Committee Reports > List of Committees > Dáil > 1996 > Committee of Public Accounts > Final Report - Appropriation Accounts 1994

DÁIL ÉIREANN

COMMITTEE OF PUBLIC ACCOUNTS

FINAL REPORT ON THE APPROPRIATION ACCOUNTS 1994

DÁIL ÉIREANN

COMMITTEE OF PUBLIC ACCOUNTS

FINAL REPORT ON THE APPROPRIATION ACCOUNTS 1994

Pn. No. 3165

TABLE OF CONTENTS

MINUTES OF EVIDENCE

List of Appendices

COMMITTEE OF PUBLIC ACCOUNTS

ORDERS OF REFERENCE

3 March 1993

ORDERED

“That, in pursuance of Standing Order No. 130* of the Standing Orders relative to Public Business, the Committee of Public Accounts be appointed”.

*Currently Standing Order No. 146.

11 March 1993

Committee appointed consisting of Deputies Jim Mitchell (Chairman), Michael Ahern, Tommy Broughan, Hugh Byrne, Martin Cullen, Seán Doherty, Bernard J. Durkan, Denis Foley, Pádraic McCormack, James McDaid, Pat Rabbitte and Pat Upton.

29 April 1993

Deputy Batt O'Keeffe appointed in place of Deputy Michael Ahern.

30 November 1993

Deputy Desmond O'Malley appointed in place of Deputy Martin Cullen.

24 January 1995

All Committee members discharged by Order of the Dáil.

9 March 1995

Committee appointed consisting of Deputies Tommy Broughan, Eric Byrne, Seán Doherty, John Ellis, Michael Finucane, Denis Foley, Phil Hogan, Pádraic McCormack, Batt O'Keeffe, Ned O'Keeffe, Desmond J. O'Malley and Pat Upton.

14 March 1995

Deputy Denis Foley was elected as Chairman of the Committee.

30 May 1996

Deputy John Connor appointed in place of Deputy Pádraic McCormack.

STANDING ORDER 146

146. (1)Chomh luath agus is féidir i ndiaidh ationól na Dála i ndiaidh Olltoghcháin, ceapfar Roghchoiste, dá ngairfear an Coiste um Chuntais Phoiblí, chun scrúdú a dhéanamh agus tuarascáil a thabhairt don Dáil—

(a)ar na cuntais ina dtaispeáanfar leithreasú na suimeanna a bheidh deonaithe ag an Dáil le haghaidh an chaiteachais phoiblí agus cibé cuntais eile is cuí leo (nach cuntais daoine a áirítear sa Dara Sceideal d’ Acht an Ard-Reachtaire Cuntas agus Ciste (Leasú), 1993) a bheidh iniúchta ag an Ard-Reachtaire Cuntas agus Ciste agus tíolactha don Dáil, maille le haon tuarascálacha ón Ard-Reachtaire Cuntas agus Ciste orthu:

Ar choinníoll, maidir le cuntais seachas Cuntais Leithreasa, nach scrúdóidh an Coiste ach cuntais do bhliain airgeadais dar tús tráth nach luaithe ná 1 Eanáir, 1994;

(b)ar thuarascálacha an Ard-Reachtaire Cuntas agus Ciste maidir lena chuid nó lena cuid scrúduithe ar bharainneacht, éifeachtacht, córais mheasúnaithe éifeachtúlachta, nósanna imeachta agus cleachtais; agus

(c)ar thuarascálacha eile a dhéanfaidh an tArd-Reachtaire Cuntas agus Ciste faoin Acht.

Thairis sin, molfaidh an Coiste athruithe agus feabhsúcháin ar leagan amach na Meastachán a chuirfear faoi bhráid na Dála.

146. (1)As soon as may be following the reassembly of the Dáil subsequent to a General Election there shall be appointed a Select Committee, to be known as the Committee of Public Accounts, to examine and report to the Dáil upon—

(a)the accounts showing the appropriation of the sums granted by the Dáil to meet the public expenditure and such other accounts as they see fit (not being accounts of persons included in the Second Schedule of the Comptroller and Auditor General (Amendment) Act, 1993) which are audited by the Comptroller and Auditor General and presented to the Dáil, together with any reports by the Comptroller and Auditor General thereon:

Provided that in relation to accounts other than Appropriation Accounts, only accounts for a financial year beginning not earlier than 1 January, 1994, shall be examined by the Committee;

(b)the Comptroller and Auditor General's reports on his or her examinations of economy, efficiency, effectiveness evaluation systems, procedures and practices; and

(c)other reports carried out by the Comptroller and Auditor General under the Act.

The Committee shall also suggest alterations and improvements in the form of the Estimates submitted to the Dáil.

(2)Féadfaidh an Coiste dul ar aghaidh lena scrúdú ar chuntas nó ar thuarascáil ón Ard-Reachtaire Cuntas agus Ciste am ar bith tar éis don chuntas nó don tuarascáil sin a bheith tíolactha do Dháil Éireann agus—

(a)beidh an chumhacht ag an gCoiste fios a chur ar dhaoine, ar pháipéir agus ar thaifid;

(b)beidh an chumhacht ag an gCoiste fianaise a ghlacadh go poiblí; agus beidh cumhacht aige cibé miontuairiscí ar fhianaise a ghlacfar, mar aon le cibé doiciméid ghaolmhara is cuí leis, a chlóbhualadh agus a fhoilsiú ó am go ham;

(c)déanfar gach tuarascáil a bheartóidh an Coiste a thabhairt, arna glacadh ag an gCoiste, a leagan faoi bhráid na Dála láithreach agus as a aithle sin beidh ar chumas an Choiste an tuarascáil sin, mar aon le cibé doiciméid ghaolmhara is cuí leis, a chlóbhualadh agus a fhoilsiú; agus

(d)déanfaidh an Coiste tuarascáil bhliantúil ar dhul chun cinn maidir lena chuid gníomhaíochtaí agus pleananna a thíolacadh do Dháil Éireann.

(2)The Committee may proceed with its examination of an account or a report of the Comptroller and Auditor General at any time after that account or report is presented to Dáil Éireann and—

(a)the Committee shall have the power to send for persons, papers and records;

(b)the Committee shall have power to take evidence in public; and shall have power to print and publish from time to time such minutes of evidence taken, together with such related documents as it thinks fit;

(c)every report which the Committee proposes to make shall, on adoption by the Committee, be laid before the Dáil forthwith whereupon the Committee shall be empowered to print and publish such report together with such related documents as it thinks fit; and

(d)the Committee shall present an annual progress report to Dáil Éireann on its activities and plans.

(3)Staonfaidh an Coiste ó fhaisnéis rúnda i ndáil le gníomhaíochtaí agus pleananna roinne nó oifige Rialtais, nó comhlachta a bheidh faoi réir iniúchta, scrúdaithe nó cigireachta ag an Ard-Reachtaire Cuntas agus Ciste, a fhiosrú i seisiún poiblí nó a fhoilsiú más rud é go n-iarrfaidh comhalta den Rialtas nó an comhlacht a bheidh i gceist air déanamh amhlaidh.

Staonfaidh an Coiste freisin ó fhiosrú a dhéanamh maidir leis na fiúntais a ghabhann le beartas nó beartais de chuid an Rialtais nó Aire Rialtais nó maidir leis na fiúntais a ghabhann le cuspóirí na mbeartas sin.

(3)The Committee shall refrain from enquiring into in public session, or publishing, confidential information regarding the activities and plans of a Government department or office, or of a body which is subject to audit, examination or inspection by the Comptroller and Auditor General, if so requested either by a member of the Government, or the body concerned.

The Committee shall also refrain from enquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

(4)Gan dochar do neamhspleáchas an Ard-Reachtaire Cuntas agus Ciste maidir le cinneadh na hoibre a bheidh le cur i gcrích ag a Oifig nó ag a hOifig nó an mhodha ina gcuirtear i gcrích í, féadfaidh an Coiste, i gcumarsáid rúnda, cibé moltaí is cuí leo a dhéanamh leis an Ard-Reachtaire Cuntas agus Ciste maidir leis an obair sin.

(4)The Committee may, without prejudice to the independence of the Comptroller and Auditor General in determining the work to be carried out by his or her Office or the manner in which it is carried out, in private communication, make such suggestions to the Comptroller and Auditor General regarding that work as they see fit.

(5)Dháréag comhalta a bheidh ar an gCoiste, nach comhalta den Rialtas ná Aire Stáit aon duine acu, agus ceathrar acu sin is córam dó. Beidh an Coiste comhdhéanta ar gach slí eile de réir fhorálacha Bhuan-Orduithe 77 agus 81, agus ar chuma go ndéanfaidh sé ionadaíocht chothrom don Dáil.

(5)The Committee shall consist of twelve members, none of whom shall be a member of the Government or a Minister of State, and four of whom shall constitute a quorum. The Committee shall otherwise be constituted according to the provisions of Standing Orders 77 and 81, and so as to be impartially representative of the Dáil.

PART I - GENERAL OBSERVATIONS

MINUTE OF THE MINISTER FOR FINANCE

IN RESPONSE TO THE COMMITTEE OF PUBLIC ACCOUNTS'

THIRD INTERIM REPORT ON THE APPROPRIATION ACCOUNTS 1994

SOCIAL WELFARE

Unemployment Assistance and Unemployment Benefit

The Minister is advised that the Department of Social Welfare is committed to ensuring that control procedures as laid down for each area of the Department's activity are clearly understood and fully implemented by all staff in local offices and are subject to periodic review.

In relation to control deficiencies referred to by the C&AG, the procedures issued to local offices specifically deal with:-

(i)access control to the computer system (the new computer system for the payment of short term benefits which was introduced in March 1995 facilitates a tightening of access control);

(ii)segregation of duties in checking transaction listings;

(iii)clarification of procedures for checking of listings and

(iv)the role of managers in ensuring that procedures are being complied with.

The need for compliance with all control procedures continues to be reiterated and emphasised within the Department.

OFFICE OF PUBLIC WORKS

Sale of Merrion Street Houses

The Minister is advised that the Estate Agents employed for this sale are a established and reputable firm and the Office of Public Works was satisfied with their performance throughout this particular transaction. Although normal tendering procedures were not followed the decision to appoint this firm was taken after proposals from six firms had been considered. While it is correct to state that their valuation,£400,000, of the property prior to the resale was proven to be conservative, it was made in the light of the market conditions that prevailed in mid 1994 when the demand for Georgian houses, suitable for conversion to office accommodation, was low. When the property was actually sold in December 1994, there was an increased demand for these houses for conversion to residential accommodation and this was reflected in the price received.

The Committee state that it appeared that the original purchaser's offer seemed, in their minds, conditional on the receipt of planning permission. The Minister is advised that the OPW has never sold a property subject to the purchaser obtaining planning permission and, in this particular case, the agents were given instructions not to deal with any purchaser who would have sought to make the granting of planning permission a condition of the sale.

The Committee's recommendations that “usual tendering procedures should apply,” when retaining the services of Estate Agents, is noted. While formal tendering may not always be appropriate, the Office of Public Works is mindful of the Committee's concerns and is endeavouring to use tendering procedures in large scale transactions.

FOREIGN AFFAIRS

Misappropriation of Visa Application Fees

The Minister is informed that pay was restored to the officer involved during the period of his suspension because of his difficult financial situation. The amount withheld by the Department during that period was £4,797. A schedule for the repayment of the balance of £2,820 has been drawn up and repayments are being made on the agreed basis.

The Department of Foreign Affairs have assured the Minister that proper controls to prevent errors and irregularities and to ensure timely detection of any that might occur have been put in place.

ENTERPRISE AND EMPLOYMENT

Purchase of equipment and EU aid for the Metrology Services

The Minister shares the Committee's concern regarding the delays in the completion of this project and the loss of EU aid. It is understood that the Secretary, Department of Enterprise and Employment has already supplied detailed information to the Committee in this regard.

AGRICULTURE AND FOOD

Headage and Premia Schemes

Overpayments on Headage Schemes since 1989 amounted to £3.9m

The Minister is informed that to date over £3.5m has been recovered and the outstanding balance is now £378,637

Overpayments under the 1992 Beef Premia Scheme

The Minister is informed that the balance of £0.5m to be recovered on the overpayment of £1.4m has been further reduced to £0.379m.

Overpayments on the EWE Premium Scheme in 1992 and 1993

The Minister is advised that the overpayments on the Ewe Premium Scheme for 1992 and 1993 amounted to £795,000 and £741,000 respectively and at the end of May this year these outstanding balances had been reduced to £420,000 in total.

Area Aid Applications

The Minister is informed by the Department of Agriculture, Food and Forestry that the Committee may be assured that the area aid scheme for 1995 operated in a satisfactory manner.

ENVIRONMENT

Irregularity in payment of Exchequer Extra Receipts

The Gardai have indicated that their investigations are nearing completion and that they are in the process of preparing a file for the Director of Public Prosecutions. The Committee has already been provided with a copy of Circular 4/96, issued by the Department of Finance, which instructs Dublin-based Government offices to hand-deliver large value payable orders and which advises offices located outside Dublin to use the bank giro system when transmitting receipts to the Exchequer Account. Credit transfers will be introduced in a new computer system.

Given under the Official Seal of the Minister for Finance this 2nd day of July 1996

L.S.

P.H. Mullarkey

Secretary

Department of Finance

MINUTE OF THE MINISTER FOR FINANCE

IN RESPONSE TO THE COMMITTEE OF PUBLIC ACCOUNTS'

FOURTH INTERIM REPORT ON THE APPROPRIATION ACCOUNTS 1994

TOURISM AND TRADE

Review of Bord Fáilte Eireann

The Minister shares the Committee's concerns regarding the adherence to tendering rules in the award of public contracts and the importance of Government contracting procedures being seen to be fair and equitable. This will be brought to the attention of all Accounting Officers.

PRISONS

Cash discrepancies at Shelton Abbey

The Minister is assured that effective control procedures are now in operation in the Department of Justice and in the Prison Service. Special training has also been provided for staff with responsibility for Cash Accounts.

The Minister is informed that the disciplinary action taken against the officer in question is still the subject of appeal. The Department of Justice will be asked to convey the outcome to the Committee.

The Minister shares the Committee's concern regarding the importance of proper controls and checking procedures for all Cash Accounts and this will be brought to the attention of Accounting Officers.

OFFICE OF THE REVENUE COMMISSIONERS

Irregularities - Furniture Supplies

The Minister is assured that revised procedures have been implemented in order to ensure that irregularities of this kind will not be repeated. Further, new procurement procedures will be put in place as a result of the recommendation of the Project Steering Group established in March, 1995 to examine all aspects of procurement policies and procedures in Revenue. The Commissioners are satisfied that these will lead to further improvements in their acquisition and control procedures.

The Revenue Commissioners have undertaken to make every effort to ensure that the correct controls are always in place and that they are reviewed regularly.

Bank Reconciliations

The Minister is informed that considerable progress has been made in this matter.

Reconciliation has proved to be extremely difficult in the past due mainly to the volume of business on the accounts in question. In 1994, £7,916 million approx., representing 1.6 million payments, was lodged to the Exchequer via these accounts, while 665,000 repayments totalling £1,290m approx. were made. However the introduction of the computerised Automated Remittance Processing Systems and new arrangements introduced in January 1996 in conjunction with the Central Bank regarding the categorisation of unpaid cheques has greatly facilitated the reconciliation process.

Working Groups were established during 1995 to examine the issues raised by the C&AG as a result of which revised procedures have been introduced which will enable Revenue to explain differences arising between banking and accounting balances.

The Working Groups expect to finalise their deliberations in the near future and complete all necessary adjustments within the current accounting year. This will enable full reconciliation of the differences between the balances in the accounting records and the bank statements for these accounts.

The Minister has been assured that there are absolutely no indications that these differences arose through any irregularities (e.g. fraud). Rather, they arose from procedural difficulties which have now been rectified.

General Amnesty - Results

The Minister notes the Committee's view regarding future tax amnesties. He has asked that the Committee be kept informed of progress in regard to improved measures dealing with audit, anti-evasion and tax arrears

P.35 Employer Returns - Penalties

The Minister is informed that the Revenue Commissioners do not accept the view that they are not discharging their statutory duty in this matter. Their view is that while an employer is exposed to a statutory penalty in all such cases, the legislation gives the Commissioners the discretion to decide in which cases it is necessary or expedient to impose the penalty. In making these decisions the Revenue Commissioners are satisfied that they are acting within their statutory powers.

The Accounting Officer has already outlined to the Committee of Public Accounts some of the practical difficulties with the penalty process which limit the number of penalties that can be taken each year, e.g. if Revenue instituted penalty proceedings in all such cases or even increased the number significantly it would absorb substantial resources in Revenue and divert staff from pursuit of much more significant sums. In this regard it is worth noting that the P35 return is concerned primarily with PAYE/PRSI information only and does not impact significantly on cashflow to the Exchequer

The Minister is advised that, apart from the feasibility thereof, the Revenue Commissioners consider that it would be counterproductive to enforce compliance on a massive scale through litigation. In their view the suggestion that penalties should be implemented in all such cases, no matter how slight the delay, would be inconsistent with the overall strategy of gaining public confidence in the system of taxation. In Revenue, promotion of voluntary tax compliance is seen as the cornerstone of operational policy and the greater the extent of voluntary compliance the more resources will be available to pursue non-compliers. The approach is to help people, particularly people in small firms, to meet their tax obligations.

The Revenue Commissioners accept that the timeliness in submitting the P35 was less than satisfactory for many years but the position has been improving considerably in recent years. This year there has been a significant improvement in P35 compliance, with 39% of employers (accounting for 50% of employments) making the return by the due rate of 30th April compared with 34% 1995

The Minister has brought to the Commissioners' attention the Committee's wish to kept informed of progress in relation to the submission of these returns.

The Minister is assured that the Revenue Commissioners clearly understand the value of the penalty sanction and that it is part of their overall strategy to use this important statutory power to its full potential.

FIRST-LEVEL EDUCATION

Payment of local contributions by National Schools

The Minister notes the Committee's concern regarding the collection of all outstanding moneys. This has been brought to the attention of the Department of Education and that Department has been asked to keep the Committee informed of developments.

Given under the Official Seal of the Minister for Finance

This 13th day of September 1996 L.S.

P.H. Mullarkey

Secretary

Department of Finance

PART II - PARTICULAR ACCOUNTS

COMMITTEE OF PUBLIC ACCOUNTS

FINAL REPORT ON THE APPROPRIATION ACCOUNTS 1994

PARTICULAR ACCOUNTS

MARINE

1.Harbour Projects

The Report of the Comptroller and Auditor General (C&AG) drew attention to two projects involving harbour development works at Burtonport, County Donegal, and Kilmore Quay, County Wexford, both of which were of considerable concern to the Committee.

In October 1992, following its examination of the Dingle harbour project, a previous Committee recommended that, in all future harbour development works, the Department of the Marine should ensure that development proposals were properly researched and planned and that all expenditure would be fully sanctioned before the commencement of the work. In both these cases it appeared that these recommendations had not been followed.

a)Burtonport

From the outset, progress on the Burtonport project had been extremely unsatisfactory due, in the Department's view, to inefficient work practices of the contractor. The contractor, in turn, blamed adverse weather conditions and the Department who, he claimed, failed to inform him of previous drilling and blasting carried out by the OPW on the site. The Department stated that this issue was insignificant as it had occurred in only a small part of the site and had been carried out 25 years previously.

Following the submission by the contractor of a claim for £705,000, on the basis of costs incurred, legal advice was obtained by the Department which was critical of the absence of a formal contract for the works, a matter which was also of concern to the C&AG. The Accounting Officer stated that the absence of a formal contract in the case had no bearing on how the situation had evolved. The contract procedure had been in existence in the Department for some time and, by and large, had been successful. The absence of a formal contract had not restricted the Department in any way, although counsel had observed that it would have been preferable to have had formal contracts. The advice recommended that the least cost option was to negotiate a new agreement with the contractor rather than terminate the contract and seek fresh tenders. The Department came to an agreement with the contractor that he would complete the work for the fixed sum of £560,000, (nearly £300,000 more than his original tender price) and a new target date of November 1995 was set for the completion of the project. The work in Burtonport was completed on 22 March 1996, some 18 weeks after the target date.

In evidence, the Accounting Officer pointed out that tenders had been sought for the project and site investigations had been carried out. The average tender received was £600,000, and the lowest tender submitted was approximately £260,000. In order to assist the Department in making a judgement as to which tender to accept, a full assessment had been carried out. The Department's estimate was that it could cost £250,000 to £300,000 and as a result, it decided to accept the lowest tender. The problem which arose had not been in relation to the cost, but was as a result of an incorrect assessment of the management ability of the contractor to deliver, despite the fact that a thorough assessment, involving numerous tests and examination of the contractor's track record and capabilities, had been carried out by the Department.

The Accounting Officer admitted that the situation had been most unsatisfactory but stated that had it been decided to go for a £700,000 contract, from an international contractor, the project could have been completed in less than six months but at a substantially higher cost. At the conclusion, the outturn of £518,095 was below the average tender price. (The negotiated contract price had been a lump sum payment of £560,250. When penalties of £38,000 - for the 18 week delay - and other deductions for charges incurred by the Department as a result of the delay, had been taken into account, the final payment of £518,095 was made to the contractor).

b) Kilmore Quay

In relation to the Kilmore Quay project, the initial problem in relation to the contract concerned the underpinning of the existing pier. The method of underpinning, selected by the contractor and recommended by the consulting engineer, was unsuccessful and there was no prospect of completing the work at anywhere near the contract price of £126,000. The contract was terminated and the contractor was paid £65,800 for work done. The consulting engineer was discharged and the work was undertaken by the Department by direct labour at a final cost of £271,000.

The lowest tender received for another phase of this particular development, the dredging contract, was £408,000. No contract was entered into because the Department decided on an alternative way of carrying out the work, again through the use of direct labour. It was pointed out that although the cost of dredging by direct labour was £350,000 greater than the tender amount, the method used enabled a much larger area than originally envisaged to be dredged and also facilitated the economic performance of other necessary works at the site.

The Accounting Officer told the Committee that, following the withdrawal of the original contractor, the original concept of the project had been changed by the Departments's engineers and rather than carrying out the project under water in the harbour without any drainage (as recommended by the consultants) had carried out the project “in the dry”.

The Accounting Officer told the Committee that the contract, as organised by the Department, had been concluded at a cost substantially below what it would have been had consultants been engaged. Indeed, he estimated that approximately £2 million had been saved on that project vis a vis the original concept. However, he could not give a final cost figure in relation to the project as there was still a minor amount of work to be carried out, although he stated that, at the time of the examination, some £2.8 million had been spent and the final contract amount was £2.95 million, which he expected to be the final amount. The Committee requests that it be informed of the final cost in relation to this contract.

Since the problems referred to had arisen, consultants had been commissioned by the Department to review procedures for the administration of contracts. Standard guidelines for contracts had been issued by the Department and the Committee was told that all current contracts were being administered in accordance with these guidelines.

While the Committee welcomes the implementation of new guidelines in relation to contracts it must again express its serious concern about the way these projects were managed and costs were allowed to escalate. The fact that similar problems had arisen in the past should have been reason enough for the Department to take particular care in relation to these projects. The Committee stresses that formal contracts should always be entered into in relation to large and costly projects and that particular attention should be paid to the choice of contractors. It also urges that consultants on any public works contracts should be aware of, and held accountable for, their responsibilities in carrying out their contracts..

The Committee hopes the new guidelines will prevent a recurrence and wishes to be informed of the methods being adopted by the Department in relation to other similar projects in the future. It hopes it will not have to refer to matters of this nature in future, particularly in relation to projects undertaken by this Department.

HEALTH

2. VHI Payments to Health Agencies

The Report of the C&AG summarises the financial effects of the VHI cap on health boards and voluntary hospitals for the three year period ending in February 1995. The cap represented a measure whereby the Department set a cash limit on the amounts hospitals would be paid each year by the VHI in respect of private patient charges. Over the three years, almost £9 million of income had been forgone by the hospitals as a result of the arrangements.

In evidence, the Accounting Officer outlined the background to the situation.

A policy decision had been made in 1991 to evolve a transitional arrangement over three years, which would address some of the problems being experienced in relation to the changing public health situation. During that three years the Department, acting on behalf of and in conjunction with the health boards and the hospitals, sought to agree a cap on the VHI's liability while supporting and seeking agreement from the hospitals and health boards that they would manage their expanding private output within that limit.

Between 1992/93 and 1994/95 there was an income increase of £28 million and at the same time the Department provided a service out of public funds, which cost almost £10 million. It emerged that prior to 1991, there had been a significant loss to public hospitals because private patients were not being identified. In one instance, one major hospital had only collected 18 per cent of all the charges it might have levied on the VHI in the years prior to 1992/93.

The Department decided to cap budgets and requested that a certain limited volume of service be produced. At the same time, it also made it clear to the health boards and hospitals that it was expected that every effort would be made to live within the budget. Nevertheless, it did acknowledge the right of consultants to private practice, and also the corresponding right of the patient to request private practice.

At the time of the examination, the matter was ongoing and discussions and negotiations with the medical profession on this matter were expected. The Accounting Officer pointed out that there appeared to be a broad acceptance among the health professions that some form of managed care was needed as it would, on the one hand, protect the clinical freedom of the consultant and as a result the patient, and on the other, it recognised that as there were limitations to resources, protection could only be achieved through better communication, co-operation, and costing systems.

The Committee heard that the Department of Health had, for a number of years, been facing major changes in relation to health insurance, particularly from the EU perspective. As a result, the Insurance Act, 1994 had been introduced which addressed the situation in relation to competition. It also set out to protect the important principles of community rating, open enrolment and life time membership (matters that had already been provided by the VHI) while, at the same time, creating an environment in which there could be competition. A detailed review of the VHI was also carried out, following which a number of recommendations were made and changes came about in the operation of the VHI. At the time of the examination, discussions were ongoing between the VHI and the providing agencies and a provisional working figure had been agreed for 1995–96. In addition, particular emphasis was being placed on developing a co-operative and focused relationship between the providers (i.e. the hospitals and the health boards) and the funder who would now have to operate together.

The Accounting Officer stated that in 1995, the total variance between the allocation and the unaudited expenditure of all the boards was £1.4 million, on a budget of £1.3 billion, in relation to public expenditure on health boards. When these figures were compared with the figures of some years ago, considerable progress had been made. He acknowledged that the skills to continue with the progress were present, but that the relationship between the boards and consultants and the consultants and the VHI was of considerable importance and would have to be addressed.

The Committee welcomes the advent of competition in the area of medical insurance but is concerned that so much of the taxpayers money had to be used in the process. It acknowledges that considerable progress has been made recently and wishes to be kept informed of any further progress which occurs in relation to this matter.

AGRICULTURE AND FOOD

3. Disallowances

In its final report on the Appropriation Accounts 1993, the Committee commented on the situation in relation to funds being disallowed by the EU. At the time of the Committee's examination of the 1993 report, disallowances of almost £110 million had been proposed for 1990 and 1991, and when the 1994 accounts were considered by the Committee no final decision had been made in relation to the fines. As the matter had not been concluded, the Committee agreed to return to the matter again when the final decision had been made.

On 27 March 1996, following a lengthy process of discussion between the Irish Government and the EU Commission, the Commission decided on the following disallowances -

The final fines represented a reduction of £24m in the general disallowance which had been proposed for intervention operations during 1990 and 1991.

The Committee discussed the largest portion of the fine, in relation to intervention beef, and was told that the Department had always accepted that there were control weaknesses in the system as it operated in the period 1990–92. The control weaknesses largely arose from over 800,000 tonnes of the product which the Department was required to intervene for over three years. The system, as initially set up, was not capable of dealing with those quantities and from 1990 onwards the Department decided to change the system in a way which would improve the controls significantly and ensure that disallowances of this kind could not arise in future. It was pointed out that the fact that the disallowance had been reduced in the final Commission decision by £24 million was done specifically in recognition of the fact that controls had been adjusted when the deficiencies became clear. The Department was of the opinion that the fines had been too severe.

In the minute of the Minister for Finance, in response to the Committee's final report on the Appropriation Accounts, 1993, the Committee was informed that a group of senior officials from the Department of Agriculture, Food and Forestry, the Department of Finance and the Office of the Attorney General, who had access to an independent legal adviser, had examined the possibility of recovery of all or part of the disallowances from resources other than the Irish Exchequer.

The Committee was also told that a number of measures aimed at combatting fraud in the beef industry and at protecting the financial interests of the EU and the National Exchequer have been adopted. In this connection a Bill (Protection of the Financial Interests of the European Communities) was expected to be brought before the Oireachtas and would include the following elements:

-improved procedures for inspection and seizure of documents and computer records in a pre-litigation phase;

-any irregularity which gave rise to identifiable loss to the EU would be the basis for statutory action regardless of whether breach of contract exists or not;

-changes would be made in the rules of evidence to ensure that all relevant evidence and documentation was not excluded;

-implementation of the Blacklist regulation which would prevent“non-reliable operators” from receiving EU and National supports. Existing legislation already provides for disqualification of certain persons from acting as directors or auditors or managers of companies.

In addition, attention was drawn to a number of substantial improvements in the control systems and organisation of the Department of Agriculture, Food and Forestry which had taken place since 1990, and which included the following changes:

-the establishment of a Beef Controls Division which has responsibility for all EU market support operations, intervention and export refunds in meat plants. In conjunction with the Customs Service, this Division carried out 250 unannounced checks on meat plants in 1995;

-more rigid controls on export refunds and intervention purchases;

-an enhancement of the Internal Audit Unit of the Department of Agriculture, Food and Forestry together with the establishment of an External Audit Committee which contains expertise from the private sector and other Government Departments.

The Accounting Officer informed the Committee that there was a responsibility on the Department to ensure that,in future,the control procedures are in accordance with the regulations. He went on to state however that in relation to multiple tendering, the Department's view was that controls had been in accordance with the regulations in operation at the time. He drew attention to both legal opinion and the view of the conciliation body which seemed to support that view. He also stated that, in 1993, when the Commission wanted to ensure that multiple tendering did not take place, it had amended the regulations. He believed that if the original regulation had excluded multiple tendering there would not have been any need to change it.

While the Committee welcomes the reduction in the fine, it deplores the fact that a penalty of such magnitude is being borne by the Irish taxpayer and is disappointed that the reduction of the fine was not greater. The Committee notes that the issue has not yet been fully finalised, due to the numerous court cases that are pending, and wishes to be kept informed as to progress in these cases.

The Committee is also aware that a sum of £9 million has been set aside pending the outcome of legal proceedings between the Department and the insurers in the case of a fire that had occurred at a meat plant at Ballaghderreen. The amount represents the difference between the Department's value (which has already been paid over to the Commission) and the Commission's value of the stock destroyed in the fire. The Committee wishes to be informed of the outcome of this case.

The Committee welcomes the fact that greater controls have been introduced but is still concerned that the fines were so high. The Committee hopes that lessons have been learnt by the Department in relation to this matter and that every effort will be made to ensure that a similar situation will not arise again. The Committee urges the Department to examine ways in which the fine can be recouped from the perpetrators of the situations that caused the disallowances in the first place.

The Committee will continue to keep the matter under review.

CENTRAL FUND

4. Aer Lingus Group plc - Share Subscription

The report of the C&AG refers to the acquisition of share capital, amounting to some £175 million, by the Minister for Finance in the Aer Lingus Group. The relevant legislation provided that the money for shares should be channelled through a special account and also stated that the money would not be passed over to Aer Lingus until conditions imposed by the Government and the EU Commission had been met.

In this particular case, the money was paid over to the special account in three instalments. The first instalment of £75 million was made in December 1993 and the second and third instalments of £50 million each were made in December 1994. The first and second instalments were paid from the special account to Aer Lingus on the same day but the third instalment was not paid to Aer Lingus until December 1995. As a result, the £50 million stood as a charge to the Exchequer for 1994, although the money was not released from the control of the Minister for Finance until 1995.

Although the C&AG reiterated that the transactions were in accordance with the authority that governed them, he nevertheless had reservations about special accounts being used to influence the amount of expenditure to be charged to the National Accounts in any one year. He contended that the use of accounts such as special accounts in this way amounted to the introduction of reserve accounting by the back door. While he accepted that a case could be made for reserve accounting on budgetary grounds, he felt that, if it was to become a regular feature of budgetary policy in the future, it should be considered in the context of an overall reform of the government accounting framework rather than being addressed in an ad hoc way. He suggested that the impending introduction of some kind of accrual accounting for the State's finances would be an opportune time to consider the wider implications of reserve accounting.

In evidence the Accounting Officer told the Committee that the money was paid in advance for budgetary reasons, in the circumstances outlined by the C&AG, in late 1994. At the time of the payment at the end of 1994, all the circumstances were not in place. The payment was made in accordance with the legislation which clearly envisaged sums being paid into that account in advance of payments out of the account to Aer Lingus. Indeed, he pointed out that the legislation, in fact, refers to interest being earned on funds while they are in the account, which implies that there was an expectation that funds could be held in the account for some time before they would be issued. He also explained that although interest was not payable on the £50 million that was paid into the account, it was available to the Exchequer while it was in the account, through the National Treasury Management Agency, for the general financing of the Exchequer requirements and, as a result, reduced the borrowings which otherwise would have been required for that purpose. He went on to explain that the matter was one that had been decided on the grounds of budgetary policy and in accordance with the specific provisions of the legislation and that he believed that the correct action had been taken in dealing with the issue.

He agreed that the reservations expressed about the use of special accounts should be addressed as part of the move to accrual accounting.

The Committee shares the concerns of the C&AG about interfering with the accounting system when what is needed is a re-evaluation and reform of the system. It looks forward to examining the Department of Finance proposals in this regard in due course.

ACCOUNTS NOTED

5. Accounts Noted

The following Accounts were examined and noted by the Committee and the Minutes of Evidence are published herewith:

Finance Group, including the Finance Accounts 1994

Houses of the Oireachtas

Office of the Director of Public Prosecutions

In addition, the Committee noted the following accounts without calling the Accounting Officers for examination:

DENIS FOLEY T.D.

Chairman

7 November 1996.

IMEACHTAÍ AN CHOISTE

PROCEEDINGS OF THE COMMITTEE

DÉ MÁIRT 9 EANÁIR 1996

TUESDAY 9 JANUARY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D.Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Ó Dochartaigh, Mac Allais, Ó Finnúcáin, Ó hÓgáin, Mac Cormaic, P.Ó Caoimh, E.Ó Caoimh, Ó Máille.

3.Chuaigh an Coiste i suí príobháideach.

4.Dréacht-Tuarascáil Deiridh ar na Cuntais Leithreasa don bhliain 1993.

Chuir an Cathaoirleach an Dréacht-Tuarascáil Deiridh faoi bhráid an Choiste lena bhreithniú.

Cuireadh breithniú ar an Dréacht-Tuarascáil Deiridh ar athló.

Chuaigh an Coiste i suí poiblí.

5.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Cuireadh an Cuntas seo a leanas ar athló:-

Muir.

6.Finnéithe a Ceistíodh:-

T.Ó Cearbhall (Rúnaí, Roinn na Mara), S.Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

7.Athlá.

Chuaigh an Coiste ar athló ar 1.45pm go dtí 11am Déardaoin 18 Eanáir 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D.Foley (in the Chair), Broughan, Byrne, Doherty, Ellis, Finucane, Hogan, Mc Cormack, B.O'Keeffe, N.O'Keeffe, O'Malley.

3.The Committee went into private session.

4.Draft Final Report on the Appropriation Accounts for the year 1993.

The Chairman brought forward the Draft Final Report for consideration.

Consideration on the Draft Final Report was adjourned.

The Committee went into public session.

5.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was adjourned:-

Marine.

6.Witnesses Examined:-

Mr.T.Carroll (Secretary, Department of the Marine), Mr. J. Purcell (The Comptroller and Auditor General).

7.Adjournment.

The Committee adjourned at 1.45pm until 11am on Thursday 18 January 1996.

DÉ hAOINE 9 FEABHRA 1996

FRIDAY 9 FEBRUARY 1996

1.Chruinnigh an Coiste ar 10.30am.

2.Comhaltaí i láthair:-

Na Teachtaí D.Ó Foghlú (i gCeannas), Ó Bracháin, Ó Dochartaigh, Mac Allais, Ó Finnúcáin, P.Ó Caoimh, É.Ó Caoimh, Ó Máille.

3.Chuaigh an Coiste i suí priobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Cuireadh an Cuntas seo ar leanas ar athló.

Muir.

5.Finnéithe a Ceistíodh:-

T.Ó Cearbhall (Rúnaí, Roinn na Mara), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.18pm go dtí 11am Déardaoin 15 Feabhra 1996.

1.The Committee met at 10.30am.

2.Members Present:-

Deputies D.Foley (in the Chair), Broughan, Doherty, Ellis, Finucane, B.O'Keeffe, N. O'Keeffe, O'Malley.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was adjourned:-

Marine.

5.Witnesses Examined:-

Mr.T.Carroll (Secretary, Department of the Marine), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.18pm until 11am on Thursday 15 February 1996.

DÉARDAOIN 22 FEABHRA 1996

THURSDAY 22 FEBRUARY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D.Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Mac Allais, Ó Finnúcáin, Mac Cormaic, P.Ó Caoimh, Ó Máille.

3.Chuaigh an Coiste i suí príobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Díospóireacht ar Fháltais ó Mhairteoil Idirghabhála agus ar ábhair ghaolmhara eile.

Rinne an Coiste breithniú agus cuireadh an díspóireacht ar athló.

5.Finnéithe a Ceistíodh:-

M.Ó Dúnlaing (Rúnaí, An Roinn Talmhaíochta, Bia agus Foraoiseachta), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.07pm go dtí 11am Déardaoin 29 Feabhra 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D.Foley (in the Chair), Broughan, Byrne, Ellis, Finucane, Mc Cormack, B. O'Keeffe, O'Malley.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Discussion on Intervention Beef Yields and other related matters.

The Committee deliberated and the discussion was adjourned.

5.Witnesses Examined:-

Mr.M.Dowling (Secretary, Department of Agriculture, Food and Forestry), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.07pm until 11am on Thursday 29 February 1996.

DÉ MÁIRT 16 AIBREÁN 1996

THURSDAY 16 APRIL 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Ó Dochartaigh, Ó Finnúcáin, Ó hÓgáin, Mac Cormaic, Ó Máille.

3.Díospóireacht ar Fháltais ó Mhairteoil Idirghabhála agus ar ábhair ghaolmhara eile.

Rinne an Coiste breithniú agus cuireadh an díospóireacht ar athló.

4.Finnéithe a Ceistídh:-

M. Ó Dúnlaing (Rúnaí, An Roinn Talmhaíochta, Bia agus Foraoiseachta), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

5.Athlá.

Chuaigh an Coiste ar athló ar 1.01pm go dtí 11am Déardaoin 18 Aibreán 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, Byrne, Doherty, Finucane, Hogan, McCormack, O'Malley.

3.Discussion on Intervention Beef Yields and other related matters.

The Committee deliberated and the discussion was adjourned.

4.Witnesses Examined:-

Mr. M. Dowling (Secretary, Department of Agriculture, Food and Forestry), Mr. J. Purcell (The Comptroller and Auditor General).

5.Adjournment.

The Committee adjourned at 1.01pm until 11am on Thursday 18 April 1996.

DÉARDAOIN 18 AIBREÁN 1996

THURSDAY 18 APRIL 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Ó Dochartaigh, Mac Allais, Ó Finnúcáin, Ó Máille, Upton.

3.Chuaigh an Coiste i suí príobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Críochnaíodh an Cuntas seo a leanas:-

Muir.

5.Finnéithe a Ceistíodh:-

T. Ó Cearbhall (Rúnaí, Roinn na Mara), S. Thompson (An Roinn Airgeadais), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.17pm go dtí 11am Déardaoin 25 Aibreán 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, Byrne, Doherty, Ellis, Finucane, O'Malley, Upton.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was disposed of:-

Marine.

5.Witnesses Examined:-

Mr. T. Carroll (Secretary, Department of the Marine), Mr. J. Thompson (Department of Finance), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.17pm until 11am on Thursday 25 April 1996.

DÉARDAOIN 2 BEALTAINE 1996

THURSDAY 2 MAY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Ó Finnúcáin, Ó hÓgáin, Mac Cormaic, P. Ó Caoimh, Ó Máille, Upton.

3.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Críochnaíodh an Cuntas seo a leanas:-

Sláinte.

4.Breithniú ar an Tuarascáii ón Ard-Reachtaire Cuntas agus Ciste maidir leis an iniúchadh ar Chuntais 1994 - Chuid II - Comhlachtaí Earnála Sláinte - Boirdeanna Sláinte.

Críochnaíodh an bhreithniú ar Chuid II - Comhlachtaí Earnála Sláinte - Boirdeanna Sláinte.

5.Finnéithe a Ceistíodh:-

J. Ó Duibhir (Rúnaí, An Roinn Sláinte), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.40pm go dtí 11am Déardaoin 9 Bealtaine 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, Byrne, Finucane, Hogan, Mc Cormack, B. O'Keeffe, O'Malley, Upton.

3.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was disposed of:-

Health.

4.Consideration of the Report of the Comptroller and Auditor General on the audit of the 1994 Accounts - Part II - Health Sector Bodies - Health Boards.

Consideration on Part II - Health Sector Bodies - Health Boards was completed.

5.Witnesses Examined:-

Mr. J. O'Dwyer (Secretary, Department of Health), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.40pm until 11am on Thursday 9 May 1996.

DÉARDAOIN 9 BEALTAINE 1996

THURSDAY 9 MAY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Mac Allais, Ó Finnúcáin, P. Ó Caoimh, Ó Máille.

3.Chuaigh an Coiste i suí príobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Críochnaíodh na Cuntais seo a leanas:-

Oifig an Aire Airgeadais, Aoisliúntais agus Liúntais Scoir, An tSeirbhís Shicréideach, Méaduithe ar Liúntais agus ar Phinsin, Cuntas Taisce an Chiste Theagmhasaigh.

5.Breithniú na gCuntas Airgeadais 1994 - Cuid a hAon.

Rinne an Coiste breithniú agus críochnaíodh breithniú ar na Cuntais Airgeadais 1994.

6.Finnéithe a Ceistíodh:-

P. Ó Maoilearca (Rúnaí, An Roinn Airgeadais), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

7.Athlá.

Chuaigh an Coiste ar athló ar 1.31pm go dtí 11am Déardaoin 16 Bealtaine 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, Byrne, Ellis, Finucane, B. O'Keeffe, O'Malley.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Accounts were disposed of:-

Office of the Minister for Finance, Superannuation and Retired Allowances, Secret Service, Increases in Remuneration and Pensions, Contingency Fund Deposit Account.

5.Consideration of Finance Accounts 1994 - Part One.

The Committee deliberated and concluded consideration of the Finance Accounts 1994.

6.Witnesses Examined.

Mr. P. Mullarkey (Secretary, Department of Finance), Mr. J. Purcell (The Comptroller and Auditor General).

7.Adjournment.

The Committee adjourned at 1.31pm until 11am on Thursday 16 May 1996.

DÉARDAOIN 18 IÚIL 1996

THURSDAY 18 JULY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, Ó Broin, Ó Conchubhair, Ó Dochartaigh, Ó Finnúcáin, Ó hÓgáin, P. Ó Caoimh, É. Ó Caoimh, Ó Máille, Upton.

3.Chuaigh an Coiste i suí príobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Críochnaíodh an Cuntas seo a leanas:-

Tithe an Oireachtais agus Parlaimint na hEorpa.

5.Finnéithe a Ceistíodh:-

C. Ó Cochláin (Cléireach na Dála), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 2.01pm go dtí 2.00pm Dé Céadaoin 24 Júil 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, Byrne, Connor, Doherty, Finucane, Hogan, B. O'Keeffe, N. O'Keeffe, O'Malley, Upton.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was disposed of:-

Houses of the Oireachtas and the European Parliament.

5.Witnesses Examined:-

Mr. K. Coughlan (Clerk of the Dáil), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 2.01pm until 2.00pm on Wednesday 24 July 1996.

DÉARDAOIN 5 MEÁN FÓMHAIR 1996

THURSDAY 5 SEPTEMBER 1996

1.Chruinnigh an Coiste ar 11.30am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Broin, Ó Conchubhair, Ó Dochartaigh, Ó Finnúcáin, É. Ó Caoimh, Ó Máille, Upton.

3.Chuaigh an Coiste i suí príobháideach.

Rinne an Coiste breithniú.

Chuaigh an Coiste i suí poiblí.

4.Breithniú na gCuntas Leithreasa 1994.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1994. Críochnaíódh breithniú ar an gCuntas seo a leanas:-

Oifig an Stiúrthóra Ionchúiseamh Poiblí.

5.Finnéithe a Ceistíodh:-

M. Ó Lideadha (Cúntóir Dlí Sinsearach, Oifig an Stiúrthóra Ionchúiseamh Poiblí), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste an athló ar 1.28pm go dtí 2.30pm Dé Máirt 10 Meán Fómhair 1996.

1.The Commitee met at 11.30am.

2.Members Present:-

Deputies D. Foley (in the Chair), Byrne, Connor, Doherty, Finucane, N. O'Keeffe, O'Malley, Upton.

3.The Committee went into private session.

The Committee deliberated.

The Committee went into public session.

4.Consideration of Appropriation Accounts 1994.

Consideration of Appropriation Accounts for the year 1994 was resumed. The following Account was disposed of:-

Office of the Director of Public Prosecutions

5.Witnesses Examined:-

Mr. M. Liddy (Senior Legal Assistant, Office of the Director of Public Prosecutions), Mr. J. Purcell (The Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.28pm until 2.30pm on Tuesday 10 September 1996.

DÉ CÉADAOIN 23 DEIREADH FÓMHAIR 1996

WEDNESDAY 23 OCTOBER 1996

1.Chruinnigh an Coiste ar 5.00pm.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Broin, Ó Dochartaigh, Mac Allais, P. Ó Caoimh, Ó Maille.

3.Chuaigh an Coiste i suí príobháideach.

4.Dréacht-Tuarascáil Deiridh an Choiste um Chuntais Phoiblí ar na Cuntais Leithreasa don bhliain 1994.

Chuir an Cathaoirleach an Dréacht-Tuarascáil faoi bhráid an Choiste lena breithniú

Aontaíodh míreanna 1 agus 2.

Mír 3.

Léadh fomhír 4 mar a leanas:

1.The Committee at 5.00pm.

2.Members Present:-

Deputies D.Foley (in the Chair), Byrne, Doherty, Ellis, B. O'Keefe, O'Malley.

3.The Committee went into private session.

4.Draft Final Report of the Committee of Public Accounts on the Appropriation Accounts 1994.

The Chairman brought forward the Draft Report for consideration.

Paragraphs 1 and 2 agreed to.

Paragraph 3.

Sub-paragraph 4 read as follows:-

In the minute of the Minister for Finance, in response to the Committee's final report on the Appropriation Accounts, 1993, the Committee was informed that a group of senior officials from the Department of Agriculture, Food and Forestry, the Department of Finance and the Office of the Attorney General, who had access to an independent legal adviser, had examined the possibility of recovery of all or part of the disallowances from resources other than the Irish Exchequer. The group decided that it was not legally possible to recover the disallowance in the form of a general levy on the meat industry or through levies on companies against which there was evidence of wrongdoing over the 1990–92 period. In cases where proceedings could be successfully brought against companies in Irish courts, the matter was being pursued.

Tairgeadh leasú (An Teachta Ó Máille):

“An dá abairt deiridh den fhomhír a scriosadh.”

Aontaíodh an leasú.

Cuireadh breithniú an Choiste ar athló.

Amendment proposed (Deputy O'Malley):

“To delete the last two sentences of the sub-paragraph”.

Amendment agreed to.

The Committee adjourned its consideration.

5.Athlá.

Chuaigh an Coiste ar athló ar 6.10pm go dtí 11.00am Déardaoin 24 Deireadh Fómhair 1996.

5.Adjournment.

The Committee adjourned at 6.10pm until 11.00am on Thursday 24 October 1996.

DÉARDAOIN 7 SAMHAIN 1996

THURSDAY 7 NOVEMBER 1996

1.Chruinnigh an Coiste ar 11.00 am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Broin, Ó Conchubhair, Ó Dochartaigh, Ó Finnúcáin, É. Ó Caoimh, Ó Máille, Upton.

3.Chuaigh an Coiste i suí príobháideach.

4.Dréacht-Tuarascáil Deiridh an Choiste um Chuntais Phoiblí ar na Cuntais Leithreasa don bhliain 1994.

D'athrom an Coiste ar a chuid breithnithe.

Mír 3.

Léadh fomhír 8 mar a leanas:

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Byrne, Connor, Doherty, Finucane, N. O'Keeffe, O'Malley, Upton.

3.The Committee went into private session.

4.Draft Final Report of the Committee of Public Accounts on the Appropriation Accounts 1994.

The Committee resumed its consideration.

Paragraph 3.

Sub-paragraph 8 read as follows:-

“While the Committee welcomes the reduction in the fine, it is nevertheless disappointed that the reduction of the fine was not greater. The Committee notes that the issue has not yet been fully finalised, due to the numerous court cases pending, and is aware that a sum of £9 million has been set aside pending the outcome of legal proceedings between the Department and the insurers in the case of a fire that had taken occurred at a meat plant at Ballaghderreen. The Committee wishes to be informed of the outcome of this and other cases in relation to this matter.”

Tairgeadh leasú (An Teachta Ó Máille):

Amendment proposed (Deputy O'Malley):

“After ‘fine,’ to add ‘it deplores the fact that a penalty of such magnitude is being borne by the Irish taxpayer and’ and to delete the subsequent words ‘it’ and ‘nevertheless’”.

Aontaíodh an leasú.

Tairgeadh leasú (An Teachta Ó Máille):

Amendment agreed to.

Amendment proposed (Deputy O'Malley):

“To replace ‘and is aware’ with. ‘The Committee is also aware’”

Aontaíodh an leasú.

Tairgeadh leasú (An Teachta Ó Máille):

Amendment agreed to.

Amendment proposed (Deputy O'Malley):

“After ‘Ballaghderreen.’ to add ‘The amount represents the difference between the Department's value (which has already been paid over to the Commission) and the Commission's value of the stock destroyed in the fire.’”

Aontaíodh an leasú.

Aontaíodh míreanna 4 agus 5.

Aontaíodh an Dréacht-Tuarascáil mar a leasaíodh.

Ordaíodh: Tuairisciú don Dáil dá réir sin.

5.Breithniú na gCuntas Leithreasa don bhliain 1995.

Athchromadh ar bhreithniú na gCuntas Leithreasa don bhliain 1995. Críochaíodh an Cuntas seo a leanas:-

Sláinte.

6.Finnéithe a Ceistíodh:-

S. Ó Duibhir (Rúnaí, An Roinn Sláinte), S. Puirséal (An tArd-Reachtaire Cuntas agus Ciste), S. Thompson (An Roinn Airgeadais).

7.Athlá.

Chuaigh an Coiste ar athló ar 1.40pm go dtí 11 am Déardaoin 14 Samhain 1996.

Amendment agreed to.

Paragraphs 4 and 5 agreed to.

Draft report, as amended, agreed to.

Ordered: To report to the Dáil accordingly.

5.Consideration of Appropriation Accounts 1995.

Consideration of Appropriation Accounts for the year 1995 was resumed. The following Account was disposed of:-

Health.

6.Witnesses Examined:-

Mr. J. O'Dwyer (Secretary, Department of Health), Mr. J. Purcell (The Comptroller and Auditor General), Mr. J. Thompson (Department of Finance).

7.Adjournment.

The Committee adjourned at 1.40pm until 11 am on Thursday 14 November 1996.

MIONTUAIRISC NA FIANAISE

MINUTES OF EVIDENCE

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Dé Máirt 9 Eanair 1996

Tuesday 9 January 1996

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Mr. Thomas Carroll, (Secretary, Department of the Marine) called and examined.

Mr. John Thompson and Mr. Robert Bradshaw, Dept. of Finance representatives, in attendance.

VOTE 30 - MARINE

Public Session

Chairman: We are now in public session.

The first correspondence we have is a letter from the Valuation and Ordnance Survey on the requirements of farmers for maps under the CAP reform schemes.

Deputy McCormack: It seems extraordinary that they based the decision on the belief that one map would cover every farm. Anybody with any knowledge of the fragmentation of farms in Ireland would have realised that one map could not possibly cover it. Irish farms are so fragmented it has taken two, three and four maps in some cases on survey sheets. The person who made that assumption was a long way off the mark.

Chairman: Noted. The second letter is from the office of the Revenue Commissioners and relates to compensation paid to taxpayers where judgements were obtained against them where in fact they had discharged the tax liability.

Deputy O'Malley: I note the reply but, with the greatest respect, he is trying to avoid the matter I raised which does not relate to a case where a judgment was registered.

Deputy Ellis: It refers to the seizure of goods.

Deputy O'Malley: He says that in both of these cases compensation was paid as a result of the taxpayers concerned having court judgments registered in error against them when they had in fact discharged their tax liability. He starts by saying that the Commissioners are advised that the seizure of the taxpayer's goods did not take place in either of the cases involved. The case to which I was referring - and I understand it is one of several - did not refer to a judgment against the taxpayer because there was no judgment. They simply issued a certificate against him, as apparently they are entitled to do without getting a judgment. Having issued the certificate, they sent it to the revenue sheriff for the county concerned and instructed the revenue sheriff to go and seize goods of this taxpayer.

The taxpayer got a notice from the revenue sheriff and informed him that his tax was paid in full. The revenue sheriff conveyed that to the Revenue Commissioners who came back and said it was not correct and to go ahead with the seizure. The revenue sheriff went ahead with the seizure and a large amount of goods was seized publicly from a shop. It went on over a period of several hours in the middle of a country town and everyone in the place knew what was happening. Some days later the Revenue Commissioners admitted that they had made an error and said it was a computer mistake. That happened and I know it happened because the man came to me.

Chairman: What are you suggesting?

Deputy O'Malley: I wanted an explanation from the Revenue Commissioners as to why they did that. They are not dealing with it. They are only dealing with cases where they say judgment was marked in error. There was no judgement in this case and the ones like it because unfortunately the Revenue Commissioners do not always have to get a court judgment. They can issue a certificate saying that a taxpayer owes money and give it to a revenue sheriff instructing him to seize goods. He seized them wrongly. They paid compensation of in excess of £40,000 for what they had done but there was no explanation or expression even of regret. They nearly put this man out of business.

Chairman: I suggest we take it up again with the Revenue Commissioners giving them the particular case raised by Deputy O'Malley.

Deputy Ellis: We also raised the question of goods that were wrongly seized by customs and excise and I do not think he ever explained the outcome. There was a number of cases.

Chairman: Can you give any specific case in which you are interested and we will get it clarified?

Deputy Ellis: We asked him for a general reply with regard to the number of wrongful seizures that were made. There was a compensation claim for £20,000 because a customs officer crashed a vehicle. We asked for full clarification as to why these goods and the vehicle concerned had been seized and nothing has come back.

Chairman: We will take it up again.

Deputy Doherty: On the last occasion goods had been seized and returned and a considerable cost incurred.

Deputy Ellis: There was also a question about livestock being stolen from Abbotstown which was held by the Revenue Commissioners.

Deputy Doherty: In fact the cattle in question were sold.

Chairman: We will get it clarified. Correspondence from the Department of Justice containing an up-to-date report on the collection of on-the-spot fines in Dublin.

Deputy Byrne: We welcome this report. The Secretary agreed that they were not doing a very good job of collecting fines. It is a worrying feature of the judicial system that while fines are imposed, it is very hard to get the fines paid. Only 40 per cent of fines issued are paid voluntarily. I have a number of questions seeking further information. How much arrears in fines have been accumulated? The local authorities will pick up the responsibility for chasing these fraudsters and would want as much information as possible. It is a poor indictment of Irish society that the Legislature passes laws which 60 per cent of the people choose to ignore by refusing to pay their fines. It is a tremendous burden when one thinks of what one could do with that money to help the elderly, the sick, the infirm and deprived areas, particularly in the capital city.

Deputy Broughan: I wish to ask the same question as Deputy Byrne. What is the current position with regard to arrears? Is this not a case where solicitors, barristers and the legal system rode roughshod over decisions of the Legislature with regard to the application of these provisions? The system worked pretty well up to a year and a half ago. It was at that stage that there was a major challenge to summonses which were delivered. The report says that a third summons cannot be delivered. What is that supposed to mean? They attempted to deliver them by post but again the lawyers were splitting hairs and that system broke down. Dublin Corporation will become responsible for traffic and the whole system. Is there any indication that the courts will allow us to collect legally necessary and effective fines or is the whole system in a state of collapse?

Mr. Purcell: My predecessor brought this matter to the public's attention a few years ago. The position at that stage was that only 40 per cent of people were paying fines, as is the case at the moment, or making this voluntary payment in lieu of a fine if we want to be legally correct. The problem exists at a few levels. There is no increase in the percentage of people paying up and not letting the case go through the legal process. The Accounting Officer talks about an imposition of a charge for voluntary payment after the summons has issued as a way of trying to get people to pay earlier.

There is also a problem in the serving of summonses. At that stage we found there was only a 30 per cent service rate of summons and to meet that problem the Accounting Officer brought in a recorded post system which was challenged. The challenge was upheld and the District Court Rules committee recently made the necessary amendments to the rules in order to give this recorded post a chance. The Accounting Officer believes this will bring the service rate up from 33 per cent to about 55 per cent so there should be an improvement there.

At the next level, even when individuals were brought before the courts and fined, there was a problem in the collection of the fines, because even at that stage, I am working from memory, only something like 25 per cent of the fines imposed were being collected. The problem exists at a number of levels but principally those three. Both the Department of the Environment and the Department of Justice are trying to do something about it. Perhaps they do not have the answer; we had several meetings here with both Accounting Officers where this matter was debated.

I do not know what the answer is, but clearly you are right. The system as it operates at the moment is not satisfactory and has not been satisfactory for some time. This has not happened just in the last couple of years. Perhaps you are referring to some technical or legal difficulties where the computer warrant was not admissible as evidence. One of the District Judges found that, so they had to change the law to make it admissible. That is a problem. The general problem was there long before that particular aspect of it was brought to light.

Deputy Broughan: Would it be worth recommending that we get away from fines altogether, that we administer the traffic in other ways?

Mr.Purcell: It is not for me to say, but clearly, if you have a system and despite trying to beef it up several times you are not getting the return, the conclusion must be then that perhaps the system is not appropriate; perhaps it is time to look at systems in other countries where they work. Perhaps there is a different culture about paying fines in other countries.

Mr.Broughan: Something like clamping, for example?

Mr.Purcell: They are always options; it is not for me to say. I am sure it is keeping the minds of both the Department of the Environment and the Department of Justice occupied, as well as Dublin Corporation in this instance, I assume, about how to collect fines if you impose them.

Deputy Byrne: Chairman, I wish to reassure the Comptroller and Auditor General that Deputy Broughan and I, as members of Dublin Corporation, will make sure that the fines imposed are collected. These people are not defrauding some foreign power, they are defrauding the city council of Dublin, reducing its ability to provide proper services, facilities and amenities for its citizens. My colleagues on Dublin Corporation agree that we will go after these fraudsters with a will and a determination that they have not witnessed to date.

Deputy B. O'Keeffe: Is there a major difference between the on the spot fine and the fine that is levied in the court subsequently? If there is not, there is no reason why a person would not allow the matter go to court. The procrastinatory nature of the system means that there is an advantage in allowing it to go to court if there is no major difference between the on the spot fine and what is levied in court. You can imagine the additional costs that are accruing either to the State from that type of system. It might be worth looking at some kind of a discount system for the on the spot fine so as to encourage people to pay up at a far greater rate than they do at present which is around 40 per cent. The total amount due is something like £9 million and even with the new system, if my calculations are right, they were talking about hoping to maximise the return on that to about £6.5 million with a shortfall of uncollectible fines of £2.5 million but it does not seem to be making great progress.

Mr.Purcell: I do not know whether the courts impose greater fines because thankfully I have not had personal experience of that. I am a compliant motorist in that sense of the word. I understand that generally speaking the court fine tends to be greater than the on the spot fine and the District Judges take that into account, not invariably because there may be extenuating circumstances given by the defendant and so on at the particular court proceedings. However, there is this extra £10 if you make voluntary payment after the summons is issued, so in a sense there is a discount for paying on time, but whether it is sufficient is perhaps a matter that needs to be addressed.

Chairman: Next we have correspondence from the Department of Agriculture.

Deputy Byrne: Chairman, you may remember I asked the Department to give us a more detailed breakdown. This is the sort of information we should have been given initially rather than have to ferret it out from the Department. To my amazement the IFA have denied that it is possible to earn as much as £183,000 under that scheme. I am not an agricultural expert as everybody knows, in fact, we are due a visit to the farm as soon as it can be arranged, but maybe my colleagues who are interested in farming might be able to explain the facts to me if I read these figures correctly. Would it be fair to assume that the farmer in question not only got nearly £183,000 in grant assistance, but also was eligible for the value of the crop that would have been sold on the open market?

This is European taxpayers money and I suppose by implication it is our taxpayers money too. It is interesting to note that you get £516 per hectare for producing linseed. I do not know how many tonnes of linseed are produced on one hectare of ground, I do not know what the market value is but my information is that the market price of linseed is in excess of that of the cereal the EU is trying to prevent farmers producing. Why would one want to pay a farmer to produce a very profitable crop in the first instance? The market value of the crop is extremely high, in fact more valuable than the cereal they have been looking to cut back on. In any case this farmer is obviously very enterprising because he used every square inch of eligible land to create a sizeable income. In that sense he should be congratulated, but there is fundamentally something wrong whereby the EU are paying out vast sums of money like that listed before the Committee.

Deputy Broughan: Could this farmer have been one of those people who the Chairman of the Revenue Commissioners told us reported as earning income of less than £25,000 per annum?

Deputy McCormack: We should be concerned about this serious information. I am quite certain that that farmer, who had over 1,500 acres - I am converting it back to what I am more familiar with - was certainly not a farmer from the west for a start. He was probably not what we know as a farmer at all. It was probably an estate or something like that.

Chairman: I understand he is from Meath.

Deputy Ellis: It is a commercial operation.

Deputy McCormack: I do not know where he is from, but I do not think they grow that sort of stuff, they are more into the beef in Meath than that sort of farming. I do not know where the farmer is from but we should be addressing this from the point of view that it is quite obvious that this is an exceptional case. I am comparing it with a situation where only last week we had cause to rejoice when the Minister, Deputy Yates, got concessions for the people who had not filled the area aid application forms, particularly farmers from the west.

The average of the incomes that they had lost as a result of not having the 1995 area aid forms filled was an average of £4,000 for the entire country, that is, 20,000 farmers. Most farmers from the west lost between £800 and £2,000 in area aid so we should compare like with like. I agree with Deputy Byrne, there should be an upper limit on the qualification for arable area aid scheme. This type of success in gaining grants is not what the scheme was ever meant to be. The scheme was meant to be a support. This landowner, whoever he or she is, had approximately 300 acres of wasteland which was set aside and for which they received £46,000. That was not the purpose for which this scheme was first established. This Committee could make a case for an upper limit on qualification for the scheme, taking that as an extreme example.

Deputy Finucane: I support what Deputy McCormack said. According to a recent English newspaper article, many MPs and Members of the House of Lords are major beneficiaries of this scheme which has a big uptake in England. The article stated that MPs seem to be totally aware of the tremendous advantages of these schemes.

Deputy Ellis: How does this compare with payments in mainland Europe? We are talking about somebody with 1,500 or 1,600 acres of land, although we do not know whether he owns or leases it. One's eligibility to avail of the scheme is determined by the regulations. Whether there should be a capping system is open to debate. If one does not have a certain scale of operation in tillage one will have serious problems - nobody can run a proper tillage operation on 30 acres of land. The biggest scandal of all is that, throughout Europe, land which could be used to grow grain is set aside while people are starving in the world. If we subsidised the growing of such food and gave it to the poorer countries of the Third World it would be a far better service than any other aid we have given the Third World.

Deputy Byrne: I asked the Department officials for this figure and the IFA came on air with me in Cork to dispute that anybody could make £183,000 out of this scheme. I support the concept outlined by Deputy McCormack but in a different format. Unfortunately, richer farmers are cleaning up under this scheme. My heart goes out to smaller farmers who are struggling to make a living and who, for political reasons, we want to see survive on the land. If I remember correctly, £46 million was claimed under this scheme, £12 million of which was claimed by 17,000 small farmers. Less than 5,000 large farmers applied and they received the bulk of the money. The message which should go out from this Committee is that this man, given the size of his holding, clearly does not need £183,000 in grant aid but many small farmers in the west, Cork and Wicklow would appreciate some aid in order to assist them and their families to stay on the land and be productive.

Deputy Ellis: The problem is that we do not know the full background and whether he owns this land or if much of it is conacre. If he owns that amount of land I would agree with Deputy Byrne but if much of it is leased or on conacre he might need that grant aid in order to break even. It might not be as profitable as it looks.

Deputy McCormack: I have no sympathy for him whether he owns the land or if it is on conacre because I do not think that that was the purpose of the scheme. Even if he has 300 acres in set aside, anybody with a 1,500 acre estate in this country will have about 300 acres under wood or bog or bad land which will be set aside for generations. Collecting£46,000 for having that land set aside is not the purpose for which this scheme was set up. There should be a cap on qualification for the scheme.

Deputy Broughan: Deputies are ignoring the fact that set aside is a pricing mechanism, the purpose of which is to restrict supply of these products and keep the price high.

Deputy McCormack: It is not.

Deputy Broughan: Eastern European countries may join the EU in the next eight to ten years and then we will have to complete with Polish and Hungarian farmers. Set aside is purely a pricing mechanism to keep the price of European products high, which is what we have been involved with for the past 20 years.

Deputy Byrne: What worries me most about the agriculture sector is that reports suggest that 50 per cent of the Irish agricultural community's income comes from EU grants. How will that community survive when the EU grants system is radically altered? We should ask the Secretary what his Department is doing to ensure that EU money is being used productively so that they will survive when the grants system is gone.

Chairman: The Committee notes the Department of Health circular. It also notes correspondence from the Department of the Environment regarding information requested by the Committee at its meeting on 20 December.

VOTE 30 - MARINE

Mr. Thomas Carroll, Secretary (Department of the Marine) called and examined.

Chairman: Mr. Carroll is very welcome and I ask him to introduce his officials.

Mr. Carroll: I am accompanied by Michael Guilfoyle, Assistant Secretary, Sara White, Assistant Secretary and Bernie Comey, Higher Executive Officer in the Finance Division. I apologise for not being able to attend the previous meeting which was scheduled for December as, unfortunately, I had the flu. I appreciate the courtesy shown to me.

Chairman: Paragraph 35 of the Report of the Comptroller and Auditor General reads:

Subhead G.1 - Development of Harbours for Fishery purposes including payments under the Fishery Harbour Centres Act 1968.

Harbour Projects

35.Department of Finance contract guidelines emphasise the importance of ensuring that all aspects of design are finalised before a project goes to tender in order to avoid the possibility of increased costs once the project is under way.

During the course of audit of contracts managed by the Department of the Marine, which took over responsibility for harbour development from the Office of Public Works (OPW) in 1989, two instances were noted where the Department encountered difficulties in keeping expenditure within projected costs and where project management was unsatisfactory.

Burtonport

In September 1993, a contract was awarded to a dredging company in the amount of £268,926 for drilling, blasting and dredging works at Burtonport harbour. The award followed a competition in which the next lowest tender was £454,078. The contract was put into effect through submission of the tender by the contractor and a letter of acceptance from the Department of the Marine of 10 September 1993. There was no formal contract signed by the Department and the contractor, and the contract conditions were a standard set of conditions as laid down by the Institution of Engineers of Ireland for works of civil engineering construction. Although the contract conditions provided for completion of the contract within a period of 6 months from the contract date, the contractor indicated in his proposed work schedule that he would complete the work within 11 weeks.

From the outset, problems had arisen in the progress of the work and there was a delay of 6 weeks in commencement due to difficulties with certification of the contractor's barges and the contractor's delay in obtaining the required licence from the Department of Justice for the use of explosives in the harbour area. Work commenced in December 1993 but progress on the contract was slow with the Department expressing concern to the contractor on a number of occasions at the lack of progress. The Department attributed the delays to the contractor's work practices which it considered to be inefficient.

In July 1994, the contractor submitted a claim for £705,143 which it was claimed was the amount of his costs incurred to 30 June 1994. The contractor contended that the increase in his costs was as a result of meeting unforeseen working conditions. He specifically referred to an area which had previously been drilled and blasted and which was now causing him difficulty. It transpired that OPW had carried out this work some years previously but this information had not been brought to the attention of the tenderers before the contract was awarded. In October 1994, the contractor left the site against the instructions of the Department's engineers, with the stated intention of resuming work in more clement weather conditions in the spring of 1995 but up to 6 April 1995, payments to the contractor had totalled £121,402 and work still had not been resumed.

The Department obtained legal advice in January 1995 to the effect that a signed contract would have been preferable to the practice adopted by the Department in entering into this contract and that a fundamental reappraisal of the manner in which contracts are awarded and administered within the Department should be undertaken by the Minister for the Marine. The legal adviser recommended that, although it was open to the Minister to terminate the contract at his discretion, it would be preferable if negotiations took place to see if a satisfactory arrangement could be made with the contractor to complete the existing contract notwithstanding that this may well involve some quite considerable additional expenditure.

In June 1995, following negotiations between the Department and the contractor, it was agreed that the contractor should complete the contract for a lump sum payment of £560,250 less the £121,402 already paid. November 1995 is the specified completion date.

I asked the Accounting Officer for information on the steps taken prior to the award of the contract to ensure that the contractor was capable of completing the contract and within the specified period and why the information regarding the previous OPW operations had not been brought to the attention of those participating in the tender competition. I also asked why formal signed contracts were not being used and what steps, if any, had been taken or were proposed to carry out a fundamental reappraisal of the manner in which contracts are awarded and administered by the Department as recommended in the legal advice and the results of any such reappraisal.

The Accounting Officer replied as follows:

The contractor's tender documentation was examined in detail and his abilities were discussed with a large consulting engineering firm which had previously worked with him on a project similar to the Burtonport project. His base of operations was also visited and an inspection was made of the facilities and plant available to him. Finally, a meeting was held with him to discuss all aspects of the work. Arising out of these investigations the opinion was formed that the contractor would be capable of carrying out the contract.

Information regarding previous OPW operations did not come to notice until raised by the contractor. Following this, an examination of stored files indicated that minor rock pinnacle removal work had been carried out by the OPW twenty five years previously in a part of one of the three areas to be dredged under the present contract.

As regards formal signed contracts, the established practice which has not given rise to any difficulties was to proceed on the explicit basis that acceptance of a tender constitutes a binding and enforceable contract.

As regards the manner in which contracts are awarded (i.e. the form of contract), legal advice that it would be preferable if formal sets of contract documents were prepared and duly executed by the contracting parties has been accepted and it is proposed to execute all future large contracts in this way. Regarding the manner in which contracts are administered, consultants were retained in spring 1994 to review procedures for the administration of contracts by the Department. This has led to the issue of a booklet of Standard Guidelines and all current contracts are administered in accordance with these guidelines. The Department's practices and procedures in relation to the role of the engineer are in accord with general practice by public authorities. The duties and roles of the engineer's representatives and his assistants, who are all professional engineers, are very broad and fully conform with the standard conditions of contract for civil engineering works. Nevertheless, the legal advice has been referred to the consultants and their response is awaited.

Kilmore Quay

In April 1993, the Department's Chief Engineer recommended that the use of consulting engineers on design work on a development project at Kilmore Quay should be considered due to the unavailability of in-house engineers.

In July 1993, the Department of Finance sanctioned the undertaking of the necessary design work by way of contract and approved expenditure of £200,000 to this end. Three firms of consultants submitted proposals for the work and in October 1993, the Department appointed one of the firms as consultant engineers. The terms of appointment included examination of alternative schemes for development of the harbour, carrying out topographical and geotechnical surveys, preparing and submitting a report on the recommended development alternatives and their cost estimates and preparing such contract documents as required by the Department for the phased implementation of the development programme. The consultants' fees were on an agreed scale based on the cost of the works, expenses being extra.

In May 1994, the Department of Finance sanctioned expenditure of £600,000 on Phase 1 of the project comprising underpinning and renewal of the pier, dredging works and rebuilding of the breakwater on condition that the relevant local authority would provide 25% of the cost of the works viz. £150,000 and maintain the works on completion.

Tenders for the contract for underpinning the pier at the harbour were received from four contractors of which the lowest was £117,152. On the recommendation of the consultants, the tender was extended to cover additional works which increased the contract price to £126,546. This tender was approved by the Minister for the Marine and the contract was entered into in June 1994. In July 1994, the contract sum was further increased to £134,202 after work had commenced, through the inclusion of additional piling works recommended by the consultants. Work commenced on site in July 1994 but difficulties with the contract were experienced from an early stage. The contract required that 83 holes should be bored and grouted in the pier to accomplish the underpinning and this process was expected to use 30 tonnes of cement. Delays were experienced in the progress of the work and by the time the contractor suspended work in September 1994, only 4 holes had been completed and 132 tonnes of cement had been used in the process.

New work procedures were drawn up by the consultants in October 1994. The contractor's revised estimate for completing the work under the procedures was in the range of £247,000 – £275,000.

In November 1994, the Department decided to terminate the contract and to complete the underpinning work by direct labour. A total of £65,871 was paid to the contractor which represented 49% of the contract price as revised, yet only 5% of the underpinning work had been completed (i.e. 4 holes completed out of the 83 provided for in the contract).

The contract with the consultants for the design work on the project was also terminated and the Department engaged the services of another firm of consulting engineers. The underpinning work by direct labour was completed by the Department at a cost of £116,576.

A contract for dredging works at the harbour under Phase 1 of the development project was advertised and 5 tenders were received in June 1994. The lowest tender was £408,572 for the two-part dredging operation and the original consultants recommended awarding the contract to the firm. However, the dredging work was undertaken by the Department instead. The work covered a much larger area than originally planned and expenditure had reached £553,921 by March 1995.

Total expenditure on the project up to March 1995 was:

By August 1995 the total cost incurred on the project was £1.4m. The estimated cost to completion is £2.95m and it is expected that the project will be completed in autumn 1995.

In regard to the underpinning works, I asked the Accounting Officer what steps were taken before the contract was awarded to ensure that the proposed method of undertaking the work was the most appropriate.

In regard to the dredging works, I asked the Accounting Officer how the Department ensured that the work was carried out in the most cost-effective manner where direct labour is used rather than contract.

I also asked whether the prior sanction of the Department of Finance had been obtained for the increased cost of the Phase 1 works over and above the £600,000 sanctioned in May 1994.

The Accounting Officer replied as follows:

The consulting engineers recommended the method of underpinning based on their knowledge and experience. They also commissioned a specific site investigation of the area to be underpinned.

Progress on the total project was not considered to be satisfactory and the Department intervened and assumed the design and construct role. Following an examination by the Department's engineers, it was considered that the most effective means of undertaking the dredging works would be to have works carried out directly by the Department using hired plant. The Department is aware from both direct works carried out by it and its experience with contractors of unit rates for different types of work. On the basis of this knowledge coupled with its technical expertise, the Department is well placed to make an assessment of the most cost effective way of carrying out projects. Cost-effectiveness assessments on the basis of unit rates for work are made for all works designed directly by the Department.

As regards Department of Finance sanction, the scope of the project was the subject of detailed ongoing discussion with the Department of Finance into 1995 and agreement in principle emerged that an enlarged project would be completed in 1995. Final formal sanction for total expenditure of £2.254m in 1995 was obtained in August 1995. Specific sanction for an increase of £800,000 including £200,000 for the local authority contribution was given by the Minister for Finance in March 1995.

He is satisfied given all the circumstances and taking account in particular of the shortage of engineers in the Department that the project was well managed and that when difficulties emerged the Department acted promptly and effectively to ensure that expenditure was both economical and efficient.

Mr. Purcell: Previous Committees have expressed concern at deficiencies in the planning and management of harbour development projects which have invariably led to material cost overruns. Harbour works which were the subject of adverse comments in recent years were Rossaveal and Dingle. In October 1992, following its examination of the Dingle project, a previous Committee insisted that in all future harbour development works the Department of the Marine must ensure that development proposals are properly researched and planned and all expenditure fully sanctioned before work commences.

Since then, two more projects have come to light involving harbour development works at Burtonport, County Donegal, and Kilmore Quay, County Wexford, where the Department encountered difficulties which led to additional costs. The circumstances of each case are set out at some length in the paragraph but I will summarise the main points in each case.

From the outset, progress on the Burtonport project was extremely unsatisfactory. The Department attributed this to inefficient work practices of the contractor who, in turn, blamed the lack of progress on adverse weather conditions, but more particularly on the failure of the Department to inform him of previous drilling and blasting carried out by the OPW on the site. The contractor then submitted a claim for £705,000 on the basis of costs incurred. Legal advice obtained by the Department was critical of the absence of a formal contract for the works and recommended that the least cost option would be to negotiate a new agreement with the contractor rather than terminate the contract and seek fresh tenders. The Department agreed with the contractor that he would complete the work for the fixed sum of £560,000, which turns out to be nearly £300,000 more than his original tender price.

Standard guidelines for contracts have since been issued by the Department to staff and the Accounting Officer informed me that all current contracts are administered in accordance with these guidelines. The new target date for completion, November 1995, has not been achieved as far as I am aware and the current best estimate is March 1996. I understand the contractor is incurring penalties at the rate of £2,000 per week because of his failure to meet the November deadline.

In the case of the Kilmore Quay project, the initial problem concerned the underpinning of the existing pier. The method of underpinning selected by the contractor and recommended by the consulting engineer was unsuccessful and there was no prospect of completing the work at anywhere near the contract price of £126,000. The contract was terminated and the contractor was paid £65,800 for work done. The consulting engineer was let go and the work was undertaken by the Department by direct labour at a final cost of £271,000.

The lowest tender received for another phase of this particular development, the dredging contract, was £408,000. No contract was entered into because the Department decided on an alternative way of doing the work, again through the use of direct labour by building a bund and dredging in the dry behind it. Although the cost of dredging by direct labour was £350,000 greater than the tender amount, it should be borne in mind that the method used enabled a much larger area than originally envisaged to be dredged and also facilitated the economic performance of other necessary works at the site. In this case I found it hard to assess with any certainty whether the project was undertaken in the most economical and efficient way.

Chairman: Department of Finance guidelines emphasise that all designs are finalised before a project goes to tender. Why were the guidelines not adhered to and do you accept that many of the problems encountered could have been avoided?

Mr. Carroll: It was not the case that guidelines were not adhered to. In Burtonport, tenders were sought for a project and site investigations were done. The lowest tender was approximately £260,000, the next was £450,000, while the average tender was £600,000. The Department had to make a judgement in those circumstances as to which tender to accept. A full assessment was carried out. The Department's estimate prior to the project being entered into was that it could cost £250,000 to £300,000 and it decided to accept the lowest tender.

In retrospect, the problem which arose with that tender was not the cost, but the wrong call was made on the assessment of the management ability of the contractor to deliver. Despite a very thorough process in assessing the management ability of the contractor, the wrong call was made and the contractor could not deliver the management capability required to do the job in accordance with the tender. It turned into a most unsatisfactory project from the Department's perspective. A lot of management and engineering time and effort has been spent baby-sitting this project to bring it to finality.

I am not sure what more could have been done. My chief engineer told me that this project could have been completed in less than six months if it had been decided to go for a £700,000 contract from an international contractor who could have delivered. It could have been delivered for less than £300,000 if our judgment of the management capability of the contractor had been correct. All the tests were carried out to determine whether he had the management capability. We looked at his tract record, consulted other companies involved in the business, visited his site, interviewed him and looked at his staff. It would have been a marvellous achievement to have brought it in for a substantially lower figure than the other contract prices. At the end of the day, the outturn on this, £560,000, is below the average tender price, but it has been most unsatisfactory.

Chairman: What were the main findings and recommendations of the consultants commissioned to review procedures for the administration of contracts?

Mr. Carroll: I would like to pick up a number of points made by the Comptroller and Auditor General. He mentioned the absence of formal contracts. In the Burtonport case, the absence of a formal contract had no bearing on how things evolved. The contract procedure has been in existence for a long time and it has worked. We got consultants to review procedures. As a result of that review, no major changes have been proposed in procedures. The consultant drew together existing procedures into a formalised document. There has been no change in the process and procedures arising from the review. We now have a formalised set of documents, which is more satisfactory.

Chairman: Did the absence of a formal contract restrict you?

Mr. Carroll: No. I looked at legal advice in this regard. In the context of a review of the Burtonport case, Counsel observed that it would have been preferable to have had formal contracts. However, what existed was a contract and we could have insisted on specific performance - there was no difficulty with that.

Chairman: In the case of Kilmore Quay, do you contemplate taking legal action against the consultants or the contractor?

Mr. Carroll: No.

Deputy McCormack: Have the Burtonport and the Kilmore Quay projects been completed?

Mr. Carroll: Some 90 per cent of the work in Burtonport has been completed. Blasting and dredging work is 99 per cent complete. Demobilisation and tidying up of the site is now taking place, which I hope will be finished in early March. Kilmore is effectively finished but it will not be formally tidied up for another month. The structural works have all been completed in Kilmore Quay

Deputy McCormack: Your Department estimated that the cost of the Burtonport project would be roughly £250,000. Was the contract price around £500,000?

Mr. Carroll: A tender process was entered into for Burtonport. The lowest tender was £269,000; the next was £454,000, while the average tender received was of the order of £600,000.

Deputy McCormack: What was the tender price?

Mr. Carroll: There was a range of tender prices. The tender price for the contractor who got the job was £269,000.

Deputy McCormack: Sometimes in the tendering process the average price is not accurate because some who tender know they will not get the job. How much is the overrun in each case?

Mr. Carroll: In Burtonport the final cost is of the order of £560,000. The technical overrun vis- à-vis the original price is almost £200,000. I am not quite sure that it is safe to regard that as an overrun. It is certainly a variation.

Deputy McCormack: I am intrigued by Mr. Carroll's use of language. The Department's judgment of the contractor was obviously not correct. How is the management ability of such a contractor assessed?

Mr. Carroll: First of all, we look at his capability, plant and equipment and the person who is running the show. There is no doubt in our minds that if the principal in that company - which is a major company - had been running that project himself, for example, that it would have been delivered. He was interviewed, the management team he would have had on the project, the engineer, etc., would also have been interviewed. A major consultancy company in this country, which had experience of that particular contractor on a project, was consulted in detail and in confidence and was advised that they could deliver. This was not a difficult project. It was a relatively simple one. It could have been carried out for costs which would not have been materially different from the £269,000. That was our judgment and remains so. However, the firm that was given the project fell down on the job.

Deputy McCormack: The engineering firm which the Department consulted must also have fallen down on the job.

Mr. Carroll: No.

Deputy McCormack: Did that firm recommend the contractor?

Mr. Carroll: It would not be for them to recommend it.

Deputy McCormack: They stated, however, that the contractor was suitable.

Mr. Carroll: Yes. The contractor is a fine contractor. However, on this particular job, the management resources and the way in which the project was organised was a disaster from the outset. We became locked into a most unsatisfactory situation. It has taken an enormous amount of time which is unfortunate for the port concerned and has disrupted its operation. It has taken an enormous amount of management and engineering time attempting to baby-sit this project. However, having become involved in it, wrongly, in retrospect, the best option - following legal and economic advice - was to stick with it. It the final analysis, the price paid is not materially different from the average tender that was there on day one.

Deputy McCormack: I am not very impressed with the average tender. Does the new cost of £560,000 for the first scheme include time spent by the Department in putting the project back on the rails, or does it represent the contract price?

Mr. Carroll: That is the contract price.

Deputy McCormack: There is no additional—

Mr. Carroll: No. We have not added in—

Deputy McCormack: So the bring across is far greater than that?

Mr. Carroll: No. You are talking about management time. It is very hard to specify the opportunity cost of management time. A lot of time was spent by Ministers, the management—

Deputy McCormack: Could Mr. Carroll estimate the cost of management time?

Mr. Carroll: We have not carried out a specific estimate of salaries and overheads. We would be watching projects in any case.

Deputy McCormack: There is much useful work for marine officials to carry out, in relation to coastal erosion and other problems, without having to spend so much time and energy in correcting this contract.

Mr. Carroll: I will return to the Kilmore project. The direct and indirect costs incurred by the Department, in relation to the Burtonport project, were significant in terms of management time. I fully agree with the Deputy.

Deputy McCormack: To which contract is the £2,000 per week penalty clause attached?

Mr. Carroll: Burtonport.

Deputy McCormack: Burtonport? Is that paid—

Mr. Carroll: It will be deducted from the final payments. Adjustment will be made to the final contract payments.

Deputy McCormack: What has been learned from this in relation to entering into relatively small contracts in the future?

Mr. Carroll: That is a question which we have considered carefully. As I stated at the outset, if you take a conservative route, employ prime international contractors and pay high prices, projects will be finished with no difficulty. If, however, you go for—

Deputy McCormack: Is that correct? Did we not achieve that with the contractor in question?

Mr. Carroll: We did. We have analysed this matter internally. The view is that one should certainly rule out low contracts. The lesson is that we must be more careful in relation to low contracts in considering track records and the management capability of a contractor. Perhaps specific personnel, that have an attractive record of delivery, should be tied in to project management on day one. The missing link in this contract was the management capability, application and structure. In this type of case in the future, much more time and effort will have to be spent on satisfying ourselves that the management capability is present. One can never be 100 per cent certain in relation to such projects.

Deputy McCormack: Mr. Carroll stated that the contractor had the requisite management capability but not when applied to this scheme. That seems very strange because if a contracting firm had any respect for itself it would not let a project collapse in such a fashion.

Mr. Carroll: They ought not to have done so and it has not done that company much good.

Deputy Ellis: I welcome Mr. Carroll. With regard to the initial contract, site investigations had already been carried out by the OPW which did not show blasting works had been carried out previously on the site. Who is responsible for the preparation of the site details prior to issuing the contract?

Mr. Carroll: The Department carried out a site investigation which showed no evidence of any previous blasting or work carried out in the area. It later transpired - through local folklore brought to our attention via the contractor - that some work had been carried out by the OPW 25 years previously in a small part of one of the site areas. It is not a material factor in the project. Such would be argued by the contractor as part of a negotiation tactic. However, we never accepted that this had any significance for the cost of the work. It was 33 per cent of 33 per cent. There were three main areas to be dredged. In a portion of one of those areas there had been some previous work carried out. This did not change it in any dramatic or serious way. It was argued that the case could possibly have gone to litigation but we were confident of withstanding that particular charge. This is not a material factor.

Deputy Ellis: Is Mr. Carroll stating that there may be further litigation?

Mr. Carroll: No. I am stating that at a stage in this project, had we insisted on specific performance or turfed out that particular contractor, it would have ended up in litigation. That was one of the factors we had to consider. It is our judgment that particular aspect had a minor, insignificant bearing on the contract.

Deputy Ellis: What detailed legal advice was received by the Department when this question arose?

Mr. Carroll: The contract was sound. We were entitled to specific performance. However having reached that point—

Deputy Ellis: Could Mr. Carroll inform the Committee of the specific advice he received?

Mr. Carroll: No. I do not have the legal advice.

Deputy Ellis: Could the full legal advice received by the Department when this question arose be sent to the Committee? The reason for this is that the people who carried out a site survey and did not discover that blasting had been carried out on the site in the previous 25 years must not have carried out such a survey. The Department would have been badly at fault if that fact was not stated in the tender documents.

Mr. Carroll: The legal advice does not, as I understand it, relate to the question of the previous site investigation. The legal advice we received related to what was the best way to proceed.

Deputy Ellis: I take it that a full copy of such legal advice will be made available to the Committee?

Mr. Carroll: If it is reasonable that the Committee should get this legal advice, I will make it available. I have no problem with that. However, to return to the site investigation and the previous work carried out by the OPW, there is a process for resolving disputes of that nature. We are reasonably professional and have a track record in that regard.

Deputy Ellis: You were negligent in the preparation of the documents because you did not state in them that you had carried out blasting at a prior date. You left yourself open to a claim.

Mr. Carroll: I do not accept that we were negligent.

Deputy Ellis: You said you carried out a full survey prior to the issuing of the contract documents. If that was the case, why did you not show that blasting had taken place?

Mr. Carroll: A site investigation was carried out.

Deputy Ellis: But that is the first thing a site investigation will show.

Mr. Carroll: It did not show.

Deputy Ellis: Somebody was negligent.

Mr. Carroll: Nobody was negligent; I do not accept that. The one question that would arise - and this is something we are looking at - is about previous records of work having been carried out. This work was carried out 25 years previously by OPW engineers. It was carried out in a small part of one of three areas to be blasted. The fact that this work had been done did not come to notice when people were researching the project. It is not a material factor.

Secondly, when the site investigation was being carried out one would expect to find, if there had been previous blasting, evidence of this in the fissures and so forth and no evidence was found.

Deputy Ellis: How is it that the contractor found the evidence?

Mr. Carroll: I am not sure how the contractor found the evidence. I speculate that it came from talking to local people and so forth and that somebody mentioned that work had been done in the area previously. However, it is not a material fact.

Deputy Ellis: You issued a contract to somebody who had problems getting the necessary licences from the Department of Justice and, with regard to barges, from the Department of the Marine. Did you not make it a specific requirement of the contract that all equipment to be used would conform and that the necessary certificates would be submitted with the tender in the same way as people are requested to submit a copy of C2?

Mr. Carroll: No, one would expect with an established contractor - and this would be the normal basis as I understand it - that this would be handled routinely during an operation. It is a reflection of the general management fall down in this project that everything that arose in the project seemed to cause difficulties.

Deputy Ellis: Did the fact that these were necessary requirements not mean that prior to a letter of intent or a letter of acceptance being issued - as was issued on 10 September, 1993 - these items would have been checked?

Mr. Carroll: It would not be done in that way; that would not be the process. These are routine requirements -----

Deputy Ellis: This is exactly what I am saying. Why were the routine procedures not followed?

Mr. Carroll: They would be carried out at the appropriate time and not prior to the award of the contract. We cannot tie down everything in advance of awarding the contract.

Deputy Ellis: Everything is checked in most local authority contracts to ensure that proper documentation is available. Did you not get suspicious when you saw a difference of £200,000 between the lowest and the next lowest tender and a difference of almost £500,000 between the lowest and the highest tenders for the contract?

Mr. Carroll: Of course, but suspicious is the wrong word. The dredging market is not big. There were peculiar things going on in the world market for dredging at that time; a lot of dredgers were being diverted to Hong Kong. One can get a wide range in price. We still believe that this project with proper management could have been delivered for a price not materially different from the £269,000 mentioned. The feeling was that this company could deliver at that price and that it was not unreasonable. The figure was not materially different from the figure the Department's engineers had put on this project.

Deputy Ellis: What was the original price put on it by the Department engineers?

Mr. Carroll: About £250,000. This was a rough guiding figure prior to inviting tenders or anything else. They estimated this project could cost £250,000 approx.

Deputy Ellis: How much has been paid out to date by the Department on foot of this contract?

Mr. Carroll: Prior to the signing of the Supplemented Agreement a total of £121,402 was paid. Since then £137,505 was paid. A further £303,848 remains to be paid less any penalties.

Deputy Ellis: Is there a specific penalty clause in the contract?

Mr. Carroll: Yes.

Deputy Ellis: Was a performance bond sought for this contract prior to its commencement?

Mr. Carroll: I am not certain of that. There may have been, but there is a problem with bonds for such projects. I do not have that information at present; I will get it for the Deputy.

Deputy Ellis: You are not sure whether there was a bond sought?

Mr. Carroll: As I understand it, there is a standard bond procedure in contracts of this nature.

Deputy Ellis: Was that proceeded with?

Mr. Carroll: Enforcement is difficult.

Deputy Ellis: I am not talking about enforcement. Was the bond put in place prior to allowing the commencement of the work?

Mr. Carroll: Offhand, I do not know.

Deputy Ellis: Would you let the Committee know?

Mr.Carroll: Yes.

Mr. Purcell: The contractor did obtain a bond. That is my information from the papers I have in front of me.

Deputy Ellis: How much was the bond for?

Mr. Purcell: I do now know. He obtained the bond from a reputable insurance company. These particular bonds are notoriously difficult to enforce and that, perhaps, is what the Accounting Officer is referring to.

Deputy Ellis: If that is the case why did we not seek to have the bond enforced? It might be hard to enforce it but we are talking about the State being out of pocket by an extra £300,000 in addition to the amount of time, which is unquantified but probably amounts to about another £100,000, spent by officials in your Department on this project.

Mr. Carroll: We had to make a judgment midstream on this project about what to do. There were two choices - one was to disengage and go back into the market for a new contractor; the other was to try to get the existing contractor to deliver. There were risks associated with either strategy.

The difficulty that faced us was that if we went to disengage we could end up in a legal dispute. The site would be sterilised after injunctions being sought and so forth and we could be stuck for years in the courts while the project would not be finished. Our objectives at that stage were to get out at minimum cost as speedily as possible. If we went back into the market given the particular circumstances - the site might be blacked and so forth - people would know about our predicament and we probably would not get it cheap.

The call was made at that point - and legal advice encouraged us in that respect - that it was best to stick with the project and complete it. We negotiated a deal on that - the £560,000 to which I referred - which was not totally unreasonable given what we would have been likely to pay if we went back into the market. Our judgment was that it would be finished faster and cheaper by going that route than by going the other direction. That was a third best; it was most unsatisfactory but that is the choice we had. If we had got into a legal dispute the project might remain unfinished for years

Deputy Ellis: Had this company ever previously carried out dredging of ports or harbours?

Mr. Carroll: I think it had carried out some work.

Deputy Ellis: Where?

Mr. Carroll: I am not sure, but it had carried out work of a corresponding nature that had been satisfactory.

Deputy Ellis: You said it was recommended by a reputable company. Can you name that company or do you want me to do it for you?

Mr. Carroll: I could not. In our business, we must have confidential dealings with various people.

Deputy Ellis: This is the problem. Everybody comes in here and hides behind the shield of confidentiality. A number of weeks ago, another Secretary of a Department eventually had to say where specific incidents took place in Cork. Who did you consult with regard to the company you were appointing?

Mr. Carroll: I wish to reserve my position on this.

Deputy Ellis: You do not have the right to do so. You either come here to tell us the truth or you should not be here. This is one of the problems. I suggest, Chairman, that it is up to the Accounting Officer to tell us every detail regarding any project on which he is being queried. Will the Accounting Officer specifically tell us the company from which he got his recommendation?

Mr. Carroll: I will reserve my position on this. I am not quite sure as to the legal position.

Deputy Ellis: You have privilege.

Mr. Carroll: We consult various people and companies on a confidential basis.

Deputy Ellis: You said that you consulted a specific company. Is that part of another semi-State company?

Mr. Carroll: Yes.

Deputy Ellis: Has it ever been involved in similar type work with this company?

Mr. Carroll: I understand it has, yes.

Deputy Ellis: Regarding marine dredging or sea dredging?

Mr. Carroll: I am not quite sure as to the specifics.

Deputy Ellis: Did they tell you the truth about their last dealings with that company? Were you aware of their last dealings?

Mr. Carroll: I was not personally involved, but our Chief Engineer consulted with those in question.

Deputy Ellis: We are not talking to the Chief Engineer. You are the Accounting Officer.

Mr. Carroll: I accept that. However, consultation took place.

Deputy Ellis: Did you ask them if they had satisfactorily carried out the conditions of their contracts with the semi- State company involved prior to this?

Mr. Carroll: I am not quite sure as to what specific questions were asked. The focus of the question was if the company would be able to deliver on this type of project, and the advice was positive.

Deputy Ellis: Despite the question as to if it had done so with regard to the company that you sought the advice from?

Mr. Carroll: I do not know what- - - - -

Deputy Ellis: I am trying to get the name of the semi-State company that recommended the company involved to you for undertaking this work. Did it have satisfactory dealings with this company?

Mr. Carroll: I do not know.

Deputy Ellis: You stated previously that it had. I am asking you to name the semi-State company, or to name it by letter to the Committee.

Mr. Carroll: The advice of this company was sought.

Deputy Ellis: Chairman, I am seeking an answer to a specific question. I am entitled to get an answer, otherwise I should not be here. I am asking Mr. Carroll to name the company involved in making the recommendation regarding this company.

Chairman: You are giving Mr. Carroll the option of providing this information by way of letter if he so wishes. He wishes to reserve his position.

Deputy Ellis: I want a commitment that he will do so by letter.

Chairman: We will take it up.

Deputy Ellis: No, Chairman. We are entitled to get this information. The company concerned is well known in the contracting arena throughout the country. It is also well known who recommended the company. They did not have fully satisfactory dealings with the company.

Chairman: Will you provide the information by letter, Mr. Carroll?

Mr. Carroll: I will review the request.

Deputy Ellis: Did you say that you will review the request or provide the information?

Mr. Carroll: I can only review the request in order to know if it is appropriate to provide- - - - -

Deputy Ellis: Will you provide it?

Mr. Carroll: I cannot say.

Deputy Ellis: Why not?

Mr. Carroll: I do not know what are the terms and conditions upon which we receive this advice. If it is appropriate to provide it, I will certainly do so.

Deputy Ellis: At the outset, you stated that you knew the company that provided the recommendation. Despite the fact that this company was almost £200,000 cheaper than the next lowest contractor, the State has lost in excess of £300,000. You said that the cost estimated by your Department was £250,000. The cost of doing the work is now running at approximately £550,000. This has arisen due to negligence, in the first instance on behalf of the Department of the Marine which did not give a clear statement regarding the site survey. Now you advise that this company was given the job because it was recommended by another reputable company, which is part of a semi-State company and which, to my knowledge, did not have totally satisfactory dealings with that company.

Mr. Carroll: In the first instance, I do not accept that there was negligence. Second, a range of assessments were undertaken and the recommendation from the company was one part of this. On the question of losing money, this was the only company that offered a price that was close to the Department's estimate.

The Deputy refers to loss of moneys. However, by comparison, the opportunity cost was £450,000. Indeed one could compare it with the average contract venture. The advice I obtained was that the best way of getting this project done satisfactorily was to pay £700,000 to a major international company.

Deputy Ellis: In view of the fact that Mr. Carroll is refusing to provide the information the Committee is entitled to get, I propose that Vote 30 be adjourned until such time as Mr. Carroll makes available to us all the information we are seeking.

Deputy Byrne: Mr. Carroll, with regard to the Kilmore Quay debacle, I understand that a contract was entered into in June 1994 for £126,000. This was a price recommended by a team of consultants to your Department. I understand that the next month, July 1994, the contract price increased to £134,000, after the work had commenced. This was, again, based on the consultant's recommendation.

Perhaps, Mr. Carroll, you would interrupt me if I get any facts wrong. My notes remind me that the work started in July 1994 and was ultimately suspended in September 1994. If the contract was issued in June, then within a three month period from the issuing of the contract, the work was suspended.

Could you explain to the Committee how this debacle occurred, given, for example, that some, presumably competent, consultancy recommended these prices? Who gave the consultant authority, within one month of the issuing of the contract, to recommend an additional payment in the month of July? Would this be a normal procedure in your Department? Would it be normal for consultants to have the freedom to deal with contractors and allow for additional work to be carried out after work has commenced, even though you have gone to public tender on the contract initially?

Mr. Carroll: Variations in tenders and renegotiations of existing tenders would be normal in any contract.

Deputy Byrne: Would it be normal to occur as early as one month after commencement?

Mr. Carroll: At that stage one would be getting down to scoping the job in very great detail, and so on. We are dealing with marine works here which are high risk works and very complex. Any marine related work is very complex. Circumstances are always changing, new information becomes available and there would be nothing unusual about amending the price to cover additional works.

Deputy Byrne: With regard to what may be described as the strangest set of figures since I started to attend the Committee dealing with the underpinning, piling and the grouting, a contract by a competent consultant was issued to a competent contractor. The contract estimated that in order to fill and grout 83 holes, approximately 30 tons of cement would be required. This contractor managed to complete the contract on four holes and he used, not 30 tons, which was estimated for the 83 holes, but 132 tons on the four holes.

That works out at 33 tonnes to this contractor per hole. Are these holes filled with cement mixed with sand or with pure cement?

Mr. Carroll: I think it is a mixture; I am not quite certain. It is a grout.

Deputy Byrne: We are dealing with a quantity of material far in excess of 33 tonnes if sand is added.

Mr. Carroll: Cement may be a loose term here. It is used for grouting purposes but I am not quite sure what the precise composition is.

Deputy Finucane: Would it have made the Guinness Book of Records?

Deputy Byrne: In October 1994 the consultants went back to the drawing board. The contract was issued in June and substantially altered in price terms and additional work granted in July. In October it was discovered that the figures were so out of alignment that 83 holes requiring 33 tonnes of cement was disproportionate to the contractor's experience which was 33 tonnes of cement per hole. Who was responsible for that incredible miscalculation?

Mr. Carroll: What was involved was dredging the harbour in Kilmore Quay, bringing down the depth around the quays. The quay had to be shored up; it had to be reinforced underneath the previous line. The Department had carried out some site investigation work. High powered consultants were acquired to continue that work and they carried out a site investigation. They explored the nature of the quay walls and so on and they came up with a plan.

With regard to the 30 tonnes, we have been going through our records on this and that was the figure the consultant used in the formal documentation - that is where the figure came from. We checked back on this and the consultant reported incorrect figures which were inconsistent with the quantities. In fact, it should have been 80 tonnes and we did not pick that up earlier. The figure of 30 tonnes should have been 80 tonnes. The contractor had this figure as 30 tonnes all along but if one looks back at the figure he had in the detailed calculations it was 80 tonnes.

Deputy McCormack: Was the hole getting bigger?

Mr. Carroll: I do not think so. A technical calculation was made that given the nature of the underpinning required one could pump in so much cement and it would work; it would seal and underpin properly. They tried pumping in 25 holes as I understand it. What happened was - the site investigations had not shown this up - clearly the material condition of the quays was different. This is high risk work; one is never sure what will happen when one starts to work under water in these circumstances. When they started to pump in the cement it leaked out; it was not able to hold it as it was porous and there may have been a sand underlay. The cement was being pumped in and was not working.

One cannot legislate against such a thing happening. The one criticism I would make was that this went on for too long, that the consultants did not intervene quickly enough to recognise it was not working and in investigating what different techniques might be required.

Deputy Byrne: You speak of high risk work. High risk work is priced accordingly. We are talking about supposedly competent contractors and engineers. I was interested to listen to the questions from my Fianna Fáil colleague who you managed to frustrate almost as much as you are frustrating me. You seem determined to defend the indefensible. How can you defend a company whose calculations were so vastly out of line, which meant the consultant had to go back to the drawing board as recently as October to start the project again? Matters were so badly organised that the Department of the Marine got rid of the consultant and the contractor and brought in direct labour.

Those of my political colleagues who advocate private enterprise might take note of the figures I have calculated. The direct labour cost was £116,000 for 79 holes; the private enterprise cost was £65,871 for four holes. The private company charged £16,500 per hole whereas the public enterprise project achieved it at the rate of £1,475 per hole - a saving of £15,000 per hole.

Be serious with the Committee and tell us if you are defending such consultancy, such so-called professionalism and ineptitude and incompetence on the part of the contractor. It was so badly managed the work had to be taken off them and done by direct labour. Why did you pay the contractor nearly 50 per cent of the revised contract price? Why was he entitled to that when he only achieved the sealing of four holes?

Mr. Carroll: The contractor was engaged on the basis of a consultant's advice and information as to the conditions he would meet. As far as I know the contractor carried out his work reasonably seriously and incurred expenditure. He would not have made any money on this; he would have incurred mobilisation costs, cement costs, labour costs. I do not think it was the contractors fault that it turned out to be quite different from that anticipated. There was a lot of pressure to get this project started. The Department of the Marine would have preferred to have done this work itself. We had not got the engineers to do it; we contracted in by tender a reputable firm of contractors. It would be unfair to suggest the contractors were negligent in how they did it.

Deputy Byrne: How could it be a reputable company if it poured 132 tonnes of cement into four holes whereas the direct labour contract resulted in vastly smaller quantities?

Mr. Carroll: We are not comparing like with like there. The whole concept of this project was changed totally by the Department's engineers. The underpinning done by the Department by direct labour was done by a totally different method in totally different conditions. The concept that had been recommended by the consultants was that the project would be done “in the wet”, that is under water in the harbour without any drainage. The Department engineers changed the concept and did it “in the dry”. They put a bund across the harbour and it was a totally different concept so you are not comparing like with like.

Deputy Byrne: What sort of engineers have you in the Department who drew up a contract which was suspended in September and they came up with a completely new concept of dry filling?

Mr. Carroll: The Department did not have the engineers available to undertake this project. The project was farmed out to consultants who handled the management and organisation of the project. Obviously, we monitor what happens and we were unhappy with what was happening. We felt that the consultant who was removed from the project was not monitoring the project closely enough. The consultants should have intervened earlier. The method being used was obviously incorrect because it was not working. The contractor should have been stopped much earlier. The Department moved in, engineers became available from another project and we decided the best way to do it was to take it on ourselves, which we did. We estimate that the final project was something like £2 million below what would have resulted had we gone the consultants' route, using their working method.

Deputy Byrne: The Comptroller and Auditor General, when he introduced his comments on these reports, suggested that the Committee of Public Accounts had previously dealt with waste of public money in expenditure by this Department in this area. As a new Member of this Committee I must record my sympathy with previous Members who were frustrated in the way I am being frustrated in this issue. Nothing seems to have been learned, as we have these two glaring examples of incompetence in the carrying out of work in the Kilmore Quay and Burtonport schemes. We owe it to those former Members of the Committee of Public Accounts to continue to expose this Department in its handling of this type of work.

Deputy Finucane: Mr. Carroll stated there was no negligence on the part of the Department of the Marine. I have been a member of harbour boards and have seen many dredging contracts allocated. Usually these allocations are preceded by much preliminary work such as hydographic surveys, which is to assess what work is there, because it naturally has a bearing on the price concerned. In most cases when a tender was submitted it was adhered to and if there were extensions after for further dredging being added, the tender was expanded accordingly.

This is another example of the Department of the Marine being a soft touch for a contractor. What repeatedly happens when we assess various Departments is that the lowest tender is used as an excuse to get a foot in, on the basis that the Department will cough up if it goes wrong. This is a classic example; the second contractor comes in at £185,152 more than the first contractor. Notwithstanding that, Mr. Carroll says we are still getting good value at £560,000, I anticipate that this would raise alarm bells in any Department.

A previous Deputy said that contractors often tender for jobs but are not sincerely interested. They are often trying to keep their hand in with the Department because they want a tender but are not interested in the specific job, so they pitch it high. Tenders can often be a misleading barometer between the highest and lowest. This is a classic example of a contractor promising the Department that he would do something within an 11 week time scale. Mr. Carroll said he had limited experience in the past -- where did he work previously in Ireland on dredging contracts? The Department was remiss in giving the contract when it was the lowest tender and not checking the area, depending on folklore about the rocky pinnacle. I would have anticipated that all that information would have been picked up in any hydrographic survey.

Mr. Carroll: There are many questions there. First, to hark back to another point, the Kilmore Quay project-----

Deputy Finucane: I am asking about Burtonport.

Mr. Carroll: Yes, but the final Kilmore Quay project would stand up to scrutiny by anyone. It is good value for money. There was a high risk element on underpinning, the impact of which should not be exaggerated in the context of the total project coming within budget. I challenge anyone to contradict me on this - the Kilmore Quay project is, overall, an example of a well managed, well executed project. In line with Deputy Byrne, it is a tribute to the engineering branch of the Department of the Marine and its ability to manage projects of this nature.

There are suggestions of incompetence and negligence attached to the Department and its engineers, which I could not accept and must emphasise. We have a small engineering team who worked around the clock and in that year managed total civil projects of the order of £13 million. There were minor problems with an aspect of Kilmore Quay. We have gone through Burtonport in detail. In retrospect, the wrong call was made and we accept that. The delay is regrettable and we are concerned that the fishermen did not have proper use of the harbour while this was going on. However, the final price of that project, vis á vis what was available in the open market, is not out of line with what might have been available from tender.

The Deputy mentioned the previous work done. I must emphasise again that this related to a small part of one of the areas to be blasted. It did not show up on the various surveys and site investigations done.

Deputy Finucane: What various surveys were done?

Mr. Carroll: There was a site investigation.

Deputy Finucane: When Mr. Carroll says “site investigation”, is he speaking of the type of sophisticated technology available now to do hydrographic surveys to determine what rock in what quantities are underneath the water?

Mr. Carroll: I am not wholly certain of that but I believe so.

Deputy Finucane: Mr. Carroll is not totally certain of many facts. I imagine any Accounting Officer facing questions from us would recognise that Burtonport and Kilmore Quay would be the subject of much focus on account of the cost overruns. I would anticipate answers to most of the questions we are asking. When I ask whether sophisticated hydrographic surveys were carried out and Mr. Carroll says he is not sure, all I am saying is that such technology exists and harbours, which are not directly under his control that carry out their own work, use those all the time. I have seen examples where tenders have been submitted and not exceeded. All the analysis has been gone through before hand because it is in the interests of the tenderer to know that data also, or else he can not tender properly. Part of the problem is that this work was not done adequately at the start.

Mr. Carroll: I do not accept that-----

Deputy Finucane: I would not expect Mr. Carroll to accept it, because he has been defending the Department of the Marine all day. I am saying what appears to us is that, given the overrun of £300,000, the tender should not have been granted in the first place. Rather than ringing up someone in Burtonport -- because I am sure the dogs in the street there know this -- will the witness say who was the contractor involved in those works? I presume he can reveal that information.

Mr. Carroll: 1It is C. W. Whelan.

Deputy Finucane: He is from Clare, is he not?

Mr. Carroll: I am not quite sure.

Deputy Finucane: He is, he is entitled to location. Would he have done works in other locations around that time?

Mr. Carroll: It is a big contracting firm and I presume it has works going on all the time.

Deputy Finucane: When Mr. Carroll says the Department went to investigate ¹C. W. Whelan equipment, where was that?

Mr. Carroll: I am not quite sure. The engineers handled that aspect, they would have visited the site, looked at the equipment and interviewed Mr. Whelan and his management. There were a range of meetings with him.

Deputy Finucane: Was that in Killadysart, County Clare?

Mr. Carroll: I am not sure where the specific—

Deputy Finucane: That is where he has his operation. What previous contracts could the Department assess with regard to the previous tendering experience of the contractor?

Mr. Carroll: I do not think he had done any work for us. We looked at his equipment and the people we thought would be available, we interviewed him and -- we were through this with Deputy Ellis already -- we consulted another company in that regard and the view was formed that this company could do it.

Deputy Finucane: Mr. Carroll said he was under much pressure at the time.

Mr. Carroll: No, I did not say that in respect of this. I said that in respect of Kilmore Quay, that we were under pressure to start it. There was a lot of pressure, and rightly so, from the fishermen and local representatives who wanted to get this project going. We did not have our own engineers, which would have been our preferred option. If I implied there was any untoward pressure in relation to Burtonport, that was not intended.

Deputy Finucane: Has this contractor done other work for the Department of the Marine in other ports since allocated the contract in 1993?

Mr. Carroll: No.

Deputy Finucane: Do you anticipate this contract will be finished within the two and a half years, March 1996?

Mr. Carroll: The structural work, the blasting, is 99 per cent finished now. The project is effectively finished. The dredged material has to be removed from the site and the site tidied up and so on. That is going on now and should be finished in the next five or six weeks.

Deputy Finucane: You are saying the contractor had not done previous work for the Department of the Marine—

Mr. Carroll: No.

Deputy Finucane: —but had done work for other ports around the country. Is that the case?

Mr. Carroll: I am not sure for whom he did work. The view was taken that he was capable of doing the work. He had done work of a similar nature, involving similar mobilisation of equipment and so on, and that he was capable of doing it. In retrospect, that was the wrong call.

Deputy Finucane: Did he not do work in Dingle harbour?

Mr. Carroll: No. It was Holland Dredging Company.

Deputy Finucane: With regard to 1993, you mentioned the whole dredging scene was a little haywire.

Mr. Carroll: Yes. It was very hard to rely on tender prices.

Deputy Finucane: In 1993, was there not a great availability of dredging companies to take on dredging contracts? There was much interest from companies in England, such as Westminster Dredging, and various others which came to this country to do work at that time.

Mr. Carroll: There is no doubt we could have got, as I said before, this project carried out very quickly at a high price. The price of £269,000 and the difference in his contract has been mentioned. There are particular reasons why a company might not want to make much money on a contract, for example, for strategic reasons because he might have unused equipment or he might want to get into this business in a bigger way. That would not necessarily be unusual.

Deputy Finucane: You say you could have got it at a high price. However, you say the average tender was £600,000 and you are now at £560,000, but one could say £560,000 is a high price compared to what you originally anticipated and that you could have got it done with other contractors for around the £600,000 mark and probably within your timescale of 11 to 18 weeks.

Mr. Carroll: There is no doubt in retrospect this project could have been delivered much quicker at a higher price - perhaps £600,000.

Deputy Finucane: What lessons has the Department learned with regard to future dredging contracts to ensure that serious cost overruns such as this do not happen again?

Mr. Carroll: This is a particular case where the wrong judgment was made on the management ability of the contractor. As I said in response to Deputy Ellis, the principal lesson learned here is that the non coming to notice of the previous work on part of the site had no material impact on the outcome. Obviously, we are putting in place processes whereby we go back a longer time period. This was 25 years previously; it was not picked up. We are concerned that the lesson to be learned is to put in place processes whereby we pick up that type of information and greater care is taken in that regard, although it was not a material factor in the whole project.

The second lesson which has been learned is that greater weight has to be given in future to the management ability of the contractor and much greater care has to be taken in assessing the management ability. In the light of this particular project, in retrospect, one should not have accepted this. Perhaps if a much more detailed management analysis was done, a different view would have been formed. Those are two specific lessons which we have learned.

Deputy Finucane: How do you feel about the lowest tender? If there is quite a differential between the first and second tender, would that not sound alarm bells that a person was cutting it too low?

Mr. Carroll: Clearly, but not about the capability of delivery. That is where the wrong call was made. As I said, the figure was not materially different from what the Department anticipated initially. Alarm bells are raised by low tenders and that is why one looks at the management capability. In retrospect the wrong call was made on the management capability.

Deputy Ellis: Before Deputy O'Keeffe contributes, I do not think we will complete this matter. A number of Deputies indicated that they wish to put questions to the witness. Perhaps the Committee could resume discussion of the matter on another date. Having listened to Mr. Carroll, as Deputy Byrne and others have done, we do not seem to be getting direct answers and perhaps the witness needs time to reflect. As our meeting on Thursday had to be postponed because the Accounting Officer is ill, perhaps the Committee could convene on Thursday morning to finalise this matter.

Chairman: I will allow two members to speak, Deputy O'Keeffe and Deputy Broughan.

Deputy B. O'Keeffe: There are two other Votes, Chairman.

Deputy Ellis: My suggestion is that we try to finish the entire matter on Thursday. It will not be completed now.

Chairman: We will hear Deputies O'Keeffe and Broughan and then consider the position.

Deputy B. O'Keeffe: Deputy Byrne asked about the cost factors between the direct labour and private contracting firm. He must understand it was like pouring milk into a leaking bucket and there happened to be a black hole in Kilmore Quay also. By the time the direct labour people came along, they had plugged that particular hole and that would make up the difference in costs between the two.

Deputy Byrne: I do not know whether the Deputy is telling me that as a matter of fact. Does the Deputy know the site and the individuals involved?

Deputy B. O'Keeffe: It is a matter of fact. In a report Mr. Carroll gave to the Comptroller and Auditor General he said the contractor's tender documentation was examined in detail and his abilities were discussed with a large consulting engineering firm. Was that engineering firm paid for that consultation?

Mr. Carroll: No, I do not think so.

Deputy B. O'Keeffe: So this was a pal's act. In other words, somebody from your Department went to a large consulting firm and said: “Hi lads, what do you think of this fellow up the road”? On the basis of a general conversation, they came back and this firm was recommended because they said: “We know these people. They are worthy of the contract and go ahead with them.” Are you telling me this is the basis on which consultation is operated by your Department?

Mr. Carroll: Our engineers do business with engineering firms and large consulting firms all the time. Networks with people whose judgment is trusted are formed. There would have been a consultation there in that regard. To describe it as an old pal's act would be quite unfair. This was just one aspect.

Deputy B. O'Keeffe: It is a very important aspect. We had an experience in Dingle on which another Committee of Public Accounts reported. It was extremely unhappy with the way the project was handled and advised that your Department should revise its procedures relating to others. To say the least, would you agree that was an extremely loose arrangement? Was it not an extremely loose way of operating by the Department to talk to another consulting firm and casually seek its advice relating to somebody who was getting a significant contract?

Mr. Carroll: No, I do not think so. As I said, a whole range of tests were carried out on this particular contractor. That was just one of the aspects.

Deputy B. O'Keeffe: This aspect is cited in your report to the Comptroller and Auditor General—

Mr. Carroll: Yes, absolutely.

Deputy B. O'Keeffe: —as one which was a major determining factor in the choosing of this particular contractor. It involved the viability of this contractor, his ability to do the work and carry it out in terms of the contract which was given to him.

Mr. Carroll: We had no direct experience of this contractor. We contacted a firm which had direct experience and its advice was positive.

Deputy B. O'Keeffe: Will the witnesses give the Committee the name of the consulting firm which was contacted?

Mr. Carroll: We dealt with that situation already. If it is appropriate, I will do so.

Deputy B. O'Keeffe: I could put down a parliamentary question and get the information from the Minister. However, the precedent here is that there has never been any difficulty in eliciting that type of information from any other Accounting Officer.

Mr. Carroll: I accept that —

Chairman: Mr. Carroll made the point already that he will consider it and give the particulars in writing.

Deputy Byrne: Besides the mysterious semi-State body, could we get the name of the actual contractor?

Deputy B. O'Keeffe: We got that.

Chairman: We got that when you went out.

Deputy Byrne: Oh, excuse me.

Deputy B. O'Keeffe: If I was the second lowest tenderer for this project - coming in at around £400,000 - I would be very aggrieved if, less than 12 months after the contract was issued, I found the price had almost quadrupled. Was there not, therefore, a case to answer by your Department relative to the person who was the second lowest tenderer? Did it not strike the Department as being very odd that there should be such a price gap between the lowest tender and all the others who tendered for the job? Did that not send out some signals? I know you said earlier that your own costings would be around the £300,000 mark, but did anyone look at what exactly the other tenders were tendering for, and what research they had carried into the project relative to, as you said, the “tricky situation” that can arise in working under water.

It could well be that these people had conducted their affairs properly, had done proper surveys and were far more in tune with the work to be carried out than the person who came in willy nilly with obviously no proper preparation having been done relative to surveying etc. They went ahead and the Department was caught.

Mr. Carroll: It cannot necessarily be taken that, if we had not accepted the first tender, we would have taken the second one which was for £454,000. That cannot be accepted.

Deputy B. O'Keeffe: Did the person who offered the second lowest tender make any observations indicating his dissatisfaction with what had gone on? It seems very easy for a contractor to come in at a low price and afterwards up the ante above the second lowest tender. Do you not think that that could be seen as malpractice, in a way, being condoned by your Department?

Mr. Carroll: We did not up the tender.

Deputy B. O'Keeffe: The price submitted was £705,000.

Mr. Carroll: But we did not up the tender. We were faced with two options to finish this project. One was to get out and get a new contractor, in which case we would have had to go back into the market in all probability. The other was to stick with the existing tenderer. The judgment was made that it was best to stick with the existing contractor. A deal was negotiated and £560,000 was agreed in that context. I do not think there is any cause for complaint and I am not sure we received any. I am certainly not going to encourage anybody to come after us in that regard. I do not think there would be any basis for complaint there. All the tenders were assessed. As I have said before, there is no doubt that we could have got this project done in six or 11 weeks for £700,000. If the message to come out from this Committee is that we are to be conservative, and we are always to get the project done on time and in line with budget, then my engineers will always go for high prices and will take the conservative path.

Mr. B. O'Keeffe: That is not it.

Mr. Carroll: In a sense a gamble was taken here which did not work out. If it had worked out we would have saved the State a considerable amount of money. As it turned out, the State did not lose that much money vis-á-vis alternative tenders.

Mr. B. O'Keeffe: The point I was really getting to was that one of the tenders was for £254,000 and the other was for around £400,000. I am trying to establish if there was a measurable difference in the estimates that were sent in, between the lowest and the others, to say that there was such a variation in price. Can you get a report to us on the differences in the work envisaged in the various tenders submitted to the Department?

Mr. Carroll: The work was the same. It was the same job.

Deputy B. O'Keeffe: I know it was the same job, but it transpired that, in giving it to the lowest tenderer, difficulties arose that they had not anticipated. The question arises whether the other tenderers would have anticipated those difficulties and would their research have been far more intensive than what had been carried out by the existing one. In going for the lowest price was your Department actually remiss in that you were taking an absolute chance?

Mr. Carroll: No. This question of difficulties comes up time and time again. The only alleged difficulties by the contractor was the question of prior work being done. I have already dealt with that two or three times. That had no material bearing on the outcome of the contract price whatsoever. It had no impact so it is not a change in circumstances that affected the outcome of this project. Our engineers estimated - and still take the view - that this project could probably have been delivered, if properly managed and organised, for a price not significantly different from £269,000. The view was formed that this company could do it. If the equipment had been properly mobilised and organised this project could have been done.

Deputy B. O'Keeffe: As regards the people who tendered, did I hear you say that this particular firm had no real experience in carrying out this type of work? Is it true to say that the other firms that tendered were vastly experienced in carrying out this type of activity?

Mr. Carroll: A number of the firms involved were high level international contractors who would have done this very quickly and expensively. You said “no experience”, but this project is not a difficult one, it is a simple engineering project.

Deputy B. O'Keeffe: On the one hand you say it was not a very difficult project but when you are trying to defend yourself you are telling us about the difficulties that can arise while working under water.

Mr. Carroll: This was specifically in relation to the underpinning of Kilmore Quay's harbour walls. That was a particular risk type venture. Underwater work is difficult and is high risk but the project in Burtonport was not a difficult or complex one. The type of experience required was not particularly demanding. If this contractor had gone about his business professionally he could, more or less, have delivered that project.

Deputy Broughan: I am a little bit confused by the two items, Burtonport and Kilmore Quay, in relation to the performance of the Department, which is the key element that we are ultimately examining, along with the expenditure of public money. On the one hand, in relation to the dredging of Kilmore Quay, we can assure the Comptroller and Auditor General that the Department has performed very well. On the other hand, in relation to Burtonport, it seems that we have a sort of Cinderella department which just does not have enough staff, certainly in the engineering area. Is it the case that we have a shortage of engineers who can effectively evaluate contractors?

Would it be better if we were to recommend to the Government in our next report that all this work should be given back to the OPW? It is the fifth or sixth occasion in the last three years that I can remember these type of contracts seem to have caused problems.

Mr. Carroll: You say “back to the OPW”, but the engineering capability of the Department of the Marine has come from the OPW. The OPW had 40 engineers on marine work while the Department of the Marine has 18 engineers working on programmes which are probably larger. Our engineers are under extreme pressure.

Deputy Broughan: Does the Department need 20 engineers?

Mr. Carroll: We are negotiating with our colleagues in the Department of Finance the staffing of the engineering side. Our engineers are highly professional, dedicated and hard working people. There is no overtime involved although they spend weekends and nights on projects.

Deputy Broughan: Why did they not examine the old files? Surely that would have solved part of the problem as regards Burtonport?

Mr. Carroll: These files, which were 25 years old, were stored in a basement. It was not a material factor in the project.

Deputy Broughan: The Burtonport saga is ongoing. At present, the company is being fined £2,000 a week. Are we sure the project will be finished for £560,000? How much has the company accumulated in fines which can be deducted?

Mr. Carroll: The fines were £2,000 a week from some date in November. The final amount depends on the completion date of the project. It could be 12 weeks at £2,000 per week. I am sure there will be disputes about this under the terms of the contract.

Deputy Broughan: Do you think we will recover that money?

Mr. Carroll: We will not pay it; we will deduct it.

Deputy Broughan: When do you expect it to be completed?

Mr. Carroll: Early in March. The blasting and dredging has been done. We now must wait until the material is cleared and we hope nothing goes wrong. Some 90 per cent of the project has been completed.

Deputy Broughan: The Department's engineering staff made a bad decision about the management abilities of ² C. W. Whelan. The only people we have not mentioned are certain individuals who were accused of fraud. Can you not tell me the name of the large consulting engineering firm which assessed the management abilities of ³ C.W. Whelan?

Mr. Carroll: I am reluctant to get involved in that because I am not sure about the terms of this consultation or if it is confidential. I do not mean to be discourteous to the Committee. We do a lot of consultations on a confidential basis with many people and if these get into the public domain those sources may dry up. However, I am anxious to be as helpful as possible to the Committee.

Deputy Broughan: My colleagues have asked questions about Kilmore Quay. As regards moneys owed to us by local authorities, Wexford County Council owes the Department of the Marine over £0.5 million. As regards the Kilmore Quay contract, Wexford County Council is entitled to pay the Department £350,000 of the £1.4 million approved by the Department of Finance. Did the Department get that money from the Council or is there any indication it will receive it?

Mr. Carroll: There is no difficulty with the payments in respect of the harbour works.

Deputy Broughan: Has the Department received the £350,000?

Mr. Carroll: I am not sure if the bill has been paid yet, but there is no difficulty as regards Wexford County Council paying for the Kilmore Quay project.

Deputy Broughan: We do not have a problem with harbour works, but with coastal erosion.

Mr. Carroll: Coastal erosion works.

Deputy Broughan: I applaud the Department for completing the Kilmore Quay project so efficiently after the astonishing performance by the contractor on the underpinning and dredging work. The Comptroller and Auditor General made a remarkable comment about the dredging work when he said he did not seem to be able to assess with any certainty the efficiency of direct labour in relation to such work and the expenditure of £2.95 million by the Department. You said the Department was short handed on the managerial side. How do we know we got value for money? The Kilmore Quay project was approved for a total of £800,000, but we are spending £3 million. This means we are spending over £2 million more than our consultants and project managers thought we would spend. Is the Comptroller and Auditor General not right? How do we know we got value for money?

Mr. Carroll: The £800,000 was the initial stage of a major project. The total cost will be under £2.95 million. We estimate that is £2 million less than it would have been had it been left with consultants and contractors. The main reason was the change made in the working method. Our engineers were not available to work on this project when it was being put together initially. They became available when the Union Hall and Portmagee projects were completed. The project was then turned on its head. The dredging carried out is of a much greater area than was originally intended. We have put in an extra breakwater and it is now a non-tidal harbour. Incidental to this project, room is being created for Wexford County Council to put a marina in that harbour. It is a magnificent job which is being done at good value for money.

The Deputy asked how do we know we are getting value for money vis-á-viscontracting. Our engineers run cost assessments on all jobs and they know from the tenders for various contracts if they can manage it better by direct labour rather than by contract. Marine engineering is a specialised area. The Department of the Marine has probably the best corps of marine engineers in the country. They are far superior to those in any major consulting firm. We have the best core of expertise.

Deputy Broughan: Is there not a case then for the Department to manage every project so that we do not read such details in the Comptroller and Auditor General's reports? We could, if we want to, subcontract further down the line.

Mr. Carroll: The Department of the Marine has the management and engineering capabilities to do the work better in complex major projects than those on contracts. Even if a project was being given to contractors, the Department of the Marine has the best consultants in the country. Consultancy is expensive. If consultants were employed for harbour works which cost £2 million, they could charge at least 10 per cent, approximately £200,000. Our engineers would do it for a fraction of that cost. We are stuck with a framework of staffing which we must use as best we can.

Deputy Byrne: Perhaps Mr. Carroll could tell me the name of the consultants for the Kilmore Quay project which was abandoned.

Mr. Carroll: ³ I think it was McCarthy but I will send the Deputy the details.

Deputy Ellis: I proposed earlier that we should adjourn this debate until Thursday. Some of my colleagues who had to leave have a number of questions on this paragraph which they want answered.

Chairman: I accept your point but we have dealt with this paragraph and seven members of the Committee spoke on it. There are a few points about which we are to receive information but we must note the paragraph before adjourning.

Deputy Ellis: Are we not allowed to defer it?

Chairman: No.

Deputy Broughan: Deputy Ellis is correct. There is information which is relevant and which we must have before we approve the paragraph.

Deputy Ellis: This is correct.

Deputy Broughan: A majority of members asked a question which has not been answered. It would be appropriate to follow the line suggested by Deputy Ellis and adjourn until Thursday.

Deputy Ellis: We are only asking that the meeting be adjourned.

Chairman: The matters outstanding are a copy of legal advice and the names of consultants.

Deputy Ellis: Other questions were asked by Deputies.

Chairman: The points I have mentioned seem to be the outstanding ones.

Deputy Ellis: There is no problem in noting the paragraph provided that members can return to the specific questions raised. There is a discrepancy between the payments made to the original and second consultants in Kilmore Quay. Approximately £71,000 was paid to the former and £8,000 to the latter. This is one of the matters regarding consultants which has not been explained and which we should again discuss.

Chairman: All I am suggesting is that we note the paragraph and deal with the queries which have been made on Thursday.

Deputy Byrne: Will we deal with paragraph 36 on Thursday.

Chairman: We will deal with paragraphs 36 and 37 on Thursday. Mr. Carroll, will you be available that day?

Mr. Carroll: Unfortunately, I will be abroad with the Minister on business on Thursday.

Chairman: Will you be able to appear before the Committee on 8 February?

Mr. Carroll: I do not have a detailed diary with me but that date should be okay.

Chairman: I proposed that we meet on that date if it is suitable for Mr. Carroll. While noting paragraph 35 the Committee must express its concern about the way the projects were managed and costs were allowed to escalate. The Committee hopes the new guidelines will prevent a recurrence.

There are a few points outstanding. Would it be possible to have information on them by 8 February?

Mr. Carroll: Absolutely.

Chairman: I propose that we deal with paragraphs 36 and 37 and the Vote on 8 February. Is that agreed? AGREED. Our next meeting will take place on 18 January at which we will discuss Garda transport.

The witness withdrew.

THE COMMITTEE ADJOURNED.

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Dé hAoine 9 Feabhra 1996

Friday 9 February 1996

The Committee met at 10.30 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Mr. Thomas Carroll, Secretary (Department. of the Marine) called and examined.

Mr. John Thompson and Mr. Noel Kerins, Department of Finance representatives, in attendance.

APPROPRIATION ACCOUNTS 1994

VOTE 30 - MARINE

Public Session

Chairman: We are now in public session. We will finish at 1.30 p.m. I understand that Mr. Carroll must finish at 1 p.m. Is that agreed? AGREED. We will move straight into public session. The Accounting Officer has said that he does not want the name of the company mentioned.

Deputy O'Malley: I am not at all satisfied that it is appropriate for an Accounting Officer to decide what will or will not be public.

Chairman: Good point.

Deputy O'Malley: That is a matter for this Committee. If we are to accept that principle it could have very serious consequences. It is wrong that an Accounting Officer should try to cover up for a company.

Chairman: He writes “I must, however, respectfully request the Committee not to bring the name of this company into the public domain for a number of reasons.” That is a matter for yourselves. That is all I will say.

Deputy O'Malley: Does he specify the reasons?

Mr. Purcell: He says that it would be unfair to attribute in any way to this company any responsibility for what transpired and that it might harm the informal contacts they have with companies from time to time. These companies might be unwilling to give off the record advice if they felt their name and advice and so on would come into the public domain as a result. This is a request to the Committee. As the Chairman said, it is up to the Committee to decide.

Chairman: The first letter is a copy of the Department of Finance circular relating to tax clearance procedures in public sector contracts which was sent to us on 25 January 1996.

Deputy Ellis: I take it the tax clearance regulations would be totally adhered to by all semi-State and State organisations?

Chairman: I take it that they are.

Deputy Ellis: Have we had any cases where they have not been adhered to?

Mr. Purcell: From time to time there are cases and if they are material and if I deem it serious enough to report on they would be brought before the Committee.

However, these regulations are adhered to in general and there is a great awareness of them now. In the early days there was some uncertainty as to whom they applied but in the last two years or so the whole area has been tightened up considerably.

Deputy B. O'Keeffe: I raised this matter at the last meeting on the basis that Irish companies may not be tendering on an equal footing with other European companies under EU directives. There are strict tax compliance laws within this country relative to public contracts; however the same laws would not apply to European companies tendering for works to be carried out in this country. They do not have the same strict guidelines relative to tax compliance in their countries so despite their being in difficulty with the tax authorities in their countries they could tender for contracts here. Irish companies could genuinely claim that there is an opportunity for other European companies to quote at a lower figure given the tax situation that pertains to them and the fact that they do not necesarily have a current tax clearance certificate. I was trying to level the pitch for all companies involved in the tendering process, in Ireland or abroad. I understood that the Revenue Commissioners were to be contacted with a view to seeing what level of control and monitoring they had of companies tendering from abroad.

Chairman: They were contacted and sent back the attached circular.

Deputy Broughan: In discussing a number of Votes we have seen that State bodies apparently did not engage in tendering procedures at all. We have also seen a number of these informal relationships on which the Comptroller and Auditor General has commented on a number of occasions. How can we be sure these guidelines are being applied at all if there is an informal relationship? Did the Revenue Commissioners not engage a public relations company to promote self assessment when that company had serious tax liabilities going back a decade or more? These guidelines are all very well, but if State bodies do not effectively require tax clearance for different companies, we have a fundamental problem.

Deputy N. O'Keeffe: May I be excused? I have another meeting in G24 with a group of British MPs. I will probably be back in about 30 minutes.

Chairman: We have Revenue in at end of the month, on 29th February. That issue could be raised with them. Is that acceptable? We are raising it on 29 February and you have the option of raising it there.

Deputy O'Malley: The Accounting Officer of the Revenue Commissioners should be put on notice that we will raise the matter of Murray consultants. It may be claimed that it was in a different period.

Chairman: We will put him on notice.

Deputy O'Malley: The document that has been circulated to us was not prepared because of the matters raised here. This is a general circular dated 11 July 1995. It does not take account of some of the recent matters that have come to light. It is one thing, as Deputy O'Keeffe says, for foreign companies to be allowed to tender against Irish companies, perhaps on an unfair basis. It is a different matter if an Irish company is able to tender against others on the basis that it be paid off-shore and not pay any tax on that income. That is an even more serious anomaly. The Accounting Officer will have to be asked why he recorded the payment as having been made by a Panamanian company when the money was due by a company in Ireland and the directors of that company in Ireland.

Deputy Broughan: We seem to have informal links between people and I know it came up in a slightly more controversial way in relation to the divorce referendum, but there do seem to be ongoing informal links between Departments or State bodies and various companies with various areas of expertise. This can drive a coach and four through the relevant guidelines which we think on this Committee are operating and are proven now not to be operating at all.

Mr. Purcell: It would be wrong to suggest they are not operating in accordance with those guidelines. My officers came upon some such cases and we have a good record of bringing those to light.

In the case of consultancies, PR, advertising and other such things, it is often the situation that the matter is not decided on price alone. There are qualitative issues which can often be subjective in the sense that people in a particular position will say: “We know these are the best people for this on the basis of the presentation they made to us and their track record.” Tenderers are not evaluated on the basis of price alone. There is always a difficulty in such cases, particularly with PR consultancies, service providers and anything related to the media.

Deputy Broughan: Is there not a supreme irony in that a company engaged to advise the Revenue and the public on tax compliance was itself a massive tax avoider or worse?

Chairman: We will move on. The second letter is correspondence from the Department of Agriculture, Food and Forestry.

Deputy O'Malley: That letter from Mr. Dowling and the enclosures are unsatisfactory. It is a pity he will not answer the questions he is asked and that this matter drags on. If one looks at Ms O'Rourke's letter to him, dated 26 January, which was written at the Committee's request, he was asked to deal with two matters. The letter asked, first, the reason his Department allowed companies to retain the balance of meat yields over the 68 per cent referred to and, second, did not seek a refund of the difference between the 68 per cent and the actual yield. He sent about 40 pages of stuff back to the Committee which purports to prove that one could not get more than 68 per cent from a carcass. That is total nonsense because there are pages and pages of evidence of actual yields of 75 per cent, 76 per cent and 77 per cent which were submitted by meat companies to their head office.

The Department was aware of that. On 11 May 1989, a Mr. Aidan McNamara in the Department of Agriculture wrote a letter to all 36 meat companies in the State, which boned at that time for intervention, saying that this practice was going on, the Department was aware of it, that it was illegal and would have to stop. It involved putting aside into one's own account and selling for one's own benefit the surplus yield from intervention carcasses. All of them were getting it and abundant evidence was given of that. There are pages of charts to show it.

They are actually the charts of the meat companies themselves. There is a column in each one showing what they called surplus yields, the difference between what they actually got and the 68 per cent for which they had to account by putting it into intervention. One sheet alone for a smaller factory for one week showed they made £44,000 from what they called surplus yield. Everyone knows that has been happening. The Department knew it as far back as 1989 but Mr. Dowling still tries to keep up the fiction with the Committee that it did not happen and could not happen.

Chairman: Perhaps the Committee should raise certain specific questions with Mr. Dowling, based on what the Deputy said, and ask him to reply to them.

Deputy O'Malley: He was asked those questions specifically in Ms O'Rourke's letter of 26 January. He was asked two points. Why did the Department allow the balance of the yields above 68 per cent to be retained by the companies and why did he not seek a refund?

It now transpires, as a result of a parliamentary question I put down in the last few days, that what we were told originally by Mr. Dowling and the Minister, that proceedings had been instituted in the Rathkeale case to recover £1.8 million which, it had been identified, the Department had been defrauded of there, is not now the case and the proceedings had not been instituted. The latest reply is that legal advice is being sought on the matter of recovery. This is at variance with what we were told originally or previously. It is a very serious matter because in parallel with this whole thing - this is where it arose here - the imposition of a fine on this country is being debated by the Commission at present. The potential fine is £109.9 million which is a huge sum of money. It arises directly from the failure of the Department to police these things and stop them happening and when it discovered them, as a result of the Beef Tribunal, to pursue those concerned and recover the money. Neither thing has been done.

Chairman: Will the Committee return the letter to Mr. Dowling and ask him to clarify the position by stating: “The Committee requests a further clarification in relation to meat yield from intervention beef carcasses and in particular the reason your Department allowed companies to retain the balance of meat yield over the 68 per cent”?

Deputy O'Malley: If he is asked that question he will be given the opportunity to send back all the rubbish he already sent in. There is no point in him trying to prove that one cannot get more than 68 per cent. We know and he knows that one can and it happened. The Committee wants to know why the Department allowed that to go on after it wrote to the companies in 1989. The particular instances which have come to light are in the accounting years 1990 and 1991. We do not want another lecture as to how one cannot get more than 68 per cent. We know one can. Why was it allowed to go on and why has he not sought a refund, not just in respect of Rathkeale, but in respect of all the others, including Waterford, Nenagh, Dublin and various other places?

Deputy Ellis: This is even more serious than it appears. There was another court case yesterday where Hibernian Meats won a sizeable claim against the Department of Agriculture with regard to intervention and APS contracts. It warrants Mr. Dowling coming back and explaining the whole matter to the Committee.

I was the first person to highlight a case at the Committee some time ago where the Department took a foolish case all the way to the Supreme Court. It cost the State millions of pounds, but we were not able to get a quantifiable cost with regard to the legal expenses. There has been another case and it is time the relevant Accounting Officer came in and explained why the Department of Agriculture continued to take foolish cases to the courts, with a subsequent serious loss of funds to the country. The only winners ever in the Four Courts are the lawyers.

Deputy B. O'Keeffe: Two fundamental issues arise from Mr. Dowling's letter and he must be questioned on them. With regard to the first issue, by his own admission and through the Beef Tribunal, it was concluded that one company had been involved in significant contravention of the rules on yields. The tribunal has been over for a considerable length of time but the Secretary of the Department says the Department has sought legal advice, not that it has taken a case but rather that it is taking legal advice. Why are we still at this stage after all these months of taking legal advice as against legal action?

The second issue - as Deputy O'Malley said - is that there is a fair volume of evidence arising from the Beef Tribunal which states that yields greater than 68 per cent can be achieved. Mr. Dowling should be asked how there is a considerable body of evidence arising from the Beef Tribunal which suggests other than what you conclude in your letter. It should be indicated to Mr. Dowling that the Committee wishes to meet and question him in public on this matter.

Chairman: Mr. Dowling is not due to appear before us, but if you wish, we can invite him to discuss the relevant matters.

Deputy Doherty: Can we have a special meeting of the Committee?

Chairman: We can.

Deputy Doherty: Can we have agreement sooner rather than later?

Chairman: We will get in contact with Mr. Dowling.

Deputy O'Malley: I am pleased to note this. According to a report in The Irish Times last October, which appeared the day after questions were put down by Deputy O'Dea and myself regarding sums of money that were defrauded in Rathkeale, the Minister replied, inter alia, that his Department had instituted civil legal proceedings for the recovery of £900,000 in respect of intervention beef which was misappropriated. We are now told this is not so and that they are seeking legal advice as to whether or not legal proceedings could be instituted. This is incorrect. Either the Dáil, the Committee or both were given wrong information.

Chairman: We will be in contact with Mr. Dowling. With regard to the correspondence from the Department of Justice on the information requested at the Committee meeting of 15 January, we are awaiting the report on Garda transport.

Deputy Broughan: We know who drives the Opel vehicles.

Deputy Ellis: We know who has the power. I note it cost £140,000 last year for taxis for prisoners. This is a high figure. Perhaps it is the kind of work that could be put out to contract.

Deputy Finucane: We recently discussed the issue of motor cycles. The Secretary indicated that one could get two vans for a motor cycle. Given what has been happening recently, and the publicity surrounding the rural crime situation, it would be worth our while to consider the logistics of this from the point of view of the gardaí.

I note that the deployment, including the allocation and replacement of all Garda vehicles, is a matter for Garda management. What is meant by Garda management? I understood that the Department of Justice would have the ultimate input here, and that Garda management would follow whatever the Department recommended. Could the C&AG shed any light on this?

Mr. Purcell: The Department lays down policy, but operational matters are decided by the Garda Commissioner and his top management team. I believe that is what the Secretary referred to.

Deputy Finucane: The Secretary lays down the policy. If a recommendation was made in a certain direction would it be conveyed to the Garda Commissioner?

Mr. Purcell: I do not know. The decision on whether to use vans instead of motor cycles would be seen to be within the domain of the Garda Commissioner and arguably rightly so.

Deputy Doherty: At the last meeting the point was made that this was based on cost effectiveness. The cost of maintenance and upkeep of motor cycles and so on is far greater. We are concerned with performance. The performance of a motor cycle in most situations is far superior to that of the van, and far more effective in its speed ratings.

Recently - this was made public in some news reports - a van happened to confront criminals in the mid west or west of Ireland recently and all that could be done was to salute them as they went by. Most of the more serious criminals today are on motor cycles while the gardaí are in vans. It is a reversal of role and of the effectiveness of mobility.

While we are not engaged in policy here, the reason for change is based on the cost implications as against the performance of the motor cycle in certain situations. It is a dangerous move and one that should not be allowed to take place.

Deputy B. O'Keeffe: A Minister of State - the three quarter's Minister - is given a State car. Is this unusual or is it a special once off provision?

Chairman: This is not a matter for the Committee. It is a policy decision.

Deputy B. O'Keeffee: Is he not a three quarter's Cabinet Minister?

Deputy Doherty: He has a dangerous job.

Deputy B. O'Keeffe: There are 68 vehicles involved here. In terms of value for money, is the C&AG satisfied that the best mechanism is being used in the Department to get the best value for money in terms of our purchasing of vans, motor cycles and cars? Would it be possible to arrange a tendering arrangement for all our requirements within the Department? Would we be likely to save considerable moneys were we to go down this road? There is a divergence in the make of car in operation with the Department. If we attempted a deal with one company considerable savings may be effected for the Department.

Mr. Purcell: We looked at the procurement procedures in the special report and concluded that economies could be achieved, mostly in staggering the supply and so on. In order to ensure fairness and equity of treatment for all manufactures and dealers, a specification is put forward. There may be several models, marks and makes which would conform to it. The criterion used in choosing would depend on the best deal that could be done, assuming that the specification is met.

Perhaps some economies could be achieved if one were to go with a specific make for a year or so. However, it may not be good thing to be locked into it. Obviously this is something that would be within the remit of the new fleet manager, who will consider the economies of such an approach as against the downside of the intangible disadvantages.

Chairman: Let us move to the Department of the Environment and the information sought on the operational programme for transport.

Deputy Ellis: Mr. O'Donoghue advises in his reply that inclusion of a project in the indicative list does not necessarily imply that it will be submitted for EU assistance, and projects other than those listed may be submitted and approved for assistance. Who takes the final decision on what will be submitted with regard to roads? Is it the National Roads Authority of the Department of the Environment?

Chairman: Presumably it must be the National Roads Authority. We can have it clarified as it does not specify.

Deputy Ellis: I do not believe that anybody other than the Department can make submissions for EU cohesion funding.

Chairman: We will have that clarified.

Deputy Ellis: The N16, which is highlighted as being a Euro route is not included for funding.

Chairman: We will ask the Accounting Officer for the Department of the Marine to come in to deal with items 5 and 6. Under Standing Order 131, section 3, the Committee shall refrain from inquiring into in public session or publishing confidential information in regard to the activities or plans of a Government Department or Office or of a body subject to audit, examination or inspection by the Comptroller and Auditor General if so requested either by a Member of the Government or by the body concerned. The Committee shall also refrain from inquiring into the merits any policy or policies of the Government, a Minister of the Government or the merits of the objectives of such policies.

Deputy Doherty: We do not deal with policy.

Chairman: I know, I am just making the point and putting you on notice, Deputy.

Deputy Ellis: We might try it but it will not work.

VOTE 30 - MARINE

Mr. Thomas Carroll, Secretary (Department of the Marine) called and examined.

Chairman: Mr. Carroll, you are welcome. Please introduce your officials.

Mr. Carroll: I am accompanied by Ms Sara White, Assistant Secretary of the Department and Ms Bernie Corney, Higher Executive Officer in the Accounts Division.

Chairman: We will move into the first correspondence regarding items raised at the meeting on 9 January.

Deputy Finucane: We discussed this issue at great length on the last occasion and Mr. Carroll responded to our request to send us correspondence. Much of our discussion hinged on the consultants' report and the recommendation of the contractor for the Burtonport job. Mr. Carroll has revealed that in writing and I will respect his wishes. With regard to the consultants involved, who are from an international firm, to what degree would they have advised the Department in the past with regard to similar projects? Are they still advising the Department with regard to future projects? Is Mr. Carroll perfectly satisfied with the advice they gave? He states in his letter that ultimately it was the decision of the Department to award the contract but in doing so it would have been influenced by the consulting engineers, who have an international reputation. Perhaps he would expand on that.

Mr. Carroll: As I understand it, we would have consulted this company and many other similar companies on many occasions and would continue to do so. That is normal practice. We are careful how we use the term “consultants”; it implies a consultancy arrangement but the term used in the original note I gave the Committee was that we discussed the abilities of the contractor. We do that with this and other companies from the public and private sector. That would be standard practice and we would be perfectly happy to consult that company again.

However, I would hesitate to jump from discussing abilities to assigning some responsibility in this matter to that or any other company one consults in this type of situation. The parallel I would draw is with interviewing people for jobs. There may be a network -- one may know a person's previous boss and might ask him, although the applicant looks an excellent person, whether there is anything about him which is not on the surface. This is normal, diligent, prudent management. One can never in those circumstances attribute responsibility to the people one consults, and rightly so. That is the position as we see it.

Deputy Finucane: There is a great deal of technology now available in hydrographic surveys. As we discovered, there were previous reports about rock being in that location. The specification in the original tender is based on certain factors. Was the Department remiss in not identifying what real work was needed to be carried out? In dredging, the existence of rocks has a profound impact on costings. Would the Department of the Marine, which was responsible for carrying out the initial hydrographic survey, not identify what was to be done? Based on Mr. Carroll's experience of the Burtonport job and the non-availability of information from the OPW -- concerning similar reports done in the past which showed that rock was present at that place -- does he think the Department erred in not at least consulting with the OPW, which would have been much involved in harbour developments and Government work throughout the country? Does he think serious consideration was given to doing a detailed hydrographic survey in order that the contractor would at least know the scope of the work on which he was giving a quote? Then we would not have been elaborating, as we were the last day, on what appeared to be a cost over-run on the additional contract, as there appeared to be a certain validity in the over-run on the basis of what the contractor found subsequently. Has the Department of the Marine learned its lesson for future harbour developments, in regard to the hydrographic survey and in order to ensure this eventuality does not happen again?

Chairman: The two letters, items 5 and 6, are being taken together.

Mr. Carroll: Deputy Finucane asked a series of questions, dealing with three main points. On consulting the OPW, the marine engineering capability of the Department of the Marine came from the OPW. Many of the engineers, including the Chief Engineer and many of the senior engineers, are former OPW staff who were involved in this function; the OPW is no longer involved in it. We have taken it over and many of the staff are the same. They would have been consulting themselves in that sense and this was minor work which was done in a small part of one of the three areas to be drilled some 25 years previously. In retrospect it was an oversight or an omission not to have picked that up but I will come back to the consequences of that in a moment.

On the hydrographic study, as I understand that from a technical perspective a full hydrographic study was done on this site. I am not a technical expert but I believe a hydrographic study will show the contours of the sea bed but will not show its composition. What was done in the site investigation was that core samples were taken by drilling through the site. That area, which was the subject of previous work, was drilled and one had a fair assessment of how much rock was in it. Again, as I understand it, the quantities which ultimately were found and taken out of that are no different from the bills of quantity in the case, so there was no variation arising from this.

We are conducting hydrographic studies and technical assessments professionally and comprehensively. I am not sure if there are specific lessons to be learned -- there may be a minor operational aspect arising from this but there is no major lesson to be derived from how the preparatory work was done here. Of course -- and we have put this in effect now -- we should go back further in time to check if previous work has been done.

However, as to the link between this and the cost overrun, I know the contractor in this case would have a different view of this but our view is that the fact that previous work was done in this area had little material bearing on the overall cost. No formal claim was lodged and there is a procedure in place to lodge a formal claim under the terms of the contract. No formal claim was lodged in the legal sense. The Department and the engineer would have been vested with that responsibility. He did not have to address the question specifically of what additional costs, if any, would have been attributable to that particular claim if it had been formally made.

Our view is and the advice I have on this is that the particular claim, if it had been made, might have resulted in no award to the contractor. I asked for a guesstimate as to the level of exposure being talked about and we would have been talking about £20,000 to £30,000 at the most. One should not overstate the bearing of this particular element from our perspective in this whole episode. I know the contractor may have a different view of that but this was never resolved as an individual issue in its own right.

Deputy Finucane: What was the original tender amount?

Mr. Carroll: £269,000.

Deputy Finucane: What was the final amount you agreed with the contractor.

Mr. Carroll: £560,000.

Deputy Finucane: The job specification would have gone into the amount of work to be carried out and you admitted that was done quite well. How could it be done quite well if one finishes with a massive increase in the tender amount? How can the difference be reconciled? It would have to be inaccurate. The contractor could not have been working consistent with the original specification or there would not be the huge variation. By definition in agreeing to a revised tender you are conceding that the original specification was not right.

Mr. Carroll: No, we are not.

Deputy Finucane: Why the difference?

Mr. Carroll: Because it was the cost of getting out having got to that point and looking at the alternatives - to expel that contractor at that particular point, to bring in another contractor and all that would arise out of that, and knowing what the alternative tenders available had been, knowing that if we went back into the market with everybody knowing the circumstances surrounding this that we would not get it cheap. We had a good view of what it would cost us and we had to make a judgement whether to expel the contractor and bring in somebody new - that was the choice. The choice was that negotiating the £560,000 at that point in time was the best option available to minimise cost at that point.

Deputy Finucane: When do you expect the contract to finish?

Mr. Carroll: During March.

Deputy Doherty: How many of engineers employed by the Department of the Marine were previously employed with OPW and would have had access to the knowledge or information regarding the work previously done on the site by OPW?

Mr. Carroll: As far as I am aware none of our present staff would have worked on that 25 years ago.

Deputy Doherty: You did say that they came from OPW with engineering capability and full knowledge and none of them were there previously, as I can well understand. What brings you to believe that these people would have been endowed with a special intelligence about something which happened 25 years previously and that they would bring it in their genetic condition to your Department and reveal it without being asked?

Mr. Carroll: The engineers are the people who do the work on these projects; they do the assessments-----

Deputy Doherty: To put it another way, what percentage of the actual site, that is the controversial part of the three areas involved, is at issue?

Mr. Carroll: 30 per cent of one of the areas.

Deputy Doherty: Of site B.

Mr. Carroll: Maybe; I will come back to that if I can find it.

Deputy Doherty: We can move on and perhaps you can find it before we finish.

Mr. Carroll: I have it here somewhere. I think it is site B but I am not sure of the particular labelled site.

Deputy Doherty: At the outset and ignoring the circumstances of the acceptance of the tender and deeming it to be a contract, were you satisfied with the contract in the first instance?

Mr. Carroll: Yes.

Deputy Doherty: Did you get a good recommendation for the contractor?

Mr. Carroll: On the basis of-----

Deputy Doherty: Your inquiries revealed that the contractor was eminently capable of doing the job.

Mr. Carroll: This is a highly reputable contractor.

Deputy Doherty: Did you examine his operations, his plant and his yard etc.?

Mr. Carroll: Yes.

Deputy Doherty: The contractor then started on the job-----

Mr. Carroll: Yes.

Deputy Doherty: -----and we find there is a hold-up. What was the cause of that hold-up?

Mr. Carroll: From our perspective the contractor did not deliver.

Deputy Doherty: Deliver what? I asked you what the hold-up was.

Mr. Carroll: On the work.

Deputy Doherty: What was the reason in your view for the hold-up or the non-delivery, or what reason did he give?

Mr. Carroll: Our perception or understanding of the reason for non-delivery was lack of management application by the contractor of that particular project.

Deputy Doherty: There was a deficiency in his management.

Mr. Carroll: Of that particular project.

Deputy Doherty: Did he at any time indicate to you that the difficulties arose in the context of his drilling of the 30 per cent area? In so doing he found there were some difficulties for which he could not at the time account, but having made inquiries locally he established that this particular area had been drilled previously by the OPW and, consequently, the work done then had left his task greatly different and impossible in the way he was approaching it. Did he tell you that?

Mr. Carroll: He took the view that there were problems and difficulties.

Deputy Doherty: Did he tell you that? We want to be specific now.

Mr. Carroll: The work did not progress on this project-----

Deputy Doherty: We know that.

Mr. Carroll: -----for a very long time. He then submitted, although not in the formal way-----

Deputy Doherty: Let us make it easy - what did he tell you was his problem?

Mr. Carroll: He would have probably hinged it on-----

Deputy Doherty: We want no probabilities. What did he tell you? Do not read his mind; I want to find out from you what you understand his reasoning to have been.

Mr. Carroll: He will claim no doubt that-----

Deputy Doherty: What did he tell you? I do not want you to tell me what he claimed. I want you to tell me what he told you or your officials. What was the specific reason for the delay? You say the delay was about a deficit in management but what was his reason given to you?

Mr. Carroll: There were 30 meetings held with this person—

Deputy Doherty: This very important point is central to the whole issue. You claim, as the Accounting Officer, to have full and total responsibility for everything which goes on in your Department. What excuse did the contractor give you for this major overrun? You have advanced another excuse but which excuse did the contractor give you?

Mr. Carroll: I do not have access to every detailed record of-----

Deputy Doherty: You have access to the officials in your Department. You know that this has come up before, that it is unresolved and that there are questions to be answered. You are now telling me that you do not have access to information which was in your realm of responsibility.

Mr. Carroll: I can talk about our understanding of the professional advice-----

Deputy Doherty: What excuse was given to you? What reason did the professionals give you for the contractor not proceeding? What reason or excuse did the contractor give to your professional technical advisers?

Mr. Carroll: He submitted a claim - not a formal claim - for £700,000.

Deputy Doherty: That is not what I asked you. I want to be very specific about this. With great respect to you and your office, I ask you to tell me the specific reason given by the contractor.

Mr. Carroll: Offhand, I do not know the specific reason.

Deputy Doherty: You do not know the specific reason.

Mr. Carroll: I cannot point out every item of-----

Deputy Doherty: We will take it that the answer I am getting is that you do not know the specific reason. However, I ask you to get the specific reason before this meeting ends. Secondly, on the basis that you do not know the specific reason, if the reason given was associated with the fact that work had been previously done by the OPW, would you expect that such a reason would be investigated by you?

Mr. Carroll: Absolutely.

Deputy Doherty: Was it investigated by you?

Mr. Carroll: There is a formal process-----

Deputy Doherty: Was it investigated by you?

Mr. Carroll: There is a formal-----

Deputy Doherty: Sorry. Mr. Carroll, I am asking a question: was it investigated by you?

Mr. Carroll: Was what investigated?

Deputy Doherty: Was the reason, as I have outlined to you - that the OPW had done work on this a number of years previously - investigated by you?

Mr. Carroll: If a claim arises there is a formal procedure under contracts to deal with it. The formal procedure was not initiated by the contractor. If it had been, it would have been dealt with. We were aware at that point of the OPW work, which I have already dealt with.

Deputy Doherty: Are you telling me that when it became known to you that the delay - and delays cost money and you were the person who was paying - was attributed to work carried out by another State Department some years previously, because of procedures you locked yourself into a situation where you made no inquiries into it? Is that what you are telling me?

Mr. Carroll: No, not at all. That would have been looked at. I have given our assessment of that. It had no material bearing and would not have-----

Deputy Doherty: But it had a material bearing - that is the very point.

Mr. Carroll: No.

Deputy Doherty: I will tell you where it had a material bearing. In your legal advice from Mr. Brian Leonard, under heading number four, the claim for extras, he states that:

Dr. Farrell explained at the consultation held in the Law Library on 12 December 1994 that the contractor was correct in asserting that part of the area, the subject matter of the present contract, had been previously drilled and blasted.

That is the excuse he gave which you could not recall two minutes ago. Mr. Leonard further stated:

My recollection is that he [Dr. Farrell, that is] informed me that something in the region of 30 per cent of the area known as “B” was involved and he explained to us at the consultation that the omission to furnish this information to the contractor could indeed give rise to a legitimate claim.

That is a very serious matter. That legitimate claim relates to the fact that you cannot recall the excuse which was given. Furthermore, when the contractor brought this to your attention, sought a reply on the matter, gave it as a justification for the delay and subsequently sent in a claim because his plant was lying idle at a cost to himself, no investigation took place and no information could be got from your Department. You told us today that there was great competency because you could use engineers from the OPW who are now in your Department because the function was transferred. However, they did not bring the files or the memory bank of the OPW. They certainly have not told you much about it in the meantime because you had no recollection today of the excuse.

Deputy Broughan: On a point of information, I accept what Deputy Doherty is saying but it might be fair to read out the next paragraph of the legal opinion which states:

We did not discuss that matter in any detail but Dr. Farrell explained to me very clearly that the contractor's claims for a substantial additional payment had not, in his opinion, been properly put forward in accordance with the terms and conditions of the contract, and explained to us that he would fully and adequately consider any claim properly put forward under and in accordance with the terms and conditions of the contract.

That is an important part.

Deputy Doherty: I accept that and thank the Deputy for pointing it out.

Chairman: I ask the Deputy to conclude.

Deputy Doherty: I am not going to conclude-----

Chairman: We have an agreement and I will let you in again later.

Deputy Doherty: I have to ensure that I get to some point of common sense on this particular matter. The position is that the contractor sought to give an excuse. That excuse, when given, should have resulted in an investigation by any normal standard and should have been rejected or accepted on the basis of the investigation. He did not pursue a claim correctly but the reality was that it was better to enter into negotiations with him and settle the matter. At the end of the day, his excuse was related to bad and inclement weather. The inclement weather is a natural expectation due to the prevailing conditions in that area. However, what was the inclement weather connected with - what was the excuse associated with?

Mr. Carroll: I do not get what you mean.

Deputy Doherty: It has been indicated by the C&AG that part of the reason given for the delay was the inclement weather, as told to your Department by the contractor. The reality is that inclement weather is not unusual in that area. In what context was that excuse given for the delay? What kind of work was he doing that meant that the weather was a factor?

Chairman: I will ask the Comptroller to give us information on the points which have been raised.

Mr. Purcell: The Deputy mentioned the two reasons which I summarised in the paragraph of my report. I based it on the note, which I have here, of a meeting held in July 1994 between the contractor and the Department. The note states that the contractor said that he had met with two major difficulties, which he named. One was that area “B”, which to his knowledge was previously drilled and blasted, was causing him difficulty during drilling and blasting. Secondly - which related to your latter point - the dump site was not accessible at times due to poor weather conditions and, consequently, he had a lot of down time. The contractor stated that he felt this site was unsuitable and unsafe. Perhaps that might help.

Deputy Doherty: It certainly does. The reality is that the expertise available to the Department of the Marine and the important meteorological information in the context of where the dump site should be seems to have been grossly wrong because the dump site was changed. Is that so?

Mr. Carroll: Yes.

Deputy Doherty: Why was it changed?

Mr. Carroll: The dump site was selected subsequent to the-----

Deputy Doherty: The dump site was selected subsequently?

Mr. Carroll: Yes, that is normal.

Deputy Doherty: The dump site was selected subsequent to the tender having been accepted?

Mr. Carroll: Yes.

Deputy Doherty: Would you not have considered that a matter as important as the location of the dump site, given the serious implications of the weather conditions, would have a significant bearing on the cost?

Mr. Carroll: This was a tendering process-----

Deputy Doherty: I am aware of that.

Mr. Carroll: -----and the onus was on the contractor to get that right in fixing a price. Weather is, of course, a factor and if it comes into play during a contract, then it comes into play. However, this contract was placed in September 1993. In July 1994, this contract was supposed to be completed in three months - the contractor suggested 11 weeks.

Deputy Doherty: I will put my remaining questions to Mr. Carroll later.

Deputy Broughan: The subject of the correspondence was that Mr. Carroll preferred not to make public the name of the consulting engineer, an action which I understand in relation to the Department's assessment of the contractor. Clearly the contractor was considered professional and capable of carrying out the work involved. On foot of that, did the Department reassess the consultant engineers?

Mr. Carroll: They are not consultant engineers. It is simply the normal checking somebody would do with people in the business.

Deputy Broughan: That is the point, the Department checked with people in the business. Having received advice which reflected a bad outcome, did Mr. Carroll reassess their advice for all cases involving important expenditure by the Department of the Marine?

Mr. Carroll: The Department recently checked with a number of firms in the business, on an informal basis, about the firm in question. In general, that firm received high recommendations. It is a reputable contractor. There is no doubt about that.

Deputy Broughan: On the last occasion Mr. Carroll appeared before the Committee we did not have access to the legal advice provided to the Department regarding this matter. In that regard, is Dr. Farrell an independent consulting engineer or did he work for the Department of the Marine?

Mr. Carroll: Dr. Farrell is the Chief Engineer in the Department of the Marine.

Deputy Broughan: The legal advice casts some doubt on his role in this matter. On one hand it stated that he acted as the Minister's representative, on the other hand he seemed to be acting as the local, on-site manager with responsibility for supervising the daily work carried out by the contractor. The legal judgment highlights the problems in that regard. I take Mr. Carroll's point that there is a shortage of engineers. The fact that the two projects incurred substantial expenditure clearly illustrates the need for increased professional expertise within the Department. This should be noted when the Committee makes its report to the Dáil. Is Mr. Carroll concerned about Counsel's opinion in relation to the performance of the Chief Engineer?

Mr. Carroll: No. Under standard contracts of this nature, there is a device whereby the engineer acts as the first point for settling disputes and determining whether a legitimate claim has been made. This is a standard provision in major engineering contracts in all sectors - local authorities, private building contracts, etc. It is a means to try to settle disputes quickly. The engineer will determine if there is a legitimate claim and does so as a professional person, independent of his role as chief engineer in the Department of the Marine. If his judgement in that regard is disputed by the contractor, another mechanism is utilised. It is a standard, accepted and long established device and I cannot see any weaknesses in the system.

Deputy Broughan: The legal advice provided by counsel states:

….the engineer's representative under the contract and that person's assistants namely P. J. Kelly, J. McHale and G. Duke whose role under the contract seems to me to be essentially that of clerk of works and assistants to the clerk of works seems to have taken over and assumed some of the duties and responsibilities of Dr. Farrell under the contract with particular reference to the consideration and issuing of certificates.

Is that an indication that the system broke down?

Mr. Carroll: I discussed that matter in detail with our engineers. There is some question regarding the accuracy or relevance of the legal advice in this respect. I believe that Counsel based the advice on architectural contracts which have different frameworks. The way in which things were done in this case would be standard practice in all engineering contracts. That is the professional advice I have been given on the matter.

Deputy Broughan: To a lay person this seems to be a messy and awkward way to carry out a contract. In relation to Burtonport, one must state that the buck stops with the Department of the Marine in relation to the ultimate responsibility for the cost overruns.

Mr. Carroll: The outcome of this project is our sole responsibility and nobody else's.

Deputy Broughan: The buck stops with yourself, the engineer and the staff of the Department of the Marine.

Mr. Carroll: Yes, absolutely.

Deputy Ellis: Mr. Carroll stated that no dumpsite had been agreed when the initial contract was put out to tender. Is that correct?

Mr. Carroll: That is what I said. I am not familiar with what precisely would be in place before the contract was awarded. My understanding is that a decision on the dumpsite would follow. People dump things all the time, it is not difficult.

Deputy Ellis: Mr. Carroll has suggested that things might be dumped willy-nilly. The terms of this contract called for rock removal and dredging. Should a decision have been taken regarding where all spoil should be dumped?

Mr. Carroll: Before the tenders-----

Deputy Ellis: I asked a simple question which requires a “yes” or “no” answer.

Mr. Carroll: Could the Deputy repeat the question?

Deputy Ellis: Was a site decided upon into which spoil from Burtonport Harbour could be dumped?

Mr. Carroll: When?

Deputy Ellis: At the time of the issue of the contract.

Mr. Carroll: My understanding is that this was not the case.

Deputy Ellis: A contract was therefore issued without a designated dumpsite. No contract can be issued without the removal of spoil, etc., without agreement on a dumpsite. I put it to Mr. Carroll that a dumpsite was agreed upon but the Department changed this midway through the contract when it was discovered that the original site was unsuitable. Is that correct?

Mr. Carroll: Dumping at sea licensing is an entirely separate function-----

Deputy Ellis: My question relates to whether the Department changed the dumpsite midway through the contract because that site - which Mr. Carroll has failed to identify - was unsuitable due to tidal conditions.

Mr. Carroll: I am not aware of the full details of that.

Deputy Ellis: With due respect, Mr. Carroll is aware of nothing. He came here today believing that, because so many questions were put to him on the last occasion, he would not be questioned again regarding this matter. His Department has been completely negligent in relation to the preparation of contract documents and informing the contractor of certain actions which had previously been taken by OPW - namely the blasting of rocks.

Mr. Carroll stated earlier that some of his staff came from OPW. However, as Deputy Doherty stated, it is obvious that they did not bring too much knowledge with them, only their PRSI numbers.

Mr. Carroll: That is an outrageous statement.

Deputy Ellis: Mr. Carroll stated that he did not have the knowledge and that some of his staff came from OPW.

Mr. Carroll: We have a very professional and dedicated engineering staff in the Department of the Marine.

Deputy Ellis: Mr. Carroll informed me that they came from OPW, that this information did not come with them and that the section in OPW responsible for marine works was taken over by the Department of the Marine. He stated that they did not bring the necessary technical data with them. That was negligence on his part or that of his predecessor.

On what date did Mr. Carroll become aware that the contractor had discovered problems regarding the rock and the dumpsite?

Mr. Carroll: In February 1994, he stated that he was experiencing difficulty on part of the site.

Deputy Ellis: What action was then taken by the Department of the Marine?

Mr. Carroll: He was asked to provide the supporting documentation. He was making a claim or purported to be making a claim.

Deputy Ellis: No. It is obvious from what you say that he did not make a claim. He said that he was experiencing difficulty. What action was taken by the Department's engineering branch at that stage to try to rectify the problem?

Mr. Carroll: He was asked to substantiate the claim and he did not.

Deputy Ellis: When did he substantiate the claim?

Mr. Carroll: He never substantiated the claim.

Deputy Ellis: If he did not substantiate it, why did the legal advice which was given to the Department of the Marine in the context of Dr. Farrell's discussions with Mr. Leonard, the counsel from whom he sought advice, state:

My recollection is that he informed me that something in the region of 30 % of the area known as “B” was involved …”.

It is obvious that Dr. Farrell, who was the Department's Chief Engineer, or some of the three people named earlier, i.e. P.J. Kelly, J. McHale or G. Duke, had been made aware in February 1994, according to Mr. Carroll, of the fact that there was a problem.

Mr. Carroll: There was a problem but it was a minor problem. It wasn't a serious problem.

Deputy Ellis: When had Mr. Carroll been made aware of the problem with regard to the dumpsite which the Department had suggested originally?

Mr. Carroll: In February 1994.

Deputy Ellis: For both items?

Mr. Carroll: Yes.

Deputy Ellis: But Mr. Carroll told me earlier -----

Mr. Carroll: In March 1994, we agreed an alternative site.

Deputy Ellis: Mr. Carroll told me earlier that the Department had not suggested the original site at all. Now he says that the Department agreed to a change of site as suggested originally. I think Mr. Carroll is stonewalling, to put it mildly. This deserves a lot more investigation. Maybe the Committee should seek to talk to Dr. Farrell, P.J. Kelly, J. McHale and G. Duke. What rank do Mr. Kelly, Mr. McHale and Mr. Duke hold? Are they engineers?

Mr. Carroll: Yes. Paddy Kelly is a very senior experienced Grade I engineer, John McHale is a Grade II engineer, I think, and I am not quite sure whether Mr. Duke is an engineer or a technician.

Deputy Ellis: Who is responsible for the payment certificate?

Mr. Carroll: The Chief Engineer.

Deputy Ellis: Dr. Farrell?

Mr. Carroll: Ultimately, he has responsibility.

Deputy Ellis: He issued them?

Mr. Carroll: He is responsible.

Deputy Ellis: Did he issue them?

Mr. Carroll: Which certificates? Payment certificates?

Deputy Ellis: Payment certificates. Any certificates.

Mr. Carroll: Some of these would be delegated -----

Deputy Ellis: Mr. Carroll says that some of them were delegated.

Mr. Carroll: In the normal course.

Deputy Ellis: Which ones?

Mr. Carroll: I do not know which ones.

Deputy Ellis: Well, Mr. Carroll should know. He is here to face the Committee of Public Accounts to give an account of his stewardship of the Department.

Chairman: Be reasonable with Mr. Carroll. He is trying to answer the questions which are being put to him.

Deputy Ellis: He does not know. He has come in here and has shown a lack of knowledge of his Department which is frightening. The Secretary of a Department has come before the Committee as the Accounting Officer and has not brought enough backup. It is unfair to the two people who are with him that they should be expected to answer the questions. Mr. Carroll was aware that this matter would be raised and he is unable, obviously, to answer the questions which are being put by this Committee. He has not told us when the core samples were taken prior to the issuing of the contract. How many samples were taken? On what date were the samples taken? Mr. Carroll can shrug his shoulders as long as he likes.

Mr. Carroll: These are all detailed itemised specific questions. One's recall would want to be quite extraordinary to be able to answer these types of questions. We will note all these specific questions and reply to them. They are almost trick questions and one could not be expected to answer.

Chairman: Will you be in a position to get that information?

Mr. Carroll: Of course. I will get that information.

Deputy Ellis: If Mr. Carroll feels that he is not able to answer the Committee's questions - it is obvious that he feels he is not able because he has answered none of them - today, I suggest we adjourn and have Mr. Carroll come back to a special meeting to specifically deal with this matter in every detail. It is unfair. Due to a lack of knowledge, as he has stated, Mr. Carroll is not able to answer the questions. If he must go back to his Department to be briefed, he should do so and come before this Committee fully briefed as most Departmental Secretaries do.

Chairman: I do not want to contradict you, Deputy, but Mr. Carroll only took over as Accounting Officer last year.

Deputy Ellis: This is part of it. If he is not briefed fully, he should go back to his Department, get himself briefed fully and return.

Mr. Carroll: I am prepared to answer any questions. A range of specific questions about this, that and the other are thrown out here. There is no basis here today, the next day or any day that one could be reasonably expected to answer such questions. Give us notice and we will deal with them.

Deputy Ellis: We are giving notice.

Mr. Carroll: I am not prepared to come here and be interrogated on detailed itemised questions or be accused of not being in charge of the brief and hear that because I cannot do so I must come back on the same basis the next day to be asked the same type of trick questions. Let us be mature about this.

Deputy Ellis: Some of us are being more mature in our responsibilities than others. I resent the Secretary of a Department coming here and saying that we are asking trick questions. We are asking specific questions.

Mr. Carroll: I apologise for both those remarks but it is extremely difficult to deal with those types of questions.

Chairman: If Deputy Ellis, Deputy Doherty or any Member of the Committee who so wish make a list of the particular questions -----

Deputy Ellis: No. That is not the procedure here.

Deputy Doherty: Accepting that Mr. Carroll is recent to the Department, that many questions can require further research and investigation, that this not first time this matter has come on the agenda, that the Comptroller and Auditor General has made a specific report on the matter and that it is a matter of serious concern since double the money was involved at the end of the day, I would have imagined Mr. Carroll would have given specific thought to all of this because the questions I asked were ones which he could not but have examined and investigated. For example, what excuses were given to him?

With regard to when the overrun occurred and the payments went from about £260,000 to £560,000, can Mr. Carroll itemise the areas which caused that overrun?

Chairman: You have a fair idea of the questions which Members wish to ask and it is obvious that they are looking for answers to specific questions. If we adjourn as suggested, will you be in a position to give the relevant information the next day.

Mr. Carroll: If specific questions are identified -----

Chairman: No. You know now what is being asked of you.

Mr. Carroll: Yes. Absolutely. We will deal with those questions. If I had brought my engineers with me - maybe I ought to have done so - we could -----

Deputy Ellis: If Mr. Carroll brought the people who were involved in this entire project to assist him forthwith when any question is put, it might help Mr. Carroll. That might be the way to tease out this matter and clarify it finally.

There are serious accusations here. There is the accusation that the Department did not manage the matter properly. There is also the suggestion that some of the people who were involved may not have been competent to do the work. I don't believe that is the case.

There were so many changes to the contract that it would have been impossible for anybody not to have made claims against the Department. It is important that the engineering people who are responsible for dealing with it should answer to you.

Deputy B. O'Keeffe: It is a good idea to adjourn. We must understand that Mr. Carroll may not be familiar with the way this Committee works and he may not be aware of how important it is to have a backup team. Such questioning occurs every week at this Committee.

You said this is a reputable contractor, but the last day you said that management deficiency caused the delay and disruption in this contract. This throws tremendous light on the developer. Last week I thought the contractor was negligent in his approach and commitment to the project. However, it now seems the tender documents from the Department were deficient in that they did not include all the details relative to the previous blasting. The location of the dump was totally unsuitable and had to be changed. The Department's tendering procedure for the contract was not correct; we had to renegotiate ourselves out of it. We should have advertised it according to an EU directive, but we did not comply with that. We stayed with the existing contractor. An apology should be sent to the contractor because of the difficulties created by the Department. The Department, not the contractor, seems to have shown management deficiency.

Deputy Broughan: I am not sure those were the observations from last week's meeting. The Secretary clearly said that the buck stopped with him and his officials and he reiterated that today. It does not follow that it is a criticism of the contractor, who is in this room today. The Comptroller and Auditor General has criticised the fact that there was no formal contract. The offer and acceptance procedure is a problem because the contractor was not given enough requisite information. I do not know if that was the reason there was no written contract. Points were made about the engineer but I am not sure if they were criticisms. The Secretary has accepted the criticisms of the Comptroller and Auditor General about the offering and implementation of the contract.

I do not know what we can do because we are only talking about an overrun of £0.25 million. We investigated Kilmore Quay a few weeks ago which had an overrun of £1.2 million. We have a tight schedule to follow at this Committee - next week we are discussing the gas interconnector - therefore, I am not sure if it is profitable to spend endless days discussing the minutiae of one contract. We must supervise a £12 billion budget; this is an overrun of £0.25 million. We also have responsibilities so, perhaps, we should leave it to the Department to put it right. The Secretary has clearly indicated he does not have enough staff to look at every area.

Deputy Doherty: The Deputy should speak to the Minister for Finance about that.

Deputy Broughan: I will because the Department of the Marine affects my constituency.

Deputy Doherty: We had a problem with Rossaveel and Dingle with which a previous Committee meeting dealt. Lessons should be learned in this regard. This is a repeat of the situation.

Chairman: Mr. Carroll is prepared to come back with information. We will adjourn these two items and move to paragraphs 36 and 37. Is that agreed? AGREED.

Paragraph 36 of the Report of the Comptroller and Auditor General reads:

Subhead O. - Appropriations in Aid

Amounts Recoverable from Local Authorities

36.Reference was made in paragraph 36 of the 1991 Report to the costs of certain coastal protection works formerly undertaken by the Office of Public Works (OPW) under the provisions of the Coast Protection Act 1963 which are recoupable from local authorities. Amounts outstanding from local authorities at 31 December 1991 were as follows:-

Cork County Council

6,176

In the case of Wexford County Council, the outstanding amount included arrears of £410,618 in respect of the period 1980 – 1989.

At that time the Accounting Officer said that there had been considerable efforts by OPW and by the Department of the Marine to recover the outstanding amounts and that the Department had been in correspondence with the Department of Finance seeking an alternative approach.

Since then, although the outstanding amount had been cleared by Cork County Council, little progress had been made in reducing the long-standing arrears in the other cases and the position at 31 December 1994 was as follows:-

*includes the 1980 – 1989 arrears of £410,618.

Further amounts were outstanding at 31 December 1994 in respect of Wexford County Council's agreed contribution towards the cost of capital development works at Kilmore Quay of £132,584 and beach refurbishment works at Rosslare Strand of £180,517.

In response to my inquiry, the Accounting Officer informed me that efforts had been made by the Department to recover coast protection maintenance moneys from local authorities but despite written requests in the period November 1992 to January 1995, the local authorities had made no effort to respond. When the matter had been raised informally with local authority officials the response had invariably been that, with the abolition of rate support grants, sufficient funding was not available to pay for these works. Sligo County Council had formally advised of their inability to pay the sums demanded. As part of the correspondence, the Department had also requested the local authorities' views on how the maintenance works could be dealt with in the future but no such views were offered. In June 1995, the Department had advised the local authorities, with the exception of Wexford County Council, that in default of an agreement being reached on the payment of arrears, the Department may request the Minister for the Environment to rule in the matter or seek an order from the Department of Finance to abandon the works in question. At the same time the local authorities had again been invited to give their views on how the Department should deal with such works in future and Donegal County Council had indicated that it hoped to furnish, at an early date, proposals regarding payment of arrears and future handling of the works.

The Accounting Officer explained that the position with regard to Wexford County Council was somewhat different to the other authorities. Payments for maintenance works had been made two years in arrears of the works and the Department would have expected payment in 1994 for the 1992 works, but this did not materialise. The Council was in negotiation with the Department with regard to funding for two major schemes at Kilmore Quay and Rossiare Strand and, given the large costs associated with these projects, the Council had sought to agree a scheme of phased payments and that the recoupment of current maintenance moneys be tied into this arrangement. The matter had been under discussion for a considerable period and agreement had now been reached that the work be paid for over a five year period. With regard to the arrears in respect of pre-1990 works. Wexford County Council had maintained that when the work had been carried out prior to 1990, no reference had been made to the Council in relation to the works being undertaken or to the costs involved. While the Council accepted that the moneys are outstanding, it advised that, given its financial position and lack of rates support grants, it was not in a position to pay the full amount of the pre-1990 arrears. It had offered to pay 50% of the outstanding arrears linked to the phased payment agreement. The Department will put this proposal to the Department of Finance for consideration.

In response to my inquiry as to why the Department continued to undertake further works on behalf of the Council despite its failure to clear the arrears, the Accounting Officer stated that this arose in view of the fact that discussions had been ongoing with Wexford County Council regarding the method by which the Council would pay for all works. Moreover, as the Department has the responsibility for the maintenance of certain coastal protection works, failure by it to carry out such works could increase the risk of litigation against the Minister in the event of accidents occurring.

Mr. Purcell: This one is more straightforward because since 1990 the Department of the Marine has had responsibility for coastal protection works and has also become responsible for the maintenance of schemes completed by the OPW. The expenditure incurred in discharging this maintenance function is recoverable from the local authorities concerned. However, there have been difficulties in collecting the moneys due. This was referred to in the 1991 report when the arrears stood at £600,000, most of which was owed by Wexford County Council. The position at the end of 1994 was much the same with the authorities still claiming an inability to pay. In the case of Wexford County Council, additional amounts totalling almost £1 million have since become due. That is on foot of capital works at Kilmore Quay, which was referred to recently, and also at Rosslare Strand. My latest information is that the Department of Finance has recently agreed to write-off £205,000 - that is 50 per cent of the pre-1990 maintenance arrears - on the basis that Wexford County Council will pay the rest of the money owed. As far as I am aware, the Department has still not seen the colour of the Council's money.

Chairman: Why has there been such little progress in recovering the debts since the Comptroller and Auditor General first raised the matter in 1991?

Mr. Carroll: We have assiduously followed the local authorities involved, but they have refused to pay on the basis that they do not have the money. There has also been a dispute with Wexford County Council about a proper claim. As the Comptroller and Auditor General has explained, we have reached a settlement with Wexford County Council whereby 50 per cent of the maintenance works carried out pre-1990 are being written off. I understand that Wexford County Council was asked yesterday if it agreed to this and if it would pay it now. I have not received a report on that, but I expect the Wexford problem is now resolved in respect of coastal erosion. The money must be paid over a five year period in instalments of £65,000 a year.

Chairman: That is Wexford County Council.

Mr. Carroll: Yes.

Chairman: It owes in excess of £539,000.

Mr. Carroll: That is the total amount of which £205,000 is being written off.

Chairman: As regards other local authorities which have been dealing with your Department, is it not unfair to say that £205,000 is being written off?

Mr. Carroll: There was a legitimate dispute over its liability in this regard because the work was carried out without its consent or agreement in advance. This proposal was put to the Department of Finance and I believe it is a reasonable outcome.

Chairman: Does it pay interest on the amount outstanding?

Mr. Carroll: It does not include interest.

Chairman: Will it be liable for interest?

Mr. Carroll: No.

Deputy B. O'Keeffe: There is an ongoing dispute about such payments between your Department and local authorities which relates to coastal erosion and the refurbishment of piers. We, in Cork County Council, have a particular difficulty in that the EU takes 75 per cent and the rest is left to the local authority. There were a number of instances recently involving a third body, the harbour commissioners, which refused to pay anything at all. Is it not about time that the Departments and the local authorities got together and worked out a modus operandi for this procedure?

The second point relates to the refurbishment of piers and EU funding. The local authority and the harbour commissioners are required to pay 25 per cent of the overall cost. It has come to my attention that it is possible for the Department to get almost 85 per cent funding if the piers being refurbished lead to new and regenerated commercial activity. This option has not been pursued by your Department. Can you tell me if this has been brought to your attention and if any efforts have been made to progress it?

Mr. Carroll: On the first question of modus operandi, there was a full review two or three years ago of the basis for financing these type of works. One major change was that the rate of contribution for local authorities was reduced from 50 per cent to 25 per cent. That lower rate had previously only applied on the west and south west coast. That was a major concession meaning that a local authority contribution in Wexford went from 50 per cent to 25 per cent. It is Government policy that local authorities make that contribution to these type of works which are 75 per cent financed from central sources. We do business with local authorities on a bona fides basis and we expect people to pay up.

We all know there are extreme difficulties in local authority finances so this has caused a squeeze. There are a number of other county councils involved and we hope to get back to people paying on time. We have brought in a phasing arrangement because it is very hard on a county council, particularly if there is a big lump sum involved, to meet it in one go. It is our intention to clean the slate. There are a number of other county councils on which we are working as well to get firm agreements and payment. We insist on that and it is our objective.

On the question of 85 per cent for local piers, the mainline schemes under either the Operational Programme for Transport or the Operational Programme for Fisheries-----

Deputy B. O'Keeffe: This was brought to my attention by my own county manager.

Mr. Carroll: Normally the rate of aid would not be anywhere near that level. The 85 per cent applies under the cohesion funds but they would not be relevant to this. They may be under some of the Leader type schemes or the local initiative schemes. They may well -----

Deputy B. O'Keeffe: My understanding is that they could be relevant where you are developing a pier that will generate commercial activity. That will pertain to roads and the pier itself and it is something that your Department has not pursued with Brussels.

Mr. Carroll: The only fund where we have 85 per cent is cohesion and cohesion does not apply to local projects. It applies to major national network projects. If you put me in touch with the county manager, I will certainly investigate that.

Deputy B. O'Keeffe: Noel Dillon, Cork county manager.

Mr. Carroll: I will certainly try to clarify it. If there is some scheme of which we could avail of and from which we would draw funds, we certainly would be more than interested.

Deputy Broughan: What is the ongoing cost of maintaining the Wexford coastline, for example? What will we spend this year? I understand that some fields close to our former colleague, Deputy Hugh Byrne's neck of the woods are under threat from serious erosion.

Mr. Carroll: The only scheme we have in Wexford is, as I understand it, in Rosslare.

Deputy Broughan: Have you nothing in that area? They lost a couple of fields a few years ago.

Mr. Carroll: I can find out but I do not think so. I have no record of any expenditure.

Deputy Broughan: In the normal course of events, and problems with local authorities specifically, why do you not simply say to them that if they are not prepared to be reasonable like most other countries, you will recommend to the Minister that they not receive further funding? We have been looking at this in relation to expenditures in the Department of the Environment. If various local authorities will not take certain actions, for example housing travellers, we may end up introducing sanctions. We may sanction them where they will not specifically implement the regulations of the Minister. What is to stop you pursuing a similar course of action? In other words, if Wexford is not prepared to support a programme to defend its own coastline, the Department of the Marine will simply have nothing to do with them.

Mr. Carroll: That is an option but there is a range of projects arising at any point in time and it is a question of whom one is penalising. The work at Kilmore Quay was being done for the fishing industry. Would it have been fair to the fishing industry in Kilmore Quay to say that we would not start the project unless the county council paid up? The decisions on the allocation of funds are political matters and are made by the Minister. He takes all factors into account. I agree with your point in that we will have to play hardball with a view to ensuring that people respect their liabilities and pay them on time.

Deputy Finucane: Wexford County Council has a liability of over £0.5 million. It is unfair of the Department of the Marine to even look for the funding from them because, at the end of the day, the Department of the Marine has responsibility for coastal erosion, particularly in certain exposed locations. Much EU legislation has been introduced in recent times requiring legislation on health and safety and, for example, the Abattoirs Act. The Department of Justice requires that we maintain courthouses. Every year local authorities are strapped for cash. The EU demands mean that the functional responsibility reverts back to the council. It is all very fine that many of these changes take place in the EU but they will place a further strain on councils' limited resources.

There are a few counties which are exposed to this coastal erosion and at the end of the day the responsibility is on the Department of the Marine. You said that one council, Cork County Council, has paid £6,176. Of course they would; it is a small amount of money relative to the other counties. Wexford County Council is no different from Limerick County Council and I do not see how Wexford County Council could come up with £0.5 million, even over a period of time. There are certain parts of our coastline which are more exposed. The Department refers to places like Rosslare, Kilmore Quay and various important strategic locations.

This matter goes back to 31 December 1991 and will probably appear again next year when we are reviewing the Department of the Marine. There will come a time when you will have to cut your losses and forget about the money because you will not get it.

Chairman: He has answered that question already. Some £205,000 has been struck off and the balance will be paid over ten years at £65,000 a year.

Deputy Ellis: Who makes the actual decision with regard to which areas should get coastal erosion funding?

Mr. Carroll: The Minister for the Marine.

Deputy Ellis: I take it the Minister will have advice.

Mr. Carroll: He will have the advice of the Department, yes.

Deputy Ellis: I see that Sligo County Council is listed as owing £33,000. I can accept that they have claimed they are unable to pay because they are in debt to the tune of £4 million. It is ridiculous to pursue moneys like that from local authorities. A write-off is one thing but it is not the responsibility of local authorities.

Chairman: Paragraph 36 is noted. Paragraph 37 of the Report of the Comptroller and Auditor General reads:

Subhead L.3 - Fund for the Payment of Ex-Gratia

Awards to Certain Former

Employees of Irish Shipping Ltd.

Ex-Gratia Lump Sums

37.Reference was made in the 1984 and 1986 Reports inter alia to the liquidation of Irish Shipping Ltd. (ISL) in November 1984. In August 1985, the Government approved ex-gratia payments of pensions to 48 pensioners of ISL from the Marine Vote.

In December 1993, the Government approved the making of ex-gratia lump sum payments to former employees of ISL and authorised the Minister for the Marine to arrange for the drafting of a Bill to provide the necessary legislative basis for such payments, as well as for the continued ex-gratia payment of pensions to former pensioners of ISL.

The Irish Shipping Limited (Payments to Former Employees) Act 1994 enacted in May 1994 provided that lump sums were payable on application to former employees of the company, calculated on the basis of three times the former employee's weekly remuneration and on the number of years eligible service with the company as defined by the Redundancy Payments Act 1967 subject to a maximum of £50,000 for any individual applicant. Applications for lump sums had also to be received within 12 months i.e. May 1995. Notwithstanding the Government decision, no provision was made in the Act for payment of pensions to the former pensioners of the company and these continue to be made on an ex-gratia basis.

The Minister for the Marine set up a committee, as provided under the Act, comprising representatives of the Departments of Finance, Marine and Enterprise and Employment and the Revenue Commissioners, to investigate applications from former employees and to ensure that each applicant or their legal representative qualified for payments under the terms laid down in the Act before payment was made.

Up to 30 June 1995, a total of £3,161,066 was paid in lump sums in respect of 313 former employees or their representatives.

Mr. Purcell: Paragraph 37 is purely for the information of the Committee. It sets down the arrangements under which former employees of Irish Shipping received ex gratia lump sum payments totalling over £3,185,000 from the State. In all, 321 former employees or their representatives received payments. The individual amounts ranged from £204 in one case to £50,000 with six persons getting the maximum amount of £50,000.

Chairman: Have all the lump sum payments been made? What was the total amount paid and how many applicants does this represent?

Mr. Carroll: We received 354 applications of which 352 have been considered. There were a total of 321 payments, 29 refusals and two refusals which were appealed and have still to be considered. A small number of other claims still have to be processed. To date, £3,186,000 has been paid out under the Act.

Deputy Finucane: This goes back to the liquidation of the company in the early 1980s. We will all be pleased when the saga is over and people have been paid their ex gratia payments. If £3 million has been paid out to date in lump sums, what will the final liability be in relation to this issue? When will the final ex gratia payment be made? Why were there 29 refusals when people have been waiting 11 years for ex gratia payments?

Mr. Carroll: It is not that they were refused the money. They did not meet with the terms of the scheme.

Deputy Finucane: Perhaps you could tell us about the final liability, and when the final ex gratia payments will be made so that we can close this sorry chapter.

Mr. Carroll: There is provision in 1996 for £25,000 to wrap up the scheme.

Chairman: We note paragraph 37.

We will deal with Vote 30 now. Under Appropriations-in-Aid, heading 5 details a shortfall of income which arose as a result of a delay in “EU recoupment in respect of expenditure on the conservation and management of fisheries” because the 1994 element of this heading was not processed during the year. How much was involved, why was there a delay, and is there a danger of potential recoupment being lost?

Mr. Carroll: There is no danger of money being lost. Money is recouped on the basis of expenditure. The problem was that the volume of expenditure in 1994 was not in line with what had been provided in the Estimate. This was a relatively new scheme at that point and it was difficult to get going on it. But the programme is ongoing and we will not forfeit the EU moneys.

Chairman: How much was involved?

Mr. Carroll: In 1993 we spent £111,000 and realised £55,000. The 1994 expenditure was £180,000.

Chairman: Under miscellaneous items, £9,956 was paid in settlement of a claim for compensation by a fish importer who was given incomplete advice regarding import licence requirements. How did this situation arise, and can you assure the Committee that such incidents will not recur?

Mr. Carroll: This was an unusual and obviously inadvertent occurrence. An importer rang the Department for advice as to what rules applied to a particular item. It so happened that the rules had been changed in a little known EU Directive which had not even been promulgated. At the time the official was not aware of this and, inadvertently, incorrectly advised the importer. So, there was a legitimate claim which was settled. As you know, EU rules are coming out so fast that it is extremely difficult to keep up with them, but we try our best. We are certainly tightening up on our procedure.

Chairman: You say the importer phoned the Department. Was he given the information in writing?

Mr. Carroll: No. This was an oral inquiry. We deal with fishermen, importers and exporters who ring us up every single day of the week. We try to be as helpful as possible. In this case the rules had changed in a most peculiar way and, as I understand it, this was a Commission decision.

Deputy Finucane: Under Appropriations-in-Aid, you estimate the proceeds of fines and forfeitures in respect of fishery offences as £945,000 and you realised £431,733. In addition, the number of detentions for fishery offences dropped considerably during 1994. Can you expand on that? Why did you anticipate such a large amount in fines and forfeitures? Do you see the fact that the number of detentions for fishery offences is dropping as being a progressive trend? Is it that you have become more active or less vigilant?

Mr. Carroll: The policy is working. In the 1992–93 period, fines were of the order of £1.2 million for each year. The provision for 1994 was based on that. In fact, the level of boardings went up but the compliance rate increased substantially. Some 40 per cent of all boardings in that period, particularly for Spanish vessels, resulted in detentions. For example, in 1992 detentions as a percentage of boarding amounted to 14 per cent, in 1993 they amounted to 9 per cent and in 1994 they fell to 4 per cent despite a significant increase in boardings.

The credibility of the enforcement authorities has increased substantially with the result that people are not breaking the law as much. In 1992, 40 per cent of all boardings led to detentions, but this figure had fallen to 7 per cent in 1994.

As regards Spanish vessels, in 1992 some 40 per cent of all boardings led to detentions, but this had fallen to 7 per cent in 1995. People are now observing the law. The number of boardings has increased and the heavy sanctions are a sufficient deterrent.

Deputy Finucane: There have been some detentions recently. You spoke about extra vigilance and so on. Do you believe that there will be a downward trend or will recent changes mean that it will increase again?

Mr. Carroll: The recent changes in terms of the number of boats are minimal. There is no increase in the number of boats in the Irish enforcement area. Some 40 of the 93 Spanish boats which previously could fish in the Irish area, but could not come within 50 miles, can now fish in a different area. There is no increase in the enforcement requirements needed to deal with this issue. As a condition of entering the Irish Box, there are additional reporting arrangements in that they must tell us when they are coming in, who they are and when they are leaving. This information is relayed to the Naval Service, to our service and to the Air Corps so we can pinpoint virtually any vessel very quickly.

Deputy Finucane: A lot of the original concerns have not been validated.

Mr. Carroll: There is serious public concern about this issue but it is one which has always been under control. We are on top of this and the figures show that.

Deputy Finucane: Are the procedures there?

Mr. Carroll: The procedures are there and new ones will be introduced in 1998, all of which are at the initiative of the Irish authorities. Catch reporting will be introduced in 1998 whereby people will ring in their catches. If a vessel catches fish in Irish waters at present, it does not need to report the catch to the Irish authorities. We have fundamentally changed the operation of the Common Fisheries Policy in that the coastal state must get reports of catches. If somebody telephones in their catch as they are leaving the Box or the Irish area and they are intercepted by our services and there is a difference in terms of what they reported and what they have, they can be nabbed. This was not the case until now. The architecture of laws, procedures and controls is formidable.

Deputy Finucane: You had projected for the Loran C navigation system to come into place in 1994. Obviously, that will have impacted on your estimate. What is the status of that at present? I am aware that people in County Clare are taking a case. Has this issue disappeared into the horizon or is the Department of the Marine actively pursuing it?

Mr. Carroll: I understand there has been no change in the policy position in relation to Loran C, which is a matter for Government. The project has not proceeded because of the planning process and court challenges. Two specific issues will go before the Supreme Court this month and we await the outcome. If that outcome stops the project, we must return to the drawing board. If it is allowed to go ahead, then that is a matter which the Government must consider.

Deputy Doherty: Under the heading Inland Fisheries, what is the budget for the Shannon Regional Fisheries Board? How many staff are employed by the board and in which grades?

Mr. Carroll: The total expenditure of the Board in 1994 was £1,436,179. I do not have the figures on staffing to hand, but the average number employed by Fisheries Boards would be 40 to 50 and they would also have temporary- contract staff. I will get precise figures for you.

Deputy Doherty: You might get precise figures on the number of staff, their grades, their duties and where they are based. In the context of the £1,436,179, how much of that is pay?

Mr. Carroll: Wages and salaries amount to £967,310. As regards the staffing figures, there are about 50 people employed. There is one Manager, one Assistant Manager, one Administrative Assistant, two Inspectors, nine Assistant Inspectors, one Senior Fisheries Environmental Officer, 11 Fishery Officers, seven Foremen and 17 General Operatives.

Deputy Doherty: Are the foremen in charge of the general operatives?

Mr. Carroll: Yes.

Deputy Doherty: So there is one man in charge of every two. That is a little high.

Mr. Carroll: There are contract staff as well.

Deputy Doherty: I am not disputing the necessity; I am only saying there seems to be a large number of management people. If £967,310 is spent on wages and salaries, then the Board has about £0.5 million to spend. We spend almost £1 million paying wages and salaries to people who do work worth £0.5 million.

Mr. Carroll: The work of Fishery Boards is labour intensive; it is not a capital intensive activity.

Deputy Doherty: What is the expenditure on petrol or diesel?

Mr. Carroll: I do not have the precise figures, but I will get the Deputy an itemised list of expenditure.

Deputy Doherty: How many vehicles has the Shannon Regional Fisheries Board?

Mr. Carroll: I do not know offhand.

Deputy Doherty: What grades drive those vehicles? Where do they drive them? What is the cost in terms of maintenance and upkeep and does that come out of the £0.5 million?

Mr. Carroll: Yes.

Deputy Doherty: How many boats has the Board?

Mr. Carroll: I am not certain.

Deputy Doherty: Where are they located and when are they used? What type of facilities and accommodation is available for the housing of boats, motor vehicles and equipment?

Mr. Carroll: I do not know offhand.

Deputy Doherty: You might find out if they are in the ownership of the Board or if they are on lease. How many posts were advertised, how many interviews took place and how many candidates were selected? How many are engaged specifically in fishery protection?-

Mr. Carroll: There are 11 inspectors whose predominant activity would be fishery inspection. These people do multiple tasks as you know. I can get you a breakdown of their activities.

Deputy Doherty: On the basis that they carry out multiple tasks, what is the total number of tasks an Inspector would carry out which would include fishery protection?

Mr. Carroll: They would advise on development projects and become involved in a range of activities where they have knowledge and experience.

Deputy Doherty: Are fishery inspectors the only personnel in the Board engaged in fishery protection? Are they out on the water, so to speak?

Mr. Carroll: People are hired on a seasonal basis for fishery protection.

Deputy Doherty: Additional people?

Mr. Carroll: Yes.

Deputy Doherty: Have they skills or qualifications or experience or training?

Mr. Carroll: I do not think there is any difficulty in recruiting suitable people.

Deputy Doherty: You might set out what the criteria are for recruiting such personnel and how often the posts are advertised. You said that the number of fishery inspectors who would have responsibility in this area is nine. You might be in a position to give the man hours they expend on fishery protection as well. Do you have that today?

Mr. Carroll: No. I would have to ask the Regional Boards; we would not have that information in the Department.

Deputy Doherty: Another matter is the area in which their man hours were expended. In other words, what part of the Shannon and its lakes were involved? You might also get the number of man hours and personnel engaged in fishery protection.

Mr. Carroll: I will certainly ask the Regional Boards. There might be reasons why they might not wish to disclose that. They might not wish to let people know where they are operating. I am just making the point although I will certainly ask the Regional Board.

Deputy Doherty: To carry that to its logical conclusion the Garda would never have a checkpoint in case they would be noticed.

Mr. Carroll: You do not tell people in advance where you are. Perhaps they had covert activities going on.

Deputy Doherty: It is important to know, from the financial expenditure point of view, where these people are located. Are they in the middle, north or south of the Shannon; are they in the Lough Allen area or in the Lough Ree area? Do you have information on the number of prosecutions that have been brought, and the number that have succeeded?

Mr. Carroll: In the Shannon board in 1994, 41 prosecutions were brought. I think they were successful prosecutions. There were 50 in 1995. My note states the number of prosecutions brought but it does not state whether they were successful or unsuccessful.

Deputy Doherty: You might check that also.

Mr. Carroll: I will check it.

Deputy Doherty: You might also find out under what legislation the prosecutions were brought and in respect of what offences committed. You might also find out what district court area the prosecutions were brought in because that will give us an indication of where the offences were detected and might help to circumvent the difficulty with identifying where the personnel are working. Finally - the Chairman is delighted to hear me say that - are there any legal claims pending or has compensation been paid in respect of any claims by the Shannon Regional Fisheries Board?

Mr. Carroll: I do not know that offhand. I will get you that information.

Deputy Doherty: Thank you, Mr. Carroll.

Deputy Broughan: With regard to the marine emergency service, how can we estimate the outturn in the provision so accurately? Are you concerned about the recent spate of tragedies in Howth, Waterford and so forth? Is it the case that our weather forecasting service or the general support we give to fishermen is completely inadequate, certainly for the conditions of this and recent winters? Can you give us guidance on that? The loss of a fishing vessel used to be relatively rare but now state of the art boats, admittedly smaller, are being lost quite frequently. Do you recommend that we should do anything extra in terms of spending and what is the breakdown of that spending?

Mr. Carroll: About £4.8 million is the contracted amount for a helicopter; we contract the Sikorsky helicopter in Shannon. The rest of it is taken up with bits and pieces, the equipment and so forth. That service is a developing service and there is no difficulty in spending money on it. We spend what we can.

You asked about the number of accidents in recent times. Unfortunately, there have been too many significant accidents. There are specific statutory inquiries in train in respect of each of the accidents and we await the results. Apart from that, a major review was initiated by the Minister last November of the safety of the fishing fleet. That is being chaired by a former Secretary of the Department of Tourism and Transport, Donal O'Mahony. It is a high level group which includes representatives of the fishing industry and it is sitting at the moment.

Safety is a complex and multi-faceted issue. Statistics show that human error in such incidents in fishing, boating, aviation and so forth is a major factor. A large proportion of accidents fall into that category. The review will look at vessels, equipment on vessels, use of vessels, training of crews, the safety culture in the fishing industry and all aspects of the issue.

Deputy Broughan: In essence, people operate as hunters and often operate in a tough environment. However, is it not fair to say that all the health and safety legislation we have implemented throughout the public service and in much of private industry is totally inoperable in the fishing industry?

Mr. Carroll: The HSA are working actively at present with the fishing industry on the question of health and welfare conditions on board ships. That is their responsibility. It is well known within the fishing industry-----

Deputy Broughan: It is not the case that fishermen, in order to earn a basic livelihood, have no option but to work with an owner on whose vessel there may be unsafe arrangements? It might simply be a disaster waiting to happen. Is that not the case and has your Department not been lax in insisting that higher standards be upheld? I know there are innovative owners who have state of the art vessels. However, is it not true that in some harbours one can find vessels that are scarcely seaworthy, certainly in recent weather conditions?

Mr. Carroll: The role of the State in safety in this regard is interesting. The State has traditionally only involved itself where people are being carried for hire, where there is a conflict between commercial imperatives and the interests of the passenger. Up to quite recently safety rules did not even apply to small passenger vessels. That has been introduced in the last few years.

The basic principle underlying the State's role in this area, be it in marine leisure, fishing, or commercial activities, is that the owners of and people on boats have a vested interest in their own safety and that they will look after themselves. Because of the changing structure of ownership, this may no longer be a valid hypothesis.

There are many unregulated sectors in marine activity, such as marine leisure and sea angling. If the State were to take on a role and if legislation and regulations were introduced, the question of enforcement would arise and there would be major resource implications. At the moment we have eight marine surveyors. There are major policy and practical issues involved as well as the question of safety. These issues are under the microscope and we are dealing systematically with them. Recent tragedies in the fishing sector have given urgency and impetus to the tackling of these issues. The situation is regarded as serious by the fishing industry and people involved in safety.

Deputy Broughan: With regard to the action taken by the Minister recently regarding the Southern Regional Fisheries Board, is it expected that any reports will be submitted to the Director of Public Prosecutions on foot of whatever investigations you have carried out so far into that Board?

Mr. Carroll: The Department has no role in this. The submitting of such reports would follow from a Garda investigation which is in train and is well advanced. Any action on foot of that is not a matter for the Minister but is a Garda matter. The Minister has had a report prepared on the Board and this has been published. On foot of that report, the Minister, under the legislation passed by the Oireachtas last year, will, within the next few weeks, bring before the Oireachtas a resolution proposing the appointment of a commission to take over the running of many of the functions of the Board. If this is approved by the Oireachtas a commission will be appointed to take over the management of the board and to tackle certain problems.

Deputy Broughan: When will the Committee get a chance to investigate these serious matters? An astonishing television programme before Christmas had an air of “who dunnit it” about it but nobody who appeared on it would say anything, possibly because of the fear of libel. The programme seemed almost to be about nothing. When will we, as guardians of the public purse, have an opportunity to discuss the affairs of the Board?

Mr. Carroll: The matter has been discussed by the Oireachtas in the context of the legislation and it will again be discussed by it when the Minister proposes the appointment of a commissioner. It is a matter for the Committee to decide what role it might have in the matter. It has not been raised in connection with the accounts. The Board is an independent, autonomous statutory body and the management of it is the responsibility of its Board. The Committee has scope to deal directly with a Regional Fisheries Board and it is a matter for the Committee to decide how it should do this. Criminal matters are being investigated and this is an issue for the Garda Síochána, the Director of Public Prosecutions and the courts.

Deputy Broughan: It is also a matter for us. We have discussed at length the affairs of another Regional Board. You can give us a great deal of information on this matter, which clearly involves State expenditure. I ask the Comptroller and Auditor General whether it would be possible for us to discuss this. Astonishing allegations have been made but not publicly. Will we be given this opportunity when we are assessing the 1995 accounts?

Mr. Purcell: Under the terms of reference of the Committee, which followed from the passing of the 1993 Act, the accounts of the Central Fisheries Board and the Regional Fisheries Boards from 1994 onwards come within the remit of the Committee. There is a slight problem in that there is an arrears situation with regard to the giving of audit reports on these Boards. This has been a historical problem; we are trying, in conjunction with the Department, to resolve it and the situation is improving. Technically, the Committee cannot review a Fisheries Board until it has an account and I have prepared an audit report on this account. This issue is being addressed and we have had meetings and correspondence with the Department and the Central Fisheries Board in order to try to bring these accounts up to date.

Deputy Broughan: This is the only situation where the Dáil may have a chance to examine the issue. Surely this is the only opportunity to look at the administration of the Board and how State money was spent by it.

Mr. Purcell: That was the object of the 1993 Act and the ensuing new terms of reference for the Committee.

Deputy Broughan: I have a final question for Mr. Carroll. Allegations were published in regional papers that some foreign boats which recently broke our laws may have had illegal drugs on board. Have you any information about this?

Mr. Carroll: I have no information on this and it would be totally outside our responsibility. If I were to comment, I would be doing so on hearsay and rumour and this would be unfair. I have no knowledge or information to suggest this was the case.

Deputy Broughan: There is a significant number of boats operating off our coast, particulary since the new arrangements which were introduced on 1 January.

Mr. Carroll: Some 1,200 boats operate inside our 50 mile limit.

Deputy Broughan: The Chairman of the Revenue Commissioners is to appear before the Committee and the Minister for Justice is attempting to deal with the problem of supply. Could you liaise with the Secretary of the Department of Justice, Mr. Dalton, to assess if there is any truth in those rumours and if there are particular firms or groups of foreign fishermen which we should investigate more thoroughly?

Mr. Carroll: A framework exists between Departments, including the Department of the Marine, on liaison in all these matters.

Deputy Broughan: Have you been consulted? Last week the Chairman of the Revenue Commissioners said he has not initiated a single case under the programme announced by the Minister for Justice, Deputy Owen, last July. Have you been consulted on the Drugs Task Force and on preventing drug imports on the exposed coastline?

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 22 Feabhra 1996

Thursday 22 February 1996

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

APPROPRIATION ACCOUNTS 1994

DEPARTMENT OF AGRICULTURE, FOOD AND FORESTRY

Intervention Meat Yields and Related Matters

Mr. Michael Dowling (Secretary, Department of Agriculture, Food and Forestry) called and examined.

Mr. John Purcell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Mr. Jim O'Farrell and Mr. Noel Kerins, Department of Finance representatives in attendance.

Public Session

Chairman: We will now deal with the correspondence. This meeting must finish at 1 p.m. because Mr. Dowling is going to Brussels.

Deputy Broughan: We might have to go with him.

Deputy Ellis: We raised questions in regard to Bord Fáilte's assessment of projects. Have we heard anything back from them?

Chairman: The Clerk received a reply from the Department of Tourism and Trade this morning which will be circulated.

Deputy Ellis: That is fine.

Deputy O'Malley: On the question of availability of Accounting Officers, what takes precedence -- this Committee of the House or a jaunt of their own?

Chairman: We try to facilitate everyone. I believe Mr. Dalton is at a meeting in Brussels so we tried to facilitate him.

Deputy O'Malley: At what meeting?

Chairman: An urgent meeting in Brussels, I understand.

Deputy Ellis: Chairman, can we take it that if we do not finish at 1 p.m. we can go back?

Chairman: There is no problem with that. We will now deal with matters raised on 9 February by Deputy O'Malley and correspondence from the Officer of the Comptroller and Auditor General under that heading? Are there any matters arising under that heading? We are now in public session.

Deputy O'Malley: Are we dealing with the Comptroller and Auditor General's correspondence?

Chairman: In relation to the Commissioner for Charitable Donations, Deputy Ellis requested this information.

Deputy Ellis: There have been a number of replies and as we receive them-----

Chairman: They will be circulated.

Deputy Ellis: We failed to get this by means of question, which is the reason for taking this action.

Chairman: We will move on to Mr. Dowling.

Deputy O'Malley: I believe he organised a rival attraction in the Department of Agriculture, Food and Forestry for this time, a press conference. Let us hope it is over now.

Deputy Broughan: Is that about the proposed size of the fine?

Deputy O'Malley: No, I believe it is about angel dust but by a curious coincidence it was arranged for exactly the same time as this meeting.

Chairman: Sorry, Deputy, I will first take item 2 on the agenda, the minute of the Minister for Finance on the First Interim Report of the Committee of Public Accounts on the Appropriation Accounts for 1994. We will note that.

Deputy O'Malley: I am glad to see the press is here.

Deputy Byrne: Deputy O'Malley should not draw their attention to him as they might use his name in the 'papers.

Chairman: You are welcome, Mr. Dowling. Would you introduce your officials?

Mr. Dowling: Thank you. With me are Mr. Michael Sheridan, Mr. Denis Byrne, Mr. Richard Healy, Mr. Tom Arnold and Mr. Aidan McNamara from our Department and Mr. Jim O'Farrell and Mr. Noel Kerins from the Department of Finance.

Chairman: This item concerns the Department of Agriculture, Food and Forestry, on the subject of intervention meat yields and other related matters.

Deputy McCormack: What steps has the Department taken in relation to the question which received much publicity during the week, an accusation that 25 per cent of cattle in herds were infected by angel dust? I do not know whether there is any foundation for that remark and from my experience I believe it is-----

Chairman: Sorry, we are not discussing that.

Deputy McCormack: I am asking what the Department is doing about it.

Chairman: We are dealing with the issue of intervention meat yields.

Deputy McCormack: Yes but this is a related matter, which we are also dealing with.

Chairman: All right, I will allow it.

Mr. Dowling: The Department has a special investigation unit, a mixed group of veterinary and other experts, which monitors the controls on illegal substances. In addition we have random testing for residues in all plants, as required by European law. We have an additional system in Ireland run under contract by us on a selective basis by an Irish firm, to do a significant additional amount of testing, mostly on a targeted basis. Where we find evidence of abuse, it is followed up by investigations on farms. We have no evidence the figure is anything like as high as 25 per cent. We think it is in the low single figures. Notwithstanding that, we are looking at how the present arrangements can be tightened up and there will be announcements at a press conference the Minister will hold this morning on further measures to be taken.

Deputy McCormack: I am glad Mr. Dowling is able to confirm there is nothing like the percentage indicated in a statement last week. What steps are we taking to allay the fears and damage which might be done to the beef industry as a result of such a statement?

Mr. Dowling: As I say, we are tightening up the controls and will be extending the specific Irish testing regime beyond the level currently tested. Other measures will be announced today to indicate additional controls. There will be an agreement, as soon as we have legal authority to do it, to make the findings of what we are getting in the tests more readily available publicly. We will provide confidential contact arrangements for people who have evidence and might not be willing to come forward if they could not do so in complete confidence. There will be other measures. The press conference is on at the moment, in fact, at which these measures are being announced so they will be publicised by the end of the morning.

Deputy McCormack: Could the Department ask the person making those public statements to assist it in its inquiries? It would be great if he could be a help rather than make statements which may or may not be true.

Mr. Dowling: That has been done.

Deputy Finucane: To ask a related question, the person who made these statements originally is Mr. Dargan -- his name is in the public domain – who is a former prominent spokesman for the Irish Veterinary Union, which was closely involved in beef activity in this country. While one might have spoken to Mr. Dargan, many people have been sensitive about what he said because he would be regarded as a professional person, speaking from a veterinary background. People have said to me they do not think he was talking off the top of his head. In that case, surely he would have done a certain amount of damage to the beef industry already? I would like to hear Mr. Dowling's observations because it surprised many people that he was speaking from that platform on that issue. There is enough concern in Ireland already about BSE and the English situation without this coming up also. What can Mr. Dowling do about this? Mr. Dargan does speak for a responsible organisation.

Deputy McCormack: A different organisation now.

Mr. Dowling: He was previously general secretary of the Irish Veterinary Union and is now connected with the Consumers' Association of Ireland. We have asked him and his former organisation to indicate if they have evidence over and above that which we have, as ours would not substantiate figures as high as that. Undoubtedly there is a case that some farmers are using illegal substances. The controls we have set up have been to attempt firstly, to prevent illegal substances getting on the market and secondly, to detect and penalise them where we find them. There are about 100 cases related to the use of substances pending, but I am subject to correction. Most of them are held up at present because there is a challenge to the constitutionality of part of the regulations under which they are being brought. That challenge has yet to be heard in the Supreme Court.

Deputy Finucane: Has the Veterinary Association disassociated themselves from the comments of its president?

Mr. Dowling: It is the Veterinary Union rather than the Veterinary Association and he was its General Secretary rather than its president. I do not know whether or not they have but the Veterinary Union has been asked if he is drawing on information available to it which was not available to the Department. Obviously, the Department would be glad to have such information.

Deputy McCormack: Anybody using such substances should be brought to justice. It must be condemned at any level.

Deputy Byrne: Having heard the interview with Mr. Dargan on RTE, does Mr. Dowling agree his suggestion that it was not his responsibility to inform the authorities was a regressive and unhelpful position to adopt? Does he agree it is this man's honourable and legal obligation to inform the relevant authorities of breaches of the law? Does he agree that such an attitude is reminiscent of an attitude taken by republican paramilitaries and their supporters in the past, i.e. that not informing the authorities is somehow an honourable thing? Does he agree that this man has an obligation to the State to inform the relevant authorities of breaches of the law?

Mr. Dowling: If he has evidence, he should make it available either to the Department or, if he does not wish to do so, to the Garda authorities. That has been asked of him, as far as I know. As I said earlier, one of the announcements today will be that if people are doubtful about passing on information where they feel their names would be known, confidential telephone lines will be put in place so that people who are interested in doing so can more easily pass on information to either the Department or the Garda.

The main focus of the effort must be to ensure the controls are tightened, the extent of testing is increased, in particular, and that it be made unprofitable for people to engage in this activity.

Deputy Ellis: What test does the Department use at present to find residues?

Mr. Dowling: The Community random sampling test on the liver is slow in the sense that it requires some days to analyse. The Department's test, which is carried out by a contract firm, on either bile or retina can give results within a relatively short period and, therefore, enables the Department to do a greater number of tests. We intend to extend the latter test systematically throughout the meat industry in order to pick up residues of clenbuterol, which is commonly called angel dust, and some of its variations. It may also pick up straightforward hormones. One of the difficulties is that the type of substances used tends to change as testing catches up with them and you must reinvent the tests. This is being done for a number of other substances at present under the Department's system.

Deputy Ellis: What percentage of animals are being tested at present?

Mr. Dowling: Less than 1 per cent of animals are tested under the Community's random sampling. The Department's system tested between 100,000 and 120,000 animals last year and that is the test which will be increased substantially. A lot of such testing would be on suspicion; it is not a random test as such. It involves testing animals which seem to have the physical characteristics of angel dust. The Department finds that is likely to give better results than the random tests which are required by European law, which tend to pick up very little.

Deputy Ellis: Has the Department established the period of withdrawal for the substances?

Mr. Dowling: Yes. The periods of time are known. Some of the other testing, beyond the testing for residues as such, involves animals being examined for injections, pellet marks, etc. before slaughter. Farm visits follow that up and tests, which are usually urine samples, are taken.

Deputy Ellis: What is the cost of each test? How many positive tests have been identified? How many farms have been closed as a result of positive tests on carcases? What is the withdrawal period for some of the other liquid substances which now appear to be the main source of this operation as they have changed from using powderedsubstance to liquid forms of the drug which come from the continent?

Mr. Dowling: I am not sure of the figures. Obviously, the figures are available but I do not have them with me.

Deputy Ellis: I can understand that. Mr. Dowling did not come here to address this matter.

Mr. Dowling: I can supply them. There is no difficulty. Some of those figures may be given out today anyway. If they are not, we can supply them with the other information.

Deputy Ellis: What is the cost of a test?

Mr. Dowling: Offhand, the cost of the better test which can be done quickly is about £7 or £8 per carcase.

Deputy Ellis: If we spend £7 or £8 testing every carcase so we could stand over every one that leaves the country rather than spend the money in some other way, would it not be a better exercise? As a result of loose talk, the product will need an extra stamp of credibility. If it means it will cost 1p. per pound extra, I think consumers would be willing to pay that to clear every carcase. The Department might examine the matter.

Mr. Dowling: The Department is examining that matter. It takes a while to introduce it because it would necessitate additional laboratory facilities. It is not only a question of the cost of the testing.

Deputy Ellis: I understand.

Mr. Dowling: At present, it is carried out on the basis of suspicion. In addition, carcases which qualify under the quality scheme must be tested anyway. The Department hopes to extend it to all carcases over time. It is a cost which falls on somebody. It either falls on the consumer or on the farmer. In the Department's view, it is not reasonable that it should fall on the taxpayer.

Deputy Ellis: It might lead to a bigger longterm saving for the Department of Health.

Deputy O'Malley: I want to deal with the matters on today's agenda which relate to the circumstances which gave rise to the proposed fines on Ireland. These matters have been going on for quite a long time and have not been finalised. Some newspaper stated they were to be finalised early in March. Can Mr. Dowling briefly inform the Committee of the exact up to date position in respect of each of the elements of this fine, which amounts to £109.925 million, because they vary? Can he deal, in particular, with the proposed fine of £74.2 million for non-compliance by the intervention agency with the regulations relating to intervention?

Mr. Dowling: The original figure was £109 million and we discussed that the last day. Some £9 million of that related to the consequences of the fire in Ballaghaderreen and has been set aside pending the hearing of the legal actions which relate to the insurance in that case. It looks as if it will be some years before the legal actions are concluded.

The other two main elements were £75 million, which relates to the issues involved in control of yield and so on, and £18 million or £19 million which arises out of the multiple tendering procedure case. In those two cases, conciliation hearings have taken place. The Conciliation Body issued recommendations in respect of both us and the three or four other countries involved. In both cases the Conciliation Body's view was that conciliation was possible and that there were factors which, if taken into account, could enable an agreement to be reached between the member States concerned and the Commission Services.

The Commission Services have not engaged in further discussions but have put the issue to the Commission. The Commission itself has not heard it nor has there been any formal discussion by the cabinets of the Commissioners. There is to be at least one further bilateral between this country and the Commission before the issue will go any further and that will take place shortly. Current indications are that the Commissioners could be asked to decide it on Wednesday, 6 March. The other issues, which are made up of a number of smaller elements, are either being cleared or going through. I think they will go through as they stand which is at roughly £7 million or £8 million.

Deputy O'Malley: What do you mean by “going through”?

Mr. Dowling: Unchanged.

Deputy O'Malley: The fines will stand. Is the amount £8 million?

Mr. Dowling: It is £7 million or £8 million. Out of the figure of £109 million, the big elements are the £9 million for the insurance which was set aside, £18 or £19 million for the multiple tendering, £74 million which relates to the controls of yields and then £6 million or £7 million for a number of other smaller items.

Deputy O'Malley: Thank you for telling us that. The position does not look very hopeful as regards the two big items, the £75 million and the £18.5 million. If the Commission decides to take the advice of the Commission Services, which they may or may not do, can it then make a Commission regulation imposing the fine on Ireland? That would be the end of it. There would be no appeal to a court as happened when it made a regulation requiring Italy to pay a substantial amount of money for lack of controls there.

Mr. Dowling: The Commission Services have put their own recommendations to the Commission along with the recommendations or comments of the Conciliation Body. The Commission cabinets and the Commissioners themselves will have both sets of documents before them. If the Commission does not adjust the penalties or disallowance, they would automatically be disallowed on the clearance of accounts. In other words they would involve reductions in moneys coming to Ireland, either this year or, more likely, spread over a number of years. This would involve Ireland having to make up the difference. However, they would not exclude the possibility of going to court on either of the issues so an appeal to the European court would be open to Ireland if it wished.

Deputy O'Malley: Even if the fine was imposed by way of Commission regulation?

Mr. Dowling: The normal clearance of accounts procedure is such that the Commission makes a decision on the clearance of accounts. That decision indicates a range of expenditure which is cleared. A range of amounts are, for one reason or another, not cleared and therefore are regarded as disallowance. Those amounts come out of moneys due to the member State in respect of the operation of the CAP. The normal procedure is that a decision is open to challenge and decisions have regularly been challenged by a variety of member States in the European Court. The only indication we have from the Commission is that the eventual disallowance will be included in the closing of accounts decision and will be open to challenge in the European Court if the Irish Government wishes to do so.

Deputy O'Malley: I want to come to the actual regulations under which the fines are being imposed. There is some confusion that this is being imposed because various meat factories fiddled various things and, in a way, the taxpayer is being substituted as a defendant or whipping boy for the malpractice of various factories. Am I correct in saying that the obligations of the member State arise under Article 8 of 729/70? This provides that the member State shall take the necessary measures set out in paragraph 1 to satisfy themselves that the transactions are actually carried out and executed correctly, to prevent and deal with irregularities and recover sums lost as a result of irregularities or negligence. The obligation is on the member State.

It goes on to provide in paragraph 2 - this is very important and I would like Mr. Dowling to comment on it - that in the absence of total recovery the financial consequences of irregularities or negligence shall be borne by the Community. In other words, if the member State and the appropriate administrative body - the intervention agency - do all they are required to do under paragraph 1 of this article, that shall be the end of it as far as the member State is concerned. The European Union will say that they obeyed the laws but it will bear the financial consequences and losses. The only time it would not bear the losses is in respect of the latter part of paragraph 2 which provides for an exception where the losses are the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the member State. In other words, the only time that Ireland or any other member State can have a penalty imposed on it is, not because malpractice went on but, because the administrative authority of the member State failed to comply with paragraph 1 of Article 8 and did not seek recovery. The fines are not being imposed because fiddles went on in factories - we all know and the European Commission knows they did - but because, under paragraph 2 of Article 8, we come within the sole exception that the consequences of irregularities or negligence are attributable to the administrative authorities or other bodies of this member State. I put it to Mr. Dowling that this is very unsatisfactory.

The unsatisfactory nature of it and the reason the Commission Services is taking a serious view arises, for example, from things such as a statement in Mr. Dowling's letter to the Committee of 1 February 1996. In relation to Rathkeale, in the fourth last paragraph, he stated that the Department has sought legal advice as to the question of recovery in that case. Many years after the Department knew about what was happening, it is still seeking legal advice. That statement is in conflict with the statements that both Mr. Dowling made at the Committee and the Minister made in the Dáil last October when they said that proceedings had been instituted in the Rathkeale case.

It now appears they have not been instituted. It is almost six years after the event, almost three years after the Commission had drawn the Department's attention to it and at least 18 months after the Beef Tribunal made particular findings. I am sorry I have gone on at such length but it is necessary to set the picture. I ask Mr. Dowling to deal with the points I made.

Mr. Dowling: To take the last point first, the answer to the question in the Dáil was not wholly accurate due to an error in saying that proceedings had been instituted. However, the correct answer was given in answer to a supplementary which said the Department has taken steps through the Office of the Chief State Solicitor to institute legal proceedings for the recovery of the funds. That is the position. We have asked, and we asked last year, the legal officers of the State to do what was necessary to institute legal proceedings. Counsel was appointed last year to draft those proceedings. They have not yet been instituted in the sense of having begun a court process but they are in the process of being taken.

They relate specifically to the two Rathkeale irregularities, one of which relates to the misappropriation or substitution of beef and the other to the cannery activities where there was substitution also. I understand the proceedings are likely to issue next week in those two cases. With regard to the wider issue - that the Tribunal found there was evidence that the Goodman Group of companies failed in their obligation to hand to the Minister or to the intervention agency all the eligible meat obtained from the boning operations above 68 per cent - in the summer of last year we asked for legal advice from the State legal officers as to the best way to proceed against the company for recovery of whatever amounts may be due in that respect. That advice is not yet at hand but we expect to have it fairly shortly. We hope in that case also that proceedings would go ahead.

The issues themselves emerged during the course of the Beef Tribunal. In the case of the Rathkeale activities, they were discovered by Department and Garda officers in follow up investigations following evidence from an ex-employee of the company. Similar follow up investigations took place in other Goodman company plants. Obviously, a wealth of other evidence was given to the Tribunal. The evidence was available all through to the Garda authorities to see what action might be taken under Irish law. Subsequent to its' becoming available, the report of the Tribunal as a whole was referred to the Director of Public Prosecutions and the Garda authorities to see whether further action could be taken arising from the conclusions of the Tribunal. It is our intention to continue with that on the basis of proceedings which either are about to be issued or will be issued we hope fairly soon.

It is true that the Commission may or may not recoup amounts which arise from irregularities. The Commission takes the view sometimes that they do and sometimes that they do not. Sometimes recoverability is not possible in any event because it cannot be proved precisely enough to enable courts to give judgments in favour of intervention agencies. In at least the two big cases, the multiple tendering arrangements and the general disallowance, there are three or four member States involved. The Commission is applying, as we understand it, disallowances in all cases. All of them are in discussion one way or another with the Commission about the level of disallowance, mostly disagreeing with it. All of them will be subject to the same decision on the clearance of accounts, after which, they will have rights to go to court to argue whether the Commission decisions in terms of the levels of disallowances applied were proportionate or not.

Deputy O'Malley: I wish to put a couple of points to Mr. Dowling arising from his comments. He does not deal at any great length, but I do not think he disagrees, with what I said about Article 8 and the reason the penalties are being imposed. They are being imposed on the member State because it did not comply with its obligations to ensure that irregularities were dealt with and to recover sums.

Mr. Dowling told me the reply I received to a parliamentary question in the Dáil was wrong last autumn. It is a very serious matter that a parliamentary question from a Deputy on this type of topic should have been incorrectly replied to after all the publicity that untrue replies to parliamentary questions got at an earlier stage of a different aspect of this whole affair. I am amazed that the Department would give an untrue reply to a parliamentary question from a Deputy. It is a very serious matter which I will have to bring to the attention of the Ceann Comhairle.

Mr. Dowling said that subsequently the correct position was given in a supplementary. I am reading Minister Yates' reply to a supplementary of mine where he is referring to this. He said that on the advice of the Office of the Attorney General the Department has - past tense - taken steps to institute legal proceedings for the recovery of the funds. He goes on to say that this is why legal proceedings have been - past tense - instituted.

Mr. Dowling: The correct position is that the Department has taken steps through the Office of the Chief State Solicitor to institute legal proceedings for the recovery of the funds. That is the correct position. With regard to the incorrect aspect, it said the Department had instituted civil legal proceedings. The Department, as such, had not done this as it is probably not open to it to do so. The correct statement should have been the Department has taken steps through the Office of the Chief State Solicitor to institute legal proceedings for recovery of the funds. There is not a huge difference between the two but we have been told that, technically, the answer given in the formal reply is not correct and that we should have said that the Department has taken steps through the Office of the Chief State Solicitor to institute legal proceedings for the recovery of the funds.

This is the correct position. It was a fact that at that stage we had taken those steps. All that is wrong with it is that, technically, we claimed that we had instituted civil legal proceedings. We did not because the correct position is that we asked the Chief State Solicitor to do so. However, this is a technical difference; it is not a major difference.

Deputy O'Malley: I wanted to know at that time whether proceedings had been instituted against this company. I was told on more than one occasion that they had been. It appears to be a remarkable situation that the Department, which presumably drafted the formal reply, is now trying to justify itself by saying the Minister corrected us when he was on his feet and he was replying to supplementary questions. In other words, the Minister was trying to tell the truth and overcome what the Department had said erroneously.

This appears to be very unsatisfactory. If my understanding, and that of everybody else, at the time was that proceedings had been instituted, why did your Department not correct the report that appeared in The Irish Times the following day which stated:

The Minister said he was very disappointed the money had not been refunded despite an undertaking from the Goodman Group. His Department had instituted civil legal proceedings for the recovery of £900,000 in respect of intervention beef which was misappropriated.

Whoever reported this for The Irish Times had the same understanding as I and everybody else had, namely that we were told proceedings had been instituted. We are now told this is untrue.

Mr. Dowling: The position is that the Department drafted the reply. It also drafted the supplementary note from which the information in the supplementary answer was derived. The drafters did not notice the difference between us having instituted a civil legal procedure, in other words asking the Chief State Solicitor to institute legal proceedings for the recovery of the funds, and our saying that we ourselves had instituted civil legal proceedings. We did not correct it because we had not noticed the difference until recently. In discussions with legal advisers, they pointed out that, technically speaking, the correct answer was the one provided to the supplementary question and that what had inadvertently been put in the other was technically wrong. However, it is not significantly wrong in the sense that the Chief State Solicitor had been asked to institute legal proceedings.

Deputy O'Malley: However, he has not done so. There is a vast difference between being asked to do something and doing it.

Mr. Dowling: He instructed counsel to do so. Counsel has concluded its work and my understanding is that proceedings will formally be issued next week.

Deputy O'Malley: Are they now statute barred given that it is six years after the event?

Mr. Dowling: No.

Deputy O'Malley: Why not?

Mr. Dowling: I understand it is not six years after the event.

Deputy O'Malley: This happened in 1990. We are now in 1996.

Mr. Dowling: It happened in 1990–91. My understanding is that six years have not elapsed.

Deputy Ellis: With regard to the UK SGS, which undertook a certificate of inspection for you on 19 June, you state that the de-boning of steer carcases to intervention was done to specifications enforced for the period 1 October 1989 to 30 September 1991. The EU accounting year is 1991. Could you comment on this?

Mr. Dowling: It was the same de-boning specification in 1991 as in 1989. The operations which were the subject of the evidence in the Beef Tribunal, and in respect of which we have documentary evidence in our view showing that the company acted irregularly, relate to offences which are still within the time limit available to us.

Deputy Ellis: What is the time limit?

Mr. Dowling: The irregularity was in respect of the period September 1990 to October 1991.

Deputy O'Malley: You appear to go to extraordinary lengths not to institute proceedings or make a recovery from some of those involved. There is now a question as to whether the Statute of Limitations has expired. Although you have an obligation under section 8 to recover sums lost, you have not instituted proceedings in respect of one penny of the tens of millions of pounds that has been lost and in respect of which the country is now being fined. This is not good enough.

Mr. Dowling: We do not go to extraordinary lengths. We did not take any action on any of the issues until the Beef Tribunal had concluded its deliberations and issued its report. Shortly after this we referred the report to the Director of Public Prosecutions and the Garda authorities. All of the evidence which was available to us during the Tribunal, all of which came from us including the evidence of the various witnesses, was also available to the Garda authorities who went over it with a view to seeing what legal actions they could institute.

Subsequently, we wrote to the Chief State Solicitor asking him to institute proceedings for recovery of funds. In the case of the cannery and intervention operations at Rathkeale we sought direct recovery from the firm concerned in the expectation, publicly stated by it, that it would repay us directly. After a time their solicitors replied contesting the Tribunal's findings and the level of recovery required. We immediately asked the legal officer of the State to take proceedings because of this.

Chairman: I wish to move on, Deputy O'Malley. You may speak again at the end if you wish.

Deputy O'Malley: There is one more point I wish to make before I pass on to the next speaker because it is a complicated matter. The EU Commission held what you have described as an Article 9 inquiry into Ireland's handling of the control regulations. It submitted its findings to you as early as 7 May 1993, nearly three years ago when it told you of the shortcomings. It advised you in more detail on 27 July 1994 and then began to impose the fines while corresponding with you. As nothing had happened it doubled the fine.

The second paragraph of the Article 9 inquiry allows the EU Commission to check, specifically in the first instance, whether your administrative practises are in accordance with EU rules. It found they were not. Second, to check whether the requisite supporting documents exist and tally with the transactions financed by the fund. It found they did not.

It is not surprising when it came to light that, for example, in one factory alone hundreds of documents that were to be signed by an official in that factory were forged by an official of the Department.

Thirdly, as regards the conditions under which transactions financed by the fund were carried out and checked by the intervention agency, it seemed to find in this case that there was no checking. You were aware of that for several years. Why did you not take steps to recover these sums, to show that you were seeking to comply with your obligations under Article 8? Why did you, by your continued unwillingness to fulfil your obligations, cause the fines to be doubled as they were on 17 March 1995?

Mr. Dowling: We had a discussion on two previous occasions about doubling the fines. In our view, what happened was that one Directorate of the Commission took a view of what level the fine should be and notified us of it. Between that and the doubling of the fines there was no further Commission investigation. No further information was available to the Commission that was not available to them when they made the fine 5 per cent. But in internal discussions between Directorates General VI and XX in the Commission, the second Directorate General insisted on increasing all the fines or disallowances imposed in the Article 9 investigation which covered France, Italy, Britain and Ireland. In the case of all four countries it insisted on increasing the fines.

DG VI, which had ultimate responsibility, agreed to go along with it. Those are the circumstances in which the fines were increased. It was not due to our failure to implement something between the notification in October 1994 and the later notification.

The Commission carried out the Article 9 investigations in 1990 and 1991. If the Commission was convinced at that time that there were serious control difficulties one would imagine it might have indicated that to us. However, in discussions with the Commission after the control visit, no indication was given that the Commission had major difficulties. Indications were given that they found some shortcomings - there is no doubt about that - which related to: what they saw as some incorrectly classified carcases; some quality of meat which should, perhaps, not have been in the boxes in the sense that it was overfat; and some trimmings which they thought should not have been in the boxes but which in our view were allowable under the Irish specification.

They were concerned about all these things but it was another 18 months to two years before the Commission indicated that they were taking a serious view of the shortcomings found. Our view is that if the Commission felt there were serious shortcomings, it would have notified us of them at the time. However, at the time, the Commission indicated that it did not intend to conclude the Article 9 investigation until the Beef Tribunal proceedings were completed, which indicated a further delay.

It is accepted by the Commission, as much as by anyone else, that during that period - from the end of 1990 to 1993 - we responded to their criticisms which in some cases we accept were justified. We are not claiming that everything we did was right because it clearly was not, but we responded to those criticisms - in particular, to the criticism of the permanent presence system of control which we were legally entitled to apply in Ireland but which they felt was not sufficient in itself - by structurally changing the type of control arrangements we applied beginning in 1990, and in 1991, 1992 and 1993, by fundamentally changing the way in which control operated in Ireland by imposing systematic arrangements for random inspections.

The original problem the Commission raised was about having the permanent presence system supplemented. That supplementation was our response to the criticisms levelled against us by the Commission. The Commission has a Bell Group procedure which is the one that allows it to apply financial penalties at the rate of 2, 5, or 10 per cent in respect of what they would see as general control weaknesses. Under that procedure, where a member State reacts to control weaknesses by adjusting the control, it is provided for that account should be taken of that in the fines or disallowances to be imposed.

We contend that our response in dealing with the criticism of the controls was the correct one. We also contend that the question of how you go about recovery was one which, in reasonableness, we would take up as soon as the Beef Tribunal report was available, and we did that.

Deputy Byrne: Since Mr. Dowling began to appear before the reformed Committee, I respected his view that there was still plenty of light at the end of the tunnel, and that the taxpayer would not have to meet nearly £110 million in fines or disallowances. But I am rapidly coming to accept that, unfortunately, the optimism - as expressed here on at least two occasions by Mr. Dowling - to reassure this Committee is rapidly evaporating. In fact, the sad reality would appear to be that, notwithstanding all the reassurances, the taxpayer will be caught for substantial fines as a result of what is essentially, as Deputy O'Malley pointed out, negligence by the Department of Agriculture in the implementation of its role as an intervention agency acting on behalf of the people.

It is extremely disturbing that in 1994 a 5 per cent correction allowance, which would probably be equal to £37 million, was doubled in March 1995 to a fine of £72.264 million. It is difficult to explain to anybody how the taxpayer will foot such a huge bill. To add salt to the wounds, a fine which started at £37 million has jumped to £74 million.

I wish to question Mr. Dowling about his negotiating stance on behalf of the citizens of this country. Does the Secretary accept that his Department's approach to discussions with the Commission on disallowances has alienated the Commission because it contends: that Ireland has done no wrong; that the Commission was wrong to increase the fine from 5 to 10 per cent; that the Article 9 inquiry was wrong; that the Commission was working to a different set of rules from the Department's; and the suggestion that, even if overpayments were made at the Commission's proposal, the fine is excessive and disproportionate?

In response to a Parliamentary Question tabled by Deputy O'Malley, the Minister for Agriculture stated, according to the Dáil Report of 20 September 1995, Cols. 2303–2305, that:

The Department does not accept the validity of the findings of the Article 9 inquiry conducted by the Commission services on legal, administrative and technical grounds. The Department also considers that the level of disallowances proposed is wholly disproportionate to the findings of the article 9 inquiry.

I note - you might wish to comment on it - that the parliamentary response states that “the Department does not accept”. I understood Parliamentary Questions were answered in the name of the Minister. Would you not accept that Ireland was wrong and that the more you try to defend the indefensible, the more fines will be, which will lessen our ability to reach a negotiated settlement with the Commission Services?

Mr. Dowling: I would not accept that there is no light at the end of the tunnel, but that is a matter which will be proven within the next two or three weeks. As I said earlier, the doubling of the fine had nothing to do with our attitude, facts or anything else. It was the judgment of one Directorate General in the Commission that the disallowance proposed by another, who incidentally had formal responsibility for the proposal, should be larger. That judgment was taken in regard to everyone, including Britain, France, Italy and Ireland in the case of the £74 million in general fines. It was also taken in regard to Denmark, Britain and Ireland in the case of multiple tendering. It is hardly conceivable that they took the view that everybody was wrong in the way they approached the negotiations. They wanted higher penalties imposed.

Deputy Byrne: You will be aware of the case dealt with in court relating to the two Goodman executives. I do not know the reasons for fines in the other countries you list. However, a Superintendent McCarthy agreed in court with the defence counsel that officials of the Department of Agriculture, Food and Forestry supervised the plant's operations and found nothing wrong. In fact, the court decided that the State had been defrauded of in excess of £900,000. It is not fair to list other European Union countries affected by the increase in fines. There is alarming documented evidence available to the Commission as regards what has taken place in our factories.

Mr. Dowling: We have never claimed here or in Brussels that there was not a breakdown of control in the Rathkeale operations - there clearly was a breakdown. That is, however, a separate issue to the one which you are talking about. That is not the principal reason we face fines. We have never contested that the Article 9 investigation did not uncover control weaknesses - we accept that it did. We have given concrete evidence of that by spending three and a half years bringing controls up to what we and others would regard as satisfactory and efficient largely by introducing a different type of control. The Director of FEOGA, the head of the audit side of DGVI responsible for the closing of accounts, while critical of our controls to the Beef Tribunal, in his evidence, said that in his view the control changes which we were making in 1991 and 1992 were in the right direction. By doing that, we indicated that we were not claiming that we were right and everybody else was wrong.

We believe, on legal grounds, that under multiple tendering the Commission is wrong. Denmark France and Britain also believe the Commission is wrong. We believe that when the Commission wanted to change it, it did so by changing the regulation to exclude multiple tendering and this indicated that we are probably right. As regards the other main fine, we accept that there were difficulties in control and control weaknesses. That is evident from the findings of the Article 9 investigation. The Article 9 investigation did not find a huge amount of evidence. It looked at 40 or 50 boxes out of one million and found things wrong with some of them. It looked at Irish beef stored in the Netherlands and Irish beef which went for processing in Italy and found substantial defects. That was in response to specific complaints. The only argument we have with the Commission is not that there was nothing wrong - as I said the evidence of trying to put it right would indicate that we believed there was something wrong - but that its reaction is out of line with what was found and with its own procedures.

We have not made this argument in a way which has annoyed people in Brussels. Relations between the Department, senior people in the Commission and those at other levels - I can only speak for senior people - have remained good. We have evidence of that in many things which have happened over the past few years. I do not believe the way in which we carried out these negotiations was wrong. It is wrong to suggest that we went into the negotiations without accepting that there were things wrong in our controls. We must accept that because we would not have changed them otherwise.

As regards the way in which negotiations took place, we referred only two cases to the conciliation body, although other countries referred more. We were heard in the Conciliation Body on our own and then with the Commission present. Nobody present could argue that those negotiations did not take place in a relatively cordial atmosphere. Furthermore, the Conciliation Body found that there were circumstances in our case which, if taken into account, would justify an adjustment in the disallowances and it suggested to the Commission that it should sit down and negotiate such adjustments. The Commission chose not to do so - that is its right. The Conciliation Body is advisory - it tries to conciliate in the same way as Conciliation Bodies work in other fora. The Commission, as is its right, did not accept that but it put the proposals to the Commissioners with the Conciliation Body's comments and those of some member States attached. The Commission has a range of things to look at before it makes the decisions.

Deputy Byrne: In essence you are telling us that the discussions were cordial but that the Commission is holding its ground. This throws back in our face and that of the Department the arguments which you have presented to the Committee and, presumably, by way of Parliamentary Questions in the Dáil. As regards this large document on deboning and yield, what was the point of the SGS experiment? Would you agree that it was processed by a hand picked group of workers who were fully briefed in advance in a clinical way under the direct supervision of expert measurement people from SGS at Slaney Meats and that the purpose was to achieve a 68 per cent yield? Would you agree that that artificial project was completely out of line with what would normally take place in our meat factories in 1990 and 1991 and that you can get the figures you want in clinical supervised circumstances? Why do you keep presenting these figures to Europe as a defence of your case when each time you attempt to defend it you are defeated? Would you agree that your negotiation stance is adding to the likely financial liability of the taxpayers and that perhaps a new direction should be adopted?

Mr. Dowling: No, just to be clear about the SGS - it was not handpicked. The SGS picked the carcases from a variety of meat plants. The deboning was done in Slaney because it had to be done somewhere but the carcases were picked from a number of meat plants based on the normal mix of Irish carcases going into intervention in the years in question. They were deboned by SGS or under the supervision of SGS to meet the intervention specification which applied in those years. The result was the expected result; I accept that.

This is about the sixth exercise which has been done on deboning, some with Commission involvement, some by ourselves without Commission involvement, one with the involvement of the Chairman of the Tribunal and his legal team, and this one. They have all come up with the same result - that it is difficult, using the intervention specification, to get yields of eligible meat significantly above 68 per cent. One can get yields of significantly more than 68 per cent but when one excludes fat, trimmings and scraps which are the property of the company, the yields normally come close to 68 per cent on average. That is not the case in every carcase because some of them are higher quality.

The purpose of the exercise has not been to say that we do not accept that some irregularities occurred with regard to deboning. We accept that; it was a conclusion of the Tribunal that, in the case of one company at least, it was the practice to evade the rules and hand up only 68 per cent and in one way or another to take some additional quantity for the firm rather than the intervention agency. However, even if that took place the amounts of what can be got above 68 per cent in normal circumstances are not enormous. The Commission, in deciding what penalty to apply, should take account of that fact.

We were not trying to deny that it happened. We are trying to point out the consequences and over the year or two of this discussion the Commission has largely pulled back from that argument as a principal element in their armoury. It began as the principal element and is no longer a principal element. You can say we were wrong to do that but it is a fact that those yields are the normal yields obtained in Ireland and they compare reasonably favourably with yields obtained in France, Northern Ireland and in Britain.

Deputy Byrne: I take it Mr. Dowling is agreeing with Deputy O'Malley and I that, notwithstanding the additional boning tests he has carried out, the Commission is not prepared to accept any reductions in the fines. The fines are not necessarily being levied against Ireland on the grounds of what went on in the factory but because the Department was deemed under Article 8 to be negligent and that is the reason why it will not concede to the Department. Would you accept that as the broad outline of the Commission's position?

Mr. Dowling: The outline of the Commission's position is that, on the basis of the investigations they did under Article 9, what they found - that factories had in some cases got away with delivering carcases into intervention which were not of the correct quality, some degree of deboning irregularity and some other faults - would indicate that there were control weaknesses which did not prevent these events taking place. We are saying that is clearly true - one cannot argue with that. However, the extent to which it was found in no way justifies the level of the fine. That is the argument we are making. We have not made it in an objectionable way. We have attempted to put forward cogent and reasoned argument against the Commission's argument. We were not found by the Conciliation Body to have put forward arguments which were unreasonable. It did not find in our favour on every single argument but it did find in favour of some of them.

Deputy Ellis: What happened if the quality of meat was not up to specification?

Mr. Dowling: In so far as they found anything, the Commission is saying that some of the carcases should not have been allowed into intervention because they were over-classified. In some cases meat such as trimmings, which are meat but in our view too small an amount to be regarded as intervention category, were found in the boxes. In a small number of cases, they found meat which, in their view, was of a lower quality. In other words, some of it had been freezer burned and various other things. However, it was a small number of cases and our view is that it has been over-magnified in the penalties.

We bought in, over a period of three years, and sold out in about four years between 750,000 tonnes and 850,000 tonnes. Virtually all the meat has been sold without any complaint by the buyers and in most cases it sold at prices which are at least comparable to the prices which are obtained for intervention beef elsewhere in the Community and, in many cases, at higher prices. Our argument is that, at the end of the day, the test of whether the meat is of marketable quality is what the buyer says about it. There were some complaints but the number of complaints relative to the quantity we are dealing with was quite small.

I am not arguing that there were not control difficulties and I am not arguing that we should not have got them right earlier. When we found out that there were significant control difficulties we moved to change the system. The system as it was being operated in 1992 and into 1993 seems to have been acceptable. The Commission has found nothing wrong with it. We must pay a penalty for the shortcomings of the earlier years but we contend that the penalty should take account of what we did to improve the system.

Deputy Ellis: You said that some of the meat was not of the quality prescribed. Was it cow beef?

Mr. Dowling: No. It is virtually impossible to distinguish after the event between cow beef and steer beef.

Deputy Ellis: That is right.

Mr. Dowling: In the case of Rathkeale, for instance, the 68 per cent was found to be achieved by substituting inferior quality beef in part for the quality steer beef that should have gone in. Without that, Rathkeale would not have been able to get the 68 per cent. It is difficult enough to get it and by taking out good quality cuts they would be below the 68 per cent. They were found to have replaced them with inferior quality cuts; that was found in Rathkeale but it was not found elsewhere. Clearly there was a major problem in Rathkeale. We are not arguing about that.

Deputy Ellis: How many boning licences did you revoke between 1989 and 1991? How many boning halls were prevented from doing intervention boning during that period, even for as little as one day, when you had discovered irregularities?

Mr. Dowling: I do not have the number in front of me but a large number would have been stopped by local inspectors from boning on the day when they found things wrong. At least one was out of action for three months. Rathkeale has been out of action since.

Deputy Ellis: Can you give us figures for how many of the boning facilities were closed for one day and more and what was the detail about them? At that time the Department should have been aware that something was going on when it had to stop intervention deboning. The reason I ask is that was the time the Department should have been aware something was going on when they had to stop the intervention deboning.

Mr. Dowling: There is certainly one that was suspended for three months during that period. My understanding is that quite a number of others were stopped deboning on particular days where people were unhappy with what was going on. I do not have the precise figures for the numbers but there would have been quite a number - many of them stopped by local officers.

Deputy Ellis: We accept it was always the local officers who had to stop it.

Mr. Dowling: That is not true. In a number of cases they were stopped by the senior officer who was on random inspections.

Deputy Ellis: How many times was the decision of the local officer overruled?

Mr. Dowling: I do not know of any cases but I cannot say there were none.

Deputy Ellis: In other words, it had come to the notice of the Department in 1989 that there were irregularities and nothing was done other than to suspend them for a day or half a day. All that meant was that a kill due for deboning one day was passed on to the following day.

Mr. Dowling: That is not true.

Deputy Ellis: Were any fines taken in that period?

Mr. Dowling: In the main the action taken would have been rejection of product - it would have been rejected out of intervention and not allowed in the following day. That is a fine in itself because at that time there would have been a significant loss in not getting the product into intervention.

Deputy Ellis: For each boning hall in the country can you give the amount debarred from intervention over that period?

Mr. Dowling: I cannot give that level of detail at this stage.

Deputy Ellis: Can you come back to the Committee with it?

Mr. Dowling: I think so.

Deputy Ellis: Following on from that, you stated earlier that the fines from Europe will be stopped at source. What will be the consequences of that for subsidies that will be due? Does it mean the subsidies to certain individuals will be cut and farmers who had no part in this will end up having payments delayed or having to foot the bill?

Mr. Dowling: The disallowances will be stopped at source over one year or a number of years, which means that the advances to us to run the premia and export refund schemes etc. will be reduced correspondingly by that amount. The schemes will have to continue at the rates legally applicable in the Community. There are two possibilities in regard to the fines: in the short-term the Exchequer will have to cover the cost and it would depend on the degree to which they can be recovered whether the Exchequer will have to carry the cost indefinitely.

Deputy Ellis: What is the potential liability to the Department of the recent Hibernia case in the High Court which is being appealed to the Supreme Court?

Mr. Dowling: The potential liability is about £3 million. We do not know whether that liability will be actualised or not. The origin of that case was that we and the Customs Service carried out a post factum examination of the 1988 APS scheme and we found what we regarded as irregular meat in trimmings in boxes and meat which was not properly wrapped under the regulations. We attempted to impose fines and we had a long discussion with the Commission about the level of the fines. The Commission was generally happy but insisted on a criterion of seriousness being introduced, in other words, that we could extrapolate the results across all of the production based on the percentage of weight of ineligible product which we found, but where the quantity of ineligible meat in a box was greater than three kilogrammes we should extrapolate on the basis of boxes. The three kilogramme rule was specifically insisted upon by the Commission.

The Irish Court has held that the three kilogramme rule has no justification in law; that the most we could have done was to extrapolate on the basis of weight, and that in its view our interpretation of the term “scraps” in the regulation to include trims was wrong and we should not have attempted to exclude that type of meat from the APS coverage. Our interpretation of the regulation and the Commission's interpretation of the regulation is that we are right; obviously, Mr. Justice Barr took a different view. That will be appealed and we expect the Commission will defend our position, at European Court level at least, on the basis that it is an agreed position with the Commission. We expect the Commission will say its interpretation of the European law is the same as ours in this case.

What happens after that depends on the result of the case and the degree to which the Commission is prepared to accept if we lose that since it was a joint interpretation and we went to reasonable lengths to get the money, there should be no consequence for the Department or the taxpayer. That remains to be negotiated later in the event. We will appeal to the Supreme Court and to the European Court if necessary. It will almost certainly be referred anyway since two of the main issues involved centre around an interpretation of the Community regulation.

Deputy Ellis: This matter is much deeper than Mr. Dowling is telling us. There are a number of factories who have not lodged claims who would be in a position to do so if the case is upheld. What will the total consequences be?

Mr. Dowling: The two firms we proceeded against in court are the two against which the biggest disallowances were made totalling about £3 million. There is one other firm that paid £0.5 million and recouped it in a counter claim against a subcontractor. There is another firm which paid £90,000 but indicated it might take legal action subsequently. I think there is another £100,000 or so with other firms. The absolute total were they all to come back would be £3.6 million or £3.7 million. I had forgotten about the ones which were not party to the immediate court case.

Deputy Ellis: I think it will turn out to be much higher than that.

Mr. Dowling: Sorry Deputy, it cannot turn out to be much higher than that because the total amount which was levied was £3.6 million or £3.7 million.

Deputy Ellis: There is a yield of 68.026 per cent on intervention; on APS contracts it is 74.875 per cent. I take it the 74.875 per cent does not include any bone, although it may include a certain amount of fat.

Mr. Dowling: It does not include any bone, obviously, because deboning takes it out to 80 per cent.

Deputy Ellis: What percentage of fat is being taken out? The 24.586 per cent as found by SGS on the APS included bones, fat and trimmings. What percentage of the 24.586 per cent is red meat?

Mr. Dowling: Typically, when the bones are taken out one should get something of the order of 79 to 80 per cent product. The fat varies by category, as you know.

Deputy Ellis: Yes, it will be different on a U3 from an O5H.

Mr. Dowling: To take an eligible R3 it is probably 7 or 8 per cent fat. Trimmings are between 4 and 5 per cent and scraps about 0.5 per cent, which brings it down to about 68 per cent. In the case of APS the bones go out and some fat goes out. APS is deboned to a commercial specification prepared by the exporter for his contract. So long as he puts in the cuts which are eligible he will obviously attempt to debone in a way that gives the maximum return subject to this client being prepared to go along with it. We have found that using the commercial specifications which work for APS one would normally get about 74 or 75 per cent. This is recognised in the Commission's regulations because it put in a minimum of 68 per cent, which is the minimum for intervention, whereas it mentions 75 per cent for APS. It recognises in its regulatory arrangements that there is normally a yield difference between APS and intervention. These are average figures which are not necessarily the same for every factory, although they are close.

Deputy Ellis: Some of them run as high as 78 per cent or 79 per cent.

Mr. Dowling: For the APS.

Deputy Ellis: The figures ran even higher if cattle received a certain amount of a particular drug. Perhaps you could tell us the exact amount of fillets and the various cuts which should be yielded from a carcass of 600, 700, 800 and 900 pounds dead-weight.

Mr. Dowling: Do you mean the numbers or the weights?

Deputy Ellis: The weights. If the sliding scale was followed through you should know how many boxes came from a certain number of cattle and their weight. Someone here knew which cuts to take and they were not shanks.

Mr. Dowling: I am assured we can give the information.

Deputy Ellis: I know you can.

Chairman: We gave a commitment to finish at 1 o'clock.

Deputy Broughan: I thank Mr. Dowling for his extensive information. Do the intervention guidelines, which seem to be a cowboy's charter, still apply? I accept what you said about the 68 per cent. Larry Goodman was a cowboy who proceeded, as the Tribunal makes clear, to ruthlessly take advantage of those guidelines. Do they still apply and do you agree they are a cowboy's charter? They gave carte blanche to people as regards what they could or could not do with a carcass. The Beef Tribunal states there was an institutionalised system by the Goodman Group in at least one or two plants, which ripped off the Exchequer and the taxpayer. Is the Department pursuing the Director of Public Prosecutions to press criminal charges against senior management figures in the Goodman Group?

Mr. Dowling: The Commission has subsequently revised and tightened up its intervention regulations. Furthermore, we have, in conjunction with the Commission, devised a new specification - we are not intervening at present - under which the quantity of beef which would normally be handed up has risen to 70 per cent because it has insisted on including some additional amounts which were previously excluded. Whichever way it is done, it is difficult to control on a continuing basis. We would have preferred if, in the case of deboning arrangements, the Commission allowed us to pay on the basis of the deboning amount offered by weight on condition that the 11 cuts or whatever number were required were in the right quantities. If operators took more meat off, they would not get paid for it. The Commission has not accepted that as a reasonable way of doing things, so we are left with a system which has a much tighter specification than that which existed in 1991. We are pursuing the DPP to see if he can take criminal proceedings. However, I am not sure if the answer will be yes.

Deputy Broughan: If local management is not to blame, surely there is a clear line of responsibility?

Mr. Dowling: I do not agree with that because there is a question of proof. It is up to the DPP to decide if he has sufficient proof to proceed. Our principal concern over the past year has been to put proceedings in place which could lead to recoveries of funds arising from the criminal activity which is not principally within our bailiwick. We have asked the DPP to consider ways in which he can proceed.

Chairman: I thank Mr. Dowling for his co-operation. Perhaps he could arrange to come back for an hour in the future because at least three Members indicated they have more questions to ask.

Deputy O'Malley: Perhaps we should leave it until after 6 March when some of these matters will have been clarified. We should not confine our discussion to an hour. I hope it can be completed in that time, but a lot depends on the answers. Things have come out today of which I was not aware. I did not know, for example, what Mr. Dowling would say about parliamentary questions. We cannot foretell what will be said.

Chairman: Mr. Dowling was most co-operative and he gave us extensive information.

Mr. Dowling: I was going to suggest next week as a suitable time. However, as I do not disagree with Deputy O'Malley, perhaps we could arrange it for the second half of March rather than the beginning of the month.

Chairman: Is that agreed? AGREED.

The witness withdrew.

THE COMMITTEE ADJOURNED.

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Dé Máirt 16 Aibreán 1996

Tuesday 16 April 1996

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (Comptroller and Auditor General) called and examined.

Mr. Michael Dowling, Secretary, Department of Agriculture, Food & Forestry, called and examined.

Ms. Elizabeth Beckett and Mr. Noel Kerins (Department of Finance representatives) in attendance.

Public Session

Chairman: We can start. You have correspondence from the Department of Justice, and from the Department of Arts, Culture and the Gaeltacht with regard to the procurement of goods. You also have correspondence from the valuation office. Are there any questions about the correspondence?

Deputy Broughan: Some of us were interested to note that members of former members of the Olympic Council of Ireland told the media that they had written to the Comptroller and Auditor General asking him to audit the funding which the Olympic council of Ireland received. I would like to know what exactly the situation is there. If it is State spending, it comes within the remit of this Committee. What kind of progress has been made so far?

Mr. Purcell: I have received two letters from two members of the executive council. I have given a long reply to the first of those. The second one, received as a result of my reply, has indicated to me that they are taking up some of the matters with the auditors of the Olympic Council of Ireland who are a private firm of auditors and, depending on the result of the further discussions with the council's auditors they will return to me if necessary. I explained to the two people involved in correspondence that I do not have audit rights in the Olympic Council of Ireland but that I have inspection rights.

The inspection rights entitle me, at my discretion, to establish if money granted to the body was used for the purposes for which it was given to the council, and that it was used in accordance with any conditions imposed by the Department, in this case the Department of Education. In my letter to the two members I asked them if they could supply me with some prima facie evidence which would enable me to make a reasoned judgement on whether I should exercise my discretion to carry out an inspection and as a result of that they have indicated to me by letter that they are in discussion with the company auditors.

Deputy Broughan: Can you take an initiative, as in the case of the Olympic Council of Ireland where clearly there has been a large State contribution - Deputy Ellis and others raised it at a previous meeting - to an organisation in the sporting arena. Question marks hang over the extent to which Olympic councils in different countries liaise with the State and with State policy on sport. Is there not a prima facie case for carrying out an inspection, at least, and come back and report to us?

Mr. Purcell: As I indicated in my letter to the members, I get a fair number of representations from members of the public and others and they fall in to different categories. I have to be very careful about how I exercise my discretion or my inspection mandate could be dictated by members of the public or by the media. I had to take account of the fact that the Accounting Officer of the Department of Education was in here just a few weeks ago and under questioning he stated that the Department was happy with the administrative procedures in relation to the control of finances in the Olympic Council of Ireland. I also had access to the current audited accounts of the council and the auditors report. They were given a clear audit report. I have to balance evidence that there is nothing wrong on one hand, against allegations made by two members of the executive council on the other hand. On the one hand I have certain documentary evidence which indicates that things are fine and I have asked the two executive members to come up with some prima facie evidence that things are not as they appear. In due course, then, I will exercise my discretion, but it is fairly clear and I have made it clear to the Committee on a number of occasions here that I cannot have either my audit mandate nor my inspection mandate dictated by individuals or by the media. I do of course respond to public concerns where they are firmly grounded.

Deputy Broughan: There has been a lot of coverage of this in the media and it is appropriate to raise it to see exactly what stage it is at. Would we have had the powers before the recent legislation to inspect State money which have been granted to a body like the Olympic Council of Ireland, through the Comptroller and Auditor General?

Mr. Purcell: Before the 1993 legislation it would have operated on a case by case basis. In some cases, where a Department was giving money to an organisation it would make it a condition of the grant to that organisation that the books would be open to inspection by the Comptroller and Auditor General. As a result of the Comptroller and Auditor General (Amendment) Act, 1993, the position now is that if a body in any year gets in aggregate 50 per cent or more of its funding from the State then I, at my discretion, can exercise that inspection function which relates to two specific aspects only. The first is that the money was used for the purpose for which it was given and the second is that it was used in accordance with any conditions that were imposed by the grantor. That is the statutory position now.

Chairman: Have we any questions about the correspondence?

Deputy O'Malley: While the Comptroller and Auditor General has a right of inspection, why does he not have a right of audit, and could he acquire it in view of the fact that it appears that 80 per cent or thereabouts of this organisation's income comes from State grants? Perhaps it is even more in some years.

Mr. Purcell: That is a policy issue. I do not have the power to decide what I audit. It is usually set down in law and that is the law as stated. As I understand it, the Olympic Council of Ireland is a private company limited by guarantee and that is why it is audited by private sector auditors. It has been decided that in such situations it is sufficient that the Comptroller and Auditor General has an inspection function. It would not be appropriate for me to comment on the merits of that particular policy objective. I am precluded by law from doing so.

Chairman: Are there any matters relating to correspondence? Do I take it that we can note the correspondence?

Deputy O'Malley: With regard to the correspondence from the Accounting Officer of the Department of Agriculture, the clerk here wrote to him on 27 February and asked him to reply to a number of matters and asked that the reply be provided before 12 March. It seems from the note on this that the clerk received the reply yesterday. I got it last night at about 6 p.m. and it is very long, running to five or six closely typed pages. I have had no opportunity to read it or at least to consider it. Could that be put on again?

Chairman: We will put it on again for Thursday.

Mr. Broughan: In relation to Irish citizenship fees, was that not today's correspondence from the Department of Justice? Did we get any breakdown in relation to the funding which came through to Ireland under the so called passports for sale scheme? These are just the basic fees. What is happening in that area? Will we be presented with any kind of breakdown on how it has been operating, particularly in the last couple of years?

Mr. Purcell: Deputy Broughan will recall that on his instigation that the Committee asked me to examine the passports for sale scheme. When the Accounting Officer of the Department of Justice was before the Committee this matter was raised and he had certain doubts about the limits of my authority. I shared those doubts.

I have been in correspondence and held meetings with the Department of Justice, including the Accounting Officer, in an effort to resolve the matter. In the last few days I received a lengthy letter from the Accounting Officer and I have not had time to consider it yet. However, I will inform the Committee by next week about how I intend to proceed. I might have to get legal advice before I make my decision and refer back to the Committee. I had intended to give the Committee an update on the status of that examination and I have taken this opportunity to do so. Until I received the lengthy letter from the Accounting Officer, I would not have had much to report.

Chairman: We will move to item 2.

Deputy Byrne: Our agenda reads: “Discussion on yields from intervention beef and related matters”. What is meant by “related matters”?

Chairman: It means where our discussion concluded the last day.

Deputy Byrne: Is there a Vote for the Department with which we have to deal?

Chairman: There is no Vote. We will just continue the discussion.

DEPARTMENT OF AGRICULTURE, FOOD & FORESTRY (Resumed)

Discussion on yields from Intervention Beef and related matters.

Mr. Michael Dowling (Secretary, Department of Agriculture, Food & Forestry) called and examined.

Chairman: Mr. Dowling is welcome. On the last occasion we said we would resume our discussion when the question of the EU fines was resolved. We were discussing yields from intervention beef and related matters. Perhaps you would introduce your officials.

Mr. Dowling: I am accompanied by Denis Byrne, Tom Arnold, David Nolan and Marian Byrne from the Department of Agriculture, Food and Forestry. Elizabeth Beckett and Noel Kerins are from the Department of Finance.

Deputy O'Malley: The fine question has been resolved at last. Various figures have been quoted, but the total appears to be between £71 million and £78 million. Can you give us a breakdown of the total amount of the fine and what the amounts are for?

Mr. Dowling: The total is £50.3 million - which is the main fine - for beef storage operations, £18.4 million for multiple tendering, £1 million in respect of a variety of headage operations and £2.3 million for accounting adjustments.

Deputy O'Malley: That amounts of £72 million?

Mr. Dowling: It amounts to £71.9 million.

Deputy O'Malley: That does not include penalties or losses that will be incurred as a result of the fire, where a substantial claim is outstanding?

Mr. Dowling: A sum of £9 million has been set aside by the Commission pending the outcome of legal proceedings between ourselves and the insurers in the case of the fire.

Deputy O'Malley: Did the Department obtain legal advice about these matters as they arose over the years?

Mr. Dowling: The Department took legal advice with regard to the closing of accounts from which all these disallowances arise.

Deputy O'Malley: When did it get the advice?

Mr. Dowling: We got the advice on a continuous basis in the course of negotiations with the Commission.

Deputy O'Malley: Did the Department get advice at the time of the multilayered tendering?

Mr. Dowling: In the case of the multilayered tendering, we did receive advice.

Deputy O'Malley: Was the advice wrong?

Mr. Dowling: That remains to be seen. The likelihood is, although there is no formal decision yet, that the Government will go to the European Court with regard to the multiple tendering issue, as will the other member States involved.

Deputy O'Malley: Where was the advice obtained?

Mr. Dowling: It is my understanding that we had advice from the Office of the Attorney General.

Deputy O'Malley: Why is it just your understanding? You either had or had not got it.

Mr. Dowling: My understanding is that we had informal advice from the Attorney General's office that what we were doing in terms of multiple tendering was in line with the regulations.

Deputy O'Malley: Have you written advice?

Mr. Dowling: Yes, we have written advice but I understand our written advice is subsequent to the issue being raised by the Commission rather than prior to it.

Deputy O'Malley: Will you make that available to the Committee?

Mr. Dowling: I am not clear whether we are entitled to make advice from the Attorney General to Ministers and Departments available. If we are, I have no objection to doing so.

Deputy O'Malley: Why did you not obtain written advice while multilayered tendering was taking place?

Mr. Dowling: Our view was that according to the regulation we were entitled to accept the tenders. The Commission was fully aware that multiple tendering was taking place in four member States. The tenders were submitted to the Commission every second week and no question was raised by the Commission as to whether the issue was, in their view, irregular.

Deputy O'Malley: Your view that you did not need legal advice has been proven wrong to the extent that it will now cost the taxpayer £18.4 million.

Mr. Dowling: It remains to be seen whether our view is right. Our legal advice is that what we did was correct. That is also the position in four other member States.

Deputy O'Malley: The Committee can only deal with the position as it is now and as it has been determined by the Commission. Before this, you told us you thought none of these penalties were justifiable, including the intervention penalty.

Mr. Dowling: I do not think we ever said in the case of the intervention penalty that it was not justifiable. We said the extent of it was not justifiable and that, to some extent, has now been accepted. With regard to multiple tendering, our view was - and it has been bolstered by written legal opinion - that we were correct in our operation of the system. Furthermore, we put that point to the Conciliation Body, as did the other member States concerned, and the Conciliation Body's view on that tended to support our view.

Deputy O'Malley: However, this country has been fined £71.9 million. That is a serious matter. It is the biggest penalty ever imposed on Ireland for breaches of regulations. Page 715 of the Beef Tribunal report states the Tribunal found that “The Department of Agriculture is clearly responsible however for ensuring that such compliance [that is, compliance with the regulations] is effected and the control system should ensure compliance with the Regulations”.

Mr. Dowling: Yes, there is clearly a responsibility on the Department to ensure the control is in accordance with the regulations. However, in regard to the multiple tendering, in our view it is in accordance with the regulations. That is bolstered by a legal opinion and the view of the Conciliation Body. It is further bolstered by the fact that in 1993 when the Commission wanted to ensure that multiple tendering did not take place, it had the regulation changed. In our view, if the regulation excluded multiple tendering there would not have been any need to change it.

Deputy O'Malley: If this country or the Department are so entirely innocent, why did the Commission fine us £18.4 million?

Mr. Dowling: Because DGVI and DGXX in their discussions on the closing of accounts took the view that multiple tendering was against either the spirit or letter of the regulations. That view remains to be tested in court. It is not a view shared by lawyers here, legal advisers in other member States or the Conciliation Body. That view is also not borne out by the fact they required a change in the regulations in order to prevent multiple tendering.

Deputy O'Malley: Leaving multiple tendering out of it for the moment, what about the responsibility for the remainder of the fine which amounts to over £50 million? I do not think you are suggesting that the Commission is legally incorrect in imposing this fine. It is the Department's responsibility, as you agreed. Is there any accountability within the Department for the situation which has now arisen?

Mr. Dowling: We have always accepted there were control weaknesses in the system as it operated in the period 1990–92. Those control weaknesses largely arose from the enormous quantities of product which we were required to intervene for over three years - in excess of 800,000 tonnes. The system, as initially set up, was not capable of dealing with those quantities. We moved from 1990 onwards to change the system in a way which would improve the controls significantly and ensure that disallowances of this kind could not arise in future. The fact that the disallowance was reduced in the final Commission decision by £24 million was a specific recognition of the fact we adjusted the controls when the deficiencies became clear.

I do not think people can necessarily be blamed for the fact that unprecedented quantities of intervention were put into the system or that the system was not fully adequate to deal with it for a period. Having said that, we still believe - it is an issue whether the Government wishes to contest this in court - that the risk to Community funds from the deficiencies in the control was not enormous and that a £50 million fine exaggerates the extent to which Union money was at risk. As I said, it is an issue for the Government whether it wishes to contest that point in court.

Deputy O'Malley: You did not reply to the question I asked. Is there any accountability within the Department for these astronomically large penalties which have been imposed on the taxpayers of this country as a result of the failure of the Department to exercise its responsibilities and comply with the regulations?

Mr. Dowling: The Department is accountable, obviously, as indeed are the Ministers. However, taking account of the unprecedented quantities with which we were faced in those years, it would have been very difficult for anybody to operate a system which was cast iron in terms of not having any possibility of irregularities taking place.

Deputy O' Can I put a specific point to you in relation to accountability? Evidence was given to the Beef Tribunal that an officer of the Department forged a person's signature on 200 or more documents. The person whose signature was forged was prosecuted for fraud but the person who forged the signature has had no action taken against him. Does that not seem almost grotesque in its unfairness?

Mr. Dowling: The position on that is that there was clearly a very substantial control breakdown in the Rathkeale plant. The issues arising out of that were put to the legal authorities in the State who decided to institute proceedings in both cases. Those proceedings were completed in February of this year when the Shannon Meats case was settled. We awaited the outcome of those cases because there was a possibility that some of our staff could be involved in one way or another. Proceedings were not taken against any of our staff. We have, over the last couple of months since the outcome of the cases, been undertaking a very rigorous investigation involving a review of all the evidence available, both in the Tribunal and the court cases, in regard to the control staff involved. We expect that investigation to be completed early next month, after which we will decide which action to take.

Deputy O'Malley: Is this not very late in the day? It appears from what one hears in regard to the Tribunal that the reason these matters came to light in Rathkeale is that the Tribunal at its own instigation caused Rathkeale to be raided. The evidence available to the Tribunal would suggest that similar activities were going on elsewhere. However, since certain other factories were not raided the evidence did not come to light in the clear way it did in Rathkeale. For some reason, you only decided to take civil proceedings, as opposed to criminal ones, in the last month or two, relating to one aspect of what was happening in Rathkeale. Have you taken any other proceedings?

Mr. Dowling: The first evidence in regard to Rathkeale came via an ex-employee of the factory. That was followed by raids, for want of a better word, on Rathkeale by our staff and Garda staff which uncovered documentary evidence of irregularity on a substantial scale.

Deputy O'Malley: At the instigation or suggestion of the Tribunal, I put it to you.

Mr. Dowling: In agreement between us and the Tribunal. We also-----

Deputy O'Malley: It would not have happened if the Tribunal had not sought it.

Mr. Dowling: It would have happened, whether the Tribunal sought it or not, once there was evidence available from the ex-employee concerned. We did not have that evidence up to then. In addition to Rathkeale, a number of other plants of the same company were raided at the same time, as was the company's headquarters. We and the legal authorities have assessed all the evidence available from those raids and other evidence available from the Tribunal to see what it would be reasonable to pursue. The legal authorities decided to pursue criminal cases in the case of the two Rathkeale incidents. We asked last year, at various times, for proceedings to be instituted to recover the moneys concerned. That has now been done in both cases. The Shannon Meats proceedings were instituted a couple of weeks ago and the other one was instituted earlier.

We are working with the legal authorities on the evidence which might enable us to pursue the wider issue, against one company specifically and possibly against other companies, for breaches of EU regulations. I do not know if we will be able to proceed on this.

One of the issues to emerge from this, which surprised me, was that evidence in the Tribunal was not, in itself, capable of enabling us to bring proceedings. We must find evidence ab initio again. We are in the process of doing this in the other cases. However, in the clearcut cases, following the civil act, criminal actions took place first and civil actions have now been instituted.

Deputy O'Malley: For a sum of under £2 million.

Mr. Dowling: For the sums that were calculated by the Tribunal as having been the amount of the misappropriated funds.

Deputy O'Malley: Scores of millions of pounds were misappropriated and no civil proceedings have been instituted regarding them, nor has any actions been taken under the Companies Act against the directors. Is that correct?

Mr. Dowling: There is no evidence that scores of millions of pounds have been misappropriated. There is the admission in the Tribunal by one company that it misappropriated amounts in excess of the 68 per cent yield. In respect of this, we are in the process of working with the legal authorities to see whether there is evidence to proceed against the company. We are looking at this in respect of other companies also.

The question as to whether or not action can be taken under the Companies Act is not principally one for us, but we could only take such action if the Minister can be shown to be a creditor of the company. As of now he cannot be shown to be one.

Deputy Byrne: As things stand at present, the taxpayers face a bill of a minimum of £72 million and a possible additional £9 million because of the fire at the Halal meat processing plant. This amounts to approximately £81 million. Is that correct?

Mr. Downling: The total amount of the disallowances in the 1992 account, which is the current one, amounts of £71.9 million. It is possible, but unlikely, that the other £9 million could fall upon the taxpayers.

Deputy Byrne: I was impressed by your determination that your Department was handling things correctly. You assured the Committee on a number of occasions, until the last time you attended, that the fines were totally disproportionate to anything that had occurred in the beef industry. On the last occasions you attended the Committee you advised that you would be visiting Brussels to tackle this questions of the fines. What diminution did you achieve with regard to them?

Mr. Dowling: The fines were diminished by £24 million. The penalty for the second of the two years, 1991, was reduced from 10 per cent to 5 per cent. According to the EU commission this was done because, since the beginning of 1991, Ireland has shown its willingness to introduce significant improvements to its control system and began to put in place arrangements for remedying the deficiencies found.

Deputy Byrne: You will recall advising the Committee that the Department does not accept the validity of the Article 9 inquiry conducted by the EU Commission on legal, administrative and technical grounds. You also went to advise that the Department considered the level of disallowances proposed wholly disproportionate to the findings of the Article 9 inquiry. Given that this was your view then, are you now prepared to say it was incorrect in view of the current fine?

Mr. Dowling: No. To the extent that the fines were reduced, it indicates that other people were prepared to concede that they were too high. We remain of the view, not that there was no weakness or that there should not have been disallowances - that would be unreasonable to argue and would contradict the efforts we made to improve the controls because if they did not need improvement we would not have had to improve them - but that, even at £50 million, it is a disproportionately high fine. However, this is not a view that was accepted by the EU Commission. It accepted that it was £24 million too high and took this sum off the fine.

The legal point does not relate to the sum of £50.3 million; it relates to the multiple tendering where we believe there is a legal case that the EU Commission is wrong. This remains to be tested in law.

Deputy Byrne: Would you agree that the reduction in the fine by £24 million had more to do, not with the efforts by your Department, but the high politics of the EU, and especially the steps take by the EU Commissioners, Mr. Flynn? It was high level political skulduggery on behalf of the Irish State that managed to have the fine reduced as against anything that was done by way of submission by the Department of Agriculture, Food and Forestry. Is that correct?

Mr.Dowling: I would be first to say that the interventions of the EU Commissioner, Mr. Flynn, on this, not just in the last week but in an earlier period, were helpful in getting the EU Commission to refocus its attention on the arguments. especially those which arose out of the Conciliation Body.

The big contribution which the EU Commissioner, Mr. Flynn, made was in drawing attention to the fact that the EU Commission Services, in its report to the EU Commission, had almost exclusively disregarded the findings of the Conciliation Body. Before the issue went to the last week, we had already obtained an understanding with the EU Commission that it would reduce the fine in respect of the second year by deferring part of it with the likelihood that it would not have to be paid because of the improvements in the controls. This was accepted at a technical level within the Commission in the end, and not just at a political level.

The EU Commissioner, Mr. Flynn, was successful in having this deferment, with the possibility of non payment, being translated into a non payment immediately. While we were not anything like wholly successful, we were at least partly successful in getting people to focus on the arguments we had made and which, to some extent, had been accepted by the Conciliation Body.

Deputy Byrne: What is your position on the fine of £72 million? Do you accept this is the fine that must be paid, or do you intend to pursue an appeal through the EU Court of Justice on behalf of Irish tax payers?

Mr. Dowling: This is a matter for the Government, which has not considered the matter yet, as to whether it will take a case to the EU Court of Justice. I believe that it is certain the case will be taken on the multiple tendering, which is the sum of £18 million, where there is a clear legal argument involved.

The arguments on the beef storage, which involves the fine of £50 million, are not as legal in the sense that they do not hinge principally upon interpretation of EU law. Rather, they hinge upon whether the evidence for the fine justifies its extent. The Government will have to decide whether to pursue it or not. It is more difficult to pursue in court than the first.

Deputy Byrne: As one of the major advisers to Government Ministers, will you be advising them to pursue the appeal?

Mr. Dowling: At present we have asked our legal adviser to give us a view as to the grounds on which we may appeal the case. When we see it we will have to make up our minds as to what advice we will give. She is not in a position to give formal legal advice at present because up until a day to two ago the formal EU Commission decision on these fines had not been published. As soon as the legal adviser and assistants have had a chance to review this, advice will be given accordingly and we will then assess it for the Government. However, I believe that it is beyond doubt that the multiple tendering issue will be pursued in any event.

Deputy Byrne: You mentioned to Deputy O'Malley the legal advice you sought on the multi layered tendering. If I understand it correctly, you were given verbal legal advice which satisfied you that there was nothing illegal within multi layer tendering. You subsequently obtained written advice, which you are considering whether or not it is open to the Committee to see. Did the written advice differ from the verbal advice?

Mr. Dowling: I am speaking from recollection of the old advice which, if I am correct, did not differ. We have no advice which indicates that multiple tendering was in doubt under the regulation. When the issue was raised by the Commission we sought formal legal advice which stated that the procedures operated in Ireland are not conflict with the regulation.

Deputy Byrne: We must, therefore, accept Mr. Dowling's statement, relating to the £50 million beef intervention fine, that the Department and the then Minister were accountable. Were they accountable during the period from 1990 to 1992 and did the fine arise as a result of this?

Mr. Dowling: The fines relates to what the Commission perceived to be control weaknesses in the system operated at that time by the Department. Again I would like to put on record the fact that those control weaknesses must be measured against the unprecedented volume of intervention we experienced during the years in question. When it became clear that the system required improvements, a process for doing so was established in 1990 and continued until 1993. These control improvements formed a basis for reducing the fine.

Deputy Byrne: Time constraints do not permit a discussion of the issues relating to the civil action taken by the Department regarding the recovery of £900,000 from the Rathkeale plant.

The Commission has set aside £9 million which represents a potential cost to the taxpayer. Could Mr. Dowling inform the Committee whether there was insurance cover on the Halal plant which was damaged by fire? If not, how can it be argued that the taxpayer must pay an additional £9 million because an outrageously incompetent official or insurance company, acting on behalf of the Department or the Minister, did not place the proper premium on the plant?

Mr. Dowling: This matter involves two separate issues. Under the rules applicable at the time, the value of the stock in the plant which was destroyed was roughly £21 million. We had paid all premia due on that stock through a broker who is insistent that he paid the premia to the insurance company concerned. The principle insurance cover was provided by a foreign company which is contesting the fact that it is liable. It has attempted to argue that the plant was not covered at the time. The legal advice available to the Department is that this is incorrect and the issue is being pursued in court to recover the amounts due under the policy.

Subsequently, the Commission decided to adjust the method under which stock in store is valued and informed us that we should apply that value retrospectively to the product in store at Ballaghaderreen. We cannot insure against possible retrospective changes of view by the Commission. That is the issue involved. The Commission has agreed that an issue exists on the points we raised but it will not consider this until an outcome is reached in the insurance case.

Deputy Hogan: A return of the Beef Tribunal has taken place during this meeting and Deputy O'Malley has a keen interest in this. Could Mr. Dowling indicate the changes that occurred in the regulations relating to the weaknesses in the system for policing and controlling intervention since the Beef Tribunal?

Mr. Dowling: The main concern of the Commission about the system as operated in Ireland was that we depended too much on permanent presence as a means of control in meat factories and did not sufficiently rely on random inspections from outside the plants concerned. At the end of 1990, a system of ad hoc, random inspections was introduced. In 1991–1992 a specific Beef Controls Division was established within the Intervention Unit in the Department. This division is responsible for undertaking systematic, random inspections of all plants operating in the export refund system or in the intervention system. In the last year alone 250 inspections were carried out. This represents a major change in the way in which the system is operated.

We have introduced new contractual arrangements for intervention and deboning, under which the obligations of the firms concerned are clearly set out. Their agreement to what happens in the event of the obligations not being properly carried out is also clearly specified and this enables the Department to pursue the recovery of moneys more effectively if the need arises. The Commission introduced new regulations in 1993 which established a different intervention specification, tighter than the one we operated in the past. When intervention is reintroduced, this will be the basis of the new regulations. The Department has implemented the two recommendations included in the report of the Beef Tribunal. These specified that Department officials would take complete control of weighing. Specification, documentation, contracts and deboning procedures have been improved. More rigorous and systematic training arrangements were introduced to cater for staff involved with intervention.

Deputy Hogan: Is Mr. Dowling satisfied that these changes have been effective?

Mr. Dowling: Yes, we are satisfied. There has been very little intervention since 1992, therefore we do not have much experience. However, we will have much experience of it during the next number of months. I should also have stated that one of the major objections the Tribunal had to our system was that the Department did not have enough staff on the ground. We certainly did not have enough staff in this regard to operate a system involving mainly permanent presence. If there had been more random inspections, the deficiency of numbers on the ground would not have been as serious. In any event, it was stated that there were not enough Departmental staff in the deboning halls. We had tended to control this process through one person. Under the new intervention system, three staff will be present in each hall.

We are satisfied that the system has worked well, where a slightly analogous system works in export refunds. A much tighter system has been introduced in this area, to cater for deboning, where it is much clearer what cuts must be produced and what the consequences of not doing so correctly are.

Deputy Hogan: Could Mr. Dowling indicate the volume of beef being placed in intervention at the time of the alleged irregularities, which were subsequently proven to have taken place by the European Commission? What were the years and volumes of beef involved?

Mr. Dowling: The Commission was primarily concerned with 1990 and 1991. Between 1990 and 1992 we took in over 800,000 tonnes - the figure was over 250,000 per year. From memory, in 1989 60,000 to 70,000 tonnes were taken in. In the years immediately prior to 1989 very little was taken in. There was a jump from relatively small quantities being taken in during the second half of the 1980s to over 0.25 million tonnes a year being taken in for three years in a row.

Deputy Hogan: What monetary figure would relate to these amounts?

Mr. Dowling: It was approximately £3,000 a tonne. That would be around £2.4 billion for 800,000 tonnes. This is the value of the beef on entry. In intervention it tends to lose its value very quickly because it depreciates.

Deputy Hogan: What was the value to the country of headage payments at this time? I want an indication of the figures involved at this time so that we can put the other figures in context.

Mr. Dowling The value of direct payments at the moment across all the schemes is between £700 million and £800 million. At that time it would have been over £200 million per annum.

Deputy Hogan: When did you first become aware that there were irregularities? Was it at the time of the Beef Tribunal or was it before then?

Mr. Dowling: There have always been occasional irregularities which are picked up by controls. In 1989 we carried out a substantial investigation into the 1988 Aids for Private Storage Scheme. This showed that some firms placed in boxes products which we and the EU Commission deemed to be ineligible and we penalised them accordingly. This was the subject of a court case which has recently been heard. The judgment of the court was that the penalties we imposed were excessive. That investigation led us to have some degree of worry about our controls and this is why we began to reorganise them from the second half of 1990.

The Commission's Article 9 investigation was concluded in 1992 and it indicated that it had a certain degree of worry about some elements of the controls. We were already dealing with these in the context of the improvements to the controls being made at the time. The Commission did not indicate at that stage that it had serious concerns arising out of its investigation but they did do so about 18 months later. It waited for the end of the Beef Tribunal before it gave its final conclusions so that it would have a chance to review the evidence. Subsequently, it reviewed the Tribunal's conclusions. There were matters with regard to the Beef Tribunal which made it clear that there were serious problems with the controls in some areas, particularly in Rathkeale. We took account of this in the formulation of the new controls.

Deputy Hogan: The judge who recently heard the cases with regard to Rathkeale made remarks about the beneficial ownership of the company and about who benefited from the actions of those who were found guilty of various malpractices. Is the Department reviewing these cases, and, if so, what legal advice is it receiving on beneficial ownership and on who benefited from the actions of those who appeared in court? Has the Department carried out any investigation as a result of these cases?

Mr. Dowling: As I said earlier, all the documentary evidence for the two Rathkeale cases was examined by us and by the legal authorities. Those authorities took the view that there was a case against certain people. We had the benefit, as had the Garda Síochána, of documentary evidence taken from the headquarters of the company. It was not possible at that stage to link the headquarters with what happened in Rathkeale. The judge took the view that it was inconceivable that what happened in Rathkeale did not have authority from above. Subsequent to the court cases, we asked the authorities to see whether there was some way in which evidence might be available to tie in both the plant and headquarters. So far such evidence has not been obtained. We cannot go to court on the balance of probabilities. This is effectively what the judge said in his obiter dictum.

Deputy Hogan: There is a welcome admission by the Department - this is borne out by the fines imposed - that there were weaknesses in the system. The Secretary of the Department has indicated openly where these were. It would be remiss of the Committee if it did not thank him, in the context of the BSE crisis, for the enormous efforts made by the Department in this matter. Some 50,000 people are employed directly in agriculture and 10,000 are employed in the processing industry and they have great fears about their future. While our function is to question the Accounting Officer about actions in the past with regard to an issue which has dominated a great deal of time and effort over the years, I hope the changes made in the intervention system will be seen to have been correct in the next few weeks and months and will protect people's livelihoods and employment. I hope the controls arising from the Beef Tribunal will be seen to be effective.

There is a huge sum of £2.4 billion involved in beef storage and tendering for intervention and headage payments amount to between £500 million and £600 million per annum. There will inevitably be difficulties in ensuring this money is given to those who should receive it. Whether the Department is directly or indirectly involved in the administration of the scheme, because of the amount of money involved we will be here on a regular basis to police this activity.

Chairman: What provision has been made in the 1996 Estimates to meet the fines which have been set at £71.9 million?

Mr. Dowling: £50 million is included in the non-programme outlays to cover what we thought might be the likely outcome of the fines.

Chairman: Does this mean there will be a supplementary Estimate for the balance?

Mr. Dowling: There will be a supplementary Estimate at some stage for the balance unless the court case on multi-tendering can be heard quickly but it is not likely that it will be heard this year.

Chairman: Do you intend paying the £50 million to meet part of the £71.9 million fines?

Mr. Dowling: We do not have the option of paying this over. The EU Commission deducts payments from the advances of a particular month. In this case it will be deducted in May.

Deputy Broughan: The country is grateful to you for the sterling efforts you made over the last few weeks, including in Egypt. Deputy Hogan misses the key point in that part of the reason you have had to work so hard in recent weeks is because of the reputation of the beef industry. Taxpayers are angry about many events which have occurred in the industry, such as the use of angel dust and the Beef Tribunal mess with regard to intervention and storage. The reputation of our agriculture and beef has been adversely affected as a result of this. This, and not setting sums of hundreds of millions against billions and saying this was minor, is the key issue. We have recently seen that some countries are insisting that Irish and British beef are essentially the same and will not hear of your efforts to disengage the reputation of our beef.

I want to ask you about the £50 million. I speak primarily for urban tax payers who are very angry and who supply the vast bulk of the tax budget of this State. Is there some way in which the £50 million that will be deducted at source by EU could be further deducted from transmission to the agriculture industry? In other words the part of the country or section of Irish business that got us into this mess should get us out of it and urban tax payers should not be expected to provide these moneys of which they are totally innoncent.

Mr. Dowling: I will answer the question about recovery presently. On the BSE issue, whatever else we may say against the beef industry, they did not cause the BSE problem. It is a problem which was caused largely by what happened in the UK and the way with which it was dealt. It would not be true that in the majority of cases we are dealing with countries that do not distinguish between ourselves and Britain. Most of the major importers of beef, in banning beef, banned European beef and cattle and not just Irish and British beef. Where bans are being lifted - and Egypt is the first big country to lift its ban - they are on the basis that the ban against the United Kingdom remains in place. A number of big markets, such as Russia, have stayed open.

Everywhere we have gone and dealt with people, their principal concern is to ensure that we are able to distinguish between ourselves and Britain but largely in regard to Northern Ireland that there is not a leakage of British beef and cattle down here from Northern Ireland. That is the single biggest issue which is being discussed now. It is an unfortunate issue because it is not a distinction which, for many other reasons, we would normally want to make but it has been forced upon us by circumstances.

An interdepartmental group comprising ourselves, the Department of Finance, the Attorney General's office and an independent legal adviser, is looking at the possibility of recoveries. The advice we have is that a general recovery, that is by way of a levy on the beef industry, would be illegal under European law. There was a similar case in Italy where the Italian authorities attempted to impose a levy on the fruit and vegetable industry to recoup a general disallowance. The European Court found that it was illegal.

It was also found that a levy on alleged wrongdoers would not be legally possible either in European law or Irish law, nor is it possible to apply administrative charges under European law or execute the beef industry from grant arrangements within the State. There are not a great deal of legal possibilities to pursue the issue other than where there is evidence of specific wrongdoing. Then one pursues the specific amounts as we are doing in the Rathkeale case. I hope that is what we will be doing in the case of the yields issue, at least in regard to one company and perhaps one or two others. We have for some time -----

Deputy Broughan: But the amounts of money will fall far short of the cost to the taxpayer. You told Deputy O'Malley and Deputy Byrne already that we are talking about a very small portion of the £72 million.

Mr. Dowling: The multiple tendering would be a separate issue. If one is talking about £50 million i.e. under the multiple tendering issue, it would not be possible to pursue that as an irregularity against individual companies. Obviously, if we pursue a general case on the yields issue, depending on what we can prove, it could be significantly higher than the £1.8 million which was at issue in the Rathkeale case but I agree that it would be unlikely to come close to the £50 million.

For a long time we have not charged the industry for the full cost of the inspection service which we provide for them. This was principally because they were challenging our right to do so in court and also because it was difficult to organise a system to do it. We won the court case and we propose that from May the full cost of the meat inspection service would be recouped from the industry. That initially works out at an extra £4.5 million. That cannot be set off as something that relates to the recovery of disallowance because it would not be legal to do so. However, we are satisfied that we are legally entitled to bill the industry for the full cost of the services we provide and as from next month that will be done. It will bring in an extra £4.5 million from the industry over a period of years.

Deputy Broughan: Is that the only area where you could charge a commercial rate for services which in the past were perhaps done as part of a political decision to look after the industry.

Mr. Dowling: It is the only area that immediately comes to mind but we will be looking at other services we provide to see if we can get the full cost or at least a greater portion of the cost back than we are at present. We provide laboratory services for instance and we are looking to see if the cost of those can be recouped.

Deputy Broughan: I want to refer to the Department's administration of the 1991–92 period. You said that the Department and the Minister of the day are accountable but is there any sense in which any heads should roll in the Department of Agriculture because of the administration at that stage? If people were aware of some of the things highlighted during the Beef Tribunal, such as people trying to do an enormous job on their own in a huge deboning hall, could it be said that they fell down on the job for the Irish State in the Department of Agriculture and should have gone to Ministers and told them to put the infrastructure in place or the whole industry will be in trouble? Would that be unfair?

Mr. Dowling: I think it would be unfair. One must appreciate the degree to which this huge amount of intervention almost appeared overnight because of various circumstances, including the first BSE problem and the closure of a major Middle Eastern market due to the United Nations embargo. It was not obvious initially that the staff was not sufficient to deal with it. In any event we were under continuous staff pressure because of a variety of decisions on staff numbers over the years. It would not have been easy to reverse that overnight or indeed to have trained people overnight to change it. Once it became clear that something needed to be done, we started to do it. You can argue that we did not start early enough but we did start to do it and that is accepted on all sides.

Deputy Finucane: I support what Deputy Hogan said about Department officials. They have put in many hours in recent times due to the ongoing BSE situation.

I live six miles from Rathkeale and know some of the people convicted in court recently. It is interesting that the judge commented that he was suspending sentence on the basis that the people were probably acting as employees under duress. He felt that more senior people were often responsible for what was perpetrated in those factories.

I want to ask about the amount recoverable for the fraudulent practices of the company involved, Anglo-Irish Meat Packers. To what degree have you advanced the case against them. It would appear to have been proved clearly in court what went on in those factories. You might establish the current status of those proceedings. The Beef Tribunal is over and I do not want to replay it but it would appear that only a small number of people have suffered, namely, the five employees who worked in Rathkeale. I stress the word “employees” because I could never understand what emerged from the Beef Tribunal. There was a structure in place within a company whereby administrative records were relayed back to the head office on a daily basis. It amazes me that anybody would think that an individual within a company would act on his own initiative in doing something like that.

However, we do not want to replay that issue.

Coming from the area I am sensitised to what happened there. The Beef Tribunal cost a lot of money and we have seen no tangible proof of redress from the beef industry which was culpable. What attempts have been made to recover the situation in Rathkeale?

Mr. Dowling: With regard to the cases in Rathkeale, proceedings have been instituted. If the matter goes to court it will be the best part of 12 months before it is heard. The amounts involved are about £900,000 for each of the two cases - the intervention hall and the cannery. The amount in one case was calculated by the Tribunal which specifically stated the value of the misappropriated beef to be £900,000. In the other case there was a tonnage calculation and it is possible from that to put a monetary value of about £900,000 on this also. The combined total, therefore, is £1.8 million.

This is only supposition, but we feel the company is not likely to contest that some amount should be recovered. It is likely to contest the figures on which the calculations are made. Because to a large extent the figures were produced by us for the Tribunal, we believe the figures are accurate. If the company does not settle and the case goes to court we will argue that the amounts are not overstated and that the full amount should be recovered.

Everybody has taken the view that it is difficult to see why employees and nobody else should have been involved. The difficulty has been in finding evidence that ties anyone else in the company to what happened in Rathkeale. We have not been able to find it nor have the Gardaí or anybody else. However, the case is not closed and people are still looking to see whether a tie up can be made. To date nobody has found evidence which lawyers believe would stand up in court and enable a case to be brought against others in the company than those employed in Rathkeale.

Deputy Finucane: I am pleased you are confident you will recover the whole amount, depending on whether the case is contested. If that is achieved it will bring some credibility back into the whole business. I trust the beef industry, which has been responsible for much of its own malaise, will behave responsibly on the intervention matter by quoting a realistic price, taking up the intervention tenders and giving something back to the industry which it has itself besmirched in the past.

Deputy McCormack: I note that £2.4 billion worth of beef went into intervention, particularly in the early 1990s. That contrasts with the previous years and the years following when very little beef went into intervention. Why did so much beef go into intervention in those years?

Mr. Dowling: There was a combination of factors. The first was the first significant BSE scare in the UK which caused a number of third country markets to close to Irish products as well as British products. It also caused a diminution in consumption in the UK and to some extent on the Continent. There was a significant quantity of beef which did not have a short-term home. Secondly, the UN embargo against Iraq closed that market completely. At the time it was a significant market. Also, following the unification of Germany there was a substantial cow cull in the former East Germany which put a lot of extra beef on the continental European market. These factors caused a contraction in the market for Irish beef and there was no market other than intervention for the vast bulk of steer beef which was being produced at the time.

For a lot of the period prices in Ireland were low enough for us to be at safety net intervention levels under which there is an obligation on the Community to buy everything offered to it. That continued for two or three years. It began to improve as the third country markets opened up: Libya, Egypt, Russia and other markets were closed and opened up again and gradually consumption began to improve in Europe as people came to terms with the situation. There have been a couple of BSE scares since but nothing like what happened then - up until last month when it all collapsed again. Hopefully, it will not last as long this time because there is evidence that a number of third country markets which had closed initially will reopen fairly quickly.

However, consumption in Europe is substantially down and it will take a number of years before that consumption will build back up again. The Community will have a choice whether it wants to have significant continuing intervention or approaches the matter in another way. Another way which the Council examined when it met earlier this month might be to increase the premia payable to farmers and let the price fall to levels at which consumers are prepared to purchase beef. I would have thought that was a more sensible way of approaching it rather than trying to deal with everything through massive intervention.

Deputy McCormack; I am not a great believer in intervention but this is an emergency. The cost of the Beef Tribunal was mentioned but its cost is as nothing to the cost of the damage done to the image of the industry. The Tribunal was highly publicised internationally. It gave an image of fiddling in the beef industry and of low quality beef being exported. Would you agree that your job in promoting the Irish product has been made difficult as a result of the damage done? That is the real cost of the Beef Tribunal. Had there not been the scandal of the Beef Tribunal we would be marketing our beef abroad as a safe product and the present BSE would not be harmful to our exports.

Mr. Dowling: Some of the activities discussed in the Beef Tribunal were not helpful to the image of the Irish product.

Deputy O'Malley: Should everything be swept under the carpet?

Mr. Dowling: I was not suggesting that.

Deputy O'Malley: It seems the Deputy was suggesting it.

Deputy McCormack: Absolutely not. I suggested that the damage done by the events which led to the Beef Tribunal was very damaging to this country.

I am not suggesting that it be swept under the carpet, I am suggesting that those people be brought to justice. The rigour of the law should be applied vigorously to those people because they are the ones who have damaged the image of the Irish product abroad. I am disappointed and surprised that Deputy O'Malley would misinterpret me to such a degree.

Deputy O'Malley: I listened to what the Deputy said and I could not come to any other conclusion. The Deputy repeated it twice.

Mr. Dowling: One must accept that the practices in the industry, whether highlighted in the Beef Tribunal or otherwise, which have shown a degree of lack of concern for financial and other regularity do not and did not help the beef industry significantly in recent years. However, I do not think it has been that huge a factor. If you look at the penetration by Irish beef of the United Kingdom market and the market on the Continent even in recent years, it has continuously improved so the quality of what has been produced for the commercial market at least seems to be accepted by the market as being satisfactory and, indeed, in many cases more than satisfactory. There is evidence of Irish beef selling in some markets at better prices than other beef.

Certainly, in the current situation in regard to BSE, I do not think any of the issues of the past are significant factors. The significant factor is that there are worries among consumers about whether or not there is a link between this disease and a disease in humans, in particular, in the United Kingdom. That has caused many world markets to close to European beef and it must be said that some minor markets have closed only to British and Irish beef because of our connection with Britain. There have been two big issues in all of this. First, we must try to reassure people that in general beef - not just Irish beef - produced properly is a safe product. This is necessary in the European Union where consumption has fallen dramatically and will take a long time to recover. Second, in regard to many third country markets, we must emphasis that Ireland is a separate market from that of the UK and reassure those markets that what is sold to them with Irish certification is Irish beef.

Deputy McCormack: I know the consumer resistance is as a result of BSE but Ireland was lumped in with Britain and other countries because of the serious mistakes which have been made in the past with the events which led up to the Beef Tribunal. In other words, the British market and other markets have said “You are all the same. You are all producing unsafe beef”. It is like tarring politicians with the same brush. My contention is that Ireland has safe beef but now our job in marketing it as a safe product has been harmed seriously by the actions of meat factories in the events which led up to the Beef Tribunal.

Deputy Finucane: I hope Deputy O'Malley does not misinterpret that.

Deputy O'Malley: Mr. Dowling told the Committee earlier that the Article 9 Investigation by the Commission concluded in 1991 and that some small part of it may have carried forward into 1992. That would suggest that it began in 1990. When in 1990 did it begin?

Mr. Dowling: March 1990.

Deputy O'Malley: Is it not, therefore, the position that as early as March 1990 the Commission was conducting an inquiry in this country into how the Department was operating the intervention system because it was unhappy with the way the Department was doing it? Why did the Department not begin to mend its ways until the end of 1991?

Mr. Dowling: The Commission carry out investigations in regard to operations of Community support systems in many sectors and many countries. It was carrying out one which began in March 1990 in Ireland and in three or four other member States, the ones which were principally involved in intervention. It was not clear at that stage that the Commission had major difficulties with the controls operating in Ireland any more than it was clear that they had difficulties with the controls operating anywhere else.

It was carrying out an investigation into how the controls operated.

It is not true that the Department did not start doing anything until 1991. We started in October 1990 by setting up a specialist Intervention Unit in the Department, bringing all of the activities under one Assistant Secretary and into one specific series of divisions. The Department moved on from that at the end of 1990 to begin the first ad hoc system of significant controls through random inspection. In 1991 it set up a Beef Controls Division to systematise the arrangements for random inspections. So the Department moved on this whole issue in an incremental way. It did not wait until 1991. Ireland was, however, in the beginning of 1990 in the middle of an Irish Presidency, which imposes substantial demands on the Department and it would not have been easy in the context of the Presidency to totally reorganise the Department. The Department reorganised as soon as it could; this began in October 1990.

Deputy O'Malley: Why did the Department not act on the strength of Mr. A. McNamara's letter to the beef industry of 11 May 1989, which stated that it had become apparent that certain meat plants were attempting to misappropriate significant amounts of beef for their own use, it was obvious that if these practices went unchallenged large amounts of beef could be taken at the intervention agency's expense, all meat derived from deboning was the property of the Minister and any taking of surplus was a fundamental breach. Mr. McNamara set out at great length in that letter all the practices which he had identified were going on illegally in factories. He was a Principal Officer in the beef area at that time. Why was he not allowed to follow that through? Why did the Department not stop all these practices which Mr. McNamara had identified and about which he informed the industry in May 1989?

Mr. Dowling: First, the practices to which he referred were picked up in ad hoc inspections of different plants. They were not necessarily on a massive scale but were sufficient to be worrying in that there could be a significant number of plants which did not see that they were required to give up all eligible product including amounts above the 68 per cent yield. Mr. McNamara followed it up in that an instruction was issued to every control officer with a copy of that letter. The instruction stated that these were the rules, they were to operate on the basis of these rules and they were to ensure in their control operations that all eligible meat in excess of 68 per cent was handed up.

Deputy O'Malley: But the random surprise inspections which Mr. McNamara had organised in March 1989 came to an end because Mr. Dowling told the Committee earlier this morning that he instituted a serious of random inspections after 1992 or 1993 and there had not been any up to that.

Mr. Dowling: There had always been some level of random inspections. The problem was that we had a very small number of staff and, indeed, perhaps only one or two people engaged on those inspections prior to late 1990 when we began to do it through setting up control inquiry teams which were to carry out random inspections in the different sectors, not just beef but in the milk and other sectors too. As I say, the Department set up a specialist beef control division in 1991 which would undertake these on a systematic basis in the beef area. We began by instructing all controls staff to try to ensure that the regulations in regard to 68 per cent were observed. We backed that up by some degree of random inspection but not to a sufficient degree. We set up these control inquiry groups at the end of 1990 and subsequently they led to the setting up of the Beef Controls Division which continues to do it in a systematic way.

Deputy O'Malley: The potential loss to the taxpayer in relation to this fire at Halal in Ballaghadereen is not £9 million as you mentioned this morning but £30 million. This is because the purported value of the beef was £21 million which you claim you had it insured for. The Commission says you undervalued it by £9 million and that its true value was £30 million. You have neither recovered £30 million nor £21 million even though that fire took place almost four years ago. Not a penny has been recovered. The State is liable to the Commission for this £30 million on top of the fines already paid. Is this not a very serious matter?

Mr. Dowling: The beef's value, based on valuations in operation at the time of the fire, was £21 million. In our view that is covered by an insurance policy on which we paid the premia up to date. The insurance company is contesting that matter which will be decided in the courts. The money has already been recouped by the Commission. It was paid over automatically as part of the arrangements on ongoing operations, and is covered by our borrowing requirement. Obviously, if the insurance company wins the case there will be a potential liability for that amount as well.

Deputy O'Malley: Have we already paid the £30 million, is that what you are telling us?

Mr. Dowling: £21 million.

Deputy O'Malley: We did not know that. You seem insistent that you can only institute proceedings in respect of places where the Beef Tribunal provides actual evidence of specific losses that the Department incurred and which they quantify for you.

Pages 514 and 516 of the report quantify losses in respect of AIBP factories in Nenagh and Dublin. Examples are given of the misappropriation or larceny of meat that went on in those places over two weeks. They do not suggest that the same thing did not go on every other week, which it obviously did. They just cite these as examples. Why have you not instituted proceedings against AIBP to recover what they purloined or stole from the intervention agency in Nenagh and Dublin?

Mr. Dowling: It is not true to say that we are proceeding only where the Tribunal quantified the amounts involved for us. The amounts in Rathkeale were quantified by ourselves with the Tribunal. That, however, is only a point in passing. The other case we asked to have brought - assuming that we can assemble sufficient evidence to bring it - is on the whole issue of yields. It would involve all the plants - not just all that company's plants - if there is evidence in regard to other plants as well.

At present we are sifting with the lawyers through all the evidence we have or can get, or that the Tribunal got for us. However, it is also not true to say that this evidence necessarily proves there was wholesale misappropriation. Under the boning classification, companies are entitled to retain a certain amount of product above 68 per cent if it comes from trimmings. The Dublin one in particular does not show that they necessarily misappropriated anything. The values they put on the removal of product to stock in that case would be relatively in line with the value we would put on the trimmings and other bits or meat they are entitled to keep.

Deputy O'Malley: £40,000 a week's worth of trimmings?

Mr. Dowling: I am assured that the value which has been put on them, in regard to the particular table you referred to for Ballymun, is in line with the value we ourselves would have put on the trimmings. They are not scraps or bits of fat, but pieces of meat which they were legitimately entitled to keep under the contract.

The Commission brought in a new specification for deboning in a 1993 regulation. On the basis of our experiments, comparing one to the other, the new one will get something like 2.5 per cent more meat into intervention than the old one, but the old specification was legitimate. It was drawn up in the mid 1980s, was sent to the Commission and, as we understand it, it was never objected to. The companies could keep a legitimate amount of meat, and that is true of everywhere, not just Ireland. The returns for deboning in France, Northern Ireland and Britain are not significantly different from ours. One cannot jump from a table in the Beef Tribunal's report and say it necessarily means that meat was being misappropriated.

Our problem is to find sufficient evidence of misappropriation that will stand up in court. We have been in the process of trying to assemble that evidence for some considerable time.

Deputy O'Malley: The people who did the misappropriating told the Tribunal they were taking out nice cuts like good fillets and sirloin steaks, and putting in hearts instead to make up the weight. They said they were told to do it from on high.

Mr. Dowling: The Tribunal report's conclusion was not that they were misappropriating a whole lot of fillets or strip loins but that the company, as a matter of systematic routine, kept some meat above 68 per cent. We are not arguing about that, we accept it. We are trying to get evidence that will stand up in court that they did it.

While I assumed that an admission to the Beef Tribunal would be evidence in court, to my surprise I found it was not. One must have evidence that they did it and - secondly, and more importantly from the point of view of recovery - we must have evidence of how much they misappropriated. One of the big difficulties in all this is that if irregularities arose out of control weaknesses, it has been very difficult to prove that an irregularity took place and to calculate the extent of it. We are attempting to do that and, to the extent that we can, action will be taken in the courts.

Deputy O'Malley: You always seem to give them the benefit of the doubt even though everybody knows that appalling, illegal activities were going on.

In October 1995, we were told there was a Government decision under which certain bonds and guarantees relating to export refunds were called in and others were released to the people concerned. Some were left in doubt, in between, for further investigation. It now appears that no releases have taken place in spite of the Government decision which was obviously wrongly based. Can you tell us exactly what the up to date position is and whether the Commission has been consulted about this? Is this not a means of withholding £30 or £40 million from some of those who were engaged in illegal activities and misappropriation of beef?

Mr. Dowling: We do not give anybody the benefit of the doubt. The fact that everybody knows something took place is still not evidence in court. Dogs in the street may bark, but barking in the street does not constitute evidence. The problem has been in getting evidence that something took place and the extent to which it took place.

In regard to the release of securities, the position is that the Minister went to Government on the basis that the amounts involved would work out at about £17 million to be released, about £7 million to be made forfeit and £6 million in discussion between ourselves and the Commission. On the last mentioned lot, we are not absolutely sure of the extent to which some of it could made forfeit or some could be released. The Commission has not concluded its examination of that £6 million.

It was clear there was still some technical work to be done to make the figures precise and in doing that, some adjustments needed to be made. As of now they do not significantly affect the order of magnitude of the figures but they do slightly affect them; and they affect one bond as against another, in that somewhat more of one bond would have to be released, somewhat less of another would have to be made forfeit, and a few things like that. The overall figures are not significantly different, as of now, from the ones in the Memorandum to the Government.

Because of the publicity attached -- and the Commission was interested in this -- we also took the opportunity to consult it and we assisted its auditors in looking over the files. The auditors looked over the figures about three or four times and indicated they did not have a problem with the releases or forfeitures. However, we still have not concluded some of the technical work and until then we will not release or make forfeit.

The point the Deputy raised was that this gave an opportunity to make forfeit a lot of money. It does if we can find reasons that something should not be released but our processing of the files indicates that the majority would have to be. These are bonds put up by financial institutions, mostly banks, to underwrite or at least to guarantee that specific contracts or export operations are carried out in accordance with the rules -- i.e., that the product is de-boned for export correctly, that it is exported from the Community, and that where it has to be imported into a specific third country, that is done. If all of those are carried out correctly and there is documentary proof that they have been, the bank has a right to have its bond released. We have legal advice, which we have got before and again since last October, that bonds put up by a bank for a specific export operation cannot be seized or drawn down against other activities. Therefore it does not provide an opportunity for wholesale withdrawal of money which is ultimately from the banks -- it is they who guarantee the company -- and would be payable to the EU if it was drawn down.

Deputy O'Malley: It is not ultimately payable by the banks and it is wrong to seek to give this Committee and the public the impression that it is only the banks who would be penalised. The banks have a full right of recourse to the person to whom they gave the bond; Mr. Dowling knows that and he should not seek to give the impression that the poor banks would have to pay it from their own pockets.

Mr. Dowling: First, there is absolutely clear legal advice that one can only draw on a bond put up for a specific transaction if the transaction has not been carried out in accordance with the rules applying to it. One cannot draw it down for any other transaction -- that is a fact. Second, the regulatory arrangement under which we work is that if a bond for £1 million is to be made forfeit, there must be a ministerial decision to that effect. The company must be written to and it has the opportunity to pay us within a certain number of days -- that is also according to the regulations. If the company fails to pay, we have recourse to the banks and they must pay. Beyond that, the provision the banks have under contract arrangements between themselves and the company is a matter for the banks and the company. As far as we are concerned the final resort or recourse we have is to the banks. I repeat that it remains the position that bonds given for one purpose cannot be drawn down for another.

Deputy Byrne: This is the part where we again say our “fare thee well” to Mr. Dowling -- needless to say he will be back because the business is not complete. I hope he will return with some good news but I am not optimistic about his power to persuade the European Community to view the Irish beef industry in a sympathetic light, given the amount of own goals it has scored in the nineties.

It is a sad reflection on the industry that it was run, particularly at factory level, by a shower of cowboys. We now know that a small number of middle management people were the fall guys for more sophisticated, articulate, financially wealthy and politically well-connected factory owners, who not only gained millions of pounds for themselves but have left the Irish taxpayer to pick up a tab which currently stands between £70 million and £80 million.

Mr. Justice Moriarty asked that further information, which he knows is in the industry, be brought to light. I am quite sure that Mr. Dowling, his officials, factory workers -- literally thousands of people -- know what went on in that filthy industry. People have the information; will Mr. Dowling appeal to them to come forward, be nationalistic in their attitude to the fines levied against the taxpayer, and give the information necessary to incarcerate for once and for all those wealthy criminals who almost destroyed the beef industry, enriched themselves by millions out of sheer greed, and left the Irish taxpayer to carry the can?

On behalf of the Irish consumer, will he warn those farmers administering angel dust to think long and carefully? The Irish consumer will continue to vote with their purses and refuse to buy Irish beef if it is deemed to be contaminated by angel dust and similar additives. These farmers should be condemned from the steeples for their outrageous behaviour in seeking additional funds for cattle.

Mr. Dowling: On the question of bringing to task those in the industry who may be responsible for irregularities and fraud, I repeat that we can only act on evidence. To put it at its nicest, there are oddities in operatives being found guilty of doing things when it is difficult to imagine how they could have done them without the knowledge, or more than the knowledge, of their superiors. We would like to get evidence which would enable us to finalise this issue and if anyone has it we would be happy to deal with it confidentially. We have not been able to find it in documentary checks. The first and biggest of such checks were the raids in the night and early morning, which included the headquarters of the main company, but we could not find the evidence which would tie activities on the ground to a higher level in the company. If the evidence is there, we would be happy to work on it and if anyone has evidence we would be glad to use it. The file is not closed and we will continue to look for the evidence.

Angel dust and other substances are illegal. There is no evidence that their use is widespread throughout Ireland but there is evidence that they are used. It is clear that, whatever consumers might have felt in the past and whether or not it is scientifically a fact that the use of hormones is good or bad for beef, the majority of consumers in Europe do not want to eat beef which has been treated with artificial substances as growth promoters.

People who used artificial substances for growth promoters are endangering the industry. If it was not stamped out, that practice would cause severe damage to our ability to sell Irish beef here and abroad. We will continue to do all that we can to stamp it out but ultimately the responsibility is on the industry. Substances have been used in other industries and those industries have managed to stop them being used once it became clear that it was necessary to do so. We will do all we can to patrol the industry. It is possible to stamp this practice out and if those within the industry are not prepared to do it then they are endangering their own industry.

Chairman: Thank you for being so forthcoming.

Deputy Doherty: When is it likely that Mr. Loughrey, the Accounting Officer for the Department of Transport, Energy and Communications, will be coming before this Committee?

Chairman: He is not due back on the 1994 accounts.

Deputy Doherty: In view of that, I propose that the Accounting Officer for the Department of Transport, Energy and Communications be invited to appear before the Committee and to bring all relevant documents concerning the award of the second GSM licence so that we would be afforded the opportunity to examine and question him in that context.

Deputy O's Malley: I second that.

Chairman: I will come back to you on that.

The witness withdrew

THE COMMITTEE ADJOURNED.

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 18 Aibreán 1996

Thursday 18 April 1996

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (Comptroller and Auditor General) called and examined.

Mr. Thomas Carroll (Secretary, Department of the Marine) called and examined.

Mr. John Thompson (Department of Finance representative) called and examined.

VOTE 30 - MARINE -DISCUSSION ON PARAGRAPH 35 - HARBOUR PROJECTS AND RELATED MATTERS

(resumed)

Public Session

Chairman: Members have a list of correspondence for public session. There is correspondence from the Department of Agriculture, Food and Forestry in relation to information requested at the special meeting of the Committee on 22 February. Are there any questions on that?

Deputy Ellis: The amount of expenditure for carrying out residue testing was £1.27 million, which suggests to me that not enough samples are being taken. Perhaps we could request the Department that all carcases should be sampled, because it is the only way we will boost consumer confidence. It would also expose people involved in the use of illegal drugs and hormones.

Chairman: There is also correspondence from the Revenue Commissioners-----

Deputy O'Malley: On the first letter, the second point in Ms O'Rourke's letter to Mr. Dowling, concerns the amount of beef debarred from intervention in each boning hall between 1989 and 1991. That is the period in which these irregularities and malpractices were at their height, as we know. Unfortunately, no answer is given to that legitimate question. The Accounting Officer states:

Records were not kept in individual plants of decisions taken by officers in charge to debar meat from intervention. Normal control activity in plants would either reject beef on the spot or ask that beef not boned to the correct specification be reworked.

I cannot follow that because the malpractice is that too much meat is taken out. How can it be sent back to be reworked if they have already taken too much out of it?

Similarly, no detailed records were kept of instances where Department officers in charge of meat plants might have curtailed production for short periods. This action would have been a standard action to be taken where an officer was satisfied that activities were being properly conducted and could be adequately supervised. Control activity, either by way of debarring beef or temporarily suspending operations, does not necessarily imply that irregularities were taking place.

The question is asked in respect of a period of three years when serious irregularities and malpractices were going on. The Accounting Officer was asked how much beef was debarred from intervention in those three years, he refuses to answer and the Committee should not accept that. If none was debarred, which I suspect, that is a very serious situation. He should be asked to give the exact amount. It is not credible that records are not kept of decisions taken by officers to debar meat from intervention. Surely if a man stopped the factory for a day or for half a day, he must have some record of it. In the normal course of events, even if there were no malpractices, a proportion of meat would be rejected anyway. The Committee wanted to know how much was rejected and it has not been told. We should get full figures on that.

Deputy Finucane: I support Deputy O'Malley. It is strange that records of decisions taken by officers in charge to debar meat from intervention are not kept in individual plants. I find it surprising because there is a quality control mechanism in every factory, no matter how small. They would obviously like to see if patterns could be established in regard to quality control. The Department should also be interested in keeping records because with the help of these records patterns of quality can be seen. If meat is being rejected for intervention that should sound alarm bells within the Department which should be able to find out whether certain factories are operating effectively or are trying to pull a fast one. Proper records are a basic necessity and these should be held within the system. The meat companies keep phenomenal records and they feed them back to the parent operation on a daily basis. There is a certain weakness if we do not keep similar records.

Deputy Byrne: In regard to the question of the costs of residue testing, when we had Mr. Dowling in here, we asked him to tell us how he would save the taxpayer some of the money because of the fines that had been levied against them. He made a suggestion that £4 million would be clawed back in a particular area which I cannot quite remember. The figures here for the testing of illegal growth promoters add up to more than 1.27. If you add all the additional months the central meat control laboratory is costing £214,000 per year. Analysis at the State laboratory costs £184,000 per year. You are talking about in excess of £2 million.

Deputy Ellis: It is £1.7 million.

Deputy Byrne: It is £1.5 million plus 184,000; it is big money in any case. Could Mr. Dowling to tell us whether we can claw back the money for all of that testing from the industry? This is one area where the industry should pay for the policing of its own industry rather than the taxpayer. Could we get clarification on that?

Chairman: I will take that up with Mr. Dowling.

Deputy Ellis: The cost of testing is approximately 1p per lb. It should be carried within the system; the State should not have to carry it. I agree with Deputy Byrne in this regard; it is one of the few things we might agree on. There is a need to do this to bring back consumer confidence that we are selling an absolutely top class product. The 1p per lb it would cost to do it would be returned four or five fold in the marketplace because you would have a product you could really stand over.

Deputy Upton: I agree with that. There is a need for consumer assurance and we must all accept that this does not come cheap. I agree that the industry should carry this overhead; any serious industry that is committed to quality control does that. Any serious commercial organisation which produces any product carries out quality control. Quality assurance is a basic part of the process and companies have to pay to put it in place. It is well worth the trouble and it more than benefits any worthwhile company that puts it in place in both the medium and long term.

Some 1,650 cases tested positive for angel dust in 1994. That has to be a matter of considerable alarm. One would begin to wonder how many more animals are out there that have not been tested. I do not know whether these tests are done on meat samples or on farms but there is a strong case to be made at this stage for random testing on farms. These drugs leave the body after a certain withdrawal period and it is possible to give the animals these drugs and then withdraw them and send them off to the factory. I know it would probably change the composition of the carcass a bit but it is the king of stuff which we really need to clamp down on.

It is very important that the public knows that the use of this drug is easy enough to spot. It changes the composition of the carcase and anybody who has any worthwhile experience of dealing with animals or meat, for that matter, should be able to make a fairly educated guess as to whether or not the product or the animal has been “dusted”.

Chairman: I want to bring this to a conclusion.

Deputy Finucane: Is it not true that at a previous meeting that Mr. Dowling indicated that it was the Department's hope and intention to proceed with testing of all animals with regard to hormones, angel dust and so on? I think he indicated that there would be quite a cost involved in setting up the laboratory aspect; I remember him saying that. It is crucial for this to happen. In the context of the BSE scare in recent times, the previous speakers are perfectly correct; if we want to increase consumer confidence there is only one way to do so; all cattle will have to be tested. We do not want a cloud hanging over the quality of our beef when the Minister and everybody is trying extremely hard to build up the beef industry again. If an angel dust scare happened, confidence will be eroded and if confidence is eroded again it will be gone forevermore.

Deputy Doherty: Members of the Committee are emphasising the importance of developing confidence in a quality product. Mr. Dowling may not have been asked this question but I am sure he was in a position to give the information. Who decides what type of testing is to be carried out and where? Are testes carried out on farms? What is the extent of them? Is there random testing? I understand that in certain situations the trained eye can make very prudent observations in farmyards and on farms if the decision to carry out this type of testing is made at local or Departmental level. What number of persons in the employment of the Department have been investigated or prosecuted as a result of investigations carried out where it has been established that personnel were involved or associated with illegal activities in this area? If there is a significant number and sufficient remedial action has not been taken, decisions relating to such testing may very well have to be the responsibility of an independent task force. If we are talking about a quality product there can be no room for doubt.

Deputy Ellis: Proceedings have been instituted in 136 cases of alleged breaches of veterinary medicine legislation. Some 118 of these cases are alleged breaches of regulation banning the possession or use of growth promoters. There is a delay in having these cases heard; they are all held up because of a Supreme Court case which is pending and which could have enormous consequences with regard to both the legislation and where our record will stand. Perhaps you would write back to the Secretary and ask him what efforts are being made to have this expedited.

Chairman: We will take up your point. I want to refer to a point Deputy O'Malley made regarding the records not being kept in individual plants. We will take that point up with him again and ask the reason for it.

Deputy O'Malley: The records are kept but he will not disclose them to the Committee. The one place about which we have full details of everything that went on is Rathkeale, which was raided by the Beef Tribunal and not by the Department. We are constantly being told that everything was wrong in Rathkeale but everything was grand everywhere else. That is not so; Rathkeale was no worse than many other places. The difference is that they were caught in Rathkeale because they were not warned. They had very detailed records including one set for the Department and one set for themselves. It is inconceivable that senior agricultural officers would not keep a record of the fact that they closed a line for a day.

Deputy Ellis: They must keep a record.

Deputy O'Malley: Tens of thousands of pounds worth of production would have been stopped so they would have had to keep records.

Chairman: We will take that up with Mr. Dowling at the Department. We will move on to correspondence with the Revenue Commissioners regarding information relating to prosecutions for tax offences.

Deputy Byrne: This is the hardy annual again. On reading it carefully, the figures clearly show that only one person has ever been sentenced to jail by a court. The other people referred to here ended up in jail not because the judge's original sentence was a term in jail but because they failed to make the fine payments. I still contend that nobody seems to go to jail for revenue or excise fraud and the public record shows that to date only one person has ever been sent to jail as part of the penalty by a judge. Other people have been fined and, having failed to pay the fine, were subsequently jailed.

Chairman: We have correspondence from the Department of Finance about bulk discounts for traffic on the public telephone network. Are there any questions? The correspondence is noted. There is correspondence from the Department of the Marine regarding lists of prosecutions for all Regional Fisheries Boards.

Deputy Ellis: Can we hold that until the Secretary of that Department comes before the Committee?

Chairman: Yes.

Deputy Doherty: During our meeting last Tuesday, I proposed and Deputy O'Malley seconded a proposal that the Accounting Officer of the Department of Transport, Energy and Communications, Mr. Loughrey, be invited to come before the Committee with all relevant documents associated with the awarding of the second GSM licence. What progress has been made and is the Accounting Officer in the process of preparing a report? Since then, the enormity of this situation has become a matter of grave concern. It is in the public domain and serious public statements have been made in the media and in the Dáil. Questions must be answered if we and the Houses of the Oireachtas are to have any credibility in this regard. What is the position at present?

Chairman: I am allowing the Deputy to raise the matter at this time, although it should be raised under other business. I told you last Tuesday that I would reply to you on Thursday.

Under Standing Orders the Committee can consider accounts audited by the Comptroller and Auditor General which have been presented to the Dáil. The matter referred to by the Deputy does not come within accounts audited by the C&AG and presented to the Dáil to date, nor is the issue included in any report of the Comptroller and Auditor General that has been presented to the Dáil. The Committee completed its consideration of the 1994 account of the Department of Transport, Energy and Communications on 14 March, 1996.

However, Standing Order 131 provides that the Committee can, in private session, make suggestions to the C&AG in relation to the work of his office and can ask him to examine particular matters, once the request is without prejudice to the independence of his office.

Deputy Doherty: We did that. However, this matter did not occur in the last few days or weeks. It has been ongoing for the last number of years, including during the period of the audited accounts of 1994. That is why I am asking for the relevant documents and details associated with it and for the Accounting Officer to be brought before the Committee. Things we suspect or fear cannot be left hanging in the air and until we look at them in the context of accounts that may well have been examined and until we have seen the documents associated with them, we will not know the facts. It is important that we know.

Chairman: I will ask the Comptroller and Auditor General to comment but he is not obliged to do so.

Deputy Finucane: I was not present for the start of the Tuesday meeting so I did not know this matter was discussed. Deputy Cowen raised this issue in the Dáil last night and the Minister gave a comprehensive response.

Mr. Purcell: I will refer to the accounts. No money has been paid so there has not been a financial transaction. In that sense, it is not something that would have been included in the 1994 accounts. From my recollection, provision of £5 million was made in appropriations-in-aid in the 1995 accounts of the Department. However, nothing came in. From my point of view, there has not been a financial transaction.

I understand from reading press reports that the completion of legal matters surrounding the finalisation of the licence is imminent. As soon as that is ready and handed over, the amount in question will be handed over to the State. At that stage we will have a financial transaction.

Deputy Doherty: The charges that have been been made are associated with the fact that this licence is worth vast sums of money. It is said that it was capped and that there were various biddings and briefings. It is said that protests were made by the American Embassy at the highest levels and direct contract was made at the highest political level outside this country recently by a chief executive operating in this country who was a tenderer. He said that he intended to pull out of Ireland because of what he considered to be seriously dodgy operations.

We should not wait until the barn door is bolted. This is a gravely serious matter. It is one of the biggest asset opportunities this country has had. Even on “Morning Ireland” this morning, the interviewee made it clear that very serious and grave questions would have to be answered. We are dealing with public accounts. Are we to wait until the barn door is closed and the State suffers massive losses? The allegations being made must be examined if our credibility in this regard is to be protected.

Deputy O'Malley: Undoubtedly, the Comptroller and Auditor General is right that there has not been a financial transaction and therefore he has nothing to examine. However, what gives rise to disquiet is the very fact that there has not been a financial transaction and that the matter was handled in such a way as to avoid it. The story is that the successful bidder has not got the money and that is why he is unable to pay the amount. I do not know if that story is correct. What is more important is the fact that this asset of the State was disposed of at an extraordinarily low figure, reputed to be about 15 per cent of its value, for no apparent or valid reason. It seems extraordinary that if five or six people were prepared to pay up to £100 million each for this license it should be sold for £15 million to somebody who has not yet paid for it. That is disquieting. Can the Comptroller investigate this although the transaction has not been completed?

Deputy Finucane: I am surprised it is being raised in this forum. If Deputies were concerned about it they could have had elaboration on it in the Dáil last night. I do not want to go into the specific issue of why it was sold for £15 million but it is important to point out that all the tenderers knew the cap was £15 million. It is also important to point out that all the tenderers spent a lot of money on the tender documents and so on and it is understandable that people would be aggrieved if they were not successful. It is also important to appreciate that all the way through the Minister engaged top outside consultants such as Andersons to advise on this aspect.

The tenders were capped at £15 million rather than going for auction situation. The objective was to introduce a second Eircell operator which could compete with Telecom in order to introduce proper competition to the Irish market. Deputy Molloy stated the other night that it could have gone to £110 million. Surely, anybody tendering in that situation would go in on a competitive basis and the objective of proper competition would not be achieved because they would have to offload their associated costs.

This is not a matter for this Committee. If people want to discuss it they will have further opportunities in the Dáil to so do. The contract is a very big document which must be correct. It will be signed in the next few days and people should wait. Much of what is going on is political shenanigans and sheer opportunism.

Chairman: I am not going to allow this discussion to continue.

Deputy Broughan: Your general ruling is spot-on. We cannot discuss matters which are not before us in an audit. It is ironic that people who now seem to be talking up the mobile phone network licence are the same people who recently seemed to be talking down the value of a strategic stake in Telecom. The whole mobile phone network situation is very complex, even on health, safety and environmental grounds. There are many problems in the area which will affect the commercial viability of any second or third network.

Deputy Byrne: Chairman, your ruling is correct as the matter is not relevant to this Committee at this time. We should get on with the-----

Chairman: I want to give members a chance to express their views.

Deputy Doherty: I have no political motives for doing this, other than my membership of this Committee, and it is not political opportunism on my part. However, I was told that briefings were given in the past in connection with this licence and that a bidding process was engaged in. Some of the bids amounted to £80 million and others were between £100 million and £110 million. Surely, this Committee is entitled to be concerned about the fact that all that went by the wayside and a cap was imposed.

Deputy Byrne: We do not know. The Comptroller Auditor General has not produced a report which would enable us to address whether that is a fact.

Deputy Doherty: I am talking about 1995.

Deputy Ellis: The big concern here, which goes back to many other issues, is that we end up handling everything when the door is closed and somebody has taken decisions which may have the cost the State enormous amounts of money. Does the role of this Committee need to be changed to give us the right at all times to raise all issues concerning finance?

Deputy Byrne: We have the supreme-----

(Interruptions.)

Deputy Ellis: I am only throwing out something which might be of interest to members. There is a lack of accountability, as far as the Houses of the Oireachtas are concerned, until after decisions have been taken on all items. I would be very worried if the figures being bandied around of a loss to the State of between £80 million and £90 million are true. We all have pet projects and members talked about how some areas got more money than others from the National Lottery. If we had another £80 million or £90 million to share among the underprivileged we could make an enormous contribution towards improving their lot.

We have to look at the role of this Committee because there is an urgent need for accountability. There is no use in talking about transparency without doing anything. If we cannot do it in this Committee, I suggest we invite the Accounting Officer to appear before us at the first opportunity and explain the position. No doubt, he will have to explain it at a later stage anyhow when the accounts are being assessed. However, at that stage the loss to the State will have been incurred. We should see if there is any mechanism whereby we could bring the Accounting Officer before us, even if that means taking the 1995 accounts of the Department immediately.

Chairman: I must adhere to the standing orders. I have given members their briefings and a chance to express their views. Until such time as the role of the Committee is changed, I see no opportunity of discussing this. Under standing order 131, paragraph 4, I will let you raise that issue in private session next week.

Deputy Doherty: I thought he indicated he would bring in a report-----

Chairman: The discussion is closed. We are moving on.

Deputy Doherty: -----after there was a financial transaction.

Deputy Upton: Deputy Ellis has just suggested that this Committee become the Government.

VOTE 30 - MARINE (Resumed)

Mr. Thomas Carroll (Secretary Department of the Marine) further examined.

Chairman: You are welcome, Mr. Carroll. I apologise for delaying you. Please introduce your officials.

Mr. Carroll: I have with me Sara White, Bernie Comey, Dr. Gerard Farrell and John McHale.

Chairman: A number of points were raised at the last meeting. I call on Deputy Doherty.

Deputy Doherty: I thank Mr. Carroll for the comprehensive report he had submitted to the Committee. It has thrown light on a number of areas about which I was concerned. I raised the question of fishery protection in the context of the number of personnel in the north River Shannon area. From the prosecutions brought and the location of the detections it would appear that not many inspections have been undertaken in the north River Shannon area. Many of them appear to occur in the southern regions of the River Shannon and away from the river. Is this because of a lack of staff?

Mr. Carroll: The principle reason why this meeting was adjourned on the last occasion was because of issues arising from the harbour projects, which I am anxious to return to. Is it intended to do so?

Chairman: Yes.

Mr. Carroll: With regard to the question raised by Deputy Doherty, in the main, prosecutions relate to salmon protection because this is the fish that is most valuable and is most subject to poaching. Salmon does not exist as a species in the region above the upper River Shannon. The species found in this region are mainly coarse fish and eels.

The coarse fishing stocks are in a reasonably good state. They are not subject to many restrictions in use so there are not many rules to enforce.

Deputy Doherty: Could you explain this?

Mr. Carroll: Conservation of fisheries takes place if there are stock problems. The coarse fishing tradition in Ireland was such that it was not heavily fished, although this has been changing in recent years. It was not subject to conservation rules. Traditionally the only rules were in respect of bans on netting. Very little restrictions were imposed on the taking of coarse fish by rod and line. The only exception to this was a bye-law introduced in 1990 which limits the number of pike that a person may take to one a day.

There is nothing to prosecute. An examination of prosecutions by fishery boards reveals that 80 to 90 per cent of prosecutions relate to salmon protection.

Deputy Doherty: I accept your comments on the importance of the salmon stocks. However, there is a related industry associated with coarse angling, coarse fishing and coarse fish stocks, which is the tourism industry. I am advised by eminent people involved in promoting Ireland, promoting coarse angling in Ireland and in the north River Shannon area and its lakes and tributaries that the coarse fish stocks, especially pike, have been seriously affected. There is much eel poaching also, which is also significant as a stock.

I witnessed, and reported some time ago, the fact that some tourists, especially Germans, have been engaged in raping waters in pursuit of pike, which are removed in vast quantities. Cruiser company boats are used and brought to certain locations where the catches are put in deep freezes and eventually returned to the homelands of the visitors. It is impossible to detect this, to enforce the law or to preserve the stocks if the personnel are not available for enforcement and if the public is not aware of the risks of prosecution. Is responsibility for enforcement carried through to the point of random inspections in some of the location where these people stay and are checks made at ports or airports?

Mr. Carroll: It is national policy to encourage tourists to visit Ireland for fishing and a strategic tourism objective to increase the volume of foreign tourists. Approximately 85,000 to 100,000 anglers come to Ireland each year for coarse fishing. It is a valuable market and they are very welcome. Approximately two thirds of these fishermen come from the UK. There is no difficulty with them because their practice is to return the fish to the water. The balance comes from continental Europe.

Prior to the introduction by the then Minister for the Marine, Mr. Wilson, of the 1990 bye-law which put a restriction on the amount of pike an individual angler could take, there was much concern that there was over-exploitation of pike and that they were being taken out. It was never documented or proved, but there was concern. In view of this, legislation was changed to put limits on the number of pike a person could take.

I discussed this recently with the Shannon Regional Fisheries Board and the Eastern Regional Fisheries Board. The number of reports and complaints they receive in respect of people, including foreign anglers, taking pike has reduced. There is no great evidence to suggest that a level of over exploitation is ongoing.

Deputy Doherty: The role, function and exercise of fishery protection should not be based on complaints from the public, the vast majority of whom are not found on the water, but rather by the carrying out of examination and inspection. The waterways should be patrolled in the same way as the Gardaí patrol the streets. It appears you do not have the personnel to do this, and if you have they are not deployed in the midlands region, which contains the biggest coarse angling industry from the tourism viewpoint, part of which is controlled and governed by the Shannon Regional Fisheries Board. There is insufficient numbers of personnel available, leading to a grave loss. You say that enforcement of the law in that area must be based on complaints. I think people are tired of complaining. It is difficult on occasions to get through to personnel in the fishery protection area.

Mr. Carroll: A whole network of information flows from Boards and angling clubs. A feature of inland fisheries administration is the close co-operation which exists among Boards in terms of their composition, the people on the ground and angling clubs. Enforcement of fishing regulations depends to a large degree on feedback from the people involved. A rich network exists and this is a positive feature of inland fisheries administration. It could not work otherwise.

Deputy Doherty: Who do you expect will be the witnesses? There is not a well established tradition in Ireland of members of the public becoming witnesses on behalf of the State in prosecutions.

Mr. Carroll: I accept that. What would happen is that phone calls would be made, people would be tipped off and they would be followed up.

Deputy Doherty: From my experience they have not been followed up. I have reported this and I have witnessed a situation where two cruisers belonging to a certain hire cruise company on the Shannon, after a report was made, went on to the river bank and openly filleted pike, stacked them and took them away.

Deputy Broughan: A number of people appear again and again on the lengthy list prosecutions for the Southern Regional Fisheries Board. This list is for 1994 and is within the remit of our current audit. When did the Department become aware of serious irregularities in the Board and when did you alert the Minister to take significant action?

Mr.Carroll: There are court proceedings in train involving this Board and we need to be careful not to stray into this area.

Deputy Broughan: Is it true that two fishery inspectors are being prosecuted?

Mr. Carroll: They have been charged and are suspended at the moment.

Deputy Broughan: Has the file been sent to the Director of Public Prosecutions?

Mr. Carroll: Yes. That is a Garda matter.

Deputy Broughan: When will those cases be heard?

Mr. Carroll: That is a matter for the Garda Síochána and the courts.

Deputy Broughan: What are the charges?

Mr. Carroll: There is a series of charges. We are not a party to these actions in any way. I do not have the details with me and it would be wrong of me to speculate. This is a criminal matter for the Garda Síochána and the Department has no direct role or function in this.

Deputy Broughan: Is the Department not the supervisory body for this local administrative board? The Garda and the DPP think that criminal irregularities have occurred within this board. Do you not therefore have responsibility?

Mr. Carroll: Legislation has been introduced to improve the capability of central Government to intervene in the affairs of a Regional Fisheries Board. This legislation was introduced early last year and was passed in November. It was prompted by concern about the Southern Regional Fisheries Board and this issue was dealt with recently by the Oireachtas. A process has taken place whereby a person was asked to prepare a report on the Board and this report has been placed before the Oireachtas. On foot of that report a Commissioner has been appointed to manage a large number of the board's functions. This is not unrelated to the other things which are happening.

Deputy Broughan: When did you first become aware that things were going on which were irregular and outside the law? What did you believe was happening?

Mr. Carroll: I am not directly aware of irregularities. There have been rumours and suggestions from time to time about the Southern Board over the years. I need to be careful about what I say because legal cases are in train. As far as the Department is concerned, we kept an eye on things and spoke to people about them. There was never any hard evidence produced. Claims were made about individuals. Staff and individuals have rights under trade union agreements. There are procedures for dealing with allegations if these affect the performance of a board. If there are criminal matters involved, they are a matter for the Garda Síochána. The first and foremost responsibility for the conduct and supervision of a board's staff lies with the Board itself. It rather than the Department is the employer. We have no direct role in the management of staff affairs within a Regional Fisheries Board.

Deputy Broughan: Does the Department provide some of a board's funding?

Mr. Carroll: Of course.

Deputy Broughan: Therefore it is a matter for this Committee and for the Department.

Mr. Carroll: The efficient functioning of a board is of course a matter for the Department, particularly if it is not doing its job properly. These boards are autonomous and many of their members are elected from various constituencies. Central Government is reluctant to interfere in the day to day operations and management of any board. The basic presumption is that boards are doing their job, including the supervision of staff and dealing with any problems which arise.

The question arises as to what mechanisms exist for central Government to intervene if there is concern about a board. The Minister can have a direct relationship only with the board and not with the staff. There may be a problem with a board's staff but the responsibility for this lies with the board itself. The question is how should the Minister intervene if a board is not doing its job. Prior to the legislation introduced last year, the process whereby this could be done was virtually impossible to operate. It would have been a complicated judicial process which would have almost ruled out intervention. This is why we reviewed the legislation and brought in a new procedure whereby it would be much easier in future to intervene if there are serious concerns. People who work in fisheries administration are involved in applying the law and dealing with people who break it. It is not unknown for malicious rumours to be made about people.

Deputy Broughan: On the administrative and audit side, would a stream of information not have come from this board which you could have compared with other boards? You have mentioned that there were rumours and that people contacted you and Deputies. There were also articles in local papers about the board. This seems to have motivated the removal of the board. Would you not have had enough information early on to act before it reached such a serious impasse?

Mr. Carroll: The board has not been removed. Some of the functions of the board have, with the support of the board, been transferred to a Commissioner. In this case things have moved forward because the board acted to advance mattes. This issue and suggestions and rumours have been around for a number of years. The charges, as I understand it, do not have anything whatsoever to do with accounts. It is not a question of misapplication of moneys and so on; it is a question of some alleged irregularities -----

Deputy Broughan: What are the allegations and charges?

Chairman: I must ask the Deputy to conclude.

Mr. Carroll: I do not have the details. This is a matter for the courts. I can get you the details. It would be wrong of me to in any way misstate or speculate and give wrong information as to what the precise charges are but I will get you the precise charges.

Deputy Byrne: You will be happy to know that I know nothing at all about fishing. I have many petty questions to ask on the basis of my ignorance as an urban dweller. I never had a fishing rod in my hand. As a conservationist and environmentalist, I applaud the work of the Department of the Marine in trying to conserve fish stocks and I applaud particularly your efforts in stamping out poaching.

You will probably be aware of a high class restaurant in this city called Roly's.

Mr. Carroll: No.

Deputy Byrne: It is in Donnybrook. Most wealthy, middle class people insist on having one meal in Roly's and very often they ask for the venison on the menu. I was delighted to see that a well known deer poacher in County Wicklow was arrested and Roly's were charged for selling illegal, poached wild deer from County Wicklow. I presume therefore that you have a comparable role vis-à-vis fish.

Is fish poaching still seen in country areas as an activity like dodging tax, smuggling goods across the Border or brewing poitín whereby somehow rural communities believe they have a cultural right to poach, for example, salmon? Is that cultural scenario still alive and well in Ireland? Are there any records, in these huge numbers of prosecutions, of restauranteurs being charged for handling poached fish?

Mr. Carroll: You have touched on what is a cultural issue. Salmon is one of the big issues in many communities in rural Ireland. It is the case that local communities feel they are entitled to take salmon and they have been taking it for generations. There is still a culture that does not regard the law as legitimate but that is changing. The advent of farmed salmon and the substantial decline in the price of salmon mean that the economic gains have declined and that lessens the incentive somewhat. There has also been a major increase in enforcement, particularly at sea, through the Navy and new acquisitions of boats by the fishery boards. The chance of being caught is a disincentive. The penalties have also increased substantially under the legislation in 1993.

The Minister of State, Deputy Gilmore set up a task force to review salmon management generally which will be reporting shortly. It is seeking a strategic framework for future management which would strike the right balance between commercial exploitation, angling, tourism and so on. It is a big issue which will not be solved easily. It is not going to change easily. It is a long haul.

You asked about prosecutions. There is an elaborate network of control of salmon through dealers and licensing. A restaurant can be prosecuted if it is buying from illegal sources and there are prosecutions occasionally. I do not have the details here but I can get them for you. It is an area which the boards monitor. When replying to a question from Deputy Doherty I mentioned that the bulk of the conservation work of the fishery boards relates to salmon.

Deputy Byrne: When the salmon start approaching the shores we read the newspaper reports and see what reminds me of tribal warfare. There seems to be incredibly strongly held and emotional feelings by certain fishermen who carry out the most outrageous and vicious attacks on protection agents. I remember reading one case where concrete blocks were dropped on them. What kind of savagery is that? Is that a particularly rural, cultural savagery that exists in a tribal sense in isolated parts of the country?

Mr. Carroll: We should not exaggerate that. It is true that there have been and continue to be vicious attacks on public officials in their jobs and this is to be deplored. There is an annual salmon war during June and July in particular when the salmon shoal come in and fishermen go to catch them at sea using illegal netting and so on. There is violence. It is a rural tradition. Our own departmental officers are occasionally under threat but not very often nowadays. It is to be deplored but I do not think we should exaggerate it.

Deputy Byrne: I do not think dropping blocks on the heads of fishery officers is something that anybody could attempt to exaggerate. That is particularly violent and vicious. It would equate with attempted murder in my book.

Mr. Carroll: There are serious attacks from time to time and I do not in any way condone them. However, we should not exaggerate the scale of the violence. There is a tradition of illegal fishing in many parts of rural Ireland. It is part of the culture. It is accepted locally and the local communities think this is reasonable. It is a question of changing that view and changing that culture.

Deputy Byrne: I ask you to cast your mind back over the last ten to fifteen years to when poaching was at its peak by today's standard. Is the civilised response of rural communities to the laws of the State and fishing laws very high today? Is this culture of anti-Statism and anti-authority declining or is it getting worse? In the Western Fisheries Board region a Patrick Herety was charged with abuse of a Spanish angler. Is this some sort of rabid nationalism?

Mr. Carroll: There is from time to time antagonism between locals and foreigners but again this is very occasional and one should not exaggerate it. Tourist anglers are welcome by and large all over this country and we are working very hard with Bord Fáilte and so on to attract them in the interest of creating sustainable employment. It would be wrong to categorise the rural communities in Ireland who have some degree of involvement in salmon fishing as uncivilised. We meet delegations of these people. People on delegations, which we and the Minister meet all the time, are trying to eke out a living and trying to maintain their families. They have different views on the law. These are decent people, but they break the law on occasions and some of them are involved in violence, which must be changed.

Deputy Byrne: Did I read reports that shots were fired and that there were vicious physical assaults?

Mr. Carroll: That happens on occasions.

Deputy Byrne: A person called Mr. Nicholas Grassick was detected by three fishery officers from the Eastern Regional Fisheries Board. The offences and charges are listed in the correspondence and then it states “dismissed employee”. What is the relevance of a dismissed employee? Was Mr. Nicholas Grassick a fishery officer?

Mr. Carroll: I am reluctant to comment on an individual case. I will get further information for the Deputy if he wishes.

Deputy Byrne: Why was Jon's Civil Engineering Company involved in fishing? It was subsequently charged. Mr. William Bard and Mr. James Heffernan were apprehended by four fishery officers. Often there is only one fishery officer involved. Do fishery officers work in groups of four when patrolling?

Mr. Carroll: There is team work and in some cases they know those with whom they are dealing. If there is a risk of violence, the Garda would be involved. I will get the Deputy more details on the case.

Deputy Byrne: I take it that if four fishery officers arrest one man who has a history of poaching, there is a possibility that he is dangerous and is likely to be violent.

Mr. Carroll: It is a possibility, but it would be wrong for me to state that it was true in this case. It would be unfair to the individual.

Deputy Byrne: I wish your protection officers every success in the forthcoming salmon war. They have my full support in implementing the laws passed by the Oireachtas. I am sure all public representatives would join in that sentiment.

Deputy Ellis: It is obvious that Deputy Eric Byrne does not have too many ties with rural Ireland because what he said earlier about people's beliefs would be severely challenged. What is being done about the poaching of coarse fish, which is major problem, especially in the north-west where a number of lakes no longer have coarse fish? Have there been any prosecutions given that the individuals involved are well known?

Mr. Carroll: We already had a discussion with Deputy Doherty on this issue. I am not aware - I discussed this with the fisheries boards and our professional staff - that there is serious poaching of coarse fish or that lakes have been fished out.

Deputy Ellis: They have not been fished out, but netted out under the eyes of fishery officers on a number of occasions.

Mr. Carroll: If the Deputy knows of specific instances, I will investigate them.