs Bill has sorted that out to the extent that all slaughtering plants will now have to comply with common standards. That has got rid of the main blockage and the main bone of contention that the bacon industry had. The second element, which augurs well for the future, is that the pigmeat industry and the bacon industry in particular which is what is at issue here, is going through a process of rationalisation and modernisation which will lead to more modern plants and greater efficiency. The last agreement reached for the payment of fees, including the extra bit that was added on for wiping out the arrears, is being adhered to and the money is coming in on schedule as of now.

Chairman.—How long is it going to take to clear the arrears? Are we talking about 10 or 15 years if the industry honours its agreements? While I accept some of the points that you have outlined with regard to the reluctance of the industry, the fact that the pork butchers were not paying the levy, nevertheless this group were responsible for paying veterinary levies and they did not pay them. Now there are arrears of £5 million. When can we hope to have these arrears cleared?

Mr. Creedon.—I am not sure that I can answer your specific question as to when, except to confirm again that they are being paid. I could do some rough calculations but I would be afraid I would not be accurate. I can send you a note on that, if you like.*

562.Deputy Foley.—That is a very valid question. What is the actual levy at the moment per pig?

Mr. Creedon.—As of today it is 75 pence plus the 15 pence to wipe out the arrears.

Mr. Creedon.—At one stage it was reduced to 50 pence and it went up to 75 pence.

Mr. Creedon.—My recollection is — and this is totally off the top of my head — I think about 15 or 16 but not more than 20, I would think.

Deputy Foley.—I noted in previous reports there were 19 to 20 mentioned. Do these people qualify for modernisation grants for doing up their premises?

Mr. Creedon.—Yes, but it is subject to a number of conditions. They do not qualify for any grants from the Department of Agriculture. They are technically eligible for grants from the IDA but subject to very strict conditions.

Deputy Foley.—But some of those bacon curers have qualified for IDA grants, is that so?

Deputy Foley.—Would it not be possible to have this amount due deducted from any grant that they have qualified for over the past couple of years? One or two have qualified for substantial grants.

Mr. Creedon.—You might have legal difficulties there, Chairman. I would repeat that last agreement made with the bacon industry for recovery of the arrears and of the levies is working.

Deputy Foley.—I accept that but as the Chairman has asked, how long is it going to take to clear off the amounts outstanding?

Mr. Creedon.—The first difficulty about deducting it from grants is that the amounts might be in excess of the grants. I am not sure what the level of grants will be but it might result in wiping out the grants. I am sure that would be a feasible proposition. I am only speculating, which is a dangerous exercise anyway.

Deputy Foley.—Would it not be a worth-while exercise to have it investigated because you have a situation with the Revenue Commissioners that if a contractor has not got a clear C2 he just does not qualify for a subsidy?

Mr. Creedon.—I think I might add one refinement that might alter the situation as well. Most of the people now getting grants for pigmeat plants are new entrants into the business so that the Deputy's proposition could not apply to them anyway.

Deputy Foley.—I accept that but some of the bacon curers involved in this have qualified for substantial grants over the past number of years while, at the same time, owing quite a share of money to the Department.

563.Deputy Crotty.—Would not those people if they qualified for IDA grants also be eligible for FEOGA grants?

Deputy Crotty.—Could I ask the Accounting Officer to explain why the agreement made in September 1985 was not adhered to by the curers? That was a very recent agreement and if you entered into an agreement at that stage you would think it would be honoured.

Mr. Creedon.—It is true. I agree with the Deputy, you would except it to be honoured but the main bone of contention at the time seemed to remain with the industry, the fact that nothing had been done to sort out the other abattoirs and secondly — this is probably the real reason — a number of the plants at that time were in extreme financial difficulty. I recall very clearly that two or three of them were dependent on help from Foir Teoranta at the time and there was some doubt as to whether they would be able to pay. It was more than a doubt, in fact, that they would not be able to pay. We went to extreme lengths at the time and threatened to close and were indeed well in the process of closing down plants when the industry came back and on the basis of the case they made at the time the final agreement was made on 1 July 1986 which is being observed. It was a combination of financial difficulty which the industry had been going through and the general complaint about the abattoirs, that they found that having made the agreement they were not able to comply.

Deputy Crotty.—The Accounting Officer mentioned that there were new entrants in relation to grant-aid. Is it not peculiar that you have new entrants going into an industry that was not profitable? How do you reconcile one with the other?

Mr. Creedon.—It is a question of scale. The conditions for new entrant schemes are that they have to be a size which guarantees economies of scale and of a standard which ensures the most efficient level of operation. That is in the contrast to the old plants, some of which have been there since the early twenties and were not suitable in terms of either the scale of operation or the efficiency generally that you would expect from a modern plant. The margin between the proper operation of a modern plant of a proper size and one of the old, smaller type plants which we had is quite substantial in terms of cost per pig.

564.Deputy Flood.—May I ask the Accounting Officer the situation with regard to the present operation of the Abattoirs Bill. Is that being operated satisfactorily in terms of receipt of fees or are there disputes there as well or would we know?

Mr. Creedon.—Yes, the situation is that regulations for the operation of the Bill are well advanced and will be brought into operation very quickly. The Bill was a framework Bill and it is depending now on operating regulations which are fairly well advanced and will be available within a very short period. The whole system will be operational at that stage.

565.Chairman.—Just one further question. Everything you have said indicates that the pig industry is in a bad way and most of us would accept that. Do you envisage this industry being able to get back and to hold the same position in the marketplace as it did ten years ago? Do you see the number of pigs coming onstream that will enable the new modernised factories to be able to compete in the European market.

Mr. Creedon.—I am afraid you are asking me to speculate again, Chairman. You are close to a particular plant and maybe know more about it than I do but the information I get from that plant where there has been rationalisation is that they are quite confident that the economies of scale achieved will enable them to compete in export markets.

Chairman.—Why is it that the importation of Dutch bacon has grown from nil 18 months ago to upwards of 1,800 tonnes today?

Mr. Creedon.—For the very reason I mentioned, that our bacon industry up to now is not competitive and that is why we need the modernisation process.

566.Chairman.—Paragraph 41 of the Report of the Comptroller and Auditor General reads:—

Subhead C.2. — Bovine Tuberculosis Eradication.

Subhead C.3 — Brucellosis Eradication.

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 follow:—

Further expenditure totalling £9.4 million to 31 December 1986 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 fund (Depopulation Fund) is appended to the Appropriation Account.

The gross cost of the Bovine Tuberculosis and Brucellosis Eradication programmes to 31 December 1986 was, therefore, £367 million. Receipts by the Department up to 31 December 1986 arising from the operation of the schemes were as follows:—

* Up to August 1976 reactors were purchased by the Department and disposed of to meat fctories by contract sale. From that date herdowners themselves dispose of reactors and are paid compensation from the Vote.

Mr. McDonnell.—I do not need to say anything about paragraph 41 as you are familiar with it and the Committee has discussed at length the question of the BTE scheme and so on and the new arrangements.

567.Chairman.—No questions. Paragraph 42 of the Report of the Comptroller and Auditor General reads:

Subhead F.2.— Payment under Exchange Rate Guarantee on loans for Agricultural Purposes

Reference was made in paragraph 38 of my previous Report to the exchange risk guarantee scheme on loans for agricultural purposes provided by the Agricultural Credit Corporation (ACC) out of £50 million which it was authorised by the Minister for Finance to borrow in European Monetary System (EMS) currencies in 1980. The scheme terminated in October 1985 but during December 1985 the ACC was authorised to borrow a further £50 million in EMS currencies, repayable in one year, for on-lending to farmers and agribusiness, with ACC being responsible for credit appraisal and commercial risk.

As in the case of the previous scheme the rate of interest charged by ACC to borrowers included a fixed contribution to cover exchange risks. This contribution was to be credited to a special account at the ACC and to attract interest at the highest rate paid by ACC on variable rate deposits. The balance on this account was to be used towards meeting the exchange losses incurred by ACC with any additional amounts being provided from the Vote. The charge to the subhead includes £5.52 million paid to the ACC under this arrangement and is made up as follows:

Mr. McDonnell.—This paragraph is for information but you will recall discussing in connection with my 1985 Report at the previous meeting the question of the interest rate allowed by the ACC on this exchange risk contribution which is made by borrowers and which, in turn, affected the amount which had to be contributed from the Vote to meet the overall exchange loss which arose on the borrowing in European currencies. You will see that in this similar scheme which followed on from the first one a more favourable rate of interest that had been allowed previously was applied to this special deposit account. The highest deposit rate interest was allowed in that case.

568.Chairman.—Paragraph 43 of the Report of the Comptroller and Auditor General reads:

Land Purchase Accounts and Land Bond Fund Collection of Annuities

Subhead L.2. — Statutory Contributions to Land Bond Fund

Subhead L.4. — Deficiency of Income from Untenanted Land

Subhead L.8. — Improvement of Estates etc.

I referred in paragraph 41 of my previous Report to the arrears of land annuities and rents which had increased from £700,000 at 30 November 1981 to £2.2 million at 30 November 1985. The collection position deteriorated further during 1986 and by 30 November 1986 the arrears had increased to £3.1 million.

The provision made under Subhead L.8 of this Vote is mainly used to meet the cost of improving lands prior to their allotment to farmers by the Land Commission. It was noted from an examination of collection accounts that arrears of annuities of some £35,000 had been written off or had been cleared by making grants from the subhead in respect of improvement works carried out by the farmers themselves following allotment, although it appears that in 1980 the Land Commission, when allotting the land, did not sanction grants for improvement works. Some of the arrears included in the £35,000 had already been reduced by the retrospective downward revision of the original annuity. The write-off or downward revision of annuities results in charges to Subhead L2 and/or L.4 of the Vote. In reply to my inquiry as to why it was decided to clear arrears of annuities by means of payments from Subhead L.8 in 1986 when such improvement expenditure had not been sanctioned when the allotments were originally made in 1980, the Accounting Officer stated that the normal practice is to instal allottees as quickly as possible and with the minimum of expenditure of public funds on improving the lands. However, it can happen in a small number of cases that the cost of rehabilitating the land is subsequently found to be beyond the allottee's resources and, in such exceptional circumstances, it is not unusual for improvement works to be sanctioned and carried out after the allotment. In the particular cases mentioned the Land Commission established that certain improvement work which could have been provided for at the allotment stage had been carried out by the allottees themselves with considerable financial disadvantages and the Commissioners therefore decided to give the allottees credit for these works, the estimated cost being offset against arrears of annuity.

The Accounting Officer stated that the circumstances which led to a reduction in annuity repayments were that the allottees were unable to pay the high annuities on the lands. These high annuities arose from the fact that the land was acquired at a time when land prices were very high and when the rate of interest applying to the Land Bonds was also exceptionally high. Another factor affecting the allottees' ability to pay was a decline in farming profitability due to the general recession and restrictive EEC price policies. Following investigations, the Land Commissioners, exercising their powers under Section 12 of the Land Act, 1950, approved reductions in each case.

The Accounting Officer also stated that since 1984, arrears were reduced or cleared by an improvement grant or a reduction in the annuity in 44 cases to a total value of £206,967.

Mr. McDonnell.—Paragraph 43 refers to a matter which was discussed recently by the Committee — the deterioration in the collection of land annuities and the increasing arrears problem. I understand that the arrears now amount to approximately £4 million. You will see there that I am also drawing to attention the fact that some arrears which had already been reduced by downward revision of the amounts of the original annuities were further reduced, or indeed cleared by payments from the Vote by way of improvement grants. One was offset against the other, so to speak, and you will see at the end of the paragraph that the amount cleared in this way between 1984 and 1986 was more than £200,000. You will also see the Accounting Officer's explanation of the circumstances in which this kind of thing arises.

Chairman.—What is the hope of collecting the £4 million due or what procedures are in place to collect the outstanding money?

Mr. Creedon.—I explained the last day that warrants had been issued for sums over a certain level. I think it is £1,000. It is slow in coming in. Warrants are being executed slowly and we have got about £600,000 in. Warrants were issued last September and at this stage some £600,000 arrears have to come in. That is offset by other people falling into arrears. So the net result is that as the Comptroller and Auditor General said, we are stuck at around £4 million arrears at the moment.

Chairman.—Would you hope to see these arrears cleared within the next two years?

Mr. Creedon.—Obviously, I would hope to see them cleared yesterday. I do no know. I mentioned the last day that a high proportion of the arrears arises in cases where the allottees acquired the land at times when both the interest rates and the price of land was extremely high, so that the difficulty — and this accounts for something like 80 per cent of the arrears from recollection — is in those cases where the annuities are high because of those factors. Obviously, we will continue to try to get in the arrears as far as possible but I am not confident that it will happen quickly.

569.Deputy Foley.—I notice, Mr. Creedon, that approximately £35,000 had been written off but that in actual fact this figure was reduced as a result of a revision of the amounts already due. Allowing for revision, what in actual fact was written off approximately?

Mr. Creedon.—Just looking at these here, I think one could say about 20 or 25 per cent. It varies quite a bit from one case to another, but that seems to be about the average. I can give examples of reductions from £8,800 down to £6,000; £22,000 down to £15,000; that sort of thing. It varies quite a bit but roughly about 20 or 25 per cent.

Deputy Foley.—What criteria were adopted in order to get that sum of money written off?

570.Deputy Crotty.—How far were the Department prepared to go to collect the amount due and at what point do you write off?

Mr. Creedon.—We do not write off at all. The cases about which we are talking is where the price of land was reduced. These are fairly recent cases. In the cases of arrears, we have gone to the extent of issuing warrants, which have been handed to the sheriff to execute. So, we go to that extent to try to collect the arrears in all cases where the amount exceeds £1,000.

Deputy Crotty.—How much land have we on hands now in the Department of Agriculture and Food for allocation?

Mr. Creedon.—It is not held by the Department of Agriculture and Food. It is held by the Land Commission.

Deputy Crotty.—I thought they were wound up. Is the Land Commission wound up?

Mr. Creedon.—The Commissioners are still there and it is the function of the Commissioners to allocate the land. They have about 6,000 hectares of land which is now being allocated and that is all that is left.*

571.Chairman.—Could I ask how many people are involved in the allocation of this 6,000 hectares at present? How many people are directly employed at that type of work just now?

Mr. Creedon.—Offhand, I am not sure but probably about 70 inspectors. I should explain that they are not just doing that, they do other work as well, division of commonages subdivision control and various other things.

Chairman.—How many staff were taken back to the Department of Agriculture and Food from the Farm Classification Office?

Mr. Creedon.—Eighty-seven returned to the Department of whom there are now 63 left.

Chairman.—It would appear that for the amount of land involved, with 70 inspectors, a year and a half would be a very long time to have them allocating 6,000 hectares of land.

Mr. Creedon.—I would hope you are right, Chairman. If you are, then we will do it a lot quicker. It is a residual process. You will have to bear in mind that the land is scattered and while there is not a large amount of land, there is a lot of small awkward parcels of land. It is a winding-up process and it is going to be more difficult to carry through than in the old days when we used to have big estates to divide up which could be done very quickly in one lump. So there are physical factors like that but if it can be done in less than 18 months it will be done, obviously.

Chairman.—In fairness, there are only 80 hectares or thereabouts per inspector.

Mr. Creedon.—I did explain that they are doing other work. They are not just doing this solely.

Mr. Creedon.—Sub-division control, for example, division of commonages where they arise, all the ongoing work that the Land Commission always did is still going on, apart from allocation of land.

Chairman.—It is my information that some of those staff who went back into the offices from the Farm Classification Office were people who were at home for six months and returned earlier this year and, in fact they found themselves with no work to do.

Mr. Creedon.—That certainly is not the situation now. I can guarantee they are all working.

Chairman.—I must say I am glad to hear that. I have an awful feeling that they will not be working for very long, with 80 hectares per individual to allocate.

Mr. Creedon.—There are other areas of work arising. We are continually having new schemes, almost foisted on us, but which we have to operate, coming from the EC in particular. For example, we have to operate a set aside programme for cereals. Staff will have to be found for these. There are other areas of work in the pipeline in Brussels. I have no doubt that we will require staff for those. Where we get them remains to be seen but I do not think we will be short of work.

572.Chairman.—Paragraph 44 of the Report of the Comptroller and Auditor General reads:—

Subhead M. 1.—Farm Improvement Programme, Aids for Young Farmers, Farm Modernisation Scheme and Western Measures

Subhead N.—Appropriations in Aid

The charge to Subhead M.1 includes £4.9 million in respect of grants paid under the Farm Modernisation Scheme (FMS). Up to 31 December 1986 grants totalling some £285.5 million had been paid under the scheme of which £163 million represented grants which qualify for partial EEC subvention. EEC aid of £34.3 million had been received in respect of such grants up to 31 December 1987.

EEC Directive 72/159 provides that in order to qualify for grant aid under the FMS, development farmers must keep farm accounts for each year of their farm development plan so that the commercial viability of the enterprise can be evaluated. While grants under the scheme might be paid to a large degree in the early years of the plan, the accounts had to be kept for its duration. The Department, however, paid the full rate of grant provided for under the EEC Regulations and claimed the full amount of EEC aid allowable in respect of such grants without insisting on this condition being complied with by development farmers prior to 1979. Thereafter grants at a lower level and not qualifying for EEC aid were paid in cases where accounts were not kept. However, the EEC in 1982 decided that, as the conditions of the scheme had not been properly complied with, no EEC aid was allowable in respect of farmers who failed to keep accounts for any period of their development plan and it sought recovery of all aid paid to the Department from 1975 to 1982 in respect of such farmers. This totalled £1.09 million and in July 1986, following the failure of protracted efforts to have the decision to disallow this amount modified, the Department agreed to refund the amount of having it deducted from current recoupment claims.

The Accounting Officer informed me that while the Department encouraged development farmers to keep accounts, it did not insist on accounts being kept in the years prior to 1979 and the EEC were informed in December 1984 in considerable detail why compliance with the accounts keeping requirement had not been insisted on in those years — absence of an accounts keeping tradition, lack of services to help farmers keep accounts, genuine efforts made to keep some type of accounts, attention given by ACOT advisers to the development plans which more than compensated for the lack of accounts and developments over time leading to more accounts being kept. Development farmers had signed an undertaking to keep accounts but as they would have been aware in the early years through contacts with ACOT advisers that failure to keep accounts would not in practice result in the loss of grant aid, it would have been impracticable for the Department several years later to demand repayment of grants received by farmers who undertook development plans prior to 1979 or to seek to offset the amount against further grants due under the FMS. The Accounting Officer pointed out that it should also be borne in mind that the farmers represented by the £1.09 million recoupment were not readily identifiable. This figure was arrived at following a survey of farm accounts kept by development farmers in Co. Kildare and by extrapolating to a national basis the amount of recoupment received from the EEC in respect of those Co. Kildare farmers who had not kept acceptable accounts. To identify the defaulter nationally would require repetition of the Kildare survey in all other counties which would be a major task, the cost of which would be out of proportion to the amount of funds likely to be recovered.

I also noted that while the Department had submitted its FMS recoupment claims for 1983, 1984 and 1985 to the EEC by the statutory dates, these claims totalling £10.2 million had not been met by 31 December 1986. In response to my inquiry the Accounting Officer informed me that payment of these claims by the Commission was delayed because of the problem created by development farmers failing to keep accounts which involved protracted correspondence and discussions with the Commission, the survey in Co. Kildare, and on-the-spot check of the survey by the Commission. The matter was eventually largely resolved in July 1986, when the Department agreed to the deduction of the £1.09 million. However, recoupment in respect of later claims continued to be held up while the Commission examined whether the conditions for recoupment continued to be fulfilled following the suspension of part of the FMS and the termination of certain elements of the Scheme in the 1983 Budget, as well as changes made when a revised Scheme was introduced early in 1984. It was expected, however, that the matter would be dealt with at a meeting of the EEC Standing Committee on Agricultural Structures in September 1987 and that the outstanding amounts would then be received. I understand that at the date of this Report the amounts concerned had not been received.

Mr. McDonnell.—This paragraph explains why just over £1 million out of the total aid which had been received from the EC towards the costs of farm modernisation grants and which had been paid to farmers was subsequently disallowed. It was reclaimed by the EC because of the failure of certain development farmers to keep farm accounts in accordance with EC requirements. Despite the Department's views that there were extenuating circumstances which led to this condition not being adhered to, the European Commission stuck rigidly to the terms of the regulation. This amount remains as a final charge against the Vote because, as the Accounting Officer has explained, it would have been impracticable to seek recovery from the several farmers who had benefited from the grants which were being reclaimed by the EC. I also draw attention there to how the problem about the accounts as well as changes which were made in the scheme in 1983 and 1984 delayed the processing of the Department's later claims for EC moneys. I understand that that was eventually resolved and by December 1987 the full amount which had been claimed for later years, less of course this £1.09 million which remains a final charge against the Department, had been recovered.

Chairman.—How was this figure of £1.09 million arrived at? How was it calculated and why did the Department of Agriculture not seek clearance from the EC that they were not insisting on accounts being kept?

Mr. Creedon.—Maybe I should answer your second question first, Chairman. I think we were a bit naive at the time. It was early days after our accession to the EC and we relied a great deal on informal contacts with the Commission at the time and we had positive indications that there would be a certain degree of tolerance which did not turn out to be the case. To answer to your first question regarding how the £1 million was arrived at, initially what the Commission demanded of us was that we go back over all the files for several years to establish exactly what farmers were affected. This would have been an enormous and costly exercise and we had a feeling that at the end of the day the results might not turn out in our favour. As a compromise, we picked what we regarded as a representative county and went through the files on that particular county and used that as a basis for establishing the £1.09 million. That is the way it was done. The Commission accepted that. They came and checked on the exercise we did in Kildare and accepted that the exercise that was done in that county was proper and accepted that as representative of the rest of the country. It saved a lot of time and effort.

Chairman.—I would say in fairness that you picked a good county to do it in.

573.Deputy Crotty.—Why was the payment delayed in the years 1983, 1984 and 1985? Why did it carry through to these years?

Mr. Creedon.—There was a legal question involved. First of all, the position about the accounts had not been cleared up and they were using that to put us under pressure to sort that question out and, secondly, there was a question as to whether the suspension of the scheme in February 1983 was legal or not. Both issues were resolved satisfactorily and, as the Comptroller and Auditor General said, money was released and credited to the account since last December.

Deputy Crotty.—Could it not have retained some to cover the disputed amount and paid what was due in the meantime. Did the Department not press for this or what was the situation?

Mr. Creedon.—There was £10.2 million paid in 1986 which was due for some years before that. If you take interest on that, the amount would even exceed the £1.09 million that we were deducted. There were two questions, Chairman. Apart from the accounts question, the £1.09 million which was eventually arrived at, there was the question of the legality of the suspension of the scheme which they felt justified them in retaining the money. You can be assured that we did press very, very strongly and continuously at all levels to have that money refunded but the Commission were adamant that this situation had to be cleared before they would release the money. It was not for want of pressure.

Deputy Crotty.—What do you mean by the legality of the suspension of the scheme?

Mr. Creedon.—The question whether it conformed with the particular regulations at the time, whether we were within our rights to do it.

575.Chairman.—Paragraph 45 of the Report of the Comptroller and Auditor General reads:—

FEOGA — Ewe Premium Scheme

Subhead M.3. — Aids to farmers in certain less favoured areas

A premium is payable directly by the EEC from FEOGA on a countrywide basis to farmers who maintain at least 10 eligible ewes on their holdings. In addition to the ewe premium a headage grant is payable from the Vote in respect of each eligible ewe up to a maximum of 200 kept by farmers in disadvantaged areas and designated mountain sheep areas; 50% of the cost of the headage grants is recoverable from the EEC. In 1986 some £44.5 million was paid in ewe premiums in respect of some 2.5 million ewes while some £10.9 million was paid in headage grants in respect of 1.2 million of these. Payments for each scheme are made following physical inspections by departmental officers.

A comparison made by the Department in 1986 between departmental statistics of payments made and livestock statistics compiled by the Central Statistics Office (CSO) indicated that the total number of ewes for which premiums were paid (some of which would also have attracted headage grants) in each of the years 1982–86 was greater than the number of ewes recorded by the CSO in its livestock enumeration reports for those years; in 1986 the difference was of the order of 400,000. As I was concerned at the possibility that there may have been significant overpayments of ewe premiums and headage grants I inquired whether the number of ewes on which premiums was paid can be reconciled with the number of ewes recorded by the Central Statistics Office.

The Accounting Officer explained that the number of ewes on which premiums are paid can be greater than that recorded by the CSO because of—

(a) a difference in definition where the CSO excludes ewes which have lambed in the season in question but which the owner intends to cull later in that same season.

(b) differences in count, where the CSO count relies more on figures supplied to enumerators by flock owners who may understate numbers through fear of taxation and/or loss of social welfare benefits,

(c) possible sample area bias because the District Electoral Divisions (DED's) selected by the CSO as the basis for its 20% sample may no longer be fully representative, as increases in flocks in non-traditional areas have arisen from restrictions on milk production and the attraction of sheep as an alternative enterprise.

The Accounting Officer stated that both the CSO and the Department were concerned at the growing differences between their respective figures for the national total number of ewes and he assured me that investigations in the matter were continuing with a view to ensuring that any difference can be satisfactorily accounted for.

I also sought the observations of the CSO on the apparent discrepancy in the statistics and have been informed that its national estimates of ewe numbers are based on grossed up returns from a fixed sample of about 600 DEDs out of a total of nearly 3,000 DEDs in the State. Restriction of the sample to this approximate 20% coverage arises from resource constraints. The information in respect of the DEDs in the sample is collected by enumerators as part of the June annual statistical inquiry but the last full Census of Agriculture was in 1980. The CSO has confirmed that it is currently engaged with the Department in examining the two sets of data relating to ewe numbers with a view to determining what effect such factors as definitions used, timing and the 20% DED sample may have on the results.

Mr. McDonnell.—This paragraph deals with my concern that there may have been a significant overpayment of grants under both the schemes referred to. One of them is being fully funded directly by the EC and the other from the Vote with partial recovery from the EC. This concern was caused by the fact that the statistics produced by the Central Statistics Office showed a lesser total of ewes in the country than the numbers for which grants had been paid. Both the Accounting Officer and the Statistics Office suggest a number of possibilities which might explain why the two sets of statistics should be different. He does say that they are both very concerned at the wide discrepancy and said that they are investigating the matter. My understanding is that this investigation is still ongoing.

Chairman.—When do you hope to have this investigation concluded between yourself and the CSO with regard to the difference in the figures?

Mr. Creedon.—It is an ongoing thing. We have been in very close touch with them. There are problems with definition and these are being sorted out. There is also the situation that the figures are beginning to converge at this stage and I think the gap is not likely to be as wide as it was. We are supplying them with information which they can cross check and vice versa. It is an ongoing thing but I think both the CSO and ourselves are confident that the position can at least be improved and that the figures can be brought closer together. But the problem of definition will remain and that will complicate the matter and there is also the problem of coincidence in time, the time of year we do our count and the time they do theirs. I think they will never be line ball but they should be much closer.

576.Deputy Crotty.—Does the Department carry out an actual count on the ewes? How do they arrive at their numbers?

Mr. Creedon.—Yes, Chairman, we do carry out an actual count and we notch the ears of each ewe as it is checked so we are more than satisfied that our count is accurate. Every ewe in the country qualifies for premium so they have to be counted.

Deputy Crotty.—Does this not cast a reflection on the Central Statistics Office? I am not asking the Accounting Officer but I will ask the Comptroller and Auditor General if the Central Statistics Office reports are relevant at all because we have come across a number of cases where their figures and estimates are questioned and there is no statutory requirement for people to return figures to the office. I wonder are the reports from the Central Statistics Office relevant or should we have a serious look at them.

Mr. McDonnell.—I would hate to say that the Central Statistics Office figures are irrelevant. I am sure the Central Statistics Office would not agree that their figures are irrelevant. What I saw was a situation where statistics which I would have accepted — and I am sure the people in the statistics office would insist — were compiled on a scientific basis to show that there was X number of ewes in the country. I understand they enumerate all the livestock; they have a process for doing that. I am not suggesting that they count every one. I do not know what their process is but I am sure that it is a normally accepted scientific method. What I saw was a situation where they came up with a figure of X ewes in the country and the Department had paid grants for X plus 400,000. I do not want to speculate, Chairman, as to what the possibilities might be in regard to where the number for which the Department paid emerged from I think I am right in saying that, as the Accounting Officer has said, the Department count them; they count the number in each herd when they pay the grant and they notch their ears. I have no doubt animals turned up in each herd for which they were paid. I am not going to speculate as to why, when all the herds for which the Department paid were added together it came to be 400,000 more than the number arrived at by the Central Statistics Office. I do not want to speculate as to where the additional ones came from if there were additional ones.

Deputy Crotty.—I am very concerned about the Central Statistics Office and its methods of compiling figures. If the figures are not going to be accurate, I think it is certainly not an advantage to the State or to the people who use the figures from the office. The Acounting Officer here is quite adamant that he is 100 per cent correct so that must certainly throw a shadow or a cloud over the Central Statistics Office. We will have another opportunity of questioning the Central Statistics Office Accounting Officer on the situation and I think this particular paragraph should be borne in mind then. The Comptroller and Auditor General was certainly correct in highlighting this. It leaves an unease in relation to the whole area.

Mr. Creedon.—There are problems of definition. I do not want to hold any brief for the CSO; they can answer for themselves, but their figures in the past have been shown to be reasonably accurate in most other areas. I think this is a particular situation. There are undoubtedly problems with definition and time and obviously you will be talking to the CSO about this. I would not be as extreme either as the Comptroller and Auditor General or as Deputy Crotty is about the CSO. Their record shows that they have been fairly accurate in all areas in relation to livestock.

Mr. Creedon.—You mean for the CSO? My understanding is that the CSO system of collection is by way of numerators employed specifically for the purpose. They do a random selection of farms in all areas of the country but I would not claim to be expert on the precise procedure.

Deputy Desmond.—Are you satisfied that there is no question of double counting of the ewes?

Mr. Creedon.—As far as we are concerned, yes, because the discrepancy seemed to apply throughout the country. If it applied only in certain areas of the country I could have other suspicions but that is not the case.

Mr. Creedon.—There are problems of definition. For example we count a ewe in lamb, as a ewe which technically was not necessarily a ewe.

Deputy Desmond.—The enumerators are hardly suffering from such grave eye defects that they have to accumulate 400,000.

Mr. Creedon.—When numbers are increasing fairly dramatically and rapidly as they are, you can run into fairly big figures.

Mr. Creedon.—I suspect that sheep production has extended to parts of the country where it was never before. It is even possible that some of these have not been picked up yet by the CSO.

Deputy Desmond.—The capacity to collect grants has also expanded. Is it not quite exceptional that out of 2 million there is a variation of about 400,000. I only pose the question. As a half a twin myself I have some doubts about the amount of twinning on the ewe side.

578.Chairman.—I doubt if twinning would be playing any part here to confuse the figures but there is a sizeable gap there and I think it is something, as Deputy Crotty has suggested, that we can take up with the CSO. Paragraph 47 of the Report of the Comptroller and Auditor General reads:—

References were made in previous Reports and in the reports of the Committee of Public Accounts to the difficulties encountered by the Department as Intervention Agency in the 1974/80 period in maintaining up to date stock records of beef held in intervention and to the continuing payments on account being made in respect of storage charges because it was not possible to verify the charges due to the absence of such records. When accurate computerised stock records became available in 1980 the problem was resolved and it was expected that it would not recur.

It was noted during audit that due to the Intervention Agency's stock records again not being up to date the full amounts invoiced in respect of storage charges since late 1985 are being paid without verification of their accuracy. In 1986 some £27 million in beef storage etc. Charges were paid on this basis but by March, 1987, the Department was still not in a position to verify these payments because sales to the extent of 32,000 tonnes for the period December 1985/November 1986 were known to be still unrecorded in the stock records at that stage. As up-to-date stock records are essential to the control and verification of storage charges, I asked why such records are not being maintained and what steps are being taken to rectify the situation.

In July 1987, the Accounting Officer informed me that in the latter part of 1985 and throughout 1986 the EEC operated an accelerated programme for the disposal of stocks of intervention beef. Because this programme involved some significant modifications in the conditions of sale previously applying and therefore required changes in the computer programme and because of time limits, increased volume and complexity of the sales, staff resources had to be concentrated on the offer and contract aspects. This delayed stock withdrawals being input to the computer record and some loss of experienced personnel in the area responsible for this work added to the difficulties.

The Accounting Officer explained that sales are made on the basis of the computer record of specific unsold and uncommitted lots in store and that at the time of each sales offer and contract the computer record is updated to show the lots specifically reserved for that sale. This makes it possible to control sales even though the computer record of withdrawals for earlier sales may not be completely up-todate. He agreed, however, that for final accounting purposes, computer recording of actual withdrawals is necessary to determine sales quantities and values as well as stocks on hands, both overall and by individual store. However, as withdrawals normally show only marginal variations from the amounts contracted for and as the delay in recording withdrawals was not the fault of the stores whose claims have generally shown a high level of accuracy, it was considered that storage accounts could be paid in full, but subject to verification on the basis of the computer record of stocks when this became available. There was also the consideration that the Department's ongoing dealings with the cold stores would enable any necessary adjustments to be made later.

The Accounting Officer stated that by July 1987 practically all the withdrawals from stores in 1986 had been input to the computer record and input for 1987 withdrawals was proceeding while the work of finally checking the stores' 1986 claims was in progress.

Mr. McDonnell.—Paragraph 47 refers to a problem which had arisen in the early days of intervention buying and which had been more or less overcome some years ago but which has now reappeared, that is, the problem of complete and reliable stock records of intervention beef. I think the need for such records is self-evident because without them proper control is impossible and overall stock balances cannot be verified and reconciled. As well as that, the amount claimed by storers which is the issue referred to in this paragraph, cannot be properly verified by the Department before payment. There are other things also which might be affected such as claiming a refund of financial charges from the EC because, as far as I know, that is done on the basis of average monthly stocks held. The Accounting Officer has explained the difficulties which were encountered by the Department in keeping stock records up-to-date and the Department still had not resolved the problem at the date of my 1986 report which was in the middle of 1987. I understand that some progress has been made in the meantime but I am not sure that I could say at this stage that the problem has been fully resolved.

Chairman.—First, how did the problem develop and, secondly, is it confined to the beef area? Are there difficulties with butter and milk powder and other products as well? How come it is taking the Department so long to get this situation sorted out?

Mr. Creedon.—The position has improved. We are well into updating to midway 1987 and we will shortly have 1987 sorted out. As to why it happened, there were technical difficulties, staff difficulties but, more importantly, there were changes in the system of sales because of the slow disposal of intervention beef Community wide. The system was changed to allow for more flexible operation of sales I think in 1986 in particular and since then. That caused a lot of problems as beef sold could be removed in lots from store and sale was not completed until it was all gone. So you could not update your computers. Sometimes this extended over a period of even six months or more, so the whole system was complicated by these. For example, there was a massive sale to Russia which was taken off store over a very extended period and caused all kinds of complications, so there were technical difficulties. From the accounting point of view, the risk of overpayment is minimal because it is an ongoing situation. You are paying regularly on these so if a deficiency or an error is found you can adjust it in the subsequent payment. Our experience in the past has been that when we do update the error or the difference between what was paid on account and what might be properly claimed was very small. The real problem in the recent 18 months or so has been this complication of a new type of sales which made the situation very difficult. They seem to have disappeared for the moment and it has facilitated the updating of the position.

Chairman.—I find it difficult to understand. If you have 1,000 tonnes in storage and you take 50 tonnes out of it it should not be very hard to calculate what is left in it. I find it difficult to see how the Department were not able to keep abreast of what was moving in and out of storage. Or is it that the computer system did not lend itself to this type of thing?

Mr. Creedon.—It is really a problem with the computer system as well. Mainly in fact.

Mr. Creedon.—I am inclined to agree with you. In fact we do keep a manual record as well as one from the computer, just in case.

579.Deputy Crotty.—I would be concerned regarding a statement by the Accounting Officer that they can recoup on subsequent payments. I note that in 1986 £27 million was paid in beef storage charges and they were not vouched. Is that right? By March 1987 the Department were still not in a position to verify these payments? This was for a period from December 1985 to November 1986.

Mr. Creedon.—All the 1986 records are completely up to date now and all payments are paid on account, pending confirmation. My understanding is that in relation to 1986 no errors were found when the records were updated and that confirms what I said, that the records kept by stores and by the Department finish up coinciding. That has been the experience.

Deputy Crotty.—While no mistakes were found, what would happen if a firm went into liquidation and you had your money paid out and they had assets left worth £2 million or £3 million and the Department were left holding the baby for £20 million plus?

Deputy Crotty.—It is a risk the Department are taking on behalf of the Irish taxpayer. There is no verification here.

Mr. Creedon.—That is why we are so anxious to have these records update which is now being done. There was a situation in 1986, as the Comptroller and Auditor General has pointed out, which arose from a number of factors which I referred to. That has now been put right for 1986 and 1987 will be completed very shortly.

Deputy Crotty.—It is also mentioned there about staff not being available and the loss of experienced staff. With intervention costing £40 million in the year we are examining, 1986, it behoves the Department or the people responsible to see that staff are there and to have accounts updated and in time. The public at large will not accept that a scheme costing £40 million has not the personnel properly to monitor their accounts.

Mr. Creedon.—Personnel is a general problem and computer personnel are a particular problem. They are always a scarce commodity. To some extent the Civil Service is a training ground for computer personnel and it is very difficult to hold onto them. There is something like 20 cold stores involved and this only applies to beef which was a particularly complicated situation which I outlined very briefly but it was even more difficult and it is difficult to explain. That situation does not apply. The Committee will find that once we have 1987 up to date we will have no difficulty in keeping up to date, subject to the personnel problem which may well occur again. Computer personnel are a scarce commodity.

580.Chairman.—Any further questions? I think we must record our dissatisfaction with the volume of beef that is being handled here and what one would have to agree is a less than accurate system of calculating the amount of beef in storage. It is something the Committee will have to look at again. We will move on to the Vote and we will take the Votes for 1985 and 1986 together.

VOTE 38—AGRICULTURE

Mr. Creedon further examined.

581.Deputy Crotty.—I noticed there was in Vote 38, page 116, subsidies paid on milk and dairy produce of £31.5 million. Could the Accounting Officer inform me how payments of the subsidies were made, how the commodity was checked and the returns and so forth required from people who were making the sales?

Mr. Creedon.—I am afraid I missed the drift of the question — my apologies.

Deputy Crotty.—I am asking about how the payments were checked, how the sales were accounted for by retailers, wholesalers or whatever, what receipts were required and what verification was required?

Mr. Creedon.—Subsidies are paid at source; in other words, they are paid in the case of butter to the manufacturers; in the case of liquid milk to the pasteurisers. We do not get down to retail level.

Mr. Creedon.—The check is done at source by our dairy inspectors who have to be satisfied from the inspecting of documents and so on but once it gets to retail level it can be used for all sorts of things but as it leaves the source the check is by way of documentation to see that it went to destinations which would represent human consumption. In case of liquid milk, the bulk of it is delivered door to door. In the case of the butter, I am not sure where else it could go except for human consumption.

Deputy Crotty.—The wholesalers deliver retail and wholesale. Do you require receipts of the sales?

Mr. Creedon.—No, delivery source from the manufacturers and the pasteurisers. That is where the records are inspected.

Deputy Crotty.—The manufacturer also delivers retail. How does he account for these sales?

Mr. Creedon.—He checks from records that the amounts of milk and butter for which subsidy was claimed was delivered by the manufacturer, either to wholesale or retail outlets. In the case of liquid milk, most of it is sold on a door-to-door basis anyway and that can be checked back against purchase of raw materials. There are a number of checks that can be carried out.

Deputy Crotty.—There are a number of checks but this is the point I am getting to. How is the actual sale checked? Do you require a written receipt? Do you require a return of money? What requirement is there?

Mr. Creedon.—I do not have the precise details but I would be surprised if there was not a very detailed check. I can give you a note on this, if you so wish.*

Deputy Crotty.—On all the checks, whether receipts or cash; how it was checked that something was sold by the manufacturer.

Deputy Crotty.—On subhead F.1. — Agricultural Credit Corporation — there was a grant of £1,000 for the Agricultural Credit Corporation. What is that grant to the Agricultural Credit Corporation?

Mr. Creedon.—That was £1,000 paid to the ACC in respect of an old grain store scheme where the Department guaranteed the loans. The amount spent out of that £1,000 was £536. The £1,000 was simply a total vote.

Deputy Crotty.—On subhead J1 — J5 — could you explain what those items actually cover, such as international co-operation at £500,000?

Mr. Creedon.—The expenditure here represents contributions for international organisations concerned with agriculture, FAO in particular. In 1986, we paid FAO, for example, £348,000. Other contributions were made to some of the FAO subsidiaries, the Commission for the Control of Foot and Mouth Disease, the International Board for Plant Genetic Resources, the International Foot and Mouth Disease Vaccine Bank and other organisations like OIE, the international veterinary bureau to which we subscribe. The total expenditure was £393,000.

Mr. Creedon.—Yes. This would be our contribution based on the criteria they use.

Mr. Creedon.—The World Food Programme, subhead J2, which is the one you asked about, is also a United Nations organisation. There the purpose is to use food donated to the programme by member countries and we make our donations on a two-year basis. Our contribution is provided by way of grant-in-aid. Usually, we supply either grain or skim milk powder.

Deputy Crotty.—Who decides on the amount? Is that a Government decision, a Department decision or is it a percentage of GNP or what?

Mr. Creedon.—It would be a Government decision taken in the context of the Estimates generally, normally but it has been maintained in fact at that level now for a number of years. You can take it that it would be a Government decision initially to supply a certain amount.

Mr. Creedon.—Subhead J3 is a scheme where young graduates with practical experience are recruited by what we call donor countries, that is, countries who make contributions to FAO and these are assigned to FAO to assist people in the field on particular projects. It is a two-way thing in the sense that we make a contribution to FAO and these people gain experience which can be of value when they come back. Each donor country, a country like ourselves, refunds to FAO the salary and related expenses incurred by these people while they are working on them. We always have a couple of graduates with FAO on that basis. We spent only £60,000 in 1986, for example, and that was because we had only two graduates there at the time. It varies. Sometimes you have two, sometimes you have more.

Deputy Crotty.—Is there any particular field of expertise that they engage in?

Mr. Creedon.—It varies a bit but the most usual one is livestock management and breeding or veterinary. Sometimes we have had forestry graduates as well and I recall that we did have plant breeding people from time to time. It depends really on what they are looking for at the particular time but those are the most general type. My knowledge of this is a bit limited but my recollection is that it is usually more in the livestock and veterinary fields than anywhere else that the demand is. It is an interesting area of contribution to FAO. The other two subheads explain themselves.

582.Deputy Desmond.—Do you have an overall figure of the amount of money saved on the relief schemes for weather damage in 1986? We spend around£17.7 million in 1985. There was no expenditure this year. There are two summers in question.

Mr. Creedon.—There was a lot of money spent in 1986. There was £13 million spent on the feed voucher scheme; £3.8 million on the winter fodder scheme which was a silage scheme and £1.3 million roughly on a working capital scheme for tillage farmers and a bit on nitrogen subsidy. That was the second of the bad years, as Deputy Desmond has said.

Mr. Creedon.—There was a small amount spent in 1985. We spent just £2.7 million.

583.Chairman.—They cost the Exchequer £20 million; they cost the farming community much more, I can assure you.

584.Deputy Desmond.—I know. It had other repercussions also. Could I ask, on the overall cost of the eradication schemes, so far we are coming up now to about £300 million to the end of 1988. I notice that the net cost to the end of 1986 is £254 million. How is the current “reorganisation” going — I put the word in quotes.

Mr. Creedon.—I am sure the Deputy does not expect me to use quotes. It is early days but we are starting from a fairly good base where positive indications of progress, marginal though they might be, at the end of 1987 gave us reason to believe that the new arrangements would achieve results. Certainly, the field operation is going extremely well. The weather helps because you can get more testing done in this kind of weather and the completion of the round of testing will be done on schedule this year and that in itself is an encouragement. There will be follow-up programmes in the bad areas. Without being over-optimistic we can look forward to results.

Mr. Creedon.—I am not sure what you mean by saving money. To go through the process it is going to cost money. We are going to save money in that the number of reactors being found is going down fairly dramatically. That in itself will save money. The physical job of doing the testing will continue for a while and that will be the main cost for the foreseeable future.

Deputy Desmond.—Are you on line in terms of expenditure for this year with the new scheme?

Deputy Desmond.—Is there any discernible improvement? We have had greater weather. We are spending £24 million or £25 million this year and we are now up to £300 million on the eradication scheme at the end of 1988. Will there be any real improvement?

Mr. Creedon.—No. My honest opinion is, in terms of money, we will be spending money of that order for the next couple of years, for this year and for next year certainly, but there will be a saving in relation to reactors. That, in relation to the total cost will not dramatically affect the overall level of expenditure.

Deputy Desmond.—At a professional level, is the Department satisfied with the new organisation?

585.Chairman.—One question there, with regard to the scheme of assistance for the expansion of the cattle breeding herd, I think it was on your visit here on 10 March you circulated the bones of a new scheme which was to be introduced in the very near future which was partly subsidised by the banks and by the meat plants. Appendix 51.

Chairman.—I am just talking about the expansion of the herd scheme. That scheme has not got off the ground yet. Is there any hope that it will get off the ground later in the year?

Mr. Creedon.—You are asking me to speculate again. No, the probability is that scheme will not get off the ground.

Chairman.—At the time it was circulated here to the Committee I am sure that the Department were satisfied it was going to be implemented. What happened between then and now?

Mr. Creedon.—The main difficulty arose from the contribution that was to be made to the scheme by some of the interests involved. Our initial impression was that there was going to be a cash contribution up front. It turned out for various reasons — it would be up to the interests concerned to elaborate upon them — that rather than cash up front that element of the money required for the scheme would only come by way of a levy to be collected over a period. That would not enable a satisfactory scheme to be operated. That was the main reason.

586Deputy Crotty.—On Vote 40, subhead M.8, there was £30,000 provided for aids to horticultural producer groups and none of this was taken up. There were no applicants. Would that be rather unusual, seeing that this is a development area, that there was no applicant particularly for a grant when there are grants available.

Mr. Creedon.—Yes, I suppose it is unusual to have money available and nobody queueing up to take it. This is provided for aid for horticultural producer groups which comply with conditions that are laid down under an EC regulation and they are fairly strict conditions. In the past there have been a couple of groups who have availed of this and who benefited from it. In 1987 there was one such group. The fact is that conditions are difficult and horticultural producers are apparently slow to organise themselves into producer groups on a basis that would qualify for the assistance. To answer the Deputy's question, I would think it is unusual.

Deputy Crotty.—On Vote 38, there is a note under Extra Remuneration, on page 123. I notice 506 employees received overtime payments ranging from £403 to£14,289. That seems to be an extraordinary amount for overtime for any one person in the year. How many people qualify for the type of overtime?

Mr. Creedon.—The type of people that qualified for the big sums the Deputy mentioned are those that mainly work in the meat industry which is very often an around-the-clock industry. This is where the high levels of overtime arise. It is unusual for such high levels to be operated. It is not an area of work that is popular with staff and where it does arise you sometimes work at weekends, up to midnight, around the clock, all sorts of odd hours and it does clock up a fair bit of time. It is only a limited number of officers that earn the high sums.

Mr. Creedon.—It is not a question of extra officials; you would have to do shift work at that stage which is a big issue and which is a difficult one, my colleague from the Department of Finance would confirm. It is the only alternative in that case.

Mr. Creedon.—As the volume of intervention work, intake and so on goes down, it would be less. It is going on to some extent still.

Deputy Crotty.—Just a final question. It mentions on the same page under “Notes” that there were sums of money paid to herd owners in respect of cattle which failed to pass tuberculosis tests but died before they were slaughtered. What is the background to that?

Mr. Creedon.—It is one of the anomalies that arises in the TB scheme. Technically to qualify for a grant a reactor has to fail the test in the first instance and then be sent to the factory for slaughter, in which case, you would pay the grant in the normal way. We have had a small number of cases from one year to another where the animal actually dies before it reaches the factory and technically, in that situation, under the normal rules, the animal would not qualify for a grant but an ex-gratia payment was made in those areas.

587.Deputy Desmond.—Staff wise in the Department, how stands the current complement of staff in terms of statements made particularly by farming organisations regarding the audit prospects and how far down have you come over say, January, February of 1987 in current loss of staff?

Mr. Creedon.—First, I would like to make the general point that in the last five years we have reduced the staff from 5,011 to, at the end of March of this year, 4,064. As regards statements made by organisations, they do tend to take a selective view of the staffing situation based entirely on the amount of money that is spent by the Department. I take the view that the Department of Agriculture is not just a spending Department any more; in fact, it is a very important revenue raising Department in a sense that it is responsible for ensuring that something of the order of £1,100 million or so of EC money accrues to the country and is distributed through the channels operated by the Department. It does not appear under the Department's Vote. That has never entered into any calculations I have seen or heard of from the farmer organisations. Secondly, as regards the audit figures that have been talked about, the outcome of the audit was that there was something of the order of 500 posts in the Department that could be saved over a period of time. Of that 500 a substantial number related to work, residential work being undertaken by the Land Commission which is finite and, therefore, they will disappear. Since the audit was taken last December, the situation has changed in the sense that a number of people have availed of voluntary retirements and career breaks and so on. That is of the order of another 200. There are not 500 people sitting in the Department waiting for their exit notices at this stage. That is a general picture.

588.Chairman.—Thank you, Mr. Creedon. That concludes the business of this meeting.

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

VOTE 44—FOREIGN AFFAIRS, 1985 and 1986.

Mr. Noel Dorr called and examined.

589.Chairman.—The Committee of Public Accounts is examining Mr. Noel Dorr, Secretary of the Department of Foreign Affairs, in his capacity as Accounting Officer for that Department. It is Mr. Dorr's first occasion to appear as Accounting Officer. You are very welcome, Mr. Dorr.

Chairman.—Apologies for the delay in starting. There was a division in the House. A great way to start off the last day of term. We do not have any paragraph. So it is straight into Vote 44 for both years, 1985 and 1986. Mr. Dorr, is the question of passport difficulties at the Irish Embassy in London subjudice? Is that matter still under examination by the courts?

Mr. Dorr.—Yes, Chairman, I believe it is sub judice in both countries. However, I can say that, obviously, we have tightened up procedures and tried to make sure that if there were something which happened it will not recur. But most of the issues are sub judice in both countries.

Chairman.—Would you let the Committee have a report on the matter as soon as it is concluded by the court? You might send us on a note letting us know what the precise position is.

Chairman.—Could you tell me about subhead D — Repatriation and Maintenance of Distressed Irish Persons Abroad? Is most of that usually written off as irrevocable?

Mr. Dorr.—No. On the contrary, most of it is recovered. A very small amount is written off. The practice is usually to require the person's family to lodge money here and then money is advanced abroad but most of it is in fact recovered.

Chairman.—Subhead H — Cross Border Studies — a very small amount of money is spent on that. To whom would those moneys be paid?

Mr. Dorr.—That is an amount which is difficult to predict in any particular year. It is considered politically desirable to have money available for studies but sometimes they have to be arranged with the local authority. I understand that a study, for example, has now been commissioned from Coopers and Lybrand. We are awaiting approval from the EC Commission, who will fund 70 per cent of it. Work on that is expected to start in September and be completed in three to six months.

Mr. Dorr.—One, which was provided for in the 1984 and 1985 Estimates, was a possible expenditure of £15,000 on a cross border study of Lough Melvin in Countries Leitrim and Fermanagh which was commissioned jointly by the Irish Government, the Northern Ireland authorities and the European Commission. Another study for which provision was being made was a proposed study of the northwest — the Derry, Donegal, Strabane area.

Chairman.—Lough Melvin is a lake I am very familiar with. What sort of things will this story cover? Will it cover stocking of the river or pollution or stocking of the lakes?

Mr. Dorr.—I do not have exact details. I would expect it would be a tourism potential. It is generally economically directed, I think. The intention would be to study issues where the Border is a factor and where co-operation can be to the benefit of the district. If you wish, I can get details. I do not have full details.

Chairman.—That is all right. With regard to subhead L—North-South and Anglo-Irish Co-operation, it went up from £150,000 in 1985 to £250,000 in 1986. Is that money spent through the Anglo-Irish Conference or how is that money dispensed?

Mr. Dorr.—No, Chairman. It is used usually to fund voluntary organisations. In 1985 six organisations benefited and, in 1986, 13. The kind of organisations in question in 1985, for example, were Co-operation North, the Glencree Centre for Reconciliation, the Irish School of Ecumenics, an organisation called Between, an organisation called The Northern Ireland Children's Holidays Scheme and Ango-Irish Encounter. I can give you the list for 1986 if you wish. There were 13 bodies, which included the Irish Commission for Justice and Peace, the British Association for Irish Studies, the Northern Ireland Voluntary Trust, the Cork Peace Council and also our share of the expenses of the International Fund — the administrative expenses are paid from that amount.

Chairman.—What about the question of the Anglo-Irish Conference? Does that involve your Department in expenses? Does it involve the Irish Government in expense?

Mr. Dorr.—It does in the sense that some of the staff of the Secretariat come from our Department. There is travel to the meetings of the Conference.

Mr. Dorr.—No, not as such. I referred a moment ago to the international fund for Ireland. In a sense that fund grew out of the Agreement or is related to the Agreement and the administrative costs are paid jointly by the two Governments. That is paid from that subhead. but, for the Anglo-Irish Conference as such, no.

Chairman.—May I ask you, lastly Mr. Dorr, about Irish emigrants, particularly in England, with which you would be particularly familiar. There are large numbers going abroad and I understand many of the people going to England because of the travel permit situation which allows them to travel quite easily, are living rough and are homeless and in that sort of situation. I met with the Director of the Irish Centre in Camden Town earlier this year and he did not paint a particularly pleasant picture of the circumstances of some of our emigrants. Is there a role for the Irish Embassy in London in that area? Do you keep an eye on the situation? Do you get involved in it? Does the Department of Finance have any projects to assist emigrants in the UK in that sort of situation?

Mr. Dorr.—We are very deeply concerned about it. As you said, Chairman, I was in London as Ambassador before I took my present job a year ago. It is an issue that the embassy follows very closely. We keep close contact with the Irish Centre and with the Irish community generally. We try to help when people come to the Embassy. Sometimes people need to be repatriated in difficult circumstances. It is certainly one that we are quite seriously concerned about. I think a lot of Irish people who go, succeed quite well. but, as you say, there is a worrying number, especially recently, because of the ease of travel between the two countries. I have met people myself in hostels there, some of whom had jobs here but preferred to go there. Some young people leaving school found it easier to be in London. It is a matter of concern to us, yes.

Mr. Dorr.—I do not at the moment, I mean, it fluctuates. I should add, perhaps, that there is an officer at the Embassy seconded from the Department of Labour at First Secretary or Assistant Principal level, who is chairman of a committee called DION which allocates funds which go to social workers in the Irish Centres. There is a small committee which is under his chairmanship which recommends on the allocation of those funds. The amount at present is £250,000.

590.Deputy Crotty.—With your permission I would just briefly like to refer to the issue of passports. First of all, I would like to compliment the Department on their handling of difficult passport cases where a person has a problem because of a lost passport, or late application; the Department are very helpful. But, it is quite obvious to anyone who comes up Molesworth Street any day now that there is a very long waiting time for people who personally apply for a passport. I think people could be there for three, four or maybe five hours. I am not certain. Is there any mechanism that could be adopted to reduce the waiting time which usually occurs in the summer period? There must be a more efficient way of doing it.

Mr. Dorr.—Chairman, if I may reply through you to the Deputy's question, this is a matter of concern to us and we have done a good deal in this area. I should say that I am informed that our record, so to speak, on passport issue compares quite favourably with a lot of neighbouring countries. There are normally two types of passport application: one is the normal postal application where the average time is about two to three weeks and then there is the person who comes individually. That latter category has been increased greatly by the rise in the possibility of cheap holiday flights at short notice. People want passports on the same day. We have taken a number of steps to try to deal with that and I hope the situation is reasonably under control. The steps included meetings with the Irish travel agents asking them to advise their clients to apply in good time where possible, an advertising campaign urging the same thing, an increase in the number of temporary staff — we now have 75 temporary and 22 permanent in the Passport Office — and improved accommodation within the office so that people do not have to queue outside. We are looking at the computer system to see if it can be improved further. We have an improved phone system which establishes a queuing system for phone calls and then assures the caller that the call will be taken. It even has a printout which shows the average delay in dealing with calls. It is an issue of concern to us. It is very difficult to cope with something which has a very high peak period and is increased by the number of people who want to travel at short notice. However, I believe that in comparison with certain other neighbouring countries our record is quite good. This is a problem in many countries including Britain. We hope that people will give longer notice. We do, however, try to deal with emergency cases. I was phoned two or three days ago by someone from my own home area who had to come to Dublin to get a passport in difficult circumstances and the matter was dealt with within half an hour. There is a concern about emergency cases. There is a concern also to reduce the numbers of callers and to accommodate them and deal with them in a better way. Finally, passport applicants are encouraged to apply giving proper notice if possible.

591.Deputy Flood.—In relation to the expenditure under repatriation from abroad, can you explain how the Department are of assistance to persons caught in difficult circumstances abroad? Are you saying that every person who presents himself or herself at one of our embassies abroad will be helped or do they have difficulty in convincing the embassy staff to be of assistance to them? With regard to our citizens abroad who lose their passports or have them stolen are they assisted speedily if they present themselves at one of our embassies? How difficult is it for them to obtain the documentation to get back or to move freely within the country they are in? I would also like to ask if our embassy in Paris is involved at present in trying to deal with the situation regarding people suffering from drug addiction who have transferred from this country to Paris? It is an issue I am familiar with because a number of people from the Tallaght area have gone there over the last number of months. Perhaps Mr. Dorr would comment on that, if possible.

Mr. Dorr.—I will try to answer on the three points raised. We are generally concerned that our embassies and consulates abroad should be very helpful to Irish citizens. In one sense, that is what they are there for. In regard to repatriation the rule is generally that only Irish citizens with Irish passports receive assistance. The main repatriation would be from Britain or the European continent. In exceptional circumstances it might be outside Europe. Generally in Britain repatriation is restricted to limited categories, for example, young persons or young girls who need care and protection or to people who are destitute or mentally ill or something like that. Repatriation at State expense is rather the exception. We normally facilitate such people, telephone home and get their relatives to lodge the money here and we then advance the money abroad and help them in that way. The money is then recovered. For example, the advances in 1986 were £82,000 and the amount written off as not recovered eventually was £1,800. There is very substantial repayment of the advances and there is a small amount sometimes to be written off.

With regard to passports that are lost, of course an embassy exists, in part, to help such people. In such cases it would probably be normal to issue an emergency travel document or a short term passport to allow the person to get home. Obviously the embassy would have to satisfy itself that the person was indeed the person in question and that there was a genuine case there. Otherwise it could be open to fraud or abuse. I believe they deal courteously with anybody and once they have established the identity they would issue either a full new passport or normally it is something shorter to allow them to get home again and set the position to right in the Passport Office here. Quite often it is in the form of an emergency travel document which is not a passport but which allows them to travel.

With regard to the drug addiction issue, I believe there was a Parliamentary Question in the Dail yesterday on this. The question asked whether there was a problem at an institute in Paris in relation to passports being retained. We are in touch with the French authorities about that and the embassy in Paris is actively following the situation. As far as I understand it, it is something to do with people who might be addicted to drugs going there for treatment. Some people suggest that part of the treatment might be to hold their passports so that they will not leave. We are conscious of the possibility of abuse there and we are following the matter closely and keeping in close contact with the French authorities.

Deputy Flood.—I am very glad to hear that. Just a final question. In relation to repatriation, can Mr. Dorr satisfy us that, for example, if a young girl presents herself to our embassy in America and is unable to obtain support from home in order to provide the money referred to by Mr. Dorr she will be helped to get home again?

Mr. Dorr.—I can say generally that we would not leave an Irish person in an emergency situation. The normal way the system works is on a basis of recoupment but in extreme cases we would be concerned that something was done. It would be exceptional but there have been some extreme cases and we would deal with them.

592.Deputy Kitt.—I have two brief questions following on from the questions about access to embassies in general. With regard to the opening hours of embassies in this country and, indeed, our Irish embassies and consulates in other countries I get the impression from calling the embassies that they seem to close at 12 noon to the public. This can cause a lot of problems for people travelling from different parts of Ireland to the embassies in Dublin. Is this true of all embassies? Is it true of the Irish embassies and consultates in other countries? I would also like to know whether there are designated people in the embassies in the US whom Irish emigrants with health or injury problems can contact. I understand that some arrangements were to be made involving the mayors of some of the cities, particularly along the east coast of the US where there was a large number of emgirants.

Mr. Dorr.—The formal opening hours of embassies abroad would vary according to local conditions. This does not mean that the embassy only works those hours. The embassy would work much longer hours that the time it is open to the public. Secondly, the personnel of the embassy, including the Ambassador, would normally be available in emergency cases at any time, weekends, day and night. There should not be a problem there. I was not quite clear. I thought the Deputy mentioned at one point embassies here. I take it he is not talking about foreign embassies in Dublin but Irish embassies abroad. We have no concern with foreign embassies in Dublin.

Deputy Kitt.—I was just wondering if there was a general closing time as regards people calling to foreign embassies in Dublin or making phone calls to them.

Mr. Dorr.—No, there is no general closing time. It obviously depends on local conditions, different time zones and so on. I suppose it is true that an embassy would try to channel or group the personal callers to the embassy and, therefore, have certain set opening hours which depend very much on local conditions. The embassy itself works behind closed doors and, furthermore, the staff at the embassy regard themselves as more or less committed on a 24 hour basis in any kind of emergency.

On the other question of the emigration to the United States and the treatment of immigrants there, of course, we have four consulates general in the United States, that is career consulates general in Boston, Chicago, New York and San Francisco and at our embassy in Washington. This is a very lively topic of concern to them and to the Government and to Government Ministers who have gone out. The consulates are in close touch with all the Irish organisations, with the mayors offices, all the welfare facilities and with such organisations as Roman Catholic charities, for instance, in the New York parish diocese. They publish booklets and so on and they appear on radio and television and are very actively concerned about this problem.

593.Chairman.—I think we can note Vote 44 in 1985 and Vote 46 in 1986. Before we do pass on, Mr. Dorr, there are a couple of things I would like to say. Firstly, it would be a very useful exercise — and you are aware of this — if there were some sort of protocol when committees are visiting abroad to avoid any embarrassing situations which can arise. That is something I would ask you to give some consideration to. Secondly, it is fair to say, before we pass off this Vote, that the general position of TDs certainly in my own experience in contacting your Department or Irish Embassies abroad, is that they are very helpful and that generally they do everything they can to assist. That is a generally held view. It is something we should put on the record. I do think that where parliamentary committees are making formal visits abroad there should be some tightening up on the protocol there.

Mr. Dorr.—If I may comment, Chairman, first of all, thank you for the kind words you have said. That is the function of embassies and of our diplomats and I certainly hope that they are helpful to all public representatives. Secondly, as regards the visits of a committee, in my own time abroad I certainly was always concerned to handle that and to ensure the committee had every facility. I believe that would be the case also of other embassies and of my colleagues abroad. If I may say so, it is helpful, of course, to know as far in advance as possible and to be able to make the arrangements so one would want the maximum co-ordination, perhaps, with the staff of the committee who were visiting. Certainly, I would regard it as very important. I take note of what you say and will ensure that is carried through.

VOTE 45 (1985) AND VOTE 47 (1986)—INTERNATIONAL CO-OPERATION

Mr. Noel Dorr further examined.

594.Chairman.—In regard to subhead A — Contributions to International Organisations — how much of the £2.18 million expenditure in 1985 and £1.96 million in 1986 was to the United Nations? Or, is that entirely covered in subhead B or is subhead B totally, as it says, contributions to voluntary agencies of the UN?

Mr. Dorr.—Subhead B is distinct. Subhead B relates to voluntary contributions to bodies like UNICEF and so on. Subhead A includes the UN regular budget and two peace-keeping operations where the General Assembly has decided that the expenses of the peace-keeping operation should be borne as expenses of the UN. Those are so called UNDUFF, which is on the Golan Heights between Syria and Israel and UNIFIL which is in Southern Lebanon. The contribution to the UN regular budget in 1985 was £1,253,216.56. The contribution to UNDUFF that is the disengagement force on the Golan Heights, was £61,299.26 and the contribution to UNIFIL, that is the interim force in Lebanon, was £223,097.61.

Chairman.—The Irish contributions to the UN are always made on a regular timely basis.

Mr. Dorr.—They are, as far as possible, made at the beginning of the year because the UN has some financial difficulties and once the money has been provided we, in pursuance of our policy of support for the UN, do try to pay it fairly quickly.

Chairman.—A lot of other countries do not follow the Irish example. Would that be correct?

Mr. Dorr.—I would say that that is unfortunately true, that some important countries have not done that.

Chairman.—Does that not result in amounts due by the UN to the Irish Government for peace-keeping services abroad, for instance, in the Lebanon, not being paid because other governments do not pay their contributions in time?

Mr. Dorr.—Just to clarify, there is a contribution to the normal regular budget of the UN which supports the normal administrative expenses of the organisation. We pay that as soon as we can. There is, separate from that, an account for UNIFIL, for example, which is a peace-keeping operation. In that particular case — I should say this is not true of all peace keeping operations — the General Assembly decided that that should be treated as a regular expense also. In that account, however, there is a very large gap because a number of countries, for political reasons, have refused to pay or have held back from paying. The situation is improving because countries such as the Soviet Union have now agreed to pay and they are actually paying their arrears.

We supply troops to UNIFIL, approximately 740, and have done since 1978. We supply them on the basis that the additional cost over the normal cost of pay will be recouped by the UN. The figure for recoupment of those additional costs has been about $1,000 per man month. We have not got back the full amount that is due to us but over the period since 1978 we have got back more than the actual cost to us. In other words, we are supplying troops on a basis that we will be recouped the extra cost. So far, we have, in fact, got back the extra cost but we have not got back the full amount we were promised. That is due to the fact that there has been failure of certain countries to pay in full to that account. That has been remedied to some extent in that the Soviet Union, for instance, has agreed in the past few years to pay and is now paying some arrears. So, we are getting back some of the money due to us.

Chairman.—How much is outstanding to the Irish Government from the UN at present?

Chairman.—Is that decreasing? Are we likely to get it in the next 12 months or when is it likely to be received?

Mr. Dorr.—We are getting some of it but I do not think we will get all of it in the near future. To give you the figure, if Ireland had received its full entitlement to reimbursements since May 1978, when we first sent troops there, we would have received for the whole period up to December 1987 a total of £64.7 million. In fact, we got £45.8 million and it is estimated — and this is only an estimate — that the extra cost to the State of supplying those troops was £40.5 million, excluding normal pay and allowances. The figure that we should have received, as promised, was £64.7 million over that ten year period; we received £45.8 million; and we estimate the extra cost was of the order of £40.5 million.

Chairman.—Despite the outstanding amount, we still cover the extra costs and come out ahead?

Mr. Dorr.—We would say so. It could be argued, however, that we might not have as many troops in the Army if we did not have troops in Lebanon. There is an accounting argument there. On one way of counting it, we have come out ahead, yes.

Chairman.—But the UN does not meet the wages costs of the soldiers concerned?

595.Deputy Harney.—First, may I refer back to the earlier comments of members. I would like to say how much I agree with them. In my experience the officials of the Department of Foreign Affairs abroad do an excellent job on behalf of this country and they do so, I might add, on what I would regard as very small and limited resources. I would like to say that this morning to the Secretary of the Department. I have always found that they have gone beyond the call of duty to be helpful, kind and courteous not just to public representatives but generally to those who contact them.

In relation to the matter we are now discussing, whose responsibility is it to seek the reimbursement of the moneys owed? Is it your Department's or that of the Department of Defence or the Department of Finance?

Mr. Dorr.—I should like to thank the Deputy first for her kind words. On the question asked there is obviously very close consultation between ourselves, the Department of Defence and the Department of Finance. Our Department are responsible for the Irish mission to the UN and are obviously in the lead on the ground in New York in pressing for this. For example, in 1987 at the General Assembly we introduced a resolution on the financing of UNIFIL which highlighted the difficulties faced by troop contributors. We take every opportunity to raise the matter including meetings with the Secretary General and action in the General Assembly. Indeed, if I may say so, bring pressure in so far as we can on countries which are behind in contributing to the account. We have been doing this for a number of years and it is a matter of considerable concern to us that the situation should be remedied as soon as possible. I might add, for example, that we act in Washington in relation to both the Administration and the Congress in trying to press for full payment by the United States in this area. The United States is also in arrears on this account.

596. Deputy Flood.—You referred to £18.9 million. Is that what is outstanding to be recouped to us?

Mr. Dorr.—It is £18 million. The figures I gave a moment ago were for the ten year period, May 1978 to December 1987. The figures I quoted there were that we should have received a total of £64.7 million. We got only £45.8 million.

Deputy Flood.—And then you referred to the extra cost of £40.5 million. Can you explain how you calculated that?

Mr. Dorr.—This is a matter for calculation primarily by the Department of Defence. It is a matter of estimating the extra cost of the troops being out there as compared with what the maintenance of the same troops in Ireland would have cost. I am sure a great deal of detailed work of an accounting type goes into that but it is essentially a matter for the Department of Defence.

Deputy Flood.—Is it expected that this outstanding amount of £18 million will be recouped to us in the foreseeable future or are faced with a long haul to have this money restored to us?

Mr. Dorr.—I am afraid it is a long haul but we are making some progress. The Eastern Bloc countries generally, and particularly the Soviet Union, were the largest defaulters at one stage. They made a political decision a few years ago to pay. They paid in full their contribution for 1987 but they still owe $172 million in arrears. They have announced they will pay the arrears over a few years and they paid £25 million in May 1988 off those arrears. Something is happening but it is a long haul.

Deputy Flood.—In relation to subhead C, Agency for Personal Service Overseas (Grant-in-Aid) I see that we have a fairly substantial grant. Can we have some details of the type of personnel which this type of grant aid covers and an idea as to where they contribute most in terms of overseas aid and assistance? Also, there is a sum included for disaster relief. I see that in the 1985 Vote a figure of £629,000 was provided for but expenditure increased considerably. Was there a particular reason for a dramatic increase in expenditure there?

Mr. Dorr.—The Agency for Personal Service Overseas for which there is a grant-in-aid to encourage voluntary service by Irish people abroad. In 1986 they funded 614 assignments in developing countries and they arranged training and orientation courses in Ireland for persons who went on these assignments. Many of these assignments are organised by Irish voluntary or missionary organisations, bodies such as Gorta, Concern, the Methodist Missionary Society, the Medical Missionaries of Mary and the Church Missionary Society. They are funded by APSO on a co-financing basis. They also sponsor some directly. In some instances they organise and sponsor personal services by Irish persons such as teachers in co-operation with our Department who fund other elements of that same programme from the bilateral aid programme, such as equipment and housing. Sponsorship is generally on volunteer, semi-professional or professional terms depending on the qualifications and experience in terms of the assignment. The assistance would include return airfare, insurance and an appropriate level of remuneration but since they are volunteers with altruistic motives most often, the level of remuneration can be quite low. The figure I gave was for 1986. For 1985 the corresponding number of assignments was 569; for 1986 it was 614. On disaster relief that is obviously something that is not easily predictable because disaster by definition is something that comes suddenly. The main factor in the amount which the Deputy asked about was the Ethiopian relief. I have figures for the allocation of disaster relief funds in each of the two years. In 1985 — if you wish me to go through the figures there are about 15 of them — but a great deal of it goes to Ethiopia.

597.Chairman.—Could you give us a general view of what the world situation is just now in the area of world hunger? Our contribution as a percentage of GNP has been falling short of the targets we originally set ourselves. Where are the serious problems? Is it the Sudan?

Mr. Dorr.—World hunger is indeed a serious problem. It is acute in countries such as Ethiopia, Sudan, Angola and Mozambique. Our contribution to developing countries is less than the target we have set ourselves. But then many countries are below that target. It is of the order of 0.18 per cent of gross national product at present.

Chairman.—Is the problem abating or is the problem of world hunger getting worse?

Mr. Dorr.—I would think — here I am talking rather personally and speculatively — it is increasing. The population is growing and pressures on the environment and otherwise are increasing. Drought conditions and climatic change have caused a great deal of additional misery. Terms of trade as between the developed world and the underdeveloped world are loaded in favour of the developed world. On top of that, in some countries, especially in Southern Africa, fomented in countries such as Mozambique and perhaps Angola which contributes to the misery of the population and increases hunger there.

Chairman.—Have you any idea of the numbers in danger of losing their lives? How do your Department measure the extent of hunger?

Mr. Dorr.—Anything we do can only be a drop in the ocean. The way we measure it is that we follow generally UN reports and such things as World Bank reports and reports of other international economic bodies. I cannot immediately give you a figure. I just have a subjective impression that it is very serious and increasing. I am advised that a figure, perhaps of 10 million, might be mentioned but it is rather speculative on my part.

Chairman.—Our drop in the ocean has been decreasing. Is there anything we can do to recommend that in these difficult times at least this area of Government spending might be looked at for special consideration?

Mr. Dorr.—I would hesitate to suggest to the Committee what they might recommend. This is probably a matter of policy. The percentage figure in 1976 was 0.1 per cent of GNP; in 1986 it was 0.25 per cent; in 1987 it was 0.23 per cent and in 1988 it is of the order of 0.18 of GNP. We have our own economic difficulties and that has to be taken into account. I feel I should refrain from making a policy comment on this issue. I do agree that the situation in the world, as you have asked about it, is pretty awful. There is a limited amount that a small country can do and we have been doing what we can.

Chairman.—Policy is not a matter for this Committee but it is something we are all very concerned about. I hope the Dáil will set up a Foreign Affairs Committee soon so that these matters can be debated and raised. There is obviously a very serious situation. Are there any other matters we would like to raise before we pass on? We can note Vote 45 for 1985 and Vote 47 for 1986. That concludes the examination of the Department of Foreign Affairs this morning. Thank you very much, Mr. Dorr.

Mr. Dorr.—May I thank you and the members of the Committee for their questions and for what you have said about Foreign Affairs. Thank you very much, Sir.

VOTE 49 — HEALTH.

Mr. Liam Flanagan called and examined.

598.Chairman.—The Committee of Public Accounts is continuing its examination of the 1986 Appropriation Accounts of the Department of Health. Mr. Liam Flanagan, Secretary of the Department of Health as Accounting Officer for that Department is the next witness. You are welcome, Mr. Flanagan.

Mr. Flanagan.—I would like to apologise for asking you to postpone my hearing and I appreciate very much your kindness in accepting the difficulties I had.

Chairman.—Thank you, I know you have been under pressure. Paragraph 55 of the Report of the Comptroller and Auditor General reads:

Subhead A.2.—Consultancy Services

Subhead K.—Building, Equipping and Furnishing of Hospitals and other Health Facilities

The report of the Review Body on the organisation of computerisation in the Government Services issued in June 1982 stated that, in the implementation of the policy of computerising these services, the Department of Health should be responsible for overall policy, co-ordination, control and development of computerised management information systems in the Health Sector and for ensuring the development of standardised systems and procedures and the installation of uniform EDP equipment throughout that sector. The Review Body envisaged that the setting up of uniform integrated management information systems would lead to greater efficiency and significant savings in the cost of the Health Services. The cost of implementing the recommendations of the Review Body regarding the Health Sector is being borne almost entirely on the Vote for the Department of Health.

Apart from the Review Body, four ancilliary grouping of departmental, health authority, voluntary hospitals or consultancy firm representatives, as appropriate, were set up over the period 1981 to 1983 to examine certain issues, provide information, formulate conclusions and advise on certain aspects of the computerisation programme in order to assist the Review Body in making its recommendations or to oversee their implementation. These had identified patient administration, pharmacy operation, community care information and financial systems as the areas to which priority should be given in the setting up of management information systems. They had also recommended the purchase of specific hardware and software which would be capable of meeting the needs of the systems proposed for these areas and had advised the Minister generally on matters relating to the development of the proposed systems. Prior to this a community care information system had been under development in the North-Western Health Board over a period of approximately four years with a view to its extension to other areas at a later date. By May 1985 management consultants engaged by the Department had produced an estimate of the overall costs of providing and operating the main management information systems recommended by the Review Body which indicated that a capital investment of up to £43.5 million and annual operating expenses of £11.5 million would be involved.

I have asked what was the original projected cost of the entire computerisation programme including all capital, software, consultancy and other costs, what was the total expenditure to 31 December 1986 under each of these headings and how far the project for computerisation in the Health Services area had progressed at that date, especially in the areas which had been identified as those to which priority should be given.

Mr. McDonnell.—There are four paragraphs in my report on the question of the implementation of a comprehensive computerisation programme in the health sector. Paragraph 55 leads into this and I outlined the background to the decisions which were made as to the scope of the project and how it was decided back in the early ‘eighties to give priority to certain areas. Some of these related to health board functions and some to hospital operation and management. You will see that I have referred to cost estimates produced in 1985 and I asked how these compared with the original cost projections. I also asked about the total expenditure incurred up to the end of 1986. Since the date of my report the accounting officer has told me that the 1985 estimate of the cost was in fact the first comprehensive one produced and that no overall costing had been carried out in the early stages because it was only at the end of 1984 that details of the shape of the entire programme were becoming sufficiently clear to enable an estimate to be made, although he did say that the cost of specific projects had been considered prior to any decision to go ahead with individual developments. He also told me about £8 million had been spent from the Health Vote up to the end of 1986. I want to say as an aside that I have sought some further clarification of this because I thought that some expenditure might also have been incurred by the health boards directly. He then, in regard to the implementation, told me about the progress on the installation of the systems which were regarded as priority and which I have mentioned there, that patient administration systems had been installed in three hospitals; he said that the first phase of a community care system had been installed in one health board and was in the process of installation in another; he said financial systems had been installed in one hospital and were at various stages of implementation at three health boards. The fourth priority system was the pharmacy operation. My understanding of that is that the standard pharmacy system which was originally envisaged has not been installed in any location. In regard to installation generally he explained, of course, that each heading which I mentioned there involved the installation of a number of modules, a number of systems within systems and that the extent to which individual modules have been installed varies depending on the priorities as seen by the different agencies and the resources and the capacity of the different agencies and so on to absorb additional computerisation. Could I say, Chairman, that in summary my main concern about this and my objective in raising it was to consider whether there was a clear statement of objectives at the beginning of this project; whether there was a clear perception of where we were going and a co-ordinated plan for getting there when the project was initiated in the ‘eighties and perhaps more importantly, whether it is now possible to quantify the rate of progress in relation to the expenditure already incurred and to assess whether it is satisfactory; that is, the expenditure vis-à -vis the progress and, indeed, whether the target, the concept of a fully integrated computerised information system for the whole health services is attainable and attainable at a satisfactory cost and whether it will lead to greater efficiency in the end and cost savings?

Chairman.—Mr. Flanagan, this is a very complicated situation. I will take up where the Comptroller and Auditor General left off. The review body on the organisation of computerisation in Government services did recommend that your Department be responsible for ensuring the developing of standardised systems and procedures throughout the health sector. Is that an achievable objective in itself?

Mr. Flanagan.—Yes, it is an achieveable objective. It has had a number of fits and starts but in one sense, if I give it two dimensions, one which all of you are aware of, there is a changing technology and there are developments within computerisation of which we need to be aware. The situation at the moment is that we have expended — and the Controller and Auditor General has touched on this — up to the end of December 1987 approximately £10 million of the £40 million which it was originally estimated we would require to bring about the objective you have talked about. I am not certain that in the terms in which you ask the question it can be attained by imposing a rigidity any longer. I have asked and it is ongoing for a while — that there be a review of what is the best way to go for the future, to look again — and it has had a bearing on the approach I have had to some Supplementary Questions asked by the Comptroller which I have not had the opportunity to reply to in full because of the review — to determine the respective roles in the light of the developments in technology and in the industry, particularly as to the role of the Department; how it should monitor progress, the respectification of the objectives of the programme and the question of the degree of autonomy within the specification that we should allow to the agencies for the future. The parameters of interconnected and interlinked systems can be laid down to seek for a uniformity in the flow of information, perhaps with some redefinition.

Chairman.—The management consultants engaged by your Department following on this review indicated that a capital investment of up to £43.5 million and annual operating costs of £11.5 million would be involved. What was the original projected cost when you got underway and what was the final cost and what are the operating costs?

Mr. Flanagan.—I am working within a ballpark figure of £40 million at the moment of which £10 million for start up and associated softwear costs has been spent. I could not with accuracy give you any projection of what it might ultimately now cost. I am advised that there is a possibility that with the changing technology it could cost less.

599.Deputy Harney.—In relation to the management consultants the Chairman referred to, who selected those management consultants and how were they selected? In relation to the company to supply the computer equipment how were they selected, was there an open tendering system? If I could refer to paragraph 58 of the Comptroller and Auditor General's report where he refers to the fact that even though at a cost of——

Chairman.—We are only dealing with paragraph 55 at present. We will be going on to paragraph 58.

Deputy Harney.—In relation to the management consultants and the supply of this equipment, how were the people selected?

Mr. Flanagan.—Essentially judgments were exercised and decisions were made by the Department on known competence. Over the period of time in which we have been involved with computers we have been involved with computers we have had a very wide-ranging experience of consultants. Essentially the Department, in consultation at appropriate times with the agencies, selected both consultants and the firm.

Mr. Flanagan.—Ultimately the Secretary of the Department approved the decision. We were advised also by computer experts in the Department of the Public Service.

Deputy Harney.—In relation to the supply of equipment was that done by way of a public tendering or was one company committed to supply the equipment?

Deputy Harney.—Why did the Department not consider inviting a number of companies to make a tender to supply this equipment?

Mr. Flanagan.—I think in the terms in which computer equipment at that time was supplied, the amount of development work which is required to be done, it is not as simple a process as you outline in the question. Decisions on the known capacity of the company selected, its track record elsewhere, were made at the time on the basis of the known information and it was accepted that it was the company of the time suitable for selection. Nothing that has transpired subsequently as of this time has altered the decision that was made. There are changing circumstances of course.

Deputy Harney.—I have no doubt you may have selected the right company and I equally know that it is not forced upon you that you must have a public tendering system but in my view it is wrong that companies are selected either to give consultancy advice or to supply equipment to any Government agency without other companies being given an opportunity to make an application and to tender for such work. I make that comment because it is wrong that we should do things in that way.

Mr. Flanagan.—Nobody is. I am not entirely happy but An Bord Altranais, as you know, recently organised a major computer seminar and my colleagues and myself prowled among the visiting experts and some of my people have gone to the United Kingdom. Nobody is particularly happy throughout the contacts I have had with the systems that are in place. There are very few, if any, comprehensive and effective systems as yet fully developed in the health service area.

600.Chairman.—With the number of paragraphs there are here this morning on the problem and the Smurfit Management Consultancy Services report which it did for the Public Expenditure Committee, the Committee of Public Accounts might consider it worth while doing a special report on the whole area because it does seem to be something of a mess. The Department do not seem to have achieved their target to say the least.

Mr. Flanagan.—I would accept that the pace has not been what anybody would have desired it to be. Some of the factors which have inhibited progress in relation to computerisation have operated outside of the direct control of the companies installing the equipment in the sense that there was considerable union difficulty to be overcome on a variety of sites, considerable union opposition to the installation and attendant difficulties in relation to the supply of softwear.

601.Deputy Flood.—Like Deputy Harney I am very surprised that this seems to have been narrowed down to one particular supply or design company and that the public tendering system was not used. As Mr. Flanagan has said, the technology in computerisation development is changing rapidly almost from month to month. The change in technology does not necessarily mean, as I understand it, that the product cost or design cost decreases, indeed sometimes the reverse is the case. In relation to the projected expenditure and capital investment of up to £43.5 million and the operating expenses of £11.5 million, once you go to one company and you accept their offer they design a system that perhaps suits one's needs but you are locked into that system then. They are then almost free to write their own particular costs in years down the road because it is their system, it is their design and very often their system is patented and it is extremely difficult for another supplier, once they have you locked in, to let you out. Otherwise it involves extremely heavy costs in trying to get out of a computerised system. You will see reference to that later on in the report. I would be very critical of the decision not to open it up to the many excellent companies operating in this country, employing substantial numbers of people who should, I believe, have been given a chance to participate in the programme or at least to offer to participate in the programme. That is something that we should learn from any further development in the computerisation we are speaking about. That should be looked at very carefully. As you yourself said Chairman we should look for a special report and I would support you in that on this issue because the whole thing could get completely out of hand.

Mr. Flanagan.—May I make the point that when dealing with Deputy Harney's question, I was dealing with the principle of selection to which she took exception. I should make it clear, that, as you will be aware, there is no question of a sum of money being tendered for of the order of £45.3 million. I accept that one company was decided upon for a particular set of systems and it is open to the committee to question that. I would like it to be clear that we do not have a contract for £45 million that we are, in fact, working with a number of other firms at this particular time. I emphasise that it is extremely difficult to get people in this field who are qualified and in the process of analysing the capacity of companies at the particular time, effectively the Department at the time analysed, with the expertise available to them, the capacity of the companies to do the job. Our rate of progress will depend on the allocation of money to us as well as other extraneous factors which are there. So, it is not a question of exclusion. In relation to consultants, when we describe, as we have described, for the Public Accounts Committee in the past, we use a wide range of consultants; we are not narrowly disposed.

A final point I wish to make — I am sorry, I may be guilty of what you pulled Deputy Flood up on in one sense — certain hospitals broke with the one company situation. They have not, with their experience, advanced indepth to the same level as those who have stayed with the selected system.

602.Deputy Crotty.—It would appear that the progress that has been achieved would not have come up to expectations and there are a number of reasons for that. What were the savings that were expected to be achieved by the installation of this system? What savings were expected?

Mr. Flanagan.—That, in fact was not quantified, or could not have been quantified. We have had this before. Whether you can have effective management without an effective flow of information is very questionable. The efficiency which stems from knowing what is happening is impossible to quantify in purely financial terms. Where systems have been installed, in general, the control has resulted in the effective use of resources.

Deputy Crotty.—I am a bit concerned about this. It was in 1982 that the recommendations were made and there has been £10 million expended out of the proposed £40 million budget over that period and this would seem to be very tardy progress. The Accounting Officer mentioned a number of areas where problems were arising which delayed action. You said you had difficulty with the software required or what was the problem? I want to say at this stage, Chairman, that I would sympathise with the Accounting Officer in relation to getting a firm and a system which would be ideal. It is very difficult to make decisions and to choose systems in this area and you would have our sympathy. At the same time, it is necessary to spell out these situations.

Mr. Flanagan.—It was difficult. The major development in my terms in the installation of systems arose in relation to the financial systems which are being pretty generally installed. Of themselves, they would have had associated with them, apart from general ledger accounts, payrolls and so on, an information system which, in reality, the Public Accounts Committee demanded of us where they were absent. They have increased efficiency. I am not, in Deputy Crotty's terms, able to give you a precise figure but undoubtedly where they are up and running and in the health boards where they are up and running you have more efficient systems and obviously would have savings in clerical staffing. The concentration in questioning on the part of the Public Accounts Committee has related to the hospital administration systems and the associated systems for hospitals. I might say that there was a more democratic slant, in the terms in which the committee might look at it in, the selection process. There was considerable discussion in which the health boards played a very strong part in selecting the financial systems which are in use.

Deputy Crotty.—In relation to the provision of funds, has there been difficulty with funds to provide computerisation here?

Deputy Crotty.—Was it not given a priority seeing that the savings in the area could be very substantial? Was this not given priority? What is the explanation for it?

Mr. Flanagan.—That is a very complex question to answer, Deputy. In a way, we did not get the resources that we were seeking for the pace of implementation but that was a constraint which was on us. Generally, the programme is funded out of the capital subhead. There were competing demands within that subhead for buildings and equipment, for the development of alternative systems in psychiatric services, not all of which could be met. In a sense, we had to apportion the resources and to an extent, it was a doubleedged process with some, perhaps, benefits that we were not quite capable of — which I think is beginning to emerge in some of the reviews which we are doing at the moment.

Deputy Crotty.—Who made the decision about the allocation of funds from the capital account? In an area where there were definite savings to be achieved and they would more than return the expenditure would you not think that would be given priority? It is rather difficult from a budgeting situation to realise that this would not be given top priority in that it would more than pay for itself.

Mr. Flanagan.—To answer the specific question, in the last analysis the Government make the decision as to the allocation of the resource which we seek. It is never in any situation, apart from computers, sufficient, no matter what the administration is, to meet the demands for the resource. It is a question of competing priorities. It is difficult to balance between the need to provide services which care for patients and something down the road which may provide savings. That is a recurring argument.

603.Deputy Harney.—It seems to me that you either have a computer system or you do not and to have a 20 per cent or a 25 per cent system which you now seem to have is next to useless. I would like to ask whether you are able to put what you have currently got to any great use?

Mr. Flanagan.—Yes, we are able to put the systems which are in being to use and, yes, we are using whatever information flows there are to manage the services. As you know, Deputy, we do not have a unitary system of health care activities. It would be much better if we had computerised information. What we have we can use quite effectively and do use effectively. It would be much more desirable to have a complete system.

604.Chairman.—Were the Department of Health, the health boards and the hospitals all pulling together on this?

Mr. Flanagan.—Not always. The system is as I said not a unitary system and the tensions are a source of difficulty between the Department, the health boards and other agencies, between the other agencies and the health boards.

Chairman.—Like Deputy Crotty, I have a certain sympathy for the situation you are in. You were dealt a very difficult task from the beginning but from the point of view of the Committee the situation is in something of a mess. I understand Mr. Glavey from the Department of Finance is something of an expert in this area and has been dealing with it. What I would propose is that we need to get together a report on the history, where we are and where we are going. Perhaps, Mr. Flanagan, the appropriate person from your Department, from the Department of Finance and the Clerk of the Committee could set that out for the Committee in the form of a report, so that we can get some order into the development of this system because it seems to be in need of getting into shape.

Mr. Flanagan.—We are very close to producing an initial document out of the current review. We can make that available to the Committee.

Chairman.—I would suggest that since it is in the situation it is in that the three people I mentioned should get together and prepare a report for the Committee. Is that agreed?

Deputy Crotty.—The Accounting Officer mentioned problems with unions possibly in the installation of equipment and the disturbance of people in existing positions. Could you elaborate a little on that? Are there problems there or have there been?

Mr. Flanagan.—The essential problems which delay computerisation have been got out of the way and are not presenting, as far as I am aware, at this time but there was considerable understandable fear translated into union opposition in a number of sites which delayed installations.

Deputy Crotty.—With regard to the personnel to work this system, we have heard at a number of meetings that it is difficult to retain personnel in vital sectors of the computerisation scene. Have you problems that way or how can it be dealt with?

Mr. Flanagan.—We have lost people and the health boards have lost people. It is difficult to retain people. It is not easy of solution. We are hoping that the concentration on it and the encouragement of staff to the greatest extent possible to stay with us will help. We have lost one or two that we could very happily have done with but that is effective commercial life against which it is very difficult to compete.

Deputy Crotty.—It would seem to be more serious than that. At one recent meeting the Accounting Officer mentioned that the public service would appear to be a training ground for the computer scene. That is a serious situation about which the Committee should be concerned and you might incorporate it in your report.

606.Chairman.—You might look at that in the report that is being prepared. Let us move on to paragraph 56. These are related paragraphs so I think the order of examination should cover paragraphs 55, 56, 57 and 58 so that the whole report deals with all of these matters but we will take them individually. Paragraph 56 of the Report of the Comptroller and Auditor General reads:—

As stated in the previous paragraph a specific software package for standard financial systems throughout the Health Service Agencies had been recommended by one of the representative groupings set up to advise on the computerisation programme. With the approval of the Department of Health three Health Boards entered into agreements with the company which held the licence for this software package which provided that it would be made available to these Boards at a total cost of £200,000, approximately, to be met by the Department and that, under a buyout option exerciseable within one year at an additional cost of some £300,000, the system would be made available to all Health Service Agencies including voluntary hospitals.

It was noted, in the course of audit, however, that in February 1985 another of the representative groupings set up to advise on the computerisation programme, and which included three user representatives, recommended that any further commitments to this company should be deferred and, in June 1985, after further consideration of various issues, including cost, public accountability and delays by the supplier, it recommended that new tenders should be sought for the provision of standard financial systems software.

As it was also noted that despite this recommendation, the Department of Health was still negotiating a buy-out option with the company in April 1987 I sought information as to the total amount paid to the company up to 31 December 1986 in respect of this system and as to the extent to which it has been successfully put into operation in the areas originally agreed with the company or in any other areas. I also inquired why, in the light of the recommendation made by the advisory group in June 1985, negotiations on the buy-out option were still continuing.

Mr. McDonnell.—This refers to one of the specific areas which is mentioned in the introductory paragraphs dealing with the financial systems. You can see that the intention was that the selected software package could be provided in all the health service agencies at a total cost of about £500,000 and that some problem seemed to arise after that. Since the date of my report the Accounting Officer has told me that the concerns which seemed to be leading to a recommendation to change horses has been satisfactorily dealt with and that all reservations regarding the suitability of this system have been resolved. He also told me that the Department were now using their own expertise in implementing the systems. In regard to the cost of this system he told me that up to 31 December 1986, the total payments to the company involved were £846,000 and that as well as that £588,000 had been paid to consultants and almost £350,000 to other software suppliers. That is in connection with the installation of standard financial systems. It appears that these costs totalling about £1.8 million have been incurred in setting up partial or complete financial systems in five locations only. This does not include hardware and site preparatory costs of about £1.65 million. I have since asked how the extra expenditure arose and what is now the estimated final cost of putting in place the standard financial systems. It is part of the overall grand plan.

Chairman.—Any comment on this paragraph, Mr. Flanagan? It will be the subject of this report in any event.

Mr. Flanagan.—If it is acceptable to you, I think it should be dealt with in the report. We have a lengthy reply to it.

607.Deputy Harney.—One question. I note the consultants were engaged again at this level and I wonder why they were brought in at this stage?

Mr. Flanagan.—Simply because within the system, and referring to the question asked by Deputy Crotty, there had not been developed in the agencies a sufficient level of expertise to instal the systems. It was a slow and difficult process. It is a developing situation and, as the Comptroller and Auditor General said, it is in five sites and there has been hesitation about a sixth site. Given the constraints on the staffing resource and to develop the level of expertise in association with consultants has always been the objective.

608.Chairman.—Paragraph 57 of the Report of the Comptroller and Auditor General reads:—

Another of the representative groupings set up to advise on the computerisation programme had identified the areas of patient administration and pharmacy operation as two of those to which priority should be given in the setting up of standard managements information systems.

In correspondence with the Department of Finance in 1984 regarding the proposals for computerisation throughout the Health Services the Department of Health stated the objective of the programme as being the establishment of a full network of health management information data by linking, through compatible hardware and software systems, the various programmes in Health Boards, the major hospitals and the Department of Health. It was also stated that any deviations from the selected standards could have very serious implications for the overall programme, not only from a cost point of view, but also from the point of view of integration with other systems. In order to ensure that the requirements of the programme would be observed by the institutions concerned, a departmental circular had been issued to all hospitals in March 1983 advising them of the need to consider the implications for the overall computerisation programme of any decisions to purchase either hardware or software for their own use. In the course of my audit it was noted that in November 1985 a Dublin voluntary hospital was informed by the Department that in the development of its computerised systems for patient administration and pharmacy operation it was not complying with departmental policy as outlined in this circular. The hospital was informed that because of this, initial and recurring costs of the non-standard system for which it had contracted would have to be met from its own resources and that no financial assistance towards the cost of this system would be available in the future.

In the light of possible cost implications of such action for the overall computerisation programme I asked whether any other hospital or Health Board had installed non-standard systems and if so the circumstances in which this had occurred contrary to the terms of the Department's instructions. I also asked whether any funds were provided from the Health Vote towards the cost of such non-standard systems.

Mr. McDonnell.—Chairman, you asked whether all of the agencies were pulling together in this project. This, as you will see, refers to the failure of some voluntary hospitals to observe the Department's guidelines which were issued to all hospitals and required them to take account of departmental policy on standardisation when buying equipment. Apart from the cost factor, because the Department did not pay for this when it emerged that they had not observed the Department's guidelines, there would still be the question of cost arising from lack of compatibility with other systems. Since the date of my report the Accounting Officer has told me that in addition to the voluntary hospital which is referred to, two other public voluntary hospitals have contravened departmental policy on standard systems. Likewise, they had not been paid for by the Department. I should say that the hospital referred to in the paragraph was asked to refund £75,000 which had been used to install wiring in the expectation that the standard system would be installed. He also told me, interestingly, that the supplier of the unapproved system to the three hospitals had been an unsuccessful tenderer when the approved system was being sought but, again, the Department was not involved in any way; it was, so to speak, directly between the hospitals and the alternative supplier. I think the Accounting Officer did say earlier in his comments generally on this whole area that the three hospitals which had failed to use the standard system had not achieved any greater progress than the hospitals which were observing the Department's guidelines. I am not clear as to why this happened, why three hospitals should have chosen to go it alone.

Mr. Flanagan.—In addition to the Mater, St. Vincent's in Elm Park and Portiuncula hospitals.

Chairman.—And they did that at their own expense despite the fact that the other system would have been paid for by the Department, is not that the case?

Mr. Flanagan.—Yes. Part of the difficulty for the hospitals, in fairness to them, was that in the initial process it had been decided to concentrate resources in a number of centres. It is an area, you are perhaps aware better than most people, of tremendous competitive lobbying by the industry and the hospitals, since you ask, are occasionally not content to operate to departmental policy not only in this area but in areas like the services they provide. The voluntary hospitals tend to attempt from time to time to assert their independence in ways.

Chairman.—It seems extraordinary — we should really have somebody from the hospital answering the question rather than yourself — where your Department is prepared to pay for a system, they go off and spend their own money on their own system at a time when there is a shortage of cash in hospitals. That seems an extraordinary thing for them to do.

Mr. Flanagan.—At the time, perhaps there were somewhat more resources around than there are now. I certainly would think they would be very loath to go down that road now. The significant thing about it was that a climate was created out of the situation in which the Department had arrived at a conclusion about the firm to supply the systems in which opposition to that decision was for commercial reasons generated amongst the voluntary hospitals particularly who I think at the time would have been receptive to the feeling that perhaps the Department had not chosen the best system and that there was a strong feeling in the Department, borne out by the subsequent events, that we had in terms of the hospital systems — and the lack of indepth achievement of those hospitals which attempted to fund their own activity is proof — that perhaps we had made the right decision at the time.

609.Deputy Harney.—One of my questions was the cost which the hospitals paid. Can I just say the reason resources are now so limited is the way they were in some ways wasted in the past and I think this particular matter is a case in point. Could I ask the Accounting Officer if he would explain, first, under what heading or from what budget the hospital would have paid for this, where would they have got the money and, secondly, can I ask the Comptroller and Auditor General to refer to the fact that the hospital chose a company that had unsuccessfully tendered for the initial system but, as I understand it, there was no such tendering?

610.Deputy Flood.—Can Mr. Flanagan say that in the three hospitals he has referred to that have apparently gone their own way that none of the systems has yet been adequately installed? Is he definite about this, that neither the Mater or St. Vincent's nor Portiuncula have fully fledged installed systems?

Mr. Flanagan.—I am advised that the precise wording is that none of these hospitals has achieved the depth of implementation realised for the approved systems. Even with the approved systems we have not achieved the depth of implementation we would fully require. So, my information is that they have not.

611.Deputy Crotty.—I am not too familiar with computers or systems but what does it mean in the overall sense of the development of the system that these voluntary hospitals have their own separate system, that they have not got the agreed system?

Mr. Flanagan.—That is the precise issue which is being addressed at the moment. I do not want in any sense, since you have moved it into another committee, to pre-judge it. On a personal observation of the information I have at the moment, but that is not to pre-judge the finding I think we will have to use the work that has been done. The financial situation, apart from any other, would require us to use what is there. I assume that it has some use, I am advised it has. On the broader issue, I would remind you that, oddly enough, despite what the common perceptions are elsewhere, we are not aware that the United Kingdom, with considerably more resources in hospital services, is any more advanced than we are.

612.Chairman.—Let us take paragraph 58 and we will dispose of them all together then. Paragraph 58 of the Report of the Comptroller and Auditor General reads:—

Reference was also made in paragraph 55 to the selection of the computer hardware to operate the standard management information and financial systems being developed for use throughout the Health Services.

It was noted that, while eleven mini-computers and accessories had been purchased at a cost of £2,118,000 which was paid to the supplier in December 1982 and January 1983, some times of this equipment to the value of £511,000 still remained in the supplier's stores in April 1986 and the Department then agreed to sell back to the supplier for £75,000 three of the mini-computers which had cost £138,000, approximately. By March 1987 the value of items still remaining in the supplier's stores had been reduced to £119,880.

I asked why there had been such a long delay in taking delivery of some of the equipment purchased and why agreement was reached with the suppliers to buy back the three mini-computers which had never been delivered at an apparent loss of £63,000, approximately. I also inquired as to the extent to which the equipment purchased to date is being utilised and whether the sanction of the Department of Finance had been sought for the loss incurred in selling back some of the equipment to the supplier.

Mr. McDonnell.—This is the one Deputy Harney was touching on a moment ago. It is a somewhat unusual transaction perhaps in the context of this whole project. It deals with the substantial purchase of equipment at an early stage and the question of the usage of that equipment. Since the date of my report, the Accounting Officer told me that the equipment in question had been purchased on very favourable discount terms prior to a significant price increase. It had, in fact, been anticipated that all of that equipment there, the mini-computers, would be in use by the end of 1983 but serious delays had occurred due to major difficulties with staff organisations, the reluctance of health agencies to accept overall policy, chosen suppliers and so on, problems of adaptation of the software, pilot sites and shortage of staff in the agencies. It had been hoped that making this equipment available to the health agencies at no direct cost would be a means of encouraging them to accept the Department's, so to speak, overseeing and guidelines in this whole operation. Apparently the environment in which the programme had to operate became more difficult, is how the Accounting Officer put it to me, than could have been reasonably anticipated and it was necessary to keep the hardware, which is what we are talking about here, in store for much longer than had been anticipated. He said that these particular computers were small ones and that with developments in this field it was found that with the passing of time it was perhaps more sensible to upgrade and, so to speak, trade in. He said that the Department of Finance sanction was not considered necessary because of the nature of the transaction in that context. In fact, only one of them was ultimately traded in because alternative uses were found for the others. He told me also that all of this equipment which I referred to has since been put into use.

Chairman.—Mr. Flanagan, why did the Department agree to sell back to the supplier for £75,000, three mini-computers which had cost £138,000?

Mr. Flanagan.—If I go back a little and it is in response to a further inquiry from the Comptroller and Auditor General that I am building this answer, we had as he said three fax 730 configurations in Digital stores valued at £46,000 each at 1982 prices. We had not drawn them down for the reasons the Comptroller and Auditor General has outlined in 1986 when more competitive and more cost-effective equipment became available from Digital, the Micro-fax two. In an agreement covering the supply of four micro-fax two configurations for the Southern, Mid-Western and Western Health Boards and the Department's hospital planning office, Digital Equipment Corporation would only allow the then 1986 sale value of £25,000 as a trade-in for each of the three fax 730 configurations. This was agreed subject to the proviso that if these fax 730s were supplied for use in the public service the price charged by Digital would not exceed £25,000. Subsequently, in December 1986 two of the fax 730 configurations were supplied by Digital to the Eastern Health Board at the £25,000 price for use in St. Brendan's and St. Mary's Hospitals where a suitable application which was staff scheduling had been identified for them. The net result then would appear to be a loss on the surface to the Department of £21,000, the difference in the 1982 price of £46,000 and the 1986 sale value of £25,000 for one fax. On the other hand, Digital have confirmed that that fax which is still available to us will be supplied free to charge to any health agency if we can find a suitable application for it. That has to be carefully looked at because it has a problem of higher ongoing maintenance costs. Against that, on the basis of an analysis since December 1982 we would argue, because of the increased retail prices and VAT increases from 18 per cent to 23 per cent over the period from January 1983 to early 1987, that we saved approximately in excess of half a million pounds. In effect, there was not the apparent loss that is argued.

613.Deputy Harney.—Despite what Mr. Flanagan has said, I find this paragraph one of the most disturbing of all. Over three years after just over £2 million worth of equipment was purchased, a half a million pounds worth of it still remained in the premises of the supplier. It is an appalling use of public money to buy equipment and three and a half years later still have it lying in the supplier's stores. The explanation obviously is the equipment was bought in advance because prices were going to increase and so on but the subsequent history of what happened to the equipment means that its value depreciated rather than appreciated. I find it extraordinary that equipment that could not have been used for up to three years should have been purchased.

Was the decision to sell the equipment back to the supplier at such a subtantial loss made by Mr. Flanagan, was it made by somebody in his Department or was it made by somebody from the Department of Finance? Who made the decision and who assessed what the equipment was worth at that stage? Was there an independent assessment of what it might have been worth?

Lastly, this, in conjunction with some of the other matters in this report, would indicate that there might have been questions in relation to the suitability of the supplier in the first place. I am surprised that you do not seem to have taken the view that perhaps it might be time to consider opening up this whole area to somebody else.

Mr. Flanagan.—There are two elements. Deputy Crotty touched on aspects of them. As Deputy Harney said, we were aware that there was a price increase coming. We were operating with agencies who were not sure of our capacity to deliver. The opportunity presented itself to purchase the equipment. We purchased it so that we would have hardware available to agencies whom we were anxious to encourage into this field. It is Digital equipment. I seem to infer something else from Deputy Harney's question in relation to that. Responsibility for the decision rests with me, on advice from people working within the computer area in the Department.

Deputy Harney.—When you decided to purchase the equipment, when did you think you would be able to use it?

Mr. Flanagan.—Within the year from the date of purchase but there were factors at all times slowing us down. There were arguments and tension outside. We have always been conscious of the need to get value for money. In the arrangements which we worked out with Digital, which is the major supplier of hardware at this time, there is compensation for the potential losses which we might have incurred.

614.Deputy Crotty.—I am a little disturbed about this paragraph, too. It strikes me that Digital did the big sell here that we are all used to in business,, where a supplier says that a price increase is imminent and that we must get in fast. In this case we must examine it very closely because the cost of these items was reducing as their use expanded. Secondly, the pitch was not cleared, as the Accounting Officer mentioned. There were all sorts of difficulties. Purchasing in advance when the pitch is not cleared seems extraordinary and I cannot see how it can be justified. The Accounting Officer also mentioned that we saved later on but is there no account taken of the interest that was accruing on the funds that were expended on machinery that was not being used? It must have been depreciating because anything that is left lying depreciates. It seems extaordinary that we are purchasing this equipment at all in changing times where new systems overtake old systems within even 12 months and that we do not lease this type of equipment. We would then not be tied into anything and we could change systems and update systems quite freely. I find the whole situation extraordinary and hard to justify. Could I have a comment on the leasing scene?

Mr. Flanagan.—Yes, leasing is an option which at first approach we consider, we make proposals about and use where appropriate. It certainly is an option which is being considered now.

Deputy Crotty.—Why was it not considered in 1982? In business it is normal to lease rather than purchase.

Mr. Flanagan.—We are one element, a very big element, in the Exchequer expenditure and there is policy at Government level in relation to the use of any deferred purchase or leasing arrangements with which we must comply. Where it would be appropriate and where we can demonstrate that there are savings to accrue for the year within which we are seeking to purchase, we have that flexibility but in terms of demonstrating the value of a piece of equipment of that nature it is difficult to cost the benefit. In relation to the particular decision, we took it. The decision was taken at the time in an endeavour to speed the process. We purchased, as I said, 11 pieces of equipment, eight of which were put in place. We got by the deal the more modern equivalents into the three sites and there is one available if we can identify a use for it. Overall, we would probably argue, given the point that I made, upon a calculation over the period of time involved the saving to the State was in excess of £500,000.

Deputy Crotty.—I do not think I would accept that there was any saving. I think there was a gross misuse of funds, actually. It would also strike me, and it should be commented on, that it would appear that the Department had to finecomb areas to site some of this equipment, to get it functioning. I question maybe, from the comment, was it the most suitable equipment for the scene at that time or was it just getting rid of the machine out of the stores and getting it functioning?

615.Deputy Harney.—Did you just say a moment ago there is one available if we can find a use for it?

Mr. Flanagan.—There is an apparatus which has been accounted for in the description that is being held by Digital and would be made available without charge the way that the balance is worth to it.

Chairman.—I am going to bring Deputy Flood in. I think we have given this thing a run and we are going to have to give it a run again when we get the special report. I do not think we are going to conclude on it here today.

616.Deputy Flood.—It is becoming clear that one of the difficulties that has arisen in this particular programme is that we did not tie up the contract with the supplier tight enough that would suit what was obviously a major programme. We were almost learning as we were going along. Therefore, whatever contract was entered into with the supplier should have taken account of that very fact and should have, therefore, helped us to avoid the situation whereby we had 25 per cent of one purchase, slightly over £2 million, almost, remaining in their stores and presumably paid for by the Department. I think the contract should have been able to help us to avoid that particular situation given that this is a major new programme. Clearly, also, we did not establish the siting and the staffing arrangements. That is something about which we ought to learn for the future.

The other point I would like to ask is, is there a life expectancy for the equipment we are now buying? I do not think it is possible, particularly in regard to the free unit that is on offer to us, with computers that you can just put them in a box, put them on the shelf, leave them for three or four years and then take them out, treat them as brand new equipment and have them working. Computer equipment, as I understand it, and I am no expert on this, does deteriorate even if on the shelf and being unused. Therefore, I do not think it is a very generous offer, if that is what Digital are offering us, that there is a free unit available. You have to ask about its deterioration while in storage and you have to ask about its maintenance costs since it is a number of years old. I would like specifically to ask about the contract, was it not tight enough to reflect the changing situation; is there a possibility that the contract, if we are still in there and can be changed or amended to take account of the difficulties which we have all spoken about and, secondly, has the life expectancy of the equipment we now have and we are contracted to purchase been spelled out as part of the contract?

Mr. Flanagan.—Just to repeat, what we did to select a supplier of software and a supplier of hardware but for each site installation — I repeat it is not a unitary system — the departmental policy laid down the suppliers of both hardware and software and under that arrangement for each site the contract is separately entered into by the agency which has been selected for its installation. The requirement would be that the equipment to be installed at the particular time would be the state of the art of the equipment at that time. So far as the single remaining one, which I contend is free of any cost implications for the State, we will go back to Digital if we discover a use for it and perhaps if there is not a use, and I have some reservations about the ongoing costs associated with the particular piece of equipment, our relationship with the firm is such that we would be able to trade off against a more up-to-date piece of equipment. That has been the history of the other two pieces, that there was no additional cost.

617.Chairman.—Let us conclude on these paragraphs 55 to 58. We will get a special report on those paragraphs from the triumvarate representative of the Department of Health, the Department of Finance and Mr. Pádraic Donlon, the Clerk of this Committee. The questions to be addressed should be those raised here today, the general public interest, but also the questions raised in the Smurfit Management Consultancy Services Report on the Health Service Computerisation dated November 1986 for the Public Expenditure Committee which never actually reported because the Dáil dissolved. Those questions need to be addressed and incorporated in the report. We should get that report as soon as possible because this is a matter which needs to be addressed. We cannot conclude this examination until we have that report. We will note the paragraph concerned pending the report as I have set out.

618.Chairman.—Paragraph 59 of the Report of the Comptroller and Auditor General reads:—

Suspense Account — An Bord Altranais

An Bord Altranais is a statutory body established under Section 6 of the Nurses Act, 1985 and its functions are, inter alia, to provide for the registration, control and education of nurses and to provide for other matters relating to the practice of nursing and the persons engaged in such practice.

It was noted that advances totalling £300,000 were issued to the Board in May, July and August 1986 by the Department of Health to enable it to meet its financial commitments pending the receipt of fee income as provided for under the Act. It was also noted that the Department of Finance in December 1986 stated that it was not open to it to sanction payments to the Board out of Subhead G.4 of the Vote for Health as requested by the Department of Health. The Department then decided to charge the advances of £300,000 to a suspense account. None of the amount advanced has been repaid to date. In the light of the Department of Finance's refusal to sanction these payments from Subhead G.4 of the Vote, I asked the Accounting Officer why and under what authority the advances were made to the Board and what steps are being taken to recover the amount advanced.

Mr. McDonnell.—This has nothing to do with computers. It simply refers to advances totalling £300,000 from a special account in the Department to An Bord Altranais and the later refusal of the Department of Finance to accept the £300,000 as a charge against the Health Vote. Since the date of my report, the Accounting Officer has explained to me the temporary financial difficulties which were facing the new board. That was in a situation where it had taken over the liabilities of the old board and was incurring expenditure on a current basis, but where the mechanism whereby it could collect fee income had not been put in place at that time. While this explanation by the Accounting Officer outlines the circumstances in which the issues were made, I think there is still the question of the authority for doing so. I should add, Chairman, that I understand that £100,000 of the advance has been recouped by the board.

Chairman.—What is the current situation, Mr. Flanagan? Is there still £200,000 outstanding?

Mr. Flanagan.—Refused to permit me to charge it to subhead G4 but accepted that the circumstances at the time were financially hugely difficult for the emerging board.

Mr. Flanagan.—I would, if you permit me, argue that point. I was relying on section of the Nurses Act of 1961 which, read together with the Nurses Act of 1950, I would consider, although I could see that there could be a doubt about it, gave me the authority to make the money available. I will elaborate on the necessity for making the money available later. Section 4 of the Nurses Act, 1961 refers back to section 59 and section 60 of the Principal Act, the Act of 1950. That section 59 suggested that if the board was in difficulty in its current expenditure the Minister could come to its assistance and where he did pay a balance to the board under section 59 of the Act it was possible to spread half the cost of that assistance over the health authorities as they were then having regard to the respective populations of their areas. My view would be that the situation envisaged by the Act allowed assistance to be given. I would then add that the Oireachtas, the Dail and the Seanad, were moving to a situation in which they were bringing into being a new Nursing board with considerably wider powers with the envisaged necessity by the Oireachtas that it should be self-funding. There was no doubt in my mind, given the envisaged legal situation as expressed in the Acts, the board could have been assisted in a situation in which it was in difficulties; that it was necessary to ensure that the board continued to function, that it should be assisted in this way. I was satisfied that with the self-funding provision being made in the new legislation for it it had the capacity very quickly to repay that money and that it would do so out of its resources.

Mr. Flanagan.—By the registration of nurses and the application of the common application board system of selection.

Mr. Flanagan.—I have sought the assurance that the bulk of it will be paid this year. I have a slight doubt at present, because there has been some difficulties about the common application board system which is now resolving itself, that I would have it all back. My objective will be to get it back before the end of the year.

619.Deputy Harney.—Obviously there is conflict here as to whether there was authority to allocate this money to An Bord Altranais. Could I ask the Accounting Officer whether he consulted any of the legal officers of the State either in his Department — I presume there is a legal division there — or in the Attorney General's office as to whether there was authority to allocate this money?

Mr. Flanagan.—I had discussions with officers within my own Department, with the legal section. This issue still remains to be resolved. I discussed the situation with the Minister of the day and I advised him of the serious situation. I should parenthetically say I have no dispute with the view of the Department of Finance. I accept the view. What I was concerned with was to keep the board afloat financially. Cheques were not being honoured. They were being held back. They were going to be bounced. The Oireachtas was considering an entirely new deal for An Bord Altranais. Had there not been the difficulty with the common application board system and some delay in making the regulations, the money would have been repaid. Having regard to the structure of the two Acts, the advice I was given was that it is possible that I was covered by section 4 related back to section 59 and section 60 of the Principal Act.

620.Chairman.—Was it not possible to bring in a Supplementary Estimate at that time to meet the problems they were facing?

Mr. Flanagan.—That was an option which was considered but given the situation that was upon us and that needed to be resolved, there was tremendous potential for embarrassment.

VOTE 49 — HEALTH (1986)

621.Deputy Crotty.—On subhead E — Statutory Inquiries — there was an over-expenditure. What were these statutory inquiries?

Mr. Flanagan.—We conduct inquiries in the normal course where doctors abuse their prescribing requirements under the Misuse of Drugs Act. There were two inquiries for removal from office. Do you want the particulars? The allegations were in relation to staff employed in a health board who in one instance exceeded the powers in the administration of a drug and in another instance was alleged to have conducted her official duties under the influence of drink.

Deputy Crotty.—On Subhead F — Developmental, Consultative and Advisory Bodies — what are these bodies? The explanation refers to the non-implementation of a proposed computerisation scheme. Has that anything to do with the previous paragraphs?

Mr. Flanagan.—No, I can give you the descriptions. They range from a national survey on children's dental health, a working group which was concerned with sexual abuse of children, the Comhairle na nOspidéal activity, communicable diseases, services for the elderly, the ENT working group in Cork, the food advisory committee, the hospital committee of the EC, an interpretation committee which operates under the common contract, a committee which was looking into laboratory services, mental handicap committee, the activities of the National Drugs Advisory Board, the National Health Council, the poisons council, the Post-Graduate Medical and Dental Board, the study group on the psychiatric services and a monitoring committee which is in existence to monitor services made available for travelling people.

622.Chairman.—Mr. Flanagan, you were given notice that Deputy Austin Deasy wrote to the Committee some time ago — on 3 March — bringing to the attention of the Committee the fact that health boards had overrun on their expenditure and that the Committee would be raising this matter with you this morning. Did you receive notice of that?

Chairman.—Would you tell the Committee what the position is; why they overran and how much they overran by in 1985 and 1986?

Mr. Flanagan.—On 31 December 1986, health boards and voluntary agencies directly funded by the Department combined, overran the allocations by £35 million.

Mr. Flanagan.—The cumulative overrun to the end of December 1985 was £20 million, making the combined overrun in the period ended 31 December 1986 £55 million.

Chairman.—What authority did they have for that? Did they require the authority of the Department of Health? Do you have any statutory powers to block this?

Mr. Flanagan.—We impose obligations by virtue of section 31 of the Health Act on agencies to live within their allocation, broken down in programmes as appropriate. That is an activity which is quite clearly telegraphed in the letters of allocation. In some instances, health boards overrode the situation and the recourse of an administration in that situation, if it wants to push it to the point, is to hold a local inquiry.

Chairman.—What happened to the over-expenditure of £55 million? Did your Department pick up the tab for the whole £55 million?

Mr. Flanagan.—No. It is being retrieved from them in a planned way over a period of time of the order of £20 million is being accorded for the current year.

Chairman.—Would you let the Committee have a note on it, how it arose, the authority for doing it, how these health boards can circumvent the Oireachtas by voting themselves this sort of money as they choose and how you are dealing with the problem? I know it was done, perhaps, against the will of your Department but it should not be allowed to happen and it should not recur without the authority of the Minister or the Dáil or the proper democratic sanction.

Mr. Flanagan.—If you would indulge me, I would like to explain that it is not being done now and it is not being tolerated. In the year in which it became very obvious it was happening, towards the middle of 1986, there were clear decisions being made by boards in certain circumstances not to operate within the constraint imposed on their chief executive officers by section 31 of the Act, we began to bring in a very firm system of cash management which has as its element the control of expenditure within allocation and of overdraft. It cannot now happen and it will not happen. The control was exercised rigidly in 1987 so that we knew precisely what health boards were doing and they had no scope to do what they did in 1985 and 1986. We learned from the process. We will give you a description of what is actually being done but it cannot now happen and it will not happen.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) in attendance.

VOTE 21 (1985) and VOTE 22 (1986) — OFFICE OF THE OMBUDSMAN.

Mr. W. P. Fagan called and examined.

623.Chairman.—This morning we are examining Mr. Fagan, Director (Acting), Office of the Ombudsman, in his capacity as Accounting Officer. This is the first time for Mr. Fagan to appear and he is very welcome. We do not have any paragraph from the Comptroller and Auditor General's Report; we have just the accounts of the Votes. Could you give the Committee the up-to-date situation on the current strength of your office?

Mr. Fagan.—At present we have 29 staff. The staff consists of myself as Acting Director, two senior investigators, nine investigators, two higher executive officers and the remainder are support staff — executive officers, clerical officers, typists and messengers.

Chairman.—You are aware that the Minister for Finance said in the Dáil recently that he was keeping the situation under review? What sort of problems are you facing at present? Has the situation eased?

Mr. Fagan.—No, the situation has not eased. We have not been able to make any inroads into our arrears of work, and we are still very much restricted in the conduct of investigations. In particular, it is very difficult with a reduced budget and reduced staff to carry out investigations outside of Dublin. We are having to cut our cloth within the parameters laid down by the budget, and it is very much restricting our ability to carry out our statutory function.

Chairman.—What percentage of your complaints are in relation to Telecom Eireann?

Mr. Fagan.—At the moment they are of the order of 40 per cent to 50 per cent, and have been growing over the years.

Chairman.—How many of those, in the normal run of events, do you find in favour of the person complaining?

Mr. Fagan.—Got rebates recommended and we were of assistance in a further 15 per cent, but 25 per cent is the number resolved for last year.

Chairman.—In the case of Telecom Éireann, have you given any thought to the question of the consumer having his or her own telephone meter so that they can monitor their own phone calls? You may be aware, and it was drawn to the attention of the Ombudsman, the fact that in Germany there are four little wheels which clock up the units you are using as you are actually making the call. Is it not possible for Telecom Éireann to install something as simple as that and then obviate the need for taking up so much time of the Ombudsman?

Mr. Fagan.—Some customers have meters, and from time to time they have been able to quote to the Ombudsman the fact that the meter showed up something different to the telephone bill. There have been some difficulties about meters installed at the users' end and there has been some difficulty in getting Bord Telecom to accept customers meter versus their own meter. That has given rise to difficulties. In those circumstances, that might not provide the whole answer to the problem. Bord Telecom are proceeding, as you know, with an itemised billing system and they claim that when the itemised billing system is in operation it will give precise details of calls made. The itemised billing may provide an answer, but initially there may be more difficulties than we have already, because when you provide somebody with more information, we have found from experience, you can sometimes answer questions but on the other hand sometimes you can raise more questions.

Chairman.—The point is that they can provide an itemised billing and provide what they want. Take my own case. Regularly — not so much in the last month or two — I would get phone calls at home for the Planning Department of Dublin Corporation and Dublin County Council, which share five digits of my number. When you complain about that to Telecom, they tell you that cannot happen, but it does happen. This question of itemised billing — what is to stop them billing you for calls that other people make and telling you that the system is perfect and it cannot go wrong when it does go wrong?

Mr. Fagan.—The point raised is very interesting. We are just commencing an investigation into faults in billing. We had to put off this investigation for over a year because of the staffing situation. This is a case where an individual had complained to Bord Telecom about his phone bill and was told that the meter was checked and was found to be all right. He then complained to the Ombudsman and the Ombudsman took the matter up with Bord Telecom, and at that stage a fault in the meter was detected. The man was given his rebate and was, therefore, happy so far as the money end of things was concerned. We have not had the staff resources to investigate this but we have, in the last three weeks, commenced work on an investigation. We get it, not on a frequent basis but on a reasonably regular basis, that a fault occurs in the metering, for example some form of crossmetering with somebody else's meter or there is some kind of stepping up in the metering which does not relate to the telephone calls. What concerns us particularly is that he had to come to the Ombudsman before this fault was detected. We would like to see in Bord Telecom, when they introduce itemised billing and when disputes arise from this what procedures will be installed to ensure early detection of such faults.

624.Deputy Foley.—You mentioned that most of the queries, 40 per cent to 50 per cent, are about Bord Telecom. What is the next highest?

Mr. Fagan.—The health boards and the local authorities separately. The percentage in each case would be between 6 and 10 per cent.

Deputy Foley.—Roughly 80 per cent of your inquiries concern Bord Telecom, Social Welfare, local authorities and the health boards, all the other queries make up approximately 20 per cent. May I go back to the year ending 1985, which is under discussion. How many staff had you at the year ending?

Deputy Foley.—At present you have one acting officer, two senior investigators, 15 overall. The staff shortfalls apply across the board and you have a shortfall of approximately 12 staff, is that correct?

Mr. Fagan.—They were due to restrictions in budget. We simply did not have any more money to pay the staff, so they had to be transferred to other Government offices.

Deputy Foley.—Of the queries remaining, what percentage would relate to Dublin?

Mr. Fagan.—I will give you a figure for last year. Of complaints received, about a third — around 30 to 35 per cent.

Deputy Foley.—The remainder were made up from rural Ireland, is that correct?

Deputy Foley.—Is it a fact that many of the queries that come in are trivial and take up a share of time?

Mr. Fagan.—I would not like to use the word “trivial” but there is a certain percentage of complaints. We do receive trivial complaints, but there is a certain percentage of complaints which is minor in nature to the extent that perhaps a phone call or one letter might resolve them. As against that, other complaints might take two or three years to resolve.

Deputy Foley.—Do I take it that certain people are continually making representations to the Ombudsman?

Mr. Fagan.—Some people are regular complainants but they are very small in proportion to the overall number of complainants.

Mr. Fagan.—They take up some time but if what you are getting at is that individuals may have a problem about something, we would soon recognise that. At this stage we have enough experience to recognise the genuine complaints.

Deputy Foley.—Would you think that — Bord Telecom are responsible for 40 to 50 per cent of the inquiries — if Bord Telecom had been more co-operative with the people looking to you for help they would have resolved the problem without it going to you? Do I take it that you have found 25 per cent in favour of the consumer? Is that right?

Deputy Foley.—Could that have been resolved without it going to you, if Bord Telecom were more co-operative?

Mr. Fagan.—Bord Telecom are co-operative with our office in terms of investigation.

Deputy Foley.—I understand that but I mean if they had been more co-operative with the consumer.

Mr. Fagan.—Perhaps. It is difficult to say. We have seen cases where people got the standard response which is, “your meter has been checked”, where no further effort was made other than giving the standard response where perhaps they might have been able to do more. I would think that when Board Telecom have their new system in operation they will have more scope. To give some excuse to Bord Telecom, there is a difficulty about checking a meter. You can check a meter now but can you say that the meter was out of order three months ago. This arises because the billing is in arrears. A difficulty for Bord Telecom is lack of information. The Ombudsman considers Bord Telecom's side of the story, he also considers the complainant's side of the story and he weighs both up and decides where the balance of justice lies in the case. That is how the Ombudsman arrives at his recommendation. The Ombudsman could not say categorically in those cases that that meter was wrong. It is hoped the new system will lead to more specific information being available.

Deputy Foley.—In view of the facts you have presented, while you have found 25 per cent in favour of the consumer, do you think that a levy should be put on Bord Telecom where they had been found responsible?

Mr. Fagan.—Where they have been found responsible they pay a refund if the bill is already paid.

Deputy Foley.—Do you not think it would be reasonable for them to compensate you where they have been found at fault?

Deputy Foley.—Chairman, I am just making a point there. I think we should consider seriously the question of levies not alone on Bord Telecom but anybody else responsible there where findings have been in favour of the consumer, for the time of the Ombudsman. He should be compensated in some way by the relevant party. I am putting that forward for further consideration.

625.Deputy Naughten.—I would like to clarify something with Mr. Fagan. Did you say at the start that it was practically impossible to pursue investigations outside Dublin?

Mr. Fagan.—It is very difficult at the moment. We are having to get groups of investigations together and send somebody — for instance, we have two or three people going to Cork next week — to interview groups of people. They are doing a great number of interviews in the one week and we are having to organise ourselves strategically this way. The interviews in Cork next week should have taken place possibly up to three or four months ago but we must have somebody available and a sufficient number of cases because not alone have we been cut back on numbers of staff, we have been cut back on our travelling budget. We are very restricted.

Deputy Naughten.—Can we take it that three or four months is not an abnormal delay in your office?

Mr. Fagan.—No, but that is three or four months for that stage. The cases have been with us considerably longer than three or four months. It is just that stage of the investigation process has been there for three or four months. That will add three or four months to the overall—

Deputy Naughten.—The reason for the delay there is that it is a complaint outside Dublin.

Mr. Fagan.—Because first of all a staff member has to travel which takes time. There is travelling up and travelling down and absence from the office, leaving work behind there, and finally there is the actual cost, so we are therefore combining visits.

Deputy Naughten.—In areas where you cannot combine, such as areas more rural than Cork, what is happening there? Is there another four or five months delay in addition to the four months?

Deputy Naughten.—This would apply with a large percentage of your cases, since 70 per cent of your work is outside of Dublin?

Mr. Fagan.—It would apply particularly in relation to what we call full investigations where full interviews would be required. We carry out much of our preliminary examination work by way of letter and telephone and we have telex and fax facilities in the office which we find very useful, but obviously they have their costs and they all mount up. However, it is still considerably less expensive to write to somebody than it is to send somebody down at the current rates for travelling and subsistence.

Deputy Naughten.—Deputy Foley made a point with regard to getting a contribution from bodies where you carried out a great deal of investigation. He mentioned Bord Telecom: some 50 per cent of your work is involved with that body and 25 per cent of your investigations prove that the client has been wronged one way or another. Is it basically with the billing system and with overcharging on bills?

Mr. Fagan.—Billing is the major problem. Telephone service was a problem in the early days, but we have found with the introduction of digital exchanges and Bord Telecom getting their act together in relation to providing service for people that has become less of a problem and the problem is almost totally about telephone billing at this stage.

Deputy Naughten.—Even though all of those clients would have taken the matter up with the board and had got no satisfaction, I take it.

Mr. Fagan.—We would not deal with a case unless somebody had taken it up already with Bord Telecom. That is the first question we ask the people when they come in the door.

Deputy Naughten.—You mentioned that your staffing level has been cut from 41 to 29 and I would ask the Department of Finance, if I may, why this office was so severely cut by comparison with any other Government office or the public service.

Mr. O'Farrell.—The question of the staffing levels of the Ombudsman has been extensively debated in both Houses and the Minister has confirmed that there is to be a review on this issue. Pending the outcome of the review and its consideration by the Minister, I hope you will accept it would be premature and inappropriate of me as a departmental official to comment on or add to the Minister's statements at this stage where there is to be a review and the Minister has announced it.

627.Deputy Naughten.—I take the point about the forthcoming review, Chairman, but one office has been drastically cut by comparison with any other office. While the review is to ascertain what can be done to alleviate the backlog of claims, what I am asking is why was this allowed to develop?

Mr. O'Farrell.—It comes back to the question of the appropriate staffing levels. If a staffing level of 41 was right and the review confirms that that is one issue. If the review were to confirm that 29 is ample that would be another matter. The issue, having been so comprehensively debated and the Minister having confirmed that there would be a review, which he reiterated in the course of the debate on the Estimates, to settle the issue once and for all. I do not think an official could usefully comment in advance of the findings of the review and its consideration by the Minister.

Deputy Naughten.—Mr. O'Farrell would appear to imply that there was a belief that a staffing level of 41 was much too generous in that office.

Mr. O'Farrell.—As the Minister said, one must approach such a review with an open mind. There would not be a closed mind approach on that issue. There have been conflicting views and the purpose of the review is to settle the matter once and for all.

Deputy Naughten.—But somebody must have made up their minds over the last 18 months that the office of the Ombudsman was grossly overstaffed when they allowed the staffing level be run down by 12. Somebody must have taken the decision to reduce staffing levels there. Was that because the staffing levels in the Ombudsman's office were causing too many problems for Government Departments? Why was it allowed to be reduced by 12?

Mr. O'Farrell.—All of it has been extensively debated. The Minister has made a number of statements. The conclusion is that in order to settle the issue once and for all the review is necessary. In fairness, how can an official pre-empt that review?

Deputy Naughten.—Perhaps I may ask a question on the 1985 Vote, under subhead C—Publicity and Advertising. I note there that there was a saving of £9,600. It is explained that the saving arose because expenditure on publicity and advertising was curtailed as a result of an unforeseen increase in the number of complaints received. It would appear from that that you advertise extensively for work. Is that the position?

Mr. Fagan.—We did in the early days. In the early days the Ombudsman saw himself not alone as having a role in the establishment of the office but in public education as to what was his role or function and the service he could provide. Money had been provided by the Oireachtas. The year 1985 was the first year of our expanded remit. The expanded remit came into effect on 1 April 1985. The Ombudsman's remit was extended to health boards, local authorities, Telecom Éireann and An Post. It was very difficult for the office to predict, in advance, what would be the number of additional complaints emanating from those new sources. At the same time, we were in the process of recruiting staff. We had to undertake a major recruitment campaign in that year on account of the expanded remit. With a combination of delays in recruiting staff and the staff having to be trained and the number of complaints exceeding expectations. We decided later in 1985 not to engage in some publicity intended earlier. That saving arose as a result of a combination of all of those factors.

Deputy Naughten.—You would seem to have made up for that in 1986 when you exceeded your budget on advertising.

Deputy Naughten.—One would imagine that you would have need to advertise more in 1985 than in 1986.

Mr. Fagan.—The main reason for the excess in 1986 — as will be seen from the note on the Appropriation Account was the preparation of a poster for schools. This is a common practice in Ombudsmen's offices in other countries — that, as part of education in civics, young people in schools should be educated on the role of an Ombudsman, that he exists and is part of the administrative/legal system. Expenditure on that schools' poster occasioned the overrun in 1986

Chairman.—We might tell some of the older people in the country what is the “omnibus” man.

Mr. Fagan.—Indeed, I did not want to allude to that. We sometimes receive letters addressed in that way, and worse — the ambulance man and so on.

628.Deputy Flood.—In relation to those contacting your office seeking your intervention do you classify them in any way based on their income or background?

Mr. Fagan.—No. Income arises only in cases where, for instance there is something like a means test involved about which they are complaining. We would not have any other reason to examine a person's income.

Deputy Flood.—In some cases do you think you should perhaps examine the income of a person making a complaint?

Mr. Fagan.—A profile of individual complainants would involve us in extra work. It would be very nice to be able to analyse the type of a complainant with whom one is dealing. Has the Deputy something else in mind other than information in terms of analysis? We have published four reports now and are in our fifth year of operation. I would like to see some analysis of the work of the Ombudsman undertaken. When you are there in the thick of it you do get certain impressions but you do not know whether they are statistically justified. Such an exercise would require staffing and resources which we simply do not have.

Deputy Flood.—What is the number of complaints you receive concerning the ESB?

Mr. Fagan.—From time to time we receive complaints which are outside our remit in relation to the ESB. They would comprise a fairly small number of our invalid complaints. I do not have actual statistics. We have a longstanding arrangement with the ESB whereby we merely refer the matter to them for examination. There are not a large number of complaints about the ESB but there is a fairly consistent one over the years.

Deputy Flood.—Presumably that is because the metering arrangements within the ESB seem to be generally accepted by the public?

Deputy Flood.—In relation to Telecom Éireann, have you or members of your staff ever gone to see their metering system in operation?

Mr. Fagan.—We have. Probably we will do more than we have done up to date in the course of our present investigation just commencing. We have attended an information session held by them on the new itemised billing system. But we have never actually gone in to carry out an analysis in an exchange, to ascertain how they photograph the meters, or watch the system in operation. If we were to carry out an absolutely thorough survey of metering, probably we would need some technical consultancy expertise which we do not have within our office. After all, Bord Telecom have hundreds of engineers and thousands of technicians, all very highly qualified on the technicality of metering operations.

Deputy Flood.—Could you comment on the co-operation you receive from the major different organisations? Are you satisfied with that co-operation?

Mr. Fagan.—In the main we receive excellent co-operation. You will come across some lack of co-operation, however, but for organisations with headquarters outside Dublin, possibly because we are a Dublin based office, there appears to be an understandable resentment of people coming down from the big smoke to look into their affairs, particularly when we want to poke around their files and ask questions. It is understandable and our staff are trained in preparation for it. By and large we get around that problem.

Deputy Flood.—What is the general nature of complaints you receive concerning local authorities?

Mr. Fagan.—They are fairly varied. I can give the Committee a run-down of major areas of complaint for 1987 if that is of any use: planning enforcement, housing loans and grants, housing allocations, transfers, roads, housing repairs, service charges, rates, housing sales, housing rents, motor taxation, water supply, sewerage. They would be the main ones. There are a few other smaller items.

Deputy Flood.—In general, are you satisfied with the co-operation you received from local authorities?

Mr. Fagan.—Yes. Obviously, the position varies with each local authority. When one is dealing with a local authority one is dealing with a county secretary or a county manager and the position can depend on the individual or the case involved. By and large, the co-operation is excellent.

Deputy Flood.—Over the years, since the office was established, have you worked out a statistical average on the length of time it takes to deal with queries from one year to another?

Mr. Fagan.—No, we have not. A statistical average, probably, would be a false figure for the reason that it would be better to divide up the cases into more serious and less serious categories before one takes a statistical average. In relation to the social welfare area, the great majority of the more straightforward cases in that large area, because of the co-operation and access we have been given, will go within three months but the more difficult ones could take anything up to one year. I say that by way of illustration. One might find a different average length for Telecom and for local authorities the time might be slightly longer because of the difficulties in communication arising from the distances involved. With the organisations that are centred in Dublin it is easier to get information.

629.Deputy McGahon.—Many of the questions I wanted to ask have been put to the witness and answered. In regard to the attitude of local authorities, does the witness find them co-operative?

Deputy McGahon.—Is it the position that local authorities in general designate one person to deal with the queries?

Deputy McGahon.—Did the witness give the Committee the number of complaints received in the first two years?

Deputy McGahon.—No, overall. How many complaints were received in the initial years?

Mr. Fagan.—I will give the Committee the numbers for each year. The total number of complaints in the first year within remit, that would be other than invalid complaints, was approximately 1,500. In the second year, 1985, the figure was 4,800. In 1986 the figure was 5,000.

Deputy McGahon.—With your staff cut to 29 is it possible for the office to function properly?

Mr. Fagan.—It is not possible to carry out the full remit and the Ombudsman has already reported on that.

Mr. Fagan.—It is suffering mostly because of the difficulty of sending an official down.

Deputy McGahon.—If a person writes in from rural Ireland, is a preliminary check carried out on that person before he or she is visited?

Mr. Fagan.—Before visiting a person we would always have had some contact with the Department or the office concerned. We would have either written to them or sent for the person's file. There is little point in turning up the file after a person is questioned and discovering that there was another question that should have been put to that person.

Deputy McGahon.—In other words, the official does not go down the country to interview an individual without having some information?

Deputy McGahon.—And rightly so. What proportion of the complaints would be from cranks?

Deputy McGahon.—It is good that we have an opportunity to refer to Bord Telecom because since that new State-sponsored body was established TDs are almost like eunuchs when trying to deal with complaints with that organisation. That sector is like an MI5 operation. What is the nature of the complaints?

Deputy McGahon.—Do you receive complaints about the attitude of personnel to people who make complaints to that organisation?

Mr. Fagan.—We do but that is not something that just applies to Bord Telecom. That applies across the board. We may be told that somebody was rude to the individual who was making the complaint or that somebody was preemptory, was abrupt or did not answer questions. That is a common complaint.

Mr. Fagan.—It is not. It is particularly common in across-the-counter situations.

Deputy McGahon.—Is there anything you can do about the fact that the cost of our telephone system is the second highest in Europe?

Mr. Fagan.—I am afraid that the charges are beyond the remit of the Ombudsman.

630.Deputy Desmond.—I should like to put four questions to the witness. I should like to ask the Acting Director the scale of salary he is now paid.

Deputy Desmond.—I understand that the Department of Finance, which is responsible for the Public Service, were asked to continue the staffing scale arrangement when you took up office and that the response was not to pay more than the scale of a Principal Officer.

Deputy Desmond.—May I ask Mr. O'Farrell from the Department of Finance who took that decision and why it was taken?

Mr. O'Farrell.—The grading levels, as well as the absolute numbers of staff of the Office of the Ombudsman, would be one of the issues that would inevitably come up——

631.Deputy Desmond.—Mr. O'Farrell, I am not interested in the review question. I am asking a straight question. Who took the decision to downgrade the post of Director of the Office of the Ombudsman from Assistant Secretary to that of Principal Officer?

Mr. O'Farrell.—I think we would be getting into an area of policy there, with respect.

Deputy Desmond.—It is not a matter of policy. I am asking who took the decision.

Mr. O'Farrell.—Again, I will have to seek guidance from the Chairman. In regard to a decision taken within the Department no official is going to say anything other than it was a full departmental decision, as is the practice.

Deputy Desmond.—Who communicated that decision to the Office of the Ombudsman? Who notified the office that the post of Director, which the previous Administration had decided as a conscious staffing decision would at least have the equivalent status of Assistant Secretary since he would be dealing with officials at Assistant Secretary or Secretary level in Departments or with chief executive officers of health boards or county managers? The last Administration wanted that officer to have that status within the system. Who took the decision in Finance, or the DPS, that the post should be downgraded? As I understand, the Office was formerly notified that the position was being downgraded.

Mr. O'Farrell.—All members here will be aware, as I am aware myself from all the times on which I have mentioned I have attended, that the internal proceedings within Departments are not gone into at the PAC.

632.Chairman.—Mr. O'Farrell should be aware that the committee has the power to send for persons, papers and records and we can send for the papers, if necessary. I think what the Deputy is getting at is that it was not a Cabinet decision, it was not a Government decision. It was an internal decision in the Department of Finance, which never downgrades itself, as a matter of record.

Deputy Desmond.—This may help Mr. O'Farrell. As I understand it, the Director, who had resigned in the normal course of events and left office, was replaced by, Mr. Fagan, an Acting Director, and it was sought by the Ombudsman from the Department of Finance that that Acting Director should be paid assistant secretary rate, or should at least be paid an allowance the equivalent thereof. I understand that he was told by your Department that that sanction would not be given and that the salary for the post in future would be only at the rate of principal officer and that that was part of the downgrading of the office of the Ombudsman. I want to know who took the decision and why it was taken.

Mr. O'Farrell.—There is an embargo whereby posts becoming vacant are not filled except by a process involving redeployment. I should say, Chairman, that in the Department of Finance there have been numerous posts at deputy secretary and assistant secretary and principal officer level vacatéd and not replaced at all.

Deputy Desmond.—Are you saying that we can get some clarification on the matter at last, that the post of the Director of the Ombudsman's office is embargoed?

Mr. O'Farrell.—When any post becomes vacant, because of the financial constraints obtaining and that have obtained for a considerable length of time it can only be blocked, if possible, by a process not involving— —

Deputy Desmond.—I asked a straight question. Is the post of the Director of the Office of the Ombudsman embargoed by the DPS management?

Mr. O'Farrell.—A senior investigator is performing the functions, at existing salary. Therefore, there is no extra cost involved to the Exchequer.

Deputy Desmond.—That is not the question I am asking, Chairman. I am asking is the post embargoed?

633.Chairman.—Are we to take it, Mr. O'Farrell, that all this is still up in the air and that it has not been concluded yet, or is it embargoed?

Mr. O'Farrell.—This will all be aired. It is inevitable that it will come up.

634.Deputy Desmond.—I will not press my question. We can make our own report on the matter. Could I ask who is doing the review?

Mr. O'Farrell.—The Minister indicated in the Dáil that he believed that the management services unit of the Department of Finance would be the appropriate group to carry it out. That would be normal.

Deputy Desmond.—Except for the abnormality of that situation, is that not in parallel with the captain of a ship reviewing why he capsized that ship?

Mr. O'Farrell.—Surely that would apply to any Department. It is the Minister for Finance under the 1956 Act, under the Regulation Act— —

Deputy Desmond.—Why was not the audit review group, which was a body of worthy citizens, somewhat removed, if only slightly, from the Department not given the opportunity to undertake that exercise?

Deputy Desmond.—Yes, since you are so preoccupied about efficiency in the Ombudsman's office.

Mr. O'Farrell.—This is a fairly specific remit which, so far as I know, it, in effect, to find ways in which savings can be achieved.

635.Deputy Desmond.—It is not. With due respect, it is to review the efficiency of each Department and for the purpose of that review the secretary of the Department concerned is co-opted on to the review group. In this case one would have imagined that the director or Acting Director would have been co-opted on so that, at least, he would have an opportunity of conveying to the audit review group what exactly was going on in his Department. I leave it at that Chairman and I ask my final question. Could I ask the Acting Director in a broad sense how many issues of policy execution is the Ombudsman's Office concerned with, as distinct from what one might call conventional complaints about the operation of the system? How many policy questions do you deal with, the execution of policy and the execution of entitlements — the policy questions that arise?

Deputy Desmond.—The impact of policy on the individual as distinct from, I will not say mundane, but conventional, complaints, about the actual operation of the system?

Mr. Fagan.—We have adopted a particular approach on this. The Ombudsman is confined legally, by section 4 of the Act, to restricting his investigations to actions taken in the performance of administrative functions. It is the administration of schemes that the Ombudsman is concerned with. What has happened over the years is that the Ombudsman has come across some examples of unfairness but because of legislation he could not intervene an example of this which he raised was a case in his first year in office. I am talking about the averaging of old age pension contributions. In this particular case the Ombudsman felt that there was nothing that he could do because of the restriction in the Act. What he has chosen to do over the years is to report the matter to the Oireachtas, so the Oireachtas can then consider this particular problem or anomaly but policy per se is not for the Ombudsman.

Deputy Desmond.—I accept that, but have there been about a dozen of what I would call anomalies?

Mr. Fagan.—Yes. There is usually a section in every year's report. Each year at most.

Mr. Fagan.—Yes. It is a recurring feature. They are not all as major as the one about the averaging of pensions. Some are difficulties about contributions for people on part-time work, or other technical obstacles that are there which, to the complainants and the ordinary man might appear to be unfair, but which you could not criticise a Department of State for implementing.

636. Deputy Crotty.—Does your office investigate all queries that arrive at your desk?

Deputy Crotty.—Is the office not selective in that there must be queries coming in that would be well known not to hold water?

Mr. Fagan.—Yes. There is a two-stage procedure. The Act describes them as preliminary examination and investigation. The actual formal investigation procedure is at the Ombudsman's discretion. We must however examine every complaint that we receive. Of course, that examination can be whatever the Ombudsman — again he has discretion under the Act — determines that to be. It might be merely one phone call and as I indicated earlier, if we find cases which do not hold water we do not waste time on them.

Deputy Crotty.—That is fair enough. Deputy Naughten raised the question of advertising for work. Did you spend any money advertising for work this year?

Mr. Fagan.—No. In 1988, the only money that has been spent out of our advertising budget, to the extent that it is an advertisement, is on producing the annual report. We actually have a statutory function. It fulfils that function. It also provides information to the public on the workings of the office. That is the only money we have spent on producing that report.

Deputy Crotty.—What percentage of your queries come from Members of the Oireachtas?

Mr. Fagan.—I could not say. Certain Members of the Oireachtas sent us complaints, not all Members. I have not got a figure and we have never actually produced a figure. I would not say it is a high percentage. It has been suggested to me here that it could be less than 10 per cent. I would be surprised if it is very much more than that.

Deputy Crotty.—I would deem it to be a very high figure. How many of those cases that you receive from Members of the Oireachtas are successfully pursued by the Office of the Ombudsman?

Mr. Fagan.—It would take some time, because it would require analysis of our back statistics. We would have to take a period of, say, a year and go back over it. It could take some time, but I could certainly provide the information.

Deputy Crotty.—I do not want to put extra or unnecessary work on the office seeing that it would appear you are under-staffed. From your own experience, would you be able to give me any information off the top of your head?

Mr. Fagan.—I would think that the percentage of successful complaints from TDs — assuming that their complaints are representative of the whole population of complaints we receive — is the same as the overall percentage resolved. If we get telephone complaints from TDs, about 25 per cent of them are resolved and likewise with other areas. Because something comes from a TD, it does not receive any special treatment either way. We are conscious of the fact that, at the end of the day, the TD will have to be notified of the outcome. Apart from that, it is treated as a normal complaint.

Deputy Crotty.—I am talking now about queries from TDs about their constituents.

Deputy Crotty.—You also mentioned a problem about travelling and investigating queries in rural areas. How many times would you travel on a case, say, down the country, to a local authority? Would you be able to tidy it up in one visit?

Mr. Fagan.—We try to. Sometimes it is necessary to go back if the visit reveals further information, for instance, it might reveal that an individual in another location might need to be interviewed or that the individual was not able to attend on the occasion of the first visit. We do an investigation plan at the outset and we try to be comprehensive about the number of people we have to interview and the individuals involved. We try to hit them all at the one time but sometimes it is necessary to make a second visit.

Deputy Crotty.—Would it be necessary to visit, three, four, five or six times?

Deputy Crotty.—I have other information, with which I will supply you privately in this regard. Finally, you mentioned the difficulty of investigating rural cases. Would the office consider in the future diversifying their office, in other words, putting an officer for the south-east in Kilkenny and an officer for the south-west in Tralee or somewhere?

Mr. Fagan.—This arose in 1984 when the office was new. The response to that was to start a series of regional visits — that is, setting up temporary offices in towns. We did that in 1985, 1986 and again in 1987 but we have not done it since June 1987. We suspended them for the past year and there does not appear to be any immediate prospect unless our budget is restored, that we can resume them. The reason this approach was taken was that first of all it was very early in the life of the office and it was not known whether there were sufficient complaints in any particular area to justify having an officer there because there are certain overheads always involved in locating an individual. It is more than just simply the cost of his salary. The second thing we found was that the regional visits were quite successful. From the three visits that we have done already in 1985, 1986 and 1987, we have nearly 1,500 complaints, which is quite a considerable number.

Deputy Crotty.—It would appear that in that sort of instance you might be looking for complaints. I am thinking about an officer who will be available for people to visit. It would cut out travelling expenses if you make an office available within 40 or 50 miles of a general area. There is no necessity to set up a hierarchy. You could have an office with just one officer. He need not have any telephonists or anyone else there.

Mr. Fagan.—This is common in other countries. In France, for instance, they have regional mediators and in other large countries like Australia. I do not know if it would be justified in this country. I could not see more than one or two regional offices outside Dublin if it ever develops that far, but there would be costs associated with it, obviously.

Deputy Crotty.—Take it that 10 per cent of your complaints or queries come from Cork, you could tie it in with an employment exchange or some other Government agency which would have a built in system already and would not need a whole hierarchy to handle it.

Mr. Fagan.—This is something that could well be examined. In Cork, we found people who had travelled from the far west of Cork and from Kerry, who had come a long distance, to make their complaints the day we were in Cork. They would not have travelled to Dublin but wanted to make their complaint to the Ombudsman in person so that would be indicative that, possibly, if there were regional offices we might have actually more complaints coming on a more regular basis from people in the more remote areas. That is only based on our own experience. Before I would give the view that it is absolutely justified in Cork, a more studied approach to the plan would have to take place but there are obviously indications there.

Chairman.—It is 12.15 p.m. and I have an official from the Department of Labour waiting.

Mr. Fagan.—There is a Garda Complaints Body but, in the early days, before the Garda Complaints Body were set up, we received complaints about the Garda Síochána.

Mr. Fagan. —No. No function whatever in relation to the Garda Síochána. The Garda Complaints Body deal with that.

638.Deputy Naughten.—With regard to the number of complaints currently on hand in your office, how long have you had those complaints? What is the backlog at present?

Mr. Fagan.—We have about 2,000 complaints on hand. Some of those complaints go back to the early part of last year — some possibly even back to 1986 because we have been hit by these cuts now since April of last year. The first staff left the office in April of last year.

Deputy Naughten.—Most of the longstanding complaints would be from rural Ireland?

Mr. Fagan.—They are the ones that are most difficult. I do not want to place an overemphasis on them as there could be complaints from the Dublin area, too, which are equally difficult but it is more of a problem for the office, from the administrative point of view, to handle the ones outside Dublin.

Deputy Naughten.—This Committee should highlight the fact that 70 per cent of the complaints are from rural Ireland. This is where the big delay is. This Committee should express dissatisfaction with that situation. For example, it would appear to me that from what has been said here today that if you have a complaint in Dublin it can be dealt with six to 12 months sooner than if you have the same complaint in rural Ireland. That is unacceptable.

Mr. Fagan.—That is not necessarily the case. The main difficulty arises with regionally-based bodies such as local authorities and health boards. If somebody in Cork complains about their widow's pension we can have the information the following day from the widow's pension section in Phibsboro and we might be able to resolve it but if you have to interview the person and maybe the local social welfare officer that might take a little longer. Some rural Complaints are dealt with just as quickly. It depends on the nature of the complaint.

Deputy Naughten.—You pointed out at the start that work outside Dublin takes much longer to examine. If someone from a rural area has a complaint with their health board or county council it will take much longer to examine it.

Deputy Naughten.— —and this Committee should express dissatisfaction with that. Some 50 per cent of the claims are against one body. If that body had gone half-way to meet those customers, those complaints would never have landed on the Ombudsman's desk. It costs £700,000 to run that office and it is only fair that they should have to meet some of the cost. The Committee should also refer to that. I would like to get a detailed explanation as to who took the decision to slash the staff in the Ombudsman's office*. Quite evidently, a decision was taken and we should seek a note from the Department of Finance as to why and when the decision was taken.

639.Chairman.—Mr. O'Farrell, would you arrange for that note to be sent to the Committee?

Mr. O'Farrell.—Did you not rule earlier, Chairman, that we would wait for the review?

Chairman.—No. I will come to that in a second. In the meantime you might let the Committee have a note about who took the decision and what the situation is regarding the staffing.

640.Deputy Naughten.—With all due respect, the review is to assess the situation as it stands now and the need for staff but somebody took the decision to cut the staff and we want to know who and why.

641.Chairman.—Mr. O'Farrell, will you let the Committee have that note, please? I propose to note Vote 21 in 1985 and Vote 22 in 1986. For the information of the Department of Finance, the Committee may return to this matter again when the review has been completed.

VOTE 39 (1985) and VOTE 41 (1986)—LABOUR

Mr. M. Keegan called and examined.

642.Chairman.—The Committee of Public Accounts are continuing their examination with Mr. Michael Keegan, Secretary of the Department of Labour, in his capacity as Accounting Officer for that Department. Good morning, Mr. Keegan, you are very welcome. Sorry for the delay but we had an official from the Ombudsman's office in before you. I wish to ask you about FÁS. A lady came to see me recently with a complaint that she was sent by Apollo House — the Department of Social Welfare — to Carlsbrook House, she was sent from there around the corner to some other office which, apparently, FÁS have on Pembroke Road or one of those roads and they sent her back again to Carlsbrook House. When she got back there she was told she was in the wrong place and that she had to go to some other place. The whole idea of amalgamating the services under FÁS was to make the system more efficient and more user friendly, so to speak. Is the experience of this lady typical or do the various groups know where to send people when they want to register with FÁS?

Mr. Keegan.—I hope it is not typical although I suppose it can happen. I know there is some accommodation in Carlsbrook House but the main office is at the end of Baggot Street. It is indefensible that a person would be sent from one office to another and then back again. I will inquire into the matter.

Chairman.—I have written to you about it. This lady felt strongly enough about it to come specifically to complain and I would not like to think that that is typical. The whole idea of amalgamating the services under FÁS was to make the system more efficient and more user friendly. It was to ensure that unemployed people, literally in despair in some cases, wishing to take part in courses, would receive a more efficient and effective response. I hope that is what is now happening in FÁS.

Mr. Keegan.—Not alone that but the idea was that when the various bodies, the YEA, ANCO and the National Manpower Service were merged you could go into one office and do your business relating to any of those services in that one office. That was the intention. With that in mind the service was regionalised, with authority being delegated to the regions, to cover all areas which were formerly the preoccupation of ANCO, the YEA or the National Manpower Service.

Chairman.—Could you tell me the statistics for strikes for the most recent year that you have statistics available, official and unofficial?

Mr. Keegan.—I have not got those figures with me but I know they have gone down considerably. They are published by the Department regularly.

Mr. Keegan.—I do not have them with me. I was concentrating on the 1985 and 1986 accounts. All I am aware of is that they have gone down. I can send you the latest figures if you like.

Chairman.—Yes, if you would not mind sending a note on it. Maybe when you are coming in on the 1987 accounts you might just have that information?

Mr. Keegan.—I can give the figures up to the end of 1987 if that would suffice. In 1983 the total number of strikes was 151; in 1984 it was 191; in 1985 it was 116; in 1986 it was 100 and in 1987 it was 76. They are broken down into official and unofficial if you wish to have those.

Mr. Keegan.—In 1983 there were 93 official strikes and 58 unofficial strikes; in 1984 there were 116 official strikes and 75 unofficial strikes; in 1985 there were 70 official strikes and 46 unofficial strikes; in 1986 there were 62 official strikes and 38 unofficial strikes and in 1987 there were 54 official strikes and 22 unofficial strikes.

Mr. Keegan.—There is a general improvement and it is also reflected in the number of days lost through strikes.

Mr. Keegan.—In 1983, 311,000; in 1984, 364,000; in 1985, 412,000; in 1986, 315,000 and in 1987, 260,000.

643.Deputy McGahon.—How many trade unions are there in Ireland and how many British trade unions operate in this country?

Mr. Keegan.—I may have the figures in the annual report for 1987. Speaking from memory, there are about 75 trade unions with negotiating licences in this country. I will just see if the exact number is given in the annual report. I am speaking from memory. I do not seem to have here the exact number of trade unions in Britain.

Deputy McGahon.—Is that not a very high percentage, of unions when compared with other countries?

Mr. Keegan.—It is. One of the weaknesses of the industrial relations scene in this country and this is agreed on both sides of industry and by the public at large is that we have far too many trade unions compared with the number of workers.

644.Deputy Naughten.—With regard to Subhead A3 — Consultancy Services — I notice that in both years under review there was under-expenditure. Why was such a large figure put in vis-á-vis what was spent? In 1985, it was £21,000 but only £4,000, approximately, was spent.

Mr. Keegan.—It is impossible to forecast how much we will spend under this subhead. Compared with other subheads, it is small but I accept the point that expenditure has been much lower than the figure granted. We put in a contingency provision. We just cannot forecast how much will be spent.

Deputy Naughten.—What type of expenditure would you envisage under this particular heading?

Mr. Keegan.—For instance on the health and safety side, we might employ specialists to carry out studies on different types of safety aspects. On the industrial relations side, we might employ consultants in particular circumstances and in connection with the Employment Appeals Tribunal, we often have to engage actuaries to carry out certain types of studies.

Deputy Naughten.—With regard to Subhead W — Social Employment Schemes — in 1985, £29 million was granted but only £7 million was spent. I note that there was a delay in getting schemes off the ground but surely that fact cannot account for the huge amount of money unspent under this heading.

Mr. Keegan.—It does to this extent. As the Deputy is aware, it was a new scheme, it was introduced in that year and it was thought that we would reach something like 10,000 participants by the end of the year. That was the expectation at the beginning of that year. There were delays in launching the scheme. There were delays in the negotiations with the trade unions, for example, and we did not get the scheme underway until April 1985. From there on there was a slower build-up than we expected. It was a new type of scheme for us. For that reason there was a very serious under-expenditure in 1985. In 1986, the position improved.

Deputy Naughten.—It has improved but there wan under-expenditure of £22 million in 1985 and £5 million in 1986.

Deputy Naughten.—The scheme was well up and running in 1986. How come, therefore, there was under-expenditure of £5 million?

Mr. Keegan.—The reason for the under-expenditure in 1986 is that there were delays in the submission of claims by sponsors. I would also admit there were delays within the Department in checking final statements from sponsors. As the Deputy is aware from previous examinations we got no extra staff to run this scheme but we are not complaining about that, it is just a fact of life.

Deputy Naughten.—It seems that there is a tremendous hold-up in taking on the next group of employees once one particular group of employees have completed their 12 months, be it by a public or private body. There appears to be a huge gap and it seems there is no overlap.

Mr. Keegan.—I hope it has improved since the first two years of the scheme. There may be some hiatus but there should not be an extended gap.

Mr. Keegan.—The hold-up at this point in time has got nothing to do with systems but rather with the fact that as of now we have to hold back because we want to keep within our allocation for this year. The demand has exceeded the supply of money and the position is being reviewed by the Minister at the moment.

Deputy Naughten.—What you are saying, therefore, is that you do not have the finance to employ them?

Mr. Keegan.—Unless we hold back at this time we will exceed our allocation. As we do not intend to do that, we have to hold back. Demand has greatly exceeded even our expectations based on last year's numbers. There are 12,500 people employed on the scheme at the moment, but, as I have said, the position is being reviewed by the Minister for Labour.

Mr. Keegan.—The average number would have been about 9,600. I take it the Deputy is talking about 1987.

Mr. Keegan.—The amount of money we got would have been sufficient to cater for an average of 9,600 throughout the full year. There would have been more than that at certain times and we were almost dead on with expenditure.

Mr. Keegan.—I have what are called the throughput figures equal to man years over time in the case of the social employment schemes because they go on for 12 months. In 1985, 5,500 participated employed, in 1986, throughput 6,100; in 1987, 8,500 and the estimate for 1988 is 11,300.

Deputy Naughten.—Would you not accept that it is exceedingly bad management or that it is mismanagement, for example, that people are prepared to go to work, by and large, for the same amount of money as many receive while on unemployment assistance? The work is there but your Department are not being given approval for them to go out on the job. Surely, it should be a question of the Department of Finance transferring unemployment benefit or assistance funds over to your Department.

Mr. Keegan.—With respect, as the Deputy well knows it is Dáil Éireann which decides on the amount of money to be made available each year for the different schemes. It is my job, as accounting officer, to see that the Department and its agencies keep within the allocation, but I take the Deputy’s point. We would use that argument with the Department of Finance ourselves if seeking additional money for the scheme. As I have said, the scheme is being reviewed by the Minister for Labour at the moment.

645.Deputy Naughten.—I would like to hear the views of the Department of Finance on this because it seems utterly ridiculous, where people are prepared to go out to work, and are willing to work, at in or about the same amount of money they receive while on unemployment assistance, that they are being prevented from doing so because of the scarcity of money in the Department of Labour.

Mr. McCaffrey.—The social employment scheme has not got the same net cost for the Exchequer as unemployment benefit. There is a significant difference in the net cost. In other words, after taking into account outgoings to the social employment scheme organisers, the Exchequer makes a saving on unemployment and increased tax revenue comes in as well. The difference between those is quite significant when you top them. In other words, the taxpayer has a significant net cost for every person who goes on the social employment scheme. It is not an identical cost or a question of switching unemployment money from one side to the other.

Deputy Naughten.—The question of cost would only come into it in the case of single people. There would be no question of cost in the case of married people because they are chosen on their rate of payment.

Mr. McCaffrey.—That is true but the average gross cost on the social employment scheme is £4,411 a year, if I remember rightly. The average social welfare saving per participant is nothing like that.

Mr. McCaffrey.—I cannot recall the figure off the top of my head, but I can tell the Deputy quite categorically that there is a significant net Exchequer taxpayer cost in respect of everybody who goes on the social employment scheme.

Deputy Naughten.—I do not know how the costs are arrived at or what figures are being spoken about here but I do know, and I am sure you know yourself from practical experience watching the schemes operate, that it was an excellent scheme when it was introduced and that it is still an excellent scheme, doing excellent work. We all know that very often people take less money on the social employment scheme than they are getting on unemployment assistance simply to get working. I find it hard to understand how the figures are calculated but it is something which this Committee should look into.

646.Deputy Crotty.—In relation to the social employment scheme and the figures for people working on it last year, are people on social employment schemes registered on the unemployment register? Are they returned as unemployed?

Deputy Crotty.—No. Are the people who are employed on the social employment scheme included in the unemployment figures?

Deputy Crotty.—So there are 3,000 or 4,000 more unemployed this year than is in the returns when it is taken into consideration that they are on the social employment scheme.

Mr. Keegan.—That is true, in so far as there are more people on the scheme than there were on it last year. At this time last year there were about 11,000 on the scheme; there are about 12,400 this year.

Deputy Crotty.—While the scheme is desirable and does very good work, it is disturbing that it is covering up our real unemployment problem because we are not getting the real figures. The figure for travelling and incidental expenses in paragraph B.1. looks rather high. It is higher than the normal Department figure for travelling and incidental expenses which is 14 per cent or so of the salary and wage costs. Is there a particular reason for that?

Mr. Keegan.—I cannot say how it compares with other Departments. In our Department we have and inspectorate who move around throughout the country inspecting factories. We also had in those years direct responsibility for the Manpower service and there was a lot of travelling involved with that. We also have a major EC involvement and that includes a sum for EC foreign travel. There is some foreign travel for other bodies, such as the International Labour Organisation and the OECD, of which we are members, and the Council of Europe, included in that. Finally, there is a sum for incidental expenses which covers a variety of things.

Deputy Crotty.—In B.2 under office machinery and office equipment, the figure nearly doubled from 1985 to 1986. Was there a particular reason for that?

Mr. Keegan.—I have the details for 1985. The expenditure was partly due to provision of office equipment for the Labour Court when it transferred to Haddington Road. There was a whole variety of miscellaneous office machines and supplies involved. That was one notable feature. The expenditure was £530,000.

Deputy Crotty.—It almost doubled. Was there any major expenditure that brought that about?

Mr. Keegan.—The two most significant items were the provision of computer equipment for the Labour Court in 1986 and computer equipment for the north east region of the National Manpower Service.

Deputy Crotty.—We talked last week about computers and this is a question which could also be asked of other Departments. Who chooses the systems, the computers and so on for the Department of Labour?

Mr. Keegan.—First, computer equipment is chosen in accordance with Government contract committee procedures. Second, in a major computer exercise such as we were undergoing last year for the National Manpower Service, it would be usual to get a team of people together from the Department who would be using computers including people from the personnel section who are responsible for computerisation in the Department and people from the Department of Finance who are experts in computers, and have the whole process considered by them. It would then go through a tendering process; a number of computer firms would be circularised. Also, in some cases it is necessary to circularise these things in the EC. When all tenders are received they would be considered by this committee and recommendations made to myself ultimately in the Department.

Deputy Crotty.—In other words you, as Secretary, do not decide what system should be installed and where it should be put.

Deputy Crotty.—Is there any Government central committee with expertise in the computer world as there is such large expenditure on computers at present and the whole system is so complex? Is there a central standing committee who have expertise and who keep themselves continually up-dated on developments and so forth who are available to brief all sections of the public service on computerisation?

Mr. Keegan.—I do not know whether it could be called a central standing committee or a central committee, but within the Department of Finance there are two areas of the Department which have considerable expertise in the computer business and are engaged full-time on it with sizeable staffs. They are available to advise other Departments on matters related to computers.

647.Deputy Crotty.—Perhaps I could shift that question to the Department of Finance, in relation to a full-time committee who would have their time well spent on this type of operation, particularly in the light of the experience we had here last week.

Mr. Gallagher.—I am at a slight disadvantage about last week in that I was not here but I have a broad idea of what was likely to have transpired. That particular instance might be categorised as the one that got away. We have a unit within the Department of Finance (IMAS) who provide advice to Departments on computer equipment. Procedures have been tightened up in recent years. Usually when a Department decide they want to computerise an area of their Department this unit get involved with the people in the Department in identifying precisely what the Department need, working out the specifications for the particular project and when that is done they put it out to tender. This group is available to all Departments and, in fact, now gets involved as a normal part of computer development. My Department is also used when it comes to the stage of doing business with computer people in helping to drive the hardest possible bargain.

Deputy Crotty.—May I ask the Accounting Officer about inspections regarding office space? I think an inspection would not be any harm in some of the Dáil offices in relation to space and conditions generally.

Deputy Crotty.—That is what I am talking about. There are regulations and it is for the Department of Labour to investigate office space, conditions of employment and wage levels. How often are these inspections carried out? Are they carried out as a result of a query or a complaint from somebody or is a general inspection carried out across the board on a regular basis.

Mr. Keegan.—Our Department are primarily concerned with inspections of factories under the health and safety Acts and those inspections are carried out on a regular basis. In recent times it has been decided to focus in on particularly dangerous operations where factories are engaged in activities which might have a tendency to lead to accidents. That is done systematically on a fairly regular basis. I cannot say how often each factory is examined. As regards the Office Premises Act—

Chairman.—There is a very hard working one there which is a bit over-crowded and dangerous sometimes.

Deputy Crotty.—I do not think I got a reply as to when the inspections are carried out on over-crowding in offices, on employment conditions and on wage rates. Are they carried out on a regular basis, are they across the board or are there reactions to complaints? The legislation so far as I can see is dormant.

Mr. Keegan.—The inspectorate would react to complaints or accidents. The Deputy mentioned, in passing, the question of wages. As you know, under the joint labour committee system minimum wages are set up for certain specified industries and apart from the factory inspectors we have general inspectors in the Department who carry out inspections in relation to minimum wages and see that people are paying the minimum wage prescribed under the joint labour committee procedures.

Deputy Crotty.—I wonder if I could get a note on their activities and on the number of inspections they have carried out in the last 12 months, where they were carried out and so forth.

648.Deputy Desmond.—What were the budget allocations for the social employment scheme for 1985, 1986, 1987 and 1988?

Mr. Keegan.—For 1985 the allocation for the social employment scheme was £29 million.

Mr. Keegan.—Twenty-nine million pounds was the grant and the expenditure was £7.25 million.

Mr. Keegan.—The grant was £44.9 million and the expenditure was £29.8 million.

Mr. Keegan.—I have not got the 1987 accounts with me but speaking from memory the grant was around £44 million and the expenditure was around £43 million.

Mr. Keegan.—For 1988 it is £39 million but there is a different accounting procedure here which has to be taken into account. Up to the end of 1987 we voted the gross amount that would be spent on the social employment scheme and the £4 million or £5 million we get for it from the European Social Fund came in as appropriations in aid. That was because they came direct to the Department. Now that it has been transferred to FÁS, in the case of bodies like FÁS the European Social Fund pay social fund money direct to the agency. The figure of £39 million for 1988 is effectively the equivalent of the amount that was voted in 1987.

Deputy Desmond.—But there has been a reduction of the SES allocation by about £4 million?

Mr. Keegan.—No, there will not be a reduction. We get the same ESF money but it will go direct and will be spent in addition to the voted sum.

Deputy Desmond.—But I am really interested in the expenditure for 1985, 1986 and 1987 and between ESF and departmental allocation, what is to be spent in 1988?

Mr. Keegan.—The scheme is not suspended but as I explained earlier to Deputy Naughten it became clear that if we went on the way we were going we would exceed our grant. We had to hold back and there can only be — unless the scheme is reviewed and the allocation is reviewed which the Minister for Labour is considering at the moment — a very small number allowed enter the scheme between now and Christmas.

Deputy Desmond.—You are running at 1,200 over at the moment. You indicated that your estimate for numbers employed was 11,300 for 1988 and you are now running at 12,500.

Mr. Keegan.—It means that a large number of people will drop out of the scheme between now and the end of the year because a very large number came into the scheme last year.

Mr. Keegan.—I presume they will. They would be entitled to go back on to the live register.

Deputy Desmond.—Does this not have live register implications for the remainder of the year?

Mr. Keegan.—It does. The more we have on the scheme the fewer people there are on the live register.

Deputy Desmond.—Has there been a reduction in the past 12 months in the number of aliens’ work permits granted in this country?

Deputy Desmond.—Is there an indication that there has been a considerable number of refusals on the part of the Department in the past six months or eight months to give work permits to aliens?

Mr. Keegan.—There was a slowing down in the granting of work permits for aliens for 1987.

Deputy Desmond.—Would it be fair to say that there has been a considerable slowing down in the grant of work permits?

Mr. Keegan.—I have not got the exact figures but I would agree there has been a sizeable slowing down.

Deputy Desmond.—Would you not think that with a very sizeable reduction in the granting of work permits to aliens coming into this country and in view of our continual berating, particularly of the United States, that work permits should be granted to young Irish people going to America? Does this seemingly deliberate policy by the Minister to totally restrict granting work permits to aliens of a double standard?

Mr. Keegan.—I would not accept that the two cases are parallel. If one looks at the unemployment level in the United States, it is something around 5 per cent, and it is something around 18 per cent in this country. To that extent, there are different circumstances. There is no question of it being totally suspended — I have not the 1988 figures with me.

Mr. Keegan.—The EC people do not need permits. There has been some slowing down — I would not like to go beyond that without the figures — but we have, as the Deputy is aware, a serious unemployment situation here, so that would justify caution in granting work permits to aliens.

Deputy Desmond.—Does it not provoke a degree of jaundice about non-EC people who see us having free access to the European Community and simultaneously demanding access to the United States, while preemptorily rejecting what are a very small number of applications?

Mr. Keegan.—In so far as the granting or non-granting of work permits is a policy matter, I would not like to go too far into that.

Deputy Desmond.—It may well be that it has some racial overtones, or undertones.

Deputy Desmond.—There is an attitude developing which I am very concerned about, but I will leave it because we are running out of time.

649.Deputy Flood.—Have regionalisation and amalgamation led to the decentralisation of staff from the old Dublin offices of the three services and has there been much movement of staff out of Dublin?

Mr. Keegan.—As of now, there has not been much movement of what we would call head office staff, but at this moment we have put regional directors into each area, and there is a competition, interview boards, going on within FAS to select the next level of management. These jobs are open to the whole of the FAS head office and local and they will be put in place within the next month or so, at least that is the expectation.

Deputy Flood.—Have you calculated, or attempted to calculate, the numbers likely to move out of the Dublin area to the regions arising out of this reorganisations?

Deputy Flood.—In relation to office space requirements in the Dublin region, are you surrendering office space or are you into that scene yet in so far as you are making provisions for handing back rented accommodation?

Mr. Keegan.—Yes. FÁS have already vacated a large premises at Mespil Road which has been sold. It is occupied by new tenants. The board of FÁS are very conscious of the need to do this where at all possible and where the merger of the services would facilitate it.

Deputy Flood.—In the regions, I presume the same line is taken, where there would be utilisation of existing accommodation by bringing in the three main participants in the amalgamation?

Mr. Keegan.—Where that can be done, the work of getting rid of surplus accommodation will be expeditiously dealt with.

Deputy Flood.—In relation to the inspectors of factories under the health and safety factory inspection, is there, within your Department, a provision for inspecting specific equipment in office accommodation like, for example, VDUs associated with computerised equipment?

Mr. Keegan.—In relation to VDUs, I cannot say they are inspected as such, but I know our health and safety people have published guidelines to be observed in relation to the use of VDUs, and this has been widely promulgated.

Deputy Flood.—I know this is a policy matter but are you aware of any determination to provide regulations that will have statutory effect?

Mr. Keegan.—I would not like to get into this field of expertise. It is a difficult area, and I do not think there is unanimity amongst the experts on it. We published these guidelines and they were favourably received.

Deputy Flood.—No, the enterprise workers. Do you have specific separate figures for them?

Mr. Keegan.—I do not think I have that information but we will write to the Deputy.

650. Deputy McGahon.—Do you consider that the unusually high number of trade unions and the staggering loss of working days has an inhibiting factor on industrialists looking at this country for location?

Mr. Keegan.—I would not agree that there is a staggering loss of working days, it is too high, but as I indicated in answer to an earlier question, it has come down considerably. We would like it to go down a lot more, but I agree that the large number of unions could be an inhibiting factor in relation to prospective industrialists, and we have tried to do something about it. I understand that there are quite a number of discussions going on among trade unions at present with a view to amalgamation.

Deputy McGahon.—On the social employment scheme, I share Deputy Naughten’s disappointment at the under-expenditure in the early years. The social employment schemes were basically 20th century relief schemes and were particularly welcome and useful in the Border area where the unemployment level is at 32 per cent in Dundalk — the national average is 18 per cent. There is a crisis in this scheme. We are only half way through the year and already the money has run out. Is it likely that extra money will be found in the near future to enable these schemes to continue?

Mr. Keegan.—I cannot say whether it is likely but, as I said earlier, the Minister for Labour is reviewing the position.

651.Deputy Desmond.—How much would it cost to let the scheme run for the remainder of the year? Would it cost an extra £3 million or £4 million?

Mr. Keegan.—You might need several million pounds. It depends on the rate of intake you allow.

Mr. Keegan.—It is a scheme for long term unemployed. One must be over 25 to get on the social employment scheme, on unemployment benefit for at least a year or on unemployment assistance.

652.Deputy McGahon.—Do you consider that this has been a success? Are you aware that most of the people who were accommodated are basically no hopers — people who have been on long term unemployment with very very little hope of employment?

Mr. Keegan.—I would not use the expression “no hopers”but I agree it has been a great success and we are suffering for its success at present in having to hold back.

653.Deputy Desmond.—With school leavers taking up vacancies, coming on to the labour market, effectively people will come off the social employment scheme and go straight back on to the live register.

Mr. Keegan.—There is a provision for the projects under the scheme to continue and for new eligible people to come on.

654.Deputy McGahon.—Have the Department recommended to the Minister that the scheme, because of its success, should be continued and money should be found for it?

655.Deputy Crotty.—I was wondering about the equality office. There seems to be quite a large number of people employed there, looking at the public service directory. How many are employed there and what is the cost of it at the moment?

Mr. Keegan.—We usually have the opposite complaint, that the resources are too meagre. The grant for 1985 was £322,000 and for 1986 it was £325,000.

Deputy Crotty.—How many people in your Department are employed in that office?

Mr. Keegan.—About nine people; I do not have the figures with me. I have a breakdown of the expenditure. The heaviest item of expenditure is administration because the salaries of the people employed there are paid out of the subhead.

Mr. Keegan.—They are a statutory body and their functions are to work towards the elimination of discrimination in relation to employment, to promote equality of opportunity in employment and to keep the employment equality legislation under review.

Mr. Keegan.—Equality is equality; I do not think it is divisible. It is equality for everybody. To put it simply, if “A” is doing the same work as “B” then “A” should be entitled to the same level of remuneration as “B” whether “A” is a man or a woman or “B” is a woman or a man.

Deputy Crotty.—It is usually geared towards getting equality for women, would that be a proper statement?

Mr. Keegan.—The Act itself is equality but, perhaps, speaking historically, women in the past did not have the same level of remuneration of conditions as men and, therefore, the problem is greater on that side.

Deputy Crotty.—What success have the body achieved over the last number of years?

Mr. Keegan.—It is hard to measure success in these matters. I think there is a general acceptance now, and they are a promotional body largely, apart from a legal obligation, equity and so on, that women are entitled to the same pay and conditions and the same opportunities as men.

Deputy Crotty.—Is it the function of this body to see that women who have the same employment are paid the same as men?

Mr. Keegan.—To promote that and to assist people who want to make claims under the procedures laid down in the Acts for equal pay or who claim they are not getting equal opportunities of promotion or on recruitment. For example, they examine all recruitment advertisements, to take a simple case, and ensure that they comply with the equality Acts.

Deputy Crotty.—I realise that but under the regulations it is laid down that there should be equal pay also. Is it through this body that the Department of Labour pursue that or do they turn a blind eye to it and let it drift along? In other words, are we enacting the regulations or are we happy that there are regulations there and we will react to them if somebody complains to us but we do not do anything about enforcing them? That happens in so many areas of Government.

Mr. Keegan.—I do not appoint accounting officers. The acts lay down a procedure that is open to everybody who feels they have a grievance or that they are got getting equality

or equal opportunity as prescribed in them and this entails submitting a case to the equality officers and then, on appeal, to the Labour Court. Everybody, either individually or through their trade union, is entitled to that. The equality agency, while it may assist people who feel they have a claim or advise them in regard to a claim, have a largely promotional function, to promote equal opportunity. They do not hear cases, dictate or decide that “A” and “B” should have different remuneration. They do their best to promote that within their resources and, contrary to what the Deputy said earlier, they feel they have unduly limited resources.

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

VOTE 9 — OFFICE OF THE REVENUE COMMISSIONERS (1986)

Mr. P. Curran called and examined.

657.Chairman.—The Committee of Public Accounts of Dáil Éireann is this aftenoon examining Mr. Philip Curran, Chairman of the Revenue Commissioners in his capacity as Accounting Office for that Department, on the 1986 Accounts. We could start perhaps with an update on the question of the attempted fraud of the Revenue Commissioners. I note you have an up-to-date report for us. Perhaps you would run through it for the Committee.

Mr. Curran.—We sent a detailed report to the Committee on 6 May.* The supplementary report which I have handed to the committee gives the best information we have as of now. It shows that seven more cases have come to light in relation to this fraud. The seven cases relates to cheques which were negotiated last year, in fact, two of them were negotiated in 1986 and the other five were negotiated in 1987. It has only come to light now because the questions were raised by the taxpayer’s query. In one case, the Fraud Squad were investigating another case and discovered this and advised the office. The amount involved in those seven cheques was £11,781. The up-to-date position as of 30 June which is shown in a table attached to the statement shows that the total number of cheques involved stands at 136. In the case of 85 of those cheques with a face value of £540,000 there has been no loss to the Revenue.

Mr. Curran.—Either the cheques were replaced or they were not cashed or they disappeared but there was no loss to Revenue. Credit would have been received from the bank which cashed the cheque or the payment was stopped and a replacement cheque was received or alternatively payment was stopped and the tax was no longer payable. In various ways those cases do not involve any loss to the Revenue.

The next category would be the case of 11 cheques valued of £24,595, and in that case we have to accept that there is a loss to the Revenue. That category would include repayment cheques issued to taxpayers but which were diverted into criminal hands and lodged in third party accounts. The banks have refused compensation on the grounds that the warrants authorising the payment were intercepted and altered to show false addresses which appeared on the cheques before they left Revenue. The warrants were altered before the cheques left our office and consequently would involve a loss.

The next category is unresolved cases where 33 cheques have been fraudently negotiated. The position is that in most of the cases legal proceedings are being prepared against the banks. In eight of the cases the Collector General is in correspondence with the taxpayer, and in a couple of cases the Collector General is awaiting information before deciding on a course of action. That is the general position.

Chairman.—The attempted fraud to date included 136 cheques totalling £783,805.

Chairman.—That figure is up a little, by the seven cheques that you have since discovered.

Chairman.—Out of that total we know there is no loss to the Revenue for 85 of those cheques, totalling £540,171 because either you got there ahead of the posse or the cheques were not cashed or those involved were frightened of cashing them. That leaves a total of £243,634, which includes unresolved cases and a now negotiated total of £193,528. It is possible that the unresolved cheques together with the ones which have been lost by the Revenue and those not yet negotiated which total £243,634, is the extent of the loss to the State?

Mr. Curran.—Where we say the situation is unresolved — I can accept your point that that would represent a maximum potential loss — we are taking legal advice and are pursuing the matter, so the loss may not be of that order at the end of the day.

Chairman.—The committee have not been told how this fraud came about. We were informed by you that none of those charged were employees or former employees of the Revenue or members or former members of the public service including semi-State bodies. Can we take it that none of those involved fits into any of those categories?

Mr. Curran.—As I said in the report which we sent in May the furthest we can go on this is to say that obviously the events must give rise to the suspicion that some member or members of the Revenue staff were involved. It is only a suspicion. So far the Garda have no firm evidence to indicate such involvement, so we do not know.

Chairman.—Would you give the committee an indication of how this fraud was actually carried out?

Mr. Curran.—All I can say is that the cheques got out of the system. They were taken out of the system somehow by some person. We do not know who did it and we do not know exactly how it was done. The Garda have been investigating this very thoroughly and they have arrested and charged a number of people but these people were at the end of the line and were trying to cash the cheques. They would not have been the prime movers and the Garda have not succeeded in tracing the chain of events back to be able to pinpoint the origin of it.

Chairman.—It is a good 18 months later now. The Garda have been making detailed and very lengthy inquiries. Are we any nearer knowing precisely what happened and can the Committee be assured that the difficulties in the system have been shored up and that they are not going to recur?

Mr. Curran.—First, as regards the Garda investigations, we have recently been in touch with them again and all they have been able to tell us is that their investigations are continuing. We cannot go beyond that; it is in their hands. They are aware of the seriousness of the situation but I am not in a position to give the committee any more information about the progress of the Garda investigation.

Regarding the question of whether we can prevent this happening again, as I said we are not quite sure who did it or how it was done, but we have taken a number of steps to strengthen the procedures in the office to try to prevent this sort of thing happening again. For example, we have changed the income tax demand form so as to discourage taxpayers from sending payments to inspectors of taxes. We have strengthened the cash office staff dealing with inspector's payments. We have installed a strong room in the cash office to replace the system of holding cheques overnight in steel cabinets. We have restricted entry to the cash office area and reminded the staff concerned of the need for vigilance. We have introduced a new system whereby as soon as envelopes are opened in the postroom any cheques in them are immediately stamped “Revenue Commissioners Account”. Supervisors in other areas of the Collector General's office have also been given these stamps and they have been told to ensure that any cheques received by them direct from taxpayers are immediately stamped once the envelope is opened. We have set up an internal audit unit and we have also set up, separately from that, an internal investigation unit in the Chief Inspector's office, whose brief is to investigate cases where it seems that fraud may be involved. Obviously at a certain stage they will have to hand over the investigation to the Garda but we believe there is a role there for them. Finally, a major ongoing study is being carried out into the feasibliity of changing the system for forwarding payments to the Collector General's office through the banking system. The purpose of that study is to reduce the number of cheques and amount of cash coming into that office.

Chairman.—The Committee of Public Accounts have been very patient but we are still no wiser as to how this attempted fraud was perpetrated. This is one case that has come to notice. The number have crept up from 129 to 136 cheques, totalling £783,805 and so far as we know there may be other cheques involved. The State's exposure in this case is a possible £243,634 and there was no loss to the Revenue Commissioners from the other cheques, totalling a little over £500,000. Much of it may be to do with the fact that it just happened to come to light, but we are no wiser as to how this came about and as to what steps have been taken to ensure that it will not recur. To ensure that it will not recursurely you must know exactly how it happened in the first instance. One heard rumours that cheques were changed from “Collector General” to something like “Generalissimo” and lodged to an account. Is that what happened? We need some detail as to what happened. This is our third occasion to look into this case. We have given a lot of time in order that it may be looked into and I think we are due some explanation at this stage.

Mr. Curran.—I accept that the committee are naturally concerned about this and indeed, the Revenue Commissioners are extremely concerned also. You asked, for example what was done with the cheques? For example, in the case of a cheque which was made out to the Collector General the name of the payee was changed to “Lilokter Geheraldi” and the cheque was negotiated in Bradford in Yorkshire in 1987.

Mr. Curran.—For £585. Another cheque was made to “Golekter T. Guhral” for over £1,000 and was cashed in Dublin. The name “Collector General” was changed to the most outlandish sort of names, for example, Grole Eone Gethenaldi.

Mr. Curran.—That was the modus operandi. The name “Collector General” was changed on the cheques and then they were lodged to various accounts. In a number of cases the people concerned have been charged by the Garda but the difficulty has been to trace all the steps back to the point where the cheques were taken out of the system. As you rightly said, we cannot guarantee that will not happen again because we do not know how it was done. However, I have listed a number of the steps we have taken to tighten up procedures and we hope it will not happen again.

659.Chairman.—Have all those who were caught been charged and sentenced by now?

Mr. Curran.—They have all been charged. Some of them have not yet been convicted and some of them have not yet come to trial. Another was remanded but he failed to appear for his trial and a warrant has been issued for his arrest. About four of the eight people concerned have been convicted.

Chairman.—Despite previous interpretations which the Committee may have put on this, is there more than a reasonable suspicion that there was involvement within the Revenue Commissioners in this attempted fraud?

Mr. Curran.—There is a suspicion. That is about all I can say. The events must give rise to a suspicion that somebody in the organisation was involved, but so far neither our investigations nor the Garda investigations have been able to produce any evidence which would pinpoint anybody.

Chairman.—Of the eight people charged how much, in total, are they charged with attempting to fraudulently convert?

Mr. Curran.—The amount covered by the charges against the eight people was £145,000 face value.

660.Deputy Foley.—First, I should like to compliment you on giving us the figures to 30 June. It is obvious that you are concerned with the serious situation which has arisen in your office. I would like to refer to the legal proceedings against the banks. Is it correct that it is intended to take 16 cases against the banks?

Deputy Foley.—I did. I have the table, but I want to know what amount of money is involved in the 16 cases of legal proceedings against the banks?

Mr. Curran.—I could not give you an exact figure related to the 16 cases. The brief is not prepared on that basis, but I will send you a note about that when we have analysed it.

Deputy Foley.—I understand that you have introduced an external audit unit within the Revenue Commissioners.

Mr. Curran.—They are new on the Inland Revenue side. We established units of this sort on the Customs and Excise side about three years ago and we have now brought them into the Inland Revenue side.

Deputy Foley.—You mentioned 136 cheques missing up to 30 June, are you satisfied that is the total number? Have you been able to cross check?

Mr. Curran.—No, the difficulty is that even though these seven additional cheques were negotiated last year, the fact that they were missing did not come to light until the taxpayers' sent in queries in April-May of this year, when in some cases they got a demand for tax which they thought they had paid. That is what provoked the query. I would hope that with this sort of timescale we should not have many more.

Deputy Foley.—May I put the question on a different basis? With regard to the manner in which you have improved your method of collection over the last 12 or 15 months, are you now in a position to say you have an up to date position as at 30 June with regard to outstanding arrears? I take your point, but is it still possible that there could be further cheques outstanding?

Mr. Curran.—There could be one or two; there should not be but it depends. There may be some cheques for small amounts which have not been chased up yet, but I would be surprised if there were may more cheques involved, given the fact that the latest ones we are talking about would have been dated around August 1987.

Deputy Foley.—The Comptroller and Auditor General mentioned that substantial irregularities apparently occurred within your office where substantial fraudulent or attempted fraudulent encashment of 107 cheques to a total value of £620,000 took place. Is that a part of this arrangement?

Mr. Curran.—This document which I have submitted today up dates the figures which were contained in the Comptroller and Auditor General's Report. It is the same matter we are talking about.

Deputy Foley.—While I sympathise with you, it is obvious to the lay person that somebody inside with a responsibility must be involved in an on-going arrangement like this.

Mr. Curran.—I am not sure if it is on-going. I want to emphasise that this has come to light now but it is over one year since the cheques disappeared. I do not think it is on-going.

Deputy Foley.—I will withdraw the words “on-going”, but it had been on-going up to 30 June when there were 136 cheques missing. In view of the up dating of your audit unit, and also the introduction of an internal investigation unit, it must be obvious to the people investigating that people with a responsible position in the office had to be involved in a matter like this.

Mr. Curran.—It depends what you mean by a “responsible position”, if by a “responsible position” you mean a senior position grade wise, I do not think it follows. Everybody who is involved in the cash office, of all grades, is by definition in a responsible position. In that sense I could accept your comment.

Deputy Foley.—I am satisfied that you are taking every precaution. The Garda have been investigating this for some considerable time and, as the Chairman has pointed out nothing as yet has come to light. Seven individuals have been charged, is that correct?

Mr. Curran.—None of them is connected with the Revenue and none of them is connected with any part of the public service or semi-State bodies.

Deputy Foley.—In order to get the cheques out of the system — again I am speaking as a layman — somebody had to be involved to negotiate with these people. Is that correct?

Mr. Curran.—I would go along with your to that extent — I have to be careful here — but I doubt whether the people who were charged were the people who actually abstracted the cheques from the system.

Mr. Curran.—I think it came through an indirect channel, and I think some of them were known to one another.

661.Deputy Harney.—Would you agree that prior to your new procedures being put in place, the procedures for checking this type of situation were grossly unsatisfactory? In your report submitted today, under item No. 5, of the seven new cases that came to light, six came to light when taxpayers queried the situation and the seventh came to light when the Fraud Squad were investigating the six cases the taxpayers brought to your attention. In other words, seven of the cheques under item, No. 5 were brought to light by forces other than those in places in your office or in the Office of the Collector General. Is that correct?

Mr. Curran.—No, I do not agree. If a taxpayer sends a cheque to the Collector General and it is abstracted from the office there will be no record of its receipt in the Collector General's Office. The Collector General will not know that the cheque has gone missing, and the taxpayer will not know either, although the fact that he has not got a receipt should alert him but sometimes taxpayers do not react. What happened in these cases was that since there was no record of the receipt of the payment, some time later the cases were reviewed and a further demand for tax payment was sent out. It was this action, initiated in our office, which alerted the taxpayer to the fact that something had gone wrong. The taxpayer then queried it and that is how it came to light.

Deputy Harney.—I am not quite clear as to how this thing happened. Are you saying somebody broke into the office and took cheques, or are you saying they were intercepted in the post, or are you saying that somebody in the office of the Collector General was in a position to pass on the cheque to a third party?

Mr. Curran.—We think it is unlikely that they were taken as a result of a break-in. We think, and we have said this in an earlier memorandum, that somewhere in the system, either in the post or in the internal movement of documents within the Office or in the Collector General's Office, somebody was abstracting these cheques and taking them away.

Deputy Harney.—When cheques arrive by post is it the responsibility of one person, two people or a group of people to take care of the post, and what kind of supervisory system is in place for that?

Mr. Curran.—The bulk of cheques arrive in the Collector General's office in a big post room attached to the cash office. It is all part of one complex and the envelopes are opened. It is quite a production. Of course, they are under supervision all the time. When the envelope is opened it has to be opened fully and searched to see if there is anything else in it. The cheques sometimes are not immediately apparent because they can be folded inside other documents. When all the post is opened and sorted, it is handed to the various groups of people in the cash office, beside the post room, to deal with the cheques. We are dealing with an average of 4,000 cheques per day, over one million a year and on a peak day there could be more. It does not take much imagination to visualise that with that number of cheques involved it would be comparatively easy for somebody to slip a cheque or two into a pocket of a handbag or whatever, and walk out with it at lunch time. That would not be very difficult to do. I am not sure whether any system we would envisage could ever prevent that from happening. In relation to the other part of your question, some of the cheques have gone to other areas of the office, and they have to be rerouted to the Collector General's office. That, of course, involves further transmission through other parts of the office.

Deputy Harney.—How long are cheques held in the Collector General's office before they are lodged or cashed? Is it true that the cheques can be held for a number of weeks in some cases? Is it also true that cheques can often be sent back because the full amount might not have been paid?

Mr. Curran.—First, as regards how long we hold cheques, in the past some cheques have been held in the Collector General's office for periods which were far too long and which we do not think can be defended. We have made considerable improvement in that area so that now most cheques are lodged practically immediately. There are snag cases, that is to say a position where you cannot lodge a cheque because you do not have enough information about what tax is being paid, whether it is VAT, PAYE, or what year it relates to or whether you have the taxpayer's number. You must have all these details before you can lodge the cheques. These cheques, in the past, have tended to be held until the necessary details were worked out, and this has been a problem but we have greatly improved the system for dealing with it. It is unbelievable that some cheques will have to be held for shortish periods.

The other problem arises where the details cannot be worked out in the cash office. What happens then is that a cheque is held in the cash office and a query is sent out to some other parts of the office. This can involve delay and we have been engaged in quite an active debate in the office as regards what to do about this. We have been cross-examining the Collector General and his staff and arguing this and we are now on the point where we recognise that we will have to open a new type of account. We will have to open a deposit account. The idea of that would be that instead of holding cheques while we are working our accounting instructions, we will lodge the cheques virtually immediately into a deposit account. When we get the accounting instructions sorted out we can then transfer funds from the deposit account and appropriate the amount to the proper tax head. We have not yet done that but we are on the point of doing it.

To do that we will involve more clerical procedures. We have to try to balance one thing against another. We will be involved in a certain amount of additional work doing this and we have to balance that against the necessity for improving the cashflow and the security. We are working out rules to decide what cheques must go into this deposit account immediately. Obviously there are other cheques which cannot be lodged such as post-dated cheques. They have to be held. Some cheques have no name on them or are defective. They are in a different category.

Chairman.—I do not think we can spend too long on this because there are a number of other paragraphs to get through. Other Deputies are offering as well. Inevitably we will have to come back to this yet again.

Deputy Harney.—I wish to make two more comments. First, I think it is appalling that you have waited until now to find a procedure for lodging these cheques. The ESB and Bord Telecom, for example, lodge all cheques when they receive them and the queries come later. Apart from the security risks involved in doing what you do, it makes good economic sense to lodge money as you receive it and then you can follow it up with the taxpayer and see whether it is VAT, PAYE or whatever it might be. It is appalling to have in place a system whereby a large number of cheques are held in the office of the Collector General. I would like to encourage you to start opening your deposit account and lodging cheques as they are received.

Let me ask you a final question. In relation to the sending of warrants by the Inspector of Taxes to the Collector General for payment, I see some of the fraud involved in the changing of names on the warrants. What kind of security system is in place there? Do you send them through the post to the Collector General or is it not possible in the system to have them hand delivered to the Collector General?

Mr. Curran.—In Dublin they are hand delivered, sent by our internal delivery system. Obviously from provincial offices they go by post.

662.Deputy McGahon.—There is no doubt about it that this gigantic fraud was masterminded from within your office. It would suggest to me that the person who was the mastermind had an accomplice or accomplices. He could not have functioned as effectively and cleverly as he did on his own. What was the background of the accused people who have been charged? Was there anything ontoward about them. Were they unemployed? What was the average background?

Mr. Curran.—I do not know whether you are equating “untoward” with “unemployed”.

Mr. Curran.—It is not an area I would want to get into. I am not sure in fact if I have——

Mr. Curran.—No, it does not. You suggested, legitimately indeed, that this was masterminded from outside the office and somebody inside the office was an agent.

Deputy McGahon.—Nevertheless, he was a very key figure. You would accept that.

Mr. Curran.—Whoever masterminded it had connections — I put it that way — with some of these people.

Deputy McGahon.—We had a similar problem on this committee with a social welfare fraud within the system involving quite a large number of people in a Dublin location which had spread right through that unit and there was very large scale complicity. Is it not likely that the same occurred in this case?

Mr. Curran.—I do not think so but it is impossible to be certain. We think this was masterminded from outside the office, that outside the office, whoever was masterminding it, has other connections with the fraternity with whom he mixed and possibly only one person inside the office was recruited to slip the cheques out.

Mr. Curran.—As soon as we became aware of this at the end of 1986 the Garda were brought in and they were constantly updated according as more things came to light.

Mr. Curran.—I would simply have to guess. For example, of the seven cheques that have turned up this time I can give you an idea. The biggest cheque was for £3,700.

Deputy McGahon.—A relatively small sum, which probably makes it harder for the Garda really to check it. I thought there might have been a much bigger sum. I would also like to echo Deputy Harney's comments about the necessity for a deposit account. Under no circumstances should any cheque be sent back to a payee for any reason other than maybe an elderly person for his or her signature. Surely, that money should be lodged immediately and possibly a phone call made to that person to ascertain what payment it was and under what heading it was to be lodged.

Deputy McGahon.—Are you happy now that your Department are alerted to the whole question of fraud and the necessity to be vigilant and observant to ensure that as far as possible — I accept what you say about the amount of cheques going into your office — that will not happen?

Mr. Curran.—All I can say is that the staff in the Collector General's office, and the cash office in particular, are very alert and alive to the problems which have been experienced. They are being constantly reminded of the necessity to take all possible steps to ensure that they did not leave any loopholes so that this can happen. They are alive now to the dangers of any weaknesses in the system.

Deputy McGahon.—Could I finally ask Mr. Curran if amounts of cash sent in from small traders in rural Ireland also have gone missing over the years?

Mr. Curran.—Cash can always go missing. There is a great danger in sending cash, particularly sending it by post or whatever——

Mr. Curran.—Unfortunately, they do and it is a very risky business. For example, even conscience money can be sent in in cash. Whoever opens the envelope has to be reliable and honest.

Deputy McGahon.—Have you had complaints from people about cash sent in not being credited to them?

Mr. Curran.—Over the years. Depending on how far back you want to go; I cannot give you an instance.

Deputy McGahon.—Was there any trend running through in that Department that heightened your suspicions of anybody?

Mr. Curran.—Absolutely not. This is the baffling aspect of it. Considering how many cheques went missing in this particular operation, we find it strange that it has not been possible to pinpoint anybody.

663.Chairman.—I understand from the Comptroller and Auditor General that one of the cheques was as big as £100,000.

Chairman.—Was that cheque negotiated or was it one of the ones that was not negotiated?

Mr. Curran.—I think it was stopped. In fact it was the attempt to negotiate that alerted somebody to the difficulties.

Chairman.—Can we take it, Mr. Curran, that the taxpayers who paid off their tax liability by cheques which were subsequently fraudulently negotiated will get credit for the tax they paid?

Mr. Curran.—If we have received replacement cheques, then they have got credit for the tax. In some cases we will give credit to the taxpayer but we will proceed against the banks. We are sorting this out.

Chairman.—We can take it that where a taxpayer has met his or her liability the Revenue Commissioners are not going to pursue them if through no fault of their own this cheque went astray because of fraudulent conversion?

Mr. Curran.—This is a legal problem which we have to sort out. This is what we have to investigate.

Deputy McGahon.—Mr. Curran, in relation to the cheque for £100,000, the difficulty obviously occurred at presentation of the cheque in the bank. Is it your opinion that the onus is on the banks to check with you about a sizeable cheque of that nature? What is your case against the banks? Surely they cannot check on the veracity of every cheque presented for payment to them?

Mr. Curran.—From recollection in regard to that particular cheque, the name of the payee had been changed. I do not know what exact responsibility rests on the bank in that situation.

664.Deputy Flood.—Is this the first substantial series of difficulties which have arisen in your office in the last couple of decades?

Mr. Curran.—Yes, I think it is true to say that this is an unusual one because of the number of cheques involved and the time-scale. Unfortunately, in most offices like ours you get the occasional isolated case where something goes missing or is stolen. The difference in this case was that it seemed to have been an organised conspiracy to abstract cheques out of the system. That is very unusual and I do not recollect anything like that happening before.

Deputy Flood.—Are there many taxpayers claiming to have paid their taxes for which they have not received credit over this period?

Deputy Flood.—Are you in dispute with some taxpayers who claim they have paid?

Mr. Curran.—For example, in some recent cases we sent out demands to taxpayers who were under the impression that the tax had been paid but we had not received it. We are having discussions about such cases.

Deputy Flood.—I should like to be clear on this. Are there taxpayers who claim that they have paid their taxes and who have not been credited?

Mr. Curran.—Seven is the latest figure. There are seven listed in the table, category 4, of unresolved cases not yet negotiated. “Unresolved” means that we are still involved in discussions with the taxpayer to try to find out what happened. The other cases have been sorted out with the taxpayers.

Deputy Flood.—Therefore, there are no other taxpayers, apart from those mentioned by you, who are claiming that they have paid their tax?

Deputy Flood.—You have said that you receive about one million payments per annum. Does a considerable proportion of that number arrive in the special envelopes for such payments?

Mr. Curran.—Yes, the vast bulk of them would. For instance, the two monthly VAT payments and PAYE remittances are sent in on those envelopes.

Deputy Flood.—In other words, from the time that payment leaves the taxpayer it will be evident that the envelope contains a payment of some kind?

Deputy Flood.—From the evidence available to me I am not convinced that this problem has arisen in your office. I believe the field is wide enough for the problem to have arisen at a whole series of stages. I am not convinced, from the evidence before us, that a major part of the problem has arisen directly in your office, and I suppose until the investigations have been completed and charges brought, we will never know the real truth. It is part of our duty to put forward suggestions as to how we can avoid something like this arising in the future and I should like to suggest to you in relation to the payment of taxes that you consider producing a cheque-type document that can only be lodged to the account of the Revenue Commissioners. I suggest that this document should be made available by financial institutions, such as banks and post offices, where a taxpayer can obtain one and make out his or her payments to the Revenue Commissioners. The taxpayer would then know that that payment can only be lodged to the account of the Revenue Commissioners. Since you say most of the payments arrive in the special envelope, accompanied by VAT or PAYE documents, would it not be a simple matter for your office to include such a special cheque as I have suggested? Your office should look at that suggestion which, taking into account that you receive one million payments per annum, should reduce the prospect of a recurrence of the problems we are discussing.

665.Chairman.—I want to make something clear: it is not one million payments that are received; it is one million transactions you referred to.

Chairman.—That would still mean that each cheque is only worth an average of £8. It seems an extraordinary number of transactions.

Mr. Curran.—If I could just respond to that. I am very grateful for the Deputy's suggestion. We will take that on board and look at it.

666.Deputy McGahon.—One of the people who have been charged has absconded. Was he on remand or did he just fail to attend his trial?

Mr. Curran.—No, they were small. The total amount covered in those charges was £145,000.

Deputy McGahon.—It is almost incredible that eight people were charged and that there are no clues linking those people, to trace them back to their source. Have the Garda run up against a total blank in this?

Mr. Curran.—The Garda may have a fair idea of the shape of the operation outside our office; where they have failed and we have failed is to make the final connection between the outside organisation and the inside organisation.

667.Deputy Naughten.—We must all express dissatisfaction and disappointment that the source of how those cheques were transmitted from your office to the people who eventually lodged them has not been traced after the amount of investigations that has taken place. I sincerely hope that by the time you are back here again we will be able to identify the source. What amazes me is the number of cheques left lying around — and indeed we established, when Mr. Curran was in with us some six weeks ago and last year that there is a considerable delay from the time cheques are received in the Revenue Commissioners and the time that they are lodged. We have already established today that there are 4,000 cheques per day. I cannot understand why those cheques are not lodged daily into a deposit account and afterwards sorted out as to whether it is VAT or other accounts that they should be credited against. I do not believe that any private firm could operate in that manner and I cannot understand why those cheques were not lodged and earning bank interest. There is no doubt about it that there was failure on the part of the Revenue Commissioners not to have dealt with this situation and have a deposit account opened so that those cheques could be lodged immediately. I would like to ask Mr. Curran when it is envisaged that a deposit account would be opened so as to, at least, ensure that cheques which come in today can be lodged tomorrow and distributed afterwards to whatever account they should be lodged to.

Mr. Curran.—As I have said, the bulk of cheques and certainly the bulk of the money, the large cheques, are lodged on the day of receipt. It is the smaller cheques which sometimes are held over until the following day because in the sort of operation that there is in the cash office the larger amounts have to be made up and presented ready for lodgement I think by midday, when the bank couriers arrive to collect them and put them into the bank. The cheques that we process in the afternoon, after midday, cannot be lodged into the system until the following day, but they are the smaller cheques. The bulk of the big money is lodged immediately. That is the first point I want to emphasise. The second point is about lodging everything into a deposit account. This would involve a massive duplication of work, a very large clerical operation because, essentially, all these payments would have to be processed twice. What we are talking about is, essentially, to keep the straightforward payments going under the present system, in other words, to lodge the large amounts immediately, the day of receipt, and then the straightforward payments to be lodged no later than the following day. In relation to cheques where some question may arise, it is in that area that we are thinking of the deposit arrangement. We have to write out rules for the staff so that they know exactly what has to be dealt with, in which way, and I would hope to have that ready to put into place by the autumn. We could not envisage opening a deposit account for everything. I hope that explains what we have in mind.

Deputy Naughten.—What I have in mind is cheques left lying around for weeks and which have not been lodged. You know that that is the situation, that cheques are left lying for weeks and not cashed. These are the type of cheques that I am talking about. Why is there not a deposit account in which they can be lodged and the questions on them asked afterwards?

Mr. Curran.—Exactly. I think we are talking about the same thing. That is precisely the sort of thing we want a deposit account for. I agree that cheques should not under any circumstances be held — by the way you used the phrase “left lying around”. They are not actually left lying around; they are fairly securely looked after.

Mr. Curran.—Maybe it was the envelope they picked up, we do not know. But I accept the Deputy's point and I do not for a minute try to defend the situation where cheques are held for weeks while accounting matters are being worked out. We are in the process of stopping that. Unfortunately, that has been happening up to now and we are taking steps to make sure that it will not continue.

Deputy Naughten.—I welcome that, because it is one of the things that are grossly unfair, that people send cheques into the Revenue Commissioners and weeks later they have not even got a receipt, the cheques have not been cashed. In some cases the cheque is cancelled and the next thing is that they receive a letter stating that their file has been handed to the sheriff for collection of the tax, when it is not their fault at all. I welcome the fact that a deposit account is set up and people should receive, by return, a receipt for their cheque which they have sent to the Revenue Commissioners. That is the least any taxpayer should expect.

668.Deputy Desmond.—Would the Chairman of the Revenue Commissioners agree that with one million cheques going through the system every year this particular incident highlights the fact that the overwhelming majority of those persons concerned both within and without Revenue act in an entirely honest way? It is quite remarkable that with the defects in the system, which have been acknowledged, the incidence of fraud is fractional, extremely low. This is a tribute to all those concerned.

Mr. Curran.—I am grateful to the Deputy for that. The staff concerned in the Collector General's office and elsewhere are naturally very perturbed that anything like this should happen, because, as the Deputy has said, they are practically all thoroughly trustworthy and devoted to their job.

669.Deputy Crotty.—I have no doubt that all the staff are trustworthy, but situations should not be allowed to develop where people can abuse the system. We have this question here last year of cheques not being lodged on the date of receipt and we got an undertaking from the Chairman that that would be confronted and that the cheques would be lodged. I am really amazed to hear today that this has not happened yet. Why has it not happened? I do not for a moment say that cheques are left lying around but certainly cheques should be lodged on the day of receipt and, in this age of computerisation and organisation, it is not beyond the bounds of possibility that this could happen in a sophisticated organisation like the Revenue Commissioners. Perhaps the incidence of fraud is small; it will be small in any organisation only if you keep the incidence under tight rein. If you do not, there will be fraud and this is what has happened here. I would like to ask why cheques were not lodged. We went through this at length 12 months ago and it has not happened yet. I am amazed that in an organisation like the Revenue Commissioners it has not happened.

Deputy Crotty.—I am amazed that you have not initiated an operation to lodge cheques on the day of receipt. That is the normal situation in any firm. From every point of view it is desirable. In the Revenue Commissioners it is more desirable than anywhere else and it has not happened in 12 months. Why?

Mr. Curran.—The short answer is that in a major operation of that sort you cannot change the rules overnight. You have to investigate in detail the various categories, the reasons things are held and matters dealt with in a certain way and that is what we have been doing. We have been getting down to investigate the reasons people hold them, why they are sent and, in the end, to isolate the area in which a deposit account would be helpful. Lest there be any misunderstanding about lodging money on the day you get it, most business would be in a position to do this up to 3 o'clock or whatever the banking hour is, but as I have explained, we have such massive transactions that our arrangement with the banks means that our large sums of money have to be ready by midday. That is our deadline; we process the rest of the cheques in the afternoon and they are then lodged the following day. So the bulk of the money goes in on the day of the receipt and the rest the following day.

Deputy Crotty.—Is it not beyond the bounds of possibility that the Revenue Commissioners could consult their bankers and say they want to get their funds in on this day and that the bank would make arrangements to receive them, no matter what time? I have personal experience with the banks; certainly they are very flexible and will react to the needs of the firm, no matter who they are.

Mr. Curran.—The bank I am talking about is the Central Bank. We send the money straight in. We will certainly look again at those procedures to see if something else can be done.

670.Chairman.—Would it not be possible to consider the possibility of the Central Bank having a branch at the Collector General's office to receive these cheques?

Mr. Curran.—In a way that is what they do because they actually come and collect them. They have a mobile branch, so to speak, but they have laid down this rule in regard to a certain time of the day. We will take it up again to see if we can do something better.

Deputy Flood.—Would the cheques under query, which for the moment prevent you from lodging them, amount to many of the daily or weekly basis?

Mr. Curran.—No. I cannot give you figures but they are in the minority. The vast bulk of the stuff goes through on the production line.

Deputy Flood.—Would it not be possible to devise a system whereby those cheques could be lodged just the same as the others you have referred to now but, if there are not a great number of these cheques, that they would be photocopies and a copy of the cheque put on the file. Why do you not do that?

Mr. Curran.—That is exactly what we are planning to do in relation to this deposit account I am talking about.

Deputy Flood.—There should be no further hold-ups. You should be able to get on with your deposit account straight away. There seems to be no further hold-up to opening that account as others have suggested and getting the system underway.

671.Chairman.—I regret that we have had to go through this grilling yet again this morning. It does not give the Public Accounts Committee any pleasure but, to be fair to the Committee, they have been very patient and still have not got to the bottom of this. It is also fair to say that since there are about 6,500 people working for the Revenue Commissioners, given the very cumbersome system, it is due to their integrity that the scale of this type of operation is not great. If anybody is reflecting on the integrity of the Revenue staff, it is a very tiny per cent of people who may have been involved in this particular fraud. In any organisation of 6,500 people, there are bound to be one or two such people but it is not meant to reflect on the staff of the Revenue who do their job well. However, this committee are concerned that this might well be the tip of the iceberg. We do not know that the system has not been defrauded to some extent which has not yet come to light. Certainly and regrettably, this particular incident has left a lasting odour which we need to eliminate. What I would like to propose without spending any more time on it today, is that we return to the matter in September and if the Committee and the Comptroller and Auditor General are agreeable, that the Comptroller and Auditor General's office might prepare a report on the background to the situation and where exactly we stand and where we are going so that we know exactly what the position is in as much detail as possible, because we are very much still in the dark as to what happened. Perhaps the Comptroller and Auditor General would like to comment on that?

Mr. McDonnell.—With regard to the background, I do not know how I could elicit more information on that than is presented in the various memoranda. I hope also that the Committee are not suggesting that I could perhaps elicit any information as to how it was done. The Garda and the Revenue Commissions have not been able to do that. I would say, Chairman, that the situation in regard to control procedures within the Collector General's Office obviously is an ongoing concern to me from an audit point of view and we are looking very carefully at the viable evidence of what the Accounting Officer is saying to the Committee here. If there are any aspects of that which indicate that weaknesses still persist or that loopholes have not been closed, resulting init happening again, I will bring those to the notice of the Committee in my 1987 report.

Chairman.—I suggest that, in view of this matter, you might report to the Committee in September and let us know your views.

Mr. McDonnell.—Yes, I could do that. I could give you the results of our ongoing audit exercise vis- à-vis the Collector General's Office, the cash office and so on.

672.Deputy McGahon.—Is there any indication of control procedures in other countries or how they confront this problem?

Chairman.—As Deputy McGahon is aware, the committee are separately carrying out an examination of the control procedures within the Revenue Commissioners. If you are suggesting that we should travel abroad to have a look at them I will give that every consideration.

Deputy McGahon.—As you know the map of the world better than I do, you might have gleaned some information on your recent travels which, I have to underline, have been very useful particularly to this Committee.

673.Deputy Harney.—The fraud squad are carrying out an investigation and the Revenue Commissioners have carried out their internal investigation into this matter. Is that investigation over?

Mr. Curran.—It is over in the sense of trying to pinpoint an individual as being at fault but it is by no means over in relation to the systems which were involved. That investigation is ongoing.

Chairman.—We will get that report from the Comptroller and Auditor General in September and we may return to that subject then. We will note it for now. Paragraphs 12, 13, 14 and 15 of the Report of the Comptroller and Auditor General read:—

Revenue Account

An Account showing all revenue received and paid over to the Exchequer by the Revenue Commissioners is furnished to me annually. I am required under Section 2 of the Exchequer and Audit Departments Act, 1921 to carry out such examination. as I think fit with respect to the correctness of the sums brought to account and to report to Dáil Éireann on the results of my examination when reporting on the appropriation account for the Office of the Revenue Commissioners. A test examination of the transactions shown in this account has been carried out with generally satisfactory results.

13. The net yield of Revenue for the years 1986 and 1985 under its main headings is shown in the following statement:—

* Includes £73.0 million duties, taxes and levies deferred under EEC regulations (1985—£72.6 million). £5,865.4 million was paid into the Exchequer during the year leaving a balance of £73.6 million compared with £77.8 million at the end of the previous financial year.

Extra-statutory Repayments

14.Extra-statutory repayments of Customs duties, £76, Excise duties £134,560, Value-added tax, £256,953 and stamp duties £48,581 were made during the year.

15.I have been furnished with schedules of cases involving losses of £100 or upwards in which claims under the Revenue Acts were remitted without statutory authority or written off during the year ended 31 December 1986.

The total amount of the items included in the Schedules, £11,546,422 is made up as follows:

I have made a text examination of the items included in the schedules with satisfactory results.

Mr. McDonnell.—I have nothing to say on these paragraphs. They are introductory and they set out what is obvious there, the scope of my statutory function, the write off, remissions and so on.

674.Deputy McGahon.—Being from the Border area I naturally have an interest in the Customs and Excise division of the Revenue Commissioners. Under the Customs heading there is a figure of £80.2 million for 1986 and £96.8 for 1985. What does that encompass?

Mr. Curran.—The £80.2 million and £96.8 million are for customs receipts. That reflects the level of imports. The customs duties are no longer national revenue duties. These are determined by the EC Commission in Brussels and generally the rates of those customs duties are fairly low. They are allad valorem,so that the receipts in any year would depend on the value of the imports of the dutiable items in that year. The value of imports would have been lower in 1986.

Deputy McGahon.—Would you agree that that is a rather surprisingly low figure?

Mr. Curran.—I do not think it is a great variation, or that it is very remarkable. These receipts go direct to Brussels.

Deputy McGahon.—I know that. At an earlier meeting we briefly mentioned the subject of smuggling and the level of it that exists. You have only a hazy notion of the level, as have I, but you will accept that there is a tremendous loss to the Irish Exchequer. Are you aware that in 1985 the Belfast Chamber of Commerce issued a statement that in excess of £500 million was spent in Ulster by South of Ireland trippers? I accept that in order to really police the Border and to effectively combat smuggling you would need to have the Irish army with fixed bayonets at every yard of the Border, but are you aware of the alleged increase in recent years of smuggling, principally of drink and petrol, and what steps have been taken to curb it? I am aware of the seizure yesterday. Are you also aware of the danger posed to Revenue customs officers, that shots were fired at Scotstown yesterday, that several cases have been reported in the last few years where customs officials have been assaulted, that cars have been run off the road and lives of customs officials threatened on more than one occasion? Are you further aware that smuggling is a very sophisticated industry, that gangs are operating, and that in some cases there is a person outside customs officials' houses throughout the night to see if they are coming out? How effective are the measures which are taken to deal with customs offences along the Border region? Is there only a token show or can it ever be effectively contained?

Mr. Curran.—There are a few wide-ranging comments there. As to whether we are an effective deterrent, I think we are from the point of view that in order to attempt to smuggle successfully it is necessary to mount a very elaborate and highly sophisticated operation. In other words, it takes that sort of organisation to get past our controls successfully and to that extent we present a deterrent. Naturally we cannot stop all smugglers but when we do, the penalties are very severe. You mentioned a figure for loss of trade across the Border from day trippers. That has largely come to an end following the introduction of the 48 hour rule. That has put a stop to the coachloads of day trippers who were going north to make purchases. The difficulty is, as the Deputy has mentioned, the highly organised smuggling. What you say is quite right. When an operation is being mounted our permanent staff on the Border are occasionally under surveillance by the smuggling fraternity. The actual Border crossing is scouted in advance and the smugglers use radio. The whole operation is very highly organised. Part of the trouble is that they are able to keep track of our permanent mobile patrols and our permanent staff up there. One of our counter measures had been to send additional staff into these areas and they would not be known on the Border. They do not come from the Border area but are sent in specially for these operations. They do not use the high profile mobile patrol cars. They use plain cars. They also have to get involved in much time-consuming surveillance and detailed investigations. For example, the operation which took place yesterday and which the Deputy referred to was the result of a long period of painstaking work and we hope some good will come out of it.

Deputy McGahon.—I appreciate your difficulties, but, nevertheless, I have to suggest to you that despite your best efforts you are unable to combat the problems posed by the professional smugglers. I accept that the problem with day-trippers, who are only amateur smugglers, has been effectively dealt with. Nevertheless, the real loss of revenue to the Irish Exchequer arises from the activities of the professional smugglers who use very sophisticated methods, which include, as you have said, the surveillance of your own men. I put it to you that you have not got the manpower or the means to combat these — despite the occasional seizure such as the one that took place yesterday and which gets the headlines. For every seizure, there are maybe ten successful forays which go undetected. Would you agree that you suffer from a shortage of manpower and are you aware that up until three years ago, in the town of Dundalk, four crews had to use the same car? Surely, these methods are not adequate to combat smuggling of a very high degree which has resulted in a tremendous haemorrhage of funds to the Irish Exchequer. I have to say——

Chairman.—The Deputy is making a Second Stage speech. We have many paragraphs——

Deputy McGahon.—because you are unaware of the extent of the problem, as are Government Departments, nothing effective has been done in recent years. Is there a shortage of manpower and can you really contain professional smuggling?

Mr. Curran.—We will never be able to stop professional smuggling entirely. We do think we have made some pretty important seizures and detections, even in relation to professional smugglers. It may well be that if the operation is not beig enough that they are able to suffer these sort of reversals and carry on. We cannot stop them all.

Deputy McGahon.—I want to ask a final question. Are you aware of the involvement of paramilitary groups, like the IRA, in largescale smuggling?

Deputy McGahon.—Have any threats been made to your men emanating from that source?

Mr. Curran.—All I can say is that over the years, and this is not a recent phenomenon, on and off attempts have been made to intimidate our staff, whether these have been made by subversives, one cannot be sure because some people would not hesitate to give the impression that they were somehow connected with subversives if they thought that this type of intimidation would work, but who can say.

675.Deputy Crotty.—I am concerned and I think a large number of people are very concerned that the fabric of the State is being challenged, particularly with the firing of shots over the heads of customs officials this week, by what would appear to be a highly organised operation to smuggle in oil. This is a very large operation. I am sure you are concerned abut this problem but what I think the people are concerned about is the suggestion of anarchy about the operation. What are your feelings on this operation, your staff and the challenge being posed to the fabric of the State?

Mr. Curran.—We are very concerned about it. The fact is that when our staff are involved in operations, whether on the Border or elsewhere in the country, where there might be a threat or possibility of violence it is ordinary everyday practice to ask for the co-operation of the Garda Síochána. I have to say, and am very glad to say, that over the years this co-operation has always been very fully and freely given. We have a very good, close working relationship with the Garda. I am not in possession of all the details about yesterday's operation but obviously this was seen to be a case where there was the possibility of a violent reaction from the smugglers and therefore as a precaution Gardaí came along. I have heard reports of shots being fired but I do not know what was involved. It is a very sinister business.

Deputy Crotty.—Has the Chairman of the Revenue Commissioners taken any action as a result? I would be surprised to hear he has not contacted the Government to express his concern and request special measures to be taken to combat this type of organised smuggling which is threatening the fabric of the State.

Mr. Curran.—As I have said, we are taking special measures and indeed the operation yesterday was the result of a long and carefully planned series of preparations to try to counter this particular form of smuggling. We are aware of the problem and we are doing what we can to combat it.

Deputy Crotty.—My question was not answered. I am asking you, as a result of your officials being put in danger yesterday when shots were fired over their heads, if you have taken any measures in relation to yesterday's incident? The most serious point of all is the real challenge to the Government's authority.

Mr. Curran.—This is a security matter and that I would leave to the Garda. They were there and they will certainly be reporting in the shooting and on the intimidation involved.

Chairman.—I am calling Deputy Naughten. We are really spending an awful lot of time on the same subject.

Deputy McGahon.—It is not today or yesterday that smugglers started to carry guns. I take it you are aware of that and of the constant threat being posed to your own officials in that area. However, yesterday's incident reveals a more sophisticated and sinister approach. I put it to you that there is IRA involvement, and I would underline Deputy Crotty's concern. I think this matter should be reported to the Government and that in future forays of that type the Irish Army should be brought along to give protection to your own men.

Mr. Curran.—The short answer is that of course we are, today, sending a report on the matter to the Minister for Finance but I understood Deputy Crotty's question to relate more to the basic threat to the institutions of the State, which I think is more a matter for the Minister for Justice. From the point of view of our staff——

Deputy Crotty.—Have you expressed your concern to the Minister for Justice, to the Minister for Finance and the Taoiseach? It is your people and your operation that is involved.

Deputy Crotty.—Everything does not stop just because the Taoiseach is out of the country. He has his people operating for him. I feel it is your duty to do this.

Mr. Curran.—It is my duty to get a detailed report on exactly what happened. I do not have that on my table yet. When I get it I will certainly bear in mind the Deputy's comments and we will see what the implications are.

676.Deputy Naughten.—I share the view expressed by Deputy Crotty that this was a challenge to the institutions of the State by those people who are operating along the border. I would like to ask Mr. Curren — and I sympathise with the extremely difficult job the customs officials have to do along the Border to try to prevent all the illegal importation that is going on at present — how many customs officials are employed on Border duty?

Mr. Curran.—Taking the Border as a whole we have 286. That includes the staff who are employed in the mobile patrol units and the enforcement staff who are employed at frontier posts and also the staff dealing with commercial traffic at the road stations. The total comes to about 286.

Deputy Naughten.—How many of those staff would be directly involved in trying to detect the type of illegal operation which went on yesterday and indeed is going on daily with oil, spirits, beer, car parts, tyres, which are freely crossing the Border, it would appear, daily and are now freely available throughout the length and breadth of this country?

677.Chairman.—Before the Chairman of the Revenue Commissioners answers that, the Committee might like to consider if it is wise that we should put these matters on public record. It is a matter for the Committee to decide. I wondered at the wisdom of alerting the people who are trying to carry out these transactions.

Chairman.—What I am saying is, Deputy Crotty, I wonder is it wise for us to put on the record the number of people involved in these sort of operations on behalf of the State since the Committee is so concerned about the people who are trying to subvert the State. I just wonder if it would be wise to provide that sort of information.

Deputy Naughten.—Far be it from me to provide information for those types of people but, as I understand it, they know an awful lot more than this committee knows. Not alone do they know the number who are operating but they know their names and addresses.

678.Deputy McGahon.—Mr. Curran says there are 286 from Dundalk to Letterkenny; there would be more at a bingo in a country parish hall. I know, and you know, though I understand your reluctance to say it, that this number of personnel, most of whom would be involved in bureaucratic duties, are totally inadequate to really combat the huge amount of smuggling that is occurring in the Border region.

Deputy Crotty.—I think this requires an answer. While this Committee does not deal with policy I think at least we should deal with the cost-effectiveness of employing a customs official. It might not be any harm if we did some study on this. I am not as familiar with the Border situation as Deputy McGahon. I do not know what work 286 officers can perform. I feel if we need another 286 — and this committee could point out that they could be cost-effective — we should have them, and that might be something that this committee should be interesting themselves in.

Chairman.—As part of our ongoing review which we will be coming to later on, that is one of the matters we will be dealing with. The question is whether we should be discussing detailed numbers available for different combat duties in the customs area and putting it on the record in such a public way. It is a matter entirely for the Committee to decide. That is the question.

679.Deputy Naughten.—The question I asked was how many were involved in identifying this type of illegal operation which went on yesterday as distinct from the normal duties which go on at official Border crossings etc. As far as I am aware the criminal element that is involved in smuggling knows precisely how many are involved. I do not think this Committee do and, as Deputy Crotty has pointed out, it may in all our interests if the numbers of customs officials were increased. I asked a question and I do not see how the answer can do any damage.

Mr. Curran.—Of the 286 which I mentioned, 106 would be involved in dealing with commercial traffic at road stations, examining goods presented for clearance and dealing with documentation. The rest, which is about 180, would be what we could call the preventive and enforcement arm, and they would be divided between the mobile patrols and the frontier post duties.

Mr. Curran.—The mobile patrol cars are based in different places, as the Deputy knows, around the Border and they cover the whole Border.

Deputy Naughten.—We have been informed that 180 are involved in prevention and enforcement. This is one area where the State could gainfully employ additional numbers of people and have a huge saving on the amount of illegal importation that is going on at present. It is grossly unfair to traders who are trying to trade and pay their way and pay their taxes and duties to have to compete against this huge volume of illegally imported goods. It is one of the things which the committee should concern itself about and indeed we should seek that additional staff be put on Border duty to eliminate this type of illegal importation.

680.Deputy Harney.—On the assumption that there are 286, and I presume they work an eight hour day, that divides by three the number that is available at any one time to patrol the Border. In the context of 1992 and the free movement of goods and people which this country hopefully aspires to, I presume that any redeployment of staff or the employment of additional staff would be on a temporary basis since this argument will all become a bit irrelevant at that stage.

Mr. Curran.—All I can do is to accept public statements from the Government to the effect that 1992 will happen and we must take it seriously. On that basis it appears that all these operations will cease at about that time. There will be no further frontier posts or mobile patrols.

Chairman.—It might be a wiser way of dealing with this, Mr. Curran. We will be looking at the area of customs as part of our special examination. It might be a good idea if some members of the committee who are not frontier Deputies might visit one or two of the customs posts as part of the examination just to see on the ground exactly what the situation is.

Deputy McGahon.—Can I act as your host on that occasion? Let me also say that I will bring you and Mr. Curran safely across the Border into the North undetected and safely back and if I am caught I will streak down Kildare Street.

681.Chairman.—I hope you will not expect the Chairman of the Revenue Commissioners to drink an excise-free pint on the wrong side of the Border. I would like to ask Mr. Curran about paragraph 15. Why was there such an increase from £1.7 million in 1985 to £11.5 million in 1986 in the amount of written of taxes which is without statutory authority. What is the reason for that? Why such a significant jump?

Mr. Curran.—First of all there are improved computerised procedures now in the Collector General's Office for identifying suitable cases for writing off. That means we are catching up with the backlog of old stuff which is dead and merely cluttering up the system and needs to be got rid of. Secondly, we have improved liaison now with the Companies Office. The Companies Office now advises the Collector General of the removal of companies from the register. Once again that also enables us to remove some old non-operative titles from the register. Finally, another factor is that in the past there had been the practice, when it came apparent that tax would have been written off for whatever reason, to send the case back to the inspector to see whether he wished to reduce his estimated assessment first, so that then the lower assessment was the amount written off. It seemed to us that this was a pointless procedure. It was completely timewasting because if you were going to write off the thing anyway there was absolutely no point in asking the inspector whether he wanted to reduce his estimated assessment. We do not send them back to the inspectors. We write if off as is. That produces an increase in the figure as well.

Chairman.—The £11.36 million arose because it was not enforceable or because of bankruptcy, liquidations or whatever. What age was on this £11.5 million which you wrote off in that year?

Mr. Curran.—I do not have an analysis of that sort. I can get it if you wish and send it to the Committee. I would expect that some of the cases were very old but I do not have that analysis.*

Chairman.—The increase from £1.7 million to £11.5 million was related more to a modernisation of your system than to an increase in the number of companies going to the wall.

Mr. Curran.—Absolutely. There would have been an increase in the number of liquidations but the large increase has more to do with the change in the systems.

682.Deputy Crotty.—In relation to the loss of income due to the Revenue Commissioners as a result of liquidations and receiverships, could the Chairman inform us the reason why there is such a loss to the Revenue Commissioners. I would like to make a comment, Chairman, that it would appear to me that people were adopting a professional attitude to going into receivership and liquidation to get rid of commitments to the Revenue Commissioners. In quite a few cases the only creditor that suffered was the Revenue Commissioners and it would appear that VAT, PRSI and PAYE in some of these cases had not been collected for up to six, seven and eight years. Could the Chairman comment on or justify the situation?

Mr. Curran.—I think that this has been mentioned in previous years. The basic explanation has been that because, I think, of a staff shortage in the office it was not possible to follow up these case as closely as one might

have wished and also, at a certain stage in the past, people did not realise how serious the recession was and there was a feeling that if we held back things might improve. All that has changed. We now follow up cases much more quickly and we do not hesitate to go for liquidations at an early stage if we are satisfied that in fact the company should not be trading. We have improved our computer systems to the extent that we now have a much earlier cognisance of cases which are falling into arrears and we go after them quicker. If you have a fairly large company whose monthly remittance for PAYE is a large sum or whose bi-monthly VAT payment is a large sum and if that company goes out of business and even if it is only a few months behind, there will be an apparently big arrears figure for tax. That simply would reflect the scale of operations of the company, but what we are trying to achieve is that we do not allow companies to continue for a long time running up tax bills.

Deputy Crotty.—To be more specific, could I ask at what stage do the Revenue Commissioners put in a receiver? Is it after three months, six months, 12 months or two years? What is the policy?

Mr. Curran.—There is no particular policy, there is no particular period. Each case is considered on its merits, and before we would move for liquidation in all these cases, normally there would be much negotiation and discussion with the Collector General. There may be demands and perhaps offers of reduced payments, things of that type; the liquidation is the final step in what is usually a fairly long process of negotiation.

Chairman.—Can we have a brief question from Deputy McGahon and pass on from paragraphs 12–15.

Deputy Crotty.—Can you give us the number of liquidations for the years we are now dealing with here?

Mr. Curran.—I do not have that. We did have that in some memos which we sent to the Committee previously. I do not have it here.*

683.Deputy McGahon.—There has been a change of emphasis by the Revenue Commissioners in the last year or two. I am sure you would accept that. With the appearance of the sheriff in particular in the Border areas these areas could be more appropriately be described as Boot Hill in an economic sense. Much of this has been — and I mean this in a benign sense — because of the lax approach of the Revenue Commissioners in not gathering taxes over the last six, seven, eight and possibly ten years. Suddenly the existing businesses, the ones that have survived, are being faced with demands from this gentleman whom I would describe as a throwback to the penal days in demanding, in a very depressed economic situation, taxes maybe going back over ten years.

Deputy McGahon.—It is just impossible for a business to pay arrears of ten years. Do you not accept that because of the lax approach of the Revenue Commissioners which I Commend and understand, too much is being sought by the sheriff and that there should be compassionate phased payments for businesses in genuine difficulties.

Mr. Curran.—We do, of course, have these arrangements for phased payments but there are a couple of criteria which have to be met. First, all current taxes have to be paid up to date. Secondly, the amount of the phased payments have to be such as to suggest that the arrears will be met within a reasonable time.

Deputy McGahon.—Are you prepared to accept a legitimate approach, with perhaps bank managers guarantees, that arrears will be paid over a period?

Mr. Curran.—We do that regularly and as I said that usually is negotiated with the Collector General’s Office and it is only if that sort of an arrangement breaks down that in the end you are faced with the sheriff.

Deputy McGahon.—A week ago a family came into me with a demand note for £10,056 sent to a relative who had died in 1974. How can that happen?

Deputy McGahon.—The deceased was a very small farmer who had died in 1974. How could that happen?

Mr. Curran.—It does not sound like a demand for income tax to me, but if it has something to do with inheritance tax that should have been paid when an estate was being dealt with, that is another matter. Something like that would attach as a charge on the land.

Chairman.—We are already here two hours and I am anxious to make progress. We still are not through paragraph 15. I will allow Deputy Naughten a brief question and we will pass from paragraphs 12 to 15.

Deputy Crotty.—I would agree with Deputy McGahon, I had a case which I think the Chairman is aware of——

Deputy Crotty.—Where the Revenue Commissioners did not chase up tax. I hope that that has changed and that all taxes, whether inheritance or capital gains are being collected by the Revenue Commissioners when they are due. Certainly that was not the case.

684.Deputy Naughten.—I wish to refer to uncollected tax. For example, in certain lines of business it is not abnormal for companies to set up and lease a premises, and go into business. Two years later they sell off their lease and walk away, and liquidate the company. What steps have the Revenue Commissioners taken to try to come to grips with this problem?

Mr. Curran.—The overall comment to be made on that is that that abuse is not solely or possibly primarily a tax abuse, it is an abuse of the company law and we think the new Companies Bill, which is before the Dáil and Seanad, will have very substantial deterrents in it to stop that sort of activity.

Deputy Naughten.—But by and large as of now you are not taking any steps to try to come to grips with this situation? In my view those people are trading very unfairly in so far as the people who have to pay cannot compete on an even footing with these type of people.

Mr. Curran.—We move as quickly as is feasible where substantial arrears seem to be building up. I know that in the past sometimes we have not moved as quickly as maybe we should have, but our systems are improving all the time and we now do not, as far as possible, allow substantial arrears to build up.

685.Chairman.—Paragraphs 16 and 17 of the Report of the Comptroller and Auditor General read:—

Tax shown in Schedules 1 and 4 as under appeal does not become due until final determination of the appeal, provided an amount specified by the taxpayer has been paid (the taxpayer may specify that no tax is payable). With regard to the year of account 1986/87, much of the tax shown as outstanding is the subject of appeals made within the normal time limits following the making of assessments.

In reading these tables particular attention should be paid to the footnotes, especially to note (c) on Schedules 1 and 4. As these footnotes state that the differences between the balances shown as outstanding and the estimates of amounts likely to be collected are largely accounted for by anticipated reductions of estimated assessments included in the balances I have asked the Accounting Officer if he can indicate how much of these differences is due to discharge for this reason and how much is due to inability to arrive at the true liability or inability to enforce collection.

Schedule 1 — Income Tax (excluding PAYE) (as at 31 May 1987)

(a)* While the amounts here were not, at 31 May 1987, disputed, it is likely that a significant portion will be subject to claims for the admission of late appeals.

(b)Deposit Interest Retention Tax which was introduced in 1986 is included in the figures for 1986/87. It accounts for £257 million of the net charge and paid amounts.

(c)† It should be noted that the difference between the balance and the estimate of amount likely to be collected is largely accounted for by anticipated reductions of estimated assessments included in the balance.

Schedule 2 — PAYE Income Tax (Tax Due from Employers)

Income Tax collected under the PAYE system and included in the amount of income tax collected as shown in paragraph 13 amounted to £1,988 million. Arrears outstanding at 31 May 1987 amounted to some £96 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

As end-of-year returns from employers were not due to be furnished until 30 April 1987 there was no significant underpayment established for the year 1986/87 as at 31 May 1987.

Schedule 3 — Pay-Related Social Insurance (Amounts Due from Employers)

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 £1,152 million was collected during 1986. Arrears outstanding at 31 May 1987 amounted to some £117 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

	All years to 1984/85	1985/86
	£m	£m
6.Arrears branch	2.5	0.1
Estimate of amount likely to be collected	27.2	19.5

As end-of-year returns from employers were not due to be furnished until 30 April 1987 there was no significant underpayment established for the year 1986/87 as at 31 May 1987.

Schedule 4 — Corporation Tax (As at 31 May 1987)

(a)* While the amounts here were not, at 31 May 1987, disputed, it is likely that a significant portion will be subject to claims for the admission of late appeals.

(b)Advance Corporation tax is included in the figures for 1986–87 in the Schedule. £27 million of the £47 million involved was paid in the years 1983–84 to 1985–86 inclusive but has been included under 1986–87 because, for administrative reasons, the formal assessments applicable to that sum were made in the year 1986–87.

Schedule 5 — Capital Gains Tax (as at 31 May 1987)

Schedule 6 — Capital Acquisitions Tax (as at 31 May 1987)

Schedule 7 — Surtax, Corporation Profits Tax and Wealth Tax (as at 31 May 1987)

Schedule 8 — Health Contributions, Youth Employment Levy and Income Levy — (self employed individuals and individuals with investment income only) — Income levy discontinued with effect from 1986–87. (as at 31 May 1987)

Schedule 9 — Value Added Tax (as at 31 May 1987)

(a)The following schedule shows the position as at 31 May 1987 of VAT liabilities declared and payments made on foot of returns submitted by traders.

* The balance outstanding in the years to 1984 includes a large element due in cases in liquidation/receivership and it is likely that little of this will be recovered. There are also amounts due from other companies and individuals that have ceased to trade, many some considerable time ago and in these cases the prospect of recovery is not good. The estimate of the amount of the balance likely to be collected takes these factors into consideration.

(b) Section 23 of the Value Added Tax Act, 1972, as amended, provides that where the Revenue Commissioners have reason to believe that a person when submitting his return understates his VAT liability or obtains an excess VAT repayment or where a person fails to register for VAT they may estimate the amount of VAT due. The following schedule shows the position of such estimates as at 31 May 1987.

	All years to 1984	1985	1986
5.Under enforcement	45.5	6.6	1.7
6.Arrears branch	10.9	0.4	0.1
Estimate of amount likely to be collected	26.0	4.0	3.0

(a)Estimates: Estimates raised by the Inspectors of Taxes represent gross liability and will therefore include amounts accounted for on any return submitted for the period covered by such estimate.

(b)Paid: Includes tax paid before the estimate was raised as well as amounts paid subsequently.

(c)The following schedule shows the position as at 31 May 1987 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.

Schedule 10 — Residential Property Tax (as at 31 May 1987)

The following schedule shows the amount outstanding at 31 May 1987 in respect of cases where returns have been made or assessments made in the absence of returns.

	Tax due to 1 October 1984	Tax due to 1 October 1985	Tax due to 1 October 1986
	£m	£m	£m
Charge	4.8	2.0	1.6
Net Paid	3.5	1.5	1.2
Balance	1.3	0.5	0.4
Analysis of balance:
1.Under enquiry	0.4	0.1	—
2.Under demand	0.9	0.4	0.4

Collection of Outstanding Taxes

17.The following statistics furnished to me by the Revenue Commissioners show the position regarding the referral of cases to the Sheriffs County Registrars to enforce collection and the results of such action.

In addition to the 72,101 cases on hands of Sheriffs/County Registrars at 31 December 1986 a further estimated 100,023 cases due for enforcement had not been referred to Sheriffs/County Registrars at that date because of the accumulation of cases already referred. The estimated face value of the charges involved is £239 million. Enforcements by Sheriffs and County Registrars realised £23.6 million and £6.8 million, respectively, during 1986. (£22.1 million and £12 million in 1985).

In my previous report I referred to action being taken to improve enforcement procedures for the collection of outstanding taxes. Since July 1986 12 additional Sheriffs have been appointed in place of the 24 County Registrars outside of Cork and Dublin for the sole purpose of enforcing certificates issued under Section 485 of the Income Tax Act, 1967. Operational guidelines were issued to the newly appointed Sheriffs who are required to submit monthly progress reports to the Revenue Commissioners on cases referred to them for enforcement. I have not yet had an opportunity to examine the effectiveness of the operation of these guidelines.

Mr. McDonnell.—Paragraph 16, which is very long, summarises the position on the various tax heads and the other areas like health contributions and so on for which the Revenue have responsibility. There are about eight pages of schedules there. You will see that the accumulated differences between the balances shown as still in charge and the estimates of amounts likely to be collected are substantial. You can come up with differences of several hundred millions if you take the figures for the total balances in charge and the total expected to be collected. Nobody is suggesting — and least of all am I suggesting — that all this tax is due. In the introduction to the tables, I say that I have asked the Accounting Officer to clarify his reference in the footnote — because the tables, I emphasise, are those given to me by the Revenue Commissioners and the footnote is also the Revenue Commissioner’s note — to these differences being largely accounted for by anticipated reductions in estimated assessments because I thought that that clearly implies that there are other factors. What I was trying to get at was the extent to which other factors have an impact in getting from the balance still in charge to the expected collection figure. Just a couple of days ago I got a reply from the Accounting Officer saying that it is difficult to give a completely accurate figure because the sums of tax shown as likely to be collected are themselves estimated figures, but he said that their experience in recent years has been that approximately 99 per cent of the difference, that is the difference between the balance in charge and the estimated amount likely to be collected, would be accounted for by reductions in the estimates and 1 per cent by the other factors which I have mentioned in my Report. I would have to say that I am slightly puzzled by this because it seemed to me to mean that for all practical purposes all amounts correctly assessable are expected to be collected. I was wondering if in referring to reductions in estimates the Accounting Officer is including, for instance, such factors as settlements? That is what I meant when I asked about inability to arrive at the true liability.

Mr. Curran.—The question as put to us has presented us with some difficulty because we could not work out exactly what was behind it. Some settlements, for example, are reached by the investigation branch. What happens there is that the inspector, having reviewed and discussed the case comes to a conclusion about what the proper assessment should be and in that context he reduces his assessment to what he thinks is proper. Indeed, in some cases there are questions of penalties and interest. That is a different operation from somehow not being able to arrive at the true liability, so that the question of inability to arrive at the true liability is never a reason for reducing an assessment. This is the way things operate. The 99 per cent we referred to simply reflects the fact that most of the difference referred to by the Comptroller and Auditor General is accounted for by the reductions in estimated assessments. The 1 per cent is the order of magnitude of the figures which in the end would have to be written off because they could not be collected. That has been the pattern up to now. What the pattern will be in the future, I am not sure.

Mr. McDonnell.—I am sorry if my question caused some confusion for the Accounting Officer. Perhaps the use of the phrase “inability to arrive at the true liability” may have caused that, but let me explain what I was trying to get at. What I am wondering is, is the picture presented by the figures in these tables a little bit blurred? I know that the Revenue make every effort to collect the tax which they consider to be due and inevitably in that the question of settlement arises. What I am really concerned about is what I might call the “statistical representation” in the tables of the results so far and of the projected end results of their efforts. As I understand it — and I am sure the Accounting Officer will correct me if I am wrong — if you take a case in which a taxpayer gets an estimated assessment, he appeals, produces evidence in support of his appeal, treats with the Revenue Commissioners, makes every effort within the law to minimise his liability and eventually agrees what is the equitable liability on the basis of satisfactory evidence. In doing so I recognise the right of the inspector to judge what is satisfactory evidence and so on. What I am talking about in that sitution is a taxpayer who goes through what I might call the “due process”. As I understand it, having gone through the due process, the difference between the estimate and the agreed liability is then discharged. That is perfectly straight-forward. On the other hand, one can have a case in which, again starting with an estimated assessment there is no appeal and the taxpayer for all intents and purposes ignores the Revenue Commissioners. Eventually perhaps the Revenue Commissioners get to grips with the situation, perhaps a figure is negotiated and a settlement is accepted. As the Accounting Officer said this is done by the investigation branch and as I understand it, the difference in that case between the settlement and the amount of the original estimate is then discharged.

I accept that the difference has to be discharged for record purposes because you have to get the case off the books. I said at the beginning that I was concerned about the blurring of the statistical representation of the situation. If the data furnished to the committee, so that they can in an informed way consider and analyse the question of tax assessment and collection presents those two cases statistically in the same way, in other words as being in exactly the same category — that is to say that the original estimate has been reduced. By the discharge which arises from the reduction in the original estimate — it seems to me that the discharge in the second case, where a settlement was arrived at, is being treated as equally bona fide and as having the same respectability as the discharge in the first case. The discharge in the first case is where the taxpayer follows the due process and the discharge in the second case is a case of difficulty. What leads me to the conclusion that they should be perhaps presented differently in the tables is partly the fact that the legislation distinguishes between the two cases because it allows the Revenue Commissioners to publish information in relation to settlements which is published in the media every year. It does not seem to be the same thing. If one discharge is as respectable or bona fide as the other, why is the punitive measure of publication applied in one case but not in the other?

The Minister for Finance on 9 February 1983 in his budget speech said in regard to settlements:

“Tax evaders have up to now been protected by a cloak of anonymity except where convicted in open court. I think this is unfair to the large majority of taxpayers who comply with the law. Accordingly, I propose that for the future the Revenue Commissioners will publish annually a list of persons and companies who have been convicted of a tax offence or with whom settlements have been reached in the larger backduty cases.”

Therefore there is a question of settlements being reached with, as the Minister for Finance described them, “not compliant taxpayers”. What I am concerned about is if, on a settlement, the balance of tax which is in charge is discharged in the same way as it is discharged for a compliant taxpayer, are the statistics blurred?

Mr. Curran.—First with regard to whether the statistics are blurred, the tables and the notes are, as the Comptroller and Auditor General said, supplied by us and published in his report but they are supplied by us in response to requests and the format of the tables has been agreed in the past with the Comptroller and Auditor General. What I suggest, because we may get into rather obscure areas here, is that if the Comptroller and Auditor General or his staff would like to contact us outside the mechanism of a formal audit query, send us a note or have a discussion about the lay-out of the tables and whatever is behind them we would be very happy to co-operate in that sort of a discussion so that the tables may be as helpful as possible and we may answer some of the pre-occupations which the Comptroller and Auditor General seems to have.

Mr. McDonnell.—I would be very happy to do that because it would be unfortunate if the statistics in relation to the non-compliant taxpayers are buried in the statistics in relation to the compliant taxpayers. I would be very happy to do that.

Chairman.—I propose that we finish on paragraphs 16 and 17 for today if that is agreeable to the committee.

686.Deputy Harney.—I want to make two comments because unfortunately I have to leave. I agree with what the Comptroller and Auditor General said but I want to add further to it. If we take Schedule 1, all income tax, including PAYE, for the year 1984–85, the balance is £694 million and the estimate likely to be collected — and I presume you know at this stage what you can collect — is £55 million, this represents a difference in ratio of 12:1; in effect, this indicates that only one-twelfth of the balance is likely to be collected, and that says two things: either the estimate is totally wrong and the method of assessing estimates is very archaic or is very faulty or else the collection system is very faulty. I believe from experience that the inspectors of taxes operate what I would regard as a rather intimidating and frightening mechanism of sending out assessments that they know are wrong, that they know are four, five or six times higher than what the person could possibly be expected to pay. They do it to perhaps intimidate and frighten people but I think that it sometimes has the opposite effect of what they obviously would intend. I should like to hear the Chairman’s comments about that. Secondly, given the extension of PRSI and so on to the self-employed, it is very difficult for a self-employed person to collect up the amount of tax that is likely to be paid or due in a year. All of us, as PAYE taxpayers, would find it very difficult if we had to pay out tax in one fell swoop. Perhaps the Chairman would comment on whether he believes it would be helpful to have a system whereby people could pay their tax on a monthly or even a weekly basis, that they could pay the kind of liability they paid in the previous tax year and then perhaps at the end of the year they could sort out the differences. I believe that a system of that kind would be particularly helpful to self-employed people who find this type of payment very difficult because all of us are not great at saving up money, particularly when it is for tax. I believe people become more resentful if they have to pay it in one fell swoop than if they have to pay it in smaller instalments.

Mr. Curran.—I agree that human nature being what it is it is more difficult for people to save up and send in one cheque than to make monthly payments or whatever. Our difficulty is that we are already under very severe pressure dealing with the number of monthly and two monthly payments we get. We would be likely to get completely bogged down if we were to envisage a system where the self-employed could send in monthly remittances. I think we would really get into very deep water there. That has been thought about before, but it has always been rejected in our office for the reason that it would generate an immense amount of work. The other business about the estimates is that, of course, in the past estimates have sometimes been far too high, but this was not a deliberate action by the inspector to frighten people, it is simply that, as we have explained here before, in the absence of details and returns the inspector had to do the best he could, and subsequent events usually showed that the estimate was too high. In the absence of any returns or information, that is all that could be done. We think the new system which is coming in this year with self-assessment will very largely put an end to that particular problem.

687.Deputy Crotty.—I wish to comment on the monthly payments, the point raised by Deputy Harney and the reply by the Chairman. If monthly payments would help the self-employed, I fail to understand how this system cannot be set up in the Office of the Revenue Commissioners at very little cost, particularly today with computerisation and with sophisticated machines that are already there. I reject the reply of the Chairman that it would cause a lot of problems. None of these transactions should cause problems to a well organised office.

Mr. Curran.—The only point I can make in reply is, the Deputy referred to the sophistication of machines and I accept that, but obviously somebody has to input the information into the machines, and this is part of the problem. If we get the new system of cash transmission underway through direct debits or credit transfers, then perhaps we could look at that further, and something might be possible, but as we are operating at the moment, the staffing situation would make it impossible to envisage that sort of operation. We will bear it in mind for the future.

Chairman.—We are dealing with paragraphs 16 and 17 together, and that takes in the sheriffs.

Deputy Crotty.—Have the Revenue Commissioners not progressed so that we can deal with this type of situation now. Might I ask the Department of Finance if they are aware of the problems in the Revenue Commissioners and what they are doing to improve the scene so that this facility is made available to the self-employed who could make monthly payments, which would be an advantage to them?

Mr. Dunning.—As the Chairman said, there are a number of significant measures which the Minister announced are being brought in this year which in relation to tax assessment procedures will assist self employed people in future when dealing with their accounts etc. The system being set up should be of some considerable assistance to them in that regard. As regards monthly payments, we certainly would have to go on the advice the Chairman gives us that this would cause major administrative problems at the moment for the Revenue Commissioners. In that regard, we would have to be guided by what he has to say.

Deputy Crotty.—Can you explain how it could cause major administrative problems in this age of sophisticated machinery, where at the press of a button you can get every sort of information? It beats me that we get that sort of a reply in 1988.

Mr. Curran.—There is nothing inherently difficult or impossible in doing what the Deputy has in mind. The difficulty is to provide the resource to handle it. The second thing is that the machines are only as good as what you put into them, and somebody has to manipulate the input and keep track of things.

689.Deputy Naughten.—I, too, find it difficult to understand why that facility could not be extended to the self-employed. Indeed, I would ask the Chairman of the Revenue Commissioners to examine what can be done because many of the self-employed are in very difficult situations with tax, and it might be of assistance to some of them if they could pay monthly. With regard to paragraph 17 which deals with collection, how is the new system of collection with regard to the sheriffs operating? What is the success rate? Is it more successful than the old system of the county registrars? What figures have you on it? What is the up-to-date position?

Mr. Curran.—The short answer is that it is far more successful than the previous system. In May I furnished the committee with details of receipts from the sheriffs; in 1986 the total for all sheriffs was £23 million; in 1987 the total was £49 million. I gave the figure for January/March 1988 and I can now give the figure for January 30 to June 30, 1988: for the first six months of 1988 the total receipts from the sheriffs was £55.9 million. You can see a trend there. The system is working very well and is producing a lot of money, and certainly a lot more than under the previous regime.

Deputy Naughten.—Would you see this £55 million reaching £110 million by the end of the year?

Mr. Curran.—It would be very hard to say. There is great difficulty in trying to forecast what will happen for the rest of the year. This is, to an extent, an exceptional year because of the various new measures which have been brought in and maybe people are coming forward with their payments. The payments may not be spread throughout the year in the same pattern as in previous years.

Deputy Naughten.—The new measures would hardly influence the money coming to the sheriff’s office.

Deputy Naughten.—Would it not be more likely the new measures are being availed of by the type of individual who would be going in and clearing tax liability rather than the type of client who would be getting a bill through the sheriff’s office? Is that not right?

Mr. Curran.—If cases are already with the sheriff, then they have to be dealt with through the sheriff. There would be a certain number of people clearing the desks and meeting their debts with the sheriff. The difference would be that under the arrangements they could avoid paying the interest, but they would still have to come through the sheriff first if something has gone that far in the enforcement process. We are not quite sure what the pattern means this year but certainly the figures are very good.

690.Deputy Desmond.—For the first six months of 1988 the sheriff’s office collected £56 million. Have you any projection for year end at this stage?

Mr. Curran.—I do not. That is basically the same question. We could not say at this stage.

Deputy Desmond.—What was the yield from the sheriffs for 1988 in tax receipts forecast?

Mr. Curran.—We do not do that sort of estimate. We do not distinguish in our estimates which are published around budget time, the Minister’s estimates.

Deputy Desmond.—For example, on the amnesty, there was a figure put in the budget this year, separate from the sheriff’s operations.

Mr. Curran.—It is impossible to distinguish amnesty payments from ordinary payments.

Mr. Curran.—No, people can avail of the amnesty if they pay their current tax, but, as I explained, if something is already with the sheriff, then they have to make their payment through the sheriff. They are relieved of paying interest but they must pay their tax through the sheriff.

Chairman.—Would it not be true to say that there would be a bulge in the system as a result of this change and that that might indicate something? Would there be £50 million as a result of the amnesty?

Mr. Curran.—We are really into the realm of guesswork. The amnesty runs out in September. It will be the end of September or October before we know what seems to have happened. All we can say at the moment is that the receipts are going very well and, in particular the sheriffs’ operations seems to be very successful.

Deputy Desmond.—The sheriffs were appointed by the previous Government in 1986 or in the first quarter of 1987 before that Government left office. Why was there a singular lack of enthusiasm for the appointment of sheriffs in 1984–85 at Revenue level and the measure had to be finally pushed through in 1986?

Mr. Curran.—I am very surprised to hear that. I was not aware that there was any lack of enthusiasm in our office for that. I would have thought the opposite was true.

Deputy Desmond.—If it was the opposite, can you give any explanation as to why sheriffs were not appointed much earlier?

Deputy Desmond.—You are charged with getting in the money. How is the mechanism operated on DIRT? Is there a big section in Revenue involved?

Deputy Desmond.—Would there have been half a dozen people involved in Revenue in it?

Deputy Desmond.—There is a specific comment on page 12. It is included in the income tax return for 1987. DIRT brings in this year about £300 million, is that correct? Has the Department of Finance a figure on it yet? It was £287 million in 1986–87 and then there is a further comment later on. I put the question through the Chair that if DIRT has been so successful, £300 million a year involving half a dozen officials, could the Department of Finance advise me as to why it was not brought in in 1983, 1984 or 1985? Why was it not brought in as a most effective and very cost effective revenue yielding process?

Deputy Desmond.—The Revenue Commissioners advise the Government as to how to raise money.

Chairman.—We might want to call members of the last Executive to find out why the policy on that was not brought forward.

Deputy Desmond.—I make the point that there was an inter-departmental committee, on which Revenue were represented, on the whole question of the introduction of DIRT. Is that not correct?

Deputy Desmond.—Is it not a reality that that inter-departmental committee recommended against the introduction of DIRT?

Mr. Curran.—That would be a matter entirely within the competence of the Minister.

Deputy Desmond.—The Minister appointed representatives of the Revenue Commissioners on to the inter-departmental committee and finally, the Government brought in DIRT. I make the point to you that indeed there are extraordinary backgrounds to some of the tax changes which are here. The final question relates to VAT. It is a bi-monthly payment, why not monthly?

Mr. Curran.—There are two reasons. First of all even in the years when VAT was brought in, which was some time ago, we did not want to deal with 12 payments a year if we could get away with dealing with six. Secondly, I think that business in general preferred bi-monthly to monthly payments.*

Deputy Desmond.—If one is dealing with a couple of billion pounds per year, the second largest amount of aggregate, where liquidations and deliberate retention of VAT moneys which, after all, is collected at the point of sale and where there is a massive opportunity for non-payment or for protracted delay in payment, why not insist, particularly now with credit transfer arrangements and electronic transmission and straight forward data debiting, on a monthly payment particularly from the large companies? On three sheets of foolscap paper, you could put all the major VAT payers in the country, accounting for 60 per cent of VAT and why not say to them, “hand over on a monthly basis”?

Mr. Curran.—First of all, we do not yet have the electronic transmission system in place and, obviously, that is something we would bear in mind. The question of changing to a monthly payment of course would have serious implications for the cash flow of the companies concerned and this would, undoubtedly, be a matter of policy, where the Minister would have to take a view. I would not like to say anything about that one way or the other.

Deputy Desmond.—Does it not have very serious implications in that there are substantial arrears of VAT on a rolled-over basis, very substantial arrears? It is your function to get the money in one way or another and Revenue should pursue the people with major liabilities of VAT, which, admittedly is used for cash flow, but that is not the purpose of the collection of VAT. VAT must be paid to Revenue. It is taken from the consumer and held for two months. It should not be, in my view, particularly if you need urgent revenue yields. Would it impose an intolerable strain on Revenue to insist on getting the money in on a monthly basis?

Mr. Curran.—It would impose considerable additional work on us and it certainly would on the traders. It would impose quite a lot of additional work on the traders——

Mr. Curran.—It would be more. There are accounts and everything else involved in this.

Deputy Desmond.—If a trader is preparing his returns on a bi-monthly basis, he prepares his returns on a on-going weekly basis. At the end of the bi-monthly period he sends in his returns. If he is any way competent, at the end of the four week period, he would draw a line, sign a cheque and send it in. I do not see any problem.

Chairman.—I am surprised, Mr. Curran, you have not referred to the fact that many traders, probably most traders, are not on a cash receipt basis, that they are paying VAT on invoices for which they may not be paid for two, three or four months. They are paying over money in most cases which they have not collected. That should be referred to for the record.

Deputy Desmond.—They are also on a 30 day credit period in terms of payment for account, but that is another matter. I know you are under pressure and you are being particularly co-operative with the committee. Could you prepare a note on the impact of a monthly payment of that?

Mr. Curran.—We can, on what the practical consequences would be. On the question of whether to do it, you would have to ask the question somewhere else.

Deputy Desmond.—I wish to make a final query on health contributions under the various schedules here. Is it correct that at the moment you have stopped collecting health contributions or levies at all? There seem to be stacks of arrears.

Mr. Curran.—Most of it comes through the PAYE system. There are some arrears on health contributions but this year those contributions and PRSI will all be integrated with the income tax collection system. That will bring in its train all the enforcement apparatus which is operated at the moment for income tax and which has not been operated up to now in relation to these contributions because of the very small amounts involved and we did not have the resource to chase them up. They are now being amalgamated with the income tax and they will in future be subject to the same enforcement regime.

Deputy Desmond.—Does it not appear since you accepted responsibility for the collection of health contributions in April 1984 that since then you have not collected them, for all practical purposes, particularly from the farming community?

Mr. Curran.—There have been substantial arrears, but I think we have explained here previously that we were conscious of this but just did not have the resources to pursue them.

Deputy Desmond.—Is it not a reality that about £27 million is owing from the farming community for health contributions and they have paid nothing since 1984 for all practical purposes?

Deputy Desmond.—They are the only people to whom the new system will apply. I pay my health contributions and everybody else here presumably pays his or hers. Could I ask the Department of Finance why this situation has been allowed to develop where currently there seems to have been no collection of health contributions for the past two or three years?

Mr. Dunning.—There has been collection of health contributions from self-employed and farmer, though certainly not as satisfactorily as we would have wished. As the Chairman says, the new system that is being introduced from this year onwards which is integrating the collection system for income tax, health contributions and the employment levy will certainly improve overall collection.

Mr. Dunning.—As far as I understand, the arrears are being pursued by the Revenue Commissioners.

Mr. Dunning.—I am unsure if the £27 million is the true level of arrears. The aim is however to pursue the arrears.

Chairman.—It is 4.50 p.m. We have three Deputies offering. Is Deputy Desmond finished?

691.Deputy McGahon.—I have to express shock, horror and disbelief that in 1988——

Deputy McGahon.—In 1988, When man has set foot on the moon, we are still operating an estimated system from the middle ages. Surely some more rational system can be found. I would also like to underline what I believe is a rather simple system. We have been over this course on previous occasions, Mr. Curran. I feel that local tax officers and local tax inspectors could help tremendously in solving the problems of the self-employed. I have said previously that self-employed people are literally terrified of the Revenue Commissioners. It is the fear of the unknown for many of them. I am talking about very small traders, small retail shopkeepers in rural areas. The system was better served some years ago with tax inspectors living in towns and actually collecting the money. I can see no rational obstacle to the Revenue Commissioners opening, in fairly sizeable towns and cities, tax offices where people can come in and pay on a monthly basis. Many self-employed people would welcome the opportunity of doing that. I have to object to the system that the Revenue Commissioners employ in releasing spurious figures of money allegedly owed by self-employed people just before the budget. I think that fans the irrational beliefs of PAYE people that the self-employed are getting away with a large amount of unpaid tax. As an out and out opponent of the sheriff and his terror tactics initially, I have to accept reality and in the face of the large amounts of money which he has produced from people who obviously have been playing the Stock Exchange or maybe racing racehorses, I have to say that his appearance in that case was justified, but I object to the indiscriminate use of the sheriff with people who are patently in difficulties such as small shopkeepers who can furnish details from their bank managers of a bad situation. Many of these people have to get down on their knees and get bank loans to pay the sheriff—

Deputy McGahon.—Due to the lax manner — and I am not saying this in a critical way — of the Revenue Commissioners in previous years in not pursuing these people and ensuring that they pay. I am talking about the person who is genuinely in trouble. I would ask that the sheriff be not used on these people and that every effort is made to help them survive. Many of them have young families.

Mr. Curran.—To be very brief on that, as I mentioned before, regarding this question of local collection facilities which the Deputy and others have mentioned, we have a project going studying the implications of it. That is ongoing. We have not a final position on that yet but we take aboard everything that is said about the social dimension to that and we will look at it very closely. As regards information, in the autumn we will be starting a series of seminars around the country, a big information campaign, explaining the new system specifically for the self-employed. We have not forgotten the suggestion which has been made here by the Chairman at a previous meeting that we might consider having something akin to clinics in hotels or whatever. That would have to be further down the road because we cannot do it all together. We are doing the seminars first. We will bear in mind this question of information for the taxpayers for the future.

692.Deputy Crotty.—I would like information on paragraph 17, page xx. Table 1 refers to 1985 and 1986. There are five headings. The fourth heading is “Returned unpaid or withdrawn”. The amount was £72 million in 1986 and £68 million in 1985. Could you explain what that means?

Mr. Curran.—The heading covers two sorts of cases withdrawn from the Sheriff. The first would cover most instances, where the sheriff could not enforce it and it is nulla bona, or for some other reason, the case is returned. In some cases warrants would be withdrawn from the sheriff where there had been developments, for example, where the tax was paid, or where the warrant expires, in other cases where an end of year return is received which overtakes it. These are the cases which are withdrawn from the sheriffs.

Deputy Crotty.—No, it is not all right. The amount returned paid, in this instance, was £8 million, and £72 million was returned unpaid or withdrawn.

Deputy Crotty.—I thought it was the amount in £ millions. The number of cases, then, was 8,000 referred and 72,000 returned or withdrawn. It seems extraordinary that that number of cases was withdrawn. Could we have an explanation? It is completely out of proportion.

Mr. Curran.—I think that the bulk of them are returned unpaid, probably nulla bona,small cases or whatever.

Deputy Crotty.—It was the same for 1985. There were 6,000 referred and 68,000 returned unpaid or withdrawn.

Mr. Curran.—To analyse that further, we will have to look into it and send on a note to explain the reasons for the return or withdrawal of that number of warrants. I do not have a detailed explanation here.

Chairman.—Would it have anything to do with the fact that they go out of date after a certain period?

Mr. Curran.—That is one of the reasons that I mentioned, a very important one.

Deputy Crotty.—Why are they being referred if they cannot be collected? That is not a reasonable explanation.

Chairman.—Would some of the 68,000 cases in 1985 have been renewed and then been included in the 81,000 at the beginning of 1986?

Mr. Curran.—Yes, many of them are reissued. Many of them, small cases — and particularly under the previous regime — are nulla bona and there is nothing else to be done about them.

Deputy Crotty.—Why are they not written off? Why are they sent to the sheriff?

Mr. Curran.—You have to send them to the sheriff first to discover that they are nulla bona. That is why they are sent back. When they are sent back, they do not go into the system again.

Deputy Crotty.—I want to probe a little further. Is due consideration given, in offices concerned with VAT, PAYE and other matters, to the referral of tax-due accounts to the sheriff?

Mr. Curran.—I am not quite sure if I understand what the Deputy has in mind. Is it given enough consideration?

Deputy Crotty.—Yes, to tax-due accounts before you refer them to the sheriff. The sheriff is a last resort and it also costs the State extra commission etc. for the sheriff.

Mr. Curran.—It does not cost the State money. It costs the taxpayer money when it goes to the sheriff.

Mr. Curran.—So far as we are concerned, the sheriff is the last resort. Normally, cases do not go to the sheriff unless the taxpayer has not sent in a return, has ignored reminders, has failed to honour commitments. It just does not happen out of the blue.

Mr. Curran.—I could never be sure that it might not happen by accident, but, in general, it should not happen.

Deputy Crotty.—I want to refer to a case of a consultant of mine which happened recently in relation to VAT. He had paid his VAT up to date but it would appear that there was one two-monthly payment in question. That payment was due three years ago. That case was referred to the sheriff by the VAT officer. All the payments before that two-monthly period and all the payments since that two-monthly period were paid by this person. He got a demand from the sheriff for payment and commission. If it was not paid within a certain time, the sheriff would seize £9,000 worth of goods.

Deputy Crotty.—I do not know. He had not been asked to pay this amount, or had not been contacted.

Deputy Crotty.—That is what I am saying. That is why I am bringing up this issue. It is so serious that I am raising it with the Chairman.

Mr. Curran.—If the Deputy would like to send me a note, we will look into the case.

Deputy Crotty.—The Chairman is aware of it because it was brought to the notice of your secretary. I am bringing it up here today because I feel so strongly about people who are trying to live within the constraints of the tax system being harassed in this fashion by tax collectors. It is just not acceptable.

Chairman.—I am going to wrap this up. The Chairman of the Revenue Commissioners has spent almost three hours here today answering questions. It is a little unreasonable——

Deputy Crotty.—This is important, that a legitimate taxpayer should be harassed in that fashion.

Chairman.—We are in the impossible position of asking the Revenue Commissioners on one hand why they are haranguing taxpayers and on the other hand we are asking why they do not pursue them early enough so that they do not go into liquidation and leave debts outstanding.

Deputy Crotty.—I pointed out that this taxpayer paid all his taxes for the last three years and for the 20 years before that.

Chairman.—Would the Chairman look into the matter and let Deputy Crotty have a note? Would you also let us have a separate note on the general issue?

Deputy Crotty.—What I want to point out here is that I am not just questioning this now. I brought it to the notice of the Chairman’s secretary. The secretary is aware of it. I am concerned that this should not happen in a general way to other taxpayers. I am insisting that the Chairman investigate this to ensure that it will not happen again.

Chairman.—Deputy Naughten will ask a brief question. Then I am going to wind it up.

693.Deputy Naughten.—I want to get back to the farmers’ contribution. It was implied that farmers were the one group of people who were not paying their fair share with regard to health contributions. I wish to point out that many in the farming community are having great difficulty in finding out precisely what they owe, on the one hand, and they must pay before they have a medical services card on the other. It is because the farming community have not got the bills that this money has not been turned in. Finally, can the chairman inform us as to the number of cases that are with the Revenue sheriffs at present and the value of same up to the end of June, or the last date for which you have figures?

694.Deputy Desmond.—They must be making a fortune in commission. Was it 5 per cent or 10 per cent?

Mr. Curran.—I can give you the number referred to the sheriffs for six months up to 30 June. The total number of referrals to all the sheriffs was 81,504. That is not the total on hand, it is the number referred in the first six months.

Deputy Desmond.—How many were referred last year to the sheriffs? Is anybody paying tax in the country, other than PAYE workers? Eighty-one thousand in the first six months — it is self-employed evasion.

Mr. Curran.—The overall total, including the independent sheriffs, for 1987 was 122,800. That is the total number of referrals.

695.Deputy Naughten.—Yes, I asked the Chairman the number of cases which he gave as 81,000 for the first six months of the year but could he give us the value of same?

Chairman.—What items on paragraph 17 are outstanding? Are we finished with paragraph 16? We will note paragraph 16 and we will resume on paragraph 17. Thank you Mr. Curran, you have been very helpful. If we are spending a lot of time on the Revenue side it is only because of the enormity of the Revenue Commissioners as a unit of State. Would you be free to resume the examination at the same time next week?

698.Chairman.—Next Wednesday. If it presents a difficulty for you we can leave it until September but, if it is possible, we would like to get it out of the way.

Mr. Curran.—I would prefer to leave it until September unless the committee insist.

Chairman.—We will not insist. We will leave it until September. We have taken up a lot of your time this year. Thank you very much. That concludes the public session. There are a couple of matters for private session.

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

VOTE 16—STATIONERY OFFICE 1985 and 1986.

Mr. John F. Mahony, (Chairman, Office of Public Works) called and examined.

699.Chairman.—The Committee of Public Accounts welcome Mr. Mahony, Office of Public Works, in his capacity as Accounting Officer for that Office and for the Stationery Office. It is your first occasion to appear Mr. Mahony and you are very welcome. Paragraph 24 of the 1985 Report of the Comptroller and Auditor General reads:—

Subhead E.—Paper and Publications

Stocks of paper are held by the Stationery Office for issue as required to contractors for printing and binding. Stock records are maintained of paper purchased, paper issued to contractors and balances on hand. A physical stocktaking of paper is carried out annually and stocks in hands at 31 December, 1985 were valued at £1,272,411.

I have been informed, however, that the physical stocktaking carried out at 31 December 1985, disclosed large deficiencies in the stocks of certain types of paper which could not be reconciled and that the Gardaí had been asked to investigate the deficiences which I understand are of the order of £100,000.

Mr. McDonnell.—This paragraph which is the only one on this vote refers to the deficiencies in paper stocks held by the Stationery Office. The figure of £100,000 mentioned in the paragraph, is made up of a deficiency of £16,000 which showed up at the end of 1984 and further deficiencies of £84,000 which came to light in 1985. The problem continued for the first half of 1986 with more deficiencies totalling £37,000 being revealed. The matter was handed over to the Garda but I understand that their findings were inconclusive. The deficiencies occurred while the paper stocks were held in rented accommodation at the Dublin Docks, but since the transfer of the stocks to the Stationery Office’s new warehouse which took place in July 1986, no serious discrepancies have arisen, so far as I am aware.

Mr. Mahony.—The difficulties arose out of a warehousing shortage at Beggars Bush. At the beginning of the eigthies most of our paper supplies were being provided by the Clondalkin Paper Mills and when they started to get into difficulties we had to buy our paper from UK mills. Clondalkin Paper Mills were holding a lot of our paper stocks until we required them, so when we started to buy from the UK mills we needed to take the paper into stock ourselves. The Office of Public Works rented temporary accommodation for the Stationery Office in a system of major warehouses in the North Wall and the Stationery Office occupied those from the end of 1981 to the middle of 1986. These were very secure warehouses and the security arrangements which were adopted at the time were that the keys were retained by the management of the Dublin Warehousing Company and when paper stocks were required a supervisor and a number of men went to the warehouses, got the keys, removed whatever material they required, locked up and handed back the keys again. The Dublin Warehousing Company also provided night security. The losses which the annual stocktaking at the end of 1984 showed up were, as the Comptroller has said, of the order of £16,000. We would not have regarded those as particularly significant. The stocktaking at the end of 1985 showed up a loss which subsequently was measured at £88,000. The Garda were brought in immediately. They interviewed various staff members. They looked at our security arrangements. We continued to do regular spot checks and when we discovered that some material was still disappearing, we moved the entire stock to the new premises in Bishop Street and that was the end of it. The losses which showed up at the end of 1986 in the Bishop Street premises related to what had been taken when the material was at the North Wall. The Garda carried out what they regarded as extensive investigations into the disappearance of the paper but to date they have not been able to throw any light on it. They have not made anybody accountable for the crime.

Mr. Mahony.—The premises were deemed to be secure in 1982, 1983 and 1984. When the theft was noticed at the end of 1985 we asked the Dublin Warehousing Company to carry out certain security works which involved works to the roller shutters and the other doors on the stores. New locks were also put on.

Chairman.—Have you any lien on the Dublin Warehousing Company or is there any way you can be compensated for the disappearing stock?

Mr. Mahony.—There was no evidence that the stocks disappeared because of negligence on the part of the company and neither was there any evidence that would allow the Garda to identify individuals as being responsible for theft of the material.

Mr. Mahony.—This is referred to in the Stationery Office as heavy paper, that is, paper used subsequently for printing.

Mr. Mahony.—It was large sheets of paper which would be used in a printing house for printing purposes.

Chairman.—Was there a very small number of people who had access to the security of this building?

Mr. Mahony.—People on two fronts would have had access — officials of the Stationery Office who were moving material from the stores over a period of years, and officials from the warehousing company who had possession of the keys up to the end of 1985.

Chairman.—What would £100,000 worth of paper weigh? Are we talking about tonnes of paper.

Mr. Mahony.—If the paper disappeared over the whole of 1985, it could have been taken out in small amounts.

Chairman.—The likelihood is that it was driven out in a truck. Would that be a reasonable deduction?

Mr. Mahony.—The reports which the Garda submitted to us did not indicate how the crime was committed and they advanced no opinion as to how the crime was committed.

700.Deputy Flood.—Mr. Mahony said that they had entered into some new rented warehousing arrangements in 1981, that this extended from 1981 to 1986 and that during that time this discrepancy referred to in the report arose. Mr. Mahony explained also that they had to change the source of supply from Clondalkin Paper Mills to UK mills to supply their needs. What were the arrangements for the receipt of the paper from the UK mills?

Mr. Mahony.—There is a fairly sophisticated procedure for receipt of deliveries to the Stationery Office. First, there is an official contract, order forms and delivery dockets to match up with the supply. The supplies are checked in by the chief supervisor of stores in the Stationery Office and the items are counted bale by bale if it is coming in as baled paper. There is an official record made and this is entered into a number of registers. As it is issued the opposite occurs. There are issue notes and there are receipts signed where the items are delivered.

Deputy Flood.—Was the paper from the UK mills received into the warehouse in the Docks area?

Mr. Mahony.—It would have been received into the warehouse in the Docks area.

Deputy Flood.—Did personnel from the Stationery Office go down there and physically check each load in?

Deputy Flood.—In other words, you are satisfied that the material was received into the premises?

Mr. Mahony.—I could not give a personal guarantee that the material was so received in 1985, but on the basis of the arrangements which we had in train, there is no reason for me to believe that it was not so checked in. In answer to the Chairman’s earlier point what was involved was 30 to 40 tonnes of paper overall?

Chairman.—Thirty to 40 tonnes. One would want a big coat in which to take that out.

Mr. Mahony.—My understanding is that the Garda examined every aspect of the case in the period from the time they were called in in January 1986 up to the last report we got from them, which was last year. At that stage they indicated that nobody had been made accountable for the theft.

Deputy Flood.—In relation to the manner in which paper was stocked in Clondalkin Paper Mills, are you satisfied that there was no discrepancy in those stocks while that arrangement was in place?

Mr. Mahony.—The committee are going back to the late seventies and early eighties. I have not got that knowledge at my disposal.

Deputy Flood.—The arrangements for handling so much of this stock appear to be a little loose. In fairness to the people working with you, to allow so much stocks to be held in a warehouse that is not under the direct control of your staff has, possibly in hindsight, proven to be a mistake. It is unfortunate that that happened. We should be conscious of that in the future stocking of any major amounts of materials, supplies etc. in areas that are accessible to non-employees of your organisation.

Mr. Mahony.—One would have to accept, with hindsight, that it now seems to have been a mistake not to have the keys and the security arrangements handled by ourselves. What I am saying is that the operation seemed to work well from 1981 through to a time in 1985 when the material started to disappear. We immediately changed our arrangements and subsequent to that we moved the material in bulk to Bishop Street.

Mr. Mahony.—We are satisfied with the security arrangements in Bishop Street.

701.Deputy McGahon.—What I find extraordinary and what I am unable to accept is that virtually week after week in every vote we examine, the question of negligence and slackness in security arises. In the case of the Revenue vote, over £780,000 worth of fraud was perpetrated and despite eight people being charged, the Garda Síochána have been unable to come up with the real culprit. There was the break-in at the DPP with hundreds of files stolen and in the case of the Social Welfare vote, a significant fraud was perpetrated by a group of employees at the Werburgh Street Exchange. Now we are being told that the Garda are unable to locate 40 tonnes of large newsprint. Surely it must have been moved over a considerable period, it could not all have disappeared in one night.

Mr. Mahony.—That is our official opinion but once the Garda were brought in in January 1986, effectively the matter was in their hands from there on.

Deputy McGahon.—Therefore, forty tonnes of newsprint went undetected with no leads at all.

Mr. Mahony.—According to the correspondence we have received from the Garda there are no leads.

Deputy McGahon.—I fail to understand the lack of security in the public sector. Nobody in private business could countenance losses of that nature and I fail to understand, too, why security is not given greater priority within the public service. You say supplies were secured from the UK, was there no papermill in the North of Ireland from which supplies could have been secured?

Mr. Mahony.—When I say from the UK, the basis on which paper would have been acquired is that any reputable papermill known to the Stationery Office at that time would have been asked to tender for supplies. If there were papermills in the North of Ireland, they would have been asked to tender.

Deputy McGahon.—Are you now satisfied that security is complete and that this will not happen again?

Mr. Mahony.—The Bishop Street complex is a modern complex and, again, we are working on a computer based stores operation at the moment. We have round the clock security in the premises. Hopefully something like this will never happen again but if people deliberately set out to commit an offence, to actually take material, to steal, it can be very difficult to block all avenues that would be open to them to commit such an offence.

Deputy McGahon.—Nevertheless I must repeat that it is extraordinary the ease with which Government offices appear to be burgled and how quite significant sums of money are lost to the Exchequer, apparently without trade. The Gardaí seemed to run up against a blank wall in almost every case we examined.

702.Deputy Crotty.—In relation to the deficiency of between 35 and 40 tonnes, would it not be reasonable to expect that the Board of Works officer or the Stationery Office official in charge of the dispensing of material would notice such deficiencies? Would the same people be involved at all times? Between 35 and 40 tonnes are involved, nearly a couple of articulated truck loads of paper.

Deputy Crotty.—The paragraph quotes a figure of about £1.3 million for the end of December. I take it that that would have been the value of the stock on hands at that time.

Mr. Mahony.—That would have included items held in the Beggars Bush warehouses as well.

Deputy Crotty.—Therefore what is missing would account for an even bigger proportion. What was the value of the stock held in the warehousing at the docks?

Mr. Mahony.—That is the value of the total stock of paper held at the end of December 1985. The terms of square footage, you are talking about 25,000 square feet of warehousing in the North Wall occupied during the period from the middle of 1981 to July 1986. That is quite a substantial amount of warehousing.

Deputy Crotty.—It is but you would not require that amount of warehousing to hold the amount of paper you are talking about — substantially less than £1 million worth of paper. Paper is very expensive. I would say that you had excess warehousing.

Mr. Mahony.—I understand there may have been several hundred tonnes spread at any one time over the various warehouses and if the amounts disappearing at any one time were not large they could well go unnoticed. This is an aspect which I am sure the Garda took up with the various people involved. It is fair to say that the Garda had their suspicions as to who might have committed the crime but they did not have sufficient evidence to enable them to successfully prosecute in court.

Deputy Crotty.—Was it not possible to get at the other end, the receivers? There would not be that many printing works who would be open to receiving goods of that kind. I am sure the number could be narrowed down. It surprises me that the Garda have not come up with some solution to this problem because it is a narrow field and the number of people involved would be very small.

Mr. Mahony.—As I have said this is a matter that was in the hands of the Garda and they failed to solve the problem.

Deputy Crotty.—The warehousing people were responsible for night security, had we any lien on them?

Mr. Mahony.—No, not arising out of the terms of the contract for leasing the property and providing security.

Mr. Mahony.—It was part of the arrangements. We were paying roughly 4p per square foot per week plus VAT. That was part of the terms of the letting.

Mr. Mahony.—If you were to take approximately 25,000 square feet at 4p a square foot it would amount to £1,000 a week or £50,000 a year approximately, plus VAT. These warehouses formed part of a bigger complex of warehouses maintained by this company. Quite a number of other agencies in the city maintained stores in those warehouses and it was part of the overall security of this block of warehouses that there was security on our take.

Deputy Crotty.—Do you know if any deficiencies were found in the stocks of the other firms?

Deputy Crotty.—Would it not be something that you would expect to be discussed?

Mr. Mahony.—I have read through all the files that deal with this particular issue in the Stationery Office and that is not one of the issues that was tackled. I presume it is an issue that was considered by the Garda.

703.Deputy Dempsey.—In relation to the security aspect, I am curious to know whether we had insurance against theft of the goods and, if not, why not?

Mr. Mahony.—The State does not normally insure itself against loss in cases such as this. It carries its own insurance.

Mr. Mahony.—We were paying £50,000 for the rent of the accommodation which included an element of security.

Deputy Dempsey.—Do we have any comeback against the people who said they were providing security?

Mr Mahony.—We have no comeback because the Garda were not able to identify who was responsible for the loss. If the Garda had clearly identified either individuals or a company we may have had a claim.

Deputy Dempsey.—You were paying the firm from whom you rented the accommodation a certain amount for security. If everybody is agreed that 40 tonnes of paper is missing surely the people who were in charge of security should have some liability. It should not be the taxpayer who ends up having to pay for it.

Mr. Mahony.—I think any court would hold that where the keys of the warehouses were not under the control of the Dublin Warehousing Company at times when material was being removed by Stationery Office officials, we would have no case against them. Their defence would be that the material was moved at the time the Stationery Office people had the keys.

Deputy Dempsey.—In other words, we were paying a lot of money for no security at all. That is something that should be addressed at some stage. I am sure it is happening in other Departments too.

704.Chairman.—May I ask Mr. Mahony to establish this very clearly. Are you satisfied that the stationery concerned was delivered.

Mr. Mahony.—Chairman, you will have to understand that my own involvement in the Stationery Office commenced roughly at the beginning of November 1987. As I said, I have researched all the papers dealing with this incident. There is nothing on any of those files which would indicate that the material was not delivered in the eighties from the UK mills.

Chairman.—Can I put it to you this way? If the paper was delivered the security people deserve to be severely rapped but if it was not delivered the committee could take a different view. If the Gardaí had somebody in mind to prosecute surely they knew whether the paper was delivered. They must have some indication as to whether the theft occurred before or after the paper was delivered.

Mr. Mahony.—I think they would have leaned towards the second of those options — that it was delivered and that the theft occurred subsequently.

Chairman.—Are these security people still doing work for the Office of Public Works?

Mr. Mahony.—So far as I am aware we do not have any accommodation in the North Wall at the moment.

Mr. Mahony.—We did not employ security at the North Wall. It was part of the overall package negotiated with the Dublin Warehousing Company.

Chairman.—So it was not a security company; it was part of the warehousing security?

Chairman.—Have the Gardaí concluded their inquiries on this matter? Have they closed the file or is it still ongoing?

Mr. Mahony.—I doubt if they would close the file in the sense that they have not made somebody amenable for the crime. The last communication from them in 1987 has been more or less accepted by us as their final say in the matter.

705.Deputy McGahon.—Did any similar occurrence take place in previous years or is this a once off deficiency?

Deputy McGahon.—I want to state my concern at the ease with which frauds can be perpetrated. We have had a succession of Votes during which very large scale deficiencies were discussed and the Gardaí seem to have had very little success. I reiterate Deputy Crotty’s opinion that this is a particularly restricted field. I would have thought that 40 tonnes of paper could have been traced relatively easily. While I can understand last week’s difficulty involving cheques from the Revenue Commissioners, I fail to understand or accept that 40 tonnes of paper cannot be traced. I express disappointment with the efforts of the Gardaí in this case.

706.Chairman.—Was this file sent to the Director of Public Prosecutions or did the Gardaí not have sufficient evidence to do that?

Chairman.—I expect that the OPW will not be using these people in a further capacity.

Chairman.—I do not think we have anything to do but mark ourselves dissatisfied with this paragraph and move on. We will go on to the Votes for the Stationery Office for 1985 and 1986. Following on from what we have just been examining and going on to your Vote here, what tonnage of stationery would you purchase in a year and what would its value be?

Mr. Mahony.—I will give you a figure first for cost while I get a figure for tonnage. In 1985 the total value of paper bought would have been of the order of £2 million.

Chairman.—Why did you have £1.2 million worth on hand at the end of the year?

Mr. Mahony.—I just want to check my figures again. I will correct that figure of £2 million. £3.3 million is the figure.

Chairman.—So you had more than one-third of your stocks on hand at the end of the year. Is there some reason for that?

Mr. Mahony.—I understand that the volume of stocks which we would retain from year to year would be approximately six months capacity in hands at any one time.

Mr. Mahony.—Since the setting up of the Government Supplies Agency on 1 January 1988 we are obliged by the terms of a Government decision to review our entire approach to Government procurement and holding of stocks. That is one of the questions we are looking at at the moment. We have had discussions with our counterparts in the UK — the HMSO — and we may be making changes along the lines of changes that have been made in the HMSO whereby they do not any longer hold large stocks of paper. The mills from which they acquire paper hold the stocks for them.

Chairman.—May I suggest to you that you get some expert advice on it and let the committee have a note when you have got that advice.*

707.Deputy Dempsey.—Do the Stationery Office and the Government Publications Sale Office charge an economic price for their publications? Does it meet the full costs?

Mr. Mahony.—Perhaps if I could distinguish between a variety of publications. Certainly a large volume of the material we produce is sold at an economic cost including a mark-up for material that would be sold in the Government Publications Sales Office and through the postal trade section outlet in Bishop Street. In relation to certain publications like Iris Oifigiúil, to pick one, it would not be possible to recover our full outlay on it having regard to the very small subscriber list we have and the very large number of free issues which are made in respect of that production. There was a parliamentary question on that particular topic during the year which is being replied to by the Minister for Finance.

Deputy Dempsey.—What about the advertising rates charged for Iris Oifigiúil?

Mr. Mahony.—The rates were increased with effect from 1 January 1988. I think they were also increased on 1 January 1987. We have a policy of reviewing the rates each year and increasing them to whatever extent we think the market will bear.

708.Chairman.—We will note the Votes for 1985 and 1986. We will now deal with Vote 10, paragraph 21 of the 1985 Appropriation Accounts, Public Works and Buildings.

VOTE 10—PUBLIC WORKS AND BUILDINGS (1985)

Mr. Mahony further examined

Chairman.—Paragraph 21 of the Report of the Comptroller and Auditor General reads:—

Subhead D. — Purchase of Sites and Buildings.

Subhead F.I. — Maintenance and Supplies.

In 1979 the Commissioners of Public Works acquired for £70,000 the leasehold interest in No. 5 Kildare Street, Dublin, which then had three years to run. When seeking sanction for the expenditure the Commissioners informed the Department of Finance that the purchase was a necessary step towards achieving an unbroken series of premises adjoining the National Library. It was envisaged that the freehold interest in the premises would be acquired by the Commissioners and that it would provide permanent accommodation needed for the National Library. It was also envisaged that the premises could be utilised on an interim basis to satisfy requirements such as the relief of congestion in the Department of Industry and Commerce, also in Kildare Street.

In 1979 when the Commissioners took over the premises the cost of bringing the building up to standard was estimated at £26,000, approximately. However, the premises were not occupied at any time after they had taken possession and in 1982 when the lease expired the cost was estimated at £100,000, approximately. When the lease expired it was decided not to seek a renewal of it but to surrender the premises to the owner as it was considered at the time that the Commissioners would have a better prospect of acquiring the freehold interest in due course by not being a tenant of the building and the premises were handed back to the owner in July 1983; by that time the cost of putting the premises in reasonable condition was estimated at £250,000.

No security had been provided in the building until 1981 when it was discovered that malicious damage had been caused to the roof. This was repaired at a cost of £19,296 but, contrary to the terms of the lease, no other internal or external maintenance was carried out by the Office of Public Works and it appears that by May 1982 the Maintenance Division of the Office had not assumed responsibility for the building. Lack of maintenance had led to such deterioration that a claim for dilapidations amounting to £762,000, exclusive of fees, was made by the owner when the premises were handed back in July 1983. Dry rot, discovered in the building while the damage to the roof was being repaired, remained untreated up to the time of surrender of the property and formed part of the owner’s claim for dilapidations. This claim was settled prior to court hearing in July 1985 in the sum of £550,000 and, as part of the settlement, the owners agreed to sell the property to the Commissioners for the sum of £50,000. The owners’ costs amounting to £94,000 were also met by the Commissioners while the Commissioners’ costs in respect of professional fees amounted to £28,000.

The work of eradicating the dry not commenced in 1986 and the cost of this work and structural reinforcement of the shell of the building which had also been found to be necessary was estimated at £100,000 including fees.

A professional valuation in July 1985 indicated that the value of the building in its dilapidated state would have been £100,000 in July 1982 (which was stated to be, in effect, the value of the site) and £480,000 if restored to a lettable condition.

In 1985 legal proceedings were instituted against the Commissioners by the owners of an adjoining building on the grounds of alleged spread of dry rot to their property from the Commissioners’ premises.

I asked the Accounting Officer why the building was not occupied as intended following acquisition of the leasehold interest in 1979 and why appropriate provision was not made for the maintenance and security of the premises. I also inquired as to the estimated cost of reinstating the building to a usable condition, the plans for its use and when it will be ready for such use and I sought information as to the present position regarding the action instituted by the owners of the adjoining building.

Mr. McDonnell.—This is a fairly long paragraph which recites the sequence of events from 1979 to 1985 in connection with the leasing and the eventual purchase of No. 5 Kildare Street and which also involved the payment of compensation to the former landlord. There are a great many figures mentioned in the paragraph and I will not attempt to go over them again.

In essence what happened was that the OPW bought out the leasehold interest in the premises which had three years to run. They seem to have neglected the maintenance and security of the building and as a result got caught for compensation to the tune of £550,000 with costs, as well as having to incur considerably increased costs in repairs and renovations and being sued by the owners of the adjoining property.

Arising out of all that, I posed the series of questions which you see there at the end of the paragraph and the Accounting Officer has since told me that the building was not occupied as intended because potential occupants rejected it as being unsuitable in its then condition. He said the significant expenditure which would have been necessary to bring it up to an acceptable standard would not have been justified at the time in view of the planned redevelopment of the premises for the National Library — that was the idea originally. He also said the expenditure of any substantial sums on repairs and maintenance as required by the terms of the lease would have been difficult to justify and would have proved wasteful if in fact that development had gone ahead. He went on to say that special security arrangements were not thought to be necessary until the break-in occurred in 1981. The up-to-date figures as I see them for this project are that £70,000 was paid for the leasehold interest. In addition £550,000 was paid as compensation to the landlord. He was also paid £50,000 purchase price. There was £122,000 spent on legal and professional fees in connection with the compensation claim. Then there was £150,000 approximately for dry rot eradication and what is called stabilisation works. I understand that the estimated cost of renovation and adaptation works is £625,000. That comes to over £1.5 million and I understand that in addition to that there is the compensation claim by the owners of the adjoining premises. I believe that was heard last week. I do not know how one can evaluate, if you like, what the OPW will have got for the £1.5 million plus whatever the figure for last week’s compensation is. All I can say is that as stated at the end of the paragraph, there was valuation carried out in 1985 which retrospectively arrived at a figure for the value of the premises in 1982 if they were restored to a lettable condition. In 1985 the valuers said that the premises would have been worth £480,000 in 1982 in a lettable condition. It is a question of concern, Chairman, that the failure to secure the building and carry out what seemed to be comparatively minor rehabilitation, works means that we have run into a fairly substantial expense.

Mr. McDonnell.—As I said, £70,000 for the leasehold interest, £550,000 compensation to the landlord, £50,000 then to buy out the interest in the property, £122,000 legal and professional fees in connection with the compensation claim — that is the landlord’s compensation claim — £150,000 for dry rot eradication and stabilisation works and, I understand, £625,000 as the estimated cost of renovating the building. You have to add to that whatever costs will arise out of last week’s hearing of the case taken by the owners of the adjoining premises.

Mr. Mahony.—Yes. It is an out-of-court settlement at this stage and the Chief State Solicitor has advised me not to mention the figures involved as the matter will have to be mentioned in court on the 28th of this month.

Chairman.—That brings us to a grand total of £1.9 million, £2 million give or take. We spent £2 million on this building. The valuation put on it was £400,000 in a lettable condition. If I look over my shoulder I can see it through the window and I notice that it is not in a lettable condition. The suggestion was that, in fact, if it was not in a lettable condition the value might be only £100,000. What is the value of the building in its present condition?

Mr. Mahony.—The figures you have calculated include approximately £650,000 which is the cost of the current contract to fit it out as storage accommodation for the National Library. I imagine the building on completion and fitted out for use by the Library would be valued somewhere between £500,000 and £750,000.

Chairman.—The estimation here is that it is worth £480,000 if restored to lettable condition.

Mr. Mahony.—That is based on an earlier year’s assessment of the position.

Chairman.—We have spent £1.5 million for what reason? What have you got to say about this serious situation?

Mr. Mahony.—I accept that, Chairman. I have read, not just once but several times, all the files, all the reference sheets and replies in relation to this. I have spoken to the people who were involved in the negotiations in the seventies and with people who dealt with the property in the eighties to see if I could come to any conclusion before I came here today. This case went horribly wrong in so far as the Office of Public Works are concerned. I am not here to defend the situation that arose but I would hope to explain how it happened if the Chairman and the Committee are willing to hear me.

Mr. Mahony.—May I trace the general background. In the very early seventies the Department of Education were responsible for the National Library. At that time they were concerned about the future accommodation needs of the Library and they engaged a consultant to prepare a report for them. That report was then considered by an inter-departmental committee and one of the recommendations of the Committee was that the Commissioners should seek to acquire all the property from the Nassau Street corner up to and including No. 6 Kildare Street and that that entire accommodation plus the accommodation in the existing premises of the Library could deal with the existing and projected future needs of the Library. No. 4 was owned by the State at the time and we went after No. 5 which was held on lease at that stage by CIE. They had a lease which commenced in 1961 and which was to expire in 1982. We had protracted negotiations with CIE in the hope that we could take over their lease and that, by having our foot in the door, we could manage to acquire the property from the head landlord or, under the terms of future legislation, we could secure an extension of the lease, under the Landlord and Tenant Bill as it was then and which became an Act in 1980.

In the meantime in 1975 we secured Nos. 1, 2 and 3. At that stage we had Nos. 1 to 4 and we intensified our efforts to get No. 5. It was only with three years to run on the lease that we concluded our deal with CIE. There is no doubt that from reading the papers the decision to take the lease from CIE with three years to go was fraught with risk and danger. It was noted on the file that this was a risk but it was considered by the Board at the time as being an acceptable risk because they felt that if we lost the chance of getting No. 5 we would lose the opportunity, perhaps forever, of dealing with the National Library in the way we had intended. When we took over the lease it had three years to go and there was a question of making that space available to other Departments until we had decided on the future of the building or until we actually secured the fee simple from the owner. It was offered to three groups. It was offered to Industry and Commerce, Labour and the traffic court of the Department of Justice but none of those three bodies was willing to move in without substantial alterations or renovations. It was a three-year lease and time was running out on a daily basis. There was a reluctance to do any work in the building since, first, it was not going to be occupied by any of the agencies we offered it to and, secondly, if we secured the fee simple interest our proposal was actually to gut the building or, perhaps, take it down altogether and rebuild as part of a wider scheme. Effectively, let us say the management of the property portfolio at the time fell between two stools. Nothing was done with the building up to early 1981 when it was discovered that there had been a break-in at the premises and that lead had been stripped from the roof and cisterns and other items had been taken from inside which had led to the building being saturated with water. At that stage remedial works were carried out to the roof and some other minor repairs were done inside. We also lodged a malicious injuries claim and we were paid £13,000 on foot of that.

It was roughly September 1981 by the time that work was completed and the lease at that stage, had nine to ten months to run. Again, nothing was done because at that stage people were afraid to commit expenditure on a building where we might not get an extension of the lease or where we might not be in a position to buy.

Once we became lease holders of the premises we intensified our efforts with the owners of the property to seek to acquire it. The owner at that stage was an elderly lady, resident in England, and, unfortunately, she had become ill and it was very difficult to establish contact with her and make progress with a view to buying out her interest. At the time we took the lease from CIE we were satisfied that we would have concluded such a deal with her because in a similar case — a property at No. 1A in Leinster Lane behind the premises in question — she had been the fee simple interest holder and we had bought it out after acquiring the lease hold. She subsequently transferred the dealings with the property to one of her family and her family sold it to a property company. That property company subsequently transferred it to another property company in which the family maintained shares. This is essentially where it went wrong for us in that our negotiations with the second property company did not bear fruit because in the sale from one company to the next it was sold, we understood, for a nominal price. The eventual owners were then not prepared to sell it on to us and show a huge capital gain. Instead they offered us a ten year lease which was not acceptable to us bearing in mind our long term plans for the building. Effectively, falling between all of those stools nothing was done. The lease ran out in the middle of 1982 and eventually we had to quit the premises in 1983. The premises were then back in the possession of the owners for a period of two years, 1983 to mid-1985 during which time they served us with a dilapidations claim which, as was stated, was settled out of court at £550,000, plus costs. Part of the deal was that the property would be sold to us at £50,000.

709.Chairman.—The “neighbour” who is receiving compensation, is it the College of Physicians?

Mr. Mahony.—The Royal College of Physicians in Ireland. During the period that we were out of the property — it arose from the fact that the building was not maintained during the three years of our lease — dry rot spread from No. 5 to No. 6 and they got an injunction against the Commissioners. The court required us to undertake certain works. Those works have been mentioned and were carried out. Subsequently there were various toings and froings between our legal people and an out-of-court settlement was reached in the past week.

Chairman.—For all the State got for this, we might as well have shovelled £1.5 million over O’Connell Bridge. It is literally money that is gone, dead, wasted and we got no value for it. Unfortunately, it is one of a series of such developments, probably the worst so far, that has come through the Office of Public Works. We had in the recent past the prison officer houses costing £78,000 each, plus site costs of probably £3,000 or £4,000 more. They were three-bedroomed houses. We had a situation in Valentia Island where a communications development was given without tender to a local firm for £80,000 and ended up costing £900,000. The committee, as a result of what we had seen before, sent to your Department a special report, which was presented to the Dáil before the recess, compiled by ESB International for the committee on how your office should in future control its capital expenditure. May the committee take it that that report is now being implemented by your Department?

Mr. Mahony.—I have the report you mention. I have a request from your committee for my observations on the report and asking when we will comply with its recommendations. That is being looked at by me and the other Commissioners at the moment. I hope to respond to you fairly quickly on it.

Chairman.—May we take it that the controls are in place now, half way through 1988?

Mr. Mahony.—Quite a number of the cases you referred to arose before Department of Finance Circular 1/83 which dealt with how capital programmes and projects should be managed in the future. Those projects predated a look at project-working in the office by the Committee on Public Expenditure. Arising out of those documents, and that investigation, we introduced certain changes into project management in the office. ESB International reviewed some of those procedures and have made recommendations as to how they might be further strengthened.

Chairman.—Have there been any personnel changes as a result of this wastage of public money?

Mr. Mahony.—In the case we have just discussed — in which people were involved from the early seventies — a number of outstanding matters remain to be resolved. A number of the people involved have since retired and some are deceased.

Chairman.—May I put it somewhat more directly? We are living in very difficult times when all of us, in our capacity as Members of the Dáil, must justify health cuts and various other economies of expenditure. Therefore, this sort of scandal gives rise to great public concern. We have sent you a report — as Chairman of the Office of Public Works which we have asked you to implement. If any further matters of this type arise from the 1988 accounts then it is my opinion that this committee will have to begin seeking changes of personnel. This practice simply cannot continue. Every single year not just one but two such matters arise. This particular one is probably the most serious of them. Can we take it that, when we get to the 1988 accounts, we will not encounter any more?

Mr. Mahony.—I hope that will be the position. Previously I was involved in quite a number of changes in my area in respect of projects. Some of the changes were considered by the ESB group who examined the management of projects in our office. I have plans to reorganise our office even more in the hope that such episodes will not recurduring my term of office.

Chairman.—Mr. Mahony, you are the new Chairman of the OPW and I wish you well in your task. In these times this committee take a different view of things. We are noting anything; we are not passing over anything. We expect our views to be taken into account and that these loopholes will be tightened up. The 1987 accounts will be coming up for our consideration shortly. In respect of the 1988 accounts you will find that the committee will take a very strong view if this or anything like it recurs. It has to be brought under control. This type of weakness in the system is cropping up far too often.

710.Deputy Crotty.—Did the Office of Public Works have a property management team during that period, or do they have such a team now?

Mr. Mahony.—Yes, there are and there have been for a number of years accommodation and property management divisions in the Office.

Deputy Crotty.—Is this division run on commercial lines? I could not imagine this type of thing happening in the private sector because the relevant company would be out of business. They could not afford to make these types of decisions and/or mistakes.

Mr. Mahony.—As I said I could not defend what happened here. It was a case that went horribly wrong. One of the reasons it occurred is that there was a reluctance on the part of the officials to spend money on the property. There was a fear that we would not get an extension of the lease or that we would not be able to buy out the property. Had that happened then I would have been here today perhaps answering questions as to why we did spend money on a property which we subsequently demolished. That fear gave rise to some of the difficulty.

Deputy Crotty.—It is not the right of a leaseholder to renew a lease? Is that not the normal practice; that the rent might be increased but they would have the right to renew the lease?

Mr. Mahony.—No. We were taking over CIE’s interest in the lease which had three years to run to expiry. We were advised that we did not have a right to renewal of that lease. We had hoped that the legislation passed in 1980 would have afforded us that right but that did not prove to be the case.

Deputy Crotty.—In other words, what it boils down to is that you gave CIE £70,000 for nothing.

Deputy Crotty.—If you had not a right of renewal there was no point in buying, was there?

Deputy Crotty.—At that stage you would be going in on the ground floor in competition with other interested parties; is that not so?

Mr. Mahony.—We had successfully concluded negotiations with that same owner in respect of a property at the rear of No. 5.

Deputy Crotty.—But you had no guarantees about this property; is that not the case?

Mr. Mahony.—I accept that. The papers show quite clearly that there was a risk involved, that we took a calculated risk which did not work out in our favour.

Deputy Crotty.—What was the annual rental cost of the building at the stage at which you took it over from CIE?

Mr. Mahony.—My understanding is that they had occupied it as a clearing house during the seventies, up to the time that we took it over from them.

Deputy Crotty.—Would it be normal practice that a building would be left lying and not be inspected? How did it happen that a building could be vandalised and the fabric deteriorate, occasioning damage to the tune of nearly £1 million to the adjoining buildings without the Office of Public Works being aware of that fact?

Mr. Mahony.—From the time we took it over in 1979, up to the middle of 1981, the property remained under the aegis of the property division as opposed to other property handed over to our maintenance division. The reason it was not so handed over was that the property division personnel were not quite sure where they stood vis-à-vis the property. In 1981 when the break-in was discovered we attempted to deal with that. We arranged security cover on the building for a period thereafter almost to the time we handed it back to the property owners. What I am saying is that this was a serious error of omission that nothing was done while people waited to see how the situation would unfold or what they would do with it: for example, would they be successful in extending the lease; would they be successful in extending the lease; would they be successful in buying it? Had we secured the outright purchase of the building, the plan was either to gut it or to take it down completely and then rebuild as part of wider accommodation. It was within that general framework that nothing was done.

711.Deputy Crotty.—In this period nobody from the Office of Public Works even inspected that building; it was just abandoned totally?

Mr. Mahony.—The relevant papers would seem to indicate that it was not regularly inspected or perhaps not inspected at all.

Deputy Crotty.—Obviously it was not inspected at all. Is that normal procedure? A normal property owner would not treat their property, whether owned or rented in that fashion.

Mr. Mahony.—I take the point the Deputy is making. But I am saying that this was an exceptional property. There are definite procedures laid down in the Office for dealing with property once it has been taken onto our portfolio. In the normal case when we would take possession of such accommodation a scheme of work would be designed and executed by one of the projects branches. Once the people would be in occupation it would then form part of the portfolio of the maintenance division. There are quite clear, agreed, specific rules and that happens in each and every case. I believe it did not happen in this case because nobody was sure where they were going or what was the position vis-à-vis the property. It was not handed over for regular maintenance; that was the unfortunate omission.

Deputy Crotty.—Those are procedures, demarcation lines or whatever. But would it not be normal to expect that somebody would inspect the building; it would not be an extraordinary practice for some of your personnel to inspect the building?

Mr. Mahony.—There is evidence of certain inspections carried out, certainly in the seventies. At the time it was taken over in 1979, it may have been inspected or examined. I would have to refer to details of the brief to verify that. Your general question is that nothing was done with the building. It was not maintained from 1979 up to 1982 during the time we had a leasehold interest in it.

Deputy Crotty.—It is quite obvious that the vandalisation took place and was not attended to for quite a considerable time when you take into account the damage that spread to the adjoining buildings. There is no doubt that it was not inspected. Arrangements should be made to ensure that this cannot happen again. I have a couple of short questions in relation to the settlement made with the people who owned the buildings. In one case the award made was £550,000. Is that right?

Deputy Crotty.—To the owners of the building and we are told here today that the value of the house brought up into good repair would be £480,000. How can that be reconciled? An award of £550,000 was made to put the house into good repair and the value of the house in repair plus site, plus the whole lot, is only £480,000.

Mr. Mahony.—You have to bear in mind that the owners were entitled to interest at 11 per cent on whatever the net damages were. That would bring it up to the higher figure.

Deputy Crotty.—It would appear that the State were ripe for picking in this case because when the State made a malicious injuries claim they got £13,000 but in the other cases awards were made of £550,000 and £250,000.

Mr. Mahony.—Yes, Let me say in relation to the value of that settlement that——

Mr. Mahony.—The commissioners made an evaluation before the case went to court and estimated the minimum settlement possible at £505,000. This is based on the capital value of the property, if maintained, at £480,000 less its value, as surrendered, at £100,000. This gives a damage figure of £380,000 and the owners would be entitled to interest at 11 per cent from July 1982. That comes to £505,000. That represented the minimum settlement. We also did a bill of variations to calculate the cost of restoration which was at that stage put at £402,000. You had to add interest onto that and that gave you a new figure of £535,000. Effectively the settlement sum was within those figures and there would have been nothing to be gained in going to court and incurring further substantial legal costs.

Deputy Crotty.—Why was a settlement not made available much earlier? If it was going to accrue interest at 11 per cent surely it was in the interests of the State to settle and cut their losses.

Mr. Mahony.—It was in August 1983 that the solicitors for the property owners put in their dilapidations claim and went through the procedure of getting a summons issued against the Commissioners. It is the law’s delay at that stage by the time you get a statement of claim. In fact, the original statement of claim from the property company amounted to over £1 million and that was subsequently settled at £550,000.

Deputy Crotty.—Could we get some explanation as to how the owners’ costs were for £94,000 and the Commissioners’ costs amounted to £28,000?

Mr. Mahony.—Much of the Commissioners’ cost would relate purely to counsel’s opinion. We would be using our own quantity surveyors and architects, and the Chief State Solicitor would be giving advice. That would not form part of the £28,000, whereas in the case of the property company they would be charging you not just for their legal costs but any other incidental costs which arose, costs involving solicitors, architects, quantity surveyors and property valuers. That is why the figures are different.

Deputy Crotty.—I am sure they will be hoping that some other buildings will come up like that in the near future. It was certainly a windfall for all concerned.

712.Deputy Dempsey.—I have a few questions to ask in relation to this. I am curious as to why the lease was purchased from CIE when it had only three years to run and they were not going to give the OPW a right of renewal of that lease. It appears that most of the problems arose as a result of that decision because then nobody knew what was going to happen afterwards, whether the building was going to be developed, whether we were going to get a further lease on it or whatever. Why buy out the lease, which was costing CIE £1,400, for £70,000 three years before it was due to expire while it gave us no rights of renewal? Why was that decision taken?

Mr. Mahony.—You are talking about the late seventies. It was the opinion at the time that there was a possibility that we would have a right of renewal under the Landlord and Tenant Bill which was being debated at the time, but that did not bear fruit. We had dealings with the owner of the property in relation to another property and we had successfully concluded those, so we were quite happy that we would similarly acquire the full title to No. 5 and that this was one way of getting your foot in the door, by being the leaseholders for the period of three years.

Deputy Dempsey.—So you are saying that the decision was taken on the basis of two opinions neither of which happened to come to fruition at a later stage. Was any prior inspection done on that building before the Office of Public Works decided to buy out the lease?

Mr. Mahony.—Yes, the building was looked at a number of times between our first interest in the property in the early seventies and the time when we took the lease in 1979.

Deputy Dempsey.—Can you tell me why the Office of Public Works did not comply with the terms of the lease in relation to internal and external maintenance for the three years they had the building?

Mr. Mahony.—Again the reason we did not comply with the terms of the lease was that we had this expectation that we would buy out the interest in the property and if we had done that our plan was to gut it or take it down altogether. Therefore the opinion was that any money we would spend maintaining it would have been wasted.

Deputy Dempsey.—You still signed on the dotted line in relation to a lease committing yourselves to maintaining the building over three years.

Mr. Mahony.—I accept that and that is in effect why the dilapidations claim arose and why they were able to claim successfully.

713.Deputy McGahon.—I am waiting for the day when an accounting officer will come in and give us an updated version of the fairy tales of Ireland. I think this is an unbelievable farce. I would describe it as a national farce. The involvement of the Office of Public Works in any project that I have sat on here on my term of five and a half years makes me want to weep. These are so called experts and I would suggest that a group of blacksmiths would not have arrived at this monumental cockup. This story is so bizarre that on its own without the litany of other incidents which the Chairman outlined it supports my belief that this stratum of bureaucracy should be wound up and the people put out to grass. Were personnel demoted, transferred, or keelhauled as a result of the huge cost to the Exchequer.

Mr. Mahony.—No, not that I am aware of. Disciplinary action was not taken against any individual officer.

Deputy McGahon.—So you are telling us this unbelievable story, which cost the Irish Exchequer £1.5 million. You or your Department can come in here, shrug your shoulders, express regret and say that there is no real accountability, that nobody has been held culpable for this tragic error?

Mr. Mahony.—I am not shrugging my shoulders or just blandly saying I regret the event. It is a source of great concern to myself and everybody else in the office that it has happened. Quite obviously, every step is being taken to ensure that something like this does not happen again.

Deputy McGahon.—Would you accept that it would be valid to question the competence of the personnel in the property division?

Mr. Mahony.—At this point in time, I am not looking into that aspect. What I tried to indicate in my replies to the questions is that initial decision to take it with a three years lease to run was fraught with danger and as it turned out, it was the wrong decision to have taken at the time. That is — with hindsight — the way it turned out. Once that decision had been taken and we had our leg in the door, we failed then to acquire either a substantial extension of the lease or the property and everything else leads on from there.

Deputy McGahon.—Just dwelling on the competence of the personnel within the property section, are they recruited from national auctioneers around the city or are they just young people who go into the public service? Do they have any commercial experience?

Mr. Mahony.—There are qualified valuers in the office, people who are experts in valuation of accommodation. The civil servants who make up the administrative staff of the various divisions that deal with our work are people with long-term administrative experience in the office who hold down work not just in relation to property acquisition and property leasing but property management for construction works.

Deputy McGahon.—But how would they and your legal advisers have failed to see or anticipate the question of the dilapidation claim?

Mr. Mahony.—What I suggested was that they were unwilling to spend money because if we had succeeded in acquiring the fee simple interest in the property, questions would have been asked then as to why we had to spend a lot of money in maintaining a property which we had subsequently demolished.

Deputy McGahon.—Was it not strange or suspicious to you that CIE had a prime city centre property for 20 years and had not utilised it for office development and had been using it for what could be described as a dump.

Mr. Mahony.—I understand — and this is not clear from files — from other sources that it was described as a clearing house.

Deputy McGahon.—A clearing house? Surely that was a great under-utilisation of a prestige office in Kildare Street? Would that not have made the personnel in the Office of Public Works suspicious that CIE had not utilised it? Could it not have been anticipated that the huge outlay was possibly the reason that they were so ready to give it to you for what would normally be a rather small sum, £70,000? I would have thought also that the buying of a lease, even with just three years to run would have been in itself an option to treat again. It does surprise me that your lease did not have that option.

Mr. Mahony.—Taking your two points, the first point is that as far as I am concerned, there is nothing wrong with CIE’s bona fides in this particular instance. They had a 21 year lease from 1961 to 1982 and we approached them as early as 1973 with a view to acquiring their interest in that lease. They were unwilling to quit the property up to and including 1978 when we were eventually successful in negotiating with them. It was at that stage that they were reviewing their accommodation requirements in the city; this property was now surplus to their requirements and they were at that stage willing to deal with us. There was nothing sinister in CIE walking away from it. If we had got into the property as early as 1974, I would not be trying to answer questions on the events that subsequently occurred.

Deputy McGahon.—I would not give the Office of Public Works my last cow to sell at Ballybay Fair. This story is unacceptable and certainly the loss of £1.5 million is only the culmination of a long series of expenditure overruns and bad investments that your office have been involved in while I have been on this committee.

Mr. Mahony.—Could I make a general response to that, Chairman. With reference to the committee’s letter to accounting officers, inviting observations on the report of the workings of the PAC and the Comptroller and Auditor General, while I regard this as a matter for Government in the first instance, on a personal basis I would be heartened that at some stage in the future not just the negative aspects of our management of the office would be considered. While I accept that the references for 1985 and 1986 are negative in the extreme, nevertheless, there is a large body of pluses somewhere else. It would be worthwhile to take those into account to some way offset the negative aspects that the committee review from year to year.

714.Chairman.—That is a fair point and hopefully if the way the committee want to evolve their work gets off the ground — instead of just looking for faults, we will look at cross-sections of your Department. By way of contrast, it might be no harm if at some stage we did look at some of your other developments because many in which you are involved are certainly very worthy and have added to the facilities available in the State. Unfortunately, today, we are examining spending on this particular development.

715.Deputy Flood.—First of all, I want to compliment the Accounting Officer for the very clear exposition of the circumstances leading up to the situation we are now discussing. You gave a lot of detailed background information as well, supported by the Comptroller and Auditor General. That has helped us to focus on this very serious problem which first began to develop back in the seventies. Maybe I could begin where I would normally end, by asking you, as a new Chairman, if you are aware of or if you have investigated the portfolio of the property division to see if there are any time bombs such as this ticking away that will explode some way down the road. First of all, have you investigated them and, if so what have you discovered?

Mr. Mahony.—Yes, there are procedures which have been in operation for a number of years whereby there is a quarterly review of the accommodation position submitted for the Board’s information. I have details with me in relation to properties in the State which are not occupied at the moment, both owned and rented buildings, and what we are doing about those. I had that in connection with a subsequent reference — the next reference deals with property in Cork — a site at O’Sullivan’s Quay. You can take it that there are measures and procedures in existence in the Office to highlight any case that might go wrong or to prevent something from going wrong in the future.

Deputy Flood.—In relation to the compensation claim to the landlord which was settled at £550,000 plus, which was taken in conjunction with the disposal of the property to the Commissioners for £50,000 you referred to the fact that this property was held by an owner in the UK, then the administration of it was passed to a member of the family, and it found its way into one property company and then into another. In giving us that information you suggested that the second development company acquired it for a nominal sum and that it was not proposed to dispose of it to the Commissioners because of concern about Capital Gains Tax.

Mr. Mahony.—It is not as clearcut as that. In reviewing the papers, the first part of it is quite clear up to the transfer from one property company to the other. There is an inference on the papers that it passed from one company to the other for a nominal sum and that the second company was not prepared to sell it to the Board because of the difficulties which that would create. Not anywhere on the file are the words “capital gains tax” mentioned. I am not clear as to exactly what I can say at this meeting. I would not want to draw the wrath of the property companies on me.

Deputy Flood.—In relation to the settlement that was arrived at, whereby the Commissioners for £550,000 plus and the payment of the £550,000 would acquire the property, are you competent to say that arising out of that settlement the State stood to lose substantially in terms of capital gains?

Mr. McDonnell.—I would have thought that there is a tax implication in getting £600,000, the way it was got, but I could not give a categorical answer on that.

Chairman.—The tax liability would not arise on a court settlement but it would arise on the capital gain from the sale of a building, is that right?

717.Deputy Flood.—The point is that the Office of Public Works contributed to effectively taking tax from the State, tax that the State would legitimately expect to achieve arising out of the sale of this property. The property was disposed of, presumably in the interest of the owners of the developing company. They wanted to sell the building but at the least cost to themselves tax wise, and in doing that the State subscribed to what I consider to be a kind of tax evasion. That should not have happened and there was a case to be made for a better examination of what was going on. There was also a case to be made for the State, if necessary, to bring the building into proper use so that the developer would be forced to hold on to the building, or if he wished to dispose of it, would have to dispose of it in a way in which the tax would accrue to the State in full. The State should not participate in assisting developing companies to legitimately, unfortunately, cut the tax take to which the State would be entitled. That point should be noted.

Mr. Mahony.—The only comment I would make on that is that I do not think that that I said at any stage that that is what happened. I would not like either of the companies involved to attribute to me the claim that that was the reason they did not conclude the sale with us. I am saying there is an inference on the papers that they were unwilling to do a certain thing because it had certain implications. Beyond that it is not within my competence to judge. Once we were out of the building and once the question of dilapidations arose, obviously, any court settlement would not be subject to taxes.

Deputy Flood.—The final point to which I would draw attention, is that the claim was settled out of court.

Mr. Mahony.—Had it been settled in court, it would have been the same result.

Deputy Flood.—My point is that we should never have got that far, that perhaps we should have gone ahead, acting as part of the State machine and thus avoided the situation where people could avoid paying their proper share of tax, which in itself might have helped to pull back the substatial loss that the State has incurred on this project. Is Mr. Mahony saying to us now that he has investigated the property portfolio of the Office of Public Works, and that he is going to aggressively move to deal with any situation that is ticking away there and that he is going to ensure, in so far as possible, that there will not be a recurrence?

718.Deputy Crotty.—Looking at the figure, it occurred to me that the largest expense occurred because adjoining buildings deteriorated. A direct cost of £1,125,000 was incurred as a result of this, as well as the building itself deteriorating, but the Accounting Officer informed us that they were going to gut that anyway. This building was taken over in 1979, and the lease came up in 1982. It appears that the building was not inspected during that period due to procedures in the Commissioners' Office, and certain steps had not been taken. What are the views of the Department of Finance on these procedures, and as a result of this dramatic loss of £1,120,000 due to these procedures, have they commented on this or taken any action to see that State expenditure is protected?

719.Chairman.—We have Mr. Gabriel Noonan, Assistant Secretary of the Department of Finance here. I intended to call him in just before we wound up this examination, so perhaps Mr. Noonan while answering Deputy Crotty's question might give us his general observations on this situation.

Mr. Gabriel Noonan (Department of Finance).—The Department of Finance view by way of a general observation, is that this was an incident which is to be regretted. The Accounting Officer has explained to the Committee in some considerable detail how it came about. In summary, what appears to us to have happened, is that the conditions of the lease governing maintenance were not observed, based on a calculated risk that the building could be acquired in 1982 which went wrong. The point has been made that the failure to maintain the building was a serious error of omission and one which we have had to pay dearly for. The odds seem — doubtless with the benefit of hindsight — to have been heavily stacked against taking that particular risk. In response to Deputy Crotty's question, the Department of Finance's view is that the Office of Public Works are responsible for the management of their property portfolio; we have to rely on them to do so to the best of their ability and we are reassured by the Accounting Officer's undertaking that he will be working wholeheartedly to try to ensure that the Office is run in such a way that a loss of this nature will not recur. A second point is that the Department of Finance, like the Committee themselves, did not become aware of what actually transpired here until after the event, and what we were faced with then was a damage limitation exercise. Very little discretion was available to the Department of Finance at the stage when it came to us. Indeed, I do not think we had any discretion about allowing these sums and agreeing to have them charged against the Vote because of the court decisions. Finance sanction for the charging of these payments to the Vote does not in any way imply that we condone or approve of what actually happened.

720.Deputy Crotty.—I do not think my question has been answered. I asked a direct question. I might add that the Department of Finance have direct responsibility for the Board of Works. They are not just watchdogs; the Board of Works are under their aegis. The problems with the lease did not cause the major expenditure here. The major expenditure, which amounted to over £1.12 million, resulted from the fact that this building was not inspected. Nobody even turned a key for a number of years. What action have the Department taken to ensure that this will not happen again and that the procedures in the Office of Public Works are changed to ensure that it will not happen again?

Mr. Noonan.—In terms of procedures, one has to look at this under two headings. First of all, there is the heading of new works and the procedures which we can prescribe and identify, particularly for new works. This we have done on many occasions, the latest being Finance Circular 1/83. In the case of the building across the road, this was a once-off situation. You cannot prescribe detailed rules to cover all the various types of cases that are going to arise in the on-going management of a property portfolio. In such instances the Department of Finance must take the line that there is a responsibility on the management of the various Departments concerned to manage their own institutions or organisations in a reasonably competent way.

Deputy Crotty.—That is the point. Have you taken this matter up to ensure that they are managed and that this will not happen again?

Mr. Noonan.—The management of the Office of Public Works is not the function of the Department of Finance, it is the function of the Office of the Commissioners of Public Works.

Mr. Noonan.—In that sense I think the Office of Public Works are accountable not so much to the Department of Finance for the actual moneys advanced to them as to the Dáil itself.

Chairman.—This is a very serious situation and I call on Deputy Desmond before we wind up.

721.Deputy Desmond.—Was this matter brought to the attention of the Minister for Finance?

Mr. Noonan.—Not by way of any specific submission. Of course, he would have been aware of it from the various press comments and so on.

Chairman.—Have there been press comments about this £2 million expenditure?

Mr. Noonan.—There were certainly, press comments when the report of the Comptroller and Auditor General on the 1985 Appropriation Accounts was published.

Deputy Desmond.—Would you agree that if it was not brought to the attention of the Minister for Finance it would have been difficult for him to bring it to the attention of the Government?

Mr. Noonan.—I would not see any problem with the Minister for Finance bringing it to the attention of the Government.

Deputy Desmond.—I will leave it at that as it is self-evident. At the risk of being repetitious — my apologies for being late, I was at another meeting — could we have a comment on the current condition of the building? What is the state of the building now?

Mr. Mahony.—There is a contract under way in the building at the moment to make it suitable for the National Library to house various records. It is expected that the contract will be completed about the middle of next year and that the building will be fully occupied before the end of next year.

Mr. Mahony.—It is included in the figures which the Chairman outlined earlier.

722.Deputy McGahon.—Because of the huge loss of public funds in this case, should the Chairman of the Office of Public Works not have made a direct submission to the Minister?

Deputy McGahon.—I know it was not you, Mr. Mahony, as you were only appointed recently.

Mr. Mahony.—The decision to take the lease from CIE with three years to run would have been taken even before the term of office of the last accounting officer commenced. You are going right back.

Deputy McGahon.—Yes, but nevertheless the representative of the Department of Finance has sat on the fence, understandably, and is not prepared to criticise another Department. He was asked a question Deputy Desmond who inquired if the Minister was made aware of this particular case and Mr. Noonan replied not specifically. I am asking should it not have been the function of the then Chairman of the Office of Public Works, because of the huge loss involved, to have made a direct submission to the Minister acquainting him with the relevant facts?

Mr. Mahony.—To finish off my reply to the Deputy’s earlier question, the previous accounting officer took up duty in 1982 at a time when the lease on this building had already run out or was about to run out.

723.Chairman.—This case is unique and it is certainly of great concern to the committee. I propose to the committee that we adjourn the proceedings, that we consider this matter in the morning and that we reassemble here in the morning at 11 a.m. Is the committee in agreement with that?

724.Deputy Desmond.—Before doing so we should thank Mr. Mahony for being entirely open with the committee. I would also strongly endorse your views that what has happened is not the generality as regards the tens of millions of pounds spent by the OPW in entirely appropriate circumstances.

725.Deputy Crotty.—I would like to be associated with those remarks. Certainly the accounting officer has been most forthcoming and patient but he would have to agree that this is a very serious matter and deserves a lot of consideration.

726.Chairman.—You have come forward with information, Mr. Mahony, which has been very helpful. Some time in the future we might go and visit some of your installations which are a credit to this State. I now propose to adjourn these proceedings, to assemble at No. 5 Kildare Street to inspect the building at 10.30 a.m. tomorrow, Thursday, 21 July 1988, and to call this committee back into session tomorrow morning at 11 a.m. Is that agreed? Agreed.

VOTE 10—PUBLIC WORKS AND BUILDINGS (1985)—(Resumed).

Mr. John F. Mahony, (Chairman, Office of Public Works) called and further examined.

727.Chairman.—The Committee of Public Accounts is now resuming the adjourned meeting of yesterday afternoon. Following our meeting half an hour ago in the building at 5 Kildare Street I understand Deputy Crotty has a question.

728.Deputy Crotty.—It relates to the costs which have been generated as a result of the problems at No. 5 Kildare Street. Could the accounting officer give us a breakdown of the costs and where they went, both for the original claim for the building, No. 4, and also for the College of Physicians? I believe the costs are something in the region of £350,000. Could we have a breakdown as to who received this money? It seems extraordinary to me that that much cost is involved, nearly the value of the building as valued when put back in good order.

Mr. Mahony.—The details I have with me are very much the figures the Chairman detailed yesterday, that is £70,000 for the leasehold interest we took in 1979.

Deputy Crotty.—No. The legal costs and consultancy costs, the fees in other words. There was in excess of £350,000 generated in fees.

Mr. Mahony.—There was the dilapidations claim which was settled out of court at £550,000, plus a purchase price of £50,000. The legal fees and the costs which arose on that were £133,000.

Mr. Mahony.—They would have been paid to the property company with whom we settled the dilapidations claim. They would then have been passed on presumably to the legal advisors, senior counsel, the valuers and the quantity surveyors they would have employed to process the claim for them. In addition there were costs paid by the commissioners. I will break down that £133,000. A sum of £1,353 was paid to a valuer; £27,139 was paid to the quantity surveyor and £104,800 was the plaintiff’s taxed legal fees and costs. So we are talking about £28,500 in fees incurred by the commissioners on their own account and £104,800 on the plaintiff’s claim.

Mr. Mahony.—As I indicated yesterday, I do not have the full details at my disposal yet in regard to the latest claim. I have been informed that there has been an out-of-court settlement and that the all-in figure, including costs, is of the order of £400,000. That includes the settlement sum plus the costs that arose on that. I indicated yesterday that the Chief State Solicitor advised me not to give details of the settlement until it is mentioned in court on the 28th.

Deputy Crotty.—Could we get a note on the general breakdown of costs on that when they are available?

729.Deputy Naughten.—My apologies for being unable to be here yesterday. I was at another meeting. I do not intend to dwell very long on this because I understand you covered this matter adequately yesterday. It is an appalling fiasco to say that a building which the State rented at £70,000 has eventually led to costing the State £2 million. The committee should have a special report prepared and submitted to the Dail on this because how do we know but that there are other buildings like that around. We do not know but that in two or three years time something else like this will surface. It is such an appalling mess that it warrants a special report for the Dáil.

730.Chairman.—We went over this yesterday and we saw the building for ourselves this morning. It is very clear that there is not now and will not be at any time in the future £2 million worth of property in the shell we saw. It is very clear that there was a major misspending of public funds, probably of the order of £1.5 million. It seems from what we saw this morning that the ultimate costs might exceed £2 million. I do not intend to go over what went through yesterday except to say that the strongest step we can take, of the five steps we leave ourselves for guidelines, is that this should be marked to be a subject of a special report to the Dáil. I propose that we so mark this particular paragraph and pass on. Paragraph 22 of the Comptroller and Auditor General reads:—

A site at Sullivan’s Quay in Cork was purchased in 1976/77 for the sum of £356,755 with the intention of erecting a central office building to accommodate staff from a number of Government Departments who were then occupying leased buildings at various locations throughout the city. A contract for the construction of the new building was placed in 1981 and completed in 1984. It was noted that, in order to provide urgently needed accommodation for staff who would ultimately occupy the new building, three floors of an office block at South Mall were leased for thirty-five years from August 1977 at a yearly rent of £52,150, plus service charges, subject to five-yearly reviews. At the first review in 1982 the annual rent was increased to £126,000, plus service charges. The leased accommodation was vacated and the new building at Sullivan’s Quay was occupied on a phased basis between August 1984 and July 1985 by staff transferred from South Mall and from other rented accommodation throughout the city.

I sought information from the Accounting Officer regarding the delay in placing the contract for the new building and the circumstances in which accommodation to provide for temporary requirements was taken on a thirty-five year lease. I also inquired as to the present level of occupancy of the new building and the plans for the use or disposal of the leased accommodation at South Mall, and the other offices vacated.

The Accounting Officer has informed me that the site for the new Government Offices in Cork was acquired from more than one owner and that, while the main part was acquired in 1976, the Office of Public Works did not gain possession of the last part until June 1977. During the process of acquisition site investigation and some preliminary planning took place and consulting architects who were engaged in September 1977 submitted their design in November 1977. Informal contacts with the planning authority commenced in February 1978 followed by formal consultation in February 1979; the length of time taken to clear the scheme with the planning authority was due to various objections and proposals put forward by the authority and the matter was not finally resolved until October 1979. In December 1979 Department of Finance sanction to proceed was obtained and the consulting architects were instructed in January 1980 to prepare contract documents which were available by September 1980. Invitations to tender were issued in October 1980 and, following the examination of tenders which were received in December 1980, Department of Finance sanction for the expenditure was obtained in March 1981 and the contract was placed in May 1981. The Accounting Officer stated that he was satisfied that there was no avoidable delay by the Office of Public Works in the placing of a contract in this case.

In regard to the accommodation leased as a temporary measure, the Accounting Officer stated that in 1977 staff of the Revenue Commissioners in Cork were housed in offices which were grossly overcrowded and well below acceptable standards and which had been the subject of continuing complaints for a number of years. There was no doubt that the Office of Public Works was in breach of the provisions of the Office Premises Act in regard to these offices and a staff association had threatened industrial action unless alternative accommodation was provided.

In March 1977 approximately 12,000 sq. ft. of office accommodation which became available at South Mall was found to be adequate to provide satisfactory accommodation for staff of the Revenue Commissioners pending the erection of the proposed new offices at Sullivan’s Quay for which planning was then about to commence. Despite the best efforts of the Office of Public Works to negotiate a short lease or a break in a long lease the lessors of this accommodation would grant only a lease for thirty-five years. Given the condition of the accommodation which staff of the Revenue Commissioners were then occupying, the fact that the Office of Public Works was in breach of the Office Premises Act, the threat of industrial action by a staff association and the fact that the proposed new office had not yet reached the sketch plan stage, the only real option at the time was to lease the accommodation on the only terms available. Further accommodation in the same building was subsequently leased on the same terms to provide for an expansion in Cork of the National Manpower Service and the Industrial Inspectorate Division of the Department of Labour. These arrangements were approved by the Department of Finance.

The Accounting Officer pointed out that in taking these leases the Office of Public Works was operating in a sellers’ market and that, given the state of the property market at the time, there was every expectation that they would be able to dispose of their interest in the leased accommodation when the new office building was completed and he was therefore satisfied that they had acted properly.

The Accounting Officer also informed me that the new offices are now fully occupied.

In regard to the accommodation at South Mall vacated by staff now occupying the new offices he stated that negotiations were opened in September 1984 with the lessors with a view to their accepting a surrender of the leases but this approach had failed and, due to the depressed state of the property market generally, they had also failed to dispose of their interest by public advertisement. Consequently, their intention now was to transfer to this accommodation staff presently occupying other accommodation in Cork on which the leases had already expired or were due to expire shortly.

In regard to the remaining accommodation vacated in the move to the new offices the Accounting Officer stated that some of this was surrendered to the landlords, some was placed on the market and some was allocated to other departments requiring additional accommodation in Cork.

Mr. McDonnell.—As you know, in recent years I have been bringing the question of the provision of office accommodation and delays in occupation to the attention of the committee. This paragraph deals with another aspect of this. It is mainly concerned with the long term leasing of office accommodation in Cork, which apparently would only have been required on a short term basis if it could have been got on a short term basis, that was, pending the provision of new office buildings. There was also the question of what was to be done with the leased office when the new building became available. In addition, there appeared to have been a fairly long delay in placing the contract for the new building. The purchase of the site had been completed in June, 1977 and the contract was not placed until 1981. The accounting officer has explained the sequence of events which led to the placement of the contract. I understand that the new offices are now fully occupied in the new building but the commissioners are apparently committed to the continuing leasing of the South Mall accommodation at an annual rent which is currently of the order of £126,000 plus service charge.

In regard to that building, of which three floors were taken, I understand that two of them have been occupied by staff moved from other premises around Cork and the leases of those other premises have been or will be surrendered. The third floor involved will, so far as I understand, be similarly occupied on completion of alteration works. I do not know whether, if the Office of Public Works had been free agents, they would have chosen to move staff located in other premises into this, what seems to be more expensive, premises. When the new building became available they tried to dispose of their interest in the South Mall premises. That was not possible because of a 35 year lease so they moved staff in other locations to that premises.

Mr. Mahony.—At the time that decision was taken, about the middle of 1977, we were very much in a seller’s market. That was the only lease which could be negotiated by the commissioners in respect of badly needed accommodation in Cork city arising out of conditions which gave rise to many complaints by staff associations and public servants. Indeed, there was a threat of a strike in relation to office accommodation in more than one building occupied by the Revenue Commissioners in Cork. Strenuous efforts were made to get different terms in relation to that least but we were not successful. The decision was taken to go ahead and take the 35 year lease. At that stage pressure on office space was extreme and it was felt that we would have no difficulty in surrendering the lease at a future date. Unfortunately, the bottom dropped out of the market some years afterwards.

The O’Sullivan Quay building was occupied as quickly as possible after it was ready for occupation, and any surplus accommodation we had was disposed of. Leases that fell in were not renewed. We have rationalised the entire office space in Cork city to make the best possible use of what we have. At present the only area that is unoccupied in Cork city is one floor of this building but that will be occupied quite soon by the Department of Agriculture. They will be moving from rented space on which we are already over holding as the lease has expired on that accommodation. We will have no unoccupied space in Cork city quite soon.

Chairman.—It seems extraordinary to me that all of this office space is leased — indeed, this building under discussion this morning is being leased — for different Departments. The building being referred to this morning was intended for the National Library or the Department of Industry and Commerce, but members of the Dáil and Seanad have to operate from very poor accommodation. What urgency is there on the Office of Public Works to seek temporary accommodation when you do not have permanent accommodation available thus giving rise to this position?

Mr. Mahony.—In the specific instance we are talking about, reports on the files describe the accommodation occupied by the Revenue Commissioners in Cork in the seventies as frightening. In one instance the staff were sharing toilet facilities with the patrons of a bar and restaurant on a lower floor. We were in breach of the Office Premises Act and one of the staff associations has threatened industrial action unless they were given alternative accommodation within a very short time. In dealing with the Revenue Commissioners, in a sense, the gun was to our head and we had to provide accommodation quickly for them.

Chairman.—Perhaps members of the Oireachtas should initiate industrial action. That is a very exceptional position you have mentioned. Are there not other very poorly housed public servants?

Mr. Mahony.—The position has been rationalised over the past number of years and accommodation generally has been upgraded. As leases we were holding on substandard premises fell in we moved staff to better quality premises. It is not a major problem at present. There is no question of rushing out at the drop of a hat and taking short-term leases. The position has changed greatly in that respect. That is not being done now.

731.Deputy Naughten.—Could the Accounting Officer inform the Committee how much vacant office space the Office of Public Works have at present?

Mr. Mahony.—I mentioned yesterday that the property division now produce a quarterly report on vacant accommodation in the Twentysix Counties. At the end of June there were 270,000 square feet of vacant accommodation of which 190,000 square feet is State owned and 80,000 is leased. In relation to the 190,000 square feet which is State owned, 120,000 square feet is unfit for occupation and there are works in progress on 60,000 square feet of it which will allow occupation shortly and the balance is for disposal. Of the 80,000 square feet of rented space, approximately half of it is for disposal and the other half will either be occupied shortly or works are in progress which will allow occupation shortly. The figure of 80,000 square feet should be reduced to 40,000 by the end of the year and we are trying to dispose of that 40,000 square feet.

Deputy Naughten.—Of the 270,000 square feet of vacant space, you are trying to dispose of 40,000 square feet?

Mr. Mahony.—In relation to rented accommodation, and there are proposls for disposal of a fair amount of State owned property also.

Deputy Naughten.—With the decentralisation programme that is in progress and the new buildings that are being constructed in regions outside of Dublin, will there not be a great deal of vacant office space in Dublin?

Mr. Mahony.—That is something we are looking at at the moment and which is causing us concern. We are already drawing up plans to deal with it as best we can.

Deputy Naughten.—We referred earlier to the 35-year lease on the building in Cork, how many other buildings have you leased that will present a problem when the decentralisation programme gets under way and vacant office space becomes available here in the city?

Mr. Mahony.—I have not got that information at my disposal. Some of the leases we negotiated during the late seventies when there was tremendous pressure on office space are on those terms without breaks. Many of the leases we took earlier have five year and seven year breaks. I would have to have an examination carried out of the entire property portfolio to answer your other question.

Deputy Naughten.—Chairman, I would ask the Accounting Officer to supply details to the Committee of the vacant space that is in the possession of the Office of Public Works, the amount of space involved and where it is.*

Chairman.—Could I suggest that Mr. Mahony might also examine the position in Leinster House. I operate in circumstances which no witness attending this Committee would accept for themselves and there are Senators in the College of Art and in Merrion Street who operate in circumstances which do not reflect well on the legislature. It is time that was looked at.†

732.Deputy McGahon.—Mr. Mahony had a hard time yesterday and I felt sorry for him. I do not want to labour this point but I believe it is valid that we come back to the question I asked yesterday in relation to whether he was satisfied with the competency within the property division of his Department. In his own words he said: “it is a project that went horribly wrong”. Therefore, I think it is valid to ask if there are people still within that Department who were involved in this project?

Chairman.—We are dealing with paragraph 22. We have dealt with that other paragraph.

Chairman.—No, I am not coming to Mr. Mahony’s rescue. I think you got a good bite of the cherry yesterday.

Chairman.—We are on paragraph 22. We have already decided what to do with that paragraph.

733.Deputy Crotty.—It would appear that the Office of Public Works found themselves in a corner and as a result panic stations arose back in 1977 when the leasing of this building arose. How did that situation arise? Were the Office of Public Works not continually monitoring the requirement for accommodation and providing reasonable accommodation? The accounting officer mentioned toilet facilities being shared with patrons of a bar. Why was that situation allowed to continue, or allowed to arise at all?

Mr. Mahony.—Civil servants in the past were prepared to put up with substandard accommodation. When I joined the Civil Service a lot of the accommodation occupied by civil servants was substandard. Coming into the seventies, civil servants were not prepared to tolerate that and managements generally sought to improve the lot of the civil servants. This was mostly by reference to what was being done for similar employees in the private sector — banks, insurance companies and building societies. Civil servants were aware of the standards that were being provided for these people and they sought similar conditions for themselves. The commissioners were faced with the situation where over a very short period of time tremendous pressure was put on them to improve the lot of civil servants generally. Having regard to the resources that would be available to us from year to year, this has to be tackled on a very piecemeal basis. The situation in Cork was that we had been trying to acquire the site at O’Sullivan’s Quay for quite a number of years to provide accommodation that would relieve pressure on the Revenue Commissioners in the city. It was as a stop-gap measure that short term leases were taken in a number of buildings, including the one I have mentioned and which caused all the difficulty. As mentioned in the reference sheet, some delays arose in getting the O’Sullivan Quay project to completion, and they have been explained in the reply to the reference sheet. To answer your question and other questions, I am satisfied as to the competence of the people who are managing the property portfolio in the accommodation division in the office. It is a large portfolio. The Commissioners have 5.5 million square feet of accommodation, both office and other, to manage and the staff we have to manage that is quite small, and is getting smaller all the time having regard to the effects of embargoes.

Deputy Crotty.—I find it hard to realise that very valuable property is not having the attention it requires. This is something this committee will have to get further details of. That is a very serious statement the accounting officer has just made that they are managing very valuable space but have not got the personnel to manage it. In other words, it is not being managed.

Deputy Crotty.—In view of what we have witnessed this morning and the gross waste of public funds, this committee could not accept that situation which the accounting officer finds himself in, where he has not the personnel to manage a very valuable portfolio property. To get back to O’Sullivan’s Quay, what was the area in this building? What did the square footage amount to? I do not think it is mentioned in the paragraph.

Deputy Crotty.—No, what was required to alleviate the problems you had until O’Sullivan’s Quay came on stream?

Mr. Mahony.—The space occupied by the Revenue Commissioners in two buildings in Cork would have been less than that — I have not got the figure in front of me. The O’Sullivan’s Quay project was to take a number of different Departments that occupied a variety of accommodation in the city.

Mr. Mahony.—No, the 68,000 square feet that was provided in O’Sullivan’s Quay and State owned property.

Mr. Mahony.—All told about 20,000 square feet in the other building — Hibernian House.

Mr. Mahony.—At the time of the first review the rent was of the order of £120,000 and the service charges would bring it up to about £150,000.

Mr. Mahony.—I am giving that figure off the top of my head. That may not be accurate.

Deputy Crotty.—In five years the lease was increased from £52,000 to £126,000. Was this on arbitration, or was it agreed? It seems extraordinary that it more than doubled in five years.

Mr. Mahony.—I would have to check that. There are precise arrangements within the terms of leases as to how these renewal are dealt with. If the Commissioners disagree on the term being sought, there is provision for reference to arbitration. I cannot say if this was referred to arbitration.

Deputy Crotty.—Would you think that was an extraordinary increase, more than 100 per cent in five years, or was that the going rate for the time?

Mr. Mahony.—I would have to assume that was the best possible deal that could be done by the Commissioners at the time in respect of the property.

Deputy Crotty.—You have this building leased at present. What is it costing now? I am sure there was a review since.

Mr. Mahony.—It was due for review last year but the owners have not asked yet for a review, and the Commissioners are considering whether we will ask for a review. That is the position at the moment.

734.Deputy Naughten.—We have been told there are precise terms for negotiating increased in rental space. Was it not amazing that, when the Office of Public Works took the lease on this premises, in view of the fact that they were commencing to build an office block themselves, they did not ensure that there was a way out for them in the contract? Why did they allow themselves to be tried to a contract for 35 years knowing that they were going to build office space?

Mr. Mahony.—It was clear that O’Sullivan’s Quay would come on stream at a particular point in time, but we were facing a dilemma at the time. That is fully delat with by the accounting officer in his reply to the reference sheet. We were in a seller’s market having regard to the state of the property market at the time and there was every expectation that subsequently we would be able to dispose of the accommodation when O’Sullivan’s Quay was completed and occupied. As I said, the bottom dropped out of the market in the eighties, and we subsequently rationalised our entire property protfolio in Cork city. We disposed of our interest in some property, in other cases leases expired, and we have now rationalised the entire portfolio to such an extent that we have one floor free in that building, which will be occupied soon, and that will leave us without any vacant rented space in Cork city.

Deputy Naughten.—I would imagine that even in Cork city at that time there were not many customers for such a huge area of office space, other than a Government agency. I cannot understand how the Office of Public Works allow themselves to be tied into a 35-year lease. Have the other Government agencies in Cork been contacted — I am referring to ACOT, the VEC’s, or Cork Corporation — to ascertain if they require office space and with a view to leasing some of that space to them?

Mr. Mahony.—We do not have any surplus office space in Cork city at present. The staff of the Department of Agriculture who will be moving into the building under discussion will be leaving a building on which the lease has already expired and which we are over-holding.

735.Chairman.—I propose that the Committee note paragraph 22 and that we should move on to paragraph 23. Paragraph 23 of the Report of the Comptroller and Auditor General reads:—

In 1974 a site at Clonskeagh, Dublin was purchased by the Commissioners of Public Works from the Institute of Public Administration for a sum of £100,000, and in 1979 it was agreed to assign portion of the site to the Institute on which it was allowed to erect a temporary building. The arrangement was approved by the Department of Finance subject to payment by the Institute of the full economic rent which the Commissioners’ Valuer stated to be £6,000 per annum. A draft licence was drawn up by the Commissioners but, apparently, was not formally completed and no rent has been paid by the Institute; at 31 December 1985 the total rent outstanding amounted to £40,500. I inquired regarding the steps being taken to complete the licence and to collect the rent due.

The Accounting Officer informed me that before the Commissioners acquired the site in 1974 the Institute had commenced negotiations with the Eastern Health Board with a view to obtaining from the Board a small plot of ground that would give access to the rear of the site because it was considered that such access would greatly enhance the suitability of the site for development. These negotiations had not been completed when the Commissioners acquired the site and subsequently they lapsed. The matter was reopened by the Commissioners in 1978 and agreement in principle was reached with the Health Board in 1979 but the purchase was not, however, completed until 1984 due mainly to difficulty experienced by the Health Board in satisfying the Chief State Solicitor regarding title; as a result the draft licence to assign the area to the Institute, which had meantime been drawn up, could not be completed. The Accounting Officer also stated that notwithstanding the absence of the licence the Commissioners sent demands for rent to the Institute between 1981 and 1986 but no rent has been received. In 1981 the Institute had stated that following it’s representations in 1979 it had come to an understanding with the Department of Finance that rent would be set aside but in May 1986 the Department of Finance told the Commissioners that it had no record of any such understanding and the rent was again demanded from the Institute. However, in June 1986, following further representation by the Institute, the Department of Finance agreed to reconsider the question of the rent. The Accounting Officer’s conclusion, therefore, was that while the Commissioners, having completed the purchase of the plot from the Eastern Health Board in 1984, were in a position to complete the licence to the Institute they must now await the outcome of the rent appeal to the Department of Finance and when this was decided they would expedite the completion of the licence.

Mr. McDonnell.—In this paragraph I was concerned about some confusion that appeared to exist as to whether the Institute of Public Administration, the IPA, was liable for rent on a site leased to them by the OPW and, if they were so liable, what was being done to collect the rent. The accounting officer has explained the position and set out in the paragraph how the confusion arose. In fact, the matter has since been sorted out and the Department of Finance subsequently authorised the waiving of the rent, including the amount outstanding. The OPW have since regularised the occupancy by the Institute of portion of the site. They have, in fact, disposed of the remainder of the site. There was some confusion at the beginning but the matter has been resolved.

Chairman.—I should like to ask the representative of the Department of Finance why this rent was waived.

Mr. Noonan (Department of Finance).—I have found it difficult to establish the full facts from the file on this case because the officer dealing with it subsequently moved to the Valuation and Ordnance Survey Office. He is at present in England and I was unable to contact him to find out exactly what transpired. However, it would seem that there was a misunderstanding in that the file was not noted to the effect that a waiver of rent had been agreed with the Institute of Public Administration. Such an agreement had been reached but once the file was not noted there was no written record to that effect. That gave rise to the confusion.

Deputy McGahon.—What is the official concerned, the official who is now with the Valuation Office, doing in England? Is he on a career break?

Mr. Noonan.—No, I understand he is attending a meeting dealing with the ordnance survey.

736.Chairman.—Paragraph 23 of the Report of the Comptroller and Auditor General of the 1986 Appropriation Accounts reads:

A contract placed in 1979 for the erection of new Government Offices in Leeson Lane, Dublin at a cost of £2,066,299 was completed in 1982 at a cost of £3,802,498. The final account included the increases provided for under the usual price variation clause of the contract as well as increases arising from variations and extras and from adjustments in respect of prime cost and provisional sums. In 1983 the contractor submitted further claims totalling £700,694 for disruption and loss sustained by him due to delay by the Commissioners in furnishing design information and instructions throughout the period of the contract. On the advice of Counsel the claim was settled out of court for a sum of £399,300 which was paid to the contractor in September 1986. In addition, professional fees amounting to £21,350 for consultation, examination and reporting on the various aspects of the claim were paid to some of the consultants who had been engaged by the Commissioners for the project. I sought information regarding the reasons for the delay by the Commissioners as alleged by the contractor and I inquired whether the Accounting Officer was satisfied that procedures for the monitoring of progress on contracts were adequate to ensure that the Commissioners were not exposed to claims for damages arising from such delays. Furthermore, as it appeared that the delay giving rise to the claim in this case was occasioned by shortcomings on the part of a consultant employed by the Commissioners on the design work, I inquired whether any action had been taken to recover the amount of the claim from this consultant.

Mr. McDonnell.—This paragraph deals with a project in which a contractor took court action for damages and loss incurred by him due to a delay, apparently, by the commissioners in furnishing design information and instructions during the contract. Details of the outcome of the action are outlined and it cost the Office of Public Works in the region of £400,000. Since the date of my report the accounting officer has explained what caused the delays in this case. Indeed, it transpires that there were unfortunate circumstances surrounding the case in that it was mainly due to the serious illness, and subsequent death, of one of the consultants. When the seriousness of the matter was realised another consultant was brought in to ensure that the contractor would be kept supplied with all the necessary instructions. Apparently, in the meantime there was disruption and this formed the basis of the contractor’s claim. I should like to add that the contractor in 1980 claimed £81,000 for disruption and that was disallowed by the Office of Public Works. It was not recognised as a sign that, perhaps, there was a problem. I make that statement with the advantage of hindsight. I asked about the procedures generally for monitoring contractors and the accounting officer has told me that the procedures which operated for this project were those which were in general use at the time for such projects. Since then revised procedures have operated which involved extensive and frequent consultation between project officials, consultants and corrective action will be taken in the operation of those procedures. Indeed, the accounting officer has said that their experience of that kind of consultation between project managers and consultants is proving to be satisfactory.

Chairman.—Mr. Mahony, the death of one of the people involved is very regrettable and may have contributed to this but I fail to understand how everything appears to happen in £500,000’s in the Office of Public Works. We never hear of figures such as £50,000 or £10,000, it is always £500,000. How does it arise that you settled for £400,000?

Mr. Mahony.—The initial claim was for an amount in excess of £1 million. I should like to take up a number of the points made so far. The structural engineer was a consultant and part of the design team on this project. Unknown to us, and to other members of the design team, and in particular to the architect who was the leader of the design team, he was terminally ill. It was because of that that there was some delay. There is a serious doubt in my mind, from reading the papers, that there was any extensive delay but the subsequent death of the consultant may have afforded an opportunity for putting a case to the courts which would be difficult for the commissioners to refute. In other words, once a doubt was put in the court’s mind it was likely that an award would be made against us. The claim submitted by the contractor at the end of the contract was for an amount in excess of £1 million and, as has been indicated, we had intended contesting that figure in court. It was counsel’s opinion that the action should be settled out of court and the figure agreed was under £400,000. The chairman asked how figures always appear to be about £500,000 but I should like to point out to him that the value of the contracts the commissioners enter into are always quite substantial, ranging from £40 million at the top down to £500,000. The contract under discussion was a fairly substantial one and covered several properties in Leeson Street and into Leeson Lane. The opportunity for a contractor to claim damages existed because of the illness of one of those who would be giving important advice.

Chairman.—The contract was placed for £2 million and the work was completed at a cost of £3.8 million?

Mr. Mahony.—Details of the contract have been given. Such contracts are subject to price variation clauses and there was also an increase in the VAT rate. Of the increase mentioned £1.2 million was in respect of price variation and an increase in the VAT rate. A figure of £320,000 represented what is called adjustment of the prime cost and provisional sums. In the original bill of quantities estimates were put in and when the invoiced figures were available the difference had to be paid. Of the increase mentioned, the contractor was legally entitled to £1.5 million and there were variations of £220,000 on the original figure.

Chairman.—The fact is that the figure went from £2 million to £4.2 million?

737.Deputy Crotty.—It has been said that the problem arose due to the illness of one of the consultants and I should like to know if the Office of Public Works when engaging consultants take into consideration the backup in the office. I find it hard to credit that the illness of one person engaged in a consultancy capacity should hold up a major development like this, costing £4 million, to such an extent that the Office of Public Works must pay an additional bill of £400,000 occasioned by delays.

Mr. Mahony.—The structural engineer in this case was the sole practitioner in the firm.

Deputy Crotty.—It is normal practice to engage a sole practitioner? He can become ill or anything can happen. Can a sole practitioner have the back-up services required for major developments like this? On a £4 million development I should imagine a back-up team of consultants in any discipline would be required.

Mr. Mahony.—My information is that the consultant in question was one of the most highly esteemed and frequently sought structural engineers in Dublin. It is on that basis that he was engaged by the commissioners. In fact, he was recommended to the commissioners by the consultant architect for the project.

Deputy Crotty.—I am sure consultant architects engaged on all projects have their favourites or pals; I have no doubt about that but has this practice been changed now in the Office of Public Works?

Mr. Mahony.—No consultant is recruited by the Office of Public Works without detailed examination of his capacity or competency to produce the requisite information. There is a committee of experts in the Office of Public Works who consider this question and make recommendations to the commissioners as to who should be engaged or employed for any particular project. It is a fairly painstaking exercise.

Deputy Crotty.—Has it been noted that this problem can arise with a sole consultant so that the Office of Public Works will not find themselves in that position again?

Mr. Mahony.—Arising out of this case we saw that the engagement of a sole practitioner led to problems; there is no doubt about that. I am sure we will bear that in mind in the future.

Deputy Crotty.—It would appear that this is not a normal circumstance. I have not come across such a circumstance previously as a member of this Committee in which a contractor sued the Office of Public Works on account of delays. But I have noted that works have been delayed by contractors on a regular basis which occasioned excessive expenditure on the part of the Office of Public Works. Have the Office of Public Works ever taken action against any contractors for delays or is it all one-way traffic?

Mr. Mahony.—Personally I am not aware of any cases in respect of which we have sued a contractor. There is provision in the conditions of contract for liquidated damages and for other damages and there are penalty clauses. But I am not aware of any case in respect of which we have taken action against any contractor.

Mr. Mahony.—I know they exist within the contract but I understand there are legal difficulties about enforcing some of those penalty clauses.

Deputy Crotty.—That is what I should have imagined. That has been my experience also of examining such contracts over the years. Therefore, it would appear that the State is fair game, that the State can be milked but cannot kick back at any contractor. It is a rather peculiar position. Can the Office of Public Works not do something in the future to ensure that, if there are delays by contractors, they can claim and enforce the penalty clauses?

Mr. Mahony.—The position vis-á-vis our dealings with contractors has been tightened up in recent years. Now they are obliged to provide us with time schedules for completion of various stages of any project and the project team endeavour to adhere as closely as possible to such schedules. But we have not sued anybody.

Deputy Crotty.—Can this practice be tightened up so that the Office of Public Works can sue and that contractors are made aware that they will be sued? It cannot be all oneway traffic.

Mr. Mahony.—I am aware that the conditions of contract are at present the subject of review by a number of groups. These conditions apply to the wider public service. They are the standard conditions applicable to Government contracts and are the subject of review at present.

Deputy Crotty.—Has the contractor in question who took the State to the cleaners for an amount of £400,000 been employed since?

Mr. Mahony.—No. My understanding is that, at the time he was finishing that contract, he was quitting the country, taking his business elsewhere.

Deputy Desmond.—Is there anything on the file which indicates that there was a monthly progress report from the contract team to the chairman?

Deputy Desmond.—Can the Accounting Officer speculate as to why it was not the practice?

Mr. Mahony.—In respect of project operations within the terms of the contract the architect is the principal party to the contract on behalf of the Commissioners of Public Works, the contractor being the other party. Various duties and responsibilities are placed on the project architect. After the various project administrative details were dealt with, up to and including the placing of the contract — it being under administrative control at that stage — the tendency was for the project management, post-placing of contract to be vested in the project architect, the administration receiving reports from time to time on progress. Obviously, as payments arose or were sought progress reports would be prepared and presented. In recent times that practice has been streamlined following a number of reports on project workings in the Office of Public Works. It is dealt with now more on a team basis, involving administrative and professional staff.

Deputy Desmond.—Would the Accounting Officer not consider it extraordinary that the lack of adherence to time schedules in the Office of Public Works during this period which seems to have obtained up to 1985/1986 contrasts very sharply with the adherence to schedules in other Public Capital Expenditure projects? For example, in Health, during that period there was capital project expenditure of approximately £240 billion to £250 billion. Yet there was a red warning system in operation in relation to all contracts, as a consequence of which there were no overruns. Insurance cover was arranged so that, if a member of a project team died, there was contractual cover. Why was there no such procedure in operation in the Office of Public Works which, after all, handles five times that kind of expenditure?

Mr. Mahony.—At that time the monitoring process the Deputy mentioned was not in operation. Certainly it was not in operation in relation to this project. I might add that, in or around that time, the Office of Public Works did undertake the major Posts and Telegraphs development programme which would have far outweighed the expenditure on health programme. That programme was dealt with entirely satisfactorily from the point of view of the then Department of Posts and Telegraphs and the State. It was handled in a very specific manner, in much the same way as the Deputy says the health programme was handled — by way of management committees representing the Department of Posts and Telegraphs — subsequently Bord Telecom and An Post — and the management groups within the office.

Deputy Desmond.—Does that practice apply to the current project at Dublin Castle?

Mr. Mahony.—The Dublin Castle project is managed by a cost-control committee which has been established under the terms of Finance Circular No. 1 of 1983. Similarily, the other large projects which were handled by the Office of Public Works recently, such as the Wheatfield Prison project, were dealt with by cost-control committees. The Custom House project is being managed by a cost-control committee. There are special arrangements for handling or dealing with quite a number of other projects.

Mr. Mahony.—That was pre Department of Finance Circular No. 1 of 1983 as far as I am aware.

Mr. Mahony.—I do not have those figures in front of me. I am always cautious in relation to the word “overrun”. I am aware, obviously, that at times of stringent economy and shortage of funds, projects have to be completed within budget. When people talk about cost overruns they should also be looking for, on the other side of the equation, value for money. Budgetary control is one consideration but at the end of the day if you are satisfied that you have got value for money that is an important consideration also. That would apply to Kilmainham.

Deputy Desmond.—Finally, do you not still consider it quite extraordinary that your predecessors — with no disrespect to them — for some reason or other failed to have a subfile of any of the main contractual files of the period with progress report warning systems built into them?

Mr. Mahony.—Again, as I said, the project architect at the time, through his site meetings, his meetings with the other members of the design team and regular dealings with the contractor and the sub contractors, had management of the contract at that stage very much in his hands, with the management at administrative level very much confined to trying to elicit how the job was going. It appears that information was not at our disposal earlier on, that there was a problem.

Deputy Desmond.—In the OPW professional level who would monitor the main contractual file?

Mr. Mahony.—With this particular contract it seems to have been consultants who were the main parties on the design team. Within the office there would have been an architect assigned to monitor that project but, he again, monitoring a project in that sense, is merely keeping an eye to the overall project.

Deputy Desmond.—Would there be a principal officer at expenditure level on the monitoring side?

Deputy Desmond.—Would a higher executive officer in ranking be responsible for monitoring a £3 million project?

Mr. Mahony.—Again in relation to those years the volume of projects being handled by individual officers was extraordinary. There is a footnote in one of the reports prepared by the Committee on Public Expenditure several years ago commenting on the very large number of projects being handled by individual officers in the office and they highlighted that as a danger factor.

Deputy Desmond.—I am sorry for prolonging my comments, but do you think it is quite inappropriate that, say, a relatively inexperienced HEO, perhaps somebody in his or her twenties or thirties with not much experience of the construction industry would in effect be obliged or expected to monitor a file of that magnitude?

Mr. Mahony.—It is not simply confined to one officer. I am not particularly mentioning grades in that there is a hierarchy within each division which deals with the projects. At another level there is the accountant’s branch. Quite often, in a combination between the two, difficulties are picked up and isolated and remedial action taken. I would not like to say that on this particular project an individual higher executive officer or assistant principal fell down on his job.

Deputy Desmond.—I am not suggesting that; I am referring to the method by which the monitoring is instituted. Surely the architect at professional level within the Office of Public Works should have sent a note to the Chairman.

Mr. Mahony.—The role of the architect within the office was a monitoring role. The main duty in respect of the project rests with the project architect who is named in the conditions of contract.

739.Deputy Naughten.—The contract for this project was placed in 1979. What was the time scale on it? When was it supposed to be completed?

Deputy Naughten.—The contract was for £4.2 million and the final cost was £4.2 million.

Deputy Naughten.—Is it not the situation that with all contracts this committee have gone through in the last six or seven years this type of overrun is not abnormal? How come the Office of Public Works are not able to get contractors to go in on a site and complete the job for the contract price?

Mr. Mahony.—That is not fair and that is ignoring the point I made earlier, that of the final account figure here the contractor was legally entitled to the price variations that arose in respect of workmen and materials. Also during that time VAT rose from 3 per cent to 10 per cent. You cannot take the contract price and just compare it with the final account figure and say the difference is an overrun. There is £1.2 million there that the contractor was legally entitled to. Arising out of Reports we had, when we tackle a project now and when we go to the Department of Finance for sanction to a project we make a list of all the inputs that that project will require in terms of the contract price, estimated inflation, fitting out costs, consultants’ fees and a sum in respect of continuances and unforeseen works.

We total that all up and that is our budget figure for the project. The Department of Finance sanction a budget figure for the project and that is a cost limit for that project. We are then obliged by the Department of Finance to bring in that project at that budget cost figure. If we had started out this job on that basis the budget cost figure would have included £1.2 million for price variation and had we known about the VAT obviously we would have budgeted for that. We would have also put in a contingency sum to cover some of the extras that arose. The real determination in any job is, “What did you budget for?” and you do not just budget for the contract sum; you have to budget for the total cost of the job.

Mr. Mahony.—In that project we would have gone to the Department of Finance for sanction for the cost of the project based on the accepted tender. That was the way we operated at the time.

Deputy Naughten.—You said the contractor was legally entitled to £1.2 million.

Deputy Naughten.—Can I assume that he was not legally entitled to the other £1 million?

Mr. Mahony.—He was legally entitled to the adjustment of the prime cost and provisional sums as well. When a bill of quantities is prepared, certain amounts are put in which are effectively estimates. These usually are for fittings and may relate to the electrical subcontract and the mechanical subcontract. When the actual cost of these is known, the amounts are adjusted and the contractor is entitled to the difference, that is £320,000 in this case so that is £1.5 million in total.

Mr. Mahony.—The PC sums are sums that are put in the bill of quantities by the quantity surveyor based on his expectation of what those items will cost. They are obviously subject to inflation and to changes in VAT which, I mentioned, went from 3 to 10 per cent.

Deputy Naughten.—You mentioned in reply to Deputy Crotty that the conditions of contract are at present under examination.

Mr. Mahony.—My personal information within the last 12 months was that the conditions of contract were being reviewed.

Deputy Naughten.—We were informed here three years ago that they had been reviewed and that changes were introduced at that stage that would prevent the like of this happening, when we were discussing the huge overrun on some other project.

Mr. Mahony.—There would be a distinction there between review of the standard conditions of contract for Government contracts and a review of the procedures by which we manage contracts. I think the previous accounting officer would have said that those procedures had been reviewed and were in place following the Department of Finance circular 1/83.

Deputy Naughten.—While we are on this paragraph, I remember when we examined the Department of Justice in relation to the building of houses in Portlaoise which were estimated to cost £22,000 but finished up costing £78,000, they said that the Office of Public Works were responsible for the overruns. Could you comment on that, Mr. Mahony?

Mr. Mahony.—I can comment in the sense that I inherited the Portlaoise housing project as a principal officer in the projects division in OPW in 1986 and it fell to me to settle the final account and the contractors various outstanding claims on the contract. I read every page of all those files relating to the Portlaoise houses. The chairman will recall that I was actually at Portlaoise with the Committee when you visited those buildings and I was here with my assistant secretary when the Committee examined the Secretary of the Department of Justice. Again, the figures as presented and quoted are accurate. I think it is wrong to lay the blame on the Office of Public Works for building houses which, as you said, by dividing A into B you arrive at a cost per house of so much. I know the committee do not want to open up all this but there are factors in that case which led to the final cost of the project being what it was.

Chairman.—The Department of Finance minute on our special report said it was wholly unjustified. There is no point in opening up that discussion again.

Deputy Naughten.—I do not want to reopen the Portlaoise issue, but it is getting back to a situation that if a contractor gets a contract from the Office of Public Works it is a licence to print money because once they get in on the site the contract price is just a figure which very often does not bear any relation to the final cost of the project. It is one of the things that this Committee will have to examine again at a later stage.

740.Deputy McGahon.—I want to express my concern at the problem posed by the involvement of the Office of Public Works in public works contracts because the contract price bears no relation to the final sum. Overruns of this magnitude could not possibly take place in the private sector. As Deputy Naughten said, it does seem to be a particular bonus for a contractor to be given the opportunity of tendering for an Office of Public Works contract. The problem in this case seems to have hinged on the availability of one person and, while the death of that person was very regrettable, it is a common occurrence in all walks of life. Surely some type of early warning system could have been devised in this case because, at the end of the day, the State again paid a very high price for the situation that occurred? Could that not have been to an extent, anticipated and measures taken to replace that vital component?

Mr. Mahony.—I mentioned that on reading the papers I was not satisfied that the delays the contractor stated occurred because of the failure of the structural engineer to give him advice were such to justify the award that was made. I have to be careful of the words I use. I think there was an opportunity there for somebody to make a claim which it would be difficult for the Commissioners to refute having regard to the circumstances at the time; the fact that the structural engineer was ill and that he died at the end of the contract. The opportunity was there and a claim was made.

Deputy McGahon.—The problem arose at the beginning of the contract when the structural engineer was not available to proceed with the contract. In a situation like that how long do you wait or what timescale do you build in? If a person building a house becomes ill, he would have to be replaced at some stage. How long, in the case of a very large contract, can you give a person to recover from an illness before you replace him?

Mr. Mahony.—My position is that I am not satisfied that the delays were of the order that were ultimately alleged. As soon as the architect became aware of the illness of the structural engineer another engineer was put on the job. I am saying that there was an area then where a claim could be made and I think this is what was done. Our advice ultimately by the senior counsel was that because there was a doubt we should settle out of court.

741.Chairman.—There is a constant stream of these paragraphs coming before the Committee year in and year out. You are a new chairman of the Office of Public Works and you are starting with a clean sheet. However, this is giving rise on a regular basis to concern here. Some Departments do not have any paragraphs to highlight difficulties but the Office of Public Works have a regular supply of them. We have sent you our report which we compiled with the assistance of ESB International on how you should control capital programmes in future. In advance of your replying to the Committee on that, could I suggest that you, myself, the Comptroller and Auditor General and the Assistant Secretary of the Department of Finance meet to see what can be done to introduce some sort of modern controls in the Department because there is a concern here and it would be a useful preparation before you reply to the Committee on the report that we sent to you?

742.Deputy Dempsey.—I have a very general question arising from what we have heard over the last two days and at various other times and from the fact that we felt we had to compile a report. Could Mr. Mahony justify the existence of the Office of Public Works? What benefit is it to the State considering that all these things are coming before us and that it cost £104 million in 1987? We seem to be highlighting the negative aspects but maybe there are some positive aspects that we should know about? It is getting increasingly difficult to see them.

Mr. Mahony.—I take the Deputy’s point. My position on this is that there have been a number of Government decisions over the past number of years setting down what the functions of the Office of Public Works are to be. It is a matter for Government to decide how the business of Government is to be discharged. Present arrangements for Government are that we have the services which we manage at the moment, the building projects, maintenance, management of a portfolio of property, heritage functions, drainage and marine engineering functions. I have nothing further to say than that. It is a matter for Government to decide what the Office of Public Works should be doing, not for me as accounting officer.

Deputy Dempsey.—Do you not feel, as Chairman of the Office of Public Works, that you might have a role to play in making the case for the retention of the Office of Public Works? Obviously, I heard reports on the radio this morning and there were reports in newspapers and so on. The Office of Public Works have received a lot of bad publicity, not just over the last two days but down through the years, every time they come before us. You cannot really wash your hands of the whole thing and say that the Government decided you should be there. Are you performing a useful function?

Mr. Mahony.—I certainly did not imply that I was washing my hands at all. What I am saying is that the Government have appointed me as Chairman and Accounting Officer of the Office of Public Works and I have been handed a particular remit which includes a variety of functions which I have mentioned. It is my duty to manage that portfolio of functions to the best of my ability while I remain as chairman.

743.Chairman.—Dáil Éireann votes the money that your office spend and they raise that money from the taxpayer. Dáil Éireann charges us with the responsibility to find out how that money is spent. The question raised by Deputy Dempsey is indicative of the degree of worry among members of the Committee about how those funds are spent. The meeting I suggested might help in bringing about a more modern approach to controlling spending in your office, so that this line of thinking might be eradicated. The meeting is justified given the experiences of the Committee over a number of years.

Mr. Mahony.—You mentioned that quite regularly there are paragraphs in the report dealing with the Office of Public Works and that there are some Departments on which there are no paragraphs. That is only to be expected. The Office of Public Works is one of the largest spending Departments in the public service and the volume of work with which we deal is huge. For instance, in 1983, one of the years that some of these works projects cover, there were 540 work contracts placed. That is a lot of work. That, of course, included schools building work which has since been transferred to the Department of Education. Even still, we are placing over 200 works contracts a year and that is only one aspect of our task. The possibility that there would be a paragraph on the Office of Public Works is quite strong, having regard to the volume of projects we are handling and having regard to the fact that we have 3,000 buildings in the property portfolio to manage. Added to that we manage the parks, the monuments, the canals, the wildlife service, the Government supplies agency, drainage and marine areas. The possibilities of a problem developing in any one of those areas is quite large. Sometimes I am surprised that the number of references to the office is as low as it is.

744.Deputy Desmond.—Is there a possibility of being ripped off by the private sector in that process?

Deputy Desmond.—Our strictures should cut both ways. Other sectors get away with murder.

745.Deputy Dempsey.—I am glad Mr. Mahony is answering the question I asked originally now by outlining some of the work that the Office of Public Works do and the amount of work they do. Could I rephrase the original question and ask what does Mr. Mahony see as the advantage, without straying into the policy area, of having an organisation like the Office of Public Works? Some people would say that each Department should be allowed to look after their own building and contractual arrangements. What would be the disadvantages of adopting that approach? Indeed, if we want to go down the road of privatisation of these services that Deputy Desmond has mentioned, what would be the advantages or disadvantages?

Deputy Dempsey.—I know you did not mention it, but you are a little bit more circumspect than I am, Deputy Desmond.

Deputy Desmond.—The private sector get the contracts and they rip us off on many occasions.

Mr. Mahony.—I am very loth to get into a discussion on this. A lot of the issues raised are policy issues, and it is a matter for the Government and for the Minister for Finance to decide how the business of Government should be discharged. I am precluded from going beyond what I have said.

746.Chairman.—Mr. Mahony knows from the report that I sent him, that I and the Committee favour a change in the approach to our work, so that, instead of going out and finding these things, we would actually look at a cross section of the Department and compare good with bad and hopefully the role of the Committee will evolve, but there is nothing to stop this Committee recommending to the Dáil, that to be more cost effective, and ensure that we get more value for money, we should wind up the Office of Public Works. If that is the case the Committee would be quite justified in asking for your views before we made such a recommendation. It is not entirely a matter of policy. The question of value for money and efficiency in spending is very central to our examination.

Mr. Mahony.—This question has been considered by previous accounting officers at times when Government have been considering how to reorganise the business of Government. In relation to, for instance, the property holding property management function there are obvious advantages in having that centralised. If individual Departments sought their own accommodation we could have one Department trying to outdo another Department as they chased a particular office block. In relation to property development and construction works, we have in the office a body of architects, and a large body of expertise in dealing with and in managing contracts, despite the evidence of the references. We have centralised in the office quite a number of the heritage functions and the Government indicated recently that that is a process they are going to continue. We have the national parks function and the canals were assigned to the office within the last number of years. The wildlife service has been assigned to the office and the Government’s intention is to expand that. The Government recognise that we have a capacity and facility for dealing with the heritage area.

Chairman.—We have a long way to go before lunch. We have three more paragraphs; we have the vote and we have the Oireachtas vote to deal with, so could we wind this up on Deputy McGahon’s question?

747.Deputy McGahon.—As a layman, I fail to understand the consistent overruns in the price and the contract prices. Overruns of the magnitude we are talking about here of £1.8 million and yesterday in relation to number 5 Kildare Street, would put the light out for any commercial firm in the private sector. No private firm could countenance losses of that magnitude, yet it is a common trend running through most of the contentious paragraphs that we have here over the last few years. Is it that the bureaucratic structures within the Office of Public Works are responsible or is it that you are just unlucky? Houses change hands and buildings are acquired in the real world every day of the week and people do not run up against these problems because if they did there would be no commercial activity. How is it that you run up against so many problems?

Mr. Mahony.—From my point of view, the office have a very dedicated and professional staff. I am not going to speculate as to whether we are unlucky or on why these things happen. We do not know what happens in the private sector. The arrangements for dealing with Government business is different and any weakness in the system is highlighted because we are dealing with taxpayers’ money.

Mr. Mahony.—No. There are none, what are referred to as bureaucratic layers or structures, in the office which are inhibiting the proper management of our functions.

Deputy McGahon.—If a Department required space would it not be cheaper for the Exchequer to go to some prominent auctioneer in Dublin and get a consultant’s report on it and acquire a building?

748.Chairman.—As I said, we will note this paragraph and that meeting will take place. The Clerk of the Committee will be in touch with your office, Mr. Mahony.

Reference was made in paragraph 14 of the 1980 Report to the failure of a contractor to complete a building contract and to the Commissioners’ intention to claim £198,016 from the insurance company which provided a performance bond for the contractor. A formal claim for recovery of this amount was made in April 1982. A claim was also made against the same insurance company in May 1983 for recovery of £110,972 on foot of another bond following the failure of another contractor to complete a building contract.

As I noted that these claims had still not been paid by June 1987, I asked the Accounting Officer what further action had been taken to recover the amounts due.

Mr. McDonnell.—Paragraph 24 deals with the delays in resolving what, I must say, I would have thought would have been two fairly straightforward claims against an insurance company on foot of performance bonds arising out of the failure of contractors to complete their contracts. As you will note, they have been ongoing for some time. Indeed I reported on these in 1980. In December last the accounting officer told me that in the older one the insurance company made an offer which was unacceptable to the Commissioners and that following further negotiations the matter had been referred to the Chief State Solicitor. In the other case, the insurance company repeatedly requested further details of the claim and eventually denied any liability under the bond. This was also referred to the Chief State Solicitor and apparently the Commissioners have been pressing the solicitor to expedite proceedings but as far as I know neither case has been concluded. The accounting officer did tell me, however, that the Commissioners’ right in each case is protected by the issue of a High Court plenary summons. Of course with these delays with the passage of time and depreciation the question of the value of any settlements will also arise.

Mr. Mahony.—No. There are two cases involved. Let us take case No. 1. Counsel in that case has undertaken to have a draft statement of claim ready within ten days and immediately after that we will proceed to court with that particular case.

Chairman.—Extraordinary business. I presume the proper premiums and proper insurance cover were taken out.

Mr. Mahony.—Yes. The responsibility lies with the contractor to produce the bonds and that is what happened in both of these cases. When both contractors failed the commissioners pursued the bondsman for the amount of the bond. In relation to the second claim, a draft statement of claim is now being prepared and the parties are meeting next week to prepare the final wording on the statement of claim. That should also be going to court. I can assure the Committee that in relation to both of these cases I will personally pursue them to see to it that they are cleared through court as quickly as possible.

Chairman.—Can we take it that you will seek full compensation, just like other people do when they are suing you, with all the relevant interests and costs?

Mr. Mahony.—We have instructed our solicitor that in the preparation of the claims any entitlement we would have under the Courts Act, 1981, in relation to interest would be pursued on our behalf.

Chairman.—I should say also that it reflects very badly on the Insurance Corporation of Ireland that they do not meet their liabilities.

Deputy Dempsey.—Especially when they have £100 million belonging to the State proping them up following the collapse.

749.Deputy Naughten.—It is extraordinary that steps are only now being taken to have this case brought to court. In one case it is six years and in the other it is five years. Why was that statement not prepared three years ago and the case proceeded with to court then?

Mr. Mahony.—There have been ongoing discussions with the bondsman in both of these cases. An effort was made to resolve both of these cases out of court and a decision was taken at a particular time by the Office that we were not prepared to have any further discussions and we were proceeding to court. In respect of one of these cases, it has taken quite some time for senior counsel to produce the required statements for us. In the second case, the more recent one, we had also hoped to settle that without resorting to the legal process.

Deputy Naughten.—It is totally unacceptable that both of these cases have been allowed to drag on for that length of time. Of course the insurance company had a vested interest in the negotiations and while they were negotiating there was no pressure on them to pay. Are you accepting bonds all the time from this insurance company?

Mr. Mahony.—I am aware that two contractors currently engaged on projects for us have their bonds with the ICI.

Deputy Naughten.—Is it not rather foolish to accept ICI bonds when they will not pay up in these two particular cases?

Mr. Mahony.—They are contesting their liability in these two particular cases and this would not be sufficient grounds for the commissioners to refuse to accept them as a sound bondsman in the case of the other two contracts under way.

Deputy Naughten.—How many other claims have you made over the last six years?

Mr. Mahony.—I have not got those figures at my disposal. I am not aware if we have made any other claims against bondsmen over the past five or six years. Remember this only arises where the contractor effectively goes bust during the currency of the contract. Thankfully, there have not been that many.

Deputy Naughten.—No, but there are two particular cases where obviously you have found it necessary to call in the bond.

Mr. Mahony.—Let us say that in one case they contested the amount that they should pay and in the second case they are contesting liability of any sort.

Chairman.—Before I call on Deputy Crotty, let me ask Mr. Noonan from the Department of Finance what he has to say about this particular problem. Should the OPW continue to rely on bonds from a company who behave in this way. Have your Department considered that?

Mr. Noonan.—If I am interpreting you correctly, you seem to be suggesting that this particular insurance company would be blacklisted. I am not sure whether the evidence is such at the moment that we should take that drastic step.

Deputy Naughten.—You have bonds with them and they are not prepared to honour these bonds. Is that not the bottom line after six years in one case and five years in another? The bonds are useless.

Mr. Noonan.—My interpretation of what the Chairman of the Office of Public Works has said it is that there has been a considerable delay in the application of the law in this case rather than that the Insurance Corporation of Ireland have deliberately decided to refuse to pay.

750.Chairman.—The question is why do we need to go to law? Let me ask the Accounting Officer if his Office have had claims more speedily settled with the same insurance company and how many?

Chairman.—Therefore, you had only two claims and they refused to pay either?

Mr. Mahony.—What I am saying is that in one of the cases they are allowing it to take due process. In the other case, negotiations were very protracted and we decided to terminate those negotiations.

Chairman.—Not the sort of people you would like to do business with if they cannot be relied on to meet their obligations.

Mr. Mahony.—On the other hand, it rests let us say, with the successful contractor to secure a bond and it would be difficult for us in law to refuse to accept this particular company merely because they are slow to pay.

Chairman.—I do not think the criticism is of you or your office and I can see the difficulty but certainly the ICI come in for criticism in this case. I do not think this can be justified.

751.Deputy Crotty.—The Accounting Officer did say that the ICI were contesting their liability. That is a serious matter. Is there a weakness in the bond system? Is the bond not clear-cut? They are actually contesting their liability.

Mr. Mahony.—I would be venturing into the legal scene here and it would not be within my competence to comment on how satisfactory performance bonds are in relation to building or other contracts. I would have to take legal advice on it.

Deputy Crotty.—Maybe that is not a fair question. I felt that the bond system would be tightly drawn up and that you were either liable or you were not, but I recognise that the Accounting Officer would not have the capacity or the expertise in that field. What explanation has senior counsel given for not having his case ready to bring forward?

Mr. Mahony.—The relationship between the Chief State Solicitor and the senior counsel is again somewhat outside my scope. When legal advice is sought at that level we have to apply to the Chief State Solicitor to nominate and effectively appoint counsel for us and we are very much then in the hands of the Chief State Solicitor and the counsel that he chooses.

Deputy Crotty.—I think that this Committee should get in touch with the Chief State Solicitor and ask him for an explanation of this situation.

Chairman.—Perhaps, Mr. Mahony, you might ask the Chief State Solicitor’s office to let us have a note on the question.

752.Deputy McGahon.—I am not holding a brief for ICI but obviously they have a case. I would have thought that in both cases where the contractor had obviously collapsed financially there would be no question or any dispute and that the bond would be paid or estreated immediately. Why not in this case, Mr. Mahony? What is the basis of the ICI case? Is it a question of degree?

Mr. Mahony.—In one case it is a question of degree. Could I say that these matters are now going to go into court and that for me to comment——

Chairman.—I would like to deal with that particular point, Mr. Mahony. The Legislature is not a subsidiary of the Judiciary. These matters are not sub judice and this Committee is quite properly inquiring into these matters so I do not think that is any reason for not replying to the question.

Mr. Mahony.—It is about to go to court. One of the questions is their liability arising out of, let us say, changes perhaps that were made in our arrangements with the contractor who concluded the job. That seems to give rise to doubt in the bondsman’s mind that he is liable for the figure that is claimed.

Mr. Mahony.—In the second case, as far as I am aware, it is a question of the insurance company contesting the loss, I imagine, that we suffered and they are reluctant to pay the full amount of the claim and they offered a figure substantially below that.

Deputy McGahon.—Since you entered into these particular bonds, have you entered into any other bonds?

Mr. Mahony.—The Commissioners do not enter into the bonds. It is the contractors who enter into the bonds.

Mr. Mahony.—What I am saying is that this particular insurance company is the bondsman for two other current contracts which we have.

Deputy McGahon.—Two other current contracts. Do you have difficulties of this nature with any other insurance company?

Mr. Mahony.—I am not aware of where we have called in the bondsman under any recent contracts. As I said to you, it relates to a builder going bust on a job and I cannot recall any such one in recent times.

753.Chairman.—Mr. Mahony, I would not rule out the possibility of the Committee calling the Chief Executive of ICI before the Committee if necessary and you might mention that to them in your discussions as part of your negotitions to settle this problem. It has gone on for far too long, and would you keep the Committee informed of the situation?*

Subhead E.—New Works, Alterations and Additions

Subhead F.1.—Maintenance and Supplies

In 1983 a contract on a time and materials basis was placed for the eradication of dry rot at numbers 64/65 and 73 Merrion Square, Dublin and for improvement works at number 73. Expenditure of £34,000 was approved for the project, including £15,000 for the improvement works. Additional work was subsequently undertaken under the contract and the contract was extended to cover rot eradication at numbers 2/3 and 83 Merrion Square. By 31 December 1986 expenditure had reached £427,070.

I sought information from the Accounting Officer regarding the final cost of work carried out under the contract, whether prior approval had been given for the additional work and the extra expenditure incurred, why the contract was extended to cover work at other premises rather than seeking competitive tenders and whether he was satisfied that adequate financial control had been exercised over the project.

As I was concerned lest the escalation in cost under this contract may have been due to inadequate maintenance of the premises over a prolonged period, I also asked the Accounting Officer if a programme of regular inspection and maintenance was in operation for these and other premises and if he was satisfied as to its adequacy.

Mr. McDonnell.—There are a number of points raised in Paragraph 25. First, a contractor who was awarded a contract with an estimated value of £34,000 carried out more work under the contract and the amount he was eventually paid was of the order of £430,000. The Accounting Officer has told me that the increased costs arose because it was decided to include three further houses in the contract and the extent of dry rot in all six houses was more widespread than had been anticipated. The opportunity was also taken to carry out some improvement works to the houses.

Second, there appeared to be some lack of control over the monitoring of the contract and the Accounting Officer has told me that in fact formal administrative approval did not keep step with the rising expenditure involved due to the protracted illness of the Office of Public Works senior architect and that adequate financial control was not exercised to the extent that Office of Public Works management were not kept informed of the escalating costs. He went on to say, however, that it was essential to eradicate the dry rot and to ensure that it did not spread to other buildings and that, irrespective of the question of the controls, the eradication works could not be halted without leading to greater expenditure. He also explained that fresh tenders were not sought for the additional work when that was decided on because the contractor’s original tender, with the appropriate price increases which applied throughout the work, were considered good value. He said, however, that a circular had since been issued to staff on the necessity for prior administrative approval to be obtained in advance in such cases.

Third, I suppose there is a question of how the buildings got into the state they were in in the first place or could their deterioration have been prevented. I asked, as you will see at the end of the paragraph, about general maintenance and inspection procedures, because the file papers seemed to indicate that there is not a planned approach to maintenance and that this can lead to deterioration especially in the fabric of old buildings. An indication of this perhaps, is that it is stated that one of the houses in question was vacant for many years and received no maintenance whatsoever and another had suffered severe water damage for the want of a proper fitting to a downpipe. My queries were back in 1985, you will recall, Chairman. The then Accounting Officer told me that he considered that a very satisfactory maintenance and inspection programme was being implemented and indeed is being implemented, though I think that following on this particular case an architectural practice and procedures list which had been in existence was reissued to all architectural staff with particular emphasis on the early detection of dry rot. I just want to add, Chairman, that the Accounting Officer at the time did say that good value was obtained because the six houses are all now in an enhanced state.

Chairman.—What about the question of the lack of adequate financial control, Comptroller? Could you be specific there?

Mr. McDonnell.—What the Accounting Officer said was that adequate financial control did not exist to the extent that management was not aware of what the costs were. The costs were escalating and apparently management and the Office of Public Works, as I understand the Accounting Officer’s reply to mean, were not aware that in fact the costs were gone up to what they were, £430,000, under this contract.

Mr. Mahony.—Yes. Quotations were sought in 1982 from a number of reputable firms and there was an acceptance of the lowest suitable quotation in June 1983 and it was a schedule of rates, rates for tradesmen, rates for operatives and rates for materials.

Chairman.—As the work developed the business was assigned to the same company without further tendering. Is that what happened?

Mr. Mahony.—That is correct. I think that, in the reply to the reference sheet, the former Accounting Officer has gone into considerable detail to outline what happened and gave assurance in relation to the regular inspection and maintenance programme. Could I just take a number of points there, Chairman? When this contract got off the ground in relation to three of the properties at Nos. 64, 65 and 73 Merrion Square the indications were that it would not cost a lot and there was no contract sum as such, since it was a schedule of rates, and the earlier figure that was mentioned was in effect an estimate of the likely cost. But as the work developed — we saw evidence this morning in No. 5 as to what can lie behind plaster work and partitions — when the contractors came in to do the dry rot work and other work, as they stripped away the extent of the problem was seen to be quite enormous. That architect at the time — I am referring to post-June 1983 when the knowledge of No. 5 Kildare Street would be in his mind at the time — was not prepared to see the buildings deteriorate and not have the proper repair work carried out.

I note from reading the files that administrative approval was given on a number of occasions. It was not as if the administration had not access of the file during the duration of the contract. On a number of occasions administrative approval was sought and given from various extras and to extend the contract to deal with Nos. 2 and 3 Merrion Square and No. 83 Merrion Square. That is quite clear from the files. In the normal course this would have been picked up in accounts branch if there was a fixed price for the contract and if there was any question of that being exceeded the accounts branch would bring that to the notice of administration immediately. The difficulty here is that we were dealing with a schedule of rates.

Chairman.—It appears that for the extended work at the other addresses it did not go to a separate tender?

Mr. Mahony.—No, the architect recommended at the time that the rates we had for Nos. 64, 65 and 73 were highly competitive and having regard to the position in the other buildings that it was expedient to tackle the dry rot in those buildings.

Mr. Noonan.—No, the Department of Finance would not approve of that procedure but in this particular case the Office of Public Works were alive to what had transpired in No. 5 and were most anxious to move ahead as rapidly as possible and not have the delays that might ensue.

Mr. Noonan.—If one thought the job could be done much cheaper then something would have been lost here, but the assurance is given that we would not have got a cheaper job.

Mr. Mahony.—Yes, they are owned by the State with the exception of No. 73. In relation to the other properties, No. 83, which was one of the buildings to which the contract was extended, was sold in the last week at a very handsome figure and there was a 100 per cent profit over and above the amount of money that was put into it. Nos. 2 and 3 Merrion Square are on the market at present and tenders are due in on 5 August. We also expect to make a substantial return on that. Nos. 64 and 65 are occupied by the Adoption Board at present and it is hoped to move that group of Hawkins House later in the year. Those two will be put on the market also so that effectively, of the various properties which were dealt with under this contract, the only one left would be No. 73 which is a leased property and which is occupied at the moment by the Department of Agriculture.

Mr. Mohony.—The amount spent on the combination of Nos. 64, 65 and 73 was £260,000.

Mr. Mahony.—We have a lease up to the year 2035 on No. 73 and it is occupied by the Department of Agriculture.

755.Deputy Naughten.—Was it on a time and material basis that those people were employed?

Deputy Naughten.—Nobody in his right senses would let anybody in on that basis. As I said earlier it is like a blank cheque when you take in somebody on a time and material basis as they have a vested interest in ensuring that that job is prolonged as long as possible. They would be very foolish to operate under any other system. How come it was not on a contract basis?

Mr. Mahony.—The advice we had at the time was that this was the best way of tackling the contract. This is the recommendation the Commissioners had from the architect who had responsibility for the maintenance of the buildings.

Deputy Naughten.—It is unbelievable to think that a State body would set out work on a time and material basis. We see here clearly the outcome of it, that something projected to cost £34,000 finished up at £260,000. Again I fail to see why the second set of houses was not put to tender. I cannot understand it and it is a highly irregular way of carrying out maintenance that because you employed a contractor to do one job you handed him another one.

Mr. Mahony.—There are two points there. There are strict requirements in relation to time and material work. A time and material contract is not given out without senior administrative approval and where as in this case the final costs did not bear any relationship to the original estimate, there are two major contracts in progress at the moment on a varied time and material basis and we are working out extremely well under the terms of those contracts. Both of those jobs will be brought in within budget. I am talking about a budget arrangement as against an estimated cost. I have missed the Deputy’s point.

Mr. Mahony.—All I can gather from the files is that this aspect was considered and there was a recommendation from the senior architect involved that the rates he had for Nos. 64, 65 and 73 were highly competitive and bearing in mind the need to deal with the dry rot in the other buildings as quickly as possible this was the course he recommended. That course of action was again approved at senior administrative level in the office.

Deputy Naughten.—I am amazed at a State body getting involved in a time and material contract because it is not physically possible for them to control it. I cannot understand why they followed this procedure, which should certainly be discontinued.

756.Deputy Crotty.—It is disturbing that the accounting officer again mentioned the lack of maintenance on Office of Public Works’ property. One of the houses was not occupied for some time and the other had not even proper drain pipes and this allowed the free movement of water through the building. I am amazed that in a highly organised organisation like the Office of Public Works this could happen. It bears out what happened in No. 5, that this was the cause of many of our problems. Was there any action taken against the architect involved who landed the Office of Public Works in this extraordinary expense without permission of the executive?

Mr. Mahony.—There is evidence on the file that approvals were obtained by the architect in question on a number of occasions. The second point is that the end product had been that the buildings in question were put into a proper state of repair and the evidence of that is the satisfactory sale of No. 83 and the anticipated satisfactory sale of the other buildings. It is also a source of regret to report that the architect in that case died in the past few years.

Deputy Crotty.—We are not questioning the final result, we are questioning the expenditure that started at £34,000 and ended up at £430,000. The accounting officer mentioned that you do not know what is going to happen until you take off the plaster work and remove partitions, but I imagine that part of the requirement of any architect or engineer who was inspecting a building, would be that he would remove the plaster and look under the partitions and that he would know exactly what was required. You just do not make a superficial examination and say we need this or that. It is extraordinary that a statement like that is made — that you do not know what is behind the plaster work. It only takes a minute to hack off a bit of plaster work and that will give you a general idea of the state of repair of the building.

Mr. Mahony.—I am not competent to deal with architectural matters like that. I thought this morning in looking at No. 5 Kildare Street that it was quite clear that what was on the surface was quite innocuous, but what lay beneath the surface was something else entirely.

Deputy Crotty.—I do not accept that. With regard to No. 5, in 1982 a sum of £26,000 was mentioned. What we are talking about today is a building that was totally neglected. As was mentioned yesterday, it was not even looked at for years and there was water pouring through it, lead was removed from the roof and the building was let run down totally. That does not equate with this situation of removing plaster work and partitions, in other words, getting a feel for what work was required. I imagine that is normal engineering work, and if they fail to do that, they are failing in the requirements of their position. I know the senior architect has died, but the whole business of inspection and reports needs to be tightened up, and more attention needs to be paid in detail.

Mr. Mahony.—The accounting officer said in his reply that considering the difficulties being experienced in dealing with financial restrictions and maintaining staff levels, this is a major problem for us, and it continues to grow. We have difficulty looking after the 3,000 odd buildings we have in our portfolio. It is difficult to provide a comprehensive maintenance programme for those buildings having regard to the ever diminishing staff numbers at our disposal, and the continuing reductions in the finances available to us for maintaining buildings.

Deputy Crotty.—In view of that reply, could I ask the Department of Finance what are their feelings on the reply given by the accounting officer, taking into consideration an earlier reply given this morning that they have not adequate staff to deal with the management of a very expensive portfolio? These are two areas where very large sums of money and very valuable property are in contention, and there would appear to be a lack of qualified personnel available to deal adequately with the situation.

Mr. Dolan.—Alec Dolan, Assistant Principal, Department of Finance. The numbers have been reducing over the last few years and the Office of Public Works are not considered to be one of the priorities areas to which staff are being allocated, but even within the Office of Public Works the large number of new buildings which were being built in the early eighties are no longer being built. The property portfolio is generally reducing and we feel it is up to the Office of Public Works to manage with the staff they have and to reallocate to the degree possible. Many of the problems that are being talked about here arose during the late seventies and early eighties before the staffing restrictions came into being, and we would certainly consider that they would have had enough staff at that time, some of the problems — such as the Cork one arose in 1977 when job creation was going on and the civil service was increasing fairly rapidly.

Deputy Crotty.—Could I ask the Accounting Officer if he has adequate staff now to manage — that is the kernel — the properties which are either leased or in the ownership of the Office of Public Works?

Mr. Mahony.—I would have to say that having regard to the size of the property portfolio that we have, we do not have sufficient numbers to manage it.

Mr. Mahony.—I have been accounting officer for the last two months and I have not had much chance to tackle those aspects.

Mr. Mahony.—I am reluctant to quote a figure. The way these properties are sold is as follows. The successful tenderer pays a deposit of 20 per cent and the sale will be subsequently closed. In this case, the deposit has been paid, and the property has been sold for a substantial figure.

Chairman.—The difficulty is that the other houses are on the market. I was not aware the sale had not been completed.

Deputy Desmond.—How much viable vacant office space do you have in Dublin now?

Deputy Desmond.—Viable. Nobody wants to send staff into Kildare Street at the moment.

Mr. Mahony.—In Dublin the vacant State owned office accommodation is 190,000 sq. ft. and in Dublin the vacant leased, accommodation is 60,000 sq. ft.

Deputy Desmond.—How much is the decentralisation programme costing, office-wise?

Deputy Desmond.—To what extent, in a general way, are you involved in the decentralisation and the provision of office accommodation outside of Dublin?

Mr. Mahony.—The arrangement for that programme is that sites have been selected — from memory we are dealing with 12 sites — and works are under way on four of them. The arrangements are that the State is not paying initially for the work of construction — this is being financed privately by developers or by the contractors themselves — and when they are ready the State will acquire them on a 20 year lease/purchase basis.

Deputy Desmond.—Does it worry you that with all the problems we have had over the past decade, from 1977 to 1987, there may be a whiff of repetition with site arrangements, leasing arrangements, special contractual arrangements, arrangements down the line unknown to this Committee, which were subject to sanction by Ministers and the Department of Finance, with due respect, and in regard to lack of control over what is going on now? This is a cause for some concern.

Mr. Mahony.—I understand that a very tight package has been negotiated in respect of each particular project.

Mr. Mahony.—The State’s liability will commence at handing over of the properties by the developers or the builders.

Deputy Desmond.—Do you not consider it extraordinary that when we have 250,000 sq. ft. of relatively viable office space we now have to engage in another exercise the dimensions of which could be from 13 million sq. ft. to 21 million sq. ft. which is expensive in terms of down-term lease, and that we are going to have a large surplus of current vacant occupancy added to by another 7,000 or 8,000 public servants moving out of Dublin?

Mr. Mahony.—The decentralisation programme is a policy matter for the Government. We are operating on instructions in relation to the provision of the decentralised offices at the various locations. Obviously, we are beginning to evaluate the effects of the decentralisation proposals on accommodation in the city. We are working on that at the moment. Beyond that the wider policy decisions are a matter for the Government.

Deputy Desmond.—Would you not think that with 9,000 public servants accepting redundancy, several thousands of whom are civil servants affected by your Vote, that there will be a substantial surplus of public office space in the Dublin area and that the need to centralise services from Dublin to some other area at enormous cost in terms of accommodation would warrant some cost-benefit analysis being carried out by your Department or has any real cost benefit analysis been carried out?

Mr. Mahony.—Any analysis that would have been done would have been carried out in the Department of Finance.

Deputy Desmond.—I should like to ask the representative of the Department of Finance if he has done a cost-benefit analysis of this exercise?

Mr. Noonan.—To the best of my knowledge a formal cost-benefit analysis has not been carried out in respect of the decentralisation programme.

Deputy Desmond.—Would you not consider it a most extraordinary admission by the Department of Finance, involving the shuffling around for political purposes of 5,000 or 6,000 civil servants to placate certain constituencies, that no cost-benefit analysis was carried out?

Deputy Desmond.—It is all related to the largest single Vote in OPW — £26 million.

Chairman.—With due respect to Deputy Desmond, the place to raise that matter is in the Dáil Chamber not at a meeting of the Committee of Public Accounts.

Deputy Desmond.—May I ask Mr. Noonan to prepare for this Committee some information about the decentralisation programme now going on, the cost of the leases, the cost of the sites, the long term cost to the State, the cost of transferring staff, decentralising from Dublin, for what purpose, the cost of computer installations being transferred out of Dublin and the overall effect on the system. We urgently need this information, particularly on this Vote. Members in 12 or 14 years time will be looking back at the kind of leases you are now signing.

Deputy Dempsey.—The report might include the social benefits that might accrue to the areas concerned.

Chairman.—Policy decisions have been taken which will have benefits one way or another but as far as there is cost involved——

Deputy Desmond.—What happened between 1977 and 1981 when the then Administration decided to indulge in this exercise.

Chairman.—In so far as there is cost involved it might do no harm to look at the cost but there are policy decisions which also bring local benefits and it is not a matter for this Committee to look at those, it is a matter for the Dáil.

Deputy Desmond.—May I ask for that information from the Department of Finance?

Mr. Noonan.—We would have to be fairly precise as to the kind of information we would provide. There may be some misapprehensions involved here, quite apart from the social and other benefits. First, the building projects are taking place and the contract prices are such that the Department of Finance, and the Office of Public Works, consider that they are exceptionally good value.

Chairman.—Will you let us have a note on the costs. I do not wish to prolong this discussion, we are on paragraph 25.*

Deputy Desmond.—We have not seen the leasing arrangements entered into. I am talking about the rent and leasing arrangements downstream. Anybody can erect a building on a cheap basis provided you are paid a fortune on a square footage basis. I would like to see those leases and to get the information.

Chairman.—Mr. Noonan, you might see what financial information you can come up with to meet the request made by Deputy Desmond. It is now 1.15 p.m., we have another paragraph to consider, the Vote to go through and an other Accounting Officer to hear. We have a long discussion on this and in view of the fact that there will be further discussions with the Chairman of the Office of Public Works, I propose that we note this and pass on to paragraph No. 26.

758.Deputy Naughten.—On the point raised by Deputy Desmond, this Committee should seek the terms of leases. Today we discussed the leasing of an establishment in Cork and we heard that the Department got stuck with a 35-year lease when, in fact, a fiveyear lease would have been sufficient. I think we are entitled to get that information.

759.Chairman.—We will get that information but policy is a matter for the Government and the Dáil. We will get the information in so far as cost and financial questions are involved.

Section 24 of the Exchequer and Audit Departments Act, 1866 stipulates that transactions which have actually come in course of payment within the year must be included in the Appropriation Account of that year. It follows that when liability has matured and the procedure of authorising payment has been completed before the year end the transactions involved must be charged to the Appropriation Account of that year. Financial procedures prescribed by the Department of Finance stipulate that the payment of matured liabilities should not be postponed even at the risk of incurring an excess vote.

In the course of audit it was noted that payments totalling £689,352 which were not charged to this Vote until January 1987 were supported by vouchers which had been certified for payment between 7 November and 16 December 1986.

As it appeared that these claims represented matured liabilities arising in the year ending 31 December 1986, and that, if duly paid, would have resulted in an excess vote (the gross surplus on the vote was £3,654), I asked why payment had been deferred until 1987.

Mr. McDonnell.—This sets out the statutory position in relation to the charging of liabilities of the year in the appropriation accounts for the year and states the rules as laid down by the Department of Finance. There was a total of about £700,000 involved but the Accounting Officer has explained to me that in regard to about £300,000 of this there were certain procedures such as the construction industry tax position of claimants which had to be gone through. In other cases advantage was taken of the terms of the contract which allowed payment to be deferred until 1987. That left about £384,000. In regard to these the Accounting Officer said that to meet these payments would have meant spending more money than the Dáil had allotted to him for 1986 and he was not prepared to do this. The alternative was to proceed, as he did, to meet as far as possible contractual obligations to pay before the end of the year such things as salaries, wages, rents and so on and to leave other less pressing cases to fall into 1987. Those referred to in the paragraph were regarded, I presume, as being in that category. My problem is that this decision is not in line with the statutory requirements. As you are aware the normal course would be to identify, if possible, excess expenditure in time and to seek a Supplementary Estimate from the Dáil or if this was not possible to meet the liabilities, incur the excess vote and let this Committee decide the issue on its merits.

Chairman.—Mr. Noonan, why was the Dáil bypassed? What have your Department done to ensure that no such vote arises again? I understand this may require a special report to the House.

Mr. McDonnell.—The excess vote did not arise. The excess vote was avoided by not incurring expenditure. The correct procedure is that there should have been a Supplementary Estimate or an excess vote.

Mr. Noonan.—What the Comptroller said is the correct position. Why it was carried over was explained by the Accounting Officer as being his decision to avoid an excess vote.

Chairman.—How do you know that a number of other Departments are not carrying over balances at the end of the year without your knowledge and which do not appear in the Book of Estimates?

Mr. Noonan.—There is that possibility. Coming towards the end of a financial year, if an Estimate is being run very close to target and there is no facility for a Supplementary Estimate, it is quite conceivable that Departments other than the Office of Public Works have carried over some expenditure into the following financial year but the sums involved are unlikely to be significant.

Chairman.—Then if that is to be allowed to happen the budget deficit at the end of any given year is merely guess-work?

Mr. Noonan.—No; the budget deficit is a precise sum, equal to the difference at the end of the year between actual receipts into the Exchequer and issues from the Exchequer. On the other hand, there are cash balances of the order of millions of pounds carried forward within the system. Those balances correspond to payable orders issued but not cashed so that, from one year to another, there is always a difference in the system between the aggregate of payable orders made out by Departments and the aggregate of payments made on foot of those orders.

Chairman.—To meet this sort of requirement? Why was the normal financial target not met or adhered to?

Mr. Mahony.—I have to rely on the information supplied by the former Accounting Officer. I would have to perceive that as a personal decision taken by the relevant Accounting Officer. The reasons for his taking that personal decision are contained in his reply to the reference sheet from the Comptroller and Auditor General.

Chairman.—Would the current Accounting Officer ensure that there is no repetition of this practice because it is not an appropriate way to vote funds? There is a procedure laid down for voting funds. Our job is to ensure that it is done through those channels. Perhaps the Accounting Officer would note that?

760.Deputy Desmond.—I note that, in those years, the Office of Public Works purchased Hawkins House for approximately £6 million. How has that worked out? It was an outright purchase; is that correct?

Mr. Mahony.—Yes, Chairman. Hawkins House was bought in 1985. You ask how it has worked out?

Deputy Desmond.—There was an outright purchase also of Agriculture House; is that correct?

Mr. Mahony.—There was expenditure of approximately £8 million in the case of Agriculture House and £6 million in the case of Hawkins House. In the case of Agriculture House we occupied the entire building. In the case of Hawkins House there are other tenants. There are arrangements being made at present to deal with that.

Mr. Mahony.—In relation to Agriculture House the Commissioners were already shareholders in that property. From the date of its original construction we took a share and interest in that development. The calculations of financial assessment of purchase versus a continuation of the rental arrangements we had in both cases were carried out in the Office of Public Works at the behest of the Department of Finance. The Department of Finance accepted that the best arrangements was to purchase outright in both cases.

Deputy Desmond.—One final question. The Office of Public Works is currently engaged on a very major contract at Dublin Castle amounting to £27 million; is that correct?

Mr. Mahony.—I would have to verify the figure. I think it is £14 million. The Conference Centre constitutes one of the blocks, involving approximately £14 million.

Deputy Desmond.—How are they working out? Have there been any archaelogical problems or unforeseen——

Mr. Mahony.—The archaeological difficulties were dealt with by the Commissioners’ archaelogist before the contractors came on site. It is my understanding that those projects are proceeding within budgetary provisions. They are being managed by cost-control committees established under Department of Finance Circular No. 1 of 1983.

Mr. Mahony.—I understand that the work on that is nearing completion. It is due to be ready for 1990 for Ireland’s next presidency of the Council.

Deputy Desmond.—You have no contractual relationship in respect of the Conference Centre on the Custom House Docks site being planned?

Mr. Mahony.—I have not examined that; it has not arisen in recent months. The decision to build the Dublin Castle Conference Centre was taken at a given time as a result of consultations between the Departments of Finance, Foreign Affairs and others having regard to the then considered lack of such facilities.

Deputy Desmond.—Does the Accounting Officer not consider it quite extraordinary that a decision — I remember being a member of the Government that took that decision — was taken to spend £14 million on a very major international conference centre in Dublin Castle and almost simultaneously another decision taken to build another international conference centre a quarter of a mile down the road on the Custom House Docks site?

Mr. Mahony.—I cannot comment on that. In the case of the Dublin Castle project our brief was to provide a conference centre, we are delivering on that brief, and on time.

Deputy Desmond.—Congratulations. The Office of Public Works are doing an outstanding job in Dublin Castle, as they have in the case of the Custom House and the Royal Hospital, Kilmainham. The total expenditure output on Dublin Castle will be approximately £26 million or £27 million?

Deputy Desmond.—Have there been any comments from the Department of Finance since they are so intimately involved in the Custom House Docks Centre?

Deputy Desmond.—It is not a policy decision: Government expenditure by way of taxpayers money——

Chairman.—If the Government take a policy decision to build ten conference centres, that is a matter for the Government and the Dáil. Our job is to ascertain whether the money was spent efficiently.

Deputy Desmond.—Mr. Chairman, do you not think that is a waste of public money?

761.Deputy Naughten.—Under the heading G.1 — Arterial Drainage Surveys — what types of surveys were those for either year, 1985 or 1986? Let us take the year 1985, on page 25.

Mr. Mahony.—Basically there were hydrometric surveys for the purpose of compiling data on the extent and velocity of river flows, operational conditions and encatchments proposed to be drained. The expenditure in relation to the G.1 provision in 1985 was £197,000. Most of that £170,000 was expended on the provision, maintenance and operation of gauges and meters for ascertaining the extent and velocity of river flows and approximately £28,000 on comprehensive drainage surveys including cost-benefit investigations.

Deputy Naughten.—Would they be much the same figures for 1986? I note that the expenditure was somewhat higher in 1986?

Mr. Mahony.—I think there was a Government decision taken that surveys would continue on four particular schemes. There are two schemes under construction and a decision taken that four would be surveyed.

Mr. Mahony.—The Owenmore is one, the Dunkellin/Levally, Mulcaire constitute the rest.

Deputy Naughten.—There would not appear to be an awful lot of money being spent on it — £28,000 in 1985. I note it is much the same for 1986.

Mr. Mahony.—The funds that are available at the moment for comprehensive survey work are limited and these surveys would proceed rather slowly.

Deputy Naughten.—What major drainage schemes are under construction at present under the subhead G.2?

Mr. Mahony.—We have the Boyle-Bonet in Sligo and the Monaghan Blackwater is the second one.

Deputy Naughten.—There was a geat deal of confusion some weeks ago where staff working on the Boyle-Bonet were told on Friday not to turn up for work on Monday, that they were being let go. On Sunday night word was sent to some of the staff that they were to turn up for work. What was the background to that?

Mr. Mahony.—I doubt if anybody was told for the first time on a Friday evening not to report on Monday. Lists of dates for short-time working had been circulated for sometime before that. The funds that were available for drainage, maintenance and construction work in 1988 were not sufficient to keep all the staff we had employed in fulltime employment for the full year. It was necessary——

Deputy Naughten.—I appreciate the background as to why short time was being worked, because there was not sufficient money, but why were staff told on a Friday evening that there was no work on Monday and why did work open up on Monday? What was the change from, say, 5.30 p.m. on Friday to 10 p.m. on Sunday?

Mr. Mahony.—The union side asked for further time to negotiate with us on how the short time working would be implemented. Those discussions are still ongoing at the moment.

Deputy Naughten.—Will this mean over-expenditure later on or will it mean that towards the end of the year work will just close down altogether?

Mr. Mahony.—The decision was that construction workers would be laid off for six weeks and some maintenance workers would be off for between one and three weeks. That is the present position. There are discussions with the union as to when that short-time working will be introduced, whether it is sooner or later.

762.Chairman.—This has been a baptism of fire for you this morning. I look forward to meeting again with you, the Comptroller and Auditor General and the Assistant Secretary of the Department of Finance. Thank you for being so well briefed.

VOTE 2—HOUSES OF THE OIREACHTAS.

Mr. Eamon Rayel (Clerk of the Dáil) called and examined.

763.Chairman.—There are no paragraphs in this report. There is simply the Vote of the Houses of the Oireachtas. Can I ask you about the 1985 accounts, subhead F.5 — equipment for broadcasting Oireachtas proceedings?

Mr. Rayel.—This subhead provided a special once-off grant of £100,000 to the Houses of the Oireachtas in 1985 in respect of capital equipment for recording and editing Dáil, Seanad and committee debates and for a new microphone system for the Dáil Chamber. The saving in 1985 is due to the cost of the broadcasting equipment supplied being a little less than anticipated.

Chairman.—You are aware that the proceedings of the committees are not being broadcast despite the agreement with RTE, despite the terms of reference of the agreement and despite the fact that money has been spent on this equipment. Has your office taken up with the RTE authorities as to why the proceedings of Oireachtas committees, in contravention of the agreement, are not being broadcast?

Mr. Rayel.—A working group of the Whips of the main parties has been set up. They are looking into the whole question of the broadcasting of proceedings, not alone broad-casting by sound but also television. A letter which you sent us some time ago in relation to the problem of privilege is among the matters to be considered by this group. They, in due course, will make recommendations to the Committee on Procedure and Privileges.

Chairman.—It seems extraordinary that RTE can send personnel all over the world to cover all sorts of events for great lengths of time and they cannot keep to an agreement with the Parliament of their country to cover proceedings which we have provided for and spent money in making the facilities available for.

Mr. Rayel.—I understood one of the problems for RTE was the problem of privilege for witnesses.

Chairman.—The same question of privilege applies to any member of the press. We are not talking about live broadcasting, we are talking about broadcasting. There is no question of any difficulty with privilege. Any journalist reporting these proceedings has the very same difficulty with privilege. That is a red herring and should not be allowed to gain currency.

Mr. Rayel.—I will take it up again with the Committee on Procedure and Privileges, with particular reference to this group who have been set up to look into the whole broad-casting issue.

764.Deputy Naughten.—By way of clarification, this matter has been discussed at the Committee on Procedure and Privileges on a number of occasions and, as Mr. Rayel has pointed out, there is a committee sitting and I understand they are to report in September. I am a member——

765.Chairman.—Do you think, say, a tribunal of inquiry, headed by a judge or a court, would have one of its staff withdrawn in the manner in which a member of the staff servicing this Committee was withdrawn? In other words, is there not a certain disrespect for the Legislature which should not come from the officials of the Legislature, particularly since you were asked not to move the staff concerned before consulting with the Committee?

Mr. Rayel.—There was no disrespect intended. I received a letter, dated 2 June, which asked me to reply as a matter of urgency that evening. I wrote and said I would see the Ceann Comhairle. I wrote a very detailed letter on 8 June to the Committee, setting out the Ceann Comhairle’s position in the matter. It was up to the Committee, if they so wished, to respond to the Ceann Comhairle.

Chairman.—You were aware that the Committee asked that there should be no changes until they met with you?

Mr. Rayel.—The point is I could not go further than what was in the letter of 8 June. I made a couple of efforts to see you during the week starting 13 June but unfortunately you had other more urgent engagements. I tried the following week but unfortunately you were not available either. We had no alternative but to withdraw Mr. Judge from the Committee and send him to the Inter Parliamentary section on 27 June, simply because nobody was there.

Chairman.—You are aware that the Committee requested to speak to you about the matter. You are aware that when this Committee came into office last year no reports had been published since 1979 and that the Committee have greatly upgraded their work-load and activities. We are certainly not prepared to return to that situation ever again. When will we have the third staff member for the Committee?

Mr. Rayel.—As I mentioned to you and to Deputy Desmond when we had a conversation about three weeks ago, I have been in touch with a senior official in the Department of Finance. Since February of this year we have had a senior clerk vacancy, which is equivalent to a HEO vacancy, and we now have a second one. I am hopeful, as a result of the discussion, that we will get two replacements by means of redeployment.

Chairman.—How soon will the Committee have their three staff members because that would seem the absolute minimum to conduct the affairs of the Committee at all?

Mr. Rayel.—I am hopeful that it will be the autumn. I will write to the Clerk of the Committee and let him know the progress being made.

766.Deputy Desmond.—In relation to the overall staffing of the Houses, do you have any figure for the reduction in the staffing between the end of 1986 and now. How many vacancies are there altogether?

Mr. Rayel.—I have a figure for vacancies since the first embargo came into being, which is 30. That would have been earlier than 1986. There are 30 vacancies now as compared with——

Deputy Desmond.—Of late, with staff on career breaks, leave or necessary absence, in the past year or two how many reductions have there been?

Mr. Rayel.—I would prefer not to hazard a guess. In the last year we have lost the Clerk Administrator, we have lost the systems manager, two senior clerks and there are two reporter vacancies but I could say that they occurred in the past 12 or 18 months. We have also lost an assistant librarian. If you wish I will send you a note.

Deputy Desmond.—Were the Houses given sanction for substantial reductions in the number of staff in the past two or three years?

Mr. Gallagher.—We are into a policy area here. We have tried where possible, given the constraints, budgetary and otherwise, to look after the Houses of the Oireachtas and treat it somewhat more favourably than other places. When we have had approaches from this Committee we have always tried to take them on board. There are some things we have difficulty in doing. A senior systems analyst was provided. We held a competition throughout the Civil Service and we found somebody to match up with the system. That individual decided to take up a job outside the country. In normal circumstances we would have difficulty in replacing him because that skill is in short supply. We spend money training systems analysts, an extremely mobile group in demand in other places and they clear out. By the time we would have been shopping for a systems analyst decisions had been taken in a budgetary context about the allocation for computerisation in the Houses of the Oireachtas and the particular individual was in to oversee a fairly hefty development. With the postponement of the expansion of that system, having somebody at that level, honestly, would have been wasteful.

Chairman.—The provision of two clerks and a typist for the Committee of Public Accounts is not favourable treatment by any manner or means. The reason this Committee had serious arrears of reports since 1979 was that we simply had not got anybody to do the work. It should not go abroad that there has been any favourable treatment for this Committee.

Deputy Desmond.—I want to make the point that the decision of the Government and the Oireachtas not to reconstitute the Committee on Public Expenditure, was a correct decision, but it is quite impossible for this Committee to discharge their overall remit with two staff. I appreciate the impossible situation which the Clerk of the Dáil faces. Is there any prospect of the Department of Finance considering favourably the sanction of an additional staff officer for this Committee?

Mr. Gallagher.—Taking your point about the expansion of the remit of the Committee, when that happens we would obviously have to take it on board as it will change the position fairly dramatically and we would be looking at it in that context. We are trying to get people by redeployment. We have a lot of pressure for particular types of people. Everyone is screaming for them and we have difficulties of that kind which we would obviously try to overcome. Basically, it comes down to resources and priorities and they are fixed effectively at political level and not at administrative level.

767.Chairman.—Leaving aside the consultants who are hired for committees of the Houses, I understand that from time to time consultants have been engaged to assist officers in the Houses of the Oireachtas. What subhead does that come out of?

Mr. Rayel.—I am not aware of any consultants being engaged to assist individual officers.

Chairman.—To assist the House, what Vote does, say, a consultant on Standing Orders come out of?

Mr. Rayel.—There was a consultant engaged but not specifically for Standing Orders. The consultant was engaged by the Committee on Procedure and Privileges to prepare a case on behalf of Deputies for the Review Body on Higher Remuneration.

Mr. Rayel.—The Committee on Procedure and Privileges engaged the consultant.

Mr. Rayel.—I know the one you mean now. Sorry, it was another case that was drawn to my attention. There is a booklet entitled Rulings of the Chair and there was sanction from the Minister for Finance to engage an officer who had just retired to bring it up to date.

Chairman.—Salaries, wages and allowances. Is it not unusual to take it from a heading like that? Most Votes have a heading for consultants.

Mr. Rayel.—Our separate consultancy Vote relates to committees. We could not charge it to that so we had the approval of the Department of Finance to charge it to subhead E.

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

VOTE 33—POST PRIMARY EDUCATION (RESUMED).

Mr. D. Brennan called and examined.

768.Chairman.—The Committee of Public Accounts are today resuming their examination of Mr. Declan Brennan, Secretary to the Department of Education, on paragraph 37 of the 1986 accounts, which for the benefit of all, again reads:

“Subhead L.—Appropriations in Aid

The VEC training programmes eligible for ESF aid referred to in paragraph 35 are planned in conjuction with Departmental inspectors whose estimates of the cost of the programmes form the basis of the applications for grant aid. The EEC Commission is informed initially of the estimated cost of each programme and a final composite claim for all programmes based on actual cost certified by each VEC is later submitted by the Department. The ESF grant is 55 per cent of the estimated cost or of the actual cost of each programme whichever is the lower and payments of 50 per cent (1983/84 — 60 per cent) of ESF grant aid are made to the Department by way of advances. Final claims must be submitted to the EEC Commission within prescribed time limits.

It was noted in the course of an examination of claims for grant aid on foot of which the Department of Education received final payments from the ESF in 1986 that two VECs had failed to furnish to the Department details of a total of nine programmes before the expiry of the time limit for the submission of the composite claim to the EEC. In six of these the Department included estimated costs of £3,561,505 in its composite claim which they stated to be the actual costs (the actual costs were later shown to be £3,150,205) while three of them in which final costs were later shown to be £187,627 were omitted altogether from the final claims.

Mr. McDonnell.—Members will recall that at the last meeting I was asked to do a summary of the Accounting Officer’s reply and that has been circulated to the members of the Committee. The thrust of the paragraph, as originally written, and as considered the last day, was to the effect that there appeared to be overclaiming of ESF aid. That was based on information available to me from the Department’s records at the time. It now transpires, as members will see from the summary of the Accounting Officer’s reply, that a detailed examination carried out by the Department shows a completely different scenario. In fact, the net result is a loss of aid of something over £280,000 and an obligation apparently to refund something over £11,000 as well as that. These figures are arrived at after some offsetting of positive and negative variations between the cost of courses as claimed and the cost actually incurred by the different VECs but the Department seem to be satisfied that this offsetting meets with the approval of the EC.

Chairman.—There are two questions here. The total write off appears to be of the order of £292,000. Why should such a large amount be written off by the State and what is the reason for what appears to be bad accounting practice where you had over claims and under claims and offsetting within programmes of the same VEC, and under claims by certain VECs in their total claim? What has been done to tighten that up?

Mr. Brennan.—I will answer the last question first because the point of greatest interest is possibly what can be done to rectify the position for the future. There will be difficulties at all times in this area, but revised guidelines have been issued to VECs and to schools about the completion of the forms on which they are required to furnish details of costs incurred on ESF programmes. Within the Department, some progress has been made by way of the use of personal computers to minimise margins of clerical error in examining claims. There will still be difficulty because this area is one, in common with the rest of the Department, which has suffered severely from staffing cutbacks. They are a matter of policy. They are accepted by us. We have to do the best we can and that is what we are doing. That does not mean that we see ourselves as being in the ideal staffing position. We are not. The staff of the Department has been reduced over a period of seven years by 33.6 per cent. That is not an approximation. That is deadly accurate. The total staff in 1981 was 1,327 and it is now 881. No one could argue that the Department have less responsibilities to carry now than they did seven years ago. In fact, their responsibilities have been greatly extended. It means, in effect, that a much tighter staff régime and a much more cost effective operation are in operation but it still leaves one with problems in an area of this kind.

The first question asked was why does it happen? The Department rely on returns from VECs and where VPTP claims are concerned from schools in the secondary and community and comprehensive area. The VECs would argue that they are in a somewhat similar staffing predicament to the Department. They have difficulties in rendering returns on time and in the past they have not always been rendered in a form which enabled us to make full sense of them and present claims in the most accurate fashion to the ESF, with the effect that potential losses have been incurred. They are potential because no moneys were actually lost, but we would have gained money if the claims had been submitted in full detailed form. The reason for the potential basis is that due to delays and due sometimes to the returns from VECs calling for further investigation, estimates have had to be made on what was due. This is something that I touched upon in my examination before the Committee last year. I have striven to ensure that estimates are now more accurate, and will be more accurate in the future so that such loss may be avoided. In each case where a loss of this kind or a potential loss is incurred, sanction has to be obtained to write off the amount of the potential loss from the Department of Finance. Invariably they have recognised that the circumstances justify their giving us that sanction.

Chairman.—You would pay for a lot of accountants with £280,000. What percentage of the total claimed from the European Social Fund did this £280,000 represent? How much was actually paid in that year?

Mr. Brennan.—The total received to date has been £167 million. We are talking here about a cumulative figure.

769.Chairman.—Have the Department of Finance any comment to make on this system?

Mr. McCaffrey.—The difficulties that have occurred in the Department of Education in the handling of the ESF are obviously less than desirable. We have pointed this out to them in the past and we have asked them to try to tighten it up. On the other hand, the Committee should be aware of the points the Accounting Officer has made about his staffing, which I think are relatively well founded. They are the same sort of difficulties that we all have but in this case they are probably a bit more severe than in others. Equally there is a factor to be taken into account here, that the work involved in dealing with the returns of the VECs is very complex because of the number of authorities involved in processing the information and the different accounting systems that are in operation. Brussels have a different accounting system to our national one, and in some of the authorities carrying out ESF programmes, the accounting system is different from the national one. The work is very difficult and is extremely complicated and detailed. I have a certain sympathy for the Department in the difficulties they had had in dealing with this. It is regrettable, but as far as I know the Department are doing their best to try to cope within the constraints under which they are working.

770.Deputy M. Kitt.—On the last point made by the Department of Finance official about the complications involved, am I correct in assuming that the VECs give scholarships or grants for very few courses now? It is the ESF grants which we are discussing here that are mostly applicable. In Galway, as far as I know, the ESF grants are operated through the third level colleges. How can the Department of Finance say that it is very complicated when ESF grants are operated through the colleges and a very small number of grants through the VEC system?

Mr. McCaffrey.—It is right that a lot of money is going out in allowances paid through the colleges, but it is equally the case on the VPTP programme that there are 23,000 to 24,000 participants and in the case of the young people on those programmes there are monthly allowances being paid. These payments are made by the VECs and not the third-level colleges. Most committee members are better aware than we are of the size of the committees handling these moneys and of the staffing they have got. I should add that VPTP grants are being paid not only to pupils in VEC schools but also to pupils in certain community and comprehensive schools and some secondary schools. In addition, Education is involved in running joint programmes with CERT and AnCO. We do not readily go out of our way to make allowances for this sort of thing but I think this is a difficult area and the committee should be aware of it.

Mr. Brennan.—So far as the complexity of the arrangements are concerned, it is simply not just a case of getting a return from a school or a VEC of grants and allowances paid to individuals, and the aggregation of those; there is also the question of apportioning costs to a programme and a proportion of the general costs of the VEC in all areas must be apportioned to any particular programme for which ESF aid may be claimed. This is accepted by the EC. We have found in the past, and we hope this will not be a problem in the future, in some instances that items have been left out of the calculations. The Department discover this and have to seek an apportionment. For instance, if the question of depreciation on buildings is involved, the appropriate apportionment of the VEC’s costs under that head has to be made and related to the individual programme in respect of which ESF aid is being sought.

771.Deputy M. Ahern.—Mr. McCaffrey mentioned that there are different accounting systems operating in the schools in this area. Is it not possible in a small country like ours to have a common accounting system?

Mr. McCaffrey.—That is a very big question and it is one which I personally am not in a position to talk about. We are faced with the difficulty of, say, semi-State bodies and the Government where you have different accounting systems, one operating on a cash basis and another operating on an accrual basis and the difficulties to which this gives rise. Obviously prima facie it would be better if we all operated the same system but then we operate different sorts of organisations. Commercial semi-state bodies run a different type of organisation for which certain accounting standards are appropriate to the sort of thing the Government operate. There may be more of them there than are absolutely necessary but different accounting standards are probably inherent in the very complex system we operate in the public sector.

Deputy M. Ahern.—The schools and colleges are not semi-State bodies. Would they not operate on a cash basis as well?

Deputy M. Ahern.—Therefore the ideal would be to get them all operating the same system so that in the future these problems will not arise.

Mr. McCaffrey.—To be quite frank, I look at the problems that face me and try to make out a list of the things we will try to do over the next year but I do not think that that would be my top priority. We are suffering in the same way as the Department of Education — a shortage of staff. There are other priorities I would see in front of me rather than that one.

772.Deputy Flood.—In the summary we received of additional enclosures from Mr. Donlon for this meeting, and this is the first point I want to make, it is suggested that there is a net potential loss of £280,541 and the Department is seeking sanction from the Department of Finance to write off these losses. I would like to try to understand what exactly this means. We are talking about a net potential loss. Are we talking about an actual financial loss, and if so, which Department incurs the loss?

Chairman.—It is worth putting on the record that it is money which the State could have received had it put in the correct claims. Now that the date has gone by, we cannot claim it because we put in an incorrect claim. Therefore, the State is at a loss to the tune of £280,000.

Deputy Flood.—We have not claimed it but the State has used it. Is that not what we are saying?

Deputy Flood.—The only point I would make is that it is extraordinary that this could happen and I do not accept that it could happen because of staff shortages. Quite frankly, I am getting a bit sick and tired of hearing this type of excuse, which I consider to be an excuse, for what I would view as a sloppy approach in the handling of these matters that results in the State losing so much money. This is not acceptable and should not be put forward as one reason why such a potential loss could accrue to the State.

Chairman.—Before you leave that point, Deputy, it is important to put on the record a quote from the summary of the reply received from the Secretary of the Department of Education to queries put to him by the Comptroller and Auditor General:

As a result of a thorough examination carried out by the Department and the review by the VECs of their returns of expenditure, the actual costs were found to be higher than the costs included in the original claims submitted to the ESF by £510,078.

Fifty-five per cent of that amount equals £284,541. In fact, the claims were understated by £510,000 but the actual loss is 55 per cent of that figure. That is how it arises.

Deputy Flood.—That leads me on to the role of the VECs, and again I am reading from the summary which states that final costs exceeded estimates to the extent of £528,000 in the case of five VECs. Am I to understand that there are five VECs who submitted estimates that were less than the final cost in the amount of £528,000 when the actual position was gone into? Is that correct? How was this information accumulated? Was it accumulated through individual schools putting forward their particular estimates which found their way up to the VEC who then examined the estimates and sent them on to the Department?

Mr. McDonnell.—I am not sure what input the VECs have at the estimates stage. The estimates would have been sent forward to the European Commission at an early stage. I do not know whether it is purely a departmental estimate or an estimate prepared on the basis of, perhaps, preliminary information received from the VECs but the end result is, as the Deputy says, that the estimate, by whomever it was submitted, was less than the final cost to the extent of £528,000 in the case of five VECs.

Mr. Brennan.—The estimates are not normally prepared by the VECs. We do not expect estimates from the VECs, we expect actual statements of the costs incurred. When we get these statements in time we examine them. We may have to clarify certain issues. The apportionment of costs as between one programme and another programme may arise in that event. When we are satisfied that we have got an accurate statement of the costs, as a result of that examination after consultation with the VECs, the claims are forwarded accordingly. But the estimates were prepared by the Department in these instances because returns were not made available in time by the VECs. The position has improved. I am told that in 1987 all returns were received in time. Not all were received on time in 1986. The Department submitted estimates based on their understanding of the scope of the programmes and it turned out that these estimates were understated. The trouble about this, and we discussed this when examining the accounts for 1984 and 1985, is that in ordinary circumstances when you submit an estimate, an estimate is taken to be an estimate, which can be corrected later when the actual figures are available and redress can then be obtained one way or the other, that would be, in favour either of the ESF or ourselves. In this case if we overestimate, we certainly will not be paid more than the actual costs that have been established. We will be paid only by reference to the actual costs when they are finally established. If we under-estimate we are limited and bound by the figures of the underestimation. That is why it occasioned some merriment at the time when I suggested that it would be necessary for us to see to it that estimates were directly relevant to the real costs in future.

Deputy Flood.—What has come out of the last contribution is that the problems have arisen because the five VECs, and maybe others, failed to provide the information on time and forced the Department into making estimates. Would that be a correct assumption?

Mr. Brennan.—The difficulty arises under two heads. First, we may have to estimate if we do not get returns. If we do not have our estimates in on time, we do not count at all and we are not in the shake up. It is something like the situation at present which has been given a lot of publicity in the CAO. You are in or you are out. If you are not in, you are out, and that is it. There is also the problem of establishing whether the figures of cost that come from the VECs are accurate. We believe we are making progress in that area. I am not here to make any special plea on behalf of the Department or the VECs but merely to explain what happened. In the early stages of this programme and for the first few years, you are in an experimental stage. The staff assigned to the ESF section of the Department in 1984 was two and a half. You may wonder how you can have half a head of staff. It means that that person rendered half his time in the ESF and half his time somewhere else. By 1986 we had a very substantial increase in staff, we had an increase of 140 per cent. That meant we had another three and a half heads of staff. We now had six heads of staff. For six heads of staff to cover all these programmes and carry out the detailed investigation that is involved in claims and costs and to establish the appropriate guidelines and to establish that VECs and schools followed those guidelines — I do not think anyone could claim that the section is over-staffed. There are many areas where you would find staffing supplied on a more generous scale.

Deputy Flood.—I hope that following this experience efforts will be made to streamline the operation in so far as the VECs are concerned and any other organisation that failed, as I can detect from these reports, to live up to their responsibilities to provide as accurate information as is possible on time and not force another Department to make decisions and make estimates that in reality are a potential cost to the State.

Mr. Brennan.—That is our earnest wish. We do not have any compelling power to insist that people render returns because, whether the returns are made or not, the budgets of the VECs remain unchanged. In the case of schools we have attempted to exercise some influence over them by telling them that, unless they make their returns, they will get no VPTP payments at all and that is working to some extent. I would like to assure Deputy Flood that we are in better shape now than we have been in the past.

773.Deputy Harney.—It strikes me that what we are talking about here is a very high level of incompetence. I am not sure whether the incompetence is in the Department of Education or wherever but I think ultimately the Department are responsible. The sooner we make people accountable for blunders like this, the sooner people will begin to lose positions or whatever, the quicker we will see an end to this kind of incompetence. It would seem to me that, given the extent of the error involved and given the length of time that this country has been involved in ESF funding, surely we should have had very clearly established quidelines before 1987. Mr. Brennan said guidelines were established in 1987. It seems we have waited a very long time to have these established guidelines. Could I ask two questions? First, what were the names of the five VECs in question and, second, where did the estimates go wrong? Was it in relation to staff costs, or what exactly was the nature of the error?

Mr. Brennan.—There were guidelines from the beginning. The guidelines were originally designed on a rather ad hoc basis. We were living with the problem from day to day; we were establishing them for the first time. What I said was that revised guidelines were introduced in 1987. Until the scale of these errors was discovered, it was not apparent that the guidelines were inadequate. We hope the guidelines now established will be more effective. We will still be up against certain logistical problems in terms of the resources available to carry out this exercise. The Deputy asked a question about the actual committees involved. They were the city of Dublin, town of Galway, town of Sligo, County Westmeath and city of Limerick VECs. The question was asked: under what head? I do not have a total breakdown here of the heads under which costs were understated. As is apparent from the synopsis that has been supplied by the Comptroller and Auditor General, there was under statement of costs, there was over statement of costs, there had to be a diversion of costs from one programme to another because the Department in their examination of claims discovered that such diversion was appropriate. I cannot go into detail on the breakdown. The summary is available and that can be given. It summarises the total for the various VECs in respect of their individual programmes. As I said earlier, it is not merely a question of establishing what is paid out directly in respect of a programme to the individuals attending the programme, or even in respect of the salaries of people engaged in giving instruction on the programme. It is a question also of apportioning relevant overheads in the correct way.

774.Chairman.—With regard to the EC officials who came and inspected your books, did they come specially because of any doubts they had about the veracity or accuracy of the application or is that an annual review?

Mr. Brennan.—It is not an annual review. The answer is no. They did not come because of any doubts being raised. They were given full access to all the papers. They are the same papers to which the Comptroller and Auditor General would have access. The situation was explained to them and they accepted these explanations. We have had no problems with them.

Mr. Brennan.—We last met here on 26 May. We furnished our detailed report just ahead of that on 23 May.

Chairman.—Between yourself and the Department of Finance we would expect that there would be a tightening up of the situation in this area. We will be monitoring this particular area because there seems to have been a great deal of looseness in the past which we expect will now be tightened up. I think we can note the paragraph for now if the Committee agrees. Thank you, Mr. Brennan.

VOTE 38—TOURISM (1986)

Mr. N. McMahon called and examined.

775.Chairman.—The Committee will now examine Mr. Noel McMahon, Secretary of the Department of Tourism and Transport in his capacity as Accounting Officer for that Department. You are welcome, Mr. McMahon.

Chairman.—There are no paragraphs in the Comptroller and Auditor General’s report on your Accounts this year, so we will go straight into the Vote. We have already examined you on the Transport and Communications Votes, it is just a question of the tourism vote. Under the heading of Consultancy Services, may I ask about the figure of £153,000? I presume part of that was part payment to Price Waterhouse for the examination of tourism? What was the total payment to Price Waterhouse for the in-depth examination they were supposed to carry out on tourism?

Mr. McMahon.—Parts of the report have been implemented and parts of it are regarded as policy guidance and strategies to be followed for the ongoing development of the tourist industry. The Minister published the report immediately on receipt of the Price Waterhouse findings so that it would be available to the public generally and to the various sectors of the industry. Since then there have been a number of developments in tourism, including the transfer of responsibility at ministerial and departmental level and a wider consultation with the industry on the basis of the Price Waterhouse findings. This took the form of a public tourism forum which took place in January of this year followed by a special task force to identify particular measures for 1988 which have been taken to improve the results and the general performance of tourism this year. That exercise is due to be repeated, and a further tourism forum will take place later this month.

Certainly, there are aspects of the Price Waterhouse recommendations that have been very successfully implemented. One of the concerns of the consultants was the competitiveness of travel to Ireland. Everybody will be aware that aviation policy has been radically changed over the past couple of years, with the result that there are now considerable increases in the number of routes being served, in the capacity that is provided and a considerable lowering of prices, especially for tourists.

We have also implemented various other measures such as the special campaign called the “Write and Invite” campaign designed to promote extra tourism from the UK, in particular; a special drive at the development of conference business which was launched by what was called the Conference Ambassador Programme and special funds to improve entrepreneurial investment and performance in tourism. There have been additional incentives provided through the business expansion scheme which were previously not available to investors in tourism.

There has been a general reorientation of the marketing in tourism directed at particular markets and particular types of activities. I just mention these as examples of the way in which tourism policy generally is being reformulated, taking account of the Price Waterhouse recommendations.

Chairman.—It is a fact that there has been a reduction in transport cost into the country, something that you and the Ministers concerned to date should be congratulated on. May I ask if you might be in a position, Mr. McMahon, to give the Committee a broad thumbnail sketch of what Price Waterhouse said?

Mr. McMahon.—Very broadly, they felt Irish tourism was handicapped, and that the product was not as attractive to visitors as it should be because we have suffered competitively with what was on offer from other competitive markets. The costs of getting to Ireland were a deterrent to visitors and they believed also that the general marketing strategy could be improved; in other words, that it should be more finely targeted towards the particular categories of people we wish to attract to Ireland rather than trying to sell Ireland in a global sense. To put it, as you say, in a thumbnail, they were concerned with the quality of the product, the price or competitiveness of the product and the general marketing efforts.

Mr. McMahon.—It may be somewhat early to make a judgment on that. We will certainly be asking Bord Fáilte to report to us on the response rate, on the follow-up inquiries and the number of actual visitors that can be identified as having been produced by it. It is a little bit early to come to conclusions on that at this stage.

Chairman.—There was a suggestion that there was a great collapse in the number of American tourists visiting Ireland this year. Is that correct?

Mr. McMahon.—No, the information available to us at present would not support that belief. The American market is not performing as well as we would have hoped and certainly not as well as other markets. This is generally attributed to the problems of the weak American dollar, not quite as difficult as it was, but certainly it made holidays in Ireland and in Europe rather more expensive. Other internal US considerations appear to have reduced the number of visitors to Europe from America as compared with previous years and as compared with our growth targets. Notwithstanding that, and while figures at this stage have to be treated as rather preliminary estimates, the indications are that the number of American visitors for the first seven months of the year is about the same as we recorded in 1987. There are a number of significant months still to come in the 1988 season.

Chairman.—Has the Dublin Millennium led to more visitors to Dublin and has it brought more tourism into the country?

Mr. McMahon.—It certainly has led to an improvement in the number of tourists into the country. I am not so sure that I could quantify them. It certainly has brought a great deal of publicity outside Ireland to activities in Dublin and it has improved the quality of the recreation and entertainment available to visitors who come, so I have no doubt at all that it has contributed to tourism in Dublin and indeed in Ireland generally in the current year, but I would not like to put a figure on that at the moment.

Chairman.—Let me ask you one final question in this particular area. We hosted the Eurovision Song Contest this year, the Irish football team did well in the European Cup, Barry McGuigan has been doing well in boxing — do we capitalise on these things? Do we use them to advertise the country, to put us on the map, to let people know that it is a friendly, sporting sort of place to come to? We have also had the Millennium this year, the Irish Open and the Horseshow as usual. Do we use those things to the benefit of the country?

Mr. McMahon.—I believe we do. Certainly the Eurovision Song Contest itself represented a considerable marketing advantage to Ireland because it exposed to a huge and vast audience the attractions of Ireland. I believe that was very well presented and, therefore, was a great benefit to Irish tourism. When it comes to individual successes such as the soccer team, cycling, Kelly, Roche and so on, certainly Bord Fáilte have been concerned to harness the excellent image of these successes to the benefit of Irish tourism. For a number of years, in fact, which predate the present crop of successes, Eamon Coughlan had a special mandate from Bord Fáilte in North America, to project Irish tourism, to wear the right type of clothes, to appear on the right television programmes and they have been endeavouring to do the same with other sporting and cultural successes.

Deputy McGahon.—While Ireland’s sporting successes might indeed encourage a few people to visit this country there is the other side of the equation — the political climate in this country, particularly in Ulster, and the atrocities of the IRA. Would you agree that these incidents keep a lot of would-be tourists away from this country? Did the report indicate the extent to which these incidents inhibit visitors coming to this country?

Mr. McMahon.—One must agree that the events in Northern Ireland and the publicity arising from those events are negative factors for those who are trying to promote tourism into Ireland. One has to say that were it not for those problems we would have a larger tourist industry and a greater number of visitors. Nevertheless one must record the fact that Ireland is not the only country which is the subject of violent incidents and other adverse publicity events.

Deputy McGahon.—As a tourist I would not be too anxious to go to Beruit. I believe that Ireland’s image in the real world has been dragged in the mud by the atrocities of the IRA. We are only shadow-boxing here in suggesting that people will come to Ireland to enjoy the Millennium and other events like that. The real reason tourists are not coming to this country is that they are afraid to come as, indeed, people from the South of Ireland are afraid to go near the Border. The other question I should like to ask is whether the report gave any breakdown of the countries from which our tourism influx comes?

Mr. McMahon.—Taking the first question, while I have acknowledged the adverse effect of the problems in Northern Ireland, one has to remember that more than 2.5 million people visited Ireland in 1987 and spent £700 million here. Notwithstanding the problems obviously a lot of people are interested in coming to Ireland and spending their holidays here. It is important to keep it in perspective. There have been scenes of violence in other countries also. There have been bombs in Brussels, Paris, Rome, Athens and in almost any city you care to name which have also received adverse publicity. I think a sufficient number of people are aware that this is almost entirely a peaceful country, that visitors are welcome here and that there is a deliberate policy of welcoming people to Ireland. I do not accept at all that it is a waste of time or effort to endeavour to promote tourism. There is a vast tourism market and while Northern Ireland is a problem for us we should not be quite so negative.

Chairman.—Before you move on, Mr. McMahon, you say it is a negative factor — and I think everybody would accept that — but do you think it is the single most negative factor?

Mr. McMahon.—That would be a rather subjective judgement. There is a range of different factors that affect the decision of a potential tourist — whether he is interested in recreational activities, or in lying on the beach, the amount of money at his disposal and his cultural or historical links. All of these things add up to decision-making and I would not like to isolate any particular factor.

Deputy McGahon.—Mr. McMahon did not answer my question. From what countries do we derive most tourists?

Mr. McMahon.—I was coming to that. In terms of the number of visitors, the total number of overseas visitors, excluding Northern Ireland, in 1987 was just over two million. The largest number, 1,200,000 came from Great Britain?

Mr. McMahon.—Yes. The next largest was North America, which accounted for about 380,000 visitors. Continental Europe accounted for about 370,000 visitors and other areas accounted for approximately 90,000 visitors.

Deputy McGahon.—I am sure you would agree that that is a very large number of visitors from Great Britain and that if we could resolve the problem in the North of Ireland, the English market is the area we should look at as having the greatest potential. The American influx is rather small. There is one other question I should like to ask. Are Irish people abroad availing of the low cost flights or how do you ascertain what visitors come here as tourists or what visitors come back to visit their families?

Mr. McMahon.—Certainly the figures include Irish people living in the UK or in other countries who come here for holidays, to visit relatives, or for other reasons. They also include people who come strictly for holidays and on business visits. We can estimate the proportions between these different categories of visitors. The Central Statistics Office do this every year. Perhaps you are interested in knowing what the figures are. Very broadly, visits to relatives account for about 40 per cent of the numbers of visitors. Holiday-makers without connections here account for about 35 per cent and business and other visits account for the balance. I would have to add that we do not regard people who come to visit relatives as in any way unwelcome. Of course, their expenditure is just as valuable and the economic impact which they make here is of great benefit to us. This is part of our policy. They do not come here by accident or in some passive way. Part of our policy is to attract them to Ireland.

Deputy McGahon.—Nevertheless they constitute a very high proportion of the visitors from the UK to Ireland and this indicates the extent to which emigration has taken root in recent years. Would you agree with that?

Mr. McMahon.—It reflects a lot of things, not just emigration in recent years. The links go back over a number of generations. Of course there is a good deal of traffic the other way. A very high proportion of Irish people who go abroad do so to visit their relatives outside the country. It is important that we continue to ensure that Irish people who have emigrated and their families continue to ensure that Irish people who have emigrated and their families continue to visit Ireland both for social and cultural reasons and also to counterbalance the expenditure by Irish people who decide to go abroad whether to visit relatives or to go on holidays.

776.Deputy Flood.—In relation to the facilities we have in this country, a fair effort has been made in recent times to upgrade them, particularly the indoor facilities. What sort of progress are we making in this area?

Mr. McMahon.—I agree it is important that we should have good facilities for visitors. We do not offer unlimited sunshine which brings people in their masses to other countries so it is important that we offer them facilities which are suitable to our climate and culture. The efforts which we have been making in recent years take various forms. Part of the funds which we give to Bord Fáilte every year are allocated specifically to enable Bord Fáilte to provide incentives for the development of amenities of various kinds, including the sporting and recreational facilities which abound here — fishing, golf, hill-walking, equestrian events, marine events and so on. In addition to that, other programmes which can be influenced from a tourism point of view are used very extensively. It is part of the policy of the Minister for Tourism and Transport to ensure that other Government Departments who are involved in the development of facilities and amenities, such as the Office of Public Works, the Department of the Environment, the Department of the Marine and the Department of Forestry, all take cognisance of the value of the work they do in the development of the product for tourism. We have also been endeavouring to ensure that other funds such as the International Fund for Ireland and the moneys available from Brussels from the European Regional Development Fund are channelled in such a way as to ensure that the tourism advantages of what we have to offer are maximised. In addition, over the last year we have extended the business expansion scheme to include tourism activities such as the all-weather facilities in hotels, equestrian events, marine equatic events, and so on. I present all of these to you as a programme of measures designed to ensure that the development of our product get a high priority in all Government programmes.

Deputy Flood.—Is specific attention being paid to the point of entry to this country? I often times get complaints, particularly at the ports and points of entry, about the type of facilities which are there. There is a lot of criticism about the port facilities and the transport connections to, for example, the centre of Dublin. There has been considerable criticism about them. Is that an area of concern to the Department and, if so, what are the Department doing or how can they deal with what I believe to be fairly substantial criticism? The ports are the first view a tourist gets of this country.

Mr. McMahon.—Visitors enter this country in three ways; either the land frontier across the Border, through the airports and through the seaports. I do not know if I interpret the Deputy’s question correctly, that he is concerned more with the latter, the seaports? The main points of entry are Dublin, Dún Laoghaire, Rosslare and Cork and the facilities there are, in our view, certainly quite adequate in relation to our tourism needs. When I say quite adequate, of course, it is important that we aspire to the standards which people meet in other countries because all of these things add up to the general image of the country and the attractions for visitors. I would not regard the present facilities as being perfect and we would be concerned to ensure that our facilities are maintained at the highest possible level. Responsibility for port affairs does not rest with the Department of Tourism and Transport but that does not mean that we are not concerned with them. As I mentioned earlier in another context, we are concerned to ensure that all Government Departments and all public agencies, are tourism-minded in their own investments and in their own activities. We have a high level inter-departmental policy co-ordination committee which is chaired by the Minister of State, Deputy Denis Lyons, to ensure that other Departments, and this will include the Department of the Marine and the Office of Public Works who have responsibility for ports, are conscious of the relevance of their activities to tourism. We would hope to see, given the present priority which the Government are giving to tourism, a gradual improvement in the facilities available both at points of entry and, indeed, within the country.

Deputy Flood.—Have you ever carried out a calculation as to how many tourists it takes to create one job?

Mr. McMahon.—That is a question to which there is no scientific answer. In fact, the number of people who are in jobs as a result of the tourist industry is, in itself, not easily calculable. The number of people directly employed in servicing tourists is about 35,000 but there are a lot of extra jobs that are supported by tourists. There are those involved in the manufacture of products that are used for tourism, in services which are necessary as an adjunct to tourism and, of course, there are jobs supported by the extra speed which is created by tourist money circulating. That depends, to some extent, on issues which cause a good deal of controversy among economists; it relates to the extent of the multiplier which one uses. I do not think I can give a direct answer to the question. What I can say is that at the moment, on a conservative estimate, there are about 55,000 people here whose jobs are created or supported by tourism. The current targets for tourism are directed towards increasing that number by 25,000 over the five year period of the Programme for National Recovery.

Deputy Flood.—This is my final question and Deputy McGahon touched on this topic. It relates to what I would term as the real tourist, although all visitors to the country are very welcome. What I am talking about is the genuine tourist coming to Ireland for the first time and who has never lived here. I am talking about 35 per cent of the 1987 figure of just over two million. We are really talking about what I would call the genuine tourist who has been netted through the efforts of our tourist organisations. I consider that figure to be extremely small. I believe that we can develop tourism if we can genuinely convince a person that he or she ought to come to Ireland on a holiday. That is really where our tourist organisations, as a matter of national policy, have been weak in the last number of years. It is an area we have got to try to develop and I hope that will be an important aspect of any changes or any efforts made by any organisation working in the tourist sector. In my view 35 per cent of two million is extremely small.

Mr. McMahon.—I do not disagree with the Deputy. Could I just comment that the 35 per cent represents 35 per cent of the number of visitors. The actual revenue which is generated as a result of visitors would be some-what higher than that because the average genuine tourist spends more. Of course I agree that this must be a salient point of tourist policy for the next year and, indeed, it is.

777.Deputy M. Ahern.—Under subheads D.2 and D.3 — Development of Holiday Accommodation and the Development of Supplementary Holiday Accommodation — the grant was £368,000 and the expenditure was £288,000. The expenditure was 20 per cent less than the grant. For tourism development works the expenditure was about 20 per cent less than the grant. I see from the explanatory note that the reasons for the expenditure being less than the grant was that the applications materialised more slowly than expected and the demand for grants was less than expected. Why do you think that the demand was less in both cases?

Mr. McMahon.—I could venture to give an opinion about it. I stress that it is an opinion because we are dealing here with a whole range of different people who make their own decisions. The factors in each case might vary. A relevant factor is that during 1986 some changes took place in our taxation laws which caused some hesitation or uncertainly among people whether to continue to provide holiday accommodation or, indeed, to invest in holiday accommodation. Those factors have since been removed but at a certain point in 1986 people found it less attractive to cater for visitors in supplementary accommodation. This may have caused some loss of interest in investment at that time. The matter was remedied by subsequent decisions but that was a factor at the time.

Deputy M. Ahern.—You have answered my second question, it has been remedied since.

778.Deputy McGahon.—Mr. McMahon spoke earlier of facilities. I believe that the tourist coming to this country does not particularly expect sun, he comes for the beautiful scenery and the 40 shades of green. What he is concerned about is realistic prices. Do you accept that this country has extraordinary high prices and that people can have holidays on the Continent cheaper than they can have here? Are flights to this country subsidised in any way for the genuine emigrant that Deputy Flood speaks of? Have the Department looked at the possibility of issuing petrol coupons to genuine tourists? The other questions I would like to ask is, what areas of the country receive most grants and what money is spent in the Border area in relation to developing tourism?

Mr. McMahon.—The Deputy has asked a number of questions and please forgive me if I have to be reminded of them. He started off about price levels here. Anybody, such as the Minister for Tourism and Transport or myself, anxious to bring visitors to this country will agree that if we had lower prices the job of attracting people would be easier. Many of the prices are not under the control either of the tourist industry itself or of the Minister responsible for tourism. The general structure of costs, the wage levels, the taxation levels, are nationally determined and related to broad economic circumstances and those concerned with tourism have to operate as far as possible within that. Nevertheless, we have endeavoured in recent years to ensure that the needs of tourism are recognised in the formulation of national policies and we succeeded in securing reductions in the levels of VAT, for example, for accommodation, for meals, and so on, and these have been quite beneficial and have been appreciated by the industry who acknowledge the benefits. On fares into Ireland, you asked if any of them are subsidised. The answer is no. There are no subsidies for travel to or from Ireland. Transport is expected to operate on an economic basis, but it is the policy of the Minister and the Department to ensure the lowest possible fares and for that purpose pressure is maintained on the carriers, especially the nationally based carriers, to take account of tourism needs in their pricing policies. In order to ensure that prices are not higher than they used to be, we have introduced a more competitive transport regime in recent years and this has had quite a beneficial effect on price levels. At this stage I have to confess that I cannot remember your next question.

Deputy McGahon.—Have you looked at the possibility of issuing petrol coupons?

Mr. McMahon.—Yes indeed, and not only looked at it but in 1987 we ran an experimental scheme of petrol vouchers. That has not been repeated in the current year but another programme, also on experimental basis with a somewhat similar objective, is being introduced for the autumn of this year, that is, an arrangement for a rebate on the car hire costs for visitors which is valued at approximately 50 US dollars for each car hire event. The value of these will be monitored and I am sure will be used in the formulation of future policy. Our aim is to ensure that tourist facilities are provided on an economic basis and that the need for subsidy is removed as far as possible because it is not an ideal instrument in itself. It may be resorted to as necessary to give a boost from time to time but I think basically we would prefer to see a tourist industry which can provide an attractive service on an economic basis and make a proper return on investment.

Deputy McGahon.—That would give a boost to car hire firms but it would not give any particular advantage to a person bringing his car over from the UK. What areas of the country receive most grants? Can you give me that figure? What money is spent in the Border region?

Mr. McMahon.—In a general sense I could try to help you on that. Certainly there are special schemes which give particular recognition to the needs of the Border regions. There are two and I think I may have mentioned them in passing at an earlier stage. There is the International Fund for Ireland which provides funds under the general umbrella of the Anglo-Irish Agreement — for the development of infrastructure and services, not purely for tourism but including a high tourism dimension in the Border counties, the five Border counties plus Sligo — there are six counties involved — and, indeed, in the counties on the other side of the Border. Altogether we have so far been able to allocate £3 million for the six counties on this side of the Border for tourism projects alone, apart from other activities. In addition to that, under the European Regional Development Fund we have secured an allocation of £8 million for infrastructural developments operated by public service agencies like county councils, the Office of Public Works, and so on, for the same six counties and because this is Regional Fund money, it must be matched pound for pound by State expenditure so the value of that £8 million is in fact £16 million. These are specifically for the six Border counties.

Deputy McGahon.—When did Sligo become a Border county? Why has it been included?

Mr. McMahon.—I did not describe it as such. I said the Border counties plus Sligo.

Deputy McGahon.—Why the “plus Sligo”? Why should it be classed as a Border county when it clearly is not? Is it for political expediency?

Mr. McMahon.—I would find it difficult to agree with that latter comment. I think it was based on the evaluation of the needs of particular counties having regard to the location and particularly proximity to the Border.

Deputy McGahon.—I take exception to it being included because Sligo Airport benefited from a significant dollop of money from the Regional Fund some years ago. By no stretch of the imagination is Sligo a Border county. Let me say to you in relation to the international fund, it seems to be benefiting individuals and various firms. I would have thought that that money should have been spent on a community basis and that local authorities should have been given the spending of that money.

Mr. McMahon.—It is important to bear in mind in this case that this is not State money. It is not voted money. It is money subscribed by other Governments and they prescribe certain criteria or objectives in relation to how this money will be used. One of these criteria is that it should be used to prime private enterprise activities and private enterprise ventures. It is against that background that the decisions by those who administer the fund must be made.

Deputy McGahon.—Nevertheless, a prominent Donegal family recently received £0.25 million. That money should have been given to Donegal County Council for community development rather than to bolster private individuals.

Mr. McMahon.—I am sure you will appreciate that the donors would have some rights in setting down their criteria as to how the money would be spent.

779.Deputy Desmond.—Has the Accounting Officer any observations to make on the fact that the Bord Fáilte grant-in-aid has been reduced very substantially in the past 18 months? I am sure he would accept the figure. Whereas we are discussing £21.5 million under Subhead D.1 as the outturn figure for 1986, what comments has he to make on the fact that the provision for last year was £20.7 million, which was a substantial reduction in the grant-in-aid figure, and the provision for 1988 is £20.2 million, again a substantial reduction in the voted grant-in-aid to Bord Fáilte. Does he share the view that the inevitable consequence of that reduction is a diminution of the tourism promotion and tourism drive in the country in the past 18 months reflected in the reality of 1988 where there has been a downturn in the number of tourists coming to this country?

Mr. McMahon.—I would have to disagree with the Deputy. I do not accept that the allocations that have been made in 1987 or 1988 imply any diminution of the effort that is being made to develop tourism and I certainly do not accept that there has been any reduction in fact in the number of visitors to this country. In fact, there has been a very substantial increase in 1987 and a further substantial increase n 1988.

Deputy Desmond.—On that point alone, you are aware of repeated statements made by the hotel industry that there has been a downturn in 1988 and that the number of tourists arriving and spending money in the country has fallen.

Deputy Desmond.—I would be agreeably pleased if you could advise me to the contrary.

Mr. McMahon.—There have been some expressions of disappointment by some sectors of the tourist industry about the number of tourists in the country. I am not so sure that it has been suggested by any sector that the total number of visitors in the country is down on last year. The indications are that for the period for which estimates are available to us, which is up to the end of July, the number of visitors to Ireland were up by between 13 per cent and 14 per cent. As regards the hotel industry, some sectors in the industry in some areas of the country have suggested that this increase is not reflected in the number of people taking overnight accommodation in hotels. If that is what they say, I have to accept that. It has to be borne in mind that visitors to this country are a very diverse group of people. They pursue different types of activity here and they stay in different forms of accommodation. It also has to be accepted, looking back to a discussion we had earlier, that a considerable proportion of the increased number of visitors to Ireland may be people with Irish connections who do not necessarily book into a hotel bed, but they use the facilities which are provided by hotels and other catering institutions. They spend their money on meals and refreshments and they attend functions. They are of considerable benefit to the tourist industry. It may be that different sectors of the industry share in a different way from the variation in the mix of visitors. I have no hesitation in saying to the Deputy that there are far more visitors into the country this year than there were in 1987 and that in 1987 we had the largest both in numbers and revenue terms that we have ever recorded in tourism. To go back to the Deputy’s original premise——

Deputy Desmond.—Let me finish off that point. The number of hotel bed nights in terms of occupancy is discernible data. Hoteliers I have spoken to from Donegal to Killarney have assured me that their bed occupancy is down. Visitors either sleep in their ethnic homes or they frequent guesthouses or hotels; they do not stay overnight in the local pub, except at some of the festivals, and they must avail of some accommodation. If we have an increase of 13 per cent or 14 per cent, surely the data is available from the registered guest-houses of Bord Fáilte who have returns to make, and it would be available from the hotels. I would be grateful if the Secretary could provide the Committee with a compilation of this 13 or 14 per cent increase, some breakdown of the data. Because of reduced airfares I would agree that we have a substantial development in ethnic net passenger movement, but in terms of conventional tourism there seems to be a downturn.

Mr. McMahon.—When I disagreed with the Deputy earlier, it was in relation to a suggestion that the number of visitors into the country was down. I would have to maintain that there is a substantial increase in the number of visitors. I did not dispute the fact that hotel interests had expressed some disappointment with the number of visitors registering for bed nights with them, because obviously they know the number they get. But, that must be balanced with the revenue which they take through other forms of sales. Hotels sell more than beds. They sell facilities, restaurants, functions, dances, discos and meals and the extra visitors who may not be staying in the hotel partake of some of these facilities so, it is necessary to take a more global view. It is only human nature to concentrate on the negatives and perhaps ignore the positives. As regards the breakdown of the numbers, I could certainly give some indication, but I would have to stress that at this time of the year we are talking about estimates based on sample surveys. If I have a reservation about that, it does not affect the number of visitors to the country because they can be counted. We know how many people come by air, we know how many people come by ship.

Deputy Desmond.—May I interrupt you. There is a net passenger movement at the moment of 32,000 emigrants, which was 28,000 in 1987, 26,000 in 1986, and below that it was 8,500 per annum down to 1980. Surely the net passenger movement data is not being included in terms of visitors? We have a tremendous through-flow of net passenger movement. Is that being counted as visitors? Of the 600 a week leaving the country there are 200 a week coming back. On that basis, all the Boston Aer Lingus flights of returning students, which amounted to the best part of 1,000 students returning in the past two or three weeks, will have to be counted as visitors to the country. I am trying to get some data. I do not want to impose unduly on the Accounting Officer, but there is a lot of scepticism expressed about the actual data translated into tourism as distinct from passenger movement. Perhaps the Accounting Officer could help me?

Mr. McMahon.—The Deputy is not imposing on me at all. These are important questions. Firstly, I should make it quite clear that I am talking about visitors into the country. The surveys which are conducted by the Central Statistics Office relate to visitors to the country and these are sampled on a scientific basis to determine their country of origin. The Deputy can take it that we are talking about genuine visitors to the country. We also know the number of visitors to the country because, of course, they come by modes which are statistically reliable, mainly through the car ferries and the air services. While the month-to-month statistics are subject to a certain degree of estimation and are not as scientifically reliable as the figures given for the first 12 months which will come out in 1989, there is no doubt that the number of visitors for the first seven months has increased. Broadly speaking, the pattern which emerges from the present estimates is that the number of visitors from Britain for the first seven months of the year was up by 20 per cent — 19.8 per cent if one wishes to be precise. I do not like to boast that degree of precision in the figures but that is what we have been given. The number of visitors from continental Europe is up by 7 per cent. The number of visitors from other areas, and these would be long-distance visitors from places such as Australia is up by 20 per cent and the number of visitors from North America is approximately the same as for the corresponding period last year. Taking account of the different weighting from these different areas, the total increase up to the end of July is estimated to be about 13.6 per cent. That includes people who do not necessarily sleep in hotels. The extent to which the benefits of the increase impacts on different sectors of the tourist industry depends on the mix of visitors and on the facilities which hotels offer and the extent and the efficiency with which they market their services.

Chairman.—We have a very long discussion on this. We should conclude it now.

Mr. McMahon.—I had it in mind to come back to that. The point the Deputy was making was that over the years, 1986, 1987 and 1988 there has been a reduction in the funds provided to Bord Fáilte and, therefore, there might be a reduced impact on developing tourism marketing. I said in my preliminary comments on that, that I did not necessarily accept that that was the case. Firstly, it is important to bear in mind that over the years concerned, there has been a considerable reduction in public expenditure globally and, therefore, the relatively small reducations that have been made in the tourism allocation may very well reflect an increased percentage of total public expenditure. It is also important to bear in mind that the value of any particular allocation depends on the manner in which it is used. Over these two or three years there has been a considerable drive on the part of the Minister, the Department and Bord Fáilte to ensure a more effective use of the funds available than perhaps had been the case previously. In this connection we have taken particular account of the conclusions and recommendations contained in the Price Waterhouse study. I should point out that Bord Fáilte in the spending of its money has considerably reduced its own operational and administrative costs. There is now a considerably smaller workforce within Bord Fáilte. The numbers working in Bord Fáilte, in fact, have been reduced from a figure of 350 seven or eight years ago to about 250 or 260 now. They have also endeavoured to channel their moneys in a way which makes maximum use in terms of conversion into visitors to the country. They have also been endeavouring, with the support of the Minister, to persuade the industry itself to allocate more moneys to the development of the product and the marketing of the product because in this country there is a much higher level of State support for tourism development and marketing than is the case elsewhere. In other words, the industry in other countries carries a greater degree of the financial cost of developing the industry than it does here. This may reflect historical reasons, climatic reasons or the length of the season but it is a fact. Over the last couple of years the extent to which the industry has contributed and is contributing to the development of their own business is increasing very substantially. Taking all of those factors into account, I would suggest that the extent of the effort now being devoted to the development of external tourism into Ireland is no less, and is probably greater, than when the sums provided by the State were somewhat higher.

Deputy Desmond.—You would accept that looking at the Vote as it stands, for example to take the non-pay element of the Vote last year as against this year, that there is a phenomenal reduction of 23 per cent, from £2.2 million down to £1.7 million. To take another of the subheads we are discussing today, subhead D.3, the development of supplementary holiday accommodation, you would agree that a derisory sum of £70,000 is provided under the subhead for 1988 as against £380,000 last year and £288,000 the year before. To take the subhead for tourism development works, £500,000 is provided this year as against £1.2 million last year, a reduction of 60 per cent. How, may I ask you, can we hope to have long-term development of tourism in this country when the basic Exchequer support has been quite drastically cut? In that framework, surely you would agree that the position is quite serious.

Chairman.—The Chair has allowed a great degree of latitude and I think we are now getting into the policy area.

Deputy Desmond.—I do not want to impose unduly but this is the industry which under the so-called Programme for National Recovery is to produce 25,000 jobs, 5,000 of them this year. I would like to know where we are making the effort to create those 5,000 jobs, this year and next year.

Mr. McMahon.—I appreciate your desire not to prolong this but I would like to make a brief response. I think it is important to bear in mind that the success of the tourist industry is not dependent totally on Exchequer support. Indeed, the present policy is directed towards giving a very substantial level of Exchequer support while also ensuring that the industry itself is in a position to attract sufficient business to operate on a profitable basis. This is the reason why you see in the Book of Estimates less money being provided in the form of grants for the development of accommodation and amenities. The role of the State, I would suggest, is to create the climate within which additional visitors can be attracted to the country. If the demand can be created and sustained, then normal commercial considerations should ensure the provision of the necessary facilities. Certainly the policies being pursued at present, including in particular the opening up of air transport policy, the increase in capacity and the lowering of fares, are designed to produce the people in the country who will spend the money, generate the profits and enable investment to be made by the private sector.

Deputy Desmond.—That is a line of argument which I do not propose to pursue. I do not necessarily share your policy elaboration on that matter. Let me ask you a final question on tourism generally. Would you accept that one of the two outstanding features which mitigate very much against the acceptance of the country in terms of tourism is the extraordinarily high cost of private hire? Is there any hope at all that we may see a change of policy in that regard? Secondly, would you share my view that the outstanding criticism which one will meet from tourists in this country relates to the price of having a drink? In my constituency if tourists want to get a half a glass of——

Deputy Desmond.—I want to make the point that it is scandalous that I have to meet tourists in my constituency in local pubs and hotels where they have to pay between 90p and 95p for a half glass of lager which in the UK they can buy for half of that price or on the Continent for virtually a third of the price. Have the Department brought any measure to bear on the question of price control?

Chairman.—Deputy Desmond must not have seen the photograph of the Chairman of the Committee of Public Accounts timing——

Deputy Desmond.—I am not looking for publicity this time, I am at a committee meeting.

Chairman.—I think it is a little bit outside of our remit but is a legitimate point to raise here. I think we should finish up on this.

Deputy Desmond.—It is a very important point and I would be glad to have the views of the Secretary on it.

Mr. McMahon.—I accept its relevance to tourism. I would like to add a point to my earlier intervention and that is in relation to the Exchequer contributions. I did not advert, although I did earlier, to the additional funds which we have attracted into the development of the tourism product in Ireland other than through the Exchequer. Approximately £15 million has been attracted through European Regional Development Fund moneys and the International Fund for Ireland and they——

Mr. McMahon.—There have been no inhibitions on the spending of the moneys available to us.

Deputy Desmond.—Your Finance colleagues are not likely to repeat themselves on the issue. Are the matching moneys being provided?

Mr. McMahon.—They certainly are available in respect of, for example, the special Border area allocation. There are ERDF moneys which amount to £8 million and in addition, £3 million has already been invested in tourism infrastructure and facilities in the Border counties from the International Fund for Ireland.

Deputy Desmond.—But the International Fund for Ireland is not matching pound for pound.

Mr. McMahon.—These moneys are available and have been invested and, therefore, have to be taken into account by anybody who wants to assess total investment in the tourism product in Ireland.

Mr. McMahon.—On the question of prices, of course one has to accept that prices are an important factor and that car hire prices in particular are a matter of some concern. They are not directly under the control of the Department of Tourism and Transport but, as I mentioned earlier, we have a general mandate to ensure that other Government Departments who conduct activities which are relevant to tourism are aware of the priority which the Government wishes to give to tourism and, therefore, that they take account of these considerations in their policies. On the car hire side, aspects like the level of excise duty and insurance costs are important factors in the make-up of the total cost. Some measures are being taken in that area to seek to reduce the levels of insurance costs. It will be the role of the Department of Tourism and Transport to ensure that Government policy generally, in so far as it can be orientated towards tourism, will be directed towards reducing these costs. Similarly in relation to drink prices. I mentioned earlier, perhaps it was before Deputy Desmond came in, that we have a high level committee under the chairmanship of the Minister for State for Tourism whose particular role is to ensure that other Government Departments, be it the Department of Justice, the Environment, Marine or whatever, are conscious of tourism needs in their own activities, spending and investment. This has brought about a greater realisation of the value of tourism to Departments which would not see that as their primary objective and which are expected, in accordance with Government policy, to take account of those policies.

Chairman.—I think we can finish at that, but there is something you might ask that committee to look at. It is something of a scandal that a pint of lager costs £1.56 and two half pints cost £1.84.

Deputy Desmond.—You are being very modest. It costs £1.70 in the hotels in Dún Laoghaire.

Chairman.—I think it illustrates the point. It is a matter which needs to be looked at.

Mr. McMahon.—I will note that. I am sure that even though he is a total abstainer, the Minister of State, Deputy Lyons, will not neglect to address that issue at your request.

Chairman.—He has been known to buy his round. We will close at that. Thank you very much, Mr. McMahon. We will note the Vote. There are a few matters which we can deal with very quickly in private session.

LOCAL GOVERNMENT AUDIT SERVICE

Consideration of First Report of the Interdepartmental Committee

Mr. T. Troy called and exammined.

780.Deputy Naughten.—Have the Department taken a very careless attitude about having this local government audit carried out when one realises the gigantic amount of arrears that have built up over the years, in some cases arrears as far back as four years?

Mr. Troy.—No. We have been very concerned about it. It is a question of what can be done. The most practical thing we could have done in the given constraints and circumstances was to set this interdepartmental examination going as to how to tackle it. As I have said here at a few previous meetings of the committee, it is not enough simply to say we should have more staff without seeing if there are better ways of doing it or if a more rational approach can be adopted. We have to satisfy ourselves on that.

Deputy Naughten.—With the amount of money spent by health boards, county councils and VECs — the figure already referred to by the Chairman is £2.5 billion — is it not frightening to think that some of those can have audit arrears up to four years?

Deputy Naughten.—Just going through the list given by Mr. Troy I note that some of them are still outstanding from 1985. The Galway and Waterford boroughs go back as far as 1985. With regard to the county councils, Dublin County Council and Limerick County Council are again outstanding from 1985. Both are big spenders and information coming as a result of an audit is totally out of date at this stage.

Mr. Troy.—I agree with that but audits require auditors. This problem was on the way to resolution in the late seventies and then the Government embargo came on and the audit service like everybody else had to bear its share of the cuts.

Deputy Naughten.—Why were the staff in the local government auditors office run down from 54 to 35? That was a gigantic run down by any standards. We all recognise that there was an embargo but there is a drop from 54 to 35 — a gigantic percentage.

Mr. Troy.—It just happened that way. Seven of those posts were not even filled at the time and in mid-1981 the Government decided that all unfilled posts would be left unfilled, so we lost seven at one stroke. When the formal embargo began at the beginning of the following year it was applied over Christmas and we came back to find we had a few more vacancies that could not be filled. After that it was one in three, and it was just a question of when people retired. The average age in the audit service is higher than elsewhere so there is a higher turnover. They come in later and there is a higher average age.

Deputy Naughten.—But why were the seven vacancies left unfilled in 1981? There was no embargo before that. Were the Department rather lax about having those posts filled?

Mr. Troy.—We could not fill them. There were problems throughout the Civil Service Commission with getting people with the qualifications at the prevailing salaries.

Deputy Naughten.—Why did not redeployment take place earlier? Obviously, the Department have got some staff now through redeployment. Why was not this approach taken earlier on? We are all aware of under-utilised staff. This is something this committee has discussed on a number of occasions.

Mr. Troy.—Redeployment has become an issue only in the last year or so. We would not have authority to go to other Departments and commandeer whatever they had. We certainly had no space without our own Department because the percentage reduction in the staff of the Department of the Environment as a whole is larger than the percentage reduction in the audit service. I am not complaining about that. It is necessary for the country that that kind of policy be followed but it has consequences.

Deputy Naughten.—I would like to ask Mr. Gallagher what are the views of the Department of Finance on such a drastic drop in the staff in the local government auditors office, an office which is looking after the spending of £2.5 billion?

Mr. Gallagher.—We did not want the reductions specifically in the audit service. We wanted a reduction around the Civil Service and the audit staff were treated like anybody else. We recognised that it was vital to get the audit done but pressure came on us for staff. It tended not to be pressure in terms of numbers but in terms of higher grade staff. The other point is that if we were to do something for the audit service we wanted it to be part of a wider strategy. We wanted the kind of improvements that are mentioned in this report. We did not want to give extra staff on the assumption that simply by doing so you solved the arrears problem. My suspicion is that if we had rolled in the extra staff three or four years ago, or towards the end of the seventies, we would probably have some level of arrears today but we would not be open to the attack that the staff was not provided.

781.Deputy McGahon.—The embargo has been a total farce. It should have been a selective embargo. Vital areas like the audit service should not have been left without sufficient staff. Private companies around the country are being pilloried for not having their affairs in order and yet Government Departments can do what they like. The Minister of the day should have recognised the need, stepped in and redeployed staff. Mr. Troy has said that each auditor does his own thing. Surely there is a common criteria required of all auditors.

Mr. Troy.—Of course, but each man has his statutory position just as a judge does. Judges are bound by the common law but each judge is separate and is not under specific direction from some superior as to how to make his finding.

Deputy McGahon.—Are they not answerable to an ultimate authority within the Department?

Mr. Troy.—They are answerable in a general way but they are independent in the performance of their functions. There is a right of appeal to the High Court or to the Minister on some of their decisions.

Mr. Troy.—It has to be modified a bit but I like to see that kind of independence at the same time. It is one of the matters we are considering.

Deputy McGahon.—Does it always work? For instance are people ever relegated or withdrawn from that post for one reason or another?

Deputy McGahon.—That is the way you do it. That is a particularly Civil Service niche. They are never shown the door?

782.Deputy Desmond.—The extra staff have been assigned on a temporary basis. Could I ask the Accounting Officer and indeed the officer from the Department of Finance what does that mean?

Mr. Troy.—It means that these people are being assigned here for a determinate period of three years. I am not saying we would not try to hold on to them at a later stage but as of now that is the position.

>Deputy Desmond.—Between now and three years time how many retirements or optional early redundancies will there be in the audit staff?

Mr. Troy.—I can think of one straight away who will be going and probably there will be others.

Deputy Desmond.—To my knowledge, and I think you have confirmed it, the audit staff are fairly senior in terms of age. Is it fair to say that over the next three years there will be four or five staff going?

Deputy Desmond.—And we will not be any better off at the end of three years.

Deputy Desmond.—Has this not been an on-going situation? You are aware that in 1983, 1984 and 1985 there were repeated memoranda at Government level pointing out to the Minister for Finance and the then Minister for the Public Service that this audit crisis existed and that it would get worse unless emergency measures were taken.

Deputy Desmond.—You are aware that the Department of Finance and the Department of the Public Service of the day resisted the redeployment proposals and resisted giving any additional staff to the local government audit service.

Mr. Troy.—I would not put it as completely as that. I think what they resisted was the proposals we put to them.

Deputy Desmond.—No modifications were suggested in retrospect by those Departments. No modifications of those proposals and no counter proposals were put forward. I do not recall any question of redeployment until 1988. Is it fair to say that?

Deputy Desmond.—May I ask, Mr. Gallagher, why was there never any acceptance of the need for redeployment? After all it was accepted in relation to the Department of Social Welfare and other Government Departments. Why did that not happen?

Mr. Gallagher.—I think, Deputy, we may be fighting a battle which was fought between my former Minister and yourself some years ago. My recollection is that is relation to redeployment we took the view that if extra staff were required and if Ministers regarded a particular service as being so vital and of such a high priority in their Departments that they wanted something done about it, we asked for a trade off. In relation to specific demands which were made to us for promotion posts in the audit service to deal with, work in the health area, I think the answer we gave was that at the level in question in the Department of Health and the Environment there were about 100 people. I believe thatthe approach of my Minister at the time was: “Give us one of your 100 for somewhere else and then we will talk to you about the other”. I am operating on this from memory but this was a general approach that we adopted. Deputy McGahon made the point about vital areas. That is something with which we always had sympathy. Our difficulty was that every Minister and every client group had a different view of what a vital area was. When we aggregated all the things that had been indicated to us as vital areas, they encompassed virtually the entire Civil Service.

Deputy Desmond.—But surely after five years of incessant agitation on the part of that office and five years of repeated memoranda, at least six or seven major memoranda, from respective Ministers to the Department of Finance and the then Department of the Public Service — there are now five temporary staff assigned on a temporary basis — there are going to be at least five or six retirements over the next three years from a small staff of 34 — we are likely to be back here in another three or four years with the same situation.

Mr. Gallagher.—I do not think so. The situation is quite different in the sense that what was spoken about at various stages during the eighties was additional staff. Generally speaking, the emphasis was put on additional chiefs rather than on additional indians. Included among the proposals which have now been taken up, is a proposal for a package which provides for reinforcements of staff but no less important it provides for major changes in the approach taken, in other words, getting better value out of the bodies that exist. That was not a feature of earlier proposals. To be quite honest, that is something that would have been resisted by some of the people who were there and by their union. We are in a different climate at this stage when redeployment is more acceptable. At that time, it was acceptable within the general service but it was not acceptable within this area.

Deputy Desmond.—Can you tell us what extraordinary new realignment of duties, arising out of the redeployment, has occurred?

Mr. Gallagher.—In talking about a realignment of duties arising out of redeployment, what I am saying is that the report before the committee includes two prongs. It includes a proposal for additional staff which are being provided, albeit on a temporary basis——

Mr. Gallagher.——but I would not get too hung up about the temporary aspect. If they are there and do the job within three years well and good. We could then see what the long term needs are and that would hang on a number of other factors. The other proposal in that report is for changes in work practices and changes in procedures to allow work to be done more efficiently. My belief is that we stand to gain as much if not more from that rearrangement.

Mr. Gallagher.—The Accounting Officer has outlined arrangements for a tightening up of the way in which work is done. He has outlined changes he would like to see in other areas. You are talking about a combination and a work programme.

Deputy Desmond.—That is very vague. I recall vividly this happened, three, four or five years ago in relation to the audits of health boards and so on. An auditor is an auditor, an indian is an indian and a chief is a chief. An auditor has to be a suitably qualified accountant capable of undertaking an audit. He has a certain status of a statutory nature within the public service as the Accounting Officer has said. While I do not propose to cavil with you now on the question of the reassessment of duties and the way in which work is undertaken, I have a healthy scepticism about the reason being alluded to now by the Department of Finance for this change of quality. You either carry out an audit or you do not; you either sign it or do not. There is nothing esoteric about it. Finally, there are 40 bodies whose accounts are two years in arrears. Would it be possible for you to tell us who those bodies are? It is projected that their accounts will be two years in arrears as of next December.

Mr. Troy.—We can categorise them. The accounts of 15 county councils at the end of last year were two years in arrears while two will be in arrears at the end of this year. The accounts of one county borough were two years in arrears last year and two will be in arrears at the end of this year. The accounts of four health boards were two years in arrears at the end of last year but none will be two years in arrears at the end of this year. They are the main bodies.

Chairman.—Under the existing method of audit, when you get it up-to-date eventually you will still have to carry out a regulatory audit. Let us take the case of Dublin Corporation, one with which I am familiar, where, if my recollection serves me correctly, the cost of housing maintenance is about £20 million. Yet they collect only a little over £16 million in rents. My point is this. Should not the audit of Dublin Corporation be a value for money audit? Should we not have modern audits which look at the poor practice, appalling practice in some local government areas, which is costing the taxpayer a lot of money? Therefore when we are doing the job why not go the whole way and make sure that proper value for money measurement is brought into the public sector through your Department?

Mr. Troy.—I can say two things on that. A certain amount of it is being done at present and the law permits and even requires something to be done on those lines. The law requires where money is lost through negligence, and that can be interpreted in quite a number of ways, that the person concerned should be charged by the auditor. In practice there is not much of that but at present there is a certain amount of it.

783.Chairman.—But you will not be surcharged if, say, you work in the maintenance department of Dublin Corporation and you bring out a hall door one day to a Department and somebody else turns up a few days later with the hinges and somebody else turns up a few days later with the screws and somebody else turns up with something else and so on. The whole thing goes on and on. What I am talking about is poor work practice which is costing the taxpayer a fortune. It is being spent on maintenance but it is not being spent in the most fruitful way possible. What I am saying to you is that any method of audit which has been modernised will not be effective from the taxpayers' point of view if it amounts to a purely regulatory audit, checking invoices against payment. Are we getting value for those payments?

Mr. Troy.—I have to press the point that it is not purely a regulatory audit. There is an element built into the law that requires them to go just that bit beyond if it is obvious that there is something being lost. There is nothing to stop any ratepayer when the accounts are on display from objecting to the provision of money for housing maintenance on the grounds you have mentioned.

Chairman.—But you are looking at a glass as being half empty rather than being half full. What we have to ask ourselves is there not a case for bringing in outside firms of accountants with their modern approach to financial measurement to look at local government and to say to your Department, to parliamentarians through this committee and to councillors at local level: “Look, this is what we have found. We have looked at your maintenance department and at some other departments and you are being ripped off”.

Mr. Troy.—It is arguable that a better way would be to bring in consultants, outside the audit system to do that periodically. That is something we consider doing from time to time in other contexts but general consideration is being given to the nature and scope of audit and your document which was circulated some time ago contains proposals along those lines. I cannot anticipate what the Government decision might be. It does need to be looked at.

Chairman.—I do not want to pursue it too far with you this morning but the position of audit and accounting for spending is a parliamentary function. Every parliament of our kind, as you are aware, has a public accounts committee. We have had one since 1922 because the theory is that the Dáil votes on expenditure and someone should account to it for expenditure but how can you account to the Dáil for expenditure when accounts are up to six years in arrears and, in modern terms, after bringing it up-to-date all you are doing is checking payments against invoices? Have we not got the right to know whether we got value for the taxpayers' money? Is that not the approach we should be taking in the modern day audit?

Mr. Troy.—Yes, but the question is how far do you go and how do you arrange it. As you are aware thre has been much controversy in Britain about this and the experience of the Audit Commission in Britain has been mixed on the questions you have raised. It does fall to be considered here and is being considered here on a more general level than just the local authority system. I have my own personal view on it but I could not say anything on it.

784.Deputy McGahon.—Chairman, I feel that you have introduced the voice of reality here. I believe that the answer is to bring in consultants with modern practices who will be free of embargoes and the like and cannot say to us that they could not do something because of lack of staff. The embargo arrangement has fouled up the whole system in vital areas. Four years of arrears of accounts, which is what we were dealing with, involving the expenditure of a huge amount of money, is an unacceptable period. The only answer for the future is to bring in private firms of highly qualified accountants, and there is no shortage of them.

785.Deputy Naughten.—On the question of value for money audit, I feel that it certainly is a pity we have not gone into this in greater detail in this country over the years. You have brought out one particular point there with regard to maintenance of local authority houses and the cost of same. I wonder have the Department of the Environment, or indeed the auditors, examined the situation where, for example, in rural counties more so than in the city here, people buy out their local authority house after five or six years and quite an amount of them have been bought out, but a lot of them cannot be bought out because there are repairs outstanding on them. Simply because the local authority have not the money to carry out repairs, the house is left lying there and will not be purchased. That is one aspect. Another aspect is that over the last number of years, particularly the last two years, a lot of people were finding it extremely difficult to meet their SDA loan repayments. Houses have been re-possessed by the county councils, put up for sale and, because of difficulties in certain rural areas, either the demand for housing or indeed the lack of money to buy them, they are unable to be sold. Why have those not been converted into local authority housing and rented out?

Mr. Troy.—You have made two points. One related to carrying out repairs. That is no longer needed under the recent Housing Act. The second point you made was in connection with loan repayments. Some local authorities have pressed that where somebody falls behind on the SDA, the local authority should take it over and re-assign that person as a tenant.

Mr. Troy.—In practice, it means the sitting tenant. It means in the end you could under cut the whole system. You could open a floodgate there perhaps.

Deputy Naughten.—I was very careful not to specify the existing house owner. I said to have it converted into a local authority house and leased, whoever it is leased to.

786.Deputy Dempsey.—May I switch, with a brief question, the focus of the questions that have been put and ask Mr. Troy whether he is satisfied with the technical aspects of the presentation of accounts by local authorities? As one who has been involved as a member of a local authority for over ten years, I have discussed this with accountants and find the system of producing the accounts and producing budgets, estimates and so on, really archaic. It seems to be deliberately complicated. I would just ask Mr. Troy if the system was looked at and simplified, particularly now that most local authorities have gone on to computers and computer-based accounts, would that not cut down a lot on the work of the auditors? Would it not help to streamline the system we have? That is one point. I would like to ask a second question. We are talking about value for money. About seven or eight years ago, there was a pilot scheme in County Meath and in a number of other counties in relation to the devolution of group water schemes and responsibility for group water schemes to counties and to county councils. I understood — and the information we were always given about that was — that they proved to be much cheaper to administer at a local level but there was no follow up to that pilot scheme. We still have the ridiculous situation pertaining at the moment where you have a duplication of inspections and approvals and so on for group water schemes around the country. Is that value for money or whatever happened to that? Was any action taken as a result of the pilot scheme?

Mr. Troy.—I agree with what you say about the group water schemes that they were run practically on a shoestring. There was tremendous freedom and no excessive checking or anything like that. Unfortunately, things began to happen and we had to move in and apply more stringent checks and controls, perhaps excessively at first because we went in for 100 per cent checks, but now we have moved it back to a certain proportion. It is the best we can do. You have to balance between the two. Your earlier point was what?

Mr. Troy.—There is a group looking into some way of improving that but I have a feeling myself — it is just a personal view — that we need more accounts and not less. We need more emphasis on unit costs and on the cost of individual works and so on as a back up to the overall situation.

Deputy Dempsey.—Perhaps you are answering the question positively. With the way they are presented at the moment in eight programmes, though I am not making any accusations, I know money can be lost and transferred and everything else once the Estimates are produced.

Deputy Dempsey.—I do not mean illegally or anything but it can be used in ways that were not originally intended in another section. Basically you are agreeing that if it was broken down a little bit more, it would be more appropriate.

Deputy McGahon.—On a point of information, that phrase, “things began to happen”, is a very intriguing one. It conjures up visions of MI6. What things began to happen in relation to group water schemes?

Mr. Troy.—There were court cases and so forth. I had better not say any more, perhaps.

Deputy McGahon.—I do not know whether that particular court case was justified.

787.Deputy M. Kitt.—To follow up on what Deputy Dempsey asked about duplication in group water schemes, there is another point further to that, that there is a lot of conflict between what Department/Inspectors are saying and what county council offices are saying. I know we are getting a little bit away from what we are discussing but to follow up that point, would Mr. Troy not see that there should be some coming together of these engineers from the Department and the councils to try to sort out things and not leave group schemes in utter confusion as to what they should do and how they should proceed with they are getting conflicting advice about road structures and road restoration and so on as regards these group schemes?

Mr. Troy.—I would agree with that certainly. If you could let us know of any cases, we will follow it up.

788.Deputy McGahon.—Why are group schemes not administered through the local authority, the county council? Surely they have the local knowledge, the local engineers. Surely they could monitor it?

Mr. Troy.—It has been announced a number of times that it is to be assigned to local authorities but——

Deputy McGahon.—It has not been done. I am always sceptical of announcements.

789.Deputy Desmond.—Within the framework of the local government audit there is no statutory requirement to report in relation to value for money.

Mr. Troy.—There is a requirement, among many other requirements, to strike out any losses due to negligence. That is what the Act says and it can mean anything.

Deputy Desmond.—That would not relate, for example, to cost containment. Negligence is a very clear statutory——

Mr. Troy.—No, there were common law decisions, even before that Act, going back about the proper approach to public money, not wasting it and so on. There have been court cases determining what it means.

Deputy Desmond.—In terms of an analysis to determine whether a particular expenditure could have been made in a more effective way it would not come within the compass of the audit service.

Mr. Troy.—The point you are raising there is the kernel of it all. Can they go into policy and at what point does policy begin?

Mr. Troy.—They are. I think the British decision on that was to leave out policy on their side. It was that point about effectiveness and efficiency——

Deputy Desmond.—And whenever they stray into those areas, accounting officers are only too quick to point out to them the limitations of their statutory authority?

790.Chairman.—I think we can note this interim report for now. We will be anxious to see the remaining two reports as soon as they are published. It is a matter of great concern to the committee that this arrears of audit should have arisen. The committee are anxious to ensure that it does not happen again. You will have noted from the comments that the committee want the most effective and efficient system brought into the local government health board and VEC areas as well as into the central Government area, whether that is done by the public sector or the private sector. Getting the job done most efficiently is what concerns this committee. Perhaps you would note those comments for your further consideration. We will ask the Comptroller and Auditor General to monitor progress in relation to the arrears and I hope it will not be too long before we are talking to you again about the second interim report. Thank you.

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

APPROPRIATION ACCOUNTS 1986 — OFFICE OF THE REVENUE COMMISSIONERS (RESUMED)

Mr. P. Curran called and examined.

791.Chairman.—The Committee of Public Accounts is this morning resuming its examination of the Chairman of the Revenue Commissioners, Mr. Philip Curran, in his capacity as Accounting Officer for the Revenue Commissioners. We are resuming on paragraph 17 and I call the Comptroller and Auditor General for his comments on that paragraph.

“Collection of Outstanding Taxes

The following statistics furnished to me by the Revenue Commissioners show the position regarding the referral of cases to the Sheriffs/County Registrars to enforce collection and the results of such action.

In my previous Report I referred to action being taken to improve enforcement procedures for the collection of outstanding taxes. Since July 1986 twelve additional Sheriffs have been appointed in place of the twenty-four County Registrars outside of Cork and Dublin for the sole purpose of enforcing certificates issued under Section 485 of the Income Tax Act, 1967. Operational guidelines were issued to the newly appointed Sheriffs who are required to submit monthly progress reports to the Revenue Commissioners on cases referred to them for enforcement. I have not yet had an opportunity to examine the effectiveness of the operation of these guidelines.”

Mr. McDonnell.—As you will recall from previous reports, I have commented each year on the rate of progress, if you like, in the collection of outstanding taxes. In paragraph 17 I am drawing the committee's attention to the action taken by the Revenue Commissioners to improve the enforcement procedure, that is the appointment of the new sheriffs. The Accounting Officer has since provided the committee with statistics for 1987 in relation to enforcement. In regard to 1987 and 1986, it is clear that there has been an increase in the number of certificates which have been referred, in the number returned paid under the new arrangements and in the yield of tax from enforcement in 1987, but, however, I think the Accounting Officer would agree that the problem is by no means solved because the number of certificates in the hands of the new sheriffs at the end of June 1988 — as you will see from a note which the Accounting Officer just circulated and which I got this morning — is nearly 135,000. I presume there would also be some cases awaiting referral to the sheriffs. I do not know whether that number has gone up or down. While perhaps the position is somewhat better that it was, the backlog is still a major problem.

Chairman.—Would you like to comment on that, Mr. Curran? Perhaps as a lead-in I might say that as far as we are aware receipts from the sheriffs in the first six months of 1988 were £59.9 million. Do you have any indication as to what the figure will be for the year as a whole?

Mr. Curran.—No, not yet. As you are probably aware, we have had some difficulties in our Collector General's office recently which, happily, were resolved in the middle of September. The problem was that during that period of difficulty it was impossible to keep up with current work, so I am afraid that our statistical analysis would not be up-to-date. I really could not give any firmer figures than what you have already received. The general picture, of course, is that the new system of revenue sheriffs has been very successful. I would agree with the Comptroller and Auditor General that certainly we cannot yet point to a solution because there is a large number of certificates still out with the sheriffs but we are hopeful that we are on the right track now and that the following years will see considerable improvements.

Chairman.—I do not think we need make a meal of this because we had started on it the last day and we have a special examination of the Revenue Commissioners going on in tandem. I call Deputy Naughten and then we will pass on to paragraph 18, unless anyone else is offering.

792.Deputy Naughten.—I have one question in regard to the number of certificates that are out with the revenue sheriffs. What is the money value of those certificates and, apart from the tax liability, is there interest on those as well?

Mr. Curran.—The short answer is yes. When tax is in arrears and we have to proceed to enforcement, then interest is added on to the tax. In the current situation if a case has been referred to the sheriff and if the taxpayer pays his tax before the end of this month he will have to pay it through the sheriff but the interest part of it will be waived. In general, interest is always included with the tax when the case goes to the sheriff.

Deputy Naughten.—Have you any idea what the overall figure is at present with the revenue sheriffs?

Chairman.—We had better clarify that because we do not want it getting out that that is all collectable.

Mr. Curran.—It is not and that is why I emphasise face value. It is not collectable. As we have seen before, we get a lot of these certificates back nulla bona, and some of them expired. Of course, we will collect some of it but that is just the face value.

Chairman.—We do not want to spark off a whole lot of public concern. What would be collectable from that? Would it be £50 million or £100 million?

793.Deputy Dempsey.—Could the increase in numbers of warrants still outstanding with the sheriffs be explained or partially explained by the fact that you are now sending warrants to the sheriff much more quickly than you used to do?

Mr. Curran.—You could say that but there was a period under the old regime before the new sheriffs were appointed — when we knew the sheriffs were about to be appointed and when the old system was completely cluttered up. We stopped sending certificates so that there was a backlog available to be sent out. We are now catching up with that.

Deputy Dempsey.—I asked this question before but I did not get a full answer. I asked you before, Mr. Curran, if the sheriffs are supposed to submit returns and you told me at that time at a previous meeting that they were supposed to submit reports at monthly intervals and to remit the money as soon as they got it.

Deputy Dempsey.—Let me clarify that answer. Does that mean that if the sheriff gets the entire amount on a warrant he is supposed to remit that within the month?

Deputy Dempsey.—But if the taxpayer comes to some arrangement with him where the taxpayer remits the money in monthly instalments over, say, a five-month period because the warrant has to be executed within six months, is he obliged to submit the instalments paid by the taxpayer?

Mr. Curran.—Perhaps I could explain it this way. Strictly speaking, he should not accept instalments but it is a matter for him. If he does accept instalments a situation arises where, possibly, a considerable balance could build up in his hands. We have come to an arrangement with the sheriffs whereby this balance is transferred to us. The payments are not appropriated to individual taxpayers but the money is transferred to us and we hold it on deposit. The result is that the Exchequer has the benefit of these amounts which, as the Deputy has said, consist essentially of part payments but they cannot be appropriated to the taxpayer until the full amount is received.

Deputy Dempsey.—Are you satisfied that all the moneys paid to the sheriffs in instalments are being remitted or have you any way of checking to ensure that this is what is happening as per that statement you have outlined?

Mr. Curran.—We do not audit the sheriff's accounts. As you are aware, we are not directly responsible for control of the sheriffs, for their remuneration or for anything else. That is a matter for the Minister for Justice and is part of the courts system. We have regular meetings with them and we know the face value of the warrants. We monitor the situation.

Deputy Dempsey.—What you are saying is that if a sheriff decides he will accept money in instalments — which he should not do but to facilitate a taxpayer and I would not disagree with it — you do not check that and there is no means at the moment of checking as to whether he submits that on a monthly basis or whether he keeps it in a private account of his own or in an account, earns interest on it and then submits it at the end of the six months? You have no means of checking that, have you?

Deputy Dempsey.—Do you think it is a satisfactory arrangement that a sheriff can be in possession of State money and earn interest on it for up to six months? We know the amounts of money being submitted by sheriffs around the country; but this money is actually being used by the sheriffs privately and personally to gain interest. Do you think that is satisfactory?

Mr. Curran.—I do not think it is a matter for me to say whether it is satisfactory or not. This is obviously part of the whole sheriff's package which is a matter for the courts and for those responsible for the conditions of service and the appointment and so on of sheriffs.

Deputy Dempsey.—Are you saying that possibly this is one of the perks of the job of sheriff, underhand or whatever way it might be?

Mr. Curran.—No, I would not like to let the remark “underhand” go. I am not sure whether the word “perk” is appropriate either. The operation is taken as a whole. The sheriffs have to be remunerated adequately for their work and it is a matter for those who are in charge of the sheriffs to determine whether the remuneration is adequate to the job.

Deputy Dempsey.—I accept that and indeed agreed with it. Why is that arrangement not out in the open? I have reason to believe that sheriffs are taking part instalments and lodging that money to their own accounts, they are earning interest on that and after six months they are submitting the full warrant to the Revenue Commissioners. If that is going on, and I know about it and accountants know about it, surely the Revenue Commissioners, the Department of Justice and those responsible know about it? It would probably serve the public interest an awful lot better if somebody came out and said: “yes, this is an acceptable practice, this is part of the incentive for a sheriff to go out and collect as much money as possible.” Do you not think it would be better to do that and have it out in the open, rather than having the public say there is something underhand going on? That is what is being said.

Mr. Curran.—It is unfortunate if it is being said, because I do not think there is anything secret or underhand about it. It will emerge when our accounts come in for 1987, and certainly the current year, and this figure will be returned by us. It is in the books and will be visible. I would not like the idea to go abroad that there is something going on which we do not know about. We know about it and we make arrangements to get the money in so that the Exchequer has the benefit of it. On your other question, of whether somebody should come out and say that is the proper way to do it, that is part of the job and that the remuneration is adequate is not for me to say.

Deputy Dempsey.—I have just one other question in relation to the sheriffs and their fees, etc. Have you any idea how much money was collected by way of sheriffs' fees prior to the Finance Act of this year?

Mr. Curran.—No. We are only interested in the tax and interest, if it is involved. We are interested only in what they remit to us.

Deputy Dempsey.—But you are aware that the sheriffs were illegally collecting poundage on foot of warrants from the Revenue Commissioners prior to this year's Finance Act and that the situation was regularised in this year's Finance Act?

Mr. Curran.—The situation was certainly clarified in this year's Finance Act. I am not quite sure what the legalities were before that.

Deputy Dempsey.—They were charging poundage on warrants they issued, which they were not entitled to do, when they did not seize goods.

Mr. Curran.—The Deputy is saying that; I cannot comment on it. We do not get involved in the poundage issue or the fees.

Deputy Dempsey.—Are you telling me that it is really the Department of Justice we should be querying about the role of the sheriffs?

Mr. Curran.—We can certainly comment about the role of the sheriffs but you seem to be more concerned about their remuneration package, their conditions of appointment and so forth and we cannot really get into that. That would be proper for the Department of Justice.

Deputy Dempsey.—What I am really concerned about is revenue collection getting a worse name that it has, and people throwing this at politicians and various other people and using it as an excuse to beat politicians, Government or whatever else. That is what is actually happening. It is giving revenue collection a bad name. It never had a good name but it is giving it an even worse name than it has. I do not like to see these practices and I do not like the State or any officer of the State acting illegally in the course of duties for the State.

Mr. Curran.—I could not say that any of the sheriffs have been acting illegally. The other side of the coin is, of course, as the committee are well aware, the revenue is coming in. They are doing the job.

Deputy Dempsey.—I accept that but I still feel that the end does not justify the means. We are talking in other contexts about the rule of law and the law applying equally to everybody. I am saying that it should apply equally to officers of the State as it does to every individual in the State. We cannot criticise other people if we are going to carry on the way ourselves.

Chairman.—Deputy Dempsey has made the point. We have a very long schedule of work ahead of us this morning. We have resumed the examination of Mr. Curran and we had already started at paragraph 17 the last day. There is a number of very lengthy paragraphs to come up yet. Before Deputy Flood came in I had hoped to finish on Deputy Dempsey. However, I will take a quick question from Deputy McGahon and then Deputy Flood, then let us move on.

794.Deputy McGahon.—What criteria are used either by the sheriffs or by the Revenue Commissioners when accepting phased payments from some and rejecting them from others? Who decides? Do the Revenue Commissioners decide or does the sheriff, when faced with the problem on the doorstep, decide himself?

Mr. Curran.—There are two questions there. First of all, we sometimes come to an arrangement with taxpayers to accept arrears of payments by instalments. This is done in the Collector General's area and it is done before the case gets to the difficult stage of being sent to the sheriff. Typically, it involves taxpayers who have slipped a bit, and have got into arrears. They have got the reminders and they come in and say that they will be able to catch up inside a year, 18 months or whatever.

The main criterion which we apply is whether the rate of instalment is such that the tax and any interest will be paid off within a reasonable period. That is the main criterion we have. If we come to that sort of arrangement it means that the case is not sent to the sheriff. If somebody does not make such an arrangement with the Collector General, or if having made such an arrangement they do not honour it, the case goes to the sheriff for collection. At that stage it is entirely a matter for the sheriff to decide how to go about it. We do not come into it.

Deputy McGahon.—I am speaking hypothetically but do you not see the dangers inherent in that? If I am in difficulties with the sheriff do you not believe that I could offer him some inducement to lay off me?

Mr. Curran.—I presume the sheriffs, like any other public servants or officers of the court, are subject to audit, inspection or whatever.

Deputy McGahon.—You would not know about that. If I offer a sheriff a payment to facilitate me over a period — in other words, if I bribe him — do you not think that that money would make the sheriffs some of the best paid men in the country? Do you see the danger there?

Deputy McGahon.—or are you unconcerned about the danger so long as the money comes into the Exchequer?

Mr. Curran.—First of all, I do not see any greater danger there than in the case of any other public servant who might be subject to bribery and corruption. That can happen anywhere.

Deputy McGahon.—It is more likely to happen when a man who wields enormous power can close down a small business person's livelihood and leave a family to suffer as a result.

Mr. Curran.—The business of sheriffs and county registrars enforcing court decrees goes back years and years — centuries for all I know. It is not something which had just been invented and, consequently, the danger to which you refer — if there is a danger — must have existed for a very long time.

Deputy McGahon.—Possibly, but as one of the people who originally criticised the sheriffs I have to admit that the money they have brought in has been very revealing. I am concerned about the very small business people and not the high-flyers who are running racehorses or playing the Stock Exchange. I am concerned about the small family grocer and the small trader who is in genuine difficulties because of the recession and who is faced with the spectre of the sheriff ready to close down his business. That is happenning at present——

Deputy McGahon.———and I believe that it is a return to the penal days. At the end of the day the court should be the instrument used to get money. I have no sympathy for the high-flying companies who perhaps hide behind company laws and very often collapse a company only to re-emerge a few months later but I have sympathy for the hard-pressed, very small business people and I believe that the sheriff is being used as a “heavy” to terrorise many of them. I accept the figures brought in by a sheriff are brought in because he is intimidating and uses intimidating tactics. The Revenue Commissioners probably accept that so long as the money is coming in but I would be happy if the Revenue Commissioners adjudicated on phased payments. It is wrong to leave it to a man to negotiate with maybe a hapless trader.

Chairman.—I think the point has been well made. We have a huge agenda ahead of us.

Deputy McGahon.—I just want to ask one other question. How many companies have the sheriffs closed down in the last year? How many companies have been closed down as a result of action by the sheriffs?

Chairman.—I think 60 is the total figure for the last three years and 37 for the last year.

795.Deputy Flood.—I should like to ask Mr. Curran if he is satisfied with the operation of the sheriff system or registrar system for the collection of these outstanding taxes. Are you satisfied with the system, or do you have proposals to improve it?

Mr. Curran.—We have no proposals at the moment to improve the system. As regards being satisfied with it, all I can say is that it is a vast improvement on what went before. However, having said that, it is early days — it is only the first year and a half of operation of the system. We are monitoring it closely. The first year of operation of the sheriff system may not turn out to be typical. We do not know what may happen in a year or two, so we are watching it. If we are not satisfied with it or if we think there are ways in which it could be improved we will certainly bring forward proposals but we have no specific proposals at the moment.

796.Chairman.—For the record, the number of companies wound up on foot of a petition by the Revenue Commissioners in 1985 was 6; in 1986, 14 and in 1987, 37. That note was supplied by the Revenue Commissioners and is dated 22 September. We will note this paragraph and go on to paragraph 18.

Customs and Excise Duties, Value Added Tax, etc.

I referred in paragraph 22 of my 1983 Report to the assessment and collection of customs and excise duties at the point of import and to certain deficiencies in control procedures occurring in the Dublin Collection area.

In January 1987 the Revenue Commissioners became aware of the possibility that irregularites were taking place at Dublin Airport in implementing the prescribed procedures of the clearance of goods through customs and the bringing to account of duties. Following an investigation it came to light that cheques received from importers on various dates since 1981 by an official of the Customs and Excise Service in respect of duty and value added tax had not been brought to account and that, over a lengthy period, goods had sometimes been released from customs control without duty being paid or secured and also that goods were released as duty free samples when it appeared that they were commercial consignments. Deficiencies in other importing and clearance procedures also came to light such as failure of the customs officer to record on entry documents whether goods had been examined by him and the preparation by him of entry documents on behalf of traders; in some instances blank cheques provided by an importer were attached to the entry documentation dated September 1985. I inquired as to the duration and extent of the irregularities and why control procedures did not bring them to light earlier. I also inquired regarding the amount of duty lost and the outcome of investigations into the case.

The Accounting Officer has informed me that during the period May 1979 to January 1987, the official concerned released goods to a small number of firms prior to receipt of the import entry for the goods and the proper payment of duty and/or VAT. He also cleared some goods without production of the relevant surveillance authorisations, did not ensure the proper mutilation of commercial samples, and is known to have prepared import entries on behalf of at least one importer. Amounts of duty/VAT outstanding in respect of different entries varied between £1,000 and £12,000 and delays in payment varied between one day after clearance to thiry-one months on one occasion. The irregularities were discovered by a supervising officer, who found in a desk drawer, unlodged importers' cheques and three presigned but undated cheques (amounts blank) drawn by importers and intended to cover consignments which had already been released without entry. Between May 1979 and December 1984 this irregular arrangement was confined to one importer on an infrequent basis only, but increased thereafter to five importers. The Accounting Officer also informed me that in September 1987 the total amount of duties, VAT and levies outstanding from the importers involved was £39,176 and that this amount might be further increased by £32,906 as a result of a valuation which was under consideration by the Commissioners. He stated that all the importers are registered for VAT, so that the amounts of VAT outstanding can be deducted from VAT repayments. With the exception of one firm who should have paid £7,703 VAT on goods temporarily imported, but now claimed that the goods were subsequently re-exported, all have expressed a willingness to pay amounts due.

The Accounting Officer in reply to my inquiry as to why control procedures did not bring the irregularities to light earlier has told me that because of the additional accounting duties arising from the introduction of VAT at import in 1982, it was necessary to withdraw staff from the area concerned with reconciling import entries with cargo manifests, resulting in arrears of work in the implementation of the control procedures. Subsequent modification of procedures elsewhere has since allowed staff to resume these duties so that current work is now up to date, arrears have been overtaken, and investigation of outstanding items is continuing. The Accounting Officer stated that no fraud was involved in this case but that the officer concerned had been suspended from duty.

Mr. McDonnell.—My concern in paragraph 18 was that a customs official had been involved in what seemed to be irregular practices for about seven years before being detected. Obviously I was concerned about the effectiveness of the systems of control which are being operated.

I want to remind the Committee that in my 1983 report I referred to the fact that certain control procedures on the customs side were not operated in the Dublin collection area and that this was leading to delays in payment and failure to establish correct amounts of customs duties payable and so on. Certain aspects of what I cited at that time were perhaps instrumental in causing the problem which is referred to in this paragraph. The Committee will see at the end of the paragraph that the Accounting Officer has said that the control procedures are now being fully implemented.

As far as the loss to public moneys is concerned, there is a balance of some £52,000 still due to the Revenue Commissioners, practically all from one of the companies for which this officer was carrying out certain tasks which he should not have been doing. That is practically all due from one company and £33,000 of that liability was established by the follow-up action by the Revenue Commissioners when the matter came to light. I understand that the company in question is now in liquidation and that there is little prospect of recovering the money.

Chairman.—This paragraph indicates that in paragraph 22 of the Comptroller and Auditor General's 1983 report on the assessment and collection of custom and excise duties, certain deficiencies were referred to. When this was raised at the Committee of Public Accounts, the Accounting Officer of the day assured us that the procedures were adequate but, nevertheless, the case in this paragraph was actually taking place when that answer was given to the Committee of Public Accounts. What comments would you make on that?

Mr. Curran.—The main comment I have to make is that for most of the time this officer was facilitating only the one trader. I think he was personally on very friendly terms with the proprietor. The reason it was able to go on for so long without being detected was because the checking procedures had had to be laid to one side for a considerable period after the introduction of the VAT at import scheme in 1982.

The problem was that before 1982 practically all the customs entry documents did not have any monetary charge on them. They were free at the point of importation because they were coming in transit or they were Community goods inside the Community. In 1982 when the VAT at import was brought in, that situation was transformed overnight and instead of a minority of customs entries carrying a money charge, the majority of them, practically all, suddenly became money entries. This meant that they had to be subjected to a different procedure, a much more time-consuming clerical procedure. The staff at the time were all diverted into this because of dealing with the money entries, checking the money entries, and one of the jobs which was left to one side was the job of reconciling the entries which were presented every day with the manifest listing all the goods which had gone into the transit shed. This is one of the very necessary checks which have to be imposed.

Chairman.—I hesitate to interrupt you, Mr. Curran, but the problem is that, when we drew attention to the deficiencies when we were examining the 1983 accounts, we were given assurances that these had been dealt with. This is the problem. I understand how it arises and this akin to what we were told on the 1983 accounts. We were told then that these procedures had been tightened up and this was going on at that time.

Mr. Curran.—I am not quite sure when that discussion on the 1983 accounts actually took place. It could possibly have been in 1986 and by that time the new procedures had been put into place. We changed very fundamentally the whole system of checking customs entries and we installed a much more efficient system, a more effective use of staff and that enabled us to get back to this business of reconciling the entries with the cargo manifests and with the airway bills, as they are called, in the case of air traffic. That system was reinstated, I would imagine fully reinstated, within the last two or three years. Up to that time this had been going on and it was as a consequence of a check by one of the local supervisors that this problem came to light.

Chairman.—According to the Comptroller and Auditor General's paragraph they were discovered by a supervising officer who found in a desk drawer unlodged importers' cheques and three pre-signed but undated cheques. Is that not a very loose arrangement? Does it not indicate a certain looseness in control procedures?

Mr. Curran.—It was absolutely, and we could not stand over a continuation of what was happening.

Mr. Curran.—As I have said, those operations had not been properly carried out over a period of maybe three or four years. The second thing was that because of the fact that it was only one entry here and there for a firm that the man was dealing with, it did not surface. It was a very minor sort of operation. Of course it underlined the necessity for reinstating fully all those checking mechanisms and that was done.

Chairman.—In relation to the last paragraph, the Accounting Officer stated that no fraud was involved in this case but the officer concerned had been suspended from duties. If there was no fraud, there was obviously a loss and the Comptroller and Auditor General has suggested something of the order of £52,000 of a loss. WHat are our chances of recovering that and was suspension from duties the only penalty imposed on the officer concerned?

Mr. Curran.—Firstly, as regards the question of recovery, the firm went into liquidation and I think the chances are very slim of recovering any of that. It will just have to be regarded as a write-off. The amount involved in that firm is nearly £52,000. Of that, £19,000 would be a firm charge in the sense that it was an established charge. The remainder, £33,000, was not firmly established as a charge. There was an argument about whether or not it should be charged and if documents had been produced indicating that charge would not have stood. Perhaps in terms of real money, the loss may be around £20,000 but I do not think there is any chance of recovering it because the firm has gone.

Mr. Curran.—The penalty was suspension for a while. The officer was then reinstated. He was downgraded from his rank of being a fixed officer at the airport and he was reverted to unattached status. He was taken out of the airport and he was put on quarterly reports under supervision. The Commissioners felt that that was an adequate penalty, given that what was involved was carelessness and lack of attention to proper procedures.

Chairman.—You are sure there was no question of financial inducement or anything of that kind in this case?

Mr. Curran.—This has been investigated quite closely by our people and there is no such suspicion in this case.

797.Deputy Flood.—Like the Chairman, I find it extraordinary that this thing only came to light after seven years by virtue of the fact that unlodged cheques were found in drawers. The witness referred in some detail to the action taken in so far as the officer was concerned. This difficulty also extended itself to a number of other companies, another five other companies. Are you saying that there was a similar problem?

Mr. Curran.—Yes, there were three others but there does not seem to be any question of loss in relation to the others. Some of the arrears have been paid and we think the rest will be paid. There is only a few hundred pounds involved. The main loss occurred in relation to this firm which went into liquidation.

Deputy Flood.—Did the firm which went into liquidation, or any of the others, break the regulations or were they guilty of some crime?

Mr. Curran.—No. Some of them gave the officer a blank cheque signed and payable to the Revenue Commissioners or the Collector to pay the duty and they said, “Look will you clear the paperwork quickly, here is a blank cheque and fix it up.” That is the sort of thing that was involved and he just failed to fill in the blank cheque and process the entry through the system.

Mr. Curran.—I think the main one involved, that one which went into liquidation as far as I know, dealt with wearing apparel or clothing. I am not quite sure what the others were involved in. It may have been medical goods but I do not have those details.

Deputy Flood.—As you may know, Mr. Curran, there have been numerous complaints from genuine traders in the clothing industry about imported goods and the fact that they can be so freely available here. They have effectively, as I understand it, practically wrecked our indigenous clothing industry. I wonder if we are not dealing in this case with the tip of the iceberg. This, your officers have discovered, by pure accident, from cheques at the bottom of a drawer. Is there a possibility that we are talking about much more widespread practice of importation without the proper entry procedures and payment of duties etc. going through? If so, can we begin to look at different industries like the clothing industry which has been savaged in recent years by what the people working in the industry say are importations and there is amazement as to how some of these goods get into the country in the first place when clearly they were manufactured very often outside the EC? Arising out of what we have discovered here, has a major investigation been carried out by an outside organisation on behalf of the Revenue Commissioners and, if not, why not?

Mr. Curran.—As to whether an outside organisation investigated this area of entry clearance, the answer is “no”, not in the sense of checking the system to see if it is adequate. The basic system is the system which has existed for many years and we have recently updated it and refined it. In answer to your major question, we do not think that there is any question of widespread evasion or widespread avoidance of the necessary procedures. On the question of the clothing industry, occasionally, over the years we get complaints from traders who say that this could not possible be sold at the price if it had gone through the proper procedures. We always investigate these. We look up the documents, the invoices, entries and so on and we always find that they have gone through the system. Whether the values are adequate or whether they are being brought in from third countries is another matter but the procedures are in force. We do not think that any difficulties which may be experienced are due to failure to operate the customs control system. It may very well be other economic factors.

Deputy Flood.—You touched on the documents produced and the possibility that there might be a question of under-valuation. An area which requires a great deal of attention is the possibility that invoices put forward could be under-valued and would, therefore, have a consequential effect on the revenue accruing to the State and that area could be the answer to the difficulties being experienced by the clothing industry. I do not want to get hung-up on that issue, but I am greatly surprised that, the deficiencies in the system being discovered after seven years by a freak, as it were, no major investigation of the operation at import point was undertaken. I am very surprised that that did not happen and I would have expected at the very least that the assistance of the Garda should have been sought to carry out a full investigation to see if what we are now discussing was much more widespread. We have discovered what we have discovered and it leads me on to ask if there are not other infringements also in relation to areas we have not investigated. It would be a good day's work if the suggestion was taken on board that a major investigation be undertaken in so far as the whole question of importing, documentations etc. is concerned. I would not be at all happy that this is all that is happening without the benefit of a thorough and exact investigation and it is a function of this committee to make such suggestions.

Mr. Curran.—Let me make two comments on that. Firstly, what gave rise to this case was not that the system was faulty. It was that the system was not being operated and this was, as I explained, because of cutting corners because of staffing difficulties. The system has now been reinstated. On the broader issue of our general procedures for dealing with customs entry documentation, we are launching a major study consultancy on the question of moving this whole procedure into the computer area. Next week outside consultants will start a major project in this area to advise us on the best strategic method for developing the system in the future in co-operation and in consultation with the trading community. The idea at the end of this is that the trading community will be able to input their data electronically into a customs computer and that much of the checking would be done in that way.

798.Chairman.—Deputy Flood raised very relevant questions which, I suggest to the committee, are also related to paragraph 21, further problems in the customs area. Before I call in Deputy Harney, I would ask the Comptroller and Auditor General to read that paragraph and I will take both comments together because there are similar problems there. With agreement we will do that now.

Mr. McDonnell.—We could do that because while paragraph 21 does not deal with imports — in a sense it deals with exports — it involves the customs services.

Chairman.—Paragraph 21 of the Report of the Comptroller and Auditor General reads:

Value Added Tax—Retail Export Scheme

Under the Value Added Tax (Goods Exported in Baggage) Regulations, 1984 and conditions relating thereto, visitors could obtain full relief from value added tax on portable goods purchased by them while in this country and exported in their personal baggage within two months of purchase. Traders were given discretion whether to charge the tax or not at the time of purchase. If the tax was charged the purchaser could obtain relief by claiming a refund from the trader within two months of exporting the goods. If the tax was not charged the trader had to rely on the purchaser returning documentary proof of export to enable the trader to satisfy the Revenue Commissioners that he was not liable for VAT on the transaction. In order to obtain such docmentary proof of export it was essential that the purchaser when leaving the country present the invoices and, if required, the goods, to the Irish Customs for certification of export.

In the course of audit I noted that it had come to light that the regulations regarding certification were not being properly observed in some instances. An investigation had revealed that invoices in respect of VAT free sales claimed to have been made by a trader to visitors exporting their goods through various exit points were certified by customs officers stationed at these and other exit points and that such certification had been carried out at the request of the trader some time after the visitors had left the country when it was impossible to verify the validity of the transactions. I sought information from the Accounting Officer regarding the outcome of the investigation into these irregularities. I asked whether, in the light of these irregularities, the procedures governing the operation of the scheme were considered adequate and, in view of the irregular certification of the invoices, what action had been taken to establish the correctness of the amount of VAT relief claimed by the trader in respect of the transactions involved.

The Accounting Officer has informed me that during the period July 1985 to November 1986 an Officer of Customs and Excise at Shannon Airport certified sales invoices for goods exported by persons leaving the State, without requiring production of the goods for examination, as required by regulations. During the same period an Assistant Officer of Customs and Excise, attached to a staff unit operating at Connolly Railway Station, Dublin, attended at a retail premises in Dublin on three occasions and certified sales invoices for goods which he did not examine and which had already been exported by persons departing via Dublin Airport. This was done through an irregular arrangement made between a member of the staff of the firm concerned and the customs officials and the invoices were used to substantiate amounts zero rated for VAT on the VAT returns made subsequently by the firm. The customs officials concerned admitted the offences and had been suspended from duty.

The Accounting Officer assured me that the 1985 VAT liability of the trader concerned had been established and paid and that the final VAT liability for 1986 as being determined.

Mr. McDonnell.—What I am referring to in paragraph 21 is that two customs officials, in apparently unrelated arrangements in Dublin and Shannon, irregularly facilitated the same company over a period by certifying retail sales invoices as representing VAT-free sales in contravention of the regulations. This enabled the company to substantiate what they claimed to be their VAT exempt entries in their VAT returns. In the absence of such certification the sales invoices would not be acceptable to the Revenue Commissioners and the VAT would have had to be paid by the trader, even though he might not have charged the customer VAT. I understand from the Accounting Officer that the company concerned in this case has since changed its practice of not charging VAT to visitors at the point of sale. I should have said we are talking about the recovery by visitors of the VAT charged on retail purchases by them. This company now charge the VAT to the customer.

The potential loss of VAT revenue, it is fair to say, was never fully established in this case but a settlement was agreed between the Revenue Commissioners and the company and, as a result, no outstanding VAT liability exists for 1985. The company's VAT liability for 1986 and 1987 has, so far as I understand, not yet been agreed.

Chairman.—By way of leading into Deputy Harney's question, are we to understand from this paragraph that an assistant officer of Customs and Excise, attached to Connolly train station, certified goods for export at Dublin Airport?

Mr. Curran.—It is totally irregular. He took the Connolly Station stamp and he removed the words “Connolly Station” from it, he buffed them out. He went to the traders' premises with this stamp and stamped the documents there.

Mr. Curran.—The Connolly Station officer has been suspended and is still suspended. His case is sub judice at the moment with the Department of Finance.

Mr. Curran.—No. The question of retention in the public service is what is at issue.

799.Deputy Harney.—That is the very question I wished to address myself to, in the context of the last problem.

Deputy Harney.—Both problems are similar. I agree with Deputy Flood in that I am surprised the Garda were not involved in investigating the abuse. The Accounting Officer has said it is not fraud, but I would describe it as fraud. However, we will call it an abuse — this is in relation to the import problem. Secondly, and more importantly, I want to deal with the question of how the officer is being treated. You say there was no question of fraud, that it was simply negligence, or somebody not doing his duty as thoroughly as he should. If an officer that has this kind of responsibility is behaving in this way and is so negligent as to be literally useless to the Revenue Commissioners, I would regard that as being serious enough to warrant dismissal. I find it extraordinary that such an officer has been reinstated, albeit at a lower grade. I would say the same in the context of the officers in relation to the Connolly Station case and the two officers referred to in paragraph 21. Until such time as we make people responsible to some degree — I am not saying that we fire everybody who make a mistake — these kind of abuses of public moneys, which is what they are, will continue. I would call it fraud: I am surprised the word “fraud” is not being used.

It is fraud if somebody leaves cheques lying around for months until suddenly they are discovered. I find that extraordinary behaviour and it is inappropriate behaviour for a public servant. People who behave like this should not be retained at any level in the public service. I would like this committee to make such a recommendation, particularly in the whole revenue collecting area where a lot of the methods being used have come into disrepute and many people are very angry with the manner in which they are being treated. Less harsh treatment might be necessary if those whose responsibility it is to collect moneys in his way are vigilant and thorough and not negligent in carrying out their duties.

Mr. Curran.—As regards the two officers who were involved in the VAT export thing, the commissioners took a completely different view of their involvement in these procedures. One of the cases has been decided on. The officer concerned was given the opportunity to resign, which he did. The second officer's case is at the moment being considered but he has not been reinstated. We take a very serious view of the actions of the two people concerned in that case.

Chairman.—Is there some suggestion or suspicion that in the export case, there was evidence of inducement?

Chairman.—Was there any attempt by the Garda to pursue anybody at that level?

Mr. Curran.—The Garda did not come into it. The person concerned in the company, as far as I know, is no longer with the company.

Deputy Harney.—Why were the Garda not brought in by the Revenue Commissioners?

Mr. Curran.—Because initially our investigations were all designed to try to establish what had happened and to try to establish whether or not there was evidence to justify dismissing the people. The most important aspect of it from our point of view is to try to make sure that people who are quite unsuitable do not continue to serve in the office. Now, whether that involves dismissing them or giving them an opportunity to resign or whatever, these are matters which have to be considered in each individual case. We took a very serious view of those two people.

Deputy Harney.—I would have thought that the behaviour warranted the initiation of criminal proceedings and, therefore, it would have been appropriate for the Garda to investigate it. If an officer is given the option after committing a serious offence like this of merely resigning, it does not act as a disincentive to other officers who might be involved or who might be tempted to become involved in similar behaviour. It is inappropriate for the Revenue Commissioners not to have involved the Garda in these instances.

800.Deputy Flood.—In relation to the official at Connolly Station and the stamping of the invoices, am I correct in assuming that what was attempted here was that a sale would be made within the State and it would be treated as if it had been made for export?

Deputy Flood.—Therefore, what we are talking about here is the suppression of genuine VAT liability, which would be non-refundable.

Mr. Curran.—Yes. Goods for export are relieved from VAT but there has to be some evidence that they were exported. The evidence of export was the stamped copy of the invoice which should have been produced at the point of exportation with the goods so that the goods could be checked if necessary. That is the system which is at present operating but in this case the officers concerned did it in a different way by stamping invoices in bulk.

Deputy Flood.—Was this a high street trader, or what sort of a trader are we talking about?

Deputy Flood.—Expecting people to walk in off the street and purchase? Is that the type of trader we are talking about?

Mr. Curran.—We are settling the tax affairs. It is not clear whether the company itself was involved in this or whether it was some bit of private enterprise by an employee. In any case, we are confining our action in relation to the company to making sure that we get the revenue due.

Chairman.—I suggest that we mark both of these paragraphs “further information to be forwarded” and Mr. Curran might let us know what the up-to-date position is in both the systems and the outstanding position in relation to paragraph 21. Is that agreed? Agreed.

Deputy Flood.—Mr. Curran, you said that that was probably a bit of private enterprise. How could it be private enterprise if the sales invoice going through the system of that big company would suppress VAT? It is part of the big company system, so where is the private enterprise?

Mr. Curran.—Yes, but there could have been a legitimate way to get those invoices. The person concerned went about getting these invoices stamped in an entirely improper way, but once they were stamped and went into the company system, they appeared to be perfectly normal.

Deputy Flood.—The company? Only the company could gain, apart from the official in Connolly Station.

Mr. Curran.—All the people who bought the goods would have got them cheaper.

Chairman.—Could they not have stamped invoices for goods that were never bought? How do you know they were bought in the first place, or exported?

Mr. Curran.—This is the problem with what happened in this case. When the proper procedure was not followed, when the goods and invoices were not produced at the point of exportation, the whole control system collapsed and that is why it was a very serious and deliberate act.

Chairman.—How long has this been with the Department of the Public Service? Can the Department of Finance tell us?

Mr. Curran.—I would like to answer that first. One of the cases was submitted some months ago and that was decided by the Government. The other case has only been submitted to the Department, possibly in the last day or two, because the person concerned wished to make a lot of representations, the trade union was involved in it and a lot of discussion took place. It has only reached the Department of Finance in the last day or two.

801.Chairman.—It is extraordinary that that could happen. We will be marking it for future information to be forwarded. We will have to get an up-to-date report on it.* Paragraph 19 of the Report of the Comptroller and Auditor General reads:—

PAYE

Tax free allowances claimed by PAYE taxpayers are granted by officials of the Office of the Inspector of Taxes on submission by the taxpayer of satisfactory evidence of entitlement to the various allowances claimed. A computer master file record is maintained of the tax free allowances granted to each taxpayer and a continuous random examination is carried out by supervisory staff to verify the validity of the allowances recorded on the master file against the allowances properly due on the basis of the taxpayer's annual return. In 1986 this examination brought to light irregularities involving the granting to two members of the taxpaying public of tax free allowances which they had not claimed and to which they were not entitled for the years 1985/86 and 1986/87. The irregularities were apparently perpetrated by an official of a Dublin tax district in inputting incorrect data to the computer master files.

In reply to my inquiry the Accounting Officer informed me that in one case the officer input an amount in excess of the amount claimed for mortgage interest and VHI contributions and in the other case he completed a fictitious claim for mortgage interest and input the amount falsely claimed with the result that the two taxpayers underpaid £3,110 in aggregate for the years 1985/86 and 1986/87. The officer concerned was suspended and has since resigned. The taxpayers have now been assessed for the amount of the underpayments.

The Accounting Officer stated that the irregularities were detected by a supervisory officer through the detailed checking procedures which are in operation and that the approach to checking is based on the need to maintain a system of scrutiny which is not excessive in relation to the risk involved, but is consistent with the need to maintain an adequate level of revenue security. He felt that the irregularities must be viewed in the context of the many thousands of transactions that are processed currently and honestly each day and that the revenue risk is not of an order that would justify the deployment of resources on the scale needed to eliminate it entirely. He assured me that procedures for the prevention and detection of irregular transactions are kept under review and that officers were being reminded of the ongoing need for vigilance in this area.

The Accounting Officer also stated that checks were carried out to establish if other irregular transactions had occurred and although close on 500 cases and files were examined no prima facie evidence of irregularity was disclosed. Five cases were still under examination, but the balance of probability was against establishing any further instance of irregularity.

Mr. McDonnell.—Again, this paragraph refers to some unauthorised practices. This was the unauthorised amendment of the tax-free allowances on the PAYE computer file by an official of the Revenue Commissioners which had the effect of granting tax-free allowances in excess of entitlement to taxpayers. Again, of course, I was concerned with the failure of the system controls to detect the spurious data at the input stage and the fact that it remained on file for over a year before coming to notice.

I accept the Accounting Officer's point that controls must be cost-effective and I would never suggest otherwise but I think everybody would agree that special care must be taken in an area such as this. One must have regard to the potential exposure. I wonder whether the level of control in this area is what it should be. There are five cases referred to at the end of the paragraph. I have no current information on those five cases which were under investigation.

Mr. Curran.—Four of the cases have been closed, in that everything seems to be in order and there is no problem. The fifth case is still under review. There does not seem to be any suspicion that anything is wrong but the case is just being checked through to finality.

Chairman.—What benefit was there for this individual to do this? Presumably this was a deliberate fraud and not an error?

Mr. Curran.—It was not an error. I think it was deliberate. I do not know what relationship or acquaintanceship he may have had with the people who benefited. We have no information on that.

Chairman.—It is quite extraordinary that in this area of PAYE and the other area of imports and exports you never sought to find out what the relationship was. If somebody was giving an inducement to a public servant should that person not be prosecuted, if they were doing something which was fraudulent and criminal?

Mr. Curran.—Criminal proceedings of that sort would have to be undertaken by the Garda. We do not get involved in that.

802.Deputy Harney.—I am getting really angry. The Garda cannot be involved unless they are brought into it by you. It seems extraordinary that again in another area of tax collection where fraud is discovered you would simply wash your hands, maybe allow the officer to resign and that is the end of it. This is appalling. The Garda should be involved in all of these cases and the people responsible, the company involved in the last case and the individual public servants involved in these cases, should be the subject if necessary of criminal proceedings because they are involved in crimes.

803.Chairman.—In the case of this individual, was he or she in business for themselves? Were they carrying out a practice and giving their own clients favourable treatment or was it a brother or sister of the person concerned? What was the reason? Surely they were not people who just walked off the street and were taken at random.

Mr. Curran.—There were two cases involving one officer in the PAYE area. They are simply not going to give you any satisfactory explanation as to why they do it. Once you catch them that is it.

Chairman.—Are these only two of a number that were discovered? If the person was in business for himself, were these clients of his, were they family or were they just people who walked in off the street and he took a chance and offered them an inducement not knowing why they might be? What is their relationship to this individual or is there a relationship?

Mr. Curran.—We do not know whether there was any connection or what the connection was. All we know is that the officer concerned was responsible for an area of work which included the records of these two individuals.

Chairman.—How did he check it? What allowances were computed that should not have been?

Mr. Curran.—The officer in charge has to go through the records periodically to check what is in the computer record against the basic documents to see whether the basic documents justify the allowances which have been put into the computer record. We cannot check them all.

Chairman.—Which allowances are we talking about in this case? Did he get a married allowance for a single person?

Chairman.—The extraordinary thing about these cases is that you do not know the background to them. The same applies in the cases in these three paragraphs and the attempted fraud earlier in the year. It does not imbue confidence. I know you have a very difficult and complex job but if I was running a business and I thought somebody was up to this I would want to know the reason for it and the relationship between the two people concerned. I cannot understand why you have not pursued that in these three cases.

Mr. Curran.—The person was suspended immediately and he has since resigned. We recovered the tax from the individuals and we also checked into the system. We checked over 500 cases and we did not see any evidence of other irregularity.

Chairman.—That is the unsatisfactory situation. We do not know either. What are we to report to the Dáil? Is this an isolated incident and on what information can we say it is isolated? It could be widespread. I doubt if it is, but we just do not know how it came about. That is not very satisfactory.

Mr. Curran.—I do not think we can deduce that it could be widespread by reference to this one case, particularly since we have checked through the rest of that area and we have not found anything else irregular.

804.Deputy Flood.—As you say, the Commissioners have a very difficult task. It is a very complex area and there is a tremendous amount of paperwork attached to it. That is part of the operation and from that point of view it certainly is complex. We have heard several examples this morning of where the irregularities were discovered and that the individuals were in the employment of the State. The worst that happened to them, which is significant I suppose, is that they lost their jobs, they were put on suspension or they were moved to a different section, presumably where the temptation would not be quite so great or the opportunity would not be quite so great or the opportunity would not be there.

Since the Commissioners are going to have to adopt a policy adopted by some commercial companies, that if you are caught perpetrating a fraud within the company or the business, the matter will be referred to the Garda and the people will end up in the courts. Surely some decision like that is going to have to be taken within the Revenue Commissioners, that if there is wrong-doing of the kind we are discussing here this morning, it will not be a question of suspension or transfer to another area but that the law will take its course. That should be common knowledge for all employees so that people cannot have the impression that if they are caught or if it comes to light they will be able to slip away quietly or anonymously, maybe having gained considerably financially. In the commercial sector certainly some companies take that view and I understand that it certainly works. It is something that the Commissioners should consider as well.

It does not enthuse me to say that you must take action and bring these matters before the courts if that is the end result. I do not feel very good about having to say that but surely you have to brush up on the act here. I am sure it is no joy to you. Mr. Curran, to come here and to explain hour after hour how these cases have arisen, how we might have been able to detect them in the past and how we are going to detect them if they arise in the future. Your energies should be concentrated in other directions. The Commissioners are carrying the can, as it were, for the difficulties which have arisen.

I suggest that a message should go out to all State employees, we are talking about your area at the moment, that if they are caught the full rigour of the law will be applied right down the line. That might help to clear up the problem we are discussing here this morning.

Chairman.—We will note this for now but you might take note of the concern which is being expressed by the committee, along the lines outlined by Deputy Flood.

805.Chairman.—Paragraph 20 of the Report of the Comptroller and Auditor General reads.—

Income Tax — Deposit Interest Retention Tax

Under Section 32 of the Finance Act, 1986 income tax at the standard rate is deductible with effect from 6 April 1986 from interest on deposits held by deposit takers as defined in the Act. The tax deducted is required to be paid to the Collector General of Revenue within 15 days of the year ending 5 April and to be accompanied by a statutory return showing the amount of interest and the appropriate tax. The Act also provides for payments on account to be made in October each year. Interest on deposits of non-residents and of charitable bodies recognised by the Revenue Commissioners is exempt from the tax and there is provision for repayment of the tax in certain cases.

By 31 December 1986 £137.1 million had been received by way of payments on account and the total received for the year ended 5 April 1987 amounted to £256.8 million. I have not yet had an opportunity to examine the operation of the procedures established by the Revenue Commissioners to ensure that the appropriate amount of tax was remitted by all deposit takers.

Mr. McDonnell.—This paragraph has been included because of the newness of the tax. I just want to say that the tax is paid on the basis of returns submitted by the deposit takers. The legislation does not allow the Revenue Commissioners to examine the records of the institutions to verify information which they furnish in support of the amount of tax paid but they are authorised to raise an assessment for any amount which they believe may have been omitted from the returns. As I understand the position at the moment, they are looking at the amounts paid by comparison with the financial accounts of the deposit takers from a “reasonableness” point of view. This is a pretty complex exercise and I do not know how conclusive the results will be. They have carried it out in a number of cases and have tried to reconcile the amount of tax paid with the total interest paid as shown in the financial accounts of the institutions. They have not considered it necessary in any case to raise any additional assessment. It seems to be working as satisfactorily as one could probably expect.

806.Chairman.—We will note this. Paragraph 22 of the Report of the Comptroller and Auditor General reads:

Remittances and Repayments of Tax

During the course of audit it came to my attention that investigations were being carried out by the Revenue Commissioners into substantial irregularities which had apparently occurred through the fraudulent or attempted fraudulent encashment of 107 cheques to a value of £620,000, approximately. These comprised cheques remitted by taxpayers in payment of various taxes and cheques issued by the Revenue Commissioners to taxpayers in respect of repayment claims validly authorised by tax inspectors' warrants. In some of the repayment cases the addresses on the warrants were altered before they were processed for payment and in other instances the repayment cheques were themselves intercepted. The existence of a fraud became apparent when, in quick succession, an Inspector of Taxes queried the absence of acknowledgements for payments which had been passed to the Collector General, a taxpayer questioned the issue of a demand for tax already paid, another taxpayer reported delay in receiving a repayment which had been authorised, a trader and independently, a bank official alerted the Collector General to the possibility of fraud.

I inquired as to the circumstances in which the fraudulent of attempted fraudulent encashments occurred, whether the loss involved had been established and what steps had been taken to recover the amounts of the fraudulently negotiated cheques from the individuals concerned or from the institutions which gave value for them. I also inquired whether the control procedures in operation for the transmission and safe custody of cheques and repayment warrants were regarded as adequate and I sought information as to the outcome of the investigations into the matter.

The Accounting Officer informed me on 10 September 1987 that originally 107 cheques to the value of £621,092 were thought to have been stolen but 4 cheques to the value of £127,274 subsequently turned up and were negotiated by the Revenue Commissioners. The remaining 103 cheques to the value of £493,818 were apparently stolen; of these 81 were taxpayers' cheques sent by them to the Revenue Commissioners in payment of taxes and 22 were Revenue Commissioners' cheques sent to taxpayers (21 repayment and one refund). Seventy of the taxpayers' cheques were intercepted either in the Offices of Inspectors of Taxes, in transit from these offices to the Collector General's Office or in the Collector General's Office itself following transmission from the Offices of the Inspectors, 10 may have been intercepted in the ordinary post and one delivered by hand to the Collector General's Office by the taxpayer's agents was apparently not received by the officer to whom it was addressed. Most of the repayment cases involved the interception of repayment warrants and Inspectors' memos giving addressed to which repayments were to be sent and the alteration of these to show incorrect addresses. The alterations were not queried in the Collector General's Office with the result that the repayment cheques were sent to the false addresses.

The Accounting Officer also informed me that 14 of the tax payment cheques amounting to £140,117 were fraudulently negotiated and the persons who gave credit, mainly banks, had not made good the amounts. The question of pursuing these amounts has been under consideration and legal advice was being sought in the matter. In addition, 11 repayment cheques were fraudulently cashed resulting in a loss to the Revenue Commissioners of £24,899. Fortyone cheques amounting to £32,614 comprised cases where there may be losses but the extent of any such losses could not be quantified until inquiries have progressed further. The Accounting Officer stated that the remaining 37 cheques to the value of £296,188 comprise cases where it has been established that the Revenue Commissioners will not be at any loss.

In regard to the control procedures in operation for the transmission and safe custody of cheques and repayment warrants, the Accounting Officer has informed me that the Collector General's Office and the Office of the Chief Inspector of Taxes had reviewed the system of acknowledging payments forwarded by Inspectors of Taxes to the Collector General's Office and delays which had sometimes occurred had been eliminated and the number of warrants greatly reduced by computerisation of the repayment system. Steps had also been taken to improve the procedures for dealing with manual repayments. He explained that methods of payment other than by cheque were being considered but that taxpayers in the United Kingdom had been found to be very slow in responding to alternative methods of payment suggested.

The Accounting Officer also stated that officials from the Collector General's Office have had several meetings with the Garda Fraud Squad to review progress in the investigations, that a number of arrests had been made in connection with the frauds and that Revenue internal investigations were continuing.

Mr. McDonnell.—Paragraph 22 deals with a matter the committee has discussed on a number of occasions. I think in fact we took it on board at an earlier meeting. It is about the cheques in the Collector General's Office.

Chairman.—Would you like to give us a brief outline of the up-to-date position, Mr. Curran?

Mr. Curran.—I can leave you a note which updates the previous note if you wish but, to summarise, the position at the end of August was as follows: the total number of cheques we are talking about is 136 with a face value of £783,800.

Mr. Curran.—£783,805. I will circulate a copy of this note. I will give it to the clerk. We have some spare copies. There was no loss to the Revenue in the case of 86 cheques with a face value of £540,000. Another 33 cheques with a face value of £193,000 were fraudulently negotiated but the case is unresolved and we are still negotiating with the taxpayer or with the banks. Another six cheques with a face value of £25,000 have not been negotiated but the cases have not been resolved.

Mr. Curran.—£25,400. In respect of those cases we are in touch with the taxpayer. The cheques have not been negotiated. There may well be no loss there. What we can say is that in the case of 11 cheques, totalling £24,595, we have to accept that a loss has occurred. Of the lot we can only say that there has been a loss in the case of 11 cheques with a face value of £24,595.

Mr. Curran.—Adding £193,000 to £25,000 together gives a total of £218,000. That amount is in dispute.

Chairman.—It has been in dispute for some time. Is it going to be a case of having to have recourse to the law or are the banks going to come across?

Mr. Curran.—No. There will certainly be a need to have recourse to the law. Counsel are involved. On the banks side, of course, counsel are also involved on our side and I think we can confidently say it will take some time.

VOTE 9—OFFICE OF THE REVENUE COMMISSIONERS

Mr. Curran further examined.

807.Chairman.—A small amount of money has been included for consultancy services Mr. Curran. What is the figure for 1988?

Mr. Curran.—We have. Next week, in fact, a major consultancy will start on the computerising of the customs clearance systems, the customs entry processing systems, in consultation with the trading community.

Mr. Curran.—We have. We have gone through the procedure. In fact, it has taken some time to go through it. We interviewed seven firms and in the end we made our choice. It has been approved by the Department of Finance. We have appointed them and they are starting work next Monday.

Chairman.—A very high figure for law charges, fees and rewards has been included. What proportion of that figure amounts to rewards?

Mr. Curran.—The bulk of it, £120,000, would have been paid to customs staff in respect of seizures.

Chairman.—We will note the Vote. That brings your 1986 Vote right up-to-date Mr. Curran. We will be concluding our special report very shortly. I am sure you will not be sorry. We have had you in a number of times this year. That is because your Department are a very important and large Department of the public service and your work touches very much on the work of this committee. I want to thank you for your frankness and co-operation and we will be talking again in the near future.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) in attendance.

LAND REGISTRY AND REGISTRY OF DEEDS.

808.Chairman.—This morning the Committee of Public Accounts was meant to be examining Mr. D. Mathews, the Accounting Officer from the Department of Justice who is Secretary of that Department on the question of staffing difficulties and delays in the Land Registry. We last examined Mr. Mathews on 14 April on this matter and gave notice to him that he would be recalled. I just want to quote from the evidence given to that committee by Mr. Colm Gallagher, Principal Officer with the Department of Finance. He said:—

The Land Registry are an organisation who have a very significant impact on a lot of vulnerble people. For example, they can keep people who are buying houses on bridging and so on. The staff know that. Simple problems can be dealt with with some ease and co-operation from staff in other organisations but over a period of ten years any change suggested by management to improve the efficiency in the organisation has been met by the staff with a price tag. The price tag generally is not for more staff at particular levels down at the bottom: it is for more staff up the line.

We had staff who were looking for higher grade posts and to get them they said they would boycott new technology. They had computers which would allow applications to be dealt with a lot faster but because they were not getting what they wanted they decided they were not going to use these and were going to go back to using nice 19th century methods of work — the pen and pencil, put everything on paper and so on — and they slowed things up. If the message goes out to people who can hold the public by the short and curlies, to put it crudely, that by acting the maggot they will generate pressure to get more staff and more of what they want, it will buy more trouble.

That is an exact quote from the evidence given to the Committee on 14 April. I read that because the clerk of the Committee wrote to the Secretary of the Department of Justice on 27 July as follows:—

I am directed by the Committee of Public Accounts to refer to your examination on 14 April and, in particular, to the discussion regarding the staffing difficulties in the Land Registry.

In view of the statement made by Mr. C. Gallagher, Department of Finance at that meeting, the Committee has decided that a detailed report should be submitted on the background to the delays being encountered in the Land Registry. The Report, which should be prepared in conjunction with the Department of Finance, should cover, inter alia—

(b)the effect on productivity and on the clearing of the arrears arising from recent up-grading and the co-operation of one of the unions,

(c)targets of management for a solution to the problem and for getting up-to-date,

That was signed by the clerk of the Committee. There was no response. On 23 September 1988, Mr. Donlon, the clerk to this Committee wrote again to the Secretary, and I quote:—

I am directed by the Committee of Public Accounts to refer to my letter of 27 July 1988 regarding the staffing difficulties in the Land Registry and to ask if you are now in a position to reply.

There has been no reply to either of those letters despite the very damning evidence given to this Committee.

The Committee decided to call the Accounting Officer this morning in special session to go into this matter. This meeting was arranged in consultation with him and the clerk of the Committee received a phone call just coming up to 5.30 p.m. yesterday evening and I received this letter this morning, 6 October 1988 which states:—

I wish to confirm the message already conveyed orally to the secretary of your Committee that due to circumstances outside of my control it is not possible to me to attend at today's Committee meeting as requested.

I regret any inconvenience caused by the short notice of this development but I had the message conveyed to the committee secretary at the earliest possible time.

I have referred to the background because I think this borders on contempt. I really feel that there is a very serious problem with the Land Registry. A number of Deputies mentioned it at the last meeting. This committee examined it on 14 April and wrote in July and again in September and arranged this meeting in October. It is a totally unsatisfactory situation. I could understand if we had got a message which indicated there was some particular problem for Mr. Mathews in attending this morning but no reason or explanation has been given as to his difficulties.

I propose that we adjourn this meeting for one week to allow Mr. Mathews to attend. He has been given notice that he will be required to attend next week and in the event that there is no attendance next week, I feel we might have to bring a special report to the Dáil. Would any other Members like to comment? Is that agreed?

809.Deputy Crotty.—It is agreed. I am rather surprised at the response from the Department. This is a very important matter, as you mentioned, for the many people who have to use the Land Registry. Certainly as a rural Deputy, I, and I am sure other rural Deputies, have experienced difficulties. It is one of the areas that require fairly regular representations. This should not happen. I feel that there is a need for the intervention of Personnel urgently in this situation from the evidence given by Mr. Gallagher from the Department of Finance.

When I read the evidence, I was rather startled. I did not think that a public servant would make such a forthright contribution and the language used at times was not parliamentary but he must have been driven to this by frustration from this section. In view of all this, I wholeheartedly back the Chairman's action. I would move immediately to report to the Dáil, if the officer in question does not attend at this committee's request.

810.Deputy Foley.—As a rural Deputy, I think over the past number of years we have all had problems with the Land Registry. They have told us time out of number that they have been compelled, due to lack of staff, to fall behind in many features with regard to land transactions and deals with regard to house purchase.

I am surprised to find that Mr. Mathews has not appeared before this committee this morning because I think if he had a problem it is to this Committee he should say so. Other Departments which the Department of Finance have been dealing with have adopted new technology. I am disappointed to find that a problem has arisen within the Land Registry. Be that as it may, I have got great co-operation over the years from the Land Registry and for that reason I would like to hear the views of Mr. Mathews. I think he should be given a chance to explain his reason for not attending here this morning. He mentioned it was outside of his control, but I think it would be of interest to us to know what was outside of his control that prevented him from attending here this morning.

811.Deputy Harney.—I think this Committee has been treated very badly by Mr. Mathews and those responsible in the Department of Justice. You do not have to be a rural Deputy to know the difficulties that exist in the Land Registry. The evidence given by Mr. Gallagher is very damning indeed and I think a lot of questions need to be answered. These are public officials after all and they have a duty and an obligation not to come here as a favour, but to come here and to answer questions. Looking at the manner in which they seek to treat this committee, you can imagine the way the public are treated if we are treated like that. I just do not think it is good enough. I certainly hope that next week we will have somebody here who can answer questions and who can reassure us that what went on has discontinued and that the Land Registry can be run in an efficent manner so that the public are not forced to endure long and unnecessary delays in the transfer of titles and so on.

812.Deputy Flood.—I am extremely disappointed at this morning's development. As a relatively new member of this committee, I was looking forward to having my say when I was circulated with the agenda for this particular session, because I have many a thing to say in connection with my own criticisms of the manner in which the Land Registry appear to deal with people who have cause to do business with them. Over the years as a public representative I have been extremely frustrated at what would appear to be inordinate delays in handling matters from that office. I certainly would have had a lot to say about that.

Indeed, I would have gone so far as to suggest that we should be looking at whether there is actually a need to have the Land Registry structured as it is at present or whether we should be looking at the total operation of the Land Registry to see if some other way could be found to deal with it. This morning I had hoped to discuss a number of complaints about which I have had to make representations to the Department.

People who do business with the Land Registry believe that there is something very seriously wrong in there and we have got to put our fingers on it and try to resolve it. I was going to talk about issues like, for example, whether it would be possible to change the whole structure and remove the work done by the Land Registry to some other organisation in the private or public sector.

813.Deputy Naughten.—I came here today especially for this meeting. I have no other business in Leinster House. I do not think it is acceptable that a secretary of a Department should inform the committee that he will not be able to attend the meeting by ringing the clerk yesterday evening and confirming it in writing this morning. The members of this Committee come from all over the country and I think it is high-handed and unacceptable that we should be treated in this fashion. We will certainly require some reasonable explanation from the officer concerned.

I agree wholeheartedly with Deputy Harney. I hate to think how the public are treated by this Department if the head of that Department treats elected representations in this fashion and, in particular a statutory committee of the House.

814.Deputy Foley.—I want to repeat what I said previously about giving Mr. Mathews a chance to give us his reasons for not appearing here this morning before judging him. He has sent us a letter——

Chairman.—The difficulty is that we wrote to him on 27 July and again on 23 September.

Deputy Foley.—I accept that but at the same time we had a letter from him this morning in which he said he was unable to attend due to reasons outside his control. I think we should give him a chance to appear next week and explain his reasons.

815.Chairman.—Yes, I agree with the Deputy but the position is that this is the senior Committee of the House. It was set up in 1923, it has a statutory role and the Accounting Officer has a statutory obligation to appear here and account to the Committee. It is not a question of anybody coming here at their own will. This has never occurred before and I am determined that it will never occur again and that it is not going to form a precedent. As Deputy Crotty said, Deputies from all parts of the country came here this morning especially for this resumed examination. The whole situation is completely unsatisfactory.

Nine members of the Committee are present and I intend to send to Mr. Mathews a copy of the minute of the proceedings of the meeting so far this morning so that he will be aware of the extent of the upset there is that he has not appeared or given reasons for his non-appearance.

Deputy Dempsey.—If you are going to do that, Chairman, I should like to be associated with the remarks that have been passed. I would certainly like to be on the record because I came up especially for this meeting as well.

816.Deputy Naughten.—Chairman, I must say that I am very disappointed that the meeting will not take place. When this matter was raised some months ago I expressed my concern at the major delays in the Land Registry. At that time we were told these delays were because of reductions in numbers of staff. The delays there are totally unacceptable. One of the points made on that occasion was that this office was one of the few offices that was self-financing.

I deplore the fact that we have come here today for this meeting — and like other members I travelled quite a distance this morning to be here — only to find that the Accounting Officer is not present. I do not think that is good enough. As Deputy Foley said, maybe there is some very good reason for this which is outside the control of the Accounting Officer and if there is I should like to know. As some other member stated, what chance do the general public have in dealing with these people when this Committee is ignored like this. I do not think it is good enough.

817.Chairman.—I should like to point out to Deputy Naughten, this was pointed out before he arrived, that this examination took place in April 1988, that we wrote to Mr. Mathews on 27 July and again on 23 September and that this morning's meeting was set up in consultation with him. There are now ten of the 12 members of the committee present. I am going to have to adjourn this public session for one week to give Mr. Mathews an opportunity to appear or to find out what his difficulties are. That concludes the public session of this meeting.

818.Deputy M. Kitt.—Sorry, Chairman, as Deputy Naughten said previously, this is a matter that affects many rural Deputies and because there are very long delays in the transfer of lands and simple things like that which affect people in rural areas very much at present, I wonder if it would be possible for you to set a date that would suit the rural Deputies when you are making a decision on the data of the next meeting or has that been decided already?

819.Chairman.—You were late coming in Deputy. He wrote a letter saying that because of reasons beyond his control — and the letter is dated this morning — he was unable to attend and he phoned the clerk yesterday. Following on our examination in April we wrote to him in July and September, to which we got no reply. That concludes the public session. I am adjourning the public session for one week and will come back to this subject then. There are some matters to be discussed in private session.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste)in attendance.

LAND REGISTRY AND REGISTRY OF DEEDS.

820.Chairman.—On 14 April we had with us the Accounting Officer from the Department of Justice, Mr. Mathews, and during that examination questions were put to him about the delays in the Land Registry. During the course of the examination, Mr. Mathews said there had been a decrease in staff of 16 per cent and that this was contributing to the problem. When the Department of Finance were asked to comment on this, they said the solution to the problem is not in throwing staff at the office. I will quote from the evidence:—

The Land Registry are an organisation who have a very significant impact on a whole lot of vulnerable people. For example, they can keep people who are buying houses on bridging and so on. The staff know that. Some problems can be dealt with with some ease and co-operation from staff in other organisations, but over a period of ten years, any change suggested by management to improve the efficiency in the organisation has been met by the staff with a price tag. The price tag generally is not for more staff at particular levels down at the bottom; it is for more staff up the line.

Later the evidence goes on to say, using some rather colourful language, that the staff literally have held the situation to ransom — I think that was the term used.

We explained to the Accounting Officer at that meeting that in view of the strength of the evidence given by the Department of Finance at the same meeting, we would have to look at the matter separately, and to recall the Accounting Officer. On 27 July the Clerk of the Committee wrote to Mr. Mathews, the Accounting Officer and the Secretary of the Department of Justice as follows:—

“In view of the statement made by Mr. Gallagher, Department of Finance, at the meeting, the Committee has decided that a detailed report should be submitted on the background to the delays being encountered in the Land Registry. The Report, which should be prepared in conjunction with the Department of Finance should cover, inter alia,

(b)the effect on productivity and on the clearing of the arrears arising from recent upgradings and the co-operation of one of the unions,

(c)targets of management for a solution to the problem and for getting up-to-date,

There was no reply to that letter in July and on 23 September the Clerk wrote a reminder to Mr. Mathews asking for a further reply. We did not receive any reply. Last week's meeting of the Committee of Public Accounts was called in the normal way and Mr. Mathews, the Accounting Officer, was informed in advance but there was no indication he was not going to attend. The night before the meeting I got a note from him, dated 6 October:

I wish to confirm the message already conveyed orally to the secretary of your committee that, due to circumstances outside of my control, it is not possible for me to attend at today's meeting as requested.

I regret any inconvenience caused by the short notice of this development, but I had the message conveyed to the committee secretary at the earliest possible time.”

In fact, I received that letter on the morning of the PAC meeting last Thursday and the clerk of the Committee had been telephoned the night before. We met last week and there was all-party concern expressed about why he did not attend and the problems being encountered. We rescheduled the meeting for today. There was no indication that there was any problem again about that. The meeting was set to go ahead. The clerk was in touch with the private secretary in the Office of the Secretary of the Department of Justice. Subsequently, there was rumour that there was some problem and the following letter from the Minister for Justice addressed to me, dated 11 October, was sent over by hand. I received it on Tuesday night.

I have been considering the request made to the Secretary of my Department that he should appear before your Committee for questioning in relation to “Staffing Difficulties and Delays in the Land Registry”. Having regard to the mandate of your committee. I have decided that it would not be appropriate for your committee to examine the Secretary on these matters and, accordingly, I have instructed him not to attend for such examination.

The functions of the Committee of Public Accounts, (PAC), as set out in Dáil Standing Orders are: “to examine and report to the Dáil upon the accounts showing the appropriation of the sums granted by the Dáil to meet the public expenditure, and to suggest alterations and improvements in the form of the Estimates submitted to the Dáil”.

Essentially the Committee's function is to examine the annual Appropriation Accounts and the report of the Comptroller and Auditor General to the Dáil thereon. Normally the principal witness called before the Committee for the purpose of this examination is the Accounting Officer for the Appropriation Account under examination — usually the Secretary of the Department in question. The general responsibility of an Accounting Officer is, however, limited by the fact that he is constrained to act under policy guidelines prescribed by the Minister for his Department and/or the Government and also, of course, under any relevant legislation. The appointment of an Accounting Officer cannot detract from the overall statutory position of a Minister who, in the last analysis, has overall responsibility to the Dáil for the policies and activities of his Department.

The Land Registry matters in which the Committee proposed to become involved are matters for which the Minister, and not the Secretary or Accounting Officer, has overall responsibility. They are clearly outside what has always been accepted as the Committee's terms of reference.

In addition, the PAC's and the C&AG's functions relate solely to the post factum review of expenditure. They have no role in a priori examination of expenditure which is the responsibility of the Government which is answerable to the Dáil.

As the issues I have referred to required careful consideration, I was not in a position to convey this decision to you in time for your meeting on 6 October as, contrary to what has been stated, less than one week's notice was given to the Secretary that that meeting was to be held and that you intended to raise at it the Land Registry matters in question.

I received a letter dated 11 October from the Secretary of the Department of Justice, saying:—

I wish to refer to the notification sent to me of the meeting of the Committee of Public Accounts arranged for 13 October 1988 which I was requested to attend. I shall be unable to attend this meeting due to the reasons which are set out in a communication to you from my Minister.

Deputy Harney.—Did we not receive a letter last week from the Secretary telling us that due to unforeseen circumstances——

“I wish to confirm the message already conveyed orally to the secretary of your committee that, due to circumstances outside of my control, it is not possible for me to attend at today's meeting as requested.

I regret any inconvenience caused by the short notice of this development, but I had conveyed the message to the Committee Secretary at the earliest possible time.”

This committee has always acted in a non-partisan way and it is our duty to behave in that way. I have no intention of coming into any conflict with a Government Minister or anyone else, but I would suggest, if the committee are agreeable, that a reply along the following lines, might suffice for now. I do not know how this molehill has become a mountain and I do not want to add to it so that it becomes a bigger mountain; I do not know what the problem is. If the committee are agreeable, I propose we send a reply along the following lines:—

I received your letter of 11 October late on Tuesday evening. To say the least, I was surprised to receive the letter and can find no precedent for it since the Committee of Public Accounts (PAC) has no function vis-á-vis the Minister and the Minister has no function vis-á-vis the Committee.

The Accounting Officer holds a statutory position. To quote, the then Comptroller and Auditor General, at a meeting of the Committee of Public Accounts on Thursday, 7 December 1967 in relation to the Department of Justice, as it happens, “Accounting Officers are appointed by the Minister for Finance to account personally for moneys provided by Dáil Éireann for public services.”

The PAC is at present finalising its examination of the 1985 and 1986 accounts and a priori examination is not proposed, although it has always been the practice, when inquiring of previous years to inquire as to how this compares with the up-to-date position. The Committee has always accepted that it is open to any Accounting Officer to decline, during the course of a meeting, to answer any question which he can justifiably claim to be related to a matter of Government policy, but it does not accept that an Accounting Officer is entitled to refuse to attend the meeting to which he has been summoned if he chooses to assume beforehand that he will be asked such questions.

The committee's concern in regard to the Land Registry is that the situation which it was told by a senior official of the Department of Justice exists there may have financial implications in regard to staff costs and the collection of State revenue both of which are accounted for through the Appropriation Accounts which it is the committee's duty to examine.

In the public interest, and in these years above all years, the PAC could hardly ignore prime facie evidence of loss of Exchequer revenue or of the financial implications of staffing costs when fulfilling its obligations to report to Dáil Éireann upon the accounts for 1985 and 1986. The PAC is empowered by Dáil Éireann to send for persons, papers and records in carrying out its examination. The matters this Committee is examining on are clearly within the terms of reference as given to the committee by Dáil Éireann.

With regard to the last paragraph of your letter, the Accounting Officer was informed during his examination on 14 April that he would be recalled on the subject in question. He was written to on 27 July last and again on 23 September last before being requested to attend the committee meeting on 6 October about which he was informed. I should point out that the committee's letters were not replied to. I find it difficult to understand why your Department has taken the attitude it has in a situation which could have been and still could be dealt with in the usual straightforward manner. On a previous occasion, again involving your Department, a special interim report of the Public Accounts Committee was brought before the Dáil and debated. The committee has a busy workload and has no wish to unnecessarily take up the time of the Dáil. Accordingly, the committee wish the attendance of the Accounting Officer at its meeting on one of the remaining Thursdays in this month. I trust this letter clarifies the situation and that you are now in a position to confirm that you will place no obstacle in the way of the Accounting Officer attending”.

Are there any objections to that reply or any comments on the overall situation?

821.Deputy Foley.—I think we have to go back to the root of the problem. Have you the minutes of 14 April available?

Deputy Foley.—At the end of that meeting Deputy Naughten raised the issue with regard to the Land Registry delays. There was a brief discussion on it and the minutes record the end of that meeting as follows:—

“I will ask the Clerk of the Committee to bring this matter of the Land Registry delays to my attention outside the meeting and we will come back with some suggestion as to how the committee might look at it in greater detail. We will note the Vote for today. That concludes the examination of Mr. Mathews.”

Deputy Foley.—He was. That is the extract there, but you say in the letter to the Minister that he was informed at that meeting on 14 April that he would be recalled on the issue. It is only a point of fact.

Chairman.—It was indicated to him that we would be looking at it in greater detail and we would come back to it.

Deputy Foley.—I made a point here last week that we would have to get more information on this because I felt there was something wrong when the Secretary of the Department notified you that he was not in a position to turn up. I got an extract of the terms of reference as laid down by Standing Orders, which I had as Chairman of the previous committee. They state that, first of all, the Chairman's role is vital to the successful operation of the committee as it requires a sound knowledge of rules and procedures and the administrative system. He also has a responsibility not alone to chair the meetings of the committee but also to ensure that he conducts its business in an efficient manner. At its meetings the committee question the Civil Service head of each Department with regard to the annual audited accounts of the moneys received and expended by each Department. In doing so the committee pays particular attention to the comments made by the Comptroller and Auditor General in his report on these accounts. There is no doubt that Mr. Gallagher was irresponsible in the statement he made here because he knew that staffing was the responsibility of the Minister.

Chairman.—For the record, do you mean the official from the Department of Finance?

Deputy Foley.—Yes, and I believe he should be recalled here and asked to apologise to Mr. Mathews for the statements he made because it was outside Mr. Mathew's control. Speaking as a rural Deputy, we know that the Land Registry have many problems but they have come out on top of these. I know that was behind Deputy Naughten's point he made on 14 April because he, too, is a rural Deputy.

822.Deputy McGahon.—I disagree with Deputy Foley on that. I think Mr. Gallagher's comments were welcome. They were an indication of the frustrations that the Department of Finance obviously have in dealing with trade union requirements within Departments. It was an insight into the difficulties they are having. It was unusual to find a public servant revealing such an insight into matters concerning unions within Departments. I think he is to be commended on what he said. He said it in a very forthright manner and it indicated the case that is within the public service. I do not think he should be reprimanded in any way for simply stating the case as the Department of Finance found it.

823.Deputy Harney.—I, too, agree, that Mr. Gallagher was very blunt. I think he was accurate in the way he dealt with this committee. He was obviously straightforward and honest. I had dealings with him when I was party whip for the Progressive Democrats and I always found him to be a very blunt, straightforward person. I think the kind of evidence he gave to this committee indicated the frustrations which he and many people in the public service experience in trying to bring about change and make the system more efficient and more responsive to the public when they find themselves all the time up against stumbling blocks of one kind or another. I want to quote one sentence from what he said referring to the delays and inefficiency and the fact that the public having to deal with the Land Registry find they have a long time to wait and, as you yourself quoted, “Many vulnerable people are made suffer unduly.” He went on to say, referring to the staff at the Land Registry: “They had computers which would allow applications to be dealt with a lot faster but because they were not getting what they wanted they decided they were not going to use these and were going to go back to using 19th century methods of work, the pen and pencil, put everything on paper and so on and they slowed things up.”

The experience in the Land Registry has been repeated many times in the public service. I am disappointed with the Minister for Justice's letter. If we are to be a meaningful Committee of the Dáil, if we are truly given the function of reviewing public expenditure and looking at the public accounts in a fair, impartial and non-partisan way, which we have been doing, we cannot do that if a Minister is going to come to this Committee from time to time and tell us that X, Y or Z Accounting Officer should not come, that at the end of the day it is the Minister who has the responsibility. We should not allow this go without fighting back because we are going to have other accounting officers faced with difficulties and with difficult questions to answer. I do not know how anyone could answer some of the questions we might ask Mr. Mathews, but nonetheless, as the Accounting Officer in the Department of Justice whose responsibility it is to run the Land Registry he has a duty, and this Committee is nothing more than a public relations committee if we cannot examine Accounting Officers like that. I feel very strongly about it. I did not travel very far to come here this morning but a number of Deputies travelled long distances last week and again today. I am talking about the Minister in his ministerial sense and not in any partisan sense. Perhaps if there was another Minister from another party there he might behave in exactly the same way. Sometimes it appears that if public servants come crying about various things they do not want to answer they, unfortunately, get sympathy and the ear of various Government Ministers from time to time. It is not good enough and if it is the case that this Committee cannot examine this Accounting Officer and put to him some of the questions and some of the problems identified by Mr. Gallagher of the Department of Finance, then I believe we are involved in a sham, we are not involved in really reviewing the public accounts in any meaningful or real way, our job is defunct and there is not much point in our sitting as a Committee and pretending that we are performing a useful function.

824.Deputy M. Ahern.—I think Deputy Harney has made a speech which in what she said is correct but when we look at the legal position regarding the powers of this Committee and the legal position that stands between the Minister and the Accounting Officer, it is clear that we are on different levels. This is the nub of the problem. We are all well aware that the terms of reference of this Committee should be extended. It is a question of policy which remains with the Government in power at any time. This is where the problem arises. That must be recognised in relation to this matter and in relation to the comments of Mr. Gallagher on matters as he saw them. These comments were extraneous to the matter we should have been examining, the actual accounts.

Deputy Naughten.—As the one who raised this issue at the April meeting, I did not think that we would be still talking about it in October.

Deputy M. Ahern.—Just before I finish, there is always the Dáil to put down Questions to the Minister regarding policy as to staffing, how many should be on the staff and so on.

825.Deputy Naughten.—These issues were raised in the discussion on the Vote for the Department of Justice. This is a continuation of the discussion of that Vote. I think Mr. Gallagher was very frank, very blunt, about the problems which he had and the Department of Finance had encountered when dealing with Land Registry. He put it on the record that staff were using 19th century methods of conducting their work.

What we were examining and discussing was the whole question of output and productivity in that section of the Department of Justice, namely, the Land Registry. I think that is well within our ambit. I could not agree more that we cannot get into the policy area, but surely if there is a particular office working at 50 per cent of production — and that is basically what was indicated here that day — it must certainly be a function of this Committee to see what can be done to improve it. When we are dealing with a section of a Department which spends £7 million and earns about the same amount from fees, I am certain it is within the terms of reference of this Committee that we should be able to discuss that in detail without being hindered by the Minister of the day.

I would see it as well within our function and I think that a very dangerous precedent could be established here if we were to accept the explanation of the Minister in this regard. That is why I propose that the Committee adopt your proposal of sending that letter to the Minister and requesting the Accounting Officer of the Department of Justice to attend either next Thursday or the following Thursday. I propose that you send that letter.

826.Deputy Flood.—When I read the minutes of the meeting that has been referred to where Mr. Gallagher made his point, as a relatively new member of this Committee I was a bit surprised in one way. I recalled a previous meeting we had here where we discussed the question of computerisation in the health service. That typified what I understand to be the role of this Committee. We were examining in that area how this money was spent on computerisation and we teased out where the problems had arisen. I did not understand it was our function to go on and say that computerisation should be extended into other areas as well within the service. We were examining how the moneys were spent and whether they got the proper equipment etc., for which they had paid. We challenged them on the storage of computers and unused computers. To me that was the essential role of this Committee.

To me as a relatively new member of the Public Accounts Committee, Mr. Gallagher's report is riddled with statements concerning policy. If I were the Minister of the day I certainly would put my head up and say, “this man is straying into our territory here”. While we will have views about how the Land Registry is run and all of us will have complaints, I do not think it is for us to decide that, for example, the Land Registry should have new technology. That is something I would say on the floor of the House in a debate on Estimates, etc. Unless I am misunderstanding the role of the Public Accounts Committee, it is for the Chairman to help us to ensure that confusion about our specific role does not arise. If our role gets confused I think the strength of this Committee will genuinely be diminished.

I would far prefer to see us coming in here examining how moneys are spent, seeing where the errors have been made. That is really our function as a watchdog committee. If we have any difficulties with regard to policy, then that is an issue to be raised in another area. As a new member I see it as being very important to this Committee that we do not confuse our role. When we wish to talk about policy, that is for another chamber. That is why I believe this situation has arisen.

My colleague made the point at the last meeting that there must be a reason why the Secretary did not attend. Now we have it. The Minister has stated his position quite clearly and I think it is right and courageous of him to do it because, presumably, this will be discussed both here and outside. It is right that we are put on the correct line so that we can get back on this issue and others to discussing how moneys have been spent.

827.Deputy Crotty.—I would certainly agree with the reply which you have drafted and which you have made available to the Committee this morning. It is a very reasonable reply and it should get the appropriate answer quickly from the Minister.

I feel a bit let down here this morning. I have served on this committee since the early seventies and it is the first time I have heard or seen the committee divide on party lines. I have never seen it divide on party lines. I do not know why it should happen now. I do not know why it should happen on this question because there is no reason or need to divide. The simple question is that there is an Accounting Officer and he was asked a question.

Deputy Foley raised the question of keeping the record straight. I agree with keeping the record straight but the fact of the matter is that this Accounting Officer was contacted in July and September and he did not even reply to this committee. That is not acceptable. Straight away it leads one to ask what is he afraid of, what is he hiding? Why not let the fresh air into it? This is what this committee is for. Open the windows and let the fresh air in. As far as I am concerned, Mr. Gallagher's evidence was a breath of fresh air and if we had more of that type of response from the public service I think the whole service and the community would benefit from it. Long may he be the representative here from the Department of Finance.

Perhaps the Minister did not consider this fully because under two headings in our letter of 27 July which the accounting officer was requested to respond to; that was under (b), the effect on productivity — certainly, that is a question for the Committee of Public Accounts and also under (d), the effect of new technology which necessitates the expenditure of public funds. I was Chairman of the Committee of Public Accounts and I was rather hard on members in that I required them to keep very much to the Standing Order and the terms of reference of the committee, but even at that stage I do not think I would rule them out on either of those questions. That is definitely something that this committee should be examining and getting reports on.

I am not going into the situation of the committee being convened twice on this issue, or of the Accounting Officer not getting proper notice. The fact is that we had no replies to two letters of the committee and the Accounting Officer was called twice. That leaves the committee and the general public to believe that there is something radically wrong here. The Secretary of the Department of Justice is leaving himself open to every type of innuendo if he carries on in this fashion. He should come in here and answer the questions as put to him by the committee.

The committee are concerned primarily in getting good return for the expenditure of funds and the productivity of staff is surely very much concerned with expenditure and productivity is related to technology. Secondly, nobody could question the concern of this comittee for the problems of the general public and the costs that are involved in the delays in the Land Registry for the general public. They are costing quite substantial sums. This can be debated in the Dáil, but nobody would criticise this committee for raising the matter as a side issue of the efficient running of the Office. I wholeheartedly agree with your reply, Chairman. I hope that sense will prevail and that the Accounting Officer will appear in the normal fashion at this committee.

828.Deputy M. Kitt.—I agree with Deputy Naughten in all he has said about delays in the Land Registry, on transfers of farms, in particular. That is not to say that the Land Registry are neglectful in dealing with people who are on bridging finance, as was mentioned in your letter. We will have to give credit where credit is due; they have dealt as quickly as possible with these when you can prove that there is a particular financial problem.

From my inquiries with the Minister's office at the Department of Justice, I understand that the industrial dispute is almost sorted out, but, unfortunately, the comments made by Mr. Gallagher, which have been printed recently in the newspapers and have been referred to here are not going to be very helpful if we are going to get the dispute sorted out. It is not the way you deal with Departments and with staff, even though you might like to say that every Department should be working 100 per cent with the newest technology. I welcome the fact that this dispute is almost sorted out because that is a big help to the Members of this House, especially rural Deputies who are dealing every week with the Land Registry.

Chairman.—For the record, I was not quoting from my letter. I was quoting from the minutes of the previous meeting about delays.

Deputy M. Kitt.—I am only giving my own experience. As regards people who have particular financial problems, the Land Registry have been helpful there and I want to pay that tribute to them. In regard to the other points raised, there are a few previous chairmen of committees here and I am on this committee only since the last Dáil was formed and I would speak about this subject with some trepidation. This is an all-party committee and I am disappointed that we cannot agree on the reply being drafted but, in fairness, all statements should be cleared here as was attempted this morning. There is no point in every member of this committee going out and giving his or her particular version about what is going on. I am prepared to act like that if that is the way in which the committee are going to behave but it should be, if possible, on an agreed basis. We are not mé féiners; we are, as a committee, hopefully, on a non-party basis dealing with these accounts and that is what we are set up to do. We are not in the area of policy as other speakers have said.

In general, all our statements should be cleared as we are attempting to do now. We might not agree, but it is the right basis on which to proceed and we have to adhere to the policy as laid down. I support much of what the Chairman has done in relation to new areas for the Committee of Public Accounts to undertake. I am glad the Chairman has visited a number of other parliaments where they are doing different types of work. I know the Chairman and all members are interested in getting new powers or looking at other areas, but policy matters are not a matter for this committee. That is where I disagree strongly with the sentiments outlined in the Chairman's letter.

829.Deputy Dempsey.—The discussion this morning merely highlights what has given rise to this problem which we have at present, of committee members straying into areas that are not properly within our brief. We have been doing that quite considerably, probably because the accounts that we have been examining have dated back to 1980 and 1981. It does not make very good reading to be talking about things that happened in 1980 or 1981 and sticking strictly to facts, figures, accounts and so on. Since I became a member of this committee over the last two years we have certainly beefed up the content of Public Accounts Committee meetings by introducing highly publicised and controversial aspects of accounts and dragging in — and I am as responsible as anyone else here — things that really were not within our brief. We continued that over the past 18 months and it is inevitable that we would end up in a situation where somebody would cry halt.

Initially, I welcomed Mr. Gallagher's candour on that day. It was his view of what was happening in the Land Registry. I have some experience. There are delays there and it certainly causes problems. I presume that it was essentially his view, but it is never any harm for civil servants to put their views across like that and from that point of view I would like to see that happening more often.

The problem we have here, and what we should be addressing, is the essential point of the letter that we have received from the Minister and that is that we are, strictly speaking, in a policy area when we start talking about delays and staff relations within the Land Registry. For that reason the Minister is right in this case. Like Deputy Kitt, I feel that we must try to extend the powers of the committee. We should be able to go into those areas but under our terms of reference we cannot and the Minister is perfectly right in this case. The problem that has arisen in this case is that a molehill has become a mountain. Part of the reason a molehill became a mountain is because the remarks of Mr. Gallagher were discussed on radio by yourself, Mr. Chairman, and in the newspapers following our last meeting. Obviously it got backs up in more places than one. That is the answer to the question as to how it became a mountain.

Deputy Harney said it would be wrong if we could not examine Accounting Officers here and I would certainly agree with her. However, what exactly we can examine Accounting Officers on is quite strictly delineated. We cannot examine them on matters of policy. They have a right not to answer that. We can ask them to account for moneys given to them from the public purse. We would put the Secretaries into an impossible position if we started asking them to comment on policy matters. Frankly, we have been doing that on numerous occasions over the past 18 months and everybody on this Committee knows it. It might not be any harm if we went into private session at some time and started to clear our lines and get back on the tracks as to what exactly we should be doing.

830.Chairman.—I have listened to every Member of the Committee. Before I call Deputy McGahon, I want to say that I have been a member of the Public Accounts Committee since 1981 and I am absolutely flabbergasted at the breakdown of contributions here this morning. It is clear to me that we are breaking down on political lines. With regard to the comments made by me on the radio last week, they were extremely restrained and I only went on because somebody else was going on the programme. I have a recording of that programme. A number of members of this committee have made contributions on radio and television over the years. It is inevitable when one has the Press present. If members look at some of the things that we have found as a Public Accounts Committee they will see that there has been some extraordinary misspending of public funds. We have spent quite a considerable amount of time — sorry, Deputy Dempsey everybody else spoke without interruption and I intend to have the same opportunity.

Deputy Dempsey.—I would rather if the Chairman did not misinterpret the remarks. I have no objections to people raising matters here in relation to misspending of money. I object to people raising a lot of other matters that are very peripheral to that issue and that have nothing to do with money. We have this at every committee meeting; there are Deputies here that know that and I know it.

Chairman.—I want to make the standing procedures very clear, because we are coming to a very serious crisis if this is the breakdown. This is going to develop into something very big if we approach it the way we are doing this morning. Initially, I wanted to deal with this matter in private session and clear our lines before we went into public session. It is very late in the day — having heard everybody on record — to suggest now that we go into private session. The reality is that the reason the Committee of Public Accounts has been chaired by a member of the Opposition down through the years from the very foundation of the State, and the same occurs in every similar Parliament, is to give the committee leeway to examine what they consider important. What could be more important that wasteful public spending at a time when there is need to cut public expenditure.

I want to read from An Outline of Irish Financial Procedures as issued by the Government Publications Sale Office — an official publication of the Department of Finance — under the heading Accounting Officer, on page 9:

“Expenditure on the supply of services has to be accounted for ultimately to Dáil Éireann. The Accounting Officer of a Vote is the person appointed by the Minister for Finance under Section 22 of the Exchequer and Audit Departments Act, 1866, to be responsible to Dáil Éireann through the Dáil Committee of Public Accounts for the proper expenditure of money from that Vote. The Accounting Officer is personally responsible for the safeguarding of public funds and property under his control, for the regularity and propriety of all the transactions in each Appropriation Account bearing his signature and also the efficiency and economy of administration in his Department”.

That is a direct quote from An Outline of Irish Financial Procedures. I want to make one point very clear. If we are to divide on a political basis here this morning, we had better all just consider our positions because it has never happened before. I do not want any political conflict on this. I would be quite prepared to amend this letter and instead of saying “at some remaining Thursday in the month” to say “at some early date in the future” to give us time to look at the matter so that we do not end up in confrontation. We have to reply to the Minister's letter. It is going in my name. I do not want any confrontation and I will use every opportunity I can to avoid it, but let us not divide on political lines and let us not bring this matter to a vote here this morning.

831.Deputy Foley.—I agree with you up to a point. The statement you made, and I quote from The Irish Times of last week, “Mitchell warns top civil servant”.

Chairman.—No, that was at the meeting. That is from the record of the meeting here.

Deputy Foley.—You mentioned also that the Dáil Committee had written to Mr. Mathews twice during the summer advising him of yesterday's meeting which he was obliged to attend. In fairness to Mr. Mathews, you did not notify him twice during the summer. That is a point I want to make because in the two letters sent to him during summer there is no mention made of the meeting of last week.

Chairman.—Deputy Foley is quoting from a press report. I am not responsible for the press report. I read out at the meeting precisely what happened. We notified him in April that we were going to look at the matter again. We wrote to him in July and we wrote to him in September. I read out all these facts at the meeting last week from which that press report is derived. I did not write the press report.

Deputy Foley.—It was not contradicted. I propose that we adjourn at this point to clarify the legal position as to whether it is within the ambit of this committee to deal with staffing situations.

832.Deputy Harney.—A week is a long time in politics, because last week the same ten people sat here and we were all unanimous. Some of the strongest criticism about Mr. Mathews' failure to attend came from Deputy Kitt and others. I, too, am very disappointed at some of the remarks that have been made. The Fianna Fáil Deputies seem to make a distinction between what they call policy and expenditure. On page 69 of the minutes of 14 April, Mr. Gallagher clearly said that computers had been acquired and they were not being used. Those computers were obviously acquired at a public cost. They were paid for by the taxpayer. If we could question Mr. Flanagan in the Department of Health about the acquisition of computers there, we can surely question Mr. Mathews about the acquisition of computers in the Land Registry that were left unused two years later. For Deputy Kitt to say that a dispute that has been ongoing for quite a considerable length of time is nearly over, quite honestly is a joke. It was going on in April and long before April. I do not know what “nearly over” means.

If we divide, it would be most regrettable, but I would be prepared to see us divide than to see us going out like a crowd of sheep all being silenced and making fools of ourselves. Last week we were very critical and just because we get a letter from a Minister are we all going to stand on our heads and almost apologise? I would not take that view and, if necessary, I would have to put this to a vote.

Deputy Foley.—On a point of clarification, I made the point last week that there must have been a reason for a senior official not turning up here and I ask that we get the position clarified.

833.Deputy Crotty.—I am very concerned about the fact that the official did not reply to two letters from this Committee. On that alone, he should come here and explain himself, if it was only to apologise to this committee. He is responsible for two meetings of this committee, which involves public expenditure. This public official should come here and explain the whole situation to this committee. If he does not want to talk about this situation, then we will accept that. That is my opinion and I am quite happy that we get direction on it. Deputy Harney has pointed out the misuse of money in buying computers that are not used. New technology and productivity is covered by that. There is no doubt in my mind that he should be here. That he has to hide under the umbrella of the Minister now leaves me in great doubt as to what is behind this. There must be some great cover-up in this whole scene. I do not think any Deputy here, no matter what party he is from, should defend a public servant who ignores the committee and does not even reply to its correspondence. It is just not acceptable.

834.Deputy McGahon.—I am certainly not party political. In fact, I have been accused by my own people over the years of flying an independent flag and the comments I make now I would have made if my party had been in power. I think this is a circus which we are engaged in — a charade as Deputy Harney has said. I fear that the Fianna Fáil members have turned this into a political issue. They have obviously had a briefing and have been told to stonewall. I know members here are not happy and cannot be happy with the situation that exists. As Deputy Harney said, some of them actually had hard words to say on the matter only a week ago.

I would suggest there is collusion between the Minister and the Secretary of the Department. That is obvious. It sets a precedent for future Secretaries of Departments. Will they run to Ministers and is this old established committee, which has been established since the foundation of the State, going to wither away? Deputy Crotty wondered what they had to hide. Is there a Pandora's box there that the Minister is afraid to open? He talks about policy. I think this is clearly a red herring. Deputy Harney again referred to computers that are not being used. Our brief is to examine value for money and to see that the taxpayer is getting value for money. You cannot equate value for money with the use of 19th century techniques.

I would ask my friends in the Soldiers of Destiny to come off the party fence and accept that what we are all looking for here is an insight into methods being used and the expenditure of money. Mr. Gallagher's comments were a breath of fresh air. They were unusual in that they were so blunt but surely what we need from high ranking departmental officials is more candour and more revelations of that nature.

If this committee is to continue to serve any useful purpose we should all be united on this. It has nothing to do with politics. Unfortunately, I have to say that Fianna Fáil have turned it into a political issue. I wonder what there is to hide? If there is something to hide, the party of which I am a member were to some extent responsible over the last four years. I do not see why Fianna Fáil should regard it as a political matter. I would appeal to all here to accept that there is no ulterior party motive in asking this man to attend. If the committee is to have any relevance in the future, Mr. Mathews, even at this late date, should attend.

835.Deputy Dempsey.—There are many people here trying to twist what is being said or done. I, along with every other member of this committee, condemned Mr. Mathews for not turning up and for giving us short notice and I will not withdraw that remark in relation to Mr. Mathews. However, Mr. Mathews did not get a week's notice for the meeting. We have a little more information now in relation to the invitation he got than we had last week, but I still feel that he should have attended and I will not withdraw my criticism.

Deputy McGahon mentioned that we are here to talk about value for money and so on. Unfortunately, much as we have been pressing for that function, we have not got that function yet. If this committee want to call Mr. Mathews to talk about the waste of public money in relation to purchasing computers and then leaving them idle, I think it is perfectly legitimate for us to make such a request. I also think it is perfectly legitimate to ask him to come here to answer this committee as to why he never responded to our letters but I do not think it is legitimate for this committee to ask him here to answer questions in relation to staffing matters that are part of Government policy and that are the Minister's responsibility.

I do not want to see this committee splitting on party political lines. It may suit people at the moment to try to describe it as that but the point is that we have a particular role and if we want to expand that role we are not going to help ourselves by getting into confrontation in the wrong, as we are in this case, trying to interfere in policy matters. That is what I would put to the committee and I would ask the other members of the committee to consider it very carefully.

836.Chairman.—I think Deputy Dempsey has made a valid point but the normal procedure when somebody comes in and is asked a question on policy is that they say it is a policy question and they cannot discuss it. As far as I am concerned, the issue at question, compared to the overall spending, is not a major one. We had no reply to our letters of July and September. Reference has been made to ongoing disputes in the Land Registry. As a Deputy who does not have much contact with the Land Registry, I am not very much aware of what is happening over there. It is more a rural matter in relation to new houses being built.

If somebody had indicated, even privately or off the record, or had written to say they could not come at present, that would have been fine but we got no reply whatsoever from April to last week. I think the Secretary has let the Minister into a situation here which could easily have been avoided and which could still be avoided. I will be happy to write back and say that at some early date in the future it could be done as part of his examination under the 1987 accounts.

I have no desire for us to divide on this matter. We have never done so before and I do not want us to do it now. I will be quite happy if somebody says that something is a policy matter. Certainly the remarks made by the Department of Finance were colourful. What I am saying is we need to look at the financial implications of this. The Department of Justice will be coming back here shortly to discuss the 1987 accounts and members can ask questions about this at that stage. I do not think we can let a situation develop where an Accounting Officer thinks that by going to his Minister he can get off the book and not attend here or ignore letters the committee have sent him. I think that is the essence here. What I would like to do is to write back to the Minister, let us continue with our normal business and we will consider the matter in due course.

Chairman.—I do not want any proposals now. Let us try to reach some agreement.

837.Deputy M. Kitt.—Deputy Dempsey has put it all in a nutshell. He put it very well. I think we all agree there should have been a reply to the letter. I travelled a long way, like many other people, the last day. There were a few problems that I wanted to raise. Like Deputy Dempsey, I am a bit wiser now than I was last week as regards what areas we can go into. The point he has made, and it was also made by you, Chairman, is in relation to meeting the Accounting Officer. I understand we have met him a few times over the last 12 months. I do not know how many times he has been in. Is it two or three times?

Chairman.—We have discussed a number of years together but he has only been in once.

Deputy M. Kitt.—Could you give us an indication when he is due to be called again? Like Deputy Dempsey, I would like to question matters such as the cost of computers and so on but there is no point in getting into a conflict with every Department and every Accounting Officer as regards policy when it is a matter for the Minister and is something we can take up with the Minister.

838.Chairman.—What normally happens if Accounting Officers have a difficulty and Accounting Officers are well aware of this, they simply say at the meeting that it is a policy matter and they cannot go into it. If that had been said or if he came along and replied we would then have to note that and people could make their comments accordingly. I call Deputy Naughten and Deputy Flood.

839.Deputy Naughten.—I want to refer to the remarks made by Deputy Dempsey. I am sure he did not intend them to sound the way they sounded and I noted what he said. He said that this is what happens when the committee strays into areas that are not within our brief. The question I asked on that day, on the top of page 67, was:— could the Accounting Officer explain to the committee the unbelievable delays that exist in the Land Registry with regard to the registration of lands? I went on to say that this is not something new; it is something ongoing over a number of years. I do not accept for a moment that I went outside my brief as a member of this committee in asking that question. That is really the nub of what we are discussing here today.

The Accounting Officer went on to point out that the problem resulted from a reduction of 16 per cent in staff numbers, but the officer from the Department of Finance came in and said that putting extra staff into the Land Registry would not solve the problem. He went on to outline other problems that have arisen as a result of new technology not being utilised. That new technology cost the Irish taxpayer and it is lying there. I believe that we are well within our rights to question that and to bring Mr. Mathews back again to pursue the matter further. I am easy, Chairman. I do not mind whether it is on the next occasion he is in on the 1987 accounts, but I do resent very much the Accounting Officer ignoring our letter of 27 July and 23 September and the fact that this committee met here last week without still not having received a reply from the Accounting Officer.

There is no way in my view that you can say that item (b) or item (d) on that letter of 27 July is a policy matter. I believe I was within my rights to ask that question. This committee should seek that information and if we give in on this, will some other Accounting Officer opt out of something and say that it is a policy matter? I think that is where we are going. I do not think we should split on this. We should try to reach a consensus. As I said, I am easy as to whether it is the next time the Accounting Officer is in that we get back to discuss this.

840.Deputy McGahon.—Could we reach a compromise by inviting Mr. Mathews, at his convenience, to come in and discuss the question in regard to the computers?

841.Chairman.—I could reply along the lines, as chairman of the committee, that we would amend the letter to say that we wish the attendance of the Accounting Officer at an early future meeting. We will continue with the business of the committee and we will see what comes out of that.

842.Deputy Foley.—I want to make the point that I do not hold and brief for Mr. Mathews in not replying to correspondence of 27 July and 23 September, but I think Deputy Naughten made a very good point. We should not split on this issue. It has been brewing for some time as a result of other matters. I propose that you go ahead and arrange for Mr. Mathews to be called for the 1987 accounts and in the course of that examination you refer to any matters outstanding. On that basis we should not divide.

843.Deputy Crotty.—I feel very strongly about the way he has treated this committee. That should not be accepted by this committee. Whatever action we decide to take he should have to account for the fact that he ignored the committee and treated us as a nonentity. We just cannot accept that. As a committee we have to retain the powers we have. I would resign from this committee rather than accept that treatment. If we do not demand a proper and full explanation of his actions up until now, this committee might as well fold tent. We are talking about the Secretary of the Department, not the Minister.

844.Chairman.—May I take it that there is no objection to my replying to the Minister's letter, amending the sentence to read “at an early future meeting” and to adjourn the meeting now? Is that agreed? Agreed.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. M. B. Murphy (An Roinn Airgeadais) called and examined.

APPROPRIATION ACCOUNTS 1986

PARAGRAPH 45 OF THE REPORT OF THE COMPTROLLER AND AUDITOR GENERAL.

Mr. T. P. Linehan called and examined.

845. Chairman.—This morning the Committee of Public Accounts of Dáil Éireann is examing Mr. T. P. Linehan, Director of the Central Statistics Office in his capacity as Accounting Officer for that Department. You are welcome, Mr. Linehan.

Mr. Linehan.—Thank you. I took the opportunity of bringing some colleagues from the office, deputy directors, with me just in case they can help in any broad discussion of specific areas of work.

Chairman.—That is fine, they are welcome. We also have present Mr. Michael Murphy, Principal, and Mr. Colm Gallagher, Principal, from the Department of Finance. The main reason for calling Mr. Linehan this morning is the evidence given by the Secretary of the Department of Agriculture and Food regarding the ewe numbers and the fact that that does not reconcile with the statistics prepared by his office. The difference is something of the order of 400,000. I will call the Comptroller and Auditor General to lead us into the discussion and we will take it from there.

Subhead M. 3.—Aids to farmers in certain less favoured areas

A comparison made by the Department in 1986 between departmental statistics of payments made and livestock statistics compiled by the Central Statistics Office (CSO) indicated that the total number of ewes for which premiums were paid (some of which would also have attracted headage grants) in each of the years 1982–86 was greater than the number of ewes recorded by the CSO in its livestock enumeration reports for those years; in 1986 the difference was of the order of 400,000. As I was concerned at the possibility that there may have been significant overpayments of ewe premiums and headage grants I inquired whether the number of ewes on which premiums were paid can be reconciled with the number of ewes recorded by the Central Statistics Office.

The Accounting Officer explained that the number of ewes on which premiums are paid can be greater than that recorded by the CSO because of—

(a)a difference in definition where the CSO excludes ewes which have lambed in the season in question but which the owner intends to cull later in that same season,

(b)differences in count, where the CSO count relies more on figures supplied to enumerators by flock owners who may understate numbers through fear of taxation and/or loss of social welfare benefits,

(c)possible sample area bias because the District Electoral Divisions (DEDs) selected by the CSO as the basis for its 20% sample may no longer be fully representative, as increases in flocks in non-traditional areas have arisen from restrictions on milk production and the attraction of sheep as an alternative enterprise.

I also sought the observations of the CSO on the apparent discrepancy in the statistics and have been informed that its national estimates of ewe numbers are based on grossed up returns from a fixed example of about 600 DEDs out of a total of nearly 3,000 DEDs in the State. Restriction of the sample to this approximate 20% coverage arises from resource constraints. The information in respect of the DEDs in the sample is collected by enumerators as part of the June annual statistical inquiry but the last full Census of Agriculture was in 1980. The CSO has confirmed that it is currently engaged with the Department in examining the two sets of data relating to ewe numbers with a view to determining what effect such factors as definitions used, timing and the 20% DED sample may have on the results.

Mr. McDonnell.—As I said the last day, I took the factual situation as I saw it, where the number of ewes in respect of which grants were paid by the Department of Agriculture and Food was in excess of the number as stated by the statistics compiled by the Central Statistics Office. My obvious concern there would be whether or not that indicated that premiums and headage grants had been paid in respect of ewes greater than the actual national flock, so to speak. That is the simple question.

Chairman.—Could I ask, Mr. McDonnell, if these 400,000 ewes missing in the figures between the Department of Agriculture and Food and the Central Statistics Office would have a value somewhere in the region of £8 million plus, if there were that many actual missing?

Mr. McDonnell.—I think it would be difficult to put an actual figure on it. I think what you are assuming is that if duplicate payments were made in respect of the whole 400,000 ewes both in respect of premiums and headage grants, if you take it that the rate of premium was, at that time, about £20 per head, on 400,000 ewes you are in the region of a figure of £8 million. The other is a more difficult one to determine because one would need to know how many of them were in the disadvantaged areas; there would presumably be a high proportion. Another way of doing it—if you look at the paragraph—is that in 1986 some £44 million was paid in ewe premiums in respect of some 2.5 million ewes so 400,000 is, say, one-fifth of that, so you have one-fifth of the £44 million. You are in the £7.8 million bracket but it must be explained that the kind of figure you mention is speculative.

Chairman.—It would be of that order if the whole 400,000 were paid for. Mr. Linehan, obviously part of this is accounted for by lack of reconciliation between your statistic sampling and the records within the Department. Would it be fair to say that part of it is also due to people claiming for non-existent ewes?

Mr. Linehan.—If I might discuss the matter generally, we have, as well as the Department of Agriculture been concerned about the apparent discrepancy between the two sets of figures. Naturally I have no competence in the field of operation of a premium scheme or payments of any money of that kind, but we certainly are concerned about the apparent discrepancy and we have been looking at that, as is clear from the records, for a while.

We are assessing two things: the likely effects of differences in timing and definition, and they appear to be substantial, and we are also using the opportunity to review our own sources and methods in that particular area. We hope to have the review completed well before the end of this year. It would appear that the differences in timing and in definition, which are linked together, are quite important factors and have a strong bearing on the situation. The premium scheme operates and the numbers that come from it relate to the peak point in the season. The traditional ewe numbers in the June count are taken at the end of the season and they also relate to the breeding flocks specifically. For example, ewes which qualify for a premium may be culled from the breeding stock after the lambing takes place and so on and they may either be disposed of or even if they are still on hands in the flock they may not be returned as breeding ewes because they have ended their breeding career, if that is the right expression to use, so that we do see a substantial difference arising and the traditional June count would be expected to be substantially lower than the premium numbers following on that reason.

Secondly, as I mentioned, we are taking the opportunity to review our own sources and methods, particularly as we are now in the course of changing over to postal inquiries in the same area. As indicated in the recent release for agricultural statistics in June 1988, the indications are that the existing estimates for sheep and ewes would be increased somewhat.

As I said, the project is not yet concluded but frankly, at this stage, it is my opinion that the two figures can be broadly reconciled.

Chairman.—Would part of that reconciliation have to do with people laiming for ewes that are non-existent? Is that a reasonable suspicion?

Mr. Linehan.—No. The work is not concluded but at the moment I have no grounds for suspecting that type of situation. The broad reconciliation that I speak of would reflect primarily the effect of the actual differences. While the word “ewe” may be used in describing the two sets of figures, one is not strictly comparing like with like and second, the revision which we feel will be necessary in our figures would have to be taken into account.

Chairman.—Part of the problem has to do with the fact that you take samples based on district electoral divisions. You are taking steps to improve your sampling methods. Are you also taking steps to compare these on a regular basis with the Department of Agriculture and Food claims for ewe numbers?

Mr. Linehan.—Yes and no. We are not engaged in an inspectorial process of checking administrative returns relating to an individual. We are, however, comparing our aggregated information from a sample of our returns with the Department's corresponding one and getting a reconciliation on those, again, in so far as one can take account of differences arising from the fact that one is measuring somewhat different things. We are, I said, changing over to a postal system of collection of agricultural statistics. This is widely known now and we are able to use some of the information coming from that change also in our assessment.

Chairman.—This committee is concerned with the loss of revenue to the State or any potential misappropriation or misuse of public funds. Is it not reasonable to suggest that there are two areas? For instance it is suggested in the paragraph in front of me, that the farmers may have understated their ewe numbers to the Central Statistics Office for tax reasons. Is that not a reasonable assumption to make? Secondly, is it not reasonable to suggest that out of £2.5 million ewes with 400,000 understated that there is somebody taking the State to the cleaners or even some parts of the country? There must be a certain amount unaccounted for in that area.

Mr. Linehan.—I am not involved in the administration of the premium scheme. I have no competence or responsibility in that respect but I am quite sure that the operation of that scheme by the officers of the Department, as I understand it, involves an actual physical click on the ear in respect of animals for which the premia is paid. There is a physical inspection in those ways. I am in no position to say whether anybody has been in a position to evade the qualifications on the scheme. I am stating, in the light of the work we have been doing in conjunction with the Department, that I see the figures can be broadly reconciled without leaving an element of significant overstatement in the Department's figures.

846.Deputy Naughten.—Mr. Linehan said that the figures can be broadly reconciled. I do not see how you can reconcile that huge gap of 400,000. By any standards there is a huge gap between the numbers estimated by your office to be physically on the ground and the numbers for which premiums were paid by the Department of Agriculture and Food. There is a huge gap there of 400,000. Why do you think this figure can be reconciled?

Mr. Linehan.—Because of the two elements that I mentioned, first of all, there are a substantial number of ewes which have been used for breeding which are culled after the end of a season and there is then a new inflow into the herd. That is quite a substantial number. The estimate that we make are for June. The instructions on our forms are quite definite, is to ensure that excluded from that count are any animals that may have been in the breeding herd in that season but are now finished for breeding and are not any longer in the breeding stock. The numbers in the Department's scheme, as I understand it, would in fact reflect the actual peak of a breeding stock in a year.

The second element that I mentioned is that we have been assessing our own figure and we have come to the conclusion on the basis not of the Department's figure as such but on the basis of the extra information we are getting directly from postal returns in the new system that the existing level of ewe numbers is somewhat low. The combination of those two, as I see it at the moment, will enable a broad reconciliation of the figures. I say “broad”, because it is impossible to do something in respect of each individual identified flock. It is the aggregated figures I am speaking of.

Deputy Naughten.—With regard to this question of timing and definition, surely you must recognise that in June when the figures would be compiled by your office that approximately 97 per cent of the ewe flocks of the country would still not be weaned and certainly there would be no question of culling at that stage of the year. To say that you would be culling ewes in June is just not realistic.

Mr. Linehan.—When I use the word “culling” I do not mean the full process of actually disposing of the animals. I mean that the decisions on whether a particular animal is finished its breeding life is taken. In the form in which we collect the livestock information, and this is a general point that we are seeking information on the breeding stock which is relevant to production in the coming year.

Deputy Naughten.—Yes, but no farmer would know at the end of June which ewes he would be culling at that stage. It is too early in the year; you do not decide to cull until August or September. That is certainly not one of the elements that would lead to a reconciliation. With regard to the point you made yourself, Chairman, with regard to the taxation question or loss of social welfare benefits, that does not arise simply because the information with regard to social welfare and taxation would be taken directly from the Department of Agriculture's figures and not from the CSO's figures. That does not arise there as a question of reconciling these 400,000. With regard to this postal system, you talk about for collecting information. Would you tell us a little more about that?

Mr. Linehan.—In the past for a long time the agricultural statistics were collected by using enumerators. That was the term used for the people who went and got information from a sample of electoral divisions covering all divisions and the various holdings within each sample division. We have now changed over and are getting the information directly from a sample of farmers. There are two advantages in it. First, it enables us to spread a sample much wider than the old system where you took a pocket of area and you collected the information for all holdings in that pocket and you had a pocket here and there. With the postal system you can pick the sample and spread it much more widely throughout the country. Secondly, we believe that it is far more cost effective. I can say that we are getting a very satisfactory response on it.

Mr. Linehan.—It is an 80 per cent to 90 per cent response. We have an arrangement whereby for the small amount of non-response there can be a follow-up through local officers of the Department.

Deputy Naughten.—I am rather surprised to hear that there is that high of a response, knowing the rural community as I do, to a postal system of collecting figures. I know the old system was certainly very unsatisfactory but I doubt if this new system can be any better.

Mr. Linehan.—If I may say so, Mr. Chairman, we were agreeably surprised I must confess at the response rate also on the first occasion but it has been substantiated in that we have had more than one such inquiry and the response rate is continuing. I would certainly hope if anybody here has any influence in appropriate places that they would continue to support it for us because we are very dependent on it. We were very agreeably surprised by the response and I would like to put on record our appreciation of the co-operation by the farming community.

847.Deputy McGahon.—I was not at the previous meeting so I am at a bit of a loss to understand how the statistics are compiled. Do you not get your statistics from the county agricultural officers in each county?

Mr. Linehan.—No, the estimates of the livestock numbers and crops and so on are on the basis of inquiries carried out directed by the CSO. In so far as the county officers were in possession of figures for the county, they would I believe have been obtained from the CSO.

Deputy McGahon.—Obviously there is a miscount of 400,000 and you have, in my opinion, failed to put your finger on the problem. Surely agricultural statistics could be obtained more accurately from the agricultural officers in each county rather than from a central source? Would that not be easier and likely to be more accurate?

Mr. Linehan.—If there were a centre in each county where that information was available, we certainly would be very foolish not to take it and use it and save the cost of trying to direct inquiries but such information does not exist. There is no comprehensive statistical collection of information that we could use. If there were I would be delighted to use it.

Deputy McGahon.—It seems extraordinary that that has not been adopted somewhere along the line and that the people associated with the Department of Agriculture and Food were not given that task. However, that is not for you to say but I would echo the Chairman's concern that somewhere along the line somebody was overpaid.

Mr. Linehan.—Could I mention that in the past—and that is going way back—there was an annual census covering all holdings in every county. That was at a time when the Garda were used as enumerators and there was a system spread right through the country but that gradually disappeared. In recent years the system has been based on a sample of District Electoral Divisions. The disappearance of that former system—and I am not criticising its disappearance, it is quite understandable why it did disappear—as one of the reasons for looking at the postal system as an alternative.

Deputy McGahon.—So statistics are compiled from information given directly by the farmers?

Deputy McGahon.—It seems a very haphazard method, particularly when the payment of grants are involved.

Mr. Linehan.—As a general policy in the Central Statistics Office we are trying to develop as much as possible in all areas the use of administrative records where we can avoid the necessity of having separate statistical inquiries. If there were comprehensive administrative records that we could use we would, but we have also to be sure that these sources continue to be available on a comparable basis from year to year. If we depend in some instance on administrative schemes and if the conditions for those schemes change, are abolished, reduced or expanded then the figures are not comparable over time and for a statistical series one needs to get that comparability.

848.Deputy Flood.—I want to ask one or two questions. Obviously a discrepancy of 400,000 in the number of ewes seems enormous; it is not a number you could put in the corner of the field somewhere. Certainly you could not bury them that far when they are part of two million. I have ideas of sheep being shifted from one side of a hill to the other but there must be some serious wrongdoing going on as far as I can see if the discrepancies are as blatant as they appear to be. For my information, I would like an answer to this question; if I am a farmer down the country looking for grants of the kind we are referring to, what is the minimum I have to do to get the grant for my ewes in terms of documentation, reports, visitations from officials, etc?

Mr. Linehan.—I am the Accounting Officer of the Central Statistics Office and I could not answer that question. I do not know.

Chairman.—We went through this with the Department of Agriculture and Food and we are just trying to reconcile it with statistics but it is certainly an interesting question which we need to reconcile. Whether we get Sherlock Holmes on the job, we need to find out the case of the missing 400,000.

849.Deputy M. Kitt.—Mr. Linehan talks about the postal query that is in doubt. I am surprised, like a lot of other people, that there is a very high response. I would like to develop that point further. If people send back the wrong information, for whatever reasons, how do the Central Statistics Office double-check, or what system have they for double-checking what the actual figures are?

Mr. Linehan.—If there is a concentrated campaign to give false information, then it is very difficult for the Central Statistics Office to counteract that. There is, however, the general reconciliation that we look at in aggregate between what is available, for example, from a number of different categories of livestock and their disposal, and the figures for the disposals are based on slaughterings in factories or exports and so on. By putting these together the question becomes one of balance of those, as to whether all the aggregates make sense when you fit them together, like a jigsaw. It is at that level that we can do it, not at the level of the individual person who may put in a wrong figure. If we have a return in which there are inconsistencies within the separate bits of information on that one return, then we follow it up and query it. If it appears that it is okay and has been made to look okay but is not okay, we are not able to find that out. When we put the aggregates together we have the question of the reconciliation of the figures and whether we can make sense between the numbers we have estimated and what is being disposed of and what is going to happen the next time. At that level we can make adjustments.

Deputy M. Kitt.—Could that not be done in this particular situation? I presume that was done but how is there a discrepancy in the order of 400,000?

Mr. Linehan.—The first point is that the two sets of figures are not measuring quite the same thing. It is that aspect of it that we are engaged in examining with the Department. The work is not fully concluded. There are actual differences. We have had a view expressed on the question of the difference I mentioned in timing and that the difference due to definition was not as big as I was making it out to be. These are the aspects we are looking at with the Department. On the second aspect, in the light of all of this, we have been looking at the validity of our own aggregates and as I have said we have mentioned in the last release on agricultural statistics that we think our existing level does need to be raised somewhat. Nothing of the order of 400,000 but a certain amount. The work is not finished yet so I am not sure what it is. Our level is coming up somewhat and we do believe that there are actual real reasons for those other differences. The ultimate assessment of whether having finished that work there are grounds for saying that something further is to be looked at vis-à-vis the scheme is way beyond me and my competence.

850.Deputy Naughten.—I have just one further question on this matter. I wonder if the Comptroller and Auditor General did a check on the number of cows reflected, for example, in the figures for 1986 and the number of cow grants paid? What was the relationship there? Was there a variation the same as in the ewe numbers or was any check done on that?

Mr. McDonnell.—If my memory serves me correctly, we did refer to something of the same nature a couple of years ago in relation to the payment of premiums for calved heifers and how that was reflected in the increase in the national breeding herd. It was difficult to reconcile the number in respect of which grants had been paid with the actual statistical information on the increase. The same kind of thing was arising. I cannot recall the outcome of the discussions at the meeting here but certainly that is in my Report of a fairly recent year, and also going back to a previous similar scheme way back in the seventies where the same kind of thing was arising.

Deputy Naughten.—I wonder if Mr. Linehan would like to comment on that? The timing and definition of culled cows would not come into it here.

Mr. Linehan.—I am honoured by the assumption that I have knowledge on that at short notice. My experience is that there is always extreme difficulty in a reconciliation between figures that come from the administration of a scheme and the regular statistics. I recollect, for example—and I speak rather vaguely—a calved heifer scheme in which the expectations were not reflected in the relationship between the number of grants paid and the increase in the herd, but the explanation turned out to be quite simple. In the normal course of events there are a proportion of herds in which there would be a decline and farmers would not be able to avail of the premium scheme. The grants were paid in respect of every increase but there was no negative grant if there was a decrease in a herd. The numbers for which a grant were paid were large but when added to the existing stock one had to take account of those that had been removed and the decrease to reconcile it. At first glance there appeared to be almost consternation but a little investigation showed the reality of the situation. Generally speaking, we have to be very careful in concluding when comparing a figure for an administrative scheme and a regular statistical series that it is evidence of some “racket”, if that is the word to use.

851.Deputy Desmond.—The Accounting Officer indicated that his reconciliation efforts had resulted in an upward adjustment “somewhat”. What is the “somewhat”?

Mr. Linehan.—This is the second part of our investigation and we have not yet finalised the figures. As we indicated in the recent release of agricultural statistics, we are investigating this and we have not issued a sheep or ewe estimate for June 1988 yet. We hope to have that estimate and to be able to answer you specifically and quantitatively within a fairly short time, well before the end of the year. I am not in a position to put it quantitatively but I can say that it is not of the order of 400,000 ewes.

Deputy Desmond.—But in relation to the 1986 figure—the differential of 400,000—can you at this stage give us any indication of how much and to what extent the upward adjustment would be on your part?

Mr. Linehan.—I can only do it in terms of “might”. It might be between 100,000 ewes and 200,000 ewes. I will be brought to task by the people who are directly working on it for going as far as that but that is my feeling at the moment.

Deputy Desmond.—Giving the benefit of the assessment at the outside level of 200,000, it still indicates that there is a discrepancy of 200,000 ewes.

Mr. Linehan.—The first half of what we are still working on is the assessment of what difference timing and definition can make and to what extent one is not comparing like with like.

Deputy Desmond.—I accept that and we are dealing with historical data in terms of going back to 1986. Can I ask the Department of Finance officials, in the case of a farmer who claims and his flock is inspected whether the ewes in question are physically checked and punched prior to payment? Is that the procedure?

Mr. Murphy.—No, I am afraid I am not an expert on agriculture. I am here in relation to the CSO Vote.

Deputy Desmond.—There is a substantial number of designated mountain sheep areas around the Border and one could perhaps smuggle 100 ewes which would not have been punched in Northern Ireland but which could be comfortably punched in the Republic across the Border in a lorry.

Chairman.—This would not relate to any experience any member of the committee would have in relation to elections or anything like that?

Deputy Desmond.—No, but if I brought 100 ewes across the Border the payment for 100 ewes in 1986 would have been £2,000, plus the premium payment. The premium payment in 1986 was £20 a head. What was the headage payment?

Deputy Desmond.—That amounts to £30 a head, or £3,000 per lorry. If I got £500 and the other fellow got £2,500 that would not be bad for a day's work. Would that account for any of the discrepancies?

Mr. Murphy.—I do not know. I think the Accounting Officer for the Department of Agriculture and Food would be better able to address the question.

Deputy Desmond.—If there are 200 ewes knocking around the country they have to be somewhere

Deputy Desmond.—Well, 200,000. The Comptroller and Auditor General said 400,000 but accepting the lower figure of 200,000 ewes they must be somewhere in the country.

Chairman.—For fear the committee would fall asleep counting these ewes——

Deputy Desmond.—They would not on the basis of £30 per head; they would be wide awake.

852.Deputy McGahon.—I support Deputy Desmond's claim. I have heard rumours in the Border area that from time to time there are advantages in transporting sheep and cattle across the Border and that sometimes cattle and sheep are suffering from vertigo they are so dizzy from going backwards and forwards. Perhaps there is something in what the Deputy said.

853.Deputy Crotty.—The Accounting Officer mentioned that in reconciling these figures he found that they were understated by his office. What was the reason for their being understated or is he concerned that there was a substantial understatement of figures from the office?

Mr. Linehan.—We are concerned all the time that the quality of what the office produces should be as good as possible and when additional sources of information appear which enable us to do some checks on what we have or which cause some doubt about the validity of something we have been using we take it as far as we can. In this case the long standing system of enumeration that I mentioned—the collection of data from a sample of DEDS—worked very well for some time but we now feel that the very rapid rate of growth in sheep and ewes in recent years was not fully reflected in it. I do not know the specific reason for that. Our concern is to try to get a better estimate from it and to ensure that we have a system which would improve on the previous one, if the previous one had shown some deficiencies.

Deputy Crotty.—The discrepancy did not show up in the cross-checks which you mentioned that have to be carried out later on and which can reconcile these figures. Why did the discrepancy not show up in your cross-checks in relation to slaughter, export, etc?

Mr. Linehan.—That is one of the questions I am asking myself: why were we not in a position to assess this earlier? Some of the factors which were mentioned—perhaps rather jocosely—a short while ago in relation to other situations may be taken into account in trying to reconcile the aggregate figures. When one hears continual rumours of movements of animals in various directions one has to conjecture that that may be a possible reason in balancing also.

Deputy Crotty.—Was a reconciliation in this case carried out in your Department and, if there was, what conclusion was arrived at as a result of the cross-checking?

Mr. Linehan.—The reconciliation I am speaking of results from the information we are getting from the postal system and what we have being doing—

Deputy Crotty.—We are on a different wavelength. I am talking about the cross-checking of figures within the Central Statistics Office and why this did not show up there. Were you happy with the results of the cross-check? I am a bit unhappy that this showed up as a result of the Comptroller's examination but did not show up in your office—

Mr. Linehan.—As a result of this point being brought to our notice and discussions with the Department, we have undertaken a far greater in-depth assessment of the existing figures than would normally be the case.

Mr. McDonnell. To be fair, it needs to be said that the Department and the CSO were aware of the discrepancy. I brought it to light because it was a matter I felt this committee should be aware of. The Department of Agriculture and Food and the CSO were looking into the reasons that might exist for it but hadn't come up with any at that stage.

Deputy Crotty.—That answers my question. I am happy the situation was in hand and that the CSO were on top of the job.

854.Chairman.—We have discussed this enough this morning. The Comptroller and Auditor General's report says:

As I was concerned at the possibility that there may have been significant overpayments of ewe premiums and headage grants, I inquired whether the number of ewes on which premiums were paid can be reconciled with the number of ewes recorded by the Central Statistics Office.

We have not got a final reply to that question this morning. I understand from what you said that your Office and the Department of Agriculture and Food are attempting to reconcile that. Would you please let the Committee have a note when you have come to your reconciliation, which I hope will not be too far in the future.

Mr. Linehan.—Certainly. As soon as that work is finished we will send a report on it and let you know. I feel I have been asked to explain the operation of the ewe premium scheme which has no relevance to CSO activity, and not having any sheep I do not have any practical experience in that area.*

Chairman.—A similar situation applied when the Secretary of the Department of Agriculture and Food was asked about the CSO. It is a question of getting both of you on the record. I would like to assure you and the committee that none of those sheep will be found in Dublin South-Central. We will note that for now.

VOTE 4 (1985 and 1986): CENTRAL STATISTICS OFFICE

We now move to the Vote for the Office of the Central Statistics Office for 1985 and 1986—Subheads A to E in both years. Are there any questions? No.

DEPUTY G. MITCHELL in the chair

APPROPRIATION ACCOUNTS, 1986

VOTE 49—HEALTH (Resumed)

Mr. L. Flanagan called and examined.

855.Chairman.—Good morning. The Committee of Public Accounts of Dáil Éireann is resuming its examination this morning of Mr. Liam Flanagan, Secretary of the Department of Health, in his capacity as Accounting Officer for that Department in relation to a report* on computerisation in the health sector arising from the 1986 Report of the Comptroller and Auditor General. I am calling in the Comptroller and Auditor General to bring the Committee up to date.

Mr. McDonnell.—As you recall, I originally brought this matter to the Committee's attention in my 1986 report because of what I saw as a somewhat diffuse approach to the computerisation programme in the Department of Health and there was the possibility, as I felt, of underlying waste of public moneys. My disquiet has been borne out by the report which has now been prepared for the Committee because there were clearly a number of serious problems.

The report raises some very critical questions about aspects of the planning and control of the project. It concedes that planning was inadequate and that there was no costing of the programme until May 1985, even though at that stage they seemed to have gone beyond what you might say was indeed the point of no return. They had, for instance, committed themselves to hardware and software much earlier than that. It is clear also that the Department did not have sufficient expertise to plan, implement and manage the project, at least the project as it was envisaged; and while they did engage consultants to advise them, indeed one might also wonder about the value they got from them when, for instance, one sees in the report that equipment recommended for the smaller hospitals proved on experience to be inadequate. One could say that the Department perhaps has now come to the point where it has attempted to analyse what went wrong and it is revising its approach and, hopefully, the lessons learned from the experience will ensure that the mistakes will not be repeated. What I would not be clear on and what is perhaps not clear is the extent to which the systems and the equipment—which cost, I think the figure is in or around £10 million—may have to be discarded or at least remodelled in the light of the new approach, and indeed also in the light of the recognition that there should be more flexibility in the choice of systems and equipment which takes account of the views of the other parties or players in the game, the hospitals and the health agencies.

Chairman.—I think that puts us in the picture. It is a serious enough situation, Mr. Flanagan. The Committee did get this special report compiled by yourselves and the Department of Finance on the background to the situation; but, as the Comptroller and Auditor General says, his disquiet and the fact that he suspected that there were serious problems there seems to have been borne out: inadequate planning, no costing until May 1985 at which date you were already committed to hardware and software and the question of £10 million expenditure which may have to be discarded or spent over again. Could you give us your comments on those opening points, Mr. Flananan?

Mr. Flanagan.—Certainly. I am not sure what the Comptroller and Auditor General meant on a point of detail, the smaller hospitals situation, but there is no question of the work being discarded, which is the larger concern. I think the planning process as such had obviously some deficiencies in it but there is, with the greatest respect if I may so, in the Comptroller's comments the gift of hindsight which is not borne out by the factual situation in the computer situation generally in the health services and indeed, I understand, in other areas. There is no conventional wisdom and we were operating as a Department within the parameters which ordained progress in the computer area generally at the time.

Looking at the report I find it difficult to accept his presentation. We worked through the Review Body on computerisation which was set up in the Government services and the associated study and project groups. The consultants employed by the Review Body on the organisation of computerisation in the Government Services were members of the study and project groups to maintain a harmony of approach, and we made decisions associated with the conventional wisdom at the time. We have made as much progress in computerisation in the introduction of systems as the allocations made to us and the level of expertise available to us permitted. I certainly would not accept a stricture.

Chairman.—Going through your report, in paragraph 1.6 there was no real consensus on the approach; in paragraph 1.9 the key areas initially identified as priority areas were stock control, pharmacy, patient administration and community care index but financial systems were not so identified; in paragraph 2.2 of your report, Praxis was selected for the financial systems on the basis of a general specification of functional requirements but prior to an examination of existing local procedures, a bit like putting the cart before the horse; Praxis only cover the minimum of basic training but this was not recognised. There was no costing on the project until May 1985, when I think Arthur Andersen was called in at that stage, and there was no precise specification of the Department's own information needs. That certainly seems to bear out the Comptroller and Auditor General's comments that the planning was inadequate and that there was no costing until later in the day when the system was already committed.

Mr. Flanagan.—If you take first the major difficulty and the particular point you made in that series of points: first of all, it is not surprising to anybody who has familiarity with the health services and their organisation that there was no consensus. The health services, as I have had occasion to remark before here, are not a unitary system. We provide direct funding to eight health boards which have their regional political identity and their regional desire for autonomy fostered by the structure and they are not entirely armoured against, for example, the suggestion, which would have been fostered commercially, that the wrong decision would be made, which was very prevalent in the atmosphere at the time. In my view, the right decision was made and such organisations, including the semi-independent hospitals, have traditions of autonomy, which is understandable in their background. Therefore, solutions driven from the centre are often resented, resisted and there were certain advantages in opposing them.

Taking the second point, it is understandable that from where you sit, the decision to concentrate on pharmacy management, patient administration and so on rather than financial systems raises a question in your mind and I would agree it would be reasonable for it so to do. However, with great respect, there is a measure of hindsight in that approach because the conventional wisdom driven by the Trident report at the time, which concerned itself with allegations of waste in the drug area, would predispose the system to concentrating on that area and working through patient administration system. As to the costing and so on, we have attempted to indicate the situation there. I can say no more than it was difficult and still is difficult and, as I think you would readily concede we are not operating in this area in any unchanging or static situation.

Chairman.—Can we go to the costs on page 11 of the report—Subparagraph 4.1:

The first firm estimate of the cost of a comprehensive computerisation programme for the health sector was not available until May, 1985 following the carrying out of a management consultancy assignment by Messrs Arthur Andersen. This put the overall implementation cost for the key systems for the major health agencies at £43.5 million with projected annual running costs of up to £11.5 million.

The up-to-date estimate for the entire programme, (including computerised applications in smaller hospitals and health agencies such as mental handicap institutions etc.) is £40 million, of which £10 million has already been expended up to the end of December 1987.

Mr. Flanagan.—There is not any additional information of any significance to answer that question. I cannot be certain. You see the figure in the sentence before subparagraph 4.2.

It is estimated that the installation of all the required modules in a major general hospital such as Cork Regional, Beaumont etc. would be in excess of £2 million with annual maintenance costs in the region of £300,000 to £400,000.

Those figures of £300,000 to £400,000 are inclusive of any licence fees. To illustrate, I understand that McAuto are not tendering for Beaumont and so the question may arise that a deal may be done in the new circumstances for Beaumont which may not involve annual licence fees. I would not want you to understand, for example, by that that it might not necessarily include some other annual costs. We will just have to wait and see. We do not have the gift of certainty in this. I am sticking by the expenditure of about £40 million at this point. I would not be certain of that either. It is just that—it is an estimate.

Chairman.—What happened, Mr. Flanagan, is that your Department got committed to this expenditure without planning ahead and without knowing the cost at the time you got committed.

Mr. Flanagan.—I would not accept that entirely. I do say that we followed the planning requirements of the time. We have changed. As you will see, the review group appointed by the Minister which commenced its work in May and reported in August has led to a change in direction. I really cannot look down the road that much further. There may be another change of direction when we come to review again.

Chairman.—At the end of the day the hospitals, health boards and your Department are stuck with obsolete equipment which cannot be serviced by the suppliers. I am referring to 7.1 of your report.

Mr. Flanagan.—To an extent, that can be inferred from that. What we have from the suppliers is a commitment to continue with the service of those systems. I know of no guarantee against obsolescence in this area. What we install this year may very well be obsolete in two years time. I just do not know. All we can rely on is the undertakings by the firm to continue to service them.

Chairman.—Is there any point in the State committing £40 million to purchasing computers if we do not know whether they will be obsolete in two years time?

Mr. Flanagan.—There is a fundamental difficulty of communication with the Committee on this. As I have said, £40 million is the estimated order of magnitude. For the new arrangements there will be individual contracts entered into for each agency. Those individual contracts will have to have their own inbuilt safeguards to avoid the sort of situation you are describing.

Chairman.—Let me ask you a couple of other questions before we open up the wider debate, just to set the parameters of this debate. Would you accept that under 1.6 of the report there were deviations from the standard systems? Under 1.8 of the report there was no Department input to ensure that the community care system in the North Western Health Board would be suitable for transfer to other health boards, that the expertise within the Department needs to be expanded if the programme is to be fully effective—I am referring to 1.2 and 7.3 of the report—and also in 7.3 of the report that no guidelines were published for the planning, selection and implementation of the systems. In other words, what I am saying is that it seems from these paragraphs that your Department did not have the expertise to implement and manage the projects concerned and that this contributed to costs being incurred which were not planned for.

Mr. Flanagan.—That is a series of rough questions. I would first of all start by saying that the Department, and it has always acknowledged it and it is still the situation, has less expertise than it requires to do this job fully. In terms of the North West, the Department certainly kept in touch with it and was aware of what was being done. Seventy-five per cent completion was obtained and there is a translation of that 75 per cent completion in the CCIS to the Eastern Health Board. As you will see from page 7 that system is under consideration for installation by the Southern Health Board. To an extent, the working through of the system which are changing and which have revealed the need for further clarification of the structures by which health care is delivered in the North West, of which account will be taken in both the Eastern Health Board and the Southern Health Board, has been one of the emerging factors. We have admitted in paragraph 1.6 that there has been a departure from the standards set by the Department at the time associated with the McAuto Digital contracts. I am afraid, as I said, this arises because the health service system is not a unitary one. There has been a new approach taken. Once the plans, guidelines and confirmation has been set down by the Department, there will be the possibility provided that all of the Department's requirements are met of the hospitals seeking tenders from various suppliers.

Chairman.—Could I come back to the question which the Comptroller and Auditor General raised in his introductory remarks. Will there be a certain amount of throwing good money after bad? How much of the remaining £30 million will duplicate that covered by the £10 million already spent?

Chairman.—We can take it that that will be the case? With regard to the hospitals and health boards who brought in the systems there are three mentioned, St. Vincent's Hospital, the Mater and Ballinasloe. Are there any other hospitals which brought in their own systems not mentioned in the standard systems which were designated?

Mr. Flanagan.—Not that I am aware of; for our purposes of discussion I do not know of any.

856.Deputy McGahon.—I have only one question. Mr. Flanagan referred to traditions of health boards. Traditions of health boards, so far as I can see, are of continual overruns. Why was the North Western Health Board chosen for this particular pilot scheme and what was the criteria used in selecting that?

Mr. Flanagan.—Just to take the first part of the Deputy's question, I think he suggested that health boards are continuing to have overruns.

Mr. Flanagan.—No health board will have had an overrun for the year 1987 or 1988. That is enjoined upon us. With a combination of cash management and overdraft we are enjoined to bring them in on line, which is the trauma that is being caused in the Western Health Board at present—they are required to be brought in on line with the financial allocations. That is not to divert from the larger question the Deputy asked. There are horses for courses. There is a coming together of a level of expertise. I mean no reflection on any other health board when I say that there was a management team which, by disposition and training in a professional capacity, were more willing and perhaps more suitable to run such a system and, in fact, they had much of the preliminary work done. Hence, they were more ready in that sense to do it. We are not all computer literate or computer appropriate and we have to make certain choices.

Deputy McGahon.—Would you not accept that, given the success of the North Eastern Health Board in living within its budgets over the last decade, they would have had more expertise for a pilot scheme of this nature?

Mr. Flanagan.—We recognise expertise in many ways, Ministers do. The expertise—I am referring to a deceased member of the staff—in the North Eastern Health Board was translated into membership of the commission on funding for example. So there is particular expertise that we recognise. The North Eastern Health Board was doing good work and it was a pilot for the personnel system. You cannot impose burdens all over the place. The essential fact I have to stress is that—I suppose I trespass in the political area in a way in saying this—some of the bitter criticisms of the Department of Health and successive Ministers is that not enough cutbacks, which is wrong, are made in the administration. Information technology (IT) is administration and we have a certain difficulty all the time in the choice between front-line care and systems.

857.Deputy Dempsey.—Just a general question on this. It strikes me that at this stage we do not know if there is any benefit to the centralisation of these and of the computer services within the health system. The studies which were set up in 1981 and later on still have not been able to come back and say yes, there is a benefit to standardising all these computer facilities. Are we wasting time and money on trying to standardise systems? Would it not be better to leave hospitals and various health boards to develop their own systems? We have not answered that question.

Mr. Flanagan.—With respect, I think we have. I am not too sure whether the Deputy means that what we are doing is standardising the equipment or if we will endeavour to standardise the information which will flow from hardware and software. But there will be a discretion open to hospitals and agencies for the future within certain guidelines which are described in paragraph 7.2 of the report. It will be for the individual agencies to select from a tendering process those systems which can deliver consistent with the guidelines we have set. But the Deputy will appreciate that we all have a desire to have standardised information flowing, otherwise we cannot make comparisons between one agency and another.

Deputy Dempsey.—Really, the question I am trying to put to you is, is that the overriding concern we have in standardising the information or was this designed as well to save money overall on administration and so on?

Mr. Flanagan.—We are enjoined by our colleagues in the Department of Finance to work towards the cheapest solution to problems—the cheapest and most effective. At present, and indeed in the past, we have been concerned to get the best value for money we could.

Deputy Dempsey.—Can we conclusively say that this standardisation we are talking about will be the cheapest way?

Mr. Flanagan.—That is our belief. It could happen in a couple of years time we would be back and the Deputy would be blasting us for not having achieved it. Competition should ensure it, but I do not know how much scope there is.

858.Chairman.—The other question I want to ask refers to the £10 million cost to date. Does that include all costs related to the computerisation programme? Were there own resources costs involved as well from the point of view of the health boards?

Mr. Flanagan.—Prior to the standardisation process agreed initially, which is described in the opening paragraphs of the report, one or two health boards put in small facilities but they were absorbed into the situation. It is of minor relevance. I can give you the breakdown of the expenditure but essentially it is only the hospitals to which you referred earlier—Portiuncula, the Mater Hospital and St. Vincent's—who put their own resources into the situation.

Mr. Flanagan.—Of the £10 million, yes. The hospital systems, £3.4 million; the community care system, £1.5 million; financial systems, £3.8 million; management consultancy assistance, £400,000 (1982); maintenance of hardware and licence fees, £0.53 million; and smaller systems on micros, £0.52 million, giving a total of £10.15 million.

Chairman.—What about the balance of the payments? What other expenditures will be made and at what stages to bring you up to the final amount of money you are committed to?

Mr. Flanagan—One of the values that has emerged out of the concentration which the Public Accounts Committee has brought on this issue is that we have accepted that there is need for, perhaps, more upfront information. There is to be brought into being a subhead from which the money to be spent on the systems will be allocated for 1989. No specific sum of money has yet been identified for the purpose. It still remains within the broad ambit of the capital allocation and it will be for determination in the current year how much money will be put into it. I cannot go beyond 1989. I simply do not know. We have not yet achieved the much desired multiannual budgeting situation.

Chairman.—Nineteen eighty eight? There will have been expenditure this year as well?

Mr. Flanagan.—I cannot be absolutely certain. I would not want to be absolutely tied to this. We would bring the figure of £10.15 million to about £11 million by the end of this year. There is not a lot of expenditure in the current year.

Chairman.—Can I ask you in relation to the consultants—they were depended on to supply the necessary expertise—did we get value for money?

Mr. Flanagan.—I suppose, broadly specking, in a situation in which we were deficient in expertise we probably got as much value for money from consultants as is normally got from the expenditure of such money.

Chairman.—£400,000. In relation to the choice of hardware and software generally, do you think their advice was good advice?

Chairman.—What about the VAX 730s? They were clearly inadequate for even the smaller hospitals and it seems now that with high maintenance costs and the uneconomic running of these they are going to be fobbed off on health boards. Is that not something you should come back at the consultants about?

Mr. Flanagan.—I do not think that it would be fair to blame consultants for that. It is a changing art. I do not want to be in any way controversial about it but all of that is over and we have found a use for them. We have got the last one out of the system without any additional cost to ourselves, and we have been given the deal that we will be replacing the remaining VAX 730 with a VAX 750 which is a more suitable model.

Mr. Flanagan.—That is a contrasting situation compared to the 750. There was, and we would not willingly set about using them if they were the only state of the art at the moment but the fact that the 730 ran into the 750 and so on meant that the technology was changing. I am sure there are many organisations who have bought 730s who would rather they have 750s but that is the way it goes.

Chairman.—Can I ask you a third question? In relation to the consultants and the advice they gave, there is no completely computerised hospital system in Europe as far as I am aware. Why were not the Department told that the programme was too ambitious? Did the consultants not let you down on that advice?

Mr. Flanagan.—We have often had a tendency, being a small country, to run the ambitious. We have done it in the past in a few instances we have headlined. I would have liked that it would have turned out better. We ran flouridation and we fought a case in the High Court against it to the Supreme Court. We are one of the few countries to do it. There is a certain ambition to be first and to do the best you can with what is inherent in the health system and we pioneer a number of things.

Chairman.—I was only talking to the main contender on that and he is now in Europe where they do not have flouridation.

Mr. Flanagan.—You have a very valid point. At the Anglo-Irish encounter, it ran right through the session yesterday that there are few people charged with quite significant health care delivery systems who are at all satisfied with their system.

Chairman.—It seems to me that with regard to the £400,000 paid some of the advice given was not the most efficient, did not point you in the most efficient direction.

Mr. Flanagan.—I am smiling for the reason that I would hate to have successive Ministers look at the advice I gave them over the years and say it was right all the time.

859. Chairman.—We have Mr. Fergus Glavey, Principal Officer from the Department of Finance. Does the Department of Finance agree with the course now being embarked on and, on the question of adequate safeguards to protect the public purse, have they been implemented?

Mr. Glavey.—Two issues arise under that. I think the Secretary of the Department of Health indicated that from 1989 onwards it is intended to put in place a separate subhead which will be the vehicle for all funding in relation to computerisation in the health boards and health agencies. The Department of Finance see that as a key element in making transparent if you like what resources are being spent on information technology in the health sector and showing in very clear terms what funds are allocated in any year and what funds are actually spent. That is the first point.

The second point is that the secretary indicated that a new régime was being put in place in terms of an approach to future procurement in the health sector and the planning of the expenditure. I am satisfied that within the context of that new approach there will be certain key elements in place which should facilitate getting good value for money, which is the primary concern. I think there are two key elements to what will be in those guidelines.

The first concerns standardisation but standardisation in a very different sense from what was available in the past. That is simply because time has moved on. It is not intended in any way as a reflection on the choices which were made in the past which, in my opinion, were correct for the time. What I mean by standardisation here is that the underlying dilemma is that you need systems which are capable of communicating with each other and which are capable of exchanging information. That is a major requirement for any system. At the same time you do not want to be tied into a monopoly situation by a single supplier because that is not the best way to get value for money. There is a tension between those two needs.

The way forward, in our opinion, and it is nothing unique to us—it is becoming commonplace throughout Europe and it is being pushed by the EC—is by referencing international standards as they emerge for the acquisition of computer equipment and software. That, in turn, should allow for multi-vendor purchasing while at the same time guaranteeing that different systems can inter-work. That is what it is all about. I want to put a cautionary remark down about that. That is the ideal.

The ideal is achievable as of now in certain areas particularly in relation to communications between different computer systems but it is by no means achievable in all areas. There are still a significant number of circumstances in which individual Departments or health agencies are for the foreseeable future—and by that I mean three or four years—inevitably tied to a single supplier. In a situation where Departments or any purchaser are tied to a single supplier, there must be concerns as to how one can ensure value for money. It is a constant preoccupation of the Department of Finance as to how one does achieve value for money in that situation.

The second leg of policy which we expect to be reflected in the health sector is the competitive element, more and more emphasis on competitive purchasing. That is already in place or coming in place both in the health sector and in other departments.

I was conscious of the comments made on high maintenance costs associated with particular types of equipment. That has been and is being tackled in the sense that there is a positive policy to ensure competitive tendering for all maintenance contracts for all computer equipment throughout the Civil Service at present. Incidentally, what has made that viable is quite simply the emergence of what are called third party suppliers of maintenance who are willing to come into any particular computer site, whether it is dominated by a single supplier or not and quote for the provision of maintenance for a year or two years ahead.

Chairman.—Are you telling the Committee that you are happy with the situation as it develops?

Mr. Glavey.—I am happy in the sense that plans are being put in place to minimise any difficulties which may have happened in the past. I was also indicating to the Committee that I was satisfied with the procedures which were used to make the original selection.

Chairman.—Despite the fact that the 730s were clearly inadequate, even for the smaller hospitals, you are satisfied with the procedures that were there?

Mr. Glavey.—Can I go back a little in terms of the basic choice that was made. At the time, the choice of supplier required the availability of a range of equipment which could use the same software throughout. The supplier chosen had a range of equipment ranging from very low level equipment down at the 730 level to much more powerful equipment. That, I think, was a desirable attribute of that supplier's offering at that time. As it turned out the 730s subsequently—and I would emphasise after the event—were overtaken by developments within the range of equipment on offer from the supplier, but there is no evidence to suggest that, at the time the recommendation was made in favour of the 730s, they were not the most viable proposition for smaller units in the health area.

Mr. Glavey.—The Department of the Public Service was represented on the project team who originally advised on the selection process.

Chairman.—Has all of this money been paid to one supplier or how many suppliers and was there a tendering procedure?

Chairman.—There was a tendering procedure and there is a number of suppliers?

Deputy Desmond.—Throughout the report there is a number of hospitals mentioned. These are, Portiuncula, the Mater Public, Saint Vincent's Public Hospital, Crumlin Children's Hospital and Our Lady of Lourdes Hospital. All of these are public voluntary hospitals. Can the Accounting Officer confirm for the record of the proceedings here that the boards of those hospitals are wholly autonomous boards and are in no way appointed by the Minister for Health or indeed that there is no representative of the Department of Health on any of these boards? Is that the position?

860.Deputy Desmond.—It is fair to say that over the years these particular hospitals have jealously guarded their apparent public voluntary independence from the Department of Health in terms of management of the hospitals?

Mr. Flanagan.—Yes, that is so. To quote yourself, they have jealously guarded that. We have at all times in seeking their co-operation endeavoured to ensure, as you know, that the money which is made available to them from Exchequer sources is expended to the best advantage of patient care having regard to the statutory obligations that are imposed on us to provide services. But you are right in saying that they jealously guard their independence.

Deputy Desmond.—It is equally fair to say that if any one of those hospitals mentioned decided to throw out their existing computer systems and bring in a totally new system, provided they paid for it out of their own resources and developed a new system exclusively from their own resources, the Department of Health effectively could do nothing about it?

Mr. Flanagan.—The only weapon open to us is the financial penalty. Given that the funding was to come from their own resources, it would be difficult for any Minister to impose the financial penalty.

Deputy Desmond.—You would share the view then that in the light of these constraints on any Minister for Health, and particularly on the Department of Health, that the problem of putting a co-ordinated national system into the public voluntary hospitals has been one of great difficulty, particularly when competing computer companies peddle their wares separately, independently and incessantly to individual voluntary hospitals behind the backs of the Department of Health, independent from the Minister for Health and directly to those boards and it is an acute problem?

Mr. Flanagan.—Yes, the short answer to that is yes. It is an extremely difficult situation. Before the Deputy came I had endeavoured to suggest that that exactly was the situation. It is an area of extreme difficulty. To go back to the Deputy's previous question, in the accounting responsibilities I exercise I could see myself recommending to a Minister that if the systems which you described being put in totally independent of the new situation and not having the capacity to which Mr. Glavey referred of harmonising with the overall system that we would have to take note of it in the financial allocation process, because we are endeavouring to develop more sophistication in that process and a dearth of information would be a very serious impediment to control. I am sorry I did not cover that in my earlier reply.

Deputy Desmond.—Just two other questions, one relating to the development of a hospital where the Department has total control, namely, Beaumont, and then the problem of staffing within the Department in relation to computerisation generally. Could I ask the Accounting Officer what is the position at the moment in relation to Beaumont where effectively it is a Department hospital? How effective is the computerisation going ahead there? Will you have resources? There is a budget of about £36 million a year and how far down the road are we to bringing in total computerisation of the operation of that hospital?

Mr. Flanagan.—The process is proceeding satisfactorily within the new system described in paragraph 7.2 of the report under consideration and at the moment, as I understand the situation, tenders are being considered and the process of selecting the new system is in train. As I said earlier, McAuto are not competing in this situation and the hospital have installed the Praxis financial system and they are going ahead with an interim solution to the problem. From our point of view it is moving quite satisfactorily.

Deputy Desmond.—That is good. How about the other major budget centre of St. James's Hospital where there is a departmental input on to the board? Will St. James's be fully computerised within a certain period?

Mr. Flanagan.—It is difficult to be specific about the period but a planning exercise is being undertaken with considerable urgency at the moment to bring into play all of the requirements that are necessary to put in train before it is put out to tender and in accordance with paragraph 7.1 of the report which we have given. We are satisfied now with the progress in St. James's.

Deputy Desmond.—The Department has had a relationship, uneasy or otherwise, with the Department of the Public Service. Would you agree that the lack of what we call a national public service computer policy and the multiple changes that have occurred in that policy and the lack of effective liaison between various Government Departments and what was then known as the Department of the Public Service in relation to computerisation gave rise to great confusion in the past decade on the implementation of systems and the spreading throughout Government Departments of expertise? In that framework has your Department suffered in not having available to it an opportunity of building up a corps of computer system managers in the Department of Health, liaising directly with hospitals and being able to pay people effective salaries to bring able to pay people effective salaries to bring in major expertise? That is no reflection on existing staff but it is impossible for the existing staff to do all of this work which is intense work within individual hospitals involving meeting representatives almost on a weekly basis? Surely your Department has suffered greatly from the absence of that kind of push on the public service side?

Mr. Flanagan.—The Deputy has outlined in a general way the general positive difficulties. We have had difficulties as everybody has had, in relation to staffing. The Department of the Public Service are, no more than ourselves, an instrument of Government policy and reflect the difficulties of the time. We drew heavily on their expertise and were supported by it considerably in a situation in which, as the Deputy suggested, we had very little available to us. The IT area, more than any other area, in recent years has suffered. In fairness to the Department of the Public Service who have in many instances been extremely co-operative—and, as the Deputy knows, let us purloin from them one of our present brightest and best—the Department would have had a difficulty, given the other demands, in thrusting hard at IT in a situation in which for a number of years, as you know, there have been serious cutbacks in relation to our capacity to deliver frontline services. That has always been a difficulty. Reluctant as I am to disagree publicly with the Deputy, for a number of reasons, I would not entirely go down the road with him on the line he has put.

861.Chairman.—Can we just keep to the computer question? I have one last question. I will quote from the Comptroller and Auditor General's report which states:

Some items of this equipment to the value of £511,000 still remained in the supplier's stores in April 1986 and the Department then agreed to sell back to the supplier for £75,000 three of the mini-computers which have cost £138,000 approximately.

Why did your Department sell back three computers still in his stock for almost half the price? Apparently you never took delivery of them.

Mr. Flanagan.—We got credit. That is under paragraph 3.3, Bulk Purchase, in which we go down the road to explain what exactly transpired to the point at which we have now totally cleared that issue.

Chairman.—Is not the C&AG correct then? You did sell back computers valued at £138,000?

Mr. Flanagan.—Two of them were used subsequently as is referred to in the paragraph which begins:

Subsequently (December, 1986) two of the VAX 730 were supplied by DEC to the Eastern Health Board at the £25,000 price—for use in St. Brendan's and St. Mary's Hospitals.

The final one which is outstanding in the Comptroller and Auditor General major concern with this is the VAX 730 and this has been translated into a VAX 750 at no cost to us. The key to that is that at the time the officers dealing with the agencies were going out in many instances with one hand as long as the other attempting to persuade agencies to do things. The greatest tool one can have in administration is to have something that can be delivered and readily available to you. A decision was made on advice to purchase as we did. We contend that in relation to the three which are the cause of concern we probably broke even or made about £1,000 and ultimately it is probable that there was a significant saving to the Department as well.

Chairman.—Just to get this clear, on the question of your Department selling back to the supplier for £75,000 three of the mini-computers which had cost £138,000, are you saying that you did not go ahead with that agreement?

Mr. Flanagan.—We did go ahead but we got the two computers. It is described in detail. Two of the VAX you are talking about were supplied by DEC to the Eastern Health Board at the £25,000 price, for use in St. Mary's and St. Brendan's and they have now converted the third into a 750; the 730 is scrapped, it is gone.

862.Deputy McGahon.—On a point of information, Mr. Flanagan referred to the difficulty that he had with private hospitals in not co-operating fully regarding computerisation. Why should they have a hostile attitude or what is their side of the equation? Why did they take that attitude?

Mr. Flanagan.—I think Deputy Desmond explained that they are in a tradition of independence, an understandable tradition of independence in the situation. That tradition derives from the fact that before State services were available they were providing services for the population in many respects. They guard that tradition jealously. In this area there is a fair sensitivity. Information, as you know, is power and Deputy Desmond made the point, with, perhaps, more clarity than I did, with more emphasis certainly that there were marketing forces at work as well. The marketing forces, since you asked me for a specificity, went into the power centres in those hospitals. They used the power centres very significantly. I do no want to be more explicit than that. The marketing in this area is very sophisficated. We alluded to it before. It has the capacity to influence decisions to a huge degree and to engender suspicions of the motivation of the Department of Health.

Deputy McGahon.—Is there no room for compromise in this particular area? I feel that private hospitals have done a great service to the Irish community over the years. I can understand them wanting their independence. Is there no way in which you can compromise on this? You referred to the market suppliers. This would, of necessity, be a limited industry. How many major suppliers are there in that area?

Mr. Flanagan.—There were two at the time which we are discussing, the unsuccessful candidate and the McAuto system. That was the intention in the situation but that was exploited. To answer your larger question, a compromise in a sense has been arrived at and is described—in the report before us the agencies will have the possibility of contracting provided that they conform to the requirements of the broad policy outline that has been made as has been set down in paragraph 7.2; in other words, as Mr. Glavey said, that there is a compatibility between the systems and that the stream of information is essentially uniform. I do not think—I hesitate to speak for him—that Deputy Desmond was suggesting that there is a hostile relationship in general between the voluntary hospitals and the Department. In fact I contend that they have uniquely a great desire to remain with us rather than be absorbed into another system.

863.Chairman.—Can I bring in the Comptroller and Auditor General in order to get his comments before we wind this up?

Mr. McDonnell.—Perhaps I should just clarify some of the matters referred to. The Accounting Officer did in his opening remarks suggest that my representation of the situation was not perhaps borne out by the facts. There were a number of things which he referred to, one of them you dealt with yourself and that was the question of—and I do not want to go into it at all—this VAC 730 and the involvement of the consultancy in advising on that. I did say also in my opening remarks that the report seemed to concede that planing was inadequate. In that respect that was my perception of the report because if one looks at paragraph 7.2. of the report, for instance, we see that as a result of the review—this is the recent review—there are certain things being done. The Department will be responsible for a whole series of things there, the health agencies will be responsible for a whole series of things and it goes on to say that the Department will publish guidelines to be followed by the agencies. It goes on further to say that, despite difficulties in regard to quantifying savings—this difficulty in the quantification of savings is referred to in the Smurfit report—this is an aspect on which greater attention will be placed by the Department. New planning guidelines will require that greater emphasis be given to cost benefit analysis. What I am really saying is that it seems that situations are being recognised which I would have thought would have been recognised earlier on, that the respective responsibilities of the players in this game would have been more clearly defined. In regard to planning generally, I did say just now that one of the comments in the Department's report was in response to a comment in the Smurfit report, which you alluded to yourself at the first meeting of the Committee on this matter. That report was done for the Public Expenditure Committee. I was looking at that report yesterday. It says, for instance, “We searched for a policy document outlining the overall plan for computerisation in the health service over the next few years, but officials denied the existence of such a public strategy document. They stated that they had followed the recommendations of various consultancy reports, including Computers for the Civil Service and they were working to an inhouse plan which outlines proposed activities for future Years”. They go on to say that they could not get access to the document. In relation to planning also I would have thought that the major players in the game would have had a significant input to the original planning. As the Accounting Officer said himself, the voluntary agencies are major players in the game and they have a certain degree of autonomy. I think that that was one of the areas in which difficulty was encountered. It did seem to me that the involvement of the health agencies and the voluntary hospitals was not what it might have been at the early stages. For instance, in regard to the study groups and the various groups—I think there were four of five altogether—quoting from paragraph 1 (3) of the report:

This was a group dealing with hardware/software policy. One of their functions was to evaluate the material received from potential suppliers, that is to say, the Department of Health, the Department of the Public Service and the consultants. Later in paragraph 1.9 we see that:

While financial assistance had not been identified by the Study Group as a priority nevertheless it soon became evident that the development of and the implementation of computerised financial systems was essential if the Department was to carry out its function in monitoring and controlling revenue and expenditure.

This is the point I want to make. A group representative of the Department, the voluntary bodies and the health boards was then entrusted with the task of selecting standard software packages covering the major financial systems, whereas earlier it seems that a group which had to evaluate the material received from the potential suppliers did not involve the voluntary agencies. I was concerned that in that context, if a player in the game who was recognised as being autonomous and who was recognised as being an important player in the game is not involved, it seems to me that that is a recipe for some difficulty. Indeed, the Smurfit report also referred to that because it said there seemed to be some controversy between the Department and certain health boards and hospitals regarding software policies to date. I think also that one of the major reasons for part of the high cost of the payments to consultants was that they found that they were being asked to provide a greater degree of expertise than they had thought they would have been asked to provide by virtue of the fact that the level of expertise available within the health boards was not sufficient to operate and manage the systems and that as a result the suppliers found they were providing a greater degree of expertise and that that led to the consultancy costs being much higher than they would have been otherwise. I would have thought that if the involvement of the health agencies had been what I thought it ought to have been from the beginning, that the lack of that expertise in the health agencies would have been recognised at an early stage. I stand over what I said. I think that situations are being recognised now which for the life of me I cannot see why they might not have been recognised at an earlier stage of the operation and that the planning which is perhaps being done now—admittedly I am saying this with the benefit of hindsight in seeing where the plan is now, but I do not think that invalidates the comment that the planning initially was not of the degree that one would have thought it should have been. Chairman, I recall you asking the accounting officer on the last day if all the agencies were pulling together on this operation. I think that is what you said. The accounting officer said “no”.

Mr. Flanagan.—I am cooling down the system. A little water is needed. As the Comptroller and Auditor General said, it is marvellous to have the gift of hindsight in the situation. His adherence to the Smurfit report, which we dealt with more than comprehensively and which was got at the instance of the Committee on Public Expenditure, is a good example, with the greatest respect to him, of his failure to understand the nature of the health system. I do take his point that there were representations on one group and not on the other but I may assure him that in the context of the climate, which has improved considerably in recent times, because of the economic driven restraints upon us in co-operation, it was not forthcoming to the officers charged with the installation of computers and working through the system at the particular time. In fact, it would have been extremely difficult even to get representation at that time given the nature of the exercise to get satisfactory and comprehensive representation of all the agencies involved on any group. They are, of their very nature, as I said autonomous and autonomy inclined. There are movements because of the strictures which are bringing them closer together and in certain circumstances it is possible. But not in such a sensitive area as information could we essentially rely on more than a huge grouping to do the sort of exercise and that is not efficiently possible to do. The Smurfit report was prey to the very pressures which a member of your Committee, Deputy Desmond, mentioned the sources of the consultancy advising the Public Expenditure Committee. They were open to the same pressures at the time, which were centred on the officers installing the system. We dealt with it comprehensively and I am surprised at the reliance that the Comptroller and Auditor General is placing on the Smurfit consultancy. I am frankly surprised and a little upset by it. If that is to be taken as a measure of expert consultancy analysis, then I have serious concerns. But let me say, finally, since you invited me to comment, that whatever else may be wrong with us in the Department of Health we are not averse to learning. We are learning. This is a continuous process. This exercise which we undertook at your insistence, Chairman, has been a valuable one. The Comptroller and Auditor General tends to interpret some of the statements we made, which are evidence of the learning, and can say with a certain smugness, if I might suggest it, that he was surprised that it was not a feature of the situation. All of us in the public service who are charged with installing computers have wished that we had the gift of the hindsight which he has when we were making decisions but it is an evolving area and we will have continuing trouble with it.

Chairman.—The Comptroller and Auditor General wishes to make a concluding remark and then I will try to wind this up.

Mr. McDonnell.—I never professed to fully understand the ramifications of the health service. The accounting officer said that I placed reliance on the Smurfit report. I quoted from the Smurfit report. I notice that in the Department's own report it in fact addresses the recommendations of the Smurfit report and recognises——

Mr. Flanagan.—Mr. Chairman, if I may interrupt, we were asked to do so. With extreme reluctance, we had to be pursuaded but it was in courtesy to the request you made that we addressed it.

Mr. Flanagan.—The Comptroller is referring to our references or rather the combined reports' reference to the Smurfit report. We were asked to address those questions.

Mr. McDonnell.—If I may interrupt, it did say, in fact that certain aspects of the report be given more attention in the future. My other comments in relation to the involvement of the voluntary bodies at the earlier stages of the operation were prompted by the fact that I noticed in the report—I was in fact already aware of it—that in certain respects they had not had an input into the selection process and I thought it strange that a group involved in evaluating hardware/software should not have involved them when, later on, when an additional software package dealing with financial systems was being considered, they were involved. Furthermore, the recognition is now there in paragraph 8.2 of the report that the voluntary hospitals acquiring their own systems by virtue of recognising their own requirements and so on has been accepted and in fact the three hospitals which chose systems which were not in accordance with the Department's selection are now in the position of being paid for those systems when initially the Department's—

“It will be a matter for the hospitals concerned to satisfy the Departments that any system already installed can form the basis for a total and effective system within the hospital itself.”

Mr. McDonnell.—As indicated earlier, it is under consideration. As I understand the question of giving a degree of autonomy to the hospitals in the choice of software is one which is now being recognised.

Mr. Flanagan.—May I just remind the Comptroller and Auditor General that, if that is the situation, there is no commitment to funding the past and the imposition of the clawback of £75,000 remains on the one hospital on which it was imposed?

Mr. McDonnell.—I read further back, Chairman: “The future policies will allow for development of existing systems within the hospitals concerned to be funded by the Exchequer.”

Mr. McDonnell.—“Will allow for development of existing systems within the hospitals to be funded by the Exchequer.”

Mr. Flanagan.—Provided they measure up to the requirements of the new planning process.

Mr. McDonnell.—And in that context if the hospitals can “satisfy the Department that the systems already installed form the basis of a total and effective system within the hospital”.

Mr. Flanagan.—Yes. But where is the commitment to the funding of what has been incurred in that? I do not read it into it.

Mr. Flanagan.—You are talking about the funding of the system, meeting the costs, to be precise, of what has been incurred. There is no undertaking to do that.

Mr. Flanagan.—You may read it that way but that is not how we understand it.

864.Deputy Desmond.—I remember well the rating of November 1985 in relation to £75,000 for the Mater but there is no historic accountability acceptance by the Department of Health, to my knowledge of what happened in that regard.

Mr. Flanagan.—Forgive me for dragging this on but I do not want to be misunderstood about this. Let it be absolutely clear that that report contains no commitment to pick up past costs but, if all things worked out and the systems came into accord and there was a case made, we would always, and a Minister—I cannot speak for a Minister—would always look at it. I am not ruling it out but it is not to be inferred from what is there.

865.Deputy McGahon.—Mr. Flanagan, the Comptroller has voiced fairly strong criticism of the lack of voluntary representation on the study group. Do you feel now, with hindsight, that it was an error to exclude that sizeable body?

Mr. Flanagan.—I have to say that I could not say so because, had I been personally charged with it then, I would have found it extremely difficult to recommend to a Minister a tight list of people who could speak for the essentially individual stand alone institutions which they represent. The process, the study group, as is fairly clear from the report, emerged from the overall Government Service review group and was in the mould of what emerged from the centre. In one sense, without in any sense elaborating on it, the lack of representation, if you like to head into the area of the token represenative, would have been cosmetically better but not effective. But so far as I could make a particular point, as I said, there is a coming together of agencies for a variety of reasons. With the disappearance of numbers of hospitals out of the system it is easier perhaps now to select, but at the extreme end of the spectrum of representation, if you take a religious hospital and a secular hospital, the distinctions tend to——

Deputy McGahon.—Nevertheless, would you not accept that the exclusion of this particular group which make a sizeable contribution to the health needs of the country is not conductive to good relations between the Department and the particular private sector?

Mr. Flanagan.—It would be very difficult to argue against that. In the broadest sense the more representation you can get the more likely you are to get apparent acceptance, but whether you get the commitment is another matter.

Deputy McGahon.—As a PR exercise would you not feel that they should have been brought to the table?

Mr. Flanagan.—Again, hugely with the gift of hindsight and on what I am undergoing at the moment, yes, probably.

866.Chairman.—We will just have to await the Minister for Finance's minute on the evidence and on the report that we have received here today. we will mark this, “Further information to be forwarded arising from the 1987 accounts.” We will put it in for discussion again and see what the up to date position is at that stage.

It is the Comptroller and Auditor General's constitutional function to bring to the attention of the Dáil and this Committee any matters which give rise to disquiet and it is quite proper that we should look at it. I have to say this however for as long as Liam Flanagan is Secretary to the Department of Health I feel quite satisfied that the Committee will always get a full and frank explanation; but it is nonetheless proper that from a parliamentary point of view whatever the Executive has done it is up to us to examine it and in many cases Secretaries of Departments do no more than is decided by the Minister or by the Government. I would like to put on the record that it is my experience of dealing with the present Secretary of the Department of Health that he is one of the most courteous and professional of the public servants I have to deal with and that makes it all the more difficult to go in to this particular type of examination. However, it is nonetheless necessary for us to do it and it is only fair to point out that the Comptroller and Auditor General is only reporting to the Committee matters which he is constitutionally required to report.

Mr. Flanagan.—I very much appreciate your comments. If I display some irritation, it is under the pressure of the situation but it is certainly not against the exercise of the function. Perhaps the irritation may obscure the fact that we are not at all unhappy in the Department to have been brought to the point of delivering this report to the Committee and we would suggest that the fact that you have sought this report and that we have worked with the Department of Finance to produce it is a starting point for the further years examination and from our point of view certainly it is of extreme value. If I gave you the impression that I have any irritation with the Committee's inquiries, that is not so, just perhaps momentarily with the interpretations the Comptroller and Auditor General has attempted to put on things.

Mr. C. Gallagher (Department of Finance) called and examined.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) in attendance.

APPROPRIATION ACCOUNTS, 1986.

VOTE 28—LAND REGISTRY (Resumed).

Mr. D. Mathews called and examined.

867.Chairman.—This morning the Committee of Public Accounts is resuming its examination of Mr. Des Mathews, Secretary, Department of Justice on conclusion of the 1986 Votes. Before the Committee recommences examination of the Accounting Officer for the Justice group of Appropriation Accounts for 1986, I feel I should recap on the events which have led to the recall of the Accounting Officer.

The Committee will recollect that during the examination of the Accounting Officer at its meeting on 14 April last year, the Department of Finance representative expressed his concern about the efficiency of the Land Registry in very forthright terms. The Committee then decided to look at ways in which it might consider the position further. This led to a letter being issued in July 1988 to the Accounting Officer seeking a detailed report on the background to the delays being encountered in the Land Registry. No such report was furnished. In the event, the Committee requested the attendance of the Accounting Officer at a meeting on 6 October for which the agenda was “staffing difficulties and delays in the Land Registry”. The Accounting Officer indicated that he was unable to attend due to circumstances beyond his control and the meeting was reset for 13 October with the same agenda. Late on 11 October I received a letter from the Minister for Justice stating that he had instructed the Accounting Officer not to attend the meeting on the grounds that the subject matter of the agenda was outside the mandate of the Committee. The Minister and I exchanged further correspondence concerning the duty of the Accounting Officer to attend. That is the sequence of events up to now in shorthand.

The problem seems to be that the agenda was viewed by the Minister as covering a policy matter for which he, rather than the Accounting Officer, had accountability. I want to make it clear that this Committee was solely concerned with the non-policy aspects of staffing difficulties and delays in the Land Registry. Having heard the evidence of the Department of Finance representative, I suggest that this Committee would be abrogating its responsibilities if it failed to follow up these matters. In this context I would like to quote from AN Outline of Irish Financial Procedures, section 9:

The Accounting Officer is personally responsible for the safeguarding of public funds and property under his control, for the regularity and propriety of all transactions in each Appropriation Account bearing his signature, and also for the efficiency and economy of administration in his Department.

Surely the use of staff resources and equipment such as computers is an essential element of efficiency and economy in the administration of the Land Registry? I am not suggesting that this Committee has any function in relation to the allocation of resources, staff or otherwise. That is clearly a policy matter but it is a normal function of this Committee to examine an Accounting Officer on how well those resources are used.

The Committee will be interested to note the Minister for Finance's reply to a Dáil question which I put to him as recently as two months ago. I quote from the Official Report of the Dáil:

Accounting Officers of Departments have a particular responsibility in securing efficient management of resources which is the subject of review by the Comptroller and Auditor General and the Committee of Public Accounts.

The question I had asked the Minister was if he has plans to eliminate wasteful spending in the public sector. Mr. Mathews, in relation to the non-policy aspects of the question in hand, would you tell the Committee what the position is in relation to the utilisation of computer equipment in the Land Registry and how much it cost?

Mr. Mathews.—I would be perfectly prepared to answer that question which seems to me to be an appropriate one addressed to me as Accounting Officer. Before I come to that with your permission, Chairman, there is a matter I wish to raise which arises out of the events that you have just outlined. It may help our further discussion at today's meeting.

At a meeting of this Committee on 13 October, a number of serious criticisms were made of me which will have been recorded in the official minutes of that meeting. A number of members who were at that meeting expressed the wish that I should come here before you to explain myself and I am glad of the opportunity provided by today's meeting to do that. I am anxious that my replies to the criticisms made should be heard here today so that they can be recorded in the minutes of this meeting and accordingly, Chairman, I would ask you to agree that I be allowed to make a statement to this meeting before we proceed to my examination of the matters that arise out of the 1986 Appropriation Accounts.

At meetings of the Dáil Committee on Public Accounts which took place on 6 and 13 October 1988 very serious criticisms of me as Secretary and Accounting Officer of the Department of Justice were made by the chairman of the Committee and by a number of other members. There was, in addition, serious misrepresentation of certain matters pertaining to the allegations made against me. These misrepresentations have tended to portray me in a particularly unfavourable light. The criticisms were made at a meeting where the press was present and were widely reported in the media, including television. The Committee chairman also repeated very serious criticism of me on national radio. As I believe my reputation as a public servant to have been gravely damaged by public criticism that is unfair and unjust, I believe I am entitled to an opportunity to put before the Committee my answer to the allegations made against me.

At the meetings referred to, not all members of the Committee condemned me out of hand. I thank those who were fair enough to consider that maybe there was another side to the story and who were prepared to withhold judgement until they got the opportunity of hearing it.

I was accused of refusing to attend meetings of the Committee, of treating the Committee with contempt, of being afraid to answer questions, of having something to hide and of refusing to answer correspondence from the Committee.

As regards my summons to attend the Committee meeting held on 6 October 1988, the chairman has clearly implied on a number of occasions that I was given more than adequate notice of this meeting. For example, the unedited minutes of the Committee meeting held on 13 October 1988 record him as saying:

The Accounting Officer was informed during his examination on 14 April (1988) that he would be recalled on the subject in question, i.e. Land Registry staffing matters. He was written to on 27 July last and again on 23 September last before being requested to attend the Committee meeting on 6 October about which he was informed.

The clear inference to be drawn from this, from any reasonable reading, is that I was notified on a number of occasions of a recall to the Committee and that I was given several months notice of this recall.

The indisputable facts of the matter are as follows. The statement that I was told during my examination on 14 April 1988 that I would be recalled is not true. I was not told or given to understand at the meeting on 14 April 1988 that I would be recalled. The relevant part of the minutes of that meeting read as follow:

Chairman.—I will ask the Clerk of the Committee to bring this, i.e. Land Registry staffing matters, to my attention outside the meeting and we will come back with some suggestion as to how the Committee might look at it in greater detail. We will note the Votes for today. That concludes the examination of Mr. Mathews.

In my understanding, and that of others, this clearly indicated that my examination on the 1986 Accounts was finished.

In addition, the reference to letters sent to me on 27 July 1988 and 23 September 1988 is totally misleading. Neither letter makes any mention nor gives any hint of any intention to recall me on 6 October 1988, or on any other date, for re-examination on any matter. These are the facts.

As regards my actual call to the meeting on 6 October 1988, the facts are as follows; the first notice I got that I was being recalled at all, and specifically that I was being recalled on 6 October, came by means of a phone call to my office on the evening of 29 September 1988. On the following day my secretary, having consulted me, phoned the secretary of the Committee, expressed surprise at the short notice and said that, due to certain prior commitments, it was unlikely that I could attend on the day requested. The response was, would I put that in writing—this despite the fact that at that stage I still had not received written notice of the meeting. Written notice of the meeting was delivered to my office on the afternoon of 30 September 1988, i.e. Friday afternoon, for a meeting at 11 a.m. on the following Thursday. This was totally at variance with what, in my experience, has been normal procedure. On all previous occasions when I was called before the Committee I was notified weeks in advance and given a choice of dates.

As a change occurred in my planned schedule of engagements, I had my secretary phone the secretary of the Committee on Tuesday, 4 October 1988 to say that I would be available as requested to appear before the Committee on 6 October. I draw particular attention to this fact which is clear evidence that there is no truth in the accusation relating to my attitude to the Committee.

At 5.15 p.m. on 5 October 1988, as a consequence of a direction given to me, I became aware that I could not attend the Committee meeting on 6 October 1988. At the earliest possible moment, literally within three minutes of the time I became so aware—I had a message, by phone, conveyed to the clerk of the Committee telling him of my inability to attend and conveying apologies for the very short notice—both of which were, as stated, “due to circumstances beyond my control”. I made a point of conveying this message at the earliest possible moment so that there would be an opportunity to cancel the PAC meeting planned for the following day if the chairman wished to do so. Before 10 o'clock the following morning I had the following letter delivered by hand to the chairman of the Committee:

… I wish to confirm the message already conveyed orally to the Secretary of your Committee—that due to circumstances outside of my control it is not possible for me to attend at today's Committee meeting as requested.

I regret any inconvenience caused by the short notice of this development but I had the message conveyed to the Committee Secretary at the earliest possible time …”

The reasons I did not attend the meetings on 6 October and 13 October are set out clearly in letters dated 11 October and 18 October from the Minister for Justice to the Committee chairman. To quote from the letter dated 11 October:

The question as follows has been raised by members of the Committee—Why could not the Accounting Officer attend the meeting on 6 October, as requested, and decline to answer any questions put to him involving policy matters, in accordance with acccepted precedent? The answer is that the circulated agenda for that meeting indicated that the only matter for discussion was “Staffing problems and delays in the Land Registry” and that is a matter for which the Minister, and not the Accounting Officer, carries exclusive responsibility. That being so, the Accounting Officer would not be in a position to answer questions on this topic put to him by the Committee—a situation which could provoke the accusation that the Accounting Officer, by attending in those circumstances, was responsible for wasting the time of the committee and for letting them travel and assemble to no avail.

I come to the allegation that I have shown contempt for the Committee. The minutes of the Committee meeting on 13 October record Deputy Kitt as saying and asking the following question in relation to meeting me, as Accounting Officer:

I understand we have met him a few times over the last 12 months. I do not know how many times he has been in. Is it two or three times?

To this the chairman is recorded as replying: “We have discussed a number of years together but he has only been in once”.

In fact, in about 18 months as Accounting Officer, I have already appeared before the Committee on no less than three occasions—1 October 1987, 5 November 1987 and on 14 April 1988. Today, 26 January 1989, is my fourth appearance and I have been summoned to appear again a week from today, which will make five appearances in 16 months.

I make this point for two reasons; first, to show that there never has been the slightest difficulty in having me appear before the Committee when I am called to answer for matters for which I, as Accounting Officer, have responsibility. The only problem that has arisen is in relation to my attendance on occasions when it would not be appropriate for me to attend—and that problem is not of my making.

My second reason for referring to my previous attendances here is this. I have, on a number of my appearances before the Commitee, been questioned, quite rigorously, and of course quite correctly, on a number of “difficult” areas. While it is, of course, a disappointment to me to see that I made so little impression on the chairman that he remembers seeing me only once, I challenge anyone on the Committee to deny that I have answered every question put to me with scrupulous honesty, openness and civility.

Allegations that I have treated the Committee with any degree of contempt—the chairman, on national radio, accused me of treating the Committee with “extreme discourtesy”—I regard as hurtful and outrageous in relation to any public servant in my position. As far as my personal reputation is concerned, I am nearing completion of 40 years service to this State—conscientious service of which I am proud. Contempt on my part for anybody, much less for a Dáil Committee, has never played a part in it. Allegations that I was afraid to come before the Committee, and particularly allegations that I must have something to hide, I regard as unworthy of those who made them.

I come to the next accusation—that I did not reply to two communications from the clerk to the Committee. The first of these, the letter dated 27 July 1988, which requested a detailed report on staffing matters and arrears in the Land Registry, was received in the Department on 29 July 1988, on which day I went on annual leave. It is the usual practice in the Department to issue a formal acknowledgment to letters which cannot be fully replied to within a fairly short time and I regret that, simply through an oversight and nothing else, a formal acknowledgment did not issue in this case. I have already expressed regret to the Committee on this point. I personally did not see the letter concerned or become aware of its existence until some time in September and while I, of course, accept responsibility for it, the fact that a formal acknowledgment did not issue can hardly, reasonably or fairly, be interpreted as indicative of contempt for the Committee on my part or indeed on anyone else's part. The fact that an acknowledgment did not issue does not mean that the letter was not attended to. Action was taken in relation to the matters raised in the letter in the normal way.

The second letter referred to was, in fact, a three line formal reminder, dated 23 September, from the clerk to the Committee, requesting a reply to the letter of 27 July. This reminder would have been received in my office on Monday, 26 September. Three days after it was received the clerk to the PAC Committee phoned my office notifying me that I was required to attend the PAC meeting arranged for 6 October to answer for the matters referred to in the original letter and in the reminder. Daily phone conversations between my office and the clerk to the Committee then ensued and in these circumstances a formal acknowledgment to his reminder did not issue. Again, in this instance, having regard to the circumstances outlined, I consider that the non-issue of a formal acknowledgment to the Committee clerk, who was in daily conversation with my office on matters related to the correspondence, cannot fairly be interpreted as indicative of contempt for the Committee by me or anyone else in my Department.

I do not see myself as responsible in any way for the problem that has given rise to this particular controversy. As some of the Committee members themselves acknowledged at the meeting on 13 October 1988, this whole problem has risen from one basic cause—because the Committee became involved in an area—the area of policy and ministerial responsibility—which is outside its terms of reference. Then somebody—not I—called a halt.

To sum up, I protest in the strongest possible terms at the damage done to my reputation as a senior public servant by the unfair and unjustified criticism that has been directed against me. I request that this statement be incorporated in the formal minutes of this meeting.

I am grateful, Chairman, to you for agreeing to hear my statement. I have never looked for, nor do I want, any row or confrontation with this Committee. I would like to think that we could resume normal relations and get on with the work we have to do. It was incumbent on me, in self-defence, to answer some very, very severe criticism that I feel was unjustly levelled against me. I thank you for letting me read that note.

Chairman.—I am glad to give you the opportunity to put the record straight. At my request minutes of the meetings were sent to you so that you would at least know exactly what was said. The position is that the whole problem arises because a letter sent to you on 27 July 1988 was never responded to. You said in your statement, and I quote: “I personally did not see the letter concerned or become aware of its existence until some time in September”. Therein lies the source of the problem because it is not our problem if you do not see correspondence that goes to you from the Public Accounts Committee. The Committee was given some very strong evidence about waste of resources at the Land Registry. The long established principle is for people to attend here if a question of policy arises to say that that is a matter of policy and the Committee passes on. In fact, the matter would have been dealt with very speedily had there not been such a delay in replying to the correspondence. The letter of 27 July was not replied to and the sequence of events I am setting out here have been advised to me by the clerk to the Committee.

When I said you appeared before the Committee once, in response to Deputy Kitt, I would have asked the advice of the staff of the Committee how many times had you been in before I replied to that and would have been advised to the best knowledge of the people attending here. Your statement is quite cleverly put together but it still has brought this whole matter into the public arena because of the fact that your Department did not reply to a letter of 27 July. A reminder was sent on 23 September. On 29 September—this is the sequence of events as advised to me—a notice was sent out arranging for a meeting on 6 October. On 5 October the clerk to the Committee was informed that due to circumstances beyond your control you were not able to attend and on 6 October I received the letter confirming that. On 12 October I received a letter dated 11 October from the Minister saying why you could not attend and on 13 October the meeting, which had already been called, convened. There was then an exchange of letters between the Minister and I, the later letter from the Minister being dated 18 October.

Very simply, Mr. Mathews, if this Committee had got a response to the letter of 27 July in which you had said that there were matters which do not come within your ambit, that they are the Minister's responsibility or a matter of policy, I do not think we would have been too concerned about pursuing matters which you might have had difficulty in discussing. There is not any witch hunt.

This morning I started by asking you about the use of computer resources. This is more a rhetorical question, and I am not looking for a reply, but if, for example, you spent whatever moneys were in the Vote for staff for the Land Registry on consultants' fees and they did not work or did not submit a report, do you not think the Committee would be right to ask what the money was spent on? We are not asking that staff be shifted or that we be involved in trade union or in policy matters but we are asking about the financial implications. It is very definitely within the ambit of the Committee that those matters be properly dealt with.

Mr. Mathews has made his statement. I hope that on all sides we can just put this matter down to experience and deal with the matters remaining to be dealt with here. Perhaps Mr. Mathews might come to the question I asked so that we might conclude this examination.

868.Deputy Foley.—Before we proceed I would just like to make a point. Now that Mr. Mathews has made his statement, I think he has set the record straight, and we accept that his statement be embodied in the minutes of this meeting.

Deputy Foley.—Is Mr. Mathews, satisfied with that? In fairness, Mr. Mathews is a public servant of 40 years standing and he felt his reputation had been tarnished.

Mr. Mathews.—As I have said before, I am not looking for controversy. It does not pay any Accounting Officer to be at loggerheads with this Committee, above all committees, but I had to set the record straight and I have done that. I thank you for the patient and courteous hearing which you have given me. I do not exactly accept the version the Chairman has given of the cause of this row but, again, I respect what the Chairman says. I am not anxious to prolong this. I am perfectly prepared to answer whatever questions the Chairman wants to get on with now.

Chairman.—I think it would be fair to say that I do not exactly accept what you have said either, but I respect your right to say it and I have given you the opportunity to put it on the record.

Mr. Mathews.—I appreciate that, and I appreciate what the Chairman has just said.

869.Deputy Crotty.—Before we come to that, this statement will go on the minutes and I want it said also that I hope that this does not create a precedent and that in future we will not have Ministers writing to us saying that their Accounting Officer or Secretary of their Department is not prepared, on their instructions, to come here. I think that this should be dealt with by the Accounting Officer coming to the Committee and explaining the issues. This Committee is representative of all parties and is a very impartial Committee. I have not seen any Accounting Officer pilloried because he could not answer questions on a policy matter. It is the obligation of the Chairman to protect the Accounting Officer and to ensure that policy matters are not discussed here.

Deputy Foley.—I do not wish to prolong the issue. Deputy Crotty is right in his point, but the Minister made a point where policy matters were concerned. It happened in the previous term when I was Chairman that I had at least two letters from Ministers in connection with certain issues. They were accepted as policy issues and there was no question of the Minister prolonging an issue or of protecting an Accounting Officer.

Chairman.—If correspondence had been replied to and these matters pointed out, we could at least have dealt with the matter in that way. Secondly, if there is a problem with a policy matter, it is the position of the Accounting Officer to say so at the meeting. If this Committee does not accept that, all we can do is report that on to the Dáil. That is the standing procedure.

Deputy Naughten.—I do not want to delay the proceedings. I am a little bit puzzled about the third paragraph of his statement where the Accounting Officer states he informed the Committee on 4 October that he would attend but on 5 October at 5.15 p.m. difficulties arose and he would not be able to attend. In a later paragraph he states that the reason he did not attend was because it was a policy matter. To put it mildly, I am a little puzzled. When did it become a policy matter?

870.Chairman.—I propose that we might leave the question and as we go through the examination we might examine what is and what is not a policy matter. Mr. Mathews, may I remind you of the question I put to you?

Chairman.—Would the Accounting Officer tell the committee what the position is in relation to the utilisation of computer equipment in the Land Registry and how much it costs?

Mr. Mathews.—Yes, I can tell you that. Computerisation in the Land Registry started back in 1982 and various sums were spent in each subsequent year: in round terms in 1982, £136,000; in 1983, £157,000; in 1984, £149,000; in 1985, £272,000; in 1986, which was the year under review, £247,000 or roughly a quarter of a million. What has been happening is that two computers not main frame computers, but medium-sized computers, have been installed there and the expenditure each year represents an expansion of the computer capacity in the Land Registry.

The system is gradually being enlarged. Most of what has been bought is extra storage capacity which has been added on as more and more data is put onto the system. I do not want to go into staffing matters at all because this is what started this whole controversy, except to say that it is not true that computers, or any aspect of that technology, have been left unused by virtue of a decision of Land Registry staff to boycott it. The equipment provided is being fully utilised, and indeed if greater staff resources were available and the equipment was there—that would be used too. It has never been used as a bargaining counter in staff negotiations. I just want to make that clear. I do not want to embark into staff areas at all, but I am authorised by the Minister to make that point clear, that at no stage was there any unacceptable behaviour of Land Registry staff in relation to computers.

Chairman.—You reject the statement by the Department of Finance, and I quote: “that they have the system by the short and curlies”.

Mr. Mathews.—I do not want to get into what other people have said. I am only saying what I say. The bottom line is that the staff down there have not behaved in any unacceptable way. I feel I must embark a little into a staffing matter—and again, I can say this only because I am authorised to do so—the remarks that emanated from here provoked, quite understandably, a lot of unfavourable reaction from staff in the Land Registry. The staff in the Land Registry are already severely depleted and they are working in a very dedicated way to try to keep the show on the road. What was said provoked them, it made management work more difficult, it made the Department—

Chairman.—We have conflicting evidence from the Department of Finance and the Department of Justice.

Mr. Mathews.—I will have to decline to answer any detailed questions about staffing or staffing relations. I have said what I said merely because I was authorised by my Minister to say it in refutation of two points that were made that reflect very seriously on staff of his Department. We are all interested in service to the public and that was not helpful either to staff or to management. That is the only reason I mention it here, not because it is appropriate for discussion here but to redress, on behalf of the staff, something that was said.

Chairman.—Mr. Mathews, the committee will decide what is appropriate for discussion here. If you do not answer a question, we will just have to report that to the Dáil, but please do not tell us what we can and cannot discuss. Can I ask you for your comments on the document entitled “Land Registry and Registry of Deeds—Proposed Reconstruction as Public Corporation” which is put forward by The Law Society in which the say: “Action needs to be taken urgently about delays in the Land Registry which are causing serious public inconvenience, expense and hardship. They are slowing down property transfers and building projects to an inordinate extent with detrimental effects on the economy as a whole. These delays had in the terms of the report, “a consequential loss in revenue, for example, by way of stamp duty to the Exchequer”. Is that a fair comment to quote from The Law Society document? Is there a loss of revenue to the State due to the practices which are being carried on and is this causing problems for the economy and the State?

Mr. Mathews.—The answer is not a straight yes or no but if I have to come down directly on one side or the other I think it must be no because revenue is not affected; what is affected is the rate at which revenue comes in. If changes were made down there it might be possible to deal with cases which would get in more fees but the action needed to bring that about would cost money so you are back where you started. To bring in more fees you have to spend more money. In any even it should be remembered that maximising revenue from that particular area is a very limited approach because it is not a revenue-generating service. If it came to the point where fees were coming in at such a rate that money was being made action would have to be taken to reduce fees because the Service is required by statute simply to break even. The point I am making is that there is not a loss of revenue to the State. If that office started to make revenue the fees would have to be adjusted downwards.

Chairman.—Therefore, you do not accept what the Incorporated Law Society say?

Mr. Mathews.—To say in a blanket way that I do not accept what they have said would be for me to go too far. I would want to study very deeply what they have said but what I have given is the general position.

Chairman.—I understand that the average delay for all transactions quoted by the Department of Justice to the Law Society was 12.6 months although the annual report of the Land Registry and Registry of Deeds for 1987 says that the average delays for examiners' and section 49 cases is 26.7 months and for Land Commission cases it is 99.7 months. Would you agree that that is the level of delays in the Land Registry?

Mr. Mathews.—Once again we are getting into areas which to my mind are not my responsibility as Accounting Officer. As I have said, those arrears have no bearing on matters for which I am Accounting Officer. That is related to work practices and arrears in the Land Registry which are matters of management and ministerial responsibility.

Chairman.—Let me put it to you this way. Supposing they do not work down there at all and it takes years and years to get anything out of them, you do no think you should account for that? They get paid a substantial amount of money for salaries.

Mr. Mathews.—As has been stated, I am here to answer questions on the 1986 Appropriation Accounts. No mention is made in the 1986 Appropriation Accounts that any such thing is happening.

Chairman.—I am asking you, are they working? That is question which arises. As I read over in the Outline of Financial Procedures economy and efficiency are matters which you have to account for.

Mr. Mathews.—Is your question, are the staff in the Land Registry working and are they working efficiently?

Chairman.—Are they working reasonably well or is this the level of delays? What is the reason for delays if you have in computers which cost as much as you said they did?

Mr. Mathews.—If you are asking me if the staff are working reasonably efficiently or hard, my answer is certainly yes, and more than reasonably. With regard to the fact that arrears are building up, again were we are getting into the whole staffing and arrears position. I must make it clear that the fact that arrears exist should not be taken as an indication that the staff are slacking in some way.

Chairman.—Let me put it to you another way. The Department of Finance have suggested that there is a serious problem down there. In relation to the computers that were put in, I understand, for instance, that there was a time when if you wanted a map reproduced, no matter how small that map was if you needed ten copies it was reproduced ten times and in order to get people to use, for instance, a photocopying machine inducements had to be given. Is that the sort of thing which pertains in the Land Registry?

Mr. Mathews.—I am being edged into a position where I have to say all the time that I cannot get into this area. You are now talking about staff and arrears.

Chairman.—I am asking you if photocopiers and computers which have been purchased are being used or do the people continue to do things by hand in order to get paid for doing things by hand and leave the computers which were paid for by the State unused?

Mr. Mathews.The first thing I said in reply to the question when you raised this matter initally was that there has not been any refusal by the staff in the Land Registry to use and co-operate in the use of technology. I have already said that.

Deputy Crotty.—There are conflicting reports on this. The Department of Finance official informed us that the staff were not co-operating. I think we should request a report from the Department of Finance on the situation in the Land Registry. What reduction was there in the staff of the Land Registry form 1982 to 1986? Has there been a substantial reduction in staff?

871.Deputy Crotty.—With regard to the Department of Finance officials, I do not want to put them on a spot today. They may want to issue us with a written report but if they are in a position to report today we would be happy to hear from them first.

Deputy Crotty.—No, I asked for a report from the Department of Finance. I think it would be more appropriate to get that in writing from the Department to the Committee.

Mr. Gallagher.—If you prefer. The origin of this goes back to something I said and I would like to——

Mr. Gallagher.—Let me make one point. I mentioned specifically copy maps. I was taking a fairly long historical view of this. I was dealing with a specific proposal which had been made by members of the Committee which implied that the solution to the problems in the Land Registry was simply to put more staff in. I gave illustrations of what had happened in previous periods, we are going back some time. The maps were done by hand I think up to the mid-seventies and after that a reorganisation of the Land Registry was done whcih involved getting them done by photocopier. That is now the situation and has been for some time.

In relation to computers, the computer systems in the Land Registry are now being used. In relation to what I said, I was speaking of specific incidents in 1986 when there were changes being made in procedures in the Land Registry and the information available to us—and I am delighted to have it corrected by the Secretary of the Department who obviously is closer to the situation—at that time was that some members of the staff had decided not to utilise computers for a specific period. We entered into negotiations, as did the Department of Justice, with the staff in relation to a change in procedures involving the use of computers and I think that from the end of 1986 that change was used.

It made a significant change—and I think the secretary would agree with me—in the working of the Land Registry by allowing, as part of a package, the transfer of examiners' cases which were dealt with by a small segment of the staff recruited as examiners to the same groups who dealt with the individual regions. I hope that clarifies things.

Deputy Crotty.—Was there a refusal by staff in the office to use the modern technology that was made available to them, whether it was photocopiers, computers or anything else, over a period?

Mr. Gallagher.—Yes, I mentioned 1986 in relation to computers but in relation to photocopiers I was taking a longer view because some problems had arisen. Photocopiers were introduced in 1975. There were considerable discussions with staff about the use of copy maps and I understand it took a certain amount of effort to introduce changes at that time. In 1986 the changes we were making led, as I understood it, to a certain degree of acrimony with the staff which I was informed at the time led to a refusal by the staff to use computers for a particular period. Obviously the continuation of that had certain implications. The Department of Justice, in consultation with us, entered into negotiations with the staff on a package of measures. That resulted in the current situation where particular types of cases, and so on, have been transferred. Certainly, I would not come before the Committee and set out to mislead them. Mr. Mathews, obviously, has information which differs from the information which was made available to us in 1986. It may be that we just have different emphasis on what we see but I have outlined what we were led to believe at the particular time. If it is not true I withdraw it and I have to accept what Mr. Mathews says.

Deputy Crotty.—May I get a reply to the question on the staffing scene from 1982 to 1986? What was the situation?

Mr. Mathews.—I can give figures on that. Again, I want to be very careful that we are not getting into matters of staffing, arrears, work practices, staff relations and so on.

872.Chairman.—Mr. Mathews, if you are asked a question that you might consider relates to policy you might raise the matter, but please do not preface everything you say. This is a Committee which is calling you to account for money which you have been in charge of. If you have any difficulty with any question that is asked please say so. The staff numbers have been supplied to all and sundry. In fact, I see a copy of them in front of me which you sent to the Incorporated Law Society. I do not think it is too much to ask that you should provide the information to the Dáil.

Mr. Mathews.—Chairman, with due respect, I must protect myself. Somebody said the Chairman is here to protect me and I accept that but I must also protect myself.

Chairman.—The Chairman also has to protect the right of the Dáil and the public to get information.

Mr. Mathews.—I am about to give information but I must not find myself edged into the position where by giving information today and then somebody may turn on me and say, “you are giving all sorts of information today, why could you not give us that” on a previous occasion.

Chairman.—Mr. Mathews, there is no Accounting Officer who has had any difficulty with the procedures that have been followed year in, year out. If there is any difficulty with policy you know how to deal with the matter.

Mr. Mathews.—Now that I have said that I will give you the staff figure you have asked for. In 1980 the staff was 541. It has gone down steadily since and today it is 383, which is a reduction of 158 or 29 per cent.

873.Deputy Flood.—In fairness to Mr. Mathews, because of the particular type of meeting we have, he should be allowed to answer questions put to him by members as he sees fit rather than you challenging him on the manner in which he opens his answers. We should let him answer his questions the way he wants. You are being a little bit uncivil to Mr. Mathews.

Chairman.—I chair this Committee and I put a lot of time into chairing its meetings. I am not prepared to preside over any situation where somebody prefaces every reply with some sort of qualification. I do not think that is acceptable. I do not think I should be hung out of dry by members of the Committee because I seek to do my duty as Chairman of this Committee. That is a bit unfair and I have been treated very unfairly over this issue by certain Deputies. We should get on and deal with the issues because there are two other Accounting Officers waiting outside. Quite frankly, I would love to read a statement on to the record but, in order to get on with the business, we should just stick to asking questions.

Deputy Flood.—In fairness, Chairman, you should allow me to make my contribution as I see fit. I do not think Mr. Mathews is prefacing every reply by refering to areas he does not want to stray into. I want to make the point that he should be allowed to make his responses. We are making progress this morning on the various issues relating to the operation of the Land Registry. In so far as computerisation is concerned, as I understand it, the introduction of computerisation in any major business, be it in the private or public sector, can often at times be a very complex issue. It requires discussions, staff training, agreements relating not only to the operation of the computers but also to hardware systems, supplies, health and safety. All of these things are involved. One should not be surprised if on the day the computer equipment arrives in an office it would not necessarily be operational from that day. I understand now that the computerisation in the Land Registry is not lying idle and I am very glad to hear that. I am glad to hear that the public moneys expended on the computerisation are being utilised properly and effectively as they possibly can. One could always say in regard to Departments down through the years that we would like a better service, a better response and so on. I suppose all of us in our own particular way will be working towards that in the Land Registry, and anywhere else we come across it. One would hope that, arising out of the changes, the expenditure of public moneys in computerisation in the Land Registry and the introduction of other modern equipment, a better service will be provided to the public. Other than that I am satisfied with the responses I have heard this morning. We are making progress on the real issues as to how moneys are being expended in the Land Registry.

874.Deputy Foley.—I believe that Mr. Mathews has cleared the position this morning. I respect the position of the Chairman and I want to put that on record. Mr. Mathews has pointed out that he had some difficulty with regard to computerisation and that it was not alone confined to the Land Registry. Over a period of time the difficulty was sorted out with the trade unions involved and the staff and I believe it has now been resolved. I was the person who made the insinuation against Mr. Colm Gallagher who made an irresponsible statement with regard to a matter he should have known was a staffing matter. I welcome the statement Mr. Gallagher made this morning accepting that the statement made by Mr. Mathews cleared his side of the position. I want to say now that I withdraw the statement I made in connection with Mr. Gallagher on the last occasion. I accept what he has said, that he has accepted what Mr. Mathews said this morning leading up to this.

875.Deputy McGahon.—I am not totally satisfied with Mr. Mathews' explanation. As one of the Deputies who criticised him, I feel he came here his morning with a deep sense of grievance and some of his comments smack of that of a prima donna.

Chairman.—I think Deputy McGahon will have to find a more parliamentary way of putting it.

Deputy McGahon.—I think Mr. Mathews, like all civil servants, resented criticism because they are removed from it. We are not. I think Mr. Gallagher's comments were very revealing, a rare insight into the feelings and frustrations of a Department in regard to another Department. Without wishing to embarass Mr. Gallagher, I feel that he has been silenced to some extent or sent to Coventry. His comments were a breath of fresh air and there was more than a grain of truth in them. As I understand it, our function here is to discuss value for money. How money was spent and when last century practices were being used certainly does not give the State value for money. Mr. Mathews was the author of his own misfortune and he is more defensive than any other accounting officer I have seen here. All Departments suffer from lack of staff. The involvement of the Minister was a pity. It brought a political connotation to a committee where there has been, in my time, no political conflict at all. The appearance of six Fianna Fáil Members here today, including a strange racing associate of mine on my right, indicated that the Minister sees this in a political light.

876.Deputy Foley.—We are entitled to respond to that statement. It is only typical of what we would expect from Deputy McGahon, in view of what was said at the outset. He is trying to continue the political discussion.

Deputy McGahon.—In the six years I have been a Member I have been my own man and after four and a half years I got re-elected for criticising my Government. I am not a member of the uno duce una voce party.

Chairman.—Let us not get any further into that. Are there any further questions?

877.Deputy M. Ahern.—I believe a question on this matter was put to the Minister prior to Christmas. I wonder would you have the answer he gave on that occasion?

Chairman.—I am not aware of any question to the Minister for Justice. The Deputy may be recalling something that Deputy McGahon raised in the Dáil; was that the matter which was not replied to?

Deputy M. Ahern.—No, It was a question posed during Question Time to the Minister for Justice. You have not the information?

Chairman.—Perhaps we can dig it out if it happened since and send the Deputy a copy if possible.

Deputy M. Ahern.—I do not think there were any supplementary questions asked.

878.Deputy Naughten.—It was I who first raised this question. Little did I think that months later we would still be talking about it. The question I asked then and reiterate today—the Chairman has outlined delays of up to 99 months in certain cases; I think that was the number of months referred to in the report of the Incorporated Law Society report—is: why in God's name was there such a delay? Why are people held to ransom by the Land Registry with regard to the simple transfer of property? I know the 99 months delay arises in particular cases only but even the most simple transfer can take one to two years. Why is that? The number of staff quoted was 383. There was £1 million spent on computer equipment over the last five years. Why do such delays still obtain in the Land Registry? We have not received an answer to that question.

Mr. Mathews.—I can only give the reply I gave the Committee on the last occasion this was raised, 14 April. Without going into the working practices or staff numbers basically it is due to a shortage of staff. If there were more staff the the work could be speeded up.

Deputy Naughten.—Fair enough; that was the answer given in April. When I asked the Department of Finance to comment on that fact they proceeded to explain that the staff would not operate new technology and were holding the Department and the public at large by the short and curlies. The Department of Finance on that occasion stated that deploying additional staff would not solve the problem. Is the Accounting Officer telling the Committee that the cause of such delays is inadequate staffing of that section?

Mr. Mathews.—The Department of Finance have recently approved the allocation of 36 extra staff to the Land Registry.

Deputy Naughten.—Is it envisaged that that will cut down the delays and if so, by how much?

Mr. Mathews.—Again, I am being questioned about arrears, which strictly speaking, is something in which I should not get involved. It has nothing to do with me as Accounting Officer. I do not want to enter into this whole argument again.

Deputy Naughten.—Surely the overall responsibility for the management of this office must lie on the Accounting Officer's desk? Again we are talking about a section of a Department which pays for itself; it raises whatever revenue is required. The people who get the service have to pay for it. We have heard of delays of up to 99 months. Surely that is not good enough. As Secretary of the Department of Justice does the Accounting Officer not feel an onus on him to try to come to grips with that problem, have it sorted out, allow people to be able to transfer property if they want to do so; not become involved in bridging finances which all of us, as public representatives, know happens. In the cases of transfer of farms it can take three, four or five years. As Secretary of the Department surely it is function of the Accounting Officer to try to get that office in order?

Mr. Mathews.—As I have said, the problem is due to shortage of staff. The policy in regard to making staff available is one over which I have no control. It is a matter of Government and ministerial responsibility. Successive Governments have cut down on staff numbers in the whole of the public service. It is not a matter about which I, as Secretary of the Department, can do anything. It is a matter of ministerial and Government policy.

Deputy Dempsey.—I was going to respond to Deputy McGahon but I do not think I will.

879.Deputy McCreevy.—Have the Department of Justice undertaken an internal audit as to how many staff would be needed to bring matters up-to-date in the Land Registry? If there were approximately 500 in 1980 and there are now 362 has there been any study undertaken on how many staff are needed in the Land Registry to bring matters up to date; would a couple of thousand staff be needed there to bring matters to date or another 100 only?

Mr. Mathews.—What I can say may not really be helpful although it is the intention to be helpful. Just to illustrate the magnitude of the problem, we have been promised 36 extra staff to be redeployed from other areas. Therefore, there is a delay in getting them. In the meantime—since we were last here—22 more staff have left. I have not got information today to the effect that there is need for, say, 300, 400 or 700 staff; we are just trying to get more to bring the numbers up to workable proportions. As of now I could not tell the Committee that the precise number needed would be a certain figure. I am sorry I just cannot tell the Committee that.

Deputy McCreevy.—In the case of a business, whether it be a shop or anything else, the manager would decide, say, that business had increased and three additional staff were needed. Three additional people would then be employed. If that did not work we would then employ three more and ascertain how the business was doing. Is it intended to undertake any such study? It strikes me that, running any business, one would say: we are totally under-staffed in this section; we need, say, X number of people there, we will deploy them and ascertain how that would evolve. I understand the accounting officer's problems with regard to the overall embargo in the public service, recruitment and so on—I accept that totally and it just exacerbates the problem but one would have to agree though, going back to the seventies when there were many more people employed in the public service than we have today—I know this too from my experience over 12 years as a public representative—that there were always inordinate delays experienced in the Land Registry. Has a study been undertaken as to what additional staff would be required there, or is it intended to undertake such a study? That would be a common sense approach in the running of any business.

Mr. Mathews.—I could not come up with a magic figure and say; yes: this is the actual number we need because assessing such a figure would involve a waste of time and resources. I accept what the Deputy says, that what he suggests is a very pragmatic management-orientated way of approaching matters. But the reality is that civil service managers are already seriously short of staff and even if one came to the conclusion that you needed 30, 60 or 90, you just will not get them. At best, if one are engaged in an exercise and said: yes we want 87 more staff one would be lucky to get three. While it might be nice as an exercise, in practical terms, it would not get one very far. That is the reality of the position.

Deputy McCreevy.—It is unfortunate that the crisis has reached such a stage. However, I am afraid that the way it has been handled on all sides leaves the public and the Committee with the impression that practices within the Land Registry are outdated. Whether that be the case, certainly that is the impression given. That has been the impression created over a number of years past. Indeed all the controversy that has obtained over the past few months leads me to believe that that is the case in the Land Registry. Indeed any fair-minded individual would have to come to that conclusion.

Chairman.—I will call on Deputy Crotty. I think we should move to bring this matter to a conclusion because we have two more Accounting Officers to hear.

880.Deputy Crotty.—The Accounting Officer mentioned that they spent a certain amount of money—which would appear to me to amount to approximately £1 million up to 1986—in the Land Registry. Have further funds been expended in 1987–1988 on computerisation?

Mr. Mathews.—In round terms the amounts were: 1986, £247,000; 1987, £279,000 and 1988, £287,000. That is what it cost to upgrade the equipment that is there to increase the storage capacity and to put in extra VDUs.

Deputy Crotty.—Is this being fully utilised? Since 1982 you spent £1.5 million on computerisation. My experience in the private world in industry and other places is that when you computerise the staff reduces dramatically. You do not see people any more, you just see a computer board and an operator. Your staff has not reduced dramatically and your performance has not increased. Is the equipment, the hardware, being used?

Mr. Mathews.—The answer is yes, it is being used, but when you instal a computer, it is not like providing a domestic appliance which you plug in and which immediately enables you do a job twice as fast as you were doing it previously. With the computer nothing can start until you input all the data. You have to transfer all your files, or folios, or whatever items of work you are dealing with has to be input into the computer. That is a very time consuming job. The data has to be checked and rechecked and it is very staff intensive. It is only when that has been done that you can speed up your procedures and possibly reduce staff. Initially, certainly in an enterprise such as the Land Registry, where very detailed and complex records have to be input in and input with absolute accuracy, that whole process of transfer to computer is very time consuming and staff intensive.

Deputy Crotty.—We are talking about eight years, from 1982 to 1989. How long does it take, or have you staff to do the job? If you have not, why have you not got the staff? Why are we spending this sort of money and not getting return from it?

Mr. Mathews.—We do not have the staff and that is delaying progress on computerisation.

Deputy Crotty.—Basically this Committee are here to investigate whether that money that is being spent is being utilised properly. You are saying now that you have spent a great deal of money and the equipment is lying there and not being used. That is a serious matter for this Committee if that is so.

Deputy Crotty.—I understood you to say you have not the staff to utilise the machinery.

Mr. Mathews.—We have not got the staff to advance computerisation to a greater or faster extent and to get more data put on to it. At the moment only 20 per cent roughly of the work is being put on but the equipment that is there is being used.

Deputy Crotty.—Is the equipment there capable of handling more than what has been put on to it? You said 20 per cent. In other words, is the equipment there capable of handling 100 per cent or 80 per cent of your work?

Deputy Crotty.—What percentage of the work is the equipment capable of processing?

Mr. Mathews.—I cannot give you any definite ideas on that. Computerisation will have to proceed over a further number of years at a gradual pace, according as staff become available to input data. That would probably involve expenditure something on the lines of what has been going on for the past seven years, roughly £250,000 a year.

Deputy Crotty.—That is not answering my question. Is the equipment which has been purchased being utilised 100 per cent?

Chairman.—Deputy Flood and Deputy Naughten are indicating and then I am proposing to conclude the discussion.

881.Deputy Flood.—Is the computerisation programme proceeding at a pace that is associated with available resources, staff resources?

882.Deputy Naughten.—I will be very brief because I do not think we are making any progress at all here. Can Mr. Mathews inform the Committee, as a result of this in excess of £1 million worth of computer equipment that has been installed, if there has been a reduction in the delays in having land or property transferred or registered?

Mr. Mathews.—I would need to see what delays were down through the years and I have not got that information. All I can say is that things would be a lot worse if the computerisation was not there.

Deputy Naughten.—We can probably all imagine that it could be worse but it is hard to see how anything could be much worse in the Land Registry. In reply to Deputy McCreevy you stated you had not carried out a survey as to the level of staff necessary to eliminate those delays in a section of the Department that is paying for itself. Is that true?

Mr. Mathews.—The management of the Department for that particular area is rather indirect. They have their own management structure, their own professional examiners and so on. Maybe they could say that to run the Registry in a totally satisfactory ultimate way they need 503 or 309 staff or whatever. Here this morning I am not in a position to tell you——

Deputy Naughten.—You did not check with them before you came into this meeting here today how many staff they would need to eliminate those delays?

Mr. Mathews.—I would be met with some derision if I asked them what staff they needed because everybody around the public service knows that making an estimate of what you need is a rather useless exercise at the moment. You have to manage with what you can get.

Deputy Naughten.—Yes, but it is different in some place where salaries and wages would have to be met by the Department of Finance from the taxpayer. In this case the people who get the service pay for it. It is a different situation, and at the same time we have, as has been discussed previously at this committee, 150 staff lying idle in the Department of Agriculture who, one would imagine, would be highly qualified to deal with this type of work. Was there no request for a transfer of these highly skilled staff who were lying idle into that Department, for example?

Mr. Mathews.—Yes, we apply, making cases all the time to Finance for extra staff for the Land Registry and, indeed, for other places as well. We have been promised staff, redeployed staff—36 for the Land Registry—but that was some three or four months ago and none of them has arrived yet.

Deputy Naughten.—Would the statement by the Department of Finance here last April have any bearing on that in so far as it would appear at that stage they felt that putting additional staff into the Land Registry was not going to deal with the problem in any event? Would that have any bearing on the fact that you have not got staff?

Mr. Mathews.—I do not know what bearing it had, but no Department or office is satisfied with the staff it is getting. Every office and every Department is looking for staff and nobody is getting what they want.

883.Deputy M. Kitt.—To follow up what Deputy Naughten said, there was a statement from the Department of Finance saying that there was no point in “throwing” staff; I think that was the phrase that was used. I want to ask Mr. Gallagher if the Department of Finance now accept that the Department of Justice, specifically the Land Registry, need staff. Are Finance happy that they need staff, and when might the staff be available?

Mr. Gallagher.—We are happy about the 36 staff and in fact before Mr. Mathews spoke at the previous meeting, there had been an indication by way of a parliamentary question from my former Minister that he was considering the provision of a number of staff by way of redeployment. The reason for the delay in the provision of the staff is that to take people in from other organisations into the Civil Service requires the holding of competitions. The competitions have now been held and the offers of appointment have gone out to those people, so we expect them to be coming on stream. I think some of them may have arrived at the Land Registry already. We certainly expect them to be coming on stream in a matter of double figure days rather than months or weeks.

884.Deputy Crotty.—To come back to the question about the hardware or the computers, I am not too happy about the question. I do not want to infer that the Accounting Officer was not telling the truth. Could I frame a question a different way? Could the computers be working more efficiently if they had the programmes written up? Is there a shortage of staff to write up programmes so that computers can work to higher efficiency?

Mr. Mathews.—If we had staff available we could have them inputting data to the computer and that would make the whole system more efficient. The computerisation programme could then proceed quicker.

Deputy Crotty.—Let me refer back to Mr. Gallagher. It is a very serious situation that we have £1½ million worth of hardware in a Department and we have not got the personnel to write in the programmes to utilise it. That is a very serious suggestion and I think the Committee should have an answer on it.

Mr. Gallagher.—I took from what the Accounting Officer said that if he had more staff they could accelerate computerisation. Two things are involved. One is expenditure on staffing. We are operating under certain staffing constraints and according to the budget statement we will obviously continue to operate under those constraints for some time to come. Secondly, there has been a programme for the provision of hardware and extra hardware is being provided for in the 1989 Estimates. But I think you have to have the two marching together. In terms of computer staff, we frankly acknowledge that we do have difficulties in getting and retaining computer staff. These are people with very unusual skills. They require a lot of training and they have a very high disappearance rate, not just from the Civil Service or the public service generally. Anybody who is involved with computer staffing has to live with the fact that you get staff, you bring them in, you train them, you invest in them, you invest time until they become efficient and as soon as they do it is hey ho, off somewhere else they go. That is one problem we have. We just cannot keep up our production of computer staff to meet the demand all over the Civil Service.

Deputy Crotty.—Is it reasonable that we should be expending in excess of £¼ million every year for additional hardware when we have not the staff to operate what is already there?

Mr. Gallagher.—We have the staff to operate what is there. The point I took from Mr. Mathews is that he could accelerate the use of the computers if he had more staff but then it probably would involve acquiring more hardware as you went. There is a limit to the memory capacity of computers, so when you want to expand you have to buy more hardware as well.

Deputy Crotty.—We are not using what we have there. Why talk about expanding when we are not using what is already there?

Mr. Gallagher.—I do not think the Accounting Officer of the Department of Justice said that.

Deputy Crotty.—That is what I took from both yourself and the Secretary, of the Department of Justice.

Mr. Mathews.—I said that the equipment that is there is being fully utilised. We could be expanding or accelerating in two ways. We can gradually each year put in a little more computer equipment and try to get more staff to operate it or to input more material. If we had more staff and more computer equipment the process of computerisation of the Land Registry could proceed quicker than at present.

Deputy Crotty.—That brings me back to the original question. When we put in a computer, personnel disappear. That is automatic in every business. They are disappearing at a slow rate here but the performance is not improving. Why?

Mr. Mathews.—I answered that earlier by saying that putting in the computer and getting it up and operating is a slow, time consuming, staff-intensive operation.

885.Deputy McCreevy.—I want to make two points. It would be unfair to blame Mr. Mathews who has only been the Secretary of the Department of Justice for a number of years. The problems have grown in the Land Registry over decades and decades. God himself would not be able to solve the problems down there. I have every sympathy for him in that regard. He did say that about 20 per cent of the work has been computerised. By what year is it thought that the whole operation will be computerised? I think at the rate we have been going over the past eight years, neither Deputy McGahon nor I will be here when it will be fully computerised. Probably my children will not be here either. Is there any time limit on it? Is it going to be the year 2000 or the year 3000 or what year is it going to be?

Mr. Mathews.—All I can say is that when computerisation commenced in 1982 it was projected that putting on all the folios for the entire county would take ten years. That programme is falling behind and until such time as staffing positions improve I cannot say when it will be complete.

Deputy McCreevy.—The second thing that struck me very obviously is that this is a self-financing kind of Department. It strikes me that the State could privatise very easily and I am sure there are many firms of solicitors in town who would love the opportunity of making the money. I think I will be recommending to the Minister to privatise the whole lot.

Chairman.—That is one of the suggestions put forward by the Incorporated Law Society. That is not a matter for this Committee, so you will have to make the recommendation in a private capacity.

886.Chairman.—Can I conclude this discussion by saying two things? Mr. Mathews, my view of the situation is that if a letter sent to your Department on 27 July had not been left unanswered until October we would not have got into the depth of controversy in the first place. Secondly, in relation to the issue of the Land Registry, I propose that we note the examination for now. We will be returning to these Votes in the 1987 accounts which are before the Committee and in subsequent years and we will no doubt get a minute from the Minister for Finance eventually reconciling the position and stating what has been done on the evidence of the Committee. I am very firmly calling a close to this section because there are two further Accounting Officers outside. I propose we note the report and send it to the Minister for Finance in due course.

Deputy Naughten.—Could we also receive a note from the Accounting Officer as to the length of delays in the Land Registry at the present time?

LIST OF APPENDICES

No.	Page
33.Department of the Marine:
(i)Leases for sites in Fishery Harbour Centres.	1000
(ii)Central and Regional Fisheries Boards.	1001
(iii)Payment for catching Pike.	1001
34.Extract from staff scheme field grades Central and Regional Fisheries Boards.	1003
35.Potential losses under Scheme of Assistance for Expansion of Cattle Breeding Herd.	1007
36.Scheme of Assistance for expansion of Cattle Breeding Herd.	1011
37.Deployment of Staff in the Department of Agriculture and Food.	1013
38.Evasion levels in television licence fee payments.	1015
39.Chipboard Products Limited (in receivership and in liquidation).	1016
40.State funding of Dublin Gas Company.	1017
41.Use of Section 11 (2) of Gas Act 1976.	1018
42.Report of Donegal County Manager on Letterkenny Airport.	1020
43.Land acquisition at Big Isle Letterkenny.	1039
44.Interim Report of Inter-Departmental Committee on review of the Local Government Audit Service — Audit Arrears.	1041
45.Claims provisioning of a number of insurance companies.	1047
46.Department of Education:
(a)Level of VEC deficits at the end of 1986.	1049
(b)Staffing in the ESF Section.	1050
(c)Documents required for completion in relation to ESF Aid.	1051
(d)Note on discontinuance of £30 grant in respect of Vocational Preparation and Training Courses.	1052
47.Grants under the scheme of learning Irish in areas outside Gaeltacht areas.	1053
48.Veterinary Inspector Fees in the Pigment Sector.	1055
49.Lands on hands as at 1 May 1988.	1056
50.Consumer Subsidy for butter or milk.	1058
51.Expansion of Beef Cow Numbers.	1063
52.Staffing levels in the Office of the Ombudsman.	1065
53.Department of Labour:
(a)Industrial Inspectorate.	1067
(b)General Inspectorate.	1069
(c)Work permits issued in 1986 and 1987.	1069
54.Department of Labour number of General inspections.	1070
55.Revenue Commissioners—alleged cheque fraud.	1072
56.Note on age of cases written off.	1087
57.Companies wound-up on foot of a petition by the Revenue Commissioners.	1088
58.Impact of monthly payments system of VAT.	1089
59.Withdrawal of Certificates from Sheriffs.	1090
60.Government Supplies Agency—Policy on stockholding of paper.	1092
61.Office of Public Works:
(a)Vacant office space.	1094
(b)Costs in connection with claim by owners of No. 6 Kildare Street.	1094
62.Office accommodation—Leinster House.	1096
63.Delays in bringing court cases.	1097
64.Programme of Decentralisation.	1099
65.CERT courses provided by V.E.Cs.	1101
66.Estimate of sheep numbers.	1102
67.Administration of the Valuation Acts.	1106
68.Office of the DPP—Fees of Counsel (1985).	1108
69.Office of the DPP—Fees to Counsel (1986).	1120
70.Computerisation in the Health Service.	1132

APPENDIX 1

COMPARISON OF AUDITED EXPENDITURE WITH EXCHEQUER ISSUES AND GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS AND CENTRAL FUND SERVICES FOR 1984

(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 1984 amounting to £158,384,655 as shown in Column 7 of the succeeding statement, were dealt with as follows:

CENTRAL FUND SERVICES 1984—SUMMARY

1984

GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS

(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, GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS AND CENTRAL FUND SERVICES FOR 1985.

(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 1985 amounting to £127,381,701 as shown in Column 7 of the succeeding statement, were dealt with as follows:

CENTRAL FUND SERVICES 1985 — SUMMARY

1985

GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS

(After audit by the Comptroller and Auditor General and review by the Committee of Public Accounts).

APPENDIX 3

I wish to refer to my appearance before the Committee on 19 November, 1987 concerning the 1985 Appropriation Account, during which I undertook to forward notes on the collection of fines and statistics of the costs of the employment of rate collectors.

In relation to fines imposed under the Roads Act and Road Traffic Acts etc. by District Courts, the procedure is that the Court staff send a notice to the defendant indicating the fine imposed and requesting payment. In the event of failure to pay within the time allowed a warrant is made out in the Court Office and sent to the Gardai for enforcement. Payments received by Court Clerks are lodged locally, transferred weekly (or fortnightly etc. depending on amount involved) to the Department of Justice where the money is lodged to a Department of Justice Fines Account and then lodged once a quarter by that Department to the Central Motor Tax Account at the Central Bank. Similar procedures apply in the case of fines-on-the-spot collected by the Gardai. The Committee will appreciate, therefore, that the Department of the Environment has no responsibility for the issue of fine notices or the collection of money on foot of them which are matters for the Department of Justice. The reason why there is a reference to the “Fines collected by the Department of Justice” in the C. & A. G's. report each year in the paragraph headed ‘motor vehicle duties’ arises from the fact that the receipts are lodged to the Central Motor Tax Account prior to their transfer to the Exchequer Account in accordance with article 6 (4) of the Road Vehicles (Registration and Licensing) Order, 1958 which states:

Any sums received by a District Court clerk in respect of penalties or forfeitures which are payable into the Exchequer under the Roads Act, 1920, shall be remitted to the Minister for Justice (with a return in such form as the Minister for Finance may from time to time direct) and shall be transferred to the Central Motor Tax Account.

I have forwarded to the Accounting Officer for the Department of Justice an extract from the transcript of my evidence before the Committee dealing with the collection of fines drawing his attention to the Chairman's remarks and requesting him to forward a note to the Committee on the up-to-date position on the collection of fines.

In regard to details on the cost of rate collectors I have appended, in respect of all local authorities, county councils only and Meath County Council, tables showing for each year from 1976, details of the number of rate collectors employed, rates income of local authorities and the cost of salaries of rate collectors. Full relief of domestic etc. rates was effective from 1 January 1978 while the collection of rates on agricultural land ceased from 1983.

APPENDIX 4

SURVEY SHOWS DECLINE IN MOTOR TAX AND INSURANCE EVASION.

Mr. Padraig Flynn T.D., Minister for the Environment, today (28 March) released the results of a national survey of motor insurance and tax evasion carried out by the Garda Síochána in April and May, 1987.

•Motor Insurance: The national level of uninsured driving is estimated at 6% to 8% as compared to 15–25% quoted by insurance industry sources.

•Motor Tax: The national level of evasion of motor tax is estimated at between 10% and 14% as compared to 20–25% in a previous survey in 1979.

•Enforcement by the Gardai — who, in 1986, instituted prosecutions totalling 74,000 for insurance offences and 164,000 for tax offences.

•New Insurance Disc — operative from 1 July, 1986 which makes identification of uninsured vehicles easier for the Gardai.

•New Motor Tax Advance Reminder — computer issued by the Vehicle Registration Unit, Department of the Environment, and operating nationwide since March, 1987.

•Heavier maximum penalties for uninsured driving under Road Traffic (Amendment) Act, 1984 — maximum fine of £1,000. In addition, the uninsured driver is liable to a jail sentence of up to 6 months and could lose his driving licence. A one year disqualification is mandatory for a second or subsequent offence. Under the Finance Act, 1983, the penalty for not taxing a vehicle could involve a fine of up to 3 times the annual rate of tax.

The Minister stressed that he was not complacent about the survey results, pointing out that an estimated national level of insurance evasion of 6% to 8% involved about 76,000 uninsured vehicles and a consequent loss of premium income to insurers estimated at £30 million.

This represents an average of about £30 per insured driver. Motorists not taxing about 131,000 motor vehicles cost the State about £17 million per annum in lost revenue (1987 motor tax yield £124 millon). Consideration is, therefore, being given to proposals to strengthen the legal framework for effective enforcement.

The Garda Síochána will use the results to pinpoint areas where intensified vehicle checks of tax and insurance will be carried out. They hope to repeat national surveys every 2 to 3 years to update the results of the 1987 survey.

1987 SURVEY OF COMPLIANCE WITH

MOTOR INSURANCE LAW AND MOTOR TAX LAW

GARDA SÍOCHÁNA

Summary

The survey of uninsured and untaxed motor vehicles was undertaken by the Garda Síochána, with assistance from An Foras Forbartha, in April and May, 1987. The survey was supported by the Department of the Environment and by the Irish Insurance Federation (Paragraph 1.1 to 1.2).

Survey 3 — 223 Cars and 73 other vehicles involved in road accidents (Chapter 4).

•Motor Insurance: The national level of uninsured driving is estimated at between 6% and 8%. If allowance is made for sampling error and the production of motor insurance certificates in court proceedings for insurance offences, insurance evasion at best could be as low as 3% and at worst could be as high as 10%;

•Motor Tax: The national level of evasion of motor tax is estimated at between 10% and 14%. If sampling error is taken into account, tax evasion at best could be as low at 7% and at worst could be as high as 20%, in certain areas.

Considerable regional variation was noted. The percentage uninsured and untaxed vehicles was higher in parts of Dublin City and parts of Cork, as against low levels in the Kerry, Sligo-Leitrim and Laois-Offaly Divisions.

Levels of non-insurance for cars, vans and heavy goods vehicles were broadly similar. Of the small samples of goods vehicles involved in road accidents, all (18) heavy goods vehicles were insured and ten out of twelve light goods vehicles were insured. However, although the sample number of motorcycles involved in road accidents was small, the indications from the survey were that the level of motorcycles uninsurance was signficantly higher than for other vehicles.

CHAPTER 1

Purpose and Structure of Survey

Background

1.1In recent years, there has been widespread concern about the level of evasion of the motor tax and motor insurance law. Varying estimates have been cited for the level of evasion but no recent survey data was available to validate such estimates. The last roadside survey of motor tax evasion was carried out in 1979* and indicated that about 22% of motor cars and about 25% of good vehicles did not display or displayed out-of-date motor tax discs (vehicle licences). Recent trends in the number of licensed figures indicated that the level of motor tax evasion had dropped to a level crudely estimated at 15% to 20%. The level of motor insurance evasion was variously estimated at between 15% and 25% by insurance industry sources but there was no national survey data to validate such estimates.

1.2In 1986, the Garda Síochána decided to carry out a national survey of motor insurance and motor tax evasion. The Department of the Environment and the Irish Insurance Federation (IIF) agreed that such a survey would provide a firmer base for estimating the level of motor insurance evasion. The survey was carried out in April and May 1987 by the Garda Síochána. An Foras Forbartha assisted the Garda Síochána in planning the survey and in processing and analysing the results.

Dates and Times of the Surveys

(a) Survey of Parked Vehicles

1.3The first survey to determine the number of vehicles using the public roads which are neither taxed or insured was undertaken by members of An Garda Síochána in each Garda Division, between Friday 24 April and Tuesday 28 April, 1987. The purpose of this survey was to establish as accurately as possible the proportion of vehicles in each Division which complied with the laws which require the display on the windscreen of Irish-registered motor vehicles, both a current tax and current insurance disc.

1.4It was considered important to try to sample different types of road users — people use their vehicles for purposes of business, or of shopping, for social reasons, and also for attendance at religious services. In order to achieve this, the sample was taken in each Division at four different periods:

1.5It was envisaged that the Friday period would cover vehicles in use for social reasons, that the Saturday period would include many shoppers, the Sunday period, church goers, and the Tuesday period would include many people using vehicles for work. The streets/roads sampled in these periods were chosen with these points in mind.

1.6This first survey was confined mainly to larger towns in each Division, since a sample of parked vehicles would be more readily available at those locations, although obviously on Sunday, locations near churches were taken. The results of this survey are set out in Chapter 2.

(b) Survey of Motoring Vehicles

1.7The second survey involved stopping vehicles on the road. Each Division was assigned a target number of vehicles to check for current tax and insurance and was asked to check a specified number of vehicles in each of four periods:

1.8While the main emphasis was on cars, and their state of insurance, information was also gathered on a considerable number of vans, trucks and motorcycles. The results of this part of the survey are presented in Chapter 3.

(c) Survey of Motor Vehicles Involved in Road Accidents

1.9The third survey involved a study of vehicles involved in accidents. For the period May 3 to May 16 inclusive, i.e. the first full two weeks in May, the investigating officer was asked to indicate on the standard accident report, the C(T) 68 form, whether a vehicle involved in a fatal or personal injury accident was covered by insurance. While this part of the study concerned itself directly with vehicles involved in accidents with no insurance, because of the time scale involved — two weeks — even with complete coverage the sample was quite small — some 223 cars and 73 other vehicles. The results of this survey are reported in Chapter 4.

CHAPTER 2

Results of Survey 1: Parked Vehicles

2.1The number of vehicles sampled in each Division was related to the number of vehicles under current licence in that Division. In all, the sample comprised some 14,000 vehicles — representing about 1.5% of the 960,000 licensed vehicles in the country. As was explained in Chapter 1, survey periods were chosen so as to include a range of vehicle users — business, shopping, social etc. Even within those periods only a limited number of vehicles were sampled, in each Division, as after a certain stage, almost nothing further would be added to the statistical data. In the bigger cities only some streets were selected. Within these limits, the aim of the survey was to provide an overall figure of vehicles with current insurance and tax discs for the country as a whole, while at the same time, giving some indication of regional variation.

2.2The minimum sample size in any one period in any Division was 50, the maximum 686, Dublin was treated as five separate Divisions: South, South Central, North, North Central and East. The average sample size was of the order of 150 for each period in each Division. In total 13,851 vehicles were observed, 3,175 on Tuesday, 3,581 on Friday, 3,743 on Saturday and 3,352 on Sunday.

2.3There are a number of different ways that the results from each Division could be combined. Table 1 below gives the overall percentages of vehicles observed with no insurance disc, while Table 2 gives similar figures for those vehicles with no tax disc. These tables are derived by weighting the results from each Division by figures derived from the number of vehicles registered in each area, as recorded by the Department of the Environment. An examination of the results for each Division indicated that using equal weightings or weightings based on sample size would have no substantive effect of the results.

2.4It is worth noting that while it was possible for a vehicle sampled for the first time on Friday, say, to be resampled on Saturday, or Sunday a detailed examination of registration numbers indicated that this happened very rarely, perhaps a dozen times in all.

Table 1: Percentage of parked vehicles observed with no insurance disc displayed.

Survey 1 — Conclusions

1. The total number of parked vehicles without a current insurance disc displayed is estimated as 7.8%. Taking sampling variation into account, this overall figure could be as low as 5.0% and is not more than 12.5%, in certain areas.

2.The total number of parked vehicles without a current tax disc displayed is estimated at 10%. Again, taking variation into account, this figure may be as low as 7% and is not greater than 20%, in certain areas.

3.From an examination of the detailed data, it is clear there is considerable regional variation.

CHAPTER 3

Results of Survey 2: Moving Vehicles

3.1The principles behind Survey 2 were similar to those is Survey 1. The sample principally comprised about 9,000 private cars, which represented 1.2 per cent of the 737,000 licenced cars in the country.

3.2Table 3 below gives the total number of cars is each division which failed to produce a current insurance certificated on the spot, or at a Garda Station nominated by driver within the ten days allowed by law.

3.3The figures can be regarded as representing the upper limit on the number of cars which are uninsured. A random analysis of returns from Garda Divisions indicates that at least 50 per cent of drivers who initially fail to produce insurance certificates to the Gardaí within ten days subsequently produce a certificate in court — showing that the driver was properly insured on the date of the insurance check by the Gardaí.

Table 3: Number of moving cars for which insurance certificate not produced within ten days.

3.3Table 4 below gives, for the same sample, the percentage of cars which had no current insurance discs at the times of the present survey. The figures correspond almost exactly to the figures for insurance certificate produced within ten days and are well within the ranges suggested by Survey 1.

	Total number of observations	Percentage with no Insurance Disc
Other Divisions
Friday	1,793	6.8
Saturday	1,533	6.3
Sunday	1,665	6.4
Tuesday	1,700	6.6
Total	6,691	6.5
Whole Country
Friday	2,356	7.3
Saturday	2,079	6.8
Sunday	2,190	7.2
Tuesday	2,211	7.0
Overall Total	8,836	7.0

* Saturday: The 29 observations in Carlow-Kildare Division are omitted from the Table for statistical reasons.

3.4Table 5 below gives for the same sample, the percentage of cars stopped which had no current tax disc at the time of the present survey. The observed figure was 14.2 per cent for this survey, considerably higher than the figure of 10 per cent estimated from the survey of parked cars, although well within the range of percentages — between 7 per cent and 20 per cent — suggested by that survey.

* Saturday: The 29 observations in Carlow-Kildare Division are omitted from the Table for statistical reasons.

3.5Of necessity, and since they were not the main focus of the study, the sample of vans, lorries and motorcycles was much smaller than that for cars. The total sample size comprised 1,350 moving vehicles made up of 1,220 goods vehicles (lorries or vans) representing 1 per cent of the 111,000 licensed goods vehicles in the country; and 130 motorcycles representing 0.5 per cent of the 26,000 licensed motorcycles. These vehicles were sampled as a by-product of the survey of cars; but the same procedures were used.

3.6Table 6 below gives the proportion of moving goods vehicles and motorcycles where motor insurance certificates were not produced within ten days.

Table 6: Other moving vehicles for which motor insurance certificate not produced within 10 days.

3.7When allowance is made for sampling error and for the subsequent production of motor insurance certificates in Court in at least 50% of cases, the figures for goods vehicles and motorcycles in Table 6 are broadly similar to the figures for cars in Tables 4 and 5.

Survey 2 — Conclusions

1.The figures in Table 3 for non-production of insurance certificates (within 10 days) are probably overstated as insurance is subsequently produced in court in at least 50% of cases. Taking this factor and sampling error into account, the non-insurance figure may be as low as 3% to 4% and, at worst, is unlikely to exceed 8% or 9%. The best estimate of uninsured moving cars is around 6% to 7%.

2.The total proportion of moving cars without current insurance discs displayed is 7% — which is consistent with the data for uninsured driving as well as the figures derived from the survey of stationary cars.

3.The total of moving cars without current tax discs displayed was 14% or twice as many as those with no current insurance disc. This percentage was somewhat higher than the 10% of parked cars estimated not to have current tax discs at Survey 1, but still well within the range of 7% to 20% suggested by that survey.

4.The survey results for moving goods vehicles and motorcycles are broadly similar to the results for moving cars.

5.Once again, and consistent with Survey 1, considerable regional variation was noted. In particular, the percentage uninsured was higher in parts of Dublin City and parts of Cork, while figures of 3% or less were recorded in the Kerry, Sligo-Leitrim and Laois-Offaly Divisions.

CHAPTER 4

Results of Survey 3: Motor Cars and Other Vehicles Involved in Road Accidents.

5.1For all motor vehicles involved in fatal or injury accidents on the roads during the first two weeks of May, 1987, as well as the usual information requested on the standard C(T)68 accident report form, the investigating Garda was asked to specify whether or not the vehicle and its driver were covered by insurance at the time of the accident. A special follow-up form was sent to those investigating Gardaí who for one reason or another omitted to supply this information. In the event, the non-response level was reduced to the order of 5%.

5.2The results are given in Table 7 below, for 223 cars involved in road accidents.

Table 7: Cars Involved in Fatal or Injury Accidents by Current Insurance—May,1987

5.3The overall proportion of cars involved in accidents without current insurance for car or driver was 7.6%, where “not knowns” are excluded. The best estimate from the figures available is 8%, a figure consistent with the findings from the other two surveys.

5.4Of 18 heavy duty vehicles involved in accidents, all were insured. Similarly, of 12 light goods vehicles so involved, ten were insured, with two unknowns.

5.5Survey 3 suggests a disturbing trend in relation to motorcycles, though given the small number of vehicles sampled the result must be treated with caution. Of 43 motorcycles involved, ten definitely were not insured at the time of the accident, with one unknown. In other words, nearly a quarter of motorcycles involved in accidents in the first two weeks of May were uninsured, three times the proportion for cars.

APPENDIX 5

Further to our telephone discussion today concerning the rates receipts figures given in our letter of 23 December, I enclose a schedule which sets out the rates actually payable by the various categories of property in the period 1976 to 1986 in case members of your committee may require further details in the matter.

You will note that in the period 1977 and 1978 rates on houses were being eliminated while farmers' rate reliefs were first being reduced in the period 1978 to 1979 and then increased between 1980 and 1983 when rates on land were terminated. This explains the somewhat erratic pattern of rates actually received over the period.

If there are further details you require, please do not hesitate to contact me at 786481.

* A High Court decision of 1982, confirmed (in effect) by Supreme Court decision of 1984 meant that £15m of the amount of rates on land collectable for 1982 (£18m) was not collected, together with £5m arrears from previous years.

APPENDIX 6

You will recall that at the hearing on 26th November, 1987, of the Public Accounts Committee on the 1985 Appropriation Accounts, I agreed to forward some further data for the information of members of the Committee. The data requested is as follows:

(1)The Chairman requested information regarding arrears of health contributions and levies payable to health boards. The estimated amounts outstanding at 30th September, 1987 were:—

(2)In regard to Deputy Foley's query regarding the number of cases in which the Ombudsman was directly involved with the Department of Health in relation to farm income, the position is that only one such investigation has been undertaken to date by the Ombudsman in relation to the assessment of farm income by health boards. This was a specific investigation in relation to the particular case of an applicant for a medical card to the Western Health Board area and led to a recommendation to the health board to ensure that as long as a notional system continued to be used it would be operated on a basis that was clearly seen to be reliable and accurate. In this regard the Ombudsman recommended that in future the Board consult with the Department of Agriculture and An Foras Talúntais.

The Board accepted this recommendation and have adopted it for future cases. I am not aware of any general finding of unfairness by the Ombudsman.

(3)Deputy Foley enquired as to the current position regarding the payment of hospital admission charges by persons in arrears with health contributions. The total amount collected since the introduction of these penalties to the 31st December, 1987, was £45,900 and 410 defaulters were involved.

If any further information is required by the Committee I will be pleased to forward it to you.

APPENDIX 7

AUDIT OF HEALTH BOARD ACCOUNTS

The following sets out the position regarding completed audits as at 31 December, 1987, compared to that as at end of 1984.

While the current position is still not satisfactory, it shows a considerable improvement on the situation obtaining a few years ago. The target is to have health board accounts available for audit within six months of the relevant financial year and to have certified audited accounts available for presentation to the Oireachtas within a further six months.

This target was achieved for the first time in 1982 in relation to the Western Health Board accounts for 1981. The twelve months target was again achieved with the Eastern Health Board's accounts for 1982.

In recent years the main difficulty has been staffing constraints on audit staff. Delays in the elimination of arrears are inevitable in such circumstances.

The carrying out of multiple audits has been the main factor in bringing about an improvement to the arrears situation. While this practice is clearly unsatisfactory, the apparent prospect of continued staffing restrictions would leave little chance for improvement in the status quo.

An Interdepartmental Review Committee is currently examining all aspects of the role and function of the audit service. It is understood that there are several aspects to be considered with a view to eliminating delays in the audit of accounts. The Committee is expected to report to the Minister for the Environment shortly.

The attached table sets out the up-to-date position on the audit of accounts including the position on the presentation of accounts to the Oireachtas.

APPENDIX 8

At recent meetings of the Committee, the Local Government Audit Service was raised with this Department's representatives.

As indicated at the meetings, this Department is most concerned that the present unsatisfactory arrears position in relation to local audits be eliminated and that the audits be brought up-to-date. The appendix to this minute shows the recent position in relation to the audits.

As a result of concern about the local audits, an Interdepartmental Committee was established in 1986 to undertake a review of the service. The committee is chaired by the Department of the Environment under whose aegis the Local Government Audit Service operates and includes representatives of this Department and the Department of Health.

“Taking account of the requirements of public accountability and of economy, efficiency and effectiveness in provision of the public services concerned, to examine and make recommendations on the operation of the Local Government Audit Service including:—

(a)the purpose and scope of audit as it relates to local authorities and to other bodies;

(b)reporting procedures, including arrangements for ensuring that reports are implemented;

(c)means that might be adopted to reduce arrears and to enable the available resources to be used to best effect;

(d)the most appropriate staffing structure, staffing levels etc. and the location of the service;

The Committee is expected to report at an early date and it is considered that, pending submission of the report, it would be premature to discuss at this stage the various issues raised by the terms of reference.

This Department and the other Departments directly concerned will give immediate and constructive consideration to the Interdepartmental Committee's Report and will consult the Office of the Comptroller and Auditor General in that context.

The Report will be considered by the Minister for Finance and the Government in the context of the overall review of the role of the Comptroller and Auditor General now in progress and also in the context of the Report of the Public Accounts Committee's Advisory Group on Public Financial Accountability. The Minister for Finance will be consulting with the Public Accounts Committee in due course on the introduction of revised arrangements.

		Audited to 31st December
	No.	1986	1985	1984	1983	1982 and Prior Years	Audits in Progress No. of Audit Years
County Borough Councils	5	1	3	1	—	—	—
County Councils	27	3	3	18	3	—	20
Corporations	6	—	5	—	—	1	4
Urban District Councils	49	9	22	13	4	1	23
Town Commissioners	30	11	10	4	1	4	2
Joint Drainage Committees	21	6	7	6	1	1	—
Joint Burial Boards	7	2	2	3	—	—	—
Joint Library Committees	2	—	1	—	1	—	—
Health Boards	8	4	2	2	—	—	5
Vocational Education Committees	*38	11	11	6	5	3	30
Committees of Agriculture	*27	6	8	2	5	4	2
Miscellaneous Authorities	*23	12	6	3	1	—	4
Harbour Authorities	19	6	10	1	2	—	7
Educational Endowments	74	17	10	10	9	28	—
Motor Tax Accounts	29	7	17	5	—	—	—
Totals	365	95	117	74	32	42	97
Completed		26.03	32.05	20.55	8.77	11.51

— Four small harbour authorities which have few or no financial transactions annually have not submitted accounts for audit for many years.

— Some Educational Endowments have not submitted accounts for audit for many years.

* 2 VECs and 2 County Committees of Agriculture are audited to 31st December, 1987.

HEALTH BOARDS

AUDIT OF ACCOUNTS

APPENDIX 9

REPORT OF HEALTH STUDIES SET UP AS A RESULT OF PUBLIC CONCERN OVER RADIATION DISCHARGES FROM SELLAFIELD.

The suggestion of a delay in the Report of the Childhood Leukaemia Study

The study was commissioned by the Department in November, 1984. Some of the earlier forecasts as to when the results of the leukaemia study would be a available were over-optimistic. Epidemiological studies, of their nature, require a carefully developed methodology so as to avoid the possibility of error and considerable fieldwork. Because of this, the time scale involved in such studies is frequently quite long and it is difficult to accurately forecast when they are likely or in making the Report available once the study had been completed. The Report was presented to the then Minister for Health on 1st December, 1986 and copies of the Report have been available since that date for interested parties.

The scope of the leukaemia study

Mortality arising from acute lymphoid leukaemia (which has a relatively short induction period) was studied for the years 1971–1982 and incidence for 1974–1983.

The findings of the leukaemia study

During the total study period no excess of mortality of incidence was apparent either on the east or south coast of the country and distribution of high rates was quite random over the country as a whole.

More detailed examination of mortality rates showed a small excess in coastal strips approximately three miles wide on the east and south coasts for the period 1971–1976 but not for the period 1977–1982. When incidence rates were examined the east coast strip showed an excess of new cases of acute lymphoid leukaemia for the study period 1974–1976 but not for the study period 1977–1983; the south coast strip showed no such increase.

These increases were in low single figures and no particular conclusions can be drawn from them. After 1977 the study found no geographic variations in mortality and incidence rates.

Conclusions drawn from the leukaemia study

It could be concluded from the findings of the study, post 1977, that no possible external causative factors were involved and that Sellafield therefore has had no observable impact in relation to acute lymphoid leukaemia in children since 1977. However on the basis of this study while Sellafield could not be linked directly to the increases in childhood leukaemia prior to 1977, it could not be exonerated either prior to that date.

Down's Syndrome Study

The November 1983 issue of the British Medical Journal contained an article by Dr. P. Sheehan and Professor I. Hillary of their investigation into an unusual cluster of babies with Down's Syndrome born to former pupils of a boarding school in Dundalk. The authors suggested that a possible causative factor was the nuclear accident at Windscale (now Sellafield) on 10th October, 1957 linked with an outbreak of illness similar to influenza which occurred in the school in October 1957.

Following this report the Department initiated a national study into the incidence of Down's Syndrome essentially to ascertain whether or not there is a prevalence of Down's Syndrome on the east coast. Various demographic factors associated with Down's Syndrome on the east coast are also being studied.

A study carried out by the North-Western Health Board which found that Co. Donegal had 2½ times the national average of Down's Syndrome births in 1985 is also being investigated as part of the national study.

However, it has transpired that the data collected through the Directors of Community Care for the purposes of the study — while of basic value — does not have a sufficient degree of accuracy of completeness for the purposes of a valid epidemiological study.

In order that the study should be completed the involvement of the Department of Community Medicine and Epidemiology at UCD would be required. Discussions have been held with the Department of Community Medicine who have since submitted proposals for completing the study. These proposals indicate that it would take upwards of two years for the study to be completed and would cost about £70,000.

The most that this study is likely to achieve is to show up anything unusual in terms of incidence of Down's Syndrome in the community and provide good baseline data for the future. It will not confirm or deny the Sheehan/Hillary hypothesis and will not identify causative factors for any clusters found to exist.

While the value of the study might be limited it would at least provide a measure of public reassurance that the health of the community is being monitored. A withdrawal from the study at this point would also be open to misinterpretation and criticism.

The Department is at present exploring the possibility of EEC funding to assist the study and a written approach has recently been made to the Commission following earlier informal approaches which met with a reasonably encouraging response.

The view of the high cost of the study relative to what it might achieve at the end of the day the decision to proceed might be conditioned by the response to be obtained from the EEC as to whether or not substantial funding would be forthcoming.

Committee to review cancer mortalities

The Government decided on 6th October, 1987 that a Committee should be set up to review cancer mortalities since 1957 to see if any trends on cancers might be apparent.

A Departmental Committee which was established under the Minister's chairmanship following on the Government decision has since reviewed available data in relation to cancer mortalities but has found that no conclusions as to cancer trends could be reached from the data.

The Committee also considers that it is from cancer incidence rather than from cancer death that cancer trends might be identified and that a national cancer registry should be established as soon as possible to monitor cancer incidence.

The Committee also reached the view that any further health studies should be in conjunction with data which would be available, in time, from a national cancer registry and that any further retrospective health studies would be unlikley to produce worth-while results.

The Minister will report shortly to the Government on the conclusions of the Committee.

APPENDIX 10

STATISTICAL INFORMATION ON AIDS IN IRELAND

AIDS Cases Reported

The number of cases in European countries and the USA is doubling every 9–14 months and this is now happening in Ireland. There have been 13 deaths to date.

Progress in Relation to AIDS

(a)A monitoring system was established in 1984 under which AIDS cases are reported to the Department of Health on a confidential and voluntary basis.

(b)All blood donations are screened for the AIDS virus and those at risk are asked not to donate blood or organs.

(c)Only heat treated blood products are used and Ireland is practically self-sufficient in blood products produced for the domestic blood supply.

(d)An AIDS anti-body testing service is available on a voluntary basis, throughout the country. The level of infection is monitored, as far as possible, by the Department of Health through the reports of the Virus Reference Laboratory, U.C.D., where confirmatory testing is carried out. Up to 30th April, 1987 a total of 9,338 tests have been carried out and 590 have been positive for the virus.

(e)A capital grant of £250,000 has been given by the Department of Health towards the further development of the Virus Reference Laboratory, U.C.D.

(f)All doctors and dentists have been circulated with booklets on AIDS and the Health Education Bureau has published a leaflet for the general public.

(h)Cases of AIDS are treated in general hospitals by the appropriate consultant depending on the nature of the opportunist infection the individual may be suffering from. General practitioners are a primary source of care and counselling for people who wish to be tested and have a positive result. The health board community care teams provide general practitioners with a support service.

(i)Ireland is participating in an EEC study of paediatric AIDS and will continue to co-operate with international bodies particularly the World Health Organisation and the Council of Europe.

(j)A Public Information Programme was carried out in May 1987 through television, radio and newspaper advertising and a booklet and freefone service at a cost of £500,000. Public knowledge about AIDS is being reinforced through the mass media programme and, on a more individual level, the personal worries and queries of individuals are being addressed through a detailed booklet and a freefone service. The booklet is available through pharmacies, public health clinics and from doctors. The booklet is still available and a telephone service will continue for the present. A copy of the May launch Press Brief was sent to the Northern Ireland Office.

(k)Health Boards have established local AIDS programmes. Over 500 people from health boards and voluntary hospitals have taken part in AIDS information/training seminars and these now provide a pool of experience and resource to develop and implement local programmes to ensure that the AIDS information element of our overall strategy is sustained.

(l)A Central Strategy Committee has been established to implement the national AIDS strategy. The Committee has available to it, and will, as appropriate, draw on the advice and assistance of other experts on particular aspects of the AIDS problem. The Committee will continue to review further strategies for dealing with AIDS.

Measures currently being planned

IV Drug Abusers and AIDS

While the campaign addresses the problem of the spread of AIDS through intravenous drug abuse, addicts are not especially receptive to general campaigns and special measures are required to get into the drug community. The booklet and a special poster directed at IV drug abusers are being provided to all voluntary drug agencies. In addition the poster has been erected at several sites in the Inner City of Dublin.

In relation to IV drug abusers, one to one contact and education remains the most important and realistic way of motivating personal behaviour changes. Having consulted the National Co-Ordinating Committee on Drug Abuse it was agreed that a meeting should be urgently convened for personnel currently working on a one to one basis with IV drug abusers. This meeting took place on 13th May, 1987, at which there was a wide ranging discussion as to how the AIDS message might be most effectively got to IV drug abusers at an individual level. The Central Strategy Committee on AIDS has been examining these suggestions including the proposal that “outreach” services should be expanded and the Department of Health will be responding on these of the relevant agencies in the very near future.

School Leavers

It is proposed that no child should leave school without the facts about AIDS. The appropriate measures for long-term education, by teachers, are under discussion between the Department of Health and the Department of Education at present. In the meantime, to meet the needs of pupils leaving school in the present academic year, Directors of Community Care and Medical Officers of the Health Boards have been asked to co-operate with local school authorities to ensure that such education is provided to those pupils.

Haemophilia Society

A grant of £5,000 has been made available to the Irish Haemophilia Society for AIDS services.

APPENDIX 11

GRANTS PAID DURING 1985 IN RESPECT OF PRIOR YEARS

Voluntary and Joint Board Hospitals	1980	1981	1982	1983	1984	Total
	£	£	£	£	£	£
Incorporated Orthopaedic, Dublin	—	—	—	—	136,000	136,000
St. Mary's Orthopaedic, Cappagh, Dublin	—	—	—	—	572,000	572,000
St. Mary's Orthopaedic, Baldoyle	—	—	—	—	125,000	125,000
Our Lady of Lourdes, Dún Laoghaire	—	—	—	—	577,000	577,000
Peamount Chest, Dublin	—	—	—	85,999	516,000	601,999
Dublin Dental	—	—	—	—	109,000	109,000
St. Patrick's Infant, Blackrock	—	—	—	—	70,000	70,000
Our Lady's Hospice, Dublin	—	—	—	—	373,000	373,000
Royal, Donnybrook	—	—	—	—	320,000	320,000
Federated Dublin Voluntary Hospitals	—	—	—	6,613	246,000	252,613
National Rehabilitation Board	—	—	—	35,423	187,000	222,423
Leopardstown Park, Dublin	—	—	—	—	4,000	4,000
Cork Dental	—	—	—	—	20,000	20,000
Drogheda Memorial, The Curragh	—	—	—	—	5,786	5,786
Linden Convalescent Home, Blackrock	—	—	—	—	44,729	44,729
St. Vincent's Fairview, Dublin	—	—	—	—	208,000	208,000
Cork Voluntary Hospitals Board	—	—	—	—	25,000	25,000
St. James's, Dublin	—	—	—	—	1,227,000	1,227,000
James Connolly Memorial, Dublin	—	—	21,485	32,488	860,000	913,973
Total Hospitals	—	—	21,485	366,386	33,887,860	34,275,731

Homes for the Mentally Handicapped	1980	1981	1982	1983	1984	Total
	£	£	£	£	£	£
Stewart's Hospital, Palmerstown	—	—	—	—	250,000	250,000
St. John of God Brothers	—	—	—	—	600,000	600,000
Brothers of Charity	—	—	—	—	450,000	450,000
Daughters of Charity of St. Vincent De Paul	—	—	—	63,553	350,000	413,553
Sisters of Charity of Jesus and Mary	—	—	—	—	100,000	100,000
Cork Polio and General Aftercare Association	—	—	—	—	150,000	150,000
St. John's Unit, Peamount	—	—	—	—	50,000	50,000
St. Patrick's Home, Kells Road, Kilkenny	—	—	—	—	30,000	30,000
St. Mary of the Angels, Beaufort, Killarney	—	—	—	—	40,000	40,000
St. Anne's Home, Roscrea, Co. Tipperary	—	—	—	—	30,856	30,856
St. Patrick's Home, Upton, Co. Cork	—	—	—	7,119	—	7,119
Sisters of La Sagesse, Cregg House, Sligo	—	—	—	—	80,000	80,000
Mary Immaculate Training Centre, Carriglea	—	—	—	—	46,720	46,720
Total Homes for the Mentally Handicapped	—	—	—	70,672	2,177,576	2,248,248
Total all Agencies	203,826	261,569	1,270,972	7,298,197	57,065,436	66,100,000

APPENDIX 12

Reports of the Local Government Auditor on the Accounts of Vocational Education Committees.

The following table shows, for each Vocational Education Committee, the latest financial year in respect of which the report of the Local Government Auditor on the Accounts has been received, the date of that Report and the date on which the Report was received in the Department of Education.

APPENDIX 13

SITE AT KILNAMANAGH, TALLAGHT, FOR A POST PRIMARY SCHOOL.

General Background

1.1A procedure has evolved whereby Dublin County Council in areas which it proposes to develop, designates sites for possible future post primary schools. It will then request the views of this Department on the matter of sites to be reserved etc. At this very early stage of planning, when construction of housing may not have yet commenced, and when demand for post primary school places arising therefrom will not materialise for at least 12/15 years, Planning Section has to take a tentative decision on the likely projected demand and inform Dublin County Council accordingly.

1.2The site(s) in question may already be owned by the County Council or may be in private ownership. In either case, the Department will come under pressure to purchase a site which has been reserved for post primary school purposes. Failure to do so within a reasonable time could lead to the site being sold to another purchaser/developer leading to a situation where later, if and when housing development had reached a level where a new post primary school is required, a suitable site may not be readily available. Indeed, in other areas, the Department has been criticised for not taking the precaution, at least at an earlier stage of development, of securing a suitable site, for possible future post primary school purposes.

1.3Once a site has been reserved/purchased, decisions have to be taken on (a) the size of school required and (b) the likely opening date. These are matters which are subject to constant review from the time a site is initially reserved up to the time when the tender for the school building is awarded to a contractor and construction gets underway. The period involved may range from 3–4 years up to in excess of 15 years depending on the pace of development and other relevant factors.

The Kilnamanagh site

2.1In 1975 it was agreed between this Department and Dublin County Council that a site — already identified by the Council — should be reserved in Kilnamanagh adjacent to “the Cuckoo's Nest”. At the same time, another site was reserved in the Castleview area. It was felt that the level of development proposed might warrant the provision of two schools in due course. Castleview is adjacent to Kilnamanagh.

2.2From 1976 onwards, the questions relating to the size, timing and need for a school on the Kilnamanagh site were periodically reviewed. From 1979 major reviews were conducted on at least an annual basis and, apart from these the matter was under almost constant scrutiny in the light of parliamentary questions, representations from political representatives, clergy, local pressure groups, etc.

In carrying out a major review, the Department will normally take into account the following factors;—

—level of post primary accommodation already available and within reasonable access

—the views of the Advisory Council on the Provision of Post Primary Accommodation in the greater Dublin area.

—national and regional marriage, fertility and other population statistics where these are available

The process of planning a post primary school cannot, of its nature, be a rigidly scientific one but the Department and the Minister make every effort to take decisions on the basis of the most up-to-date information available.

2.3The Department's views on the desirability of building a school on the Kilnamanagh site can be summarised as follows:—

Particulars of sites at Kingswood Heights and Huntstown

The Kingswood Heights site was purchased as two separate plots, one on 8th December, 1987 at a cost of £143,000 and one on 18th March, 1980 at a cost of £192,854 making a total cost of £335,854.

No consultants have been appointed to date and, consequently, no fees have been paid.

APPENDIX 14

UNUSED CLASSROOM PLACES IN THE DUBLIN AREA

Primary

1.1By the early 1980s, the Department of Education was aware that there was a large surplus of primary school accommodation in the Dublin area. In 1983, a study was carried out by a Department analyst in order to give an indication of the magnitude of the surplus and the extent to which it could be used to cope with peak enrolments in primary schools in new housing areas. A figure of 30,000 unused places emerged from this study. A copy of the study was made available to officers of the Department of Finance in the course of exchanges between the two Departments and this is the origin of the figure of 30,000 unused classroom places attributed to that Department.

1.2.The figure of 30,000 must be treated with due caution for the following reasons—

(a)The figure was arrived at by surveying the numbers of classrooms in Dublin national schools, multiplying the result by 35 and subtracting from the total thus produced the actual number of pupils in the schools.

(b)The figure is notional in that it was produced solely on a count of vacant classrooms, without reference to their condition or proximity to developing housing areas, and using a factor of 35 which exceeds the average number of pupils per class in the Dublin schools. At the time of the survey, this average stood at 30. Had the actual average been used in the calculation the result would have been approximately 20% less.

(c)Many of the vacant classrooms, while technically returned as vacant, are in fact availed of by teachers for purposes other than ordinary class use. There are approximately 340 remedial teachers in Dublin national schools, 240 of which operate in schools which are without remedial rooms as such, and accordingly use the spare classrooms for their work. Were the rooms not available then the authorities would be entitled to seek grants for the addition of remedial rooms. Indeed, some of these remedial teachers are shared between schools, and would need exclusive classroom space in more than one location. It must also be taken into account that principals whose schools have over seven assistant teachers, and whose numbers are not taken into account in the formulation of the schedule of accommodation of the larger schools, also use spare classrooms for teaching activities under the rule which sets out that they cannot be completely relieved of teaching duties.

(d)The study made no reference to the condition of the vacant classrooms. When some of the schools returned as having vacant classrooms were subsequently surveyed, in the course of dealing with improvement grant applications, it was found that many of the vacant classrooms would not have been suitable for further use without major expenditure on refurbishment. Some of the works would have involved costly outlay on essential improvements such as the rewiring of electrical systems, renewing heating installations and re-organising internal walls and partitions so as to eliminate substandard-sized classrooms. In practice, it would ordinarily be found more satisfactory and economical in many cases to provide schools seeking extra classrooms for short-term use with prefabricated classrooms, rather than to undertake costly improvements to existing old buildings.

(e)Over 7,000 of the surplus places occurred in 8 locations where over-provision of permanent accommodation occurred many decades ago — the best known of these being Ballyfermot (the equivalent of 45 classrooms), Crumlin (41 classrooms) and Cabra West (35 classrooms).

1.3.An accurate indication of the overall surplus accommodation could only be arrived at following detailed surveys taking all these factors into account. The availability of such surplus accommodation within reasonable distance of the relevant locality is established and taken fully into account in the planning process now engaged in the case of all applications for national school building grants in the Dublin area.

Post-Primary

2.1.The Department is aware of the existence of some spare capacity in post-primary schools in the Dublin area, and also of the fact that further spare accommodation will become available during the 1990s as a result of the downturn in the birthrate since 1980 and other factors.

2.2.The actual amount of the spare capacity is difficult to establish accurately in the absence of a detailed technical examination of each individual school, but it is not of the magnitude that some commentators suggest. For example, in the school year 1986/87 some 99,004 pupils were enrolled in schools with an estimated overall capacity of about 108,000 places. Included in the figure of 108,000 are a number of new schools whose enrolments will be building up rapidly in the immediate future, and also many schools where prefabricated accommodation is extensively used. A more realistic enrolment figure would probably be in the order of 103,000/104,000 places.

2.3.In its examination of any application for additional accommodation, the Department has access to and utilise a wide range of statistical data and development plans in every case. Cognisance is also taken of birth trends and “shifts” in population. No area is examined in isolation. Adjoining areas are looked at in the context of achieving rationalisation and at the same time providing a better educational facility in a more cost-effective manner.

2.4.Having regard to the fact that there are some 200 post-primary schools in the Dublin City and County area, the overall incidence of surplus accommodation is relatively insignificant. Nevertheless, the Department is making, and will continue to make, every effort to ensure maximum utilisation of any such accommodation.

APPENDIX 15

USE OF FLAT ROOFS IN SCHOOL BUILDING DESIGN

The question of a change in school design involving the discontinuation of the use of flat roofs does not arise, since there has been no occasion to develop a policy on this matter.

This applies not only to post-primary i.e. second-level school projects, but also to first-level (i.e. primary schools) and third level buildings.

There has been no necessity to keep a record specifically of the number of developments in which flat roofs were used; nor has there been any necessity to keep a record of the cost of repair and replacement of flat roofs, since such work is not a significant element in capital expenditure, especially when one regards the very considerable expenditure on educational building in recent years.

Where roofs need repair, whether they be flat or pitched, the cost of such work is normally met out of current expenditure, and would not be grant-aided directly by the Department of Education.

Where roofs have to be replaced, the question of grant-aiding such work from Exchequer funds would not arise if the remedial work arose out of a design defect or faulty workmanship. In such cases the costs of the remedial work would have to be borne by the party responsible either under the terms of the contract or under indemnity insurance carried by the consultants.

Roofs do not have an indefinite “life” and it would be open to schools to apply for grants for roof replacements (again, whether they be flat roofs or pitched roofs) when the “life” of the roof has been exhausted.

The enquiry seems to suggest that flat roofs are “suspect” when used in educational building, and of course that is not the case. Even the most casual observation of educational buildings around the country will reveal that flat roofs are quite common. Flat roofs are often used in combination with pitched roofs in the same building.

Apart from the use of flat roofs on low-cost prefabricated buildings, particular types of flat roof would not be acceptable to the Department's professional advisers, and it is thought likely that this is the reason why a “policy” in this matter is imputed to the Department. There is nothing unacceptable in a flat roof, as such. Indeed it is pointed out by the Department's professional advisers that in certain circumstances not only is the flat roof the answer to a design problem, but is the only answer on cost grounds: this would be the case in areas where the cost of spanning a large floorspace would be prohibitive if conventional rooftrusses had to be used.

To give examples of roofs of good quality and those of low-cost (and therefore “short-life”) design, a roof of structural steel with a suitable covering of insulating material, vapour barrier and asphalt would be in the former category, while a plywood roof with layers of mineralised felt would be in the latter. The low-cost roof would have a correspondingly short life, and generally speaking would not be acceptable in a building whose “life expectancy” would have to be in terms of many decades of years.

It would be an enormous task with the low level of staffing currently available to the Department's Building Branches to extract information on grant applications where improvements to roofs were concerned, to establish whether flat roofs were a feature and to assess what gave rise to the need for improvement (or replacement if such took place).

APPENDIX 16

I refer to the queries raised by the Committee of Public Accounts in relation to the collection of examination entry fees.

The Department fully shares the concern of the Committee that the strictest standards of public accounting should apply at all times, and has taken careful note of the comments and suggestions made by the Committee in the matter of the collection of examination entry fees. Having examined the matter in detail the Department is concerned however that, while present procedures should indeed be tightened up, a more radical change in procedures might well result in significantly less income accruing to the Exchequer at the end of the day.

The Examinations Branch of this Department is responsible for the administration of the following public examinations.

Entry fees are payable in respect of all of these examinations. These are collected in two ways:

1.Collection of the fees by schools from their individual pupils and submission of the fees, usually by means of one cheque, to the Department.

2.Direct payment to this Department by the individual candidates in the case of external (non school) candidates (E10s).

All communications relating to school candidates, including the question of fees, is done through the authorities of the appropriate school. In the case of E10 candidates communication is made directly with them.

Following is a summary of the procedures involved in the submission of entries and the collection of fees.

Entry forms are issued on request to individual applicants. The closing date for receipt of completed application forms is 1st November and the appropriate entry fee must be submitted with the application.

When the application is received, details of the applicant's name, amount received, bank code and cheque number or payable/money order number as appropriate are entered in a ledger and a receipt is issued. If there is a shortfall the applicant is requested by letter to submit the balance due.

Rule 40 of the Rules and Programme for Secondary Schools clearly places the obligation for the collection of fees on the authorities of post-primary schools. Entry forms are issued to schools in October and must be returned to the Department by 1st November in the case of (a) the Intermediate, Leaving and Day Vocational Examinations and by 1st December in the case of (b) the Technical Schools Summer Examinations. In the case of (c) Block Release examinations, held at Christmas, Easter and summer, the issue of the entry forms and the closing date are governed by the commencement date of the appropriate Block Release courses. Fees must be submitted to the Department by 1st February in the case of (a) and by the appropriate closing date for entries in the case of (b) and (c).

Some years ago a fee alleviation scheme was introduced to reduce the hardship caused by fees in the case of necessitous pupils. No actual payment is made to the schools. A school amount is allocated to each school or Vocational Education Committee. The allocation is based on the amount granted to the school in respect of the scheme for free books for necessitous pupils. It is left to the discretion of the school authorities to decide whether individual pupils should benefit under the scheme and if so to what extent (i.e. full fee or portion thereof) subject to a total overall limit for each particular school or Committee. The scheme applies only to the Leaving, Intermediate and Day Vocational examinations. A copy of the relevant circular is attached for information. The fee-collection system as it operates at present has clear administrative advantages for the Department. The actual collection of the fees is done by the schools and payment is generally submitted in one block payment thus minimising the amount of recording which has to be done in the ledgers kept by the Branch and the numbers of staff needed to perform this work. The schools make great efforts to collect the fees. A deadline some days before the date for submission of the fees to the Department is set by the schools. The actual date varies and the Department is not aware of it. In most cases it seems the fees are collected in one operation by the school. In others, however, a system of payment by instalments has to be operated in order to collect the fees due.

Some schools, particularly those in the religious secondary sector, pay the fees from school funds on behalf of those candidates who cannot afford to pay the fees and who cannot be assisted under the fee alleviation scheme because of the limited amount available under that scheme.

The fee alleviation scheme is also administered by the schools. Apart from the obvious benefits to the Department from a workload point of view, this system has the added advantage that the school authorities are in a much better position to assess the ability of a particular candidate to pay the fees than the Department could ever hope to be. The Department is satisfied that this is the best way of ensuring that the alleviation, however small, is being given to the more deserving candidates.

When the fees are received in the Department a receipt is prepared and details of the school involved, amount received, bank code, cheque number and receipt number are entered in the appropriate ledger. Where Postal/Money Orders are submitted the PO/MO number is recorded. The net amount due from the school taking account of the number of entries, cancellations and the fee alleviation scheme is calculated. Should a greater amount than that be submitted the amount allocated under the alleviation scheme is reduced accordingly. Should there be a shortfall in the amount received, the school is formally advised of this and requested to submit the balance due. Reminders are sent if the amount due is not received in a reasonable time.

With effect from 1988 a revised scale of fees applies to repeat Leaving Certificate pupils. Unless their parents or guardians are holders of current medical cards (in which case the ordinary fees apply) these pupils are required to pay higher fees. The responsibility for checking whether a repeat candidate is eligible for this concession has been placed on the school authorities and they will be required to submit a summary of the position relating to repeat students when submitting the fees. It would add significantly to the work of the Examinations Branch if it had to process all applications for this concession individually. It would involve the submission of medical cards to the Department, examination/verification of them and their return to the applicants. Apart from the staff costs involved, there would also be the postage and the telephone costs associated with the checking/verification of them.

The Department is continually examining the position in relation to fee collection so as to ensure that all fees due are received. It is acutely aware that this system, in common with all systems involving the collection/disbursement of funds, is open to abuse. It is also aware, however, that the introduction of a revised system could result in a drop in the net receipts to the Exchequer. It must be borne in mind, for example, that suggestions that interest might accrue if money were paid over earlier could also be made by those who are due payments from the Exchequer whether within the education field or in other areas. The Department's prime concern in this matter is that fees due are paid by the schools by a particular date. Candidates are under no obligation to pay sooner than this but, as mentioned earlier, schools do apply earlier deadlines so as to ensure that the money will be available for payover to the Department on the due date.

It is the Department's view that it would be extremely difficult and costly to change the current system of collection. If fees had to be collected from individual pupils by the Department directly rather than through the schools there would be a much greater level of non-payment. The pressure which the Department could exert would be less effective than that which a school principal can exert in his/her daily contact with the candidates. While the use of a special bank account to which fees should be lodged has its advantages, it does not solve the problem raised by the Committee in relation to the actual payover of all monies collected. To achieve this it would be necessary to have the candidates lodge the fees directly and submit proof of this (through Giro slips?). All of the lodgment dockets would have to be checked against entries thus creating a large volume of work for the Examination Branch. Any interest which might accrue to this account would be more than offset by the costs involved in maintaining the records needed to reconcile the account.

The accounts of the schools in the vocational, community and comprehensive sectors are subject to audit and any irregularities with relation to examination fees should come to light in that audit. The position with the schools in the secondary sector is that they are private institutions and are not subject to audit. While it can be argued that the system is open to abuse because of this the Department has no evidence to suggest that irregularities have in fact occurred and gone undetected. The Department is satisfied that where a shortfall in fees occurred that this arose because the schools were unable to collect the fees from particular candidates.

The Department is satisfied that the system currently in operation is the most appropriate in the circumstances. The balance which has been achieved over the years between the Department and the school authorities in the collection of fees has had the effect that in spite of the financial constraints on many parents in recent years some ninety-nine per cent, if not arguably all, of the fees due have been remitted to the Exchequer. The Department will of course continue to press schools to have any outstanding fees collected and submitted.

1.The fees for entry to the 1988 Certificate Examinations* will be as follows:—

2.School authorities are informed that in order to alleviate the effect of the fees in cases of particular hardship the following concession will apply.

A reduction in the amount of the fee payable in the case of recognised pupils of post-primary schools may be allowed in cases of particular hardship. The amount of the reduction in the case of any pupil concerned will be determined at the discretion of the school authorities, subject to the total amount of such reductions not exceeding a specified amount notified to each school or Vocational Education Committee. This specified amount relates to the amount, if any, allocated to the school or Vocational Education Committee for the purpose of the scheme of aid towards the cost of school books in the case of necessitous pupils.

For the purposes of the scheme a necessitous pupil may be defined as a child from a home where genuine hardship exists because of unemployment, prolonged illness of parent, large family with inadequate means, single parent, more than one child from same family doing the Certificate Examinations, or other circumstances that would connote a similar degree of domestic financial hardship. In this connection it should be noted that the possession of a medical card by a parent or guardian does not necessarily qualify pupils for assistance under this scheme.

The specified amount in the case of your school/Vocational Education Committee in respect of the 1988 Certificate Examinations is £.

3.In addition to the fee concession referred to in Paragraph 2 above, the following will also apply.

Where a recognised pupil enters for the Leaving Certificate Examination for the first time and also for a Technical (T.S.) Examination or the Day Vocational Certificate Examination the total fee payable by such a candidate will be half of the Leaving Certificate fee plus full fee for the other examination, subject to a minimum overall fee of £35.

The total fee payable by a Repeat Leaving Certificate candidate in such circumstances will be the Leaving Certificate fee plus half of the fee for the other examination.

It should be noted that the fee concession referred to in Paragraph 2 above does not apply to non-school candidates (E10s) nor to the Technical School (T.S.) Examinations.

4.All entry fees for the Certificate Examinations must be remitted to the Examinations Branch by 1st February, 1988. Schools may remit some or all of the amount of fees before that date if they wish.

School entries received between 1st November and 1st December, 1987 will be accepted on payment of a late fee of £8 per candidate in addition to the ordinary fee. School entries received after 1st December, 1987 will be accepted only in very exceptional circumstances and on payment of a late entry fee of £25 per candidate in addition to the ordinary fees.

6.School authorities are requested to bring the terms of this circular to the notice of intending candidates.

APPENDIX 17

REPRESENTATIONS FROM PUBLIC REPRESENTATIVES.

There has been a longstanding practice in the Department of Education that all representations from public representatives should be dealt with by the Office of the Minister or the Minister of State as appropriate.

It has now been decided that this practice should be discontinued in relation to oral representations. Henceforth, oral representations from public representatives may be dealt with by the individual sections of the Department.

APPENDIX 18

VARIATIONS IN PER CAPITA COST — ESF-AIDED CERT PROGRAMME 79–83.

Subject

1.1In paragraph 30 of his Report on the 1985 Appropriation Accounts, the Comptroller and Auditor General noted that there was a considerable variation in the per capita costs of ESF-aided CERT courses provided by seven Vocational Education Committees during the years 1979 to 1983. The purpose of this memorandum is to show why these variations occurred and whether they reflect underclaiming or overclaiming of ESF aid.

1.2The centres and the per capita costs in question are shown in the following table:

Per Capita Cost

2.1The per capita cost adverted to by the Comptroller and Auditor General was arrived at by dividing the number of participants in each centre into the total apportioned expenditure on the programme. However, the CERT craft programme is not a homogeneous programme but is made up of a number of diverse courses. During the years 1979/80 to 1981/82, for example, the craft programme included seven different courses and an eighth course was added in 1982/83. Some of these courses required the fulltime attendance of participants for the full academic year, while others entailed attendance for one day per week only. The mix of courses varied from centre to centre and from year to year in the same centre. For example, one course only was offered in Waterford during 1979/80 but five were offered by Town of Galway VEC. Four courses were offered by the City of Cork VEC in 1979/80 as compared with six courses in 1982/83. A completely different programme was offered in Sligo in 1981/83 as compared with 1979/81. Any comparison either of one centre with another in the same year or of one centre from one year to another, based on this per capita cost, would be valid only where the range of courses offered was unchanged. The basic reason for the variations in per capita costs is, therefore, the difference in the mix of individual courses offered within the same programme.

2.2Per capita costs are, of course, necessarily affected by a number of other factors such as the number of participants in each class group, the cost per teaching hour depending on the use of part-time teachers or wholetime teachers on different annual rates of pay etc.

The reduction in unit cost in the case of Waterford from £1,132 in 1979/80 to £772 in 1980/81 coincides with an increase in the number of participants from 15 to 32.

The large increase in unit cost in the case of Sligo from £779 in 1979/80 to £1,403 in 1980/81 coincides with a reduction in the number of participants from 30 to 20.

While the same two courses were offered in Westmeath in 1979/80 and in 1980/81 and the total number of participants did not change significantly, the distribution of participants between the two courses did change considerably with a substantial greater proportion of the participants taking Course No. 1 in 1980/81. As Course No.1 involves fulltime attendance for the full academic year while Course No. 2 involves fulltime attendance for half the academic year only, the change in distribution affected the per capita cost and is reflected in the very low figure for 1979/80.

2.3The list of courses included in the craft programme, and the mix of courses offered in the individual centres, is as follows:

3.Dining room waiter/waitress (Food): This entails fulltime attendance for half of the academic year

4.Dining room/bar waiter/waitress (drink): This entails fulltime attendance for half of the academic year

5.Barllounge (Bar Tender): This entails fulltime attendance for half the academic year

6.Reception/housekeeping: This entails fulltime attendance for the full academic year

2.4In the circumstances outlined, therefore, the variations in per capita cost do not in themselves establish underclaiming or overclaiming for ESF aid. Indeed, similar variations have been adverted to in the past by the ESF authorites and they have accepted the explanations tendered.

Cost per Timetabled Teaching Hour

3.1A comparison has been made on a different basis in order to assess the relative efficiency in the use of resources on this programme in the centres in question. Tuition costs are the single greatest element of education and training costs. The cost of an education or training programme is not directly related to the number of participants but is directly related to tuition costs. The method used for calculating the costs of these programmes was to apportion to the programme an element of the total teaching costs of the centre which reflects the relationship of teaching hours assigned to the programme to total teaching hours in the centre. Non-teaching pay costs and non-pay costs were calculated either on a similar apportionment basis or on a direct identified cost basis. (As the County Donegal centre is exclusively concerned with CERT courses, apportionment was not necessary.)

3.2The following table shows the total cost per timetabled teaching hour for each centre for each year in question:

Note: In the case of City of Dublin for 1982–83 records necessary to complete the table are not now available due to flood damage. In the case of County Westmeath for 1981–82, one element of the information required is not now available, i.e. the number of timetabled teaching hours used in calculating the teaching element of the cost.

3.3It will be seen that variations still occur but not one of the magnitude shown on the per capita unit cost table. These variations are commented on in the following paragraphs.

3.4An examination of the costings of individual centres has shown that accounting and structural differences in the different centres gave rise to some variations.

3.5The accounting differences arise in that, while all centres followed the basic methodology outlined in the Department's guidelines and referred to in paragraph 3.1 above, the detailed calculation of costs tended to vary. Examination has shown that these different approaches would result in differences only within the range of + or – 4 per cent. Even though these different approaches are each valid in their own way, the Department has issued additional guidelines with a view to more complete comformity with a single common methodology.

3.6The examination has shown that structural differences are more significant. The programme is offered in County Donegal in an institution which is organised and funded within the second-level education programme with consequent lower costs. Part of the programme was offered in the City of Dublin in second-level schools with similar results. The significance of the level of use of part-time teachers can be gauged from the fact that the minimum part-time hourly rate in 1982 was £7.08 compared with a rate of almost £29 for a full-time lecturer. The use of part-time teachers as a proportion of the total timetabled hours tended to vary from one centre to another, from one year to another in the same centre and even within the same academic year as wholetime staff left or were appointed. No fixed average or minimum level of teaching hours per year is laid down for fulltime staff in the VEC Colleges and, where the total number of teaching hours per year is lower than average, the cost per timetabled teaching hour on the CERT programme is correspondingly higher.

3.7It will be seen from the table in paragraph 3.2 that, within the range of variations which should be expected, there is a consistent pattern from one year to another in the case of the City of Cork, City of Dublin, Town of Galway and County Donegal.

3.8The figures for Westmeath in the table in paragraph 3.2 are significant in two respects viz. the figure for 1981–82 is not available and the figures for the three years available are consistently higher than those for the other centres.

It is not possible to say for certain at this stage what number of timetabled teaching hours was used in the original calculation of the teaching element of the apportioned cost. However, the figures for apportioned cost (1980–81 £73,439, 1981–82 £132,390, 1982.83 £136,386) do not suggest any departure from an acceptable trend.

Examination has shown that the main reason for the consistently high rate of cost per timetabled teaching hour in Westmeath is that the total average teaching hours per staff member in Athlone Regional Technical College was significantly lower than in other centres with a resultant higher than average cost per teaching hour.

3.9The figures for Town of Sligo for 1981–82 and 1982–83 are lower than might be expected. Further enquiry has shown that in 1979–80 and 1980–81, by using a more general apportionment method, Town of Sligo VEC included an apportionment of technician cost while in 1981–82 and 1982–83 a more precise method was used reflecting actual technician input into the course. It has also emerged that an error occurred in calculating the teaching cost in 1981–82 resulting in an understatement of total cost of £14,200 representing £7,810 in potential ESF aid.

APPENDIX 19

ADMINISTRATION OF THE HIGHER EDUCATION GRANTS SCHEME

Statutory Position

1.1The Higher Education grants scheme is a statutory scheme governed by the provisions of the Local Authorities (Higher Education Grants) Act, 1968.

(a)make any grant under this Act to any person without the previous approval of the Minister, or

(b)make, during any year (other than the first year in which the grant here-inafter referred to is payable) any payments in respect of a grant under this Act consisting of a series of annual payments (payable either in one sum or in two or more instalments) during a specified period, unless the Minister has previously approved of the making, during that year, of payments in respect of that grant.”

Practice

2.1All grant applications are considered in detail by Local Authorities, who are statutorily entrusted with administration of the scheme. Except in cases of dispute or appeal, the Department does not examine grant applications in detail. However, because of the requirements of Section 6 of the 1968 Act, Local Authorities submit, on an annual basis, details of the new and renewable awards for approval by the Minister. These details are course of study, year to study and category of grant. These details are checked by the Department, as required by the 1968 Act, and together with socio-economic particulars of parents, assist in formulating estimates of cost of the scheme.

In practice, the Department's function in this regard is to convey to Local Authorities the Minister's approval for payment of grants at the appropriate rates to eligible students, on foot of recommendations received from Local Authorities as required by Section 6 of the 1968 Act. A similar practice prevails for Vocational Education Committee Scholarships.

New proposals

The question of delegating authority to each Local Authority and Vocational Education Committee to grant and renew individual awards is being considered by a Departmental Task Force which is examining (a) admission procedures to third-level education and (b) administrative procedures relating to grants and scholarships.

APPENDIX 20

SCHOOL TRANSPORT CHARGES

Details are given on the tables below of charges in respect of schools transport since January 1983—

APPENDIX 21

CONFIDENTIAL

I refer to my appearance before the Public Accounts Committee on 21 January, 1988 when I undertook to provide the Committee with additional information on a number of matters related to the export credit insurance and finance schemes.

In accordance with this commitment I am now enclosing notes for the attention of the Committee giving background information and up-to-date details in relation to claims incurred in the Sudan and in the U.S.

In relation to Nigeria, since January we have received a promissory note valued US $1,197,314 from the Central Bank of Nigeria in respect of the claim mentioned by the C & AG in his commentary on the 1985 Appropriation Account. We have received a first payment of US $14,936.20 (IR £9,265.77) due under the note. Further payments are due to be made on a quarterly basis. We are continuing our efforts to secure outstanding promissory notes, failing which further negotiations with the Nigerian buyer will be entered into in order to reach satisfactory settlement.

I have given very careful consideration to the Committee's request for disclosure of the name of the Nigerian buyer in this instance. However, I have come to the conclusion that because of the considerable sensitivity involved disclosure at this point in time would not be in the best interests of effecting a recovery of the debts due.

We have also made considerable progress in having claims subject to the bilateral rescheduling agreement with the Nigerian Government validated by the Central Bank of Nigeria. No payments have yet been made under this agreement but we are continuing to put pressure on the Nigerian Central Bank to have all debts honoured.

APPENDIX 22

PAYMENT OF TWO LARGE CLAIMS UNDER THE EXPORT CREDIT INSURANCE SCHEME ARISING FROM DEFAULTS BY TWO AMERICAN COMPANIES.

1.The Irish exporter in this instance was a company set up to manufacture and export wind turbines which were to be used as a source of alternative energy in California.

2.The Irish exporter signed 2 contracts for the sale of wind turbines to 2 Californian corporations — the first set up in 1982 and the second set up in 1983. Both of these corporations were in the business of operating “wind parks” and selling individual wind turbines to investors who in turn received significant tax write-offs for their investment in alternative energy. The contracts were covered under the Export Credit Insurance Scheme. State exposure on the 2 contracts was over IR £6m. The credit terms provided that the American corporations were due to pay the Irish exporter in February 1986 and October 1986 respectively.

3.Due to a number of factors, including the collapse in oil prices and the subsequent withdrawal of the generous tax concessions for investment in alternative energy sources in the U.S., both Californian corporations got into financial difficulties and defaulted on the payments due to the Irish exporter. ICI and the Department engaged in negotiations in California with both companies commencing in October 1986.

4.Negotiations with one of the companies went on for 3 months but in January 1987 it filed the Chapter 11 Bankruptcy in the Californian Courts. Chapter 11 Bankruptcy is a provision under U.S. company law which affords the debtor company the protection of the Courts from its creditors in order to allow time for all parties to work out a package which will satisfy the creditors and also enable the company to continue as a going concern. A claim in respect of the contract with this company totalling £3,667,000, was paid under the Export Credit Insurance Scheme on 27 March, 1987. The Irish Government accordingly became the major creditor of the debtor company to the extent of U.S. $6.2m.

5.Detailed and very delicate negotiations are still taking place with the company within the framework of Chapter 11 with a major input from the Irish Government as the major creditor. Due to the complex nature of the negotiations it is difficult to say when negotiations will be completed and what the outcome will be. We are nonetheless hopeful that a creditors “Plan of Re-organisation” will be approved by the Court later this year from which recoveries of debts will commence.

6.The financial difficulties of the second company meanwhile have been more severe. The claim paid in respect of this company (on 28 November, 1986) was IR £2,547,000. This company also filed for Chapter 11 but it is, to all intents and purposes bankrupt. The prospects for any recovery in this instance are very slim indeed although we will continue to monitor developments. Repossession of the wind turbines has been considered but the company is no longer the legal owner of the machines which it sold to individual investors. The legal complexities involved mean that the cost of seeking repossession would be far greater than the potential recovery.

7.Credit checks were carried out on the two American companies prior to the granting of export credit insurance. The credit checks included satisfactory bank references and reports from international credit agencies. In addition up-to-date audited accounts for both companies were provided and were examined in detail.

APPENDIX 23

PAYMENT OF CLAIM UNDER EXPORT CREDIT INSURANCE SCHEME ARISING FROM DEFAULT BY SUDAN.

1.In 1974/1975, an Irish Company exported a total of 40 ferries and structural parts for the construction of 26 barges and six push boats to two Government Ministries in Sudan. They were the Ministry of Transport and Communications and the Ministry of Local Government, Housing and Community Development. At that time a military-type Government was in power in Sudan. (The current head of Government in Sudan is Prime Minister Sadiq E1 Mahdi who took over after a general election in May, 1986. The nature of the current regime is classed as a parliamentary democracy). The value of the exports in question was Stg. £1,828,874 and cover amounting to Stg. £1,648,933 was provided. Guarantees of payments were received from the Sudanese Central Bank in advance. The contracts were insured and financed under this Department’s export credit insurance and finance schemes for capital goods exports.

2.Payments were made initially by the Sudanese but due to critical foreign exchange problems in Sudan, Sudan defaulted in 1977 and no further payments were made on foot of those contracts. This Department was accordingly obliged to pay Stg. £1,069,007 (IR£1,104,762) in claims as a result of this default during the period 1977–1981. Under a recourse agreement a sum of IR£139,641 was received in the period 1978–1980 from the Irish exporter. [A State guarantee was provided to the exporters bank so as to enable 100 per cent of the amount outstanding from Sudan to be advanced to the exporter. However, as the exporter’s insurance policy covered only 90 per cent of the amount outstanding, the exporter was required to join in a recourse agreement which provided for payment of the 10 per cent balance to the Minister in the event of a claim. The recourse agreement also covered any exchange rate loss incurred under the guarantee.]

3.In 1979/1980, Sudan approached the International Monetary Fund for assistance and one of the conditions of such assistance was that Sudan sort out its external debt situation. Accordingly, a multilateral agreement was reached with its major creditor countries, under the auspices of the Club of Paris (an international forum for the rescheduling of insured trade debts).

4.Government approval was obtained in November 1980 to reschedule the debts owed to Ireland along the lines agreed with Sudan’s major creditor countries. Accordingly, a delegation consisting of officials of this Department and an official of the Department of Foreign Affairs travelled to Sudan in April 1981 and negotiated a bilateral rescheduling agreement with the Sudanese. Government approval for the formal signing of such an agreement was obtained in May 1981 and the agreement between Ireland and the Sudan was formally signed in London on 1 July, 1981. Under this agreement, the total debts of Stg. £1,069,007 were rescheduled over a period of 9 years up to 1989.

5.The Sudanese met the first interest payment to the Department in August 1981 of Stg. £34,140 (IR£42,675) but no further payments have come to hand. The Department since then has applied pressure on the Sudanese in an effort to secure further payments but to no avail. Approaches have also been made through the Irish Embassy in London, the Department of Foreign Affairs, the Central Bank of Ireland, CTT, the original Sudanese trading company involved in the contract and a Swiss intermediary, to try to get them to pay, again with no success.

The question of further rescheduling agreements between Ireland and Sudan was also considered but by 1985 it was clear that other EEC Member States who had negotiated a number of rescheduling agreements with the Sudan were not being paid either. It was accordingly considered to be of little benefit to attempt to negotiate a further rescheduling with the Sudan.

6.Although it is still theoretically possible that the Sudanese will begin to repay us under the terms of the original agreement the position is that the Sudan is totally dependent on overseas aid and realistically, therefore, the money in this case must be written off.

Repossession

7.A decision was taken to pursue a rescheduling agreement with the Sudanese Government in view of the fact that the debt was a sovereign debt. Once the rescheduling agreement was signed, that ruled out the question of repossession. The fact that the Sudanese Government reneged on payments in theory raised again the question of repossession. However, given the length of time which had elapsed since the barges were first delivered the task of locating, identifying and repossessing the barges and other equipment was seen as extraordinarily difficult if not altogether impossible. The cost of such a course of action when measured against the prospect of success would have been and remains prohibitive.

8.Export credit insurance cover has not been available for Irish exports to the Sudan since 1979. In view of the continuing chronic economic situation of the Sudan, further cover will not be made available for the foreseeable future. There is accordingly no possibility of a similar situation occurring with Sudan.

APPENDIX 24

At the PAC meeting of 21 January on the Industry and Commerce Vote (Appropriation Accounts 1985), I undertook to provide the Committee with details of the receivership costs in the case of Verolme Cork Dockyard. I now attach that information together with a short background note.

VEROLME CORK DOCKYARD (IN RECEIVERSHIP)

General

The Company was put into receivership on 3 December 1984 by Fóir Teoranta which had a 47.5 per cent holding in the company and was also a substantial creditor. Since that date, numerous parties interested in acquiring the Yard have visited the site and inspected the facilities. To date, however, it has not been found possible to dispose of the Yard though efforts to secure a purchaser are being actively pursued by the Receiver. Certain assets are being leased by the Receiver on a short term basis to local interests for the carrying on of ship repair operations.

To date, two Receivers have acted; the first for a six month period to 4 July 1985 and the second from 4 July 1985 to date. Details of the costs of the receiverships, including the Receivers’ fees, up to 31 December 1987, together with an estimate for the 6 months to 30 June 1988, are set out below.

Note: Receivership costs to date have been met from funds available to the Receivers from dealing with the assets of the company during the receiverships. They do not include rates of approximately £200,000 — to 31 December 1987 — as rates will become payable only if the fixed assets are sold.

APPENDIX 25

VEROLME CORK DOCKYARD LIMITED — IN RECEIVERSHIP

I acknowledge receipt of your letter of 22 April 1988 in relation to attendance at the meeting of the Committee to be held on 19 May 1988.

As you will be aware my appointment as Receiver arises out of the various Companies. Acts culminating in the Consolidation Act of 1963. My duties as Receiver are clearly set out and the Receiver’s Abstracts have been filed in accordance with the Act. I enclose herewith copies of Receiver’s Abstracts filed with the Companies office for your attention.

I consider the submission of the above information to be more appropriate than a personal appearance. I hope you will understand my position.

COMPANIES ACTS, 1963 to 1977.

RECEIVERS ABSTRACT

Itemised description of the assets of the Company of which possession has been taken since appointment of receiver.	Date on which possession was taken.	Estimated realisable value included in statement of affairs under section 319 (1) (b).
The Statement of Affairs required under section 319 (1) (b) of the Companies Act 1963 has not been filed.

Receipts	£	p
Abstract brought forward from previous Receivership.
Brought forward from last abstract	4,013,997	00
Debtors	12,426	03
Sales	18,324	70
Miscellaneous Income	193	80
Interest Received	72	69
Redundancy Rebates	127,946	05
Pension Fund	41,702	68
Customs Refunds	13,734	30
House Mortgages	2,307	16
PRSI Refund	440	23
AnCo Refund	6,324	48
Cork Shipyard Offshore	440	90
Benevolent Fund	95	63
Social Club	50	00
Insurance and Telephone Refund	109	57
VAT	4,475	14
Cork Land Engineering	30,000	00
Carried forward	4,272,640	36

Payments	£	p
Abstract brought forward from previous Receivership.	1,505,384	00
VAT	21,906	68
Creditors	2,250,894	76
Statutory Redundancy	2,054	50
wages	49,815	01
Maintenance Costs	359	79
Admin. Costs	17,411	60
Office Expenses	2,659	07
Cork Land Engineering	40,080	00
Receiver's Fees	35,000	00
Receiver's Expenses	1,755	00
Security Costs	1,904	09
PAYE & PRSI	222,165	62
Power and Fuel	6,645	02
Assets Disposal Costs	9,774	66
Legal Expenses	3,194	57
Harbour Dues	4,756	85
Insurance	29,961	57
Carried forward	4,205,722	79

Payments	£	p
Brought forward	4,205,722	79


Carried forward to next abstract	4,205,722	79

COMPANIES ACTS, 1963 to 1977

RECEIVERS ABSTRACT

Itemised description of the assets of the company of which possession has been taken since appointment of receiver	Date on which possession was taken	Estimated realisable value included in statement of affairs under section 319 (1) (b)
The Statement of Affairs required section 319 (1) (b) of the Companies Act 1963 has not been filed.

Receipts	£	p
Brought forward from last abstract	4,272,640	36
Debtors	30,805	22
VAT	76,720	32
Sales	24,619	96
Redundancy Rebates	70,300	58
Cork Land Engineering	65,980	00
(Misc.) Other Assets pre-Rec.	9,084	35
Insurance Claims pre-Rec.	43,165	39
Refund Bond Deposit	10,389	62
Telephone & ESB Refunds	450	07
Refund of Labour costs	410	00
Carried forward	4,604,565	87

Payments	£	p
Brought forward from last abstract	4,205,722	79
VAT	13,846	84
Creditors	52,022	59
Statutory Redundancy	593	40
Wages	37,366	17
Maintenance Costs	3,411	19
Admin. Costs	15,260	60
Office Expenses	403	03
Cork Land Engineering	340	00
Receiver’s Fees	15,000	00
Receiver’s Expenses	2,160	40
PAYE & PRSI	627,119	05
Power and Fuel	12,822	05
Asset Disposal Costs	21,949	92
Legal Expenses	2,495	00
Harbour Dues	4,131	80
Insurance Costs	55,938	33
Advance Payments Costs	677	12
Other Liabilities pre-Rec.	1,009	00
Redundancy Extra-Stat. (pre-Rec.)	1,384	10
Tax Advice	500	00
Interest Paid	1,152	14
Carried forward	5,075,305	52

Receipts	£	p
Brought forward	4,604,565	87


Carried forward to next abstract	4,604,565	87

Payments	£	p
Brought forward	5,075,305	52
Carried forward to next abstract	5,075,305	52

COMPANIES ACTS, 1963 to 1977

RECEIVERS ABSTRACT

Itemised description of the assets of the company of which possession has been taken since appointment of receiver	Date on which possession was taken	Estimated realisable value included in statement of affairs under section 319 (1) (b).
The Statement of Affairs required section 319 (1) (b) of the Companies Act 1963 has not been filed.

Receipts	£	p
Brought forward from last abstract	4,604,565	87
VAT	22,789	27
Pre-Receivership Debtors	10,116	03
Sale of Stock	1,526	00
Redundancy Rebates	31,322	88
Receivers Insurance Claim (roof repairs)	975	00
Refund of Labour Costs	193	00
Hire of Plant	18,054	46
Refund of ESB Costs	5,949	98
Refund of Telephone Costs	577	74
Receivers Insurance Costs	34	99
Pre-Receivership Insurance Claims	4,697	70
Asset Disposal	305	10
Other Assets pre-Receivership	1,323	33
Refund of Water Costs	351	36
Deposit Account Interest	1,872	42
Cork Land Engineering	14,520	00
Pre-Receivership Insurance Claim	102,203	90
Refund Receivers Insurance Costs	12,440	10
Carried forward	4,833,819	13

Payments	£	p
Brought forward from last abstract	5,075,305	52
VAT	17,842	02
Pre-Receivership Creditors	116,431	90
N. Holland Receivership Creditors	8,853	21
Wages	58,180	32
Maintenance Costs	1,667	36
Administration Costs	24,858	65
A. Hofler's Fees	17,500	00
A. Hofler's Expenses	4,320	15
Rec. PAYE and PRSI	22,177	26
Power and Fuel	13,040	10
Asset Disposal Costs	43,040	58
Legal and Professional Costs	5,290	00
Harbour Dues	7,195	52
Water Rates	300	00
Adv. Payment Costs	993	39
Sale of Stock	120	00
Pre-Receivership PAYE/PRSI	1,323	33
Receivership Insurance Costs	5,645	19
Carried forward	5,424,084	50

Receipts	£	p
Brought forward	4,833,819	13
Carried forward to next abstract	4,833,819	13

Payments	£	p
Brought forward	5,424,084	50


Carried forward to next abstract	5,424,084	50

COMPANIES ACTS, 1963 to 1977

RECEIVERS ABSTRACT

Itemised description of the assets of the Company of which possession has been taken since appointment of receiver	Date on which possession was taken	Estimated realisable value included in statement of affairs under section 319 (1) (b)
		£
Bank Balance		1,957,365
Cash on Hand		5,401
Trade Debtors		842,950
Loans and Sundry Debtors		1,092,045
Stock in Trade		320,000
Bank Guarantee Bond Deposit Account		195,529
Pension Scheme Fund		935,000
Property		255,000
Interest in Subsidiaries		96,242
Leasehold Property		1,929,670
Gross Assets		IR£7,629,202

	If realised
Date of realisation	Purchaser	Proceeds of realisation
3/12/1984	Opening Cash (see note 1)	2,060,470
3/12/84–5/6/87	Various	1,114,585
3/12/84–5/6/87	Various	884,606
3/12/84–5/6/87	Various	350,407
3/12/84–5/6/87	Various	10,389
3/12/84–5/6/87	Various	941,703
3/12/84–5/6/87	Various	288,326
3/12/84–5/6/87	Various	71,037
	Note 1: Opening balance including IR£96,231 guarantee Bond released on 31/12/1984. Guarantee Bond is shown elsewhere on statement of affairs.

Receipts	£	p
Brought forward from last abstract	4,833,819	13
Pre-Receivership Debtors	841	36
Pre-Receivership Insurance Claim	23,564	90
Asset Disposal	3,120	00
Sale of Stock	5,702	90
Interest of Guarantee Deposit	16,571	99
Sale of Property	288,326	00
Subsidiaries	516	13
VAT	9,468	63
Hire of Plant	8,350	00
Deposit Interest Earned	200,011	71
Malicious Damage Claim	579	00
Refund on Telephone	64	08
Refund on Electricity Costs	3,822	47
Refund on Water Costs	112	38
Pension Fund	900,000	00
Carried forward	6,294,870	68

Payments	£	p
Brought forward from last abstract	5,424,084	50
VAT	12,072	12
Wages	43,001	83
Maintenance Costs	1,150	88
Administration Costs	17,711	91
Receiver's Fees	12,500	00
Receiver's PAYE/PRSI	32,118	98
Assets Disposal Costs	6,510	68
Legal and Professional Costs	5,456	59
Harbour Dues	6,669	22
Telephone Costs	2,658	45
Pre-Receivership Creditors	14,148	86
Power and Fuel	12,230	00
Pre-Receivership Debt Collection	230	25
Foreshore Rent	4,345	50
Receivers Expenses	300	00
Insurance Costs	64,747	47
Tax Advice	500	00
Advance Payment Guarantee Costs	360	85
PAYE Pre-Receivership	200,000	00
Carried forward	5,860,801	09

Receipts	£	p
Brought forward	6,294,870	68
Carried forward to next abstract	6,294,870	68

Payments	£	p
Brought forward	5,860,801	09
Carried forward to next abstract	5,860,801	09

APPENDIX 26

At my meeting with the Committee on 21 January, 1988, I promised to submit material on the question of the classification of certain expenditure of the Irish Film Board as capital.

At that meeting Deputy Crotty asked how many firms the Irish Goods Council would have consulted in relation to import substitution in 1985. The Annual Report of the Irish Goods Council, a copy of which is attached for reference, gives considerable detail of the Council's activities. It sets out, at page 23, the number (2,288) of personal calls by the Council's marketing personnel to industry, with the objective of facilitating market information flow. This would be the most relevant figure in the context of the Deputy's question.

(a) Irish Film Board

This Act provided that the Minister for Industry and Commerce might make, out of monies provided by the Oireachtas, grants to the Board to enable it to perform its functions and to meet its administrative and general expenses.

The Act provided that the Board might provide various forms of assistance including:

(1)investing in or making a loan or a grant to defray in whole or in part the cost of the making of a film wholly or partly made in the State;

(2)the making of grants to defray in whole or in part the cost of providing training for persons in all aspects of the making of films;

(3)the provision of monies for general activities in accordance with the Board's general functions.

2.The Board maintained separate administration and capital accounts, the latter dealing with financial assistance provided by the Board in connection with the making and development of films.

Over 80% of this assistance took the form of advances to film makers specifically for the production of motion pictures. The balance would have included development loans, grants to film festivals and professional/legal fees.

An amount equal to the investments made by the Board was transferred to the Capital Reserve. Because of the nature of advances to film makers, and development loans, a provision amounting to 50% of all such advances and loans issued was made by the Board in its accounts for their possible non-recovery.

3.The separation of income/expenditure into administration/capital accounts was in line with approved accounting procedures, having regard to the nature of the expenditure. This separation was agreed to after detailed discussions involving the Film Board, the Departments of Industry and Commerce and Finance, and the Office of the Comptroller and Auditor General. The Paramount consideration in this regard was the radically different nature of the types of expenditure included in the separate accounts.

4.In the Irish Film Board Act, 1980, a clear distinction was made between administrative/general expenses and monies to enable the Board to perform its functions (Section 5).

This was reinforced by Section 10 which sets a specific ceiling on the amount of investments, loans, grants or other monies which might be provided by the Board under Sections 6 and 8 of the Act. These Sections essentially defined the direct and infrastructural assistance the Board might provide to the film industry in the context of its general investment role under Section 4 of the Act whereby it was to “assist and encourage by any means it considers appropriate the making of films in the State and the development of an industry in the State for the making of films”. Copies of Sections 4, 5, 6, 8 and 10 are attached.

5.As a general consideration, it is relevant to point out that the Revenue Commissioners regard the expenditure incurred in the making of the master negative of a film as eligible for capital allowances for tax purposes, thus confirming the capital nature of such expenditure.

Irish Film Board Act, 1980.

4.—(1)In addition and without prejudice to any specific functions given to it by this Act, the Board shall assist and encourage by any means it considers appropriate the making of films in the State and the development of an industry in the State for the making of films, and may engage in any other activity (including the establishment of a national film archive) which it is empowered by the Act to engage in.

(2)In so far as it considers it appropriate, the Board shall have regard to the need for the expression of national culture through the medium of film-making.

(3)The Board shall have all such powers as are necessary for or incidental to the performance of its functions.

(4)Without prejudice to the generality of subsections(1) and (3) of this section, the Board shall have power to participate and promote participation in international collaborative projects in accordance with any of its functions under this Act and, where appropriate, to enter into agreements with comparable bodies outside the State, subject to the consent of the Minister and the Minister for Finance and, where appropriate, to consultation with the Minister for Foreign Affairs.

5.—The Minister, with the consent of the Minister for Finance, may from time to time make, out of moneys provided by the Oireachtas, grants to the Board to enable it to perform its functions and to meet its administrative and general expenses.

6.—(1)The Board may invest in, or make a loan or a grant to defray in whole or in part the cost of the making of, a film wholly or partly made in the State.

(2).The making of an investment, loan or grant under this section shall be subject to such terms and conditions as the Board may think proper, including terms and conditions relating to the repayment to the Board of any moneys paid by it and payment of interest on any such money.

8.—(1)The Board may, subject to such terms as it thinks proper, make grants to be used to defray in whole or in part the cost of providing training for persons in all aspects of the making of films.

(2)The Board may provide moneys, subject to such terms as it thinks proper, for general activities in accordance with its general functions specified in section 4 of this Act.

10.—The aggregate amount of any investments, loans, grants or moneys provided by the Board under sections 6 and 8 of this Act, together with the aggregate amount of principal and interest which the Board may at any one time be liable to repay on foot of any guarantee under section 7 of this Act for the time being in force, together with the amount of principal and interest (if any) which the Board has previously paid on foot of any guarantees and which has not been repaid to the Board, shall not exceed £4,100,000.

(b) Irish Goods Council

Main Activities	Objectives	Results				Costs
			'83	'84	'85
5.Placement of Marketing Graduates in Industry
	Main Objectives:
	Upgrade marketing skills in companies who do not already employ professional marketing personnel	Number of Graduates Placed	8	47	63	1983 — £23,000
		Of which estimated Number of Graduates to be retained permanently after elapse of subsidy period	6	38	45	1984 — £116,000 1985 — £147,000
NOTE This Programme is funded by the Youth Employment Agency from the Employment Levy.

APPENDIX 27

At my recent meeting with the Committee, I agreed to review the material submitted in relation to the Bread Subsidy Scheme, in the light of the comments made by Deputy Crotty that the points raised by him had not been answered.

I would first like to reiterate that I was satisfied that the points raised by the Deputy were dealt with in our response. I would like to assure the Committee that where I give an undertaking to supply additional information it would always be my intention to fully comply with this. While the material was forwarded by Mr. A. McGrath to you, it had, in fact, been seen, and cleared, by me.

While, having reviewed the papers, I remain satisfied that the procedures were satisfactorily outlined, it is clear that Deputy Crotty takes a different view and perhaps it would be helpful if I elaborated on some of the points.

Firstly, the material supplied outlined the records required to be kept by the bakeries, and it would be these records which would be examined by the Inspector on his/her visits. In particular, the Inspector would examine the records of sales and returns by the bakery via shops, van men, agents, contracts, inter-bakery sales, etc. Records of flour and wheaten meal usages, for both subsidised and non-subsidised products, which as indicated must be kept, would also be examined.

Clearly the Inspector would not examine every record, on each visit. However, he/she would examine sufficient records to be satisfied.

In addition, the Inspector would carry out a visual check of production in the bakery, and would also carry out a visual check in any retail outlet attached to, or owned by the bakery.

This was an additional means of ensuring that actual production/sales was not out of line with the details recorded, and of checking the position regarding returns.

As indicated, the general practice was to have regular inspections of bakeries — up to 3–4 times p.a. Where deemed necessary, more frequent visits would be undertaken. The Inspector would make a report to the Bread Subsidy Section on each inspection, and periodic conferences would be held between the Section management and the Inspectorate to ensure uniformity in approach and that the procedures regarding records and substantiation of claims were being adhered to. On occasion, the Inspector would be accompanied by an officer from the Central Bread Subsidy Section. This ensured that the Inspector did not deviate from the procedures to be followed and this, together with the detailed reports required to be submitted by the Inspectorate, ensured that proper monitoring was taking place.

On the question of a standard procedure, the position was basically that while the trading practices of different bakeries might vary, they would each be required to maintain records sufficient to allow for complete substantiation of all claims. As indicated in the explanatory notes, issued to bakeries, it was necessary to submit quarterly certificates from their auditors certifying that proper books and records had been kept and that the amounts claimed were correct, to the best of the auditors' knowledge and belief.

If the Committee require additional information, might I suggest that you let me have details of the points at issue. This would, perhaps, avoid a further lengthy discussion on the Bread Subsidy Scheme when the Committee next reviews the Industry and Commerce Vote although, I have, of course, no objection to participating in any discussion, long or short, on the matter.

APPENDIX 28 (a)

DEPARTMENT OF SOCIAL WELFARE.

Summary of the Reports on Review of Payment Systems conducted by Craig Gardner, Management Consultants

Introduction

In August 1986 consultants were commissioned to carry out a security review of the Department's payment systems. The firm of Price Waterhouse/Craig Gardner were asked

“to examine the major payment systems in the Department with a view to establishing where they were most at risk, and to advise on the best cost-effective measures to keep these risks to a minimum”

•the Department was going through a revolutionary phase in terms of modernising its many diverse payment systems and wanted to have an objective assessment of its approach by reference to independent criteria,

•concern, arising from adverse media comment, that the current attempts to limit fraud were not seen to be fully effective or, indeed, adequate.

The review was carried out in two phases between August 1986 and September 1987. It dealt with:

The consultants' reports, which run into several hundred pages, deal with operation and organisational matters. They contain detailed information and recommendations about protecting the schemes from abuse. The publication of the reports, in the view of both the management of the Department and of the consultants, would inevitably increase the exposure of the scheme to abuse. The reports and specific findings will not therefore be published.

Nevertheless, the recommendations could affect in a fundamental way the manner in which services are delivered by the Department. While many of the new internal working arrangements would not be immediately apparent, others envisage substantial changes in the service as it is seen by the public. For example, they involve greater emphasis on local service and control, more in-depth examination of identity issues and possible new payment methods. In view of this and the continuing level of public interest, the Department has decided to present a summary of the major findings and recommendations in this booklet.

Consultants' Assessment of the Situation

Arising from their lengthy and detailed examination, the overall assessment of the consultants was that there is serious exposure to abuse at many points of the systems. Their study included an assessment of current operational methods as well as planned future strategies and developments. The broad conclusion of the consultants was that the directions the Department were already taking were substantially correct. They found, however, that the problems begin with overall attitudes to social welfare abuse. These attitudes contribute to the problem. They identified organisational and procedural weaknesses, the inadequacy of certain control procedures and the difficulties which reliance on outside agencies can cause. They saw scope for increased efficiency in a number of areas.

The consultants highlighted the fact that the Department is working under constraints of a fundamental character which require remedial action. Among these are

•the large volume of work to be processed. Until the amount of day-to-day routine work is reduced by changes, including some of a policy nature, effective measures to combat abuses will be difficult to implement,

•the organisational and management structure of the network of local offices, their relationships with other units and their linkage to the Department's headquarters are seen to be inadequate.

•the Department carries out its tasks against a background of largely complementary, but often competing objectives, viz:

—to provide a dignified, courteous, speedy, efficient, and effective service to meet the statutory entitlements of claimants, and

—to ensure that the systems and procedures are operated so that they are secure against abuse either internally or externally.

Public opinion and pressure, focuses from time to time on one or other of these objectives but rarely on both,

•the huge problems associated with making a quarter of a million unemployment payments each week on time with the present staffing, accommodation and very limited support of computer systems (16 per cent of these cases on computer at the time the consultants concluded their fieldwork but increasing month by month in the meantime as computerisation programme advances).

•the current level of expenditure on administration for the Department as a whole (4 per cent of budget) was seen as over ambitious (i.e. too low in the short term). Yet there is an increasing demand on the system to curtail costs, in particular to restrict staff numbers.

•the Department's dependency on other agencies to supply information and services that assist in detecting and preventing fraud.

Recommendations

The consultants made recommendations in relation to these and many other matters. They saw a major need to address the problem of public attitudes to social welfare fraud. They report that fundamental changes are necessary in the way the Department is structured to deliver services, in the way in which it relates to outside persons and agencies and in the way it implements controls.

They have made several hundred detailed recommendations on various aspects of the Department's controls and procedures. A number of the recommendations raise policy issues which have repercussions beyond the Department, viz.

Identification of claimants

•A secure means of identification is needed on a national basis in the longer term. However, important interim improvements involving new arrangements to control the allocating of RSI numbers are feasible and should proceed quickly,

•As long as the RSI number continues to be the primary identification within the payment systems, there should be a single authority with responsibility for issuing such numbers. This responsibility should rest with the Department of Social Welfare.

Relationships with outside agencies

•A considerable increase in the co-operation between the Revenue Commissioners and the Department will be required to ensure the success of many of the other recommendations made in the reports.

•Benefits would derive in the longer term from integrating the social welfare system and the employment aspects of the National Manpower Agency (since incorporated in Foras Aiseanna Saothair, the new agency incorporating the National Manpower Agency, AnCO and the Youth Employment Agency),

•Supplementary Welfare Allowance and related schemes currently administered by Community Welfare Officers of the Health Boards should be brought under the control of local Department of Social Welfare management,

•Employers should have greater responsibility in preventing abuse, for example a transfer of responsibility for the initial periods of Disability Benefit to employers would permit a major improvement in the security of the system.

•The Department should undertake a publicity campaign to gain support in preventing fraud and in identifying areas of abuse.

Findings on Public Perception

The consultants used the services of a market research company to carry out a survey aimed at establishing the public perception of the level of abuse. The survey indicated that there is a fairly widespread view that there is much abuse of the social welfare systems. It is acknowledged that lack of knowledge about what constitutes an abuse may contribute to that view. The survey also indicates, though perhaps less clearly, that in general the public would be supportive of efforts to apply the current rules and penalties more forcefully.

Key Service Issues

In the specific recommendations relating to the short-term payment schemes the consultants make a number of recommendations which are also of a policy nature and which will directly improve the quality of service to claimants. Among these are

•In relation to unemployment payments, a move to more selective signing, along with more systematic and selective reviews of individual claims,

•Alternative and more secure payment systems to be deployed, coupled with the abolition of universal weekly signing,

•A move away from cash and movement towards new methods of payment to allow flexibility, e.g. in the use of cheques, Electronic Fund Transfer, Post Office Warrants.

•The focusing of more positive methods of review on categories of claims which are known to be high risk.

•Provision of the comprehensive range of services from local Department offices.

Organisation and Procedures

The majority of the specific recommendations are made in this area. The consultants indicate that the Department's local offices should be grouped under a regional structure. This will improve the span of control of individual managers and will require a new layer of management at regional level between the local offices and headquarters. The work of the reorganised local offices should be segregated along new lines to ensure better control and a better service. The consultants stipulate that the accommodation of the offices will have to be improved and more will be needed at local level.

The consultants propose that while all phases of claim processing must be reviewed, increased checks on the identity of the claimant at the “take on” phase of the claim will be a vital element. The RSI number should be used as the reference number for all claims. It is also recommended that employers should obtain a clearance certificate from the Department's local offices when taking on a new employee.

Estimating the Level of Abuse

The consultants assisted the Department in developing and using statistical sampling methods to estimate the levels of abuse. A methodology has been established and the experience gained has been used as a foundation by the Department to carry out a limited review of a sample of payments on foot of unemployment and disability benefit claims. The sample was restricted to the Dublin area. Our findings indicate that in Dublin some 2 per cent by number of unemployed payments and some 1 per cent by number of disability benefit payments are based on claims which contain some clear element of fraud. An estimate was made in each such case of the amount of the overpayment arising from the fraudulent element of the claim. Combining those estimates suggests that the value of such overpayments would be in the region of £3.6 million in a full year; of that amount, £2.9 million would arise in the unemployment payments and £0.7 million in the disability benefit payments. In terms of monetary expenditure these figures represent some 1.6 per cent in the case of unemployment payments and some 0.8 per cent in the case of disability benefit payments. Additionally the review showed that 7 per cent of the sample gave rise to suspicion on the ground that the facts of the case did not check out at the initial interview. Later investigation of these cases showed that only a minimal number were clearly fraudulent while two thirds were found to be actually bona fide.

The application of these techniques is still at a relatively early stage and reliable nation-wide estimates of the level of fraud or abuse are not available. Considerably more work needs to be done, procedures need to be further refined and sampling extended. The work done so far has, however, been of considerable benefit in giving indications of levels of abuse and in helping to identify its most prevalent forms. When further refined it will provide a way of monitoring the extent to which the weaknesses or exposures in the systems identified by the consultants are in fact being abused. It will also provide a technique for evaluating the effect of changes in procedures in combating fraud.

Implementation

The reports highlight weaknesses in the Department's operations which need to be addressed. The Department is committed to tackling these issues.

APPENDIX 28 (b)

CHEQUE REPLACEMENT.

1.The need to replace cheques/payable orders arises where the payment is reported as not having been received or where changes are required e.g. order out of date because it was not cashed in time. In many cases cheques are lost in transit in the post and are never cashed.

2.The majority of cases relate to cheques issued under the Disability Benefit scheme.

Where the non-receipt of a cheque is reported by a claimant, a “stop payment” notice is immediately put on the relevant cheque record in the Department. An indemnity form is sent to the claimant seeking his/her agreement that in the event of the Department issuing a replacement cheque, the claimant will return the original cheque to the Department, should it come into his/her possession, or refund the value of the original cheque, if it emerges that the cheque had in fact been cashed by the claimant. (Experience has shown that in some small number of cases the claimant will have cashed the cheque and forgotten about it or delays in the postal system may cause the original cheque to arrive late and it is then cashed by the claimant in mistake as the replacement.)

Where on return of the completed indemnity form the records of the Department indicate that the cheque has not been cashed, a duplicate is sent to the claimant and the Department is in a position to “bounce” the original cheque to the bank under the new Cheque Reconciliation system if it subsequently is cashed.

Where on return of the indemnity form the records of the Department show that the original cheque had in fact been cashed, follow-up action includes a comparison of the signature on the cheque against the claimant's signature. If the signatures match and there is reason to believe that he has cashed the cheque, he is so advised in writing and, where necessary, a photocopy of the cashed cheque is sent to him. No replacement cheque is issued. Where there is no reason to believe that the claimant cashed the cheque, a replacement is issued provided the indemnity form has been completed. In that situation the matter is further investigated by the Department and the Gardaí notified, if necessary.

3.Over 3,300 cheques/payable orders valued at £250,000 approximately were replaced for claimants by the Department in 1987.

Of these, approximately 2,700 were in respect of cheques issued in the weekly payment of Disability Benefit—out of a total of over four million cheques issued under that scheme in the year.

APPENDIX 29

LEVEL OF OVERTIME WORKING IN THE DEPARTMENT OF SOCIAL WELFARE

1.The possibility of reducing the level of overtime spending and replacing it by additional staff was raised by the Committee during the discussion of the 1985 and 1986 Appropriation Accounts.

2.When the need for additional resources arises in the Department of Social Welfare, for example because of an increase in the number of claimants on the Live Register or the introduction of new schemes or extension to existing schemes, all of the resources options whereby the work might be carried out are considered.

3.In considering whether overtime or additional posts are required the following types of issues are relevant:

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

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

—in certain cases, new schemes or procedures might require overtime in their initial stages only when they are being developed. In general, the development and implementation of would require experienced staff. Once the new systems are in place, the assigned staff can generally deal with the on-going work without recourse to regular overtime.

—having tasks completed by a smaller number of officers including overtime rather than by a larger number without overtime can save on items such as accommodation and VDU terminals and can enable better and more sustained use of capital intensive items such as computers.

4.For reasons such as these it would simply not be possible to totally replace overtime working with new posts. However, the level of overtime working in the Department, is closely monitored and the possibility of creating permanent job opportunities in lieu of overtime is kept under review. However, control over the recruitment/redeployment of additional staff rests with the Department of Finance and is subject to the embargoes and constraints on public service numbers imposed by the Government.

The level of overtime working in the Department in recent years is as follows:—

The figures show that overtime spending in the Department of Social Welfare has been relatively stable in recent years in spite of increase in pay levels which occurred in the meantime.

APPENDIX 30

JOBSEARCH PROGRAMME.

1.The National Jobsearch Programme, is operated by the Department of Social Welfare in conjunction with the National Manpower Service and AnCo, now FÁS. The jobsearch course provides two weeks intensive coaching in job-seeking skills and two weeks applying these skills in practice.

2.The 1987 Jobsearch Programme targets in relation to those on the live Register were as follows:—

Placement of interviewees: (i) schemes, programmes and job vacancies (as confirmed by employers) 35,676; (ii) Jobsearch course: 10,320.

4.An additional 118 staff were made available to the Department of Social Welfare to operate the Programme by way of redeployment from other Government Departments and Agencies. Accordingly, there was no additional cost to the Exchequer in respect of the salaries of the 118 staff.

The main costs of the administration of the Jobsearch Programme in the Department of Social Welfare in 1987 were as follows:

Costs in 1988 will be £1,230,000 approximately—this is a fully year cost whereas the costs in 1987 were for at most nine months only.

APPENDIX 31

During my appearance before the Committee in connection with the 1985 Appropriation Accounts I undertook to respond by letter to specific questions asked by members of the Committee on the redeployment of professional staff from the Farm Classification Office.

FARM TAX—PROFESSIONAL STAFF

At the time of the change of Government last year some 91 staff on loan from the Department of Agriculture were engaged in the classification of land under the Farm Tax Act. Although the Government decided to abolish this activity, it decided to collect tax for the year 1986. This decision entailed dealing with all the initial appeals then on hands and the professional staff of the office were fully engaged on this work until the end of June, 1987.

The entire staff of the Office was placed with effect from 1 July, 1987 on the payroll of the Department of Agriculture and that Department was notified that the loan of these staff (other than the Commissioner, the Chief Inspector and one Senior Inspector required in connection with appeals to a statutory tribunal) was being terminated with effect from the end of June, 1987.

It was recognised by both the Department of Finance and the Department of Agriculture that the Land Commission work on which the Inspectors had originally been deployed could not absorb the full complement of returning officers and that, in the long term, most of them would be surplus to the requirements of the Department of Agriculture. The short-term engagement on such work of any significant number depended on the stance adopted in regard to the disposal of the Commission's land bank where different options (e.g. free sale of selective redistribution) had significantly different manpower implications. The legal implications of each of these options was under consideration by the Government's legal advisers and final decisions to operate on the redistribution basis were not taken until spring 1988.

The Inspectors were, with a few exceptions, graduates in Agriculture with pass degrees. The only other areas of the public service which employ Agriculture graduates are:

—the Agricultural Inspectorate for which an honours degree is required and where most of the posts involve specialised qualifications and experience which Land Commission and Farm Tax staff do not possess. The Inspectorate is in any event adequately staffed;

—the Valuation Office (which recruits graduates in various disciplines, including Agriculture, as Valuers) but which is adequately staffed at professional level;

There were, therefore, no posts in the civil service or in the wider public service requiring the particular skills and qualifications held by the Inspectors into which they could be absorbed.

The Revenue Commissioners were prepared to engage Farm Classification staff as Inspectors provided they were found suitable for that work after a selection process carried out by the Civil Service Commission. Twelve Inspectors have been so selected.

Following contact during the autumn between my Department, the Department of the Marine and the Fisheries Boards, two Inspectors were selected to fill vacant posts as Managers of the Northern and South-Western Fisheries Boards and took up office in January, 1988.

In order to provide scope for redeployment early retirement was offered generally in the Civil Service to staff over the age of 50 in September, 1987.

The Farm Tax personnel are included with other civil service groups and surplus staff from certain state bodies in a redeployment pool from which staff are being selected to fill posts throughout the civil service which have been vacated under the early retirement scheme for over-50s. Competitions for these posts are now being held by the Civil Service Commission.

There are at present no other groups in the civil service whose work has terminated and which have not been redeployed.

APPENDIX 32

Further to my appearance before the Committee on 18 February, 1988 I enclose a Note for the Information of Committee Members in relation to certain aspects of the Letterkenny Airport Project.

NOTE FOR THE INFORMATION OF THE PUBLIC ACCOUNTS COMMITTEE IN RELATION TO THE LETTERKENNY AIRPORT PROJECT

Details of costs of the Public Inquiry, Arbitration Hearing and Value of the Land in question.

1.The Department of Tourism and Transport was advised by Donegal County Council on 10 June, 1985 that the projected costs of the Public Inquiry and Arbitration Hearing associated with the acquisition by the County Council of the land for the airport project would be about £100,000. It was expected that this expenditure would be incurred on discharging legal fees and the costs of expenses of expert witnesses.

2.Up to end March, 1988 payment in respect of legal fees and the expenses of expert witnesses amounting to £76,771 have been recouped by the Department of Tourism and Transport to Donegal County Council. These recoupments have been made by the Department of Tourism and Transport on the basis of sanction for expenditure by the Department of Finance and clearances for the levels of fees from the Chief State Solicitor's Office and, where appropriate, the Taxing Master of the High Court.

3.In all seventeen land holdings comprising 183.635 acres were required for the project. The arbitration proceedings which commenced in April, 1983 related to 182.2 acres for 6 main holdings and one minor holding. The Arbitration Award was signed in November, 1984. Agreement outside of arbitration was reached in relation to the remaining land.

Under the Arbitration award total compensation amounting to £452,860 was decided by the Arbitrator. This figure comprised the following items:

4.The Department of Tourism and Transport understands that the value of the land was assessed by the Arbitrator at the time on the basis of agricultural values. The appropriate rate settled by the Arbitrator ranged from around £1,500 per acre to just over £2,000 per acre, depending on the land in question. It is understood that there has been no professional valuation of the land in question since then. However, on the basis of informal discussions with the Valuation Office the Department of Tourism and Transport understands that the value of the land would not be likely to have altered significantly.

5.It is understood from Donegal Council that the land has recently been let by them following public auction for the eleven months commencing 1 March, 1988 for the cultivation of spring cereal and for grazing purposes.

APPENDIX 33

I refer to the Public Accounts Committee meeting of 25th February, 1988, which dealt with the 1985 and 1986 Appropriation Accounts for the Fisheries Vote of the then Department of Fisheries and Forestry. I promised to provide you with additional information on three issues raised by the Committee. I hope the following information clarifies the issues involved.

Leases for Sites in the Fishery Harbour Centres

I undertook to research the position regarding the letter of 12 February, 1987, from OPW to the Department which the Comptroller and Auditor General referred to during the meeting. Specific reference was made to the fact that in that letter substantially higher rents were referred to than those which had been agreed in relation to some of the leases.

On researching the position I find that the letter referred to by the Comptroller and Auditor General relates to the OPW Valuers's opinion of what the up-to-date valuation of the sites might be in the context of a rent review. The Department felt that while the revision of rentals could not arise until after the leases were finalised, it should nevertheless have an independent assessment of the value of these sites for rental review purposes. It was in that context that the OPW letter of 12th February, 1987 was invited. The Department has written to the companies involved informing them of the contents of OPW's letter. That letter will be taken into account (together with any other relevant information) when revision of the rent is being discussed. The immediate priority is the resolution of the remaining difficulties with the leases prior to their finalisation and execution. The second priority will be to get agreement on the revised rents.

The Valuer recommended a rental of £22,500 p.a. for the period 1981 to 1985 and £50,000 for the period 1986 to 1991. The background to this case is that Gallagher Brothers entered the site in April, 1981. The Company subsequently sought an extension of the site and commenced work on that extension in the spring of 1983. The rent of £22,500 recommended by the Valuer is on the basis of the extended site and he has agreed that it would not be appropriate to charge this amount for the full period.

The latest position is that the following rentals have been recommended by him—

As I explained at the recent Public Accounts Committee meeting, the leases cannot be completed until some areas of reclaimed foreshore are vested in the Minister for the Marine. I have recently written to the Chief State Solicitor asking for his assistance in completing the transfer. In the meantime, negotiations are taking place with Gallagher Brothers on the terms of the draft lease, including the level of rent as set out above.

The OPW Valuer has recommended a rent review of £10,000 with effect from November, 1985. The completion of the Swan Net lease is dependent on the transfer of areas of reclaimed foreshore to the Minister for the Marine as in the Gallagher case. There is a further complication with this site. The high water mark was incorrectly delineated on the most recent O.S. map for the area. A number of sites were registered in accordance with that incorrect high water mark. Unfortunately the Swan Net site was affected by those registrations. It is necessary to draw up a deed of rectification to resolve the issue. This can only be done after the reclaimed foreshore involved has been vested in the Minister for the Marine. It is intended to transfer all the reclaimed foreshore in Killybegs to the Minister for the Marine by one deed of conveyance and, as I indicated in relation to the Gallagher case, I have requested the assistance of the Chief State Solicitor in completing the transfer.

Negotiations are also in progress with the Swan Net Company about the terms of the draft lease cluding the terms of the rent review.

The OPW Valuer recommended a rent of £3,600 per annum from 1st April, 1985. The lease for the ice plant site has only recently been executed. Negotiations are taking place with B.I.M. on the review of rent.

I would like to take this opportunity to assure you that I fully appreciate the need to have these problems resolved as soon as possible. Every effort will be made to resolve these problems which have proved very intractable over a long period in the past, and to complete the leases as soon as possible.

Central and Regional Fisheries Boards.

I undertook to confirm in writing that the staff scheme for the Central and Regional Fisheries Board lays down the terms for travel and subsistence payments for the staff of the Boards, as I intimated at the meeting, this is, in fact, the case. These terms are appended to this letter for the information of the Committee.

Payment for Catching Pike

The question of making payments for pike removal also arose. The situation in relation to angling for pike should be put in context.

In areas of coarse fisheries (e.g. pike, perch, roach, bream etc.) it is Departmental policy to conserve pike. For this reason in December, 1986, the Conservation of Pike Bye-Law No. 654 of 1986 was made. This Bye-Law prohibits:—

(i)the taking and killing by any person of more than three pike on any one day; and

This Bye-Law is at present under review and, pending the views of the various interested parties, will be amended as necessary.

These coarse fisheries are particularly important in, for example, the Cavan/Monaghan area.

However in game fisheries (salmon and trout) pike prey on trout and salmon. For this reason the Regional Fisheries Boards carry out pike eradication schemes to keep the levels of pike under control. This Department does not allow blanket approval to fishing clubs to fish for pike at all times. However, in the case of clubs that wish to hold fishing competitions or pike removal operations on certain lakes, special arrangements can be made. A special authorisation can be issued by this Department to allow the club members to kill and have in their possession pike in excess of the numbers specified in the Bye-Law.

No compensation is paid by this Department or by the Central or Regional Fisheries Boards in respect of pike removal. The only instance of a payment which would be construed as being a form of compensation is the sponsorship by the South-Western Regional Fisheries Board of a pike angling competition to the tune of £500. However, the pike are returned to the lake alive during this competition.

APPENDIX 34

EXTRACT FROM STAFF SCHEME

Field Grades

Central and Regional Fisheries Boards

Central Fisheries Board

Travel Policy

It will be policy to provide transport, where feasible and economic, within each area/district for the discharge of a Board's functions.

Each Fisheries Board will supply suitable Board vehicles for this purpose. Car radios/telephone units and other necessary equipment/technology may be installed.

It will be the prerogative of management to determine policy and practices in relation to the nature, distribution and use of the Fisheries Board transport.

In general, no staff member will have exclusive right to any Fisheries Board vehicle and transport may rotate from one duty to another or from one staff member to another at appointed places and times as required by management.

Staff members will not normally have access to private use of any Fisheries Board vehicle, unless approved in special circumstances, which would be merely incidental to Fisheries Board use. In these circumstances, the Fisheries Board will be re-impursed the cost of any private use.

Fisheries Board transport will not normally be kept overnight in the vicinity of any residential premises where the staff member is residing except with approval, which can be reviewed at any time.

14.2The Central Fisheries Board may issue, from time to time, detailed staff regulations on the use of Fisheries Board transport.

Travel Expenses

15.1Where it is not feasible and economic for a Fisheries Board to provide transport, staff may be requested to provide their own transport and make it available to the Fisheries Board for approved travelling duties.

In these circumstances they will be entitled to payment in respect of prior approved journeys in accordance with and subject to rates and regulations obtaining in the Civil Service. The current mileage rate is set out in Appendix II.

All claims for travelling expenses must be made on the required form and be accompanied by completed work diary sheets. Each claim must clearly state:

15.2The Central Fisheries Board may issue from time to time detailed staff regulations in accordance with this policy for compliance by staff.

Sea Patrol Allowances

The following allowances will apply in settlement of all issues in respect of sea patrol work. Appendix III.

A special allowance of £18.00 (Rate A) will be payable to each staff member in respect of each 24 hour overnight stay on board the Naval vessel.

This allowance is exclusive of out of pocket expenses, i.e. mess bills, which will be refunded on approved claims separately.

A special allowance of £18.00 (Rate A) will be payable to each staff member in respect of each 24 hour overnight stay on board a Fisheries Board boat on patrol at sea. Provisions will be made available on board without charge

A special allowance of £23.25 (Rate B) will be payable to each staff member in respect of each 24 hour overnight stay on board a Fisheries Board boat on patrol at sea. The total cost of provision will be charged to staff.

The following allowances will be payable to each staff member in respect of time spent on board a boat on day/night patrol at sea.

Unsocial Hours

17.1Field staff engaged in fishery protection duties are required to be available over 24 hours each day through seven days each week and to work flexible hours throughout this period in accordance with the needs of fisheries protection.

17.2It will be a matter for management in consultation with staff to determine all working arrangements and if, when and how much unsocial hours work is required.

17.3Unsocial hours are defined as hours worked on Saturday, Sunday, Public Holidays and at night and extended periods of duty in excess of 8 hours per day and forty hours per week, in accordance with the seasonal demands of the job.

17.4An unsocial hours allowance will be payable only where these requirements are met fully and where unsocial hours are actually worked on fisheries protection work.

17.5The maximum allowance payable in respect of any week will be £28.39 or £1,481 per annum. (Appendix IV).

17.6A staff member, who has the opportunity and does not reach sufficient levels of unsocial hours work will have the allowance reduced or withdrawn.

Subsistence

18.1Subsistence expenses will be paid within the rates authorised from time to time for the Civil Service. The current are set out in Appendix V

Subsistence allowances are payable only in respect of necessary and approved absences from base.

Subsistence is not intended to meet the whole cost of living when absent from the designated base or home on official duties, but only the extra expenses necessarily incurred through such absence. It is not intended to be a source of emolument or profit.

All claims must be on a standard form and be accompanied by completed work diary sheets. Each claim must state:

In order to be entitled to the payment of subsistence day allowance, all the following criteria must be met:

a.A day allowance is not payable for an absence at any place within 20 miles of an officer's home or designated base.

b.Subject to paragraph (a) a day allowance will be paid in respect of an absence from home or designated base of 5 hours or more. Time spent at base or on journeys from home to base or vice versa will not reckon towards the qualifying period of 5 hours.

c.Subject to paragraphs (a) and (b) a day allowance may be paid in respect of an absence from designated base or home as follows:

A special lunch allowance up to the maximum of the 5 hour rate of day subsistence set out above may be payable in respect of a staff member's attendance on Board business in court where court business extended over the lunch period and where the terms of the day subsistence regulations would not otherwise entitle the staff member to a subsistence payment.

An overnight allowance (Rate C) may be paid for each night approved for residence away from home and base. The night allowance covers a period up to 24 hours from the time of departure as well as any further period not exceeding 5 hours. An overnight allowance will not be payable for any absence at any place where it would be more economic to the Board for the staff member to commute.

The following will be paid for continuous absence away from designated base or home in any one place:

When detention rate ceases to be paid a staff member, who is obliged to maintain his/her household while absent, may be paid vouched extra expenses necessarily incurred within reasonable limits.

Provided that there would be no loss of official time in travelling, a staff member may return to his/her designated base at week-ends or for Public Holidays. Travelling costs necessarily incurred in the most economic manner possible will be paid within reasonable limits. If, however, the staff member remains at his/her place of transferred duty he/she will be paid subsistence in accordance with the appropriate regulations.

A return to designated base at week-ends (unless it is certified that the staff member is required to attend for official purposes) or return on the occasion of a Public Holiday will count towards the period of stay at one place for purposes of reduction of subsistence allowance. The nights of the week-ends will be reckoned towards the periods after which reduced or lower rates of subsistence will apply.

Seasonal staff will not be entitled to day subsistence allowances. In special circumstances where a seasonal staff member is in fact put to significant extra expense for meals in consequence of his/her absence on duty from his/her normal area a special rate may be fixed.

The current rates of subsistence payable are set out in Appendix V and are based on the Civil Service rates. The rate of allowance is governed by the staff member's grade and scale of salary during the period of his/her absence from base.

The regulations in relation to all other areas of subsistence will be generally based on the Civil Service regulations. The Central Fisheries Board may issue further regulations in accordance with this policy for compliance by staff.

APPENDIX 35

POTENTIAL LOSSES UNDER SCHEME OF ASSISTANCE FOR EXPANSION OF CATTLE BREEDING HERD

This note covers the extent of actual losses prevented by Departmental checks or revealed by the Audit sample and also deals with the question of extrapolating the Audit results.

Departmental Checks—£732,000

The full text of the reply of the previous Accounting Officer dated 7 August 1986 to one of the three Audit Queries raised on 19 May 1986 is enclosed for the information of the Committee and gives an indication of the comprehensive nature of Departmental checks on this and similar schemes. As a result of these detailed controls, 677 herdowners were found at inspection by Departmental saff to have no increase in numbers as required by the 1984 scheme. This resulted in total disallowance of claims and a saving of £172,000. Similar reductions in numbers claimed compared to numbers found at inspection resulted in partial disallowances and a saving of £560,000 in approximately 3,500 other cases.

Losses Revealed by Subsequent Audit—£7,070

The three Audit Queries mentioned above related to 407 animals and a possible overpayment of £28,490. On detailed examination by the Department (which is not finally concluded) overpayments were deemed to have been made on only 101 animals at most or a possible overpayment of £7,070 in total. The reduction of 306 on the 407 animals queried arose mainly because (a) descriptions by vets of young cows as heifers or other unreliable descriptions could not be regarded as sufficient grounds for withholding payment to herdowners, (b) animals bought in before inspection or sold after inspection under the scheme but before a veterinary test were not ineligible, (c) animals whose cattle identity cards had not been notched by Departmental staff could not be deemed to have been ineligible particularly as they were in fact inspected on the ground.

Extrapolation of audit results—+£13,000

Extrapolation from a 1 per cent sample level might suggest possible saving of £707,000. If, however, all herdowners' files were checked in the same detailed manner as by the Auditor, a considerable extra cost would have been involved for the Department. Our experience is that cross-checks of applications and inspection reports with files in the District Veterinary Offices can take days rather than hours to complete but assuming it would take a minimum of two to two-and-a-quarter hours to check each file, some 64,000 man hours equivalent to the employment of 60 additional staff would have been required to perform the work. This would involve an additional staff cost of £720,000 per annum. To introduce further detailed controls on top of the comprehensive Departmental checks would therefore have cost the State £13,000 more than the possible extrapolated £707,000 savings referred to in respect of the 1984 Scheme.

General Comments

In the Accounting Officer's view it is unsound to extrapolate a sample audit result to the entirety of a scheme's payments. The matter must be looked at in a balanced context. This scheme was one based on 100 per cent inspection of animals and the controls applied were on balance the most efficient in the circumstances. Assessment of the administration of any scheme has to take into account whether on cost benefit grounds the field controls are deficient or indeed excessive. In this regard, it should be noted that the value of the scheme to the economy was over £100 million when the disposal value of maturity of the extra animals and the value of the increased milk quota generated are taken into account.

REFERENCE SHEET

APPENDIX 36

I enclose herewith a note from the Comptroller and Auditor General as requested by the Chairman at the meeting of the Committee on 10 March 1988 in connection with the discussion on Paragraph 36 of the Comptroller and Auditor General's Report on the 1985 Appropriation Account of the Vote for Agriculture.

1985

VOTE 38 AGRICULTURE

SUBHEAD D2 SCHEME OF ASSISTANCE FOR THE EXPANSION OF THE CATTLE BREEDING HERD

1.Each local office of the Department maintains a separate file for each herdowner in its area containing the grant application forms submitted under all incentive schemes including the calved heifer scheme. The local office also maintains a separate BTE file for each herdowner.

2.Herd inspections are carried out by departmental inspectors to verify the details on the application forms. The Inspecting Officer must verify simultaneously the number of animals eligible under all schemes, certify the application forms and return the file to the local office for checking and processing for payment.

3.A random selection of 263 herd files drawn from every county and representing 1 per cent of applicants was made by my staff. In each case the details on the calved heifer application form were compared with details shown on other incentive scheme applications made simultaneously by the herdowner in respect of 1984 grants and also with prior years applications all of which are held on the same file. They were also compared with the details shown on the separate BTE file. In addition a sample of cattle identity cards in respect of some of the animals claimed for were selected and examined to ensure that the required notching had been carried out. Notching of the cards is the means of ensuring that the same animal cannot be presented by more than one applicant.

4.These checks revealed a number of discrepancies, the following being the ones referred to in paragraph 36 of the 1985 report.

	Herds	Animals
(i)Animals accepted for 1984 calved heifer grants had been accepted for suckler cow grants in earlier years.	11	25
(ii)Animals accepted for 1984 calved heifers grants had already been accepted for calved heifer grants under the 1982 or 1983 scheme	6	9
(iii)Animals accepted for calved heifer grants in 1984 had already been declared as the dams of calves for the purposes of 1982 or 1983 Calf Premium Scheme.	2	3
(iv)Animals stated to have first calved in 1984 had, for the 1983 scheme, been shown as cows which first calved before 1 January 1983 and therefore ineligible even under the scheme for the earlier year.	1	19
(v)The cattle identity cards had not been notched	9	28
(vi)Calculation of the basic herd was incorrect	3	26
	32	110

(The Accounting Officer's note in which 407 animals are mentioned includes additional animals which were the subject of paragraph 41 of my 1984 report and paragraph 37 of my 1985 report.

5.The Accounting Officer in his note accepts that the discrepancies which came to light as a result of the cross check of application forms had not been detected at the physical inspection and that some overpayments arose in these cases.

6.The Accounting Officer felt that the 100 per cent physical inspection of the herds of all applicants under this Scheme represented a heavy cost overhead which he would not be justified in increasing by introducing any type of post factum documentary cross check such as carried out by my staff. He also explains that a 100 per cent documentary cross check by administrative staff would not be cost effective in the context of the likely saving which would be achieved on the basis of the extrapolation on a national basis of the results of my officers' cross check.

7.It was never suggested in my Report nor was it the intention to suggest that such an administrative 100 per cent cross check should be undertaken post factum; although not stated in my Report, it would seem reasonable that some form of documentary cross check could have been carried out by the inspecting officer simultaneously with the physical check since he would have the full file on all current and prior years applications in his possession at that stage. What was suggested as indicated in the 4th paragraph of Paragraph 36 of my Report was that the evidence produced by my officers' random cross check could be an indication that the degree of vigilance being exercised by officers carrying out the physical inspections may have been deficient and that consequently there might be a need for the Department to take steps to ensure that inspecting officers were aware of the implications of animals being incorrectly described by the herdowners and would insist that all application forms reflect the composition of the herd with absolute accuracy by reference to the precise requirements of each scheme.

APPENDIX 37

Deployment of Staff in the Department of Agriculture and Food

Farm Tax Inspectors

Eighty-seven of the 91 former Land Tax Inspectors who had been assigned to the Farm Tax Office in 1985 returned to this Department in January 1988. Some have chosen to take early retirement and a few have accepted redeployment elsewhere. All the remaining 74 officers have now been assigned to work on the disposal of the 6,000 hectares of land still in the possession of the Land Commission. The headquarters for these officers have been settled and they have commenced work.

It was originally proposed to assign only 52 of these officers to land reallocation work. They were selected on the basis of seniority but on the basis that the outstanding work will be completed more quickly, all 74 officers have now been assigned.

Redeployment of Staff in/out of the Department

(b)by Department of Finance directing staff returning from Career Breaks to other Departments;

(c)in local offices, through the redeployment of surplus staff to other Departments, by agreement with Department of Finance, and

A total of 55 serving staff were transferred, the balance being assigned to the Departments concerned by the Civil Service Commission against fillable vacancies in this Department. None of the levied staff were returned.

A further levy demand for 2 HEOs and 2 EOs for Social Welfare has recently been received.

Since the introduction of the restrictions on recruitment and promotions in April 1987 the following staff numbers returning from career breaks were directed elsewhere:

In addition 2 COs and a CA who had been job-sharing in the Department were redeployed to other Departments to full-time posts i.e. half the job-sharing partnership went to a full-time job elsewhere while the remaining half took up a full-time post in the Department of Agriculture and Food.

Redeployment usually arises from rationalisation of local offices, or from demands to meet particular problems in another Department's local office. In the past year approximately 8 such redeployments took place.

A total of 21 officers have been assigned work outside the Department of Agriculture and Food in the past year. Details are as follows:

(i)Redeployment of 13 Estate Officers (Land Commission) to Department of Justice on 1 May 1987

The decline in the work of the Land Commission due to the cessation of land acquisition meant that there was no continuing need for the employment of Estates Officers in the Department.

The Estates Officers provided support to the Inspectorate grades with the management of estates acquired by the Commission. Their duties included checking the extent of local land congestion, taking possession of land acquired by the Commission, appointing herds and caretakers and investigating and collecting annuity arrears for Collection Branch in Castlebar. The Estates Officers also arranged land and turbary lettings, upkeep of land, timber and salvage sales and organised the repair of fences and the safeguarding of buildings.

The Estates Officers were transferred to the Department of Justice for appointments as District Court Clerks with effect from 1 May 1987. This transfer was organised by the Department of Finance after consultations with UPTCS.

(ii)Redeployment of one Well-Driller (Land Commission) to Geological Survey Office, Department of Energy on 1 April1988

The redeployment of the Well-Driller arose as a result of the completion of well-drilling work for the Land Commission.

The last remaining Well-Driller has accepted early retirement with effect from 29 April 1988.

One Supervising Serological Assistant, 2 Serological Assistants and 1 Laboratory Attendant have been reassigned to the State Laboratory with effect from last autumn.

Two Inspectors took up work in the Department of the Marine while one other Inspector has gone to OPW. These were effective from the spring.

APPENDIX 38

I return the certified copy of the Minutes of Evidence, as requested in your letter of 20th April. I also enclose latest details available to us on evasion levels in licence payments in other European countries.

A EUROPEAN COMPARISON LICENCE COLLECTION

APPENDIX 39

I refer to the recent meeting of the Committee of Public Accounts which examined the Vote of the Forest Service and in particular to the discussions on paragraph 33 of the Comptroller and Auditor General's Report — 1985 concerning Chipboard Products Limited (in receivership and in liquidation).

The Receiver has paid the sum of IR£1,157,054.28p to the Department of Finance which represents the principal sum due to the Minister by virtue of his right of subrogation. The question of the Minister for Finance's entitlement to interest remains to be resolved and his Department has sought a meeting with the Receiver to discuss this issue. The position of the claim of the Minister for Energy will not be known until the Receiver furnishes advice on his final distribution of funds.

I propose to write to you again at a later stage on these issues and also on the question of the fees paid or payable to the Receiver and Liquidator.

APPENDIX 40

At my appearance before the Committee of Public Accounts on 21 April 1988 I indicated that, in so far as the Energy Vote is concerned, I would forward to the Committee a Table outlining the expenditure involvement of the State in Dublin Gas Company.

Funding of Dublin Gas Company

*i.e. Section 11 of the Gas Act, 1976 under which the Minister for Energy may, with the consent of the Minister for Finance, direct how the profits of Bord Gáis Éireann (BGE) should be applied.

APPENDIX 41

At the Committee's meeting on 21 April the Chairman asked for a note setting out the view of the Department of Finance on the use of Section 11 (2) of the Gas Act 1976 to direct certain profits of BGE to Dublin Gas Co. I enclose a note on the subject.

SECTION 11 (2), GAS ACT 1976

1.Under the terms of Section 11 (2) of the Gas Act 1976 the Minister for Energy ‘may, from time to time, with the consent of the Minister for Finance, direct that the profits of the Board (of BGE) in a year specified in the direction shall be applied in such manner … as is specified in the direction’.

2.As indicated at paragraph 62 of the Report of the Comptroller and Auditor General on the Appropriation Accounts for 1986, directions have been given by the Minister for Energy in accordance with this provision which resulted in the transfer of certain BGE profits to Dublin Gas Co. These transfers were deemed to be necessary in order to accord with Government policy that the latter company be kept operational. The bulk of the transfers were made on a loan basis and are still owing by Dublin Gas to BGE. The balance consisted of accelerated payments of rebates which BGE would in any case have made to the Company without any such direction at a future date.

3.In assessing the question of conveying the consent necessary under the terms of the provision in question the Department of Finance in every instance satisfied itself that—

(b)the amounts in question were the minimum necessary to achieve the objectives specified in addition to taking account of Government policy in the matter.

4.With regard to the question of transparency, which was adverted to by Chairman of the Committee, it might be noted that the Report and Accounts of BGE, which are laid before each House of the Oireachtas in accordance with the terms of Section 14 (i) of the Gas Act 1976, show separately the amounts which were the subject of directions under Section 11 (2) of that Act in relation to profits, including directions relating to Dublin Gas Co. A copy of a relevant extract from the BGE 1986 Report is attached for reference.

CONSOLIDATED VALUE ADDED STATEMENT

APPENDIX 42

REPORT OF DONEGAL COUNTY MANAGER, FRANK MOLONEY; TO THE COMMITTEE OF PUBLIC ACCOUNTS ON LETTERKENNY AIRPORT

This Report must necessarily be based on information assembled for me by my Officials to a very large extent. I believe that it accurately sets out the position in general but I am not in a position to give much of the information at first hand. I took up appointment as Donegal County Manager in October of 1983.

The proposal to have an Airport in East Donegal was actively pursued from 1970 by the County Council, the County Development Team and the Regional Development Organisation. A number of Reports were assembled dealing comprehensively with the need to have an Airport facility in this area as well as the potential use of such a facility. The proposal was given a new impetus on the publication of the Cross Border Communication Study for Derry and Donegal in 1977 which concluded, in relation to the development of air services, that the mid-Donegal area should have available a local airstrip which would be capable of expanding to meet any future demands for increased air travel into the Resort area. Subsequent to the publication of that Report, it was decided by the Regional Development Organisation that there should be a joint promotion between Donegal, Derry and Strabane of the objectives contained in the report and this included the development of air services. Pursuant to this policy, a number of meetings were arranged between sub-Committees of various bodies and Government on both sides of the Border when specific needs in the areas were discussed. One such meeting took place with the then Taoiseach on the 4th of June, 1980 when, inter alia, the question of air transport was fully discussed and the Taoiseach gave an undertaking that, if a suitable site could be found, the Government would finance the cost of providing an all-weather airstrip in the East Donegal area. The Taoiseach indicated that in the examination of such a proposal provision should be made for an all-weather airstrip with a minimum runway length of 4,500 feet and land available for further development of a runway up to 7,000 feet.

Consequent on that commitment a comprehensive assessment was undertaken by the County Council of a suitable site for the facility, including extensive discussions with the appropriate authorities and detailed discussions with the Officials of the Department of Transport. Meetings were also held between the Minister of State at the Department of Transport and senior Officials of the Council during the course of which it was made clear by the Minister of State that the full cost of acquiring the necessary land and providing the Airport would be financed in total by the Government. Following the comprehensive assessment of possible sites, a decision was taken by the Council in September 1980 to have the proposed Airport located at the Big Isle near Letterkenny. The estimated cost of the project was £1.6 million. On the 4th of October, 1980 the commitment by the Government to the project was re-inforced at a further meeting between the Cross Border Committee and the Taoiseach in Letterkenny when he was made aware that a suitable site had been identified by the Council and negotiations were proceeding to acquire the necessary land.

(See Statement issued after Meeting between An Taoiseach and Cross Border Group attached as Appendix B).

At this stage so far as my Council is concerned there was firm commitment by Government to finance the building of an Airport in County Donegal with the Council as the undertaking authority under the Air Navigation and Transport Acts, 1936–1961 subject only to

(b)The consent of the Minister for Transport pursuant to Section 37 of the 1936 Act and

(c)The consent of the Minister for the Environment to the acquisition of the land.

On the strength of this commitment the Council decided to proceed with the project.

Subsequent to the selection of the Big Isle as the site for the proposed Airport the County Council entered into negotiations with the relevant landowners and proceeded with the preparation of design work for the facility. The Council experienced difficulties with some of the landowners and decided to proceed by way of Compulsory Purchase Order in respect of all of the lands required.

The necessary consents of the Ministers for Transport and Environment under the said Acts were sought and on the 28th of April, 1981 the Minister for Transport granted his consent under Section 37 of the Air Navigation and Transport Act, 1936 to the establishment by the Council and maintenance of the Airport and necessary services.

On the 20th of May, 1981 the Minister for the Environment gave his consent under Section 43 of the Air Navigation and Transport Act, 1936 to the Council to acquire the necessary land.

On the 2nd day of June, 1981 the Compulsory Purchase Order was made by the Donegal County Council for the compulsory acquisition of the land believed to be required for the Airport and for the improvement of the approach road to enable the Council to give effect to the commitment as above. The Compulsory Purchase Order was made pursuant to the powers conferred on the Council by the Air Navigation and Transport Acts, 1936–1961 and procedure adopted was that laid down by Section 10 of the Local Government (No. 2) Act, 1960 as amended by the Housing Act, 1966.

The Compulsory Purchase Order was submitted by the Minister for confirmation and there being objections thereto the Minister directed the holding of a public inquiry. This public inquiry was held on the 1st, 2nd and 3rd of December, 1981 and the merits of the proposal and of the acquisition of land were dealt with by an Inspector from the Department of the Environment.

(a)The need to acquire the land and this involved esablishing the need for an Airport and

(b)That the land the subject matter of the Compulsory Purchase Order was the most suitable land in the area for the purpose of an Airport.

In the course of the inquiry very detailed evidence was given to the Inspector both by experts and lay witnesses on each of these aspects of the project to enable him to report to the Minister so that, in turn, the Minister could make a decision as to the confirmation of the Order. The transcript of the evidence ran to over 300 pages which gives an indication of the depth and thoroughness of the inquiry.

By Order of the 7th May, 1982 the Minister for the Environment confirmed the Compulsory Purchase Order with the amendment as to area appearing in the Order. This amendment had the effect of reducing the original area to a total area of 148.551 acres in respect of the lands acquired for the Airport. Following this Notice to Treat was served on all the owners and a 14 days' Notice of Entry was served of the Council's intention to enter the lands on the 21st on June, 1982. Following on the service of the Notice the Council was in a position to take possession of the lands on the 5th of July, 1982.

At this stage the Council had complied with the commitments of Government referred to above and, so far as it is concerned, there was a binding arrangement with the Government to finance the provision of an airstrip etc. and the Council were confirmed as the undertaking Authority for the Airport under Section 37 of the Air Navigation and Transport Act, 1936 as amended by Section 7 of the 1950 Act with the corresponding obligation to proceed with the project.

Following service of the Notice to Treat the Council were unable to agree compensation with the various landowners and applied to the Land Values Reference Committee for the appointment of an arbitrator to determine the compensation payable.

On the 20th of January, 1983 the Land Values Reference Committee appointed an Arbitrator to determine the compensation payable and the Arbitrator sat in the months of April and October, 1983 and January, 1984. The hearing of evidence concluded on the 6th of January, 1984. During the Hearing the Council agreed necessary accommodation work mainly consisting of fencing the acquired land, building an accommodation road to severed land, and drainage. These accommodation works were fully clarified in correspondence subsequent to the hearing of evidence.

The Property Arbitrator issued his award on the 7th of November, 1984 in which he determined compensation in a total sum of £452,860 for the seven landowners with whom agreement was not reached. Six of these landowners were the landowners of the site of the proposed Airport and the Seventh was the owner of a small plot being acquired along the access road. The amount awarded to the latter was £500 and accordingly the total amount awarded in respect of the Airport lands themselves was £452,360. Of the total amount awarded, the sum of £283,500 was awarded in respect of the actual land holdings and a sum of £168,860 was awarded in respect of severance, injurious affection and disturbance. The land prices awarded per acre ranged from £1,800 for one of the larger holdings to £2,100 for the two small lots. The amounts claimed by the claimants per acre ranged from £1,900 per acre for one of the large holdings of £2,750 per acre for other holdings. The claim for compensation, severance, injurious affection and disturbance included claims for the injurious affection and disturbance to the remainder of the lands of the claimants arising from the construction and use of an Airport in close proximity to the remainder of their lands. Immediately prior to Arbitration agreement was reached on compensation and accommodation works with all of the remaining landowners, being owners of lands along the approach road to the Airport. The difficulty and complexity of the arbitration may be gauged from the fact that the total amount of compensation claimed by all the claimants in respect of the Airport site was approximately £1.4 million and though this was obviously grossly exaggerated the claimants collectively sought at arbitration to justify this amount. This was vigorously contested in all areas which involved not alone in a number of agricultural areas but in the whole area of the effect of air and ground traffic, drainage, environment and nuisance etc. The outcome speaks for itself.

On the 17th of January, 1984 a deputation from the Council met the then Minister for Communications at the Department to make representations in relation to the providing of funds for the acquisition in anticipation of the Arbitrator's Award. It was pointed out to the Minister that upon service of the Notice to Treat the Council had entered into a legally binding contract with the landowners on the strength of the Government's commitment. The deputation was assured by the Minister that the Government would consider all the representations made and that the Council would be informed of financial arrangements for the Airport within one month.

On the 18th of December, 1984 the Council received a letter from the Department of Communications indicating that the Government had reviewed the project and had decided to withdraw the commitment to provide an Airport at Letterkenny. The Department's letter also stated that the Government had also decided that the County Council should approach the owners of the land which were to have been acquired with a view to seeking their formal agreement to release the lands from the acquisition procedure including the withdrawal of their compensation claims.

On the 10th of January, 1985 a meeting was held at the Department of Communications between the Council Officials, the County Solicitor and Officers of the Department and the Council's position was clarified and specifically it was pointed out that a legal contract existed between the landowners and the Council which the Council was obliged to fulfil. The existence of these contracts were acknowledged by Department officials.

The matter was brought to the attention of the Donegal County Council at their meeting of the 28th of January, 1985 when they passed a Section 4 Resolution directing the County Manager to complete the purchase of the Big Isle lands. In the course of the debate it was made clear that the Council wished to insist upon the Government honouring its commitment to pay for the lands and the attendant expense and proceed with the Airport proposal. However, the Council did authorise the Officials to enquire from landowners as to their willingness to release their lands from acquisition with instructions to report back. In the event all but one of the landowners indicated their unwillingness to release the lands and the one landowner who indicated verbally willingness to release the lands subsequently instituted proceedings for recovery of the compensation. Even if it had been possible to procure the release by that one landowner since his lands were crucial to the development, the result would have been to leave the Council liable for full compensation to the rest of the landowners with no prospect of ever completing the project.

Very detailed and prolonged correspondence with the Department sets out clearly the manner in which the Council's officials dealt with the decision of the Government as expressed in the letter of the 18th of December, 1984 and the Council's position in the matter was made clear in a letter from me to the Department of Communications on the 27th day of September, 1985 when, inter alia, I put the following matters on record.

“No Official of the Council did or could concede that the Government was legally entitled to unilaterally withdraw the commitment to finance the completion of the land acquisition undertaken by the Council at the behest of the Government a commitment which has never been in dispute.

The Council holds the Government liable upon its commitment to finance the acquisition of land undertaken as aforesaid including all the expenses of such acquisition and accommodation works associated therewith full particulars of which have already been submitted. You have assured my officials that there was no intention to dishonour this commitment.

On the 10th day of June the Council's Officials were requested to furnish detailed information in a large number of respects and were assured that upon submission of this information the question of payment of the funds necessary would be dealt with without delay. All of the information was furnished by the 20th of June.”

Commencing on the 15th of November, 1985 and in the following months proceedings were instituted by the major landowners requiring the Council to meet its contractual obligations to pay compensation awarded by the Arbitrator. Where proceedings were not actually instituted in two of the cases they were threatened. These proceedings resulted in the Department of Communications through the Chief State Solicitor's Office providing the compensation payable to the landowners included in the Arbitrator's Award and the legal and other expenses awarded to them. These monies were paid by the Department of Communications through the Chief State Solicitor to the Council's Solicitor and from him to the landowners through their Solicitors. These funds did not pass through the Council's Accounts.

In general I am informed that all payments made by the Department have been vouched and in particular payments for costs and expenses of the Arbitration were either taxed by the Arbitrator, by the Taxing Master of the High Court, or, agreed by the Council's Solicitor after consultation with the Chief State Solicitor. In regard to the costs taxed the Arbitrator's Awards in relation thereto and the Taxing Master's Certificates have been furnished to the Department. The total amount of claimants's costs and expenses of the Arbitration taxed or agreed was approximately £47,546 inclusive of VAT where appropriate. Of this amount £33,590 was for legal costs, £11,034 for expenses and £2,922 for Stamp Duties on the taxation. The remaining expenditure in relation to the acquisition included the Council's costs in connection with the Public Enquiry, the Arbitration, the proceedings instituted by the claimants, and the completion of the purchase.

In all 17 land holdings were recited in the Compulsory Purchase Order. Six of these related to major land holdings for the construction of the Airport with the remaining eleven minor land holdings already referred to being necessary to widen the access road. As already indicated agreement was reached outside the arbitration with these landowners and accordingly the Council is contractually bound to them to pay the compensation payable and carry out the compensation works undertaken. Some of the landowners have not as yet brought any pressure to bear on the Council in relation to these land holdings but some of them are bringing pressure to bear and I am informed that in some cases there may be a threat of proceedings.

While as already indicated, upon expiry of the Notice of Intention to Enter in 1982, the Council would have been entitiled to exercise all the rights of ownership, subjects only to ascertainment and payment of compensation, ownership did not pass to the Council finally until the completion of the various purchases in 1986. The Council could not exercise effective ownership of the land until monies were made available for fencing it and building the necessary accommodation road. Upon payment of compensation as aforesaid transfers of the lands involved were obtained and have been lodged for registation and registration is in progress. It has been agreed that an Inhibition be entered on the folio in the following terms:—

“No dealing shall be registered without notice to the Minister for Communications”.

I understand that the Council's Solicitor on behalf of the Council has given an undertaking to the Chief State Solicitor that pending registration of the Inhibition no dealing of the lands will be lodged for registration and as will be apparent from this report the Council do not contemplate any disposal.

I am advised and understand that in any event under the provisions of the relevant State the approval of the Minister for the Environment (after consultation with the Minister for Transport and Tourism) would be necessary before any of the land could be disposed of. Furthermore of course the land could not be disposed of except after the passing of a Resolution by the elected County Council under Section 83 of the Local Government Act, 1946.

Following sustained pressure by the Council the Department of Communications on the 11th of November, 1986 approved the carrying out of some of the necessary accommodations works agreed with the Arbitrator including fencing ofthe major land holdings at a total expected cost of £140,000.00. This work was put in hands by the Council and was completed as at the 1st of March, 1988. Following the approval to proceed with the accommodation works and fencing the Council was in a position for the first time to arrange for effective occupation of the lands. The lands have been let at Public Auction for the eleven months commencing the 1st of March 1988. I am advised that this is not a letting within the meaning of Section 43 of the 1936 Act inasmuch as it is merely the granting of a right to graze or take crop off the land for a period of eleven months commonly referred to as “conacre” or “the eleven month system”. Accordingly the formal consent of the Minister was not sought but the Department have been informed of the position. This was done to ensure some return from the lands pending clarification of the position.

The expenditure of the Department already referred to covers compensation to the major landowners and the one minor landowners dealt with at the arbitration, their legal fees and expenses, part of the Council's legal fees, and part of the costs of the accommodation works mentioned (£112,000.00). In addition to this expenditure the Council has itself expended monies on the items listed below which have been paid out of the Council's general account pending recoupment from the Government:—

The Department of Communications has been requested to recoup all but the last item of the above costs pursuant to the commitment of Government to finance all of the expense of the establishment of an Airport at the Big Isle. This recoupment is awaited and is urgently necessary from the point of view of the Council's funds. The final figures on the costs of accommodation works carried out to date will be submitted to the Department in the near future. Subject to this the above figure represents the total expenditure by the Council from its own funds not yet recouped by the Government.

As already indicated, the Council's position is that it remains committed to the provisions of the Airport at the Big Isle and to the arrangement with the Government whereby the Government was to bear the expense of acquisition of the land, and the provision of the Airstrip with ancillary works. This was reaffirmed by the Council when they considered the matter at their most recent General Purposes Committee Meeting. In the light of this questions of disposal of the land or land values cannot be dealt with by me. However for the information of the Committee I have sought a general opinion on the position and am advised that if it was decided to dispose of the land there would be no prospect of recovering the element of compensation due to severance etc. that the land values would be determined by the demand in the area, that the placing of this substantial acreage on the market would tend to depress the price and that the background might tend to inhibit competition. It would appear therefore that the maximum value of the land is as the site of an Airport adjoining landowners having already been compensated for the existence of such. In recent arbitrations in the area evidence as to the market value of agricultural land of top quality has varied from £1,500 to £3,000. No relevant awards have yet been made.

The overall position in relation to the Airport project is that the lands required for the facility have now been acquired and are the property of the Council. In addition the necessary design work has been completed to allow work on the project to proceed. Some of the accommodation works have been carried out and major drainage works which would be designed mainly to accommodate the Airport remain to be carried out. It is not proposed to carry out these drainage works until the work on the Airport proceeds. In the meantime however it will be necessary, at least, to maintain the existing drains on the land. Already one of the landowners has challenged the fact that the main drainage accommodation works have not been carried out but this is being disputed on the basis that they are not required unless or until the Airport works proceed.

It will be apparent from the foregoing that there is a major conflict between the wishes of my Council in the matter and the Government. It is the wish of my Council that the Airport project for Letterkenny proceed, that the arguments in its favour are at least as persuasive now as they were when the relevant Orders were made, and that the lands should be retained by them until funds are made available for the completion of the project. Having regard to the existence of the conflict referred to, and the fact that the disposal of the land in question is a matter for my Council, I must treat any information, other than that which is in the public domain or which the Department have been given or are entitled to as strictly confidential to my Council.

APPENDIX A

REPORT ON MEETING BETWEEN THE TAOISEACH, MR. C. J. HAUGHEY AND A DEPUTATION CONSISTING OF REPRESENTATIVES OF THE DONEGAL REGIONAL DEVELOPMENT ORGANISATION, FOYLE DEVELOPMENT ORGANISATION, DERRY AND STRABANE DISTRICT COUNCIL — HELD IN LEINSTER HOUSE, DUBLIN, ON THE 4TH OF JUNE, 1980.

ATTENDANCE:

DELAY IN IMPLEMENTATION OF THE CROSS-BORDER COMMUNICATIONS STUDY FOR THE DERRY/DONEGAL AREA.

The Deputation gave a brief history of developments to date. It also outlined the inadequacies of the Report, particularly from Donegal's point of view. It was pointed out that progress to date was considered much less than expected and it was suggested that representations from the Report Area should be allowed on the Steering Committee.

The Taoiseach stated that he would do everything possible to speed up the implementation of the recommendations contained in the Report and that he would deal with the various items involved in more detail as they were discussed in the course of the meeting.

JOINT REPORT ENTITLED “PRIORITIES FOR PUBLIC INVESTMENT IN THE STRABANE, LONDONDERRY AND DONEGAL AREAS IN THE CROSS-BORDER CONTEXT” BY THE FOYLE DEVELOPMENT ORGANISATION, DONEGAL R.D.O. AND STRABANE DISTRICT COUNCIL:

The Taoiseach was informed of developments since the preparation of this Report. Following points were put to him:—

(a)Mr. Pierre Mathijsen, Director General for Regional Policy, had stated that he had put forward proposals for an integrated operation (i.e. a package of the priority recommendations contained in the Report, for finance by the EEC in conjunction with the British and Irish Governments).

(b)When the non-quota section of the Regional Fund is agreed, the Report should be examined in detail by the Government and projects from it put forward for finance.

(c)A specific person should be appointed both in Dublin and Belfast to liaise overall with Bodies in the Report Area and who, possibly, could come to meetings at local level.

(d)An informal Committee had been set up comprising approximately five nominees from each of the three Bodies and it was felt that this Joint Committee should be given formal recognition by the Irish and British Governments.

In reply to the points made, the Taoiseach stated that, following the visit of Commissioner Antonio Giolitti to the Report Area, the Government would take a serious look at the proposal for an integrated operation. If it was a worthwhile and practical proposal, then every effort would be made to provide finance for its implementation. The Taoiseach welcomed the setting up of the Joint Committee and stated that he would certainly recognise and liaise with it. He announced that he had assigned special responsibility to Mr. Pádraig Flynn, T.D., Minister of State for Transport, for advancing the implementation of a recommendation contained in the various Cross-Border Reports. Mr. Flynn stated that Bodies from the Report Area should feel free to liaise with him on the different matters involved.

AIR TRANSPORT:

In reply, the Taoiseach stated that the Government in the Republic would subsidise an air service between Derry and Dublin if the British Government could be persuaded to do likewise. If a suitable site could be found, the Government would finance the cost of providing an all-weather airstrip in the East-Donegal area. The Taoiseach felt that it should be a proper all-weather airstrip with a minimum length of 4,500 feet and land available for further development of a run-way up to a length of 7,000 feet, if necessary.

FINANCING OF PROPER ROAD NETWORK FOR THE REPORT AREA:

The importance of improving the road between Derry and Strabane was stressed. The Taoiseach stated that the Government would do what it could to influence the British Government to provide the necessary finance.

A case was made to the Taoiseach for greater road grant allocations to County Donegal. He stated that, in general, there had to be cut-backs in public expenditure in the interests of the overall economy. However, he would ensure that a further allocation of road grant monies was made to County Donegal in the current year.

DEVELOPMENT OF PROPER FREIGHT AND PUBLIC PASSENGER TRAFFIC FACILITIES FOR THE REPORT AREA:

Serious concern was expressed to the Taoiseach in relation to the proposed closure of CIE's freight operations at Waterside Station, Derry. The Taoiseach stated that he would have the matter examined further, but, in the meantime, CIE's operation there would be continued.

The case was made for the provision of finance to the Lough Swilly Railway Company as recommended in the Cross-Border Study. The Taoiseach referred to the offer of the Government to extend financial and technical assistance to the Lough Swilly Railway Company for a further two years. This offer included replacement buses to the Company.

SANITARY SERVICES:

The inadequacy of the Sanitary Services allocations to County Donegal, over the years, was stressed. It was pointed out that existing allocations were totally inadequate in relation to the needs of the area. The lack of proper water supplies and sewerage services was hindering tourism, and industry, particularly the fish-processing industry.

The Taoiseach stated that, because of the necessity to cut-back on public expenditure as referred to by him earlier, it was unlikely that the Government could see its way to increasing the sanitary services allocation for County Donegal in the current year. However, the matter would be examined as requested.

The needs of the Strabane area in relation to water supplies and sewerage services were outlined. The Taoiseach stated that he would keep these matters in mind, and the other items referred to earlier in relation to Northern Ireland, in his discussions with the British Government.

DRAINAGE OF THE RIVERS FINN, FOYLE AND MOURNE AND PROVISION OF NEW CATTLE MARKET IN STRABANE:

The Taoiseach stated that he was not very optimistic about finance being made available for the drainage of the River Finn. It was most unlikely that the National Priority List of the Office of Public Works, on which the Finn was listed No. 26, could be altered. However, he stated that if there was any scope for extra monies, then the Government would do what it could.

In his talks with the British Government, he agreed to keep in mind the need for a new Cattle Market in Strabane.

TOURISM AND CULTURAL FACILITIES:

Reference was made to the Scheme involving expenditure of £16 million which had been mooted at EEC level for tourism and artisan development in Border Counties. It was acknowledged that the Scheme was being held up because of the delay in getting agreement on the 1980 EEC Budget. However, if and when the Scheme was agreed and ready for implementation, the Taoiseach was asked that:—

(a)some of the Schemes suggested in the Joint Report for the Derry, Donegal and Strabane area, should be put forward by the Government for finance from this Fund, and,

(b)any Schemes suggested by the Regional Tourism Organisation or the North West Tourism Co-Operation Group should be put forward for finance from the Fund.

On the Northern Ireland side, the importance of the inner-City Development Scheme for Derry, as detailed in the Joint Report, was stressed. Reference was also made to the importance of developing tourism facilities in the Sperrin Area. The Taoiseach assured the Deputation that he would give both of these proposals his full hearted support in his talks with the British Government. He considered both of them very worth while. Other proposals suggested for finance were the new Civic Theatre in Derry and a County Museum for County Donegal.

NATURAL GAS:

The Taoiseach stated that, politically, the Government had no objections to supplying part of the Republic's natural gas find to parts of Northern Ireland if such a proposal was economically feasible.

TELECOMMUNICATIONS:

Mr. Mark Killilea T.D., Minister of State at the Department of Posts and Telegraphs gave a progress report on improving the telecommunications network in County Donegal.

In relation to the Telex System, he stated that 140 channels would be available for County Donegal by the middle of July. To date, approximately only 48 applications had been received and accordingly, the system would now have spare capacity.

Mr. Killilea stated that the Dublin/Sligo/Letterkenny Radio Link which had been held up, would be available by the end of 1980 and when it was complete, the system in Donegal would have a spare capacity. He stated that all of the telephone exchanges in County Donegal would be changed to automatic working by the end of 1982 which would result in a vast improvement in the telephone system in the County. He stated that South-Donegal was definitely included in the Programme of Changeover to Automatic Working by the end of 1982.

APPENDIX B

STATEMENT ISSUED FOLLOWING MEETING BETWEEN TAOISEACH AND DEPUTATION REPRESENTATIVE OF DONEGAL REGIONAL DEVELOPMENT ORGANISATION, THE FOYLE DEVELOPMENT ORGANISATION, THE FOYLE DEVELOPMENT ORGANISATION AND STRABANE DISTRICT COUNCIL, 4th OCTOBER 1980.

The Taoiseach, Mr. Charles J. Haughey T.D., accompanied by the Minister of State at the Department of Industry, Commerce and Tourism, Mr. Ray Burke, T.D., today met a deputation representative of Donegal Regional Development Organisation, the Foyle Development Organisation and Strabane District Council. The members of the deputation were:

The meeting was a follow up to one held in June last and the progress made in the meantime was reviewed.

The deputation noted with satisfaction the recent announcement of Government backing for the development of an airport at Big Isle, Letterkenny to serve the East Donegal area.

The Taoiseach outlined to the deputation the progress made in discussion on plans for an air service in the Derry/Donegal area and he reiterated the Government's commitment to subsidising such a service for an initial period at least. He gave an undertaking that everything possible would be done to bring these plans to fruition. In this connection it was noted that proposals, including costings, are expected shortly from two companies who have expressed an interest in providing a Derry/Dublin scheduled air service.

The deputation also expressed satisfaction with the recent extra allocation of £½ million for roads improvement and maintenance in County Donegal.

The meeting reviewed progress in implementing the recommendations in the Cross Border Communications Study. The deputation expressed satisfaction at the decision to give special responsibility for advancing the implementations of the recommendations in the Study to Mr. P. Flynn, Minister of State at the Department of Transport.

On the question of financing of essential sanitary services it was noted that additional water schemes were recently sanctioned for County Donegal at an estimated cost of approximately £1 million. The deputation pressed for sanction for the Killybegs and East Innishowen Water Schemes and pointed to the enormous advantage which would accrue to the area if this were done.

Satisfaction was expressed at the progress made and the commitments given in the telecommunications sector and at the projected developments particularly the programme for conversion to automatic exchanges in County Donegal.

Reference was made to the study done by the North West Tourism Co-operation Group on the question of a roll-on/roll-off car ferry service from Scotland to ports in Innishowen and Derry and the deputation requested financial assistance for this project.

The deputation undertook to supply to the Taoiseach relevant background data in support of this proposal.

Among other items discussed was the question of EEC aid for the region and the Taoiseach undertook to press the area's needs vigorously in this regard. It was unanimously agreed that these meetings have proved extremely fruitful and further meetings are envisaged in the near future.

APPENDIX C

I am directed by the Minister for Transport to refer to your letter and application dated 1st April, 1981 and to inform you that the Minister, after consultation with the Minister for the Environment, grants his consent under Section 37 of the Air Navigation and Transport Act, 1936 as amended by Section 7 of the Air Navigation and Transport Act, 1950 to the County Council of the County of Donegal to establish and maintain an aerodrome in East Donegal at the Big Isle site near Letterkenny and to provide and maintain in connection therewith roads, bridges, approaches, water supply works and watermains, sewers and sewage disposal works, electric lines, lights, signs, apparatus, equipment and buildings and other accommodation.

APPENDIX D

I am directed by Mr. Raphael P. Burke, T.D., Minister for the Environment to refer to the consent given on 28 April, 1981 by the Minister for Transport under Section 37 of the Air Navigation and Transport Act, 1936 as amended by Section 7 of the Air Navigation and Transport Act, 1950 to the County Council of the County of Donegal to establish and maintain an aerodrome in East Donegal at the Big Isle site near Letterkenny. I am to inform you that the Minister, after consultation with the Minister for Transport, hereby gives his consent under Section 43 of the Air Navigation and Transport Act, 1936 to the County Council of the County of Donegal to acquire land for the purpose of part V of the aforementioned Act.

APPENDIX E

Department of the Environment

Local Government (No. 2) Act, 1960 County of Donegal

The Minister for the Environment in exercise of the powers vested in him by section 76 of and the Third Schedule to the Housing Act, 1966 as extended by Section 10 of the Local Government (No. 2) Act, 1960 (as subsituted by section 86 of the Housing Act, 1966) hereby confirms the Donegal County Council Compulsory Purchase (No. 2) Order, 1981 which is set out in the Schedule hereto subject to the modification that so respects the lands described in the Schedule to the said Order as numbered 2,3 and 4 on the map deposited at the offices of the Local Authority there shall be excluded from the said Order those parts of the said lands which lie west of an imaginary line drawn east of, parallel to and 75.5 metres distant from the western boundary of the lands as numbered 2 and 3 on the said deposited map.

Given under the Official Seal of the Minister for the Environment this 7th day of May 1982.

APPENDIX F.

The Donegal County Council Compulsory Purchase (No. 2) Order, 1981 and Confirmation Order dated 7th of May, 1982.

1.The County Council of the County of Donegal (hereinafter referred to as ‘the Respondent’) is authorised by the above Orders to purchase the lands described in the Schedule to the above Compulsory Purchase Order and delineated on the map attached thereto (hereinafter referred to as ‘the Scheduled Lands’).

2.The Respondent served Notices to Treat pursuant to Section 79 of the Housing Act, 1966 on the Claimants in respect of their several interests in the scheduled lands and having failed to reach agreement with the Claimants on the amount of compensation to be paid to them applied to the Land Values Reference Committee to nominate an Arbitrator to hear and determine the question of the said amounts of compensation.

3.The Land Values Reference Committee by Order dated the 20th of January 1983 nominated me, Sean M. McDermott, FRICS FCIArb. of 22 Upper Fitzwilliam Street, Dublin 2 to be such Arbitrator.

4.The Claimants and the Respondent were represented before me when I sat in public at Lifford, Co. Donegal on the 27th of April 1983, the 18th, 19th, 20th & 21st of October 1983, the 3rd of January 1984 and at Letterkenny on the 4th, 5th & 6th of January 1984 and I have heard and considered all the evidence offered and all the argument adduced on behalf of the Claimants and on behalf of the Respondent.

5.I was informed by the parties that agreements have been reached between them regarding the accommodation works to be carried out by the Respondent and I have had regard to these agreements in determining the compensation to be paid.

(a)That the compensation to be paid by the Respondent to the Claimants for the purchase of the several interests in the lands specified in the Schedule hereto annexed are the sums set forth in the column headed ‘Total Compensation Payable’ opposite the names of the parties respectively interested therein.

(b)That in addition the Respondent pay to the Claimants compensation for the cost and expenses, if any, properly incurred by the Claimants in the preparation and submission of their claims to the Respondent following receipt of Notices to Treat and in negotiation thereon, such compensation as is not agreed to be determined by me and separately awarded.

(c)Should the sum awarded to any of the Claimants exceed the sum specified in an unconditional offer in writing of compensation made by the Respondent to that Claimant the Respondent shall pay to that Claimant the Claimant's costs and expenses of and incidental to the reference to arbitration and to the taking up of the Award which costs in default of agreement are to be taxed on a solicitor and client basis by a Taxing Master of The High Court. Should the sum awarded to any Claimant not exceed the sum specified in an unconditional offer in writing of compensation made by the Respondent to that Claimant that Claimant is to bear his own costs and to pay the costs of the Respondent insofar as such costs were incurred after the unconditional offer was made.

SCHEDULE

APPENDIX 43

Further to my appearance before the Committee of Public Accounts on 28 April, 1988, I enclose a Note for the Information of Committee Members in relation to consultations which my Department have had with Donegal County Council about the use of land which has been acquired by the Council at Big Isle, Letterkenny.

OUTCOME OF CONSULTATIONS BETWEEN THE DEPARTMENT OF TOURISM AND TRANSPORT AND DONEGAL COUNTY COUNCIL REGARDING THE FUTURE USE OF THE LAND AT BIG ISLE, LETTERKENNY

1.At its meeting on 28 April, 1988 the Committee of Public Accounts decided that the Department of Tourism and Transport and Donegal County Council should have consultations about the future use of the land which had been acquired by Donegal County Council for an airport at Big Isle, Letterkenny. These consultations were initiated by the Department of Tourism and Transport in May, 1988 and have recently been concluded.

(a)It is the Council's intention to proceed with the development of an airport at Big Isle, Letterkenny, as a matter of priority; and

(b)the County Manager has been instructed by the Council to proceed to plan an airport on the land at Big Isle.

3.The Minister for Tourism and Transport now proposes to commission a Feasibility Study of the proposal for a regional airport at Big Isle, Letterkenny. It is envisaged that the Feasibility Study will assess the contribution which a regional airport at Letterkenny could make to the realisation of the tourism potential of the area.

4.The proposed Feasibility Study arises in the context of the Minister's recent announcement regarding proposed investments by the State in the Development of Regional Airports. Total investment of £4 million is now proposed on the regional airports at Farranfore, Waterford, Carrickfin, Sligo and Carnmore. This expenditure will help to bring the airports up to the standards which would meet the Minister's operational requirements and will leave them in a position to exploit prospects for tourism growth.

5.In relation to the funding of the proposed investments in regional airports the existing policy of a minimum contribution of 25 per cent from local sources towards the cost of the development of individual regional airports will continue to be maintained. On this basis the Minister envisages that State assistance of up to £3 million will be available for the regional airports. However, funding by the State will be contingent upon the remaining £1 million of developmental costs being provided by the individual regional airports from local sources. Payment of the Exchequer contribution will be subject to terms and conditions to be incorporated in individual grant agreements and the Minister will need to be satisfied in each case that an appropriate structure exists for the control and management of the airport.

APPENDIX 44

INTERIM REPORT of the Inter-Departmental Committee on the Review of the Local Government Audit Service.

AUDIT ARREARS.

3.1The value of an audit process lies in large part in its capacity to discover and deter fraud or irregularity, to authenticate systems which inhibit such practices and to promote good management practice. Clearly, the value and relevance of audits diminish progressively with the passage of time between transaction and audit. Correspondingly, the amount of work involved in completing an audit increases. Indeed, there is a strong case to be made for initiating audits not just following a financial year but on a current year basis and this practice is being followed in some of other countries. The devaluation of the audit process due to delays also has an impact on the morale of the audit service itself. Accordingly, a high level of audit arrears is a matter of concern. While there has always been a certain element of arrears in local audits, since the establishment of the State, the level of arrears currently prevailing was one of factors which lead to the establishment of the Commitee. It is essential in the interests of ensuring continuing effectiveness in the audit service that these arrears be eliminated as soon as possible.

3.2Table 1 shows the arrears position over the past five years. In the view of the Committee, this ongoing and unacceptable level of arrears is attributable to a combination of factors related to the approach to audit and the staffing structure, the inadequacy of the staffing of the LGAS by reference to these factors and certain shortcomings on the part of local bodies in the discharge of their accounting role.

3.3Under present arrangements, the staffing position in the LGAS has been the most significant factor contributing to the arrears situation and while efforts have in the past been made to address this problem, they have been frustrated by a variety of factors.

3.3.1In a direct response to the the very serious audit arrears problem, approval was given in 1976 to an increase in LGAS staff, involving inter alia the creation of a new Trainee/Assistant auditor grade. The new establishment was to total 54 staff, an increase of 25, of whom five auditors were to be regarded as supernumerary pending the elimination of arrears.

3.3.2The LGAS was reorganised the following year, to accommodate the new establishment and facilitate a more effective audit effort. This reorganisation involved the establishment of a headquarters (5 posts including the Inspector of Audits) and seven audit regions, each comprising four audit districts (involving 42 posts). The remaining seven staff were to be deployed as necessary to areas where the workload, including arrears, was heaviest at any time.

3.3.3The increased staff complement was never realised, due to difficulties in recruitment of suitably qualified staff in the period 1977–1980 and the implementation of restrictions on public service recruitment from mid-1981 onwards. The total staff of the LGAS never exceeded 47 and at present time totals only 35. The proposed headquarters unit never functioned as intended. Table 2 shows the staffing position over the past ten years.

3.3.4It is apparent that while the increase in staff numbers between 1978 and 1983 contributed to a substantial decrease in the level of arrears, the progressive reduction of staff since 1983 has resulted in a reversal of this trend, though the increase in arrears is less than might have been expected, reflecting the commitment of the staff involved.

3.4The Committee is satisfied that the staffing structure within the LGAS does not utilise existing grades to their full potential and therefore does not facilitate maximum audit efficiency. Each Principal Auditor administers the general conduct of audits within his region and is in charge of one of the audit districts in that region; the remaining three are in the charge of Auditors. The Principal Auditors undertake the major audits in a region and in most cases are obliged to obtain the assistance of the local government auditors as well as assistant/trainee auditors in the region. Apart from the fact that the involvement of auditors in this manner conflicts with their responsibilities in their own audit districts, it is wasteful for either a Principal Auditor or Auditor to have to spend time on the routine lower grade duties associated with audit. The Committee considers that the relationship between the numbers of posts in the different grades should be reviewed.

3.5The Local Government auditor is assigned audits in his own right and not for instance as an agent of the Inspector of Audits. The basic legal provision regarding the conduct of audit is Section 12 of the Local Government (Ireland) Act, 1871 which simply specifies that the auditor “shall examine into the matter of every account”. This has in practice been interpreted to give the auditor a wide discretion in the conduct of audits, subject only to certain specific legislation relating particularly to his powers of charge and surcharge, and to normal professional standards. However, it is understood that some auditors have felt inhibited by the terms of the 1871 legislation from conducting anything other than the most rigorous scrutiny of every aspect of accounts, while others have implemented comprehensive but less detailed audit procedures, in line with good professional practice. As a result, there are wide variations in the duration of audits in bodies of similar size, reflecting individual auditors' views as to what constitutes a thorough and effective audit. The Committee sees merit in a more standardised and in some cases more streamlined approach to audit, implemented in the context of an appropriate code of practice and audit programmes. There is also a case for changing the position with regard to the legal responsibility for audits. Appropriate reforms in these areas can be made without impairing the local government auditors' essential independence.

3.6Health boards are under no statutory obligation to have properly balanced and reconciled final accounts available for audit by any given date and long delays are often experienced before accounts are finalised. Where such obligation exists in relation to other local bodies, many fail to comply and do not observe the due dates. This is, perhaps, in part a consequence of the general awareness that audits are very much in arrears. It is apparent that it also reflects too low a priority being accorded to the completion of financial accounts as part of the machinery of financial management and control in some local bodies. The overall result is that auditors are sometimes delayed in commencing audits or otherwise have to waste time assisting local bodies to complete a basic reconciliation of accounts. This is clearly an unsatisfactory situation.

3.7The Committee has identified inadequate staffing as one of the main causes of the arrears under the present arrangement for the discharge of the local audit function. It accepts that having regard to the present workload, there is a need for consideration of the present level of staffing in the LGAS and the grade structure — these matters will be dealt with in more detail in the section of the main report on staffing. Clearly however, such issues can only be finally determined in the light of decisions regarding the future location and duties of the LGAS and as such the outcome is unlikely to have any impact on the arrears problem in the short term. There are nevertheless other changes which can be implemented at present and which, in the view of the Committee, could eliminate the current arrears within a period of about three years and in general contribute to a more efficient audit service.

3.7.1In the area of audit practice, a system of multiple year audit should apply until such time as arrears are eliminated. In effect, where several years accounts are to be audited, this would involve verifying the arithmetical accuracy of all years prior to the final year under audit and giving an in-depth examination to selected areas — these would normally vary from year to year, on a cyclical basis but would in any event include those areas where weaknesses were revealed in earlier audits or where the normal detailed examination of the final year accounts suggest it would be advisable. In addition, a maximum of days should routinely be allocated for the completion of any given audit, which would be exceeded only in specified exceptional circumstances.

3.7.2The Committee welcomes measures along these lines which have recently been introduced on an informal basis. However, in order to remove possible doubts, it is recommended that appropriate legislation be introuced at the earliest opportunity to provide a more positive and specific statutory basis for such procedures. In this context, the Committee recommends also that the legal responsibility for audit (and in consequence the power to determine inter alia the duration of audits) should be vested in the office of the Inspector of Audits, with appropriate arrangements for delegation. Furthermore, the opportunity should be taken to provide in such legislation that the submission of final abstracts of account of all bodies concerned should be made by dates to be specified by regulation. The following deadlines should apply in respect of all local bodies —

30 June for large bodies, including all county councils, county boroughs and health boards, and

3.7.3A joint local authority/Department of the Environment working group is currently engaged in reviewing the provisions of the Public Bodies Orders, as they relate to the technical aspects of local authority accounting procedures. As improvements in such procedures would, inter alia, inevitably assist in the audit function, the Committee would welcome the early completion of this work and recommends that a similar exercise be initiated in relation to health board accounts.

3.7.4Even with the implementation of the new procedures and initiatives outlined above, it will not be possible given existing staff limitations to do more than slow down the ongoing deterioration in the arrears position. If arrears are to be tackled, the Committee considers it essential that further personnel be made available. It has been estimated by the Inspector of Audits that the elimination of arrears under the new arrangements will take 15 man years. In the short term, the Committee sees only two, possibly complementary, ways of providing this manpower, viz.

*redeployment of suitably qualified or experienced staff on a temporary basis from other areas of the public service, and/or

3.7.5.The Committee would favour the first option, but it recognises that it may not of itself provide adequate numbers of suitably trained staff to clear arrears in a reasonable time. With regard to the second option, there are two alternative approaches. The first is to contract particular audits to private sector firms. While the Committee would not wish to close the door to such a course of action under appropriate circumstances in the future, it does not consider this to be an attractive alternative in relation to the present arrears problem. There are certain perceived difficulties with private sector audit of public bodies, relating to cost and the level of experience of private accountancy firms with the requirements of public accountability. Their employment on the audit of a large public body could only be contemplated in the context of a more long term structured approach involving close monitoring and quality control — it would probably be counter productive as a short term measure.

The second alternative is to recruit an appropriate number of accountants or take on secondment staff from commerical accountancy firms, on a limited contact basis. As individuals working to and assisting senior LGAS staff, the particular demands of public accountability could be assured. The increased cost of such contract staff, which would be in line with normal LGAS audit costs, could be incorporated in overall audit fees charged. Given that outstanding audit arrears amount to an estimated 15 man years of work, the Committee recommends that 5 accountants be obtained on a contract basis over a three year period, or that an appropriate variation be pursued in the event that staff redeployment takes place.

The Committee strongly recommends that necessary action be taken so as to ensure that the required number of staff will be in place by the end of June, 1988.

3.7.6With regard to delays by local bodies in producing final accounts, the Committee recommends that—

*abstracts of accounts submitted for audit should be accompanied by a certificate from the relevant Manager/CEO to the effect that final and subsidiary accounts have been properly balanced; and

*local bodies be surcharged over and above the normal audit fee, at an appropriate punitive level, for each day necessarily spent by an auditor on accountancy work in order to balance/reconcile accounts.

3.7.7A total of 74 educational endowments are audited by the LGAS. These endowments are generally quite small and though audited spasmodically, still consume about 100 audit days per annum. The cost of audit far exceeds fee income. There is no compelling reason why the LGAS should have to continue to audit such accounts. In the majority of cases, competent honorary auditors would suffice. In the case of the larger endowments, there appear to be sufficient means to employ private auditing firms. The necessary steps should be undertaken to this end — it is understood that the Department of Education and the Commissioners of Charitable Donations and Bequests would be agreeable to such proposals. In the interim, all further auditing of such accounts by the LGAS should cease.

Summary of Recommendations.

1.Additional staff should be provided to the LGAS on a temporary basis by end-June, 1988 to help eliminate arrears within a three year period. These staff could be obtained through redeployment within the public service or on a contract basis from the private sector.

2.A system of multiple year audit should apply as appropriate until audits are on a current year basis, and time limits should be allocated for the routine completion of all audits. A suitable legislative basis for such procedures should be provided at the earliest opportunity, to include the vesting of responsibility for audit in the Inspector of audits. Legislation should also provide for deadlines for submission of final accounts by all local bodies audited.

3.Abstracts of accounts submitted by local bodies for audit should be certified by the relevant Manager/CEO to be properly balanced and authorities should be surcharged for each audit day lost where this is found by an auditor not to be the case.

4.Auditing of education endowments should cease and audit responsiblitity should be transferred to honorary or private sector auditors.

APPENDIX 45

At my meeting with the Committee on 18 May, 1988, I promised to respond to Deputy Dempsey's questions on the claims provisioning of a number of insurance companies.

This matter has since been the subject of a Dáil Question put down by Deputy Dempsey, I enclose, for the Committee's information, a copy of the reply to the Question which was given by my Minister on 31 May.

DÁIL QUESTION NO. 8

To ask the Minister for Industry and Commerce if his attention has been drawn to the growing concern regarding the inaccuracies in insurance liability provisions by Irish based insurance companies; and, if so, the way in which he proposes to tackle the problem.

REPLY

I am aware of a recent magazine article which expressed concern at the claims provisioning of some insurance companies operating in this country. I would like to point out, however, that the figures quoted in that article could be misinterpreted given that they reflect the gross position on claims, that is, before allowance is made for reinsurance recoveries. Therefore, the increases in the claims provisions referred to do not have a corresponding effect on the companies' net profitability as they are, to a large extent, met by the reinsurers involved. This is particularly so in so far as the more costly third party injury awards and settlements are concerned.

Difficulty in claims reserving in the past can be attributed to a number of factors, which in general either no longer apply or are now being taken into account by insurers. These include high inflation over a number of years, a dramatic increase in claims consciousness and the level of claims awards by juries, and other unforeseen factors outside the control of insurers.

I would like to emphasise that my Department exercises supervisory control over insurance companies and pays particular attention to claims reserves. The strengthening of provisions in the companies' returns referred to in the article came about in a number of cases following action taken by my Department in its insurance supervisory capacity. My Department has also been instrumental in the increasing use of independent expertise by insurers in recent years to assist them in estimating their claims liability and in advising on the appropriate premiums to be charged.

As the Deputy will be aware, the Government is committed to improving the overall environment in which insurers operate and has already taken action to change our Court and legal procedures, including the abolition of juries in personal injuries cases. Other measures which are in train include the rationalisation of legal representation, the introduction of a pre-trial procedure system with a view to shortening the length of trials and reducing legal costs, and the establishment of a Book of Quantum of Damages.

I am confident that as well as helping to reduce insurance costs, these measures will also provide a greater degree of certainty for insurers in estimating their future claims liability.

APPENDIX 46

I enclose the following documents which I was requested to supply at a meeting of the Committee of Public Accounts on 26 May 1988:

(3)Copies of the documents that the schools and VECs fill in in relation to ESF aid.

(4)A note on discontinuance of £30 grant in respect of Vocational Preparation and Training Courses.

(a)

VEC DEFICITS AT END-1986

1.The tabular statement attached sets out the deficits of the VECs in question at end-1986 on the basis of unaudited accounts. The total of the deficits was £2.918 million or 1.9 per cent of the total approved payments for VECs on their second level schemes in 1986.

2.VEC accounts are prepared on a payments and receipts basis. A deficit at end-year in an account represents an excess of liabilities over assets.

(b)

Staffing to deal with ESF claims

1.The ESF Section in the Department deals with making applications and claims for European Social Fund aid.

(ii)the administration of pilot projects in training and study visits for training specialists;

(iv)liaison with Government Departments and training/manpower agencies at local, national and international levels.

2.Under a Principal Officer who is also responsible for the funding and administration of Colleges of Technology, Regional Technical Colleges, National College of Art and Design and Colleges of Home Economics and related policy matters the staffing of the ESF Section has been as follows:

3.Any consideration of staffing to deal with ESF claims has to be considered in the context of staff shortages in the Department as a whole which have resulted from a combination of successive staff embargoes and staff levies and increases in the overall workload of the Department. Since the beginning of 1981 the total number of staff in the Department has fallen from 1,327 to 881, a decrease of 33.6 per cent. The Department does not consider that it has enough staff to carry out all its essential functions adequately and the Department of Finance/Public Service has been told this on numerous occasions.

4.In this unfavourable staffing environment the Department has endeavoured to meet the needs of ESF Section to the maximum extent possible while striving at the same time to maintain the level of services required of the Department in its other areas of operation. This has resulted in a 140 per cent increase in fulltime staffing of the ESF Section from 1984 while during the same time there has been a fourfold increase in the major ESF programmes operated by the Department.

5.The acute staffing situation in the Department has resulted in a Management Survey of staffing needs of the Department as a whole being carried out by the Department of Finance. The needs of the E.S.F. Section have been examined in the course of the survey. Pending the results of the survey an additional Higher Executive Officer has been assigned to the Section on a temporary basis to help with urgent business.

(c)

Documents that schools and VECs have to fill out in order to claim ESF aid

1.Currently the main ESF aided programmes operated by the Department can be divided into five main groups requiring the completion of claim forms by the educational agencies as indicated below.

2.The Department issues claim forms to the agencies involved in respect of each ESF aided programme for the return of costs incurred in the operation of each of the ESF aided programmes in respect of a calendar year. Guidelines for the calculation of costs particular to the programmes are also issued. These guidelines are drawn up by the Department and are based on the most up to date information available on practices and procedures for claiming ESF aid acceptable to the EC Commission. The guidelines and the claim forms have to address the particular requirements of the different programmes as well as taking account of the administrative and opperational differences of the various agencies and centres providing the programmes.

3.Guidelines and related claim forms for the five groups of programmes are attached as Appendices as follows:

(d)

COMMITTEE OF PUBLIC ACCOUNTS — 1986 ACCOUNTS

Note of the decision to discontinue payment of £30 per month grant in respect of Vocational Preparation and Training Courses

1.The decision to discontinue payment of the £30 per month grant to pupils attending Vocational Preparation and Training Programme Courses is effective from September 1988.

2.Consequently, this decision did not effect the receipts from the ESF brought to account as appropriations in aid in 1987.

3.In the case of 1988, the decision reduces expenditure on ESF aided courses by approximately £1.7 million. Appropriations in aid will not be affected as claims for advances from the ESF in 1988 had been submitted on the basis of continued payment of these grants. The decision will be reflected in the final instalment of ESF aid in respect of the year's activities, which will be received in 1989.

4.In general, the effect of the decision is to save the Exchequer a net 45 per cent of the cost of the grants.

APPENDIX 47

D'iarr tú orm, nuair a bhí fianaise á thabhairt agam do do Choiste ar 16 Meitheamh, scrúdú a dhéanamh féachaint an bhféadfaí an deontas faoi Scéim na bhFoghlaimeoirí Gaeilge a íoc i gceantair lasmuigh den Ghaeltacht — áit a mbeadh scoil lán-Ghaeilge — le mná tí i dtithe a mbeadh an Ghaeilge mar ghnáth-theanga acu agus a bheadh sásta foghlaimeoirí Gaeilge a choimeád ar íostas.

Is mian liom a chur in iúl duit go bhfuil scrúdú déanta ar an gceist seo anois agus tá ordaithe dom ag an Aire Stáit ag Roinn na Gaeltachta a chur in iúl duit go gceaptar nach ceart Scéim na bhFoghlaimeoirí Gaeilge a leathnú chun gur féidir deontas a íoc i gcásanna dá leithéid.

Is é an tuairim meáite gur sa Ghaeltacht amháin is ceart tairbhe Scéim na bhFoghlaimeoirí a bheith ar fáil mar is ann amháin atá saol iomlán trí Ghaeilge ar fáil do na foghlaimeoirí. Ní sna tithe nó sna ranganna amháin a bhíonn an Ghaeilge le clos agus á labhairt ag na foghlaimeoirí. Bíonn sí ar fáil i ngach gné den saol agus is í amháin a bhíonn ar fáil go hiondúil. Déanann gach siopa gnó tri Ghaeilge. Is aifreann Ghaeilge gach aifreann. Gaeilge a bhíonn á labhairt agformhór mór de mhuintir na háite i gcónaí. Bíonn teaghmháil ag na foghlaimeoirí sna déaga le déagóirí dá gcineál féin ar Gaeilge a bhíonn á labhairt ag a bhformhór. Tá sé tábhachtach ní amháin go bhfoghlaimeodh na daoine óga seo Gaeilge, ach go bhfeicfidís le na súile féin agus go gcloisfidís gur gnáth mheán-cumarsáide i ngach gné den saol an Ghaeilge agus nach díol iontais ná ábhar suntais é duine nó teaghlach ag labhairt Ghaeilge. Is cuid tábhachtach de na cúrsaí an caitheamh aimsire a chuirtear ar fáil ag céilithe 7rl. Meascann muintir na háite, ar Ghaeilgeoirí iad uile, leis na foghlaimeoirí ag na céilithe, ag na cluichí, ag feiseanna 7rl., agus an Ghaeilge á labhairt ag gach duine mar ghnáthnós imeachta. Áit ar bith a gcuirfí duine óg chun Gaeilge a fhoghlaim lasmuigh den Gaeltacht, ní léir go mbeadh na cúisí sin thuas go léir ar fáil ann.

Ní miste a lua freisin nach féidir agus cúinsí airgid mar atá, an limistéir ina bhfeidhmeofaí an Scéim a leathnú. Cheana féin i mbliana, níor mhór cosc a chur ar choláistí an líon daltaí a bhí acu i 1987 a shárú, d'fhonn smacht a chur ar an gcaiteachas a bhaineann leis an scéim.

You asked me, when I was giving evidence before your Committee on 16 June, to examine whether it was possible to pay the grant under the scheme for learning Irish in areas outside of the Gaeltacht — places where there would be all Irish schools — to households in which Irish is the normal language and which would be happy to accommodate Irish students.

I am pleased to tell you that an examination has now been carried out on this question and I am directed by the Minister of State at the Department of the Gaeltacht to inform you that it is considered that it would not be proper to extend the scheme for the learning of Irish to make it possible to pay the grant in cases like that.

It is the considered opinion that it is the Gaeltacht alone that should benefit from the Scheme for Learning Irish because it is there alone that a life totally through Irish is available to students. It is not only in the houses or the classrooms that Irish is heard and spoken by the students. It is available in all walks of life and it is Irish only which is available as a rule. Every shop does its business through Irish. Every Mass is in Irish. It is Irish which is spoken always by the vast majority of the people of the area. The students are in communication with teenagers of their own age, the majority of whom are speaking Irish. It is important not only that these young people learn Irish but that they see and hear that the normal means of communication in every walk of life is through Irish and that it is not a wonder or a subject of attention that people or families are speaking Irish. It is an important part of the courses that pastimes like ceilis etc. are laid on. The people of the area, all Irish speakers, mix with the students at ceilidhes, games, feiseanna, etc. and Irish is spoken by everyone in the normal course of events. It is obvious that all these conditions would not exist for a young person learning Irish in a place outside the Gaeltacht.

It should be pointed out also that it is not possible with the financial position as it is to extend the jurisdiction of the scheme.

In addition this year, it has been necessary to restrict colleges to the number of students they had in 1987 with a view to controlling the expenditure associated with the scheme.

APPENDIX 48

VETERINARY INSPECTION FEES IN THE PIGMEAT SECTOR.

Veterinary inspection fees in the pigmeat sector which had been waived for the period from January 1981 because of the depressed state of the bacon-curing industry at that time were re-imposed in May 1982. However, because of continuing difficulties in the industry, the bacon-curers were still unable to pay the fees. After prolonged discussions with the curers, the Government approved of a fresh agreement reached with the industry in June 1985. There were two main elements in this agreement: (1) that the bacon curers would resume payment of all current fees immediately and (ii) that the arrears of fees accumulated during the period from 1 May 1982 to 31 March 1985 would, in due course, be cleared by means of a special fee of 15p per pig. The latter charge would be brought into operation when the legislation relating to the control of local/non-export slaughterhouses became operative and the question of continuing the 15p charge would be reviewed after 3 years from the commencement of payment.

Subsequent to the June 1985 agreement, the bacon industry continued to experience difficulty. Their problems were resolved in March 1987 and since then the first element of the June '85 agreement is fully operative.

About 90 per cent of current arrears (i.e. relating to the period post 1 April 1985) have now been paid and it is expected that all outstanding amounts will be collected. This legislation relating to local/non-export slaughterhouses has now been enacted in the Abattoirs Act, 1988. This is a framework Act and requires a series of Statutory Regulations to bring it into full effect. It is envisaged that the main Regulations will be finalised later in 1988. At that stage the plan for paying the pre-1 April 1985 arrears of close to £5 million through the mechanism of the special charge of 15p per pig is due to come into operation.

On the basis of the 1987 level of pig slaughterings of 2.2 million a fee of 15p per pig would yield an annual return of £330,000. The development programme for the pigmeat sector envisages pig output of 3 million by 1992 and this number would yield £450,000 per year at 15p per pig. If the special charge of 15p per pig remains unchanged after the 3 year review already mentioned collection of the pre-April 1985 arrears will extend over about 10 years.

APPENDIX 49

LANDS ON HANDS AS AT 1 MAY, 1988

Note: The figure shown for unlettable land i.e. bog and mountain is 5,214 hectares. This is fee-simple. In addition it is estimated that the Land Commission has about 35,000 hectares of turbary rights.

Total Land distributed by the Land Commission in the year 1987

Note: The total area allotted (4,122 hectares) includes, in addition to agricultural land, bog, mountain and commonages. The agricultural land allotted was 1,088 hectares.

APPENDIX 50

CONSUMER SUBSIDY FOR BUTTER AND MILK CONTROLS BY INSPECTORATE OF DEPARTMENT OF AGRICULTURE AND FOOD

All payments made under both schemes were subject to the condition that the claimant kept full and accurate records of each sale of liquid milk and butter for human consumption. These records had to be retained, together with supporting documentation, for a period of not less than three years from the last day of the period to which the claim related. Failure to meet the minimum requirements in relation to record-keeping resulted in refusal to pay claims.

Only licensed pasteurizers or dairymen registered under the Milk and Dairies Act, 1935, selling milk for human consumption could apply for payment of the subsidy.

The records kept by the dairy were required to show a total reconciliation of stock i.e. opening stock, production, purchase, sales, closing stock. The sales figures were broken down between cash sales, retail sales, sales to institutions and wholesale credit sales. These records were examined on the spot by the Department's Dairy Inspectorate and the claim certified only if the Inspector was satisfied as to their veracity. Comprehensive on the spot examinations of subsidy claims were also carried out by the Department's internal audit unit.

All butter manufacturers who took part in the scheme were required to be registered under the Dairy Produce Marketing Act, 1924. The records kept by the claimant were required to show full reconciliation of butter stocks. The sales figures had to identify between sales to retail outlets, wholesalers and other disposal means. The verification of these records by the Department's Dairy Inspectorate included visits to retail premises for spot-checking of the amount of butter taken over. The butter subsidy scheme was subject to continuous examination by the Department's internal audit unit who made frequent visits to the premises of the claimants to examine the records kept there.

Copies of the claim forms which include the certification required from the Department's Inspector are enclosed in respect of both the liquid milk and butter subsidy schemes.

APPENDIX 51

EXPANSION OF BEEF COW NUMBERS.

Details of the size and composition of the national cow herd at June and December in each of the years 1980 to 1987 are given in the table annexed. The most recent data from the Central Statistics Office show that whilst the total national cow herd declined by 1.7 per cent in 1987 compared with a decline of 2.3 per cent in the previous year, the number of heifers in calf increased by 1.5 per cent. Moreover, in the non-dairy sector, the total of cows plus in-calf heifers was up by 4 per cent.

Against the background of two extremely bad years weatherwise in 1985 and 1986, the increase in suckler cow numbers is significant and it is expected that this trend will continue as a result of existing incentives available to beef farmers. These cover a combination of headage and premium grants. In disadvantaged areas the rate of headage grant on beef cows was increased from £32 to £70 on the first eight beef cows and from £28 to £66 on the next 22 (or 20 in less severely handicapped areas) under the 1986 headage scheme. When taken with the EEC Scheme of Premiums for Maintaining Suckler Cows (at £36.80 in 1987) the EEC Calf Premium Scheme (at £7.36 in 1987) and the headage grant of £19 on cattle over six months in more severely handicapped areas, it represents a considerable incentive to farmers in disadvantaged areas to maintain and expand beef cow numbers. In fact, farmers can obtain up to £133 for a cow and a calf in the more severely handicapped areas, up to £114 in the less severely handicapped areas and £44 elsewhere. In addition, a special Beef Premium of £15 on male animals over nine months has been available to all farmers since May 1987.

In addition, further incentives for beef farmers and for dairy farmers embarking on suckler production are envisaged under a new Scheme to Maintain the National Cow Herd.

(a)Under the first element of the scheme which applies to beef cow herds, there will be a cash grant of £50 on additional beef cows kept in non-disadvantaged areas and on additional beef cows over the number eligible for headage grants in the disadvantaged areas. The grant will be paid up to a total of 70,000 beef cows.

(b)In the case of dairy herds an interest subsidy of 5 per cent (or 4 per cent depending on the financial institution involved) will be available for three years where at least four cows are retained for suckler beef production. It will be paid on a maximum of 30 cows per herd. The subsidy will be calculated on the basis of £400 per cow and will apply to a total of 60,000 cows.

The meat industry, the Associated Banks and the ACC, the dairy co-operatives, the co-operative and private livestock marts and the farmers will contribute to the cost of the two elements (estimated at about £7 million over three years).

Various technical aspects of this Scheme including the financing of it have been under discussion with the interests concerned recently. These have now been clarified and the operational details of the proposed Scheme have been circulated to those interests with a view to securing their final agreement to them.

During the past year ACOT conducted a successful advisory campaign to promote the keeping of extra suckler cows. This campaign is being renewed this year. ACOT have also been carrying out an intensive programme directed at reducing calf mortality. While the success of the brucellosis eradication programme has reduced losses due to abortions to a minimum, it has been estimated that mortality at birth and in the postnatal period can still be as high as 10 per cent or more annually. A reduction of only 1 per cent in calf mortality through improved management could make an important contribution to cattle numbers by adding about 20,000 extra calves to the national herd each year.

The scope for encouraging the production of once-calved heifer beef and the possibilities for exploiting the new technology becoming available in the form of embryo transfer are under examination by the Department at present.

NATIONAL COW HERD 1980–1987 (000)

APPENDIX 52

OFFICE OF THE OMBUDSMAN.

Note on the staffing of the Office of the Ombudsman as requested at the meeting of 7 July 1988

The 1987 Budget Estimate for the office was reduced by £100,000 and there was a further reduction of £114,000 in 1988. The staffing reductions necessitated by these reduced allocations were achieved through redeployment and natural wastage as follows

(i) The Director took a career break for a post in the private sector. That position is blocked by one of the Senior Investigators

(ii) One Senior Investigator resigned to take up a position elsewhere in the public service

(iv) The Ombudsman's Office recently granted special leave without pay to another Senior Investigator to take up a post in GATT

I trust this clarifies the position but I will of course be glad (to the extent that I can, pending the review) to answer any supplementary queries the Chairman of the Committee may have.

APPENDIX 53

In accordance with my undertaking to the Committee on 7th July, 1988, I am forwarding:—

*(3)12 copies of this Department's booklet “Gudelines on the Safe Operation of Visual Display Units.

There are twelve (12) U.K. based trade unions, which hold negotiation licences, operating in this country.

There are fifty two (52) enterprise workers employed on the Community Enterprise Programme at present.

As regards (4) above, I think in my evidence I conceded to Deputy Barry Desmond that there had been a decline in the number of work permits issued and, later in my evidence, that perhaps there had been a sizeable decline. “Sizeable” may have been too strong a word in the light of the actual figures in the statement attached.

Note for Public Accounts Committee regarding inspection activities of the Industrial Inspectorate

Introduction

Scope

The Industrial Inspectorate and the Occupational Medical Services of the Department of Labour have certain responsibilities in relation to enforcement of:

(a)The Safety in Industry Acts, 1955 and 1980 (factories, construction activities, docks, wharves, quays, warehouses etc.),

(f)Regulations made under the above Acts as well as Regulations made under the European Communities Act, 1972, to give effect to EEC Directives.

Inspection Statistics

During the year, 13,085 of the 21,916 Safety in Industry and Mines and Quarries Acts premises on the register were visited on a total of 20,518 occasions. A total of 407 offices attached to factories of occupied by the State were inspected.

During the year, 12,752 of the 20,792 Safety in Industry and Mines and Quarries Acts premises on the register were visited on 19,385 occasions. A total of 393 offices attached to factories or occupied by the State were inspected.

Complete statistics are not available for 1987. Provisional figures show that 13,024 of the 21,208 Safety in Industry and Mines and Quarries Acts premises on the register were visited as well as 376 offices attached to factories or occupied by the State.

Inspection Targets: 1988

(a)The Industrial Inspectorate is scheduled to conduct in 1988 a targeted Programme for Reducing Accidents in the following sectors:

All premises are due to be visited at least once during the year, special attention to be devoted to the main cause of accidents and means of eliminating them and to main health hazards.

(b)The Industrial Inspectorate is scheduled to undertake in 1988 a total of approximately 16,000 visits to and inspections of work operations on the basis of the Targeted Programme above and of a prioritised system based on the level of risk in various types of industrial premises.

(c)In addition to prioritised (or routine) inspections, all fatal accidents are investigated as well as dangerous occurrences. Inspections would also be carried out on a selective basis in relation to other reported accidents and complaints.

Inspections of Office Premises

The Offices Premises Act, 1958 applies only to offices in which more than five people are employed primarily on clerical work. The Industrial Inspectorate is responsible for enforcing the Act only in respect of offices attached to factories and Government offices. Local authorities, through the Environmental Health Officers, are responsible for enforcement in all other offices. Inspections are normally originated on a complaints basis.

Note for the Public Accounts Committee regarding the General Inspectorate of the Department of Labour

The General Inspectorate of the Department of Labour administers and enforces Employment Regulation Orders (EROs) made under the Industrial Relations Acts. These orders prescribe minimum rates of pay and conditions of employment of those employed in traditionally low-paid, unorganised areas of employment such as clothing, catering, law clerks and hairdressing (Dublin and Cork).

General Inspectors carry out routine inspections to ensure compliance with the terms of the EROs. In addition to routine inspections, specific inspections are carried out on receipt of complaint.

APPENDIX 54

I refer to your letter of 7th October in which you indicated that Deputy Kieran Crotty has requested detailed information in relation to inspections carried out by the General Inspectorate of this Department. I am not altogether clear on how this information is relevant to your Committee but in order to be as helpful as possible I am giving what information we have.

Records of inspections carried out by the Inspectorate are on a county basis only and the record of inspections for counties Kilkenny, Tipperary and Waterford for 1986 and 1987 is set out in the attached table. All breaches of employment Regulation Orders discovered are followed up by the Department and may be resolved with or without recourse to legal proceedings. Records of arrears of wages collected on behalf of employees under the various Employment Regulation Orders in 1986 and 1987 are also attached. These records are not prepared on a county basis.

Inspections carried out by the General Inspectorate in 1986 and 1987 in counties Kilkenny, Tipperary and Waterford.

APPENDIX 55

The report submitted by the Chairman, Revenue Commissioners, in May 1988 on the alleged cheque fraud has been up-dated. All reports submitted are printed below.

Report on aspects of the Administration of the Office of the Collector-General

1.Fraudulent or attempted fraudulent encashment of (1) cheques sent by taxpayers to the Revenue Commissioners and (ii) repayment cheques issued by the Revenue commissioners.

Investigations are continuing and the Accounting Officer will provide the Committee with a further report on these and any other missing cheques at the next meeting to consider the 1986 Appropriation Accounts.

A case is categorised as not involving a loss to Revenue if one of the following conditions applies—

This category includes repayment cheques issued to taxpayers but diverted into criminal hands and lodged in third-party accounts which may have been opened for the purpose. The banks have refused compensation on the grounds that the warrants authorising payment were intercepted and altered to show false addresses which appeared on the cheques before they left Revenue.

In the unresolved category the pursuit of 31 cases fraudulently negotiated is being conducted under Counsel's guidance. The position is as follows:

3—the Collector-General is awaiting information before deciding on a course of action.

Of the ten cases “not negotiated” at 31 March, 1988, payment has been stopped in seven and the Collector-General is awaiting replies from the taxpayers involved in the other three cases.

1.2.The recent theft of a cheque for £531 by a temporary clerical trainee in the Collector-General's office has not been included in the above figures. The trainee joined Revenue in October 1987 and the attempted fraudulent encashment of the stolen cheque appears to have no connection with the wider frauds.

1.3.Eight persons have been charged in connection with the frauds. Four of those charged were convicted but one has lodged an appeal. Three cases are pending and in the remaining case the charge was struck out on the instructions of the Director of Public Prosecutions because of insufficient evidence.

1.4.None of those charged were employees or former employees of Revenue, or members or former members of the public service (including Semi-State bodies). The Gardaí are satisfied that some of those charged were known to one another or were associated with members of the criminal fraternity. Obviously, the events must give rise to the suspicion that some member or members of the Revenue staff were involved. So far, however, the Gardaí have no firm evidence to indicate such involvement.

1.5.The charges were brought under Section 33 (1) Larceny Act, 1916 and Sections (2) (6) and (7) of the Forgery Act, 1913. Typical charges were:—

—receiving a cheque property of the Revenue Commissioners knowing it to have been stolen;

—obtaining cash by virtue of a forged instrument, knowing same to have been forged;

—obtaining goods by virtue of a forged instrument, knowing same to have been forged and with intent to defraud;

1.6.Investigations by the Garda Fraud Squad are continuing and every effort is being made to identify any other culprits and to establish how the cheques were stolen, diverted and converted.

1.7.Procedures for the receipt and acknowledgment of payments sent to the Collector-General by Inspectors of Taxes have been strengthened considerably. Similarly, steps have been taken to improve the controls and procedures for dealing with repayments. Other steps taken to improve security include:

—changing Income Tax demand forms so as to discourage taxpayers from sending payments via Inspectors of Taxes;

—installation of a strong room in the Cash Office to replace the system of filing cheques overnight in steel cabinets;

—supervisors in the Cash Office and Post Room constantly reminded of the need for vigilance;

—cheques now stamped “Revenue Commissioners Account” as soon as the envelopes are opened in the Post Room rather than, as previously, when the cheques were received in the Cash Office from the Post Room nearby. Supervisors in areas other than the Cash Office have been given stamps and directed to ensure that any cheques received by them direct from taxpayers are stamped as soon as the envelopes are opened;

—the Internal Audit Unit has been strengthened and its role has been expanded;

—a major study is being undertaken on the feasibility of introducing Electronic Funds Transfer systems for the payment of taxes and for the making of repayments.

Delays in receipting and lodging cheques.

2.1The Collector-General's office handles in excess of one million payments each year. The procedures operated in the office are designed to ensure that all payments of £5,000 and over are lodged in the Central Bank and made available to the Exchequer on the day following their receipt.

2.2.The volume of payments of less than £5,000 is high and fluctuates considerably from day to day. There is a major peak in receipts between mid-November and mid-December when over 55 per cent of the yield from farm tax and income tax for the self-employed is received and lodged. In addition to the November peak, there are concentrations of payments after the 14th of each month for PAYE/PRSI and after the 19th of each second month for VAT.

2.3.It would be neither cost-effective nor feasible to maintain staffing complements on a continuing basis at the level required to dispose immediately of peak volumes of payments of less than £5,000.

2.4.Delays can occur, generally when it is not immediately clear what a taxpayer's intention is regarding the appropriation of a particular payment. In such instances some investigation is required before receipting and lodging can proceed.

2.5.Efforts are continually being made to minimise arrears of receipting. Staffing of the Cash Office stood at 54 at the end of 1980, was maintained at 50 over the period to 1986 while some 160 staff reductions occurred elsewhere within the Collector-General's office. Since then it has been possible to increase the number to 56. The supervisory position has been strengthened and clerical staff have been changed around to the best advantage. Other sections in the office have been providing loans of staff at peak times over the last 12 months and this has helped to reduce delays. It has, however, at the same time, added to backlogs of work in areas concerned. For example, in the income tax collection area outstanding replies to taxpayers' queries were exceptionally high at 31 December, 1987 because a lot of help had been given by that area to the Cash Office at times when, although its own work was in arrears, it was considered that the Cash Office was more critical. Thus, this remedy cannot be used at will. Efforts towards flexibility in using staff have also run up against accommodation and supervision difficulties. Equipment is not a problem.

2.6.There has been some increase in payment numbers over the years—from 1,070,000 in 1981 to 1,173,000 in 1987. Details of quarterly receipts for each tax type in 1987 and the first quarter of 1988 are given in Appendix 1 to this report.

2.7.Receipting of straightforward payments of all taxes was up-to-date on 31 March, 1988. Some 7,629 hours overtime were worked in the Cash Office in January-March. Staff from other areas were loaned to the Cash Office at various times in the quarter and nine temporary trainees were also available.

2.8.The inherent delays in the system and the vulnerability to fraud of largescale money handling operations have led the Commissioners to undertake a major study on how taxes might be paid through the Banks and An Post by means of credit transfer or direct debit systems.

2.9.The need to appropriate payments correctly would create difficulties if the suggestion to lodge cheques immediately and to tidy up the paperwork afterwards were to be adopted. The matter is, however, being studied further with a view to ensuring the earlier lodgment of cheques.

Revenue Sheriffs.

3.1.Appendix 2 contains particulars of referrals of tax certificates under Section 485 of the Income Tax Act, 1967 to sheriffs and county registrars in the period from 1 January, 1986 to 31 March, 1988.

Appendix 3 gives details of the payments received from sheriffs on foot of these certificates in the same period.

Appendix 4 shows, for comparison purposes, the payments received from county registrars in 1985 and 1986. These figures reflect the fact that 1985 was the last full year of operation of the registrars on Section 485 certificates. The new sheriffs who replaced the registrars on this work were appointed over the period from July 1986 to March 1987. In expectation of the appointments, the issue of tax certificates to the registrars was gradually wound down during 1986 and finally terminated in the middle of the year. All certificates in the hands of county registrars at the point of take-over by the new sheriffs were withdrawn and recycled for issue at a later date to the new sheriffs.

3.2.The face value of certificates issued can present a misleading impression of the potential yield from the sheriffs enforcement process. This arises from the nature of the collection system which operates generally on the basis of estimated amounts until the taxpayer declares the correct figure in his return. The great bulk of charges referred to sheriffs are for estimated amounts and this is reflected in the inflated face-value figures. Where the defaulter files his return after referral, the sheriff will accept the declared liability together with the interest and his poundage.

3.3.A further factor influencing the relationship between face-value and amounts paid is that a great many warrants are returned unexecuted. The principal categories of returns are:

Out-of-date certificates—a certificate is returned at the end of its legal life of twelve months;

Recalls by Revenue—These occur where, for example, PAYE/PRSI estimates are superseded by the P35 end-of-year return. The certificate would also be returned in cases where a VAT repayment claim is received for a VAT period which is at enforcement, or where estimates for individual tax periods are replaced by a composite review estimate for a year or accounting period.

Appendix 5 contains a summary of the numbers of certificates issued, paid and recalled in the years 1983 to 1987.

3.4.Sheriffs are required to transmit to the Collector-General the monies received in a month in full settlement of a certificate by the middle of the following month. Sheriffs are instructed not to return certificates or money until the full amount is collected because the Collector-General does not have the staff resources to process part-payments. Moreover, one of the major collection systems (the PAYE/PRSI monthly system) could not cope with a succession of payments for a particular charge. Sheriffs are under general instructions not to invite defaulters to enter into arrangements involving phased payments, but it is an inevitable feature of the sheriff operation that defaulters will volunteer part-payments in response to the sheriff's preliminary application and then make the final payment when the sheriff calls. Given the volume of the warrants extant, the practical course is for the sheriff to accept the part-payment pending the full execution of the warrant. Sheriffs are required to execute certificates within six months of the date of issue.

3.5.The sheriffs make a monthly report on the numbers of warrants processed by them and on the numbers remaining on hands. They also provide, in relation to the payments made by them to the Collector-General each month, the date of receipt of the amounts from the taxpayer. These reports indicate that, in general, payments are being made on time and that the incidence of part-payments is not excessive by reference to the nature of the sheriff operation. However, the monthly report is now being extended to provide particulars of the monies being held by the sheriff as well as particulars of the monies being paid over to the Collector-General so that any factors delaying payment to Revenue can quickly be detected and put right.

3.6.The more effective of the new sheriffs are, in general, those that were appointed earliest. The wide variation in performance reflects this factor and others such as the potential tax yield from a bailiwick measured by reference to the population and distribution of taxpayers and, of course, the skill and vigour of the sheriff. The increase in the number and value of payments from sheriff enforcement since the appointment of the new sheriffs has been impressive. In 1985, the county registrars collected £12 million on foot of 1,070 warrants. The new sheriffs collected £16.6 million on foot of 5,962 warrants in 1987 and in the first three months of 1988 the figures were £9.8 million on foot of 3,488 warrants.

3.7.The results achieved by the four independent sheriffs in Dublin and Cork have also improved over the period—

3.8.The current practice for dealing with remittances received by the Collector-General or Inspector of Taxes for liabilities with the sheriffs, is as follows:—

Usually, a remittance received by the Collector-General for a liability with the sheriff does not exceed that liability (tax and associated interest). Such remittance is transmitted to the sheriff and the defaulter is notified in writing that this has been done. The purpose is to secure that, where a liability has been referred to a sheriff, it can be cleared only by the defaulter dealing with the sheriff and paying the attendant charges.

There are two circumstances where it is not possible to follow this procedure. These are:—

(1)where the one remittance is found to cover liability in the hands of the sheriff and liability not in his hands, and

(2)where the agreed liability (and accordingly the amount of the remittance) is found to exceed the estimated liability in the hands of the sheriff.

As regards (1), the defaulter's intention with regard to appropriation is usually clear and the Collector-General is not at liberty under the law to appropriate portion of the remittance to interest, costs and poundage if, as is normally the case, this is contrary to the defaulter's intention. The remittance is returned to the defaulter who is advised of the separate amounts to be paid to the sheriff and to the Collector-General. The defaulter is thus compelled to deal with the sheriff in relation to liabilities in the hands of the sheriff.

As regards (2), the sheriff may not legally act in relation to the amount of the agreed liability in excess of the estimated amount because the excess is not covered by a certificate in his hands. As in (1), the remittance is returned to the defaulter who is advised to pay to the sheriff the lower amount in his hands and to pay the excess to the Collector-General. The Collector-General could recall the certificate and deal with the remittance but this procedure would leave in abeyance the sheriff's costs and poundage which must be met by the defaulter. It would also have the undesirable effect of circumventing the sheriff.

Remittances received by Inspectors of Taxes for liabilities in the hands of the sheriff are transmitted to the sheriff who processes such remittances in consultation with the office of the Collector-General.

4.Appointment of local officers to assist and advise taxpayers who appear to be getting into difficulties.

4.1.The Commissioners consider that this topic would best be dealt with in the context of the provision of local collection facilities. They have instituted a study to determine the feasibility of providing such facilities and to ascertain the costs and benefits involved. Improvement in the level of service to the taxpayer is an important consideration in the study.

Report on Cheques Fraud referred to in Paragraph 22 of the C. & A.G.'s Report on the 1986 Appropriation Accounts

1.This report up-dates the information given in the report forwarded to the Committee of Public Accounts on 6 May 1988.

2.The attached statement shows in tabular form the developments in the situation since 31 March, 1988.

3.In the seven cases where items moved from Categories 3 and 4 to Category 1, replacement cheques were provided by the tax-payers.

4.The case moving from Category 3 to Category 2 was one in which the cheque was made payable to the taxpayer's accountant who did not endorse it before submitting it to the inspector of taxes. As it was not made payable to Revenue a case against the bank would not be sustainable.

5.Seven new cases came to light during the period under review. These were cheques negotiated between August 1986 and July 1987 on most of which the name of the payee was altered. All but one were brought to notice by taxpayers enquiring during the last three months about the apparent non receipt of payments they had made much earlier. The remaining case was discovered by the Fraud Squad in the course of their investigation of one of the suspects involved.

6.The following is the position in regard to the residue of the cases in Category 3 on 31 March 1988—

2—The Collector General is awaiting information before deciding on a course of action.

7.No further persons have been charged since the previous report. The appeal submitted by one of those convicted has not yet been heard.

Of the three cases previously reported as pending, one has resulted in a dismissal of the charges on the grounds of insufficient evidence. Another case has been adjourned more than once and the next hearing is fixed for 27 July. In the third case, the defendant failed to appear in Court for his trial and a warrant has been issued for his arrest but he has not yet been arrested.

VOTE 9—REVENUE COMMISSIONERS

Meeting of Public Accounts Committee on 13 July, 1988

Cheque Fraud—Note on the amounts involved in cases in which proceedings against Banks are being prepared

Report on cheques fraud referred to in paragraph 22 of the C. & A.G.'s Report on the 1986 Appropriation Accounts

1.This report up-dates to 31st August, 1988 the information given in the report forwarded to the Committee of Public Accounts on 6th May, 1988.

2.The attached statement shows in tabular form the developments in the situation since 31st March, 1988.

3.In the eight cases where items moved from Categories 3 and 4 to Category 1, replacement cheques were provided by the tax-payers.

4.The case moving from Category 3 to Category 2 was one in which the cheque was made payable to the taxpayer's accountant who did not endorse it before submitting it to the Inspector of Taxes. As it was not made payable to Revenue a case against the bank would not be sustainable.

5.Seven new cases came to light during the period under review. These were cheques negotiated between August, 1986 and July, 1987 on most of which the name of the payee was altered. All but one were brought to notice by taxpayers enquiring during the last five months about the apparent non receipt of payments they had made much earlier. The remaining case was discovered by the Fraud Squad in the course of their investigation of one of the suspects involved.

6.The following is the position in regard to the cases in Category 3 on 31st August, 1988—

2—The Collector-General is awaiting information before deciding on a course of action.

7.No further persons have been charged since the previous report. The appeal submitted by one of those convicted has not yet been heard.

Of the three cases previously reported as pending, one has resulted in a dismissal of the charges on the grounds of insufficient evidence. Another case has been adjourned more than once and the next hearing is fixed for the end of October. In the third case, the defendant failed to appear in Court for his trial and a warrant has been issued for his arrest but he has not yet been arrested.

Report on cheques fraud referred to in paragraph 22 of the C & AG's Report on the 1986 Appropriation Accounts

1.This report updates to 31 March, 1989 the information in the report forwarded to the Committee of Public Accounts on 28 September, 1988.

2.The attached statement shows in tabular form the developments in the situation since 31 August, 1988.

3.Five new cases came to light during the period under review. These were cheques negotiated between November, 1986 and September, 1987 on which the name of the payee was altered. Three of these were brought to notice by taxpayers enquiring about the apparent non-receipt of payments they had made much earlier. The remaining cases were discovered by the Fraud Squad in the course of their investigations of one of the suspects involved.

In two of the cases the taxpayers were reimbursed by bank/An Post and they subsequently sent replacement cheques to the Collector-General. These cases are therefore in the “No loss to Revenue” category.

4.Two cases were moved from Category 3 to Category 1. In one of these cases a replacement cheque was received from the taxpayer.

In the other case a stolen bank draft belonging to Taxpayer A had been used by Taxpayer B to pay his tax. Credit was withdrawn from Taxpayer B and credited to the file of Taxpayer A who had originally purchased the bank draft. The outstanding tax owed by Taxpayer B was pursued in the normal way and has now been paid. The Director of Public Prosecutions considered there was not enough evidence to prosecute Taxpayer B.

5.The following is the position in regard to the cases in Category 3 and 4 on 31 March, 1989—

20—Legal proceedings against the Banks are being prepared. Opinion has been received from Senior Counsel and is under consideration.

6.No further persons have been charged since the previous report. The case due to be heard in October, 1988 is now due for hearing on 1 May, 1989. In the case of the defendant reported as failing to appear in Court a warrant for his arrest remains in force and the Gardaí remain anxious to question him.

Cheques Fraud—Schedule of Developments between 31 August 1988 and 31 March 1989.

C. & A. G. Report on Appropriation Accounts, 1986

The information provided to the Committee on this matter in April, 1989, indicated that the amounts outstanding were owed by one firm which had gone into liquidation.

The liquidation proceedings in respect of this firm have not yet been finalised.

The attached table summarises the developments in relation to the cheques fraud between 28 February, 1990 and 31 March, 1991.

In category (1) three extra cases have been added. Two cases were transferred from category (3) when replacement cheques were received from the taxpayers and one new case was discovered. This case is not a loss to the Revenue Commissioners because the bank concerned reimbursed the taxpayer, who subsequently sent a replacement cheque to the Collector-General.

In category (3) the number of cases is now 34. Two cases have been transferred to category (1) as replacement cheques have been received. Three new cases were discovered, amounting to £8,403. All of these cheques were stolen between November, 1986 and May, 1987 and came to light in the course of normal collection procedures. The latest position, therefore, is that legal proceedings are being prepared against the banks in a selection of the 21 cases in which proceedings were considered and in the other 13 cases the Collector-General is in correspondence with the taxpayers (see final paragraph).

To date, Garda investigations have resulted in charges being brought in 29 cases against ten individuals unconnected with the Revenue Commissioners. Of these, 21 cases have been successfully prosecuted. One individual was charged in connection with 15 of the cases. He pleaded guilty, was given a suspended prison sentence and bound over to keep the peace for five years. Another individual implicated in two of the cases was tried three times in connection with one case. On the first occasion the jury was discharged at the end of the first day because two of the jurors could not attend court the following day, and in both subsequent trials the jury failed to agree a verdict. The Supreme Court has now prohibited any further action in this case. In the other case he pleaded guilty and was given a year from 17th December, 1990 to repay the amount of £4,500 to the Revenue Commissioners or face a prison sentence.

Informal negotiations have taken place with the main bank involved with a view to ascertaining their attitude to compensating for the amounts not yet made good. To date one case only has been made good by a collecting bank. The current view is that the main bank is awaiting the outcome of a case (not connected with the Collector-General fraud) which is currently being referred to the Supreme Court. The Commissioners have selected the cases in which action against the banks is most likely to succeed and details are being referred to Counsel for drafting of procedures.

Cheques Fraud—Schedule of Developments between 28 February 1990 and 31 March 1991.

APPENDIX 56

Note on the age of cases written off

The ranges of the years of accounts of the cases in which tax of over £100 was written off in 1986 is shown in the following table—

APPENDIX 57

Companies wound up on foot of a petition by Revenue

The figures below indicate the number of companies in respect of which the Revenue published a winding up petition in the years 1985, 1986 or 1987. The figures include cases where the Revenue took over someone else's petition but do not include companies which prior to liquidation by the Court went into creditor's voluntary liquidation or receivership, where the tax was paid or where for some reason the Revenue petition was withdrawn.

APPENDIX 58

Impact of monthly payment system on VAT

Prior to the introduction of VAT in 1972 sales tax returns were made on a monthly basis. The proposed change to VAT, which entailed tax collection over all stages of production and distribution, resulted in several representatives following the publication of the White Paper on the draft scheme for a Value-Added-Tax which was published in March, 1971.

The Revenue Commissioners, having examined various submissions, were satisfied that the introduction of VAT would worsen the liquidity position of some firms, particularly those who purchase for cash or on short-term credit and who sell on long term credit. In order to avoid these problems the accounting period was extended to two months. The reasons for conceding the adoption of a two monthly period are still relevant.

If the period were reduced to one month, the increase in compliance costs for many business enterprises would be significant and there is little doubt that the reaction from the business community would be hostile. At present there are constant complaints that the two monthly period is inadequate to cover the lengthy periods of credit which are customary in business in this country. The question of allowing small traders to submit annual returns is being examined and this would further inhibit the possibility of introducing monthly returns for other traders who would feel that they were being made to pay for the concession of annual returns to small traders.

A trader who would normally be in a net repayment position over a two-month period might find himself liable for the first month; if he paid up a repayment would have to be issued the following month.

The introduction of monthly returns would probably result in an estimated once-off gain to the Exchequer of £20 million in the year of introduction. There would also be some continuing cash flow gain. Against such gains would have to be set the very considerable additional costs of administering a VAT system in which a greatly increased number of returns would be issued and processed.

The introduction of monthly payments would necessitate major amendments of the VAT computer system and would make enormous demands on the data processing services which are already over-stretched.

APPENDIX 59

WITHDRAWAL OF CERTIFICATES FROM SHERIFFS.

Table 1 of Paragraph 17 of the 1986 Appropriation Accounts indicated that 72,095 certificates* were returned unpaid or withdrawn from the sheriffs during 1986. A breakdown of the reasons for such returns or withdrawals is as follows:—

(2)Certificates recalled because of factors relating to the case.	14,745
Breakdown of factors:
Ceased trading:	40%
Left address:	40%
Wrong bailiwick:	10%
Deceased:	3%
Others:	7%

*This is the document corresponding to Sheriff certificates used to refer items to Solicitors.

APPENDIX 60

GOVERNMENT SUPPLIES AGENCY: POLICY ON STOCKHOLDING OF PAPER AND PAPER RELATED ITEMS.

At my recent examination before the P.A.C. the Chairman asked for a note on the above matter. He also suggested that expert advice be sought on the volume of paper stocks which should be held in the Stationery Office.

The details of expenditure on paper and paper related items for 1985 and 1986 together with the value of stocks of these items held at 31st December for each of these years are given in the Appendix attached.

The policy of the G.S.A at present is to hold approx. 6 months supply of stock items at any given time. This is based on the premise that the Agency must be in a position not only to meet the normal requirements of the Civil Service but also be able to cope with sudden, unexpected demand. This frequently arises through changes in policy on the introduction of new schemes and programmes.

This view has been strengthened with the closure of the only home-based paper mill at Clondalkin. The G.S.A is now dependent on imports for its paper requirements. The majority of supplies come from U.K. mills. In recent years the paper industry there has undergone significant rationalisation due to market pressures and competition from mainland Europe and the Nordic countries. Many of the older and smaller mills have closed and the industry in the main now consists of mills which would be regarded as medium to large by world standards. For the most part G.S.A orders are not significant in these terms and would not often be of sufficient volume to justify separate manufacturing runs. In a relatively buoyant market such as has existed in the past 2/3 years the lead time on orders from the G.S.A can often extend up to 4 to 6 months.

A further significant factor in a situation where the Agency finds itself dependent on imports is the possibility of serious delays in obtaining supplies due to industrial disputes. The recent U.K. ports strike is a good example. Had this continued for a few weeks longer the Agency would undoubtedly have been out of stock of certain lines of paper. Similar disputes might arise in the papermaking industry itself or in the ports in this country.

In view of all these factors it is considered that the present policy of holding approx. 6 months stock is the minimum necessary to guarantee continuity of service. However the G.S.A is required by Government decision to review all its activities and procedures and the question of stockholding will be included in that review. In fact the Agency has already taken steps in this direction in that the procedure for supplying photocopying paper (which the Agency supplies to Departments/Offices throughout the country) has been changed in 1987 to a system where the supplier delivers directly to the Customer Department/Office.

It is interesting to note also that the Stationery Office in the U.K. (HMSO) no longer holds stocks of “Heavy paper” but requires the paper merchants or mills to do so on their behalf while maintaining the advantages, from an economic point of view, of bulk purchasing. The feasibility of such an arrangement in this country will be considered as part of the review already referred to. The overriding consideration however must always be the need to guarantee continuity of supply to the public service.

In view of the above there would be no justification at this point in time in incurring expenditure on the employment of experts to advise in this matter.

“Small Issues”: Approx. 60/65% of this category is made up of stocks of envelopes of different sizes and quality. These are mainly the plain, brown envelopes with printed harp which are used in very large volumes throughout the Civil Service. The envelopes are manufactured in Ireland (the majority by two Dublin based firms) but the paper used is imported from U.K. mills.

The balance of this category comprises items such as typing, duplicating and carbon papers and other miscellaneous paper related items.

“Heavy Paper”: This category comprises the largest element of stocks held both in terms of volume and value. It consists of various types of paper in large sheet format which is issued to printers who hold contracts awarded by the G.S.A. Since the closure of the paper mills at Clondalkin the vast bulk of this paper comes from U.K. mills. Some years ago over 200 different lines of paper were stocked but this has now been reduced to less than 70.

APPENDIX 61

VOTE 10: OFFICE OF PUBLIC WORKS.

At my examination before the Public Accounts Committee in July, 1988 the Committee asked for notes on the above matters.

I now enclose statements setting out details of vacant office accommodation held by the Office of Public Works as at 30 September, 1988.

I am advised by the Chief State Solicitor’s Office that costs in connection with the claim for damages by the owners of No. 6 Kildare Street will not be fixed by the Taxing Master until late November/early December. I will let the Committee have the information as soon as it is available.

APPENDIX 62

During my examination before the Committee on 21 July, 1988 the question of office accommodation generally was discussed and the Chairman suggested that I should look at the position in Leinster House where, he claimed, he operated in less than satisfactory circumstances. The Chairman also suggested that I look at the accommodation for Senators in the College of Art and in Merrion Square which, he stated, was unsatisfactory.

I am advised that accommodation in Leinster House is not allocated by this Office but by the Leinster House authorities. In this connection I understand that the Chairman’s accommodation is on a par with other accommodation in the complex and was in fact recently decorated. Having regard to the Commissioners non-directive role. I am not in a position to be of any assistance to the Chairman in the matter of alternative accommodation.

Accommodation for Senators in the College of Art and 88/89 Merrion Square leaves a lot to be desired but we do not have the funds at our disposal which would allow for the necessary refurbishment. The decentralisation of a number of Government services next year will release a certain amount of accommodation in proximity to Leinster House which could be allocated the Oireachtas. In the longer term rationalisation of accommodation in the College of Science building (when vacated by the College) and the North Block of Government Buildings would appear to offer the best solution.

APPENDIX 63

At the recent examination of the Chairman of the Commissioners of Public Works on matters arising on the 1985 and 1986 Appropriation Accounts the Committee of Public Accounts asked that an explanation be obtained from the Chief State Solicitor’s Office on the delay by Counsel in bringing a particular case to Court.

I enclose for the information of the Committee a copy of a letter which the Chairman sent to the Chief State Solicitor’s Office on 25 July 1988 together with a copy of reply dated 29 July which has been received from the Chief State Solicitor’s Office in the matter.

CLAIM AGAINST INSURANCE CORPORATION OF IRELAND UNDER PERFORMANCE BOND IN RESPECT OF CONSTRUCTION OF MET. OFFICE H.Q. GLASNEVIN.

The above case is one which first came to the notice of the Committee of Public Accounts as a result of the Comptroller and Auditor General’s report on the 1980 Appropriation Accounts, and the Committee had questioned my predecessor about it in 1984. The Comptroller and Auditor General referred to it again in his report on the 1986 Accounts noting that the claim had still not been settled by June, 1987.

I was before the Committee on the 20 and 21 July, 1988 in connection with the 1986 Accounts and was asked if the case was yet resolved. I explained that after direct unsuccessful negotiations with the Insurance Company it had been decided to report to Court proceedings to recover the full amount of which we considered we were entitled. The instructions to institute proceedings were issued in October 1985, however, and the Committee expressed concern about the lack of progress since then. I informed the Committee that the matter was in the hands of Counsel and that Counsel had undertaken to have a statement of Claim ready within a matter of days.

The Committee felt that there should be an explanation for the length of time which had elapsed without any apparent progress being made in regard to the Court proceedings and asked me to request your Office to forward a note for the information of the Committee explaining the delay by Counsel in bringing the case to Court. When forwarding your comments it would, I think, be helpful if you could give the Committee an indication as to when the case might now be likely to reach the Court.

Re:— Claim against Insurance Corporation of Ireland under Performance Bond in respect of Construction of Met. Office H.Q. Glasnevin.

As your Officials will have told you, we had been bringing continuous pressure on Counsel to let us have a draft Statement of Claim so as to enable the Court action to be progressed.

I am glad to be able to tell you that, this afternoon, I received the necessary documentation from him, and we are taking the necessary action, in consultation with your Officials, to ensure the Court proceedings will now proceed as rapidly as is possible.

It is impossible to be precise—the Court Lists are very full at the moment—but I would feel the action should reach “hearing” stage in about six months.

APPENDIX 64

During the Public Accounts Committee’s discussion of the Office of Public Works’ Appropriation Accounts for 1985 and 1986, material was requested from this Department about the Government’s decentralisation programme (your letter of 5 September 1988 refers).

The queries raised by the Public Accounts Committee and responses to them are set out in the report attached. It will be appreciated that the answers are as frank as is compatible with the confidentiality of tendering arrangements between the selected contractors and the Office of Public Works. By its nature, confidentiality is essential in the decentralisation programme particularly while it is in progress. Nevertheless, I trust that the responses attached provide the required information.

Report of responses by the Department of Finance to queries raised by the Public Accounts Committee about the Decentralisation Programme.

A.When the original decentralisation programme was being drawn up in 1980, a comprehensive analysis was carried out by the Department of Finance examining the economic impact and social effects of withdrawing sections of certain Government Departments from Dublin and locating them in purpose built office accommodation in provincial centres. That report found that: “The proposals announced for the decentralisation of certain civil service activity were in keeping with the proposed strategy (of regional spread of higher order service activities) and would contribute to the development of some of the main urban centres outside Dublin and also of the smaller towns”.

In 1987 a detailed analysis of the relative merits/demerits, costs and benefits, of tenders submitted by developers selected to tender for the construction of the decentralised offices at Ballina, Cavan, Galway and Sligo, was undertaken by the Department of Finance’s Analysis section.

Q.What is the cost of the leases on the decentralised offices under construction?

A.The decentralised offices are being built by private developers on sites provided by the State or by local authorities and paid for by annual payments over a twenty year period. The annual cost per square foot of the decentralised offices is very competitive compared with the cost of comparable rented accommodation in Dublin occupied by civil service staff. It will be appreciated that the exact cost of the leases cannot be revealed due to the confidentiality of tendering arrangements between selected contractors and the OPW, and to the ongoing nature of the decentralisation programme.

Unlike usual rent arrangements, there are no rent reviews. Annual payments may vary in relation to interest rate movements; these variations may be up or down.

The State also owns the properties outright without further payments after twenty years—in contrast to normal renting arrangements under which no ownership rights accrue.

A.The intention is that there should be a long-term saving by replacing more expensive Dublin accommodation with less expensive accommodation in the provinces. It is impossible to state categorically what the long-term saving from decentralisation will be to the State, in advance of knowing the properties to be disposed of in Dublin.

Q.How many staff in which Government Departments will transfer to the decentralised offices?

A.There is no cost involved because removal expenses are not being paid to the civil servants transferred.

Q.What is the cost of computer installations being transferred out of Dublin and the overall effect on the system?

A.It is not envisaged that the decentralization programme will give rise to any significant increase in the overall computerisation programme for the sections of Departments being transferred over and above what would in any event have occurred through normal expansion of these services.

APPENDIX 65

C. & A. G. REPORT ON APPROPRIATION ACCOUNTS, 1986

Paragraph 18—Customs & Excise Duties, Value Added Tax etc.

When this matter was discussed with the Committee in September 1988, five identifiable sums totalling over £54,000 were outstanding as a result of the negligence of the officer involved. Of these, three items amounting to over £2,000 have now been paid.

The amount involved in the remaining two items is nearly £52,000 of which £19,000 was an established charge. The balance of almost £33,000 had not been firmly established. These amounts are owed by one firm which, as the Committee was advised, has gone into liquidation and the liquidator has been notified of the Revenue charges.

The officer involved retired in December last under the early retirement scheme.

Paragraph 21—Value Added Tax—Retail Export Scheme

The outstanding item on this paragraph is the determination and collection of the VAT liability of the company involved for the year 1986. The Commissioners are still in communication with the company on the matter but agreement on the liability has not yet been reached.

APPENDIX 66

I refer to my appearance before the Public Accounts Comittee on 20 October last and in particular to the Chairman’s request for a note on the matter discussed—the apparent discrepancy between the CSO estimates for ewes and the Department of Agriculture and Food’s figures for the number of ewes accepted for the Ewe Premium.

In that context I enclose a copy of a letter which I have sent to the Comptroller and Auditor General together with a copy of a statistical release of today’s date. The release contains revised estimates of ewe numbers, the extent of the upwards revision being substantial for recent years as explained in the text.

It is our view that the revised estimates for ewes and the numbers accepted for ewe premiums are now broadly reconcilable.

I refer to previous correspondence concerning the CSO estimates for ewe numbers (your ref. sheet 40/16/87) and in particular to my letter of 29 August 1987.

Following a detailed review, incorporating results from a new postal survey which will replace the existing survey, the CSO estimates for all categories of sheep, including ewes, have been revised upwards. The revised series are given in the enclosed statement which is being released today.

The revised ewe estimates for June compare with the ewe premium figures as follows:—

Year	Ewe premium	CSO estimate	difference
	(000)	(000)	per cent
1981	1,750	1,619	–7.5
1982	1,797	1,683	–6.3
1983	1,960	1,824	–6.9
1984	2,106	1,933	–8.2
1985	2,247	2,133	–5.1
1986	2,509	2,334	–7.0
1987	2,812	2,610	–7.2

During the review we established that classification and timing aspects do combine to give a lower figure for “ewes” in the CSO’s June postal returns, which cover each category of sheep, than the numbers accepted for the ewe premium at the time of inspection. For some 400 of the flocks in the postal inquiry the Department of Agriculture’s inspectors, in the course of their 1988 inspection for the ewe premium, collected additional information for all other categories of sheep. Direct comparison on an aggregate basis with the CSO postal returns showed that the difference for all sheep excluding lambs taken together was much lower than for ewes. Allowance for disposals between the two periods would reduce the difference even further.

In the circumstances we have concluded that the revised estimates at national level for ewes are broadly reconcilable with the number accepted for the ewe premium in 1988 and earlier years.

ESTIMATED SHEEP NUMBERS 1980–1988

Revised Estimates

Introduction

In the CSO Statistical Release “Agricultural Statistics June 1988” (issued on the 26th of September) no figures for sheep were included and it was indicated that the estimates for recent years were under review. This review, which has now been completed, has shown that the levels published for the June and December sheep flocks were underestimated. Results for June 1988 on a new basis together with revised estimates for each year since 1980 are given in Tables 1 and 2 overleaf.

The review was undertaken because of growing concern that the very rapid increase in sheep numbers in recent years was not being fully reflected in the annual June and December estimates. The most tangible evidence of this was seen in the case of ewes where the two statistical series indicated a growth of between 34 per cent and 43per cent in numbers between 1981 and 1987 whereas trends based on the numbers qualifying for the Ewe Premium Scheme, administered by the Department of Agriculture and Food, showed and increase of over 60 per cent for the same period.

The conclusions drawn from the review confirmed the impression that the rate of growth in sheep numbers between 1981 and 1987 had been consistently underestimated and, accordingly, the new June and December series presented in this release involve upward revisions, substantial for more recent years, for all categories of sheep.

Basis of revised series

In December 1987 the CSO initiated a programme to replace, on a phased basis, the long-standing “enumerator” system for surveying farmers with a direct postal survey approach. The results from the new system have played a central role in conducting the review and in preparing revised estimates.

The old estimates for sheep were based on trends observed in a fixed sample of District Electoral Divisions (DEDs) which were enumerated each June and December by part-time enumerators. These trends were then linked back, using year on year matched samples, to the last full Census of Agriculture, which was held in June 1980, to derive overall sheep population estimates for each survey. The unusually long interval since the last Census of Agriculture gave rise to concern in respect of estimates for items, such as sheep, undergoing rapid change since any failure to consistently pick up the full extent of the change is amplified over time using the annual linking approach.

The main focus of the review was to compare and examine the sheep estimates derivable from the two survey approaches. The results indicated clearly that, for both December 1987 and June 1988, estimates based on the postal survey returns were significantly higher for all categories of sheep. Furthermore, the estimates for ewes obtained from the postal survey returns were broadly reconcilable, when timing and classification differences were taken into account, with the numbers accepted for the Ewe Premium in the Spring of 1988. It was, therefore, concluded that the estimates based on the postal surveys should be accepted as providing a more accurate assessment of the sheep population in December 1987 and June 1988.

While the major uncertainty concerning the old figures related to the last few years it was considered necessary to reassess the situation back to 1980. For the years before the start of the postal inquiries, revised estimates were calculated by interpolating between the 1980 Census of Agriculture levels and the new levels established for December 1987 and June 1988. The interpolation procedures for each sheep category took account of both the relative annual trends shown by the existing estimates and the trend in the annual numbers qualifying for the Ewe Premium.

Scale of revisions

The revisions were carried out separately for the two series, June and December, and for each category of sheep. Higher revisions were found to be necessary for the December series and revisions for total sheep were greater than for ewes. Since the understatement of sheep numbers has accumulated over the period 1981 to 1987 the scale of the adjustments has also increased. Thus for ewes the size of the adjustments increased from a relatively low 1 to 2 per cent in 1981 to 14 per cent in June 1987 and almost 30 per cent in December 1987. For total sheep the revised figures for 1987 are 22 per cent higher for June and 32 per cent higher for December.

ESTIMATES OF SHEEP NUMBERS 1980–1988

Revised* Series

APPENDIX 67

Thank you for your letter of 17 February advising me that the Committee has noted the Appropriation Accounts for 1985 and 1986 for Votes for which I am Accounting Officer and that the Committee does not intend to call me to give evidence.

You also referred to a submission by Donal O’Buachalla & Co. Ltd. on the administration of the Valuation Acts and I enclose as requested a note setting out my response to that submission.

ADMINISTRATION OF THE VALUATION ACTS

Response of Commissioner of Valuation to Submission by Donal O’Buachalla & Co. Ltd.

Under the Valuation Acts, machinery not used specifically for the production of motive power is exempt from valuation. Machinery is not defined in the Valuation Acts, or any other statute.

In 1980 the Supreme Court ruled that fermentation and conditioning tanks used in brewing, which were traditionally deemed to be in the nature of a building under the Valuation Acts, were in fact machinery and hence not rateable. The main thrust of the submission is a complaint that successive Commissioners of Valuation have

—refused to apply the Supreme Court decision in a myriad of “analogous” cases

—insisted on treating each of these numerous “analogous” cases as a test case in seeking a definitive superior court ruling on rateability, and

Response of Commissioner

The properties which are valued for rating purposes provide the base on which rates are levied by local authorities. It is the responsibility of the Commissioner of Valuation to ensure that each property which legitimately forms part of the valuation base is included. Otherwise the principle of equity would be violated. When some items of property escape, the effect is to redistribute the rates burden in the sense that a reduced valuation base simply pushes local poundage rates higher than they would otherwise be fixed by local authorities to meet their financial requirements. Therefore successive Commissioners have had no alternative but to seek definitive High Court rulings from time to time on the interpretation of the Valuation Acts, including the rateability of the numerous “analogous” cases mentioned in the submission. The question of what is “analogous” can itself be open to different interpretations.

Before deciding to appeal to the High Court it is usual practice of the Commissioner to seek a written legal opinion from Counsel who represented him in the case before the Circuit Court. In every case mentioned the advice has been to proceed with the appeal.

Before he can appeal to the High Court the Commissioner must then obtain the prior consent of the Attorney General in each and every case. This consent is not always given. Where it is given it must be presumed that there are sufficient grounds to warrant proceeding with the appeal.

Once an appeal is lodged with the High Court the Commissioner has no control over the time taken to finalise the case and obtain a definitive ruling. For example long delays can occur in having the case stated prepared by the Circuit Court Judge with the help of Counsel on both sides. In the meantime similar cases are being processed through the Circuit Courts with the inevitable additional costs. While the Commissioner is most anxious to expedite superior court rulings he obviously has no authority in this matter. Nor can he be deemed responsible for costs incurred at Circuit Court due to delays in obtaining decisions from superior courts.

APPENDIX 68

OFFICE OF THE DIRECTOR OF PUBLIC PROSECUTIONS

SUBHEAD “D” FEES TO COUNSEL

PROFILE—V—EXPENDITURE

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JANUARY-JUNE 1985.

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JANUARY-JUNE 1985. (Contd.)

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JULY-DECEMBER 1985.

Name	Fees	V.A.T.	Total
	£	£	£
50.Stephen L. O'Keeffe*	1,922.00	442.02	2,364.02
51.Henry Abbott	1,921.50	441.93	2,363.43
52.Desmond Kearns	1,699.16	—	1,699.16
53.Paul O'Higgins	1,614.37	—	1,614.37
54.Patrick Hanratty	1,522.50	350.16	1,872.66
55.Alan Mahon	1,417.50	326.00	1,743.51
56.John Gordon	1,165.50	268.05	1,433.55
57.Dermot Fitzpatrick	1,111.25	255.58	1,366.83
58.Greg Murphy	966.00	—	966.00
59.Liam Reidy	787.50	181.11	968.61
60.Dermot McCann	693.00	—	693.00
61.Liam Devally	551.25	126.78	678.03
62.John O'Hagan	530.25	121.94	652.19
63.Cyril Kelly	476.00	—	476.00
64.Barry Hickson	472.50	—	472.50
65.Miriam Reynolds	357.00	—	357.00
66.Tom Slattery	157.50	—	157.50
67.Adrian McLynn	157.50	—	157.50
68.Ciaran Foley	105.00	—	105.00
69.Matthew Deery	94.50	—	94.50
70.Barry White	70.35	—	70.35
71.Kieran O'Reilly	31.50	—	31.50
Totals	389,609.48	57,221.93	446,831.41

APPENDIX 69

OFFICE OF THE DIRECTOR OF PUBLIC PROSECUTIONS

SUBHEAD “D” FEES TO COUNSEL

PROFILE—V—EXPENDITURE

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JANUARY-JUNE 1986.

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JANUARY-JUNE 1986—Contd.

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JULY-DECEMBER 1986.

SUBHEAD “D”—FEES TO COUNSEL: COURT EXPENDITURE (MONTHLY): JULY-DECEMBER 1986—Contd.

Name	Fees	V.A.T.	Total
	£	£	£
50.John McMenamin	2,976.50	744.10	3,720.60
51.Edward Walsh	2,882.25	668.06	3,550.31
52.Paul Gallagher	2,602.77	642.28	3,245.05
53.Alan Mahon	2,210.25	544.68	2,754.93
54.Dermot Fitzpatrick	2,184.00	546.00	2,730.00
55.Patrick Moran	2,131.50	414.74	2,546.24
56.John Whelan*	2,084.25	510.63	2,594.88
57.Michael McMahon	1,939.00	481.59	2,420.59
58.James O’Mahoney*	1,904.25	—	1,904.25
59.Henry Abbott	1,564.50	386.92	1,951.42
60.Patrick Hanratty	1,338.75	331.53	1,670.28
61.Finbarr McElligott*	1,144.50	—	1,144.50
62.Adrienne Egan*	953.05	—	953.05
63.Shaymus O’Quigley*	750.75	—	750.75
64.John Edwards	735.00	—	735.00
65.Liam Reidy	656.25	160.90	817.15
66.John Finlay	582.75	138.33	721.08
67.Brian Lenihan	562.80	—	562.80
68.Cyril Kelly	525.00	—	525.00
69.Denis Convery	490.00	—	490.00
70.John McKenna	336.00	—	336.00
71.Liam Devalley	315.00	78.75	393.75
72.Diarmuid McGuinness	252.00	63.00	315.00
73.Olive Buttimer	105.00	—	105.00
74.Denis Mitchell	94.50	—	94.50
75.Miriam Reynolds	70.00	—	70.00
TOTALS	489,191.59	87,352.05	576,543.64

APPENDIX 70

COMPUTERISATION IN THE HEALTH SERVICE

REPORT FOR THE COMMITTEE OF PUBLIC ACCOUNTS

COMPUTERISATION IN THE HEALTH SECTOR

1. BACKGROUND

1.1 Review Body on the Organisation of Computerisation in the Government Services

Computer policy in the health sector was determined by the above-mentioned Review Body and by one of the special groups set up under the aegis of that body. A proposed examination of computing in the health sector had been postponed pending the report of the Review Body. Because of this delay and growing level of demand for local computers by health agencies, special priority was accorded to the health area.

In summary, the Review Body’s recommendations in relation to the health area were:—

(a)that the Department of Health be responsible for overall policy, co-ordination, control and development of information management services in the health sector;

(b)that, for this purpose, the Department establish a small computer unit within its organisation function. This unit should issue standards, guidelines and procedures to be applied throughout the health sector;

(c)that standardised systems and procedures be applied throughout the health sector in so far as possible, and for this purpose, an integrated hardware/software policy be developed and implemented;

(d)that each common system to be developed, or package to be implemented, be assigned to a centre of responsibility designated from among the health agencies; and

(e)that the centre of responsibility so designated would assume complete responsibility for the development and maintenance of the system and for support to agencies subsequently implementing the system.

1.2 Study Group on Hardware and Software Strategy in the Health Services

“To develop and recommend to the Review Body a future computer hardware/software policy for the health sector.” The main recommendations of this study group, which reported in June, 1981, were as follows:—

(i)The Department of Health should urgently finalise the selection of computer hardware to meet the needs of the whole health services for the next five to ten years;

(ii)One of the criteria for the selection of equipment is that application software is available on the selected equipment which meets identified current and urgent system requirements;

(iii)This software must meet a series of defined key functioning requirements which had yet to be established in detail;

(iv)In order to provide for and control longer term standardisation in these areas and also in the areas of procedures and system design, development, and documentation, it would be necessary for the Department of Health to establish within the Department a general competence in computer-based health systems;

(v)Under well developed, co-ordinated plans and control procedures, arrangements should be made for the acquisition, development and implementation of comprehensive integrated information systems which (a) meet the needs of operational and strategic management in health services and (b) are supported by the selected equipment and portable across the range of equipment;

(vi)That equipment should be organised within the health services in accordance with the following broad general principles:—

—interactive mini-computers undertaking on-line processing would be sited in hospitals, in some cases linked to smaller machines dedicated to special tasks in individual hospital departments.

—hospital computer installations within a region would be linked to larger computers at a remote location which would undertake major batch processing tasks and support central registers. In the case of health board hospitals, the health board administrative centre would support this computing centre which would also undertake specifically health board systems.

—the regional network thus established would be capable of being ultimately linked to a computer system of the Department of Health.

1.3 Report of the Project Group on Hardware/Software Policy for the Health Services

A Project Group to develop further these recommendations was set up and reported in December, 1981. The membership of this project group comprised representatives of the Department of Health, Department of the Public Service and the Management Consultants employed by the Review Body (Messrs. Cooper and Lybrand). It was decided that the Project Group should be the same as the Study Group. The following terms of reference were agreed:

(1)To evaluate the material received from potential suppliers in response to enquiries from the Study Group;

(2)To continue the examination of hardware/software policy for the health services initiated by the Study Group to the point of making recommendations to the Department of Health on the hardware and software to be adopted as standard;

(3)To examine the current developments in the health sector and make recommendations to the Department of Health on the projects which should be launched in the short-term in pursuance of the policy proposed in the study group report.

As a first step, the Project Group considered the key areas which demanded priority for immediate development and implementation and decided that these were:—

In recommending these three areas for development, the project group had been influenced by the Trident Report on the “Review of arrangements for the Supply of Drugs and Medicines” which underlined the lack of effective control by hospital pharmacists, over purchasing, stock levels, etc., and pointed out the need for a system in this vital area. A patient administration system, incorporating a flexible patient index, was regarded as an essential foundation for most aspects of hospital based computing. A recent management consultancy report on the operation of community care teams throughout the health board sector had recommended that standard information systems should be implemented in all community care areas and a community index was regarded as an essential data base of all recipients of the various services that health board provides under the community care programme.

The Project Group recommended that these three areas be selected for a pilot computer system and that the pharmacy system should be piloted in St. James’s Hospital, Dublin; that the patient administration system be piloted in the Mater Hospital; and that the community index be piloted in the North Western Health Board. These sites were selected on the basis that management consultancy assignments had already been undertaken in these three areas. The project group were also satisfied that the needs of the nominated sites were sufficiently representative of the requirements of health agencies to enable these sites to be used on a pilot basis.

In relation to hardware requirements and the selection of a standard hardware supplier, the project group pointed out that the requirement was for a continuous spectrum of computer configuration ranging from small to very large. In other words, it was not a standard piece of equipment but rather a range of computers. Some twenty (20) hardware suppliers were accordingly contacted on this basis and were asked to complete a detailed questionnaire on their products including technical features, cost, supply conditions and supplier status. A total of fifteen (15) potential suppliers replied to this questionnaire and following a thorough examination, this number was subsequently reduced to nine (9) suppliers. A request for proposals was issued to these nine suppliers together with the specifications or systems descriptions for the patient administration system, the pharmacy system and the community index.

1.4 Recommended Hardware Range

Based on the detailed review of the short listed suppliers and on further information, clarification and confirmation secured during site visits and subsequent meetings, the Project Group recommended that the Digital Equipment Corporation range of equipment provided the solution most likely to meet the future needs of the health services in accordance with the criteria defined. The project group pointed out, however, that this would not rule out the provision of hardware and software from other sources capable of operating within the recommended standards and which would be acceptable in the following categories:—

(ii)other equipment employing the same hardware/software conventions (including cases where suppliers use DEC supplied components in assembling configurations which are marketed under different designations),

(iii)Other configurations which can emulate the standard hardware software conventions to achieve the same effect as the selected range.

(iv)Peripherals and other equipment which are “plug compatible” with the selected range.

1.5 Recommended Applications Software

In its search for suitable applications software for the identified systems, i.e. pharmacy, patients, administation and community index, the project group examined the software packages available not only from the hardware suppliers but also from software houses. Three main sources of supply for an integrated range of health systems were identified namely, (1) the Digital Medical Systems Group range of health care systems, (2) the SMS (Share Medical Systems) Action set of packages and (3) the McAuto HDC set of packages. Following further examination and discussions it emerged that the Digital range of health applications were only at a preliminary stage and accordingly, the choice was one between SMS and McAuto as providing a better short-term solution. The project group finally recommended following full discussions with both of these suppliers that either of these could meet the immediate identified requirement and that the choice between them depended on the long-term view taken of systems development in the health services, and on the relative merits of the final proposals put forward by the two suppliers particularly in relation to support arrangements and costs. It was accordingly recommended that the Department of Health should make the final selection of software supplier and the Department subsequently accepted the McAuto systems for patients, administration (which included a pharmacy module).

It should be noted that in its search for suitable software packages, the project group were not successful in finding any such package to cover the community index system. It was accordingly recommended that such a system would have to be developed in-house.

1.6 Patient Administration System

The selection of the McAuto HDC Patient Administration System instead of the system offered by SMS did not find favour in a number of health agencies particularly some of the voluntary hospitals. It is also met with resistance from the Local Government and Public Services Union. Some but not all of this opposition may have been due to the fact that several of the agencies had experienced or were involved in the development of computer systems with the unsuccessful tenderer (SMS). In any event there was significant adverse reaction to the McAuto decision. In this connection it should be noted that in deciding on the McAuto system, the Department had taken into account future developments potential within the McAuto systems, cost comparisons, ongoing maintenance, and the availability of support. SMS had no fewer than three attempts at securing the contract for a standard system:—

—firstly through a joint proposal with Digital Equipment Corporation for a system being developed at the Meath and Adelaide Hospitals. This was not accepted by the Project Group on the basis that it was only at the development stage.

—secondly a proposal to develop a patient administration system in collaboration with the Department was rejected on the grounds that the Department had not the expertise or personnel required to implement such a proposal.

—thirdly through their proposal for their Action System which was in operation in the US. This was on similar lines to the system proposed by McAuto but capital costs involved were significantly higher.

As indicated earlier in this report the Mater Hospital, Dublin had been selected as a pilot site for the implementation of a standard patient administration system. Following the selection of the McAuto HDC System as standard, negotiations proceeded with the Mater Hospital for the implementation of the system on a pilot basis. The management of the Mater Hospital issued a letter of intent to Messrs McAuto to proceed with the installation of their system and arangements were put in hands for the accommodation for hardware and cabling. Negotiations between the Mater and McAuto became protracted over certain clauses in the standard conditions of contract entered into by McAuto with their clients. It subsequently transpired that while these negotiations were in progress, the hospital was also negotiating with the unsuccessful contractor or tenderer (SMS) in relation to their system. The Department was informed towards the end of 1985 that the Hospital had decided to go ahead with the implementation of the SMS system. As this was not in conformity with the departmental policy on standardised systems the hospital was informed in November, 1985 that no financieal assistance from the Exchequer would be forthcoming and that £75,550 already paid in respect of computer room and cabling for the McAuto system would be deducted from future grant installments. At this stage also the Department became aware that St. Vincent’s Hospital, Elm Park and Portiuncula Hospital, Ballinasloe were in negotiation with SMS for the implementation of their system. All three hospitals (which are public voluntary hospitals) subsequently proceeded with the SMS system and no funding from the Exchequer was made towards the cost. While these negotiations and discussions were in progress the Department had decided to implement the McAuto systems in other hospitals which were prepared to co-operate in the implementation of standardised systems, namely Crumlin Children’s Hospital, Cork Regional Hospital and Tralee General Hospital which at that stage was about to open as a new General Hospital. Even in the case of Cork Regional and Tralee Hospitals there was some union opposition which was overcome only by agreeing that these be regarded as pilot sites for subsequent implementation and that such implementation would not be proceeded with until satisfactory implementation of each module in Cork Regional or Tralee General Hospitals. This of course led to a considerable delay in the implementation of the standard patient administration system particularly as considerable modifications to the McAuto package had to be carried out to comply with Irish conditions. The current situation is that the McAuto Systems have been installed in the three hospitals mentioned and from a recent date have commenced installation in Our Lady of Lourdes Hospital, Drogheda.

1.7 Pharmacy/Stock Control System

As indicated earlier it had been intended to acquire a standard software package to cover this area. A suitable package had not however been identified by the project group and it was decided acordingly to cover this area as part of the patient administration system within the hospitals or in the case of the health boards generally as part of the overall financial systems.

1.8 Community Care System

As had been expected a software package to cover the community care area was not available. It was accordingly agreed to proceed with the development of such a system in the North Western Health Board and this was proceeded with and continued over several years. Consultancy assistance was provided by Messrs Arthur Andersen and Company. At present such a system is approximately 75 per cent complete and covers such areas as community index, medical cards, registration, social work, deployment etc. Apart from the medical card aspects the transfer of which to other areas (Eastern Health Board) has commenced, its suitability for packaging and implementation in other community care areas has yet to be assessed.

1.9 Financial Systems

While financial systems had not been identified by the Study Group as a priority nevertheless it soon became evident that the development of and implementation of computerised financial systems was essential if the Department was to carry out its function in monitoring and controlling revenue and expenditure. A group representative of the Department, voluntary bodies and health boards was entrusted with the task of selecting standard software packages covering the major financial systems namely general ledger, accounts payable, accounts receivable, stores and payroll. Following an investigation of the market, a suite of systems for which the Dublin-based software company Praxis, held the agency in this country, were selected.

2. IMPLEMENTATION OF SYSTEMS

2.1Implementation of the various standard systems were commenced early in 1983 and the position to date is as follows:—

The Praxis General Ledger system has been implemented in the following sites—Eastern Health Board, North Easten Health Board, South Eastern Health Board, Beaumont Hospital and Crumlin Children’s Hospital. It is at present being installed in the Southern Health Board.

The Accounts payable system has been installed in the Eastern Health Board, the North Eastern Health Board, Beaumont Hospital and Crumlin.

The Stores system has been installed in a number of locations in the Eastern Health Board and in Crumlin Hospital.

The McAuto Patient Administration system was installed in Crumlin Hospital, Cork Regional Hospital, Tralee General Hospital and is in course of installation at Our Lady of Lourdes Hospital, Drogheda.

As indicated in Part 1 of this report the Patient Administration System supplied by SMS has been installed in the Master Hospital, St. Vincent’s Hospital and Portiuncula Hospital, Balinasloe. As these were non-standard systems the Department did not provide any funding.

A total Community Care System has not yet been developed. The system in the North Western Health Board is approximately 75 per cent complete. The medical cards module of the system has been installed in the Eastern Health Board and is under consideration for installation in the Southern Health Board.

Implementation of the financial systems gave rise to a considerable amount of expenditure on consultancy services due to the following factors:—

This led to an almost complete reliance on Praxis or other Management Consultations in the installation and initial running of systems. The Praxis quoted costs covered only the minimum amount of basic training in the use of the system and envisaged a level of expertise in client agencies which was not available within the health area.

(b)The need to examine in detail the existing procedures and systems in health agencies prior to implementation of computerised systems

The Praxis system was selected on the basis of a general specification of functional requirements. The systems had to be adapted to cater for existing local procedures or systems for performing such functions, whether manual or computerised. These had to be examined in detail prior to implementation and the services of management consultants were required for this process. Major management consultancy assignments were carried out in the Eastern Health Board, the North Eastern Health Board, the Mid-Western Health Board and the South Eastern Health Board. In the case of the first three health boards mentioned, the management consultants were Messrs Coopers and Lybrand and in the case of the South-Eastern Health Board the management consultants were Messrs Stokes Kennedy and Crowley. These consultants were engaged and selected in accordance with the normal procedures for employing consultants i.e. after receipt and evaluation of proposals from at least three consultancy firms (in fact, five or six proposals were received in relation to each assignment).

(c)The need to examine integration with secondary or subsidiary financial systems

Such subsidiary systems would include bank reconciliations, budgetary control, ambulance and general transport, fixed assets, welfare payments, refunds of medicines etc.

(d)Integration with other non-financial systems, eg Community Care, Hospital Patient Administration, Personnel etc.

This was also a key factor in view of the necessity to relate financial data to activity data.

It should be noted also that the original intention, as envisaged by the Systems Policy review Group, was to install the systems in one or two pilot areas to be designated as “Centres of Responsibility” for further implementation in other areas. For the reasons outlined above, this could not be put into practice, particularly in view of the lack of experienced computer staff at local level. A Praxis buy-out option could not be considered favourably in such circumstances.

Considerable modifications to the system had to be carried out to comply with Irish conditions. The agreement with Messrs McAuto provided for an annual licence fee in respect of each module of the application software installed, the amount of the fee being related to the number of beds in the hospital. Accordingly, while no additional software support fees were involved in carrying out the modifications or additions required, nevertheless it did give rise to considerable delays in the implementation of the various modules in Cork Regional Hospital. The modules contracted for in respect of that hospital have now been in operation for some time and we have had no complaints about them.

(f)In the course of implementation of the “Praxis” Financial Systems concern was expressed by some health agencies about the suitability of the systems. These concerns were however related more to the status of Praxis as a firm for implementing the systems for which they were agents than to the suitability of the systems to meet the health agencies requirements.

3. HARDWARE ACQUISITION

3.1 McAuto Systems

The agreement with McAuto was on the basis of McAuto being a single vendor supplier i.e. all hardware and software being contracted for through McAuto. The software package runs on a Digital Equipment Corporation (DEC) PDP 11/44 and contracts entered into between health agencies and McAuto provided for the supply of such equipment by McAuto provided for the supply of such equipment by McAuto. Discount arrangements were agreed between the Department and McAuto in relation to such hardware.

3.2

The arrangements with Praxis related to the software packages only and separate arrangements were made for the appropriate hardware with Digital Equipment Corporation (DEC) The hardware in question is the VAX range of equipment and substantial discounting arrangements were negotiated by the Department with DEC. In the course of management consultancy assignments carried out prior to the implementation process the VAX 750 had been identified as the appropriate equipment on which to run the Praxis systems. A small sized VAX (VAX 730) was considered suitable for the smaller hospitals.

3.3 Bulk Purchase

When funding became available in late 1982 the Department entered into arrangements with Digital Equipment Corporation for the Supply of 8 VAX 750 configurations and 3 VAX 730 configurations in anticipation of the 1983 implementation programme for financial systems. The total cost of this equipment was £2.118M and the arrangement was that this equipment would be drawn upon as required at the then prevailing (December, 1982) prices. A 4% increase in cost of equipment was in the offing at that stage. Due to the difficulties mentioned in previous sections of this report the implementation programme did not proceed at the expected rate and it was early 1987 before the last of this equipment had been drawn down. This has been the subject of adverse comment by the auditor and by the Public Accounts Committee but the reality of the situation is that because of increased retail prices and VAT increases over the period from January, 1983 to early 1987 it is calculated that the overall deal resulted in a net saving to the Department of more than £500,000. This figure was confirmed by officers of this Department with DEC and took into consideration the going costs of the VAX 750 equipment at the time each piece of equipment was supplied.

It is agreed that the three VAX 730 configurations purchased in December, 1982 created a problem since it had become apparent from experience that the processing power of this equipment was not sufficient to cater for all the transactions which might be required even in the smaller sized hospitals. These machines had not therefore been drawn down in 1986 when more competitive and more cost effective equipment became available from DEC i.e. Microvax II. In an arrangement covering the supply of 4 Microvax II configurations (for the Southern, Mid-Western, and Western Health Boards and the Department’s Hospital Planning Office) DEC would only allow the then 1986 sale value of £25,000 as a trade in for each of the VAX 730 configurations. This was in contrast to the £46,208 each at which they had been bought in 1982. In view of the experience and performance with the VAX 730 the Department had little option but to agree to the trade-in value of £25,000 and this was accordingly agreed subject to the proviso that if these VAX 730’s were supplied for use in the Public Service the price charged by DEC would not exceed £25,000.

Subsequently (December, 1986) two of the VAX 730 configurations were supplied by DEC to the Eastern Health Board at the £25,000 price—for use in St. Brendan’s and St. Mary’s Hospitals where suitable applications (staff scheduling etc) had been identified for them. The net result would appear to be a loss to the Department of £21,000 i.e. the difference in 1982 price (£46,000) and the 1986 sale value (£25,000) for one VAX 730 configuration. On the other hand DEC have confirmed that this VAX 730 is still available and will in fact be supplied free of charge to any health agency provided a suitable application can be found for it (the main problem here is that the high maintenance costs do not make great economic sense today).

The ready availability of hardware at no direct cost to the health agencies was seen as a major factor in gaining acceptance of the need for computerisation of key functions. It was an important component in the process of encouraging major change in how agencies are run and managed. For example, the introduction of the computerised Financial Systems was not merely to automate the accounting function but to provide the basis for the development and use of comprehensive systems of financial control and reporting, an objective which has now been achieved in some of the agencies. The management of change at this level here and elsewhere, has always proved to be a difficult and time consuming process. The environment in which the programme had to operate became more difficult than could have been reasonably anticipated and it was necessary to keep the hardware in store for a much longer period than envisaged. It should be noted also that the choice of the Digital VAX range hardware was fully justified when Digital subsequently placed increasing emphasis on this range as their strategic hardware offering.

4. COSTS

4.1The first term estimate of the cost of a comprehensive computerisation programme for the health sector was not available until May, 1985 following the carrying out of a management consultancy assignment by Messrs. Arthur Andersen. This put the overall implementation cost for the key systems for the major health agencies of £43 million with projected annual running costs of up to £11.5 million.

It is difficult to put a firm estimate on a programme such as this, in the absence of a clear indication as to how far computerisation of areas such as the major acute hospitals should be computerised. We are not aware of any location in Europe where there is a completely computerised hospital system. In the programme envisaged here we are providing for the basic systems relating to admissions, discharges, transfers, patient index, outpatients, ward order communications and subsequently, clinical applications such as Radiology and Laboratory. It is estimated that installation of all the foregoing modules in a major general hospital such as Cork Regional, Beaumont etc would be in excess of £2 million with annual maintenance costs in the region of £300,000-£400–000.

4.2The up-to-date estimate for the entire programme, (including computerised applications in smaller hospitals and health agencies such as mental handicap institutions etc) is £40 million of which £10 million has already been expended up to end of December, 1987; as already stated this does not include running costs. It may well be that the remaining costs will be somewhat less than the £30 million difference because of improved technology, increased familiarity with and experience of computerisation within the health sector, and the changing needs and priorities of the health agencies. The Department will continue to strive for the most cost effective solutions.

5. Cost Justification

It is extremely difficult to quantify in financial terms the savings which might be achieved in the implementation of the systems mentioned In general terms, apart from saving in staff numbers, the following are the cost benefits which might be expected to arise from implementation of the systems in the various areas:—

(a)Hospital Information Systems

The systems being installed are designed to facilitate the flow of relevant information relating to patients from the time of admissions to the time of discharge. When comprehensive systems, including clinical systems such as radiology and laboratory, are installed they could be expected to lead to a reduction in the average number of patient days per hospital. According to informations available from the USA, where computerised systems are in operation; the average length of stay per patient could be reduced by as much as 14 to 15 per cent. This of course does not necessarily mean significant savings in the running of a particular hospital (in fact the reverse might be the case because of an increased turn-over of patients) but in such cases the cost benefits would arise from a reduction in the total bed requirements either locally or nationally.

(b)Financial Systems

Where financial systems have been installed they have led to an increased efficiency which stems from knowing what is happening is not possible to quantify in purely financial terms. The financial systems include, apart from a general ledger system, an accounts payable system, stores system, payroll and so on and the information obtained from linking these systems will provide, for management, the information and control necessary for the effective use of resources. Computerisation has proved invaluable in recent years in helping boards and hospitals to live within allocation.

(c)Community Care system

A large part of this system is concerned with the issue and control of medical cards. As the issue of these are subject to means test there is an ongoing requirement for review and updating. As upwards of 40 per cent of the population are covered by medical card the volume of work is considerable. Apart from the medical card aspect there are other elements of the Community Care Staff such as Social Workers, Public Health Nurses, Home Helps, Community Workers, etc.

6. Funding Arrangements

As was indicated earlier in this report, some £10 million has been expended over the last five to six years on the computerisation programme. In general the hardware aspect was funded out of the Department’s Capital Programme. And the software and consultancy requirements were met from the Departments A2 sub-head for management consultancy requirements. The pace of implementation of systems was obviously influenced by the resources available from these sources, and by the manpower available. In particular in relation to the capital programme where there were competing demands for funds for hospital buildings and equipment and for the development of alternative systems in psychiatric services, funds for computer equipment (which are expensive) could not always readily be made available. Alternative funding arrangements such as leasing or deferred payments were considered but could not be authorised within existing financing policies. Given the size and complexity of the programme for the health area, an average expenditure of 2 million pounds per annum would hardly be expected to make a significant impact in the computerisation programme.

It has been decided that from 1989 onwards there will be a special subhead in the Departments Vote for computerisation of health boards, hospitals and other health facilities. This would facilitate the drawing up of an agreed planned implementation process over a period of time: progress will, of course, depend on the resources provided for the subhead as well as the manpower resources the Department will be permitted to engage depending on the funding and other resources available.

7. COMPUTERISATION POLICIES AND PROCEDURES REVIEW

7.1A group representative of the Department, the Health Boards, the Voluntary Hospitals other health agencies and involving outside consultancy expertise has recently carried out a review of the policies and systems implementation since 1982 to date. The issues giving rise to such review were as follows:

(1)The policies particularly for software/hardware are now out of date. The systems selected as a standard for hospitals have been superseded by a more recently developed McDonald Douglas system. This is not supported on the standard Digital hardware. Major parts of the software designated as standard for financial systems are no longer locally supported. Existing policies do not allow for new software offerings to be considered.

(2)Exclusive reliance on one hardware supplier runs counter to the competition requirements of the European Communities. Competition for computer products is favoured on cost effectiveness grounds by the Department of Finance.

(3)The resources, both financial and human, required to achieve effective and significant systems implementation have been inadequate.

(4)The relative roles of the Department and of the agencies need to be updated in order to clarify responsibilities in relation to the effective implementation of systems.

(5)There has been significant implementation of systems in contravention of the standard systems designated.

(6)With the increased use of technology world wide and a greater awareness among users of its potential, the needs and emphases of users are changing and becoming more demanding. These new needs and emphases need to be addressed in future systems selection.

(7)The Departments need for information has grown significantly particularly in the current economic environment. The Department depends on the various agencies for the supply of this information. It therefore has to specify precisely its information requirements so that systems developments in health agencies can meet these requirements accurately, regularly, and efficiently.

7.2As a result of its review the group has recommended to the Minister (who has accepted these recommendations) that the following will be the future computerisation policies and procedures for the health services:—

—fostering the introduction of IT (Information Technology) throughout the health service

—providing support and resources for IT planning projects (particularly initially)

—establishing standards, procedures and measures for planning, selection and implementation.

—specifying, as users of information its information requirements to the various agencies so that the computer systems which they are installing will make provision for this. (A planning exercise is currently being undertaken by the Department on this aspect in collaboration with the Information Management Advisory Service of the Department of Finance)

—adherence to the standards, procedures, and measures laid down by the Department (as essential pre-requisite to obtaining the Departments approval of any project proposals)

—determining priorities amongst its own information systems requirements, taking account of its objectives, current situation, and benefits to be achieved

—the evaluation and selection of hardware and software to meet its requirements, according to the procedures and standards laid down by the Department.

The Department will publish guidelines, to be followed by the agencies, for the planning, selection and implementation of information system. These will be updated from time to time based on experience of their use. There will be 4 major stages in the overall procedures from initial strategic planning through to systems implementation. Department of Health approval will be required at various points in the process.

The Department has made proposals to the Department of Finance to expand the small body of specialist information technology expertise within the Department and to provide staff support to health agencies information systems projects. Without such support the programme will not be fully effective.

The selection of hardware/software for any agency will be solution driven. The most suitable hardware/software combination which most closely meets the requirements of the agency including integration of systems, will be selected. It must also meet standards for computer systems primarily based on EC decisions and other requirements for computerisation in the public sector. The Department will supply guidance on suitable suppliers and take account of the experience of other agencies.

Effectively this will open the supply position to any hardware and software supplier, though the selection will obviously be subject to such factors as cost, existing hardware and software in the institutions concerned, the degree of fit to agencies requirements, the suppliers track record, the long-term viability of the supplier, commitment to the health industry, availability of support for users in Ireland, modernity of the design and development used etc.

As indicated earlier these policies have been agreed by the Minister and are being notified to the various health agencies. As indicated also the health agencies themselves were represented on the group which developed these policies.

8. GENERAL ISSUES

Smurfit Management Consultancy Services report to the Dáil Committee on Public Expenditure

The following comments are made on the summary of recommendations made in section 6 of above report:—

6 (1) to 6 (4)—As indicated in the previous section of this report these recommendations have been addressed by the review group mentioned. This includes a review of progress to date, the current situation (i.e. in 1988) and policies for the future (including a planning framework). These were developed in association with representatives of the health agencies. Selection of all hardware and software will in the future be primarily a matter for the health agencies subject to department’s approval and any systems selected will be solution driven.

Regarding 6 (5) of the recommendations it is vital that the technological expertise within the Department can be augmented or supported and proposals on this are before the Department of Finance.

Regarding recommendations 6 (6) the difficulties in relation to any quantification of potential savings of computerisation have already been mentioned in this report. However, despite the difficulties this is an aspect to which greater attention will be placed by the Department. The new planning guidelines will require that greater emphasis be given to cost benefit analysis in planning any project. It is the intention of the Department that an indepth analysis of small number of projects will be coordinated to ensure that the anticipated benefits eventually materialise. Cost-benefit analyses form part of the planning guidelines being issued in conjunction with the new policies.

Financing of Non-Standard Systems

As indicated earlier in this report three hospitals ignored the Departments circular on standard systems and chose to instal independent systems at their own expense. This Department has sought the details of the funding expended by the 3 hospitals themselves and this will be forwarded to the Committee when supplied. The future policies will allow for development of existing systems within the hospitals concerned to be funded by the exchequer, subject of course to any such development being carried out in accordance with the guidelines being issued by the Department. It will be a matter for the hospitals concerned to satisfy the Department that any systems already installed can form the basis for a total and effective system within the hospital itself.

Previous Meetings of Committee of Public Accounts

At previous meetings of the Public Accounts Committee queries were raised about the selection of Management Consultant and also about the methods of selection of the standard hardware and software packages. As indicated earlier in this report the normal tendering procedures were carried through in all cases i.e. in relation to the hardware and software selections numerous hardware firms and software houses were approached and asked to submit information and/or proposals. Regarding the Management Consultancy assignments all of these were entered into after going through the normal procedure for engaging management consultants i.e. invitation of proposals from a minimum of three consultancy firms (in fact 5 or 6 firms were asked to submit proposals in each case).

INDEX

Creedon Mr. D. 412–425, 428–439, 441–443, 599–605, 607–609, 612–614, 616, 618, 619, 621–626

Curran Mr. P. 235–236, 245–257. 259–263, 265–269, 679–692, 694–701, 710–721, 810–826, 828–829

138, 153, 154, 155, 160, 180, 183, 190, 193, 195, 204, 207, 212, 213, 215, 226, 235, 245, 259, 266, 272, 273, 279, 280, 286, 295, 296, 303, 304, 308, 331, 332, 342, 344, 346, 364, 377, 378, 386, 389, 390, 397, 410, 412, 418, 420–426, 431–434, 441, 456, 458, 460, 462, 480, 485, 486, 491, 492, 497, 502, 509, 526, 530–532, 543, 546, 551, 553, 557, 567, 568, 571, 612, 615, 617, 618, 620, 635, 642, 645, 649, 692, 694, 710, 712, 723, 731, 732, 741, 747, 752, 753, 763, 767, 773, 774, 782, 785, 810, 816, 819, 820, 824, 826, 828, 852, 859, 861, 872, 874, 875

Supply of ear tags for use in the disease eradication schemes 45–46, 410–417

Exchange Risk Guarantee Scheme on loans for Agriculture purposes 48–49, 424–429, 610–611

Export refunds payable under CAP—Appeal to European Court of Justice against EEC ruling 50, 604–605

Refund to the EEC of grants paid under the Farm Modernisation Scheme (FMS) 53–54, 614–617

Financial involvement of the State in Chipboard Products Ltd. (in receivership and in liquidation). 62–63, 479–484

Special Loan arrangement under Export Credit Insurance Scheme 27–29, 271–278

Annual Accounts of transactions under the Export Credit Insurance Scheme 29, 278–285

Net losses arising on operation of Export Credit Insurance Scheme 30–32, 271–278

Staffing difficulties and delays 59–62, 473–475, 831–835, 837–850, 877–894

Minute of the Minister for Finance on Report dated 15 March 1988 of the Committee of Public Accounts on the Appropriation Accounts 1984 93–106

Weaknesses in internal control—payment on foot of pro-forma invoices 57–58, 457–461

Redeployment of staff on abolition of Farm Classification Office 84–86, 436–439, 574–578

Waiving of repayment of principal and interest on special advances issued to Industrial Credit Corporation (ICC) 36–37, 345–348

Expenditure in excess of amounts authorised to be issued from the Exchequer 56–57, 457–458

Expenditure incurred prior to a decision not to proceed with the building of a proposed second-level school 15–17, 203–211

Costs associated with the purchase and renovation of a building at No. 5 Kildare Street (Dublin) 67–72, 730–746

Claims against the Insurance Corporation of Ireland on foot of insurance bonds 75, 763–766

Dry rot and other improvement works at six houses in Merrion Square Dublin 75–77, 766–773

Irregularities involving the fraudulent claiming of VAT repayments 78–79, 258–266

Fraudulent and attempted fraudulent encashment of cheques 82–84, 247–258, 679–692

Weaknesses in internal controls of a computerised system for the payment of unemployment assistance 12–13, 318–320

Aid from European Social Fund in respect of courses run by VEC’s 18–22, 215–225, 556–559

Mechanism used by Department of Education to overcome shortfall in receipts from European Social Fund 22–25, 544–552

Land Registry and Registry of Deeds 59–62, 473–475, 831–835, 837–850, 877–894

Gallagher, Mr. C. 199, 200, 220, 221, 436, 437, 438, 474, 672, 802, 803, 804, 885, 886, 892, 893

DÁIL ÉIREANN

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

TUARASCÁLACHA

EATRAMHACH AGUS DEIRIDH

INTERIM AND FINAL REPORTS

TABLE OF CONTENTS

TÉARMAÍ TAGARTHA

ORDERS OF REFERENCE

INTERIM REPORT

STATEMENT OF EXCESS

FINAL REPORT

OBSERVATIONS OF THE COMMITTEE OF PUBLIC ACCOUNTS

1.MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE APPROPRIATION ACCOUNTS, 1982–1983

2.MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE APPROPRIATION ACCOUNTS, 1984

CUID I—NÓTAÍ GINEARÁLTA

MEABHRÁN ÓN AIRE AIRGEADAIS DAR DÁTA 27 IÚIL, 1988 AR TUARASCÁIL ÓN GCOISTE AR NA CUNTAIS LEITHREASA DO 1980 AGUS 1981

PART II — APPROPRIATION ACCOUNTS 1985 & 1986

LOCAL GOVERNMENT AUDIT SERVICE

Arrears of audit in bodies audited by the Local Government Audit Service

SOCIAL WELFARE

Overpayments of Invalidity Pensions

Use of computerised facilities for cross-checking purposes

Irregularities in Employment Exchanges

Arrears of Social Insurance Contributions

Overpayments of Social Insurance and Social Assistance

Weaknesses in internal controls of a computerised system for the payment of unemployment assistance

POST-PRIMARY EDUCATION

Accounts of County Kilkenny VEC

Expenditure incurred prior to a decision not to proceed with the building of a proposed second level school

Collection of examination fees

Future of Scoil Ard Mhuire, Oberstown, Co. Dublin

Aid from European Social Fund in respect of courses run by VEC's.

Mechanism used by Department of Education to overcome shortfall in receipts from European Social Fund

Accumulated deficits in Comprehensive and Community Schools

INDUSTRY, TRADE, COMMERCE AND TOURISM

Special Loan arrangement under Export Credit Insurance Scheme

Annual Accounts of Transactions under the Export Credit Insurance Scheme.

Default in payment by two Sudanese Government Ministries

Net losses arising on operation of Export Credit Insurance Scheme

ISSUES UNDER THE INSURANCE ACT, 1964.

Financial difficulties of Insurance Corporation of Ireland

ISSUES UNDER THE IRISH SHIPPING LTD. ACTS, 1947–84.

Repayment to the Central Fund

OFFICE OF THE MINISTER FOR FINANCE

Waiving of repayment of principal and interest on special advances issued to Industrial Credit Corporation (ICC)

COMMUNICATIONS

Proposed construction of airport at Letterkenny

Visit to Connaught (Horan) International Airport, Knock.

Collection of TV licence fees.

FISHERIES

Leases for sites in Fishery Harbour Centres

DEFENCE

Irregularities in the payment of wages to civilian employees

AGRICULTURE

Supply of ear tags for use in the disease eradication schemes

Potential losses under Calved Heifer Scheme

Exchange Risk Guarantee Scheme on loans for Agricultural purposes

Arrears of land annuities

Export refunds payable under CAP — Appeal to European Court of Justice against EEC ruling

Arrears of Veterinary Inspection Fees in the Pigmeat Sector

Absence of proper stock records of beef held in intervention.

Refund to the EEC of grants paid under the Farm Modernisation Scheme (FMS).

AGRICULTURE AND CENTRAL STATISTICS OFFICE

Reconciliation of total ewe numbers

OFFICE OF THE MINISTER FOR JUSTICE

Expenditure in excess of amounts authorised to be issued from the Exchequer.

OFFICE OF THE MINISTER FOR JUSTICE AND GARDA SíOCHÁNA

Weaknesses in internal control — payment on foot of pro-forma invoices

COURTS

Failure to effect payment of matured liability

LAND REGISTRY & REGISTRY OF DEEDS

Staffing difficulties and delays

OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

Staffing

FORESTRY

Financial involvement of the State in Chipboard Products Ltd. (in receivership and in liquidation)

Monies due from the sale of timber

ENERGY

Avoca Mines Ltd.