Committee Reports > List of Committees > Dáil > 1996 > Committee of Public Accounts > Fourth Interim Report - Appropriation Accounts, 1994

DÁIL ÉIREANN

COMMITTEE OF PUBLIC ACCOUNTS

FOURTH INTERIM REPORT ON THE APPROPRIATION ACCOUNTS 1994

Pn. No. 2787.

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”.

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 131 AS AMENDED BY RESOLUTION OF DÁIL ÉIREANN OF 3 MARCH 1994

131. (1)Chomh luath agus is féidir indiaidh ationól na Dála tar éis 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 dtaispeánfar 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 scrúduithe ar bharainneacht, eifeachtacht, córais mheasúnaithe eifeachtúlachta, 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.

131. (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 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)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

(c)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)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

(c)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 igcrích ag a Oifig nó an mhodha ina gcuirtear icrích í, féadfaidh an Choiste, 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 Office or the manner in which it is carried out, in private communication, make such suggestions to the Comptroller 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 71 agus 74, 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 71 and 74, and so as to be impartially representative of the Dáil.

PART I - GENERAL OBSERVATIONS

MINUTE OF THE MINISTER FOR FINANCE INRESPONSE TO THE COMMITTEE OF PUBLIC ACCOUNTS’

FIRST INTERIM REPORT ON THE 1993 APPROPRIATION ACCOUNTS.

Excess Vote for International Co-operation

The Minister wishes to inform the Committee that all Accounting Officers will be reminded of the importance of having adequate control procedures and advised to include in those procedures a warning system to alert them to the possibility of excess expenditure.

With regard to the suggestion that the Paymaster General’s Office (PMG) might have a role in alerting Accounting Officers when expenditure is approaching the limit for the Vote, the Minister advises that the PMG’s Office will do all that it can to help with the timely compilation of information, but that the assistance it can provide to Accounting Officers is quite limited. The date on which expenditure occurs for accounting purposes is the date of issue of a payable order, not the date on which the PMG recoups the bank that cashed it. While the PMG’s Office compiles summary information on a weekly basis about the total expenditure on each Vote, this is not new information; it comprises the amounts on the payment authorisations sent to the PMG by the Department or Office, and is therefore already available to the Accounting Officer. Also, the PMG information clearly cannot tell anything about matured liabilities not yet paid, but which must be paid, even at the risk of an Excess Vote, in accordance with public financial procedures.

The Minister advises that the assistance which the PMG system can, and does, provide is limited to summarising the very recent position about total payments from a Vote and bringing it to the attention of the Department of Finance in a more timely fashion than the more detailed reports submitted monthly by the Accounting Officers. There may be some circumstances in which this procedure would give an early warning about an emerging abnormal trend, but the detailed information about expenditure, including that about matured liabilities in the pipeline, would be available only to the Accounting Officer, who, of course, also has the responsibility to control that expenditure.

Finally, the Minister wishes the Committee to note that the PMG system did not provide (and, indeed, could not have provided) any early warning about the excess which the Committee were examining in this instance.

Given under the Official Seal of the Minister for Finance this 13th day of September 1995

L.S.

P.H. Mullarkey

Secretary Department of Finance

MINUTE OF THE MINISTER FOR FINANCE IN RESPONSE TO THE 2ND INTERIM REPORT OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE 1993 APPROPRIATION ACCOUNTS

FOREIGN AFFAIRS AND INTERNATIONAL CO-OPERATION

The Minister agrees that the introduction of a new financial management system cannot be regarded as a valid reason for failure to meet the statutory deadline for the submission of an Appropriation Account and this will be brought to the attention of all Accounting Officers.

Office of the Attorney General

Legal Fees for the Beef Tribunal

The Minister has already communicated with the Committee (Minute of 31 August 1995) on the subject of fees charged by Counsel acting for the State.

Efficiency in the Office of the Attorney General

The Minister notes that Mr J Hurley, Secretary, Public Service Management and Development, met the Committee on 12 April, 1995 to discuss matters arising from the examination of work practices in the Office of the Attorney General.

Given under the Official Seal of the Minister for Finance this 13th day of September 1995

L.S.

P.H. Mullarkey

Secretary Department of Finance

MINUTE OF THE MINISTER FOR FINANCE IN RESPONSE TO THE FINAL REPORT OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE APPROPRIATION ACCOUNTS 1993

FINANCE

Funding of ICI Administrator

The Minister notes the Committee’s concern regarding the transparency of the financial activities of the Insurance Compensation Fund and the Administrator in their handling of State moneys. The Insurance Compensation Fund is administered under the control of the President of the High Court, acting through the Accountant to the High Court. The Administrator of Icarom plc, was appointed by the High Court on the nomination of the Minister for Enterprise and Employment, and is, therefore, an officer of the High Court and is accountable to it. The Accountant to the High Court is required by law to keep proper and usual accounts of moneys paid into or out of the Fund and to furnish an abstract of the accounts of the Fund to the Minister for Enterprise and Employment. The Minister for Enterprise and Employment, in turn, is required to publish this abstract which forms part of the Insurance Annual Report. The Minister lays this Report before both Houses of the Oireachtas. The Minister for Finance is advised that the financial activities of the Insurance Compensation Fund and of the Administrator of Icarom plc are undertaken in a manner which complies fully with the stipulated legal requirements.

The Minister notes the Committee’s view that funds administered by the Courts should be audited by the Comptroller and Auditor General. Under the Constitution, the C&AG is appointed “to control on behalf of the State all disbursements and to audit all accounts of moneys administered by or under the authority of the Oireachtas”. The Minister is investigating whether funds administered by the Courts can be treated as falling within the audit remit of the C & AG.

Computerisation

The Minister for Finance agrees that the approved procedures should be followed in cases involving the acquisition of information technology services. The staff involved in making contractual arrangements in this area have been reminded of the procedures to be followed.

AGRICULTURE

FEOGA Transactions, Disallowances and Legal Proceedings

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 -

This represents a reduction of £24m in the general disallowance which had been proposed for intervention operations during 1990 and 1991. The Government was disappointed that the Commission had maintained the full disallowance of £18.475m in respect of beef multiple tendering procedures. An appeal to the European Court of Justice (ECJ) is being made for a mitigation of the multiple tendering disallowance, and consideration is also being given to whether a legal challenge should be made to the beef storage disallowance for intervention beef.

The possibility of recovery of all or part of the disallowances from resources other than the Irish Exchequer was examined by a group of senior officials from the Department of Agriculture, Food and Forestry, the Department of Finance and the Office of the Attorney General. The group also had access to an independent legal adviser. The advice to the Government from this group is that it is 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. Where proceedings can be successfully brought against companies in Irish courts, this has been and will continue to be pursued.

It has been decided that the costs of veterinary inspection services to the beef industry will in future be borne by the industry in full (rather than partially as previously under which some £4.5m of the cost of these services was met from general taxation).

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) will be brought before the Oireachtas as soon as possible. This will include the following elements:

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

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

-changes will be made in the rules of evidence to ensure that all relevant evidence and documentation is 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.

Since 1990, a number of substantial improvements have taken place in the control systems and organisation of the Department of Agriculture, Food and Forestry.

These include:

-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.

In addition, the following further control and organisational reforms have been approved:

New Executive Unit

(i)A New Executive Unit dealing with FEOGA payments is being established. This Unit will be headed by a Director who, as Accounting Officer, will be subject to examination by the Committee of Public Accounts. The establishment of this Unit is part of an overall restructuring of the Department of Agriculture, Food and Forestry which is now at an advanced stage, in the context of the Government’s Strategic Management Initiative.

Special Anti-Fraud Unit

(ii)A special Anti-Fraud Unit is being established which will augment and co-ordinate the existing investigation functions within the Department. These functions have been substantially strengthened in recent years. Among the functions of the Unit will be the monitoring of implementation of all legislation in relation to irregularity and fraud. The staff will consist of a combination of investigation and control staff and persons with legal expertise. This Unit will also have the function of advising the Department and the Executive Unit on regulations being considered in Brussels and, from a legal and procedural point of view, on the optimum implementation of regulations when adopted. The Unit will work in close collaboration with the Office of the Attorney General.

Inter-Change of Control Staff

(iii)A large element of the Department’s control system is based on permanent staff, i.e. Veterinary Inspections and Agricultural Officers, located at individual plant level. It is intended that a policy of inter-changing staff every four years will be put in place.

The Minister for Finance is assured that these measures together with the organisational and control improvements since 1990 will ensure that the stringent standards required for the control of operations in this most important sector, and for the full and effective protection of both EU and National Finances, will be met.

Teagasc Recruitment

With regard to the concerns expressed by the Committee, the Minister understands that since the employment of unauthorised staff was detected the Department of Agriculture, Food and Forestry has insisted on obtaining a full staff inventory from Teagasc. This gives the names, grades sections and locations of all Teagasc staff and is updated regularly by reference to staff movements. In addition, an outside consultant was engaged to review Teagasc’s financial reporting procedures. Arising from the review of Teagasc’s accounting and financial reporting procedures, the Teagasc internal audit function is now reporting to a special Audit Sub-Committee of the Authority and will report on the staffing situation at regular intervals. Teagasc have also appointed a new head of administration to co-ordinate the legal, financial, personnel and other administrative work. Also, staffing levels have now been set, and will be maintained within the cadres which the Department of Finance (pursuant to a detailed Management Services study of the clerical staffing in Teagasc) is satisfied as being warranted.

Irish Thoroughbred Marketing

In relation to the extent of State support for the Irish Thoroughbred Marketing (ITM) division of the Racing Board, the Minister for Finance notes that the Committee accept that both the Department of Agriculture, Food and Forestry and his own Department were fully aware of An Bord Trachtala’s involvement in the total package of State aid for ITM and had accepted its validity. The Minister is assured that the State investment represented value for money having regard to the success of the marketing drive which was undertaken by ITM.

The Minister, however, accepts the Committee’s suggestion that one channel State support would be preferable. Since 1995 all State aid for ITM has been channelled through the Department of Agriculture, Food and Forestry. The Minister for Finance will seek to implement the one channel State support policy in other circumstances in the future where this is practicable.

Overpayments

The Minister is informed that recovery of the overpayments made in January, 1993 has been slow because of the large number involved and because many applicants overpaid are no longer in farming, have died, emigrated etc. but that every effort is being made to recover the outstanding amounts by deduction from future headage payments where that is feasible and by direct approaches to the applicants concerned.

With regard to the overpayments made in 1989, the Minister understands that approximately 22,000 payments under the Disadvantaged Areas Cattle schemes could not be processed in the second half of 1989 because of industrial action by the CPSU. To enable payments to be made to as many farmers as possible a decision was taken in November 1989 to make advance payments on the basis of payments made in the previous year.

Local Offices of the Department of Agriculture Food and Forestry were asked to supply “stop lists” of persons who were not to be paid advances because they owed money to the Department or because they were not applicants under the 1989 schemes. The industrial dispute was not resolved however until around mid December 1989 and the result was that the extent and scope of the stop-lists supplied by Local Offices proved inadequate to prevent overpayments arising. 8,390 overpayments amounting to £1.75m were made. Action to recover the overpayments was taken by offsetting against other headage entitlements where this was possible and by issue of requests for refunds.

The total amount recovered to date is £1,519,796 leaving a balance of £230,204 outstanding, and recoupment of this amount is being pursued.

Pigmeat Industry Special Levy

Following introduction of the Statutory Instrument governing the payment of inspection fees by local abattoirs in June, 1992, the Department of Agriculture, Food and Forestry issued demands for arrears of pre-April 1985 Veterinary Inspection fees to pigmeat plants still operating at that time and has issued reminders at frequent intervals. These demands have been largely ignored, apart from payment by two firms of a total of £18,000 towards offsetting part of the arrears owed by them.

Given the poor response from the pigmeat plants, the Department of Agriculture, Food and Forestry sought advice from the Attorney General as to whether the debts were legally collectable, given the passage of time which had elapsed since the original agreement in 1985. Final advice on the points of law at issue is awaited.

SOCIAL WELFARE

Overpayments of Social Insurance and Social Assistance

The Minister understands that the number of prosecutions dealt with by the courts has increased substantially in the past year and that 98 cases were referred to the Chief State Solicitor’s office for prosecution in 1995 as against 40 cases in 1994; there are currently 58 cases under consideration for prosecution within the Department of Social Welfare.

The Minister accepts that the Department of Social Welfare is committed to the detection of abuse of the Social Welfare system. Control activity has been co-ordinated and monitored centrally since 1991 and a Central Prosecutions Section ensures consistency of approach across social welfare schemes and between the various regions of the Department.

Overlapping Benefits

The Minister is advised that the Department of Social Welfare is involved in many activities designed to curtail unwarranted overlapping of benefits and is continuing to strengthen controls in this area. The use of a common claim registration system has reduced the potential for overlap. A new computer system for the payment of short-term benefits which was introduced in March, 1995 facilitates cross-referencing of clients, spouses and child dependents. In addition, the Department is making use of special audit software to scan databases for potential overlap cases and to identify gaps in control procedures which need to be addressed.

Computer Control Systems

The Minister is informed that corrective action has been taken in each of the areas highlighted by the Comptroller and Auditor General’s Report; the Department is committed to ensuring that control procedures as laid down for each area of the Department’s activity are observed.

ENTERPRISE AND EMPLOYMENT

Funding of County Enterprise Boards

The Minister is informed that the issue of £958,000 to Area Development Management Ltd. occurred during the initial start-up phase of the County Enterprise Board (CEB) project in late 1993 in an effort to get the new initiative up and running as a matter of urgency with a view to providing early results in the context of job creation. In the 1994/5 period grant approval and payment systems for CEB’s were established in the Department of Enterprise & Employment. These involved individual claims being processed through the Department’s accounts system. Thus, in those years payments were not made in the absence of a financial liability. From 1 January 1996 individual CEB Operating Agreements are being put in place between the Minister for Enterprise & Employment and each of the 35 County Enterprise Boards as Companies limited by guarantee. Moneys are now released to CEB’s on a quarterly basis and payments to intermediate agencies will not arise.

The Minister notes that while the possibility of duplication and overlap of State funding to local enterprise projects must be borne in mind, it is felt that the various organisations and initiatives involved have sufficiently distinct roles in the field of local development. The focus is on the achievement of the highest level of complementarity in the operation of local and national development initiatives, whether funded by the Exchequer, the E.U. or other sources, and County Enterprise Boards are encouraged to liaise with the local development groups in their areas of operation. County Strategy Groups set up by the Department of the Taoiseach promote complementarity and this should assist different agencies in being clear about their distinct role in local development.

TRANSPORT, ENERGY AND COMMUNICATIONS

Liability for Superannuation Funds

Under the Postal and Telecommunications Act, 1983, the Exchequer accepted liability for pre-Vesting Day pension costs of the staff transferred from the Civil Service to An Post and Telecom Eireann and for the pensions of existing pensioners of the former Department of Posts and Telegraphs. This liability would have existed if An Post and Telecom Eireann had not been established.

The original arrangements for meeting the liability to the Superannuation Funds of An Post and Telecom Eireann were explained to Dail Eireann by the Minister for Posts and Telegraphs on 23 June 1982 during the debate on the Bill. The Minister explained that the Government had decided that payment of the Exchequer liability would be deferred. The companies’ pension funds would meet the Exchequer’s liability until the funds went into deficit. The Exchequer would then top them up, and continue to do so until its full liability had been extinguished.

Under the changed arrangements approved by the Government in 1994 the Exchequer meets its fresh liabilities as they arise on a pay as you go basis. Interest on the accumulated, capped liability is paid quarterly in arrears. If the Exchequer had met its liabilities as they arose from Vesting Day, the payments would have increased the Exchequer borrowing requirement and the National Debt.

In the case of the Irish Aviation Authority which was established on 1 January, 1994, the Minister for Finance is liable to make an appropriate contribution to the pensions fund of the Authority in respect of the pre-vesting day pensionable service of employees. The precise contribution to be made in respect of the retirement and death-in-service benefits is a matter for determination by the Minister. The Irish Aviation Authority Act, 1993, requires that the appropriate contribution be paid by 1 January, 2001 to the Trustees of the IAA Pension Fund.

At present, the Departments of Finance and Transport, Energy and Communications have an arrangement whereby the pre-vesting day pension costs of the IAA are reimbursed as they arise, on a monthly basis in arrears. All relevant pension payments have been met by the Exchequer since 1 January, 1994. In respect of 1994 and 1995 these payments were made from the Vote of the Department of Transport, Energy and Communications but from 1 January, 1996, they are being met from the Central Fund under the provisions of the Irish Aviation Authority Act, 1993.

The making of these payments acts to help offset, in part, the build-up of liabilities of the Minister for Finance to the IAA Pension Fund and will be taken into account in determining the overall contribution liability of the Minister. The Minister for Finance will, however, pay interest on his undischarged liabilities to the Pension Fund.

Shannon Task Force

The Minister is informed that the Department of Transport, Energy and Communications has reviewed its procedures on the operation of bank accounts opened by agencies under the control of the Department. The number of such accounts is being kept to a minimum and when such accounts are opened, with the sanction of the Department of Finance, the Finance Unit of the Department of Transport, Energy and Communications is monitoring the accounts to ensure that moneys are issued only on the basis of demonstrated requirements.

The Minister is informed also that the Department of Transport, Energy and Communications accepts that had there been more input by the Department at the time into the operation of the Task Force the problems would not have arisen.

The attention of Accounting Officers will be drawn to the provisions at para. 3.13 of Public Financial Procedures governing the opening and operation of public bank accounts.

MARINE

Purchase of the Blackwater Fishery

Legal action has been instituted against the solicitors involved in the original purchase of the fishery and pending the outcome of these proceedings, the Committee will appreciate that the Minister does not wish to comment on the acquisition process.

An Inter-Departmental Working Group has been established to draw up guidelines for any further acquisition of fisheries. The Department of the Marine, the Department of Finance, the Office of Public Works and the Valuation Office are represented.

OFFICE OF PUBLIC WORKS

Meteorological Office - Award of Building Contract

The Minister notes the Committee’s concerns and concurs with its view as to the desirability of competitive tendering in all save the most exceptional circumstances. The Commissioners of Public Works are in agreement with this principle.

Regional Offices for Ordnance Survey

The Minister shares the Committee’s concerns at the way the building was rented. The Minister is informed that the Commissioners of Public Works made every effort to secure the best possible result for the State in the circumstances, including a four month rent-free period from the date of completion of the work. The Committee’s view that in future the OPW should consider renting the shell of a building rather than waiting for the developer to upgrade it has been brought to the attention of the Commissioners.

PRISONS

Computerised Time Recording System for Prison Officers

The Minister agrees with the Committee that there were inadequate management arrangements in the Department of Justice for a project of this size and complexity, and that unapproved expenditure occurred. The Minister is now satisfied from discussions between his Department and the Department of Justice that significantly improved procedures are in place, both for project and financial management, which should ensure that there will be no recurrence of the previous problems. The Minister has also been advised that, as a result of the measures put in train by the Department, all of the equipment which had been paid for has now been delivered.

Prisoners’ Cash Computer System

The Minister shares the Committee’s concerns at the delay in implementing the prisoners’ cash computer system, which is recognised as an important control mechanism. The Department of Justice advise that the system has been extended to seven institutions to date and that installation will be completed in all twelve institutions within fifteen months.

ENVIRONMENT

Motor Tax Evasion

The Minister has been advised that efforts to reduce the level of motor tax evasion are continuing. In addition to prosecutions and on-the-spot fines, over 1,000 vehicles were impounded for motor tax offences in 1995 under new regulations which came into force in April, 1995.

The Minister has been informed by the Department of the Environment that it accepts that up to date statistics are necessary to assess the effectiveness of measures to combat motor tax evasion. Following discussions with the Department of Justice, arrangements have been made for a new survey of motor tax and motor insurance evasion to be carried out by the Gardai in May 1996. It is anticipated that about 50,000 vehicles will be surveyed.

Custom House Docks Development Authority

The Minister has been advised that construction activity at the Custom House Docks is progressing rapidly, with further office blocks, a hotel and a multi-storey car park, due to be completed this year or in 1997. Three further office blocks are planned.

The Minister wishes to inform the Committee that these projects will enable the Custom House Docks Development Authority to continue to generate a return on the State’s original investment in a site valued at £9 million, along with grants of £1.3 million. The Authority remitted £2 million to the Exchequer in December 1995, bringing the total amount paid to date to £5 million. A further £3 million is due to be remitted in 1996, with further payments projected for future years.

Local Authority Bank Borrowings

The Minister has been advised that the Department of the Environment continues to monitor carefully borrowings by local authorities. In 1994 overall overdraft interest paid by local authorities declined to £1.7 million from £3.4 million in 1993. Over the same period, peak overdraft levels fell from £53.5 million to £40.8 million, and overall monthly average’ overdraft levels fell from £31 million to £19 million.

The Department of the Environment wrote to local authorities in January 1996 requesting them to seek competitive tenders for their banking business generally. Given the requirements of individual local authorities, and bearing in mind that some of the smaller banking groups do not operate a national banking network, the Department did not advocate a centralised national tendering campaign. Instead, local authorities were informed that it was open to them to join with other local and public authorities (such as health boards) in seeking tenders, and that this approach could have attractions for banks and lead to more competitive tenders for local authorities.

The Minister notes the Committee’s concern in this matter and wishes to inform the Committee that the Departments of the Environment and Finance will continue to monitor the situation.

OFFICE OF THE REVENUE COMMISSIONERS

Incentive Amnesty Audit

The Minister notes that a decision is awaited from the High Court with regard to matters raised by the C&AG in relation to the Incentive Amnesty. The Minister has been assured by the Revenue Commissioners that their position with regard to the Comptroller and Auditor General is and always has been one of total co-operation and the Commissioners have never sought to frustrate the process of public audit and accountability.

Self Assessment, Random Audits

The Minister is satisfied that the Revenue Commissioners are conscious of the need for an active and effective audit programme to ensure compliance and deter tax evasion. The overall level of audit activity dropped in 1993 due to the reorganisation of the Audit Districts, the training of newly assigned audit staff and the suspension of 1990/91 and prior years’ audits as a result of the tax amnesty. However this was rectified in 1994 with the level of audit activity being higher than in 1992. The Commissioners are satisfied that the present audit/investigation programmes are operating satisfactorily.

The Commissioners accept that random auditing is an important element of the self-assessment auditing programme which was resumed in late 1994.

Automated Entry Processing

The Minister is informed that there has been a considerable improvement in the level of activity of the Post Clearance Units (PCUs). Units have now been established in all major import stations and a number of training courses have been held for PCU managers and staff. The Units are now working satisfactorily and full checks are being carried out. The number of cases of outstanding documentation had dropped to 29,130 at end December 1995 and all underpayments established have been collected and brought to account.

It is intended to introduce a Paperless Declaration from May, 1996 and thus abolish the requirement to produce hard copy documentation. Plans are also well advanced to introduce, in association with the Paperless Declaration System, a number of collection based Audit Units which will replace the PCUs. The emphasis will be on auditing the traders rather than on the transactions and should prove to be a more effective and efficient system.

Internal Audit

The Revenue Commissioners have informed the Minister that they are acutely aware of the vital role played by internal audit in ensuring that control systems in place are operating satisfactorily and have made a considerable investment in the Internal Audit Branch since its inception in 1980. The temporary suspension of the audit function in June 1993 arose as a direct consequence of the Waiver of Certain Tax, Interest and Penalties Act, 1993 and the need to set up a special unit to administer the incentive amnesty. Mindful of, inter alia, the confidentiality so central to the amnesty operation, the Commissioners decided, following an examination of the various options open to them, that the Internal Audit Branch, notwithstanding the importance of its function, was best suited to provide the staff required for the Office of the Chief Special Collector. The internal audit function resumed in March, 1995.

The Minister shares the Committee’s view on the importance of internal audit in Government Departments. The Accounting Officer of the Department of Finance and the Comptroller and Auditor General recently addressed Accounting Officers on the role of internal audit. The Minister would like to assure the Committee that the Department continues to monitor and support the development of internal audit in central Government areas.

EDUCATION

Vocational Education Committees

The Minister has been informed by the Department of Education that each VEC has been requested to satisfy itself as to the adequacy of its internal control procedures and to take any corrective action deemed appropriate. VECs have been asked to pay particular attention to the segregation of responsibilities of personnel involved in financial matters, the role of signatories of cheques and payable orders and the identification, authorisation and control of bank accounts.

The Minister has also been informed that the Department of Education is in the process of developing new control systems, procedures and reporting formats for the VEC sector which will facilitate a more active role by the Department in the monitoring and supervision of VEC expenditure.

Contract for the provision of Financial Services

The Minister for Finance notes the concern of the Committee about open-ended contracts. He will arrange to have the Committee’s views in this regard brought to the attention of Accounting Officers generally.

The Minister in advised that while the accounting firm’s services were retained for a period after the appointment of key financial personnel, this overlap did not involve a duplication of activities, and that it was a necessary and prudent measure to ensure that the financial management functions in the colleges were transferred in an orderly manner to the new financial personnel.

Given under the Official Seal of the Minister for Finance this 25th day of April 1996

L.S.

P.H. Mullarkey

Secretary

Department of Finance

MINUTE OF THE MINISTER FOR FINANCE ON THE SECOND INTERIM REPORT OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE APPROPRIATION ACCOUNTS 1994

Excess Vote for Forestry

The Minister notes that the Committee have no objection to the Dail voting funds to meet the excess incurred on this Vote.

Given under the Official Seal of the Minister for Finance this 26th day of March 1996

L.S.

P. H. Mullarkey,

Secretary,

Department of Finance.

PART II - PARTICULAR ACCOUNTS

COMMITTEE OF PUBLIC ACCOUNTS FOURTH INTERIM REPORT ON THE APPROPRIATION ACCOUNTS 1994 PARTICULAR ACCOUNTS

TOURISM AND TRADE

1. Review of Bord Fáilte Éireann

On several occasions in the past, the Committee of Public Accounts has emphasised the importance of adhering to public procurement procedures in the award of public contracts and a case referred to in the Annual Report of the Comptroller and Auditor General (C&AG) was of considerable concern to it.

In February 1994, the Minister for Tourism and Trade instigated a review of the future role of Bord Fáilte Éireann, which involved the appointment of external consultants. The tendering process used by the Department was not in accordance with correct procedures in three important areas:

(i)the contract had not been advertised in the EU journal, although the amount turned out to be in excess of the specified threshold.

(ii)the assessment of tenders had not been documented.

(iii)the approval of the Government Contracts Committee had not been sought, as is required where the lowest tender is not accepted.

In addition, the firm in question had obtained two related assignments as a result of this contract, which brought the total value of the consultancy to £300,000.

In evidence, the Accounting Officer outlined the sequence of events. At the outset, and in accordance with procurement policy that had been published in 1994, it had been decided that restrictive tendering could be applied because of the nature and scope of the project. No prior list of suitable firms existed because no similar previous project had been commissioned by the Department since its establishment. A list of suitable companies was drawn up and five firms were invited to tender.

On receipt, each tender was assessed on the basis of the following criteria:

(i)the way in which the terms of reference were addressed;

(ii)the insight the firms had into the nature of the problems being tackled, and also that of their teams working on the project;

(iii)the likelihood of each firm delivering workable solutions to the problems;

(iv)the relevant expertise and experience of the individual consultants offered by the firms;

(v)the personnel undertaking the project;

and

(vi)cost.

The Accounting Officer told the Committee that, as far as she was aware, there was no evidence to suggest that the contract had been administered in a slipshod manner, particularly as the project had been completed on budget. She explained that the additional payments to the firm had resulted from two contracts which had been carried out by the firm outside the original terms of reference given to it, and had been carried out when its initial contract had been completed. It had been decided that the consultancy firm, by virtue of the fact that it had carried out the overall review, was in the best position to carry out the work on the two related contracts, particularly as they had arisen from the overall review.

The Accounting Officer acknowledged that, in this case, some procedures had not been followed correctly and stated that the Department would ensure that a similar situation would not recur. She believed, however, that good value for money had been obtained from this project and that the results had been satisfactory in terms of Bord Fáilte’s performance and the resulting impact on tourism performance. The Committee acknowledges that the improved tourism returns should be welcomed.

Nevertheless, while it accepts the explanation of the Accounting Officer, in this instance, it must repeat again its concern that Government contract procedures were not adhered to. The Committee has emphasised, on a number of occasions in the past, the importance of adhering to tendering rules and guidelines in the award of public contracts, and stresses once again that not only should Government contracting procedures be fair but their application must be seen by all concerned to be fair and equitable.

PRISONS

Cash Discrepancies at Shelton Abbey

Shelton Abbey in County Wicklow was established in 1972 as an open prison with the intention that it would cater mainly for offenders who had committed less serious offences or who were approaching the end of their sentences. The accounting system of the prison requires that returns of expenditure incurred, together with details of cash and bank balances, are submitted monthly to the Finance Division of the Department of Justice, where they are checked for correctness.

In January 1994, while the monthly returns to the Department were being prepared, a discrepancy in the accounts was noted at the prison and the Governor informed the Department of the problem.

During the examination that followed it was discovered that prescribed accounting procedures were not being adhered to. In addition, it appeared that the amount in the cash box had not been reconciled with the book balance on a regular basis. As a result, the discrepancy, established at £8,595, had not been detected. It was also noted that large cash balances were being carried forward, a fact which had not been noticed or queried by the Finance Division of the Department when the monthly accounts were submitted for examination.

In evidence, the Accounting Officer told the Committee that the basic problem was as a result of three factors:

1)the officer dealing with the money had not been supervised in his work;

2)the Governor had not been checking the cash on hands;

and

3)the abnormally high increase in the balance as shown had not been checked by the Finance Division of the Department.

When the Department had discovered the discrepancy, the matter had been referred to the Fraud Squad who were unable to establish whether the missing money had been misappropriated. Subsequently, although there had been no prosecutions, disciplinary action had been taken against the individual dealing with the money. At the time of the Committee’s examination the disciplinary action was the subject of an appeal. The Committee requests that it be informed of the outcome of the appeal.

The Accounting Officer admitted that over-reliance had been placed on local managers to ensure that records were correct. It had been deemed inefficient and a duplication of work for the Department to check local cash balances on an ongoing basis. As a result the system had been abused.

The Accounting Officer outlined the new procedures that had been introduced as a result of the discrepancy. In future, the handling of cash would continue to rest with the same officer grades - Clerk I or Clerk II - and the Department’s Finance Division would, as a matter of course, be alerted to significant changes in the cash balances. In addition, methods had been implemented to ensure regular imprest returns, which would be monitored to ensure efficiency and cost effectiveness. It would be impossible to increase imprests advanced by the Department to the prisons, without the specific approval of the Department’s Prisons Division, which had introduced a separate and independent check. Forms had been revised to emphasise relevant regulations and procedures and the Department’s professional accountant had provided training for the staff of the Finance Division, governor grades and clerks with responsibility for cash accounts.

The Committee welcomes the extensive changes made by the Department to avoid a recurrence of this type of discrepancy. While the amount involved is not large, the Committee is concerned that this is the second time in 12 months that inadequacies in the control procedures in the Department of Justice have been brought to its attention and hopes that the more stringent control procedures introduced by the Accounting Officer following the report on the 1993 Appropriation Accounts, and the changes referred to in this instance will ensure that this type of situation will not recur. It stresses that the new procedures should be fully adhered to and that no slippage of standards should be allowed.

The Committee points out, however, that more care should be taken by all Departments when money is being paid out in advance. It urges Accounting Officers to ensure that the correct controls are in place so that the amounts issued are actually spent on the projects identified and that correct checking procedures apply to all cash accounts.

OFFICE OF THE REVENUE COMMISSIONERS

Irregularities - Furniture Supplies

The report of the C&AG drew attention to a fraud involving a junior employee, stationed in the Supply Branch of the Revenue Commissioners, who was ordering furniture purportedly for Revenue purposes and selling it at reduced prices to third parties. In addition, he sanctioned overtime to facilitate the movement of the stolen goods The fraud which occurred over a period of 15 months and resulted in a loss of almost £43,000, was facilitated by lack of control and supervision which enabled the individual to forge signatures on orders and invoices, without detection, for over a year.

In evidence, the Accounting Officer stated that the fraud had occurred in an area where management had expected correct controls to be in operation. Nevertheless he accepted that there had been serious shortcomings in the operation of the system at the time and he fully acknowledged the need for improvement. He did, however, point out that the fraud had come to light as a result of the checking procedures that had already been in place. The officer had been suspended, court proceedings had been instituted and a sentence (albeit suspended) had been imposed. The Accounting Officer admitted that there was little chance of recovering the money in view of the fact that it had been gambled.

Since the discovery of the fraud, several new procedures had been introduced which addressed the particular problem highlighted by this irregularity. As a result, specimen signatures were now being sent to the Office of Public Works to ensure that, in future, only documents bearing those signatures would be accepted by that office. The problem in relation to the sanctioning of overtime, by an officer who did not have the authority to do so, had also been addressed and the process had been strengthened and made more rigorous.

The Accounting Officer stated that an expert study group had been set up by his office to examine the procurement of goods procedures. The group had consulted other major organisations and had devised interim recommendations which were being implemented by the Office of the Revenue Commissioners.

The Accounting Officer pointed out that Revenue had a wide spread of offices throughout the country and that this had to be considered when the new system was being devised. In addition, the expertise requirements in relation to contracts, procurement and conditions had also to be met. The main interim recommendation was the adoption of a system which would centralise the expertise in the Supply Branch, with a computer system that would enable certain decisions and procurements of a smaller nature to be made on a localised basis, but that the system as a whole would be controlled centrally. Safeguards would be built into the computer system to prevent fraud and this type of situation occurring again.

The Committee acknowledges the fact that checking procedures in the office had identified this fraud in the first place but it is disappointed that it took 15 months to do so. However, the Committee is surprised that the excuse that it was assumed that correct controls were in place had been offered. It stresses that in all accounts areas, every effort should be made to ensure that correct controls are always in place and recommends that they should be reviewed regularly.

The Committee welcomes the fact that action has been taken to implement further safeguards and trusts that the revised procedures will ensure that irregularities of this kind will not be repeated.

Bank Reconciliations

The C&AG has frequently drawn attention to the significant differences between balances appearing in the records of the Revenue Commissioners and the balances of the amounts actually in the bank. The reconciliation of differences in these two sets of records is a fundamental accounting control for any organisation but particularly so for one as large as the Revenue Commissioners, where millions of pounds are dealt with every day. The C&AG was particularly concerned that unexplained differences, which in one instance had grown by over £4 million between 1990 and 1994, were not being reconciled, which increased the possibility of irregularities occurring without detection.

The C&AG pointed out that rectifying the problem was both difficult and tedious but that the end result was beneficial to all concerned, particularly as it would assist in reducing the Revenue Commissioner’s exposure to possible error or fraud and would enable them to operate in a more controlled environment.

The Accounting Officer had attributed the failure to tackle the problem over the years to its complexity and also to staffing constraints arising from the decentralisation of both the Accountant General’s office and the Collector General’s office in recent years.

The Revenue Commissioners had been examining the basis for the historic differences and had found that a substantial portion was due to the fact that taxpayers’ records were not being adjusted for cancellations and other irregularities, including those that had resulted from dishonoured cheques. In evidence the Accounting Officer told the Committee that the examination was ongoing and that the difference was being reduced constantly.

The Committee was told that the difficulty was mainly as a result of the substantial amounts of money which were going into the Central Bank every day and also to the fact that adjustments arising from previous days had to be dealt with simultaneously. In addition, the Bank’s procedures for lodging the money or recording cancellations differed to that of the Revenue Commissioners and it had emerged that money which the Revenue Commissioners thought had been lodged to the Exchequer had not in fact been so lodged by the bank.

Although the figures had grown considerably since 1988, the Accounting Officer assured the Committee that there was no question of money being missing from the accounts and that the issue was one of reconciling the numerous tax payers’ accounts with the actual money that had been lodged. The discrepancy had recently been reduced from £3 million to £200,000 and the progress was continuing.

The other main discrepancy was as a result of the drawings accounts for VAT and Income Tax refunds, the reconciliation of which had been reduced to £800,000. The Accounting Officer stated that, in view of the new arrangements with the Central Bank, which would in future accept negative balances, and also as a result of the use of electronic equipment for dealing with lodgements, which meant that receipting and accounting was a much quicker process, the Office was hopeful that the differences could be kept to a much lower level in future.

The Committee welcomes the improvements that have now been introduced in order rectify large discrepancies in reconciliations, but must criticise the Revenue Commissioners for the long delay in introducing the improved procedures, especially since the C&AG had drawn attention to the problem on numerous occasions in the past. The reconciliation of bank accounts is of vital importance and under no circumstances should it be delayed by any Department or Office. The Committee urges the Revenue Commissioners and the Central Bank to review their joint procedures on a regular basis to prevent balance discrepancies from creeping up again.

The Committee wishes to be kept informed of the further progress that is made in bringing this matter up to date.

General Amnesty - Results

The Report of the C&AG refers to the general amnesty on interest and penalties, which, the Committee was told, only succeeded in attracting 7 per cent of the £1 billion book debt targeted by Revenue. A review of a random sample of the records of 200 taxpayers who availed of the general amnesty, indicated that a number of taxpayers had disqualified themselves from the provisions of the amnesty because they either had not filed a return for the 1992/93 tax year or had not paid off the pre-April 1991 arrears in full and 35 per cent of those trying to avail of the amnesty had previously availed of the 1988 amnesty.

Of the 26 cases identified by the C & AG as ineligible because of failure to submit returns, the Accounting Officer explained that, in 2 of these cases, returns had been submitted on time, there were 6 cases of late returns and 18 cases where the returns were not submitted at all. Of the latter, 12 were PAYE cases and in 6 cases some tax was paid during 1992-3. The largest amount involved was only £600 in relation to a late return which brought into question the cost effectiveness of pursuing returns involving small sums.

The majority of cases highlighted by the amnesties in 1988 and 1993 related to tax in arrears as a result of late payment and not to either tax evasion or avoidance. The effect of both the 1988 and the 1993 amnesties had been to give people an opportunity to bring their affairs up to date prior to the full scale introduction of self assessment and without having to pay the interest penalty.

The Committee noted that the sample findings questioned the effectiveness of amnesties in getting taxpayers to change habits of non-compliance or late paying, which was illustrated by the fact that 32 per cent of those who availed of the general amnesty had failed to submit preliminary tax returns as required for the 1993/94 tax year and 39 per cent had post-amnesty arrears.

The Committee is disappointed with these findings but it hopes the increased audit and anti-evasion activity and also the new strategy for the management of tax arrears, will avoid the need for any future amnesties which, as the results have shown, are largely ineffective in obtaining taxpayer compliance.

The Committee will keep the ongoing effectiveness of the current measures under review and wishes to be kept informed of progress in this area.

P.35 Employer Returns - Penalties

The P.35 end of year return is a key document in the administration of the PAYE system. It is used to require employers to give year end details of remuneration paid and Income Tax and PRSI deducted from each of their employees as well as their total liability for the year. The information, on the P.35, forms the basis of records maintained for PAYE and PRSI purposes.

P.35s are required to be submitted within 25 days of the end of the tax year i.e. before the 30th April each year and under the provisions of tax legislation, failure to do so leaves an employer liable to a penalty of £1,200.

The Report of the C&AG drew attention to the fact that during his examination of the 1994 returns, it was noted that only 41,000 out of an estimated total of 126,000 employers had submitted their P.35s within the statutory period and that, four months after the statutory date, there were still an estimated 17,600 P.35 forms outstanding. Notwithstanding that fact, it transpired that penalties had been imposed in only 1,000 cases in June 1995 and only 100 of the penalties had been paid.

The Accounting Officer explained that the primary purpose of the penalty provision was to encourage employers to submit the P.35s on time and that it was Revenue’s policy to make voluntary compliance a more attractive option rather than trying to enforce compliance through litigation which, in any event, would not be feasible because the number of penalties which can be imposed is limited mainly by the inability of the District Court system to deal with more than 1,500 cases a year.

The Accounting Officer also believed that, notwithstanding the problem with the courts and the low collection rate, it would be an uneconomic use of resources to pursue penalties on a wider scale, bearing in mind that compliance levels in the submission of returns had improved over the years. He pointed out that the 70 per cent of employers, who submitted returns by June, account for some 90 per cent of all employments and the returns submitted by September accounted for 99 per cent of employments. In addition, a number of cases were registered for PAYE although there were no employees and this would be regarded as a technical failure to send in a P.35 and, as such, would be included in the records.

It was explained to the Committee that, in collecting PAYE revenue and operating the system, the employer is acting on behalf of the State and, as a result, the objective was to try to keep the administrative costs to a minimum, especially for small firms. The main significance of the P.35 was that it formed part of the register for social welfare entitlements. The main concern of the Office of the Revenue Commissioners was to provide the required information to the Department of Social Welfare as quickly as possible.

While the Committee acknowledges that the primary concern of the Revenue Commissioners must be the submission of P.35 forms within a reasonable period, without upsetting too many employers, it agrees with the C&AG that, in relation to the submission of P35 forms, the law of the State is being ignored, to a large extent, by those charged with administering it. The Committee points out that this situation is unsatisfactory and hopes that, in future, all legal powers will be used to ensure that the statutory penalties will be fully implemented as otherwise, in relation to this matter, the statutory duty of the Revenue Commissioners is not being discharged.

The Committee will keep the matter under review and wishes to be informed of progress in relation to it.

FIRST - LEVEL EDUCATION

7. Payment of Local Contributions by National Schools

The Department of Education provides capital grants towards the provision of national school buildings which is standardised at 85% with the exception of schools designated as disadvantaged where a grant of 95% is payable. School Boards of Management are required to contribute the balance of the capital cost from their own resources. Building projects may be managed by the Board of Management or alternatively directly by the Department in which case the Board pays the local contribution to the Department prior to the commencement of the project.

The Report of the C&AG referred to a situation where it appeared that the Department was not collecting supplementary local contributions from boards of management towards the cost of capital works at national schools. The problem had been referred to previously in the Report of the C&AG on the Appropriation Accounts 1989, subsequent to which assurances had been given that the situation would be improved. However, the 1994 audit showed that £206,000 in contributions were outstanding at the end of that year, some of which had been outstanding for periods in excess of two years.

In evidence, the Accounting Officer explained that the process of clearing final accounts was a long one which could often result in delays in setting up collection of the supplementary local contributions. In this instance, that factor, in addition to the heavy workload on the section involved, as a result of an expanded capital programme in 1993 and 1994, meant that the matter could not be given the attention it needed. At the time of the examination, the actual amount outstanding was quoted by the Department to be £88,600, of which over £16,783 had been recovered from eight schools. Three schools were paying the money in instalments and had paid almost £2,000.

In describing how the liability arose, the Accounting Officer explained that when a contract is authorised, it is usual for schools to pay a local contribution towards the capital cost and that this had been done in this instance. In general, the balances would arise when the final cost of the project exceeded the original estimate for one or more of the following reasons:-

(i)a need for additional foundations because of difficulties discovered during site excavations;

(ii)changes in tax and VAT rates at Budget time;

and

(iii)inflation.

He went on to state that the collection of the amounts, which were generally quite small, is demanding in terms of administrative time and resources.

Following a query from the C&AG in relation to this matter, the Department initiated review procedures. As a result, new arrangements had been put in place which the Accounting Officer thought should eliminate the problem and lead to a more satisfactory situation and a better service for schools.

He outlined the problems experienced by schools in raising local contributions and stated that the contributions can vary from 0 per cent to 15 per cent in some cases. He suggested that one solution to the problem would be the inclusion of a contingency sum by the Department of 2 per cent in all building contracts. In introducing this system schools would be informed that supplementary contributions would no longer be sought. Thus, if an architect or engineer required additional works during a contract, the Department would pay any cost not covered by the contingency sum. If, on the other hand, the school was to seek a change in the contract, which would cost money outside of the contingency sum, the school would bear the additional cost. This would assist in addressing the sense of grievance which existed in schools in relation to the collection and supply of the 2 per cent contribution. Any such change would, of course, be subject to the approval of the Department of Finance.

Notwithstanding that fact, the Department intended to provide greater autonomy for schools and, in the case of minor and emergency grants, it had been proposed that the budget for minor grants would devolve to the schools. It was expected that this system would commence in January 1997, when approximately £10.8 million of allocated capital funds would be transferred from the capital subhead to the 3,300 primary schools on the basis of a £2,000 basic grant to each school plus £9 per pupil.

The Committee welcomes the efforts being made by the Department to address the problem that had been ongoing for some time. It points out, however, that the money was properly due and every effort should have been made to pursue the amounts outstanding. The Committee is concerned that the Report of the C&AG on the 1989 Accounts was effectively ignored by the Department and is disappointed that corrective action was not taken at that time.

In conclusion, the Committee urges the Department to collect all outstanding moneys as a matter of urgency and requests the Department to keep the Committee informed of developments.

ACCOUNTS NOTED

8. Accounts Noted

The following Accounts were also noted and the Minutes of Evidence are published herewith:

Transport, Energy and Communications

Office of the Minister for Education

Second-Level and Further Education

Third - Level and Further Education

Office of the Minister for Justice

Garda Siochána

Courts

Land Registry and Registry of Deeds

DENIS FOLEY T.D.

Chairman.

20 June 1996.

IMEACHTAÍ AN CHOISTE

PROCEEDINGS OF THE COMMITTEE

DÉARDAOIN 25 EANÁIR 1996

THURSDAY 25 JANUARY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, E. Ó Broin, Ó Dochartaigh, Mac Allais, Ó Finnúcáin, Mac Cormaic, P. ÓCaoimh, 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:-

Turasóireacht agus Trádáil.

5.Finnéithe a Ceistíodh:-

M. Uí h-Aodh (Rúnaí, An Roinn Turasóireachta agus Trádála), S. Ó Fearghall (An Roinn Airgeadais), R. Bradshaw (An Roinn Airgeadais), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.47pm go dtí 11am Déardaoin 1 Feabhra 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, E. Byrne, Doherty, Ellis, Finucane, Mc Cormack, 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:-

Tourism and Trade.

5.Witnesses Examined:-

Ms. M. Hayes (Secretary, Department of Tourism and Trade), Mr. J. O’Farrell (Department of Finance), Mr. R. Bradshaw (Department of Finance), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.47pm until 11am on Thursday 1 February 1996.

DÉARDAOIN 1 FEABHRA 1996

THURSDAY 1 FEBRUARY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

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

3.Breithniú na gCuntas Leithreasa 1994.

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

Oifig an Aire Dlí agus Cirt, Garda Síochána, Príosúin, Na Cúirteanna, Clárlann na Talún agus Clárlann na nGníomhas.

4.Finnéithe a Ceistíodh:-

T. Ó Dáltúin (Rúnaí, An Roinn Dlí agus Cirt), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

5.Athlá.

Chuaigh an Coiste ar athló ar 2.20pm go dtí 10.30am Dé hAoine 9 Feabhra 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan E. Byrne, Doherty, Ellis, Finucane, B. O’Keeffe, O’Malley, Upton.

3.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 Justice, Garda Síochána, Prisons, Courts, Land Registry and Registry of Deeds.

4.Witnesses Examined:-

Mr. T. Dalton (Secretary, Department of Justice), Mr. J. Purcell (the Comptroller and Auditor General).

5.Adjournment.

The Committee adjourned at 2.20pm until 10.30am on Friday 9 February 1996.

DÉARDAOIN 29 FEABHRA 1996

THURSDAY 29 FEBRUARY 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, E. Ó Broin, Mac Allais, Ó Finnúcáin, Mac Cormaic, P. 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. Cuireadh an Cuntas seo a leanas ar athló:-

Oifig na gCoimisinéirí Ioncaim.

5.Finnéithe a Ceistíodh:-

C. Mac Domhnaill (Cathaoirleach, Oifig na gCoimisinéirí Ioncaim), S. Puirséal (antArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 2.08pm go dtí 11am Déardaoin 7 Márta 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, E. Byrne, Ellis, Finucane, Mc Cormack, B. 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 adjourned:-

Office of the Revenue Commissioners.

5.Witnesses Examined:-

Mr. C. Mac Domhnaill (Chairman, Office of the Revenue Commissioners), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 2.08pm until 11am on Thursday 7 March 1996.

DÉARDAOIN 7 MÁRTA 1996

THURSDAY 7 MARCH 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), E. Ó Broin, 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.Breithniú na gCuntas Leithreasa 1994.

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

Oifig na gCoimisinéirí Ioncaim.

5.Finnéithe a Ceistíodh:-

C. Mac Domhnaill (Cathaoirleach, Oifig na gCoimisinéirí Ioncaim), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

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

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), E. Byrne, 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.Consideration of Appropriation Accounts 1994.

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

Office of the Revenue Commissioners.

5.Witnesses Examined:-

Mr.C.Mac Domhnaill (Chairman, Office of the Revenue Commissioners), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.40pm until 11am on Thursday 14 March 1994.

DÉARDAOIN 14 MÁRTA 1996

THURSDAY 14 MARCH 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaíi Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), E. Ó Broin, Ó Dochartaigh, 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 an Cuntas seo a leanas:-

Iompar, Fuinneamh agus Cumarsáid.

5.Finnéithe a Ceistíodh:-

S. Ó Laughraí (Rúnai, An Roinn Iompar, Fuinneamh agus Cumarsáide), F. Cooper (An Roinn Airgeadais), S. Boyle (An Roinn Airgeadais), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 12.51pm go dtí 11am Déardaoin 21 Márta 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), E. Byrne, Doherty, 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 Account was disposed of:-

Transport, Energy and Communications.

5.Witnesses Examined:-

Mr. J. Loughrey (Secretary, Department of Transport, Energy and Communications), Mr. F. Cooper (Department of Finance), Mr. S. Boyle (Department of Finance), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 11.00am until 11am on Thursday 21 March 1996.

DÉARDAOIN 21 MÁRTA 1996

THURSDAY 21 MARCH 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

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

3.Breithniú na gCuntas Leithreasa 1994.

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

Oifig an Aire Oideachais.

Cuireadh na Cuntais seo a leanas ar athló:-

Oideachas Céadleibhéil, Oideachas Dara Leibhéal agus Breisoideachas, Oideachas Tríú Leibhéal agus Breisoideachas.

4.Breithniú ar an Tuarascáil ón Ard-Reachtaire Cuntas agus Ciste maidir leis an iniúchadh ar Chuntais 1994 - Cuid III - Coistí Gairmoideachais.

Críochnaíodh breithniú ar Cuid III don Tuarascáil.

5.Finnéithe a Ceistíodh:-

An Dr. D. Thornhill (Rúnaí, An Roinn Oideachais), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 1.45pm go dtí 11am Déardaoin 28 Márta 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, E. Byrne, Doherty, Ellis, Hogan, Mc Cormack, B. O’Keeffe.

3.Consideration of Appropriation Accounts 1994.

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

Office of the Minister for Education.

The following Accounts were adjourned:-

First-Level Education, Second-Level and Further Education, Third-Level and Further Education.

4.Consideration of Report of the Comptroller and Auditor General on the audit of the 1994 Accounts - Part III - Vocational Education Committees.

Consideration of Part III of the Report was completed.

5.Witnesses Examined:-

Dr. D. Thornhill (Secretary, Department of Education), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 1.45pm until 11am on Thursday 28 March 1996.

DÉ CÉADAOIN 3 AIBREÁN 1996

WEDNESDAY 3 APRIL 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

Na Teachtaí D. Ó Foghlú (i gCeannas), Ó Bracháin, E. 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 suípoiblí.

4.Breithniú na gCuntas Leithreasa 1994.

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

Oideachas Céadleibhéil, Oideachas Dara Leibhéal agus Breisoideachas, Oideachas Tríú Leibhé agus Breisoideachas.

5.Finnéithe a Ceistíodh:-

An Dr. D. Thornhill (Rúnaí, An Roinn Oideachais), S. Puirséal (an tArd-Reachtaire Cuntas agus Ciste).

6.Athlá.

Chuaigh an Coiste ar athló ar 12.45pm go dtí 11am Dé Máirt 16 Aibreán 1996.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, E. 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:-

First-Level Education, Second-Level and Further Education, Third-Level and Further Education.

5.Witnesses Examined:-

Dr. D. Thornhill (Secretary, Department of Education), Mr. J. Purcell (the Comptroller and Auditor General).

6.Adjournment.

The Committee adjourned at 12.45pm until 11am on Tuesday 16 April 1996.

DÉARDAOIN 20 MEITHEAMH 1996.

THURSDAY 20 JUNE 1996

1.Chruinnigh an Coiste ar 11.00am.

2.Comhaltaí i Láthair:-

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

3.Chuaigh an Coiste i suí príobháideach.

4.Dréacht an Cheathrú Tuarascáil Eatramhach ón gCoiste um Chuntais Phoiblí ar Chuntais Leithreasa 1994.

Chuir an Cathaoirleach Dréacht an Cheathrú Tuarascáil Eatramhach faoi bhráid an Choiste lena breithniú.

Aontaiodh Dréacht an Ceathrú Tuarascáil Eatramhach.

Ordaíodh: Tuairisciú don Dáil dá réir sin.

1.The Committee met at 11.00am.

2.Members Present:-

Deputies D. Foley (in the Chair), Broughan, E. Byrne, Connor, Finucane, B. O’Keeffe, O’Malley, Upton.

3.The Committee went into private session.

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

The Chairman brought forward the Draft Fourth Interim Report for consideration.

Draft Fourth Interim Report agreed to.

Ordered: To report to the Dáil accordingly.

MIONTUAIRISC NA FIANAISE

MINUTES OF EVIDENCE

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 25 Éanair 1996

Thursday 25 January 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.

Public Session

Chairman: Are there any points in relation to correspondence?

Deputy Byrne: Item 2 of Mr. Mullarkey’s report reads: “Inquiry into the Distribution of Lottery Funds in Relation of Community Recreational Funding.”. I specifically requested this report on the grounds that I was happy with lottery funding being processed for community and amenity grant assistance through Local Authorities. Mr. Mullarkey’s report informs us that, in 1990/91, this is precisely how the moneys were distributed. It was all above board because the community development sections of the Local Authorities dispersed the money to those most in need who conformed to a set of rules.

Sadly, the Government in power in 1991 decided to reverse this policy. The Minister of State for Sport, at the Department of Education, and the Department of the Environment were given responsibility to disperse their own Lottery funding. That was an extremely regressive step. It infuriates me that, following many reports - including the substantial one carried out by Brian Harvey - what was a positive direction in 1991 has been reversed to a regressive position in 1996. There are as many politicians in public life as there were ten years ago, when the National Lottery was introduced. These people travel around at Christmas, like Santa Claus or the Society of St. Vincent de Paul, using taxpayers money in a most unseemly manner.

The Committee of Public Accounts has debated this issue on numerous occasions - there was the famous incident involving Dr. John O’Connell. I am unhappy that a decision has not been taken to properly respect surplus Lottery money by politicians in this Government and previous Governments. This Committee should take Brian Harvey’s findings on board and also other reports which emanated from this august body in the past while seeking transparency, honesty and accountability with regard to the dispersal of Lottery moneys. I am not happy. Government Departments should distribute such moneys through a fair and honourable system. The present trend seems to be that there is a personal spending fund, taken from National Lottery moneys, in existence for certain Ministers. This is fundamentally wrong.

Chairman: The final paragraph of the report states that the scheme was terminated with effect from 31 December 1993 and funding was again provided by the Department of Education for the recreational facilities scheme. Accounting Officers will not comment on policy.

Deputy Upton: Whatever about the policy aspect of this matter, I thank the Comptroller and Auditor General and his staff who have, as far as possible, cleared up some of the mysteries of the Lottery. However, many mysteries remain. There is great need for some degree of openness, some simple way which will enable ordinary people to discover what is happening. Brian Harvey’s report is a terrifying indictment of what has happened. Some of the information is classified. As I understand it, Brian Harvey was informed by the Health Boards that the information is classified and could not be made public. It seems incredible, at this stage in the development of Irish society, that the final destination of Lottery funding cannot be made public. It is high time for reform and the introduction of an easy guide to the Lottery in terms of where money is spent and how it is distributed. Clear guidelines are required with regard to the criteria for such distribution.

Deputy Broughan: I support the comments of my colleagues and thank the Comptroller and Auditor General for the work he has carried out to date. Each year, when the Committee of Public Accounts considers Lottery allocations, there is a striking correlation between the relevant Minister’s constituency and the allocation of grants. Last year 33 per cent of the allocations for 1993, in the case of the Minister of State for Sport, went to the constituency of Kilkenny. He was not alone in this, there have been many similar instances in the past. Concerns have also been expressed - they will become apparent from consideration of the 1995 accounts - in relation to the spending of funding through the European local development programmes. In this regard, there also seems to be a major correlation between local development programmes expenditure and a particular Minister’s constituency. On foot of a recent Parliamentary Question, I am in possession of a list which illustrates that correlation. This is wrong and I would like the Comptroller and Auditor General to investigate the matter.

We have discussed the fact that all parties could be involved in this matter. It would be a bad Minister who did not pay attention to their own locality. One of the honours for a constituency in having a Minister, is their ability to draw down resources to, what might be, a neglected part of the country. There is a genuine motivation in this regard. However, if the lists are considered - in relation to sport expenditure or European local development expenditure - there seems to be a striking correlation between a particular constituency and the number of grants allocated. That is not fair and was never meant to be the case. The European Auditor could legitimately raise concerns in that particular case and the State will be brought to book. It is the role of the Committee to look at this area to see what can be done. Last week or the previous week I asked if we could again examine the issuing of Irish passports to foreign nationals in return for investment in our country. Concerns were recently expressed in a number of newspapers such as The Sunday Business Post and The Sunday Tribune about the granting of passports to a Saudi Arabian family and about whether the conditions regarding investment were complied with.

I have great reservations about this scheme. If we are to continue it, we must expect that its terms are followed. The last Government discussed the scheme and it drew up guidelines. The Committee is anxious to ensure that the concerns which were then raised are adequately addressed. I ask the Comptroller and Auditor General to prepare a report on the scheme or to organise a discussion on it on foot of an investigation into its operation and how it is administered by the Department of Foreign Affairs and the Department of Justice. Our passport is one of the most sacred symbols of our country and its people and history. We should not lightly sell it to people who apparently have not adhered to the basic requirements of the scheme.

Chairman: The Accounting Officer from the Department of Justice will appear before the Committee next week.

Deputy Ellis: We are all concerned about where money from the National lottery is going. I am mystified as to where this money is being allocated. Some of it is supplementing State funds. I have no objection to money from the lottery being spent on health and education but the sports facilities which everybody thought they would be subscribing to by playing the lotto are not coming on stream. I see from the recent allocations of National Lottery funding that only £12,000 was allocated to projects in my county. The contribution of local communities to the National Lottery is not being returned to them under any heading. The cost of administering the National Lottery needs to be investigated. It seems to be costing more to run it than it costs other countries to run lotteries. Whenever the Lotto jackpot is £500,000, it is rarely won. This is more apparent over the last six to 12 months than it was previously. Until then the number of multi-draws was much smaller.

Deputy O’Malley: I am glad the issue of the Lotto has been raised. I was sceptical of it from the beginning. It was abused from the start in terms of allocations. The early years were the worst when Ministers went around with cheques in their pockets offering them to potential beneficiaries. When there were two Ministers in one part of County Limerick, would-be recipients used to turn down offers of cheques from a Minister on the basis that the other Minister in the constituency would certainly provide more. A Minister making an offer used to be told to go away with his miserable cheque for £5,000 or £10,000 and come back with a more adequate sum.

Deputy Broughan: Were you one of those Ministers?

Deputy O’Malley: Unfortunately, I was not. Deputy Byrne has suggested that the money should be given to Departments and distributed in a clearly transparent way with laid down criteria. One of the great weaknesses of the National Lottery is that the money is given to Departments. If it is given to them, it, inevitably, is not distributed in a transparent way. In Britain the proceeds of the lottery are distributed by an entirely independent board.

One of the difficulties of giving lottery money to Departments is that it gets mixed up with Exchequer money and we do not know which is which. Lottery money is used as a substitute for Exchequer money even though the original intention was that this would not happen. The Committee should ask that the money should be distributed entirely independently of Departments and, needless to say, Ministers. It should be administered by a board set up for that purpose, as is done elsewhere, so that allocations can be seen to be transparent and proper. At the moment an aura of suspicion and doubt hangs over the issue. It is a great pity that the vast sums of money which are foolishly put into the Lotto every week are distributed in a way about which there is continuous doubt and which is used and abused for political and Departmental purposes.

Deputy Finucane: I agree with what has been said about lottery funding. Sight has been lost of the spirit of the National Lottery. The former Deputy, Mr. Donal Creed, was Minister of State with responsibility for sport when the National Lottery was established. His intention was that lottery moneys would be allocated to sporting and community organisations. This ideal has long since drifted. Before Christmas, £1 million was dispersed nationally and divided pro rata between different counties. As public representatives we know that there are far more people looking for funds than the amount of funds available. Although there are some satisfied people, there are also many people who are disappointed at not being selected. I am disappointed that the money is being raided by Departments and that the true spirit and objective of the lottery has been lost.

Deputy O’Malley is perfectly correct. He referred to west Limerick. There was a competition between the two ministers involved - Deputy Michael Noonan and Deputy Gerard Collins - with regard to the presentation of cheques. I remember a farcical situation where a recipient of a cheque told one of the Ministers that she never made representations seeking funds and she made this public. Whatever criticisms have been made, I do not see myself in the role of dispensing cheques to people in west Limerick and the competition and abuses which existed in the past are gone.

Officials from the Department of Justice are appearing before the Committee next week. The sale of passports scheme, the proper title of which is the business migration scheme, has been debased to some degree because there appears to have been abuses in the past. Because of the parameters which were outlined in the past and because of the publicity which has been generated in recent times by some recipients, the Minister for Justice had to honour commitments made in the past. Since the present Government was formed, the parameters operated by the Department of Justice and the Department of Enterprise and Employment have become so restrictive that the business migration scheme is practically non-existent with a small number of applications. I would particularly disagree with one restriction that was introduced which raised the price for a passport, in a situation like that, from £500,000 to £1 million. I say that because I believe the business migration scheme is a good one if you have the restrictions. But if I was asked to change one restriction, I would say it should change from £1 million back to £500,000. What turned out to be the spirit of a good scheme originally has now been debased. If anything we are throwing the baby out with the bathwater because of abuses in the past which have been publicised.

The current restrictions are too restrictive. In my own constituency a company was helped out by the scheme which led to the preservation of 100 jobs. That £1 million infusion that helped the company to survive certain difficulties at that time. Many companies that receive this type of funding may have certain problems and so require an injection of cash. It is also important to bear in mind, however, that the person who puts that investment in is, in a lot of cases, putting it into a high risk venture.

People will say that the most sacred thing we have is a passport to this country. However, I wonder if, as members of the European Union, we appreciate the type of importance that could be given to this. Canada and Australia - where admittedly you probably have a larger ethnic base - have similar schemes which operate effectively and create many jobs in their economies.

Britain operates a parallel system with the same restrictions and controls. However, Britain is not regarded as being pro-EU whereas we have the advantage of being regarded as strong EU participants. We should be maximising that advantage rather than minimising it.

Deputy McCormack: I want to refer briefly to the National Lottery and the concerns expressed by some Deputies including Deputy O’Malley. What remained of the National Lottery money for 1995 was dispersed at the end of 1995 and, from my knowledge, it has been evenly dispersed throughout the country. But none of the recipient organisations have been paid because they have to fill up a very detailed account of their affairs. They have to show how the money will be spent and what money they have already spent before any of the National Lottery money can be expended. Whatever concerns were being expressed by Deputy O’Malley they certainly do not exist now. Maybe there should be another way of dispensing it but that is the way it is done at present. As far as I can find out it has been done correctly on this occasion.

Some of the Lottery money goes to Health Boards which redistribute it to hospices, wheelchair associations, groups for the mentally handicapped and others. That is a legitimate use of the funds. Some people suggest we should spend more National Lottery money in that direction. In the past there was public concern about the Lottery. I have knowledge of a Minister of State who used to go around and personally announce the National Lottery disbursement in the constituency. That was the first anybody had heard of it.

Deputy B. O’Keeffe: I know a person who was handing out cheques.

Deputy McCormack: Yes, he presented cheques. That Minister of State was in operation when Deputy O’Malley’s party was in Government. If any lesson can be learned from this maybe it is that that Minister of State is no longer in the Dáil. Maybe it is not the right way. There seems to be no advantage in going around doing that.

Deputy B. O’Keeffe: He bought his way out of the Dáil.

Deputy McCormack: The lessons of the past have now been taken on board. The criterion for dispersing the National Lottery is meeting rigid requirements as I found out myself. Some organisations cannot draw down the money because they do not meet those rigid requirements.

Deputy Upton: Can information be made available on the basis of each Local Authority in relation to the amounts of money that is gathered by the Lottery each year? I am asking that that information be made public. Second, we should be provided with an estimate of the amount of Lottery funding which is redistributed back to each Local Authority area. That would put a stop to a good deal of the gombeen politics which, sadly, is still going on. The sooner Deputy O’Malley’s suggestion is implemented the better for everybody.

Deputy Broughan: We should note that the present Minister for Finance last Tuesday brought in a Budget with none of the famous sweetners behind it which used to be a feature of other Finance Ministers in previous Budgets. That is a good step forward in accountability and transparency for which he should be commended.

Deputy McCormack: I hope he continues it between two Budgets.

Deputy Broughan: In addition to what has been said about the National Lottery, would the Comptroller and Auditor General look at the programmes for local economic development which are funded from Europe in the 1995 accounts to examine the disbursement? Concerns have again been raised about the correlation of localities with people who are responsible.

Deputy Doherty: I would like the Comptroller and Auditor General to provide us with the National Lottery allocations for 1994. If any residue was left in the Lottery fund at the time of the change of Government, where was it expended and how much was involved? Can he also tell us what amount of Lottery funding has been allocated over the last few years to various other Departments for purposes other than those described as “community-based” or “sporting”?

It would be interesting to find out how much of the promise initially associated with Lottery funding has drifted into other areas of support funding with a consequent loss to the very people - the youth - who were primarily intended to be the beneficiaries through sporting developments.

At a time when crime is out of control, it is important that emphasis on that type of expenditure should again be redirected towards sport and the provision of sporting facilities which have a meaningful contribution to make in that context. I would like to have the figures, if they are available, now or later.

Deputy Byrne: I welcome the debate. I do not know what the Comptroller and Auditor General’s authority and powers are, nor the powers and authority of this Committee, but I would like Brian Harvey’s document to be debated by the Committee. Is there a format whereby we can debate it with a view to coming up with a set of proposals? I take Deputy O’Malley’s point that there should be an independent board. I do not know how far I would go down that road. I would like to see the costings involved and the money one would lose to a board in trying to disburse the money. Are we empowered as a Committee to discuss this as an agenda item with a view to coming up with a recommendation to Government about how they should handle the money?

Chairman: The recommendations coming through today have already been summarised to the Department by way of a report dated 28 April 1994. There was a response from the Office of the Minister for Finance on 9 June 1994, stating that:

The Minister for Finance wishes to advise the Committee of Public Accounts that his Department has revised comprehensive guidelines on the administration of grants made from subheads which are designated as being National Lottery funded.

These guidelines, which will take into account the recommendations of the Committee, will be issued through Departments as soon as possible. He will make a copy of the guidelines available to the Committee.

In regard to the recommendations of the Committee, an independent monitoring group should be established for the purpose of assessing whether there is an equitable geographic and demographic spread in the allocation of National Lottery grants and that the Minister should be invited to record his reasons for not accepting the recommendations of his officials relating to a grant application. The Minister will discuss these matters with his Government colleagues.

Mr. Purcell: You referred, Sir, to the earlier discussions of the Committee and that report, which to a certain extent has been reiterated in the research report mentioned by Deputy Byrne. The Committee got it right on that occasion. It talked about having a monitoring group to look at the demographic and geographic spread of Lottery money. It is, at the end of the day, a policy matter as to whether anything will be done about it. The Committee has done all it can. Of course, it can revisit the matter if it still has concerns.

On the more general issue of transparency, on who and what organisations get Lottery moneys, as Deputies correctly said, there have been some advances on that in the Appropriation Account itself. There are lists of bodies in the environment, social welfare, health and education areas which have received National Lottery moneys. We decided in line with the Committee’s recommendation that a minimum level of £10,000 would be the criterion for whether one was included or not.

That said, when moneys go to Health Boards and the like, one does not have the same level of transparency, which was brought out in the research report. Now that I have audit responsibility for the Health Boards, I intend at a minimum that the same level of disclosure would pertain in the audit and reporting of the accounts of those areas as applies to the auditing and reporting of Government Departments.

I can undertake, in response to the concerns of the Committee to perhaps think of some way we can get a document that will show in detail where all the disbursements of Lottery moneys have gone. Of necessity, it will be a thick document. There will be difficulties if we want to know about every organisation that received money from the National Lottery. It would make it easier if we decided on a limit of £10,000, for example, and there only being full accountability from groups receiving money above that figure. I could undertake to the Committee to publish such details with my report on the Appropriation Accounts for 1995 and the Committee would have them in early September.

Deputy Broughan: Would it not be possible to take a sample of grants to see how the money was spent?

Mr. Purcell: We do that in our normal audit. Procedures have been tightened up, certainly in Departments. There was a looseness in the Departments of Health and Education, which was brought to light and reported upon to the Committee. Remedial action has been taken. In the case of a Health Board, I can recall bringing to the Chief Executive Officer’s attention the need for more formal procedures; Deputy McCormack mentioned this. We do not need to get into a bureaucratic nightmare or morass either, but there is a price to be paid for this kind of transparency and for the demonstration of equity in the granting of these moneys.

Chairman: I want to close the discussions now.

Deputy McCormack: We could all give many examples of how Lottery money was well spent. Some £2,000 was spent in my area in taking people off the street and getting them involved in a boxing club. This was the best spent money I have seen in a long time. This club was operating voluntarily for years under bad conditions. Now they have a hall with showers etc. for only £2,000, supplemented by £2,000 from local resources as well.

Chairman: I want to refer to a matter raised by Deputy Byrne regarding the Harvey report. We are committed to any report coming from the Comptroller and Auditor General or matters arising therefrom. I will have that investigated to see if we can deal with it.

Mr. Purcell: The cost of administration was mentioned by Deputy Ellis. The National Lottery Company has an agreement with the Department of Finance that only a certain percentage of proceeds will go on administration and a ceiling has been imposed by the Department of Finance, which is subject to annual review. I can confirm that the National Lottery Company is well within that ceiling.

Deputy Ellis: What is the percentage?

Mr. Purcell: I cannot recall offhand but I can come back to the Deputy on it.

Deputy Upton: I think it is around 30 per cent.

Mr. Purcell: The figure is not that high; it is around the late teens. It has been revised downwards in recent years but that would not include the commissions.

Deputy Ellis: Therefore, adding the 6 per cent commission paid to vendors to that figure means that around 25 per cent of Lottery money consists of administration and sales costs, which is a high figure.

Deputy Doherty: Does that figure include Lottery funding made available for various forms of advertising, including the purchasing of tickets at ringside seats for various extravaganzas?

Mr. Purcell: I do not audit the National Lottery Company because it is a commercial semi-State body.

Deputy Ellis: Do we have the right to audit the National Lottery Company at that stage?

Mr. Purcell: No. I audit the National Lottery fund, the money made available by the National Lottery Company.

Deputy Ellis: We should seek to put the National Lottery Company under the auspices of the Comptroller and Auditor General in the same way as the Lottery funds.

Deputy O’Malley: I am disturbed to hear the levels of commission and, in particular, the administrative expense which seems utterly and unnecessarily high. These people conduct themselves, as most monopolies do, in an arrogant fashion.

I want to draw attention to two differences between our Lottery and its British counterpart. First, Britain has an independent disbursement board. Therefore, it is not open to that dubious activity. Second, there is an official and independent regulator - OFLOT - in Britain but there is no regulator here. These are two great deficiencies in the situation.

I proposed that this Committee should recommend that an independent board be set up for disbursement. That proposal would meet with general favour here and I ask you to put it to the Committee to adopt it, Sir.

Deputy Byrne: I find Deputy O’Malley’s statement contradictory. He is complaining about the administrative costings; the figure is around 20 per cent. Another tier of bureaucracy by way of a board may shoot these administrative costs through the sky. Rather than adopt that motion, I would appreciate more information on the potential costings involved.

Chairman: Deputy O’Malley has made a proposal. It is a policy issue and something we cannot go into but if there is a seconder we can pass it on by way of recommendation.

Deputy Ellis: With regard to what Deputy O’Malley has said, do we not have the right, as public funding is involved, to have it fully investigated as far as we can? The Comptroller and Auditor General said we cannot go into the actual 18 or 20 per cent that it costs to run it but we should do what we can even if it means seeking a review of the legislation which established it. It has been in existence for almost ten years and naturally enough the hiccups are now coming to light. There may be a need to ask for the Lottery legislation to be reviewed in view of the present day standing.

Chairman: It is a policy issue. I will ask the Comptroller and Auditor General to come in on the passports issue.

Mr. Purcell: Deputy Broughan mentioned the matter of passports and a possible role I might have in looking at Department’s procedures for checking compliance with the conditions under which passports are granted. I have a slight difficulty and I am not sure where my mandate begins or ends in this matter. I am not being unnecessarily coy. A passport is not an expenditure as such. My mandate generally would be to look at expenditure, revenue and so on. A passport has a value on the open market over and above the £40 or whatever it costs to get a ten year passport.

However, if there is a recommendation from the Committee - and I am always left in this situation where if a Member recommends or requests me to do something I am not quite sure if that is representative of the views of the Committee - I probably could look at it from the point of view of the value for money mandate which talks about the effectiveness of systems in Departments for carrying out their operations. There is a difficulty if you issue a passport to individuals on foot of investment or promise of creating jobs. Can one withdraw that passport if they fail to come up with the goods? I am not sure but I probably could under my value for money mandate have a look at that if it is the wish of the Committee.

Chairman: Is Deputy Broughan making a proposal?

Deputy Broughan: Yes, I am.

Deputy B. O’Keeffe: Could I just come in before the proposal is made? May I ask the Comptroller and Auditor General if he would see any role for himself in terms of the value for money and the possibility of passports being used illegally? We had a report which said that there were 609 passports either lost or stolen and that five of these had been found. Two were found on the Austrian/Hungarian border, one as far away as Manila and another in Tokyo. When we got a report back, the Department of Justice indicated that they had no knowledge or idea whether there was a racket with regard to these passports. It is quite serious that 500 passports are missing at the present. We do not know whether they were lost or stolen or whether there is racketeering going on with passports. Would the Comptroller have a role in having that investigated?

Chairman: Do I have a seconder for Deputy Broughan’s proposal?

Deputy Finucane: I think if the Comptroller goes back to day one ——

Chairman: I want to bring it to a conclusion.

Deputy Finucane: I do not think there is any point going back to day one because the press has focused on certain irregularities. It would be far better to examine the operation of the new restrictions because there is quite a punitive regime in place at present. The question relating to conformity and job creation after a passport has been issued is a valid one.

On the point of lost passports, does the Deputy realise that with traffic to and from the States, a person can get a passport and go to the States and in order to get back to the States look for an extra passport having lost the original?

Chairman: I want to bring it to a conclusion now.

Deputy Doherty: Would it be possible to establish the exact consequences of the provision of passports where people make investments, how successful the scheme has been and if the money has actually been invested? If we are to draw up guidelines in the future we want to know the experience of the past, what investments were made, where the investments were made, their consequences and if there is any shortfall.

Deputy Finucane: You will get a fright.

Deputy Doherty: I do not mind being frightened.

Deputy Broughan: That is the exact question I was asking. It would be incumbent on the Comptroller and Auditor General to go into history.

Chairman: Have we a consensus for Deputy Broughan’s proposal?

Deputy Finucane: Let us have it pre and post the new restrictions.

Chairman: That is okay.

Deputy O’Malley: The Comptroller and Auditor General should at least seek to look into what has happened to these investments and whether they have actually been made. Sometimes an investment could be made but it could be withdrawn again in six months.

Could I go back for one minute to the earlier matter about the Lottery? I made a proposal. Was that agreed?

Chairman: What was the proposal?

Deputy O’Malley: It was that the Committee recommend the setting up of a board to disperse the funds.

Chairman: We can make a recommendation; it is a policy matter. Do we have a consensus on that? AGREED.

Deputy McCormack: As Deputy Broughan said, we would want to know the cost.

Deputy O’Malley: Two or three people can do it part-time. I would not say it would cost that much.

Deputy McCormack: I am always suspicious of handing over authority to any non-elected people because of what they can do with it when they get it.

Deputy O’Malley: Do you see what the elected people do with it too?

Chairman: Is that agreed? AGREED.

Deputy Ellis: We have a letter from the Secretary of the Department of the Environment with regard to the National Roads Authority. I do not think it does much to allay the fears some of us have with regard to how the National Roads Authority is spending money. There is commitment from 1994 to 1999 in the operational programme for transport and they have attached maps of roads, some of which are not included in the programme. They should be asked to explain why these are shown on the maps and not included. I am referring mainly to the N16.

Chairman: We will get clarification on that letter which is signed by Brendan O’Donoghue.

Deputy Ellis: I am not saying there is anything wrong.

Chairman: We have a delegation from Hungary visiting the country next Wednesday and they are anxious to meet members of the Public Accounts Committee at 4 p.m. How many Members would be available next Wednesday? The secretary will inform the three Members of the details.

Deputy Finucane: Do they have a public accounts system in Hungary?

Chairman: We will know that when we meet them. We also have a meeting arranged for Thursday 8 February. I suggest that be transferred to Friday, 9 February because we were asked by the Whip’s Office to hold a number of Friday meetings and Friday 9 February has been allocated to us. Is that agreed? AGREED.

Deputy O’Malley: There is correspondence from the Secretary of the Department of Agriculture, Food and Forestry in respect of some of the queries put to him - he does not deal with some of them - in a letter that was sent to him last December. He replies on 15 January. He goes to great lengths, again for reasons best known to himself, to justify the fact that the appropriate yield from intervention carcasses is 68 per cent. There was abundant evidence given to the Beef Tribunal and printed in the report that the actual yield on many occasions was 74 to 76 per cent and that the difference between that and 68 per cent was pocketed by the companies concerned in breach of the regulations governing intervention deboning. That remains the case and saying that properly deboned meat should only yield 68 per cent is immaterial and pointless. I cannot understand why the Secretary goes to the expense of having the report carried out by a company in England which reports in great length and detail when the plain fact is that there is abundant evidence that substantially greater than 68 per cent was obtained. The Department knows that and that the meat was the property of the Minister but it did nothing whatever to secure a refund of the difference and the companies were allowed to pocket it. Writing a letter of this kind to the Committee is pointless because it does not deal with the point involved.

Chairman: He is responding to the meeting of the 14 December concerning information which he undertook to provide in respect of two matters discussed at the meeting. Does the Deputy seek further clarification?

Deputy O’Malley: It is not clarification about how much beef one can get from a carcass; we know that and we did not need an expensive report from these consultants to tell us that. What we want to know is why the Department allowed companies to retain the balance over 68 per cent. In a given day that amounts to thousands of pounds and over a year it amounts to millions of pounds.

Chairman: We will take that up.

Deputy Byrne: While I share the concerns of Deputy O’Malley and I read this report which is reasonably complex, the bottom line is that the EU is claiming a £75 million clawback from us——

Deputy Ellis: No, I thought it was £108 million.

Deputy Byrne: It is £75 million of disallowances. We have a collective responsibility to try to do all we can to highlight the inadequacies that existed at the time. It would be important that we lend our support in so far as we can to the officials in the Department of Agriculture, Food and Forestry who are attempting to fight the EU and its formula. There are two sets of formulae given here and I am sympathetic to the Department which is now fighting the EU Commission. It is all before us here. Every penny that is reclaimed by the Irish State on behalf of the Irish taxpayer is important and we should point the finger where the blame lies. If it was the Department or the factories’ in-house managerial systems that were ripping off the State we should point in the right direction. However, we should do all in our power to reclaim as much money as we can from the EU Commission for the taxpayer.

Chairman: We will take up the point raised by Deputy O’Malley with the Accounting Officer.

APPROPRIATION ACCOUNTS 1994

VOTE 35 - TOURISM & TRADE

Ms. Margaret Hayes, (Secretary, Department of Tourism & Trade) called and examined.

Mr. Robert Bradshaw and Mr. Jim O’Farrell, Department of Finance representatives, called and examined.

Ms. Sue Blood, Department of Finance representative, in attendance.

Chairman: I welcome Ms Margaret Hayes, Secretary, Department of Tourism and Trade. I understand it is your first time to come before the Committee as Accounting Officer. Perhaps you would introduce your officials.

Ms Hayes: I am accompanied by Mr. Gerry Naughton, Mr. Tony McGrath, Mr. Con Considine and Mr. Peter Smyth.

Chairman: Paragraph 48 of the report of the Comptroller and Auditor General reads:

Subhead A.7. - Consultancy Services

Review of Bord Fáilte Éireann

48.In February 1994, the Minister for Tourism and Trade instigated a review of the future role of Bord Fáilte Éireann to be carried out by external consultants.

The Department, using a restricted tendering process, invited five firms to submit costed proposals. Following assessment and subsequent negotiation, a firm which had not submitted the lowest tender was appointed having reduced its original tender from £190,000 to £150,000 (excluding VAT); expenses of £30,000 were also payable.

It was noted that Public Procurement Procedures were not complied with as:

-the proposed contract was not advertised in the Official Journal of the European Communities as required under EU Public Procurement directives;

-an approved list of consultancy firms, as required under the restricted tendering process, was not in place in the Department.

-criteria used in selection were not adequately documented and a report on tenders received was not on file;

-the approval of the Government Contracts Committee was not sought despite the accepted firm’s tender not being the lowest.

It was also noted that invoices for work done, presented for payment to the Department, did not specify the number of days worked or the category of staff involved and, accordingly, verification of the amounts charged was not possible and furthermore, the expenses of £30,000 were not vouched in sufficient detail. In addition, the firm in question was also awarded, with Department of Finance approval, two further Bord Fáilte related consultancy contracts, without separate competition, bringing total Departmental payments to the firm to £266,200 including VAT.

I sought the observations of the Accounting Officer on the absence of proper contract and payment control procedures.

The Accounting Officer informed me that the three leading consulting firms with relevant expertise in Ireland and two leading international firms were invited to tender for the work. All of these firms were considered particularly suitable for the project and a time limit of 12 weeks for the completion of the project was set. Because cost was not expected to exceed the EU threshold of 200,000 ECU (£154,627) the need to consider advertising the work in the Official Journal of the European Communities did not arise. No prior list of suitable firms existed because no similar previous project had been commissioned by the Department since its establishment. However, the list of five firms invited to tender represented in the view of the senior management of the Department, based on its collective experience, the most suitable potential appointees. All of these steps were in the view of the Accounting Officer fully in accord with the Guidelines on Public Procurement published in 1994. He outlined the criteria by which the tenders were assessed:

-how the terms of reference were addressed

-likelihood of delivering workable solutions to the problems

-relevant expertise and experience

-the personnel carrying out the project

-cost.

He stated that the firm was selected as the best overall proposal in the context of these criteria, and in terms of the firm’s international experience in the tourism sector and ability to deliver the project within the challenging timeframe set. However, the chosen proposal appeared to go unnecessarily beyond the Department’s terms of reference and following discussion with the Department the firm excluded the work in question and reduced the tender price accordingly. Other tenderers were not invited to amend their prices because the consultancy project was not offered on a price basis, but rather on the scope and quality of work likely to be achieved. The need for Government Contracts Committee approval was quite simply overlooked.

The Accounting Officer accepted that the receipt and assessment of tenders had not been fully documented partly because working papers, particularly those recording the scoring of tenders, were not filed for later inspection. He did, however, give an assurance that the process was properly conducted at all times as he was personally involved at all stages.

Following their appointment, the consultants reported regularly to a Consultancy Steering Committee which the Accounting Officer chaired. The Department was fully informed on the progress of the consultancy in this way and was fully satisfied with the consultants’ work on it. Detailed justifications for invoices for consultancy charges and for expenses were subsequently sought and had been provided in July 1995.

The Accounting Officer stated that he fully stands over both the appointment of the consultants and the value for money achieved from their work which contributed significantly to the rejuvenation and renewal of Bord Fáilte, to the effectiveness of that body and to tourism development.

Mr. Purcell: This Committee on a number of occasions in the past has emphasised the importance of adhering to tendering rules and guidelines in the award of public contracts, the fundamental point being that not only should procedures be fair but they must be seen by all concerned to be fair and equitable. The subject of this paragraph is a consultancy commissioned by the Department on the future role of Bord Fáilte. I had a number of concerns about how the contract was handled. It was not advertised in the EU journal even though the amount turned out to be in excess of the specified threshold. The assessment of tenders was not documented and the approval of the Government Contracts Committee was not sought, as is required where the lowest tender is not accepted. I also noted that the firm in question got two related assignments on the back of this contract which brought the total value of the consultancy to £300,000.

I am not suggesting that there was anything underhand in this because I am sure the people at senior level in the Department know best when it comes to choosing the most suitable consultants for a particular job. However, some corners were cut and some things were inadvertently overlooked. When that happens transparency suffers and that is the point I am making.

Chairman: In a situation where a restricted tendering process was used, how could the need for the approval of the Government Contracts Committee be overlooked?

Ms Hayes: My understanding is that it was a simple matter of being overlooked. The Accounting Officer was deeply involved in the commissioning of these consultancies and the matter of the reference to the Government Contracts Committee was overlooked.

Chairman: Why were working papers containing details of receipts and assessment of tenders not available for inspection, particularly in view of the approval of the Government Contracts Committee being overlooked?

Ms Hayes: I understand from my predecessor that while criteria were set out and a marking system applied, somehow the actual document carrying the markings does not appear to have been filed.

Chairman: Why were an additional two Bord Fáilte related consultancy contracts awarded to a firm without resort to separate competition?

Ms Hayes: The consultancy firm, by virtue of the fact that it had carried out the overall review, was considered to be in the best position to carry out the work on the two related contracts, both of which had arisen from the overall review.

Deputy Broughan: Was your predecessor under pressure from the policy maker who was the then Minister, Deputy McCreevy, in relation to this contract? The time set out for it was very short. Was it because of this that all the procedures were broken? When one reads about the allocation of this contract in the Comptroller and Auditor General’s report it certainly seems like it could have been an old pals act or an instance of people in a golden circle handing out contracts between themselves - breaking all the rules, not going through proper tendering procedures, somebody who had not made the lowest tender somehow coming back and making a lower tender and ending up receiving much more money than the amount which had been prescribed. If there was not a policy making deadline on this, was the situation not fundamentally unfair, and did it not represent an old pals act, a golden circle between the contracting firm and the Department?

Ms Hayes: No, I do not believe there is any evidence that time pressures were put on the Accounting Officer in this case and there is no statement from him to this effect. On the question of unfairness——

Deputy Broughan: Why have we got this note that a time limit of 12 weeks was set for the completion of the project?

Ms Hayes: The time limit was in respect of the consultants, for completion of the project.

Deputy Broughan: Was it a situation where the Minister wanted the report and that action was to be taken? He was a very vigorous Minister for Tourism and Trade. Were procedures not followed because he was to take action on Bord Fáilte Éireann?

Ms Hayes: There is no evidence that this was the case. Although the Government was anxious that the consultancy would be undertaken, the Accounting Officer is not saying this urgency is the reason for the omission in this case.

Deputy Broughan: In that case, why did you not follow the relevant procedures? For example, why did you say it was not considered on the basis of price? Surely public tendering has to take price into consideration? How was it that this person, who had not submitted the lowest tender, was able to reduce his tender? How did he know this?

Ms Hayes: According to the files, the sequence of events was as follows: It was decided to go for restrictive tendering because of the nature and scope of the project, and no prior list of suitable firms existed because no similar previous project had been commissioned by the Department since its establishment. However, a list of five firms was decided on and these were invited to tender. In the view of the senior management in the Department at the time, based on their collective experience, they represented the most suitable potential appointees. In the opinion of the Accounting Officer, all these steps were fully in accordance with the guidelines on public procurement, published in 1994, especially chapter five, which deals with restrictive tendering.

The five firms were invited to submit proposals and each of the tenders was assessed on the basis of the following criteria: how the terms of reference were addressed; the insight the firms, and their teams working on the project, had into the nature of the problems being tackled; the likelihood of each firm delivering workable solutions to the problems; the relevant expertise and experience of the individual consultants offered by the firms; the personnel undertaking the project; and cost. Cost, therefore, was not the only criterion used in assessing the tender documents when they were submitted.

Deputy Broughan: Who got the tender? Is it an Irish company?

Ms Hayes: No, it is an English based company. Arthur D. Little Limited was selected as the best overall proposal in the context of the above criteria, and in terms of its international experience with the tourism sector and its ability to deliver the project within the challenging time frame set. The international dimension was very important, because it was being asked to look at Bord Fáilte Éireann in terms of its performance in international markets.

Deputy B. O’Keeffe: Where does this leave the golden circle?

Deputy Broughan: It could have been an international golden circle. The administration of the project and of the consultancy appears to have been very sloppy with regard to invoices, payments and so on. We appear to have gone way over Budget, for example, up to the limit in which you would have had to advertise it in the European journals. Have you any comment on this? Was it not administered in a fairly sloppy manner with regard to payments?

Ms Hayes: I do not believe there is evidence to suggest that the contract was administered in a sloppy manner. It came in on Budget and the additional amounts paid to the firm to bring the figure to £300,000 resulted from the addition of two contracts, the nature of which I discussed earlier with the Chairman. The firm did additional work outside the terms of reference given to it, post the completion of its initial contract.

Deputy Ellis: With regard to the company in question, who prepared the shortlist prior to it being granted to Arthur D. Little Limited?

Ms Hayes: The shortlist?

Deputy Ellis: Yes.

Ms Hayes: It was prepared by senior management in the Department under the direction of the Secretary at the time.

Deputy Ellis: Was any Irish company included in the shortlist?

Ms Hayes: Three companies were included.

Deputy Ellis: Could we have the names of all companies included in the shortlist?

Ms Hayes: This is a confidential matter.

Deputy Ellis: Nothing is confidential when you attend the Committee of Public Accounts. I accept it is your first time here, but the Members of the Committee are entitled to obtain all relevant information, and it is the duty of the Accounting Officer for the Department to make it available.

Chairman: This matter has arisen before. The relevant guidelines for the Committee make clear that it is undesirable to mention the names of business firms in connection with their business or dealings.

Deputy Ellis: If you read the remainder of these guidelines, Chairman, it is clear that it is for the Committee to use its discretion as to whether or not it wishes to have it provided.

Chairman: It is the practice not to discuss the affairs of any company, the constitution of its directorate, or whether or not members are connected with it. This is the first time the Accounting Officer has appeared before the Committee and I would ask her to provide the information requested in writing, which will clarify the position.

Ms Hayes: I will clarify the position, but there may be commercial sensitivities about offering the names of unsuccessful candidates.

Deputy Ellis: While the Accounting Officer may have her views on this, we, as Members of the Committee, have the right to obtain this information, either in oral or written form. The Chairman has requested that you provide it in written form and I hope you will have done so for next week’s meeting.

Ms Hayes: I will consider the request.

Deputy Ellis: I do not accept undertaking to consider the request. I ask that it be provided for next week. It is the duty of the Accounting Officer to do so. I take it the information will be provided in written form next week. Did Arthur D. Little Limited undertake any previous work for the Department?

Ms Hayes: No.

Deputy Ellis: Has it any associate company in Ireland?

Ms Hayes: Not that I am aware of.

Deputy Ellis: When it came to preparing the report, did it use any Irish consultancies to help it out?

Ms Hayes: Not that I am aware of, but I can check this out.

Deputy Ellis: Did it work for the Northern Ireland Tourist Board or for the British Tourist Board prior to its work for Bord Fáilte Éireann?

Ms Hayes: I am aware that it had experience in undertaking consultancy work for other tourism boards. I do not have precise details with me regarding these boards.

Deputy Ellis: I take it that when it submitted its application to the Department it provided details, like all others, regarding previous work experience. I take it, therefore, that in your written reply, you will advise us whether or not it had worked for the British Tourist Board or the Northern Ireland Tourist Board.

Ms Hayes: I will look at our papers to see what references were provided and I will check with the company, as such information may also be of a commercial nature.

Deputy Ellis: It may be of a commercial nature, but it should be made available, because I do not want a company which may be working for the Northern Ireland Tourist Board or the British Tourist Board, also working and preparing strategy for Bord Fáilte. I feel this is relevant information. I accept this happened prior to Ms Hayes taking over but the relevant information should be made available.

With regard to other consultancies currently being done by the Department with regard to tourism projects, how many are ongoing and who is employed to do them?

Ms Hayes: At present?

Deputy Ellis: Yes, and with what areas of the industry are they concerned?

Ms Hayes: At present there is only one consultancy underway in the tourism area. It is related to the evaluation of the tourism operational programme and it will be ongoing. It is in accordance with the requirements and conditions set out in the programme.

Deputy Ellis: Who is carrying that out?

Ms Hayes: Fitzpatrick Associates.

Deputy Ellis: When were they appointed?

Ms Hayes: They were appointed in the second half of last year.

Deputy Ellis: Was public tendering used?

Ms Hayes: Yes.

Deputy Ellis: I take it they are Irish based?

Ms Hayes: Yes.

Deputy Ellis: What is the cost per annum of that contract?

Ms Hayes: I do not have the specific cost with me but I can supply it to the Deputy.

Deputy Ellis: Could Ms Hayes also let us know whether it is being done on a set cost or a fee basis? Who carried out any reviews prior to that? Who did they replace?

Ms Hayes: This is the first review provided for and commissioned under the current programme, the 1994 to 1999 operational programme.

Deputy Ellis: No one was appointed for 1994 and no one was appointed until 1995?

Ms Hayes: That is so.

Deputy Ellis: Who currently reviews policy with regard to the provision of new accommodation?

Ms Hayes: The Department, and the Minister determines policy.

Deputy Ellis: The Minister now has the right to determine, subject to the advice of his Department.

Ms Hayes: Yes, in relation to policy on accommodation.

Deputy Ellis: Yes, that I understand, but the Minister will make the final decision — we can take it that is the position?

Ms Hayes: That is the position.

Deputy Ellis: What is the current position with regard to the provision of accommodation on green field sites, as it appears to vary from one part of the country to another?

Ms Hayes: At present, there are no Exchequer funded grant schemes in operation in relation to the provision of accommodation. There is financial assistance under a measure in the tourism operational programme, 1994 to 1999 for refurbishment and expansion of small hotels on a selective basis. Decisions are made by the independent product management board appointed to determine applications for EU aid across that programme.

Deputy Ellis: When were they appointed?

Ms Hayes: On the establishment of the programme in 1994.

Deputy Ellis: That board has not changed, I take it?

Ms Hayes: No, it has not, it is still the same, apart from one change which resulted from personnel changes within the Department — the Departmental representative has changed.

Deputy Ellis: That board’s decision is final?

Ms Hayes: It is.

Deputy Doherty: It is stated in the report of the Comptroller and Auditor General that the Accounting Officer said he fully stood over the appointment of consultants and the value for money achieved from their work, which contributed significantly to the rejuvenation and renewal of Bord Fáilte. In that regard, what changes were recommended and what was implemented?

Ms Hayes: A wide range of recommendations were made, particularly with regard to the strategic focus of the future work of Bord Fáilte. Arising from those recommendations a number of organisational changes were made within Bord Fáilte to secure the focus. If the Deputy wishes I can go in detail through the implementation.

Deputy Doherty: Perhaps I can assist Ms Hayes in finding what I want. Were additional outside persons taken into Bord Fáilte to pursue this focus? On what terms were they brought in? Were people with particular expertise brought into certain areas of grand marketing? What are these areas and where are these people located? Are they on contracts?

Ms Hayes: The primary recommendation of A.D. Little is that Bord Fáilte should in future concentrate on its overseas international marketing role. It recommended that a number of personnel changes be made in pursuit of that aim. The first change to take place was the appointment of an international marketing director. Since then, a new marketing director for the European market has also been recruited by Bord Fáilte. Bord Fáilte are in the process of taking in a number of other people, mostly graduates, to fill more operational roles in the marketing area, with the focus on placement in overseas markets. Those are the major changes which have taken place in the personnel area on foot of A. D. Little.

Deputy Doherty: How many of these people have been recruited to date?

Ms Hayes: I do not have information from Bord Fáilte on the recruitment levels. Certainly the international marketing director has been in place since August, the european manager has been in since late December or early January and a small number at lower levels have also been recruited but the recruitment process is still ongoing.

Deputy Doherty: Do they have a staff of their own, separate and apart from Bord Fáilte, in accordance with their contract?

Ms Hayes: As far as I am aware the plan is to integrate them with existing Bord Fáilte staff.

Deputy Doherty: I see. So this is a wholly new departure and those persons who were covering this in some form or other previously are now incorporated in this new concept?

Ms Hayes: Yes.

Deputy Doherty: It is really a new head?

Ms Hayes: It is and the change is for all the organisation. The recruits are new blood to help the change process within the organisation.

Deputy Doherty: Has it meant a different budgetary requirement?

Ms Hayes: No, the B.1 grant-in-aid for this year, which is the source for payroll costs for Bord Fáilte, shows only a slight increase on last year, when one excludes the cost of the voluntary early retirement scheme, so there will not be any major budgetary implications because 70 people left the organisation under that scheme.

Deputy Doherty: With relation to the consultancy arrangements I accept what Ms Hayes has stated as a genuine account and an understandable oversight in the circumstances. I have a last question about my neck of the woods. Is there any update on what is happening at the Lough Ree Forest Park development? Is the hotel project ongoing or is a decision likely shortly? There was a suggestion that communication took place with the promoters and that £3.5 million to £4 million was on the table subject to certain criteria and conditions being met. Has that progressed any further?

Ms Hayes: As I explained, the implementation and administration of the operational programme in the case of a project such as that is dealt with by Bord Fáilte and the decisions are made by an independent management board. I do not have details of most of the projects that would be considered by the board.

Deputy Doherty: Does the proposed grant aid have to go to the Government for approval?

Ms Hayes: Not that I am aware of.

Deputy Doherty: It is dealt with by the management board.

Ms Hayes: It is dealt with by the independent management board.

Deputy Doherty: The amount of grant payable is not a matter for the Accounting Officer.

Ms Hayes: No.

Deputy B. O’Keeffe: As regards the awarding of the contract, is it a dangerous precedent to invite tenders and then, after realising that one of them is not the lowest, to renegotiate the tender price with the company who sent in the document? Would this give the other companies a reason to complain given that in normal circumstances a tender is sacrosanct? While I understand you are looking for the best consultancy group for the job, is this not a dangerous precedent to set given that every company is entitled to tender on an equal footing? Perhaps that could not be said of this particular tendering arrangement.

Ms Hayes: I am advised that what happened in this case was that the successful proposal was selected as the best overall proposal in the context of the criteria I listed earlier, of which cost was just one. However, the management team which was awarding the contract considered that the proposal was going unnecessarily beyond the terms of reference under which the Department had asked people to submit tenders. In this case the proposal was considered the best but far more comprehensive than was required by the terms of reference. On that basis the Department went back to the company and asked it to look again at the terms of reference. After looking at the terms of reference and revising and slimming down its proposals, we expected it to charge less. That is the background to the revision of the costs.

Deputy B. O’Keeffe: Did you receive complaints from the other companies?

Ms Hayes: Not that I am aware. I did not find anything on file.

Deputy B. O’Keeffe: Should that modus operandi be used by the Department for tendering?

Ms Hayes: It is exceptional for a good proposal to come in which is more comprehensive than the terms of reference require. It is an exceptional circumstance in this case.

Deputy B. O’Keeffe: Would it not have been more important for the tendering arrangement, when it was revised, to go before the Government Contract Committee given that such a major change had taken place?

Ms Hayes: In hindsight I would agree. As I said, it was a human omission. Ideally, it should have gone before the Government Contract Committee.

Deputy B. O’Keeffe: Would you agree there is a worrying trend in the Comptroller and Auditor General’s report in that comprehensive tendering had to be scaled back, the tender did not go before the contracts committee and there was inadequate accountability in terms of expenses until it was brought to the attention of the Comptroller and Auditor General? As an accounting officer, are you concerned that your Department acted in this way?

Ms. Hayes: We try to ensure at all times that all procedures are followed. In this case a few procedures were not followed and we will aim to ensure that does not happen again. However, we believe we got good value for money from this work and that it gave us a programme of work which was followed on immediately. We are happy with the results in terms of Bord Fáilte’s performance and the impact it is having on tourism performance.

Deputy B. O’Keeffe: I accept the report has been successful. However, if it had not been so successful we would have had serious questions to raise.

Ms Hayes: The emphasis was on the assessment criteria which were instrumental in getting such an appropriate report. The emphasis in the commissioning phase was good and the results we got are not unrelated to that emphasis. It is unfortunate that some of the procedures were omitted, but we now have a good solid body of work.

Deputy B. O’Keeffe: I am concerned about the restrictions placed on Irish firms who wish to tender in that they must produce C2 certs and comply with the tax code here.

Deputy Byrne: There is nothing wrong with that.

Deputy B. O’Keeffe: No, but are the same restrictions placed on international firms? For example, do we run a check to see if these firms comply with the tax regulations, that their tax affairs are up to date and that they are viable entities? I know of two cases where foreign firms built houses in this country and then the companies folded. If those had been Irish firms, they would have had to adhere to strict guidelines. Those same guidelines did not appear to be in place for international companies. Perhaps it would be more appropriate for the Comptroller and Auditor General to answer this query.

Mr. Purcell: I am not sure what the legal position is. I doubt if international tenders for Irish contracts have to satisfy the tax clearance procedures as a matter of law. I am aware that in this case there is a document which is prepared and signed on behalf of the Revenue Commissioners on the suitability of a non-resident tenderer carrying on or proposing to carry on business in the State. That was obtained in this case. It is not and it does not purport to be a legal document. However, it is an indication from the Revenue Commissioners that they are happy. I am not sure about the basis for their state of happiness.

Deputy B. O’Keeffe: It is a matter of principle that if we insist on public contracts going to people who have their tax affairs up to date, then we must do the same with international firms. Should we require a company’s home country to provide a document stating its compliance with tax regulations, etc.? It is extremely unfair that Irish firms must compete with foreign companies which do not have their tax affairs in order.

Mr. Bradshaw: It may help for the Deputy to be aware that under the terms of the EU directives concerning public procurement, where those directives apply, a firm can be excluded from a competition if its tax arrangements in its home country are not in order.

Deputy B. O’Keeffe: Do we adhere to that code?

Mr. Bradshaw: The answer is “yes” but, of course, finding information about the tax situations of firms in foreign countries can be a problem.

Deputy B. O’Keeffe: I would not be satisfied with that. If companies from abroad tender for work here and the requirement is in place by way of EU Directive, I do not think there is any excuse for any company or Department to move away from the terms of that Directive.

Chairman: May I make a suggestion? Would it be possible for such companies to submit a tax clearance certificate when tendering?

Mr. Bradshaw: This is really a matter for the Revenue Commissioners. I am not qualified to answer on that point. My understanding is that we could not impose tax obligations on firms from outside the State which were not applying to them in their home country, because they are entitled to operate under the general universal passport of their home State and fulfil their tax obligations in their home states.

Some States operate very strict taxation régimes with tax clearance certificates rather similar to the ones we use in Ireland but some do not do so. It is a matter of how they satisfy their home tax obligations. The Revenue Commissioners get information about the tax obligations of firms coming to Ireland in certain circumstances.

Chairman: If there is an EU Directive with regard to companies’ tax positions, would your Department carry out an assessment of any firm which would tender here?

Mr. Bradshaw: Under the terms of the Directive, the responsibility for satisfying the arrangements fall upon the contracting authority, whoever that might be, and they will be obliged to check whether or not that firm is in conformity with all of the obligations under the terms of the various Directives.

Deputy B. O’Keeffe: Would the Department of Finance be concerned that Irish firms could be at a disadvantage given that the same demands are not placed on a foreign firm competing for tenders with Irish firms?

Mr. Bradshaw: Yes. The Department would be very concerned generally if there was any evidence of discrimination against Irish firms because of a more rigorous tax régime. In fact, I think you would find that tax régimes for firms in States such as Belgium, for example, would be more rigorous than those which apply to Irish firms so there would not be a disadvantage there. How those régimes are enforced in those States may be an issue.

Deputy B. O’Keeffe: Can we contact the Revenue Commissioners for a report on this particular aspect of the matter because it is causing serious concern? Local Authorities are employing international firms and consultants for major development works and this will present itself as a difficulty in the future.

Mr. Bradshaw: We have no difficulty asking the Revenue to provide a note on that situation.

Chairman: Good.

Mr. O’Farrell: I want to make a further point that the fact that foreign firms are able to compete here is not by any means all one way traffic. Equally, Irish firms can and do compete very successfully under those arrangements in the EU market so it is a case of swings and roundabouts.

Chairman: The Committee notes Paragraph 48. Paragraph 49 of the Report of the Comptroller and Auditor General reads:

Subhead B.3. - Payment to Tourism Promotion and Development Fund (Grant-in-Aid)

United States Marketing Initiative (USMI)

49.In November 1993, the Government approved new tourism marketing proposals for the 1994 season including a special marketing campaign aimed at increasing tourism from the USA market. An additional £5m was provided in the 1994 Budget for a greatly expanded tourism promotional drive abroad as a special once-off marketing initiative under the direct control of the Minister for Tourism and Trade.

Following the Government approval, the Minister announced details of a special consumer advertising campaign aimed at the USA market to be co-funded by the Exchequer, the EU and the tourism industry at whose prompting the campaign was initiated.

The main objectives of the campaign were to create a greater awareness of Ireland as a desirable and affordable location, reverse the trend of decline in visitor traffic and loss of market share, secure more business at off-peak times, support expanded airline capacity for 1994 and beyond and to complement Bord Fáilte’s promotional campaign. Prior to the establishment of the initiative, Bord Fáilte was targeting growth of 5% in the holiday segment in 1994. USMI set a target of an additional 19% or a total growth in holiday visitors of 57,000.

To implement the initiative, a Management Committee representative of the Department, Bord Fáilte and Tourism interests (including Aer Lingus and CIE Tours) was established by the Minister with full executive authority and operational responsibility for the marketing campaign. The Management Committee appointed an Irish firm to administer and execute the campaign in the USA following the approval of the Government Contracts Committee.

In April 1994, the Department of Finance sanctioned expenditure of £8m from the subhead in 1994 viz. £2m to the USMI for tourism promotion and development in the USA and the balance of £6m to Bord Fáilte for various other promotions under which £5.8m was expended.

As outlined in Note 10 to the Appropriation Account, total expenditure under the initiative was £2.773m, funded by the State’s £2m, by tourism sector contributions of £570,000 and EU funds of £320,000. There was, therefore, a balance of £117,000 on hands at 31 December 1994.

The tourism sector contribution comprised £250,000 from Aer Lingus, £60,000 from SFADCo/Shannon Task Force, £30,000 from Aer Rianta, £20,000 from CIE Tours, £79,000 from American interests and £131,000 from Irish private tourism sources. Procedures were also to be put in place by the Management Committee to measure the effectiveness of the US campaign, to establish whether the targeted incremental increase under USMI in 1994 was met in addition to a Bord Fáilte anticipated increase of 5% and to ensure that USMI funding was both new and incremental to existing expenditure by contributing bodies.

In reply to my inquiries the Accounting Officer informed me that while the target growth rate was not achieved, nevertheless very significant additional growth was generated by the USMI:

(i)According to Bord Fáilte figures, US holiday visitors increased by 10% to 316,000 - an additional 30,000 holiday visitors on 1993;

(ii)While total US visitor traffic to Europe rose by approximately 8% in 1994, US visitor traffic to Ireland rose by 19% to a total of 449,000 - the highest number ever;

(iii)Ireland’s share of the US market rose from 4.8% in 1993 to 5.4% in 1994, reversing an eight year decline;

(iv)Research commissioned by USMI has shown that the proportion of would-be US holidaymakers to Europe selecting Ireland as a first-choice destination in 1994 increased significantly from 7% to 11%;

(v)136,000 enquiries were generated by the campaign and an Enquiry Conversion Study undertaken subsequently indicated that over 21% of respondents (28,650) to the USMI advertising actually travelled to Ireland in 1994.

As regards the question of whether all expenditure was incremental, he stated that written assurances had been received from all investors that their contribution to the USMI was additional to their normal US marketing budgets. Bord Fáilte had also provided the Management Committee with figures indicating that their US marketing budget for 1994 was higher than the 1993 figure.

Mr. Purcell: This paragraph is really for the information of the Committee. It outlines the financial aspects of a new approach to tourism promotion undertaken in 1994 to supplement the efforts of Bord Fáilte, particularly in the American market. A sum of £8 million was provided through a tourism development fund to finance the initiative. What was unusual was that management of the £2 million programme for the US was contracted out to a commercial firm rather than Bord Fáilte doing the work as heretofore, although Bord Fáilte retained responsibility in 1994 for administering the additional non-US promotional work and received over £5.8 million to this end. The US marketing initiative appears to have had some success in increasing holiday visitors. A 10 per cent increase was achieved but fell far short of its ambitious target of 19 per cent.

A similar approach was adopted in 1995 but on this occasion the full tourism promotion and development fund was managed by the commercial firm and its remit covered not only the US, but also the UK, France and Germany. I understand that there has been some change in the approach in 1996 and, no doubt, the Accounting Officer will be able to update the Committee on that score.

Chairman: While any increase in the number of holiday visitors are welcome, the USMI only achieved an increase in volume of just over half of its target, 30,000 compared with a target of 57,000. Why did the increase fall so far short of the target? Were you satisfied that the resources available were used in the most effective manner?

Ms. Hayes: We are satisfied that the resources were used quite effectively in this case. Unfortunately, the target was not achieved. Significant elements of the success that was achieved are well worth noting, such as the fact that we significantly increased our share of US business to Europe in that year and the growth of US traffic to Ireland was significantly ahead of overall growth figures to Europe. That was a major achievement. The most important element of this approach was the involvement of the industry in determining marketing strategy, particularly in tactical issues relating to tourism promotion.

The major change which has taken place in relation to the operation of this initiative in 1996 is that the independent contractor services are no longer required as Bord Fáilte is now taking over the administration of the initiative.

A major change also took place in 1995 in that, in addition to extending the scope of the initiative, it was decided to incorporate the Northern Ireland Tourist Board and to develop a number of projects being funded under the initiative on an all Ireland basis. This is an ongoing trend in wider tourism marketing.

Chairman: How much do you estimate the increase of 30,000 in tourist numbers generated for the economy? Has the number of holiday visits from the US continued to rise? Do you have figures for 1995? What target level has been set for 1996?

Ms Hayes: We have preliminary estimates for outturn for 1995. The CSO estimates will not be available until the end of the first quarter of this year but I have a summary of our preliminary estimates. I will give you a general outline.

Chairman: If you wish, you can send it out.

Ms Hayes: The figures of the indicative estimates for performance in 1995 show a quite buoyant return from the American market and evidence of a build-up in performance based on the initiative taken in 1994, a follow-on impact of that expenditure in 1994. The American market was by far our strongest performer, with visitor numbers expected to be up about 19 per cent in 1994 and revenue up about 17 per cent. They are preliminary figures.

Chairman: Have you a target set for 1996?

Ms Hayes: We will be looking again this year for double digit growth out of North America in the region of between 10 and 12 per cent. This is somewhat ahead of the average target set out in the operational programme but we feel the market is buoyant and can give us a return ahead of the six year target we have set for markets overall in the operational programme.

Chairman: How much do you estimate the 30,000 visitors have generated for the economy?

Ms Hayes: The revenue return?

Chairman: Yes.

Ms Hayes: The revenue overall from the market in North America was about £213 million in 1994. That is the total return from the North American market.

Chairman: What was the increase from the previous year?

Ms Hayes: The figure for the previous year was £182 million.

Chairman: An increase of £32 million for an expenditure of £2 million.

Deputy Broughan: Are you hopeful the visit of President Clinton will accelerate this process? Do you hope he will return this year and perhaps visit Kerry?

Ms Hayes: I hope he will come back this year or next year and generate the coverage we got in the course of his two day visit last year. I would not have any preference as to what part of the country he might visit but another visit with the quality and timing of the coverage in the media would give a good fillip to the Irish tourism effort.

Deputy Broughan: The Chairman probably hopes he will visit Kerry.

Chairman: Thank you Deputy; you anticipated my last question. You have been well briefed by the Tánaiste.

Deputy Broughan: In relation to the expenditure on this project under the Appropriation Account of £2.773 million, I have noted that the private sector made a woefully small contribution to a project led by the State. In this case the State paid £2.773 million, Aer Lingus gave £250,000, SFADCo £60,000, Aer Rianta £30,000, CIE £20,000 and £79,000 from American interests. There was only a minuscule contribution of £131,000 from the Irish private sector. Do you agree that is disappointing in view of the fact that the main beneficiaries would be the private sector - the various hotel groups etc.? Is there anything can be done to remedy that in the future?

Ms. Hayes: The campaign in 1994 was experimental and the contribution from the commercial sector overall was on target. Within that commercial contribution we would hope that, as we continue with the initiative, the industry across the board would find confidence in the initiative. There are results to encourage that kind of confidence and that will increase the investment in it. The trend is upward.

Deputy Broughan: Can you tell us about the management committee? Who was on that and how often did it meet? Had we any American representatives?

Ms Hayes: The members of the management committee were Mr. John Dully, Assistant Secretary in the Department of Tourism and Trade, who was the chair, Ms Eileen O’Mara Walsh of O’Mara Travel, Mr. Pat Dooley of Dooley Rent-a-Car, Mr. John Duffy, the Marketing Manager from Aer Lingus, Mr. Eamonn McKeon, the General Manager of the Great Southern Hotel group, Mr. Niall Millar, who is the Executive Vice President of Bord Fáilte in New York, Mr. Ciaran O’Leary, who was Managing Director of CIE Tours, International, Mr. Bernie Lynch, who is manager of the Aer Lingus office in New York and Mr. John Murray from European Travel Management, a US travel operator.

Deputy Broughan: Who selected or appointed them?

Ms Hayes: The appointment was made by the Minister.

Deputy Broughan: Can you tell us a little about the working of the committee?

Ms Hayes: The secretarial services in 1994 were provided to the management committee by officials from the Department. It met on a regular basis. The management contractor was appointed to administer the payments - it was an Irish firm called Tourism and Leisure. They were paid a management fee and expenses were agreed. It worked out quite efficiently in terms of administrative overhead in that the management cost was something under 2.5 per cent of the total expenditure from the fund on marketing.

Deputy B. O’Keeffe: With regard to the focus on increasing tourist numbers are you happy we have integrated the various entities into a common approach?

Ms Hayes: We are happy that most of the restructuring in Bord Fáilte is now on its way to completion. In terms of bringing wider elements into the process we see a lot of potential in the current work being done on the generation of a new brand image for Ireland as providing the kind of focal point that will bring various industry interests and their marketing spend together, co-ordinate and concentrate a focus and give us a clearer image in our overseas markets. That process is underway at the moment under the general management of a steering committee which has representatives from the tourist boards and the industry North and South. That will be the next step in giving us the focus recommended by A. D. Little.

Deputy B. O’Keeffe: Given the contribution from the private sector was so small, is there a lot of independent marketing and promotion taking place by the private sector itself? Have you any idea what overall amount of money is ploughed in by the private sector into its own direct marketing?

Ms Hayes: I could not give you a figure for independent private sector marketing although there are areas left totally to the private sector. For example, the private sector undertakes and funds most marketing activity in the domestic market and invests quite a considerable amount of its resources naturally in direct selling in niche markets it has identified for its own products and services. I could not give you a figure or an estimate of the amount.

Deputy B. O’Keeffe: While the contribution looks small I understand there is a significant amount of money being ploughed in by various private groups.

Ms Hayes: That is a useful point to make given the initiative is about incremental new advertising, particularly a leap into consumer advertising at a level at which we had not participated.

Deputy B. O’Keeffe: Those of us from the west would point out that when you market “Ireland Ltd.” the statistics show a 19 per cent increase for Dublin and the east coast as against a 3 to 5 per cent increase for the Cork and Kerry region and less again in the west.

Deputy Broughan: Dublin has a small base.

Deputy B. O’Keeffe: Cork and Kerry is not a small base. Given Dublin will be associated with Ireland and given this trend of an increase in the east coast will continue, will there be any counter balancing in the marketing focus to ensure the overseas markets of the west and south-west are not decimated?

Ms Hayes: The first point is that all regions have shared in the unprecedented levels of growth we have had over the last two seasons in particular. All regions have been growing, albeit at different rates. There has been a particularly marked tendency in the last year for that acceleration to concentrate on the east coast - not just Dublin but also the south east and east midlands. As long as we continue to grow the market, everybody grows, which is good news.

In terms of the overall brand we are selling and the influence which that has on decisions, my predecessor spoke at some length to the Committee last year on the point that the brand which Ireland sells at the moment is one of a green, spacious country. There is no bias in the brand towards Dublin or other urban areas. Dublin has achieved a unique success in the last 10 to 15 months in a market which we had not, hitherto, succeeded in penetrating as much as we should have - the short break city market. It is hard to predict whether the levels of growth in that market will continue but a pent-up demand which has existed in Britain over the last 25 years has begun to come through. The gratifying part about the growth in the last two years has been the overall growth in all regions and the fact that we have been able to open up a new market. This short break market is open to all cities. We still see our brand strength as the green, clean, environmental image which is the unique aspect of Ireland. Early research results on the branding project, which I mentioned, indicate that we will be reinforcing that image.

Deputy B. O’Keeffe: I received documentation from the Irish Hotels Federation and other agencies in the southern region and they are extremely concerned about the low increase in their area. There is also concern in the west of Ireland. This has to be focused on and we must ensure that some marketing emphasis is placed on the regions. It must be taken into account that the development of the regions is part of Government strategy.

We have regional and international airports. From speaking to various people in that business, I gather that there is an element of overlap and competition in the foreign market between our airports and airlines with a price war, inducements and under the counter payments. Do you have evidence of this, which is peculiar to the European market? How does your Department try to ensure a proper focus and that we widen the horizon for each of these airports? I have been told that in France and Germany, tour operators are getting inducements to fly into Shannon, Kerry, Waterford and Cork airports, which are undercutting each other in order to get tourists into their areas. If that is happening, it is a disastrous situation which must be ended.

Ms Hayes: As the Deputy is aware, the management of overall airport policy is a matter for the Department of Transport, Energy and Communications. In so far as Bord Fáilte is concerned, it concentrates its efforts each season - and any assistance which it applies - to incremental new business. It is acutely aware of displacement issues and of creating unnecessary competition between Irish suppliers in the market. It tries to co-ordinate the efforts of industry across the board to concentrate on new markets and generate additional new business. I am quite satisfied that that focus will be retained and that Bord Fáilte generally works to that focus.

Deputy N. O’Keeffe: The share of the US market rose from 4.8 per cent to 5.4 per cent in 1994. How is that measured and what are the actual figures? A great number of North American tourists travel to Scotland. Many of those would travel to the southern region of the Emerald Isle if there was adequate transport. What proposals does your Department have to overcome that?

Ms Hayes: On the question of transatlantic access to Ireland——

Deputy N. O’Keeffe: My point was that they travel to Scotland and would like to travel on to Ireland but there is a transport problem because there is no access from Scotland to the south of Ireland - Cork, Kerry, Tipperary and Waterford.

Ms Hayes: That issue was touched on last year when the Committee discussed this Vote. As the Accounting Officer then explained, readily available access obviously assists tourism development. The development and operation of access services is, at the end of the day, a commercial decision to be made by the service provider. Bord Fáilte constantly encourages operators to consider opening new services or to expand services to Ireland from a range of routes, including Scotland. However, these are ultimately decisions for the service provider. Quite an amount of use is made of the car ferry service in the case of the Scottish market where people are encouraged to extend their touring holiday of Scotland into Ireland. However, I accept that there is a difficulty in encouraging such tourists to travel to the southern region.

Deputy N. O’Keeffe: What about the first part of my question?

Chairman: Could you repeat the question?

Deputy N. O’Keeffe: Ireland’s share of the US market rose from 4.8 per cent in 1993 to 5.4 per cent in 1994. What are the actual figures and which method of measurement is used?

Ms Hayes: The figures are collated by the Central Statistics Office which collects them on the basis of frontier surveys of arrivals and departures. It carries out sample surveys on the country of origin of arrivals and departures and it collates that with detailed statistics of actual carryings supplied to it directly and on a confidential basis by the full range of carriers serving all airports and seaports in this country.

Deputy N. O’Keeffe: What are the actual numbers?

Ms Hayes: The actual numbers for 1994 in the case of the American market?

Deputy N. O’Keeffe: Yes. I think that is the North American market.

Ms Hayes: I gave figures earlier to the Chairman, before you arrived, in relation to the North American market. I think that the figures which I gave him are actually outturn figures for 1994. The outturn in numbers for 1993 for North America was 422,000. That figure rose to 494,000 in 1994 and our latest estimate for 1995 is 630,000. They are the highest per annum rates of increase we have achieved for quite some time.

Deputy N. O’Keeffe: Are the increased numbers being targeted at the east or south west coasts?

Ms Hayes: The evidence is that North Americans travel quite widely in Ireland - rather than concentrating on one region they generally travel to at least three regions. The southern and south west regions, in particular, are quite popular with North Americans.

Deputy N. O’Keeffe: If one wanted to see Ireland’s heritage and what is has to offer in the future, in terms of green image, one would not stay in Dublin but would travel to the south west, which has the most scenic and——

Deputy Broughan: Get on a bus.

Deputy N. O’Keeffe: If one wishes to see concrete, one visits Dublin. If one wishes to see Ireland, one travels to the southwest.

Ms Hayes: As is the case with all long-haul markets, when people travel that distance they try to travel, as much as possible, within the final destination. Americans tend to come on package tours which have quite a number of internal points. They come on coach tours or by car. That is their concentration and there is quite a lot of mobility within the country from that market.

Deputy N. O’Keeffe: That is not the view expressed by the southern people.

Deputy Byrne: Any journalist, national or international, should take up Deputy O’Keeffe’s comment that there is not much to seen in Dublin but concrete. That is quite an outrageous presentation of what Dublin has on offer to tourists. The proof of the pudding is in the eating because Dublin is the second or third most popular city in Europe for short weekend breaks. The tourists are speaking with their feet and their money. They have identified the beauty of Dublin, its attractions, magnificent value for money, the quality of accommodation, the quality of the——

Deputy Broughan: Conversation?

Deputy Byrne: —— hostelries, theatres, culture, arts, the Temple Bar, etc. It is by far the most attractive place in Ireland. If people wish to see rural Ireland they should travel to County Cork.

Before proceeding I apologise to Members and the Accounting Officer for my intermittent absences from these proceedings but, unfortunately, I had to attend in the House and at another Committee meeting.

It seems that quite an amount of money is being spent in targeting the North American market. The report of the Comptroller and Auditor General states that this request for a once-off marketing initiative targeting the US market would be co-funded by the Exchequer and the EU. The report also states that it was at the prompting of the tourism industry that the campaign was initiated. It is interesting that the tourism industry initiated a campaign suggesting that the State does certain things to target that market. The industry should put its money where its mouth is in this regard. I am disappointed to see that the figure of £131,000 is the totality of input from Irish private tourism sources. Is there any way that the Department of Tourism and Trade could extract a larger contribution from the Irish tourism industry which is benefiting substantially from the taxpayers’ contribution to marketing Ireland as a venue?

Ms Hayes: As I explained earlier in answer to the same question, the initiative in 1994 was continued in 1995 and will be maintained in 1996 on a different scale and with a wider scope. The trend is an upward one in the case of the contribution from that source. We will continue to maintain the pressure for an upward increase in that contribution. I accept the point. We would like to see more of a contribution and I think the industry is responding with more financial input to this initiative.

Deputy Byrne: Are there plans to continuously target the North American market or will it eventually fall into a more general marketing initiative?

Ms Hayes: The most unique aspect of the USMI, as it was called in 1994, was not really its concentration on the North American market but the involvement of industry with a more proactive role in the steering of marketing decisions and the allocation of funding to markets. That role is continuing and is being developed. In 1995 the initiative included the US, UK, French and German markets and there are further new markets being added in 1996.

Deputy Byrne: Deputy Broughan will probably agree that we are conscious that Dublin has achieved a remarkable turnaround in the past two to three years. Personally, I am very conscious of the tiny resources which Dublin Tourism had available to identify the city as a market. Does Ms Hayes share my enthusiasm for the tremendous work of Dublin Tourism? Was is not Dublin Tourism’s tireless effort that promoted the capital as the place to visit, as against Bord Fáilte using its financial resources to target Dublin as a final destination for tourists?

Ms Hayes: They have made a major contribution. However, they managed to obtain good co-operation from carriers and hoteliers in the city. They have been most wise in targeting the short citybreak market, in particular, and have made a major breakthrough in that market in the past two years. That has been a joint collaborative effort with the industry but Dublin Tourism has played a major role in focusing on that market and achieving results.

Deputy Byrne: Given that they have been so successful - I will not be sectarian, I am a member of the board of Dublin Tourism and should have laid my cards on the table - has the limit been reached? Is there scope for continued success in growth in the Dublin market? I am aware that there has been a shortage of hotels and a major programme to construct more has been initiated. How does Ms Hayes perceive Dublin’s development in the future?

Ms Hayes: It still has potential for further development. Plans are underway for hotel expansion and bedroom development across all accommodation sectors, which seems to indicate that people share this view. The short citybreak market is still open to us in a number of European markets as well as the British one. We will see more growth in Dublin but that will be in line with our overall projections written into the operational programme where we foresee continuous growth in the sector up to 1999. We are confident that we will achieve that growth.

Deputy Byrne: Obviously, the services sector must supply services to facilitate that growth. Does the services sector contain sufficient numbers of adequately trained personnel - catering and hotel staff, for example - to meet the increasing demand?

Ms Hayes: CERT is planning for annual increases in its training capacity up to 1999 to match the anticipated growth in demand. If anything, the major concern we may have is the level of retention of trained staff in the industry. This is something we have encouraged CERT to address. Recently it has established, in conjunction with the IHF and the Restaurants Association of Ireland, a committee to consider the problems of career development and structure within the industry. The purpose of this committee is to see if strategies can be worked out to encourage the retention and maintenance of skills and experience in the sector. That committee’s work will be very important to the industry.

Chairman: The Committee notes paragraph 49 of the Report of the Comptroller and Auditor General.

VOTE 35 - TOURISM AND TRADE

Ms. Hayes further examined.

Chairman: There was a saving of £354,000 under subhead B.7 due to the slow start-up of the business expansion scheme for tourism. Is this scheme now fully operational? How successful has it been?

Ms Hayes: The scheme is now operational. The management of it, from a Departmental point of view, is being co-ordinated within the Department of Enterprise and Employment in terms of efficiency of administration. The tourism sector has been availing of the scheme and has drawn down almost the maximum of its targeted allocation.

Chairman: It has been successful?

Ms Hayes: It has. The industry has discovered that the assistance to the cost of capital has been very important to its business decisions.

Chairman: From the analysis of expenditure by Bord Fáilte through the tourism promotion and development fund, I note that £1.254 million was expended on sporting/artistic promotions. What exactly was this spent on and what do you estimate was the income generated from this expenditure?

Ms Hayes: The money was expended on sponsorship of sporting events with the emphasis on encouraging people to come to Ireland to attend them and on sponsoring promotional work done by certain leading Irish sporting personalities, particularly those with a profile in important overseas markets. The idea was to use their success to raise the awareness of Ireland in these markets.

Chairman: What do you estimate was the income generated by this expenditure?

Ms Hayes: It is difficult to measure with any accuracy the awareness levels to which this fund contributed but we are satisfied that it brought notice to Ireland and to important events.

Chairman: This may be an unfair question but did leading personalities qualify for subventions from this fund, such as people attached to the Irish soccer team?

Ms Hayes: No, the soccer team did not receive any funds. The emphasis was on internationally successful Irish sporting personalities and using their profiles as a vehicle to generate awareness of Ireland. We targeted the most successful of Ireland’s international sporting world.

Chairman: How do you select people at international level?

Ms Hayes: It was generally in response to proposals which were submitted.

Chairman: Would it be possible to obtain in due course a list of the people who qualified?

Ms Hayes: Yes, we could give the Committee a breakdown of the allocation.

Deputy Broughan: Was Eddie Jordan one of those personalities?

Ms Hayes: The Jordan Grand Prix team, the sponsorship of the logo and associated promotional events at Grand Prix time were funded.

Deputy Broughan: I differ with my colleague from Dublin with regard to Dublin Tourism. When Dublin Tourism came under the responsibility of the City Council, there was generally a critical reaction to the chief executive and his staff in that we felt Dublin was not being sold strongly enough. Direct flights from Dublin to North America, the ending of violence in the North and the general buzz provided by Dublin culture are key factors and we felt that Dublin Tourism did not exploit them sufficiently. It was because of our urging that it began advertising Dublin for city breaks in the European media. I do not share the Deputy’s admiration for Dublin Tourism. The Dublin tourism business promoted itself almost on its own.

I differ fundamentally with Deputy O’Keeffe with regard to a brand image for Ireland. Is it not important that Irish cities and towns are part of that brand structure? We should not glibly assume that all we have to offer are the empty rolling hills of Donegal, Wicklow or Kerry, where, in reality, nobody lives. The Ireland where people live and make their livelihoods and culture is the Ireland we want people to visit. There seems to be strong appreciation of this abroad, particularly among our English visitors.

Ms Hayes: There certainly is and no small credit is due to the industry itself, particularly in Dublin, for generating the image aspect. With regard to the overall brand, Deputy O’Keeffe was concerned that there is a bias towards urban Ireland in the brand which is projected. I confirmed that there is no such bias. Initial research findings show that the overall image people expected from Ireland and to which they responded was that of a green and environmentally friendly country. Within that image things like our cultural heritage, which features prominently in our urban landscapes, our quality of life and our music and artistic vibrancy, which tends to concentrate in towns, will also come through and it is expected that urban centres will gain from this dimension. We are looking for a balanced image.

Deputy Broughan: Subheads B.1 and B.2 deal with grants under section 2 of the Tourist Traffic Act, 1961 and the Tourism Development Works. What percentage of total expenditure in this area do these grants represent?

Ms Hayes: It is only a small element of total capital expenditure on the tourism product because of the level of assistance from the EU through the operational programme.

Deputy Broughan: If we include EU money, which we in this Committee must do, what proportion of the total expenditure in 1994 did these grants represent? I am trying to get at the issue Deputy Byrne and I raised about the small amount of spending by some sections of the tourism industry.

Ms Hayes: Are you talking about expenditure under subhead B.2?

Deputy Broughan: Subheads B.1 and B.2.

Ms Hayes: Expenditure on these subheads amounted to approximately £23 million.

Deputy Broughan: How much capital improvement did we achieve in the tourism infrastructure as a result of spending this money?

Ms Hayes: I do not have the projected outturn figures for 1994 against which I could compare this spending but I will supply the Committee with a full break down of EU expenditure on capital development and a comparison of this with subheads B.1 and B.2 allocations.

Deputy Broughan: This Committee has always taken a great interest in export guarantee arrangements under the Insurance Act, 1953, which is covered by subhead D.1. What is the present running total of the amounts for which the State is liable with regard to insuring our trade?

Ms Hayes: Our current aggregate potential liability exposure is about £20 million.

Deputy Broughan: Last year we were told the running total was around £32 million.

Ms Hayes: That is the cumulative losses on the scheme to date since its initiation.

Deputy Broughan: What is this figure currently?

Ms Hayes: It is still about £32 million. This is the amount of the net losses.

Deputy Broughan: Does the figure of £20 million not represent net losses?

Ms Hayes: No. That figure represents our aggregate potential exposure on policies still in operation.

Deputy Broughan: Is there any possibility of getting back any of the £32 million?

Ms Hayes: We will continue to seek recovery of a large element of this. A significant element is due to political situations in two markets. This represents what we call pipe line debts, which are related to the non-availability of foreign currency in these markets for settlement purposes.

Deputy Broughan: Which countries are they?

Ms Hayes: The two countries are Iraq and Nigeria.

Deputy Broughan: Realistically, do we have any prospect of getting that money back?

Ms Hayes: It is very difficult to tell. In the Iraqi situation the UN sanctions still apply so they have great difficulties in getting foreign currency there. But who knows what the position will be in a few years time? Similarly with Nigeria. They are both oil exporting countries. It is very hard to read the future of what their particular circumstances may be even within the next six or seven years.

Deputy Broughan: In relation to D.1, why did we provide such a relatively small sum in the Estimate compared to the previous year, 1993, in relation to the claims paid out? We were told that in 1993 we paid out something like £11.5 million in relation to dodgy markets, when our exporters came back to us, yet in the 1994 Accounts we only paid out £6 million. How was our exposure halved in that year?

Ms Hayes: This does not represent exposure. It actually represents a charge to the Vote in respect of claims already paid out, the payment of which was funded from the central fund. So the figure is precise because it covers a historic, accurate cost in relation to claims paid out. The claim will depend on policy performance. The figure you have in subhead D.1 is essentially in relation to claims paid and funded from the central fund in the period 1 April 1992 to 31 March 1993. The payments were made to a suspense account and then the balancing charges were made on our Vote in the following year.

Deputy Broughan: How come, though, we set aside half of what we set aside in the previous two years?

Ms Hayes: Because of the level of claims the cost of settling claims was half what it had been in the previous year.

Deputy Broughan: And we knew that that was the case?

Ms Hayes: We knew, yes.

Deputy Broughan: Therefore, our total exposure at the moment is £20 million?

Ms Hayes: Yes. That is an exposure. At present we anticipate that we will not have any claims to pay on that exposure. But what we are talking about here under D.1 are where liabilities occurred, where claims arose and had to be paid.

Deputy Broughan: When we get 1995 Accounts what will the figure be?

Ms Hayes: It is much lower again. It is only about £100,000. We had a low level of claim in the following year.

Deputy Broughan: We know there are very deep political issues. Charges and counter charges are made, particularly in relation to Iraq, but do you feel we are getting out of this kind of nightmare?

Ms Hayes: We are now operating a much different scheme to the pre-1991 one. Following the restructuring of the scheme in 1991 a huge amount of cover that was previously on offer was opened to the private insurance market. We are now only offering cover on short term political risk and on medium term commercial and political risk. So it is a much restricted scheme and we anticipate a much lower level of claim settlement because of that.

Deputy Byrne: Where in these subheads can I find your contribution to Dublin Tourism?

Ms Hayes: The Department does not make a direct contribution to Dublin Tourism, as the Deputy may be aware. The funding for Dublin Tourism is managed and allocated by Bord Fáilte who fund their allocations to the RTOs from subhead B.1 which is the grant-in-aid towards current expenses of Bord Fáilte. The subventions to the RTO are included in those current expenses.

Deputy Byrne: Would you agree with me that Dublin Tourism, contrary to what my colleague has said, has been operating on a shoestring budget? Dublin Tourism did not have to wait for the Dublin City Council to suggest that it should target Ireland as a potential market for weekend breaks. Reports show that Local Authorities elsewhere have a far more important role to play in assisting and capitalising on the development potential of their city. City councils have an important role to play in the tourism industry. Would you agree that the petty, miserly contribution that Dublin City Council makes to Dublin Tourism is a snub and reflects the political ignorance of the City Council about the real benefits of a vibrant tourism industry? In conclusion, would you agree that the services Dublin Tourism ran - not least of which included servicing tourism at ports and in O’Connell Street - are worthy of a tremendous round of applause and acclamation by the City Council and by politicians representing the capital city? They have done a remarkably good job with a miserable budget.

Ms Hayes: The structure of the RTO budget has been changing over the years as a direct result of a policy decision taken in the late 1980s that RTOs should try and generate more of their resources from commercial activities and from industry contribution. As a result, nowadays Bord Fáilte’s subvention consists of only about 30 per cent of the total expenditure by the RTOs. The Local Authorities contribute about 11 per cent and the remainder comes from a mix of industry contributions and, mainly, commercial activities that the RTOs have become involved in. As a policy, there is no indication that there will be a change. The indications are that the RTOs responded very well to the challenge set out in the 1980s.

On Local Authority contributions, I am sure RTOs across the country would like to see everybody contributing more across the board - not just Bord Fáilte and the Local Authorities but industry also. We see the Local Authorities’ role and contribution to tourism as being much broader than just contributing to the RTOs. The role they have to play in the provision of infrastructure is absolutely essential to the provision of a quality tourism product. Only they can do it. In recent years the performance of Local Authorities in this area has been commendable.

Deputy Byrne: Would you agree that Dublin Tourism has had a very unfair press for years when it attempted to run the capital’s St. Patrick’s Day parade on such a shoestring? It was disingenuous of the City Council to demand something better when the money was so limited.

Deputy Broughan: There was a dearth of ideas as well.

Deputy Byrne: In fact, this year there will be a substantial improvement in the St. Patrick’s Day parade, not because Dublin Tourism has been taken out of the leading role of organising it but because a substantial increase in funding is being made available to run the parade in the capital city this year.

Ms Hayes: Even more important than the funding issue for St. Patrick’s Day is the acceptance that this is such an important event it cannot be left to the RTO to do it on their own. They need widespread involvement across the city not just with the tourism industry but with corporate interests also, applying more effort and commitment to deliver what is the first showpiece in the marketing of Ireland, particularly on the American market. Each year, it is the first window the American media offer the US holiday market on what they can expect in Ireland. The biggest contribution we will get from the latest initiative on St. Patrick’s Day is the recognition that there is a part for everybody to play. We expect a very constructive and creative contribution from the Committee in defining what the part is in each case.

Deputy Broughan: As you know, Secretary, we are all going to be in the parade. Perhaps you would like to join us?

Ms Hayes: Thanks for the invitation.

Deputy Broughan: It is going to be a Mardi Gras.

Deputy Byrne: Weather permitting. Under the subhead B.6, CERT gets a grant for training in excess of £2 million. Is the Exchequer funding that £2 million?

Ms Hayes: As you know, a 75 per cent contribution to the overall training costs of CERT comes from the ESF.

Deputy Byrne: I see that the ESF has made a contribution of over £8.25 million. This is the Exchequer expenditure?

Ms Hayes: This is the Exchequer and ESF contribution, the CERT budget is overleaf.

Deputy Byrne: If anything has helped Irish tourism, it has been the quality of our catering industry. Not so long ago, we had fish and chip shops and about half a dozen extremely exclusive and expensive restaurants and little in between. Those who initiated the move in getting CERT involved with what was then the City of Dublin VEC, now the Dublin Institute of Technology, have raised the level of quality. It may be true to say that Dublin city especially now has the most fantastic and extensive range of international cuisine that one could expect in any capital city. Is there a way of quantifying this most magnificent success in the catering area? Since it is an attractive element in our tourism package, how is it rated from a tourist satisfaction point of view?

Upgrading the quality of our restaurants and cafés etc. has been a remarkably successful targeting of a segment of the industry. Is there a way of quantifying how attractive that range of cuisine is to tourists?

Ms Hayes: The most visible way is through the independent guidebooks and ratings prepared on an international basis. For example, Egon Ronay awarded one of only ten two star ratings to a Dublin restaurant. Each year, Irish catering establishments and hotels feature more regularly and in greater numbers in these quality guides. That is the most tangible market expression and reaction to the kind and level of quality that we have. These series of independent assessments are conducted on an international basis.

Deputy Byrne: Given that I am lauding that fact, the questions of retaining a skilled base and the cheap labour/low income levels to the employees in the sector disturbs me. Has Bord Fáilte a policy on this? How do we address this marvellous international presentation of our cuisine and our ability to serve various palates with the fear of not retaining that skilled workforce trained by CERT as the market develops further? Ms Hayes mentioned opportunities within the industry, but one of the key incentives to stay in that sector is if the remuneration is good.

Ms Hayes: The perception in the industry is perhaps the hours and conditions are more important and critical to long-term career decisions than the level of remuneration. A set of issues that will be addressed by this Committee are mentioned, such as industry and CERT looking together at how this problem, which could become critical in the not too distant future if we continue to grow at these levels, can be addressed.

Some of the critical core set of issues they are examining are rostering, holidays and leave periods, which are practical issues. The feedback that both CERT and the industry are getting is that these conditional issues are more important in terms of career decisions than the level of remuneration. Naturally, remuneration levels have increased in response to the perceived demands for skilled labour. These levels are good; it is these conditions that are the source of concern. I hope this Committee will come up with some proposals.

Deputy Byrne: By skilled labour, do we mean chefs and management as against the waitressing staff?

Ms Hayes: We also want to retain skilled professional waiters. The sophistication of the industry has resulted in upskilling at almost every operative level. Front of house has become a skilled and sophisticated extension of the marketing arm. Food and beverage management and handling has become more demanding because of consumer expectations and hygiene requirements. There is upskilling across the board, to which CERT has responded well. However, there is a need for the industry to project the change in the nature of employment and of showing how challenging and more rewarding it now is. One will find the industry taking a more active role on the recruitment and career structuring sides in the industry in the next few years.

Deputy Byrne: Are CERT in the College of Catering and the DIT two institutions in one or is it CERT funding that goes to the DIT?

Ms Hayes: CERT uses facilities and various services provided by some colleges. I cannot tell the Deputy the exact arrangement with the DIT, but CERT is a limited company set up under the Tourist Traffic Acts and is separate from DIT and the vocational education structure. They would naturally work closely with the Department of Education and in the interests of efficiency, would use various facilities and services offered by other educational establishments, some of which it pays for and others with which it has other remunerative arrangements.

Deputy Byrne: This is a joint venture type of relationship?

Ms Hayes: Yes

Chairman: I propose we note Vote 35.

The witness withdrew.

THE COMMITTEE ADJOURNED.

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 1 Feabhra 1996

Thursday 1 February 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. Colm Breslin and Mr. Stephen O’Neill, Department of Finance, in attendance.

APPROPRIATION ACCOUNTS 1994

JUSTICE GROUP OF VOTES

Mr. Tim Dalton, (Secretary, Deptartment of Justice) called and examined.

PUBLIC SESSION

Chairman: Next week’s meeting will be at 10.30 a.m. on Friday, 9 February. I welcome Mr. Dalton and ask him to introduce his officials.

Mr. Dalton: Michael Mellett is the Assistant Secretary with responsibility for prisons, Tommy Maguire is also in the prisons division and Michael Madden is the Finance Officer.

VOTE 21 - PRISONS

Mr. Tim Dalton, Secretary, Department of Justice, called and examined.

Chairman: Paragraph 30 of the report of the Comptroller and Auditor General reads:

Cash Discrepancies at Shelton Abbey

30.Shelton Abbey in County Wicklow was established in 1972 as an open prison with the intention that it would cater in the main for offenders who had committed less serious offences or who were approaching the end of their sentences. It has the capacity to accommodate up to 60 offenders at any given time. As in the case of other prisons, it is funded by way of an advance of funds (an imprest) from the Department of Justice, out of which day to day expenditure is met.

Returns of expenditure incurred together with details of cash and bank balances are submitted on a monthly basis to the Finance Division of the Department of Justice where they are checked for correctness.

In January 1994 during the course of preparation of the monthly returns to the Department a discrepancy in the accounts was noted at the prison and the governor informed the Department of the problem.

The nature of the discrepancy was that a substantial amount of money could not be accounted for in that the monetary value of the discrepancy was not reflected in the bank balance or as cash on hands nor was there any evidence that it had been expended for bona fide prison purposes.

An investigation conducted by the Department’s Internal Audit Unit established that the amount which could not be satisfactorily accounted for was £8,595 and the Garda Fraud Squad was called in. The investigation was also critical of the accounting system in operation at the prison and identified a number of weaknesses.

In September 1994, an audit examination by my staff at Shelton Abbey confirmed a number of weaknesses in the accounting system and an inadequate system of internal control. Among the findings were the failure to maintain proper books and records and a lack of any evidence to suggest that cash was regularly checked and reconciled to the accounting records. The weaknesses identified were also in direct contravention of the Department of Justice’s own procedural requirements.

As part of the audit, returns made by the prison to the Finance Division were inspected and this revealed that balances of cash on hands as reported by the prison to the Finance Division showed abnormally large increases (from £1,391 to £13,200) over a period of six months and that these increased balances had not been monitored or queried by the Finance Division.

In reply to my enquiry the Accounting Officer stated that the problem at Shelton Abbey arose as a result of a lack of adequate arrangements being in place for the checking of work performed by staff to whom responsibility had been delegated. He indicated that in light of the governor’s overall responsibilities, it was not always possible for him to carry out sufficient checks personally, but that in future sufficient checking to ensure that the accounts were being operated properly would be carried out by either a deputy or assistant governor and that instructions had been issued to this effect.

With regard to the adequacy of procedures in place in the Department’s Finance Division the Accounting Officer stated that due to the large volume of work being processed on a daily basis, it was not possible to perform comprehensive checks on imprest accounts and that this view had been supported by a management survey report carried out by the Department of Finance in 1991 which recommended checks of a compliance and regulatory nature rather than substantive tests. He indicated that cash balances were essentially a local issue and that staff in Finance Division would not be privy to the underlying reasons for fluctuations in balances.

He went on to state that the need for a change of approach to checking had been recognised and that certain new procedures had been put in place, including amendments to standard forms to provide more information to Finance Division

staff, an additional level of certification prior to submission to the governor and increased control over advances of funds to prisons. In addition, training will be provided for relevant staff.

On the question of the Department’s financial regulations the Accounting Officer indicated that, although they are obsolete in many respects, in his view the provisions, as far as they relate to cash management, provide for reasonable control if correctly operated and, if adhered to, constitute best practice.

The Accounting Officer added that he had received the Garda Fraud Squad report which concluded that it was difficult to establish what happened to the missing funds and whether or not a crime had been committed. However, a disciplinary report had been submitted to the Minister and appropriate action had been taken.

Mr. Purcell: Paragraph 30 draws attention to the fact that £8,595 went missing from the accounts of an open prison at Shelton Abbey at some time prior to January 1994. In retrospect, it is easy to see why this might have happened as both the Department’s internal audit unit and my own staff found that the prescribed accounting procedures were not being followed at the prison. The most basic control when dealing with cash is to regularly check the amount in the cash box with the book balance. However, this was not done at the prison. For this reason, the discrepancy was not detected when it should have been. I was also concerned that large cash balances were carried forward, a fact which was not noticed and queried by the Finance Division of the Department when the monthly accounts were sent in for appraisal. If this had been done it would have set the alarm bells ringing at an earlier stage.

The Committee will note from the paragraph that the necessary corrective action has been taken by the Accounting Officer, at the prison and in the Finance Division. This should help to ensure that there is no recurrence of the slackness which facilitated the apparent misappropriation. I say apparent because the Garda Fraud Squad’s investigation did not establish what happened to the missing funds or whether a crime had been committed. We are no wiser on that score. The amount is quite modest but the point of principle was important. It is for that reason that I included it in my report.

Chairman: Why did the Department not seek additional information and exert greater control over prisons with regard to funding and expenditure? What do the new procedures involve and will the additional information collected by the Finance Division prevent a recurrence?

Mr. Dalton: The person who brought this matter to our attention was the individual responsible for handling the cash. It happened to coincide with the introduction of new procedures by the Department. However, the individual concerned actually brought it to account. I do not wish to draw conclusions as to why he did so at that time but the Committee may do so.

What happens is that imprests are issued by the Department to the prisons for the daily operation of those prisons. The money would be used for items such as local purchases. The amount sent in the imprest should be matched by receipted expenditure and the cash in the local bank account. The work is usually handled by a Clerk I or Clerk II. However, what occurred was that the Governor was sending up the records to the Department each month, once the figures totted up on the record. The bank balance was not checked to ensure that the money, which was allegedly in the bank, was actually there. In this case it was not there. The accounts being sent to the Department did not match the reality to the extent of £7,000 to £8,000.

A number of things were not noticed. For example, the imprests being demanded by the prison were much higher than they should have been. The actual reason for this was that they had no cash locally despite what the records showed. The Department was not checking the imprests at that time. My understanding is that it was not deemed appropriate that the Department should do so. The Department of Finance some years ago had recommended that the checking of imprests was a local matter and it was not appropriate for the Department to check such things.

The factors blamed for the emergence of this problem - which is what the Committee is interested in uncovering - is that the officer dealing with the money was not supervised in his work. That is the basic problem. The Governor did not check the cash on hands and the abnormally high increase in the local cash balance was not checked by the Finance Division. We did all that we could do at the time and called in the Fraud Squad who could not establish that the missing money had been misappropriated.

In relation to the issuing of new instructions, the handling of cash will continue to rest with the same officer grades - Clerk I or Clerk II. The Department’s Finance Division is alerted as a matter of course to significant changes in the cash balances. Methods have been implemented to ensure regular imprest returns and these are monitored to ensure efficiency and cost effectiveness. Imprests advanced by the Department to the prisons cannot be increased without the specific approval of the Department’s Prisons Division which has introduced a separate and independent check. Forms have been revised to emphasise relevant regulations and procedures. The Department’s professional accountant has provided training for the staff of the Finance Division on the new procedures and will provide training for Governor grades and clerks with responsibility for cash accounts at a seminar to be held in the near future. A number of controls have, therefore, been introduced.

With regard to what befell the individual concerned, disciplinary action - which is the subject of appeal at present - was taken. In other words, although a prosecution did not take place, we proceeded by means of disciplinary measures.

Deputy B. O’Keeffe: Is this not a sorry saga, to the extent that the Comptroller and Auditor General’s report states that the returns of expenditure were submitted on a monthly basis, but we then discover that the discrepancy was brought to the notice of the Department, by an official, while an audit was underway? Is it fair to say that a total breakdown occurred in the control system? If such a breakdown was reflected throughout the prison system, it could have extremely serious consequences. How did it happen that the Department exercised such little control in terms of the check, particularly in relation to cash on hands? Why was the control system so loose? Did the same situation pertain at other prisons?

Mr. Dalton: It was loose, there is no point in pretending that it was not. The same system applied to other prisons. Essentially what happened was that we placed over-reliance on local managers to ensure that records were correct. It was deemed inefficient for the Department to proceed to check local cash balances. There was a report which indicated that it was not an efficient exercise to perform. The result was that the system was abused. We placed over-reliance on local managers to check that the cash was actually in the bank. We misplaced our trust. All I can say is that we have corrected the problem. However, I acknowledge that the system was loose. There is no point in defending it.

Deputy B. O’Keeffe: A fair amount of responsibility obviously rests with prison governors. Surely it is fundamental, in any accounting procedure involving cash in hands, to cross-check the money in the account against the book balance? Mr. Dalton stated that the charges of the requests for imprests were more frequent and the amount of money involved became quite sizeable. Was there any monitor to suggest that the demands being made on the Department, by the prison involved, were quite abnormal?

Mr. Dalton: No. It was nobody’s job to notice whether the amount on hands locally - I believe it was £13,000 - was above what it should have been. They should not have been seeking money if they had £13,000 in the local bank account. Nobody noticed this fact. It is unsatisfactory. We are fortunate that it happened in only one case.

Deputy B. O’Keeffe: Does that suggest that Mr. Dalton examined the accounts of each of the other prisons to ensure that this activity was not the norm throughout the system?

Mr. Dalton: That is correct. The internal audit unit have studied the matter and checked that everything is in order.

Deputy B. O’Keeffe: Mr. Dalton referred to the number of prisoners in the prison involved. Was it in the region of 65?

Chairman: 60.

Deputy B. O’Keeffe: What was the ratio of prison warders to prisoners in that prison?

Chairman: Mr. Dalton, before you proceed, I welcome a research group from countries in central and eastern Europe who have just arrived. They are involved with the University of Limerick and they are in Ireland to study public management in this country at local and central government level. On behalf of the Committee and my own behalf I wish them well and hope they will enjoy their stay in this country.

Mr. Dalton: There are 24 prison officers. The figure I have here is for 45 prisoners. That is a ratio of 53:100. That does not mean there are 24 officers there all the time. That is for 24 hour attendance, every day of the year. At any one time the ratio of prison officers to prisoners would be considerably lower. During the day it might be 10 officers on duty. The overall figure makes it look as though the officers are practically falling over each other but that is not the case.

Deputy B. O’Keeffe: Chairman, do you propose to take the general Prisons Vote with this item?

Chairman: It will be dealt with separately.

Deputy B. O’Keeffe: All right. In regard to the appeals procedure that is going on at the moment, Mr. Dalton, what disciplinary action was taken by your Department relative to this matter?

Mr. Dalton: I do not want to imply, by saying what disciplinary penalty was imposed, that this man is guilty. He was reduced in rank. He has appealed this decision and in fairness to him I want to emphasise that.

Deputy B. O’Keeffe: Was the reduction significant?

Mr. Dalton: He was reduced one grade. That was in a situation where we could not prove that he had misappropriated anything. The best we could establish was that his handling of cash had been careless.

Deputy B. O’Keeffe: One final question. It is now phantom money in that even the Fraud Squad cannot find out where this money is. Are there any accounts, good, bad or indifferent, to suggest how this money could have been misplaced?

Mr. Dalton: The Fraud Squad would have looked at everything. I am sure they would have checked this man’s financial situation, they would have checked everything that was relevant to establish whether there had been a crime and they came up with nothing. The amount of money is not such that one could easily establish that someone was enjoying a new lifestyle as a result of it. We just do not know where the money went to.

Deputy B. O’Keeffe: Were there any other people who would have direct access to the petty cash within that prison other than the official who was downgraded?

Mr. Dalton: My understanding is that he was the person dealing with it on an ongoing basis and unfortunately the Governor was not checking his work.

Deputy Byrne: I welcome Mr. Dalton. I know from the report that the prison was opened in 1972 and in January of 1994 the discrepancy in the accounts was discovered. That is 22 years. I presume that the staff of the Comptroller and Auditor General, the departmental staff and possibly the Garda Fraud Squad discovered many inadequate procedures in carrying out their investigations into this discrepancy. Could you explain to me how this very unprofessional handling of cash could have gone on for 22 years?

Mr. Dalton: One of the problems here is that we did not check the actual imprest. Nobody raised a query at departmental level about the fact that there was more in the local bank account than appeared to be required, against a situation where the prison was still looking for money. I understand that at one stage we did carry out that check but it was deemed an inefficient practice. Due to the volume of work being handled in the Accounts Branch, this responsibility was to be left with the local manager. Unfortunately, the local manager did not take on that responsibility.

I have said already that it was fortunate that the vast majority of people who were handling cash in prisons over the years were extremely honest people and that matters went wrong in just one situation. All the checks we have carried out indicate that this was a unique situation where one person, who did not do his job properly, caused a loss to public funds. I suspect that all over the public sector and in the private sector as well - the Comptroller and Auditor General would be in a much better position to comment on this than I am - there are systems that depend almost completely on honesty. If you are depending on somebody who does not perform his duties properly, no matter what system you have in place losses can arise. I am not putting that forward as an excuse for the inadequate systems here, but I cannot sit here and say that there are no other systems in my own Department, in other Departments and in the private sector that are not open to abuse.

All I can say is that this system failed once, to the best of our knowledge, to a fairly limited extent and we have amended it. That is the advantage of having a Comptroller and Auditor General and having an internal audit unit, which we have had since 1993. This unit is picking up many inadequate systems that will not come to your attention because they are being found and dealt with.

Deputy Byrne: I wish to correct myself. I said 22 years, my maths is slightly off, it is actually 24 years since the prison was opened.

I agree with Mr. Dalton that in most workplaces employers place great faith and trust in their employees. In this case, it is unfair to suggest that the problem was 100 per cent the fault of an untrustworthy employee, particularly in the light of reports that “the investigation was also critical of the accounting system in operation at the prison and identified a number of weaknesses”. That implies not that there is some individual guilty person there but makes a very strong statement that the in-house management structure was inadequate. You as Accounting Officer, responded to the Comptroller and Auditor General’s report by saying that “this problem arose as a result of a lack of adequate arrangements being in place for the checking of work performed by staff”. These two managerial condemnations say that the running of Shelton Abbey was not up to scratch. The report says further that some of these accounting procedures were the difficulty, that some were in direct contravention of the Department of Justice’s procedural requirements.

An individual has, in some way we have not figured out, done a Danny with over £8,500. Your defence is weak in the sense that you say you are relying on human honesty. To some degree we do but by the same token we require in-house structures that will limit opportunities for fraud of this nature. Would you agree with that?

Mr. Dalton: I would. I would not deny it for a moment. I just want to clear up one thing. I have said it once or twice but I want to say it again: I am not saying that anybody was guilty of anything. The gardaí have found nobody guilty of anything. This person who has appealed is absolutely entitled to have his appeal considered in a fair and objective way. If we do not consider it in a fair and objective way then the appeal is lost from the State’s point of view.

It appears that the way in which an individual carried out his duties left a share to be desired. There is no denying that the absence of adequate systems - I acknowledge that quite openly - was a factor. If you have a combination of inadequate systems and carelessness the result is loss.

Mr. Purcell: I might be able to help. The Deputy said that this might have been going on for 22 years. There is evidence of a headquarters’ check by the Department of Justice accounting staff in September 1992. That check included counting the cash in the cash box. It is more than likely that it had only been going on - if you want to put it that way - for a year prior to when it was discovered or brought to light.

Deputy Byrne: I am confused that the Department discovered something - i.e. the loss of £8,500 - that it deemed serious enough to bring in the Garda Fraud Squad to investigate and serious enough to have deranked an official in the prison service, yet the Garda Fraud Squad in its findings cannot say whether or not a crime has been committed. Mr Dalton told us earlier that it might not have been misappropriated. What is he telling the Committee? If it was not misappropriated how could the money just disappear? Why has someone been downgraded? What are you saying became of the money if it has not been stolen, misappropriated or overspent? The Fraud Squad was brought in, someone has been demoted and they are saying they do not know whether a crime has been committed or not. Where are you implying the money disappeared to? Can I ask you where you think the money has gone?

Mr. Dalton: The people who actually investigated it were not able to say that the money had been misappropriated.

Deputy Byrne: It is missing money, isn’t it? Are you confirming that it is missing?

Mr. Dalton: It is missing. They have not been able to say how it went missing. They spent some time investigating it. They are professional investigators. They could not say that money had been stolen. Given that an identifiable individual is involved, it would probably be a bridge too far for me to second guess the investigation and to say that I know it was stolen. I can have my views and suspicions as to where it is, as everybody here can, but we have a situation where there is an identifiable individual, there is a disciplinary procedure, he is entitled to his good name, and I am not entitled to speculate as to whether the loss in this case was the result of dishonesty.

Deputy Byrne: The Garda Fraud Squad regularly comes into our deliberations here through various votes. Having come on this Committee, to my knowledge I have never been informed that they have been successful in locating and charging people. In many cases, it seems that their investigations have been going on for an interminable length of time. We are waiting with baited breath for the outcome of a number of Garda Fraud Squad cases. Given that you are the Accounting Officer, could you reassure this Committee that you have absolute confidence in the ability of the Garda Fraud Squad to tackle fraudulent crime, particularly white collar crime? We are living in a hi-tech society, with huge technological data bases, banking and business transactions. Having debated the involvement of the Garda Fraud Squad at this Committee, it is my view that maybe it is not up to the task that has been given to it. But you assured this Committee that you have absolute confidence in the ability and trained personnel in the Garda Fraud Squad, that it has sufficient staffing and training to confront hi-tech white collar crime in the modern world?

Mr. Dalton: There are two legs to the question. First, as regards calling in the Garda Fraud Squad, there is absolutely no choice for somebody in my situation - and I would suggest that the same is true for other Accounting Officers - where there appears to be a crime. On the face of it there appeared to be a crime because there was no logical explanation for the missing money, as you said yourself. It was absolutely incumbent on us to call in the Garda Fraud Squad even though, as you have said yourself, the chances of actually finding that a crime had been committed were quite slim. However, the obligation is there. I would rightly be criticised by you if I came in here and said I had not bothered to call in the Fraud Squad.

Second, you asked me whether the Fraud Squad was up to its task. A complete revamp of the squad has taken place. There is a new National Bureau of Fraud Investigation. There was a report by a Committee on the subject and we are now in the process of appointing accountants for the squad as recommended by the Committee. There is a recognition that the Fraud Squad needs more resources, expertise and technology. We would not be making these changes if the Fraud Squad was capable of handling all modern forms of crime. So the answer is that they do need to be beefed up and it is being done.

Deputy Doherty: I suppose if I wanted to be facetious, Mr. Dalton, I could ask whether you searched the premises properly. It seems that the £8,500 could be anywhere. Will there be any attempt - or is it worthy of an attempt - to try and have this money restored to the Department by any particular individual?

Mr. Dalton: The problem is trying to find what individual we would ask to restore it because we have not been able to say that any individual took it in the first place.

Deputy Doherty: The accounting or bookkeeping procedures suggest it was likely to have disappeared because of the weaknesses that were in the system.

Mr. Dalton: Yes it did. But the reduction in rank of one individual, even though it does not imply that he misappropriated anything - and I am saying this for the fourth time now because I am conscious of what might happen if I do not say it - is, in itself, a form of restoration to the system.

Deputy Doherty: To be honest, I feel he may have been dealt with a little harshly in the circumstances because there is a grey area. It is not good enough that somebody necessarily has to be seen to pay for something that has not been established as being his responsibility. There were others there, and - through no fault or wrong designs of their own - there was not a very successful management of the operation. I cannot say that any one individual is responsible. These things can happen but I take it the matter has presented an opportunity to ensure their avoidance as far as possible.

Mr. Dalton: That is correct. The overall policy in the Public Service, not just in relation to prisons, where money goes missing, is quite harsh. People have been dismissed over very small amounts of money.

Deputy Doherty: But you would know where it went.

Mr. Dalton: That is where they co-operate. I want to say again, for the fifth time now, that in this case we are not saying that this man took the money. The disciplinary action was the result of inadequate performance of duty, as it was considered at the time, rather than an implication that he took money. You can lose money by being careless about the way you do your books. He has an appeal and, as you say, I am sure he will make the case during the appeal that, in the all the circumstances, it was a very harsh course to demote him when the system he was working with was inadequate. That is probably the case he will make and he should be allowed to make it.

Deputy Doherty: That is a fair assessment. The inadequacy, obviously, was not his alone.

Mr. Dalton: It was not his alone.

Deputy Doherty: I can understand that these things can happen. It did happen and the amount is small anyway.

Mr. Dalton: It is.

Deputy Doherty: That does not make it any less significant but it is small and he did report it himself.

Mr. Dalton: Yes, he did.

Deputy Finucane: This relates to a question that Deputy Byrne mentioned. You stated that the Garda Fraud Squad was being beefed up. That is desirable. We recently reviewed the Department of the Environment and it transpired that a payment of £25,000 went astray between the Department of the Environment in Ballina and the Department of Finance in Dublin. It ended up in a credit union in Cork. It was duly cashed and paid, and inadequacies were exposed at that meeting regarding that situation. It is surprising that when we queried what follow up action had been taken, we were told the Fraud Squad was investigating. In this case, its investigation was ongoing in excess of 12 months. Perhaps Mr. Dalton will explain why such an investigation was so convoluted that it took the Garda Fraud Squad over 12 months to come up with findings. Is the objective of the beefing up of the Garda Fraud Squad - Mr. Dalton mentioned accountants - to ensure a quicker follow up with regard to fraudulent activities? What is the average length of Garda Fraud Squad investigations? Is the average 18 months or a year? If so, is the objective of beefing up the squad to ensure investigations are completed in a shorter timescale?

Mr. Dalton: I do not have a figure for the average time taken to conduct investigations. We could probably get one but it would take some time to get it. If the Committee wants a figure I will try to get one.

The purpose of it is many fold. First, it is to speed up investigations, but it is mainly to get the relevant expertise into the investigative process. Fraud squads all over the world have problems investigating fraud. The Serious Fraud Office in London, which was specially set up to investigate fraud, has had, according to recent media reports, considerable difficulty in dealing with what appears to have been one of the major frauds of the century. It has much expertise, including accountants. It is a highly beefed up organisation. It has been conducting that investigation for some time and yet the Courts knocked the results.

Unless one goes to court with absolutely everything tied down - it takes time to tie down everything - the case will be thrown out. One can spend years working on a fraud case. To the layman’s eye, everything may appear to be sewn up, but when one goes to court the millions spent on the investigative process can go down the drain because one has not met the legal requirements. That is the core problem and what takes the Garda time in all investigations. Unless the evidence is watertight the lawyers will play ducks and drakes with it and the prosecution will not be secured at the end of it all. The purpose of beefing up the squad is to bring in expertise, extra numbers, to try to make it more speedy and achieve better results.

Deputy Finucane: With regard to Shelton Abbey, which is an open prison, a certain amount of attention has been focused on Loughan House and Blacklion in recent times in terms of people taking advantage of the fact that it is an open prison. People may be taking unlisted leave. What is the success of Shelton Abbey in that regard? Does it suffer from the same problems as Loughan House and Blacklion?

Mr. Dalton: I understand that it does not. Overall, the number of people who abscond from open institutions is about 6 to 8 per cent of the total. The media coverage sometimes gives the impression that they are running out of it as if it were a hotel. That is not true. The record in Shelton is better. The rate of abscondings depends on the type of prisoner being detained. Shelton prisoners are older and some are long-termers who are glad to be in an open institution and serve out their time there.

There is also a general problem about Loughan, especially with Dublin prisoners. I hope people outside the pale are not offended, but it is regarded as the back of beyond. There have been situations where people walked out of Loughan House and knocked on the door of Mountjoy to get back in because it is seen as a respectable penal institution compared to a “culchie” institution like Loughan. That does not seem to apply to the same extent in the case of Shelton which is located in Wicklow. Dublin prisoners see it as being nearer to civilisation and therefore more acceptable.

Deputy Finucane: People in Blacklion might dispute that.

Chairman: I take it the Committee notes the paragraph and hopes the irregularities, as highlighted by the Comptroller and Auditor General, will not reoccur. Is that agreed? AGREED.

VOTE 19 - JUSTICE

Mr. Dalton further examined.

Deputy B. O’Keeffe: I refer Mr. Dalton to incidental expenses. The figure in the Vote is £821,000 in 1994, which is a substantial sum of money. How was that made up?

Mr. Dalton: The major element is under the miscellaneous heading and I will return to that aspect. The cost of forensic science equipment that year was quite high, £266,000. That relates to the purchase of DNA equipment. The figure for staff training and development was £75,000. A sum of £123,000 relates to cleaning services and laundry. The miscellaneous heading covers uniforms, publications and so on. This breaks down as follows: uniforms, approximately £2,000; newspapers and periodicals, £91,000; and advertising, £9,329. There is a further miscellaneous heading of £221,000 for which I do not have a further breakdown. However, I can give a total breakdown later if the Committee wishes to have it.

Deputy B. O’Keeffe: Perhaps the Committee could get a total breakdown.

Chairman: What was the figure for newspapers and periodicals?

Mr. Dalton: £91,000.

Deputy B. O’Keeffe: What does the laundry figure of £123,000 entail? It is quite staggering.

Mr. Dalton: It relates to laundry and cleaning. Some of the prisons have laundry services themselves and they do their own laundry. Other prisons do not have such services. It also involves cleaning of premises. The Department of Justice has a very large number of premises around the country. I can give the Deputy a breakdown of the cleaning and laundry costs.

Deputy B. O’Keeffe: The cost of legal aid for criminal matters was over £7 million. How many cases were granted free legal aid? What is the average payment and the largest amount paid in respect of a single case?

Mr. Dalton: I do not have the number of cases but I can tell the Deputy the highest payments. The highest payment was £497,577 to Michael Staines & Company. I do not have to explain that the payment was to a company which may have several solicitors working for it. That was the type of money involved.

The next highest payments were £337,000 to Dermot Morris; £305,000 to Terence Lyons; £178,634 to Terence Hanahoe; and £169,00 to Garrett Sheehan. The highest payments to barristers were: £99,980 to Barry White; £76,775 to Patrick Marrinan; £71,550 to Patrick MacEntee; £57,000 to Anthony Salmon; and almost £52,000 to Brendan Grogan.

I do not have a figure for the average payment but my recollection is that the average payment is not that high. Many barristers and solicitors earn very little from the scheme. It tends to be skewed towards a few firms. This relates partly to the fact that offenders nominate certain people on the basis of their track records.

Deputy B. O’Keeffe: Suffice it to say that it makes for a nice sideline.

Mr. Dalton: It is not bad.

Deputy B. O’Keeffe: Why has the cost escalated over the last number of years? The figure for 1994 is £7 million. What was the figure in previous years?

Mr. Dalton: It has escalated very considerably mainly as result of an industrial dispute and a settlement that was made in 1992. In 1993 the figure was £5,989,000. In 1992 the figure was considerably less, £3,869,000. The figure for 1991 was £3,152,000. The figures before that are around that level but slowly creeping up. The real change came from 1992 onwards. There was a 28 per cent increase in the number of District Court claims received between 1992 and 1994. That was a factor in itself. A 38 per cent increase in claims was experienced in the Circuit Court and higher courts, but the major cost increasing factor was the 72 per cent average increase in the fees payable to solicitors in respect of District Court cases in 1992. Incidentally, it is still better value than any alternative because the Department of Justice and the Department of Finance have looked at alternatives - for example, using salaried lawyers or the American public defender system. It would appear that that would cost £10 million and it would not necessarily provide as good a service. Although the present scheme is expensive, it is not all that expensive relative to alternatives.

Deputy B. O’Keeffe: Do you expect this upward trend to continue in 1995?

Mr. Dalton: The provision for 1995 is £6.5 million but I suspect that actual expenditure will be higher.

Deputy B. O’Keeffe: As regards value for money, I see that in one instance payments totalling £22,147 were made to ten solicitors and five counsel. That seems like an inordinate number of people to be involved in that payment.

Mr. Dalton: They were people who were not on the legal aid panel. Strictly speaking, lawyers are supposed to be on the panel before they get legal aid cases. £22,147 is the gross figure paid to them all, not to each one of them. Sometimes the accused may nominate someone who is not on the panel and it may be convenient to proceed with the trial and put them on the panel afterwards.

Deputy B. O’Keeffe: Did you ever look at a tendering arrangement for civil legal aid cases? Given that we are spending this amount of money, would it be possible to get better value by bringing in competition between the barristers and solicitors involved?

Mr. Dalton: I am not sure that you would get a lot of competition because of the way the scheme is structured. The choice ultimately rests with the accused and he or she will want whoever will stop them going to prison. Regardless of how we go about it, they tend to nominate the same group of solicitors. I am not sure if we have considered what you suggest, but we will do so and come back to you.

Chairman: Under subhead D.1, compensation for personal injuries criminally inflicted rose from £1 million in 1993 to £4 million in 1994. Was this increase due to a reduction in arrears? How many arrears cases are there?

Mr. Dalton: We allocated extra money that year in order to bring down the arrears, which have been considerably reduced. There was a delay in hearings of up to 18 to 24 months prior to that. That has now been reduced to two to three months as a result of the injection of £3 million in 1993. There are 244 non fatal pre-1996 cases still to be finalised. Some 105 of those cases are at different stages - obtaining reports and evidence. The remainder are subject to appeal. There are 584 post-1986 claims and 558 are at various stages of investigation. Arrears have been reduced considerably and the period for hearings has been reduced from two years to two to three months.

Chairman: What are the main items included in miscellaneous receipts of £60,214 under Appropriations-in-Aid?

Mr. Dalton: I am sorry I do not have a breakdown.

Chairman: You can send it in. As regards free legal aid and the figure of £7 million, are you satisfied that free legal aid is not being manipulated by the solicitors involved?

Mr. Dalton: I have no evidence that it is.

Chairman: Each time a prisoner is placed on remand under the free legal aid system, is a separate fee paid?

Mr. Dalton: Fees are payable for each appearance. That is probably why you asked that earlier question - in other words, are remands and so on arranged for that purpose?

Chairman: There is no ceiling. Is there a fee involved each time a prisoner has an interview with a solicitor under free legal aid scheme?

Mr. Dalton: I must confess that it is a while since I dealt with criminal legal aid but at that time, fees were payable for separate items of service. There may be a certain point at which there is a cut off, but I will check that. One of the problems with free legal aid was that somebody could arrange things in such a way that there were a few remands which might suit others in court. As a result, legal aid fees and overtime payments increased. I do not have evidence of that but it is a suspicion which exists.

Chairman: Is it happening at present?

Mr. Dalton: I cannot say it is.

Chairman: Seeing as the figures are so high, would it be possible to investigate the matter?

Mr. Dalton: It would be possible.

Deputy Byrne: I did not hear the answer to the question about the highest paid solicitors. Was £500,000 paid to Michael Staines? You listed the number of solicitors working in that office.

Mr. Dalton: I do not know the size of his office or how many are involved in providing free legal aid.

Deputy Byrne: The office would be paid the money, not him.

Chairman: It would be paid to his firm.

Deputy Byrne: Given that we are dealing with the Estimates for 1994, presumably the figure of £7 million would now be higher.

Mr. Dalton: Yes.

Deputy Byrne: Given the spiral upwards in costs, is there any way of finding out if costs are increasing because solicitors are making a killing on the scheme, that they are bringing more criminals before the courts or that those appearing before the courts are on low incomes or do not have incomes and require free legal aid?

Mr. Dalton: We are putting more criminals through the courts. Since 1992, the number going through the District Court has increased by 28 per cent and 38 per cent in Circuit Court. The number appearing before the courts is escalating. You asked about the figure for 1995 which is £7.988 million.

Deputy Byrne: If we are putting more criminals through the system, then there is obviously a lot of business available. If we are putting more people through the system and there are not enough cells available, where are these people going?

Mr. Dalton: A combination of things. Some of them are going on custody alternatives which has gone up a lot. Others are caught in the proverbial revolving door system. The number of places has not gone up all that much so there is a mixture of disposals. Some are getting out of prison faster than they should; we do not deny that. However, a large number of people have gone on alternatives from the outset. They go through, get legal aid and opt for an alternative. I should say, in case it comes up again, that we have been looking at this recently and found that practically everybody who goes to prison has had experience of every available alternative and sometimes experienced them a few times. Alternatives have a value up to a point but some people who are tested repeatedly on custody alternatives still end up in prison.

Deputy Byrne: Can I refer to subhead E for a moment and ask you about the Garda Complaints Board? It cost £366,000 in 1994. Do you have any figures available as to the number and type of complaints made against the gardaí in 1994? How many complaints have been upheld?

Mr. Dalton: Unfortunately I do not have the figures for complaints. They are published in the annual report and I do not have one of the reports with me.

Deputy Byrne: Maybe you could send the Committee a copy.

Mr. Dalton: I will.

Deputy Byrne: On page 159, there is a figure for actual receipts payable to the Exchequer and it mentions cash for nationality and citizenship certificates. There is some controversy about citizenship or passports and so on. Does the figure for fees for nationality and citizenship certificates relate in any way to passports?

Mr. Dalton: They are not separate. The so-called “passports for sale” situation is where people who invest in this country to a certain level, establish a residency requirement and manage to persuade an independent body that they have made the investments and so on are granted naturalisation because, under the provisions of the Citizenship Acts, they are deemed to have Irish associations. They are naturalised and they pay the same naturalisation fees as anybody else who is naturalised.

One is entitled to naturalisation after five years residence. One is entitled to post-nuptial naturalisation if one is married to an Irish citizen after three years of marriage. The only way the so-called “passports for sale” compares to other cases is that all applicants pay the same naturalisation fees. Investment- based naturalisation cases represent a minute proportion of the people granted naturalisation every year. About 20 people a year were granted naturalisation because of investment while several hundred naturalisations would fall into other categories. The only relationship is that they pay the same fees, which is £500 for a person being naturalised after five years and £100 for a spouse.

Deputy Byrne: We realised an intake of £146,000. Is there a way to quantify the numbers involved in this figure?

Mr. Dalton: I may have it.

Deputy Byrne: If you do not have the information available, you might submit it to the Committee with a breakdown of those who have been successful in gaining nationality and citizenship certificates. It would be interesting to see if they are African, Third World, political refugees or the rich oil sheikhs.

Mr. Dalton: Refugees are a different item completely. That is not naturalisation. I have figures here but I would like to give you more complete figures. Under the foreign births register - these are people who register abroad - the figure is 3,500. For post-nuptial naturalisation - that is people who marry Irish citizens - the figure is 800. In 1994 the number of people naturalised because of five year residence was 310. This gives a total of 4,600.

Refugees do not pay anything once if they are classed as refugees. They are in a different situation. There were 31 refugee applications in 1991 and 355 in 1994. It is going up. The latter were mainly Cubans who did not qualify for refugee status. Less than 10 per cent of people who apply for refugee status actually qualify as refugees. The UNHCR is quite strict on it. They do not like to see the term “refugee” being debased so if there is anything they are not satisfied about they will not accord refugee status. I can give you more detailed figures - we will supply them to you.

Deputy Byrne: As a public representative I find great difficulty with your Department in dealing with representations on behalf of people who are in terribly tragic situations. For example, there are some very highly educated Iraqis living here who are drawing the dole. They are recognised as unemployed by the Department of Social Welfare and as some sort of illegal alien by your Department. Could you comment on my view that your Department is one of the trickiest and the most consumer-unfriendly Departments that public representatives have to deal with, in so far as it is almost impossible to extract information from it?

I understand that there is a degree of sensitivity involved but this is a widespread belief among politicians. I represent Dublin South Central which has the only mosque in the country. The result is that there are many Moslems from around the world living in the area. We have a heavy concentration of non-EU Moslems. Would you like to respond to my allegation that you run a strict, secretive consumer-unfriendly office? It causes nothing but agony for the poor unfortunates on whose behalf we are making representations and it frustrates us politicians no end.

Mr. Dalton: I am sorry that you have bad experiences. I urge the Deputy to write to me personally about them and I will investigate them.

Deputy Byrne: I have written to the Minister.

Mr. Dalton: I do not know about the bad experiences the Deputy had but could I comment about the Department of Justice generally? We find that the media and others have a 1960s attitude to the Department of Justice in terms of secrecy and so on. It seems to me reading the papers, that some journalists pick out their notes from 1960, dust them down and repeat their 1960 impressions as the present position. It has changed somewhat in the meantime. We are much more open than we were about issues.

However, there is an ongoing problem in that many of the matters we handle in the Department involve a conflict of interests. One has the problem of trying to protect the privacy of an individual who may be telling a Deputy one thing while we know something entirely different. We are in a dilemma as to whether we tell the Deputy the real story but very often we cannot do so. It probably happens more than it does in any other Department that we know something entirely different from what this person is telling somebody else. I am not saying that is always the case and I am not saying the Department handles everything in an ideal way because it does not. Sometimes the way in which the so-called aliens process is handled, I would acknowledge, is not ideal. I can only promise that we will try to do better on these fronts and I am sorry the Deputy and others have had bad experiences of that kind.

Deputy Byrne: I will take up your offer and send you a copy of the correspondence I sent referring to three specific instances.

Mr. Dalton: I will be glad to respond.

Deputy Finucane: It is not all bad with the Department of Justice. I do not have a problem with Iraqis looking for naturalisation in west Limerick. However, I will make a general observation about the dole. There is a problem with new age travellers who are coming to Ireland because we have a far more benign social welfare system and living off the fat of the land in this country. Maybe that is as a result of being EU citizens and we have to accept that kind of thing but it is a fact. They are enjoying our scenery and everything and they are ripping off the system.

How many are rejected for naturalisation after five years? What is the percentage rejection or are they all automatically assumed to be successful once they have spent five years in the country?

Mr. Dalton: The rejection rate is extremely low, but I would have to get you a figure on it. It is rather like the situation regarding visas - there is an assumption that it is almost impossible to get a visa. However, 85 per cent of those who apply for visas get them immediately without any question and a very large percentage of the remainder get them when they supply more details.

The point you made before this is part of the dilemma. The law is structured in such a way that is not in itself entirely “foreigner friendly”, if I might use that term. This is because there is a division in society about the extent to which we should be generous about naturalisation and the admission of people to this country, including new age travellers.

The Department of Justice is positioned in the middle where we have to try to apply the law as it is, not as different people may wish it to be. However, Ireland’s approach is not very different - there is much mythology over this - to many other countries, many are much stricter than we are. In view of European requirements, we have to apply visa requirements to those to whom we did not apply them before.

We are not unique in this but the point you make regarding the division in society itself as to how generous we should or should not be in dealing with applications for citizenship from foreign nationals is reflected in the law and partly explains the problem we in the middle then have to handle.

Deputy Finucane: On the issue of compensation for personal injuries criminally inflicted, what are the kind of injuries involved? Are we concerned with people with ordinary injuries, with stress or about gardaí who experience stress? Could you elaborate on this?

Mr. Dalton: Is this in respect of the scheme that is operated under the criminal justice compensation tribunal?

Deputy Finucane: Yes.

Mr. Dalton: There are broadly two kinds. Pain and suffering were taken out in 1986, so much of it is compensation for direct loss, loss of pay, hospital costs, etc. There is another category within this. Prison officers receive compensation for pain and suffering.

Deputy Finucane: If a garda was involved in a stressful situation, for example a bank robbery, where a gun was pointed to him and he subsequently suffered from stress, would this come within the scope of the scheme?

Mr. Dalton: No. The Garda have a special compensation scheme. This is why prisons have had pain and suffering compensation restored under this scheme. The Garda compensation scheme is different and some large compensation payments have been made under it.

Deputy Finucane: There is a category regarding funds from the EU. You estimated £20,000 but realised £157,000. You state it was hard to factor in because it was a new category. For what purpose would the sum of £157,000 from the EU be coming to Ireland?

Mr. Dalton: The size of the sum was largely as a result of arrears in respect of travel refunds. We pay the travel costs of staff going to Europe on EU business. We obtain refunds in respect of this.

Deputy Finucane: Is this where Department of Justice officials may travel to seminars, conference and so on?

Mr. Dalton: And in respect of other EU business.

Deputy Finucane: I am pleased that people other than politicians do some EU travelling because politicians are often maligned when they travel on business. You advise that planned information regarding the Data Protection Act was not proceeded with in 1994. Has this been issued and what kind of information is it expected to provide?

Mr. Dalton: Is this the video?

Deputy Finucane: Yes.

Mr. Dalton: I have not seen it, and I do not know. I understand that the sum involved was £2,000. There are many people who are not registered. The policy of the Director is to try to get more people registered. I presume that the purpose of the video is to advise people on the wisdom of being registered. I know that six political parities are registered, but many Deputies are not.

Deputy Broughan: You said that there were approximately 20 passports for investment issued per year, with new rules following the Masri case. A couple of weeks ago and last week I asked the C&AG to examine the area and see if the basic conditions were complied with because there were disturbing reports about a large Saudi Arabian family who had come to Ireland and the level of investment involved. Who is ultimately responsible for ensuring whether or not the financial conditions regarding the issuing of Irish passports for investment purposes are complied with?

Mr. Dalton: Hitherto there was no follow up mechanism. The whole situation has now been revamped and there is an obligation on the Department of Justice to check matters, using other agencies, such as the IDA.

Deputy Broughan: Are you responsible?

Mr. Dalton: Yes.

Deputy Broughan: I understand the case of the Saudi Arabian family was highlighted in the Sunday Business Post recently and one or two other cases were highlighted by various newspapers. Would you be in a position to give us a report or to assist the C&AG in examining the operation of the scheme, both before and after the previous Government amended the rules?

Mr. Dalton: I have no objection if the C&AG wishes to investigate something of a financial nature for the Committee.

Deputy Broughan: If I asked you about, say, an individual who had obtained an Irish passport in 1991 or 1992, could you tell me whether or not that individual had complied with the conditions?

Mr. Dalton: I could do so. I would have to check the various powers of the Committee. The kind of material published about a family in a newspaper, which you mentioned, is grossly out of order.

Deputy Broughan: Why?

Mr. Dalton: It is grossly out of order because it gives the impression that this family somehow participated in something that was underhand. Nothing could be further than the truth.

Deputy Broughan: You must agree that it is a controversial scheme.

Mr. Dalton: I agree.

Deputy Broughan: The Committee had a full discussion about it in private session. Different views were expressed. The Canadians and the British are also involved. Many people may take the simple view that very wealthy foreigners can come here and get Irish citizenship, whereas a poor foreigner cannot, such as some of those who live in my constituency and in Deputy Eric Byrne’s constituency.

There is, perhaps, a fundamental inequity here. While there is a major investment in the country, the least we would like to know, in view of the difficulties outlined by Deputy Eric Byrne - we had a major discussion in the Dáil on the Masri case - is that everything is above board and that everything is being complied with.

Mr. Dalton: There are two separate questions here. Should we have a scheme like this at all? It is not for me to comment because this is a matter of policy. It appears to have been the view of successive Governments that we should have a scheme whereby people who invest certain amounts can be deemed to have Irish associations and be naturalised.

It is very difficult to discuss individual cases; it is something we have always avoided in the Department of Justice. However, with regard to the case you mentioned and which received much publicity, the facts are, and these can be established, that the people concerned invested the kind of money that would qualify applicants for naturalisation under the scheme. The issue is that they indicated that they would invest more but it is not their fault that it was not invested. My information is that they left the money here for investment but it was not taken up.

The kind of material published about this family is therefore out of order. It does not stand up.

Deputy Broughan: We realise that, with regard to our immigrants, refugees and so on, matters are personal. This case is not. On foot of the payment of a large sum of money for investment in the country, and individual or his family, or an extended family will come to the country. The remit of this Committee would cover, and we would have to know, whether the conditions were complied with — that is a basic requirement. The difficulty journalists had in tracking that case was that they could not get the information, precisely for the reasons the witness outlined. He treated that case as if he was an ordinary immigrant coming to this country. I feel we are not assessing them under the normal conditions — of residency, nuptial, or economic or political refugees — that we would deal with on an ongoing basis through our clinics. Cases I have dealt with include an Irish doctor who has lived in this country since he was a young teenager and went to secondary school here but was denied citizenship for 15 years. I accept it is a political decision but if we are doing it, we would like someone who gets Irish citizenship quickly would at least fulfil the conditions and that we would know the conditions were fulfilled. As policy makers, we cannot review that unless we know how it is operating.

In the first part of this Parliament, under the partnership Government, a case arose which caused extreme concern to Deputies. A file was read by the leader of my party and he made a judgment on a particular matter.

Deputy B. O’Keeffe: It suited him at the time to be happy with it.

Deputy Broughan: I trust his judgment. We must know if the general conditions are being complied with in relation to these 20 people each year. The journalistic interest in it is fair and reasonable, given that we have such difficulties at times with ordinary, poor or student immigrants.

Mr. Dalton: I never said journalistic interest was not fair — I want to be clear about that. It is fair and understable. I am saying that if one does not have facts, one should not pretend one has them and publish something which is untrue. I understand the interest.

Deputy Broughan: Does Mr. Dalton accept there was no forum for the public to know?

Mr. Dalton: I agree.

Deputy Broughan: So we now have a forum?

Mr. Dalton: Yes, but I want to say something else about it also. Deputy Broughan mentioned that the Department of Justice treated these cases the same as any other. If the Department gets information in confidence, it has to respect the confidence, it does not matter who it comes from. It would be a sorry matter if we received information and ignored people’s rights and privileges. That is the reason we treat all these applications the same way; we are in a situation where we get information in confidence. I could not purport to tell this Committee what its powers are but if it is the case that this Committee and the Comptroller and Auditor General has the power to investigate these matters, they will not find us standing in the way.

Deputy Broughan: Pursuant to the Comptroller and Auditor General consulting Mr. Dalton, it may be possible to bring a report to this Committee on the operation of the scheme?

Mr. Dalton: It may well — I will have to take my own advice on it. If we are free to give the Committee this information and there are no impediments on us doing it, we will not obstruct it.

Mr. Purcell: I was quite reticent when I was asked by the Committee to carry out this job because, like the Accounting Officer, I have doubts about whether it comes within my remit. I think the law could be read in that fashion, that is, looking at the system which the Department has to ensure the effectiveness of its procedures. If I were to look at this, It would be from that angle and not from the angle of going into individual cases. I had intended, after today’s meeting, to take the opportunity of having a word with the Accounting Officer about this and to get his thinking on this also. I am not surprised to hear that he might have doubts in this area as well, because I have some doubts about my mandate in this respect. I would like to have the opportunity to clarify that matter with the Accounting Officer before proceeding on foot of the Committee’s request to me.

Deputy Broughan: Have any of the applicants or had any of them in the past close links to the failed BCCI Bank?

Mr. Dalton: I do not know that as a matter of fact.

Deputy Broughan: That is the concern — that there may be people with “dodgy”, shady international backgrounds, who have moved capital in and out of different countries, who may latch themselves onto this scheme and in no way deserve — in fact it would be outrageous to confer on them — what we have referred to in this Committee as one of the symbols of our nation, our passport. Could Mr. Dalton establish whether an individual or individuals associated with that bank have gained Irish citizenship?

Mr. Dalton: I know that, in the past, it was not necessarily the case that we asked for police reports on people — we do now. My capacity to investigate the affairs of people whose private wealth would probably exceed the total GNP of this country is rather limited. That is the reality — the kind of people who invest are sometimes very very wealthy. I do not know, to be honest, whether the people concerned have been associated with BCCI, or whether members of a family or a particular individual who has been naturalised is a member of that family.

Deputy Broughan: Could he not say, for example, if an individual might have been fleeing from justice in another jurisdiction?

Mr. Dalton: I do not know, Chairman, that anyone has fingered anyone in particular for the BCCI collapse or that anyone has established criminality in it. If international fraud experts cannot do it, I would have considerable difficulty in pinning it on someone.

Deputy Broughan: Has it ever been the case that the procedures which have been in place since the controversy in 1993, or which were previously the case and were found wanting, were short-circuited? Is there a fast-track way, even in this proceduré, of making an Irish investment to get Irish citizenship? Has it ever happened that someone was quickly given citizenship on foot of either Ministers, or another person, making particular representations?

Chairman: I ask you to conclude now, Deputy.

Mr. Dalton: Yes, some cases have been dealt with quite quickly — there is no question about that.

Deputy Broughan: I feel this scheme, because it involves expenditure and revenue, does come within the remit of the Committee. I expect the Comptroller and Auditor General to ask for a report on it, so that we would at least know that the conditions are met and that some of the concerns I raised and which have realistically been raised by our journalist colleagues would be addressed fully in that report. Then policy makers in this or the next Dáil could make a judgment as to whether we could keep this scheme.

Mr. Dalton: I would be glad to talk to the Comptroller and Auditor General about that.

Chairman: I take it we can adopt Vote 19?

Deputy Finucane: I have no intention of repeating what I said the last day about the “passports for sale” business migration scheme. It is worth pointing out that last year there were five applications which were successful. One of them happened to be in my constituency and it saved 100 jobs. I also believe that the new controls and restrictions have strict guidelines. I believe it was a mistake to raise it to £1 million — it should have been left at £500,000. It is a high risk capital investment for most of these people who were investing. A lot of companies were in financial difficulties at the time with their cashflow. I have no qualms about this scheme once the controls are in place — I think it is a good scheme which could be kept. It could even be modified.

Deputy Broughan: We do not know who——

Deputy Finucane: Deputy Broughan is talking about the past.

Deputy Broughan: I am talking about this year.

Chairman: I think we can adopt Vote 19.

VOTE 20: GARDA SÍOCHÁNA.

Mr. Dalton further examined.

Chairman: Under Subhead E, an excess of £1.172 million was incurred because equipment due for delivery in 1995 was delivered in 1994. What equipment does this refer to and was it installed soon after that? Is it now in operation?

Mr. Dalton: Is this Subhead E.1?

Chairman: Subhead E, an excess of £1.172 million.

Mr. Dalton: It was the Cork communications system. The equipment became available in 1994, so therefore payment was brought forward.

Chairman: Is it fully operational now?

Mr. Dalton: It is.

Chairman: Under the statement of losses, note 6, we are told that only £61,704 of the total cost, amounting to £224,000, was recovered arising out of accidents involving Garda vehicles in which the Garda was not at fault. Why is the recovery rate so low? What procedures are used to recover these amounts?

Mr. Dalton: We operate a knock for knock system with most insurance companies. We carry our own costs as they carry their costs. There will not, therefore, be a complete match between the amounts recovered and the loss of the Garda vehicles.

Deputy B. O’Keeffe: Under office machinery and supplies there is an excess due to purchasing photocopiers, typewriters and other items for office use. Is the office equipment used by gardaí or by civilian staff? How many civilians are appointed in Garda stations throughout the country? Is this of benefit in terms of releasing gardaí for crime prevention duties?

Mr. Dalton: Yes. There has been a growing use of civilians over the years. There are approximately 700 civilians employed at present. The policy is that a garda will be released for each civilian appointed. At present, we have plans to recruit 184 more civilians and thereby release 184 gardaí for duty on the streets. We must clarify the exact impact of the recent control on public service numbers to see if we can do that. There has been a fairly large intake of civilians, although it is still quite small by international standards. The number of civilians in the Garda Síochána is only approximately 5 per cent whereas in the London metropolitan police, for example, there are more civilians than police. We have a long way to go in this regard. However, there is resistance to it. The type of people we took on up to now did not give rise to major objection because they were doing low level clerical work. However, when one moves up to higher levels where people are involved in investigating or preserving scenes of crime, it becomes more difficult. We have plans to progress it, but how far it goes will require discussion with the Garda Associations.

Deputy B. O’Keeffe: I received a Dáil reply recently which stated that out of approximately 10,700 gardaí, 8,500 were aged between 30 and 55. I am sure that has consequences vis-à-vis Garda structures and the type of duties allocated. Has the Department of Justice seriously considered proper deployment given this age profile?

Mr. Dalton: We depend on the Commissioner to do that. The Commissioner would decide on duties, allocation, etc. I know the Commissioner has been concerned about the level of fitness. A specific fitness programme is ongoing at present which is linked with age profile. I am not aware of any specific attempt to bring the age profile down.

Deputy B. O’Keeffe: Has the Department got permission to recruit the extra 184 civilians?

Mr. Dalton: No.

Deputy B. O’Keeffe: Has permission been sought?

Mr. Dalton: It will depend on policy in relation to recruitment to the public service. The Government has taken the position that recruitment to the public service should be restrained for financial reasons. This has happened before and it means that such difficulties arise in certain areas. We will have to assess its impact in this regard. It may look attractive to take in 184 civilians, but if we do it here it might undermine a more substantial economic policy. The jury is out as to what will happen in the Garda at present. I do not think there will be a disposition to undermine the restriction of numbers policy in order to deal with one situation.

Deputy B. O’Keeffe: The Garda is against this type of recruitment. Is this opposition coming from the Commissioner’s office or from the Garda Representative Association?

Mr. Dalton: That is not the problem as regards recruiting 184 civilians because they were coming on stream. There is resistance in the Garda Representative Association and the Deputy heard that during our discussion about possible civilianisation at higher levels and when recruiting mechanics. The association is represented here. There is considerable interest in removing gardaí from particular jobs and employing civilians. The association is no different from any other association. If I was an association official and was being paid by it, I would be expected to be here to find out what was going on.

Deputy B. O’Keeffe: Some £355,000 was paid in a civil action against certain gardaí. How did that happen?

Mr. Dalton: That was in relation to the Athy bank robbery where a civilian was shot in the course of the exchanges. A bank employee was shot.

Deputy B. O’Keeffe: Was that an out of court settlement?

Mr. Dalton: That was a settlement on advice.

Deputy Byrne: Under miscellaneous items, sums were charged to Subhead A.4 in respect of postal and telecommunication services availed of by the Association of Garda Sergeants and Inspectors, the Garda Representative Association and the Garda Medical Aid Society. Perhaps Mr. Dalton could give me some information about these three unions. The Association of Garda Sergeants and Inspectors produces a glossy magazine every month; the other Garda union produces a more American style publication; and the Garda Representative Association produces a colourful magazine. The subhead indicates that substantial sums of taxpayers’ money is being paid to these unions. Do union members pay union fees? If so, why is it deemed necessary to pay in excess of £257,356 to these associations for free postage, free telephones and free office accommodation for gardaí who are seconded to Garda offices? Do you agree that there seems to be Garda turmoil vis-à-vis who represents who? Could the availability of taxpayers’ money make the conflict worse?

Mr. Dalton: The members pay association fees. I would say, and I do not know this for a fact, that the associations concerned are not short of funds because there has not been an industrial dispute for some time. They receive about £750,000 per year. I do not want to put that down as a definite figure but it is there or thereabouts.

As to why they are receiving subventions from the State of £257,356, that is the result of various agreements which were made over the years. I agree with the Deputy that they are probably unique amongst public service unions. We checked with the Department of Finance who said that the only payments of this nature made to Civil Service unions is a subvention to the General Council Staff Panel of £7,000 for administrative expenses plus a salary for the secretary of the panel who is a HEO from the Department of Health.

Concerning the dispute with the Garda Síochána, I am not sure that has anything to do with subventions. It has to do with long-standing differences between various groups - Dublin and outside of Dublin - which only came into the public domain a short time ago but which have been simmering there for quite some time. I cannot see that the payment of money to the association is a big factor. They have substantial resources and maybe that, in itself, enables people to mount or resist legal challenges and so on but I do not think that this is a major factor in the continuing dispute.

Deputy Byrne: Given the quality of these journals, I have no doubt they have such substantial resources. When every garda is a vital resource in the service of the community, does Mr. Dalton agree it is not appropriate that sergeants, inspectors and ordinary gardaí work in these associations with full pay at the taxpayers’ expense? The public will be scandalised to discover that the taxpayer is paying to have gardaí sit in offices producing magazines such as these. The most appropriate route would be that taken in ordinary unions: if members pay a union due, the union recruits officials to carry out the functions of negotiations, etc. In this case, why can gardaí avail of secondment? Presumably, they are not trained union negotiators in any case. They are trained as gardaí, sergeants and inspectors in policing on behalf of the State. Why is that vital resource being used to service the association when it is there to service the needs of the public?

Mr. Dalton: I agree they may not be trained negotiators but they are not bad at it - I can tell you that much from dealing with them. Traditionally, the reason gardaí tended to represent other gardaí is that Garda associations are unlike many other unions in that there is an interest in the maintenance of stability and a belief that “insiders” would prioritise this consideration. It was probably felt in the past that if one was dealing with people who had an appreciation of what it meant to be in a disciplined force and the limits which that implied, it was probably a safer arrangement from the State’s point of view. I cannot say here and now that this is justified beyond all question or doubt. I can understand the Deputy’s question: why pay £257,000 to Garda associations? The only reason it is being done is that it has been the subject of agreements and, as with any other trade union, if one wants to set aside agreements, one must negotiate. I do not think I can say anything more that is useful about it.

Deputy Byrne: Newspaper reports of the 20 September 1995 indicated that the Minister for Justice, Deputy Nora Owen, was to lend £90,000 of taxpayers’ money to the Garda Federation, which was in legal dispute with the Garda Representative Association which resulted in gardaí having to pay substantial court costs. Why would the taxpayer be asked to lend money to a financially well-heeled organisation, by Mr. Dalton’s acknowledgement, which already receives £257,000? Why should it be acceptable to anybody that this Government contemplate lending £90,000 to this association?

Mr. Dalton: The money was lent to the Garda Federation. The people who now have the money are the GRA, the official body. The Garda Federation is the breakaway organisation. Members of the Garda Federation found their names in Stubbs because of debts which arose out of legal actions taken against the GRA.

It seemed there was a reasonable prospect of settling the dispute if the question of costs was resolved. The Minister, with, I should add, the sanction of the Minister for Finance, got agreement to advance a loan. This loan is governed by a legal agreement which was drawn up by the State Solicitor’s Office. The only point in it at the time was that it seemed likely that repaying this amount to the GRA would get the Garda Federation names out of Stubbs Gazette and, thereby, advance the prospect of a settlement. Sadly, the settlement has not come about and the Minister will introduce the heads of a Bill to the Cabinet in about two weeks time to address the problem.

Deputy Byrne: The media have extended the debate about the crime situation. Notwithstanding the reality or the media perception, people are living in great fear and are not being reassured by the incredible public nature of the dispute between the GRA and the Garda Federation. We read in the newspapers that the GRA recruited private security guards to protect their members in session. I appeal to Mr. Dalton to try once and for all to knock heads together within the Garda Síochána to resolve this unsavoury dispute. The public’s confidence will quickly be undermined by the public manifestation of the dispute and the manner in which it is being handled.

Deputy Broughan: Returning to Subhead A.5, the expenditure under office machinery and other office supplies, I note that in the previous vote, Vote 19, we allocated £0.5 million in this area. This particular year, we allocated £3.5 million to the Garda Síochána.

In recent weeks, there have been a series of horrendous murders. Sadly, Ms Marilyn Rynne, Commandant Ray Quinn’s wife, Mr. Tommy Casey are the victims of this crime wave. The one thing which stunned us, as Deputies, and the general public is that the Garda seems to have almost no computerisation whatsoever. As the Garda began manhunts for these criminals, it did not seem to be possible to draw together all the relevant records of potential suspects in previous homicides dating back five or ten years. Why are our Garda stations not computerised? This year we spent £4 million and we have spent millions of pounds in previous years so why do they still have to go through each garda’s notebook? We are operating 1960s police procedures because the Department has not ensured that the Garda is properly computerised. In Britain, different police forces can bring together huge amounts of information about suspects. Apparently, our force cannot do that. Is that the case?

Mr. Dalton: The Garda is like every other organisation in this country. If you go back to the 1960s, few people had computers. What had been happening is that all sorts of systems had grown up within the Garda Síochána - there are at least 20 different systems for all kinds of purposes within the Garda Síochána. What was wrong was that these were not interconnected. We are producing a modern integrated system now and spending £26 million on it.

Deputy Broughan: If I walk into one of my local stations - Howth, Raheny or Coolock - I would see loads of files. There is no way the gardaí on duty can call up information about possible suspects.

Mr. Dalton: I do not think that is true. It is not as quick as if gardaí had all the data on line but they can certainly get the information pretty quickly from crime records in Garda headquarters - that is all computerised and has been so for years. Despite all the systems in operation in other countries the gardaí appear to perform better than most.

Deputy Broughan: I have tabled a question in the Dáil today on this matter. In the last ten years what was the level of homicides for each year and what is the conviction rate?

Mr. Dalton: I know the level of homicides has remained pretty static for about 20 years - I know because we had a study carried out on it. Towards the end of last year there was an increase but if one takes the figures over a 20 year period there has not been a change in the rate of homicides at all.

Deputy Broughan: What was the rate for 1985?

Mr. Dalton: Unfortunately, I do not have a figure for 1985 here. I have figures for 1993 – 21 - and 1994 – 24.

Deputy Broughan: Are you sure that is the case?

Mr. Dalton: They are the figures I have.

Deputy Broughan: For total homicides?

Mr. Dalton: For murders.

Deputy Broughan: No; I am asking for homicides.

Mr. Dalton: I do not have a figure for total homicides.

Deputy Broughan: There was an interesting article in a Sunday newspaper urging people not to get hysterical because the rate has remained fairly steady. It seemed he was not referring to homicides - including all murders, manslaughters and other cases where life was taken.

Mr. Dalton: It was homicides that were the subject of the study last year and that homicide rate has remained steady at about an average of 43 per year for 20 years.

Deputy Broughan: The public perception is that the homicide rate is now one per week.

Mr. Dalton: Unfortunately, public perceptions are often wrong.

Chairman: I am sorry to interrupt you Deputy but we are straying from the Vote.

Deputy Broughan: This is an important point. It relates to the information the Garda can have. I would like to know the figures. The public perception is that there is one homicide a week and the conviction rate is low enough in international terms. The comment you make about international comparisons are not valid.

Mr. Dalton: The detection rate for homicides is high; I do not have a figure with me but I know it is high. Quite often homicides are not murders - they may, for example, be manslaughters. One does not always get a murder conviction or one might not necessarily get a manslaughter conviction, despite the fact that a detection has been made.

Deputy Broughan: There is a perception that it is quite low.

Mr. Dalton: If the matter is not dealt with in your Parliamentary Question today - although I would be surprised if it is not - I will get the figures and forward them to you. The information I had when the matter was expertly analysed is that the homicide rate has remained static. I would emphasise that towards the end of last year the homicide rate seemed to be going up. The total figure for last year was about 45 which was up from previous years. However, if one looks at it over a 20 year period the idea that we have suddenly moved from a tranquil and peaceful society to one characterised by murder every day of the week does not stand up.

I do not blame you or anyone else and I do not blame the media for reporting on crime, but sometimes crime can quite innocently be reported in a way that creates unnecessary fear. This is still one of the safest countries in the world.

Deputy Broughan: I know, but the perception is that it was a lot safer. On the north side of Dublin people have been shot out of hand in dastardly murders and nobody has been convicted. That has been the reality in a significant number of cases in the last two or three years.

We would be concerned to find gardaí do not have at their fingertips the relevant information on suspects or major criminals. We were talking last summer about taking action against drug barons but if we do not have a source of information available to everybody in the Dublin metropolitan district, for example, we are asking the Garda to do an impossible job.

Mr. Dalton: There are a number of computer systems in operation by the Garda. As you will know, we have recently introduced a computer system for fingerprinting - one of the most effective tools the Garda can have. It was launched about two weeks ago and it reduces the amount of time to find a fingerprint from 500 man hours to 10 minutes. There is progress on that front.

I know there are various systems in relation to ballistics and modus operandi and so on but the problem is that they were not interlinked. This has been one of the general concerns the IT section of the Department of Finance has had with the public service system generally. We are trying to pull them together. It is not ideal but we are trying to get there by spending money on it.

Deputy Ellis: Under Subhead A.7, Consultancy Services, there was a saving of £5,000. What was the consultancy involved in and what consultants were employed?

Mr. Dalton: The main consultants were Andersen Consulting in connection with computerisation. It was one large consultancy. I do not have a note on it but the major consultancy on the Garda side involved an expenditure of about £800,000 in connection with computerisation.

Deputy Ellis: Was that to give advice as to what system should be put in?

Mr. Dalton: Yes.

Deputy Ellis: I do not dispute that it happened but £800,000 for advice as to what system should be put in seems rather high. Was this over a long period or for the year in question only and are there any ongoing commitments in 1995 and 1996?

Mr. Dalton: No, it is very much the going rate. It is a £26 million project. Proper tendering procedures were followed and we are applying the recommended methodology to decide who gets contracts and who does not. All the appropriate procedures are being followed. That is the going rate for these major consultancies.

Deputy Ellis: Good advice does not come cheaply. The banks paid £1 million in respect of cash escort services. What was the total cost to the Garda of the provision of this service?

Mr. Dalton: I do not have a figure but it would be in excess of that.

Deputy Ellis: Much in excess?

Mr. Dalton: I would say it would be a multiple. I will get a figure for you.

Deputy Ellis; Is anything being done to try to seek further funding from the banks? If it is a multiple of £1 million, it is only fair the public should know how many millions it costs. Given that only £1 million was paid by the banks for a service we see continuously it is only fair the public should know what it costs, especially since their bank charges are not going down.

Mr. Dalton: We will get that information for the Deputy. There is always the problem that there is a public interest in ensuring that criminals and terrorist organisations do not get money so that even if we got nothing from the banks we would still have an obligation to prevent that. There is a balance there and the concern is that if one charges too much one may get slipshod systems and money could be lost to criminals.

Deputy Ellis: There may be a need for the insurance companies carrying the risk for the money to make a contribution. Are they making any contribution?

Mr. Dalton: To the best of my knowledge they are not.

Deputy Ellis: Just whatever they get from the bank. Under the miscellaneous subhead, payments totalling £91,000 were made in respect of claims arising out of injuries received by eight gardaí while on duty. I have no problem with that but what is the present position in regard to people injured while in the Garda service but who are able to do other Garda work? Are they normally redeployed?

Mr. Dalton: There are two types of injury. The compensation for injuries which qualify under the Compensation Acts - for example, being shot in the course of duty - is very different to that which arises in this case and is infinitely larger. It depends on the nature of the injury. If someone was very badly injured and could not perform on the street the tendency is to find them suitable office work, but it is determined on a case by case basis.

Deputy Ellis: I take it that the same would apply to all members of the Garda at all levels. I take it that someone with minor leg injuries who cannot run 100 yards in 30 seconds - as opposed to someone with major disabling injuries - would be redeployed elsewhere within the Force.

Mr. Dalton: It would be the same as in any other job - he would be retained to do work which needed to be done.

Deputy Ellis: What is the Garda Síochána reward fund? The balance on 31 December 1994 was £71,903.

Mr. Dalton: That is used to purchase medals for football matches and so on. It is funded by fines imposed on gardaí for discipline offences.

Deputy Ellis: There is nothing wrong with that.

Chairman: Before we move on, I understand that the banks also pay £1.5 million to the Department of Defence for military services.

Deputy Ellis: Yes, but we have asked the Department of Defence to establish the economic cost to both the Garda and the Department and to see how much the shortfall is.

Deputy Upton: A total of £400 million is spent on the Garda. How of much of that is spent on research into techniques, criminal behaviour and so on?

Mr. Dalton: I do not have an exact figure for that but the amount is very small.

Deputy Upton: Why is it so small?

Mr. Dalton: Until quite recently, we did not have a research unit. It is a similar situation in the Department of Justice. We have only recently sought sanction to appoint somebody to conduct research.

Deputy Upton: Is it not crazy and outrageous that that situation has been allowed to develop? Would many of the difficulties and incoherent and off the wall responses to the present crisis not be eliminated or seriously diminished if we had a worthwhile research base and understanding of criminal behaviour?

Mr. Dalton: I would not subscribe to the idea that the responses are all incoherent and off the wall.

Deputy Upton: The elements which are incoherent and off the wall might be diminished - I am not saying that they all are but a significant amount are. The two extreme views are that crime is an inherited disorder or that crime is generated totally through social conditions. I saw those polarisations in essays on crime written in newspapers over the last week or ten days. There does not seem to be anyone who can authoritatively speak in relation to these matters - or only a small number can. It seems that the Department of Justice does not have very much to contribute to these debates.

Mr. Dalton: If there is anyone in the world who can authoritatively say what causes crime - regardless of what research unit he is in - I would love to meet him. There is no such person. Having said that, I acknowledge fully that the lack of research is a major deficiency. However, I would not draw the conclusion from that that researchers would have prevented any murder in the last week.

Deputy Upton: I am not suggesting that for a minute. I am suggesting that many of the incoherent responses would be diminished and eliminated and, accordingly, much of the fear which has been engendered would have been prevented - although not all of it.

Mr. Dalton: Which responses were incoherent?

Deputy Upton: It has been suggested that crime is caused either genetically or entirely through social factors. It has been suggested that the response to crime should range between flogging and community activity. Those polarised positions are——

Mr. Dalton: There is no incoherence because we have applied community activity and not flogging.

Deputy Upton: Those are the suggestions which have been put about in response to the crisis. It would be very useful if there was someone in this country - particularly in the Department of Justice - who could draw on research and the international comparisons.

Mr. Dalton: That is true, I do not deny that.

Deputy Upton: Are there plans to invest more in research?

Mr. Dalton: There are.

Deputy Upton: How much more?

Mr. Dalton: We have sought sanction from the Department of Finance to employ a top quality researcher - whose name I do not want to mention - to engage in crime research. I have a cabinet full of research reports from England which examine what causes somebody to steal cars or to steal one thing from a car rather than another. To be honest, I have yet to have it proved to me that any of that research affects anybody who decides to steal a radio from a car - I do not believe that it does. At the same time, I acknowledge that it is very difficult to defend a situation where £600 million of public money is spent on the law and order system and there are not adequate research facilities. I do not deny that for a moment and we are trying to correct it.

Deputy Upton: The point is taken. In relation to big, important criminals, to what extent have the ways of dealing with similar individuals in other countries been examined? How much research has gone into that?

Mr. Dalton: The Garda attend courses and are in constant contact with their opposite numbers in other countries. Gardaí at all levels have attended courses with organisations such as the FBI and Scotland Yard. There is a constant interaction between forces on how to deal with major criminals. The problem is not a lack of knowledge but that in every country such people have proved quite elusive and extremely difficult to deal with.

Deputy Upton: A great deal of effort was put in some years ago into tailing these important criminals. Was the effectiveness of that method analysed? It no longer seems to be used.

Mr. Dalton: Those who were doing it would have drawn conclusions about its effectiveness. These highly organised and powerful criminals can circumvent controls because they have lieutenants. It is possible to waste the time of a lot of men in watching the criminal himself when his lieutenants are conducting his business on his behalf. Every technique is tried and they are kept under close scrutiny. However, the top man is not necessarily the one who is found with his hand in the till. It is a difficult coterie to deal with.

Deputy Upton: How much is invested in media relations?

Mr. Dalton: I will have to get that figure for you. I do not know whether that figure would include the programme “Crimeline” for example. A great deal of information is sent out in the form of leaflets and advice of all kinds.

Deputy Upton: There is a new journal published by the gardaí in Templemore called Dialogue, which I greatly welcome. It takes a scientific and systematic approach and it is encouraging to see a number of young gardaí, psychologists, sociologists and so on writing for it.

Deputy Doherty: Could Mr. Dalton inform the Committee regarding the number of gardaí involved in the junior liaison scheme and the cost of that scheme?

Mr. Dalton: 126.

Deputy Doherty: 126?

Mr. Dalton: Sorry, it is page 126. That is the trouble with having too many pages.

Deputy Doherty: Turn over a new leaf.

Mr. Dalton: There are 89 gardaí assigned to 34 centres of population throughout the country.

Deputy Doherty: What is the cost of the scheme?

Mr. Dalton: I do not know the exact cost but it is in the region of £2 million.

Deputy Doherty: It is a very good scheme. It is important to encourage contact between gardaí and young people at risk. The Garda should be complemented for their work in this area. There should be greater expenditure on the scheme.

In relation to Garda district and divisional headquarters, do they each have fax and photocopying facilities?

Mr. Dalton: They all have photocopying facilities. I could not inform the Deputy whether they have fax machines. However, I believe they do because I have sent fax messages to various places.

Deputy Doherty: Would it be possible to confirm that fax facilities are available at district and divisional headquarters?

Mr. Dalton: Yes.

Deputy Doherty: Under Miscellaneous Items, I note that payments totalling approximately £550,000, ranging from £76 to £355,000, were made in the 245 instances where civil actions were taken against the State, arising from actions taken by gardaí in the performance of their duties. What type of actions would this include? Would it include actions resulting from assault, for example?

Mr. Dalton: Very few were for assault. The major payment was made to a person who was shot in the course of a bank robbery.

Deputy Doherty: The reason I requested that information is that the basis for the actions should not be misinterpreted or an improper perception created as to how they arose.

Mr. Dalton: There are different categories involved. A payment of £355,000 arose from an exchange of gunfire. Various payments were made. £97,000 was paid as a result of an accident which occurred when the traffic lights at a junction were green in both directions and the gardaí injured an ambulance driver. A further £97,000 was paid following another collision.

Deputy Doherty: Were any payments made in relation to assaults or actions taken against the Garda?

Mr. Dalton: Actions against the gardaí - a payment of £125,000 was made in respect of a woman who set fire to her cell in Castlebar while being held for disorderly conduct. The total payment in this case was £150,000. Most of them——

Deputy Doherty: To whom was the £150,000 paid?

Mr. Dalton: It was paid to the woman involved.

Deputy Doherty: It was her cell which was set on fire. Who took the action?

Mr. Dalton: The woman involved took the action.

Deputy Doherty: Who was responsible for causing the fire?

Mr. Dalton: My recollection of it is that the Garda were deemed responsible because she was left in a cell with access to matches and had drink taken. We settled on advice for the amount mentioned earlier. When the State is the defendant, it sometimes makes sense to settle because one might not do well in court.

Those payments seem to be the major ones, I cannot find one which involves an assault.

Deputy Doherty: That makes a statement about the manner in which the Garda perform their duty. I suggest that this be acknowledged and highlighted.

Deputy Broughan: In relation to the moneys paid in that particular year for retirements, how many gardaí retire each year? How many retired during the year in question?

Mr. Dalton: I will obtain that figure for the Committee.

Deputy Broughan: Reorganisation has taken place in recent days with the appointment of the new assistant commissioners. One of our concerns is the situation whereby people become familiar with officers who may be working particularly well in their area. Those officers could be there for a relatively short period of time and then moved or promoted, which, for an individual’s career, is a good thing. Do the recent developments in relation to regionalisation deal with the worry that officers, from the rank of inspector upward, might become very familiar to the people of one area - and be very good at policing that district - but are then effectively lost to that area? The next officer assigned to the area must become familiar with intractable types of criminals. Is there concern within the Department about officers serving at a particular level for a short period before retiring or about their being transferred? Is it correct that these officers - even district gardaí in Dublin - do not obtain the local knowledge they require because they are transferred to different areas?

Mr. Dalton: It cuts both ways. Sometimes officers must be transferred because they become too familiar with an area or the people living there. I agree that at other times expertise can be lost. However, these are the kinds of things which the Commissioner takes into account when transferring personnel. I am aware of cases where very strong representations were made in deprived areas to retain particular gardaí at senior level. This was done because of their knowledge. In one case I can recall it was done because of his special capacity to deal with the local disadvantaged community. That capacity was deemed by the community itself as better than any other individual’s/organisation’s capacity to deal with them. If somebody has a particular aptitude for dealing with people in underprivileged situations, they would take account of that. It may be desirable to transfer personnel at other times because they might become too entrenched.

Deputy Broughan: Is Mr. Dalton concerned in relation to people retiring very early?

Mr. Dalton: Does the Deputy mean those who retire at 57 years of age and not 60 years of age?

Deputy Broughan: Fairly early.

Mr. Dalton: That is an issue that the sergeants have put to the Department at present. They believe they should continue until they reach 60 years of age. That will be a policy decision for Government.

Chairman: The Committee notes Vote 20.

VOTE 21 - PRISONS

Mr. Dalton further examined.

Chairman: The note on Subhead C refers to savings made on fuel, light and cleaning. What levels of saving were achieved in this area? What measures are being taken by the Department to reduce costs in this area?

Mr. Dalton: I do not have an explanation for the saving beyond that fuel was saved that year due to the mild winter.

Chairman: In note 6, Extra Remuneration, £5.1 million is included under the miscellaneous category. In respect of what where these payments made? Why did one individual receive a payment of £6,980?

Mr. Dalton: Rather than hold up the Committee’s proceedings, I will forward the figure to you.

Deputy B. O’Keeffe: Under miscellaneous items, payments totalling £188,337 were made in respect of claims arising out of injuries received by 18 prison officers and payments totalling £216,000 were made in respect of claims arising out of injuries received by 33 prisoners. Were they peculiar to particular prisons?

Mr. Dalton: No, they were spread around the country. I can give the Deputy some details with regard to prison officers. In Cork, for example there was a sum of £25,000, in respect of settlement and costs, for one officer who was hit by a football in the grounds. Another injury in Cork resulted in £25,000 being paid. A third case in Cork involved a payment of £15,000. In Portlaoise there was a settlement of £10,000 for somebody who slipped on a floor. Similarly in Mountjoy, somebody who slipped on a floor was paid £8,000 plus £4,000 costs.

Deputy Doherty: Who kicked the ball?

Mr. Dalton: The football was probably very accurately kicked.

Deputy Doherty: Was it deliberate?

Mr. Dalton: If one stands in a prison yard and should not be standing there, one would be surprised at the accuracy with which the football is kicked. I have had experience of footballs passing my head in the prison yard.

Chairman: Was he a Kerryman?

Mr. Dalton: I do not think so. We could do with him if he was.

Deputy B. O’Keeffe: With regard to Mountjoy being a hotbed for drugs, I asked my previous question because I wondered if there were incidences of claims relating to Mountjoy. Has the drugs situation in Mountjoy been alleviated? How many prison spaces, prisoners and prison officers are in Mountjoy?

Mr. Dalton: A conservative estimate is that about 40 per cent of the people who go into Mountjoy are on drugs before they arrive. In other words, it is not a problem that is created inside Mountjoy. Some people might go on drugs on the inside but most of those in Mountjoy who are addicted to drugs arrived there that way. A fact that is not widely known is that doctors are always amazed at how well these people look after a period spent in Mountjoy. There is a variety of reasons for that - there is more control in their lives and so forth.

A good deal is being done about the drugs problem in Mountjoy. We have introduced new surveillance equipment which deters people from passing drugs over the counter. The number of seizures has gone up by 100 per cent since these measures were adopted. The indications are that there is a significant fall-off in the amount of drugs getting into the prisons. Again, in Cork, footballs were employed - they were full of drugs and kicked over the wall. Netting has been installed and that has eliminated that problem.

There are 601 prisoners in Mountjoy as of today and 649 staff.

Deputy B. O’Keeffe: How many prison places are available? Is the prison being fully utilised?

Mr. Dalton: It is more than fully utilised. The capacity figure for Mountjoy is 556. It is not unusual in Mountjoy to find people sleeping at night under billiard tables and so forth. That is the reality of the situation and it is why the revolving door operates with such alacrity. Most nights the place is overcrowded and it is dangerous.

Deputy B. O’Keeffe: Are you concerned about the number of prison warders vis-à-vis the number of prisoners? It appears to be exceptionally high.

Mr. Dalton: It is high. However, it is an old prison and is not designed in the same way as it would be if it were being built now. That figure is also for round the clock cover.

Another huge problem has developed in all prisons in recent years. There are various forms of segregation in operation in prisons. First, there was HIV-AIDS which required a high staff ratio. The policy now is not to segregate HIV inmates any more; that was changed a few years ago. However, some people are still segregated. There is a hospital wing in Mountjoy which absorbs 88 staff. Segregation of sex offenders is a large problem in prisons now. They must be kept separate for the sake of good order, security and their own safety. A number of things which happened in prisons in the last ten or 15 years have pushed up staff numbers significantly.

We are trying to reverse that situation. When the Minister recently announced the extra 278 places over the next 18 months we did not seek staff increases which means we are acknowledging that there is a level of overstaffing. This applies particularly to Portlaoise where the ratio of prison officers to prisoners is quite high.

Deputy B. O’Keeffe: It is about two to one?

Mr. Dalton: Yes. We are absorbing the new places without any extra people. Portlaoise would be the major focus.

Deputy B. O’Keeffe: How could the situation in Portlaoise be allowed to continue for years? Additional space was not used because of the system of control of special prisoners in that jail.

Mr. Dalton: In all prison systems, one must make decisions from time to time as to what is the best way to maintain good order and security. In Northern Ireland there have been constant disputes over the years about segregation, political status and so forth. That is horrendously expensive from the point of view of staff as disorder is very expensive. The ratio in Northern Ireland would have been far higher than it is here, although it must be acknowledged that they have a different type of prisoner.

We took a different position. From 1969 on, when paramilitary prisoners became an issue, we decided that good order in prisons required that these people be kept separate. We followed that policy throughout the years and it made a good deal of sense because the amount of difficulty we had with paramilitary prisoners was greatly reduced. There is a choice involved - one could force paramilitary prisoners to house themselves with others. However, the consequent difficulties are more demanding on staff and costs than if one made a sensible decision in the first place, accepted the segregation and accepted that it does involve extra staff. We chose that option.

Deputy B. O’Keeffe: It was brought to my notice that four prisoners were introduced into Portlaoise at some time during the Christmas period and that people in one section of the prison refused to allow them into the prison. As a result they had to be taken care of overnight in one of the kitchens or some such location and they were transferred to another prison the following morning. Is that type of activity due to the lack of control we have in certain wings?

Mr. Dalton: I am not aware of the circumstances but I would not be surprised to hear that there were such difficulties, not just in Portlaoise but in any prison. There can be resentments and problems. If four child abusers were put into a prison, for example, one would almost certainly get the same message if it was not a prison for sex offenders. Segregation operates in prisons and it has become a big problem in recent years. I do not know the details of the case you have mentioned. I would be surprised if prison officers simply accepted that such a situation should be tolerated and that the prisoners should be kept in the kitchens. I cannot imagine that was the case. However, I can check it out.

Deputy Byrne: Why do ordinary common decent criminals feel they must brutalise and beat up sex offenders? Do they not regard such offenders as real prisoners?

Mr. Dalton: This is a fact of life not just here but all over the world. Prisoners who may have committed the most awful crimes take a segregationist attitude to criminals who commit a different type of crime. Rapists are likely to segregate themselves from child abusers. Robbers are likely to segregate themselves from all and sundry. It is the kettle calling the pot black, no matter how black the kettle itself is.

Deputy Byrne: What degree of choice do they have? If robbers want to stay away from rapists, are they allowed do so by the prison authorities?

Mr. Dalton: It is the other way round. Experience shows that rapists and other sex offenders get beaten up because other prisoners find them distasteful. The sensible thing is to eliminate the opportunity for this.

Deputy Byrne: A sum of £7,848 was written off. These are funds which were misappropriated at Fort Mitchell. Who stole this money?

Mr. Dalton: There are indications but no proof that a prison officer misappropriated tuck shop funds but, unfortunately, we could not investigate this because he disappeared. He was dismissed in his absence and we have not had any contact with him.

Deputy Byrne: There was a substantial saving of £712,000 under subhead E.1 because the recruitment and appointment of probation officers did not proceed as anticipated. This worries me because probation services are very important. Why did this recruitment not take place?

Mr. Dalton: I agree that they are vital services. Recruitment did not take place because of the embargo on the recruitment of civilians. Probation officers are civil servants and the various embargoes apply to them. This is an example of the kind of things which are affected by embargoes. The Department of Justice is not an exception, all Departments have special cases.

Deputy Byrne: We are examining the 1994 accounts? Was there an embargo that year?

Mr. Dalton: The recruitment process was very slow. In that year there was a reduction of 17 officers in the service arising from the grant of career breaks and job sharing. Some 31 joined the probation and welfare service leaving a net increase in staff of 14 probation officers. The panel of new recruits available from the Civil Service was not adequate to fill the posts sanctioned and it was necessary to hold another recruitment competition for probation and welfare officers. This competition was advertised on 26 May. The closing date was 16 June. Interviews were held between 12 and 19 September. No officers took up duty in 1994 as a result of their participation in this competition because of factors such as their contractual obligations to their employers, the necessity to give adequate notice and so on. There was a long slippage period between the advertisement, recruitment and appointment.

Deputy Byrne: Is there a relationship between this and Subhead E.3, where there is a saving of £823,000 because the development of several probation projects did not proceed as planned? What type of projects were envisaged?

Mr. Dalton: We had in mind the conversion of premises for use for probation purposes. We ran into difficulties because people were not keen to have these facilities in their neighbourhoods; we always have this problem. We planned to develop a hostel facility in Kilmainham but this did not go ahead. We also planned the renovation of a premises in Dominick Street. Objections arise to such developments. We have to deal with them and this holds up progress.

Deputy Byrne: Overtime and extra attendance amounted to more than £17 million. The top overtime earner last year was a prison officer who earned £26,000. This year someone is earning £29,600 in overtime. Is this person a prison officer?

Mr. Dalton: Yes. He is an assistant chief officer.

Deputy Byrne: Is this not a remarkable sum to be earning in overtime and is it not indicative of a flaw in the system? Why should a man who is presumably on a decent salary have to work such phenomenal hours in an environment which is supposed to be oppressive? We often hear spokespersons for the Prison Officers Association say that working in a prison is worse than being a prisoner because the environment is so oppressive. It surprises me that someone would volunteer for this amount of overtime or would be rostered for it if the circumstances are as oppressive for prison officials as they are made out to be.

Mr. Dalton: The whole overtime situation is very unsatisfactory and we fully acknowledge this. This individual’s total gross pay, including allowances and overtime, was approximately £56,000, which is a considerable sum. Others were paid almost as much. We have been looking at the overtime problem for years and all sorts of explanations can be offered for it. We managed to reduce overtime in 1995 to around £16 million. We have also managed to reduce the average amount of sick leave from 17 to 13 days. However, there is still a large overtime bill. We put proposals to the Department of Finance which involve taking a radical look at value for money in the prison service, including overtime. We are not talking only about the Department of Justice, the Department of Finance, the POA and prison staff. We want outsiders involved in this.

Deputy Byrne: I did not hear you say to which grade the person who earned £56,000 belongs. Could you repeat this?

Mr. Dalton: Assistant chief officer.

Deputy Byrne: What is this in layman’s language? Is it a promoted prison officer?

Mr. Dalton: This is the first promotional grade in the prison service. This person earned £56,000 in total. The second highest earner was paid approximately £53,000. This overtime was voluntary and not forced. Some people do not want to work overtime because of the oppressive environment about which you spoke.

Deputy Byrne: I do not want to deprive this man of his earnings. He is doing well and substantially better than Tds, who work hard and receive a great deal of abuse. Given the extent of unemployment and the need to recruit people, I am disturbed that people are earning £30,000 in overtime when additional staff could be recruited and well paid.

Deputy Doherty: I have a number of questions for you, Mr. Dalton. If you do not have the information now, I would be grateful if you could subsequently supply it to the Committee. What is the total number of prison spaces?

Mr. Dalton: 2,174.

Deputy Doherty: What is the total number of prisoners and what is the breakdown of the numbers in each prison?

Mr. Dalton: The total number of prisoners is 2,143, which is less than the number of useable spaces. A loss of spaces occurs because of segregation. There are 601 male prisoners and 39 female prisoners in Mountjoy. The maximum capacity in the female wing is 40 prisoners, which currently numbers 39; the capacity for Limerick prison is 120 prisoners and we currently have 127 - the capacity for Limerick’s female wing is 12 prisoners and we have 9 - the capacity for Cork prison is 244 prisoners and we have 249; the capacity for Arbour Hill is 130 prisoners, which is the number we have there; the capacity for Portlaoise prison is 207 prisoners and we have 142 - that is where the big gap arises - Shelton Abbey has a capacity for 56 prisoners and we have 52 there; the training unit has a capacity of 87 prisoners and we have 76; Loughan House has a capacity for 85 prisoners and we have 76; Fort Mitchell has a capacity for 102 prisoners and we have 100, St. Patrick’s has a capacity for 155 prisoners and we have 169, Shanganagh has a capacity for 60 prisoners and we have 56; and Wheatfield has a capacity for 320 prisoners and we have 317.

Deputy Doherty: What is the weekly cost of keeping a person in prison?

Mr. Dalton: It would be on average around £42,000 per annum.

Deputy Doherty: That average would apply across the board?

Mr. Dalton: Yes.

Deputy Doherty: For which type of crimes are these people in prison?

Mr. Dalton: I do not have that category of information. I can tell the Deputy the number for those committed of sex offences because I looked at the figure this morning. There are around 260 sex offenders, which is creating a huge problem because they get long sentences without being granted temporary release. The amount of space one had to play with is reducing all the time.

Deputy Doherty: Will it be possible to get a list of the categories of crime committed by prisoners on other occasions?

Mr. Dalton: We can get that for the Deputy.

Deputy Doherty: Will it also be possible to get the number of early releases during the last year and the categories of crimes a prisoner committed?

Mr. Dalton: It would be possible.

Deputy Doherty: Is it also possible to get information on those who were subsequently rearrested, charged and brought before the courts for other offences committed after having being given early release?

Mr. Dalton: We are often asked for that in Dáil questions but it is much more difficult to get it. We will have to try to get it at some point, but we do not have it at the moment.

Deputy Doherty: Would the Garda need to have that information in circumstances when it would need to give evidence of previous convictions when such persons are before the court?

Mr. Dalton: Yes.

Deputy Doherty: In that situation, members of the Garda would be entitled to have that information. I presume, on that basis, that the information would be available. If prisoners given early release have not been convicted, charged and imprisoned for a certain type of crime and were then subsequently arrested, charged and convicted after early release, that information would be available?

Mr. Dalton: It should be available in a criminal justice system.

Deputy Doherty: Will the Department do its best to make it available?

Mr. Dalton: We will.

Deputy Doherty: I want specific emphasis placed on any persons convicted of sex offences in the past, given early release and were subsequently arrested and charged with other types of crime, which may or may not include sexual crime.

Mr. Dalton: We do not grant early releases to that category of offenders.

Deputy Doherty: When did that policy come about?

Mr. Dalton: I do not know how long it has been in existence but I can check it for the Deputy. It is a firm policy of Ministers not to grant early release to sex offenders; they are the one category who serve their full time.

Deputy Doherty: Can Mr. Dalton find out when that policy first came into being, if it has been rigidly adhered to and if persons who preceded that policy were give early release and were subsequently arrested and charged for other crimes which may have included ones of a sexual nature?

Mr. Dalton: We were asked that question recently and did not have a figure for it. However, it is believed that it is a small figure. If I can get that information, I will do so. They may have served their time and committed sex offences afterwards but even then we could not pinpoint many of them.

Deputy Doherty: What type of system operates when a high number of people are refused admission to prisons because of lack of space? I know of a case of a person sentenced to two years imprisonment who was sent to St. Patrick’s. However, he could not be accommodated there and was subsequently brought to Mountjoy. However, due to the type of policy that operates, that person will be back on the streets again. That case involved the threatening and abuse of an elderly man. While it gave suspended sentences to two people who were involved, the court sentenced the third to two years imprisonment, but he was not taken into St. Patrick’s.

In the same court area, an elderly man was sent to prison for non-payment of a fine imposed for not having a television licence. There seems to be a necessity to examine and prioritise this situation. In the announcement of her package, the Minister gave the numbers of persons imprisoned in respect of non-payment of fines as 20, but when one considers factors like non-payment of insurance and tax - two people were convicted recently for selling intoxicating liquor without a proper licence and got four months each - it is not good enough that they should take up prison spaces when somebody who had beaten up a man in his mid-70s cannot be accommodated.

Mr. Dalton: I was surprised to hear this. The golden rule of prisons is that one never closes the door against people coming in, though it means early release for others. We have to take people from the courts.

I am glad the Deputy referred to the number of fine defaulters and television licence non-payers etc. in prison. There is a great misunderstanding about this matter. It is not the case that we have a large number of people of this kind in prison and if only we got them out it would improve the situation greatly. If we knew where they were, we would release them without delay, but we do not have them.

There are around 20 people convicted for non-payment of debts etc. in our prisons at any one time. The problem in saying that we would eliminate these 20 places is that nobody would ever bother paying a fine again. One would thereby demolish the other large alternative to custody. Unless we threaten some kind of prison sentence, some people will never pay up. If prison is threatened, many will pay.

Deputy Doherty: It is like the power of attachment held by the Revenue Commissioners.

Deputy Broughan: Are the statements made by Mr. Dalton about debt cases and fines etc. true? I and my solicitor rescued one of my constituents from Mountjoy on foot of a debt two years ago. The media has also referred to a woman who was put in prison for six days on foot or a court order in a custody battle. Deputy Upton referred to major criminals, against whom serious charges have been levelled almost openly in the public media, who are walking the streets with impunity while this woman, who displeased a judge by disagreeing with his order on access to her children, was imprisoned for nearly a week. When nonsense like that still exists, how can one say that no places are being taken up by people who should not be in jail?

Mr. Dalton: I did not say there were none but that the number was small. When people look at the prison problem and begin to consider solutions - I am saying this is true of all commentators - they often take consolation in the idea that the solution is along those lines. I wished that people would think more deeply about this problem because there is no such solution.

There may well be a case in Deputy Broughan’s example - I do not know the facts of it.

If it were the case that we could solve the prison problem by dealing with minor debtors, fine defaulters and those who did not pay their television licences, we would have done it long ago. The person beside me here has the doubtful privilege of looking at who is available to come out every evening and it is not a pretty sight at the moment. Every day we let out serious offenders because we have nobody else to let out. If we had fine defaulters they would be out. I do not know the facts of the custody case and I do not know how serious the breach was. I could not comment on an individual case or decision. I am making the point that there is a myth about the number of minor criminals in gaol. We are letting out people whom we would gladly keep if we had space for them.

Deputy Broughan: Is there any way the court rules could be amended in such a way that judges would be at least aware of the fact that prison places are being clogged up with people who, to the casual observer, would not seem to be serious criminals, even if it is in a women’s prison. Many people would say that it was outrageous that a woman was gaoled in those circumstances.

Mr. Dalton: I am not trying to avoid the question, I could not comment on the case as I do not know the facts. Oddly enough, the women’s prison is one place where we do not have overcrowding.

Deputy Broughan: In relation to Subhead C, prison services, we overspent there by about £433,000. Did that include medical services?

Mr. Dalton: Yes, medical supplies were up. The grant was £700,000 and the expenditure was £755,000. That was one of the areas covered under Subhead C. The cost of prisoner food, which has been the subject of great public entertainment, was up also. There is another popular myth to the effect that prisons are like gourmet restaurants. I do not know of any gourmet restaurant that will feed a person four meals a day for £3.13, which is the average cost per day of feeding a prisoner. When these things are said publicly it causes problems with prisoners who know that this is not the case. There is no mention of the fact that they bake most of their own bread or provide most of their own vegetables, which gourmet diners are not in the habit of doing. Neither are gourmet diners in the habit of washing up their own dishes. It costs £3.13 per day on average, but that cost went up by £170,000.

Deputy Broughan: You agree that it is good basic wholesome food?

Mr. Dalton: It is. I have eaten it, not because I was a prisoner, but because I wanted to see what it was like.

Deputy Broughan: I wish to return to the medical situation. A delegation of Deputies went to Mountjoy a number of months ago and we were concerned about the amazing drug statistics. I have taken on board what you said to a colleague, but we were flabbergasted to know why the drugs-free unit had not been established or when it is to be established. Governor Lonergan did not seem to be able to give us direct answers on that.

We were concerned about the treatment of prisoners who are desperate to come off drugs. Day after day in the Dáil, Deputies make the point that it is their estimation from contacts with your Department and the Garda that perhaps 70 to 80 per cent of crime in Dublin is drug related and it seems Mountjoy is awash with drugs. We were shown bags of evidence of different types of drugs that have been found on prisoners. I know you have introduced the screens and so on and I know the problem of totally stopping supply, but we were surprised that there is no permanent medical staff for prisoners who are desperate to give up and who want to be rehabilitated and do not want to go back to crime. If those are the circumstances, why did you not take steps long ago in Governor Lonergan’s time or before his time to create drug-free areas?

Mr. Dalton: We are doing it now. It will happen very shortly.

Deputy Broughan: Can you tell us when? When will the drug-free unit be open?

Mr. Dalton: My understanding is that it will be open in about a month, in March or April.

Deputy Broughan: How many prisoners?

Mr. Dalton: We do not know yet. We won’t know until we set it up. While many prisoners would swear that they want to come off drugs, we are spending a lot of money on a very sophisticated urinalysis machine just to establish that when they tell us they are off a drug they are actually off it. We are looking forward to seeing first how many people volunteer for this and how many people stick the pace when they see that it is actually a drugs-free unit. We have detoxification options, and various bodies that advise on drugs go in to Mountjoy. We have psychiatric and medical services.

Deputy Broughan: We saw the detoxification unit and it seemed to be a very short programme in relation to what is done in Cherry Orchard or Beaumont. A person who wanted to come off could get a start but then they were back into the ordinary situation, with drugs circulating, I presume, so they could go back on them relatively easily. It seemed to us to be a vicious circle. I know the point you are making in relation to whether people really want to come off drugs, but you will have urinalysis, the Governor will be able to chuck people out if they do not toe the line.

Mr. Dalton: We have no objection to methadone maintenance treatment. We depend entirely on what we are told by medical advisers in this regard, but this treatment will be provided for people who are on methadone in the community. The problem about it is that you very often find that not only are they taking the methadone, but they are taking shots of heroin as well. We are trying to tackle the problem of drugs in prisons. The issue of drugs in prisons will never be solved completely. People come in on drugs, they go back out into the same communities and they get involved in the same situation again.

Deputy Byrne: Who directs the medical officer as to policy in Mountjoy?

Mr. Dalton: The head of the medical service is the director of medical services. We appointed a medical director about three years ago.

Deputy Byrne: Who directs him as to the implementation of policy? With all due respects to your own philosophical viewpoint on methadone and treatment services, the medical officer for Mountjoy has had a philosophical objection to the prescribing of methadone. Who makes policy? Is the medical profession independent in some way of a direction being given by you as a civil servant?

Mr. Dalton: I would not give direction on medical issues. We have a director of medical services now. We are in the process of changing policy in this area.

Deputy Broughan: Have you got a permanent medical presence in Mountjoy? It is an important point, Chairman, because that and previous delegations, Ministers and various other Deputies have visited the prison and have come out thinking that certain steps should be taken and steps have not been taken. There is no permanent medical presence in Mountjoy prison for 600 or 700 people.

Mr. Dalton: No, there is not, but there is no shortage of doctors. Four doctors go in there every day.

Deputy Broughan: If you wanted to make a success of the drugs-free unit, would it not be a better situation if you had either trained warders or some permanent medical staff?

Mr. Dalton: We will train warders, and warders are trained already in these issues, but I do not know whether a full time doctor is needed in the unit just because people are off drugs. I do not think so. We will be guided by our own medical director on these issues. If it is necessary for the success of the service that we employ a doctor full time, we will do it. We are in the process, for the first time ever, of trying to employ nurses for the prison service. We do not have any nurses in the prison service either.

Deputy Upton: How much money is spent on the drugs service in the prison?

Mr. Dalton: I would not have a figure for that. I will try and get it for you. It is very difficult to identify a figure because technically every officer in the prison is meant to be preventing people from taking and using drugs and they all participate in it. I do not know how much of their time is spent on that. I do not think it would be possible to isolate it.

Deputy Upton: Is there a case to be made for evaluating the levels of drug addiction of people on entry to and exit from the prison?

Mr. Dalton: Yes, and that is one of the first tasks the researcher I am talking about will be asked to carry out.

Deputy Upton: Is there anything going on in that regard at present?

Mr. Dalton: We have a study from some years ago but we want to update that now. When I say we have 40 per cent roughly, that estimate is largely anecdotal, it is based on what people suspect. We want to analyse these things more scientifically. That is your cognitive research again.

Deputy Upton: I hope I am not misquoting the Governor on that meeting that Deputy Broughan and I, and some other colleagues, had with him but there was a suggestion of 90 per cent. I certainly have a figure of 90 per cent which would indicate that around 500 people have a drug problem. I am not stating that is certain but one way or another, given the concentration in the prison, it would seem there is a strong case for having an individual medical expert working on that all the time. It is the biggest concentration of drug addicts anywhere in the country. It is hard to explain why it is not wise, sensible and reasonable to develop a state-of-the-art approach towards dealing with the problem. Where else will you get a captive audience of drug addicts?

Mr. Dalton: A doctor can do nothing if you do not want to give it up yourself. You could have all the doctors in the world around them but if they are not willing to give up drugs themselves nothing can be done. The only thing you can do about it is to make sure they do not get them. I am not competent to advise on medical issues but if we got advice from our medical director that in order to solve the drugs problem in Mountjoy it was essential to employ a doctor, we would immediately ask the Department of Finance for sanction to do that.

Deputy Upton: Is the advice available at present contrary to that? In other words, does the advice you are receiving suggest it is not a good idea to employ a medical director or somebody who has full responsibility for dealing with the drugs aspect and for diminishing the extent of the problem? It is a great opportunity to try and limit this problem. Given the fact that large numbers of drug addicts go in and out of prison, there is huge potential for dealing with the drugs problem through prisons and through a follow up service subsequent to their release.

Mr. Dalton: We are not happy with the medical service in Mountjoy generally. I am not talking just about drugs but treatment generally. There are prisoners in there with all sorts of complaints. In fact, we have been in discussion with the IMO to change the medical service being provided. I have not yet received any recommendation from our own medical director, but I am told by the prisons people that one of the options they are considering is the appointment of a full time doctor. That would not be just for drugs but for ailments generally. If that is recommended, and if it is soundly based medically, it is a very small expenditure compared to the large amount of money spent on prisons, and I would not stand in the way of it.

Deputy Upton: Do you think there is a case to be made for studying the management of prisons?

Mr. Dalton: As I said earlier, because of the overtime situation and the value for money issues that are, understandably, raised by this Committee from time to time, we have made a proposal to the Department of Finance for a study of that kind.

Deputy Upton: Do you think there is a case to be made for explaining to the public what goes in prisons to a far better extent? Clearly, from what you said earlier in relation to the questions from Deputy Doherty, there seems to be a deficit of information on what the reality is and what the public perception is.

Mr. Dalton: We try to set it out in a very comprehensive way. Probably the most comprehensive document published in any area of public policy last year was the five year plan we published on prisons. Strangely enough, for a document in which we bared our souls about virtually everything, it got very little public reaction. We were quite surprised because we were absolutely honest about things like accommodation, medical services, etc. You name it, it is all in there.

Deputy Byrne: Did you consult with Gay Byrne as to his views on it?

Mr. Dalton: I have often intended to send it to him.

Deputy Upton: Do you think there is a case for relaunching that document with the central points that are in it?

Mr. Dalton: We have referred to it several times but it goes back to what I said before about some people having a view that we have done nothing since 1960. We have done things like this in the last year. We have also done other things that do not seem to have hit the public mind, for example, the idea that you should have a multi-disciplined approach to crime. We set up and chaired the interdepartmental group on urban crime which set out all the problems concerning the relevance of factors like unemployment etc., but that seems to have escaped also and people think that we have no policy or ideas on the issue. We have said all these things.

Deputy Upton: Your words remind me of the line from the Paul Simon song, “Man hears what he wants to hear, and disregards the rest”.

Chairman: I take it that we can note Vote 21.

Deputy Broughan: You have clearly done work in that area but do you ever feel you should try to get through to colleagues in the Department of the Environment, for example, in regard to estate management? In deprived urban areas certain steps have to be taken and that is that. It seems to me that the ideas have been done there. In relation to the report on Ronanstown in west Dublin it does not seem to have come through.

You cannot say categorically that any prisoner who went into Mountjoy drug free could conceivably have come out as a drug addict. Could that have happened?

Mr. Dalton: It could. I would certainly not put my hand on my heart and say that it has not. I would say it has happened that some have gone in clean and come out not clean. The information I get, a lot of which is anecdotal, is that the vast majority who come out unclean went in unclean.

Deputy Broughan: It is almost like a case where the emperor has no clothes. If you look at the relationship between serious drug addiction and serious crime - including larceny, physical attacks and burglaries - it is so clear. Surely a major effort on the medical treatment front, for people who genuinely want to get off and whom we could monitor, should be implemented immediately.

Mr. Dalton: I think so. We are trying to do it as fast as we can. I agree with you.

Chairman: I am sorry, Deputy, we have to conclude. Is it agreed that we note Votes 22 and 23? AGREED.

Deputy Broughan: You may need to have a look at those courts again, Chairman.

Chairman: Yes. We will be coming back to that again. Thank you very much.

The Witness withdrew.

THE COMMITTEE ADJOURNED.

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 29 Feabhra 1996

Thursday 29 February 1996

The Committee met at 11 a.m.

MEMBERS PRESENT

DEPUTY DENIS FOLEY IN THE CHAIR

Mr. John Purcell (Comptroller & Auditor General) called and examined.

Public Session.

Chairman: I gave a certain amount of latitude at the last meeting which excluded some of the Members toward the end of the meeting. I ask Members for their co-operation in not exceeding ten minutes each.

We have correspondence from the Department of the Marine.

Deputy Broughan: In relation to purchases of equipment by Departments, I did not consider the tone of the response from the Department of the Environment was in keeping with a response to a Dáil committee. We were briefly lectured on the operation of the European Union and what could and could not be done about purchases of equipment and so on. We were basically told to “get lost”. I received it during the week. I am not sure who made the inquiry about the purchases by Government Departments - it may have been Deputy Ellis or Deputy Doherty - but the tone of the response was not appropriate to a reply from a civil servant to a Dáil committee. We are well aware of the operation; the inquiry made was in relation the extent to which the Government was able to support domestic industry and suppliers. Would the Chairman write to the Secretary of the Department and ask him to account for the tone?

Chairman: Is that agreed? AGREED.

Deputy Ellis: The same can be said with regard to a reply from the same Department in relation to the National Roads Authority. The same tone appears in it.

Chairman: We will take that up.

Deputy Byrne: By the same token we should congratulate the Department of Social Welfare which seemed to go to great lengths in a three page response.

Deputy Ellis: Look at all the researchers they have there now.

Deputy Byrne: It is all about giving quality answers to questions from the PAC.

Deputy Ellis: I do not think they are doing that.

APPROPRIATION ACCOUNTS 1994

VOTE 9 - OFFICE OF THE REVENUE COMMISSIONERS

Mr. Cathal Mac Domhnaill (Chairman, Office of the Revenue Commissioners) called and examined.

Mr. Noel Kerins,Mr. Stephens O’Neill and Mr. Barra O Murchada (Department of Finance) in attendance.

Chairman: I welcome Mr. MacDomhnaill. Would you introduce your officials?

Mr. MacDomhnaill: I am accompanied by Mr. Frank Daly, Accountant General and Mr. Denis Power, Principal Officer.

Chairman: Paragraph 10 of the Report of the Comptroller and Auditor General reads:

Subhead A.6. - Office Premises Expenses

Irregularities - Furniture Supplies

10.The furniture requirements of the Office of the Revenue Commissioners are chiefly met through the Office of Public Works (OPW) and to a lesser extent directly by suppliers.

The Revenue Commissioners carried out an internal investigation following the discovery in February 1994 of irregularities relating to the acquisition of furniture. The investigation established that the irregularities were perpetrated by a junior employee, apparently acting alone, and involved the purchase of new furniture which had not been officially requisitioned for Revenue services. The furniture was either delivered directly to a low security Revenue store or delivered to Revenue offices and later removed to the low security store on the instructions of the employee. The furniture was then sold on by the employee to third parties. In perpetrating the irregularities the employee had, without authority, raised orders or altered existing ones and falsely certified invoices for payment. The employee was suspended from duty on 2 March 1994 and resigned on 3 February 1995.

In response to my inquiries, the Accounting Officer informed me that losses to the Revenue Commissioners resulting from the fraud were estimated to have been £42,890 and that none of this was likely to be recovered.

He explained that the principal weakness which facilitated the perpetration of the irregularities was that a junior employee was able to forge signatures on orders and invoices without detection for over a year. Other contributory factors were the lack of control over access to the computer system which generated the orders, lack of supervision in the moving of furniture and lack of segregation between the ordering and payment functions.

Regarding corrective action taken, he stated that specimen signatures of authorised officers were now being supplied to the Accountant General’s Office and the Furniture Branch of OPW and that OPW had been advised and had agreed only to process orders which were in writing, signed by an authorised official and were unaltered. He also stated that revised instructions for certifying invoices had issued, that the functions of ordering furniture and checking invoices had been separated and that access to the computer system used for ordering furniture had been restricted to certain named officials.

Regarding the adequacy of management and supervisory checks, he informed me that supervisory staff routinely and systematically check invoices against supporting documentation but that in a small number of cases this had not happened due to pressure of work and that in future, under the revised procedures now in place, there would be no such lapses. He also stated that a significant supervisory weakness was that a junior employee could, unsupervised, arrange for Revenue van drivers to move furniture on overtime and that supervisory staff had been reminded of the appropriate procedures for approving such overtime.

In general, the Accounting Officer considered the systems and procedures in operation for the acquisition and control of fixed assets to be satisfactory and he stated that since December 1994, an assets register had been put in place to properly record and effectively control all fixed assets. He further stated, that quite apart from the irregularity now highlighted, a firm of external consultants had also been engaged by Revenue in early 1994 to report and make recommendations for an integrated computerised purchasing and stock control system and that arising from their report a Steering Group had been set up which would be making recommendations shortly on procurement policies and procedures.

The Accounting Officer expressed confidence that these developments would lead to further improvements in the acquisition and control procedures.

Mr. Purcell: Paragraph 10 draws attention to the perpetration of a fraud in the furniture branch of the Revenue Commissioners over a period of 15 months which resulted in a loss of almost £43,000. The fraud involved a junior employee ordering furniture purportedly for Revenue purposes and selling it on at reduced prices to third parties. The fraud was facilitated by lack of control and supervision which enabled the individual to forge signatures on orders and invoices without detection for over a year. The Accounting Officer accepted that there were serious shortcomings in the way the system operated at the time and acknowledged the need for improvement. Remedial action has been taken to address the immediate problems and consultants have since examined the system. Their report is being considered by a steering group on procurement policies and procedures. My staff are currently finalising their own audit in this area and any matters arising therefrom will be taken up in due course with the Accounting Officer.

Chairman: This paragraph shows that factors such as forging signatures on orders and invoices, a lack of control as regards access to computer systems, a lack of supervision in moving furniture and a lack of segregation of duties contributed to this fraud. In view of the fact that over £13 million was spent in 1994 on office machinery and other office supplies, can you explain the absence of such basic controls?

Mr. MacDomhnaill: The difficulty is that the fraud occurred in an area where we expected the controls to operate. We identified the areas which needed to be tightened, such as the deliberate forging of documents and signatures and the sanctioning of overtime by an officer who did not have the authority to do so. We have since introduced procedures in relation to signatures. We now send specimen signatures to the Office of Public Works so that, in future, only documents bearing those signatures unamended will be accepted by the Office of Public Works. We have strengthened and made more rigorous the process of sanctioning overtime. One of the difficulties was that a junior officer was able to get furniture delivered by people on overtime so that it would not attract attention.

However, the fraud was uncovered by the system and the procedures. It would have come to light earlier only that it was difficult to believe it was happening. When it was uncovered we took immediate steps. The officer was suspended and the sanctions were quite severe. Court proceedings were instituted and a sentence was imposed. While we have further tightened up the structures, they did uncover the fraud and severe sanctions were applied - loss of job and a four years suspended sentence. Any system depends on the integrity of the people operating it and if that integrity is lacking, there are adequate sanctions to deter others from doing the same.

We have, as the Comptroller and Auditor General said, set up an expert study group to examine the procurement area because a number of other things have happened in the meantime. For example, we now have to establish a list of all assets being used in the Revenue offices. This is a new requirement from the Department of Finance. There is also the question of value for money which is now the remit of the Comptroller and Auditor General. The expert group has consulted with other major organisations on how they deal with these issues. It has devised interim recommendations which we are in the process of implementing.

Chairman: Some £42,890 is unlikely to be recovered. What is the position in this regard?

Mr. MacDomhnaill: The money will almost certainly not be recovered because it was gambled.

Deputy Ellis: Was any action taken against the third party, the receiver of the goods, or were they identified?

Mr. MacDomhnaill: As soon as this matter was identified it was handed over to the Garda to pursue criminal charges. The gardaí would have questioned the culprit about the other accomplices involved. I do not have any information in this regard, but I know the matter was pursued by the gardaí.

Deputy Ellis: In this, as in a lot of other cases, the receiver is normally as guilty as the person who carries out the crime if they know what they are receiving. Did the gardaí send you a final report of their investigation?

Mr. MacDomhnaill: Our final report comes from the people we send to the court case. They reported back to us on the result of the court case which affected our former employee only.

Deputy Ellis: Was the receiver’s name mentioned in court?

Mr. MacDomhnaill: I have no information on that.

Deputy Ellis: Is there any possibility you might have been able to recoup some of the loss from whoever received the goods? A person cannot easily dispose of £43,000 worth of furniture without finding someone with a home for it.

Mr. MacDomhnaill: I am advised that the person or persons concerned - I do not suppose it was one culprit - were not identified. It depends on whether the person concerned will co-operate with the gardaí in the course of giving evidence. Our understanding is that such information was not forthcoming.

Deputy Ellis: The culprit did not tell the gardaí the names of his accomplices. In view of that fact, have you written to the Garda to see if further action can be taken? I am sure the public would like to know who received the furniture. If that information was not made available, it should have had a bearing on the sentence.

Mr. MacDomhnaill: I am sure it did because a four year sentence is quite severe.

Deputy Ellis: A suspended sentence is nothing provided a person behaves. It would have been much worse if the person had been given a six months sentence which was not suspended. This would have been more appropriate when they were not prepared to give the gardaí information.

You said you now have a replacement system. Has the steering group issued its recommendations and have they been implemented?

Mr. MacDomhnaill: We have got interim recommendations, but we do not have a report. This is a much wider issue now because one of the things we must take on board is the computerisation of the process. That means ascertaining if there is an adequate system to do all the things we want to do. We want to take on board the agenda of value for money and all the regulations which govern procurement - European Union and Department of Finance regulations.

The main recommendation so far is that we should centralise control and computerisation but, as far as possible, maintain a delegated function. We have a wide spread of offices throughout the country. It has been suggested that responsibility and decision-making should be pushed down the organisation as far as possible. We want to address that and at the same time take into account that the area of expertise in relation to contracts, procurement and conditions must be met. We should have a system which will centralise the expertise in Supply Branch with a computer system that would enable certain decisions and procurements of a smaller nature to be made on a dispersed basis, but the whole thing would be controlled centrally. That is the way it will go and we are in the process of ascertaining whether a computer system has already been designed which will satisfy our needs. This is where consultation with other organisations has taken place. We will then go to tender to have the system installed. That is the main recommendation at this point but in this process we will build many safeguards into the computer system to prevent fraud and this type of thing happening again.

Deputy Ellis: What is the cost of the consultants so far?

Mr. MacDomhnaill: £3,500.

Deputy Ellis: I have another question; if Mr. MacDomhnaill does not want to answer it directly he can reply in writing to the Committee. What background have the appointed consultants in this type of work, or is it an accountancy firm?

Mr. MacDomhnaill: The firm is a specialist firm in procurement and procurement control. As the Comptroller and Auditor General said, there is an ongoing audit there also and we hope we will have an input and take on board his requirements also.

Deputy Ellis: What internal expertise did the Department have of controls prior to this? Would there not have been quite an amount, in view of the fact that Mr. MacDomhnaill stated earlier that the system put in place managed to identify it even at the £42,000 stage? The Department seems to be getting away rather——

Mr. MacDomhnaill: It was a clerical manual system with a certain amount of computer support. We are now talking about a major computer support with information output and controls. It is a different level of expertise. This is what we have to move away from all the time - we are in a state of constant change and we must take advantage of technology as it becomes available and use the extra controls needed for accountability also.

Deputy Ellis: What does Mr. MacDomhnaill anticipate the system will cost, hardware plus programmes?

Mr. MacDomhnaill: I know that at present we are also looking at a system which would enable us to monitor staff costs, control staff allocations, etc. The software for that kind of system costs about £67,000. We would have a lot of the hardware already but we might have to get, for example, a mid-range computer to deal with this, although the network is in place. The software cost could be of that order.

Deputy Ellis: Will the new system require more or fewer personnel to run it? Will there be a net saving or a net cost?

Mr. MacDomhnaill: What we are talking about here is our ability to deal will all the new things coming on board — an asset register, value for money audits plus control of procurement. A lot of extra work has come on the agenda and we hope the benefit or dividend would be that this work could be done with the same staff resource, rather than——

Deputy Ellis: Extra staff as a result of the new computer?

Mr. MacDomhnaill: Yes.

Deputy Upton: May I ask the Accounting Officer about the amount of outstanding tax which has not been collected?

Chairman: We are not on this point now.

Deputy Upton: Are we not on pages 10 to 26?

Chairman: No, paragraph 10.

Deputy Upton: Is this just about the furniture?

Chairman: Yes.

Deputy Upton: I have no interest in furniture.

Deputy Broughan: We should not spend too long on this, as we are considering Mr. MacDomhnaill’s management of £13 billion and this is only a small amount. Is he sure this is only £43,000? He said it was an estimate.

Mr. MacDomhnaill: No, we trawled through every procurement, covering the time before this person came into that area up to the date of discovery and we are satisfied we have identified all the invoices involved.

Deputy Broughan: Where was the employee based and the where was the low security store to which he had access?

Mr. MacDomhnaill: The employee was in the Supply Branch.

Deputy Broughan: Surely that is not the Castle, is it?

Mr. MacDomhnaill: Sometimes it is in the Castle, sometimes in Castle House but it is in the Castle precincts. He worked in that area. The fortuitous circumstance which enabled this to reach the level it did was that a massive refurbishment of Castle House was ongoing and it was decided the furniture of the refurbished area, with new modern wiring going on, would be totally new furniture, so there was a high peak of furniture change at this time which masked these transactions — otherwise they would have stood out more in terms of normal furniture replacement. The store was meant to be for discarded furniture, so there was low level security and the diversion of new furniture into it was to facilitate the other parties, who have not been identified, to pick it up without coming near the Castle.

Deputy Broughan: The irony in this situation is that we are depending on Mr. MacDomhnaill to ensure taxation revenue comes in, to the huge amount of £13 billion, but an employee in Dublin Castle was removing some of the Revenue’s own assets. One hopes this irony will not recur.

Mr. MacDomhnaill: I accept that.

Deputy Byrne: I am interested in Mr. MacDomhnaill’s comment that it was difficult to believe it was actually happening. One would have imagined, given that we are talking about the Revenue Commissioners, the experts in investigating fraudulent activities by deviant employers, non-compliant taxpayers, etc., that they would have a network of investigators that is second to none. It should then not have been so surprising to them to think that a staff member would do this, given the type of investigations they carry out, except that the in-house mechanisms were fundamentally flawed. What was the grade of the junior person involved in the fraud?

Mr. MacDomhnaill: He was a clerical officer, the next above——

Deputy Byrne: What is surprising is that the Revenue’s offices could allow a clerical officer to move furniture from point A to point B and to sanction the overtime payments to the driver moving the furniture. It may not be that surprising but it is rather disturbing that it could happen, particularly in the Revenue Commissioners. Does Mr. MacDomhnaill agree with me?

Mr. MacDomhnaill: I do but I should point out that this person forged other people’s signatures. Procedures were not as lax as all that but what happened was that he forged other people’s signatures at a higher level and put in verbal instead of written orders. We had to tighten up our procedure about people accepting verbal orders rather than written, authenticated orders with identified signatures. He was able to take advantage and not follow the system, rather than that the system itself was faulty.

Deputy Byrne: When the total cost to the State — a loss of £42,000 plus on the furniture — was calculated, did anyone in Revenue evaluate the additional costs to the State in overtime for driving around vans containing ill-gotten goods, for example? Was that ever evaluated?

Mr. MacDomhnaill: The cost of overtime would be a factor also — people were paid overtime for delivering this furniture that was stolen. I agree that would be an additional cost; I do not know if that can be quantified at this stage. There would have been an overtime loss in delivering furniture that did not reach the correct destination.

Deputy Byrne: Is it fair to say that your eye was wiped by this entrepreneurial gambler? If there is a message in this it is that gambling is a terrible disease and gamblers will do everything to get money for their gambling addiction. Do you have in-house counselling or personnel that can deal with people with addiction problems?

Mr. MacDomhnaill: We have a welfare system. Our disciplinary procedure is tied into people availing of these counselling services. Alcoholism is another problem we encounter. With a staff of 6,000 one encounters almost every conceivable type of problem. We encourage people to get counselling. However, ultimately, when a fraud like this occurs we must abide by the sanctions and the deterrent factor.

One must have a degree of sympathy with those who have major obsessional problems. We have a welfare system to help them but ultimately, if they step over the line we have no option but to go for suspension and dismissal.

Deputy Byrne: Had this individual come to the attention of the counselling services before he was fired?

Mr. MacDomhnaill: No.

Deputy Byrne: How could you guarantee that only furniture was involved? Is there any possibility that he may have been engaged in other fraudulent activities?

Mr. MacDomhnaill: This arose in the area in which he was working. He did not have access to other decision making processes.

Chairman: I propose that the Committee note this paragraph and trust that the revised procedures will ensure that irregularities of this kind will not recur. Is that agreed? AGREED.

Chairman: Paragraphs 11 to 14, inclusive, of the Report of the Comptroller and Auditor General read:

Revenue Account

Basis for Audit

11.An Account showing all revenue received and paid over to the Exchequer by the Revenue Commissioners is furnished to me annually. I am required under Section 3 of the Comptroller and Auditor General (Amendment) Act 1993 to carry out such examinations of this account as I consider appropriate in order to satisfy myself as to its completeness and accuracy and to report to Dáil Éireann on the results of my examinations. The results of my examinations have been generally satisfactory except for the matters referred to in Paragraph 15.

Revenue Collected

12.Revenue collected for the years 1994 and 1993 under its main headings is as follows:

* The amount paid into the Exchequer was £10,405m leaving a balance of £18m compared to £13m at the end of the previous year.

Extra-Statutory Repayments

13.Extra-statutory repayments were made during the year of Value Added Tax £780,603 (in respect of diplomatic privilege) and Stamp Duties £3,276 (mainly in respect of lost stamped deeds).

Under Section 113 of the Finance Act 1992, Excise Duty repayments to diplomatic missions have been placed on a statutory basis since 1 January 1993, while following concerns expressed by the Committee of Public Accounts, a Ministerial Order is to be made in relation to Value Added Tax repayments to diplomatic missions.

Write-Offs

14.The Revenue Commissioners have furnished me with details of cases in which claimsof £100 or more under the Revenue Acts were written off during the year ended 31 December 1994.

The total amount £98,894,460 is made up as follows:

The distribution according to the grounds of write-off is:-

I have made a test examination of the cases and I am satisfied with the action taken.

It should be noted that the amount written off may overstate the actual liability as many of the items included in the arrears represent estimated assessments.

Mr. Purcell: It is a good idea to take paragraphs 11 to 14 inclusive because they are the standard paragraphs which I am more or less required to include each year on my audit of the Revenue. Paragraph 11 merely sets out the basis for the audit of the Revenue accounts. Paragraph 12 shows the total of revenue collected in 1994, under its main headings. Paragraph 13 shows the amount of extra statutory repayment of VAT in respect of diplomatic privilege. A small amount for stamp duties is also included.

The Committee will recall that, following concerns expressed by it, it was decided to put these VAT repayments on a statutory basis. This requires the making of a Ministerial Order which I am informed is imminent. Paragraph 14 records that nearly £99 million in taxes were written off by the Commissioners in 1994 for the reasons stated. This amount would not include the original tax liabilities covered by incentive amnesty payments. Technically they are discharged rather than written off.

Chairman: What means do you propose to identify the figures with regard to paragraph 12 and to measure the extra yield from taxes, specifically, income tax and

corporation tax provided by extra taxpayers coming into the tax net as a result of the amnesty? Do you have these figures for 1994-95?

Mr. MacDomhnaill: We cannot give an answer to this. As you know the main part of the amnesty was confidential.

Chairman: Will you have extra tax yields as a result?

Mr. MacDomhnaill: We are expecting an uplift in the annual take as a result of the amnesty. However, if you were to go by the main corporation tax result in 1995, there was a considerable drop, of £150 million, in this tax. The kind of increment one would get as a result of new cases and uplift would be small by comparison with the dramatic things that can happen in the financial sector, where there are multi nationals and enormous bond losses, which is the main factor accounting for the loss of £150 million in 1995. It is, therefore, very difficult to measure whether there is an uplift, which would be very small by comparison with the other factors that are operating.

Chairman: With regard to paragraph 13, has any progress been made on the Ministerial Order to regularise VAT payments to diplomatic missions and when can we expect one to be introduced?

Mr. MacDomhnaill: I understand that the difficulty about making a Ministerial Order relates to the whole question of reciprocity in this area. If one unilaterally gives a relief one undermines one’s ability to negotiate reciprocal arrangements for our diplomats in the other countries. This is the main difficulty they are trying to surmount.

Chairman: With regard to paragraph 14, the total amount written off for each of the last few years was in the order of £100 million. What governs the total level of write-offs each year? What year do the write-offs refer to? Is there an amount accumulated that is waiting to be written off?

Mr. MacDomhnaill: Do you want me to go through each of the figures?

Chairman: No, I was referring to the figures on paragraph 14, for example there is an amount of £7,146,000 for 1993 in respect of concerns that cannot be traced or are outside the jurisdiction.

Mr. MacDomhnaill: I have a list but it is extensive.

Chairman: You can submit a copy of it.

Mr. MacDomhnaill: The earliest years, before 1984–85, accounted for 15 per cent of the arrear. The year 1984 account for 4 per cent of the arrear, the year 1985 for another 4 per cent. The figure is 4 per cent for each year up to 1989. Following that, 6 per cent of the arrear relates to the year 1990, 7 per cent relates to the year 1991, 11 per cent relates to the year 1992, 14 per cent relates to the year 1993 and 23 per cent relates to the year 1994. That is the breakdown in terms of years. Not all those cases ended in those years. Some cases covered many years, so there is an overlap. However, that is the way it breaks down into years.

Chairman: The amount written off in income tax has risen by approximately 50 per cent. Why is this and how are write-off levels in each category determined?

Mr. MacDomhnaill: With regard to the percentage of income tax, the PAYE is 32 per cent——-

Chairman: I take that. According to paragraph 14, the amount in respect of income tax increased from £8,374,000 in 1993 to £12,433,000 in 1994, with the number of items increased from 933 in 1993 to 1,477 in 1994.

Mr. MacDomhnaill: There could be an explanation. In this whole write-off process we have devoted considerable resources to this area for a number of years because there has been a historical build up when it was not attended to. We are proceeding on the basis of larger cases in the earlier years so now we have drifted down to a smaller case size. That would tend to bring in more income tax cases than the other ones which tend to be larger tax certificates. That is probably the explanation. I know from looking at these lists that the average size of the case has been going down steadily as we are moving through the register. I would expect to get more income tax cases in that situation.

Chairman: When you refer to items, do you mean individuals? It is stated in the documenation that the number of items was 923 in 1993 and 1,477 in 1994. Would they be individual cases?

Mr. MacDomhnaill: These are cases. There would be a number of years in each case.

Deputy Ellis: Is it correct to say that revenue intake went up by roughly £1.1 billion from 1993 to 1994?

Mr. MacDomhnaill: The comparative table shows that the income tax in 1993 was £3,803 million, and went up to £4,098 million in 1994.

Deputy Ellis: The overall take under all the various headings increased from £9,312 million to £10,410 million.

Mr. MacDomhnaill: That is the figure for all revenue tax certificates. The amount increased from £9,312 million to £10,410 million.

Deputy Ellis: The table shows an increase from £155 million to £185 million. What was the big increase in customs take made up of?

Mr. MacDomhnaill: The excess of the receipts over forecast of 6.6 per cent is relatively modest compared with the excess in 1993 of 15.3 per cent. The higher than anticipated level of receipts reflected the continuing strong performance of the economy, particularly in the foreign owned manufacturing sector which relies heavily on imports of raw materials and components from non EU members. Customs duty applies only to imports from outside the European Union.

Deputy Ellis: That is the explanation for the increase right across the board with the exception of income tax?

Mr. MacDomhnaill: The increase in the income tax reflects a buoyancy as well. More people are working, which acts to counteract budget concessions. In the last number of years our records will show that there has been a substantial increase in the number of people in employment, which accounts for a substantial part of the percentage.

Deputy Ellis: I take it the Ministerial Order concerning VAT repayments to diplomatic missions will be cleared up quickly? Has this been cleared up already?

Mr. MacDomhnaill: I understand that it is at a very advanced stage. The difficulty I mentioned is this difficulty of not losing reciprocity.

Deputy Ellis: What do you envisage will be the tax take for 1995, or are those figures available to you yet?

Mr. MacDomhnaill: Our estimated figures of the take are as follows: customs, £202,621,000; excise, £2,114,913,000; residential property tax, £12,135,000; capital acquisitions tax, £59,585,000; capital gains tax, £44,033,000; stamp duties, £286,049,000; income tax, £4,122,675,000; income levy, £5,799,000; corporation tax, £1,148,609,000; value added tax, £2,888,742,000. That gives a total of £10,885,161,000. That is exclusive of the PRSI which we also collect.

Deputy Ellis: In other words, tax take will grow by roughly £500 million.

Mr. MacDomhnaill: We estimate that it will grow by £481 million.

Deputy Upton: The total tax take went up from £9.3 billion to £10.4 billion. The write-off seemed fairly static. The previous figure of £97 million increased to £98.8 million. As a proportion of the whole, the amount of write-off seems to have got smaller. What is the basis for that? Is my analysis correct?

Mr. MacDomhnaill: Are you talking about the value added tax write-off?

Deputy Upton: No, I am talking about the uncollected tax which was written off. This amounted to £98.8 million in 1994 and £97 million in 1994. The actual figure increased by £1 million whereas the total take went up to £10.4 billion from £9.3 billion. As a fraction of the total, the write-off has decreased. What is the reason for that? It is very encouraging.

Mr. MacDomhnaill: The write-off is substantially a function of earlier years. I indicated the make up of the arrears in percentages. I could also give you a break down of the age of write-offs by reference to the various tax heads. Arrears of less than two years made up only 1.3 per cent of the whole write-off. Arrears of two to four years made up 9.2 per cent, arrears five to nine years old made up 37 per cent and arrears over 10 years came to 52.5 per cent. You can see that the current year is not reflected in the write-off because the write-off process is started only after all other avenues of collection have been exhausted.

The factor which determines the amount we can write-off is the resource which we have devoted to this task and the number of cases they can process. Each of these cases has to be submitted to the Comptroller and Auditor General and various people have to make spot checks. I make some spot checks myself just to be sure that the system is being properly followed and that whole process takes time.

The resources we put into this determine how much of it can be done in any one year. I have sent a submission to the Comptroller and Auditor General about the overall backlog from past years which is still very substantial and we will be working systematically through that. Part of what we will get will be recoveries, part of what we will get will be what the Comptroller and Auditor General described as discharged, in other words the tax will be written down to a new sum which is a correct sum and eventually the residue will come up here for write-off. Current buoyancy will not be reflected in the write-off.

We hope that write-offs will be substantially reduced in the future because we have stepped up a lot in our proficiency as regards estimates. You are probably all sick and tired of hearing about the estimated content in these figures. The estimated content in the write-off is very significant. Some 96.6 per cent of the corporation tax written off is estimated in these cases as well as 94.3 per cent of the income tax. We have tightened up the estimation process a lot and we hope that cases will be properly examined and appraised in the future before substantial estimates are made. In the past, as I explained in my submission to the Comptroller and Auditor General, there was an over reliance on an automatic computer estimating process which led to a lot of spurious arrears. Therefore, while these figures look very significant in terms of write-off, much of it is not real tax but estimates which never materialised. As I said, 96.6 per cent of corporation tax written off was estimated. These estimates did not yield tax and now have to be written off.

Deputy Upton: The write-off is about 1 per cent of the take. How does that compare with international figures? What is the ultimate level to which that can realistically be taken?

MacDomhnaill: I understand that in other jurisdictions where they do not retain the book debts indefinitely - as we do here where we have to individually write them off - they lapse after a certain number of years and write-offs can be up to 3 or 4 per cent. It varies from country to country. We hope, if we can perfect our system, to get it below 1 per cent but it is all a function of the resources put into pursuance. The value for money exercises would be very significant here as the Comptroller and Auditor General looks at this from a value for money point of view. There are cases where the arrears are too small to justify the cost of pursuing them through the courts.

There are about 100 people involved in various aspects of arrears work. Up to 80 per cent of arrears can be discharged before this detailed arrears process begins. There is a great deal of spurious material still on the books. As the Comptroller and Auditor General pointed out, we should get a better picture in the future with the better estimation process we are installing and the technology we are developing to help with case work.

Deputy Upton: I wish to ask specifically about the write-offs in relation to compassionate allowance. You were obviously much more compassionate in 1994 than in 1993 - almost four times as compassionate. In 1993, 153 items were written off on compassionate grounds but it increased in 1994 to 557 items. Did you change or did the circumstances change?

Mr. MacDomhnaill: The Chairman asked virtually the same question when he asked about the size of the case write-off. As we move downwards from larger corporate liabilities to individual cases, the fact that we have more individual write-off cases signifies that there is more likely to be hardship in individual cases rather than in corporate ones.

Deputy Upton: The bulk of the write-offs seems to be in VAT and PAYE. Is there any way of anticipating that and trying to prevent the level from being so high? Those two account for about 5,000 write-offs and corporation tax write-offs are somewhat smaller at £14 million. Is there any scope for improvement on that front?

Mr. MacDomhnaill: PAYE and VAT are the big yielders of tax revenue. Another fact, which might not be apparent, is that there is a very rapid cycle in relation to PAYE. For example, new PAYE becomes due every month and new VAT becomes due every two months, whereas corporation and income tax have yearly cycles. The result of that is, in order to keep revenue at the targets which we set, we have no option but to make estimates in the VAT and PAYE areas so as to start various procedures such as sheriff and solicitor action very early in large cases.

In the past, such estimates were made by computer process. We hope, in future, only to make such estimates where the enforcement arm of the Collector General can guarantee that it will be followed by rapid individual case working. Where that cannot be guaranteed or they cannot be assured that the level they are striking in the estimates is representative of the business, the case will be referred to the Chief Inspectors for an evaluation. We hope that these evaluations will take place before the estimation is put in.

We are at an interim stage at the moment and we have to deal with any arrears which have built up by referring them to the Chief Inspectors’ branch for this evaluation. However, we will stop making any further estimates in those cases until we get to grips with the case. In future, we will require this appraisal to be done of new cases upfront so that the estimates are informed. About 30 per cent of the year’s yield hinges on getting estimates made and pursued. In order to meet the targets, we have no option but to have some estimation at all times, to ensure compliance in terms of timeliness more so than payment. If a month’s revenue slips from one year to another it means that £1,000 million is gone out of the budget. Maintaining timeliness in addition to payment is the big factor in the estimates.

Deputy Upton: To what extent are these write-offs influenced by representations or concerns about closing down businesses and so on? To what degree do you use your discretion in these matters? I presume that you are constantly placed in dilemmas where people tell you that their businesses will collapse and their employees will be put on the dole. How do you manage those representations and is there any scope for improvement there?

Mr. MacDomhnaill: We receive several thousand representations every year from all quarters about individual cases. Where I, or my private secretary, recognise a case as being within one of these categories we refer it to the appropriate area for consideration. By and large, the vast bulk of these cases come up from working through the arrears on the books.

Deputy Broughan: In how many cases of write-offs on grounds of liquidation, receivership and bankruptcy did the Revenue Commissioners, as major creditors, initiate liquidation procedures?

Mr. MacDomhnaill: The figures show that a very large proportion of this write-off relates to incorporated bodies with limited liability. Individuals account for 28 per cent of the tax write-off and limited companies for 72 per cent. A very substantial amount of this relates to the type of case you are talking about. About half are companies which have formally been liquidated - those would be very large cases - but in a substantial number of cases people just walk away from companies.

There is a huge number of companies with very small paid up capital which operate on credit - we call it phoenix syndrome. We have incorporated a new approach to the phoenix syndrome in our policy document, a copy of which I have sent to the Comptroller and Auditor General. We should have a means of identifying the people behind phoenix companies. We must look at each company as a separate persona and cannot treat companies as being identical with the people behind them. However, we can, as a matter of common sense——

Deputy Broughan: You may be interested to know that today is the final day for Deputies to declare their interests in relation to directorships and so on in line with the new Ethics in Government Bill. Are certain individuals repeatedly named in write-offs as directors? Could you identify those and take any further action on their activities?

Mr. MacDomhnaill: The Deputy has put his finger on our new strategy. In future, as soon as we get cases like these, the Collector General will have to draw attention to them in the first instance and identify the principals behind them. The next stage is that as new companies register we will have to ascertain who is behind them. Mostly, when a company is registered in the Companies Office there are only two clerks in a solicitor’s office named as shareholders. We will have to ask for information about companies. We can do nothing when they are incorporated but when they register for value added tax or PAYE in particular, we have to find out who is behind them. In many of these cases they will not give us that information so we must then have a follow up operation, which we call a compliance operation.

We have diverted substantial new resources into this area to deal with this phoenix syndrome so that we will have a rapid response to it. Unfortunately, we cannot do anything about limited liability and the fact that people can walk away from companies - that is a larger question involving the encouraging of investment - but we can improve our performance by having a rapid response to phoenix syndrome companies.

Deputy Broughan: Is there any way the names of those individuals who repeatedly default on their obligations to the Revenue can be made public so we could know which businessmen were continuously abusing our tax laws?

Mr. MacDomhnaill: We are dealing with a limited company that goes into liquidation - there will be much publicity about that - while directors of other companies will walk away and these companies will eventually be struck off the register by the Registrar of Companies. There are around 14,000 new companies incorporated every year. Another substantial number leave the register every year and this is where the difficulty lies. They are separate legal personas from the directors and shareholders.

However, we are entitled to adopt a rapid response when we know the promoters behind the company are the same as those who have walked away from debts beforehand, notwithstanding the fact that it is a separate company. It is amazing how much of an arrear can accumulate in a period of two years while a company is in the shadow. By the time our normal procedures catch up with it, there is a massive amount of money to write off. Therefore, we think we are entitled to expedite that whole process.

Deputy Broughan: Paragraph 12 states that residential property tax increased during the period 1993–94. Many Dublin Deputies consider it as a tax that is only being levied on the Dublin region. Some £14 million was realised from that tax in 1994. What is the cost to revenue ratio for residential property tax? The total cost of collecting the £10.5 billion for that year - £135 million - came from the Office of the Revenue Commissioners. While it is a policy area, in view of its costs could we do without it?

Mr. MacDomhnaill: We estimate the total cost for the year as £550,000. Therefore, the ratio is around 28:1.

Deputy Broughan: It is around 100:1 for general taxation.

Mr. MacDomhnaill: In all areas of capital taxation, the ratio would be much higher. They are more complex and require much legal background knowledge.

Deputy Broughan: Is it not an expensive and costly tax to administer? What percentage of the £14 million in 1994 or the £9 million in 1993 was raised from the Dublin region?

Mr. MacDomhnaill: The total raised by Dublin for the April 1994 valuation date was £8,950,688, which was paid by 22,296 people.

Deputy Broughan: Is this not an astonishing tax? Of all taxes levied by the Revenue Commissioners, over two thirds of this tax was paid by the Dublin region. Residential property tax is, in effect, a tax on the people of Dublin.

Mr. MacDomhnaill: Cork also made a substantial payment and the dormitory counties around Dublin were also reflected highly. It is totally a measure of the value of property. When there tends to be prosperity, there also tends to be property.

Deputy Broughan: If an employed person wants to live in an area like Howth or Sutton and happens to be living in a nominally valuable house, they will have to pay a large and disproportionate tax.

The estimated figures given for income tax in 1994 was £4,098 million. How much of that came from the farming community?

Mr. MacDomhnaill: The level of income tax paid on farming profits by the farming sector for the years 1993–95 was £55 million in 1993, £66.5 million in 1994 and £70 million in 1995.

Deputy Broughan: How many taxpayers were involved?

Chairman: I ask you to conclude, Deputy.

Deputy Broughan: This is an important issue, Sir, even in north Kerry.

Mr. B. O’Keeffe: The Deputy’s leader would be pleased with him.

Deputy Upton: He has been for years.

Deputy Ellis: And he paid the price.

Deputy Broughan: That is what I am doing here.

Mr. MacDomhnaill: I do not have that figure with me at the moment but I can send it to the Committee.

Deputy Broughan: It highlights the unbelievably low income tax contribution from the farming community. Out of an overall tax figure of well over £4 billion, they only contribute £70 million. Yet that community partakes fully in all services, such as health, education etc. While this tax is a policy issue, it still is a frightening statistic.

Deputy B. O’Keeffe: Is it possible for Mr. MacDomhnaill to give us an idea of the indirect taxes paid by the farming community?

Deputy Ellis: That is where farmers pay their greatest tax.

Deputy Broughan: They are also paid by the non-farming community.

Mr. MacDomhnaill: There is no way we can break down indirect payments. VAT is paid to us by business people; we do not know their customers and the excise comes to us through the breweries and distilleries. We are too high on the distribution chain to be able to identify the consumer sectors.

Chairman: You referred to a question from Deputy Broughan about directors walking away from businesses. Are they disqualified under legislation for a period of time from becoming involved in new companies?

Mr. MacDomhnaill: I am only going by media reports because this area is within the province of the Department of Enterprise and Employment. However, concern has been expressed recently that not much disqualification of these directors is taking place. The conditions that have to be met to have a disqualification are rigorous enough. That is already in company law and it will be reviewed from time to time. There is a feeling, certainly in large debt management areas like ourselves and the financial institutions, that not many directors are being disqualified as of yet.

Chairman: Do you list the directors who have walked away from companies and owe substantial amounts, particularly to the Revenue Commissioners?

Mr. MacDomhnaill: I do not want to be too black and white on this matter because the whole idea of limited liability is to encourage people to risk their capital. Failed companies are genuine failures in many cases. If all the cases were only phoneix syndrome ones where company law was being manipulated, of course it would be easy to target it. However, a substantial number of new ventures fail. People say that up to two out of every three can fail.

Deputy B. O’Keeffe: On a parallel issue, I put down a question to the Minister on the Companies Act and companies not filing returns. There are many instances where companies have not filed returns for over three years. If they are not filing returns, one can only presume they are not making proper tax returns. Is there any linkup between the Revenue Commissioners and the Companies Office pertaining to these issues?

Mr. MacDomhnaill: Yes. We have an electronic linkup with the Companies Office. On average, 14,000 new companies are incorporated every year. On the difficulty with returns, we come up against this too. If the Deputy looks at the percentages when we come to the Paragraph on compliance, he will see the percentages are lower for companies than for individuals. The explanation is simple enough; a lot of companies do nothing, they are sitting on shelves and may hold assets which do not produce income so there are many passive companies. A lot of our penalty procedures are based on the fact that if there is no liability, the penalty is only nominal. We do not have the resources to pursue nominal penalties. We must keep after the real issue, so many companies do not file in the Companies Office. If these companies are not doing anything, there may not be any very severe penalties either. That would be one explanation for it.

Deputy B. O’Keeffe: I am talking about active trading companies.

Mr. MacDomhnaill: The actual trading companies?

Deputy B. O’Keeffe: It has come to my attention that for three years no returns have been filed by actual trading companies. If no returns have been filed, can we deduce that no tax has been paid? How is the Revenue handling that matter with the Companies Office?

Mr. MacDomhnaill: Here, active means if they are holding any assets even if they are non-income producing. We have a compliance programme for dealing with companies. We are satisfied that if one takes out the factor of non-profit bearing companies, our percentages are in the 90s as for individuals’ returns compliance. If you discount out these factors for companies which have no income but may have assets or have nothing at all going, the percentage for compliance is close to 90 per cent. We will have some figures on that when we come to the paragraph. We have an active campaign for returns compliance for companies as we have for individuals.

Deputy Byrne: Does Mr. MacDomhnaill agree there is a huge public debate about crime and that people are calling for all sorts of punitive and alternative methods of catching and incarcerating the criminals but that little publicity centres around white-collar crime which, in the case of the Revenue, is defrauding the State?

Chairman: To which paragraph are you referring?

Deputy Byrne: This is my preamble to revenue ollected. I will argue that we are not collecting the necessary revenues. -The growth in white-collar crime is of particular concern to this Committee, i.e. the question of the laundering of ill-gotten moneys from illegitimate sources into legitimate business and out of the country. If Mr. MacDomhnaill’s officials went after a person who they discovered owed substantial sums to the State and managed to make a settlement for £1 million, could I legitimately call that person a criminal?

Mr. MacDomhnaill: We would like to think that evasion of tax is the taking of money from the State and, therefore, it is called a revenue offence. I do not know whether or not we can go so far as to call it a crime. There is a distinction in this because once you cross over the line into crime, you import a whole lot of individual safeguards. If you accuse somebody of a crime as distinct from a revenue offence, there is an onus of proof of a crime, individual sanctions, warnings must be given, etc. That is the terrain you would be getting into. Therefore, I would say it is a revenue offence because there has been a lot of publicity surrounding a case where £1 million was paid and it is very easy to have any remarks we might make here attributed to that particular case. That would be most unfortunate because over the years the Committee has avoided the discussion of individual cases.

Deputy Byrne: I would be disappointed about traditions because I am about to talk about the collection of £1 million outstanding by the major PR company called Murray Consultants Limited. I want to congratulate Mr. MacDomhnaill and his staff for the successful return to the Exchequer of a sum of £1 million. Nobody should feel apprehensive or shy about accepting the congratulations of this Committee, which concerns itself with the public finances.

Whether it is a criminal activity or something of a nicer name, it is robbing the Exchequer of money. It is theft and those who engage in theft are criminals. They should stop pussyfooting about white-collar criminals just because this case involves three directors of Murray’s PR company. It is time that the Revenue put out the word that politicians and the Department deem people who rob taxpayers’ money and deprive the State of income which would provide services to the elderly, education and health services to be criminals and this activity to be crime.

I am interested, in particular, in knowing the route the Revenue took in apprehending these gentlemen.

According to media comments, I understand the Revenue is authorised to pay rewards to informants under section 32 of the Inland Revenue Regulations, 1892. Does Mr. Mac Domhnaill believe these regulations are sufficient for today’s society given the laundering of money, the involvement of drugs barons and high-powered white-collar criminals and that these regulations are a century old? The 1892 regulations state that the maximum reward for information supplied to the Revenue is £50. Is that a sufficient incentive for people to report the criminal activities of white-collar criminals?

Mr. MacDomhnaill: First, I appreciate the Deputy’s support for Revenue action on this whole area of tax evasion. On the 1890 Act, if it were still £50, we would be clamouring for an amendment but the reality is that the section states we must get Department of Finance sanction if it goes over that so it allows an open-ended sum after that. We have, in fact, had Department of Finance sanctions upgraded from time to time. Currently, we have a general sanction for up to £5,000 but we can go beyond £5,000 in certain limited circumstances, for example, if the recovery is £1 million or more and there are certain other factors, but any such case would have to be presented to the Board of the Revenue Commissioners and we have guaranteed the Department of Finance that that would happen. Before going over the £5,000 threshold, which is the general sanction of the Department of Finance and would be roughly equivalent in purchasing power of the £50 in 1890 or a little more, we would have to be absolutely certain that this tax could not have been recovered without the information and that, even if we had undertaken an audit of the case, we would most likely not have uncovered the evasion. We look at these factors and we look at the quality of the information which has been given. Overall this is a very difficult area for us because one would be amazed at the number of people who try to use the Revenue Commissioners out of vindictiveness because of other issues.

We must also be careful not to put ourselves in a position where people become agents of the State and might undertake actions which would not be condoned by the Oireachtas. For example, our powers are very finely defined in terms of what we may do about entering premises, examining records and what warnings we must give. If freelancers could operate and hold themselves out as agents of the Revenue Commissioners without those sanctions, we would be in very dangerous territory. It is a very difficult area for us and we have to mark down many safeguards before we can use information.

The vast bulk of information does not require any payment whatsoever. It comes either through anonymous letters or telephone calls. Much of that we must be very careful about because there might be a vindictive motivation. However, in many cases we get good quality information and nobody raises any question of compensation. Where somebody raises the question of compensation we try to establish that we would not get the information otherwise. The amount of money spent on this is actually quite modest.

Deputy Broughan: On a point of order, we are discussing paragraphs 16 to 20 which many Deputies have prepared and we have moved away from them. Many people would have asked some of these questions but we decided we were talking in general terms. We have moved into the general collection area.

Deputy Byrne: I disagree with my colleague. We are talking about revenue collecting and I want to argue the point. I do not need any direction from the Deputy, with all due respect.

Deputy Broughan: I am asking the Chair for direction.

Deputy B. O’Keeffe: There is division to the left.

Deputy Byrne: I thought the information forthcoming was particularly relevant to this Committee.

Deputy Broughan: On a point of order, we must have a means of doing business. We could be asking about paragraph 27 but we decided not to because we stuck to the paragraphs. We must stick to the paragraphs.

Chairman: That is correct.

Deputy Byrne: I am absolutely convinced I am correct to talk about revenue collected and the means of collecting it.

Deputy Broughan: Nobody is disputing that.

Deputy Byrne: Can I ask a couple of questions?

Chairman: Your time is up, Deputy.

Deputy Byrne: It would not be up if I had not been interrupted.

Deputy Ellis: The bell has gone.

Deputy Byrne: In fairness, you should allow me a couple of questions.

Chairman: The Deputy can ask two questions because he has gone over time.

Deputy Byrne: Do you think it would be worth while for the Revenue Commissioners to publicise the fact that there is money available for information leading to the collection of unpaid taxes? I say this in the context of at least two major tax amnesties which allowed tax dodgers off the hook. If £1 million worth of taxes is returned to the Exchequer on good information from an informant, approximately what type of payment would one expect to get?

Deputy B. O’Keeffe: It is the right of Deputy Ellis to ask those questions. After all, he is the first person in today.

Deputy Byrne: Maybe I should ask that question again.

Chairman: You are moving away from the paragraphs we are dealing with which are paragraphs 11 to 14.

Deputy Byrne: I think the Secretary was about to reply.

Mr. MacDomhnaill: I do not want to comment on individual cases. If the money is £1 million or more, we would be looking at over £5,000. The largest payment we have made in any of these cases involving recovery amounting to millions of pounds was £11,500.

Chairman: We note paragraphs 11 to 14.

Paragraph 15 of the Report of the Comptroller and Auditor General reads:

Bank Accounts

Bank Reconciliations

15.The regular reconciliation of the balances in an organisation’s financial records to the balances in the statements from its bankers is a fundamental accounting control. It gives overall assurance that moneys received and recorded in the books of account have been lodged in the bank and that only those payments recorded in the accounting records have been met by the bank.

Moneys received by the Revenue Commissioners in respect of Income Tax, PAYE, VAT, Corporation Tax, Capital Gains Tax and Residential Property Tax are lodged to 5 separate bank accounts while repayments of taxes are effected through 2 drawing accounts. The accounts are maintained at the Central Bank with the exception of one drawing account which is with one of the associated banks.

During audit it was noted that while partial reconciliations were being carried out, there were substantial unexplained differences between the balances in the accounting records and the bank statements for these bank accounts. These differences had existed for some time and had been the subject of previous audit queries. It was also noted that the procedures for dealing with cancelled cheques militated against effective control.

In the light of the unexplained differences, I asked the Accounting Officer how he could be satisfied that all receipts and payments were being properly accounted for and that the bank balances in the accounting records were correct.

The Accounting Officer informed me that an expert Working Group had recently completed a review of reconciliation and reporting procedures and had identified certain accounting deficiencies, particularly in relation to the treatment of cancelled cheques in the drawing accounts which could give rise to the differences. New procedures had been introduced with effect from 1 August 1995 which would address these deficiencies and enable reconciliations to be carried out effectively.

In relation to the bank accounts for receipts he informed me that the introduction of automated and on-line remittance processing would remove the potential for the generation of discrepancies between the lodging and receipting processes in the future. He stated that the expert Working Group had now commenced its investigation into the historical imbalances on the accounts and that there were no indications of any irregularities being involved. He accepted that the Group’s investigation must identify and quantify the effect of the technical factors considered to be at work. In parallel with these moves, a meeting had been held between Revenue staff and representatives of the Central Bank, following which the Bank agreed in principle to a number of changes to its system which will facilitate accounting on a basis acceptable to my Office and these changes will be implemented as soon as discussions are finalised with the Bank.

The Accounting Officer stated that he was fully aware that the matter had been outstanding for some time and regretted that it had not been practicable to address the problems in a comprehensive way before now due to the complexity of the issue and to staffing constraints imposed by the decentralisation of the Accountant General’s Office to Ennis in 1992 and the ongoing decentralisation of the Collector-General’s Office to Limerick. He assured me that every effort will be made to complete the reconciliations in the shortest timeframe possible.

Mr. Purcell: Paragraph 15 refers to a long standing problem in the Revenue Commissioners concerning differences between balances per the Revenue Commissioners’ records and those of the bank. As I indicated to this Committee on a number of occasions, the reconciliation of differences in these two sets of records is a fundamental accounting control for any organisation but particularly so for one like the Revenue Commissioners which puts millions of pounds through its hands each day. Of course there will be differences, for reasons of timing and the like, but the numerical effect of each of the elements of the difference must be identified and accounted for, otherwise there is a danger that unexplained differences arising from an irregularity would not be detected.

My concern was increased when I saw that the difference in one group of accounts had grown by over £4 million in the period 1990 to 1994. I would like to point out that it is not a simple matter to put things right. It requires much tedious work. It is well worth the effort. It is not just about having the books in pristine condition. It is more about reducing the Revenue Commissioner’s exposure to possible error or fraud and enabling them to operate in a much better control environment. The Committee will note that the Accounting Officer attributed the failure to tackle the problem over the years to its complexity and also to staffing constraints arising from the decentralisation of both the Accountant General’s office and the Collector General’s office in recent years. However, the Revenue Commissioners have now set about putting things right and, with the help of computerisation, are getting the current reconciliation under control.

The Revenue Commissioners have also been examining the basis for the historic differences and, as I understand it, have found that a substantial portion is due to the fact that taxpayers’ records were not being adjusted for cheques which had bounced. I am sure the Accounting Officer will be able to update the Committee on the results of that examination.

Mr. MacDomhnaill: The examination is ongoing and we are whittling down the difference all the time. The main cause of the difficulty is that we have a substantial amount of money going into bank every day and the adjustments arising from previous days hit the Central Bank every day as well. They largely relate to bounced cheques but also to adjustments where we might have taken a certain interpretation on a cheque and the bank may take a different view if there is a difference between amounts or a signature is missing. All these amounts were netted off by the Central Bank. They took all the bouncers and netted them off against that day’s receipt, but of course they did not relate to that day’s receipt but to other days. That kept the banking position accurate. In other words the money that we said in previous days was coming into the Exchequer, they just docked it off. That is very convenient and it is common sense.

The other problem that arose was that Central Bank were not very keen to have negative balances. Our accounts are cleaned out every day. If you do not have a negative balance, how do you manage to deal with a bouncer when there is nothing in that particular account? The arrangement we had come to was that they netted all these bouncers against the income tax account which had money coming in all the time and was always in credit. There was always enough money to cater for the add backs in the income tax account but that made further complications for us because it meant there was a distortion between the real income tax receipt and the amount which was shown by the Central Bank as going into the income tax account.

A process had to be undertaken on an ongoing treadmill basis of disentangling these individual cheques to get the tax heads correct and then going back and getting the individual income tax entries. Fortunately for us, these are not sums of money. They relate to entries for 1984/85 income tax for example. When you come to PAYE you have an actual period and not just the year. There is a mass of detail behind all these cheques and the entries which went in when it was credited have to be undone. This has been the process since 1988. A lot of things have happened with us since 1988 including the amnesties and decentralisation. The figure grew to those mentioned by the Comptroller and Auditor General but I can assure the Committee that there is no question of missing money. You are really talking about reconciling our numerous tax payers’ accounts with the actual money that has been lodged. We have whittled the figure of £3 million, which was mentioned, down to £200,000. We have disposed of £2.8 million. The work on the receipts account is detailed, tedious and ongoing.

The other discrepancy relates to the drawings account. We refund major amounts of value added tax, roughly £2 billion, every year. There are income tax refunds as well so we have two drawing accounts, one for personal income tax refunds and PAYE refunds and one for VAT. The reconciliation of these drawing accounts is now down to £800,000 and is ongoing.

Given our new arrangement with the Central Bank which will accept negative balances in future, and electronic equipment for dealing with lodgements which means that receipting and accounting is done in days rather than weeks - we hope we will be able to keep these differences to a much lower level in future. This is what the expert group is looking at. We will be keeping the Comptroller and Auditor General advised of progress.

Chairman: Why was there a decision addressing the entire bank reconciliation problem?

Mr. MacDomhnaill: It is a labour intensive operation. Frequently in the past, our accounting system was such that we had to get the money into the bank first. The next operation, using the same resource, was to get the money credited against all the entries in our accounts. In times past, with peaks and so on, you could have a delay of up to six weeks before we could get around to that. The third process which came after that was to issue receipts to taxpayers for the various amounts paid. With the automatic remittance processing equipment all three things are combined in the initial entry. We speeded up accounting and receipting but, unfortunately, in about 25 per cent of cases, accounting documents are not sent back either by taxpayers or their accountants. Such cases must be processed outside the ARP system. We hope that our campaign will improve on that. If we could get close to 100 per cent into the ARP we would be on top of the problem.

Chairman: In round figures, what did the unexplained differences amount to? Do you have those figures?

Mr. MacDomhnaill: On the receipts account the figure is down to £200,000, and on the drawing account it is down to £800,000.

Deputy Ellis: With regard to the operation of the bank accounts, you stated that it sometimes took up to six weeks from receipt to lodgement. What is the current period from receipt to actual lodgement?

Mr. MacDomhnaill: For a number of years our target has been to get the money lodged on the same day. We get same day credit for the big money and we get following day credit for practically all the rest. The vast bulk of the money is lodged within 24 hours. The six week period relates to the process of going into our ledgers and closing off all entries for various tax heads, tax sub-heads and amounts.

Deputy Ellis: There is no loss of revenue to you, it is only a delay in the paper work?

Mr. MacDomhnaill: There is absolutely no loss of revenue involved in this at all.

Deputy Ellis: I totally understand that. With regards to reconciliation, do you anticipate you will be able to get in on the button or even lower than you have it at the moment? How long more will that take?

Mr. MacDomhnaill: We need greater co-operation from taxpayers in sending back accounting documents with their remittances. There is a 25 per cent shortfall at the moment. The ideal thing would be to have no bounced cheques but if we can extend the direct debit and bank giro arrangements they will further improve the situation. By and large, bounced cheques occur because people think they have funds when they do not, and the vast bulk of bounced cheques are honoured on re-presentation. It is messy but we are not talking about default or non-compliance; we are talking about people who are not in full control of their cash flow.

If we can get people to send back the right accounting documents, we will be able to have all receipts and accounting done within three days of receiving the money. We will have it all lodged on the day of receipt. We are very close to having it all lodged on the day of receipt at the moment. There is a small residue which we call snags. If snags cannot be cleared within three days they are lodged to a suspense account pending the process of dealing with the snag. Snags would include differences between written and numerical amounts, unsigned or wrongly made out cheques, or no documentation to identify the taxpayer concerned.

Deputy Ellis: Arising from that, did you ever consider putting in some small penalty for cases where no documentation or wrong documentation is submitted. I am talking about a nominal penalty for a carrot and stick effort to make sure the paperwork you receive is correct?

Mr. MacDomhnaill: I agree with that but we will leave it over for the moment because, as you know, we have a huge agenda. With the consolidated taxpayer development of our computer systems we will be able to consolidate all tax bills. You must have a certain amount of sympathy for the trader who is getting a PAYE bill from us every month and a VAT bill every two months as well as corporation and income tax demands. On top of that he may find himself making a VAT refund claim. Sometimes you might have an amount apparently outstanding while we are processing a refund concurrently. With consolidated billing we will be able to bring all those things together into a single bill. That would be the time to start looking at a penalty system because we will have a much improved and simplified system. We can then expect a higher level of compliance with accounting documents.

There are other measures we could take if, for example, we found that people were constantly sending in the wrong documents. There is a period of grace within the system at the moment. VAT must be in on the 19th of the month but if it is paid within a reasonable period to allow for postage we give a period of grace. We could consider not giving the period of grace where the accounting documents are wrong. Such sanctions would be modest enough. Those possibilities are there but we would like to get a bit further on with consolidated billing before being too demanding in terms of what we want the taxpayer to do when our own system is a little cumbersome.

Deputy Ellis: When do you expect to have your system updated? What is your target date?

Mr. MacDomhnaill: We have already updated procedures in relation to balances. For example, under the new ARP system, amounts will go on record automatically. We have electronic exchange and we will be able to get the amounts routed automatically. The procedures are already there to improve the current situation. Largely what we are talking about in relation to the discrepancy is a historical experience which is tedious and predates any current systems. We will have to continue in that tedious way, but we have already introduced measures to improve the situation in future.

Deputy Upton: How many bounced cheques would you receive in a year? You mentioned people sending in documentation which was badly presented or designed as a stalling job to slow you down for a while. What significance do you attach to that and how big a problem is it?

Mr. MacDomhnaill: We process somewhat over 1.25 million payments every year. If you take one quarter of that you are into a very big number of transactions. On any working day we lodge from £45 million to £100 million in the bank which is made up of a huge number of cheques. Accurate accounting documentation would be a tremendous boost to our cash office because cheques would run through the machines and we would not have to go through the painstaking business we now have to go through. Even with the best will in the world people will make mistakes. In the hurry and bustle of business, cheques are sometimes made out incorrectly.

Deputy Upton: What is your estimate of the number of cheques which are deliberately made out incorrectly to slow your office down or to defer things?

Mr. MacDomhnaill: People use tipp-ex on documents from a previous period to erase the period stated on them and insert the correct period. However, our automatic machinery reads the optical character recognition data on the bottom. If we were not alert to this, the same payment would be made in respect of a previous period for which it had already been made. We must get the message across that using tipp-ex on these documents is not good enough because our machines read the OCR at the bottom and cannot amend it. We must conduct an educational process to get people to understand that amending documents in this manner is totally unsatisfactory from our point of view. Many of the cases are in this category.

Deputy Upton: Do you always assume the best when people write cheques and do not bother to sign them or insert the wrong date? Do you invariably take the most optimistic and well meaning assessment of this or do you sometimes conclude that they are trying to string out your office for a while longer?

Mr. Mac Domhnaill: We have an arrangement with the Central Bank whereby we are allowed to represent these cheques when they are corrected. This is the most convenient arrangement for the taxpayer.

Deputy Upton: To what extent can a company drag things out if it does not want to pay tax? How much does your office tolerate with regard to badly written cheques and the messing up of documentation?

Mr. MacDomhnaill: We tolerate quite a lot. We have to assume that these mistakes are genuine in many cases. We look for recurring mistakes. We cannot fault once off mistakes by companies which normally do the job properly. However, we will become stiffer with people who regularly do not send in documents or manipulate them even though we have told them not to use tipp-ex on them or to adjust them. We are already carrying out a campaign of information. The next step will be to say what action we will take if these people still persist in doing this.

Deputy Upton: What volume of people continually and deliberately make mistakes?

Mr. MacDomhnaill: A few thousand.

Deputy Upton: Are these individuals or accountancy firms?

Mr. MacDomhnaill: Much of it comes from business. Accountants do not like handling this. Some accountants deal with small firms and they handle the payroll and tax affairs of these firms but, generally speaking, they avail of the giro system, which works well. They would fill in one cheque and would have the necessary giro forms. They receive receipts within three days. Accountants who deal with payments as well as accountancy, usually have a good track record.

Deputy Broughan: Yesterday what would have been the balances in the two drawing accounts?

Mr. MacDomhnaill: I only have the cumulative balance for each. On the receipts account it is £200,000 and on the drawing account, which deals with refunds, it is £800,000. There are many other complications which I have not mentioned. We do not fund the drawing account on the day we certify the refunds because we know that these have to be posted and presented. We deliberately build in a time lag. There can nominally be an under funding even though from a cash flow point of view the account is okay. I cannot give the Deputy a figure for a particular day. We will look at this and we may be able to provide balances for a few sample days for the Committee.

Deputy Broughan: Which of the associated banks do we use for the drawing accounts?

Mr. MacDomhnaill: We have one account with the Bank of Ireland for business reasons.

Deputy Broughan: My next question is directed to the Comptroller and Auditor General. This has been an ongoing saga and I appreciate the difficulties. Was this drawn to our attention before and, if so, have you noted an improvement in its administration?

Mr. Purcell: There have been problems in this area over the years. Both my predecessor and I, at different levels in the office, have drawn this to the attention of the Revenue Commissioners. There were reasons for not doing the reconciliations; I am not saying these reasons were good but one can certainly justify not doing it in terms of resources. When people hear of bank reconciliations they tend to go for their zappers because these reconciliations are boring and dry. However, there is a meaning to them. In this case it was found that £1.6 million had been credited to taxpayers’ accounts on foot of bounced cheques. Those taxpayers were not pursued for these moneys on the basis of the wrongful information, updated to their accounts, that they had paid their dues.

There is a serious side to this work and it is important that it is done. It takes a great deal of effort and resources but, unless we do it, those kind of errors and discrepancies can set in and have a real impact on the collection of revenue. As a result of, at last, taking this criticism on board, the Revenue Commissioners will operate in a very good control environment although it will take a lot of effort to get to this stage. This is the point we have been trying to make over the years to them. In fairness, they accepted this point but had other priorities at different stages.

Deputy Broughan: You have drawn attention to it now. Will you draw ongoing attention to it in the 1995 accounts?

Mr. Purcell: It is fundamental to audit and the concept of good accounting control. The Committee can rest assured that we will do this as an integral part of our work.

Chairman: We note this paragraph and hope the matter can be resolved as soon as possible.

Paragraphs 16 and 17 of the Report of the Comptroller and Auditor General read:

Assessment and Collection

Basis for Audit

16.I am required under Section 3 of the Comptroller and Auditor General (Amendment) Act 1993 to carry out such examinations as I consider appropriate in order to ascertain whether systems, procedures and practices have been established that are adequate to secure an effective check on the assessment, collection and proper allocation of the revenue of the State and to satisfy myself that the manner in which they are being employed and applied is adequate. Paragraphs 21 to 26 refer to matters arising from this examination.

Outstanding Taxes

17.The table overleaf was prepared on the basis of information furnished by the Revenue Commissioners and reflects activities and transactions in the twelve month period ended 31 May 1995, the latest date for which data is available at the time of finalising my Report.

Footnotes:

1. Some figures from the 1993 Report have been adjusted due to changes in presentation.

2. Net of write-offs.

3. Includes Deposit Interest Retention Tax, Withholding Tax, PRSI for the Self-employed, Health Contributions and Levies.

4. Net of discharged estimates.

5. The estimate of the amount likely to be collected takes into account factors such as:

-anticipated reductions of estimated amounts included in balances brought forward from previous years

-the level of liquidations and business closures

-historical collection patterns

The status of the total balance outstanding is:

Mr. Purcell: Paragraph 16 is just an introduction to the assessment and collection section of the report. Paragraph 17 sets out the collection position as at 31 May 1995 for the various tax heads and PRSI. The nominal balance outstanding was just over £2 billion. This has been falling in recent years. It was nearly £3 billion in 1990. This large reduction is due more to the nature of the tax liabilities, many of which, as the Accounting Officer said earlier, were based on estimated assessments which turned out to be unrealistic. The reduction is due to this, rather than to a dramatic improvement in revenue collection but, to be fair, there has been a gradual improvement in this regard. Now that self-assessment is well bedded down, the incidence of estimated assessments has reduced and this, in conjunction with the concerted effort being made by the Revenue Commissioners in tackling arrears, should result in a continuing fall in the amount of tax outstanding in the books. Traditionally this has been an emotive figure and one which was not always properly represented. We are now perhaps moving to a situation where it will be possible to make some meaningful correlation between what is on the books and the true amount of tax outstanding. The Committee will note that based on its experience the Revenue Commissioners expect to collect some £500 million of the £2 billion nominally outstanding.

Chairman: Mr. Mac Domhnaill, bearing in mind that £100 million is written off per annum and with an increased emphasis on a system of self-assessment, why do you only expect to recover £500 million out of an estimated outstanding amount of £2 billion?

Mr. MacDomhnaill: In a lot of these cases we are dealing with estimates. The £2 billion includes quite a substantial amount which relates to the pre-self-assessment era and the percentages we are getting for collectability are around 10 to 13 per cent when all the work is done and that makes a hole in the nominal arrears. The other amounts will be perfectly collectable but, as I mentioned earlier, in dealing with companies one may have companies in liquidation with no assets. We have to bear in mind that we know certain companies are in difficulty and when we do the appraisal of the collectable element it is a much higher percentage now than it has been traditionally. We will be able to pinpoint large individual cases and use trends and percentages for the smaller sums.

Chairman: Should self-assessment not lead to more accurate estimates of the amounts outstanding?

Mr. MacDomhnaill: I have no doubt whatever about that. It is a big factor in the reduction of the nominal balance outstanding. As the Comptroller and Auditor General mentioned, there has been a tackling of estimates and getting them out of the system historically. The system has also been improved with a view to the future and that is through the self-assessment process. The essential difference between the old system and the estimated element in self-assessment which is the preliminary tax, is that the inspector only has to estimate the amount of preliminary tax under self-assessment whereas, under the old system, he had to estimate the income level, the capital allowances and all the various reliefs and each element had to be sufficient in itself.

By and large, one was getting tax in charge which was three times the amount one was likely to collect ultimately. When one takes the payment on account out of that, which might be 80 to 90 per cent of the final liability, the residue would contain a high percentage. In other words the collectable element could be 20/220 which is about 11 or 12 per cent. That is how one might have a low recoverability. Under self-assessment on the other hand the amounts which would be in charge for preliminary tax would be very much closer to the ultimate liability. Therefore, we would expect that the write off element when the figures are finally agreed will be much smaller.

Another factor is that there is much greater timeliness now. The final liabilities are agreed by March of the following year, whereas under the old appeal system it could take several years to bring a case to settlement.

Chairman: If the self-assessment is not genuine is there a penalty clause?

Mr. MacDomhnaill: There is a massive penalty. The first penalty is if the preliminary tax is not up to a given percentage and there is a range of percentages depending upon whether one takes the preceding year. For example, under the instalment arrangement one can take an earlier year but one has to pay 105 per cent. If one does not make those percentages one has to pay interest - the interest is at 15 per cent per annum which is quite substantial and is not tax deductible. It is the equivalent of a gross rate of 25 to 28 per cent.

Chairman: I accept that but is there a penalty in addition to the interest?

Mr. MacDomhnaill: If the return is not lodged by the due date the tax is increased by 10 per cent.

Chairman: If it comes to your knowledge that the self-assessment is not genuine is there a penalty in addition to the interest?

Mr. MacDomhnaill: That usually arises when we do an audit. The checks we would do in relation to a self-assessed return initially would not show that up but when we come to that case under audit and there is a recovery, the penalty provisions then apply.

Deputy Ellis: If somebody overpays their assessment do they get a refund of interest and at what rate?

Mr. MacDomhnaill: If the preliminary tax is overstated they get a refund. I will have to consult on the rate but it is not 15 per cent.

Deputy Ellis: I do not expect it would be.

Deputy Upton: They are not that generous.

Mr. MacDomhnaill: I would not like to be quoted on a rate but I think it is 9 per cent as against 15 per cent if one is late. The reason is that the rate one gets on deposit is not the same as the rate one pays on one’s overdraft. The interest we charge is meant to have a penalty element in it whereas the interest we pay is meant to be economic restitution for the fact that the money was not available to the trader during the period.

Chairman: As a matter of interest, at this point in time it pays to overpay if one gets 9 per cent.

Deputy Ellis: It is obviously more beneficial to overpay.

Mr. MacDomhnaill: I am only giving that as a tentative figure and it is reviewed from time to time.

Deputy Ellis: How many such cases would you get per annum?

Mr. MacDomhnaill: The prosecutions for non-filing would be the main line we would follow.

Deputy Ellis: I am talking about deliberate overpayment of taxes to draw a higher rate of interest than they might get on deposit.

Mr. MacDomhnaill: We would have quite a few people who overpay. The reason we have a different rate for refunds compared to the rate for late payment was that some years ago there was a practice of overpaying tax deliberately because the rate was favourable. That was largely in the corporate area. I do not think it is a big factor now since the rate was reviewed.

Chairman: It happened in the past that big business substantially overpaid in order to qualify for an attractive rate of interest.

Mr. MacDomhnaill: That was a big factor a few years ago.

Deputy Ellis: With regard to the collection of outstanding taxes, revenue sheriffs issued 89,590.

Deputy Upton: That is paragraph 18.

Deputy Ellis: We are on assessment and collection.

Deputy Byrne: The Deputy is getting ahead of himself.

Deputy Ellis: I did not interfere with the Deputy.

Deputy Broughan: The Chairman said we would deal with up to paragraph 18; it is all collection.

Chairman: We are not dealing with paragraph 18; we are dealing with paragraphs 16 and 17.

Deputy Broughan: We would be better to go to about paragraph 20.

Deputy Ellis: It is all assessment and collection.

Deputy Byrne: Would the Comptroller and Auditor General like to say a few words?

Chairman: Paragraph 18 of the Report of the Comptroller and Auditor General reads:

Collection of Outstanding Taxes

18.The Revenue Commissioners have supplied the following information regarding the collection of taxes from recalcitrant taxpayers in 1994:

Sheriffs

Tables 1 and 2 summarise the results of enforcement action taken by sheriffs on foot of certificates issued under Section 485 of the Income Tax Act 1967.

Table 1 - Certificates

* These figures differ from those in the 1993 table due to retrospective adjustments.

Table 2 - Analysis under tax heads of certificates on hands

The amount paid over to the Collector-General in 1994 by the Sheriffs was £88.4m compared to £92.5m in 1993.

Soclicitors

The number of items referred to solicitors in 1994 was 3,890 and the revenue yield from solicitor enforcement in the year was £10.3m. the corresponding figures for 1993 wer 4,850 and £11m respectively.

Attachment Orders

The power to attach amounts owed by third parties to tax defaulters was successfully used in 238 cases in 1994 resulting in a yield of £2.5m. The 1993 yield from attachments was £4.7m from 614 cases.

Back-duty Settlements

During 1994, the Revenue Commissioners completed 245 investigations resulting in 208 back-duty settlements amounting to £15,672,587 (£19,550,737 from 121 settlements in 1993) inclusive of £781,851 (£306,193 in 1993) in penalty and interest charges.

Mr. Purcell: Paragraph 18 gives summary information on the main methods used to collect tax from recalcitrant taxpayers. Although the amounts collected through these methods are small in relation to the total revenue collected in any one year, the effectiveness of the activities serves as an indication of Revenue’s resolve to pursue non-payers and slow payers. Enforcement action by sheriffs accounts for the vast bulk of moneys collected - £88 million in 1994. This return is more or less in line with performance of sheriffs in previous years.

Solicitor enforcement accounts for £10.3 million which shows little change on the previous year. However, the Committee will note that the power of attachment was used more sparingly in 1994 and, as a result, the yield was down to £2.5 million. The return from back duty settlements by the investigation branch was also down at £15.7 million, as against £19.6 million in 1993. I am not sure of the extent of the scope, if any, for upping the return from enforcement activity.

Deputy Ellis: How much money was paid to Revenue sheriffs during that year for doing this work?

Mr. MacDomhnaill: Unfortunately, our figure is the combined figure for sheriffs and solicitors and it amounted to £1,237,000.

Deputy Ellis: That is what you paid them for work done. What was the highest individual payment and how many solicitors and Revenue sheriffs were involved?

Mr. MacDomhnaill: The vast bulk of that money was paid to solicitors. A scale was agreed with the solicitors in accordance with standard legal practice and it depended on the amount and the court in which the case was taken. I could not give the Deputy such a breakdown but we could get some information, for example, the terms on which we make payments to solicitors. Normally we settle with solicitors for a number of cases at any one time.

Deputy Ellis: The Revenue sheriffs collected £88.4 million. What share of that amount did they receive?

Mr. MacDomhnaill: Each Revenue sheriffs is on a salary of £400 per annum, which is not the best level of remuneration.

Deputy B. O’Keeffe: Can they have a commission?

Mr. MacDomhnaill:> Other factors must also be taken into consideration. The sheriffs are entitled to poundage and to recover certain costs. This is not governed by Revenue legislation but by other legislation because sheriffs are officers of the court. The recovery for travelling, for example, is derisory; it is only 7p per mile. There is a big deficit in the formal arrangements for payment of sheriffs. This matter has come before the Committee before. There is a period during which they can get interest on the funds, otherwise they would lose money in operating the sheriff function. Sheriff remuneration is under review with the Department of Finance and the Department of Justice. It goes outside Revenue because sheriffs are beyond Revenue debt. Revenue sheriffs’ salary is quite nominal. It compensates for the costs they incur in that they are able to use the money in certain circumstances. Guideline arrangements govern this issue and these have already been debated by the Committee. Does that answer the Deputy’s question?

Deputy Ellis: Were any claims taken against the Revenue Commissioners for wrongful seizure of goods by the Revenue sheriffs? Did we have to pay compensation in such cases?

Mr. MacDomhnaill: Our legal advice is that the sheriff as an independent officer of the court is responsible for the conduct of seizures and that the action, if any, would lie against the sheriff. That is our official position but that does not mean we have not had some difficulties. I recall one case, for example, where we were partly culpable. Whether we were or not, the question of admission is a factor in this regard. What happened in that case was that there was a VAT registration for both a company and the individual. We credited moneys paid to one account but it was claimed by the taxpayer that they related to his company. As a result, he claimed damages because a seizure was mounted against the company. In that situation we would have had to accept that the sheriff was not at fault. This matter was dealt with by the Committee.

Deputy Ellis: That is not the matter to which I refer. I received a complaint from an individual who had property seized by the Revenue sheriffs on his premises, but all documentation showed it did not belong to him. What redress does this person have in those circumstances?

Mr. MacDomhnaill: Through the Revenue sheriff. The sheriff system, as the Deputy can see from the remuneration package, is out of date. We are talking about 1920s legislation which includes 35p poundage per certificate, expenses for travelling which amount to 7p per mile and 5 per cent of the first £100 and 2.5 per cent of the balance.

Deputy Ellis: That is for sheriffs, but I am talking about Revenue sheriffs.

Mr. MacDomhnaill: Revenue sheriffs are governed by the same conditions.

Deputy Ellis: What is the average period during which they are allowed to retain the proceeds from seizures? How often must they bring their account up to date? Recommendations were made by this Committee for a shorter return period. Has anything been done about that?

Mr. MacDomhnaill: As regards performance, in 1990 the guidelines were breached on 29 occasions; in 1991 it happened on five occasions; in 1992 it was three occasions; and in 1993 and 1994 it did not happen. These guidelines have been strictly observed for the past few years.

Deputy Ellis: I am asking about the period during which they can use the money. Is it three or six months or can it run to 11 months?

Mr. MacDomhnaill: I am sorry but we did not bring a copy of the guidelines.

Deputy Ellis: That is fine, but we would appreciate it if you could send it to us.

Mr. Purcell: The guidelines which were introduced as a result of the Committee’s concerns provide that a sheriff must remit moneys, which have discharged a tax debt in full, by the end of the particular month in which he received them. In the case of instalments, he may keep the money for a period until the full amount has been given to him but the instalment arrangement may not exceed six months. That is the essence of the arrangements.

Deputy Upton: I am not sure if you answered Deputy Ellis who asked how many sheriffs were employed by the Revenue Commissioners.

Mr. MacDomhnaill: We haven’t got the——

Deputy Upton: An approximate figure?

Mr. MacDomhnaill: Roughly it is one per county, with one for Dublin city, one for County Dublin, one for Cork city and one for County Cork.

Deputy Upton: It covers borough areas, corporations?

Mr. MacDomhnaill: They are not exactly co-extensive with counties but that would be a rough measure.

Deputy Upton: Some 90,000 cases were returned without payment — that seems an inordinate number of failures. If the stuff is not there, why go looking for it; and if it is there, why not collect it? Three to one is the ratio between successes and failures.

Mr. MacDomhnaill: The figures for 1994 show the liability was satisfied through the sheriff in 35,425 cases. It was satisfied by direct payment to the Collector General in 31,236 cases — it sometimes happens that people get a letter from the sheriff but pay the Collector General. The third category is where certificates were displaced. When we get a Section 22 VAT estimate or a Section 8 PAYE estimate, there is a mechanism whereby if a return is submitted, it displaces the estimate and that happened in 17,749 cases. That makes up a high percentage; 29.6 per cent were satisfied through the sheriff; 26.1 per cent through the Collector General and 14.8 per cent through the displacement of estimates by returns. Those not executed relate to those ceased or returned in the post, where the addresses did not match. That happened in 9,678 cases or 8 per cent. The action was stopped because of nulla bona in 6,272 cases. These are items — I shouldn’t really call them cases. An item is a particular head of tax and the number of cases would be far less than that. Of those items of nulla bona——

Deputy Upton: Forgive my ignorance but what is nulla bona?

Mr. MacDomhnaill: It means “no goods”, “goods” meaning distrainable goods. For example, one can have massive financial assets but the sheriff cannot distrain on those; they are not distrainable effects. One cannot distrain on certain assets or there might be a question as to the ownership of the assets. Nulla bona does not mean there is no business premises; there may be a leased premises. One cannot distrain on real estate either. Therefore, if we find we have to look for recovery from financial assets, we have what is called a power of attachment — we can issue a certificate of attachment, as the Comptroller and Auditor General mentioned. We have to go a different route. When the thing comes back nulla bona our action then is to consider whether this is a genuine case where there will be no assets against which to pursue and it comes up on the write off list; or it is a case where we should be pursuing through attachment; or one we should be pursuing through the courts to get a declaration of bankruptcy or a judgment mortgage.

Deputy Upton: How does one determine ownership on the day on the premises?

Mr. MacDomhnaill: The ownership is determined by evidence. As I say, the sheriff cannot distrain on real estate and that is the most complicated area of ownership. Cars, for instance, could be leased, the person could produce a document to say it is on hire and that would satisfy that. The onus would be on the person to show the ownership was in question.

Deputy Upton: In relation to private individuals who find themselves in hardship and have sheriff orders made against them, how far will the sheriff go in seizing household goods? Where is the line drawn, is it before essentials for living like cooking or sleeping facilities and how far from there — does it take in television sets, videos?

Mr. MacDomhnaill: Some items are excluded from the list and the sheriff may not seize them but they would be absolutely vital personal items. Fortunately it has not been our experience that seizure is a big factor — few cases hold out to the point of seizure. One gets stock in trade, cars and other solid goods which are realisable. That is generally what would be seized and stock in trade would be a big element.

Deputy Upton: Am I right in thinking that most people will pay up when cornered by the likelihood of the sheriff arriving?

Mr. MacDomhnaill: That is exactly it.

Deputy B. O’Keeffe: How effective is the judgment mortgage system? If a judgment mortgage is put on a person’s house when it is owned equally by the husband and wife, what chance does the Revenue have of ever getting money from that, if the couple are going to continue living in the house and pay the mortgage on it? Is there any return from judgment mortgages?

Mr. MacDomhnaill: We have a substantial number of judgment mortgages. One could describe a ceased business / family home case as the Deputy has described it. In many such cases we would tell the Comptroller and Auditor General that in this case the business has ceased and there are no other assets — frequently, the people would be on social welfare — and we would say this should be written off. A case in which we would use a judgment mortgage would be somewhat different — there may be a lot of assets but we could not have them seized. Quite frequently, people are unhappy with the judgment mortgage and long before it falls due they will approach us saying they want to sell the property or do something to pay off the debt. It is an effective instrument but one does not get immediate yield, I take that point.

Deputy B. O’Keeffe: In many instances where a judgment mortgage is issued against an individual who has a business, the person has had health problems with drink or some other factor. The judgment mortgage puts a massive imposition on the other partner, who is totally innocent of the trading difficulties. I find the Revenue is slow to settle or write anything off. It is held over the head of the innocent party for a lifetime in many instances. Is there any way some approaches can be made about the inhumanity of the situation that pertains in many of these judgment mortgages?

Mr. MacDomhnaill: I think the situation the Deputy describes is what comes up regularly in the hardship write off cases. The law does not give much leeway in writing off tax but we can come to the Comptroller and Auditor General and this Committee with a big list. Anyone dealing with a case like that should be advised to put in a hardship request. If we can write off the tax, we can lift the mortgage judgment and that is that. We might even come to a halfway house settlement. If one looks at the write-offs, it is the balance we are writing off in quite a few cases — we have already received a sum.

Deputy B. O’Keeffe: Two cases have been brought to my attention where settlements have not been made or the Revenue has not been willing to make them. Both cases involved alcoholics.

Mr. MacDomhnaill: I do not know the details of the cases but we are very reluctant to bring any case to the Comptroller and Auditor General or the Committee where there is an ongoing business, because VAT and PAYE are huge factors in terms of market competitiveness. There is an obligation towards the complying taxpayer that at least on those fiduciary taxes, a person should not be able to compete on the basis that he was not paying them. While we have these hardship clauses, and what the Deputy describes would fit within them, if there was an ongoing business we would not be able to entertain it for that reason.

Deputy B. O’Keeffe: With regard to the sheriff, a case was brought to my notice last week involving a business that went into liquidation and a personal judgement obtained against the individual concerned. The sheriff visited the individual and stripped the house, even though he had appealed the personal judgement. Is this kind of activity within the terms?

Mr. MacDomhnaill: Is it a tax case?

Deputy B. O’Keeffe: Yes. Tax was involved.

Mr. MacDomhnaill: When we get a judgement we notify the taxpayer in the first instance. We allow an interval during which many people pay up. However, if the tax is still not paid after the lapse of the interval we register the judgement. It is only at this point that it is published and that there would be subsequent action by, in this instance, the general sheriff. If the action was in Cork the same sheriff would be involved, whereas if it was in another county the county registrar would be involved as such a seizure does not go through the Revenue sheriff. In such cases the judgement would have to be final. If a defence is lodged, the judgement will not be registered, so there must be a misunderstanding here.

Deputy B. O’Keeffe: I do not understand it myself.

Mr. MacDomhnaill: I cannot conceive of a case judgement going to seizure without having first been registered.

Deputy B. O’Keeffe: With regard to the balance and the estimate of the amount to be raised in connection with the issue of outstanding taxes, I note that the balance of income tax at 31 May excluding PAYE was £684 million and that the estimate collection was £198 million, resulting in a difference of £468 million.

There is a perception in many instances that tax collectors are unrealistic. A case was brought to my attention where somebody was asked for £300,000. He was willing to pay £100,000 but the Revenue would not settle, with the result that the individual liquidated the company, paid £80,000 for liquidation and was willing to give £100,000 to the Revenue. This meant that Revenue got nothing. How much common sense is involved here? Getting £300,000 out of this company was like getting blood out of a turnip. How much is this thinking reflected through Revenue arrangements?

Mr. MacDomhnaill: There is a huge factor here. It is our obligation to the complying tax payer to ensure that all taxpayers pay their fair share. Much as one is looking at a situation where one may be able to get more by not going through a liquidation, one does not always have this option. Take any business, whether it be a pub or a supermarket. It will be competing with other businesses which pay the full tax. That is the problem.

Tax compliance is a very rigorous business, especially with regard to incorporated bodies because they are purely business entities. Over 70 per cent of write-offs relate to companies of this kind. They do not all incur big money expenses in liquidations; people just walk away from them. Usually only the very big companies employ liquidators.