Committee Reports > List of Committees > Dáil > 1994 > Committee of Public Accounts > Interim Report No. 03 - Report of the Comptroller and Auditor General 1991

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 16 Nollaig 1994

Thursday 16 December 1994

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY JIM MITCHELL IN THE CHAIR

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

INTERIM REPORT OF THE COMPTROLLER AND AUDITOR GENERAL ON NATIONAL LOTTERY GRANTS.

Mr. John Hurley, Secretary, Department of Health, called and examined.

Mr. Seán Cromien, Secretary, Dept. of Finance, called and examined.

Chairman: We now turn back to the question of National Lottery grants. Perhaps Mr. Hurley will introduce to us his officials.

Mr. Hurley: On my right Chairman is Mr. Gerry O’Dwyer, Assistant Secretary in our Finance Unit and on my left is Helen Minogue who is the Accountant.

Chairman: You have been supplied with a copy of the Comptroller and Auditor General’s report in relation to the disposal of National Lottery grants in your Department last year. Would you like to make an open statement by way of explanation as to how this state of affairs arose in the first place?

Mr. Hurley: I would Chairman, I am very grateful for the opportunity to make a statement. I will be as brief as I can as I am sure there will be supplementary questions under a number of headings.

Firstly, by way of background, there is an error in the Lottery expenditure figures as detailed on page 2 of the Interim Report. It is really a transposition error. Essentially the block allocations should read £1.6 million instead of £21 million while the services funded via the Health Boards, should read £21 million instead of £1.6 million. Two columns have been transposed in these figures. It is just a typographical error I am sure.

There is one minor adjustment in terms of the amount of money paid directly by the Department of Health to other bodies. The figure there is £7.721 in 1992, the actual figure is £7.691 million. There is £30,000 of a difference. The fundamental change there is that two columns have been transposed.

In relation to the discretionary grants paid by the Department of £7.691 million, this includes a figure of £6 million, which was a once off payment to the HIV infected haemophiliacs. This is a matter about which the Dail has been fully informed and was subject to a High Court process.

The vast bulk of the Lottery funds are used to support ongoing services administered by Health Boards or bodies which have a close ongoing relationship with the Department such as agencies providing services for the mentally handicapped, the elderly and the physically disabled. The amount involved under this heading in 1992 was £40.435 million or 98 per cent of the total Lottery allocation. The use of these funds is, of course, subject to the normal audit arrangements enforced for these bodies and is like other health expenditure, so 98 per cent of the total Lottery funding is audited in the normal way. The total amount of funds remaining - these are the funds nominally at the discretion of the Minister - was £1.691 million in 1992 and of this about half -

Chairman: £1.6 or £7.6?

Mr. Hurley: £1.691m. The £6m was paid on the process of a High Court arrangement to haemophiliacs and the Dáil has been fully informed about this. It was compensation for HIV infected haemophiliacs. In relation to the £1.691m about half of this, £834,000 to be exact, had to be allocated to meet ongoing commitments arising from decisions made in earlier years and, therefore, was not available for Ministerial discretion. This left the balance of £857,000 on which the Minister was free to make a decision. Again, almost half of this sum went to bodies subject to external audit bringing the total sum subject to audit in 1992 to 99 per cent of the total Lottery funding available to the Department. The remainder was allocated, on the basis of the decision of the Minister, to smaller bodies.

I turn now, Chairman, to the points raised by the Comptroller and Auditor General in his report. I want to emphasise that the Department has acted in accordance with the guidelines issued by the Department of Finance and I will explain this later. There is a detailed system for assessing each request for Lottery assistance and making recommendations to the Minister. There is an administrative procedure which requires applications to be considered on the same criteria and in the same manner as other requests for funding. This, of course, is not a statutory requirement and the requirement to have a written application form is not a statutory requirement, it is an administrative requirement. The Minister was entitled to make the decisions he made in relation to Lottery fundings for the bodies funded in 1992 including the decisions on the cases referred to in the Report Comptroller and Auditor General. He acted in accordance with Section 5 of the Lottery Act, within the Vote and within the necessary Department of Finance delegated sanction. There was no misuse of funds or impropriety.

Chairman: Are you sure?

Mr. Hurley: Yes, there was no misuse of funding and I can deal with this in detail later on. I have indicated that 98 per cent of the entire Lottery funding available to the Department is covered by the normal audit arrangements for health expenditure; a further 1 per cent goes to national bodies whose accounts are externally audited and the remaining 1 per cent goes to bodies which, by and large, are small and low cost because of maximum voluntary input and minimum administration. The grants given are also small.

The health services have a continuing relationship with these bodies either at Departmental or Health Board level. Our experience over the years in seeking to deal with many of these smaller bodies on a formal basis has not been productive. They are not generally geared to cope with detailed arrangements. I am talking about the small number of very small bodies who receive very small grants. A lighter, less formal, style is more appropriate on the basis of our experience. The smooth working relationship is based on trust and our assessment of the performance of organisations when further requirements for funding arises.

In the light of experience in 1992 and particularly in the light of the short notice which the Department was given to consider and assess a small number of cases for Lottery funding, a number of decisions were taken in the middle of 1993. That is when the first tranche of Lottery funding in the Department of Health was discussed with the Minister. It is discussed twice a year, generally in the middle of the year and towards the end of the year. In the context of those discussions and in the light of experience, a standard application form has been prepared and will be introduced from 1 January. It will be the basis on which payments will be authorised, save for those which the Department has to recommend to deal with ongoing health services to the Minister.

As regards confirmation of expenditure, I have indicated the extent of the Vote which is audited and the extent of the discretionary amount which is externally audited. I gave figures for the position in 1992. Prior to 1992, of the 2 per cent representing discretionary payments in 1990, 90 per cent was externally audited. In 1991, 83 per cent was externally audited but when the external audit fell to 45 per cent in 1992 because an increasing number of grants were given to small bodies, we decided to recommend that the procedures be changed. The situation is that we have decided to follow up more vigorously the smaller bodies who are not accustomed to dealing formally with the Department in this way and we have received about 30 per cent of a response to the follow up. In no case has there been any misappropriation or misuse of funding that we can detect. In relation to the cases in question here, we wrote to the Eastern Health Board within days of the Minister making decisions in relation to these cases in 1992. The Eastern Health Board has been in contact with many of them since, five bodies in particular, because they fund them on a Section 65 basis and must have weekly contact with them. In relation to the other bodies, we can go through them in detail but it is the purchase of a mini bus or various obvious projects which can clearly be detected.

Essentially what I am saying is that we have a very detailed system of assessing Lottery applications in the Department of Health. We discuss it with the Minister and we make recommendations on the basis of the policies in the different areas. I will give an example. In relation to mental handicap, if you have a waiting list for mental handicap children and a voluntary body comes to you to help mentally handicapped children, the Department’s recommendation is inclined to favour a body which provides a service where there is no service already. In other words, you link in with the statutory services in a particular area and this is the basis on which recommendations are made to the Minister. The Minister has the final say, the Minister makes the decisions and the Minister’s discretion can extend to changing an administrative arrangement particularly in relation to an application which is not based on statute. Thank you, Chairman.

Chairman: How categorically can you state that there was no wrong doing in any of these cases? Have you satisfied yourself that in these three cases - we will produce a list now of another six or seven in a moment - the organisations concerned were actually involved in activities which genuinely relate to the Department of Health?

Mr. Hurley: The position is that when a Minister decides to grant aid projects under Lottery funding the integrity of the Vote has to be maintained. In a situation where a proposal which a Minister might make or an application is outside the Vote, the Minister is informed that it is not appropriate to be funded out of the Health Vote. In any situation where this has arisen a Minister has not proceeded to fund a Lottery project. The cases in question are all embraced by the Health Vote. I can go through each of them and explain exactly what they do and how their functions relate to the Vote. I can indicate what has happened to the money. I can explain the responses that we have been given from the different organisations. I can tell you that the Eastern Health Board is in constant contact with the bulk of these bodies. There are a few bodies that would not have contact -

Chairman: I asked you a specific question. I want a specific answer to the question. You are the Accounting Officer for this Department. You are independent of the Minister in this respect. You are to guarantee the integrity of the expenditure. The Minister admits, and the record shows, that decisions were taken and cheques were issued within 48 hours without any apparent documentation, assessment or control. I have asked a question. Can you guarantee to this Committee and to Parliament that all the organisations concerned were engaged in activities which at the time of their application related to the Department of Health?

Mr. Hurley: In so far as I can be certain, that is my information.

Chairman: That is your information?

Mr. Hurley: My information is that they were all embraced by the Health Vote at the time and were capable of being funded from the Health Vote. Second, my information on the basis of our follow up and on the basis of the follow up by the Eastern Health Board in relation to the bodies I mentioned, is that the money is being used for the purposes for which it was given.

Chairman: The fact is that cheques were issued from your Department without any assessment or evaluation by officials of the Department. Is that not correct?

Mr. Hurley: I have indicated that we have an assessment process. I have indicated in relation to these cases that the Minister has discretion and his discretion extends to changing an administrative process. I have also said that we did not have the time that we would normally have to assess these particular projects. What I am also saying is that the Minister had the discretion to change an administrative arrangement within the Department.

Chairman: This is in conflict with what the Secretary of the Department of Finance told us when we discussed this matter first. He will be present later. He told us that if the points put to the Committee and put to him at the Committee on 9 September were correct then the guidelines set down by the Department of Finance in relation to Lottery grants had not been observed. The Comptroller and Auditor General’s vindicates completely the points put to him at the Committee. It is very clear that the guidelines of the Department of Finance were not observed in this case.

Mr. Hurley: I wonder if you could bear with me here. I do not agree. We had a standard procedure in the Department which had to do with a written application form and an assessment. It was an administrative procedure. Under that procedure we conducted the assessments in the usual way. The Minister is entitled to extend his discretion further and to say to a Department that the administrative procedure is not what he wants. It is not set out in Statute and therefore that is an administrative procedure. Provided there is no impropriety, provided it is within the Vote, provided it is within the Lottery Act and provided it is within the delegated sanction from the Department of Finance the Accounting Officer must act on those instructions.

In a situation where a Minister would wish to go outside a Vote, the Accounting Officer has a well and time honoured procedure to follow. That did not arise. When a Minister in the past was approached on this basis, he has never insisted on breaching the Vote and incurring expenditure which is inappropriate.

Chairman: The Minister was not approached in these cases.

Mr. Hurley: There was no impropriety in these cases because they fell within the Vote and they fell within the Lottery Act. In any case where there was a danger of a Minister going outside the Vote the Minister would be approached and would not follow that course of action.

Chairman: So you felt there was no impropriety in a Minister authorising nearly £200,000 in his own constituency in the middle of a general election campaign?

Mr. Hurley: I am not a politician. I am talking about the propriety of expenditure. I am talking about the entitlement of a Minister who has a seal of office. Basically, if a Minister acts within the law, within the Vote and within delegated sanction, it is not for the civil servant to tell a Minister in such situations that he cannot take these decisions. The Minister in this case took the decisions. The Minister decided in relation to a small number of cases that the administrative process would not be followed exactly. I have indicated that we would have preferred if the administrative process was followed but the Minister was within his rights. This administrative process is not set out in legislation. He was entitled to make the decisions and there was no impropriety. I cannot comment on the date of a general election as a civil servant. I deal with the Minister who has a seal of office until he ceases to be Minister.

Chairman: Could I ask you this question, do you feel there was no impropriety? How many other applications from worthy health related organisations were in your Department on 1 November 1992; and who were not grant-aided?

Mr. Hurley: I have not got the details here, but I can tell you there was a very significant number. We get a significant number of requests for Lottery funding. We have not got the resources to meet all these needs. The people who apply for Lottery funding to the Department of Health are, by and large, voluntary organisations. They are serving a very useful purpose and were founded because of an essential need, in many cases, by relatives of the disabled, children in need, mentally handicapped or the elderly to care initially for their own people. This is extended out and the voluntary tradition grows. We are the envy of Europe in relation to our voluntary tradition. The reason we developed it is because we value it and because it integrates very well with our statutory system.

Chairman: That is why all these grants were left unassisted in your Department up to 1 November. I hope you will be supplying us with details.

Mr. Hurley: Yes. You asked me to give you details of these for the previous three years but I think you would -

Chairman: Would you say then that there is no impropriety in spending up to £200,000 in one constituency during a general election campaign?

Mr. Hurley: I cannot comment on the question of a general election or a constituency. That is not my business. My business as Accounting Officer for the Health Vote is to be concerned with the Health Vote and the propriety of expenditure under the Acts. I cannot comment on the political.

Chairman: That is the point. Do you consider it proper that there should be a very substantial number of applications meeting the standard requirements unmet in the other 41 constituencies of this country?

Mr. Hurley: That is not a matter for me to decide on. The Minister has the decision in relation to the allocation of Lottery grants. My responsibility is to ensure that -

Deputy Foley: Chairman, on a point of order -

Mr. Hurley: - these payments are within the Vote, that they are within the Lottery Act and that they are within the delegated sanction from the Department of Finance. We advise the Minister but the Minister is entitled to make the decision at the end of the day. This is discretionary expenditure.

Chairman: But there was no advice given on these.

Mr. Hurley: I have indicated that advice is given on all cases but in this particular case the administrative process was not followed. I have indicated that it was not a statutory administrative process and that therefore the Minister is entitled to direct his civil servants within that administrative process.

Deputy Upton: On a point of order I think it is proper to draw a distinction between political decisions and administrative decisions. We need to be clear about that. It is obvious to me from what the Accounting Officer is saying that this is a political question.

Chairman: That is not a point of order.

Deputy McCormack: To get back to what the Accounting Officer said, in 1991 83 per cent was audited and in 1992 45 per cent was audited.

Mr. Hurley: Sorry, Deputy, I just want to clarify that. I have indicated that 98 per cent of Lottery funding is audited through the normal audit arrangements. When I talk about these percentages, I am talking about the 2 per cent that is remaining.

Deputy McCormack: That is the figure I am talking about. In 1992 - the particular year which we have discovered in the course of this debate was a general election year - only 45 per cent of the discretionary part was audited. As a result of the concern found in that, steps have now been taken to change that situation.

Mr. Hurley: That is correct. The amount allocated to large bodies - bodies which would be externally audited - fell in 1992. Because of that and because we did not have the time to assess in detail the particular applications involved here we felt it was necessary to recommend that certain procedural changes be made. These particular changes have been adopted.

Deputy McCormack: In other words, you were concerned about that situation. I am not saying that any money was misappropriated. At the end of the day, I am sure all grants were used for some useful purpose. I do not think anybody went away and used grants for anything other than the useful purpose for which they were were intended. You say the Minister has discretion and has further discretion to change the procedures or the rules if they did not meet the original discretion. Is that the case?

Mr. Hurley: The administrative arrangements for Lottery Grants in relation to applications and so on, are the Department of Health arrangements adopted within the Department of Finance guidelines. Within those guidelines, while the Department of Finance guidelines do not specifically refer to a written application, most civil servants would normally require that an application be in writing and that is what the Department of Health has done. But that is an administrative procedure and a Minister is entitled to direct his civil servants in relation to administrative procedures and provided that the Minister’s decisions are proper and within the Vote and within the sanctions, the civil servants must comply.

Mr. McCormack: The Minister can tell them what to do. I think the main concern about the Lottery grants and what has brought them into a certain amount of disrepute, if you like, is not that the funds are not being used for what they were allocated for but the manner adopted in relation to applications and particularly the manner adopted in announcing grant aid funds. When you say the Minister’s discretion, does this translate to the Minister of State as well?

Mr. Hurley: The Minister takes the decisions in relation to the Lottery funding. He may from time to time have discussions with the Minister of State. I am not aware of that, but the Minister takes the decisions in relation to Lottery funding. Could I explain perhaps in more detail Chairman, the actual process that is adopted for all applications in the Health area. When we get applications for Lottery funding, with the exception of the ones that we are speaking about, each request is assessed by the relevant division in the Department having regard to the nature of the service being provided by the organisation seeking the grant. The request may be made by an organisation or on its behalf. The division will, either through its direct knowledge of the work of the organisation or on the basis of information provided by the relevant Health Board, take a view on whether the grant should be favourably considered and, if so, the order of priority which will be afforded to it among competing requests. In a small proportion of cases, the Department may itself take the initiative based on its knowledge and ongoing relationship with the organisation and recommend to the Minister the making of a grant to supplement the resources available from other sources. The various requests and recommendations are then the subject of discussion with the Minister normally in the first half of the year and again in November - December each year. The Minister’s decisions are then implemented.

Other requests which arise from time to time and which have to be dealt with quickly are addressed in a similar manner. That is essentially the process that is followed in the Department.

Chairman: They were not in this case.

Mr. Hurley: In relation to these cases that administrative process was not strictly followed but then it is an administrative process.

Deputy McCormack: To offer some advice in solving this for the future and what steps we should now take to ensure that the National Lottery allocation does not fall into disrepute, I think that the procedure should be that the organisation seeking the grant should be informed whether they are getting the grant or not. I know you cannot inform organisations that they have got grants if they did not seek them at all. It would be impossible to do that and I know of a few cases where that occurred. The organisations seeking the grant should be informed rather than have Ministers or Ministers of State, opposition Deputies or anybody else come to a function or a public meeting and announce the allocation of a grant as if they were after allocating that grant themselves to the body that applied for it. Common courtesy should apply and bodies applying for the grant should be notified of their success or otherwise in getting the grant and after that let anybody who likes tell them.

Mr. Hurley: That is an excellent point and that process is in place. People who apply to the Department of Health now for Lottery funding will be told whether or not they are successful and that means that the decks are cleared every year in relation to this matter and there is a clean process. That is the situation.

Deputy McCormack: Will that apply to every applicant as well as applicants to the Department of Health?

Mr. Hurley: This applies to the discretionary element of the Lottery grant on which the Minister for Health makes decisions.

Deputy McCormack: When did that change come in?

Mr. Hurley: It was made by the current Minister in the middle of this year in the course of the discussion to which I have already referred.

Deputy McCormack: It is obvious that we are learning a little bit from our mistakes in the past.

Mr. Hurley: I have indicated that in so far as propriety is concerned, impropriety means misuse of funds, there were no mistakes.

Deputy McCormack: I never said anything about misuse of funds. I said mistakes regarding the manner in which grants were sometimes announced.

Mr. Hurley: Yes, Deputy, I think that all processes can be improved and we have indicated, as a result of the changes that took place recently, particularly in terms of the numbers not externally audited, that changes were necessary and these have been put in place. Of course we can constantly learn from these areas, but the Lottery funding is vital to the health services and so important for so many of these organisations who are inadequately funded - small voluntary bodies, whose fund-raising in some cases has not been successful - that I cannot emphasise enough that it is very important that there was no impropriety in this case. Many of these organisations are household names. In your own area some of the voluntary bodies aided from the Lottery are Galway Association, Western Clare, bodies beyond reproach.

Deputy McCormack: I am delighted that such bodies are being grant funded but it is very degrading for them to hear someone announce that their application has been successful without them being notified of the position.

Deputy Upton: That is politics.

Deputy McCormack: It is not politics. The situation should be that voluntary organisations in Galway and elsewhere who do such good work would be communicated with directly about their Lottery funding or otherwise.

Deputy Foley: I congratulate the Accounting Officer on his statement this morning regarding the question of Lottery Grants and that he is satisfied from the statements he has made that all beneficiaries of the grants in question were deserving, and further that they came within the remit of the Eastern Health Board who have constant liaison with the various recipients of such grants and pursue same from time to time. You mentioned £200,000 Chairman, I believe it is approximately £100,000.

Chairman: There is one that is not on that list.

Deputy Foley: They all seem to be worthy of grant aid. One thing I want to place on record is that during the short time that Dr. John O’Connell was Minister for Health he brought an injection into the office because the many voluntary bodies -

Deputy O’Malley: An injection of what?

Deputy Foley: The way he operated as Minister for Health because he cut through a lot of red tape in his Department the way he dealt with situations in regard to hospitals and Health Boards. I wonder if we did not have an election in November if we would have this discussion today.

Deputy O’Malley: Deputy Foley did not have any question to put to the Accounting Officer. He made statements with which one might disagree but however, perhaps that is for another time. I take it that what is appropriate now is to put questions to the Accounting Officer. Could I put it to Mr. Hurley that he has said on three, four or five occasions this morning that there was no impropriety, is that not a matter for this Committee to decide?

Mr. Hurley: I am giving my view Deputy O’Malley - clearly other views will be taken on board by this Committee in consideration but I am simply giving my view. My view is that the decisions were made within the Vote and within the Lottery Act and within the sanctions.

Deputy O’Malley: Could I put it to you Mr. Hurley that your view is that no criminal act took place, no breach of criminal law took place but that you cannot put the matter beyond that?

Mr. Hurley: I would say also that there was no expenditure outside the Health Vote, in other words there was no project funded which was not encompassed by the Vote so far as we are aware and therefore the money went for purposes within the Vote. I think that is the position.

Deputy O’Malley: In other words what you are telling us, Mr. Hurley, is that in your opinion, and I am sure you are right on this, there was no illegality. Whether there was propriety or not is very much another matter. Somebody can do something that is legal but which would be not at all a proper thing to do.

Mr. Hurley: Yes, when an Accounting Officer definitely uses the word impropriety, I am using it in the sense that Accounting Officers would normally use it, in other words that the matters are within the rules laid down for the Accounting Officers. That would be my interpretation. That is the way I meant to use the word.

Deputy O’Malley: Could I put it to you this way Mr. Hurley - if the Minister for Industry and Commerce were to let it be known to the IDA that he would only approve of their paying industrial grants provided that they were paid in the constituency of Limerick East but that they could show that every grant that was paid, was paid for an industrial purpose; that it was within the act; that it did not breach the law; that they could show that Limerick East was within the jurisdiction of Ireland and therefore the money was properly spent - would you say that in those circumstances there was no impropriety if 85 per cent of industrial grants in a given year were all spent in one constituency?

Mr. Hurley: I think it would be fair to say that industrial policy would probably not be best served in that situation but in relation to the discretionary grants in the Lottery we are talking about funding health services - the needs are enormous in the different areas. There are vast numbers of projects and we are not able to fund them all, somebody must make the decision. You can argue that perhaps other projects should be funded in other areas but I think that when we look at these projects they carry out very good work and I would not say that they ought not to have been funded.

Deputy O’Malley: While, I am sure we would accept that those that were funded were quite worthy in their own right, do you not agree that in every part of this country there are voluntary organisations carrying on work of the type that is carried on by this list of seven or eight in Dublin south central and that they are equally worthy and equally good in Cork, Limerick, Galway, Donegal, Waterford, Wexford, anywhere else? Do you not think that it is inequitable, whatever about improper, that there should be such heavy funding of voluntary activities in one small part of Dublin during one month, the month of November, 1992?

Mr. Hurley: What I would say to you, Deputy O’Malley, is that the administrative processes in the Department did not recommend this, the decision was made by the Minister.

Chairman: Do you say there was no impropriety?

Mr. Hurley: I am talking about the misuse of funds within the Vote and my role as Accounting Officer.

Deputy O’Malley: Do you in your capacity, Mr. Hurley, as Secretary of the Department of Health as opposed to your capacity as Accounting Officer approve of what happened in Dublin south central in the month of November, 1992?

Mr. Hurley: I would, as Secretary of the Department of Health naturally have preferred to have had the opportunity to assess those projects and to assess them in order of priority as against other projects.

Deputy O’Malley: Do you agree with me that there are hundreds of equally deserving and equally well run voluntary activities of this type all over the country?

Mr. Hurley: Yes.

Deputy O’Malley: They did not get any aid or any significant aid in of November, 1992?

Mr. Hurley: No. But I think that in looking at funding the only point I am making is that there are many deserving bodies all over the country in different capacities within the Health Vote. I would only say that you would look at year-on-year - some bodies get funding one year and other bodies get funding in another year. I cannot comment on the timing of the payments, it is not my function.

Deputy O’Malley: Do you not regard it as extraordinarily undesirable that the Minister of the day would go to a meeting in Dublin south central on a particular evening, would apparently engage in conversation with some people there, would make promises to them or a promise to them and that the following morning a cheque would issue from the Department of Health based on the conversation or on a promise of the night before without any documentation being brought into the Department or examined in the Department?

Mr. Hurley: I have indicated to the Deputy that we would naturally have preferred that the time honoured process was observed and that we had the opportunity to assess all of the cases and to determine in a recommendation to the Minister in order of priority. But that did not happen and the remainder is not for me to determine. The decision is not for me to determine, the decision is taken, we would have preferred if the procedure had been followed.

Deputy O’Malley: So you agree, Mr. Hurley that normal procedures were not followed.

Mr. Hurley: Yes, the normal procedure, the administrative procedure which we would have followed in other cases was not followed in this case. But as I have indicated the Minister was, in my view, entitled to take that view if he so wished because it was not a statutory procedure or a procedure affecting the Accounting Officer in the normal way.

Deputy O’Malley: Would you agree with me finally, that using the word impropriety in its normal sense, as opposed to the rather limited sense in which you use it or the technical sense in which you use it as an Accounting Officer, that the procedures which the Comptroller and Auditor General has brought to light, which we have been discussing this morning, do amount in the normal use of the word to impropriety?

Mr. Hurley: I do not wish to comment on that. Basically that is not for me to take a view on. As far as I am concerned in my position I have to be concerned with the Health Vote, with the integrity of that Vote and that is the limit of my responsibilities here before this Committee, it is for somebody else to take that view.

Deputy O’Keeffe: I would like to address my question to the Comptroller and Auditor General. In your interim report, Mr. McDonnell, did you if you specifically targeted the Minister’s constituency in following through on allocations, and if so was that a specific request from this Committee?

Mr. McDonnell: Chairman, I think we explained this in the preamble to the report. We looked at payments from ’89 obviously when we looked at the Department of Health. - I have given the reasons why we did that. That is where we started. I emphasise that this is an interim report. Having looked at the Department of Health we looked at the discretionary grants.

Mr. Hurley: There was a valid point made in the interim report by the Comptroller that the Lottery grants given were not set out in the Appropriation Accounts. Could I deal with that and why it occurred? Prior to 1990 Lottery funds were accounted for by way of a suspense account within the Health Vote and issues from the suspense account were listed in the Appropriation Accounts for 1987, 1988 and 1989. It was decided in consultation with the Department of Finance that the matter would be dealt with through the Health Vote from 1990 onwards and therefore in 1990 and subsequent years the Health Board subhead B.7 accounted for Lottery non-capital moneys and subhead J.2 for capital moneys. The majority of the money goes through the normal audit arrangements.

As Accounting Officer, I have never been asked since 1990 to provide details of Lottery payments in the Appropriation Accounts nor has it been ever suggested that my Department’s Appropriation Accounts were deficient in this or any other area. Lottery payments for the years 1991, 1992 and 1993 are a matter of public record as the Minister for Health has already dealt with this in Parliamentary Questions before the Dáil and copies of these replies can be given to you. All of the grants issued from the Health Vote on a discretionary basis are a matter of public record.

Chairman: Up to a certain date.

Mr. Hurley: Up to today.

Deputy B. O’Keeffe: We are talking about discretionary grants. In reply to Deputy O’Malley, Mr. Hurley said he would prefer that proper procedures would be followed. Was there any legal requirement which stated that the Minister could make a decision to give a grant and was there any legal requirement for him to have application forms before he took that decision?

Mr. Hurley: This was purely an administrative arrangement.

Deputy B. O’Keeffe: Effectively you are saying that the Minister has the right to make that decision. In the interim report, it is important when we are talking about impropriety, the Minister visited the three centres and there was an on-the-spot examination of exactly the requirements of each of those centres.

Chairman: That may not turn out to be the case.

Deputy B. O’Keeffe: Is the Chairman telling me that he has information that the other members of the Committee do not have?

Chairman: I intend to put it to the Secretary that there has to be further investigation.

Deputy B. O’Keeffe: I am aghast. I am trying to establish if the Minister visited three centres and saw exactly what was there and he took a decision that the three centres deserved money and he made a decision to give them so much. The Chairman tells me that he has information which is being withheld from this Committee to say that is not correct. If the Chairman has that information it behoves him to give it to the members of the Committee.

Chairman: I would draw the attention of the Deputy to the original transcript which has not yet been addressed in this case. I am going to ask the Secretary of the Department of Health in due course to check that transcript and to check the realities of one of the organisations involved which he said he is satisfied is involved in the health area. I felt it right to intervene in view of the fact that you took it for granted that these centres were visited and that may not be the case.

Deputy B. O’Keeffe: If you have information now is the time to give it. I am trying to establish the fact that there was an on-the-spot visit, and that the Minister took a decision, which he was entitled to take, that money should be given. The Chairman is now suggesting that one of the groups that was grant-aided was not and is not carrying out a function for which the grant aid was given.

Chairman: Our job is to ensure that there are adequate controls of the public finances and that is why the Accounting Officer is here today. He cannot deal with charges of a political nature. He can only deal with the question of proper controls. My concern is to see if the Accounting Officer discharged his duty in controlling public money independent of the Minister.

Deputy Broughan: There is another issue which is the issue of the Comptroller and Auditor’s General’s role in this and his function over the last number of years.

Chairman: We will come back to that.

Deputy B. O’Keeffe: My question -

Chairman: I want to allow others to ask questions.

Deputy B. O’Keeffe: We are coming to a most important issue in terms of the role of this Committee. This is where we should deal with the issue that has now raised its head. The Chairman suggested that a grant was paid to a group for a specific purpose and that that group was not engaged in that activity.

Chairman: I am not making any suggestions. I am merely reporting to the Committee what was reported to me because I believed and satisfied myself that there was reason to believe there was substance in the report. Those reports have so far been borne out by the Comptroller and Auditor General’s examination and perhaps the remainder of that report will be borne out by further examination. I am concerned that the controls seem to be so lax in the Department of Health that they do not seem to be aware of that.

Mr. Hurley: I cannot accept that. I indicated the procedures and I have indicated that these are detailed procedures.

Chairman: The procedures were not followed in this case.

Mr. Hurley: In particular cases I have indicated that they were not followed. It is difficult to generalise from those situations. We have a very detailed process. It is important that the view does not go out from this Committee that the arrangements within the health system for dealing with funding are inadequate when the bulk of it is audited, nearly 99.9 per cent is audited even of the discretionary sums, it would be an unfair view to come from this Committee. I have indicated in relation to particular cases that a different process was followed. I have indicated that the Minister was entitled, if he wished, to take that course because the administrative arrangements were purely administrative and not legal.

Chairman: That is a view that may not be shared by everybody.

Deputy Upton: These issues refer to the constituency that I have the great honour to represent. In the election we are talking about, I was a competitor for votes with Dr. John O’Connell. That is the background to it. I am familiar with some of the organisations that are mentioned and I am less familiar with others but to the extent that I know them, I have no doubt that the money was spent well and that these organisations are worthy ones.

In relation to the charges that are being made here this morning, essentially what we are talking about are political questions. It is as simple, raw and crude as that. Whether or not the Minister for Health at the time should have done what he did is a political issue. I am taking the view of the Accounting Officer when he says that what has happened has been in accordance with the law and the law allows the Minister to exercise the discretion that he should. I would prefer if the allocation of Lottery funding was given by legislation, to some organisation who would be considered to be objective and out of politics. A lot of what is happening is unseemly and I would wish that it be taken out of the hands-on political process. The reality of it is that it is not and more is the pity as far as I am concerned. I would welcome a change in the law which would bring that about.

There are other comments I would like to make about these organisations, particularly those mentioned in the note we received this morning. Two of these organisations are located outside the constituency of Dublin South Central. There is one located in The Little Flower Day Centre in Meath Street. Meath Street is no longer part of Dublin South Central. It was in Dublin South Central in 1989 but it was not in the last election. The Saint Andrews Centre for the Elderly in Greenhills is also outside Dublin South Central. There is an element of overlap. They are located on the other side of the road but they are both outside the area.

The central question we are coming to is the legislative parameters within which the funding is allocated. That is essentially political and I would welcome a change in the law which would take away the political taint which is now attached to much of the Lottery funding and which also seems to be associated with highly worthy organisations which receive funding. I wish that Ministers and politicians did not take themselves around the country waving letters and making speeches to organisations and I wish it for a variety of reasons. First, it is unseemly and second, I question how many votes are in that type of nonsense. People are a good deal more clued-in, more perceptive and a good deal more analytical about things than we might give them credit for. I doubt if there were that many votes for Dr. John O’Connell in what happened in the constituency of Dublin South Central and certainly I do not think it did me one bit of harm in the general election.

Deputy McCormack: I thank Deputy Upton for his support of my views.

Deputy Broughan: I also would like to support my colleague, Deputy Upton. In my own case, before I was involved in politics, when I was working with various community groups, it always seemed extraordinary how one particular worthy group doing a lot of good local work would get a Lottery grant and another, which on the face of it seemed an equally good group, would not. There is a perception of having this kind of political slush fund. It is not good for politics and it is not good for politicians. It is something that should be changed in the legislation.

We have here a very informal and non-accountable system of disbursing State moneys. I would like to explore this situation which I tried to raise the last day. Given that this has been the situation for a number of years, why did this Committee in a previous era and the Comptroller and Auditor General not warn public representatives that this was the situation and that there was a widespread and incredibly informal type of situation in relation to disbursements for a number of Departments, including the Departments of Education or Health? If you read previous Comptroller and Auditor General reports, why is there not a significant section on this detailing the incredibly informal procedures - of the suspense accounts and so on - in the Department of Health. Why was there not a recommendation to the public representatives that the system just did not merit examination in accountancy terms and would have to be ended with perhaps politicians taking the responsibility? If a Government is performing well - as I believe this Government is - then it should be able to administer its affairs in a transparent and forthright way. I cannot see why there should be any necessity for the unseemly situation in which a Minister turns up at a function, takes an envelope out of his pocket with a cheque for £50,000 and says: here you are now, we have delivered.

Deputy O’Keeffe: Or a Minister of State.

Deputy Broughan: Or a Minister of State. It has happened under different Governments. Perhaps it is a practice that we should look at legislatively and bring it to an end. We cannot hold our Accounting Officers and civil servants accountable for a political system which was allowed to grow. When people spend their money each Wednesday and Saturday on the Lottery they want a situation where the money does go to the most needy areas for which legislatively it is stipulated to go. With a Minister just paying a flying visit to a centre it seems impossible to me that he could assess that that centre needs £20,000 or £25,000. It just cannot be done and probably down the road there is an equally good centre which would require funding. There would need to be an assessment by skilled people. Why has this issue not been brought to the forefront before your chairmanship of this Committee?

Chairman: The Comptroller and Auditor General wants to reply to those remarks by Deputy Broughan.

Mr. McDonnell: Thank you, Chairman. I feel I should reply to those remarks. Before I do, I want to say that these organisations were very worthy and deserving. In no way would I enter into that debate. There are many organisations doing that type of work and all very deserving.

You may recall I did clarify this position the last day here. I said that in the Health area for the years 1987-90 practically all of the discretionary grants from the Lottery fund went to Health Boards or to what I described the last day as national organisations such as the Irish Wheelchair Association, the Multiple Sclerosis Society and all those organisations which have a national profile.

In those cases the organisations concerned would have been in constant contact with the Department of Health and in many cases would have already been in receipt of State funds from the other resources of the Department. In this scenario we would perceive the audit risk to be quite low. I want to explain that the audit process is not a process of looking at each and every transaction. That would be impossible. In fact it is a process of looking at very few transactions. We have to look at the risks involved in particular areas. Bearing in mind the scenario that existed at that time the audit risk involved would be quite low. We have to - by force of circumstances and again because you cannot look at every transaction and every area every year - operate our audit programmes on a cyclical basis. Having looked at the situation up to the year 1990 when this scenario existed and the audit risk would have been low we would not have programmed our work to look at Lottery grants again for maybe three or four years after that. It simply is a fact of life in the audit scenario and in the way we programme our work that we would not have got around to that area for about three or four years. I hope that adequately deals with Deputy Broughan’s concern on that.

Deputy Doherty: I take it that you are satisfied that the money was spent properly, was warranted and expended on the particular projects?

Mr. Hurley: To the best of my knowledge and on the basis of the information I have received, yes. In relation to the small bodies it is not possible to pursue these matters to finality.

Deputy Doherty: I take it you are satisfied that the administrative procedures that normally would be pursued were not pursued in relation to these cases and there is nothing wrong with that in so far as that there is no restriction, curtailment or obligation on the Minister to pursue a particular line which might be the chosen one from an administrative point of view. He was entitled to take the decisions that he took.

Mr. Hurley: This was a Department of Health administrative procedure within the Department of Finance guidelines. Because it was an administrative procedure the Minister had discretion in relation to that but we, of course, would have preferred to have more time to assess the case in question but the Minister was entitled to take the decisions he took.

Deputy Doherty: We have arrived now at a point where what happened was a political decision taken by the Minister that did not conform to practices that would be described as the norm from an administrative point of view. The Minister acknowledges the position in his letter to the Committee and to my mind we are really engaged in an exercise where we are asking you to comment on political matters which are outside your scope.

Mr. Hurley: I have a difficulty in going further in relation to these matters. The Minister took decisions. He is entitled to take these decisions and it is not for me to comment on them.

Deputy Doherty: I accept your view on that. We would be in danger of being accused of an exercise in hypocrisy if we continue to ask questions of you about political matters and about matters that the former Minister has acknowledged as his responsibility alone. Consequently until such time as this Committee has a mandate to examine the actions of particular Ministers in relation to decisions taken which affect the expenditure of public funds, I cannot see how we can progress this with any real value any further. I am satisfied from what you have stated here that nothing improper was done. The manner and the format by which the objective to grant-aid and assist these organisations was pursued differed from the form which would normally be expected from your point of view. It was a political decision that was taken and that is it. We have little more we can establish about the matter other than what you have stated already. It is an exercise now in attempting to pillory somebody and I would love if we were in a position where the public would not think the glasshouses are throwing the stones again.

This is not peculiar to John O’Connell. If we were to go down the full extent of Lottery grants, claims and public statements there were made in constituencies and made by individuals you would find that he is not alone in practising politics in relation to public expenditure. All of us have evidence of that. In the circumstances, we are engaged in a futile exercise. It can be seen as nothing more than an exercise in absolute hypocrisy. I suggest, Chairman, that unless you have further views to put forward that can indicate that there is clear evidence to justify an examination of the Accounting Officer in an area that he has responsibility for this matter should be closed.

Deputy McCormack: I disagree with my colleague’s point of view. If we can, as a result of this and all the attention it has received, draw up procedures as the Secretary has told us is being done since 1992 to ensure that such a thing cannot as easily happen again in the future we are doing useful work. It is to ensure that the mistakes of the past are not made in the future that we spend so much time on Committees like this.

Chairman: We have a letter from Dr. John O’Connell, copies of which should be given to the Press. The point here is that we, as the Committee of Public Accounts, have to ensure, regardless of who is involved, that there are adequate controls in place and that they are being observed. If there have been mistakes or lapses we must ensure that they do not occur in future.

Deputy Doherty: You used the word “mistake”. Who made the mistake and who established that a mistake was made because the Accounting Officer in my opinion has not made any mistake? To suggest that a mistake was made interferes with what I would consider to be the impeccable integrity of the Accounting Officer of the Department of Health. I cannot see anything improper having been done by Dr. John O’Connell either in so far as there is an absence of rules or regulations governing procedures to exclude him or any other Minister from doing what he did.

Chairman: I said “if there are any mistakes or lapses” that we should put them right. We will obviously have to come to a conclusion about that as a Committee. Our job is to ensure that there are proper controls and proper standards throughout public expenditure. I want to ask Mr. Hurley, to explain to the Committee the procedure if a Minister gives directions for expenditure which the Accounting Officer disagrees with or feels is not covered by legislation or not covered by proper decisions, what is the mechanism for the Accounting Officer to follow?

Mr. Hurley: If the Minister goes outside the Vote or wishes to incur expenditure which does not come within the Vote, the Accounting Officer would approach the Minister and explain this to the Minister. The Minister in all cases in my experience would not go ahead with such expenditure but if the Minister wished to go ahead with such expenditure the Accounting Officer would ask him for a direction in writing. That direction in writing would be copied to the Department of Finance and to the Comptroller and Auditor General. In that situation the Accounting Officer would be entitled to carry out the Minister’s instructions. That is the procedure which would apply.

Chairman: You would write to the Comptroller and Auditor General.

Mr. Hurley: The Comptroller and Auditor General and the Department of Finance would be informed.

Mr. McDonnell: The Accounting Officer is then relieved of the responsibility and the Minister must answer for it.

Chairman: That did not happen in this case.

Mr. Hurley: It was not necessary. It did not arise because the expenditure came within the ambit of the Vote and also there were no statutory procedures.

Chairman: I will put a hypothetical situation to you. Suppose Shamrock Rovers AFC came in looking for a grant. Football does not come under the ambit of the Department of Health but if it were Shamrock Rovers, AFC and Senior Citizens’ Club it might. Suppose they got a grant on that basis, would there be impropriety in that case?

Mr. Hurley: I would have to know the particular details. What we would do in the Department is examine the particular body. We would talk to the Health Board and we would try to talk to people who were aware of what the body was doing locally. On the basis of that we would take a view. I could not really comment on a hypothetical situation.

Chairman: If one of these organisations, up to the day the grant was paid, was not involved in providing for senior citizens or any other area that could conceivably come under the Department of Health would it have been wrong to give them a grant on the basis that they were going to become involved arising from a suggestion made at a meeting?

Mr. Hurley: The money is provided for a specific purpose. If that specific purpose has to do with the care of the elderly or children or the disabled and it is spent for that purpose, that is within the Vote.

Chairman: Shamrock Rovers could become Shamrock Rovers and Senior Citizens Club and get a grant and it would be all -

Mr. Hurley: Theoretically that might be so but I would need to look at the details. I am not saying that the Department would recommend to the Minister in that case that they ought to get a grant. You are asking me a technical question and the technical answer is if the money comes within the Vote for a particular purpose it may well be considered. The Department would be unlikely to make such a recommendation.

Chairman: We know there was no recommendation in these cases but what I am trying to highlight is the lack of control in the system. The report to me is that is precisely what happened in this case. There was no involvement whatever in one of these cases in any area that could conceivably be brought under the Department of Health. Dr. O’Connell seems to confirm this when he states on page 2 of his letter “I said that they could and would qualify for a grant if they were providing facilities for the elderly infirm at their centre.” The report to me is that no such services up to that point were being granted. In fact the organisations in the area who were providing senior citizen services were absolutely horrified when they heard what happened in subsequent days, which may have been the genesis of further grants being granted. This highlights to me a very serious lack of control in the Department of Health.

Mr. Hurley: I think that is very unfair.

Chairman: If the reports are correct -

Mr. Hurley: I have explained the position in regard to the decision on these grants and I have explained that it did not follow the normal practices. I do not think you can say, Chairman, with respect, that all of the other decisions taken in relation to Lottery grants are thereby deficient because of this. This was a particular set of cases and I have indicated why our processes were not followed in those cases. I have also indicated numerous times that it was an administrative process and if the Minister so desired he is entitled to take that view. I do not think you can generalise from these cases and suggest that the processes within the Department are deficient because of this.

Chairman: Okay.

Deputy O’Malley: I have listened to Mr. Hurley’s description of the procedure whereby an Accounting Officer, if he is not satisfied with what the Minister is doing can, as it were, legally absolve himself by getting a direction in writing and notifying the Department of Finance and the Comptroller and Auditor General. In some of these cases it seems unlikely that you or senior people in the Department would have had time to make such an assessment because it appears that the promise to issue funds was made on a particular evening and the cheque issued from the Department the following morning. I put it to you that it would scarcely have been possible for you as Accounting Officer to decide whether or not the object was within the scope of the Department of Health or within the scope of the legislation if the cheque issued that quickly? Who actually issued or signed the cheque?

Mr. Hurley: The cheques would be issued by way of departmental bank draft by the official in the Department in the financial unit responsible. That would be the normal procedure. In relation to the point made earlier by the Deputy that an Accounting Officer’s role in relation to the questions at issue here and the procedure mentioned arises when there is a clear breach of the Vote. That was not the position and we had sufficient time to make a determination to the best of our ability that these bodies were engaged in functions which came within the Vote. Because of that it was not necessary for the Accounting Officer process, which arises in the case of an impropriety - within the strict meaning of that word - to be implemented. Therefore the view taken was that the Minister was entitled within the Vote to make the decision.

Chairman: Even though no application forms had been received in the Department? Grants were issued before and that was not improper?

Mr. Hurley: I have indicated that that was an administrative procedure adopted by the Department of Health within the Department of Finance guidelines. Because it is an administrative procedure and not a legal procedure, the Minister is entitled to exercise his discretion further in relation to that matter.

Deputy O’Malley: Mr. Hurley, were you personally aware of the three cases referred to in the Comptroller and Auditor General’s report or of the seven subsequent ones referred to? Were you personally aware of them before the paying order or cheque was issued?

Mr. Hurley: No, these matters were not brought to my attention because people were satisfied in our finance function that it came within the ambit of the Vote.

Chairman: Satisfied without having any application forms? How could they be satisfied?

Mr. Hurley: They were satisfied that the purposes for which these organisations were there and the purpose for which the money was being given came within section 5 of the Lottery Act and within the ambit of the Health Vote.

Chairman: How did they satisfy themselves when they did not even have application forms in most cases?

Mr. Hurley: From their own knowledge within the unit, from the purposes for which the projects were being designed, the purposes for which the money would be spent. That is the ambit of section 5 of the Lottery Act and also the ambit of the Health Vote.

Deputy O’Malley: Who directed the Accountant to issue the cheques? I presume the Accountant does not act on his own initiative.

Mr. Hurley: The Minister issued the directions in all of these cases.

Deputy O’Malley: You are aware from the Comptroller and Auditor General’s report that in a number of these cases the written application to the Minister is dated several days after the cheque had issued from the Department.

Mr. Hurley: That is correct.

Deputy O’Malley: Do you regard that as desirable procedure?

Mr. Hurley: I do not. It certainly does not fall within the administrative procedure that we established in the Department. The Minister can exercise his discretion in relation to that matter. There is no legal requirement otherwise.

Chairman: So we now know that the administrative procedures were not followed and the administrators did not alert you as Accounting Officer even though those procedures were not being followed.

Mr. Hurley: The crucial question in terms of the finance function of the Department of Health is that these matters would fall within the Health Vote. There was no need to contact me unless there was an impropriety.

Chairman: No need - but supposing one or more of these projects were not involved in any activity relating to the Department of Health, would it not be wrong for it to get a grant on the pretext of being so involved?

Mr. Hurley: It has to do with the purpose for which the funding is given.

Chairman: How could your Department assess the purpose if there were no application forms?

Mr. Hurley: From its knowledge of the system and the inquiries it would make. It is possible to do that within a very short space of time.

Chairman: In a matter of hours?

Mr. Hurley: Of course. What I am talking about is the ambit of the Vote. I am not talking about assessing applications in the way we would normally assess them.

Deputy O’Malley: One of the beneficiaries of these moneys was called the Walkinstown Community Centre. The Walkinstown Community Centre, I take it, has a variety of activities, I am not personally familiar with it but I am going on most community centres. Some of their activities would be in the health related area. They might, for example, have a basketball team for young people in their community centre or a badminton or some other sports team attached to the community centre. If a cheque is made out to the Walkinstown Community Centre, how does the Department of Health know that it will be spent on health related projects?

Mr. Hurley: In relation to that particular application there was a total cost of renovations for that particular centre which would have been twice the size of the grant. The purposes for which the money was given would be to cater for the young, the old and disabled. It was not the entire cost of the particular project.

Chairman: How do you know that when the application was made verbally on the 2nd and the direction to issue the grant was on the morning of the 3rd. How can you substantiate what you have just said about the old, the infirm and the young?

Mr. Hurley: That was the purpose for which the money was given.

Chairman: Is there something in writing to that effect in the Department’s files?

Mr. Hurley: That was the information and the purpose for which it was given.

Chairman: Who gave that information?

Mr. Hurley: The Minister indicated that that was the purpose for which the Lottery grant was to be applied.

Chairman: Is there something in writing in your Department to that effect? Is there something that the Committee has not been shown?

Mr. Hurley: No. The Ministerial direction is as referred to by the Auditor. That is the information that came through the Minister.

Chairman: There is nothing in the Auditor’s report which suggests that the Minister said it was for the young, the elderly and the infirm. You are telling me there is nothing in writing to that effect.

Mr. Hurley: There is nothing in writing on the file in the Minister’s specific handwriting in relation to this matter.

Chairman: Why did you give the explanation you have just given when there is nothing on the files of the Department to say that?

Mr. Hurley: That is the understanding that the Department had at the time and that is the information that the people were given.

Chairman: Who in the Department had that understanding and where did they get it from?

Mr. Hurley: My information is that that would have come directly from the Minister’s office. The Minister asked that a grant of £25,000 be made available to the Walkinstown Community Centre from Lottery funding. The funds would be used for the refurbishment of a day centre for the elderly and that was in a note by an official of the Department.

Chairman: There is nothing about the infirm or the young. The purported purpose was for the elderly and the former Minister almost admits in his letter that there were no such services up to the time the decision was made.

Mr. Hurley: This was for the refurbishment of a centre and it was going to cost much more than the particular amount.

Chairman: Do you know if the Walkinstown Community Centre under that title actually existed before the grant was issued?

Mr. Hurley: I cannot answer that question but my information is that that was the organisation for which it was drawn.

Chairman: You cannot answer that question. It may well emerge as the fact of the matter and yet your Department, without you being told, was able to issue a cheque within 24 or 48 hours to an organisation that under that title may not have existed.

Mr. Hurley: All I can say is that the money was issued on the basis of a Minister’s instruction for a purpose which came within the Vote and to the best of the knowledge of the officials of the Department involved, it was correctly attributed to the Health Vote.

Chairman: But nobody drew your attention to it at the time.

Mr. Hurley: No, my attention was not drawn to it at the time and it would only be drawn to it, within the strict interpretation of the Accounting Officer’s function, if there was impropriety and the view was that there was no such impropriety.

Deputy O’Keeffe: It is important when we are quoting from Dr. O’Connell’s letter that we would quote exactly what he says. “It might be argued that the application should have been assessed first by Department of Health officials but in my opinion, seeing at first hand the work being done by this voluntary body, and their lack of resources, enabled me to assess more accurately the merits of their case”. The Minister specifically indicated that the meeting was attended by about 30 people. They informed him of the plight of the centre and asked for his advice in terms of how they could get funding. He assessed the situation at first hand on the spot and he took a decision. Surely there is very little wrong with that.

Chairman: The Minister had discretion and therefore it is into the political area. What we are concerned about here is the controls that exist within the Department to check that money cannot be spent or allocated which is not appropriate to that Department.

Mr. Hurley: I have indicated that as a result of our experience and the shift in the balance, particularly between small bodies to audited bodies, changes in procedure have taken place. There are no procedures that are absolutely perfect and stand up forever but, to the best of our ability, procedures have been put in place to deal with this situation. Immediately the Minister made those decisions, we contacted the Eastern Health Board in relation to those projects. Every effort has been made by the Department to improve the procedures - Deputy McCormack referred to it earlier - and to learn from this particular experience. If you look at the procedures which are now in place, they are the best that can be put in place short of a statutory procedure.

Deputy O’Keeffe: If we come to the kernel of the matter we are very anxious that proper procedures would be followed. The difficulty as I see it is that you are telling us that a set of procedures have now been put in place. That is fine with the present Minister but if there is a change of Minister or if another Minister comes on stream and he has discretion to make a grant available and does not follow those procedures, then should we be looking at a recommendation from this Committee that a statutory regulation be put in place to ensure that whatever procedures are now operating within the Department of Health would be on a statutory basis?

Chairman: I have a draft proposal here for the Committee but I want to adjourn the meeting.

Deputy Doherty: Do I take it that the information on the head of which approval and money was issued was based on what the Minister at the time told an official of the Department?

Mr. Hurley: Yes.

Deputy Doherty: And it would not be the normal practice for you to doubt the Minister in the circumstances.

Mr. Hurley: Not unless we had other information to the contrary or any inquiries being made revealed otherwise and that was not the position.

Deputy Doherty: You confirmed that what the Minister told you subsequently was correct?

Mr. Hurley: To the best of our knowledge, the money is being spent for the purposes for which it was given. It is only part of a larger cost for the centre involved. I have indicated earlier that these are small bodies, and there is a certain amount you have to take on trust. When we get replies we must take those on trust too, unless we send out an inspector, which may cost more than the grant itself.

Deputy Doherty: Would it be realistic to presume that a community centre might provide for activities that the elderly or the infirm might not be able to participate in, but could enjoy as spectators in the Community Centre? In other words, they did not have to play badminton or table tennis but they could watch it, and a community centre that will allow for them to do that will be legitimately entitled to seek money through the Minister.

Deputy O’Malley: On that basis Landsdowne Road should get a grant.

(Interruptions.)

Deputy Doherty: Seeing that you have taken over the role of the the Accounting Officer I will address an answer to you.

Deputy O’Malley: I accept that.

Deputy Doherty: I do accept that facilities in such places are entitled to be provided for the elderly.

Deputy O’Malley: Does the Rugby Union apply to the -

Deputy Doherty: I do not know. I do not play rugby. I wish that Deputy O’Malley would not interrupt my line of questioning with the Accounting Officer. It is impertinent and improper and if he has a bias in the pursuit of questioning here, he should not divulge it or reveal it by interrupting me. I will not accept it now or in the future. I asked a question and I think I am entitled to an answer. Is it reasonable to expect that facilities in a community centre do not necessarily have to comprise facilities for youth or whatever but might also include seating or other arrangements to allow elderly or infirm people to come to such places and watch, observe and enjoy the facilities provided.

Mr. Hurley: It is fair to say that when we assess projects we would look for the health aspects of these matters predominantly.

Sometimes there is a thin dividing line here if you take cases like the one that has been raised and a judgment has to be made as to the health contribution. Clearly we would be looking for a substantial health contribution and the grant involved would have to be commensurate with that and in this case the cost of the centre is much larger than the health aspect of it.

Chairman: Assessing the health aspect of it and bearing in mind your comments a few moments ago about looking to the future would you go through again for the Committee what new safeguards have been put in place to ensure that every application is actually assessed by the Department before a decision is made to grant-aid.

Mr. Hurley: There are four elements to what was decided in June. Basically there is a standard application form to be introduced which should enable us to have more time to assess in detail the projects in question. It would be, say, for those ones which I have already mentioned. There is ongoing funding for the Department for certain projects and it does not arise in those cases. Deputy McCormack referred earlier to letters being issued to people who are successful and unsuccessful and and that is being done. We are trying to follow up, even with the very small bodies and the very small number of bodies involved, given the extent of the audit, to get some confirmation of expenditure that is pursued for the purpose involved. This is in addition to the ongoing relationship which either the Department or the Health Boards would have with these organisations.

I indicated that after these decisions were made last year, we wrote to the Health Board involved about the grants given to these bodies and they have been making their own inquiries in relation to the bodies in their area, not all of the bodies but quite a number of them during the year. We have decided that on a far more routine basis all direct payments to organisations within the functional areas of Health Boards will immediately be brought to the attention of those Boards with the aim of improving co-ordination. I think there is not much more that can be done at administrative level to tighten up a process other than this.

Chairman: Could I make one more suggestion to you? One feature of these cases was that the money was paid up front. In Local Authorities and in the Department of the Environment there is a practice in some areas whereby maybe a proportion of the grant would be paid initially, a further proportion when the work was under way and a further proportion when the work was satisfactorily in place. Would you consider changing the practice whereby only a proportion of the grants are paid up front when the approval has been given and then when the Department is satisfied that progress has been made to provide the service or facility which is the subject of the grant -

Mr. Hurley: There is no objection in principle to that, Chairman, it is just a practical problem. There is a practical problem that in some of these cases the money is just for running costs with the organisation involved. In other cases where it is for capital, it is easy to do what you are suggesting. When it is a larger organisation you can phase the payments but if you have a small organisation on the edge which actually needs the money to improve or build a premises it may not be possible in those cases. I would certainly consider what you are saying. I would not like to give a definite answer today until I look at all the circumstances and see whether it is possible. If it is possible we will certainly consider it. We are anxious, and I indicated to the Committee at the beginning, to improve where we can the administrative process but at the end of the day it is an administrative process.

Chairman: On that point we will adjourn the hearing on the Department of Health. Before we adjourn the meeting I want to see the Secretary of the Department of Finance briefly. We are not finished with this, Mr. Hurley, we are just adjourning for now. Thank you and your officials for coming before us this morning.

Mr. Hurley: Do you wish me to remain on, Chairman?

Chairman: If you wish to do so you are welcome.

Mr. Hurley: Could I mention something, Chairman, which has nothing to do with this hearing. I sent you a letter in recent days because you asked me to write to you in relation to the cash problems of the Boards and I think I have given you an update on that.

Chairman: You have, we have already decided that we would ask you to confirm on the first week in February that some actual arrangements are in place, that is the week after the Budget.

THE WITNESS WITHDREW.

NATIONAL LOTTERY

Mr. S. Cromien, Secretary, Department of Finance called and examined.

Chairman: You are welcome. Perhaps you will introduce your colleague to us.

Mr. Cromien: I was proposing to give evidence myself. My colleague is Mr. Breslin.

Chairman: You will recall that when you were before the Committee on 9 September dealing with the Department of Finance Vote in which there was a paragraph on the National Lottery from the Comptroller and Auditor General, certain reports were brought to the attention of the Committee. At the time you said that if the reports were borne out they would have been in breach of the guidelines of the Department of Finance. I presume you have seen a copy of the Comptroller and Auditor General’s interim report?

Mr. Cromien: Yes Chairman.

Chairman: And would you accept that the cases in point were in breach of the Department of Finance guidelines?

Mr. Cromien: I do not recollect saying that specifically. A particular case was put to me at the time which was presented in a rather general way. I have now seen the Comptroller and Auditor General’s report and I cannot say that they are in breach of the Department of Finance guidelines. I have a proposal to make about this particular matter but before I go into it I should like to make a general point arising from the discussion the last day and perhaps the presentation that has been made more recently as a result of the Comptroller and Auditor General’s report.

I would like to correct a certain misunderstanding. There seems to be a suggestion that in some way financial control of spending from the National Lottery is less stringent than spending from taxation or other non-tax revenue. I want to say, Chairman, that this is not so. Exactly the same financial controls are in operation over Lottery spending as over other spending. You are familiar with the process by which the surplus from the National Lottery is taken into the Exchequer as non-tax revenue and is voted by the Dail for specific purposes. What the Committee has been concentrating on has been certain areas of discretionary allocation of Lottery funds. This discretion existed in fact before the National Lottery funding was arranged for these particular subheads and the financial controls, in other words, predate the attribution of the spending to National Lottery funds.

If I understand the approach of the Committee they are concerned about the arrangements for discretionary spending whether it is from the National Lottery or otherwise. There is nothing special in relation to National Lottery spending so far as financial controls are concerned. There are exactly the same controls. I am emphasising this because the discussion here is in relation to the exercise of discretion by a Minister on money that has been voted by the Dail for a specific purpose. The Dáil votes the money and the Minister then has the discretion to use it within the ambit of the Vote and, so far as it is earmarked for National Lottery funds for the purposes of the National Lottery. When there are allocations the Minister is making a choice between different organisations. There are usually far more organisations than can be accommodated and far more spending sought than there are funds to meet the requests. He has to exercise his discretion between different organisations. All that officials can do is to put in place structures that will allow the applications to be reviewed in a fair manner.

I have supplied the Committee with a note of the advice which the Department of Finance has given to Accounting Officers over the years. Our Department cannot cover every eventuality. We have to leave the details to the discretion of the Accounting Officers. I have also sent the Chairman two very large volumes which I take it the Members of the Committee have seen which explains the arrangements that Departments have for monitoring the spending of National Lottery funds. Having examined the documents, I am satisfied that Departments have in place proper structures for this purpose. The extent to which Departments implement the structures and the extent to which Ministers allow them to do so is a matter for each Accounting Officer. I want to put that on the record as my view so far as I can see it from the perspective of the Department of Finance. I am prepared in view of the Committee’s interest in this and the Comptroller and Auditor General’s concern to issue a fresh guideline to Accounting Officers reminding them of their responsibilities in this area. I have in mind that the guideline would say that there should be an appropriate standard application form to be completed in advance of payment by all applicants. This form would seek full details from the applicants, for instance, the name of the organisation, the names and addresses of the officers, the purpose for which the grant was sought and details of any other applications made to any other public body for support for that project. The applicants who are successful would be advised that the money may only be spent on the authorised project and not for any other purpose. Certificates of expenditure or annual accounts would be required to be supplied. All applicants should be notified as to whether they have been successful or not.

These are the arrangements which are broadly in place in Departments at present as is clear from the dossier of documents I sent you. Accounting Officers would be reminded of their obligations. I would hope that this guideline would be made available to Ministers who would see what the formal arrangements were. It would be a matter for them to depart from those arrangements if they wished to do so but they would leave themselves open to the criticism that they were not abiding by the guidelines.

Chairman: I have a proposal drafted for the Committee and while what you have said is a step in the right direction I would be anxious that not only would applications be received in writing in advance together with all the information but there has to be some check that the organisation has a proper constitution and rules and that they have been properly adopted. There has to be a proper evaluation by Departments, a proper recommendation to the Minister as compared to other applicants and the Minister makes a decision based on that information and then there is appropriate follow-up in the Departments. We would like your comments in writing on the paper which I have just circulated to the members of the Committee. If you could come back to us on this within a few weeks we would then make decisions in relation to the Committee’s position about future grants. Our concern is that proper controls are put in place and are observed.

I propose that we note Dr. John O’Connell’s letter.

We accept that Dr. John O’Connell has endeavoured to reply to the Committee and we accept the apologies contained in his letter. The Committee will now consider what further controls should be put in place to ensure that any perception of lack of control in relation to Lottery grants is removed. We will now table my proposal for the consideration of the Committee which will be circulated to all members together with what the Secretary of the Department of Finance has said and we will seek his and the Comptroller and Auditor General’s comments before we make a decision sometime in January.

Mr. Cromien: I would probably need to consult the Minister for Finance on my reply. What you are suggesting would change the freedom of Ministers to operate in a particular way but that might be what the Committee will want.

Chairman: We understand very well that Ministers must have discretion and that policy matters are matters for Ministers but it is incumbent on us to ensure that there is a proper structure in place within which that discretion is exercised. That is our job. It is not our job to interfere with the discretion or policy decisions of Ministers. Our job is public accounts and expenditure control.

Deputy O’Malley: Mr. Cromien said that having read the Comptroller and Auditor General’s interim report that he does not consider that guidelines of the Department of Finance were breached in the three instances that are mentioned here. My observation would be if the guidelines of the Department of Finance have not been breached by these three instances, then the guidelines of the Department of Finance are useless.

Chairman: Hear, hear.

Mr. Cromien: The Deputy and the Committee have had the benefit of a long discussion with the Accounting Officer for the Department of Health. I am not accountable for the actions of the Department of Health. I am not familiar with the files. I am saying that the guidelines that I gave to Departments seem reasonable. In relation to the Department of Health, I understand from what you say in relation to a letter from Dr. John O’Connell that the guidelines which were being implemented in the Department of Health were by-passed.

Therefore, I am not clear why the guidelines of the Department of Finance could be considered as useless.

Chairman: The problem is that the guidelines could so easily be by-passed. Are you happy with a situation whereby cheques could be issued within 24 hours of a verbal application before any application was received by the Department?

Mr. Cromien: What you are asking me to say is that some arrangement should be put in place which will restrict a Minister from doing that.

Chairman: I am asking does it meet the minimum financial controls that such things can take place?

Mr. Cromien: What the Civil Service can do and what I have recommended and put in place in relation to the Department of Finance and other Departments is that proper procedures are there for Ministers to use. The Dáil, in voting this money to Ministers, has given them the discretion to make decisions about it. I can recommend procedures. If a Minister departs from those procedures he is not responsible to the Department of Finance or to me in any way. He is responsible to the Dáil and he answers to the Dáil. I cannot put a restriction on him. What the Committee suggests may change the procedure and tighten it, and it is a matter for Ministers to decide if they wish to go that road. I would be willing to issue a directive on their instructions. The guidelines we have issued were complied with as far as I can see by the Department, but were departed from.

Chairman: Not by Departments.

Deputy O’Malley: You said not by the Department.

Chairman: It is a rhetorical question.

Deputy O’Malley: Does Mr. Cromien agree that the deviation from the guidelines was not a departmental deviation?.

Mr. Cromien: I am not knowledgeable about the procedures in the Department of Health and I am not accountable for the procedures there. As Accounting Officer I am accountable for the procedures and arrangements in the Department of Finance. I am not here as Accounting Officer for the Department of Finance but as Secretary of the Department of Finance. It is in a different capacity acting on the instructions of the Minister as appropriate when he tells me what financial regulations are to be put in place in other Departments. From my observation of what is here in the Comptroller and Auditor General’s report, when he says there was no illegality involved, it seems to me that the Minister for Health at the time was operating within the exercise of his functions in doing what he did. Having said that I note from what you say that he has apologised to the Committee for by-passing the arrangements. That is a matter between himself and the Committee in his function of being responsible to the Dáil.

Chairman: It is unfair to ask you to comment without seeing the full text of that letter. Dr. O’Connell exonerates his officials and accepts whatever personal responsibility is involved. Our concern is to make sure that the discretion that is available to Ministers is within reasonable public financial control. We shall adjourn and ask you to come back with your observations having consulted your Minister as soon as possible.

Mr. Cromien: Certainly, Chairman.

THE COMMITTEE ADJOURNED AT 1.45 P.M.