Committee Reports > List of Committees > Dáil > 1994 > Committee of Public Accounts > Interim Report No. 01 - Appropriation Accounts 1992

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 25 Samhain 1993

Thursday 25 November 1993

The Committee met at 11.10 a.m.

MEMBERS PRESENT

DEPUTY JIM MITCHELL IN THE CHAIR

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

Mr. Liam Basquille, Mr. Donnacadh Cullinane and Mr. Colm Gallagher, Department of Finance, in attendance.

APPROPRIATION ACCOUNTS 1992

Mr. Kevin Bonner, Secretary, Department of Enterprise and Employment called and examined.

Mr. Richie Ryan, European Court of Auditors, attended to address the Committee.

VOTE 33 - LABOUR

Mr. Kevin Bonner, Secretary, Department of Enterprise & Employment called and examined

Chairman: You are welcome Mr. Bonner. Perhaps you would introduce your officials.

Mr. Bonner: This is Kathleen Glackin, Martin Lynch, Ronnie Sheehan and John Reilly.

Chairman: I would ask the Comptroller and Auditor General to introduce the report. We are dealing here with the report on the old Department of Labour almost all of which is now in the Department of Enterprise and Employment. On this occasion we are in a happy situation that the accounting officer from the Department of Labour happens to be the Secretary of the present Department of Enterprise and Employment.

Paragraph 44 of the Report of Comptroller and Auditor reads:

Subhead N. - Grant for National Authority for Occupational Safety and Health

Fitting-out costs of premises

44. The National Authority for Occupational Safety and Health was established on 1 November 1989 under the provisions of the Safety, Health and Welfare at Work Act, 1989 and is financed by means of a grant from the Labour Vote. The grant to the Authority in 1992 totalled £3.229m.

Initially the Authority shared accommodation with the former Department of Labour in Davitt House, Mespil Road, Dublin.

When the Office of Public Works (OPW) decided, with the agreement of the Department of Finance on 10 April 1989, to avail of a break in the lease on Davitt House and to evacuate the building with effect from 11 January 1991 with a view to making financial savings by using alternative surplus office space, the Authority engaged a property consultant in its efforts to secure its own accommodation.

The Department of Finance requested that the Authority examine the possibility of occupying some of the significant surplus vacant accommodation available in the building leased by FÁS at that time which was sufficient to meet the Authority’s needs.

The Authority rejected the FÁS accommodation as unsuitable for its long-term headquarters. It eventually proposed that a premises which was in the process of being built, with an estimated completion date of mid-1991, be leased at an annual rent of £229,000 for a period of 10 years with effect from January 1992.

In December 1990 the approval of the Minister for Labour with the concurrence of the Minister for Finance had been given for this proposal, subject to a condition that the maximum amount which could be spent from Exchequer funds on fitting out costs would be £150,000.

From December 1990 to April 1992, the Authority occupied the surplus accommodation in FÁS pending the completion of its new premises.

The lowest tender received for fitting out the premises was £618,687 subject to adjustment of PC Sums included in the specification, and, as the Minister for Labour had reservations about this level of cost, it was decided to seek the advice of a senior architect of the OPW on the standard, price and value of the fit-out proposals.

The OPW architect stated that while he considered the cost of the proposed fit-out acceptable, the cost per square metre would exceed by some 50% the average rate for OPW fit-outs for client Departments, due mainly to the fact that the planned layout of the building was almost 100% individual rooms which required a large amount of partitioning and consequential increase in related works.

Tenders for the sub-contract work reduced the contract sum to £555,250 inclusive of VAT and this was sanctioned by the Department of Finance in April 1992 together with £80,000 for professional fees.

The final cost of the fit-out was £579,218 with £77,442 in professional fees, less a contribution of £115,000 received from the developer by offset of rent due by the Authority.

I asked the Accounting Officer for his observations on the incurring of this level of costs on fitting out premises leased for the relatively short period of 10 years.

The Accounting Officer stated that careful consideration had been given to the question of a longer lease, particularly in view of an offer from the developer of an increased contribution of £120,000 towards the fit-out if the lease was extended from 10 to 20 years without a break clause, as against the flexibility and cost advantages attaching to a shorter lease.

It was the Accounting Officer’s view that a ten year lease could ultimately prove beneficial to the State if there were developments affecting the location, future existence or role of the Authority in the interim. In the absence of any such development, the Department considered that the protection afforded a tenant under the Landlord and Tenants legislation and the likelihood that the customised fit-out of the premises for the Authority’s purposes would almost inevitably require considerable refitting to make it suitable for an alternative tenant were factors which should favour the Authority in renewing the lease on the expiry of the initial period.

The Department considered that the main advantage of a longer lease lay in the developer’s increased contribution which would reduce the immediate cost of financing the fit-out cost.

The proposal relating to a 20-year lease had been put to the Department of Finance and had not been favoured.

Mr. McDonnell: Thank you, Chairman, there is just one paragraph in my report on the Labour Vote for that year 1992. What I am referring to is first of all the leasing of new accommodation by a state body in circumstances where vacant accommodation leased by another state body had become surplus to requirements. Secondly, what seemed to be a relatively high fit-out cost, that is to say if one judges by what the Department of Finance initially thought might be an acceptable level and thirdly, the incurring of that level and cost in the context of a ten year lease. You will see there, Chairman, from the report that the surplus accommodation was not considered a suitable option by the body concerned. The body incidently is the Health and Safety Authority. Secondly, you will see that the level of fitting out costs which was 50 per cent above the OPW average was due to the type of internal lay out decided on.

Thirdly I referred to the fit out costs vis-a-vis the relatively short lease. The Accounting Officer has explained to me that a longer lease was not acceptable to the Department of Finance. He has also suggested that the customised fit out which was the case here, might be a deterrent to other potential lessees at the end of the lease period. Therefore it would work to the advantage of the authority before seeking to renew the lease. He also assured me Chairman that careful consideration had been given to the advantages and disadvantages of long and short leases and to the authority’s position as tenants when the lease expired. He also said that the assistance of OPW architects had been obtained in the monitoring of the fit out arrangements and that as a result he was satisfied that value for money had been achieved in the fit out process. It may well be indeed and I am not disputing that the cost of the fit out was fair and reasonable for the work that was done. I am concerned that admission costs would be incurred. Those costs were not brought into the equation in a real sense until after the decision to enter into the lease was taken. I would have thought that it would be prudent to have an estimate of the overall cost of the accommodation package at the start of the exercise. That is the point I am making, Chairman.

Chairman: Deputy Byrne perhaps you would like to start?

Deputy Byrne: Yes, Chairman can I ask for instance if the Committee could be supplied with a list of persons and their job description who have the luxury of private offices? I am very anxious to know why is it so necessary that there be privacy in this case. I am very conscious of my own office in Leinster House when I ask this question.

Chairman: You know of course the Office Premises Act does not apply to that.

Deputy Byrne: Indeed.

Chairman: Can Mr. Bonner answer that question?

Mr. Bonner: I understand that the Health and Safety Authority have got a lot of specialist inspectors who are highly qualified technical people and it was felt from the point of view of the authority that in view of their positions and jobs that they should have separate offices. I should also make it clear that obviously all the offices are not separate for every individual - only in respect of some inspectors who are the more senior inspectors. Some of the offices are open plan as they would be in most civil service offices.

Chairman: Are we sure about that?

Mr. Bonner: For example typing and reception facilities and so on are open plan.

Chairman: You’ve read the paragraph of the Comptroller and Auditor General’s Report?

Mr. Bonner: There are however very few clerical staff in the organisation.

Chairman: Let us just clarify this? In the paragraph the Comptroller and Auditor General says almost 100 per cent individual rooms. Is that the case or not?

Mr. Bonner: Yes, there are some open plan offices but they are very few. I have to say that most of the people involved in the authority are technical inspectors, graduates and so on and it was felt that they should have their own rooms and accommodation.

Deputy Byrne: How many private offices are there, and do you feel justified that the fitting out should have cost 50 per cent more than normal?

Mr. Bonner: I have to say that despite the fact that most of them do have their own offices some of the inspectors do share rooms as well.

Deputy Byrne: What number?

Mr. Bonner? Could I make a general comment on this?

Chairman: Yes. I will allow that.

Mr. Bonner: I was personally involved in this and I made every effort to keep the costs of this down and the figure of £150,000 which we suggested as a possible cost for fitting out was settled in an effort to ensure that the authority did in fact keep costs for this down. When I found that a much higher figure was suggested I personally discussed it with the Minister and we got extra advice from the OPW to ensure that everything was above board and that the costs were not excessive. The architect with whom I personally visited the offices to discuss the matter suggested that it was more than would normally be expected but in the circumstances of what was required it was not excessive. He assured me that the actual fitting out cost was not excessive for what was involved.

Chairman: Tell me this Mr. Bonner, when the National Authority for Occupational Safety and Health was set up it replaced the factory inspectorate and the general inspection role of the Department of Labour. It was not a new thing but a new quangle to do what was already being done. Is that correct?

Mr. Bonner: Well there was a new Act which set up the Health and Safety Authority and I have to say it was given considerable extra duties under that new legislation. For example, farming was added to its area of coverage and the actual amount of inspections and so on had to increase substantially. Before the actual Health and Safety Authority was set up, only 25 per cent of the workforce was covered. As a result of the Health and Safety Authority and the 1989 Act, virtually 100 per cent of the workforce were covered by the legislation.

Chairman: Was there a significant increase in the staff?

Mr. Bonner: There was some increase in staff, not significant however.

Chairman: Why was it necessary that such an authority be located in one of the dearer locations in the city, in the Dublin 2, Dublin 4 area? Could this Health and Safety Authority have been located for instance in an industrial estate outside the city or perhaps in one of the less costly areas of the city which might have helped to regenerate that part of the city?

Mr. Bonner: Yes, that would be a possibility. I know that the Health and Safety Authority in looking for premises did a wide trawl of possible locations around the city. It was finally decided to go for this building which seemed suitable from the point of view of the size of the Health and Safety Authority and what they were doing. One of the factors was that from the point of view of clients and so on calling on the Health and Safety Authority an effort was made to make it as central as possible. The point you make is however, valid.

Chairman: Why did you not, as an Accounting Officer try to ensure that the body was located in an area where it would cost the least amount to the Exchequer without affecting the effectiveness of the authority?

Mr. Bonner: The area it is in is very much an inner city area. It is in Grand Canal Street which you would agree is improving its position but it was not exactly Dublin 4 so to speak.

Chairman: No, but it is Dublin 2. It is where we are here now. It is not exactly the cheapest part of the city.

Mr. Bonner: I do not think it is excessive from the point of view of the actual rent being charged. I do not think there is any question of the actual rents being charged as being in excess of anything that is being charged anywhere else. As far as I understand it is very good value for money.

Chairman: The fit out costs plus professional fees came to £615,000 approximately. This should represent more than what would have been expected. How can you account for that?

Mr. Bonner: The reason given for it is that the final cost of the fit out came to £579,000 with £77,000 professional fees and there was a contribution of £115,000 received from the actual builder or developer of the complex. The reason for the extra fit-out cost was because of the fact that the authority required individual offices which would be in excess of, as you said at the beginning, what would normally be required because of the type of officers and work that is being done by the Health and Safety Authority.

There was also an element that because of the work of the Health and Safety Authority - they have a laboratory and also a secure area for the filing and holding of confidential information which is required because of European Community legislation, special facilities were called for.

Deputy Durkan: How many people are accommodated in the building in question? Why were the FÁS offices considered to be unsuitable? Were the reasons for change sufficient to warrant the increased cost in terms of annual rent and fitting out costs?

Mr. Bonner: To take the first question, the number of staff employed in the authority at present is 87 and because the authority has had a continual demand for extra staff because of the increased workload which I described earlier, there is a possibility that there will be further staff employed in the authority. In regard to the FÁS offices, I can say without hesitation that I personally went to see those offices and they were not suitable from the point of view of the authority. First, the space was chaotic because the Authority numbers and work could not be accommodated within the square footage that was provided at the time. I have to pay tribute to the staff of the Authority who put up with the conditions they had to put up with for the temporary period that they were required to do so until the new officers were ready. It was a very difficult situation for the employees of the Authority during that period.

Deputy Durkan: On the question of costs, was the move sufficiently warranted having regard to the extra annual costs plus the fitting out costs?

Mr. Bonner: The fact that the Authority moved has to be looked at in the context of the fact that the Department itself was also moving at the time. These were two things that have to be taken into consideration together. The Authority had been asking for some time to have its own premises separate from the Department so that it would have its own independence and so on. The lease on the Department’s buildings ended at the same time so its personnel had to move as well. We moved to Adelaide Road as you probably remember and the accommodation available there would not have been sufficient to house both the Department and the Health and Safety Authority so that, in any case, separate accommodation would have had to be found for the Health and Safety Authority. In that context, I know for a fact that the Authority employed people to look at the type of accommodation available around the city and there was a very rigorous examination of the type of accommodation both by ourselves and the Department of Finance at the time in terms of what was available, value for money and so on. There were several proposals submitted by the Health and Safety Authority which were turned down on the basis of cost, whereas this particular proposal was upheld on the basis of the cost involved.

Chairman: There are a number of Deputies offering, but could I put it to the Committee that it is very clear that the Accounting Officer went to great lengths to try to get value for money in this case and to get proper accommodation. From the evidence already given it would appear that the cost seems to be on the high side. If there are 87 employees and you are paying £222,000 rent a year, that means you are paying £2,550 a year or £50 a week per employee in rent; you could buy a rather nice little house for that sum. It is expensive but it is very clear from you evidence that you went to great pains to ensure it was value for money. It is also worth saying that this Committee not only does not object, but sees the correctness of there being proper working conditions for our staff, but we would ask that in future we look further afield than Dublin 2 and Dublin 4. We will move on to the account.

Deputy B. O’Keeffe: I find it unusual, Chairman, that you would wrap up before we had the opportunity to ask questions on this.

Chairman: I am conscious of the fact that we have a lot of business to deal with and the answers to the questions so far clearly indicate that exhaustive care was taken in this case.

Deputy B. O’Keeffe: In the Comptroller and Auditor General’s report he makes the point that to make financial savings they would use consultants to find accommodation. Would you agree that the original objective of achieving significant savings was thrown out the window when you see the final result of cost involved in this case; that the purpose which the Department initially tried to achieve was a miserable failure and that there was an expenditure incurred that perhaps otherwise might have been avoided? Given the nature and role of the staff in the Department, would it not be correct to say that many of these staff would be engaged in outdoor activity? Would it not be fair to say that many of them would be decentralised into the country? Has any study been done on the occupancy level in those offices during the working week, in other words, are most of your officers on fieldwork? What percentage of their time would they spend in these very expensive single offices?

Mr. Bonner: First, let us be clear about this. An architect from the Office of Public Works examined these offices and they told me that the actual amount was not excessive by the standards of fitting out. It was expensive by the standards of other open plan type offices, but it was not excessive. I had to accept that point of view from one of the most senior architects in the OPW. I do not have the exact figures for the occupancy level, but I understand they are fairly high. The Deputy is quite right in that many of the officers concerned would be involved in inspections and so on, but there is also quite an amount of legislative, European Community work and so on. I can try to make some attempt at occupancy levels, but I do not have a figure on that at the moment.

Deputy B. O’Keeffe: I would like to get a report on that at a later stage because it appears to me, coming from Cork and knowing the investigations that were carried out in, for example, Hicksons in Ringaskiddy, that field officers would be out of those offices to a large extent and it would be well worth having a report on it.

Mr. Bonner: Can I also say that the Health and Safety Authority have an office in Cork with inspectors.

Deputy B. O’Keeffe: What territory is covered from headquarters here in Dublin?

Mr. Bonner: There are offices in Cork, Limerick, Sligo and Waterford, so that, to the extent possible local cases would be dealt with by those officers, but obviously in regard to specialist activity, where the expertise would not be available to the local offices, it would be necessary for inspectors from the head office to undertake surveys of a specialist nature and to co-operate with the local officers where that was necessary. Much of the routine work in terms of inspections would be done by the local officers, but where specialist advice was needed, somebody from head office would also attend.

Deputy B. O’Keeffe: One final question, consultants were brought in, but at the end of the day the OPW were brought back in to actually analyse the costing and work that was done. Is this normal procedure, is it usual and could it be fairly asked why would the OPW not be brought in from the very beginning?

Mr. Bonner: We did ask the OPW to be involved from the very beginning but they told us that they did not have the resources or the time to be available to us so we had to go another route.

Deputy B. O’Keeffe: But eventually they ended up -----?

Mr. Bonner: They did but only on a very specific request on a very specific issue at my request and the Minister’s request.

Deputy McCormack: I will just ask the questions and wait for the answers. Was it the Government in 1990 who decided on this or approved of the lease of those offices and was there any free hand given after that to develop the offices any way you liked? If there are 87 staff did I hear earlier that there were 170 single rooms and what is each staff member doing with two single rooms each? There are four people in my room.

Chairman: How many of the 87 are actually in headquarters? That is the question I would like to have answered.

Deputy McCormack: You said that exhaustive care was taken in this matter. I agree that exhaustive care was taken to ensure that the safety officers were well accommodated in nice offices, there was exhaustive care taken in that regard and you say that the Office of Public Works agreed that the cost of fitting out was not excessive. Maybe I would accept that but I suggest that the standard of fitting out was excessive. What was done might be good value for money but was it necessary to do what was done.

Mr. Bonner: I do not have a figure for the actual number of offices in the place but certainly my understanding is that there are not 170. I do not know where that figure came from.

Deputy McCormack: I only heard it mentioned since I came in here this morning.

Mr. Bonner: I have not heard the figure of 170. The actual number in had office, 87, is the total staffing of the Authority and the numbers in Dublin are about 75.

Chairman: Maybe we should go down and visit these offices and see can we get the same in Leinster House. There was raised eyebrows about the cost of this and the ongoing rent and of course we are concerned that this should be the case but it seems to me that the Accounting Officer as I said is very clear in saying that there was no lack of care and attention to the issue.

Deputy McCormack: Absolutely.

Chairman: We cannot make any adverse comments in that respect. I want to move on to the ------

Deputy B. O’Keeffe: The kid glove....

Chairman: ---- Vote of the Department of the Labour and want to ask Mr. Bonner some questions. Does Deputy Durkan want to come in first?

Deputy Durkan: I want to ask a question on the Vote, subhead P5. Expenditure under the grant for the employment subsidy scheme was considerably less than was provided. See the top of page 277. My question is, why would the grant for the employment subsidy scheme be under expended to the extent that it was, given the absolute emphasis and necessity to encourage and increase employment at every possible opportunity.

Chairman: This is a question I wanted to ask myself, subhead P5, grant for the employment subsidy scheme, £5.4 million is provided in the Estimate and only £1.75 million was spent which meant that £3.65 million was not spent on employment subsidies. The note at the bottom of the page says, the numbers recruited to the scheme were less than anticipated. Could the Secretary tell us why, given the huge level of unemployment? In the light of the recent remarks of the Governor of the Central Bank, is this further evidence that there is a difficulty in getting people to take up employment?

Mr. Bonner: There were two schemes introduced at the time together, one was the employment subsidy scheme and the other was a job training scheme. The targets which were set at the time for both of these schemes were 25,000 jobs 15,000 for the employment subsidy scheme and 10,000 for the job training scheme. It has to be said that the targets, and we realised it at the time, were very ambitious and every effort was made by FAS on both of these schemes to get as many as possible onto the schemes. However I think the targets were so ambitious that it proved impossible to realise them. In fact in 1992 we did not nearly reach the target and for that reason there was such a shortfall in expenditure.

Chairman: Can you just give us some more detail, why, given that there is 300,000 unemployed, we had the money provided for employment subsidy schemes and we could not spend it. What are the reasons for this target not being reached? You mentioned another job training scheme for 10,000 jobs, under what subhead was that provided?

Mr. Bonner: Subhead P2.

Chairman: Grant for training, presumably that was more than just a job training scheme.

Mr. Bonner: The job training scheme is under P2.

Chairman: Can you go back to my other question.

Mr. Bonner: The fact is that employers were given this incentive and they were entitled to employment subsidy of £54 per week per new recruit in respect of employment which had to last at least 78 weeks. It was very heavily promoted, we produced brochures, we advertised and we used the local FÁS offices and contacted employers to tell them about the scheme and so on but the fact is that employers did not employ numbers to the extent that we would have expected them to.

Chairman: But this is the point, have you come to any conclusion as to why that was the case?

Mr. Bonner: It was a scheme which was worked out in conjunction with the European Community and quite simply the scheme did not prove as attractive to employers as they would like.

Chairman: You have heard a great deal talk about the tax wedge, in other words the difference between the cost of gross pay to employers compared to the take home pay of the employee. Do you imagine that is part of the problem?

Mr. Bonner: I do not think so in this case. Part of the problem in this case probably was that they had to keep the employees on for 78 weeks whereas the actual subsidy lasted for only 12 months so they had to keep them on for an additional six months at their own expense. That was probably one of the elements of the scheme which they did not find so attractive.

Deputy Durkan: At what stage in the financial year did it become obvious that the uptake of the scheme was not as anticipated?

Mr. Bonner: We monitored it throughout the year but it became clear after a matter of months that it would be impossible to reach the type of targets which were envisaged.

Deputy Durkan: Was it not then advisable, and why was it not done, to revise your projections and introduce alterations to the scheme and perhaps convey to the Minister the fact that the scheme was not working properly. Was that information conveyed to the Minister and were any steps taken to ensure that corrective action was taken, given the importance of the premium nature of employment in the country, at that time as at the present time, and given the unemployment figures which are not 300,000 but 382,000, if you take into account all of the people who are available for but not availing of or getting work. What action was taken to regenerate interest in the scheme in that climate?

Mr. Bonner: We monitored the scheme carefully and what we decided to do was to maximise the scheme to the greatest extent possible. The fact is that there are a wide range of other schemes available to employers to take on people such as the social employment scheme, teamwork and so on. Employers still have the option of using other schemes including the employment incentive scheme for disadvantaged people. The best objective from our point of view was trying to maximise the numbers on this scheme which is what we tried to do.

Deputy Durkan: This scheme was EC assisted. I would suggest that it was gross mismanagement given the availability of funds under a certain heading not to be able to avail of the scheme, which obviously must have had some merit when it was first introduced. More especially it was mismanagement when a large portion of the funding was coming from the EC which, if not availed of, is not available to the State in a given year.

Mr. Bonner: In regard to EC funding the fact of the matter is that although this funding was available the funding is not lost. It can be used for other purposes within the Community support framework. There is only a certain amount of persuasion one can use with employers to use any particular scheme.

Deputy Durkan: What purposes were those funds used for?

Mr. Bonner: I have not got that information here.

Deputy Durkan: Can we have it Chairman at a later stage?

Chairman: It seems to me that they were remitted to the Exchequer.

Mr. Bonner: They would have been transferred to other similar type activity.

Chairman: Within the Department?

Deputy B. O’Keeffe: Two questions, Chairman, Subhead E which covers subscriptions to international organisations. We seem to be quite generous under this heading - £266,000. What would be the comparison, for instance, for contributions by other European Union member states? Who would be the main beneficiaries? What exactly is our outturn from that? What benefits do we derive from it?

Mr. Bonner: The main contribution that is involved here is a contribution to the International Labour Organisation which in 1992 amounted to £236,000. The International Labour Organisation is a body which lays down labour standards in regard to labour legislation, collective bargaining, industrial relations and so on. It is a subsidiary of the United Nations and would have membership in the vast majority of countries in the world - over 100 countries. We are one of the countries that was involved in the founding of the International Labour Organisation and in fact we have provided three Presidents of the organisation. We have a long history in that organisation.

The contribution that we gave is based on criteria. Our contribution would be in keeping with our GNP and population. The other small contributions are towards the International Centre for Advanced Technical and Vocational Training in Turin. That goes to projects in Third World countries and amounts to £15,000. We also made a contribution to the OECD local employment initiative programme which amounted to £14,000. The big contribution was for £236,000.

Deputy B. O’Keeffe: Can you tell me what benefits are there from an Irish view point for such a major contribution to the International Labour Organisation? You mention research and labour relations, are there benefits for Ireland accruing from this particular membership?

Mr. Bonner: It is important that we be in touch with the best standards of social legislation that is available. Most countries in the world would be members of this organisation. We derive considerable benefits from the point of view that the actual organisation monitors our own legislation and takes us to task, for example, if we do not fulfil the obligations of conventions which we have ratified. It operates a bit like the Council of Europe. There is benefit to be gained from it. As a modern democratic State it is important that we keep in touch with the higher standards that are available and that we accept these conventions. If we left the International Labour Organisation we would be turning our back on the body which has been responsible for developing social standards throughout the world. It would not be an advisable position for us to take in a progressive sense.

Deputy B. O’Keeffe: As such are there audited accounts available to us from this particular organisation?

Mr. Bonner: The International Labour Organisation? Of course.

Deputy B. O’Keeffe: One other question Chairman.

Chairman: I do not think we are going to propose that we withdraw.

Deputy B. O’Keeffe: Subhead F relates to research including manpower surveys which has cost us £80,000. On a general note I would understand that we have, for instance, the Central Statistics Office to carry out surveys. We also have Social Welfare and the Revenue Commissioners. I would like to ask a question about the total co-ordination and the role of manpower surveys. Is there a data duplication between the various Departments? How is it networked?

Mr. Bonner: I do not think so. Most of the expenditure that is involved in the £80,000 goes to what is called a school leavers’ survey which was uniquely carried out by the Department of Labour and now by the Department of Enterprise and Employment and which monitors what the position is of school leavers after they leave school - whether they get jobs, go to university, enter training, etc. This provides basic information which is very important from a policy point of view in regard to devising educational policy, training policy, employment schemes, etc. It is very basic and important information to have.

In that year all but £60,000 of that went on a school leavers’ survey. Part of it went on a school leavers’ survey for 1992 and £25,000 went on the 1993 survey because we were starting to prepare the one for the following year and then there was a follow-up to the school leavers survey. £60,000 went on a survey which is unique to our Department and which is not duplicated elsewhere in the public service. It is carried out by the Economic and Social Research Institute.

Deputy B. O’Keeffe: It is just a general thing as I become suspicious when I see so many Departments carrying out surveys of their own. I wonder would it not be a far better policy and maybe cheaper administratively if the Departments got together and said: this is the role for the Central Statistics Office. Yes we can make some money available but allow one body to carry out all of the relevant surveys. It seems to me that if you have four, five or even six different Departments carrying out different surveys it is going to be very expensive in the long run.

Mr. Bonner: There may be a general point there but in regard to the specifics here I do not think so. Every effort is made by Government Departments to ensure that there is not duplication. In general where surveys are carried out we co-operate interdepartmentally to ensure that. The actual expenditure has to be sanctioned by the Department of Finance who will have a global picture of what was going on in different Departments. You can take it that there would be no question of the Department of Enterprise and Employment receiving money in regard to a research project which is being duplicated elsewhere in the public service. That would not be possible.

Chairman: Okay.

Deputy Durkan: A quick question Chairman. On page 279 of the Comptroller and Auditor General’s report there is a sentence:

As agreed with the Department of Finance under the delegated administrative budget scheme a carry over of £529,000 is included in the Estimates for 1993 in respect of a Vote for the Department of Enterprise and Employment.

Could you explain that Secretary please?

Mr. Bonner: The situation that exists with regard to administrative budgets in Departments at the moment is that in regard to salaries and certain other subheads which are mainly the administrative costs of the Department, we have a three year agreement with the Department of Finance which gives us a certain amount of flexibility to change expenditure within those subheads and try to save money in one area and spend it on another and agree on priorities. There is provision in the agreement with the Department of Finance that if you do not expend money you carry it over to the following year. We made savings of £529,000 which we agreed with the Department of Finance could be carried forward to the following year. Those savings would have been in the ordinary administrative expenses of the Department.

Chairman: This is a new policy which does not require Departments to rush out and spend all their money before 31 December.

Mr. Bonner: Correct.

Deputy Broughan: Why do we have the overrun in the expenditure of the Labour Relations Commission under subhead G and in relation to subhead H - grant for Emigrant Advisory Services - what money would the emigrant support groups in Britain have been looking for? The sum of £500,000 was allocated and we spent that sum but were they looking for greater amounts? Under subhead K - Trade Union Amalgamations - I wonder why it is lower than the estimate. Is the European Foundation based here?

Mr. Bonner: Yes. It is in Loughlinstown.

Deputy Broughan: What is the spin-off into our economy as a result of that being based here and we making a relatively small contribution towards it. In relation to FÁS, what proportion of their budget is provided from the social fund and in relation to Subhead P.4 - Grant for the Social Employment Scheme - which we overspent in 1992, will there be any SES schemes from 1994; in other words will everything be the community employment development programme. Will the country be so organised that in 1994 we will need a greater amount for that purpose?

Mr. Bonner: The Labour Relations Commission expenditure was in excess because of greatly increased demand on the services of the Commission. The new chief executive has been very carefully monitoring the expenditure and has been able to keep it within the current year’s budget. There was an overrun but it was largely as a result of an enormous and not clearly explainable demand for the services of the Labour Relations Commission during that year.

With regard to the Emigrant Advisory Services the £500,000 goes to emigrant organisations in Britain. I do not have the figure for the demand but you can take it that the demands would be by more organisations than actually received the money in the first place. It goes to 33 organisations in Britain and you can take it that the demands would have been in excess of that amount. That would be par for the course; one would not expect anything else.

With regard to Trade Union Amalgamations we try to make a rough shot at the number of amalgamations in the forthcoming year. There has been a considerable reduction in the number of unions over the last 20 years and we tried to make a shot at the number of amalgamations coming up in the following year and what happened is that some of the amalgamations that we had expected to come to fruition in 1992 did not materialise and would have fallen due for payment in 1993.

What happens with the foundation in Loughlinstown is - first of all it makes a contribution to the economy. They hold regular big conferences which bring a lot of people into the country, secondly, they commission an amount of research and some of the research is commissioned from existing institutions and individuals who are involved in the work of the foundation. The £100,000 resulted from a contribution which the Government decided to make over a three year period; 1992 was the second £100,000 of the £300,000. It relates to a £4 million pound investment which the European Commission was making in regard to expanding the foundation in Loughlinstown. They have added on new facilities so in terms of the overall expenditure involved this would be very small. It was a token of our appreciation that the Foundation is here and remains here. This year is the last year.

With regard to the percentage of the Social Fund which the ESF would be responsible for, it would be about 60 per cent. In some cases the Commission would pay for 75 per cent of expenditure but when you take administration into account, it is roughly about 60 per cent or 65 per cent. With regard to the SES and CEDP, the position is that there are 12 area partnerships and it is within these area partnerships that the CEDP operates which means that they have extra benefits. At present the coverage of those partnerships is being reviewed. Although the matter is subject to debate at the moment, the intention is to extend those partnerships and have a look at existing partnerships and their coverage. In the light of that it is probable that the CEDP would substantially widen as against the present SES; in other words, that there would be a greater coverage of CEDP than SES.

Chairman: A greater?

Mr. Bonner: A greater preponderence or a much greater use of CEDP because the areas would expand and the CEDP would expand with them.

Chairman: Will you make sure that they cover Deputy Broughan’s constituency and mine?

Deputy Broughan: They already did.

Deputy Foley: Not to the exclusion of all others.

Deputy McCormack: If the targets of participation in some of the schemes are not being met, has there been a change in the regulation? When FÁS schemes and SES schemes came out first the regulation at that time was that if a person did not participate in a scheme, that person could lose their unemployment assistance. Has there been a change in that rule now?

Mr. Bonner: Essentially the question of the payment or non-payment of social welfare benefit is a matter for the Department of Social Welfare.

Deputy McCormack: Of course I know that because I am dealing with that for a long time but has there been a change since FAS and SES schemes were first introduced? A lot of useful work can be done by FÁS schemes in urban and rural areas and they are useful also in that a person on a FÁS scheme can earn their wages for the week they are on. They have a week off then and they can earn as much as they like for the week they are off. It is often advantageous for the person who might be able to get work for the week they are off the FÁS scheme.

Mr. Bonner: I am not aware that there have been any changes in the position.

Deputy McCormack: I will give a practical example of what I am talking about. In Connemara in a seaside area there was a burial ground adjoining the sea. A couple of years ago a big wave washed part of the wall facing the Atlantic into the sea. On numerous occasions a FÁS scheme has been mooted to repair this wall. Even though there are about 200 people on the unemployment register in the area, the organisers of this scheme are unsuccessful in getting anybody or in getting sufficient numbers to go on the scheme to set up a FÁS course. If the rule has not been changed, it is certainly not being implemented.

Mr. Bonner: I understand that, for example, if a person is going on an SES course or a CEDP course or whatever and if you are going to be worse off than you were on social welfare, the Department of Social Welfare will not debar you from social welfare payments. As regards going on SES or CEDP courses our experience is that there are plenty of people willing to take up the places on SES courses. In fact just recently we have substantially expanded the SES course by taking on about 5,000 extra in the past couple of months.

Deputy McCormack: I can only relate from my practical experience that there are not plenty of people to take up places on courses, I am talking in particular about FÁS schemes where very useful work can be done but there are not enough people willing to take up places on schemes in areas that have over 100 or sometimes over 200 people on the unemployment register. There are not enough people to take up the opportunity to carry out very useful work in their community, both useful work in this case for the living and the dead because the next big wave is going to take a number of graves into the Atlantic and yet we cannot in that area get a FÁS scheme organised simply because the regulation is not being implemented - I know this regulation was there from my experience because I have been dealing with FÁS schemes for seven or eight years - when the FÁS schemes came out first there was the understanding that if a person on unemployment assistance did not take up the offer of work on a FAS scheme they could lose their unemployment assistance because they were saying they were not available for work.

Mr. Bonner: I take the point made by the Deputy.

Deputy Broughan: A person signing on for credits, for example, will not be considered for an SES scheme. That is a problem in my constituency where the woman is the breadwinner and the man is a househusband and people are desperately anxious to get on a scheme. In the north inner city we are talking about CEDP and they are totally excluded. I know of cases - this is similar to the point made by Deputy McCormack - in FÁS northside there might be 80 positions on the board and a number of men and women in this situation. Recently a number of men who were signing on for credits just cannot get a place on a course; they were told to go away. They were ideally suited because of their years of experience.

Deputy McCormack: That is a very relevant point too but the point I was making is quite different. The people are eligible in an area to go on a FÁS scheme and there is no penalty on them for refusing to go on a FÁS scheme. This is militating against the development of FÁS schemes particularly in rural areas. There should be some censure or some enquiry in the case of a person who is not available for this type of work; are they you available for work at all?

Mr. Bonner: I take the point made by Deputy McCormack.

Deputy McCormack: I will give you the instance of the case I have in mind. I am still doing my best to get the graveyard wall rebuilt.

Chairman: I want to summarise. I want to go through a few general figures with you. On page 279 of the Comptroller and Auditor General’s report, it shows that from the unemployment and training levy there was a total of £143 million paid into the Exchequer in the year 1992 - the year under review. I notice then that if you come back to the Vote, under the headings of Training and Employment, the Department spent less than £140 million. Is it a case that the Department is making a profit out of the training and employment levy and that all of the money is not being spent on employment?

Mr. Bonner: Of course the actual amount spent on training is much in excess of that when you take into account European Social Fund moneys. The actual total amount would be of the order of approximately £250 million.

Chairman: But the total -----

Mr. Bonner: The Chairman is right, the £143m goes directly into the Exchequer.

Chairman: Out of Exchequer resources you are spending about £140 million?

Mr. Bonner: That is correct.

Chairman: You are making a profit out of the employment and training levy. It seems surprising going back to the question we dealt with earlier, given the total level of unemployment and given the fact that under Subhead P.5, the grant for the employment subsidy scheme, less than one third of the budget allocated was spent, even though there are 300,000 people unemployed. It seems to me that this must point the Department in the direction of the structural problems inhibiting employment. I was a great advocate of the idea of a Department of Employment and I am glad to say that it has been established and that you are the Secretary of it but could you tell us, in the 11 months since the beginning of this year, has there been any changes, any improvements, have we been more successful in getting people to take up these subsidies? Could you tell us what your projections are at present for unemployment?

Mr. Bonner: That is a very difficult question to have a shot at in terms of unemployment. The main result of the new Department has been to bring about a very concentrated focus on employment in its broadest sense and to ensure that the resources that are available both in terms of training courses and the IDA where there are going to be new organisations is singularly rooted and focused on employment. The Department also has been given a post-Culliton role of ensuring that all other policies, taxation, industrial etc. are employment friendly so to speak and lead to the greatest extent possible to the creation of sustainable employment.

Chairman: I thought that the creation of the Department of Enterprise and Employment would have led to the elimination of a lot of the structural problems very quickly and indeed a lot of the organisational difficulties. I want to tell you, Secretary, that I have had two very poor experiences with your Department in the course of this year, one about six months ago - I wrote it off because the Department was quite new at that stage - and one in the past couple of weeks. I think it is worth telling the story. I rang you Department asking to be put through to the Assistant Secretary in charge of job creation and it would appear that there is not one because I was put through to the Minister’s office on one phone and while I was waiting seven or eight minutes to find out who was the Assistant Secretary responsible for job creation I rang up on another phone and I was waiting for five minutes to be told that there was no one. I got two different names at the same time on two different phones.

Deputy Broughan: Perhaps you should have contacted Bertie Ahern.

Chairman: A person who had contacted me was trying to create jobs and had exactly that difficulty - they could not get through the maze of bureaucracy and I was experiencing the same difficulty. Is there not in your Department some clearing house where people can be directed to where they can get help. The operators on your exchange do not know, the Minister’s Office do not know and I would like to know what is being done to make it easy for people who have job creation ideas. They are not being encouraged by your office. There should be somebody there to say yes, we want you; take your ideas in here and let us see what help we can give you.

Mr. Bonner: First of all I apologise for whatever inconvenience you had. The problem is that probably a lot of Assistant Secretaries would regard themselves as involved in job creation. I think the Chairman has a point and part of the problem is that the client is out there trying to create a project or get involved in job creation. He does not know the bureaucracy and does not know exactly what he himself wants to do and he needs a sympathetic hand or somebody to talk to him. I certainly understand that point and it is a point which was raised recently with me by the Minister and others and is being examined at present. We are considering this within the confines of Forbairt which is a new body to deal with indigenous industry. Also included are county enterprise boards and the area partnerships and we on our part must make every effort to ensure that there is as little confusion as possible. Having looked at the problem which you just mentioned, we might have an office within Forbairt where people can get in touch and be directed in a friendly type of fashion.

Chairman: Forbairt, while the board is appointed is not up and running yet - Is that correct?

Mr. Bonner: That is correct.

Chairman: On behalf of this client who had gone through all of this process himself, I had rang the IDA to find out that as this was an indigenous service project the IDA did not deal with it. I suggested that Forfás was set up to deal with it but they said that it was not up and running yet.

I am not asking for an apology for any inconvenience to me but what I am highlighting is that here we have 300,000 unemployed, costing the State an enormous amount of money, causing huge human degradation and that people who have proposals for employment projects do not know where to go. They would be more easily put off than I was because I have more experience of dealing with bureaucracy and I would urge that there would be a clearing house where all queries needing clarification are dealt with quickly and efficiently.

Mr. Bonner: If it was a service type industry that you were inquiring about, the answer up to recently was very simple. There is nothing that can be done for service type industries as there were no grants or incentives available whereas FÁS could provide training schemes of some type. Any grants available through the then IDA only cover manufacturing industry or internationally traded services. Therefore, if it was an internal type of service then there would have been a problem with it.

Chairman: If you are Irish, stay out of the parlour. It is no help if you are Irish.

Mr. Bonner: That is wrong. It does not matter what colour you are.

Chairman: If it is an internationally traded service, it gets help and if it is an Irish service it just gets no help.

Mr. Bonner: There are very good reasons for that. The fact is that any particular small town in Ireland probably needs only one garage and if you open up two you put one out of action. There is a practical problem - you can only have so many hairdressers etc.

Chairman: Of course.

Mr. Bonner: There are problems there but it is an area which is under intense scrutiny at the moment and the county enterprise boards have been given some flexibility to have a look at possible projects in the service area in regard to start-ups. There has been some progress there and it is not a question that in regard to internal services you will get nothing at all. There is a possibility of doing something in that area under the county enterprise boards.

Chairman: You mentioned something about a garage. The two projects that I was involved in were new services. One case involved an interpreting and translation service which would have earned us foreign revenue and substituted imports. In regard to any conferences we have to import interpretation services and the proposal was to provide those with Irish graduates by a person who has built up a translation service but she could get no help anywhere. The second case is a new proposal in the leisure area which has exciting possibilities and could have employed 12 people immediately but there is no where for them to go to get help. Yet we have a crisis in unemployment of 300,000 and I was under the impression that the creation of the Department of Employment would very speedily bring changes to these problems and yet we are now ten months into the new Department and the situation does not appear to have changed.

Mr. Bonner: In relation to the first case mentioned, it should be straightforward and open for consideration by the IDA.

Chairman: She was not.

Mr. Bonner: In relation to the second one -

Chairman: I raised this already on the Estimate in the Department with the Minister in the House.

Mr. Bonner: All I can say is that I take on board what you have said and I will see if the situation can be improved.

Chairman: I am raising this in the context of this Estimate where we have employment subsidies which are not being spent. I believe the Committee have to express their shock that given the level of unemployment in the country and the degradation which so many families who are affected by unemployment experience, that we cannot actually spend money voted by the Houses of the Oireachtas. There must be some other problem and I would hope that when the Secretary comes before us next year he will have more progress to report in that respect.

Deputy Broughan: I want to make a remark or two. I have been involved in the community enterprise movement for about ten years and I think it depends on where you are. It appears to be the problem that if you were a north sider or living in Tallaght you would know where to go in relation to getting advice on setting up a business. In my experience from sitting on vetting committees and so on, a lot of business ideas that come in are just not feasible and mildly experienced people would shoot them down. I very much welcome the setting up of the Department and look forward to it coming to grips with the horrendous problem of unemployment over the next three years. In that area you have the county enterprise boards beginning to get into place and on that point I understand Chairman that we have a board in Dublin city. We are hopeful that Dublin city will get the same per capita amount of expenditure as the rest of the country from the allocation for this area because at the moment we are not receiving it. It appears that we are presently getting 1/35th which is not acceptable. It is an ongoing struggle for us in the Dublin area and we are discriminated against right, left and centre. We welcome Forbairt and hope that it will be of a similar type of drive and determination as the IDA is in regard to a foreign industry and we understand that this is going to be the case, now that Forbairt will be a domestic sister of the IDA.

In relation to the county enterprise boards and CEDP etc., we need a countrywide programme and a situation where in the chairperson’s area a person with a business idea can get in close contact immediately and proceed. Is it not also a fact that at the end of the day if we are to tackle the 300,000 unemployment and significantly reduce it, the key macro-economic decisions are made by the Department of Finance and even if you do what the chairperson has said in relation to structural improvements of the Irish economy which I have confidence you are going to do and you have being doing for the last nine or ten months, are you not still faced with the situation that the key implementation of those structural changes in relation to the tax wedge, general taxation etc., is done through the Department of Finance. Obviously there has to be very close cohesion between your Department and Finance but in order for your Department to achieve its goal it will be necessary for Finance to do its work.

Mr. Bonner: Yes, I accept that and you can take it that there is good co-operation between the two Departments and we are always in continuous discussions with the Department of Finance on issues which concern employment as indeed we are with a lot of other Departments. As you rightly say a lot of decisions concerning employment are affected by macro-economic policy and by fiscal policy and so on. Therefore, you can be assured that we are in constant contact with that Department.

Deputy Broughan: In relation to remarks that were made recently by the Governor of the Central Bank, which you may know the Chair may have referred to earlier on, at the time of the currency disaster up to the start of this Government was your Department, and its predecessors, in contact with the Central Bank and evaluating the numbers of people that were being laid off as a result of crazy currency policies which were being pursued by the Governor of the Central Bank? Would the Department have imput into that or would the Department even say at the moment to the Central Bank your own statistics reveal that half of the unemployment, Chairperson, results from the failure of domestic policy but a significant imput of that 50 per cent perhaps comes from a mistaken currency policy. In other words what I am asking is - would Enterprise and Employment be able to quantify for the Central Bank the problems in unemployment relating from the policies being pursued by the Central Bank?

Chairman: Just one second, the Chair has a duty to protect people who are not present and we have already agreed to call the Governor of the Central Bank but in his defence I must say the Governor implements Government policy, he does not make policy. Otherwise Mr. Bonner if you would answer the question.

Mr. Bonner: The Department of Enterprise and Employment only came into being towards the end of the then currency crisis and as I said at the beginning, in reply to a question by the Chairman, I think it has given us a unique focus on employment and that includes the issue which is being raised by Deputy Broughan.

Chairman: I want to summarise. What I propose to the Committee is that we would note the Comptroller and Auditor General’s report on the Vote of the Department of Labour for 1992 and that in respect of the employment subsidy scheme and other job creation schemes that we would ask the Secretary perhaps to come back to us in say April of next year to report progress on the administrative arrangements for job creation that have taken place, the changes and improvements that have taken place including the arrangements in relation to Forbairt, Forfás and the IDA and also arrangements within his Department for dealing with enquiries by persons with job creation ideas.

Mr. Bonner: Could I first say that the employment subsidy scheme ended last March. It was a temporary scheme, it was only for a specific period of time.

Chairman: I am talking about employment schemes generally and the efficacy of the administrative arrangements in respect of them.

The witness withdrew.

Address by Mr. Richie Ryan, European Court of Auditors, to the Committee of Public Accounts 25 November 1993

Chairman: I now turn to the next item on the agenda and it gives me very great pleasure to welcome an old colleague back before us, Mr. Richie Ryan. He is here in his role as Governor of the Court of Auditors of the EC. The Committee has interested itself in the past six to nine months in the question of how best we should co-ordinate our activities with the European Parliament Committee on Budgetary Control and the Court of Auditors because it is more than a little concerned that in relation to the transfers of funds from the EC to the Member States there may be a slip between the control of the Court of Auditors and the Parliamentary control of the Member States. I am looking forward to first of all an address by Mr. Richie Ryan and then some questions to him. Mr. Ryan you are very welcome.

Mr. Richie Ryan: Mr. Chairman, Comptroller and Auditor General and distinguished Members of the Dail, it is a real pleasure for me to be back in the ambience of Oireachtas Eireann once again. I am delighted to know of the anxiety which you manifest concerning the control of European Union finances. I have here a present for you, Mr. Chairman, as I am sure you are short of reading matter. I give you 404 pages of small print - the Court’s Annual Report for 1992 which was published and delivered to the European Parliament last Wednesday, so it is straight off the press. I will be addressing a few remarks concerning it. I would like to preface my remarks as members of the Court always do when they are speaking in a personal capacity. Any views which I express today are personal to me and are not necessarily those of the Court of Auditors. The Court is a collegiate body and when it makes a decision it is printed and published. It is only the published views of the Court which may be taken as those of the Court, though as you might anticipate, there will not be much (if any) diversion between views which I might personally express and the philosophy of the Court itself.

It would be considered rather bizarre and unnecessary were a national institution to require public servants to protect public funds as they would their own money. This is something which we presume all public servants would do. Yet the Maastricht Treaty contains the following article:

’Member States shall take the same measures to counter fraud affecting the financial interests of the Community as they take to counter fraud affecting their own financial interests.’

It is rather shocking that such a solemn commandment has been considered necessary 36 years after the foundation of the European Community but it is an obvious acknowledgement that Member States have been lax in protecting the funds of the Community. Significantly the Maastricht Treaty does more than state that aspiration of good financial behaviour. The Treaty also strengthens the powers of the European Court of Auditors to ensure better financial discipline in the future. The Court has just been elevated in status by the Maastricht Treaty to the same level as the Commission, the Council of Ministers, the Parliament and the Court of Justice. That is not a mere matter of prestige. It in fact gives the Court of Auditors a power that it did not previously have, a right of direct access to the Court of Justice against other European institutions which fail to uphold the Treaty and an indirect power against Member States who may not facilitate the Court in carrying out its audit work.

Concomitant with the Court of Auditors’ new institutional status, the Treaty imposes a new obligation on the Court. Hitherto unlike your Comptroller and Auditor General who must certify the accounts, the Court of Auditors of the European Community did not certify the accounts of most European expenditure - just a few small exceptions like the Shankill Institute for the Improvement of Living and Working Conditions, and some small satellite institutions but generally speaking the Court of Auditors has not been required and has not given certificates on the accounts. In future the Court will have the obligation to provide the European Parliament and the Council with a statement of assurance as to the reliability of the accounts of all community revenue and expenditure and the legality and regularity of underlying transactions. An obvious corollary to this requirement will be the issuing of reservations and qualifications to such a statement of assurance where the Court does not have sufficient confidence that accounts produced by institutions and the member states meet acceptable standards. Financial audits which we have conducted in ten member states in agricultural funding since 1989 including Ireland give rise to serious anxiety regarding the reliance which can be placed on financial controls and audits of Community funds in Member States. It is obvious that Member States will have to significantly improve their accounting and auditing practices, so that the assurances of the reliability of accounts foreseen in the Maastricht Treaty can be issued by the Court of Auditors without reservations which would call into question the soundness and integrity of Member States management and accounting procedures. Similarly Member States and Community institutions will need to implement more expeditiously and effectively than they have in the past theCourt’s recommendations for improvements in financial management if they are to avoid the embarrassment of an unfavourable statement from the Court concerning the reliability of accounts. Quite frankly if Ireland is not to end up with egg on her face there will have to be much more meticulous management of European funds.

It is not with any pleasure that I would remind you, Mr. Chairman and friends, that the European Court of Auditors has almost annually had to criticise the management of some European Community funds in Ireland particularly in relation to agriculture and the structural funds. Amongst the matters criticised in the 1992 report are that no post payment checks are performed by the Department of Agriculture to ensure that payments of the ewe premium are correct. Yet whenever the court carried out “a posteriori” checks in agricultural expenditure it invariably finds serious faults not only in Ireland but in other countries also. There is an obligation on member states to carry out “a posteriori” checks but this is not being done. There are considerable risks of irregularity affecting yew premiums in the counties which adjoin the Border where premiums on almost three-quarter of a million sheep were claimed in 1992 - £130 million were paid out on that item of expenditure alone.

The controls in the South are quite good; the Court acknowledges this, there is 100 per cent inspection and ear notching of sheep. In the North there is a 25 per cent inspection level and no ear notching. It does not take any great imagination to envisage the possibility of moving sheep from North to South to win fraudulent double payments. Both the Department of Agriculture and ourselves have identified some such payments. It is the Court’s belief that the extent of controls is not sufficiently rigorous to ensure that there is not a possibility of a widespread scam in that area.

In relation to public storage, the Department of Agriculture sometimes over estimates the intake into public storage of agricultural produce thereby benefiting from advance funding. Thus because of an intake over-estimation of nearly 3,000 tonnes of bone in beef in October-November 1991 Ireland irregularly gained £2.1 million. An examination of export refund forms by the Court last year established that there were widespread unverified alterations of export refund forms which nonetheless were accepted as the basis for paying our large amounts of refunds to exporters. At the time of the Court’s audit in October 1992 there were guarantees still outstanding on exports claimed to have been made seven years earlier. There were 655 guarantees worth £35 million outstanding for more than two years. On beef alone outstanding guarantees of £29 million covered more than 25 per cent of the value of export refunds in that area in 1991. It took the Department of Foreign Affairs ten months to forward to the Department of Agriculture in Kildare St., proof which it had received in Stephen’s Green of the arrival of milk products in Mexico. We also found that the Department of Agriculture released export refund guarantees in the absence of the required proof of the arrival of goods in the country of claimed destination.

In the area of regional development the 1991 tranche of operational programmes for rural development was not submitted by the Irish authorities to the Commission until February 1993, almost a year late. In social policy a group called the Management Initiative Development Activities (MIDA) was awarded a technical assistance contract to implement HORIZON, a structural policy human resources initiative designed to improved access to employment for disabled and disadvantaged persons. The procedures for selecting MIDA were found to be questionable; payments were made to MIDA without proper justification and MIDA’s performance was found wanting in several important respects.

An audit of the reliability of the administrative and control procedures in force in Ireland for the EAGGF funds which were approximately £102 billion in 1992 found that independent “a posteriori” checks are not carried out in Ireland to support the certificate of expenditure submitted to the Commission by the Irish authorities.

In respect of moneys advanced under loans and with interest subsidies, a Dublin water supply and sewage disposal project experienced delays, cost increases and significant technical changes. By the end, final costs had increased by £40.5 million or 57 per cent above the original estimate and many works intended to be carried were not included in order to keep the cost down to that figure. Another project involving the construction of 45 regional water schemes to upgrade the country’s water supply and sewage disposal infrastructure, also experienced delays, cost increases and significant technical amendments. In this case the final costs had increased by £10.5 million representing a 29 per cent rise over the estimate. There are other examples but it is not possible to list them all in the time available.

In 1992 Ireland received £2.6 billion from the European Community, now known as the European Union, principally through the Agricultural and Structural Funds. When I spoke to the Committee in 1988 I expressed disappointment that there was so little information in the Appropriation Accounts on the European Community, receipts and expenditures. While there has been some improvement I am disappointed to note some substantial omissions. There is as yet no clear presentation to either the Members of the Oireachtas or the Irish public at large of the details of EC receipts and expenditures. As a consequence it is doubtful whether EC expenditure in Ireland is subject to the degree of political scrutiny which is a prerequisite of public accountability.

Not for a moment would I presume to criticise the presentation of the Appropriation Accounts in the presence of the Comptroller and Auditor General or even behind his back. I would, however, invite you to reflect upon a possible lack of balance when minute details of disbursements of National Lottery funds are given, while either no, or only the vaguest, information is given about hundreds of millions of pounds paid out from EC funds. Of the £2.6 billion received in 1992 from the EC only £1.1 billion of payments from those funds are identified in the Appropriation Accounts. When experts at the European Court of Auditors and at the Commission have difficulty in reconciling the figures, what chance has an innocent reader? For example, individual National Lottery items in the Appropriations Accounts include, £81 to an art centre, £150 to a football club, £481 for library vans, £340 to a table tennis club, £220 to a brass and reed band, £88 to a cemetery committee. However, all the Appropriation Accounts tell us about unstated hundreds of millions of pounds on road works, public water supply and sewage, environmental services etc.., is that the activities and I quote from the report are “cofinanced from Euro-Regional Development Funds” but the amount of the EC contribution is not identified nor are the works to which the payments relate.

While the Commission has overall responsibility for the execution of the Community budget, day-to-day management is necessarily delegated to Member States; 99 per cent of the agricultural expenditure in Ireland is managed by the Department of Agriculture. Much of the Court’s audit work has to be carried out on the spot in the Member States by the 130 auditors of the court. To illustrate how the Court works, in 1991 there were 11 visits by the Court of Auditors to Ireland, visits usually of a team of two of three people here for only three to five days at a time, 14 missions to Ireland in 1992 and only six so far this year. In these circumstances it is obvious that even if the Treaty’s legal obligations to do so did not exists, the European Court of Auditors would have to liaise with national audit institutions.

I wish to take this opportunity to thank most sincerely the Comptroller and Auditor General, Mr. McDonnell, and his staff for the excellence of the co-operation which they have always given to the Court. Indeed, the Court’s auditors are usually well received throughout all sectors of the public service in Ireland and also at the premises of private beneficiaries of EC funds. However, two shortcomings frequently occur. Normally, following an audit mission by the Court, there are many outstanding questions to be answered by Government Departments. These are posed by Court Auditor’s on the spot and later on in audit mission reports and post-audit letters addressed via the Comptroller and Auditor General to the auditors concerned. It frequently takes an inordinate amount of time for Government Departments to reply, as a consequence of which we have to annoy Mr. McDonnell, who in turn has to annoy the Government Departments. You were explaining earlier, Chairman, some of the difficulties you experienced in getting information in a certain Government Department. I am sorry to say the Court of Auditors frequently has this similar experience in getting answers to points which it makes in the course of audits.

The second disappointing feature is the slowness in the case of several Departments in implementing the improvements in financial management recommended by the Court. It is sincerely hoped that for the future we will see more expeditious responses on the part of Government Departments in replying to the Court’s queries and in implementing the Court’s recommendations. As an Irish man and one who is proud of having served for more than two decades in Dail Eireann I would be naturally anxious that the country of my origins would have an impeccable reputation in this field. I believe that with a little more effort on their part there can be considerable improvement. As I said at the outset, if that improvement is not forthcoming the Court of Auditors in issuing a statement of assurance in relation to the accounts will attach thereto such reservations or hesitations as it considers the circumstances warrant. I hope I have not spoken too long, Mr. Chairman, and I would be very happy to answer any questions, if anybody wishes to pose them.

Chairman: Richard, thank you very much for those words and as I said the Committee itself has expressed its own concerns about the lack of clarity as to what is appropriate for this Committee and what is appropriate for the European Parliament Committee in respect of the European funds spent here and in relation to what you have said about agricultural spending, the Committee has expressed its own concerns about the lack of control and, indeed has directed that a separate FEOGA account be established so that the FEOGA situation is very clear and that it should be audited by the Comptroller and Auditor General, that is about to happen but has not happened yet. I know that the Comptroller and Auditor General would like to say a word.

Mr. McDonnell: Thank you, Chairman. From listening to what Mr. Ryan has said I think I would divide it into three areas. Firstly, the area of national control, secondly, the area of transparency and thirdly, the question of liaison with the national audit offices.

In relation to the area of controls I would not disagree with what Mr. Ryan has said. I think there is a question to be asked in relation to the efficacy of the national controls and I think that the Committee will be conscious of the fact that over the years in my reports we have adverted to aspects of the control particularly in the agricultural area which were of concern to us and of concern to the Committee. Looking at this years report, for instance, which I know the Committee not yet concerned, we do refer to the area of controls by the Department in its capacity as intervention agency and we refer to expenditure totalling £11 million, which was disallowed by the Commission. We do, in the context of my function vis a vis the national finances, look at the area particularly in the context of the possible impact on the Exchequer because it is a fact that if Community funds have been found to be wrongly spent in the member State then the national Exchequer, if it cannot recover those moneys from the beneficiary, is liable to bear the cost of that. But we have been as concerned as the court has been. I want to make it clear that our audit, as the court’s audit, is based on test examinations of transactions and it might well be that our test examination of transactions might in fact, throw up different instances of particular occurrences than the court’s audit might but we have been equally concerned in this area.

Regarding the area of transparency I would agree wholeheartedly also with what Mr. Ryan has said. He did instance the fact that this year there has been some reference to the funding of Vote expenditure from Community funds and we have noted them, for instance in the case of the Department of the Environment. I should say incidentally that what is included in an Appropriation Account, under the format of the appropriation account, essentially is a matter for decision by the Department of Finance and it is they who give instructions to Accounting Officers in regard to what has to be in an Appropriation Account. Of course we would be consulted and we would give advice in that process and in fact it was by virtue of a Committee representing my office and the Department of Finance that the reference is made this year in the Appropriation Accounts to the funding by EC money of certain vote expenditure. I agree with him that it would be a vast improvement if one could state the precise amounts and could state the projects on which they had been expended, but apparently there is a problem in relation to this in that it is said that once Community funds go into the Exchequer they in a sense loose their identity and they become part of the Exchequer and that therefore if moneys are voted, for instance under the Department of the Environment for roads, then that is voted by the Exchequer and as to whether the precise amount which has been provided out of Community funds is, we are told not identifiable. I would certainly agree with the Court, if one could produce, for instance, a national account showing the flow of funds into the Exchequer from the Community and show where that was channelled, of course that would not necessarily account for all Community funds in a national sense because certain Community funds do not go through the National Exchequer they would go directly to beneficiaries but at least if one could have an account showing the flow of funds between the Community and the National Exchequer, I would have no problem with that kind of situation, in fact I would welcome it. Of course the difference in the instances between that situation and the situation vis a vis the National Lottery is quite apparent from the accounts. All I would say on that is that of course the disbursement, and I do not think I have to say it at this Committee because it has been quite evident over the past few weeks, of National Lottery funds is a very emotive political subject and I would not say anymore about it at this stage. As I said I would agree with Mr. Ryan in relation to the question of controls and the greater degree of transparency.

In relation to liaison with my own office, I appreciate his comment in regard to the co-operation which we have given to the Court over the years. We have tried to co-operate to the greatest extent that we can. The treaty, as he said, requires the Court’s audit in the member States to be carried out in liaison with the national audit offices. The question of what liaison is, precisely, is one which has exercised the minds of national audit offices of the Community over the years and we do meet as a group every year and we try to get to grips with this question of liaison and I think that it would be fair to say that it varies significantly from one Member State to another. In our case we have tried to co-operate with the Court to the best extent that we can and to facilitate it, and I would say that the liaison up to now has operated on the basis of our acting as a facilitator for the Court in order to make contact with the bodies where they want to carry out their audit and to try, and I emphasise to try, to get those bodies to respond to the Court’s questions. The Court has the practice of issuing what I think they call sectoral letters after they have visited a Member State and carried out their audit and they do raise serious questions from time to time and I think it is true to say that Departments have been slow to respond to those sectoral letters by the Court. We do as a national audit office, and I am sure that Mr. Ryan will agree with this, we make every effort to try to put pressure on the bodies concerned to respond to the Court’s questions. In regard to liaison for the future I think it will have to take on a different dimension, because as he said, under the Maastricht Treaty the Court is now required to provide the European Parliament with a statement of assurance in regard to the correctness of the accounts and in that context we had a discussion with the Court quite recently at our annual meeting of all the Member State’s audit offices as to how this would be done in practice. The Court presented a position paper on that which, I have to say, I agreed with entirely, that it should, to the greatest possible extent use the resources and the services of the national audit offices to provide that statement of assurance. It is, of course, the Court’s responsibility to provide that statement of assurance, not the national audit offices, but I think it is reasonable to suggest that in carrying out their audit with a view to providing that statement, they should, of course, liaise closely with the national audit offices. I have no problem with that principle. I will have a problem with the actual implementing of that from a resource point of view because it may well be that the Court would require the national audit offices to carry out certain exercises on its behalf and so on and to perhaps look at certain areas with a greater or lesser degree of intensity. Liaison between the Courts and the national audit offices for the future will become a very real and live issue. I do not want to say any more at this stage, but I hope I have responded adequately to what Mr. Ryan has said.

Chairman: Thank you, Mr. McDonnell. We will have a few questions now.

Deputy Broughan: I would like to welcome the auditor, Mr. Ryan, a very distinguished former Minister for Finance, to our Committee. It is good to hear of the interest there is within the European Court in our own auditing process here. In relation to what the Comptroller and Auditor General has said, I would agree with him that it is amazing that in the 1992 Appropriation Accounts we have such detail on very small Lottery grants and yet in the Department of Enterprise and Employment, whom we have been interviewing, and in the Department of the Environment which will receive the bulk of our Structural funding, it is impossible to see where exactly that money went. I find it particularly frustrating perhaps in relation to the Department of the Environment because you get a sign erected on a road, but that is about it. It seems to be incredibly difficult. Does the problem also apply, Mr. Ryan, in the other direction? Over the next six years while we are receiving £14 billion from Europe in relation to the present and new national plan. we are also sending across £3 billion. We have 1.5 per cent, wherever there is VAT and so on, our contribution to Europe, but do I know, as an Irish citizen, were my £3 billion is going, or does this Committee know where our £3 billion will be going? Would the European administration be able to identify exactly our input into Europe and know what happens to it?

I am interested to know if you and the auditors have a relationship with the European Parliament, a similar type relationship that our Comptroller and Auditor General and his staff have with us? Is it the same at European level?

Mr. Ryan: Yes, to answer the question about Ireland - I will not call it Ireland’s contribution because it is wrong to talk about Member States making a contribution to the Community. All customs duties for instance belong to the Community. I might query the presentation of that income in the State’s accounts in Ireland. That money is shown as coming into the Irish Exchequer, but that money belongs directly to the Community. VAT is a different matter because the Community only receives a certain percentage of the VAT collected nationally and, of course, a much more significant percentage of the VAT is the property of the individual Member States. On the Union’s accounts, the Commission furnishes a most detailed account of all their expenditure every year and we as auditors audit that. There is, in fact, an immense amount of detail and I would think that taking pound for pound there is more detail given by the European Commission than there is available to the public here in Ireland.

As to the relationship between the Court and the Budget Control Committee of the European Parliament, the Treaty requires us to assist the Council of Ministers and the Parliament in their monitoring of the budget. In practice, we do this by regular contact with the Budget Control Committee of the European Parliament. I was interested in what the Chairman said about the discussions which had taken place about the appropriate level of activity on the part of the European Parliament and yourselves in relation to monitoring of European receipts and expenditure. Before I was a member of the Court of Auditors, I was a member of the Budget Control Committee of the Parliament for about nine years. I think there is an enormous gap between what I might call the political supervision by the European Parliament and the actual administration of the monies back in the 12 national jurisdiction. It is that gap which makes it very difficult for the public at large to understand how the Community budget works. There are those in the European Parliament who would probably even resent my presence here today talking to you because they would say that by being here I was bypassing the Parliament, which of course I am not, because I am in regular touch with the Parliament. It seems to me that the European Union needs to improve the effectiveness of political control over the accounts of the Union. At present, the gap is too big between what happens in Strasbourg or in Brussels and what happens in the national environs. When members of the European Parliament criticise poor financial management it seldom hurts administrators back home, whereas when you offer criticism here, I know that people in Government Departments feel that you are threading on their toes and, therefore, it helps to keep them on their toes. When that gap is as big as a yawn between the European institutions and management in national jurisdictions there is a weakness in political control which needs to be dealt with. I understand we are going to be talking about that in the very near future.

Deputy Foley: I have a brief question. First, I welcome Mr. Ryan and congratulate him on his success as Governor of the Court of Auditors. In his statement he made reference to the export refund forms that were tampered with. I would like to know was any action taken at the time they were found to be tampered with?

Mr. Ryan: The auditors were doing an “a posteriori” check. The payments and so on had already been made and what we found was that the Department of Agriculture and the Revenue Commissioners who handled the export refunds had made payments against forms that were not properly completed. We have asked that there be a double check made, but the quantity of work to be done is so immense it will probably seldom be done. Oftentimes, our criticism has, unfortunately, to be of a historical nature and our recommendations are more directed to future activity. Whenever we discover a fraud or some serious error, we bring it to the notice of the national authorities and it is their responsibility to put matters right. We are not, as many people believe us to be, a police force, we are not prosecutors, we are not policemen and we are not detectives. It is our job to give financial advice for the better management of Community funds. It is for others, both the Commission and Member States, to face up to their responsibilities. I could not specifically say in relation to all the forms found to be poorly completed in Ireland that corrective action was taken or that any refunds paid were withdrawn? The Court was pointing to sloppy and unverified documentation.

Deputy McCormack: I too would like to welcome Mr. Ryan and thank him for attending our meeting. He mentioned that delays in construction works, particularly water and sewerage schemes, often cause substantial increases in costs and grants and so on. Where does the delay take place? Is it at the Irish or European side?

Mr. Ryan: In relation to the cases I referred to where there was a delay, it was on the Irish side in the execution of the works, so that the planned dates for completion were not met, as of course can often happen. There were technical problems discovered in the course of executing the works, but the overrun in cost and time, as we mentioned, was very considerable and should not have occurred.

Deputy McCormack: Often times there is delay also, of course, at the European side in sanctioning grants, for example, in Galway city there was a £19.8 million sewage treatment works scheme adopted and recommended by the Council two years ago and recommended by the Department of the Environment about 18 months ago and we are still waiting for approval from Brussels for it. There is no doubt in my mind if approval of the funds is not forthcoming fairly shortly that the scheme will cost a lot more than £19.8 million and not through the fault of the local authority or the Department of the Environment.

Mr. Ryan: Yes, that is a problem of which we are aware. We have often drawn attention to the costs that arise by virtue of delay on the side of the Commission, but that did not apply to the cases which we identify in our report this year. I am aware of the dispute which appears to exist regarding the execution of part of that Galway project.

Deputy McCormack: There is no dispute at all. I will put them right on that very shortly. We want a sewage scheme as soon as possible to stop pumping sewage into our bays and waterways.

Chairman: We cannot bring the Court of Auditors down to the specifics of Galway Bay.

Mr. Ryan: I know Galway Bay very well.

Deputy McCormack: Galway Bay is a very important place.

Deputy Durkan: I would also like to welcome Richie Ryan back amongst us and to congratulate him on his work over the years. Could I ask a question in relation to your remarks regarding the identification of the element of EC funding in various projects that are in operation in this country. Surely there must be a major responsibility on whichever Department hosts the development. Is it not possible to get the precise figures from the Departments in the same way as the National Lottery funding is shown so that we can all identify EC contributions very precisely. Is it not possible to get the same precise information from Departments or have Departments been asked for that information or have they been vague in returning that information?

Mr. Ryan: It is a vagueness mainly on the part of Departments in making specific identifiable information available to the Comptroller and Auditor General and available for publication in the Appropriation Accounts. As the Comptroller and Auditor General said part of the difficulty arises in the treatment of the funds as being Exchequer funds once they arrive. Remember, for the purpose of qualifying for European Union grants Ireland has to identify specific projects to the Commission. The monies are advanced to finance specific projects. Therefore there should not be a real difficulty in Departments furnishing such information in a form which would be understandable and accessible to everybody. Amongst some of the other items which are vaguely described for instance in the 1992 accounts the Office of Public Works identifies that regional development money is received but the amount of payments from the regional development fund for work done by the Office of Public Works is not identified; the environmental protection agency likewise. The building grants and capital costs of regional and university colleges include European development funds, no details are given but there is an acknowledgement that £79 million was received since 1987. The accounts do not say where that £79 million was spent and yet it must have been on specific works but whether it was at third level or second level I do not know from the accounts. We as auditors could go and ferret out the answer from the Commission by doing an audit of the Commission’s records. We would see there certain information given by Ireland but that information should be available to you or to whoever else is charged with the political monitoring of public expenditure.

Deputy Broughan: Again in relation to the misuse of European funding we are all awaiting with great interest the hopefully swift publication of a tribunal report which may shortly throw further light on possible misuse of European funding in relation to agriculture and other areas. In this whole general area, how does Ireland compare with the other 12 Member States. The Chairman will recall we had this meeting with other public accounts committees in Europe and there seemed to be similar situations elsewhere; in Belgium for instance we were reading about some terrible scandal the Belgians had, or was it some Belgians and Italians who were involved in difficulties in relation to European funding. Do you have a league table of countries which you suspect, misappropriate or misuse European funding and if there is such a league table where would Ireland be, or do you have enough information to put Ireland into the table yet? What is the general impression in that area?

Mr. Ryan: We are all sons and daughters of Adam and Eve. We all have a strong and I believe somewhat equal inclination to evil. We do not keep a league table nor do we ever make any utterance regarding the morality of one Member State as against another. Every year in planning our work programme we have chosen matters which we consider to be interesting from an audit point of view. There are possibly some irregularities in the operation of schemes which need to be examined and weaknesses which need to be closed. But we do not make our choice of work on a geographical or ethnic basis, we do it wherever the money is spent. Obviously because of the fact that we have only 130 auditors to audit an enormous budget we have to bear in mind materiality as well. From time to time, incidentally you will be interested in this, the European Parliament may ask us to examine a particular matter. We have often times been criticised because we do not react speedily enough to parliamentary requests but we have a work programme and we have to plan it a year ahead. We have an agreement with national audit bodies that we will give them four months notice of our intention to carry out an audit in a particular area and six weeks before the audit we fix the date, time and place and the record which we want to look at and so on. All this is done where we think there is something material and interesting. At the same time we do try to ensure that we visit all countries at roughly the same frequency.

Deputy Broughan: But would you find that there are not more interesting cases in relation to Ireland than other countries?

Mr. Ryan: No, the ingenuity of man and woman is amazing and it is not limited to any particular nation.

Deputy Rabbitte: Chairman, I too want to welcome Mr. Ryan and I apologise for being late; I was speaking in the House.

Chairman: I want to note some of the things that Richie Ryan has said. Firstly, I want to repeat that we have already asked in respect of lottery grants that there would be the same detail in the accounts of every Department as there is in the Department of the Environment because there has been a concern expressed that perhaps there is a feeling out there that lottery grants are easier got and less accountable for than normal Exchequer money. There seems to be a similar view in relation to European money. I would make provisional recommendation to the Committee that we would ask in future accounts that they clearly identify EC receipts and expenditure in each departmental account. The Committee is visiting the European Budgetary Control Committee next Tuesday and Wednesday in Brussels to follow up this matter but it does seem to me that perhaps there is a need for co-ordinated thought between the 12 Parliamentary Committees, the 12 audit offices and the Court of Auditors on given the progression towards European union. We are now indeed in a European Union, whether or not the auditing and accounting procedures are adequate or co-ordinated enough. I think there is very clear evidence that they are not. If European monies are seen by people to be an easy touch or a number of scandals are allowed to arise for lack of auditing procedures in the future it could bring into discredit the whole question of co-operation and European union. Following our visit to the European Budgetary Control Committee next week, we will draft a report or set of proposals to put to the European Parliament and the other National Parliaments for consideration on the present level of auditing and perhaps any improvements that should be brought about.

Mr. Ryan: No, just to continue your good work. I would like to come back to a point which the Comptroller and Auditor General mentioned and that is the likelihood that the European Court will have to depend a great deal on national audit institutions in the giving of the statement of assurance. At the same time we recognise that we cannot expect national audit institutions to do our work. Clearly with only 130 auditors the Court cannot examine in sufficient depth and scope the accounts of 12 Member States. Therefore, we will have to put tremendous reliance upon the controls and certifications which are in place in Member States or which various audit institutions may give. If we are not able to rely on national financial controls it would be unpleasant, to say the least of it, for those who have responsibility for financial management were the Court to withhold a statement of assurance. There is not in each Department a sufficient number of people adequately conscious of the need for good financial controls and good internal audit. Unless they are put in place it makes the Comptroller and Auditor General’s task very difficult and it makes it even more difficult for those at the European Court of Auditors, who are even more remote from the action on the ground.

Chairman: On that very point I wrote to each Accounting Officer in the last number of weeks asking them to tell us specifically the new financial controls that are in place and about the internal audit procedures in those Departments. We have all the replies now. There has been a training session in the Department of Finance which the Comptroller and Auditor General has been involved in. You might like to tell us about the internal audit improvements in each Department.

Mr. McDonnell: I would like to add to what Mr. Ryan said. One must not lose sight of the fact that control is primarily the function of management. The perception that audit is the detector, so to speak, in irregularities of fraud or whatever is a misconception. The primary control rests with management and audit is a review process of those controls to see whether they are effective in doing what they are supposed to do. One of the main instruments which can do that effectively in any large organisation is internal audit. In other words it is an instrument which reports to management. The external auditors function is to report on management as opposed to management. Last week I was giving a talk to the heads of Departments about the need for internal audit in Departments. We did a project audit report on it a couple of years ago which the Committee considered. I am glad to say that I think and I hope that there is an awareness now throughout Departments of the need for effective internal audit properly structured and properly mandated to do what internal auditing is expected to do. We found that Departments which said they had internal audit did not have internal auditing experience. I hope that there is some progress being made on that front.

Chairman: This is a matter which we will be pursuing as a Committee. We will review this in a few months time to see what improvements have taken place in the light of my correspondence and in the light of the Comptroller and Auditor General’s action.

I want to thank Mr. Richie Ryan for coming before us. He is still in the Court of Auditors and will be replaced sometime soon but not yet. We wish him every success in the future and thank him for his service to this country and to the Community.

THE COMMITTEE ADJOURNED.