Committee Reports::Interim and Final Report - Appropriation Accounts 1990::09 September, 1993::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 1990 expenditure in excess of the amounts voted by the Oireachtas was incurred under the Votes hereinafter mentioned.

STATEMENT OF EXCESS

Beneath is a statement of the sums required to be noted in order to make good excesses on the Votes for the President’s Establishment (Vote number 1) and for Superannuation and Retired allowances (Vote number 18).

The sanction of the Oireachtas will be required in respect of the sums set out in column (6).

The excess on Vote number 1 arose from a misreading of an expenditure return in December 1990 resulting in an underestimation of expenditure on Subhead A (Salaries, Wages and Allowances).

The excess on Vote number 18 arose as a result of a significant excess on Subhead D (Additional Allowances and Gratuities in respect of Established Officers and Payments in Respect of Transferred Service) and to a lesser extent on Subheads A, B and H which were not fully offset by savings on other subheads. A detailed assessment of expenditure was carried out towards the end of the year when the figures for the period to end November showed an unspent balance of £9,049,000 remaining for the month of December for Subheads A to H. The average monthly expenditure had been £6,139 with the highest being £7,480,000. Therefore it appeared that a sufficient sum was on hands for payments from the Vote for the month of December and accordingly, no transfer was sought from Vote 46 - Increases in Remuneration and Pensions although a sum of £510,000 could have been claimed in respect of salary increases implemented after the Estimate had been prepared.

Departments with delegated authority charge payments in respect of lump sums, death gratuities and marriage gratuities to suspense accounts and are under instructions to recoup from Subhead D on a quarterly basis. A number of Departments failed to do this and during December 1990 claimed recoupment of payments made up to 11 months previously. As a result the total recoupment from the Subhead was significantly higher than had been provided for.

The Committee notes that instructions have again issued to all Departments regarding the correct procedure for recoupment of payments made under delegated authority and that the position is being monitored on a quarterly basis.

PART 11 - 1990 ACCOUNTS

DEFENCE

Use of Fishery Protection Vessel L.E. Eithne and Fishery Patrol Helicopters - Project Audit Report

The 1990 Report of the Comptroller and Auditor General included a Project Audit report on the use of the fishery protection vessel L.E. Eithne and fishery patrol helicopters by the defence forces. The L.E. Eithne was completed at the Verolme Dockyard in 1984 at a cost of £26m (excluding VAT and armaments).

Unlike other ships in the fishery protection fleet, the Eithne was designed to carry an on-board helicopter. It was argued by the Department of Defence that the extra expense of designing and building a totally new class of ship was justified by the fact that the helicopter would significantly increase the area of ocean patrolled by the Eithne.

Two Dauphin shipborne helicopters were ordered in December 1982 and delivered in 1986 at a cost of £7.4m. The total cost of purchasing the Eithne and two helicopters came to £35.4m.

The Report of the Comptroller & Auditor General found that since the acquisition of the L.E. Eithne and the two fishery patrol helicopters, no coherent operational programme for their combined use had been put in place. Consequently, the use of the helicopters on fishery protection duties had been limited to 3 patrols totalling 10 flying hours. Because of the fact that it had operated without helicopters on virtually all of its patrols the L.E. Eithne had performed similarly to the Navy’s Deirdre class ships which cost less than 40% of the cost of the Eithne. Furthermore, training of the Naval Service personnel in combined ship and helicopter operations had been inadequate and would have to be improved. The Report found that the two fishery protection helicopters were being used by the Air Corps for the same type of duties as those helicopters which were originally purchased for search and rescue operations. As a result of these findings the Comptroller and Auditor General concluded that the enhanced fishery protection which could and should have derived from the acquisition of the L.E. Eithne had not materialised.

The Accounting Officer had responded to the Comptroller’s Report that the ship and helicopters had not been used jointly primarily because the helicopters had been used for air/sea rescue work which prevented them being used for fishery surveillance. In addition, the proposed use of ship-borne helicopters proved more complex technically than had been envisaged. The build-up of Air Corps expertise had been slow because of a shortage of skilled pilots and maintenance crews.

The Committee of Public Accounts notes that the stated shortage of skilled personnel did not prevent the helicopters from achieving the targeted number of flying hours per annum. The Committee also fails to see how the air/sea rescue priority prevented the helicopters from being used from the L.E. Eithne, to the extent that occurred since a ship-borne helicopter can perform air/sea rescue in much the same manner as a land-based helicopter. The Committee notes that during the period 1986-1991 there has been much public debate about the inadequacy of air-sea rescue facilities on the south and west coasts. The Committee would suggest that if the helicopters had accompanied the Eithne on its patrols in those waters, instead of operating almost exclusively from Baldonnel Aerodrome, some of the limitations of the air/sea rescue service could have been eliminated.

The Committee considers that the primary reason for the failure to operate the helicopters from on board the L.E. Eithne was the fact that the helicopters are operated by the air corps while the ships are operated by the naval service and there appears to have been an inadequate level of co-operation between the two services. Consequently the ships and the helicopters were seldom made available for the purpose for which they were purchased. The Committee notes that the Air Corps were able to make the helicopters available for only 3 fishery protection flights totalling 10 hours flying, yet they completed no less than 238 flights for purposes such as VIP transport, demonstrations, co-operation with Government Departments and other military uses. This suggests that fishery protection was ascribed the very lowest priority by the military authorities and this was the primary reason that so few fishery surveillance flights took place. Given that both the Dáil and the E.C. funded the purchase of the helicopters for the express purpose of fishery protection, the Committee must be concerned about the manner in which the military authorities used this equipment for these alternative purposes.

The Committee visited the L.E. Eithne in January 1992 to see the ship and helicopters in operation. The Committee welcomes the fact that shortly after the Comptroller and Auditor General drew public attention to this matter, the Air Corps were able to overcome all of their previous difficulties and assigned a helicopter to the L.E. Eithne on a permanent basis. This arrangement was operating at the time of the Committee’s visit and was contributing significantly to increasing the area of ocean patrolled by the L.E. Eithne and at that stage the number of trawler arrests by that ship was increasing to an appreciable extent. The Committee expects this arrangement to continue and asks that the Department of Defence keep them informed of the level of joint patrolling in future.

On another level, the Committee suggests that a lesson should be learned from this experience which would have general applicability in the public sector - that the successful management of a project like this should be seen to extend beyond the acquisition of the capital asset.

It must be recognised as including the identifying, scheduling, prioritising and implementing of the additional steps required to enable the resource to function to its optimum effectiveness as soon as possible. A timetable for all of those steps together with target dates should be an essential part of a comprehensive and co-ordinated management plan which would ensure that the required training and other preparatory work was completed by the date that the capital expenditure was completed.

SOCIAL WELFARE

Disability Benefit and Invalidity Pension Schemes - Project Audit Report

The Comptroller and Auditor General’s Report on the Appropriation Accounts for 1990 refers to a project audit conducted by his office which analysed the profile of persons in receipt of Disability Benefit (DB) and Invalidity Pensions (IP). Disability Benefit is paid to persons temporarily unable to work due to incapacity and the cost of the scheme for 1991 was £173m. Invalidity Pension is a related benefit for permanently incapacitated insured persons. The cost of the scheme for 1991 was £135m.

In the course of the audit the Department’s computer files were analysed by reference to four main criteria: age, sex, marital status and duration of claim. A firm of actuaries was engaged by the Comptroller & Auditor General to evaluate the findings authoritatively and to compare the Irish experience with that in Britain and with trends in permanent health insurance schemes. Their report found that although DB is officially designated a short term benefit and IP is regarded as the appropriate benefit for persons with long term disabilities, in practice DB can continue in payment more or less indefinitely provided the recipient declines to transfer to IP. The number of long duration DB recipients represented a high proportion of the total number of DB recipients. The report found that three out of four persons under 35 who were in receipt of long duration DB were women. 81% of women in receipt of DB were married. 40% of DB recipients had been in receipt of Unemployment Assistance/Benefit immediately before transferring to DB. There was evidence that some transfers to DB took place when entitlements to Unemployment Assistance/Benefit were exhausted.

Actuarial comparison between recipients of long duration DB and IP in Ireland and recipients of invalidity benefit in Britain revealed many similarities but found that there is a 20% - 27% higher incidence of claiming in Ireland, with a 75% higher claim rate here for claims of more than 3 years duration. The corresponding rate for shorter term claims is over 20% lower in Ireland. Both countries show a similar profile of recipients in terms of sex and marital status but there is a noticeable dissimilarity in the level of claims from married women under 30 years of age. In Britain this group are four times more likely to claim invalidity benefit than single women in the same age category. In Ireland married women under 30 are fourteen times more likely to have a long duration claim than their single counterparts.

The actuaries attributed some of the discrepancies between Irish and British claim rates to higher unemployment levels here. The experience has been that the higher the unemployment level the lower the incentive for people on sickness benefits to return to the labour force.

The actuaries found the high claim rates for young married women difficult to explain but suggested that it would be worthwhile for the Department to carry out a more detailed analysis of the underlying causes of disability and the total family financial circumstances of such claimants.

In evidence to the Committee the Accounting Officer stated that the primary reason that recipients were reluctant to transfer from DB to IP was because IP was taxable and DB was not. In addition, recipients of DB could qualify for additional benefits which IP recipients did not qualify for. In regard to the fact that there appears to be a disproportionate number of young married women on long term DB, the Accounting Officer was unsure of the possible causes for this. He suggested that a possible explanation could be that young married women tend to be employed in large numbers in jobs which, both here and in other countries, are associated with high levels of sickness claims, regardless of the employee’s sex. He reminded the Committee that the Department is legally obliged to ensure that any action which it takes in relation to claims could not discriminate or appear to discriminate against individuals on the basis of sex, marital status or age.

While recognising that the IP and DB schemes are an essential service for persons who are genuinely injured or incapacitated, it does seem that the incapacity stated to exist in some cases is questionable. Certainly the fact that some 25% of those referred to the Departmental medical examiners are found capable of work must cast doubts on many certified causes of incapacity. While the Committee recognises that the medical examiners are by no means infallible, it does seem to the Committee that there are many doctors who operate very loose procedures when certifying persons as unfit to work. The Committee recognises that the Department have tightened up on the operation of the DB and IP schemes, with the result that the level of DB claims has fallen from 79,000 in 1986 to 53,000 in 1990.

The Committee recognises the value of the project audit undertaken by the Comptroller and Auditor General. The findings help to give an insight into the composition of a large slice of social welfare expenditure and should be used by the Department to focus in on areas of concern. In this context the Committee notes that in his Estimates speech of 19 December 1991 the Minister for Social Welfare announced that from April 1992 all weekly DB and occupational injuries benefit payments will be treated as income for tax purposes. This may well have the effect of bringing the relative numbers in receipt of DB and IP more into line with the essential nature of the incapacity i.e. DB meeting short term incapacity needs and IP meeting permanent incapacity needs. The Committee requested the Accounting Officer to carry out further analysis to determine why young married women form such a large proportion of long-term disability benefit recipients. Specifically, the Committee wish to be advised of the medical conditions which are most commonly cited by young married women claimants.

Social Welfare Fraud

“Not enough is being done to prosecute persons who commit social welfare fraud. The committee expect that there will be meaningful penalties imposed on those who are discovered to have committed fraud.”

The Committee notes that the level of social welfare fraud continues to be unacceptably high. In 1990, detected fraud cost the taxpayer a total of £7,441,269. The most common form of fraud (60 % of cases) relates to persons who claim social welfare payments while working. The Committee is concerned that the prevalence of this type of fraud is very high yet the Department only prosecuted 209 people for welfare fraud. Committee notes that the Department has powers to disbar persons convicted of fraud from receiving welfare payments for a period of three months. The Committee wishes to know what powers the Department has to penalise the others who commit fraud but who are not prosecuted. The Committee notes that the proportion of moneys recovered in cases of fraud and overpayments has been around 25% in recent years. Taken together, these facts suggest that even if detected, social welfare fraud is a paying proposition.

The Committee accepts that many of the fraud cases involve technical breaches of regulations involving small sums of money and it would not be appropriate for prosecutions to proceed in such cases. However, there are also many cases where sums of money defrauded are large and there is obvious intent to defraud.

The Committee believe that the Department of Social Welfare must take greater regard of its responsibilities to take meaningful action in these cases. Specifically it must ensure that it devotes the level of resources to the processing of prosecutions that the scale of the problem demands.

HEALTH

Health Board Expenditure

The Minister for Health sets limits to the amount of expenditure which may be incurred by individual Health Boards and provision to meet the major portion of this expenditure is made in the Vote of the Department of Health. The Comptroller and Auditor General brought to the attention of the Committee the fact that a number of Local Government Auditor’s Reports made reference to the fact that Health Boards had, over a number of years, exceeded their allocations for both capital and non-capital expenditure. In 1991 the Department of Health, with the approval of the Department of Finance, regularised the position in regard to non-capital expenditure through granting retrospective approval of expenditures totalling in excess of £50m. The appropriate amounts were paid out of the Health Vote. However, in regard to capital expenditure there were unfunded balances of over £10m which had not been resolved.

The Accounting Officer in evidence to the Committee stated that about half of the overruns related to a single year, 1986. The overruns which are occurring now are much smaller than those which occurred in the past and the Department is now working towards eliminating overruns entirely in the future. The Accounting Officer pointed out that the powers of sanction which the Department has over Health Boards under the 1970 Health Act are very limited. However, the Department are currently considering making amendments to that Act to provide for greater accountability of Health Boards.

The Committee notes that this problem is not unique to Health Boards but also applies to other health facilities which are funded directly by the Department. The problem also arises regularly in regard to the funding of VECs by the Department of Education. The Committee notes that expenditures by Government Departments themselves are monitored constantly by the Department of Finance, a procedure which serves to prevent excess expenditure being incurred on a Vote. The Committee finds it unacceptable that the same level of control does not appear to exist in regard to expenditure by Health Boards and VECs. The Committee wishes to be informed what proposals the Department of Finance have for resolving this persistent problem. The Committee also wishes to be informed how it is proposed to deal with the balance of capital expenditure by Health Boards which has not been funded.

Variations in Health Costs

The Local Government Auditors compared costs in hospitals administered by the South-Eastern Health Board and found large variances in costs of provisions and medicines and also in the costs per in-patient day. For example, the cost of provisions per in-patient day in the dearest acute hospital was 71% greater than in the cheapest and the cost of medicines per in-patient day in the dearest geriatric hospital was almost 2.5 times that of the cheapest.

In evidence to the Committee the Accounting Officer acknowledged that this problem is not particular to the South-Eastern Health Board but exists right across the health services. His Department have been analysing unit costs of health facilities in detail and have been trying to develop a methodology for establishing what the correct levels of expenditure should be for patients in each type of care setting. However, because the circumstances of individual facilities vary considerably it is inevitable that there should be some variation in per-patient costs. For example, some facilities have older, less mobile patients who need more intensive care; others have very old buildings that are very expensive to heat and maintain. Because of these factors the Department cannot harmonise all unit costs of all facilities.

The Committee accepts that it would not be desirable for the Department to adhere slavishly to rigid guidelines regarding the unit costs of health facilities. The Committee recognise that the cheapest facilities are not necessarily the most cost-effective nor are the dearest facilities necessarily providing the best service. However, the Committee is concerned at the size of the variances in unit costs which exist at present and considers it unlikely that these are solely attributable to the different operating circumstances of individual facilities. The Committee believes that some variations in costs must also be due to variations in the standards of management in the different facilities. Cross-comparisons of expenditure on different facilities are therefore likely to prove a very useful tool in identifying facilities where resources are imprudently managed. The Committee will continue to monitor the Department’s efforts to develop this methodology further.

OFFICE OF PUBLIC WORKS

Lease of Teach Earlsfort

The Office of Public Works entered into a 34 year lease agreement with effect from June 1973 with the owners of Teach Earlsfort in order to provide accommodation for the offices of the Revenue Commissioners. The initial rental was £140,000 per annum subject to review after seven years, fourteen years and every five years thereafter. The rent increased to £435,000 per annum in 1980 and £476,000 per annum in 1987.

The air conditioning in the building was the subject of numerous complaints by Revenue Commissioners’ staff over a number of years. In 1986 OPW took over responsibility for the air conditioning from the landlords and a total of £186,000 was spent on modifying the system. However, staff complaints persisted and it was decided in September 1988 to surrender the lease and move the staff to other office buildings.

OPW entered into negotiations with the landlord who agreed in May 1990 to accept a surrender of the lease subject to payment by OPW of £700,000 which included rental due of £119,000.

In evidence to the Committee the Accounting Officer said that in his view the agreement on the surrender of the lease had been very favourably negotiated. The lease had a further 17 years to run and under the lease agreement the owners of the building could have insisted on the OPW maintaining the lease for the remainder of that term at a rental cost of approximately £500,000 per annum. The settlement agreed was therefore viewed as the most prudent course of action and the most beneficial outcome which could have been achieved by the State.

The Committee accepts the Accounting Officer’s view that the surrender of the lease was the correct course of action and was prudently managed. However, the Committee trusts that OPW have learnt from this experience and will not find itself hemmed into “no win” positions such as this in future leases.

ENVIRONMENT

Sales Scheme for Local Authority Dwellings

In 1988 the Government approved a scheme whereby sitting tenants in Local Authority houses were given the option to purchase their houses. The scheme was intended to reduce the cost of management and maintenance of such housing, which exceeded the rental income. Houses were sold at a discount of 40% of the market value of the house with an additional £2,000 discount in lieu of the new house grant and a further 10% discount on houses built pre-1960. Applicants for the scheme were provided with local authority housing loans at fixed interest rates in order to finance their house purchase.

The Comptroller and Auditor General expressed concern in his Report on the 1990 Appropriation Accounts that the savings on management and maintenance costs which were promised originally did not appear to have materialised. Since the publication of that Report, the Accounting Officer had informed the Comptroller and Auditor General that although there had been a very slight drop in the management and maintenance costs, no substantial reduction had materialised. This was because most of the dwellings purchased were those built in more recent years, on which the maintenance costs were very low. In addition, most of the dwellings were purchased through local authority loans and the collection of repayments on these loans involved the same level of management costs as the collection of rents had required previously.

The number of houses sold under the scheme in the years 1988 to 1990 was 27,200 and the Accounting Officer informed the Committee that the average sale price was £9,000. The average cost of building local authority houses varies between £35,000 in rural areas and £60,000 in inner city areas.

The Committee is concerned at the very high level of hidden costs associated with this scheme which was underpinned by flawed arguments regarding potential savings on management and maintenance costs. Because the remaining stock of houses includes most of the older houses, many of which are in a poor state of repair, the cost of maintaining these in the future will remain high and will in all probability continue to exceed rental income.

The Committee is also concerned at the very poor value for money being obtained from expenditure on maintenance of local authority housing at present. Average expenditure per house is about £900 per annum in Dublin and Cork yet neither the local authority nor the tenant appear to get good value for money from this expenditure. The Accounting officer stated in evidence that his Department is absolutely satisfied that there is need for very substantial improvement in this area. However, the maintenance of local authority housing is legally the responsibility of the local authorities and the Department have limited scope to enforce greater efficiency in this area.

The Committee takes the view that this problem will not be resolved by individual local authorities dealing with it in piecemeal fashion. Instead, it will be necessary for strong central direction to be given by the Department of the Environment. The Committee wishes to be informed in detail of specific proposals of the Department to ensure that value-for-money is obtained in regard to future expenditure on local authority housing maintenance.

Construction of a Community Centre at Cherry Orchard

In March 1986, the Department approved an amenity grant of £100,000 to Dublin Corporation for the construction of a community centre at Cherry Orchard, Dublin. The building which was subsequently built was much larger than that originally planned and the eventual cost was £448,703 which was met from amenity grants of £200,000, Corporation funding of £169,591 and Fás payments of £79,112.

The Accounting Officer informed the Committee that problems arose because, although the project was funded by the Corporation, the centre was built by the residents’ association using Fás facilities. Differences arose between the Corporation and the residents association concerning the facilities to be provided and the project ground to a halt in April 1989 once the local residents had exhausted their original financial allocation and the Corporation was unwilling to provide further moneys at that stage. Work was suspended until March 1991 when, after further negotiation it was agreed that the Corporation would take over the management of the project and would complete it through increased funding from the Department and a significant input of the Corporation’s own moneys.

The Accounting Officer assured the Committee that lessons had been learnt from this project and all subsequent schemes were operated on a very different basis. Grant levels have been greatly reduced and there is now a clear understanding that cost overruns will not be met by the State.

The Committee accepts the Accounting Officer’s assurances and expects that this type of poor financial control will not be repeated.

EDUCATION

Special Schools Project Audit

The Minister for Education has a statutory responsibility under the Children’s Act, 1908 to provide places for the detention of young offenders and in order to fulfil this obligation certain institutions which are designated as special schools are funded by the Department of Education. At the time of audit there were 4 of these schools though a fifth school at Oberstown was opened in September 1991. The schools meet different needs:

Finglas Children’s Centre is run by the De La Salle Order and comprises St Michael’s, a remand and assessment centre and St. Laurence’s, a school catering for male offenders in the age group 12-15 who have been detained for committal periods of one year.

St Joseph’s, Clonmel, is run by the Rosminian Order and caters for boys in the age group 9-12 who are committed through the Courts or directly referred by the Health Boards. The committal period may be up to 4 years.

Trinity House is run by a Board of Management and is a detention centre for seriously disturbed young males under 16 years of age. They may be detained up to 18 years of age.

Oberstown Girls Centre is run by a Board of Management and is a remand and assessment centre for young females between 12 and 17 years of age.

Oberstown Boys Centre is run by a Board of Management and has been partially reopened to provide extra remand and long-stay places for young male offenders.

The objective of the audit was to assess whether the management of the available facilities and resources at the schools ensured that:

(b)detainees were being accommodated in the institution which had been determined as appropriate to their needs;

The audit also examined whether the Department of Education was carrying out its overseeing responsibility in a way that contributed positively to the attainment of these objectives.

The audit revealed primarily that none of the objectives were being attained. In particular the report concluded that the following matters contributed to this failure:

-the unresolved fundamental differences about the roles Finglas Children’s Centre (St. Michael’s and St. Laurence’s) should be playing in the provision of residential services.

-the fact that St. Michael’s only provides an assessment service for 33 weeks each year thus limiting the operation of St. Laurence’s and St. Joseph’s;

-St. Michael’s, St. Laurence’s and St. Joseph’s all operate restrictive admission policies;

-there are no residential facilities for boys between 13 and 15 years of age who have been assessed as needing long term residential care;.

-the lack of suitable facilities and the failure to operate existing facilities to full potential is having an impact on the extent to which convicted youths and youths on remand are being released by the courts;

-management of both the Finglas centre and St. Joseph’s Centre was found to be less than satisfactory and the passive role adopted by the Department of Education in relation to the management of both centres contributed to the continuation of the unsatisfactory situations;

In evidence to the Committee the Accounting Officer stated that he did not accept some of the conclusions contained in the Comptroller and Auditor General’s Report and in a subsequent written report to the Committee of Public Accounts he gave details of actions pursued by his Department arising from an internal Departmental audit and a review of policy related to young offenders and those at risk.

As part of this audit the Department had identified causes for concern in relation to the operation of the special schools in the area of financial control and accounting procedures and a number of recommendations were being implemented with a view to improving the position in the context of a systematic audit of the centres which is ongoing.

The Department had also identified the need for a thorough review of prevailing practices in the area of admissions procedures to ensure consistency in admission policies and the avoidance of practices which might militate against optimum use of available facilities.

Attention was directed particularly at practices in the Finglas Children’s Centre and to a lesser extent in relation to the operation of St. Joseph’s Industrial School, Clonmel. A particular area of attention was the period of operation available in the case of St. Michael’s Assessment Centre. The primary focus of the

The Department’s review of this area was to maximise usage of facilities, within the limits both physical and professional under which the Centres are required to operate.

In the case of St. Michael’s Remand and Assessment Unit, there is a major constraint in that assessment depends firstly, on the reports of a range of specialists who are not easily assembled during peak holiday times. Secondly, boys require to be under observation for assessment for a period of weeks; a period broken by the holiday gap is not ideal for this purpose. This entailed both a gap in assessments during holiday periods and also not accepting additional boys for assessment at times when this could not be completed before the holidays. A more effective operating arrangement was agreed and put in place whereby the Centre delivers an extended active admissions period involving acceptance of referrals up to its full capacity throughout the year, with the limited exception of August and a two-week period at Easter and Christmas. This arrangement constitutes a significant increase in the annual period of operation of the centre and will facilitate a higher annual throughput of assessed cases, with consequent improvement in the rate of referral to other institutions.

In the case of St. Joseph’s, it has been established that suggestions of an effective upper limit on levels of annual admissions are not correct. The school is fully receptive to appropriate referrals up to full complement.

Referring to occupancy levels in particular schools the Accounting Officer pointed out that these are not dictated by the level of referrals to the schools. He said that decisions on placement should not be driven by considerations of accommodation availability but rather by the suitability of the facility chosen to address the needs of the particular child involved.

However, the Department considered it equally important that, where appropriate referrals are made, the centre’s facilities are used to the maximum extent possible. The need for a certain balance between traditional practices of advance booking of places and the ability to meet the immediate demands of the courts was acknowledged. A tendency on the part of the referral agencies to reserve places which are subsequently not availed of causes obvious difficulties where efforts are being made to maximise usage of available places. There is also a need to ensure that any cases of refused admission are fully justified.

Arising from discussions between the Department and the centres it was agreed that:

(a)the practices of advance bookings will be curtailed so as to ensure that priority will in all cases be accorded to the immediate facilitation of referrals from the Courts;

(b)any case of refused admission will be brought to the Department’s attention forthwith so as to ensure that a justified basis exists for such action.

These measures are calculated to achieve maximum appropriate usage of the facilities available. However, there is an obligation that places be retained for those young offenders who may be temporarily absent from a centre through absconding or on short-term leave.

A draft policy document is currently being discussed, the main thrust of which relates to the need to -

(i)expand and intensify services for those at risk;

(ii)develop and extend the use of non-custodial measures for young offenders;

(iii)use custodial care as a measure of last resort;

(iv)ensure that the nature of the custodial care is appropriate to the background and circumstances of the individual child;

(v)monitor the effectiveness and appropriateness of referrals; and

(vi)ensure effective co-ordination between all concerned agencies and interests in the implementation of this policy.

Finally, the Department of Education proposes to establish a Monitoring Committee, independently chaired and comprising a small number of experts in the area of adolescent care, to review and report annually on referrals and referral practices.

The Committee notes that the Department is now addressing the problems in relation to these special schools. The initiatives which are being taken to improve financial accountability within the schools are obviously very welcome. However, the Committee is still a little concerned that St. Michael’s remand centre only operates on a limited basis in August and at Christmas and Easter. The Committee notes that according to evidence given to the Dáil Committee on Crime 38% of criminal offenses are committed by juveniles. The type of crime committed by juveniles includes many very serious offenses and the Committee therefore wishes to be assured that sufficient facilities to deal with these offenders are available during school holiday periods.

(i)that all involved in the provision of child care services including the Departments of Education, Justice and Health, the Health Boards and the people delivering the service on the ground should get together with a view to establishing the nature and extent of the problem, devising an approach to solve those problems and agreeing an implementation plan with regular reviews of its effectiveness;

(ii)that this overall plan should form the basis for an operational strategy which the Department, the school management and the staff can work and which, most importantly, meets the needs of those in residential care;

(iii)that the schools should be operated with due regard to the principles of financial control and sound management practice and always with an awareness of the need to provide value for taxpayers money. The Committee asked the Accounting Officer to report on progress on these recommendations within six months.

Purchase of Computer Equipment

The Report of the Comptroller and Auditor General on the Appropriation Accounts for 1990 refers to the purchase by the Department of Education of various items of computer equipment which were purchased at a cost of £371,964. This equipment was intended to serve two purposes:

(i)to assist with the planning and implementation of the educational building programme;

In the course of audit it was noted that the management information system acquired for the building programme had never been operational and the replacement for the payroll computer had been found to be unsuitable following two years of effort by the Department’s staff to make the computer and associated software operate satisfactorily. In 1987 the Department had to revert to up-grading the original payroll computer system at a cost of £47,104.

The Comptroller and Auditor General had asked the Accounting Officer whether the Department had undertaken adequate feasibility studies before undertaking this project. He also enquired why the management information system was not operational some five years after it was acquired; whether the Department had sought to recover any of the costs of these systems from the suppliers; and why annual service charges of £30,000 were being paid on equipment which was not in use.

The Accounting Officer stated that the Department had not proceeded with its plans to use the computer system to introduce a management information system for the educational building programme because it found that the technology concerned was now obsolete and it was now more appropriate to use a PC network to serve the needs of the Department’s Buildings Section. This did not mean however that the computer was not being used at all. It was being used for other purposes such as file registration, correspondence listing, calculating redundancy entitlements of teachers and producing address lists on adhesive labels.

In relation to the payroll computer the Accounting Officer stated that the system was originally purchased after detailed negotiations with suppliers and a formal tendering process which had been subject to the scrutiny and approval of the Central Data Processing Service of the then Department of the Public Service. Although the system was capable of processing a payroll it was not capable of processing it fast enough to cope with the ongoing volume of payroll work in the Department. In this regard the Accounting Officer accepted that the original specifications which were given to the computer suppliers should have been more carefully defined to include performance criteria relating to the processing capacity of the computer system. The Accounting Officer stated that it was not now possible to recover any of the costs of the project from the supplier because the computers did in fact meet the limited criteria which were covered in the original purchase contract.

In regard to the annual maintenance charge of £30,000 for the computers, the Accounting Officer stated that this was paid up to the end of 1991 and had now been discontinued.

The Committee notes that the computer acquired to provide a management information system for the Department’s building programme never became operational and that the computer acquired to replace equipment which had been used for processing the payroll was found to be unsuitable. At the same time the Department continued to pay maintenance costs of £30,000 per annum for the two computers. The Committee was gravely concerned that taxpayers’ money would be spent in this way.

The Committee asks for the assurance that, in future, tendering procedures for purchasing computers throughout the public service should incorporate detailed performance specifications for the equipment being purchased so that this type of waste of resources cannot occur again.

Problems Concerning School Roofs

The Report of The Comptroller and Auditor General refers to problems arising in regard to community schools at Birr, Rathcoole and Clane which opened between 1979 and 1983 and which developed serious leaks in their roofs shortly after they opened. In 1990 major re-roofing works were undertaken at a cost of £254,274 with additional work at Birr likely to cost £118,000. These monies could not be recovered from the builders concerned as all three of the companies involved in the contracts had ceased trading shortly after completion of the schools.

In his response to queries from the Comptroller and Auditor General the Accounting Officer informed the Comptroller that he was satisfied with the Department’s arrangements for supervising such projects. He stated that problems with roofs were commonplace for a variety of reasons in all building types, particularly those with complex cross-sections required for many institutional and commercial buildings.

In evidence to the Committee the Accounting Officer informed the Committee that the buildings in question were single storey buildings with up to 6,000 square metres of roofing. The leaks were attributed by the Department’s consultants to the failure of contractors to rectify poor workmanship by subcontractors. Although the contractors were bonded the Department did not take action against the bondsman within the liability period covered by the bond. They were also subsequently unable to recover the cost of repairs from the contractors because their legal advice had suggested that any legal action was unlikely to succeed in that it would be difficult to prove that the leaking roofs were due to defective workmanship rather than defective materials. The Department had however succeeded in having some monies due to a contractor on completion of a contract held over against part of the costs of the roof repairs.

The Committee rejects the Accounting Officer’s contention that problems with roofs are commonplace and more or less to be expected. The Committee is of the view that the problems in relation to school buildings are primarily due to the way these projects are managed by the Department of Eduction. Specifically it is clear that:

-materials for roofing the schools appear to have been chosen solely on the basis of cost. These materials were not appropriate for a building with the lifespan normally expected from a community school and are no longer used in the construction of school buildings;

-proper procedures were not followed to recover the cost of repairs against the bondsman, despite the fact that leaks were discovered shortly after the schools opened and well within the warranty period;

-supervision of the project by the Department was totally inadequate. Although the Department paid substantial fees of 13% of construction costs to consultants who managed the project, the completed buildings were seriously defective and required extensive reconstruction to remedy those defects. According to the Accounting Officer the Department of Education was unable to seek legal redress for compensation from its consultants. Given the scale of the defects and the fact that the consultants do not appear to be liable for any of these, this begs the question - for what were they being paid such substantial fees?

-it appears that the contractual responsibilities of the consultants, contractors and materials suppliers were not properly defined by the Department before contracts were signed in the first place. If the Department had sought legal advice when drawing up the contracts instead of after the damage was done they might have saved the taxpayer a great deal of expense.

(i)the Department concerned must ensure that the responsibilities of all the third parties involved are clearly defined in any contracts;

(ii)the Department concerned must ensure that the choice of materials takes due regard to effectiveness as well as cost implications;

(iii)Government Contract Committee procedures in regard to bonding must be adhered to. In the event of defects occurring within the liability period these must be pursued with the bondsman immediately.

The Committee asks that these recommendations be brought to the attention of all Accounting Officers.

Sites for School Buildings

The Comptroller and Auditor General’s Report highlights two instances where land purchased by the Department of Education for its school building programme was encroached upon by other developers. In one case an entire site at Kilnamanagh, Co Dublin, which had been purchased in 1979 at a cost of £210,000, had been taken into possession by Dublin Co. Council who had incorporated it into a public park. In a separate case ten houses had been built on a portion of a site at Knocklyon by a private developer. That site had been purchased in 1982 for £385,000 with a further £179,593 being spent on fees for the design of a school. The encroachment by the builder would have necessitated the re-design of the school to accommodate it on the remainder of the site. In December 1990 the Department agreed to accept £68,000 as compensation from the builder for the transfer to him of that portion of the site on which he had already built the houses. Although the Department estimated that consequent on the encroachment, redesign of the school would cost a further £68,000, it decided that no compensation should be sought as the proposal to build a new school on the site had been effectively abandoned.

In evidence to the Committee the Accounting Officer stated that in regard to the site at Kilnamanagh the only explanation given by Dublin Co. Council was that when they are undertaking development work in an area they routinely look at any adjoining unused properties in State ownership to see whether they can be incorporated into the site. In this case there had been no consultation with the Department and the Co. Council had simply taken it upon itself to take possession of land which did not belong to it. The Department has since had the land valued and was given a valuation of £1 million by the Valuation Office. They were now involved in negotiations with the Co. Council to secure the return of the site or payment of a fair price for the land.

In regard to the site at Knocklyon the Accounting Officer stated that the Department had also got a valuation from the Valuation Office for the portion of the site encroached upon by the builder. That valuation was for £68,000 and it was on this basis that the Department agreed to compensation of that amount from the builder. At the time it was becoming clear that the Department would not be proceeding with a development of a school at that location and it was therefore felt that it would be unreasonable to impose an additional charge on the builder. The Department took the view that the builder had encroached on the land by accident rather than by design.

The Committee does not accept that it was possible for the builder to accidentally build on over 1 acre of State land. This seems to have been a case of opportunism rather than error which was facilitated by the Department’s negligence in managing its property allied to their subsequent indifference to recovering reasonable damages from the builder. The fact that nothing was sought to compensate the Department for rendering its school design worthless is reprehensible. The Committee doubts if the builder would have been so accommodating if the roles were reversed.

The Co. Council’s action in taking possession of the site at Kilnamanagh cannot be condoned. The Committee wishes to be kept informed of the outcome of the Department’s negotiations.

In regard to the future safeguarding of sites still in the Department’s possession the Committee insists that these should be regularly inspected and maintained. It is totally unacceptable that the Department should allow two of its very limited number of sites to be taken possession of or built upon by other parties. It is difficult to imagine this sequence of events happening to any other organisation.

NATIONAL TREASURY MANAGEMENT AGENCY

The National Treasury Management Agency (NTMA) was established on 3 December 1990 to manage the National Debt and to perform certain related functions, including the management of the Post Office Savings Bank Fund, under the control and supervision of the Department of Finance. It has been agreed that the Agency will prepare and submit its first accounts for audit covering the period 3 December 1990 to 31 December 1991.

Post Office Savings Bank

An Post operates the Post Office Savings Bank (POSB), together with a number of other savings services, on behalf of the NTMA. In lieu of this service expenses incurred on the POSB are met from the Post Office Savings Bank Fund and those incurred on other Savings Services are met from the Exchequer. These expenses amounted to £8.9m and £4.6m respectively in 1990.

The Accounting Officer of the NTMA has been negotiating with An Post with a view to completing a formal agreement to provide a revised fee structure to place the relationship between the two bodies on a more commercial basis. The Accounting Officer is anxious that the fees should be structured so that the cost of borrowing funds through An Post would be competitive with the costs of borrowing through alternative mechanisms.

The NTMA are also involved, in co-operation with An Post, in preparing development proposals for the modernisation of the POSB through computerisation of counter operations in 600 post offices nationwide. The Committee would like to be informed of the outcome of the negotiations regarding the fee structure for management of the POSB fund and of the development of the post office counter services.

COURTS

Delays in Serving Summonses

The Comptroller and Auditor General’s Report on the Appropriation Accounts for 1990 noted that the temporary unavailability of a Court premises to prosecute parking offenses was a factor in the failure to apply for summonses within the period prescribed by law. Thus the prosecutions became statute-barred and no further action was taken.

In response to the Comptroller’s enquiries the Accounting Officer had explained that the summonses in question had not been applied for within the legally specified period of time as under the computerised system which was then in place the application for and the issue of summonses were dealt with simultaneously. This was because many parking offenders tended to delay the payment of fines until the last minute and it was therefore normally necessary to delay applying for summonses until the deadline had almost expired. In this instance the summonses could not issue as Courts for hearing the cases were not yet available, but the application for summonses was also inadvertently delayed until the Courts subsequently became available. By that stage 17,000 cases in which applications for summonses were not made had effectively become statute-barred. Another 8,000 summonses which had been prepared were not issued because of the time lag since the offenses were committed. The Accounting Officer estimated that about 8,000 of the 25,000 cases would have come before the Court based on an effective summons serving rate at that time of about 30%. The average conviction rate of 75% in such cases would give about 6,000 convictions and with an average fine of about £30 he estimated that the amount of unpaid fines would have been about £180,000.

The Accounting Officer accepted that the non-availability of the Court need not have delayed the application to the Court for the summonses even though these could not have been issued. The application alone would have prevented the summonses becoming statute barred. The Accounting Officer assured the Committee that in such cases in future the staff involved would proceed with processing applications for summonses in order to prevent cases becoming statute barred. Only the actual issuing of these summonses will in future be delayed as a consequence of any Court being temporarily unavailable.

The Committee regards it as totally unacceptable that the summons serving rate for parking offenses in Dublin is as low as 30%. It appears to the Committee that the underlying reason for this is not the inability of the Gardai to trace offenders, an excuse that is often offered. The more likely reason for the low level of summons serving seems to be that this work is, of necessity, given a very low level of priority by the Garda authorities. The Committee considers it essential that persons who park illegally must be properly fined and where they fail to pay the fine they must be prosecuted. The Committee considers that this will only happen if and when the local authorities rather than the Gardai are given full responsibility for the processing of parking offenses. In any event the Committee considers it inappropriate that the Fines-on-the-Spot Office is run as a Garda office with a sizeable complement of Gardai involved in processing summonses when it is likely that all of this work could be done more effectively and at lower cost by civilians.

The Committee wishes to be informed of the views of the Department of Finance on this matter.

MARINE

Dingle Harbour Development

In July 1988 the Department of the Marine proposed a scheme of development works at Dingle Harbour at an estimated cost of £2 million to be financed 75% by the Department and 25% by Roinn na Gaeltachta. This work was to include dredging works, land reclamation, extending the main pier by 60 metres and constructing a quay wall and breakwater.

In December 1988 the Department of Finance sanctioned expenditure of £1.02 million on some of these works and in March 1989 further sanction for expenditure totalling £493,000 was given.

Expenditure on the works reached £1.8m in April 1990 as against this sanctioned expenditure of £1.513m. This was brought to the attention of the Department of the Marine by Roinn na Gaeltachta when they were requested to contribute an amount in excess of the 25% of £1.513m which had been agreed. It appeared that failure to detect excess expenditure was due to problems in the accounting and management information system for harbour works in the Department of the Marine

The excess expenditure arose mainly because the quay wall was constructed to more than double the original planned length, surfacing of the quay cost more than envisaged and it was necessary to divert a stream to facilitate the works but this had not been provided in the original plans. Excess expenditure totalling £390,000 was sanctioned retrospectively by the Minister for Finance in January 1991.

A year earlier, in January 1990, a further project was proposed by the Department of the Marine on a separate site west of the existing harbour. This project encompassed widening of an existing pier, construction of a breakwater and providing deeper berthage, at a projected cost of £2.3m. This amount and further expenditure of £220,000 for the construction of a marina were sanctioned by the Department of Finance.

The Comptroller and Auditor General’s Report noted that the Department of Finance had expressed concern that expenditure for works in Dingle harbour had escalated from the original £2 million to £4.5 million for a significantly larger project and had also expressed concern that the sanctioned level of expenditure was exceeded.

The Accounting Officer for the Department of the Marine explained in evidence to the Committee that two separate projects were undertaken in Dingle Harbour - the extension and development of facilities at an existing pier, and the construction of a completely new pier and marina.

The development of the existing pier was to comprise extending the length of the pier and dredging the approach channel and quay basin to allow much larger vessels to moor at the quay. However, the original plans were modified in the course of the project. Firstly, the dredging company decided that the best way to proceed with deepening the harbour basin was by building a dam across the harbour mouth and excavating the site after it had been pumped dry. This meant that original proposals to extend the original pier by underwater construction were no longer appropriate and the costs of construction per foot of pier were greatly reduced. It was therefore decided to take advantage of the dredging company’s dam by building a longer footage of pier than had been originally intended. It was also necessary to re-direct a stream which was flowing into the harbour in order to provide the dredging company with a dry basin for excavation work and this work also required a modification of the original plan. The Accounting Officer stated to the Committee that these changes which were necessary for engineering reasons were also designed to ensure that the project gave the maximum value for the level of expenditure. However, in keeping a close eye on the engineering and value for money aspects of the project the Department had, to the Accounting Officer’s regret, failed to keep the Department of Finance informed of developments and had lost sight of the need to seek the necessary sanctions for additional engineering works.

In July 1992 the Committee visited Dingle in order, to see, at first hand the development work which had taken place. In the course of that visit the expansion in the level of economic activity at the port was pointed out to the Committee. Over the past two years, because of the increased berthage and deeper channel, many of the fishermen of Dingle have up-graded their boats to large ocean-going vessels which can fish all year round and in most weather conditions. Consequently the value of the catch being landed at Dingle has increased from £1.6m in 1988 to £3.7m 1991. In addition, the development of the harbour including a marina has provided an additional focal point for tourism in the area. The use of excavated material to reclaim part of the seafront for use as a car park has also provided a very useful facility in a town which previously suffered severe traffic congestion because of the absence of adequate parking facilities.

The Committee accepts the validity of the economic arguments favouring most of the development of Dingle Harbour and also accepts that the engineering aspects of the project were well managed and executed. The Committee is satisfied that a worthwhile development was put in place and that it has contributed handsomely to the local economy.

Despite the apparent success of the project the Committee cannot accept that proper planning and control should ever go out the window when taxpayers money is being spent. The Committee must reiterate that there is no substitute for using tried and tested methods which have proved themselves time and time again when it comes to getting cost-effective results. Good planning and good execution of a project are not mutually exclusive and in this case it is clear that planning was not all that it might have been.

The Committee insists that in all future harbour development works the Department of the Marine must ensure that development proposals are properly researched and planned and all expenditures are fully sanctioned before work commences.

Rent Arrears in Fishery Harbours

The Comptroller and Auditor General’s Report of 1990 referred to rent arrears totalling £137,175 owed by four firms at Killybegs Harbour. Problems relating to delays in concluding rental agreements at Killybegs had been referred to previously in the Reports of the Comptroller and Auditor General and the Committee of Public Accounts on the Appropriation Accounts for 1985.

The Accounting Officer stated in evidence to the Committee that this problem pre-dated the transfer of responsibilities for fishery harbour management to the Department of the Marine in 1987. At that time the ownership of the property concerned had not been registered, so first of all the Department had to establish its own title to the sites in question before pursuing the occupants for arrears of rent. There was then a dispute with the occupants as to how the rent should be determined. Regarding the largest site, the original rent estimate in 1981 was £3,000. However, the company in occupancy of this site subsequently had to reclaim more than half the site from swamp or foreshore and had incurred costs for infill and foundations prior to building a fish processing plant on it.

In 1992 the State Valuer suggested an annual rental of £30,000 for the largest site but this was not acceptable to the company in question. In order to resolve its position that company then offered to buy the site. The Valuation Office placed a value of £350,000 on the site. It was estimated that reclamation costs of the order of £200,000 in current terms had been incurred by the firm concerned. After negotiation the Department agreed to sell the site for £275,000, an amount which included £25,000 paid on account in 1988. Details of the sale were being finalised in October 1992 when the Accounting Officer gave evidence to the Committee. The Accounting Officer was of the view that once the problem relating to the largest site had been resolved, there was a good prospect of clearing the outstanding issues with the companies in occupancy of the other three sites.

The Committee recognises that the problems in this instance were not of the Department of the Marine’s making. The Committee accepts the assurance of the Accounting Officer that since 1987 the Department has had a policy of not allowing any developments on State property without the proper agreements being finalised in advance.

Nevertheless, the Committee must express its concern that this case has arisen at all. It seems extraordinary that the firms in question were allowed to build on land which they did not own and were then allowed free use of that land for 11 years. This would certainly not happen in any commercial business. In the light of this case and also of other cases outlined in this and other reports, it is clear that the standards of management of land holdings by State organisations leaves a great deal to be desired. It is all too obvious to the Committee that the taxpayer has consistently come off second-best in most negotiations relating to publicly owned land. The Committee therefore requests that the Department of Finance should examine these matters in greater detail and should write to all the Departments and Offices concerned setting out appropriate standards relating to the purchase, sale and ownership of State lands.

The Committee also wishes to be kept informed of the final outcome of negotiations in relation to each of the sites at Killybegs Harbour.

AGRICULTURE AND FOOD

Meat Inspection Service - Project Audit Report

The 1990 Report of the Comptroller and Auditor General included a Project Audit Report on the Meat Inspection Service. This Report recorded the results of an examination of the meat inspection service operated by the Department of Agriculture and Food at premises where animals are slaughtered for the production of meat intended for export.

Under national and EC legislation the Department is required to maintain veterinary supervision at such premises where the Department’s inspectors are responsible for overseeing food health and hygiene standards in slaughtering and associated procedures and practices.

The Department of Agriculture and Food employs permanent veterinary and technical staff for this purpose who supervise operations in all slaughtering plants, export petfood premises, processing plants and cold stores. In addition sizeable numbers of private veterinary practitioners (Temporary Veterinary Inspectors - TVIs) are employed as required on a day to day basis to assist the Department’s permanent veterinary and technical staff. The overall management of the service is carried out by a number of senior veterinary officers located in a number of regional offices and at the Department’s headquarters. The Department’s Personnel Division is responsible for determining pay and conditions of service for staff and the Beef Division is responsible for carrying out certain administrative functions associated with the service.

Meat plant operators are charged inspection fees to meet part of the cost of providing the service. The cost of the service in 1990 was £15.9m and receipts from fees totalled £8.1m.

The purpose of the examination was to assess whether, in administering the service the Department had in place procedures to adequately monitor its delivery in terms of economy, efficiency and effectiveness and whether all associated policy objectives had been defined in a way which enabled the extent to which they had been achieved to be measured.

-there was no clearly defined Departmental policy as to what level of costs should be recovered from the meat plant operators;

-the Department did very little to correct the shortcomings of the service despite being aware of the problems.

In relation to providing the service in the most cost-effective way the report referred to:

(i)the Department’s failure to conduct a pilot study to assess the feasibility of using lay technicians for meat inspection work. Lay technicians are engaged on this type of work in a number of other E.C. countries.

(ii)problems with the employment of private vets mainly arising from a long standing disagreement between the Department and the Irish Veterinary Union as to what constituted a 4 hour working day;

(iii)daily rates being paid to vets for as little as half an hour’s work arising from the engagement of extra shifts of private vets to finish off short periods of inspection at day’s end;

(iv)late notification of cancellations of slaughterings by factories led to payments to private vets even though no service had been rendered. The factories suffer no loss because fees are charged per animal slaughtered irrespective of the cost to the Department;

(v)the rising cost of overtime for permanent inspection staff (from £0.86m in 1986 to £2.15m in 1990) and the fact that this did not prompt the Department to revise its working arrangements to bring them into line with activity patterns in the industry.

(i)despite the existence of a Department of Finance guideline that charges should be set at a level which would recover costs, the policy of the Department of Agriculture and Food was to charge what the industry could afford although there was no evidence to show how this might be determined. In fact, the industry’s contribution as a proportion of total cost had decreased overtime;

(ii)the Department felt constrained by EC Regulations in the matter of the level of fees which might be charged although, on the face of it, the regulations were quite open in this regard. In Denmark, for example, the full cost of providing the service is met by the industry;

(iii)attempts in 1988 to recover overtime worked solely to facilitate factory management, foundered because of legal objections but no amending legislation was proposed by the Department.

A series of reviews of the service, both internal and external, was undertaken over the years which pinpointed shortcomings and recommended corrective measures but very little action was taken by the Department. The report suggested that the diffusion of management responsibilities within the Department may have been a contributory factor to the inaction.

In evidence to the Committee the Accounting Officer stated that the Department is now examining the question of whether or not lay technicians could be employed on meat inspection duties. He stated, however, that current thinking within the Department was in favour of the continued use of TVIs because it was felt that:

(ii)the slaughtering of livestock is highly seasonal and consequently more suited to the employment of contract staff than to the employment of a permanent work force of inspectors;

(iii)the work involved is very intensive and demanding and it was considered inadvisable to require staff to work longer than 4 hour shifts.

The Accounting Officer informed the Committee that the Department had recently increased fees charged to the meat plant operators so as to recover 75% of the costs of the meat inspection service and they would intend to increase the charges again, on a phased basis, with a view ultimately to recovering the full cost of the service. In regard to the disagreement with the Irish Veterinary Union on what constitutes a 4 hour shift, negotiations are on-going and the Department is hopeful of a satisfactory outcome.

The Committee does not accept that the explanations given in this instance are adequate. In the Committee’s opinion, the justifications put forward by the Department fell short of being satisfactory. For instance, given the fact that TVIs are paid £79.28 for a maximum of four hours work the Committee find it difficult to accept that the employment of lay inspectors working a full day would be likely to be more expensive. The Committee also does not accept that the seasonality of slaughtering necessitates the employment of contract staff in such large numbers, nor does it necessitate the very high levels of overtime payments being made. It is the view of the Committee that if the Department had pursued the option of employing lay inspectors, as has been done in other countries, then this service would have cost the taxpayer and the meat processors a good deal less than it does at present.

In this regard the Committee wishes to be informed of the outcome of the Department’s examination.

The Committee rejects the argument that it is inappropriate to require inspectors to work more than 4 hours per day. It is clear that in most other countries inspection staff work a full day, with normal provisions for lunch time and other breaks.

The Committee also feels that the Department has been dilatory in dealing with problems arising in the operation of the TVI shift system.

The Committee deplores the way the Department has allowed the cost of providing the meat inspection service to escalate despite having information available to it which would have enabled it to take timely corrective action and notes that it is now, belatedly, doing what it should have been doing long ago. The Committee cannot accept that the taxpayer is getting value for money and is concerned that up to now the Department seemed to be pursuing a policy of finding reasons for not making the necessary changes. The Committee exhorts the Department in future to adopt a pro-active approach to the problems of the service rather than the laissez-faire attitude that seems to have prevailed up to now. The Committee sees the Management Services Unit of the Department of Finance as having a role to play in containing the costs of the service and urges that it should be more attentive in future in seeing that its recommendations are taken on board and implemented.

Abolition of the Land Commission

In August 1984 the Government decided to abolish the Land Commission and to dispose of lands in its possession by the end of 1986. A Bill entitled “Irish Land Commission (Dissolution) Bill 1989” was introduced in the Oireachtas in March 1989 to give legal effect to the Government’s decision.

The staffing of the Land Commission at the time the decision to abolish it was taken was 588. The need for staff in areas in the Land Commission other than Collection Branch was expected to diminish in line with the gradual reduction in the amount of land remaining to be allotted and it was envisaged that ultimately the need for staff would disappear.

In 1985, a total of 91 inspectors were transferred to the Farm Classification Office to undertake the valuation of farms in connection with the introduction of a farm tax under the Farm Tax Act, 1985. Following the Government decision of early 1987 to abolish this tax, 88 of the Inspectors were restored to the payroll of the Department of Agriculture and Food on 1 July 1987 but did not take up duty in the Department until early 1988. The estimated salary costs of these officers during this period was £1 million.

In May 1987, nine estate officers were redeployed to the Department of Justice but, following legal action taken by them, had their employment in the Land Commission restored with effect from 5 January 1991.

In May 1990, the Department decided to redeploy 24 inspectors to other duties but 17 of them had not been so redeployed by the end of September 1991.

Administrative staff were largely redeployed within the Department and, following the unsuccessful efforts to relocate Land Commission technical staff, the staff complement at the beginning of 1991 comprised:

The Accounting Officer furnished the following information on the volume of field work, administrative work and legal work uncompleted at the end of 1990 in terms of the manpower required to complete it and the timescale within which it was proposed to have it carried out:

(c)the carrying out of on-going work involving the rearrangement of land and the division of commonage;

(d)the carrying out of surveys of disadvantaged areas and inspections relating to set-aside schemes.

The processing of this remaining work would at that stage require 46 technical and 31 administrative staff. Although many of these would be redeployed over the next 5 years there would be a need to maintain some staff in the division to deal with residual work.

The work of the Legal Branch has diminished substantially since 1984 and it was proposed to transfer the legal staff together with the work involved to the Office of the Chief State Solicitor.

Regarding the transfer of inspectorate staff from areas where there was no work the Accounting Officer had explained to the Comptroller that the proposed transfers involved a change of home as well as headquarters and caused a storm of protest from the 24 staff involved and their Unions. Negotiations with the Unions continued but by June 1981 only six transfers had taken place, a further one had transferred to Teagasc leaving 17 officers surplus to requirement not yet redeployed. However, these inspectors had been assigned to work connected with the classification of disadvantaged areas and the cereal set-aside scheme to an estimated total of approximately 300 man-weeks. The question of whether the proposed transfers should be reactivated or whether other more radical solutions might be necessary was being addressed in consultation with the Department of Finance.

As regards the redeployment of the Estate Officers to the Department of Justice the Accounting Officer stated that, following the settlement of the legal action, the Department of Agriculture and Food was compelled to take them back on to the payroll although there was no work for them. On principle, it was considered prudent however, not to assign any duties to them, pending a final resolution of their employment position. Consultation with the Department of Finance was continuing.

In addition to the £1m in salary costs incurred in 1987, the total amount paid in salaries to former Land commission staff during periods when they were not engaged in productive work from May 1990 was approximately £640,000; the Department has indicated that they were fully employed in the intervening period.

In evidence to the Committee in September 1992 the Accounting Officer stated that there was now a core group of 12 Land Commission staff remaining who would have to change house in order to be redeployed and these had temporarily been assigned to farm inspection work in their respective localities. In regard to the estate officers who had successfully challenged their redeployment to the Department of Justice, these had since been assigned to work in meat factories and district offices, although it remained to be seen whether or not these assignments would be accepted.

The Committee must be critical of the length of time being taken to resolve these difficulties. The payment of substantial salaries, over an extended period, to staff who were not engaged in productive work cannot be defended. The Committee take the view that those staff who were not required to move house as part of their redeployment should have been transferred far more speedily than was the case. In regard to the small core group of staff who might have been required to move house, the Committee believes that these could have been accommodated through redeployment to work in their own locality in meat plants, district offices or on the Leader or Rural Development programmes far sooner than was ultimately achieved. The Committee expects that in future in all Departments where decisions are taken to close or abolish offices, the redeployment of surplus staff arising out of those decisions will be dealt with expediently. The Committee asks to be informed of progress in redeploying remaining Land Commission staff.

Farm Classification Office\Farm Tax Act, 1985

The Farm Tax Act, 1985, provided for the setting up of the Farm Classification Office for a period of five years or such longer period as might be prescribed by the Minister for Finance. As mentioned in the previous section 91 Land Commission Inspectors transferred to that office in 1985 and either retained their entry grades or were appointed, on an acting basis, to higher grades.

In May 1987 the Office was abolished and 88 of the officers had their employment in the Office terminated. They were restored to the payroll of the Department of Agriculture in their promoted grades with effect from 1 July 1987, but were reappointed to their former grades with effect from 15 January 1988.

Sixty Three officers who had thereby suffered downgrading took a High Court action to have the decision to terminate their appointments at the higher grades in the Farm Classification Office reversed. The Court held that the officers had no legal right to be continued in the higher grades on a permanent basis and that the decision to revert them to their former grades had been lawful. However, it also held that they were entitled to compensation for the frustration or breech of legitimate expectations which the Court held they were entitled to have. The compensation was to be computed by taking the loss of salary suffered between the date of the termination of the higher payment and 25 August 1990, (i.e. the end of the period for which the Farm Classification Office was to remain in existence) or the date of the repeal of the Farm Tax Act, 1985, whichever was the earlier.

The provisions of the Farm Tax Act were not repealed and total compensation of £333,095 including interest was paid in October 1990. This covered a period of two years beyond the date of the court decision. The Committee takes the view that the Farm Tax Act, 1985, should have been repealed at the earliest possible date. The fact that the Court had drawn attention to the possible repeal of the Act makes the inactivity on the matter more unacceptable.

Farm Investment Programme

The Department of Agriculture operates a number of schemes to grant-aid farm investment in buildings, land improvements, machinery and pollution control. A proportion of the grants paid are recovered from the EC - in 1990 £12.3m was paid out in grants and £8m was recovered from the EC.

Prior to the payment of grants farms are inspected by the Department and, since 1983, farmers are required to pay a fee to defray costs of these inspections. It had been the practice up to 1985 to deduct the fee from the grant payable. Although a net amount was paid to the farmers the Department claimed reimbursement from the EC, based on the gross amount. Since 1985 the EC have refused to allow this practice to continue and have insisted that either the claim be related to the net amount or the farmers should be paid the gross grant and asked to pay the inspection fee separately.

In his Report the Comptroller and Auditor General noted that from 1985 to 1990 the Department continued to make net payments and claimed reimbursement based on those amounts even though this resulted in a loss to the taxpayer amounting to £648,000. In 1990 the Department changed the arrangements and began claiming reimbursement on the basis of gross grants and began recouping the inspection fees from the farmers as a pre-condition of paying the grant.

In evidence to the Committee the Accounting Officer stated that the gross basis of payment and re-imbursement had not been introduced earlier as it had been felt that the cost of collecting the fees would have exceeded the amount that would be saved but no detailed cost benefit analysis had been undertaken to substantiate this view.

The Committee must be critical of the fact that the Department did not act sooner in changing over to the gross basis of payment. The Committee is sceptical of the suggestion that the administrative costs would have exceeded the benefits since the arrangements which have now been made to collect the inspection fees before payment of the grants would appear to have provided a very efficient low cost mechanism for collection.

INDUSTRY AND COMMERCE

Science and Technology Development Programme

The Department is responsible for the funding and overall control of the Science and Technology Development Programme whereas Eolas, a number of third-level educational institutions and other bodies are responsible for the day-to-day activities of the Programme, which attracts EC Structural Fund aid at a rate of 75%. Equipment purchased under the programme is located in the organisations where the research is taking place although it remains the property of the Department. The total cost of such equipment purchased up to the end of 1991 was £20 million.

In the course of audit the Comptroller and Auditor General had noted that effective procedures were not in place which would enable the Department to assure itself that the equipment was where it should be and was being used for the purposes for which it was purchased.

In evidence to the Committee, the Accounting Officer stated that the Department was making good progress in regard to this matter and would shortly have completed a full inventory of all the fixed assets used in relation to the programme. Procedures would also be introduced to ensure that the assets registers would be kept up to date. The Department was now considering whether to retain title to the equipment concerned or to transfer ownership of it to the organisations using it, subject to receiving assurances that it would be used solely for the purposes for which it was provided.

The Committee notes the Accounting Officer’s assurances but wishes to be informed as to when and how this matter has been fully resolved.

FINANCE

Internal Audit in Central Government - Project Audit Report

The 1990 Annual Report of the Comptroller and Auditor General included a review of the status and effectiveness of internal audit in central government. The Report concluded as follows:

(i)Internal audit units which function satisfactorily have been established in the Department of Social Welfare, the Department of Agriculture and Food and in the Offices of the Revenue Commissioners. The Comptroller and Auditor General suggests that there appears to be a need to split the audit unit in Agriculture and Food by divorcing the FEOGA inspection work from the audit of Vote expenditure;

(ii)internal audit units of limited scope operate in the Departments of Justice, Defence, Education and in the Office of Public Works. It is recommended that the scope of these audits be made more comprehensive and all sections undertaking internal audit work within each organisation should be integrated into single units;

(iii)in the remaining Departments and offices there is no internal audit service. In smaller offices with limited financial expenditures internal audit sections may be unnecessary. However, Departments/Offices which do not fit into this category should assess the benefit to be derived from establishing internal audit units;

(iv)there is a need to equip internal audit units with computer expertise and training to enable maximum benefit to be derived from computerised auditing;

(v)the Department of Finance are currently finalising standards for internal audit units which should create a more focused internal audit function in the Civil Service. This initiative should be followed up by setting out guidelines for training and grading of staff in the units;

(vi)internal audit will provide a valuable service to Accounting Officers only if it is properly mandated, organised and resourced, and is itself subject to regular, rigorous and objective assessments of its usefulness.

The Accounting Officer for the Department of Finance informed the Committee that he welcomed the comments in the Report of the Comptroller and Auditor General regarding the use of internal audit units. On receipt of the report he had written to each Accounting Officer asking them to examine the Report and to indicate how they would respond to it. A number of Departments had indicated that they were examining the question of establishing internal audit units while others had indicated that they would be trying to improve existing internal audit units. The Department of Finance were also looking at the question of establishing a small unit in the Department of Finance which would provide a central pool of trained staff which could conduct internal auditing within smaller Departments/Offices.

The Committee welcomes the initiative of the Comptroller and Auditor General’s Office and the Department of Finance in undertaking this review of the role of internal audit units. The Committee would like to be kept informed of progress on improving internal audit in Departments so that it too can give impetus to strengthening the internal audit process.

REVENUE COMMISSIONERS

Self-Assessment Income Tax

The Report of the Comptroller and Auditor General for 1990 referred to the operation of the Revenue Commissioners’ procedures for ensuring compliance with the requirements of the Income Tax self-assessment system.

The Comptroller and Auditor General informed the Committee that the Revenue Commissioners had achieved a high level of compliance in the matter of getting returns in from those who were on the records. However, he was concerned about the level of audit being applied by Revenue to the returns - less than 1% of returns at the date of his report, and felt that this could give the wrong signal to taxpayers and perhaps impact adversely on the success of the self-assessment system. In this regard the Revenue Commissioners had informed the Comptroller that the number of staff assigned to audit work has been increasing since the programme commenced and the average number of audits initiated each month had increased correspondingly - 305 in July 1991 as compared with 73 in July 1990. The limited revenue audit process had yielded impressive results; in 1,041 of the 1,324 cases audited additional liability to tax had been established to a total of £11.6m or an average of £11,143 per case. This figure was not considered to be representative of the additional liability that would be detected if all returns were audited as those selected were the product of detailed screening and probably would in general yield higher results. However, the Revenue Commissioners were introducing a random element into the audit selection process and this should help to provide more objective data as regards the overall level of underpayment of income tax among the self-employed community.

In evidence to the Committee the Accounting Officer stated that there was still a nominal arrear of over £1 billion remaining from pre-1988 when self-assessment was introduced. Until that arrear is cleared the tax inspection resources would not be fully freed up to investigate self-assessment tax cases as no new resources had been allocated to the Revenue Commissioners. He stressed that the changeover to self-assessment required a cultural change on both the Revenue Commissioners and the business community and that a gradual approach had to be adopted. However, the Commissioners had 430 people on outdoor investigative activity by September 1992 and they were negotiating with the unions to re-deploy more resources to investigative and audit work.

The Accounting Officer remarked that the United Kingdom and ourselves are unique in that the professional auditing system which applies here provides for certified accounts to be presented by independent auditors. He contended that there is therefore not the same need for a high level of auditing as there is in countries such as the United States where these accounting practices do not operate.

While the Committee appreciates that audited accounts provide a certain degree of authenticity to tax returns of the self-employed, it is of the view that undue reliance should not be placed upon them bearing in mind the results of the limited revenue audit process in the early stages of self-assessment. The Committee considers that it is vital that the audit programme be brought up to speed as quickly as possible and be maintained at a level that is commensurate with the proper discharge by the Revenue Commissioners of their care and management responsibilities. The Committee shares the concern of the Comptroller and Auditor General that unless this is done there is a danger of the credibility of the self-assessment being undermined with consequential detrimental effects for the Exchequer.

Corporation Tax - Section 84 Lending

The corporation tax relief known as Section 84 relief has its origins in Section 84 of the Corporation Tax Act, 1976. The designation of a loan as a Section 84 loan converts into a distribution what otherwise would be taxable interest in the hands of the lender and tax deductible interest in the hands of the borrower.

Since the provisions of Section 84 were introduced in 1976 a number of Finance Acts have included provisions which have sought to restrict the availability of these loans and the costs to the Exchequer arising from the tax forgone. Nevertheless, the Revenue Commissioners estimated that the cost to the Exchequer of Section 84 relief for 1990 was about £113m.

In his 1990 Report the Comptroller and Auditor General had suggested that more use should be made of the available returns and statements which were submitted by lenders and borrowers, with a view to detecting inconsistencies which might affect the tax liability of either of them. The Comptroller and Auditor General had also suggested that the Revenue Commissioners should make use of IDA lists of Section 84 corporate borrowers in order to ensure that where Section 84 relief was claimed by a lender the loans were being used by borrowers for the purposes specified. These suggestions had since been taken on board by all of the Accounting Officers involved - the Revenue Commissioners, the Department of Industry and Commerce and the Department of Finance.

The Accounting Officer for the Revenue Commissioners informed the Committee that the Revenue Commissioners were now in the process of screening firms on IDA lists which had benefitted from Section 84 lending with a view to determining if the loans had been used for the purposes specified. Sixty three cases had been screened and Revenue were satisfied, without further examination, in relation to 47 of them. The other cases were at different stages of audit. Five had been completed and in three of the cases no adjustment was made, one case is under appeal and there was a disallowance of £25,702 in the remaining case.

The Committee is pleased that the Comptroller and Auditor General’s suggestions have been taken on board and notes the Accounting Officer’s assurance that Section 84 lending and borrowing is now subject to much tighter controls than heretofore.

Collection of Taxes by Sheriffs

Operating guidelines issued by the Revenue Commissioners to Sheriffs covering the collection and transmission of outstanding taxes require that moneys collected should be transmitted to the Collector-General without undue delay. The staff of the Office of the Comptroller and Auditor General visited a number of Sheriff’s offices in 1990 and in one case it was noted that sums totalling £400,031 in respect of taxes recovered between February and July 1990, which should have been sent to the Collector-General in the month following collection had been placed in an interest-earning deposit account and had not been paid over until September 1990. In this case, and in the case of nine other Sheriffs the amounts of money being held were found to have exceeded limits set out in the guidelines on 29 occasions during 1990. The excess amounts held ranged from £10,000 to £790,000.

In evidence to the Committee the Comptroller and Auditor General pointed out that a complicating factor in these cases was that interest on tax collected forms part of the accepted remuneration package of Sheriffs but this would presume compliance by Sheriffs with the time limits for remitting moneys set out in the guidelines. The Accounting Officer stressed to the Committee that the conditions regarding the remittance of tax moneys by the Sheriffs were in the form of guidelines and not statutory provisions. Although he acknowledged that there had been unacceptable delays he felt that the guidelines had to be administered with a degree of flexibility and that in monitoring and trying to enforce their guidelines Revenue must always strive to achieve a delicate balance between securing adherence to the guidelines and motivating Sheriffs to maximise their effectiveness. The Department of Finance representative informed the Committee that his Department had accepted that the traditional practice whereby the Sheriff retained the interest was unsatisfactory. They would shortly complete a review of the statutory remuneration of Sheriffs and would then be in communication with the Department of Justice with a view to establishing a new statutory scale of fees which would exclude the retention of interest.

The Committee cannot accept that what was allowed to happen in this case came within the bounds of what could be considered as reasonable flexibility in applying the guidelines. Bearing in mind that public moneys were involved, the Committee must be critical of the Sheriffs in question and furthermore it feels that serious consideration should have been given by Revenue to recovering the excess interest earned.

The Committee trusts that the new arrangement on fees will be finalised without further delay.

TOURISM TRANSPORT AND COMMUNICATIONS

Aer Lingus Holidays Ltd.

The Committee examined this matter in the course of dealing with the 1989 Appropriation Accounts. The Accounting Officer informed the Committee on 24 September 1992 that the matter was still sub-judice and provided the Committee with the following additional information, prepared on the basis of legal advice:

“On 28 February 1991, my predecessor made a factual statement to this Committee in regard to Aer Lingus Holidays Limited. The historical facts outlined in that statement remain unchanged. I propose to make a further factual statement updating the Committee on developments since then.

I understand that the Garda investigation, initiated on foot of the Craig Gardner report, has been completed and a report forwarded to the Director of Public Prosecutions. Where the result of a Garda investigation so warrants, a report is forwarded to the Director of Public Prosecutions for a decision on whether criminal proceedings should be instituted - that is the current position.

The businesses in which Aer Lingus Holidays was engaged have been sold. £638,000 has been realised to date from the sales. I am informed that there is potential for a further realisation of £680,000, depending on the profitability in future years of one of the purchasers. I understand that it may take at least two years before the position in regard to this latter amount is clarified.

In addition, Aer Lingus have signed contracts for the sale of 56 of the 91 Lanzarote apartments for a price of Stg. £890,000. This was the best of three offers received by Aer Lingus. The remaining apartments at Lanzarote and Malaga will be disposed of as soon as possible.

For legal reasons, it is not possible for me to make any further comment on the affairs of Aer Lingus Holidays, Limited. I have been advised that to do so would be to run the risk of prejudicing not only civil proceedings, including those which have been initiated against the former auditors of Aer Lingus Holidays, but also any criminal proceedings which might be brought as a result of the Garda investigation”.

The Committee accepted that in order not to prejudice the legal proceedings it would not be appropriate to inquire further into this matter for the present. However, the Committee wishes to be kept informed of developments in due course.

PART I - FIRST INTERIM REPORT

Information Note

SECOND INTERIM REPORT

STATEMENT OF EXCESS

PART 11 - 1990 ACCOUNTS

DEFENCE

Use of Fishery Protection Vessel L.E. Eithne and Fishery Patrol Helicopters - Project Audit Report

SOCIAL WELFARE

Disability Benefit and Invalidity Pension Schemes - Project Audit Report

Social Welfare Fraud

HEALTH

Health Board Expenditure

Variations in Health Costs

OFFICE OF PUBLIC WORKS

Lease of Teach Earlsfort

ENVIRONMENT

Sales Scheme for Local Authority Dwellings

Construction of a Community Centre at Cherry Orchard

EDUCATION

Special Schools Project Audit

Purchase of Computer Equipment

Problems Concerning School Roofs

Sites for School Buildings

NATIONAL TREASURY MANAGEMENT AGENCY

Post Office Savings Bank

COURTS

Delays in Serving Summonses

MARINE

Dingle Harbour Development

Rent Arrears in Fishery Harbours

AGRICULTURE AND FOOD

Meat Inspection Service - Project Audit Report

Abolition of the Land Commission

Farm Classification Office\Farm Tax Act, 1985

Farm Investment Programme

INDUSTRY AND COMMERCE

Science and Technology Development Programme

FINANCE

Internal Audit in Central Government - Project Audit Report

REVENUE COMMISSIONERS

Self-Assessment Income Tax

Corporation Tax - Section 84 Lending

Collection of Taxes by Sheriffs

TOURISM TRANSPORT AND COMMUNICATIONS

Aer Lingus Holidays Ltd.