Committee Reports::Fourth Interim Report - Appropriation Accounts, 1994::20 June, 1996::Report


DÁIL ÉIREANN

COMMITTEE OF PUBLIC ACCOUNTS

FOURTH INTERIM REPORT ON THE APPROPRIATION ACCOUNTS 1994

Pn. No. 2787.


TABLE OF CONTENTS

 

Page

Orders of Reference

5

Standing Order No. 131

7

PART I - GENERAL OBSERVATIONS

 

1. Minute of the Minister for Finance on the First Interim Report of the Committee of Public Accounts on the Appropriation Accounts 1993.

11

2. Minute of the Minister for Finance on the Second Interim Report of the Committee of Public Accounts on the Appropriation Accounts 1993.

13

3. Minute of the Minister for Finance on the Final Report of the Committee of Public Accounts on the Appropriation Accounts 1993.

15

4. Minute of the Minister for Finance on the Second Interim Report of the Committee of Public Accounts on the Appropriation Accounts 1994.

31

PART II - PARTICULAR ACCOUNTS

 

TOURISM AND TRADE

 

1. Review of Bord Fáilte Éireann.

33

PRISONS

 

2. Cash Discrepancies at Shelton Abbey.

35

OFFICE OF THE REVENUE COMMISSIONERS

 

3. Irregularities - Furniture Supplies.

37

4. Bank Reconciliations.

39

5. General Amnesty - Results.

41

6. P.35 Employer Returns - Penalties.

42

FIRST-LEVEL EDUCATION

 

7. Payment of Local Contributions by National Schools.

44

ACCOUNTS NOTED

 

8. Accounts Noted

47

PART III

 

Proceedings of the Committee

49

Minutes of Evidence

57

MINUTES OF EVIDENCE

Date

Vote

Subject

Page

25/1/96

Tourism & Trade

Paragraph 48 - Review of Bord Fáilte Éireann.

57

 

 

Paragraph 49 - United States Marketing Initiative (USMI).

 

 

 

Vote 35.

 

1/2/96

Justice Group

Paragraph 30 - Cash Discrepancies at Shelton Abbey.

81

 

 

Votes 19–23.

 

29/2/96

Office of the Revenue Commissioners

Paragraph 10 - Irregularities - Furniture Supplies.

109

 

Revenue Account

Paragraph 11 - Basis for Audit.

 

 

 

Paragraph 12 - Revenue Collected

 

 

 

Paragraph 13 - Extra-Statutory Repayments.

 

 

 

Paragraph 14 - Write-Offs.

 

 

 

Paragraph 15 - Bank Reconciliations.

 

 

Assessment and Collection

Paragraph 16 - Basis for Audit.

 

 

 

Paragraph 17 - Outstanding Taxes.

 

 

 

Paragraph 18 - Collection of Outstanding Taxes.

 

7/3/96

Office of the Revenue Commissioners

Paragraph 19 - Compliance.

137

 

Assessment and Collection

Paragraph 20 - Revenue Audit Programme.

 

 

Tax Amnesties

Paragraph 21 - Incentive Amnesty Audit - Legal Proceedings.

 

 

 

Paragraph 22 - Incentive Amnesty - Follow up Action.

 

 

 

Paragraph 23 - General Tax Amnesty Receipts.

 

 

 

Paragraph 24 - General Amnesty - Results.

 

 

P.35 Employer Returns

Paragraph 25 - Penalties.

 

 

 

Paragraph 26 - Checking Procedures.

 

 

 

Vote 9.

 

14/3/96

Transport, Energy & Communications.

Paragraph 29 - Expenditure in Excess of Authorised Issues.

163

 

 

Vote 18.

 

21/3/96

Education Group

Paragraph 33 - Payment of Local Contributions by National Schools.

177

 

 

Paragraph 34 - Issue of grant in excess of requirement.

 

 

 

Vote 26.

 

3/4/96

Education Group

Votes 27–29.

199

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 -


 

£m

Intervention Beef

50.285

Beef Tendering Procedures

18.475

Valuation of Beef Stocks

0.105

Premia

1.017

Export Refunds

0.087

Miscellaneous Intervention

 

Adjustments/Corrections

2.013

Total

£71.982M

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 Tommy Broughan

Deputy Pádraic McCormack

Deputy Eric Byrne

Deputy Batt O’Keeffe

Deputy Seán Doherty

Deputy Ned O’Keeffe

Deputy John Ellis

Deputy Desmond O’Malley

Deputy Michael Finucane

Deputy Pat Upton

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 Tommy Broughan

Deputy Michael Finucane

Deputy Eric Byrne

Deputy Batt O’Keeffe

Deputy Seán Doherty

Deputy Desmond O’Malley

Deputy John Ellis

Deputy Pat Upton

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 Tommy Broughan

Deputy Pádraic McCormack

Deputy Eric Byrne

Deputy Batt O’Keeffe

Deputy John Ellis

Deputy Desmond O’Malley

Deputy Michael Finucane

Deputy Pat Upton

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:


 

1994 £m

1993 £m

Income Tax

4,098

3,803

Value Added Tax

2,603

2,329

Excise

1,981

1,757

Corporation Tax

1,141

953

Stamps

281

226

Customs

185

155

Capital Acquisitions Tax

59

50

Capital Gains Tax

47

27

Residential Property Tax

14

9

Agricultural Levies

1

3

 

*£10,410m

£9,312m

* 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:


 

1994

 

1993

 

 

Number of Items

Amount £,000

Number of Items

Amount £,000

Value Added Tax

2,386

38,269

1,790

41,965

PAYE

2,416

32,104

1,818

29,752

Corporation Tax

1,232

14,729

1,237

16,718

Income Tax

1,477

12,433

923

8,374

Other Taxes

148

1,359

88

883

 

7,659

98,894

5,856

97,692

The distribution according to the grounds of write-off is:-


 

1994

 

1993

 

 

Number of Items

Amount£,000

Number of Items

Amount £,000

Liquidation/Receivership/Bankruptcy

 

 

 

 

Ceased Trading-no assets

1,996

46,181

2,104

48,238

Cannot be traced/outside jurisdiction

4,294

42,050

2,894

40,813

Compasionate Grounds

 

 

 

 

 

812

7,642

705

7,146

 

557

3,021

153

1,495

 

7,659

98,894

5,856

97,692

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.


 

Balance at 31May 19941

Charges/Estimates Raised2

Paid

Discharged

Balance at 31 May 1995

Estimate of amounts likely to be collected

 

£m

£m

£m

£m

£m

£m

Income Tax (excluding PAYE)3

687

846

803

46

684

198

VAT (declared liabilities net of repayments)

186

2,060

2,074

-

172

88

VAT (estimates)4

414

30

87

-

357

42

PAYE (declared liabilities)

144

3,102

3,098

-

148

45

PAYE (estimates)4

142

96

126

-

112

11

PRSI (declared liabilities)

169

1,934

1,926

-

177

51

PRSI (estimates)4

94

52

70

-

76

9

Corporation Tax

302

1,151

1,117

68

268

50

Capital Gains Tax

70

52

54

14

54

12

Residential Property Tax

3

14

13

-

4

0.4

Capital Acquisitions Tax

2

61

59

1

3

2

Abolished Taxes

2

-

-

-

2

0.1

Total

2,215

9,398

9,427

129

2,057

508.5

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:


 

£m

Under appeal or enquiry

263

Not disputed

588

Under demand

759

Awaiting transfer to enforcement

172

Under enforcement

296

Arrears Branch

66

Outstanding VAT repayment claims

(87)

 

2,057

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


 

 

1994

1995*

On hands of Sheriffs at 1 January

 

49,247

61,654

Referred to Sheriffs during the year

 

109,927

131,410

 

 

159,174

193,064

Returned Paid

31,161

 

 

Returned unaccompanied by payment

89,590

120,751

143,817

 

 

38,423

49,247

* These figures differ from those in the 1993 table due to retrospective adjustments.


Table 2 - Analysis under tax heads of certificates on hands


 

Number of Certificates

Value £m

VAT

25,331

132,72

PAYE/PRSI

7,286

37.88

Income Tax

5,339

19.21

Corporation Tax

445

10.25

Others

12

.03

 

38,423

£200.09m

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.


There are hard decisions to be made. It is one thing if we can bring a case and look at it purely on grounds of hardship because it is no longer competing and there is not an ongoing non payment of tax involved. However, we are left with very little option where one, in a sense, condones an ongoing non payment of tax.


Deputy B. O’Keeffe: Would it not be far better for the Revenue if a settlement produced some money, rather than get no money? At least the individual running the company would be in compliance for the future. It appears to be the practical course to make a settlement in such cases. The perception is that, in many instances, the Revenue go one step too far with the result that it loses all. This is why we have an appreciably high write-off within Revenue.


Mr. MacDomhnaill: I do not believe that, in real terms, the Revenue write-off is terribly high. Much of what we write-off relates to estimates. In some cases the company never traded at all. If one had the figures one could get them down and one would not be writing it off, but discharging it. In real terms, therefore, the write off is not huge.


However, we must get £12 billion to meet the Exchequer requirement. One cannot afford to undermine this. The battle to preserve this tax base is along the edge to which your referred, with people on one side and on the other side. One company may be very big, and it may be said that small entities do not interfere with big companies. They do because in between there are companies that are larger etc. The competition in the market place is very severe and there is a sum of £12 billion which has to be safeguarded. This means, unfortunately, very hard decisions in individual cases if there is an ongoing business.


Deputy Broughan: I want to return to white collar and blue collar crime. With regard to white collar crime, and accepting that tax evasion is a crime, were you not desperately embarrassed by the revelations regarding Murray Consultants Limited, which we received a few months ago? Was it not a desperately embarrassing saga that a company which effectively had been defrauding the tax authorities for many years was effectively utilised by the Revenue Commissioners to promote tax compliance?


Mr. MacDomhnaill: It was embarrassing. When we engaged this firm of consultants the normal procedures were followed. It went out to tender and people were interviewed. We got a professional job done. They were not involved in advertising but in the whole management of selling the idea of self assessment. It had to be sold to many constituencies such as accountancy, the taxpayer, business and the public on the basis that this was a safe system to adopt. We took the advice and our campaigns were regarded as very successful.


Deputy Broughan: Did their expertise on the PR side derive from its own experience?


Mr. MacDomhnaill: Their expertise related to getting concepts across to various constituencies.


Deputy Broughan: They were expert at tax evasion.


Mr. MacDomhnaill: I would have to be careful here. In law, a company is not the same as the people associated with it. It would be wrong to say that Murray Consultants, as a firm, was involved in evasion at all. That is the strict legal position. In any case, at the time we awarded the contract we obtained a tax clearance certificate. When people have their taxes paid up to date they get a tax clearance certificate.


The events to which you refer, which relate to an associated company, took place some time after this, so while it was awkward that this firm was associated with a company that had advised us with regard to self assessment, it is a tribute to our staff and our organisation that we proceeded and applied the law, obtaining what I consider to be an exceptionally good settlement.


Deputy Broughan: I understand the protocols regarding privilege, which I have, and the extent to which you have it. Was this matter not in the public domain? With regard to some of the moneys which were offshore and which were defrauded from the tax payer, I agree with Deputy Eric Byrne that the Government has a desperate job in trying to provide services, especially in health, education and welfare and perhaps in the promotion of business. Did these moneys not go back many years, indeed over a decade?


Mr. MacDomhnaill: The fees relate to completely non Irish business, covering a number of years.


Deputy Broughan: Was tax, which had not been discharged, not due over many years from some of the principals involved in this company or its associated company?


Mr. Mac Domhnaill: The tax would have been a long way short of £1 million. That figure represents a payment to cover tax, interest and penalties. The penalties and interest far outweigh the tax on that settlement. It was one of these settlements where a breakdown was not possible. Chairman, we have unfortunately been drawn into discussing an individual case. I do not know how I can deal with the questions in that context. Are you happy with the way this is going?


Chairman: Deputy Broughan asked a question on that point. If you do not feel you can reply on the basis of a particular individual, you have that option.


Deputy Broughan: Could it be the case that other companies that had worked for the Revenue Commissioners over the years had been tax evaders as well? Are we only seeing the tip of the iceberg?


Mr. Mac Domhnaill: We follow the tax clearance procedure. We are bound by the tax clearance procedure, as is every other public organisation. If a person is behind with tax, then they will not get a tax clearance certificate. We follow that procedure but you must bear in mind that the tax clearance certificate procedure relates to a particular year and a particular time. There is no question in the tax clearance arrangements that if somebody, at a future date, is found to be guilty of tax evasion you are going to unwind any of the business that took place before. That does not happen. We do business with outside contractors all the time. We can only follow the tax clearance procedure. This is a good innovation which we did not have in the past.


Deputy Broughan: In regard to the whole area of offshore assets, if there is a company in which - I know we are getting into the whole area of the black economy here - substantial sums of money end up going offshore, what relationships do you have with some of these havens to attempt to determine where the money that is due to the Irish Exchequer has been sent?


Mr. Mac Domhnaill: We have double taxation treaties with a number of countries and there is provision for mutual assistance and an exchange of information. However you must bear in mind that this is a reciprocal arrangement. We do not enjoy access to Irish bank accounts so we are not able to reciprocate this kind of information. We get information about foreign bank accounts, very much on a one sided basis, usually as a result of enquiries which we issue, but we will never get information from some of these tax havens. We have experience on record where inspectors from this country went to some of these tax havens with large powers, pursuing individual items, and they have not been successful because of the whole basis on which these economies work.


Deputy Broughan: You depend largely on information received.


Mr. Mac Domhnaill: Even where we get the information, and even if it is first class, if all the funds are off shore and the funds and the contracts are done with an offshore company, we may still not get a penny in tax. There is quite a degree of the voluntary element in that type of situation. We would have no way of pursuing many of the offshore accounts or indeed enforcing the liability because they would be clearly able to show that the business was done with a foreign company, the contracts were made with a foreign company and the assets belong to a foreign company. Without quite a substantial degree of co-operation from the residents, who may be associated with those companies, we would not get a penny.


Deputy Broughan: The last couple of times you were with us we asked you about serious crime, traffic in drugs and drug pushing. Just before the second last time we saw you, the Minister for Justice, Deputy Owen, published a package of measures which included very close liaison between yourselves and the Garda to try to identify drug barons and then provide information to the DPP which would enable serious charges to be brought against them. The Revenue Commissioners were seen as a key factor in the fight against drug barons. There have been comments in newspapers and so on that progress in this matter has been slow. Deputies will probably agree with me that we do not see any activity whatsoever, towards using whatever information we have about these people, like for example when they buy large houses or seem to be engaged in business. When serious allegations are made about them we do not see the Revenue Commissioners there at the coal face. What progress have we made on that? Have any funds been realised, has any information been sent to the DPP which could result in criminal prosecutions?


Mr. Mac Domhnaill: Very significant progress has been made since I was here last. A formal memorandum of understanding has been signed by the Garda Commissioner and me, and has been endorsed by the Ministers for Justice and Finance. This is a very far reaching document in relation to the whole area of drug transportation as distinct from trafficking. Our major area of concern is to stop the drugs from getting into the country and our role has been very clearly defined in this memorandum. Part of that arrangement is that there would be an ad hoc group with representation from the Department of Justice, the Revenue Commissioners and the Garda where we will work out detailed arrangements for operations such as a controlled import. This is where we know drugs are being imported but we allow them to go through because the Garda want to follow them to their destination. That is a very difficult area because we all have to be satisfied that the drugs will not escape into the jurisdiction or into the European Union because we have an obligation there as well.


Deputy Broughan: Are you saying that the incident that was supposed to have happened some months ago could not happen again? The two agencies seemed to be in conflict.


Mr. Mac Domhnaill: The ad hoc group is now working on rules and guidelines and a code of practice, but the essential ingredient is that all operations of a particular kind will now be joint operations. Intelligence will be shared and we have an exchange of officers between the two organisations. The type of incident you mentioned would in future be a joint operation. That is not to say that we will not have links in the future which are not joint operations. For example, our remit does not extend to prosecuting drug trafficking on the ground in Ireland. Our remit relates to the importation into the European Union from outside and the stopping of the importation of contraband, whether it is drugs or not.


Deputy Broughan: If your joint officers, the Garda/Revenue officers, have information on the taxation front, is that information available to the Garda?


Mr. Mac Domhnaill: It will be a joint operation. The intelligence will be jointly shared, both agencies will jointly access the same data base and sources and these are very valuable in the whole fight against drugs. Intelligence is a very important aspect of all this. However, the actual execution of the job will be a joint task force execution. However, that is not to say that items will not happen outside of that. For example, in the ordinary course of customs work there is an obligation on every customs officer to stop the importation of drugs, as happened at Shannon Airport recently. That happens in the course of ordinary customs work and will not be a joint task force. However, forward intelligence operations will all be joint operations.


Chairman: I ask the Deputy to move on.


Deputy Broughan: Could information gathered by the Revenue Commissioners be used as evidence to enable the prosecution of a drug baron to succeed? That has not happened so far.


Mr. MacDomhnaill: In relation to drug seizures, it is recognised in the memorandum that the prosecution will be carried through by the Garda and that our people are available to give evidence. The chain of evidence and the procedures for handing over seized drugs are taken care of. The Deputy mentioned the lifestyle of drug barons. That has been taken on board and we have had much discussion with the Garda on that matter. We have six cases with the DPP. The Deputy might be fed up of me saying this but the DPP delivered a paper to the Incorporated Law Society on this whole area of fraud. He mentioned that revenue was one of the major items in fraud. White collar crime is one of the most difficult areas in which to secure a conviction. His whole paper deals with that matter.


Another aspect is that there might be a revenue offence or there might be what is called a Section 19 of the 1983 Act assessment. Section 19 enables us to assess certain sums which appear to us as capital or unaccounted for lifestyle. However, we do not classify that as earnings from drug related or other criminal activity. We describe it as miscellaneous income which enables us to proceed with the collection of tax without having to establish whether the criminal activity of drug trafficking has taken place. This was a conscious decision of the Oireachtas in 1983, the rationale for which was that at least the tax was being collected even if the crime was not being established.


Chairman: We have to move on.


Deputy Byrne: In all fairness——


Deputy Broughan: Our constituents would be desperately unhappy to think that the first concern was to raise taxes - we do not want blood money.


Mr. MacDomhnaill: We have emphasised at all times - ourselves and the Garda - that the primary obligation on the State in relation to crime is to catch the criminals and totally confiscate the ill-gotten goods. There is no question whatsoever about that. However, there may not be enough evidence available to secure a conviction. Information and evidence are two different things and we may have a great deal of information but very little evidence. In those circumstances, while it is not possible to take a criminal prosecution it may be possible to get a tax settlement.


Deputy Byrne: We discussed this in great depth on the last occasion when I argued strongly that the dogs and cats on the street know who the successful dealers are. I mentioned the buying and building of properties and a well known property in my constituency in Downpatrick Road. A man associated with this property, Mr. Gantley, was subsequently shot in a public house in James Street. I hope that your officers were carrying out their tax investigation duties in that case. I do not see the house on the market for sale yet.


The shocking, objectionable and sad reality of the public competitiveness between the Revenue Commissioners and the Garda Síochána is doing nothing to boost morale in either agency, in the handling of drug seizures. I remind you of the rather embarrassing outcome of the drugs seizure in Shannon Airport where customs officers placed a value of in excess of £800,000 on the drugs seized. That was embarrassingly refuted by the Garda Síochána who estimated the street value at £80,000. This public bickering and competition for publicity is damaging the struggle against the drug barons. Do you have any comments on the differential between your Department’s estimated value of the drugs seized at Shannon Airport and the estimate made by the Garda?


Mr. MacDomhnaill: Any expression of a difference in value did not come from the Revenue source, obviously - that goes without saying.


Deputy Byrne: The fact is that the Garda would have to prosecute and, as the basis of the charge before the court, they would have to explain the estimated street value of the drugs seized.


Mr. MacDomhnaill: That is true. However, the substance in question is more akin to cannabis than cannabis resin. Apparently, there is an enormous difference between the value of cannabis resin and cannabis. My understanding of the position is that our people are still satisfied enough with the valuation which they put on it. It is not a big issue. The big issue is that it was successfully seized, although it was destined for the American market rather than for here.


Deputy Byrne: I appreciate that. The issue is the bad public image of two agencies which are supposed to be working in co-operation but are bickering in public.


Mr. MacDomhnaill: The larger question can be best addressed by not having individual attribution for these seizures. It would be better if we said that the Garda and customs officers seized drugs and got away from individual attribution. That might do away with the sense of rivalry which seems to persist, which is retrograde. We should be targeting drug traffickers rather than differences in the valuation of the substances seized. What does it matter if it was only worth £80,000? The important point is that it was seized. I do not see how differences over valuations advance the whole cause. I would prefer if we concentrated on doing the job.


It is important, from the point of view of public confidence, to show that drugs are being seized and I am not against publicity. It is good for public confidence to see that large amounts are seized and prevented from entering the country and that those who are paying for this stuff are suffering. That gives some consolation to those who are suffering as a result of drug trafficking.


Deputy Byrne: I agree with you, but would you agree that your statement is an implied criticism of the Garda Síochána, in so far as they differed in the valuation of the drugs?


Mr. MacDomhnaill: I do not think that it adds to the efficacy of what we are doing to draw attention to such matters. So what if there was a difference between the valuations? I do not think that it is as dramatic as has been portrayed but it does not help the cause to talk about it. I would prefer good publicity for successes without having to say who made the seizures. That would be best.


Deputy Byrne: We will return to the success story of the £1 million fine. You were obviously equipped with great intelligence for the investigation of that problem which dated back to the 1980s. You should be congratulated on your successes due to the intelligence available to you. Did you manage to break this on your own or did you have assistance?


Mr. MacDomhnaill: That was one of the cases where we paid for information. Our people advised that we would never have been able to locate this without the intelligence which was made available.


Deputy Byrne: This was covered in the newspapers and, according to Emily O’Reilly, Revenue may have paid £100,000 for a tip-off on the Murray case. Will the Accounting Officer confirm that while there was assistance, there was no payment of anything near £100,000?


Mr. MacDomhnaill: Absolutely. I have already given the highest single payment and it was much less than that.


Deputy Byrne: Nearly 90,000 certificates unaccompanied by payment were returned to the sheriffs. That is a large number of failed seizures. Who checks on the sheriffs - this question may be more relevant to the Comptroller. Do we take the sheriff’s word that there were no goods to be seized on those returned certificates or have we ever double checked a percentage, even by way of a pilot project, of those failures? I would ask the same question about the write-off list. At what stage does the Comptroller double check to see if they are above board? Who polices the police?


We hear much about limited prison cell spaces but a substantial number of people occupy prison cells because of defaulting on fines or payments. How many tax defaulters have served a prison sentence at the instigation of the Revenue Commissioners in the last two years?


Mr. MacDomhnaill: Is this in the whole tax area?


Deputy Byrne: Yes.


Mr. MacDomhnaill: We have had a number of successful prosecutions. There was a sentence imposed in one case but it went all the way to the Supreme Court where, unfortunately, it was lost on a technicality. This is what one would find in these type of cases.


Deputy Byrne: I am sure Mr. MacDomhnaill does not have to check his records. I presume so few went to jail that he may know the approximate figure off the top of his head?


Mr. MacDomhnaill: I would not think tax debt would be a factor in prison overcrowding but it, like other factors, contributes to it. There is a certain constituency that feels people should not go to prison for debt and defaulting on tax is debt. We would not normally put people in prison for non payment of debts.


Deputy Byrne: If Mr. MacDomhnaill does not have the figures with him, maybe he could send them to the Committee. I would be happy to receive them at a later stage.


Mr. Purcell: The 89,590 certificates returned unaccompanied by payment can be misleading but we have used that format for many years. It emanates from a time when the Revenue Commissioners did not have the statistics they seem to have now. In my 1995 report, I intend to give more information to break that figure down further.


As the Accounting Officer rightly said, many of those certificates would be unaccompanied by payment because the taxpayer had made a payment to the Collector General in the meantime; he gave those figures earlier and I am sure he will provide them again. However, I intend to elaborate on that information so that it would not be capable of being misinterpreted in this way again.


We visit sheriffs’ offices as part of our audit of the Revenue Commissioners and try to establish that they had proper procedures for carrying out their work and that certificates were not on their hands for an unreasonable period and look to see that they were not holding moneys for periods in excess of guidelines etc. We would not try to second guess a sheriff if he seized goods because we would be going beyond our remit. However, we would try to ensure they were doing their job in relation to revenue. If they were not, we would write to the Revenue Commissioners to see if they were satisfied and ask them what they were doing about it. They would be the next tier of responsibility in that hierarchy.


Deputy Byrne: My question was directed as much to the Accounting Officer of the Revenue Commissioners as it was to the Comptroller and Auditor General. Do they have a system of double checking?


Mr. MacDomhnaill: We monitored our performance at the receiving end. I gave some figures on lateness which has been totally eliminated. We have also strengthened up the type of instruments that may be used for holding the deposits; they have to be on demand.


Deputy Byrne: If there are 90,000 certificates - that may be a vastly inflated figure - who checks the revenue sheriffs when they make an unaccompanied by payment return? Is there any system of spot checking to ensure that no goods can be seized by the Revenue?


Mr. MacDomhnaill: Yes. We use the sheriff as our first enforcement option. If the certificate comes back nulla bona, we must consider what other options we can use. For example, if there are no distrainable goods but there are financial assets, we would then use attachment. There may also be a case for saying that we will go for bankruptcy and therefore start legal proceedings and prosecutions or we might go for a mortgage judgment. These actions would follow on from dealing with the nulla bona. Of course, in some cases we will find that the business is wiped out at this point. It may be a company where all its assets were leased initially or all of its stock is now gone. This can happen fast once illiquidity surfaces. At that point, one is left with the write-off.


Chairman: I propose that we note paragraphs 16 to 18.


The Witness withdrew.


THE COMMITTEE ADJOURNED.


AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin, 7 Márta 1996


Thursday, 7 March 1996


The Committee met at 11 a.m.


MEMBERS PRESENT

Deputy Eric Byrne

Deputy Batt O’Keeffe

Deputy Michael Finucane

Deputy Desmond O’Malley

Deputy Pádraic McCormack

 

DEPUTY DENIS FOLEY IN THE CHAIR


Mr. John Purcell (Comptroller and Auditor General) called and examined.

Public Session.

Chairman: There are further replies to queries raised on the issue of public procurement.


Deputy Finucane: They all appear to conform. There is a similarity in most of the letters.


Mr. Purcell: I expect so. Part of our job is to see to this. The attention the Committee has paid to the need to comply with the proper contract procedures has been a factor. The message has gone out in this regard.


Deputy B. O’Keeffe: On the issue of conformity, the total value of imported goods to the Office of the Commissioner of Valuation, is £878,860.33. Much of the equipment is of a technological nature relating either to software programmes or computers. If one further looks at the expenditure on imports by the Department of Education, one will find, for example, that computer software in 1995 cost £1,918,000. This appears to be a staggering figure to be importing, given the number of software companies of which the country boasts.


Chairman: I understand this sum is £1,918.


Deputy B. O’Keeffe: However, there is £1 million in respect of the valuation Office. While a total figure is not provided in respect of the Department of Education, the approximate figure is £250,000. This appears to be a lot of money to be spending in equipment that could, perhaps, be sourced locally.


Chairman: We will take up this point.


Deputy Byrne: Does the extensive documentation not specify that they do source all that is possible to be sourced in Ireland? Perhaps a better figure to look at would be the hundreds of millions of pounds that are being spent within the national economy. Much as we may wish that everything could be purchased in this country, we are not, as yet, comparable to the status of the Californian high-tech silicon valley. Sadly, there are many technological items we must import.


Deputy B. O’Keeffe: There is very little emphasis on the silicon valley. Most of it appears to be imported from the UK. All our indications are that we would be well advanced in many of the high technology computing areas. This is a question well worth pursuing.


Chairman: They are procured under EU and international obligations which prevent us from discriminating.


Deputy B. O’Keeffe: I understand. However, we are not certain that all of these items, such as the tender and orders, were in excess of the EU average.


Chairman: We will have the matter clarified.


VOTE 9 - OFFICE OF THE REVENUE COMMISSIONERS (Resumed)

Mr. C. MacDomhnaill (Chairman, Office of the Revenue Commissioners), called and examined.

Mr. Noel Kerins, Mr. Barra O Murchadha and Mr. Con Breen (Department of Finance) in attendance.

Chairman: You are welcome, Mr. MacDomhnaill. I take it your team is the same as last week. Paragraphs 19 and 20 of the Report of the Comptroller and Auditor General read:


Self Assessment
Compliance

19.The rate of taxpayer compliance with the requirements of the self assessment system in terms of returns submitted at 31 May 1995 was:


 

 

Year (April to March)

 

 

 

1990/91

1991/92

1992/93

1993/94

Income Tax

97%

98%

96%

82%

 

 

Year (January to December)

 

 

 

1990

1991

1992

1993

Corporation Tax

80%

80%

77%

70%

Prosecution action arising from the failure to file tax returns was suspended in 1993 on the instructions of the Revenue Solicitor, following the enactment of the Waiver of Certain Tax, Interest and Penalties Act 1993. The compliance programme was recommenced in September 1994. I have been informed that only a small number of cases had been forwarded for prosecution by the year end.


Revenue Audit Programme

20.The Revenue Commissioners have furnished me with the following information:


(a)1994 Audit Programme


 

1994

 

1993

 

Audit Type

No. of Audits Completed

Yield £m

No. of Audits Completed

Yield £m

Comprehensive Audits

4,114

39.89

2,537

19.7

Value Added Tax

13,632

31.83

13,158

30.8

PAYE Employers

8,707

20.38

6,009

16.5

Relevant Contracts Tax

2,350

9.19

2,105

7.9

Investigating Branch (IB)

245

15.67

138

19.5

Anti-Avoidance

132

17.76

19

7.5

Totals

29,180

£134.72m

23,966

£101.9m

(b)Comprehensive Audit Activity in 1994


 

Total

Income Tax Returns

Corporation Tax Returns

No. of returns screened

56,402

37,247

19,155

No. of returns selected for possible audit

4,822

3,016

1,806

No. of selected for audit other than by screening

456

315

141

Audits initiated in 1994

 

 

 

 

4,488

3,075

1,413

(c)Comprehensive Audit Results


 

Total

 

Income Tax Returns

 

Corporation Tax Returns

 

Audits in progress at 1/1/94

1,971

 

1,283

 

688

 

Audits initiated in 1994

4,488

 

3,075

 

1,413

 

Total

 

6,459

 

4,358

 

2,101

Returns accepted

1,400

 

879

 

521

 

Cases dropped

185

 

93

 

92

 

Referred to IB

4

 

1

 

3

 

Cases closed with additional liability

2,714

 

1,958

 

756

 

 

 

4,303

 

2,931

 

1,372

Audits in progress at 31/12/94

 

2,156

 

1,427

 

729

(d)Yield from Comprehensive Audits


Income Tax Returns

No.

As % of Total

Yield

As % of Yield

Nils (Returns Accepted)

879

30.98

-

-

£1–£5,000

1,100

38.77

£ 2,757,844

14.34

£5,000–£50,000

815

28.73

£10,801,662

56.17

£50,000–£100,000

34

1.20

£ 2,437,600

12.68

Over £100,000

9

0.32

£ 3,232,894

16.81

Totals

2,837

100.00

£19,230,000

100.00

Corporation Tax Returns

No.

As % of Total

Yield

As % of Yield

Nils (Returns Accepted)

521

40.80

-

-

£1 – £5,000

288

22.55

£699,395

3.39

£5,000 – £50,000

388

30.38

£5,738,148

27.78

£50,000 – £100,000

49

3.84

£3,504,555

16.97

Over £100,000

31

2.43

£10,712,902

51.86

Totals

1,277

100.00

£20,655,000

100.00

The amount of the highest individual settlement in 1994 was £1,000,400 and arose in respect of Corporation Tax.


(e)Random Audits


As part of the 1994 Audit Programme, a total of 58 random audits were completed. Additional tax liabilities of £108,366 were assessed in 24 cases while the returns of the remaining taxpayers were accepted as originally submitted.


Mr. Purcell: Paragraphs 19 and 20 are related. Paragraph 19 gives details of the percentages of taxpayers who comply with the requirement to submit a return under the self-assessment system for income tax and corporation tax. The figures for the most recent years should, in due course, come up to the high level of compliance eventually achieved for the earlier years, after the late submission of returns is taken into account. Prosecution action arising from the failure to file tax returns has, I understand, recommenced but I do not have any details on what the current level of activity is in that area.


Paragraph 20 gives information on the general level of revenue audit activity in 1994, and more specifically on its comprehensive audits during the year. Overall, audit numbers increased from nearly 24,000 to over 29,000 and the increased activity is reflected in the greater yield, just under £135 million. The increase is almost entirely due to greater activity in the categories of comprehensive audits and anti-avoidance action.


Ideally, the outcome of comprehensive audits should give an indication of the success or otherwise of the self-assessment system in so far as the accuracy of returns is concerned. However, the results from the targeted audits, which show additional liability in nearly two thirds of the cases, would not be representative, nor would the outcome of the random audits, because of the small number undertaken and the selection methods used.


I know the Revenue Commissioners are working on this but I do not know how far they have got with it. It would also be interesting to learn if the Revenue Commissioners had come to any conclusions about what the appropriate level of Revenue audit activity might be, not only from the viewpoint of what is necessary for the proper policing of the system, but also taking into account the potential for extra revenue from the input of additional resources into this aspect of their work.


Mr. MacDomhnaill: The compliance programme is fully operational. It consists of a policy in relation to returns compliance followed by interventions and calls. We have substantial outdoor activity in relation to returns compliance. In addition, the compliance area involves monitoring the registration of new businesses for value added tax and PAYE with a view to establishing what level of liability might be expected in the event of non-filing, so that we will have more informed estimates. Finally, we have a substantial Revenue Solicitors’ office managing a prosecutions policy where there is a failure to submit returns.


Chairman: In regard to paragraph 19, have all the cases been reviewed in which prosecution was suspended at the time of the amnesty, and have prosecutions recommenced where appropriate? How many prosecutions are pending now and how many of these refer to cases on hand before the introduction of the amnesty?


Mr. MacDomhnaill: Are you speaking about prosecutions in general or just in relation to amnesty cases?


Chairman: I am speaking about prosecutions in general and cases where the action was suspended at the time of the announcement of the amnesty.


Mr. MacDomhnaill: We have resumed our prosecution policy. In 1995 we sent out 1,146 warning letters in cases which were considered suitable for prosecution. By year end, 387 of these cases were referred for proceedings to be instituted and fines have been imposed in 119 cases. This programme is continuing and there will be a regular flow of suitable cases referred for prosecution. Corporation tax cases are being pursued to prosecution for the first time in 1995 and represent about 25 per cent of the cases referred.


Chairman: In regard to paragraph 20, the level of audit completed for 1993 was substantially less than 1994, I presume because of the amnesty and as a result the yield from the audits decreased by an amount in excess of £30 million. Do you not find this worrying? Should extra reserves have been made available to bring up the audit levels?


Mr. MacDomhnaill: The audit level dropped in 1993 and early 1994 for the reasons you state. However, there was a diversion of resources into cases which needed to be quantified. This is because there was a general amnesty which applied to all cases, notwithstanding that they might be under investigation, so people were anxious to avail of that amnesty relating to interest and penalties and there was a certain amount of pressure in quantifying the tax to enable them to avail of it before 14 January 1994.


We availed of this opportunity to build up a much more significant auditing force. That meant a substantial amount of training had to be undertaken so we availed of this opportunity to get that training done by calling in the people with experience in the auditing area to build up our skill level in the training. At the end of this process we had over 500 people involved in auditing activity between all the different types of audit. That was a substantial upward move and would have had to occur anyway. It was good planning on our part to avail of the lull brought about by the amnesty to bring about that upgrade in the level of qualified and trained auditors. Nothing was lost on that account.


We now have a much more substantial auditing force. The factors governing the level of audit must be a realisation that the more auditing you do the more you are moving away from highly targeted cases into cases where there is less of a prima facie case. This is edging in towards the complying sector and one of our strategies in all of this is as far as possible, to keep the interference with complying taxpayers to a minimum, to keep the cost of compliance to a minimum. It is always a matter of judgement in relation to the level of auditing, but we have up to now been able to devote most of our auditing resource to targeted audits and that is why there is a very significant yield in the targeted audit.


In regard to random audits, we are only doing a very low percentage for the reasons which I stated, so the sample is not yet significant. Over time, the sample will aggregate. Admittedly, if you wanted to get a check on any particular year, it would be better to have an adequate sample in that year, but this would involve deflecting a very substantial resource away from targeted auditing where the yield is coming in terms of the amount and percentage of cases that result in extra tax as against random auditing.


We have no option but to follow the strategy of building up a random audit of significance over a number of years. We will be adding to the number of random audits each year and eventually the number will be significant statistically to enable us to draw conclusions. We are already experiencing an improvement in the random auditing process because the percentage of cases yielding tax in the random audit is going down. If the whole policy is correct, I hope we will get to a level where the random auditing would indicate the overall level of compliance and would be a fairly reasonable measure of that. As of now, we are still getting a lot of cases into the random auditing which would have been selected anyway under the targeted auditing. The sample is polluted on that account as well.


Deputy B. O’Keeffe: In regard to paragraph 19, income tax and corporation tax, self assessment in income tax amounted to 97 per cent in 1991. Corporation amounted to 80 per cent. By 1993, income tax was down from 97 per cent to 82 per cent, and corporation tax was down from 80 per cent to 70 per cent. How did this occur? Is it possible for you to give an estimate of the amount of loss of revenue that would represent because of non-compliance with self-assessment?


Mr. MacDomhnaill: The explanation for the difference between 1991 and 1993/4 in relation to income tax is simply that this is a progressive situation. We are taking a read-out a much longer time interval after the due date for 1991 than we are for 1993/4. We have every reason to believe, and would be quite confident from the trends, that 1993/4 will ultimately be even better than 1991. I say that because the initial response for 1991 was 73 per cent. This is taking a reading immediately after the returns were due to come in. The corresponding figure for 1993/4 is 78 per cent. The trend is upward. We will not have a read-out for 1993/4 comparable to the 1991 read-out until next year, because the process is ongoing.


Notwithstanding the surcharge of 10 per cent, a considerable number of people do not send in the return until after the due date. They have to pay the 10 per cent surcharge, but that is the difference between the 80 per cent and the 90 odd percent. This is the compliance operation the Chairman mentioned, where we have to follow up cases where returns do not come in automatically.


With regard to the difference between income and corporation tax, the explanation is somewhat complicated. In both these areas, penalties and surcharges are based on the tax chargeable, but in the case of a company that is active and managing assets, but has no income or chargeable income, the surcharge will be nil and the penalty nominal. It is our policy to use our resources on the basis of risk analysis. Consequently, where we feel there is little to be achieved in terms of penalty or surcharge, we will not devote many resources to obtaining the return for the sake of it. Admittedly, there is a legal obligation there but we must be realistic in this. If a company is simply holding a non-income producing asset, for example, a house, it might be felt that there is too much red tape involved in having to submit a return in such a case.


I suggest that it is a fair policy to devote resources to the area where there is tax and where surcharges and penalties are likely to be paid, rather than to an area where there is not. If such cases are removed, it is our belief that the percentage compliance rate, for really active companies with tax liability, is as high as it is for income tax. This was not the position in the past because corporation tax did not come into self-assessment until some time after income tax. It is a lap or two behind income tax in this regard. We are only now taking the first prosecutions for non-filing of returns for corporation tax.


Deputy B. O’Keeffe: Would good accountancy practice not state that if money was not received by the end of 1993, a shortfall would be reflected in the 1994 accounts? Is that a fair barometer? Did Mr. MacDomhnaill state that moneys paid in 1991/1992 were included in the accounts for 1991? Effectively he stated that the Department had to wait almost a year in 1991 to obtain the 97 per cent in question. In relation to 1993 he stated that the percentage will increase by the end of next year. This hardly represents good accountancy practice. Surely the Department should work on the basis of the income it receives at the end of the tax year. Whatever moneys are consequently received should be reflected in the returns for the following year. Was Mr. MacDomhnaill’s reply a fair one?


Mr. MacDomhnaill also referred to a decrease of 70 to 80 per cent in terms of corporation tax. Was there a decrease in the number of companies trading and profit-making in Ireland in 1993/1994 than there were in 1990/1991? I thought there would have been a dramatic increase in the number of companies operating on a profitable basis in 1993/1994 because the country’s economy was in recession during 1990. How can Mr. MacDomhnaill state there is no point in pursing companies that are not operating profitably? This does not seem to stand up to argument.


Mr. MacDomhnaill: I agree with the Deputy with regard to accounting practice. However, fiscal accountancy is completed on the basis of cash received by the Exchequer during a particular year. In other words, the Government can only spend money which is has obtained. If we were to work out a system where we had to relate back all tax charged during a particular year - although collected afterwards - more money would be received and this would be relevant for a profit and loss account. I agree with the Deputy on this point.


I would not read any conclusion about tax paid into the figures for returns compliance. Essentially, most of the people involved in such cases would have paid preliminary tax during the year in question. At the return filing stage we are only discussing a balance of tax due which is usually less than 10 per cent of the total figure. Those involved must make a preliminary tax payment which depends on the base they are using - 90 per cent or 100 per cent of the preceding year - in order to avoid an interest charge. Usually this amounts to 90 per cent of the liability. The fact that a return is late does not mean that the payments are correspondingly late. We are aware, from the remainder of the report, that there is an ongoing battle for payment of arrears where, notwithstanding whether returns have been submitted, the tax has not yet been paid. This involves the area of sheriff enforcement and prosecutions for debt. The prosecutions to which I referred in relation to returns are for returns compliance.


If that answers the Deputy’s question, the figure for companies in 1993 was 70 per cent and does not relate to the total number of companies in operation. That figure represents a percentage of companies that were served with notices. Obviously the percentage could be of a higher or lower number of companies. With regard to the percentage of companies where notice was served and where a return was submitted on the date on which we made the count, I stated that, because of the subsequent compliance actions we are taking, including prosecutions, a further number of returns will be submitted after the date which will eventually add up to the 80 per cent of the cohort of companies active in that particular year. It is a percentage, it is not an absolute figure.


Deputy B. O’Keeffe: Mr. MacDomhnaill stated that 10 per cent of the figure for general tax paid is outstanding. Could he provide an estimate of what that percentage represents in terms of money? In terms of the adequacy of audits, the Comptroller and Auditor General stated that an additional liability was discovered in 66 per cent of all audits undertaken. That represents an extremely serious situation. How does Mr. MacDomhnaill reconcile it with his statement that there seems to be an indication of far greater compliance in the random audits undertaken by the Revenue Commissioners? How can this be reconciled with the Comptroller and Auditor General’s statement?


Mr. MacDomhnaill: I would reconcile it as follows. The main body of audits carried out by Revenue are undertaken as a result of a number of processes which we call targeted audits. These cases are screened and rescreened to see if there are characteristics which suggest that an audit should be undertaken. In addition, such cases are matched with sources of third party information and information gleaned by Revenue from other sources in the course of its operations. When all these factors are added in, cases are selected for audit. We would regard these functions as deficient if we did not obtain a very high level of undercharge in the cases selected. I think the Comptroller and Auditor General stated that these cases are no indication of the compliance level for the general body of taxpayers. They are specifically selected because there is an indication that there may be an undercharge.


In the initial number of random audits which we undertook, we discovered a higher percentage of undercharges than has been experienced in later audits. Therefore, the random audit is the correct way to measure tax compliance in general. An audit only measures the tax compliance in the case itself. If that is a targeted audit, a recovery is obviously expected. Random audits are expected to give an indication of the level of general compliance. The fact that the number of cases yielding tax under random audits is decreasing indicates an improvement in the level of compliance.


Deputy Finucane: I compliment the Revenue Commissioners who have become very user-friendly in recent years. People tended to look on them with awe in the past. Perhaps Mr. MacDomhnaill will clarify another point which relates to the 1994 audit programme. The number of comprehensive audits increased from 2,537 to 4,114. The word “comprehensive” means what it says but 185 of those cases were dropped. What were the reasons for that if you had decided on a comprehensive audit?


Mr. MacDomhnaill: The cases are selected on the basis of screening and all the information I mentioned. Our instruction to our auditors is if they are satisfied, when undertaking an audit, that the accounts reasonably reflect the level of business going on, which is to be observed as they are undertaking the audit, and if the factors which led to the selection of the audit prove explainable or not a basis for suspecting there is an undercharge, they would not go on a fishing expedition to find out undercharges one way or another simply because they have gone out. If we establish that the return submitted and the accounts reflect adequately the level of business and the level of profits, that is a successful audit, even though we have dropped it in terms of recovering any tax.


Deputy Finucane: Will Mr. MacDomhnaill expand a little on the investigation branch and anti-avoidance with regard to the audits? They appear self-explanatory, but perhaps Mr. MacDomhnaill will expand on the differences with regard to the audits.


Mr. MacDomhnaill: The investigation branch is a specialist branch with very highly skilled auditors undertaking extensive audits, covering a number of years of perhaps a number of companies, where there is an indication of a very serious level of evasion. Evasion in this instance is largely brought about through non recording of certain turnover, perhaps overstating certain expenses and withdrawing profits otherwise than through the normal channels of dividend or remuneration. This is evasion.


On the other hand, avoidance is availing of legal interpretations of the tax code in conjunction with, for example, company law, trust law and the law of property to bring about a set of circumstances where a transaction which might otherwise attract liability does not do so. For example, it may be possible to arrange that a certain part of a business is conducted by means of an overseas company and that this overseas company would be controlled by other people and would in the event be non resident. The profits would all be earned abroad and, therefore, as they would accrue to a non resident entity, they would not be liable to Irish tax.


This is a legitimate part of tax planning, but taken to extreme, we call it tax avoidance. For example, somebody might construct a situation to give the appearance that that was the case, but, in reality, a business was being conducted out of Ireland. Many things would be put in place to try to give the opposite impression. That is tax avoidance. Tax avoidance largely relates to capital taxation, particularly capital gains tax. A number of the very big cases which have come before the courts related, not to the total avoidance of capital gains tax, but to the securing of a lower rate of capital gains tax. A few years ago, the range of rates was abolished and a single rate was introduced. When there was an opportunity of paying a lower rate because one held the asset for a longer period of time, obviously the opportunity was there to construct mechanisms, whether through companies or trusts, to ensure that the asset which has changed ownership may still appear to be in the same ownership to acquire a longer period of ownership and a lower rate of capital gains tax. We would also call that tax avoidance.


These types of arrangements must be challenged in the courts. They require a very highly skilled cadre of inspectors, not of the investigation type, but skilled in the tax code and the other associated bodies of legislation, to be able to challenge these effectively in court. The big debate is the conflict between substance and form. A number of jurisdictions take a different line in relation to that argument and there have been a number of leading cases in Great Britain where they just simply cast aside all the various legal entities and looked at the substance of the transaction.


On the other hand, our courts do not take that view, but rather that a limited company is a separate persona and that actions carried out by a limited company are not the actions of the principals involved. We have a very difficult regime and we have a fairly substantial resource committed to the anti-avoidance campaign. It is separate from investigation.


Deputy Finucane: To what degree are the Revenue Commissioners succeeding in terms of anti-avoidance? I remember when we discussed the Telecom Éireann building affair and the raft of companies involved, many of which were off shore, with the objective of evading tax. What is the degree of success with regard to off shore companies in Jersey and elsewhere? I presume in terms of anti-avoidance activity and special investigations, that the Revenue Commissioners are increasingly probing that aspect. I understand very professional people must be involved at that level, but to what degree are the commissioners winning in terms of off shore companies, whose objective is tax avoidance? Various aspects have been tightened in the Finance Bills of recent years. Does Mr. MacDomhnaill feel the Commissioners are on top of that aspect?


Mr. MacDomhnaill: The difficulty with off shore companies and the mobility of funds is another area where a balance must be struck. We are an open economy and one of the main tasks confronting a number of Departments is to secure inward investment into the Irish economy and a climate favouring investment and risk taking. These agendas must be weighed against the agenda of trying to secure the tax base. This is one part of the argument. There is a constraint on Government regarding the amount of intrusion which can be accepted in relation to the financial sector.


Another part of the argument is that, without international co-operation, a little country like Ireland has no hope. For example, we have seen steps taken by Germany, in relation to withholding tax on interest, where they had to back off. If one takes the resources committed by the United States to this process, they are enormous, but they still had to introduce a unilateral type of control of foreign companies legislation, which we have not got. That requires a huge amount of surveillance and commitment of resources well beyond anything we have in the Revenue Commissioners.


We are in a network of double taxation treaties where there is a certain degree of reciprocity in relation to the exchange of information. Unfortunately, the tax havens are not a party to that network. Most of the countries involved have special provisions in relation to tax havens and the use of what they call treaty shopping. I cannot be assertive in relation to being on top of the off shore international funding operations. However, it is a much larger question than taxation.


On balance, we probably have as much as it is reasonable to expect in this area. We should remember that we have already conceded, in relation to funds lodged here by non residents, that we do not collect any tax on the interest. This is done statutorily so there is a recognition in law of the problem. There is also a recognition in law of the whole deposit interest retention tax regime, where the rate of tax is 15 per cent. If one gets 15 per cent, that is the compromise one accepts. In other words, instead of information, one settles for 15 per cent tax. That is a fairly strong recognition that getting 100 per cent tax, if the 15 per cent regime was not in place, is difficult.


Deputy Byrne: This Committee will only be satisfied when we get figures of 100 per cent across the board for each year. That is, obviously, easier said than achieved. However, I share Deputy Batt O’Keeffe’s concern in regard to the sliding scale on compliance, particularly the corporation tax returns for 1993.


Is it a fact that self-assessment came in as a result of the 1988 tax amnesty, representing the new thinking in the Department which would bring deviant tax payers into the net? If that is the case, it disturbs me that in 1993, 30 per cent of those liable for corporation tax did not make due returns. Do you share my concern that, despite the mechanisms of the new system, in 1993 only 70 per cent of people decided to make these returns by a certain date? A large number of people, 30 per cent, are turning up their noses at the system.


Mr. MacDomhnaill: Many companies do not carry on business but we still have to issue returns. About 14,000 new companies are registered each, year and almost as many are wound up or get into difficulties. There is a massive turnover of companies. We only hear about very successful businesses in the media but at least two out of three new ventures fail; people lose their capital and may end up with tax arrears. The 70 per cent figure does not relate to 70 per cent of companies liable to pay tax but 70 per cent of what we consider to be the live register of companies. Some of those companies might be only asset holding companies which do not generate any income. In each group of companies, there is a number of companies which simply hold shares in other companies.


We brought in a new measure because it was recognised that the surcharge is zero if the tax is zero. Some new measures were brought in a few years ago whereby if companies did not file returns, certain rights in relation to loss set off would be restricted. These caused an amount of concern among the business sector and had to be moderated. New efforts are being made in this area. I do not agree that the 30 per cent which had not filed by May 1995 were all liable to pay tax - the vast bulk of them would not have any tax liability.


Deputy Byrne: The compliance programme was suspended and then recommenced in September 1994. The Comptroller stated in his report that only a very small number of cases have been forwarded for prosecution. Can you give us an update of those figures - how many have been presented for prosecution?


Mr. MacDomhnaill: There were a number of technical difficulties in relation to prosecutions because of some court decisions. However, it is correct to say that there was a period when prosecutions were not undertaken. Since commencing in 1995, the first process has been to send out a warning letter, to which we hope people will respond. We sent out 1,146 warning letters and selected 387 of those cases for prosecution. Fines were imposed in 119 of those cases.


Deputy Byrne: Can you inform the Committee about the level of those fines, although not necessarily today?


Mr. MacDomhnaill: Those cases all have to be published. They are summary convictions so the fines are not enormous. However, although the fine level is low, because they are prosecutions they have to be published. The Committee mentioned before that evasion case fines below £10,000 are not published. However, fines in this area of £500 or £1,000 are published.


Deputy Byrne: In relation to the revenue audit programme, the comparative figures for 1993 and 1994 are startling. Comprehensive audits in 1993 yielded almost £20 million but almost £40 million was yielded in 1994. The logic of those figures is that the more comprehensive audits are carried out, the greater the resulting yield. Would you admit that 2,500 audits in 1993, which yielded £20 million, were not enough because twice that amount was received in 1994 by only increasing the number of audits to 4,114? Are you happy that we are carrying out sufficient comprehensive audits in order to bring in the outstanding revenue?


Mr. MacDomhnaill: 1993 was a particularly difficult year in relation to audits because there was an ongoing amnesty until the end of that year for declarations and payment into January 1994. We availed of that year to step up the total numbers trained and skilled in auditing to over 500. We are now on a different plateau. Having regard to the grade and skill level of the existing complement, we are probably at the highest level of auditing we can achieve.


The Revenue Commissioners would require additional resources to go beyond that, which must be put in the context of the situation regarding public sector numbers. We have been allowed by the Department of Finance to retain some overlap staff on the decentralisation programme. In other words, we had to transfer work to Limerick and we were able to retain people for a transitional period in Dublin. We have been using that staff substantially in the whole collection compliance area. How long we will be able to do that depends on how long these extra numbers will be left with us. However, it is accepted all around that we have excessive numbers at the moment so we will probably not be able to do any more auditing. We are probably at maximum commitment in relation to auditing.


Deputy Byrne: You mentioned that the names of those who had been fined would be documented in the media. Is that a fact?


Mr. MacDomhnaill: Those cases are listed in the back of the report for the particular year.


Deputy Byrne: The highest individual settlement in 1994 was £1,400,000, which arose in respect to corporation tax. Do we get to see who these individual companies are? Does the Revenue publish their names?


Mr. Mac Domhnaill: Yes. We have two lists: the list for prosecutions to which I referred and the list where the recovery was over £10,000. These are the evasion cases and they are listed.


Chairman: The Committee notes these paragraphs and holds that self-assessment audit and compliance will play a major role in ensuring the system operates in a credible manner.


Paragraph 21 of the Report of the Comptroller and Auditor General reads:


Tax Amnesties
Incentive Amnesty Audit - Legal Proceedings

21.In paragraph 20 of the 1993 Report, reference was made to difficulties encountered in reporting certain aspects of the results of the audit of the Incentive Amnesty introduced by Section 2 of the Waiver of Certain Tax, Interest and Penalties Act 1993.


The Attorney General’s opinion in the matter was that I was prohibited by virtue of Section 7 of the Act from reporting to Dáil Éireann in the way that I had intended and that the audit carried out by my officers was not an audit within the meaning of Article 33.1 of the Constitution. I then sought the opinion of Counsel who advised that I was entitled to make such a report as part of my constitutional and statutory duties. Legal advice obtained by the Committee of Public Accounts supported the views of my Counsel. In the light of the uncertainty and the importance of the substantive issues I have instituted proceedings in the High Court for a determination of the matter. Should the Court(s) decide in my favour, it is my intention to publish the results of the audit within any parameters set down by the Court(s).


The vast bulk of moneys received under the Incentive Amnesty was remitted in 1994 and therefore my Report on the audit of Revenue for that year is not complete.


Chairman: This is an information paragraph which reminds the Committee that legal procedures have been issued in the High Court for the determination of the issue in which the Comptroller and Auditor General wished to safeguard his constitutional statutory rights in relation to his right to report to the Dáil on his findings on the tax amnesty. It also states that in view of the amnesty moneys received in 1994 his revenue audit for that year remains incomplete.


As I say, it is an information paragraph but if there are any relevant questions, they can come under paragraph 22, which relates to follow-up action on the amnesty. The Comptroller and Auditor General may wish to comment on paragraph 21.


Mr. Purcell: Paragraph 21 gives me an opportunity to bring the Committee up to date on the status of the legal proceedings which I am taking in connection with the audit of the incentive amnesty. A plenary summons containing a particularised general endorsement of claim was served on 8 March 1995. It had been hoped to proceed on the basis of an agreed special case but in the event it did not prove possible to agree its terms with the other party to the action. In that event, a statement of claim was delivered on 27 July 1995 and the defence to the proceedings was served on 9 October last. On 23 October my legal advisers received senior counsel’s certificate of readiness and they served notice of trial together with notice to produce on 13 November. Notice of trial, books of pleadings and the certificate of readiness were lodged in the High Court Central Office on 13 December last.


At present, I am awaiting the appearance of these proceedings in the court’s list to fix dates but it is clear that the proceedings will not be heard until the Easter law term at the earliest. I will inform the Committee when a date for the hearing is fixed.


Chairman: The Committee notes paragraph 21. Paragraph 22 of the Report of the Comptroller and Auditor General reads:


Incentive Amnesty - Follow up Action

22.The statutory terms of the Incentive Amnesty did not apply to certain categories of persons and taxes e.g. individuals who were the subject of an audit or investigation or tax at enforcement at the specified date. Moreover, those availing of the Amnesty were required to make a correct return of income or gains for the 1992/93 tax year by the statutory date or otherwise lose the benefits of the Amnesty.


In accordance with the Amnesty legislation the Collector-General will become aware of payments under the Incentive Amnesty only when the taxpayer concerned produces to him the prescribed Form of Evidence of payment made to the Chief Special Collector. While technically, under Section 6 of the Amnesty legislation, any person who has received a request for payment or a demand from the Collector-General (and who has availed of the Incentive Amnesty) should take the initiative to send the Form of Evidence to the Collector-General’s Office, it may not be clear to the taxpayer in all instances that the document he or she received represented a demand.


In the circumstances, and in order to avoid waste of resources on collection and enforcement activity where taxpayers have already paid, the Revenue Commissioners decided to write to the taxpayers concerned inviting them to forward the Form of Evidence in the event that they had availed of the Incentive Amnesty. This programme has been under way since late 1994. In order to manage the programme, letters are being issued in tranches starting with the largest recorded arrears. By mid August 1995, some 35,500 of these letters had issued to taxpayers and approximately 4,500 Forms of Evidence had been provided to the Collector-General’s Office. The issue of the letters was expected to be completed by late August 1995.


In accordance with the procedures that have been put in place to check eligibility for the Incentive Amnesty, the Form of Evidence is being validated in each case with the Chief Special Collector’s Office and the relevant checks are being undertaken to ensure that the conditions of the Amnesty legislation have been complied with. For this purpose, specific instructions and checklists have been prepared for the relevant staff in the Collector-General’s Office which are designed to ensure that excluded cases do not benefit from discharge of tax under the Incentive Amnesty. Lists have been drawn up of cases which were under investigation or at enforcement at the relevant date and these are available to the Collector-General’s Office for the purpose of operating the instructions.


The Accounting Officer has informed me that 10,068 such cases had been identified (1,220 where the entire case may be excluded and 8,848 where specific tax may be excluded) but that quantifying the arrears of tax represented by cases on the list could only be done on a case by case examination and would require a very considerable resources input. He also informed me that because the examination of the Forms of Evidence and the follow-up had only just begun, no results were available at the date of my Report.


Once the tax concerned has been discharged in accordance with the instructions all other cases with balances still outstanding will be available for action. It is intended to tackle the arrears concerned under intensified arrears/compliance, local collection and enforcement programmes. The Revenue Commissioners are of the view that in many cases the arrears will be unproductive estimated liability or will relate to ceased companies, and care will have to be exercised to make the best use of resources in tackling these arrears while maintaining pressure for timely payment of current tax.


The Amnesty legislation provides that, in certain dealings with an Inspector of Taxes relating to pre-April 1991 liabilities in respect of taxes covered by the Incentive Amnesty, a taxpayer may produce a certificate from the Chief Special Collector which will preclude the Inspector from making any further inquiries unless the Inspector can satisfy the Appeals Commissioners that there are reasonable grounds to believe that the taxpayer had not made a full and true declaration of income or gains to the Chief Special Collector.


The Accounting Officer stated that 179 such certificates had been presented to Inspectors of Taxes during the course of audit and investigation work and that in one case an Inspector had applied to the Appeals Commissioners for leave to pursue inquiries and that the application had been granted. In accordance with Section 6 of the 1993 Amnesty legislation, actual discharge of tax takes place on foot of Forms of Evidence submitted to the Collector-General’s Office rather than on the basis of certificates given to Inspectors and the process of discharge of tax was currently under way.


Mr. Purcell: Paragraph 22 outlines the work undertaken by the Revenue Commissioners in the follow-up to the incentive amnesty and I must say they have been quite diligent in that regard. The terms of that amnesty did not apply to income tax or capital gains tax if it was under investigation or at enforcement at the specified date, but of course due to the confidentiality provisions of the amnesty, Revenue was not in a position at the time to check if any amounts remitted fell into this category.


However, as part of its post-amnesty review of arrears, Revenue issued some 38,000 letters to those who, according to their records, could have come within the scope of the incentive amnesty - essentially, those with pre-April 1991 arrears of the relevant taxes. This was to ensure that collection and enforcement would not be pursued in those cases where the terms of the amnesty had been complied with.


To date, Revenue has received 6,900 forms of evidence from those who availed of the incentive amnesty and that prepares the way for Revenue to tackle the remaining arrears. Revenue also addressed the checking of eligibility from a complementary angle, that is, in producing lists for use in the Collector General’s Office of cases where tax would have been ineligible for incentive amnesty purposes by virtue of being under investigation or at enforcement.


I do not know whether the Accounting Officer is in a position as yet to disclose the outcome of the various checks undertaken, including the requirement to have submitted a correct return for the 1992–93 tax year by the statutory date.


Chairman: Mr. MacDomhnaill, can you outline the results and information you have been able to ascertain so far as a result of follow-up action taken in the aftermath of the amnesty?


Mr. MacDomhnaill: A number of cases have been dealt with. About 450 eligible cases have been dealt with fully right through to discharging the tax that was on our books. 110 cases have been identified as possibly ineligible for the amnesty: if found to be ineligible, will get credit for any tax which they have paid but will be subject to the normal processes after that. There are 400 cases in the process of being checked at present. These are fairly elaborate checks. The first step we must take is to get the Chief Special Collector to endorse that the certificate is a correct one; then we must go through the various lists which we have identified as potentially excluded cases; and, finally, if there is an objection, we must deal with it. Correspondence will ensure of course in many of these cases because people may not accept our view of what is happening.


That is the state of play at present. As I mentioned, this is a very resource intensive operation. We have 40 people committed to this. We got no extra staff at all, as I have said already, to handle this amnesty so the 40 people are technically on loan to us at present and we are under notice that we may have to surrender those 40 people before the year is out. That will present us with great difficulties because we see a very long tail to this process. Until it is cleared out of the way, we cannot get our normal enforcement activity back in place.


Chairman: When do you expect to be in a position to tackle the arrears under arrears/compliance, local collection and enforcement programmes?


Mr. MacDomhnaill: Of course all our compliance, arrears and enforcement staff are fully occupied. There is plenty of other work, as you can imagine. In fact, our priority must be to keep current taxes, and the £13 billion which is needed for the year, coming in. The bulk of our resources are tied up in that and will continue to be tied up in that. What we are talking about here is a very peripheral type of revenue in the overall context but because it is a fundamental part of the regulatory process and these cases must be seen through to the end, we must deal with it.


As we look at the cases which are not in the potential catchment of the 38,000, as the Comptroller and Auditor General mentioned, and the vast bulk of them are not even within sight of being eligible for the amnesty, they will all be released now, either to the compliance arrears programme in the Chief Inspector’s Office for revalidation of the amounts, if there is suspected large estimated content; or, if there is a substantial declared or informed estimate of tax, then they will go to either local collection in the provinces or the Collector General for local collection in Dublin, to be pursued. Now that is an ongoing activity. We have assigned 100 new additional staff, which we got from the single market process - if you recall, Chairman, as a result of the single market a certain amount of customs and excise work fell out and we were allowed use some of the staff for this purpose; other members of staff were used for new work, such as vehicle registration tax and for the Mutual Assistance Programme - to boost up local collection in the whole collection process. Those cases will go out to that area, to the Dublin local collection area and back to the Collector General where the case is substantial. That is ongoing.


Our arrears compliance programme is ongoing in relation to the cases which must be re-vetted. We have substantial numbers going through that process all the time. It is a question of catching up.


Chairman: How many certificates from the Chief Special Collector have been presented to the Inspectors of Taxes to date? In how many of these cases have the appeals commissioners allowed enquires to be pursued? What was the total income from these cases?


Mr. MacDomhnaill: As of now, we have had 212 certificates, which disclose the amounts paid to the Chief Special Collector. The evidence, which is the first thing we get in relation to collection, does not disclose that. If we do not accept these certificates, we must go to the appeals commissioners before we can reopen the audit. We have gone to the appeals commissioners and have been successful in reopening one case and refused in two cases. We have a number of other cases which are still in the process of the appeal procedure.


Chairman: What was the approximate income from these cases?


Mr. MacDomhnaill: I do not have statistics on the income from these cases with me.


In the last day or two there was a settlement of a case, which will appear on the list for 1995, in which the taxpayer thought he was within the amnesty but he was made ineligible. At least one case in that category has gone through. Sums will become clear but this will take time.


Chairman: How much would that be approximately?


Mr. MacDomhnaill: Thousands of pounds. The difference between the 15 per cent and the correct rates of tax, plus interest and penalties, can be very substantial.


Deputy O’Malley: The Comptroller and Auditor General, in paragraph 22 and subsequent paragraphs, gives the position as he understood it up to last August, when he would have had to write his report for 1994. He points out that the report is not final. In so far as you can say, is it final now? Have you approached everybody who availed of the amnesty and examined whether they were eligible for it?


Mr. MacDomhnaill: It is not final. We have written to everybody who could possibly avail of it. We have had just under 7,000 people identified. The next process is to look at our book debt and clear it. This is what all these conditions and lists have to be checked against. That process will go on for a long time. At present we have a surplus of 40 people to deal with it but they are only with us on a temporary basis.


Deputy O’Malley: Where are they from?


Mr. MacDomhnaill: They are our own staff but they should have been released into a decentralisation pool because we have other staff who are now serving in Limerick. These were the people who were left in Dublin and were not redeployed to another Department. They are surplus to our sanctioned number of staff. There is still ongoing work in relation to decentralisation. We have not yet sent all the work from Dublin to Limerick because the last people we got in just before Christmas have to be given time to be trained to the right skill level. We have a recognised overlap period. We are using them at present to do the work that has remained in Dublin and 40 of them are doing this arrear project work.


Deputy O’Malley: This amnesty has been, in net terms, of little benefit to the Exchequer if many of your staff are tied up three years later and are likely to be tied up for the foreseeable future in running after these people. How many people availed of the amnesty? Many different and confusing figures are given for different categories of people.


Mr. MacDomhnaill: Some 40,300 declarations in respect of income tax and CGT and 2,100 in respect of VAT were lodged with the Chief Special Collector. The VAT did not qualify for the incentive amnesty but people were given the opportunity of paying the VAT to the Chief Special Collector. The 2,100 would not represent other people who would have paid their VAT in the ordinary way directly to the Collector General.


Deputy O’Malley: I know you cannot give me a final figure because the matter is not finalised, but how many of the 40,300, roughly, are likely to turn out to be entitled to the amnesty and how many will be disallowed?


Mr. MacDomhnaill: Some 37,552 individuals availed of the incentive amnesty and paid £199.5 million between 1993 and 1994. £14.1 million of that sum related to VAT. We have established lists, from our total tax register, of just over 10,000 who could be ineligible for the amnesty. A substantial number will be eligible. Of that 10,000, the vast majority will not have availed of the amnesty at all; they are just lists of cases that were at certain stages of investigation and enforcement. The 10,000 does not represent all ineligible people, it is just the potential number. If everybody who was ineligible tried to use the amnesty it would be about that figure. Obviously, that will not be the case. The ineligible category will be considerably below 10,000. The bulk of the people who applied for the amnesty will have been successful.


Deputy O’Malley: Would you say it could be 90 per cent?


Mr. MacDomhnaill: That would not be far off the mark.


Deputy O’Malley: Can you give an estimate of the tax foregone by Revenue as a result of these people availing of the amnesty? I do not mean just the basic amount of tax they owed but the amount of penalties and interest that would be payable if it were collected by the Revenue in the normal way.


Mr. MacDomhnaill: We are into many imponderables because of the confidentiality aspects of the amnesty for individuals.


Deputy O’Malley: I am not asking about individuals. I am looking for an overall total figure.


Mr. MacDomhnaill: We have to average out the marginal rate of tax and find out what it would have been. One must also take into account that a substantial amount of this undercharge will relate to capital gains tax. If one tries to strike a marginal rate of tax of, for example, 50 per cent - in some years the marginal rate of income tax would have been over 70 per cent - one can see that the tax element alone could have been as high as £600 million. Adding on interest and penalties would again depend on the years one is dealing with and the level of penalty that would have applied. If, for example, somebody came to us, without there being an amnesty, and made a voluntary disclosure, the penalties would not be as high as if we detected it. The Revenue Commissioners are entitled to mitigate penalties and where we receive 100 per cent voluntary disclosure and co-operation we would seldom charge a penalty of more than 5 per cent. Much depends on whether these people would have come forward and voluntarily made a disclosure.


Deputy O’Malley: We can only deal in round figures. You have given a figure of approximately £600 million due in tax. Would it be reasonable to add a figure of about £400 million in respect of interest and penalties, giving a round figure of £1,000 million which was due to the Exchequer? You appear to have received about £200 million so the net position is that Revenue is £800 million worse off, compared with what it would have been if it had been able to collect the full amount of tax, interest and penalties.


Mr. MacDomhnaill: That is one way of looking at it. Your figure of £1 billion could be sustained if certain assumptions are made. However, the real answer is that we might not have got any of this money. The idea behind the amnesty was that funds were abroad, undetectable and undistrainable. One has to weigh up whether we would have got any of this money at all. We have a factual realisation of £200 million as against a long-shot potential of £1 billion. One must weigh up the odds; it is a gamble. Does one take the £200 million? I have encountered this dilemma quite frequently in individual cases.


The opportunity is there. Approaches are made and money is completely undetectable. Should we take what we can get or should we stick to the strict letter of the law? I find myself in a dilemma sometimes because there can be very substantial moneys involved which can be very profitably used by the Exchequer but which can be just turned away. These are very difficult decisions which must be faced on a case by case basis. This is a global version of the same thing.


Deputy O’Malley: I accept that. You mentioned that the original idea behind the amnesty was to bring in from abroad a lot of money which was unknown and presumably undetectable for the most part. Accountants in practice tell me that in their experience at least - no individual accountant would have as global a view of it as the Revenue - the great bulk of the rather limited proceeds of the amnesty was not this hot money hidden abroad but were arrears due within Ireland in respect of either activities in Ireland or funds or assets in Ireland. Is that not so?


Mr. MacDomhnaill: There are two components there, funds in Ireland as distinct from offshore. When a final decision had to be made on this, the argument was put forward that funds in the Irish system would drain away offshore simply to come back in and that the second situation would be worse than the first if the category of eligible funds was not expanded. It was not possible, therefore, to adhere to the original idea of offshore funds only because in the first instance it could be so easily circumvented, and second, it could cause a run of funds out of the country. This is the first component. The elements of it would not be known to us at this point.


Many of the mechanisms were aimed, in the general amnesty and indeed in the incentive amnesty, at tax which had already been declared. These were on our books and could now be paid, in the case of the general amnesty without interest or penalties, and in the case of the incentive amnesty without interest and penalties and at a rate of 15 per cent.


However, we were substantially disappointed with regard to this aspect of the amnesty. The impact on the book arrears will not be anything like what we thought it would be. For example, in the cases which have been identified as eligible for the amnesty thus far, some 450, the amount of tax discharged from the books is only £3.5 million. It is disappointing.


Deputy O’Malley: The effect or value of this amnesty to the Exchequer overall is very limited, although its value to those who have engaged in prolonged evasion is very great.


Mr. MacDomhnaill: It amounts to £200 million. I happened to be in the Dáil when the Minister announced the allocation of this sum. A substantial portion of it went, rather matchingly, to commitments with regard to the pension fund in the two sections of the former Department of Posts and Telegraphs which had, as it were, been privatised. This was a commitment from back years and this was back tax, so there was good matching here.


Deputy O’Malley: That is a policy judgement. You should stick to accountancy, and in terms of accountancy it was extremely bad value. Unhappily for us all, An Post and Telecom Éireann have not been privatised. Would that they were.


Chairman: You mentioned that possibly 90 per cent would qualify for the amnesty. You have 560 cases surveyed at present, from which 450 qualified and 110, or approximately 20 per cent, did not. Would that be a fair average?


Mr. MacDomhnaill: It would be an indication of where ineligibility was likely. There will be many cases where people will not even have to submit the certificates because they will not have arrears on our books. This is only a specific category of the total 37,000.


Deputy Byrne: Would you not agree that the figures are quite startling when you consider that they have been documented at in excess of £1 billion? A total of £1,066 million is owed by 137,000 tax payers. This amnesty was introduced in 1993, which is not long after the amnesty of 1988. What was wrong with the Revenue Commissioners which meant that, in this relatively short period of time, there were 137,000 non compliant tax payers withholding a sum estimated in excess of £1 billion, yet ultimately only £200 million was returned to the Exchequer? Was it policy? Was your organisation not geared up? One would have thought that, after 1988, you would have been in full gear, that tax payers would have learnt a lesson in that they were now recorded on your books. Yet soon after, 137,000 had thumbed their noses to the Revenue, and by implication, the State.


Mr. MacDomhnaill: There is a complex number of elements to your question. The 1988 amnesty was introduced at a time when a massive change was taking place. There was a shift from an assessing type of tax system to a self-assessment tax system. It was considered that, because of the very strong enforcement measures in the powers given to the Revenue Commissioners, people should be given the opportunity of getting themselves up to date before the new regime was introduced.


This amnesty produced a very substantial amount of extra revenue. Barring a very small percentage, a few million pounds, all of this revenue related to quantified tax, which was established but was simply in arrears. This was paid.


Since then, very substantial amounts have been paid off the arrears which were in the books in 1988. This has not stood still and we have collected hundreds of millions of arrears since 1988 off this book debt. If one goes back to the beginning of this process, when the book debt was approximately £4.5 billion and represented nearly as much as what we were collecting in that year, and compares it with the present situation, one will find that the book debt, including this backlog of over £1 billion, is below £2 billion, while the collection has more than doubled. If it was pro rata, one would be looking at a book debt of over £6 billion instead of under £2 billion.


A substantial amount of arrears have been collected, aside from the 1993-94 amnesty, which was a totally different type of amnesty. We have devoted much resources to working on this book debt and it is now down to this residual £1 billion. You will note from the cases that came up at the end of this process for write-off that, in the case of corporation tax, 96 per cent related to estimates, which were churned out by a computer process.


One thing we have learned from all of this is that hardened defrauders do not respond to computer processes. We must get people in place to casework these arrears. This is the objective of our current policy. Starting in 1988, we have moved into a culture of promoting voluntary compliance, while devoting our resources, in a more focused way, on the non complying. We had our resources spread over the entire register before 1988. Our policy now is to be as unintrusive as possible in cases where we detect a fairly satisfactory degree of compliance and to concentrate our resources on the non complying. This strategy is working, but it has not yet worked its way through.


We are down now to this £1 billion. You are saying that they have come along for another amnesty following the 1988 one. Of course, as you know this is a Government decision, not a Revenue one. We do not make the laws but we try to operate them as best we can. That particular amnesty was aimed at a different type of situation - totally obscured funds that we were unlikely ever to detect. I still think the vast bulk of those who responded to that amnesty are in that category. Because there was an attendant general amnesty we hoped that a further influx of cases on the register would substantially reduce this £1 billion, but we were disappointed.


By laboriously working through all those cases, the various enforcement processes and the evaluation process we will eventually, bit by bit, get some money, will wipe out some spurious tax and will bring a number of cases before you for write-off. That is the agenda.


Deputy Byrne: If you have had 40 staff working for three years on this amnesty, is it possible to quantify the salary foregone on this type of work? If you lose the 40 staff because they are redirected to other duties, what would the net revenue loss be to the State as a result of their being taken off amnesty work altogether?


Mr. Mac Domhnaill: Unfortunately, this is a resource intensive business and if resources are reduced there must be some consequential result. Our job is to make sure resources are devoted to obtaining the maximum result possible for the Exchequer. As a process of risk analysis we have to concentrate on getting the vast bulk of the money in, although that may not be the vast bulk of cases.


We have other strategies in place to try and curtail the amount of spurious estimation. The fundamental strategy is self-assessment through which it is easier to arrive at a tax estimate nearer to the collectible amount than was possible under the old system. It was virtually impossible under the old system to safeguard all Revenue and Exchequer requirements without creating estimates which were three and four times the amount of tax ultimately payable. That gave rise to a lot of this debt.


Some £1 billion of that debt is still the residue from that process. We have corrected that now because the preliminary tax is simply an estimate of the tax that should be paid and, therefore, it can be more finely tuned.


We have also introduced computer-assisted technology to sharpen up our VAT and PAYE estimates, thus we can relate the estimate more closely to the amount of tax we should get. For new cases, where we do not have a good indication of that level, we are insisting that the evaluation and assessment process takes place before the estimates are made and not, as heretofore, when the estimates are made and prove to be uncollectible.


All these things will enable us to sharpen up considerably, but we have to operate with whatever resources we have. At the moment we feel we are wise to use the 40 surplus staff on this arrears package which is clogging up the system. We would like to get rid of it if we can and clear up the entire backlog.


Deputy Finucane: How much was returned from the 1988 amnesty?


Mr. MacDomhnaill: We estimate it was close to £600 million.


Deputy Finucane: In 1993 you estimated it was £200 million which, there is no doubt, was a substantial amount of money. In the report, a survey sample of 200 taxpayers who availed of the general amnesty revealed that 35 per cent of them availed of the 1988 amnesty.


Chairman: Excuse me Deputy, we have not yet gone on to the general amnesty.


Mr. Mac Domhnaill: We were talking about the incentive amnesty only for the £200 million. It is £261 million if you take both amnesties.


Chairman: The Committee notes this paragraph and urges the Revenue Commissioners to give the matter their utmost priority. We will now take paragraphs 23 and 24 together.


Paragraphs 23 and 24 of the Report of the Comptroller and Auditor General read:


General Tax Amnesty


23.The Waiver of Certain Tax, Interest and Penalties Act 1993 provided for a General Amnesty allowing the waiver of interest and penalties on any unpaid arrears of tax due from individuals or companies for periods ending on or before 5 April 1991.


Arrears of £1,066m owed by 137,425 taxpayers in respect of periods prior to April 1991 were identified by the Revenue Commissioners as qualifying for the General Amnesty. To date it has been established that £76m was actually received under the provisions of the General Amnesty from 15,055 taxpayers including £14m in VAT remitted to the Chief Special Collector who administered the Incentive Amnesty. The following schedule shows details of the arrears together with the amounts received in respect of the various qualifying taxes.


Tax

Arrears £m

Received £m

% of Arrears Received

Income Tax

347

12

3

PAYE/PRSI

273

18

7

VAT

239

20

8

Corporation Tax

168

9

5

Capital Gains Tax

39

1

3

Other Taxes

N/A

10

N/A

Unallocated

N/A

6

N/A

Total

1,066*

76

7

The following table sets out the value of payments received, excluding the £14m remitted to the Chief Special Collector and Bank Giro Payments of £15.2m for which the information was not readily obtainable.


* The arrears figures would include estimated amounts and may not represent the true liability.


Range £ - £

No. of Cases

% of Cases

Amount £

% of Amount Received

0 – 1,000

3,479

46.61

1,430,258

3.05

1,000 – 5,000

2,566

34.38

6,003,471

12.82

5,000 – 25,000

1,151

15.42

12,765,397

27.24

25,000 – 50,000

154

2.06

5,363,425

11.45

50,000 – 100,000

70

0.94

4,805,761

10.26

100,000 – 500,000

34

0.46

6,650,185

14.19

500,000 – 1,000,000

7

0.09

4,767,219

10.17

1,000.000 – 2,000.000

3

0.04

5,070,962

10.82

Total

7,464

100

£46,856,78

100

General Amnesty - Audit Sample Results

24.A review by my staff of the records of a sample of 200 taxpayers who availed of the General Amnesty showed that:-


(a)14% had not filed a Return of Income for 1992/93 as required by the Act and were therefore ineligible to avail of the benefits of the Amnesty


(b)32% had not submitted preliminary tax Returns for the tax year 1993/94


(c)25% still had pre-April 1991 arrears after taking the Amnesty receipts into account


(d)39% had post-April 1991 arrears


(e)35% had availed of the 1988 Amnesty


I enquired as to:


-The action taken to collect interest and penalties in the case of those who availed of the Amnesty but who had not filed a Return of Income for 1992/93 by the due date.


-If any additional procedures were contemplated to ensure that taxpayers who had eliminated their arrears by availing of Amnesties remained compliant.


-The action taken in relation to taxpayers who availed of the Amnesty but still had pre-April 1991 arrears.


-If any review had been carried out on taxpayers availing of the 1988 and 1993 Amnesties to see whether procedures to ensure compliance could be improved or better targeted.


-The action taken to deal with the substantial pre-April 1991 arrears still remaining.


The Accounting Officer replied as follows:


-Taxpayers who availed of the Amnesty were not obliged to file their 1992/93 Income Tax Returns until the end of February 1994 (and later in the year for the majority of 1993 Corporation Tax Returns), whereas payments under the Amnesty were required to be made by 14 January 1994. Accordingly, in most cases, compliance with the Return filing condition was not capable of being checked at the time of payment. The view of the Revenue Commissioners was that taxpayers who availed of the General Amnesty would be unlikely to fail on the 1992/93 Return requirement. Any cases where the Return was not made would be detected under normal control arrangements and interest charges raised where necessary. A similar position would arise where the audit programme established that a return was incorrect.


Revenue Commissioners’ audit and anti-evasion activity had increased and an overall programme geared towards voluntary compliance was in operation. There is a new strategy in relation to management of arrears of tax and enforcement action against defaulters involving greater emphasis on case working aided by improved technology, more timely intervention, and a more “hands on” approach for producing estimates as opposed to the automatic process driven system previously employed. While these procedures are not directly targeted at taxpayers who have availed of the Amnesty, they should have the effect of ensuring that they, in common with the generality of taxpayers, remain compliant.


Those who correctly availed of the Amnesty will not have pre April 1991 arrears. A taxpayer is excluded from the benefits of the Amnesty if he fails to pay the full amount of tax outstanding. In such a case the Revenue Commissioners’ computer record would show any arrears remaining after account was taken of payments under the General Amnesty. When these arrears are being pursued the cases will be reviewed to check, in accordance with procedures laid down in the Act, whether the outstanding amounts had been cleared under the Incentive Amnesty. The normal enforcement measures to secure collection of any outstanding liability will be taken and appropriate interest charges would be raised.


Although no specific review of taxpayers availing of both Amnesties had taken place, the Revenue Commissioners are satisfied that such cases are adequately covered by the current compliance and enforcement programmes which are applicable to all taxpayers.


The pre-April 1991 arrears will be tackled under the intensified arrears/compliance, local collection and enforcement programmes. In many cases, the arrears will be unproductive estimated liability or will relate to ceased companies and, in order to make best use of resources, a balance will have to be struck between tackling these arrears and maintaining pressure for timely payment of current tax.


Mr. Purcell: Both these paragraphs refer to the general amnesty on interest and penalties, as distinct from the incentive amnesty which was targeted only at income tax and capital gains tax, and also had the benefit of taxing at 15 per cent rather than at standard rates. That makes the difference clear - this was a general amnesty on interest and penalties only. Paragraph 23 makes the point that the general amnesty only succeeded in attracting 7 per cent of the £1 billion book debt targeted by Revenue. That shows up there.


Paragraph 24 outlines the result of a review by my staff of a random sample of the records of 200 taxpayers who availed of the general amnesty. The findings show that, on the face of it, a number 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.


The sample findings also suggest that amnesties are not entirely effective in getting taxpayers to change habits of non-compliance or late paying. For example, on the basis of the sample, 32 per cent of those who availed of the general amnesty failed to submit preliminary tax returns as required for the 1993/94 tax year. Some 39 per cent had post-amnesty arrears.


It is also worth noting that 35 per cent had previously availed of the 1988 amnesty. I suppose this percentage is one indicator, at least, of the effectiveness of Revenue’s collection procedures in the intervening period. As you will see, the Accounting Officer acknowledged the problem but pointed to the increased audit and anti-evasion activity and to a new strategy for the management of tax arrears. I will keep the ongoing effectiveness of the current measures under review.


Chairman: The table shows only three cases in the £1 million to £2 million bracket where taxpayers availed of the amnesty. How did this compare with your pre-amnesty estimates for this bracket and do you have comparative figures for all brackets from £50,000 upwards?


Mr. MacDomhnaill: We would not have been expecting any case of that size in the general amnesty. But I think the explanation is that the general amnesty took on board the very high yielding fiduciary taxes like PAYE, VAT and corporation tax. I suppose you would expect that the very big payers became eligible.


Under the amnesty there was a period when you could delay payment without incurring an interest penalty. The amnesty was announced early in 1993 but payment under it did not have to be made until 14 January 1994. It would be a business decision not to pay earlier if you were not going to incur an interest penalty. That might have encouraged some big cases to delay payment. Otherwise, cases of this size would attract our attention very quickly and would be the subject of enforcement activity. It is accidental.


Chairman: In relation to paragraph 23, has the figure of £6 million - mentioned in the first table in page 17 of the annual report - been allocated, or to what does it refer?


Mr. MacDomhnaill: It is still awaiting classification. What is at issue here is the breakdown between the different tax heads. It has been lodged to a bank but has not been allocated.


Chairman: With regard to paragraph 24, from preliminary investigations can you inform us of how many availed of the 1993 amnesty and did not file returns for the 1992–93 tax year by the deadline? What penalties have been imposed? Has a full check been carried out in this case?


Mr. MacDomhnaill: Of the 26 cases identified by the Comptroller and Auditor General as ineligible because of failure to submit returns, returns were submitted on time in two of these cases. There were six cases of late returns and 18 cases where the returns were not submitted at all. Of the latter, 12 were PAYE cases and there were six cases where some tax was paid during 1992–93; this makes up the 18 cases. The largest amount involved where the return was late was £600. In the amnesty a high percentage of cases involved trifling amounts. We must take into the reckoning the cost effectiveness of pursuing a return.


There is a special situation with regard to PAYE cases. The particular requirement in the amnesty legislation was aimed at chargeable persons. This category excluded cases where the income was substantially emoluments governed by the PAYE régime. We are not in the same position of ineligibility when it comes to a PAYE case. The pre self-assessment legislation applies. We would have to serve a notice of return before there could be a failure to send in a return. In the vast bulk of PAYE cases there is very little change in eligibility from one year to the next. There are statutory allowances and in some cases there are things like mortgage interest and VHI reliefs. In many cases where these reliefs do not apply, we can cater for the statutory entitlements through computers by marking the cases up to take account of budget changes.


We feel it would be uneconomical to issue returns in these cases. When we do not issue a notice, there is not a failure to submit a return. For there to be such a failure, we must issue a notice first. In some of these cases we must make up our minds if they warrant this kind of activity. Since most of the tax has been recovered by PAYE, we are talking about minor adjustments because of allowances having been overclaimed or modest amounts of income which could have been coded into the PAYE system.


Chairman: The review of the 200 cases carried out by the Comptroller and Auditor General shows that 35 per cent had availed of the 1988 amnesty. Why did the Revenue Commissioners fail in their efforts to ensure that this 35 per cent continued to comply?


Mr. MacDomhnaill: In passing the 1993 legislation the Oireachtas did not exclude cases which had availed of any earlier amnesty, either the 1988 one or any of the several other ones. This was a deliberate decision by the Oireachtas. Therefore, they were entitled to avail of the amnesty.


Deputy Finucane: The 1988 and 1993 amnesties raised £600 million and £260 million respectively. These are substantial amounts of money. When the Committee discussed the 1993 amnesty with Department of Finance officials, great emphasis was put on the confidentiality aspects of it. Is it correct that 35 per cent of people availed of the two amnesties? To what degree do you have a data bank to ensure that those who availed of the amnesties subsequently went on the straight and narrow? At the time of the last amnesty the Committee understood that there was a special group of officials within the Revenue Commissioners dedicated to co-ordinating and controlling the amnesty and that a limited number of people had access to the data bank on those availing of the amnesty. To what degree can you monitor and track those who availed of both amnesties? I think it is unlikely that there will be another amnesty because the Revenue Commissioners have changed their records and systems.


Mr. MacDomhnaill: With regard to the general amnesties of 1988 and 1993, we have total access to the information. The vast bulk of these cases related to tax in arrears. We are not talking about evasion or avoidance but late payment. Late payment is a matter of huge resource application in the Revenue Commissioners every year. If we were asked about a particular case, we could say at any one time, without divulging confidentiality aspects, whether the person involved was in arrears or not.


The effect of the 1988 amnesty was to give people an opportunity to get up to date before self-assessment was introduced without having to pay the interest penalty. The 1993 general amnesty was on exactly the same footing. There is a complicating factor in that if we announce an amnesty in early 1993 and announce a payment date several months later, human nature and good business sense would dictate that people do not have to pay the taxes in question until the deferred interest due date arrives. To some extent the general amnesty created some cases of arrears by giving this leeway but I do not think we could have denied people this opportunity.


We had to give a commitment at the time that, as far as possible, because this could have seriously undermined the revenue for 1993, we would pursue cases even though there was not an interest penalty, which we were entitled to do. However, we could only devote these type of resources to very large cases which underwrite the revenue yield for that year. We were not able to pursue many small cases because they were going to avail of the interest remission. We would have had to take prosecutions in these cases.


The Deputy spoke about a special office within the Revenue Commissioners. The amnesty legislation provided for the office of Chief Special Collector. Severe constraints were placed on the Chief Special Collector to observe confidentiality with regard to the people concerned, the declarations and the money paid. We were, extraordinarily, given the task of managing this office. We had to find people who would not, in subsequent assignments, deal with the cases for which they had confidential information. This has led us into other difficulties because the people with competence and experience in collection and accountancy were part of our internal audit unit. However, this was the only decision we could make at the time. These people became the management core of the Chief Special Collector’s Office. They have information about those cases which the Comptroller and Auditor General also has.


Deputy Finucane: If the special collection unit and the Chief Special Collector had access to that confidential information, to what degree was that data accessible within the Revenue Commissioners in general?


Mr. MacDomhnaill: It is not accessible at all in the Revenue Commissioners.


Deputy Finucane: For the people who availed of the amnesty, especially the special incentive amnesty in 1993, that was the end of it. As far as Revenue is concerned it is not a question of watching them in the future. Could the same people avail of another amnesty in five years time?


Mr. MacDomhnaill: That is correct. This guarantee has been given by the Oireachtas. There are conditions about having the correct amount of tax paid for 1991–92 and filing returns for 1992–93. As a result, we would have expected an uplift in the yield from those cases in 1991–92. This will be factored into our general information base. In selecting cases for audit, as has been indicated, we have already arrived at a few hundred cases which came up for audit and the certificates had to be produced. Our system is working. We would have come across about 200 cases in our selection process anyway. Whether we would have discovered the particular items concerned is another matter, but we would have reached them on audit. We would have expected an uplift and that will be a base from which comparisons will be made. Some indications will be available to us, notwithstanding that we will not have positive identification that the individuals availed of the amnesty.


Deputy O’Malley: The figure which stands out to a layman like me is that 35 per cent of those availing of the 1993 amnesty had already availed of the 1988 amnesty. Does that suggest you did not follow them up properly? How were they able to involve themselves in so much evasion again in the interim? A level of 35 per cent is a huge proportion.


Mr. MacDomhnaill: The Committee is fully aware of the fact that substantial numbers of people are in arrears with tax all the time. It is an industry. Hundreds of thousands of certificates go to the sheriffs and there are thousands of cases with solicitors. It is an ongoing part of Revenue work. People run into cash flow problems. The 1988 amnesty was not about evasion; it was for late payment. That is how it turned out. It is an ongoing part of every revenue organisation in the world. People will fall behind with their payments as there is competition for their funds. One may take it that a lot of the cases who availed of the 1988 amnesty may now have gone out of business.


Deputy O’Malley: How many cases were there under the amnesty of 1993 in which you collected £1 million or more?


Mr. MacDomhnaill: Is this the general amnesty?


Deputy O’Malley: Yes.


Mr. MacDomhnaill: The table in the report states that in the range of £1 million to £2 million there were three cases and between them they paid £5 million.


Deputy O’Malley: Were there none above £2 million?


Mr. MacDomhnaill: If one takes the average it says £1 million to £2 million; none above £2 million. The average between the three cases is less than £2 million.


Deputy O’Malley: You mentioned prosecutions. How many serious prosecutions on indictment do you take?


Mr. MacDomhnaill: Technically, we do not take any because they all have to be taken by the DPP. At any one time we have a number of cases under investigation. The indictment prosecutions have to follow criminal law procedures. The safeguards laid down for individuals have to be followed. We are dealing with a situation where we must make a decision early in a case that there is prima facie evidence to take that route.


Where there is prima facie evidence - real evidence and not information - that we have an offence we can prosecute on indictment we give it priority. In the vast bulk of cases we have information which falls far short of that and we have to seek the co-operation of the taxpayer to reach a settlement. Once we go down that route we cut off the prosecution route because one cannot use information obtained in that way as evidence in a criminal prosecution. We have to make those choices early on.


We give priority to the prosecution route because we think it is a valuable deterrent; not a money raising technique. It takes an enormous resource to carry a case because we are talking about fraud. It is not like other crime where there is physical evidence. I read recently an address by the DPP to the Law Society in which he dealt with the topic of prosecutions for fraud. One will find there are relatively few prosecutions for fraud as it is so difficult and time consuming. Our difficulty with a number of cases that have gone to the DPP is that they have been referred back because it has taken so long to get the case together they were felt to be out of jurisdiction on the principle that justice delayed is justice denied.


Our object is to try to speed up that process and we have undertaken a new training programme in relation to taking statements, retaining a chain of evidence and developing a dedicated team to this task. This still leaves us with the problem that the DPP prefers, if at all possible, to take the criminal route rather than the revenue offence route. A major evasion usually has attendant fraud and the DPP would prefer to take that case on the basis of fraud rather than a revenue offence. That is probably correct because of the principle announced in the Supreme Court many years ago by Mr. Justice Kennedy, that no State can afford to give other types of prosecution priority over its criminal law. The confiscation of ill-gotten goods and putting people behind bars for crime is a matter which no self-respecting State can relegate to something else.


Getting tax is a secondary target and if there is insufficient evidence to secure a prosecution it is a legitimate avenue to take. If there is not enough evidence for a criminal prosecution one can take it as nearly certain that there will not be enough evidence for a section 94 prosecution either because the same arguments apply. We have six cases with the DPP at the moment and there are a number of other cases under investigation. Even in revenue offences the DPP prefers that the investigation be taken over by the Garda once a decision has been made that there is a case to be pursued so it goes out of our hands at that point. We can only take the cases to a certain point and then do our best to facilitate the process and help the Garda. We have permanent ongoing liaison with the Garda Fraud Squad to help out and give any analysis we can in relation to the preparation and development of evidence.


Deputy O’Malley: I asked you how many prosecutions and you have given me a long reply without answering the question. I want a figure. I am concerned there seems to be so few, if any.


Mr. MacDomhnaill: I did answer the question. I said we do not take the prosecutions; the DPP takes them. I can give information on Revenue originating prosecutions.


Deputy O’Malley: Taken by the DPP on indictment.


Mr. MacDomhnaill: In 1991 we had three cases referred to the Garda; of those cases one was referred to the DPP and two are still with the Garda.


Deputy O’Malley: The question I asked was how many prosecutions. Referring a matter to the Garda is not a prosecution. How many people were arraigned in Green Street before a jury charged with tax evasion?


Mr. MacDomhnaill: On the Inland Revenue side, two jail sentences were imposed in recent years for offences. In 1993 an individual was sentenced to six months in jail for failure to file returns, but the sentence was quashed in the Supreme Court for some reason. In 1994 another individual was sentenced to ten months in jail for making a false claim to value added tax repayment, but a stay of sentence has been placed on that.


Deputy O’Malley: A statement I made recently that nobody had gone to jail for a tax offence seems to be true. Two people were convicted but they both got off for some reason. It is not surprising because you said you agreed with a judgment by Mr. Justice Kennedy in the Supreme Court, which was a long time ago - he was Chief Justice approximately 60 years ago - that crime had to take priority as far as the State was concerned and that, therefore, revenue matters were secondary. I suggest that revenue evasion is as big a crime in the 1990s as any other crime and is at least as antisocial as many other activities before the courts everyday. Is that the right approach? Only two cases were successfully taken but both were set aside afterwards.


Mr. MacDomhnaill: I will not comment on those opinions. We are responsible for a range of taxes. We have had a number of people put in jail for various tax offences, not on the Inland Revenue side.


Deputy O’Malley: For non-payment of income tax?


Mr. MacDomhnaill: For smuggling. There is substantial money involved in this area. We are talking about hundreds of millions of pounds from these sources, including the use of unmarked diesel, every year. When we talk about offences we are talking about large amounts of materials. These are fairly substantial prosecutions as well.


Deputy O’Malley: But no prosecutions for evasion of income tax.


Mr. MacDomhnaill: I reiterate that we have a substantial number of cases either with the DPP or with the Garda. I have nothing to add to the figures I have already given.


Chairman: We must move on.


Deputy O’Malley: The Revenue Commissioners did not start yesterday; they are there a long time. You have now sent these cases to the Garda. It is a disturbing situation. This must be the only country in the world which does not seek to enforce, as a criminal act, the deliberate evasion of large sums of income tax. There are many people in jail for such an offence in other countries. However, to use your own words, it is secondary to crime in this country.


Chairman: The Committee notes these paragraphs and indicates that matters brought to light here will be addressed as a matter of urgency and dealt with in the appropriate manner.


We now move on to paragraph 25.


P35 Employer Returns
Penalties

25.Employers are statutorily obliged to make a P35 return within 25 days of the end of the tax year, giving details of remuneration paid and Income Tax and PRSI deducted in respect of each of their employees, as well as their total PAYE Income Tax and PRSI liability for the year.


The information on the P35 return is used in a number of important ways in administering the PAYE Income Tax and Social Insurance systems, such as processing claims for refunds from PAYE taxpayers, determining the appropriate tax table for individuals, checking if employers have made correct tax deductions from their employees and updating of employees’ Social Insurance records.


Section 128 of the Income Tax Act 1967 (as amended) provides for the imposition of a £1,200 penalty for the non-submission of the P35 return by the statutory date.


It was noted in the course of audit that, in respect of the tax year 1993/94, only 41,490 employers complied with the statutory deadline. A further 66,635 employers submitted returns in the period May to August 1994, and an estimated 17,602 had not made their returns by 31 August 1994.


No penalties were imposed on employers who submitted their returns in the May to August period and of the estimated 17,602 who had not made their returns by the end of August only about 1,000 had been pursued for payment of the penalty up to June 1995, of which approximately 100 had paid.


I asked the Accounting Officer why payment of the penalty was pursued in so few cases and whether the rather generous time extensions allowed to employers to comply with their statutory obligations and the fact that the Statute provides for a fixed penalty regardless of the numbers employed or the time period over which the breach occurs, militates against having the returns submitted by the due date.


The Accounting Officer informed me that the number of penalties that can be imposed is limited, among other things, by the inability of the District Court system to deal with more than 1,500 cases approximately a year and a collection rate of less than 10% of penalties imposed. He also explained that the original provision of the Income Tax Act 1967, which provided for the penalty to be related to the time period over which the breach occurred, was changed in 1982. Prior to 1982, proceedings under Section 128 of the 1967 Act were treated as criminal offences and some District Justices held that continuing daily penalties could amount to such a figure as would bring them outside their jurisdiction i.e. above the threshold for minor offences. A flat-rate penalty was introduced to ensure that these cases of default would continue to be dealt with in the District Courts. The Circuit Courts could not have handled the numbers involved. He stated that while the penalty sanction was used to its full potential, the policy was to encourage voluntary compliance by minimising the administrative costs for those taxpayers who complied voluntarily through streamlined processes and fewer contacts, and subjecting non-compliant taxpayers to closer scrutiny and a progressively harsher regime.


In relation to the issue of the P35 returns which were outstanding at 31 August 1994, the Accounting Officer made the point that the returns filed by that date accounted for 98% of all employments. Those employers who had not filed their returns by end August were, in general, individuals with only one or two employees. He also stated that the completion of the returns can be a difficult task for some employers and that some have asked for the legislation to be changed to provide further time for the exercise and that delays in the submission of the returns does not have a significant cash flow impact. Furthermore, it would be an uneconomic use of resources to pursue penalties on a wider scale and the fact that compliance levels in the submission of the returns had improved over the years showed that the existing overall approach was effective.


He assured me that the late submission of the returns had not caused delays in the various processing checks carried out in the administration of the PAYE tax system or reduced the level of checks actually carried out or their effectiveness.


Mr. Purcell: The Committee will be familiar with the P35, which 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 P35 thus forms the basis of records maintained for PAYE and PRSI purposes.


P35s are to be submitted within 25 days of the end of the tax year. Under the provisions of tax legislation, failure to do so leaves an employer liable to a penalty of £1,200. In our examination of the returns we noted that only 41,000 out of an estimated total of 126,000 employers had submitted their P35s within the statutory period. Even four months after the statutory date there were still an estimated 17,600 P35s outstanding. However, penalties were imposed in just 1,000 cases and to June 1995 only 100 of the penalties had been paid. The Accounting Officer stated that the primary purpose of the penalty provision was to encourage employers to submit the P35s on time. He explained that it was Revenue’s policy to make voluntary compliance a more attractive option rather than trying to enforce compliance on a massive scale 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. He felt 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 considered that this showed that the existing overall approach was effective.


While I appreciate that Revenue’s primary concern must be to get in the P35s within a reasonable period without upsetting too many employers, it is hard not to come to the conclusion that this is a classic example of a law being made which is largely being ignored by those charged with administering it.


Chairman: Have you looked at other means of penalising employers without resorting to legal action which would affect all offenders, not just a few?


Mr. MacDomhnaill: As indicated, quite a substantial number of prosecutions have taken place. However, I should point out that you are talking about anything from a big employer to a one employee type of case. The 70 per cent of employers who submitted returns by June account for some 90 per cent of all employments. We have a lot of cases on our register where they stay registered for PAYE although they have no employees. This is a non-productive level. By September the returns submitted accounted for 99 per cent of employments.


The employer is acting on behalf of the State in collecting PAYE revenue and operating the system. Our objective is to try to keep the administrative costs, especially for small firms, to a minimum. There is such a thing as a technical failure to send in a P35 where there may be no employee or only a part-time employee and these are of little significance. The main significance of the P35 is that it forms part of the register for social welfare entitlements and, therefore, we are concerned about getting the information to the Department of Social Welfare as quickly as possible. It is a good result if 99 per cent of employments’ information is received. Some 1,000 prosecutions can add to our list under section 23. Collecting fines is a matter for the gardaí. However, how much of this represents a productive allocation of resources?


The P35 system has improved vastly in the past few years. Our policy is to send people to help employers to operate the system, which is almost incomprehensible for many small firms. If they are late, we ask if we can help rather than serving a summons on them.


It is not a simple thing for many of these employers to send in these returns.


Chairman: I appreciate that and congratulate you on it, Mr. MacDomhnaill, because I know that in Tralee they give assistance to employers when they have a problem with the P35. Do I understand that where you proceeded with 70 per cent of cases, that represents 90 per cent of staff — or at least of employees — and therefore the 30 per cent outstanding which have not been dealt with represents 10 per cent, and in some cases there would be no staff there?


Mr. MacDomhnaill: Exactly. If one takes that on to September, only 1 per cent of employments are left.


Deputy Byrne: We have just heard an interesting debate. I am anxious to get on to the Vote because I want to ask about a couple of areas but I cannot let this point go without asking one question and commenting. As has been proven, we do not send tax dodgers to gaol or push employers to pay their fines — we have touched on this before. Does Mr. MacDomhnaill think it is the Irish political culture or the culture within Revenue which permits this to continue?


Mr. MacDomhnaill: No, I do not think so. We have an extremely complicated tax regime and for a small businessman who has to operate PAYE, PRSI and VAT and then pay his own income tax and corporation tax it is an overwhelming burden. The policy should be to assist people as far as possible. If there is a flagrant abuse or delay, or a delay in a case where it is quite clear that there is a competent accounting officer dealing with in-house accounting, or an external person, that is a different matter. We find in many of the small cases, where the company has one or two employees, it is a question of struggling to meet all the obligations imposed on them by various legislation, not just tax law. I think if we can manage in the course of the year to get the returns in one way or another, while keeping prosecutions to the cases which should be targeted, that is the best we can do.


Deputy Byrne: Mr. MacDomhnaill said it is an overwhelming burden on people to go through the exercise of making their tax returns. That is not the position that would be put by the Internal Revenue Service in the USA about tax deviants. Politicians should take some blame for the culture but it disturbs me than he answered my question — as to whether the culture comes from the political arena or Revenue — by apologising for the overwhelming burden on these criminals we have been discussing for the last two weeks. Frankly, I do not care and I do not think Mr. MacDomhnaill or the Committee should care about or apologise for the burden involved in making tax returns. There is a legal obligation — we as legislators bring in the law and expect the witness’ Department to act on it. The law seems to be a farce, whereby fines are applied to employers who thumb their noses. We collectively — the Revenue, this Committee and whatever Government is in power — must reject this culture and this sympathy for the overwhelming burden on employers or companies. We must look at the American position and make people appreciate that there is an important reason for laws compelling people to pay taxes.


Deputy Finucane: Deputy Byrne is being rather strong. As I said earlier, the Revenue Commissioners have become user-friendly and approachable in the past few years. The carrot and stick approach has been taken and I think the strategy adopted in this case is correct. I am a Member of the Joint Committee on Small Business and Services and all deputations from the small business community speak about the administrative burdens imposed on them through all the returns they must fill in. The Joint Committee is trying to find a vehicle for a simpler form system, as exists in other countries, to address the problem and obtain whatever is required. I do not favour using emotive language like “criminal” to describe a person who delays sending in a P35.


Deputy Byrne: I was not necessarily referring to them as criminals, I was talking about the debate over the last few weeks. This morning we discussed an amnesty in which over £1 billion in tax was uncollected.


Deputy Finucane: If I may finish, the point I made at the start was that as politicians we are regularly in contact with the Revenue about probate and a range of different issues. In Limerick I have found them extremely helpful and user-friendly. The present attitude of the Revenue Commissioners is that a person may have sinned in the past but they will not hound him out of existence. They will fix the problem now so that he will be on the straight and narrow for the future. I think the Revenue is going in the right direction and I wanted to make that point in case it was lost in what we said.


Deputy O’Malley: I think Mr. MacDomhnaill is right when he speaks of the awful burden of compliance with so many taxes, particularly on the small employer. It is wrong to hound people because they are late. I was not speaking earlier about those people, who I do not regard as criminal; I was speaking about beef barons and their like who would be in goal in other countries but are not here. I was not talking about people with a handful of employees where very little tax is involved but about cases where they are advised by accountancy firms in St. Stephen’s Green, which are more expensive than those elsewhere, where they have huge staff and enormous evasion over a long period of years, where that has been found by a judicial tribunal and where there has been no prosecution. That is where the system is weak and falls down. Neither I nor the majority of this Committee seeks to encourage the Revenue Commissioners to go after small people who are inundated by all the requirements of the Revenue, which are unnecessarily complex in this country.


Chairman: The Committee notes the paragraph but hopes all legal powers will be used and the statutory penalties will be fully implemented.


Paragraph 26 of the Report of the Comptroller and Auditor General reads:


Checking Procedures

26.The information on the P35 employer returns is analysed by computer to identify cases showing apparent discrepancies or inconsistencies within certain specified parameters and the resulting report classifies such cases into 15 categories for follow-up work to establish whether underpayments of tax have occurred.


In practice, since 1986 only the following 4 categories were examined each year:-


Category

Description

02

Taxpayers receiving special exemptions

05

Revenue repayments exceeding tax paid

14

Tax undercharges £200 to £500

15

Tax undercharges over £500

These indicated possible tax undercharges of £28m in the 1992/93 Income Tax year.


An audit by my staff at a Division of a Dublin PAYE Tax District in respect of the 1992/93 Income Tax year indicated:


-Of the 4 units in the Division, only 1 unit carried out examinations on the report and these examinations were confined to 2 of the 4 categories selected, viz 14 and 15.


-While the guidelines issued to the Division from the Chief Inspector of Taxes stated that priority should have been given to the over £500 category in selecting cases for examination, this was not done.


-The guidelines issued to the Division did not specify any minimum level of examination that should have been completed in each category, or specify the corrective and follow-up action that should have been taken when underpayments arose.


-Even though no statistics were maintained, it would appear, on the basis of a small sample examined during the audit, that a large proportion of the cases in categories 14 and 15 represented actual underpayments of tax — due in many cases to the employee not having earnings commensurate with the tax table allowances which had been allocated.


-No follow-up action had been taken or explanations sought from the employers in cases where the reasons for the tax underdeductions were not clear.


In response to my inquiries the Accounting Officer informed me that:


-Having regard to the resources available it is not possible to check all categories. The categories selected for checking are those perceived as having the greatest potential for loss of revenue.


-There were staffing problems in the Tax District in 1994 due to reorganisation and change of locations resulting in a substantial build up of unworked post. During the year priority was given to dealing with this correspondence resulting in a curtailment of other work, including the checking of the reports for the 1992/93 Tax Year. He accepted that the position was unsatisfactory but stated that these problems had been resolved and that it was proposed to give more attention to the checking of the reports.


-The level of checking in the particular District was not representative of Tax Districts generally where it was much higher for the 1992/93 Tax Year. An overall checking rate of 61% was achieved which was regarded as generally satisfactory.


-The failure to give priority to apparent underpayments of £500 or more was also attributed to dealing with the acklog of correspondence and he assured me that the guidelines were adhered to in the other Districts.


-The level of checking was monitored centrally and all work was monitored by District managers. There would also be closer monitoring by Regional Directors from 1995 onwards.


-The majority of the discrepancies are due to technical reasons. In many cases, review of the apparent underpayment showed an actual overpayment of tax. While individual cases are not normally followed up with the employers, there was now a more extensive programme of auditing employers for PAYE purposes.


-The management of the checking of the reports is to be reviewed having regard in particular to:


Prioritisation of categories for examination


Efficiency of working methods


Monitoring of operations.


Mr. Purcell: This is the last paragraph. It records the results of an audit carried out by my staff at a division of a Dublin PAYE tax district, which showed that the checking of cases identified as possible underpayments had fallen into disuse. As the total indicative underpayments for all tax districts amounted to about £28 million, I was concerned that the shortcomings in the division might be representative of a countrywide trend. I am happy to report they were not and that the level of checking generally was in line with the guidelines issued to the districts, except in the case of the Dublin tax districts. The Accounting Officer attributed the shortcomings in the Dublin division to staffing problems brought about by reorganisation and changes of location, which resulted in a substantial buildup of unworked post, the clearance of which had to be prioritised to the detriment of other work, including the checking of potential underpayments. He accepted the position was unsatisfactory but now that problems have been resolved it was proposed to give more attention to checking the underpayments reports.


On a more general level, he stated that the whole management of checking the reports in question was being reviewed. In my opinion such a review is well overdue as there has long been a view in Revenue that on checking, many of the apparent underpayments turned out to be overpayments of tax. However, subsequent enquiries by my staff indicated that such cases might only amount to 15 per cent of the total, so perhaps more attention needs to be focused on this area as a potential source of extra revenue.


Chairman: I have a brief question before we move on to the Vote. Has the policy of closer monitoring by regional directors been put in place; what does it involve; is it fully operational; and is it successful?


Mr. MacDomhnaill: The system is reasonably satisfactory. The lists are circulated or meant to be circulated to the districts, then followed up and must then be marked off. We are referring here to a fairly difficult period for us when we were involved in much change. I now understand that we have caught up with the deficiencies with regard to the lists. It was especially unfortunate in respect of the unit that was selected for the audit. However, the potential for correction is all the same to us, whether it be under charge or over charge, because our policy is that the taxpayer should only pay the correct amount of tax. We would be equally concerned, therefore, to get an overpayment refunded as to get an under charge recovered.


We have a policy on under charges of very small amounts, of £50 or less, which are uneconomical to pursue. However, taking all this into account the system operates whereby the computer produces these lists of discrepancies which must be followed up. In many cases the taxpayer may have already corrected the discrepancy and an adjustment may have been made or a review may have taken place.


As the system undertaking the review does not log onto the system which generates the lists, one can find that much of the work involves knocking cases off, that have been addressed already. However, it must be done. We recognise the point made by the C&AG. Potentially up to £28 million could have to be recovered. It is a question of getting resources into this area. However, we are on top of the problem.


Chairman: How many regional directors have you?


Mr. MacDomhnaill: In some cases the lists went to the wrong place.


Chairman: How many regional directors have you?


Mr. MacDomhnaill: I understand we have four regional directors. However, we also have people of comparable grade in the Chief Inspector’s Office who are available to the regional directors. For example, we have a specialist unit on all the problems relating to income tax. They are available.


Chairman: How do you make up the regions? Is it on a provincial basis?


Mr. MacDomhnaill: It is more or less on a provincial basis.


Chairman: While noting this paragraph, the Committee must stress the importance of keeping the level of checking in this area under review.


VOTE 9 - OFFICE OF THE REVENUE COMMISSIONERS

Mr. MacDomhnaill further examined.

Deputy Byrne: We had an agreeable discussion last week centring around the operations of the customs units attached to Revenue. We were all agreed that the issue of the bad public image of two agencies, which are supposed to be working in co-operation but are bickering in public, did nothing to enhance the activities of the Revenue and the Garda in tackling the importation of large quantities of drugs.


Given what is now emerging about the Urlingford importation of substantial quantities of drugs, estimated to be valued at £115 million, could you advise if you were involved in this operation? Was it a joint operation between customs and the Garda? Were you happy with the degree of co-operation Revenue received from the Garda? Was it the Garda or the customs who decided to abort the stakeout on the drugs haul?


Mr. MacDomhnaill: This refers to an individual case. It happened at a time when the new joint arrangements were in a transitional phase. The Garda had identified very high level personnel who were in place and operational. Our national drug team is already in place and we had established liaison arrangements. However, the liaison exchanges had not taken place. We were awaiting the formal signing of the Memorandum of Understanding, which took place much later than this operation. Nevertheless, certain aspects of this had been anticipated and we were trying to get them in place. However, it would be incorrect to say that the formal arrangements now envisaged, where intelligence is fully shared and joint operations would take place, had been reached.


In all these activities, we are dealing on a need to know basis of information because there are operations in this area which are completely within the competence of the C&E and the Revenue to undertake themselves, as indeed they do, when they come across consignments in the course of normal traffic. However, there are other operations which tend to be of a more dangerous type. We would be guided by the advice of the Garda, as we have on a number of occasions, where danger to life is involved.


I would not be allowed to comment on operations which are ongoing because lives are at risk in this area and people put their careers on the line. It would not be proper for us to comment too much on such situations. What happened at Urlingford was a skirmish in an ongoing war. The substantial responsibility for this activity was a matter for the Garda.


Deputy Byrne: You appreciate why I have raised these questions. We agreed that the seizure of drugs at Shannon Airport was an unseemly and sad reflection on what appeared to be public competition between the Garda and customs. There appeared to be unnecessary public bickering as to the value of the drugs seized. In view of this seizure, and of the Urlingford incident, you said you did not believe that the public bickering added to the efficacy of what you were doing. It is not good for public confidence to see this bickering. Are you happy that your staff in customs are happily co-operating with the Garda and that apparent leakages to media sources will hopefully not occur in the future? Would you agree that we should, perhaps, congratulate the Minister for Justice for the Drug Trafficking Bill, which might put an end to the unseemly public bickering between the various agencies involved?


Mr. MacDomhnaill: I agree with everything you say. We have very tight control over publicity in Revenue. We have a senior press officer and a press office function. People are not allowed to make statements without prior arrangement or clearance through the press office. One aspect that concerned me regarding Urlingford was a suggestion in the media that there had, somehow, been a leak from Revenue. This is totally untrue. As information on these matters is on a need to know basis, very few people in Revenue were aware of this operation. Even at the late stage, when the container had been identified, our customs people were not in possession of the drugs at any stage up to that point. The media were already aware of the seizure when our representatives arrived at Urlingford.


However, there was a suggestion that there had been a leak somewhere along the line. As a result, I was concerned and approached the few people who would have had access to any information about this and had their assurance that there was no leak from our officers. In view of this I considered it necessary to telephone the Secretary of the Department of Justice and express my concern. He telephoned me back to say that he had the assurance of the Garda Commissioner that they were satisfied that a leak had not occurred through the Revenue Commissioners. I was satisfied with that and I want the Committee to know that.


Deputy Byrne: Fair enough. I should quote you properly because I had trouble with one of the words there. You said: “I do not think that it adds to the efficacy of what we are doing.”. That is for the record. Can you give us any indication as to whether we are likely to see any arrests arising from the case where the ship off-loaded the huge quantities at sea to a trawler which was presumably being monitored by customs? Can it be indicated whether they were Irish trawlers involved or ships registered in some other country? Are we likely to see any prosecutions in the near future?


Mr. MacDomhnaill: We did not have contact or involvement with that part of the operation at all. The information we have about this operation is quite limited and I can understand that. These operations are conducted on a “need to know” basis.


Deputy Finucane: It is interesting that we should be discussing this because the Urlingford issue has been in the news in the past few days. I accept what you say; you probably would not like to comment on certain aspects of it. He has established from the Department of Justice that the leak did not take place from Revenue. However, the leak came from somewhere; probably what would have been a successful operation, the result of a lot of planning, probably did not turn out successfully because of it.


You have said that an agreement has been signed recently by all the State agencies involved in drugs. If that is there now, we could anticipate that we will not have similar leaks in the future. A lot of undercover work goes on in this type of work, and many people are involved. Infiltrating drug dealing is a very hazardous activity and people’s lives are at risk because drug dealers are ruthless. It has been said in the papers that the Garda authorities are extremely concerned that a Member of Dáil Éireann raised the issue over the past few days; they are now concerned about their people’s safety.


Could you comment on the fact that in regard to a drugs search, because the big players are involved, there is often fear within the Revenue Commissioners of such people? There is great fear of specific individuals, and when people talk in the past about attachment of property in order to pin them down, there is apprehension within the Revenue; your own staff are scared of these people. They seem to have such a good intelligence network of their own that they are able to finger people. Would that observation be incorrect? The big drug barons seem to be known to everyone, it is a question of pinning the offences on them, but they seem to engender a network of fear. It was unfortunate that Urlingford was not seen through to the finish. I am interested in your observations about the Revenue Commissioners’ attitude to these drug dealers and whether they have instilled a network of fear.


Mr. MacDomhnaill: There is genuine concern among our officers, but that will not deflect them from doing their duty. We have had a number of death threats in the last year alone and I can assure you that the investigations proceeded. We notify the Garda in all those situations and we have the support of the Garda but nobody can be made totally secure. We have stepped up on our security arrangements. Our customs staff on the land frontier have been subjected to all kinds of intimidation, guns have been produced, petrol bombs have been thrown, they have been rammed. We are not strangers to that in Revenue. You have my assurance that whatever job has to be done will be done and that our people in this area are quite determined.


We have had a number of death threats, not only directed at the officials themselves but also at their families. We have to live with that.


Deputy Finucane: I appreciate what you said; families are involved as well. These people seem to have their own intelligence network and probably know where people are living and so on. It is an unfortunate part of that culture that you have received death threats but we respect what you are trying to achieve.


Deputy Byrne: We as a Committee throw our full support behind the Revenue Commissioners in carrying out its duties on behalf of the State. We appreciate that both the Garda and Revenue are at the coal face, which is a black, murky, dangerous place. As a politician, who represents the south inner city, in a city where we have an estimated 7,000 heroin addicts causing havoc for society in general, I would like to think that when we raise this issue here, under this Vote, that it is with a view to both agencies working in very closely bonded relationships, rather than that we will pick up newspapers and see reports of bickering between the various Departments. Our constituents demand it and we as politicians representing our constituents demand that these gangsters who are threatening the lives of civil and public servants be brought to justice: They are challenging the foundations of democracy and none of us can be found wanting in confronting this challenge.


Chairman: Under appropriations-in-aid, note 5, £567,000 was recouped for special attendance officers. Can you outline what exactly this covers and whether costs are recouped in full?


Mr. MacDomhnaill: Most of what is involved is attendance after normal hours, weekends and Sundays. Cargoes arrive and they do not always fit into normal hours. We have certain people who are prepared to work outside those normal hours. We pay them overtime and we are compensated by the traders for the cost.


Chairman: That brings us to the end. Thank you for your co-operation over the last two days. You were very forthcoming in your answers. We can note Vote 9.


The witness withdrew.


THE COMMITTEE ADJOURNED.


AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 14 March 1996


Thursday 14 March 1996


The Committee met at 11.00 a.m.


MEMBERS PRESENT

Deputy Eric Byrne

Deputy Michael Finucane

" Seán Doherty

" Batt O’Keeffe

" John Ellis

" Desmond O’Malley

DEPUTY DENIS FOLEY IN THE CHAIR


Mr. John Purcell (Comptroller and Auditor General) called and examined.

Mr. Fred Cooper and Mis Sinéad Boyle (Department of Finance) called and examined.

Mr. Colm Breslin (Department of Finance) in attendance.

VOTE 18 - TRANSPORT, ENERGY AND COMMUNICATIONS.

Mr. John Loughrey (Secretary, Department of Transport, Energy and Communications) called and examined.

Chairman: I welcome Mr. Loughrey to the Committee and ask him to introduce his officials.


Mr. Loughrey: I am accompanied by Brendan Tuohy, Assistant Secretary, who looks after the finance function, among many other things in the Department; Greg Flanagan and his colleague Paul Mulqueen, who are the effective accountants in the Department. The Department of Finance team, with whom I think you are familiar, is headed by Colm Breslin. They can introduce themselves.


Chairman: Paragraph 29 of the Comptroller and Auditor General’s report reads:


Expenditure in Excess of Authorised Issues

29.In order to enable the services of public Departments to be carried on pending the passing of the Annual Estimates, Section 2 of the Central Fund (Permanent Provisions) Act 1965 allows the Minister for Finance to issue out of the Central Fund, in respect of Supply Services for which sums were appropriated in the preceding financial year, sums not exceeding four-fifths of the sums so appropriated.


It is a fundamental principle of parliamentary control that expenditure on a Supply Service must not exceed the amount statutorily authorised and it is the responsibility of each Accounting Officer to see that this principle is strictly adhered to. To this end, adequate monitoring arrangements should be in place to give timely notice when payments from the Vote are approaching the limit authorised by the 1965 Act.


In January 1994, the Department of Transport, Energy and Communications was informed that the Minister for Finance was making available a sum of £89.479m in respect of its 1994 Vote under the provisions of the Central Fund (Permanent Provisions) Act 1965.


The full amount provided in the 1994 Estimates for this service - £182.682m - was voted by Dáil Éireann on 30 June 1994 but at that date the Department had already incurred net expenditure amounting to £103.616m, i.e. £14.137m in excess of the amount statutorily authorised.


There has been no breach of the 1965 Act in that the issues from the Central Fund did not exceed the prescribed amount. However, the Department’s actual expenditure was not kept within the limits authorised by Dáil Éireann


(equivalent to incurring an Excess Vote), a fact that did not emerge until brought to light during audit.


I asked the Accounting Officer how expenditure in excess of the amount authorised to be issued from the Exchequer came about and whether the monitoring procedures in place in the Department to prevent such an occurrence were adequate and effective.


The Accounting Officer stated that the 1994 financial position was exceptional primarily due to two factors:


(a)Irish Aviation Authority (IAA) was established as a new semi-state body with effect from 1 January 1994 to replace the Air Navigation Services Office (ANSO). The Department’s 1993 Estimates had included £35m in ANSO related Appropriations-in-Aid, a sum received regularly throughout that year by the Department. In 1994, £19.2m was receivable from the IAA but an agreement had been reached with the Department of Finance for a year-end payment, the effect of which was an increase in the Department’s net expenditure in the early months of the year.


(b)There was a decision to reduce the State’s liability to An Post’s and Telecom Éireann’s pension funds. In an effort to minimise the interest payable for the year, large amounts were issued to the funds in the early months and by the end of June 1994, £38.4m had been issued.


The Accounting Officer pointed out that of gross expenditure of £106.242m at 30 June 1994, over £100m related to just three subheads - A.1. Salaries, Wages and Allowances(£7.441m), C.1. Grants to CIE (£54.975m) and E.1. An Post/Telecom Éireann Pensions (£38.4m). A further indication of the exceptional position in 1994 was that the initial Central Fund issue amounted to only 49% of the 1994 Vote.


He accepted that the level of the Department’s advances from the Central Fund should not have been exceeded. As a result of the audit findings, a re-examination of the monitoring procedures has been carried out in the Finance Unit and changes to some procedures have been introduced. The Accounting Officer is now satisfied that there will be no recurrence of the 1994 situation.


Mr. Purcell: Paragraph 29 merely draws attention to the fact that in 1994, the Department spent in excess of the interim limit specified in law, pending the passing of its Estimate by Dáil Éireann. It is, in a sense, a technical matter about appropriation which is often taken for granted. However, it does have the value of emphasising the primacy of the Dáil when it comes to granting supply to the executive.


The Department exceeded the limit without being aware of having done so. It came to light during the course of our standard audit test. It does not normally arise and the exceptional circumstances which caused it in this instance are outlined by the Accounting Officer in the paragraph. The Committee will note that the Accounting Officer is satisfied it will not happen again.


Chairman: Should you, Mr, Loughrey, not have foreseen the potential effects of the Irish Aviation Authority and Telecom factors on the 1994 financial position, and thereby avoided the situation in which expenditure limits authorised by Dáil Éireann were exceeded?


Mr. Loughrey: Yes, I should have. It is something which, quite frankly, I regret and which our financial management systems should have been able to pick up but, in the event, it did not. I take it very seriously. I accept what the Comptroller and Auditor General said about it being a fundamental principle of parliamentary control. The four fifths rule, which is essential to keeping Government business going, is a privilege extended by the Oireachtas and should never be taken for granted.


I do not say this in any way to excuse what happened, but I do not think any Government Department since the foundation of the State encountered the set of circumstances which happened in 1994 in our Vote. Under the provisions of the 1965 Act, the four fifths amount was set at £89.5 million. Clearly, we took that on board and it was part and parcel of our control system. However, the ink was hardly dry on the finance authorisation of 2 January when later that month, in the course of the Budget, expenditure to go through our Vote as a Budget day adjustment of £72.5 million was put forward by the Minister for Finance on the day.


Already, without any other complication, there was expenditure which was urged, for the most part, to be spent early on because there was a penalty clause. In other words, there was an interest rate building up. It was advisable from a financial point of view and because the Government wanted to take its first major step in the direction of correcting the perceived catch-up on the pension funds of An Post and Telecom. This gesture was to be followed up by actual payments. Without going into any further detail, within a month of the standard authorisation under the 1965 Act, there was a proposal to the Dáil which, effectively, was expenditure almost equal to that four fifths amount.


Allied to that, was the fact that the vesting day for ANSO, which transposed then into the Irish Aviation Authority, was 1 January of that year. We had a regular and assured stream of income, which amounted to roughly £36 million in the previous years. That was to be lost, quite correctly, on vesting day. However there was to be a vesting day adjustment due to the opening balance sheet of the Irish Aviation Authority, under which we were to receive an amount just short of £20 million. However, due to an agreement we had with the Department of Finance and the Irish Aviation Authority, that was back-ended.


There was a double whammy effect of a Budget day adjustment which was almost equal to the four fifths amount, and a loss of assured income which, on a discretionary basis, was put back to December. I examined most Government Department records, over many years, and I could not find a counterpart for those two exceptional circumstances. Having said that, you, Sir, were right in your opening comment and it should not have happened.


We have now introduced a new system whereby it will not happen again. However, I am hoping - it is not totally within my remit - for a wider financial management system for the whole Civil Service where, ultimately, through an IT system there will be trigger points which will ensure that not only will it not happen in this Department but that it will never happen. It should not be beyond the wit of our IT staff, and in the wider Civil Service, to introduce such a system. Perhaps, I could leave it at that for the moment.


Chairman: What changes have been made to monitor procedures? Are you now satisfied there will not be a recurrence?


Mr. Loughrey: Yes. We have introduced accrual accounts in the Department. Part of those accrual accounts are a set of management accounts which are drawn up weekly and monthly. The management team will have a full set of accounts which will come to us on a regular basis. At the end of every month we will take a view on what is happening. This means that no matter what exceptional circumstances arose - if there was an occurrence such as this - I would have the cash and expenditure positions monitored on a daily basis if we came within 75 per cent of the authorised limit.


Deputy Byrne: I am happy to pass. I just wish to discuss one item under the Vote.


Deputy Ellis: How much is the future State liability with regard to pensions for An Post and Telecom Éireann?


Mr. Loughrey: On vesting day they were frozen at a figure of £461 million. I recall we discussed this last year. If one were to take the reckonable service of all employees of An Post and Telecom Éireann on vesting day 11 years ago and bring that forward to a net present value, it would be approximately £1.5 billion. However, the amount that was frozen on vesting is now being tackled in a systematic way and it is no longer a matter for this Department. It has now been taken over by the Department of Finance and will be paid from Exchequer funds through that Department. All pension fund flows can sound, in aggregate, quite significant but in practice it is a situation that is now entirely under control.


Deputy O’Malley: Paragraph 29 states that there was an amount due from the Irish Aviation Authority to the Department. That was in the first year it was established. How is that? I thought moneys would go in the other direction and that the Department owed the authority a contribution towards the capitalised pension costs.


Mr. Loughrey: If all moneys and all liabilities were put into one pot, the Deputy is right. However, pension liabilities are accounted for in a different manner from corporate liabilities. The adjustment whereby we were owed over £19 million by the Irish Aviation Authority arose from the adjustment of the difference between shareholders’ interest and the corporate interest of the new Irish Aviation Authority. In other words, there was a discretionary division of how much of the assets in the balance sheet of the Irish Aviation Authority would be financed by own funds as opposed to debt. When that division was made the shareholders were due £19 million. We can go into the detail if the Deputy wishes.


An approximate figure of £60 million to £63 million was the amount which the Minister for Finance undertook to pay to the pension fund of the Irish Aviation Authority in respect of reckonable service of employees prior to vesting day. The undertaking by the Minister was that this would be paid over seven years. It was left entirely to the Minister for Finance’s discretion whether he would do this on a regular payment basis or as he saw fit or ultimately in one payment at the end of seven years. His undertaking is watertight; how he chooses to meet that undertaking is left to the Minister’s discretion.


Deputy O’Malley: I do not follow that. There appears to be an element of creative accounting. The Minister for Finance owes £63 million to the company but the company appears to owe him an indeterminate sum on paper. What does the company owe him for? For purchasing the assets from him?


Mr. Loughrey: That is right.


Deputy O’Malley: It is somewhat meaningless.


Mr. Loughrey: In an element, it is a form of circularity. If the Irish Aviation Authority remains in public ownership, it is a matter of on which balance sheet or which set of accounts it will appear. However, in order to set up the Irish Aviation Authority on a sound financial footing, a view was taken on how much would be on their balance sheet. Should they have 100 per cent equity financing from day one or should they have a judicious mix of debt and equity? It was on that basis that the adjustment was made.


Deputy O’Malley: How much has the Minister for Finance paid the IAA, An Post and Telecom Éireann for their pension liabilities?


Mr. Loughrey: He has not paid anything as yet to the Irish Aviation Authority, although I am open to correction by my colleagues. With regard to An Post and Telecom Éireann, the Minister undertook, taking one year with the other, roughly to pay an amount of £70 million. In the first year, 1994, he paid £71.5 million. Then there was some leeway in our budget and we paid an extra figure of approximately £11 million. The outturn for 1994 is approximately £84 million. There was some leeway in central Government’s finances, so an extra payment was made directly from the Central Fund of £50 million which was to be effectively a down payment for the 1995 pension amount. An extra payment of approximately £24.5 million was put through our Vote in 1995.


Deputy O’Malley: My question was, what is the accumulative amount? You are talking as if it all started in 1994. The Department of Finance’s liability commenced in 1984.


Mr. Loughrey: That is right.


Deputy O’Malley: What has the Department paid since 1984?


Mr. Loughrey: In 1994–95 approximately £140 million. I will have to check that with my colleague in the Department of Finance whether a payment is proposed in the current financial year.


Deputy O’Malley: I am asking for the accumulative figure from 1984.


Mr. Loughrey: It is the same amount.


Deputy O’Malley: Did the Department only begin in 1994?


Mr. Loughrey: It only began in 1994.


Deputy O’Malley: It paid nothing at all for ten years?


Mr. Loughrey: It paid nothing for ten years.


Deputy O’Malley: Is that not surprising?


Mr. Loughrey: We are back to a situation where State pensions and central Government are based on a pay as you go system. In effect, it is an act of faith. That sounds like a pejorative term, but it is the assurance that the Government is the ultimate backstop in terms of financial standing in any democratic society. One can have either a funded scheme, an unfunded scheme or a hybrid of the two. In the case of State, Civil Service and central Government pensions it is on the basis of unfunded schemes and that has stood us well since the foundation of the State. That is what will continue.


Deputy O’Malley: It has, but the question is whether it will stand us well in 20 years time.


Mr. Loughrey: Some of the aggregate figures for liabilities appear to be large in absolute terms but I can assure the Deputy that we do not need a growth rate of 5 or 6 per cent of GDP to pay them. Even at modest growth rates we will be comfortably able to afford our pay as you go system. In fact, given demographic trends, it will be more comfortable still.


Deputy O’Malley: These three companies are now independent companies. I cannot see the relevance of your comment that the Government will meet its obligations in ten or 20 years time. Whether it can or cannot, these companies are supposed to stand on their own feet.


Mr. Loughrey: They are. The trustees of the pension funds would not have accepted any system other than undertakings which would assure the full pension rights of the members for whom they are responsible. Indeed, they would be in dereliction of duty under the Pensions Act, 1990 if they did so.


There are two elements in the pension schemes of the IAA, An Post and Telecom Éireann. There is the post-vesting day funded portion which will assure, from investments, that the actuarial liabilities will be met for reckonable service after vesting day. There is also the Minister for Finance’s obligations for pre-vesting day service.


He has given an undertaking to meet his obligations with regard to the IAA within seven years. His undertakings on An Post and Telecom Éireann do not have the same time limits; they have a different formula. The Minister has undertaken that there will be no cash shortfall in any of these schemes. Given the nature and composition of the membership of these pension schemes, a cash shortfall is not likely to arise in any scenario for another decade. Having said that, the Minister has volunteered to bring forward his outstanding liabilities in such as way that they do not fall on one lump sum and are met on a planned and measured basis. The £70 million each year is the embodiment of that approach.


Chairman: I take it that we can note this paragraph.


Deputy O’Malley: This has great implications and is not a minor matter. Merely noting the paragraph would imply it is of no significance. There is a huge liability to the people working in these three companies. The recent one is all right because there is a statutory obligation on the Minister, but he has never met his obligations in respect of the others and tens of thousands of people are affected.


Mr. Loughrey: The Deputy is correct in raising an issue like this but I do not want the Committee to feel there is a long term threat to the adequacy of the funding arrangements for these pensions. The employees of An Post and Telecom Éireann can be fully assured, as they have been by the trustees of these pension funds, that there is no threat in any way or in any sense to the full payout of their entitlements. The fact there is a nominal actuarial deficit at present, given the Minister for Finance’s obligations on vesting day, cannot lead us to the conclusion in any way that somehow there is a threat to the adequacy of these pension funds.


Mr. Cooper: With regard to the outstanding liability in respect of Telecom Éireann and An Post, the end of 1995 liability is estimated at £425 million, which is a decrease on the original figure mentioned of £461 million. I understand that the liability will be further reduced, depending on the proceeds of the sale of part of the assets of Telecom later this year. Deputy O’Malley: What accounts for the approximately £1 billion difference between the £461 million which was frozen on vesting day and what Mr. Loughrey described as the actual liability on vesting day of £1.5 billion?


Ms. Boyle: The £425 million is the accrued liability since 1984. The £1.5 billion is the total liability, including future payments, for the pre-vesting day service of Telecom Éireann and An Post employees. The £425 million is the crystallised liability which is owed by the Exchequer to the two funds but which has not yet been paid. There is a commitment to pay this over 25 years. The current liability as it accrues is being paid quarterly in arrears so that it will not increase from £425 million. It will be paid at a rate of approximately £70 million a year, as mentioned by Mr. Loughrey.


Deputy O’Malley: Is this why Telecom in particular is reluctant to reduce the number of people on its books? If several thousand came off together, it would not be able to meet its pension liabilities.


Mr. Loughrey: There is no direct connection between the pension liability issue and any necessary adjustment to the cost base of Telecom Éireann. The pensions could be adequately catered for under present circumstances. There is no direct connection between the degree of freedom the company would have in addressing its cost base and the pension issue.


Chairman: We can note this paragraph.


VOTE 18 - TRANSPORT, ENERGY & COMMUNICATIONS

Mr. Loughrey further examined.

Under subhead A.7 there was an underspend of £2.9 million because ongoing consultancies were not as advanced as anticipated. What are the major consultancies involved here? What stage are they at now and what will be the total cost?


Mr. Loughrey: Those major anticipated consultancies in 1994 were related to the restructuring of the ESB. Subsequent to those Estimates being submitted, the CCR, which was a tripartite effort by the management and unions of the ESB and the Department, was agreed. In that context many of the major studies which were to have been undertaken unilaterally by the Department were undertaken under the auspices of this tripartite approach. In those circumstances the bills were paid directly by the ESB. This is the main reason for that shortfall.


Chairman: Who are the major consultancies involved?


Mr. Loughrey: The major consultancies involved in the CCR exercise were McKinsey and Electricité de France, which is the French equivalent of the ESB. McKinsey was the lead consultant in this exercise.


Chairman: Were these the only two involved?


Mr. Loughrey: They were the major ones involved in the tripartite process.


Chairman: How much funding has McKinsey received to date from this?


Mr. Loughrey: It would be close to £1 million. I can only give a rough estimate because this was paid by the ESB.


Chairman: How much did EDF receive?


Mr. Loughrey: As in the case of McKinsey, this figure did not go through my Department’s Vote. I would have to check these figures with the ESB.


Chairman: Under subhead B.3 there was an underspend in excess of £1.2 million on energy conservation. This was partly due to the delay in setting up the Irish Energy Centre. What was the reason for this delay? Is the Centre now up and running and, if so, what are its aims?


Mr. Loughrey: The Centre is up and running and is extremely successful. It has established a niche for itself in the market. It has a clear institutional identity. Being institutional may give the impression that it is moribund but it is nothing like that. It is a pro-active unit and has obtained great acceptance from business and commerce. The delay in setting it up occurred because it had to be an intrinsic part of the Operational Programme to be agreed with Brussels in 1994. This agreement was not made until September of that year. We are talking about the sort of expenditure which would have been incurred in almost the last quarter of the year. Reaching agreement with DG XVI in Brussels under the new Operational Programme took longer than expected and this is the reason for the shortfall.


Chairman: I take it that the Centre was grant-aided by Brussels as part of the Operational Programme.


Mr. Loughrey: Yes.


Chairman: What type of funding was involved?


Mr. Loughrey: From memory I think it was 50 per cent but I can check this.


Chairman: Did you qualify for all the grants? Had the delay any bearing on the amount you received in grants?


Mr. Loughrey: It had no bearing on the amount in aggregate over the next four years. It had a bearing only to the extent that the grants were slow to take off. This is because we did not have the agreement of Brussels for the full plan. No moneys will be lost as a result of this. Under the Community Support Framework, once an aggregate amount is agreed with Brussels, it will be paid over the four or five year duration.


Deputy Byrne: I welcome Mr. Loughrey to the Committee. We find it difficult to get scandal on the Department of Transport, Energy and Communications.


Deputy Ellis: Is that what the Deputy is hunting for?


Deputy Byrne: Mr. Loughrey should take a bow because it is a bad day’s work if he has to come in here to be torn apart by us.


The farm electrification grant scheme was £145,000 in 1994. As an urban Deputy, I thought farmers got enough grant assistance throughout the years. How many farmers have availed of this scheme and is there still a need for it in 1996?


Mr. Loughrey: I thank the Deputy for his kind comments. However, Accounting Officers are responsible for all mistakes and I was correctly contrite at the beginning of the meeting. The credit for controls is due to my colleagues, not to me.


As regards the farm electrification scheme, the Deputy is asking me to speak on Government policy. I am happy to talk about the scheme and how it operates. The scheme is justified on the basis that farmers in less developed areas still need support. There are still some farmhouses which are not connected. In many cases the farm enterprise must be upgraded to three phase electricity to keep people in rural Ireland. This cost would be a deterrent to farm development unless some assistance was available. That is the continuing justification for the scheme.


Deputy Byrne: It is not that they do not have electricity, but that they are upgrading their farms.


Deputy Ellis: If somebody builds a second house on their farm they may be eligible for this scheme. It can cost £3,000 or £4,000 to connect electricity.


Deputy Byrne: Is there any way of knowing how many farm houses do not have electricity?


Mr. Loughrey: No, but the ESB said it is less than 1 percent of all dwellings. This is a carefully controlled scheme in that the full grant aid is only eligible up to the first £2,000. Deputy Ellis would be the first to say there are no fat cats in farming in County Leitrim. It was more open-ended initially when larger agricultural projects were eligible, but it is now only given to the needy. The cut off point for the maximum grant of £2,000 means that it is focused on the smaller farmer.


Deputy Byrne: I asked this question because of the proposal in the Budget to give farmers living in isolated communities an allowance to install alarms. However, alarms would not be of much benefit if 1 per cent of farms do not have electricity.


Accrued expenses show an excess of £1 million and a footnote deals with the infamous seizure of a Yugoslavian aircraft. It states that the “figure includes an accrued expense of £46,000 for the maintenance of an impounded Yugoslavian aircraft ..…”. Perhaps you could clarify the up-to-date position because I read in the newspapers that the owner of this aircraft intends to sue the State. Can you assure this Committee that we will not have to pay substantial bills? Are you happy that the seizure was legal and that the taxpayers will not be liable for any expenses incurred?


Mr. Loughrey: I understand the Deputy’s concerns. I will not tell the Committee the matter is sub judice and that I cannot say anything about it. However, I must be careful in my comments because it is still before the courts.


I assure the Deputy that the Department, at all stages, acted on the close advice of the Government’s legal services and the Department of Foreign Affairs. In 1993, sanctions against actions by the former Yugoslavia, as seen by the United Nations, were accepted by Ireland and by all members of the United Nations. There are obligations under such an international agreement. When the plane was impounded, we sought to ensure that we were acting correctly on the advice of the Attorney General’s office. The High Court adjudged that the State acted in such a way that the plane should no longer be detained. It is the Attorney General’s prerogative to appeal that decision. It would be improper to infer a particular outcome if such an appeal goes ahead. That is a matter for the Supreme Court if it makes a judgment on it.


At the same time, it has been referred to the European Court of Justice on a point of law. I understand the European Court of Justice will take evidence towards the end of this month. Those who are familiar with the European Court of Justice know how overworked it is, so we may not have a judgment until the end of the year. This matter is before both the Irish and the European courts. I assure the Deputy that we have the taxpayers in mind at all stages and we are acting within the considered advice of the Attorney General’ office and the Department of Foreign Affairs.


Deputy Byrne: I accept that explanation. However, £46,000 has already been spent to maintain this aircraft. We know that a complicated peace is returning to the region. How long will the aircraft remain impounded or will it be returned? Is the embargo still in place?


Mr. Loughrey: After the Dayton Ohio Agreement, the embargoes were lifted so we are now in a different situation. The owners of the plane are free to take it away any time they wish but having been impounded for two or two and a half years, they would have to get a renewed air worthiness certificate. To fly out of this jurisdiction it would need to be taken out of care and maintenance and put in an airworthy condition. There is no restriction on the operators coming to an agreement with TEAM Aer Lingus or anyone else to do this. The Department of Transport, Energy and Communications is not stopping them. The operators should decide what to do from a commercial and legal viewpoint, but there is no legal ban on them taking the plane out of this jurisdiction. They must only satisfy the Irish Aviation Authority’s airworthiness stipulations.


Deputy Byrne: There is a 20 per cent rate of depreciation for vehicles, etc. What is the rate of depreciation for this aircraft? What was its initial value? I am worried that if things turn sour the taxpayer will be confronted with substantial bills.


Mr. Loughrey: I think it was a Boeing 737 but I am not absolutely sure. As regards depreciation policies on planes, they have a lifetime of approximately 25 years - it varies from plane to plane - before they come up for their equivalent MOT test. That is not to say they depreciate over 25 years.


I am not an expert on aircraft depreciation policy but I would be surprised if they were not depreciated effectively over a 12 year period even though they have an effective life, before a major equivalent MOT test, of approximately 25 years. I take the Deputy’s inference to be that if this aircraft was put in a hanger for two or three years, the opportunity cost for the operators would be very high.


Deputy Byrne: I am worried about the potential liability to the State if they should win the case.


Mr. Loughrey: I can understand that. A contingent liability does not mature until such time as there has been a judgment, if there were to be a judgment in the Supreme Court, so we have flagged it clearly in our accounts as a contingent liability but it would not mature as a liability. It would depend on the outcome and it would be improper obviously ōf us to suggest the outcome of a court case. The figures which appeared in newspapers have not come from this Department.


Deputy Byrne: If that is the case, will Mr. Loughrey give us his figures?


Mr. Loughrey: Given the fact that the court case may result in a discussion on costs or liabilities, I would prefer not to opine on that. I would be delighted to come back next year and discuss it.


Deputy Byrne: Will Mr. Loughrey keep us posted on this issue?


Mr. Loughrey: I would be happy to give the Committee details of standard depreciation. As this case is of interest to Deputy Byrne and other Members, I will give the aircraft type and the standard depreciation policies of airlines for these aircraft which, although totally unrelated to the case before the courts, will give the Committee an appreciation of the sort of issues facing the court.


Deputy Byrne: Did I read that the aircraft was valued at £27 million? Is that way out of proportion?


Mr. Loughrey: That figure would not necessarily be out of the question for a modern aircraft of the capacity classically of a Boeing 737, for instance.


Deputy Finucane: Will Mr. Loughrey expand on subhead D.5, aircraft accident investigation insurance?


Mr. Loughrey: Under accepted international aviation rules, all jurisdictions are responsible for accidents that happen in their area of control, whether it is offshore or on the island of Ireland. God forbid that such an accident would ever occur but, if we have responsibilities for the investigation, the potential liability for the State is enormous. Normally, the State carries its own insurance. I am not sure whether there has been a value for money audit on this because I know it has just started. I am not suggesting it is an interesting topic but I know the State has been satisfied in general that carrying one’s own insurance is the right thing to do.


In this case, the amount could be so large that the Department thought it prudent to take out specific insurance. Can I give the Committee the example of a scenario which, God forbid, will never happen? If, for instance, an international aircraft crashed offshore, as has happened, and we were responsible for the full investigation, including sub-sea salvage, the costs nowadays are absolutely enormous. Having considered this very carefully, we have decided it would not be prudent for us to carry our own insurance in this case. Therefore, we have arranged internationally, through insurance and reinsurance, that this matter is covered fully. That is the basis of our reasoning.


Deputy Finucane: Mr. Loughrey may have read recently of the German charter aircraft which went down off the Dominican Republic with the loss of all on board. There is seemingly intense charter competition in Germany. Reservations were expressed by certain safety people in Germany with regard to the safety of the actual charter used.


A similar type of competition is evolving in the Irish charter sector and we hear of new airlines being introduced to the Irish charter business. What assurance can Mr. Loughrey give to the people who avail of such charter flights in this country? Based on the German experience with regard to the type of aircraft used on charter flights especially, are shortcuts being taken on safety? Can this be proved conclusively? After all, I would regard Germany as a very advanced country. The Germans are very advanced in how they approach issues yet the safety people admitted afterwards that they had reservations about the company involved and the aircraft which was used to fly to the Dominican Republic. When something like that occurs in Germany and I see what is evolving in this country, I want positive reassurance that full safety certification is carried out by the Department. Perhaps Mr. Loughrey can assure me that this is the case?


Mr. Loughrey: I so assure the Deputy. It is a topical point because I know this crash caused great angst in Germany. Indeed, the German Transport Minister, in expressing those very concerns of the Deputy, received the support of all his colleagues at the Transport Council meeting. It is a very topical and live issue all over Europe.


From memory, I think there is a qualitative difference. Even though it was a German charter company that operated out of Hamburg, I understand the aircraft was registered elsewhere. In other words, it was registered in the aviation equivalent of the maritime ’flag of convenience.’


There is a genuine concern here. One must walk on eggshells here because when sovereign states sign up to international air worthiness and safety agreements, to infer that their safety standards are not up to scratch is a very delicate matter, so I will not name any countries with which there might be such a concern. I assure the Committee that the standards applied by the Irish Aviation Authority meet all the highest international standards. In fact, the Irish Aviation Authority is developing a world-wide reputation in its own right now for training people in other jurisdictions on safety matters.


The Irish Aviation Authority keeps a very professional hands-on overseeing approach to all aircraft which are registered in Ireland and which must have their air-worthiness certificates in Ireland. I assure the Deputy that Irish travellers need not feel any of the concerns which were expressed in Germany over this particular tragedy.


Deputy Finucane: Mr. Loughrey mentioned the flag of convenience with regards to the aviation industry. Should any situation materialise where he felt reservations about aircraft and their source, would his Department use a veto?


Mr. Loughrey: That has been done already. It has been done for cargo airliners. So far as I recall, it has not arisen in my time for charters which would have involved tourist packages or any such similar arrangement. The Deputy can take it that the Irish Aviation Authority’s byword is vigilance when it comes to ensuring safety standard.


Deputy Finucane: I am pleased with that assurance. Will Mr. Loughrey expand on subhead B.5, the training of Irish personnel in petroleum related disciplines, as there is another reference to training under another subhead?


Mr. Loughrey: This is a happy partnership between the industry and the Department which was sponsored by the Department as far back as 1976 after the first major Marathon find off Kinsale, County Cork, a few years earlier. It is a partnership approach which is not mandatory and which involves companies which feel they can support the training of young postgraduate students in hydrocarbon skills. It was bankrolled initially by Marathon and was joined for the most part by the so-called “seven sisters”, the bigger international oil companies. As their interest in the Irish offshore ebbed and flowed, they dropped in or out but I must acknowledge their generosity and partnership with the Department in putting these funds effectively at our disposal. Their contributions ensure that the very talented postgraduate engineering, geophysical and geological students can get extra training in hydrocarbon exploration and similar techniques. This has proved to be an excellent investment for the oil companies. Everybody is a winner in this regard. Highly skilled Irish people have returned and have made various contributions to the hydrocarbon industry.


On many occasions I am reminded, by Chief Executives, of some of the major international oil companies that the Irish diaspora in terms of hydrocarbon exploration is highly regarded. Recently, the director general of one of the largest oil companies in the world told me that they cannot get their hands on enough Irish-trained hydrocarbon people. It is a winning formula from a professional viewpoint and it is good for the Irish economy.


Deputy Finucane: As regards the opening up of offshore oil exploration with Enterprise Oil, I understand Foynes is likely to be the location for the offshore oil base. There has been a tradition in the past where Irish workers got work on those offshore oil rigs. In recent years emphasis has been placed on safety on offshore oil rigs and people need international recognition as regards safety. I have discussed this with the appropriate Minister. What is the Department doing as regards a suitable training course so that Irish workers can work on those rigs? I understand that, at present, few would qualify, given the safety training required, although they have worked on offshore oil rigs in the past. Is the Department doing anything so Irish workers may avail of that facility?


Mr. Loughrey: The Deputy’s insights into this area are even more precise than the comments I was going to make and he has raised a very useful point. In general, the problem of maximising the value added and getting jobs to Irish people, whether in Foynes or Cork, is of concern. Once again there is a narrow dividing line between active sponsorship of Irish companies and personnel and EU competition policy which says that we cannot discriminate. If companies operate out of Falmouth or Portsmouth and are in competition with those operating out of Cobh or Cork, the State cannot take what would appear to be a discriminatory role in favour of making sure that the value added in Ireland is maximised.


I have stated the official position but obviously our heart is in facilitating as much as possible value added jobs in Ireland - Irish based jobs and expertise. I should be more familiar with the point the Deputy raised. I know there have been discussions between the industry and the HSA on certification, about which I will ask my experts. I would be pleased to write to the Deputy directly on that.


I am aware that there were problems, including competitiveness. We must look at all the facts, although the may be unfriendly. We found ourselves in a situation in some instances where the all-in-costs of operating out of an Irish port were beginning to become uncompetitive. That is something for Irish enterprises to address. The Department cannot do anything about that except to sit down and talk to them by way of advice. On the questions of how the State can facilitate qualifications to ensure that we are not at a disadvantage, we have had discussions with the HSA on that matter. I am not sure of the outcome but I would be delighted to write to the Deputy on that issue.


Deputy Finucane: I would appreciate that. I understand about the EU and discrimination. My point was about making the workers who already have skills adaptable to changes in the marketplace. At least they would have the chance to compete with others for positions.


Mr. Loughrey: I understand the Department works closely with the Association of Offshore Operators to make sure that what the Deputy requires will happen. However, I will be more precise in my letter.


Deputy Ellis: Under subhead D.1, Acquisition of Land, Buildings, Rent on Lands, etc., at State Airports, there was a saving of £74,000. How did this come about? Does it refer to the Irish Kennel Club?


Mr. Loughrey: The saving under this subhead arose from legal and other processing delays in reaching agreements on land deals, particularly at Corballis garden plots on the perimeter of the airport. The money was not paid because the deal we thought we could have in place did not happen because of legal and other delays.


Deputy Ellis: Arising from that, how much land does the State and Aer Rianta own adjacent to Dublin airport?


Mr. Loughrey: Aer Rianta is not a fully fledged commercial State-sponorsed body, although it has full power to act as such - it is still an agent of the Minister. We plan legislation to set it up correctly as a public enterprise from a legal viewpoint. Lands would be vested in the Minister. I understand I sent the Committee a brief on this issue subsequent to last year’s meeting. I will ensure that it is updated and sent again to the Committee because I know it has a particular interest in this.


Deputy Ellis: Was the Department involved in any planning objections during this period as regards private development adjacent to Dublin airport?


Mr. Loughrey: The Department was enjoined in the planning process where there were proposals for land development where there were constraints on the sewage arrangements. In other words, the sewage arrangements which were put in place originally based on the acquisition of land could only be used in a particular set of circumstances. The new development wished to join this sewage system. There were, however, genuine legal difficulties. The Department was not enjoined in any action at planning stage to smother worthwhile business or economic development. There was a genuine legal constraint on who could have access to this sewage system. This was not a management or a discretionary restraint, it was a legal one. That is why the Department was so enjoined in opposing a planning application.


Deputy Ellis: Was it subsequently withdrawn?


Mr. Loughrey: There was a subsequent agreement of which I would like to give you the detail, but I am not sure what form it took.


Deputy Ellis: Will you notify the Committee in writing about the subsequent agreement? I know very little about this except what I have read in newspapers over the past couple of years, but it caused some concern at the time. What appeared to be legitimate development was being hindered by a Government Department.


Mr. Loughrey: I assure the Committee that the overriding objective of the Department in this area is to facilitate worthwhile economic development because it all comes down to jobs. There is no killjoy attitude in the Department of Transport, Energy and Communications and provided worthwhile business activity does not interfere with either safety dimensions in terms of corridors in and out of airports - obviously that would be paramount - or a genuine strategic landbank that is required for an expansion. For example, Dublin Airport is effectively bursting at the seams at the moment. Some eight million passengers came through its gates last year and it has a design capacity for slightly less than that figure. Aer Rianta and the Department are addressing that problem. Where a landbank is genuinely required for strategic, not defensive, reasons, clearly the Department, in terms of long term planning, would have to support the retention of such a landbank.


Many cities worldwide, from New York to Munich, greatly regret that they did not hold onto a strategic landbank because they were short sighted enough to think that the airline industry was static. The number of people going through Dublin Airport may almost double in the next seven years; it may be around 15 million people. It is absolutely essential that Aer Rianta and the State retain a strategic landbank. Other than the safety issue and the strategic landbank, the Department would not stand over, nor would Aer Rianta want it to, any defensive mechanism to hold on to land for any corporate reasons. If worthwhile and genuine economic activity can be facilitated around airports, this Department will support it.


Deputy Ellis: We will appreciate it if Mr. Loughrey gave us the details he promised. What is the current position with Bula Ltd. as far as the State is concerned?


Mr. Loughrey: If the Deputy had asked me that question last year, I would have said it was sub judice and sadly, it is the same this year. Out of respect for the Judiciary and the courts, I will not make any prediction for next year.


Of course, the courts must, and will always under our Constitution, have an unfettered assessment of any case put in front of them. I am sure this long running saga has already beaten some records in the Guinness Book of Records, certainly as far as Irish case law is concerned. We are close to 200 days in this particular case and it would be inappropriate or improper of me to elaborate on it.


Deputy Ellis: Is there a potential net gain or liability as far as the Department is concerned or is that dependent on the mercies of those people?


Mr. Loughrey: The wisdom of the courts will decide that. On an accruals accounting basis, it would be prudent of us to enter this as a contingent liability. However, that is not to infer that there will be any particular outcome of the court case.


Deputy Ellis: Is there any estimate of the potential liability?


Mr. Loughrey: The plaintiffs have put in a claim but that is not ——


Deputy Ellis: That would wipe out the Department.


Mr. Loughrey: I would then have to stand over the adequacy of the pay-as-you-go pension system.


Deputy B. O’Keeffe: Arising from Deputy Finucane’s question about the major uptake in the licences, has the Department examined the knock on effect in terms of reaping the benefits for Irish workers? What level of co-operation exists between the Department and the Department of Education with regard to certificate and diploma courses in that field?


Mr. Loughrey: Is this in regard to offshore exploration?


Deputy B. O’Keeffe: Yes.


Mr. Loughrey: We work closely on that matter. The raison d’étre of the Department of Transport, Energy and Communications in this area is to maximise activity in the offshore area. The more wells that are drilled, the more sporting chance we have of bringing further oil or gas ashore. This is our business strategic objective.


As a subset of that, it is extremely important that, whatever activity is there, we maximise the value-added for Ireland, particularly by way of jobs and business activity. In that light, we work closely with the Association of Offshore Operators and the hydrocarbon exploration companies to ensure the result that we all want happens.


There are a number of ways in which we work with the offshore association and the oil explorers. We first work in an exhortative way so that they fully understand that in operations off the Irish coast, it is the Government’s intention to the maximum possible extent, that the business is done in Ireland with Irish operators or staff. We also work with them to find out exactly what they require. This covers both the technical and skills requirements. I discussed the skills requirement with representatives from the universities some time ago. We have a professional set up in the Department, headed by Dr. Keith Robinson, which comprises geophysical, geological and engineering expertise. They work closely with their colleagues in universities and training institutions to ensure there is no gap in the market in the availability of Irish personnel. We have worked with the HSA to ensure that Irish training is not at a disadvantage relative to others in terms of certification.


If the Deputy was to ask me how successful we have been, I would have to ask my professional colleagues about the latest outcomes. There is no lack of both awareness and enthusiasm to get the same result the Deputy is seeking.


Deputy B. O’Keeffe: The staff of Irish Helicopters would say they are not getting the benefits of contracts staying at home, given that 35 of them will be made redundant. My colleagues in Cork RTC, as the National Nautical Centre, indicate that there is little liaison between the Department and the setting up of courses that would provide sustainable jobs in that area. The reason why I raised this question was to get Mr. Loughrey to examine the possibility of having better levels of co-operation.


Mr. Loughrey: I will give the Deputy an undertaking, in light of what he said about Cork RTC, that we will take this matter up directly with the RTC straight away and without delay.


Deputy B. O’Keeffe: Is our regional airport policy in tatters? A provision of £250,000 was provided for a marketing promotion fund for regional airports and £1.25 million was provided for essential air services programme for regional airports and not taken up. Does this mean that irrespective of what rationalisation we undertake, the regional airports are posing major difficulties in remaining viable entities?


Mr. Loughrey: That means we are not totally masters of our own destiny. We do not have total discretion in spending money, even when it is provided by the Oireachtas. The £1.25 million for the essential air services programme needs clearance on a State aid basis from Brussels. We could do this in the good or bad old days when Governments were not bound by the Treaty of Rome and their degrees of freedom were not limited by competition policy. It could select people to provide these essential air services. We now have to clear both the theory and each individual practice with Brussels.


Unfortunately, the take-up did not exist either for Carrickfinn or Sligo because when we put out a bidding process, which was acceptable to DGVII and DGIX in Brussels - the transport and competition groups respectively - the competition was not successful. The money could not be spent because we could not find the identikit of people who would met all criteria for Sligo and Carrickfinn. That is the main reason for that particular shortfall.


The Deputy inquired if our regional airport policy is in tatters, which is a very strong and provocative question. Without being defensive, the answer must clearly be “no”. To begin with first principles, regional policy in Ireland demands that we need regional airports much more than other countries because we are an island nation. For the purpose of business and tourism, regional policies will be an intrinsic part of our aviation policy. Having said that, there is one airport per 400,000 people in Ireland. That figure is not matched anywhere else in the world. For example, in the UK there is one airport per 2.8 million people and in France the figure is one airport per 2 million people. The Department is overseeing a regime which, by world standards, is very airport intensive.


Deputy B. O’Keeffe: One airport per 400,000 people?


Mr. Loughrey: In Ireland, yes. In other words we would state that the spread of regional airports is already in place. The problem with regional airports in Ireland is not that the Department is not committed to establishing the necessary infrastructure. The problem lies with generating the business. In the past we helped, either directly or indirectly through Brussels or directly through marketing grants, to bankroll the start-up costs. In other words it does not matter whether this involves Knock, Kerry, Carrickfin, Sligo, Waterford or Cor na Móna in County Galway, the Department has been involved in pump-priming exercises or, directly or indirectly, facilitating the establishment of these airports. The real problem relates to getting airlines to use them. While we can act as facilitators, it is not a command economy. We cannot actually ask people to do something.


The Department made the case to Brussels that moneys should be provided for essential air services. This was a Departmental initiative. Where we can convince Brussels that this is the case, we have done so. It must be done, however, within the rules relating to Brussels. That explains the slow take-up of essential air services. Brussels clearly refused to grant funding for a regional airport at Waterford. It was felt that it was too near the east coast and too close to existing airports in Cork and Dublin. Brussels felt that support for essential air services was not warranted. We can be as creative as possible but there is a limit to the amount we can achieve under State aid rules. We must adhere to that. In general, however, the Department has been facilitative and supportive of regional airports and will continue to be so while remaining within the competition policy ground rules.


Deputy B. O’Keeffe: I have a difficulty in relation to the international airports at Limerick and Cork vis-à-vis other airports. The Department has scarce resources which are often, in terms of marketing, ploughed into the same area. The different entities are spending money in an attempt to eke out business and are in direct competition with each other. While that may not be a problem for the Department which is spending available money, it seems that overlapping and duplication have occurred. Consequently money is being wasted and backhanders are being paid to operators to use certain airports. It does not appear to be a fluid operation.


Mr. Loughrey: I could not allow the Deputy to let that statement stand on the record. I am extremely concerned about waste. If I thought that this was a zero sum game, that the budgets for Shannon and Cork were somehow cancelling each other out and that it was a waste of taxpayers’ money, I would not sleep at night and I would be doing something about it. I believe that it is not a zero sum game and the efforts of Cork Airport - which has its own budget and local input by way of a steering committee - and Shannon Marketing give considerable added-value to both airports. If I did not think so, I would so advise the Minister and money would not be wasted.


Deputy B. O’Keeffe: My advice to Mr. Loughrey is that he should perhaps consider the matter more closely. People on the ground to whom I have spoken fear that overlapping and a waste of scarce resources have taken place.


My final question relates to Cork and the revenue generated through MMDS, which it was estimated would amount to £1.5 million but the actual figure realised was £1.9 million. How successful have MMDS operators been in covering the intended areas? What gaps are present in the service? What is the present situation regarding the other deflector operations throughout the country?


Mr. Loughrey: Deputy O’Keeffe has raised pertinent questions which are of interest to people from Malin Head to County Cork. With regard to the success of the regional franchise of MMDS operators, without passing the question, one would have to ask them how they see the situation from a corporate point of view. From a technical point of view, the roll-out of the MMDS has been slower than they or the Department would have wished.


Whether it be cable, deflector services, or MMDS, there are blank spots in every system because of topographical or technical considerations. I am informed that, following a slow start, the MMDS coverage and the quality of reception is now impressive in most areas. However, the success or otherwise for franchise holders is a matter for their direct commercial concern. Clearly the Department has no responsibility for their success.


Deputy B. O’Keeffe: They would maintain that the Department does have a responsibility in this regard, particularly if other people are operating without a licence and interfering with their market.


Mr. Loughrey: The Deputy is aware that this matter was the subject of a court hearing and is currently being addressed by the Minister. The question of where existing deflectors fit in is a major problem. I know that the Chairman does not want any long deliberations on his matter but I will attempt to explain in brief.


One of the Department’s most valuable assets is control of the spectrum, in other words, access to airwaves be they radio or otherwise. This is a scarce international resource and the best advice available to the Department is that it is difficult to shoehorn more than four national channels into our spectrum. Clearly, no one will contest the right of RTÉ 1 and RTÉ 2 in this regard. Teilifis na Gaeilge was earmarked for the third channel and, following a competition, the fourth was awarded to a private sector consortium. That channel is still available. According to the experts, this broadly fills the spectrum. If, either through mirrors or some technical breakthrough, we can shoehorn further channels into the spectrum, the Minister is open to such suggestions. That is the current state of play. There are at least 65 deflectors which are technically acting illegally at present and there may be more. This creates a major difficulty if the full spectrum for national television broadcasting is to remain in place.


The Department is considering this matter as creatively as possible but I cannot provide any conclusions today. It was a matter of judicial review and the Minister has given an undertaking that he will and is examining this on the very best independent technical advice.


Deputy B. O’Keeffe: With regard to filling the spectrum, Mr. Loughrey stated that there are four available channels. He also stated that a technical breakthrough might be achieved through utilising a mirror system, for example. Is he stating that a licence cannot be issued for the present spectrum and the only way the deflector system can be permitted to operate legally is by way of a technical breakthrough?


Mr. Loughrey: I am not stating that, I am merely pointing out the difficulties and illustrating the fact that the Department is trying to be as constructive as possible. If operators of deflectors can come to us with solutions we have not thought of, we will entertain them in a most open and constructive way.


Deputy O’Malley: Subhead D.6 contains a provision for a special promotion measure for Shannon Airport. They have changed that since as this would have been in 1994 when there was something of an underspend. The promotion of Shannon has been changed since and it is now primarily an Aer Rianta matter. It is confusing because there is a certain amount of overlap. I do not regret the passing of the special measures because they turned out to be useless.


The promotion of airports, particularly State airports outside of Dublin such as Shannon and Cork, is very much bound up with carriers using them at competitive fare levels. Shannon has suffered a severe double blow in recent times. The first was the changes in arrangements for Atlantic flights which has been a serious matter and the second was the loss of Ryanair from Shannon. The result when Ryanair go off a route from Ireland is always that Aer Lingus immediately not just double but treble the fare on the route.


Since all other measures have failed the proper way to promote Shannon and Cork is simply, so far as European and British flights are concerned, to abolish permanently landing charges and passenger handling fees and not, as Aer Rianta are now proposing, for a 12 month trial period. They are preventing the development of these airports and Shannon is in a vulnerable position now. I know a new small British airline has come in there and it is an improvement because its fare levels are way below Aer Lingus fare levels. However, they are still substantially above what would be a normal competitive fare charged by Ryanair.


Can Mr. Loughrey give the Committee an assurance that the attitude of his Department, under its former name, which was to put down Ryanair at all costs, is now fully and totally over and that the Department will go out of its way to seek carriers who will provide competitive services into and out of Irish airports?


Mr. Loughrey: There is much validity in what Deputy O’Malley has just said. I cannot answer for my predecessors but in my time in the Department and indeed that of the Ministers to which I have worked, the only commitment we have to Irish aviation, because we could not have any other commitment, is to have the most competitive airline services. We are more dependent than any other Member State of the EU. We happen to be in the most competitive trading block in the world. In terms of trade to GDP, Ireland and Belgium are the most open economies in Europe. We cannot afford to have anything other than the most competitive airline services. I can assure the Deputy that our interest is in providing the most competitive active transport in and out of Ireland. There is no bias for Aer Lingus and no bias against their competitors. We would not tolerate that.


With the best will in the world, even though there were excellent people in both SFADCo and Aer Rianta, the Shannon marketing experiment was not the success we hoped it would be. The focus is gone back on a single institution, Aer Rianta. The budget has remained the same but it is more focused, both institutionally and in terms of its target and that will be an improvement.


The next point relates to Cork and Shannon. The last thing the Deputy would want is something I mentioned earlier, that is, a command economy. Airlines must choose to operate in and out of Cork but it is our job to ensure that choice is easy. We have been pressing Aer Rianta not only to freeze landing charges - they have been frozen for the last decade - but to bring them down. The Department has been working very hard with them to ensure that it is as creative as possible.


There comes a point when there is a trade off, in corporate terms for Aer Rianta,between an ability to bank roll necessary capital expenditure at Shannon and Cork and writing off the possibility of all revenue. Clearly that trade-off must be considered carefully. Certainly up to recent years it has not been done. It has erred on the side of the corporate rather than facilitating development but that balance is being examined. It is under study in the Department and we will bear the Deputy’s comments in mind.


Deputy O’Malley: There is no question of writing off all revenue. The point I am making is that landing charges and passenger landing fees are a relatively small part of the total revenue. The revenue for the most part in the three airports is from duty free sales where, incidentally, the profits are astronomically high. It is outrageous that, for example, Irish made spirits cost far more in an Irish duty free shop than they retail duty paid in the United States.


Mr. Loughrey: The Deputy is quite right. Duty free has been a cash cow not just in Ireland but all around the world. Captive travellers have been conned for decades by margins in duty free. That is something on which people will have to examine their own conscience. However, that life is over. Duty free, as we know it, will end in 1999 so Aer Rianta has to look at how it positions itself financially in terms of bankrolling expansion in the future.


While I have every sympathy with facilitating travel in and out of Shannon and Cork, the Deputy will be aware that there comes a point, in the provision of below cost services, where it can be challenged by other airports under the Treaty of Rome. It is not possible to get down to nil handling charges or landing charges. It is a matter of seeing how far we can get without being challenged by other airports in Europe and that is a point to be borne in mind.


Deputy O’Malley: I do not think there is much danger of that at all, particularly in the European context. Shannon is at the very end of the line and there is nowhere one can go beyond it. It is not in competition in a European context and I am not talking about the transatlantic market. There is no competition and other airports which are in a similar situation, where they are at the end of the line, frequently do not impose charges in order to encourage usage of the airport. Shannon, unfortunately being in the west of Ireland, has a very small resident population in its hinterland and it has to generate traffic by artificial means. In so far as the future of duty free in Shannon is concerned, 1999 will not make much difference because the majority of their sales are transatlantic anyway.


Mr. Loughrey: We are critically aware of the regional policy dimensions and how essential the Shannon gateway and Cork are for the west coast of Ireland. We are working as imaginatively as possible within both but it would be prudent for the future if Aer Rianta increasingly stood on its own feet when duty free goes. Without being provocative to DGIV and EU competition rules, we are working as creatively as possible to achieve the sort of throughput to which Deputy O’Malley aspires.


Chairman: I take it we can note the Vote.


The witness withdrew.


THE COMMITTEE ADJOURNED.


AN COISTE UM CHUNTAIS PHOIBLí

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin 21 Márta 1996


Thursday 21 March 1996


The Committee met at 11 a.m.


MEMBERS PRESENT

Deputy Tommy Broughan

Deputy Phil Hogan

Deputy Eric Byrne

Deputy Pádraic McCormack

Deputy Seáan Doherty

Deputy Batt O’Keeffe

Deputy John Ellis

 

DEPUTY DENIS FOLEY IN THE CHAIR


Mr. John Purcell (Comptroller and Auditor General) called and examined.

Mr. Eugene O’Sullivan and Mr. Noel Kerins (Department of Finance) in attendance.

APPROPRIATION ACCOUNTS 1994

OFFICE OF THE MINISTER FOR EDUCATION

Dr. Don Thornhill (Secretary, Department of Education) called and examined.

Chairman: We note the correspondence which has been received.


Deputy Ellis: The Government Supplies Agency spent £4.22 million on garments, £3.9 million of which was placed with Irish firms. A sum of £212,000 was spent on items which are only available abroad. What are these items?


Chairman: We will obtain that information for you.


VOTE 27 - FIRST LEVEL EDUCATION

Dr. Don Thornhill (Secretary, Deptartment of Education) called and examined.

Dr. Thornhill: I am accompanied by Mr. Peter Kelly, Mr. Seán Harkin, Mr. Gerry Murray and Mr. Frank Wyse. Other colleagues may join us during the course of the meeting.


Chairman: Paragraph 33 of the Report of the Comptroller and Auditor General reads:


Subhead K.1. - Building, Equipment and Furnishing of National Schools
Payment of Local Contributions

33.The Department provides capital grants towards the provision of national school buildings. The amount of the grant is standardised at 85% except for 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 contribution is based initially on the contract price and when the project is complete a supplementary contribution is payable to the Department in those cases where final costs exceed the original contract prices.


In the course of audit 23 cases were noted where supplementary local contributions to a total value of £73,000 due to the Department on or before 30 September 1992 were not collected at 31 December 1994. In the light of previous assurances I asked the Accounting Officer why supplementary local contributions were outstanding for periods in excess of two years.


The Accounting Officer informed me that delays occur in clearing final accounts and in establishing and pursuing a definitive supplemental liability and that the supplementary contribution amounts represent a small proportion of the overall local contributions collected. In the past few years a number of initiatives have been taken to tackle the backlog but these were impeded due to an extremely heavy workload arising from the expanded capital programmes of 1993 and 1994. In regard to the 23 outstanding supplementary contributions he stated that final accounts remain to be cleared for 2 projects, contributions have been sought for 21 projects and an amount of £9,458 collected for 4 of these projects. The collection of the remaining supplementary contributions is being vigorously pursued. At 31 December 1994, contributions totalling £206,647 were due in respect of 50 projects. A further 61 projects are ongoing and the amount of contributions due for these projects will be definitively reckoned when final accounts are cleared.


He assured me that the entire process from completion of the building project to clearing of final account and calculation and collection of supplementary contribution was being pursued in a systematic way and the position was expected to improve significantly in the coming months.


Mr. Purcell: Paragraph 33 points to a lack of diligence on the part of the Department in collecting supplementary local contributions from boards of management towards the cost of capital works at national schools. These arise when the final cost exceeds the estimate on which the local contribution is calculated. The matter was also referred to in my predecessor’s report for 1989. We were given assurances that improvement would be forthcoming but our 1994 audit shows that £206,000 in contributions was outstanding at the end of that year. Some of this was for periods in excess of two years.


The Accounting Officer explained that the process of clearing final accounts can be drawn out and this can result in delays in setting up collection of the supplementary local contributions. That factor plus the heavy workload on the section involved, due to an expanded capital programme in 1993 and 1994, meant that the matter could not be given the attention it needed. As a result of a more systematic approach, he expected the position to improve in the short term. I know the sums in question are relatively modest, when set against expenditure on the school building programme, but I feel strongly that the collection of moneys due to the State should not be put on the long finger.


Chairman: Dr. Thornhill, can you give us an update on the 23 cases which were due on or before 30 September 1992?


Dr. Thornhill: I can. It may be helpful to the Committee if I outline what we are doing by way of a systematic response to the issue which has been raised by the Comptroller and Auditor General. Some 23 cases are identified in the audit query. At the time Mr. Purcell prepared his report, the amount outstanding was stated to be £73,000. We have gone through these cases and the amount has been revised upwards to £88,600. The current position in respect of the 23 cases is that the Department has recovered over £16,783 from eight schools. Three schools are paying the money in instalments and they have paid £1,721 so far. We are in touch with the remaining 12 schools.


The Comptroller and Auditor General described how this liability arises. When a contract is authorised, schools pay a local contribution towards the capital cost. All the schools in question provided the local contribution. The balances, which are the subject of this query, arise where the final cost of the project exceeds the original estimate. This can arise for a number of reasons. There could be a need for additional foundations because of difficulties discovered during site excavations. There could be changes in tax and VAT rates at budget time and there is also the factor of inflation. Collection of these amounts, which are generally quite small, is demanding in terms of administrative time and resources.


Following the review procedures, which partly relate to our response to the query from the Comptroller and Auditor General, new arrangements are being put in place which should eliminate the problem and lead to a more satisfactory situation and a better service for schools. Schools are having increasing difficulty in raising local contributions. The local contribution can vary from 15 per cent in some cases to 5 per cent and to 0 per cent. The first change in the new system - this is a proposal we will have to discuss with the Department of Finance - is that the Department will now include a contingency sum of 2 per cent in all building contracts. In introducing this system schools will then be informed that supplementary contributions will no longer be sought. Thus, if an architect or engineer requires additional works during a contract, the Department will pay any cost not covered by the contingency sum. If on the other hand the school seeks a change in the contract and this costs money outside of the contingency sum, the school will bear the additional cost.


The second change relates to a situation where we are providing greater autonomy for schools and this will have the added advantage of easing the administrative burden on the Department and allow us to concentrate more on bigger tasks. This change is that, for minor and emergency grants, an agreement has been reached between the Department and the schools whereby the budget for minor grants will devolve to schools. The Minister has made an announcement about this. This initiative is in line with the White Paper. The new system will commence in January 1997 when approximately £10.8 million of allocated capital funds will 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. This will give school managements much more autonomy to get work done and will also have the effect of dramatically reducing departmental involvement in minor works in national schools. The Department’s staff will then be able to devote more time to the major projects in the annual building programme and to deal with important property management work. The net effect of these will be a much more streamlined and efficient system. In particular, the 2 per cent provision will remove a profound sense of grievance which exists in schools about having to collect and supply the 2 per cent contribution. The argument is continually made that schools are providing a public service. In this instance, it is a public service under the provisions of the Constitution where there is an entitlement to free primary education. There is an increasing sense of grievance and difficulty as regards collecting these local contributions. We hope the combination of these two measures will remove this problem.


Chairman: What is the total level of contributions outstanding? How many projects are involved and how are you tackling the problem?


Dr. Thornhill: When we mention the total level we are talking about projects which are currently underway. The Comptroller and Auditor General identified projects where the work had been completed. The total number of cases is 125 and the sum involved is £0.58 million. We are talking about accounts which are active and which have not been closed off, and where we are not certain about the situation. Schools are in the process of making arrangements for payment. It is a fluid situation.


Chairman: How do you know that the beneficiaries of grants from your Department have systems in place to satisfy you, as Accounting Officer, that they have been utilised for the purpose for which they were originally applied?


Dr. Thornhill: Payments are made on presentation of an architect’s certificate to the Department certifying that works which had been part of the contract have been carried out and that payment is now due.


Chairman: The Olympic Council of Ireland has received £759,000 for year ending December 1995. Was an inspection carried out and are you satisfied with the result?


Dr. Thornhill: The Olympic Council of Ireland present us with audited accounts. Most of the money provided to the Olympic Council of Ireland is in turn dispensed to other sporting organisations by the Olympic Council of Ireland. It must vouch to the Department that those moneys were paid out. The Olympic Council of Ireland retains a certain percentage of the total grant given to it for administration purposes. I have the audited set of accounts here from the Olympic Council of Ireland for the year 31 March 1995. In that year the grant which would have been paid to the Olympic Council of Ireland was £759,000. Some 15 per cent of that, approximately £90,000, was retained for administration purposes. Some of the headings under administration are conferences and seminars, £21,000; marketing and promotions £17,000; salaries and PRSI £15,000; rents and rates £10,000.


Chairman: The other figures mentioned are £600,000 and £250,000. The balance is £9,000 for an exchange grant.


Dr. Thornhill: For an exchange grant?


Chairman: Yes, the Italian exchange grant.


Dr. Thornhill: I do not see such an item in the accounts.


Chairman: Are you satisfied that each of these beneficiaries have systems in place?


Dr. Thornhill: There are systems in place in the Department which require an exacting application procedure which the organisations must follow. Perhaps I will describe the procedure in relation to the Olympic Council of Ireland. The OCI must submit an application form early in the year in respect of the grant. The application includes a list of the grants made by the OCI to its affiliated organisations in the previous year. On receipt of the application form, the Department agrees an initial payment.


Chairman: I apologise for interrupting, but are you, as Accounting Officer, satisfied that the money allocated to various beneficiaries is accounted for?


Dr. Thornhill: Any organisation which receives more than £10,000 must present us with audited accounts.


Deputy Byrne: As regards Vote 27, paragraph 33, 85 per cent of taxpayers’ money is used to build national schools. They get 95 per cent of taxpayers’ money if they are in a disadvantaged area. A small local contribution is expected from the religious orders which run the national schools and from the growing number of gaelscoileanna and interdenominational groups.


Dr. Thornhill: With the exception of the gaelscoileanna who do not have to make any contribution.


Deputy Byrne: Gaelscoileanna are financed by the State and their buildings are owned by the Minister for Education.


Dr. Thornhill: That is correct, but they are managed by whatever appropriate organisation.


Deputy Byrne: The other 3,319 national schools, which are run predominantly by religious orders, make a small contribution but they own the buildings. Is that correct?


Dr. Thornhill: That is correct.


Deputy Byrne: Why is that the case if, for example, the Minister owns the buildings of the gaelscoileanna, the VEC and third-level institutions? Why do you pay as much as 95 per cent of the capital costs to provide a building which the Department does not seem to own?


Dr. Thornhill: This issue is set in a historical context. The basic origins of the primary education system date back to the 1860s when the philosophy was that the State would aid private initiative in making schools available. We have inherited that situation. There was an extraordinarily difficult historical controversy at the time over the ownership issue. The patron or sponsor of the school would provide the site and the Department had a stake in the building. In the event of the school ceasing to operate, the issue arises as to what return is due to the State in respect of its investment in the building. The situation can become difficult and argumentative. If we take a school which has been closed in an area with a lot of development, patrons will argue that any value is in the site and not in the buildings and that the first thing the builder will do is knock the building. They will also argue that the State got value for money in terms of the provision of education over the years. We are moving into a policy area of different viewpoints and perspectives.


Deputy Byrne: You are going back to the 1860s, yet we live in the 1990s. We all remember the debate about Carysfort College and who owned what. Will you outline current thinking in the Department? Could you put a ballpark figure on the value of buildings financed by the Department, that is, the 3,319 national schools, which it does not own? How much taxpayers money is in bricks and mortar?


You may be familiar with two Christian Brothers schools located on Armagh Road and Parnell Road in my constituency. Half of the school building on Armagh Road has been derelict for the past five years, while the other half is being used. Every pane of glass in this building, which could be put to other uses, is broken. Perhaps you might take the opportunity to look at it. You have said that the State cannot lay a claim on that building. The school on Parnell Road is closed and private developers are now on site building apartments. Is there a system whereby some of the investments made by the taxpayer can be clawed back?


Dr. Thornhill: There is a clawback system. Depending on the age of the school - I speak from memory because my brief does not cover this - and the arrangements made at the time, the State’s lien on the property may well vary. That position is under review in the Department. The first objective of this review is to create a situation where the ownership and disposal issues of these properties can be quickly resolved. This would deal with the problem to which the Deputy referred. A building may lie derelict because of an argument between the Department and the patron. The second objective is to ensure that there is an adequate return to the State in terms of its investment in bricks and mortar.


Deputy Byrne: You mentioned that there was an increasing sense of grievance and a difficulty in collecting local contributions. Do you think taxpayers would feel some grievance? As you will know, the buildings to which I refer are the only ones with rooms and gymnasiums which the community could use. Do you not think it is time that this was seriously looked at with a view to taxpayers getting a better return for their investment? Maybe we need to look at the democratic structures. If the taxpayer is putting in 95 per cent of the capital cost, it would not take a genius to work out a democratic structure to ensure that the community had control over what happens buildings.


Communities often feel frustrated at the inability of citizens, including youth groups or women’s organisations, to access these facilities. Even if brothers or nuns at local level are committed to a project or a development in which the community would like to be involved, they do not have any power in this regard because it lies with the hierarchy in Monkstown or Rome. That is not democratic. If we are putting 95 per cent of taxpayers money into bricks and mortar, we must regain some control. Would you agree that it is time we updated our position in this regard?


Dr. Thornhill: Every system should have cognisance of current realities. The issues which you raised are being addressed in our review. On the question of community involvement in schools, there is a proposal in the White Paper on education that, as well as parental, teacher and patron representation on the boards of management, that there should be community representation. The objective is to make the management and operation of schools more sensitive to the type of community issues and sensitivities to which you referred. Negotiations between the various groups have almost concluded. The framework emerging from these negotiations, which is in line with what was set out in the White Paper, will be contained in the Education Bill which will be published later this year.


Deputy Byrne: At your leisure, you might inform the Committee of the value in terms of bricks and mortar of the primary school network which has been built by contributions from taxpayers.


Dr. Thornhill: I will try to address that. To be honest, it will be a difficult estimation problem.


Chairman: We will take questions on the Olympic Council under Vote 26.


Deputy Ellis: We have seen the problem with moneys due as part of the local contribution. What grant is available as regards the provision of equipment for disadvantaged schools? What is the amount of the local contribution sought?


Dr. Thornhill: Equipment is paid for out of the capitation grant but as you will know, disadvantaged schools get an enhanced capitation grant.


Deputy Ellis: What checks are carried out by your Department to see that the standard of equipment in disadvantaged schools is on a par with that available in schools which are not classed as disadvantaged?


Dr. Thornhill: The Department lays down standards in relation to equipment.


Deputy Ellis: Does it lay down basic standards?


Dr. Thornhill: Yes.


Deputy Ellis: It is well known that some schools have computers and other equipment, while disadvantaged schools do not.


Dr. Thornhill: Some schools are very effective at raising additional money for current purposes - for example, computer equipment.


Deputy Ellis: These are mainly schools which are not disadvantaged. The gap appears to be widening between the two types of schools in terms of equipment available.


Dr. Thornhill: Schools which are disadvantaged get an enhanced capitation grant which is a reflection of the reality that those schools will not have the capacity to raise supplementary funds like those in better off areas.


Deputy Ellis: What is the Department doing to try to bridge that gap? We know an additional capitation grant is paid. Is the Department trying to upgrade the equipment in those schools plus the various backup facilities?


Dr. Thornhill: Essentially, schools buy the equipment out of their capitation moneys. There is a range of support mechanisms for disadvantaged schools. They get a supplementary capitation grant of £25 per pupil and receive an ex-quota concessionary post. Disadvantaged schools also have the home-school liaison programme. There was also a crisis funding provision for schools in disadvantaged areas which had run up bad debts because they could not meet operating costs.


Deputy Ellis: How many schools took up all their extra entitlements?


Dr. Thornhill: The supplementary capitation grant is paid automatically.


Deputy Ellis: Is there further assistance available?


Dr. Thornhill: Yes.


Deputy Ellis: How many of those schools took it up? How many were entitled to take it up?


Dr. Thornhill: I would imagine the ex-quota concessionary teaching posts would be taken up automatically. I do not have the information here on the home/school liaison programme but I can check it for the Deputy. That programme is focused on schools in disadvantaged areas.


Deputy Ellis: How many of the schools which were classed as disadvantaged are on the waiting list for remedial teachers or to share a remedial teacher? This is a major problem in rural Ireland where smaller schools are finding that remedial teachers are not being made available to them. They are being left out on the wings entirely and their pupils are naturally suffering.


Dr. Thornhill: I am afraid demand for remedial teachers exceeds supply. The provision for remedial teachers has been enhanced quite considerably in recent years but the demand for such teachers is in excess of what the Department can fund out of the annual estimates.


Deputy Ellis: How many schools in rural Ireland have no remedial teachers but have made a request for one?


Dr. Thornhill: I do not have that information here, Deputy.


Deputy Ellis: If Dr. Thornhill will return to the Committee with that information, that would be acceptable.


Dr. Thornhill: I will. The Deputy will appreciate that a request for a remedial teacher must then be assessed by the Department. There would be schools which would have a case for the provision of a remedial teacher but where a remedial teacher cannot be supplied at present from current resources.


Deputy Ellis: How many of the last allocation of remedial teachers were appointed to rural schools? How many went to urban or town schools?


Dr. Thornhill: I can get that information for the Deputy. I do not have it here.


Deputy Ellis: How many remedial teachers are needed to fill what Dr. Thornhill sees as the present vacancies?


Dr. Thornhill: That would be related to one of the Deputy’s earlier questions. Again, I would have to go through the Department’s records on that.


Deputy Ellis: Dr. Thornhill will be able to inform the Committee through the secretariat.


Dr. Thornhill: I will. I have some aggregate data which may be of interest to the Deputy. In 1991, 947 remedial posts were allocated to schools; in 1995, 1,188 were allocated.


Deputy Ellis: How many are still left unfilled?


Dr. Thornhill: That is the issue on which I must return to the Committee?


Deputy Ellis: That is the question.


Deputy McCormack: Paragraph 33 of the Comptroller and Auditor General’s report states that the collection of the remaining supplementary contributions is being vigorously pursued. Yet at the end of 1994, contributions totalling £206,647 were due in respect of 50 projects. A further 61 projects were ongoing at that time and the amount which may be overdue when they come to fruition is unknown. We are told this arises because contract prices increase which necessitate an increased local contribution which is not paid. What does that figure of £206,647 represent?


Dr. Thornhill: Does the Deputy mean what that figure represents as a percentage of the total cost?


Deputy McCormack: No. By how much did the 50 projects exceed the contract price which led to the local contributions being unpaid?


Dr. Thornhill: I must work backwards on this, Deputy.


Deputy McCormack: I might be able to help Dr. Thornhill. If it was an average of between 5 and 15 per cent, that is 10 per cent, the amount would be £2 million over 50 projects which seems to be excessive. I am trying to establish how many of the 50 school projects exceeded substantially their contract price.


Dr. Thornhill: That figure would be regarded as an outstanding rather than a settled liability. What we are talking about here is an account which is fluid. I suspect that is why the Comptroller and Auditor General focused his enquiry on the earlier 23 cases, which were settled cases, where it is easier to identify the outstanding features.


Deputy McCormack: At the end of 1994, £206,647 in local contributions was outstanding in 50 projects. That arises from the fact that the real price exceeded the contract price in those schools and the local contribution was not sufficient. I am trying to establish by how much those 50 projects exceeded their contract price.


Dr. Thornhill: There is a difficulty in dealing with those 50 projects because they are fluid and are still in progress. Incidentally, there is a substantial credit balance in the suspense account. If we return to the 23 cases, which we would take as being representative, the average cost overrun would have been £4,000 per school.


Deputy McCormack: That does not meet the figures as I calculate them. If the figure of £206,647 is as a result of projects in which the contract price was estimated and it represents 10 per cent of the cost, the average amount per project would be about £40,000.


Dr. Thornhill: If we take that figure of £40,000, that is the average amount due from the school - we are talking about £4,000 per school ——


Deputy McCormack: We are not talking about £4,000 per school. We are talking about £40,000 per school according to my calculations.


Dr. Thornhill: I am sorry, Deputy. Yes. I was going to say that if we gross that up, it would be of the order of more than £40,000. The Deputy is right, but we are talking about projects which could cost as much as £750,000. Some of these projects could be quite big. In the context of the type of cost overrun which would arise from a price variation clause or, for example, unanticipated site works because of foundations, that is probably not an unreasonable figure. For example, to put it in perspective, the average cost of a classroom is £40,000.


Deputy McCormack: I am sceptical of builders who tender the lowest contract price but are well able to add to it for any additions. What control is there in building projects to ensure they do not overrun their contract price?


Dr. Thornhill: The controls are quite demanding in the sense that the contract documents set out the basis for the price arrangements and payment are only made on foot of architects’ certificates. There would be a provision in contract documents for a situation where due to circumstances beyond the builder’s control, such as a VAT increase or the sort of issue which would arise from site works, a price increase would be necessary. The builders, and their representative organisations, state continually that the Department of Education is among the most demanding and rigorous of public service clients in terms of negotiating limits and sticking to them.


Deputy McCormack: Can Dr. Thornhill establish by how much those 50 projects, which owed the local contribution of £206,647, overran their contract price?


Dr. Thornhill: I will get that information for the Deputy.


Deputy McCormack: I estimate it will not be less than £2 million.


Deputy B. O’Keeffe: Can Dr. Thornhill define what he means by disadvantaged area with regard to national schools? I ask this in the context of the Government’s major problem with definitions. Deputy Byrne’s Minister could not define the term advertisement. The Minister for Defence and the Marine, Deputy Seán Barrett, said there would be voluntary redundancies in the Army while telling nearly half of the troops that they were unfit for soldiering duties.


Chairman: A question, Deputy.


DeMISSING TEXT DUE TO ILLEGIBLE SOURCE FILEitu Byrne: The definition of a bad Government is when an incoming Government inherits an £800 million bill because it did not give the social welfare arrears payments to women. The present Government then ends up having to pay left right and centre for mistakes in regard to hepatitis C and £100 million for irregularities in our beef industry.


Deputy B. O’Keeffe: Millions of pounds has been allocated from the EU to our disadvantaged areas. In the Department of Education, this rule applies to urban areas in particular. Pupil numbers in rural schools are being decimated. Therefore, does the Department see the natural extension of disadvantage in all other categories, such as agriculture and social funding? Should education not come under that heading and surely national schools should be included in disadvantaged school areas?


Dr. Thornhill: A points system is in operation for determining whether schools are disadvantaged or not and it works on the basis of a range of socio-economic criteria, which were agreed with the schools management and the INTO. The factors that come into it are the level of unemployment, medical card holding and local authority housing occupancy among the parents of the pupils. The inspectors would also carry out an on-site assessment of the school in establishing an overall profile for it. There has been a further development on that. Those criteria were agreed in 1989. In 1994, the Minister commissioned the Combat Poverty Agency to undertake an initial assessment of the adequacy of the current approaches. Having looked at it, the agency suggested that a more detailed study was required, which would embrace not only the criteria for selection but also the more fundamental question of education disadvantage, which we are trying to address, and the nature of the responses which will be put in place. A detailed specification for this study is currently being finalised. The existing set of criteria will be reviewed by the Combat Poverty Agency with a view to coming up with more refined ones.


Deputy B. O’Keeffe: Is there is an anomaly between urban areas and rural decline? While the criteria refers to population and local authority housing, there is little emphasis, good bad or indifferent, about the denuding of our rural population. There are no rural schools involved; two teacher schools are becoming one teacher schools. There is no consistency in Government policy. While an area may be classed as disadvantaged for EU funding, when it comes to education no cognisance is taken, good, bad or indifferent, about the drawbacks of living in rural Ireland.


Deputy McCormack: Was the Deputy briefed by his spokesman?


Deputy B. O’Keeffe: Naturally. We co-operate well in our constituency. I have a rural background.


Deputy McCormack: The Fianna Fáil spokesman for the Education portfolio lives in the Deputy’s constituency.


Deputy B. O’Keeffe: Naturally. We meet every night to discuss these matters.


Dr. Thornhill: The Deputy made some points about policy character about which I could not comment. A review of the application of the existing criteria is taking place. The Deputy highlighted the rural schools problem. This has been highlighted elsewhere as well. It was mentioned, for example, in the National Education Convention and it will be addressed in the forthcoming Combat Poverty Agency study.


Deputy B. O’Keeffe: While we all welcome the proliferation of gaelscoileanna, the Accounting Officer is aware of the tensions between them and normal national schools. There are two difficulties pertaining to it. In many cases, it is seen that the emergence of gaelscoileanna is denuding existing schools of their pupil populations. What, in the Department’s point of view, will the consequences of this be in connection with teacher-pupil ratios, costs etc?


If there are gaelscoileanna, there must also be all Irish secondary schools. Can Dr. Thornhill spell out the problems ordinary national schools will face with the emergence of gaelscoileanna?


Dr. Thornhill: There are problems here and they are felt most acutely in local areas. I can discuss these issues with the Deputy but he must appreciate that I am moving into a sensitive policy area. An existing school and its teachers and management may not welcome the establishment of a gaelscoil. If its enrolment falls, it will affect its teacher entitlement. There is also the additional factor that this will be felt more acutely because overall primary enrolments are dropping.


Against that, parents have the right under the Constitution to send their children to the school of their choice. International experience suggests that biggest is not always best in terms of schooling and that aggregation of schools is not always the best approach.


The approach set out to deal with that in the White Paper - the issue is of balancing pluralism in terms of education provision with the State’s concerns about cost effectiveness of schools and value for money - is that new schools would, once the education boards are set up, only be established when the board had reached a decision that such a school was viable and appropriate. A new school building would then be provided by the education board and leased to the trustees or patrons of the new school. Ownership of the building would remain with the State through the board.


However, this still does not resolve the tension that will exist when a gaelscoil is established in an area. It depends what one’s perspective is on this debate. The gaelscoileanna perceive that the establishment of the education boards may adversely affect their future and they have demanded a separate education board.


Deputy B. O’Keeffe: In the period 1987–89, it was deemed that the construction phase for national schools was extremely lengthy and expensive. Under the model we are examining, developers would send their architectural design and build which would cut down some of the major costs. There are six different stages in the present system. Although we seem to be taking that route, we appear to have returned to the old system. Would the other system not have been more cost effective and were any surveys of this carried out in this area?


Dr. Thornhill: Mr. Murray and I discussed that issue recently. The design and build system seems to be a very effective mechanism - the Comptroller has analysed this - for big projects. Construction of schools, even if we are taking about a project of £1 million, would, in terms of construction activity, be relatively modest. The problem with design and build is that the up front costs for people making tenders are high. Unless they have a good prospect of getting the contract, we may not get many responses to invitations for tenders. That approach is one which commends itself in principle. Working out all the practical details is an issue which remains to be pursued.


There is one other matter. Traditionally, the Department handled all primary school projects in-house. That is no longer that case. Quite a lot of them are now what we call manager’s cases.


Deputy Doherty: Is the definition of “disadvantaged area” related purely to the economic conditions prevailing in that area?


Dr. Thornhill: The economic factor would be relevant. Socio-economic would be a better description as it includes factors such as the level of unemployment, medical card holding and local authority housing occupancy. Each of those would reflect sociological as well as economic matters.


Deputy Doherty: Is there any other definition to describe disadvantaged children and their socio-economic background? Children coming from homes where medical card holders exist, coming from depopulated areas or areas with high unemployment are not necessarily disadvantaged children. I want to establish if there is a distinction being made there. We are talking about education and expenditure on education and we must ensure we target the disadvantaged children. Do you have a definition for disadvantaged children? Are you in a position to identify disadvantaged children in disadvantaged areas throughout the country?


Dr. Thornhill: There is a points system based on the criteria I mentioned. The Combat Poverty Agency has been asked to revisit this area and this reflects a concern that the definitions should be re-examined and the fact that this is a complex area. For example, economic factors may not always determine disadvantage.


Deputy Doherty: The Combat Poverty Agency is not an agency of the Department of Education.


Dr. Thornhill: It is an agency of the Department of Social Welfare.


Deputy Doherty: Yes, but it is not an agency of your Department. Are they employed by you to carry out any examination of the very matter I am raising?


Dr. Thornhill: That is correct.


Deputy Doherty: Are they doing that study at the moment?


Dr. Thornhill: The specifications for that study are being drawn up.


Deputy Doherty: I take it that included in those specifications is an attempt to establish the numbers of disadvantaged children and children with problems resulting from their social, environmental or economic situation or personality disorders. Is that at the core of what you wish to ascertain?


Dr. Thornhill: There is a two stage process. The Combat Poverty Agency’s work will concentrate initially on the first stage which is the appropriate criteria to use. The second issue, arising from the application of those criteria, would be the numbers involved.


Deputy Doherty: School transport has associated with it criteria which were formulated quite some time ago. The decline in rural population has seriously affected the implementation of the school transport policy as initially inaugurated and consequently one finds disadvantaged children in that context in many rural areas. I do not want to go into policy issues but there is a financial advantage to the Department where depopulation has resulted in persons failing to qualify for transport and the service is diminished or cut off. Unless children pay a concession rate fare, they are not carried.


Dr. Thornhill: If somebody is living in an area where, because of depopulation and distance factors, it would not be cost effective in terms of the overall running of the scheme to provide transport, there is provision whereby a grant can be made to the parents of the family concerned. We are looking at a substantially changing landscape in terms of policy. There is the factor of declining numbers and depopulation at primary level and increasing enrolments at secondary level.


A review group has been set up under the chairmanship of Professor Bristow of Trinity. Its terms of reference are to examine the effects of declining enrolments in the operation of the school transport system, to make recommendations in regard to any anomalies that have come to light, including the possibility and advisability of revising catchment areas, if necessary, and to review the arrangements for pupils in special schools, multi-denominational schools and all-Irish schools.


Deputy Doherty: So, until that review is completed, the answers are not available.


Dr. Thornhill: That is right.


Deputy Doherty: Can you tell me the number of child psychologists available to primary schools?


Dr. Thornhill: An additional ten appointments to the psychological service were made recently. Do you want me to give you the precise total figure?


Deputy Doherty: Yes, and where they are located and what type of service and duties they are fulfilling. We have already discussed the numbers of children in need of such a service. I also want to know the number of trained counsellors available to primary schools and children, where they are located, how they interact with the remedial, psychological and home/school liaison arrangements and the amount of money expended on this. Are allowances made for the fact that some of these people can recognise children who, at seven and eight years of age, show tendencies towards being difficult at 13 and 14 and possibly going on to a life of crime? On occasion these children come from good homes and indeed from homes which are poor economically but nevertheless are still very good homes.


Dr. Thornhill: At primary level the psychologists work mainly with class teachers, remedial teachers and the teachers with particular responsibility for children with special education needs. The psychologists carry out a range of duties including assessment and counselling of individual pupils, preparing reports and recommendations relating to individual assessment and counselling, assisting teachers in developing appropriate programmes for the pupils assessed, monitoring the implementation of special provisions arising from the assessment of individual pupils and the quality of special measures being implemented in schools, assisting schools and teachers in respect of a range of disabilities and problems such as bullying, disruptive behaviour and emotional difficulties adjusting to school and assisting parents individually and in groups to promote the educational development of their children. The psychologists do quite a bit of work with individual pupils but the emphasis of their activity would very much be to try to work with the school and school community rather than providing a service to an individual child.


Deputy Doherty: Did you tell me how many are providing the service?


Chairman: I have to interrupt you there, Deputy.


Deputy Doherty: I am waiting for the answer to this question. How many psychologists are employed?


Dr. Thornhill: I am open to correction but I think we are talking about a total of about 60 psychologists.


Deputy Doherty: You might be able to give us details at a later stage by letter to the secretary of where they are all based and what numbers you are hoping to employ - the projected target.


When tenders are being sought for building schools, is there a panel from which selections are made in the first instance, which allow particular contractors to apply? Some contractors do not seem to be able to get on the list from which they can tender. What criteria have you laid down in relation to who is selected in the first instance to tender for a particular school project?


Dr. Thornhill: There is no short list, pool or pre-selection process. There is an open advertisement first of all and contractors are invited to tender. There is a pre-qualification procedure then and tenders are invited from those who pass that. Criteria applied in the pre-qualification stage include the capacity to undertake the work - in other words what has the track record of the builder been like.


Deputy Doherty: I do not wish to interrupt you but I take it that what you are telling me applies to all the other levels of educational building programmes that have to be pursued as well. No distinction is made. The suitability of the contractor is what matters.


Dr. Thornhill: It is open, competitive tendering at second -level.


Deputy Doherty: I know of a situation where a building contractor built a school which was a considerable investment by the Department. When he proceeded to submit a tender in respect of another similar type of school, he discovered he could not because he was not on this in-house list. This is a fact but you are telling me that list does not exist.


Dr. Thornhill: There is a pre-qualification procedure that would apply in each instance.


Deputy Doherty: Is there a group of building contractors whose names are available to you within the Department of Education, and from whom tenders are exclusively accepted?


Dr. Thornhill: No.


Deputy Doherty: Do you recall that you courteously assisted me when I queried you about a particular building contractor who had carried out a major project on one school, and was told he was not on the list in the Department and therefore could not tender in respect of a second school in an adjoining county?


Dr. Thornhill: I remember you approached me about this case quite some ago but I am afraid that not all the details are in my mind now. From what I recall, I think that contractor was invited to submit a tender.


Deputy Doherty: That is correct. I take it that after your intervention he was allowed to tender. He did not get the project but that is irrelevant. The fact is that in the first instance he did not even have an opportunity to tender.


Dr. Thornhill: I am not au fait with the details but I would be happy to investigate instances of concern to you.


Deputy Doherty: I want to ensure that if it is supposed to be an open public opportunity for individual contractors, it should absolutely be so because it was not in this case. I have come across another case since then - not in your Deportment but another one - where the same situation applied.


Dr. Thornhill: I can assure you that there is no inside list.


Deputy B. O’Keeffe: As regards the IQ test, are you aware that there is a group in the 70 to 89 category which in the old days would have been termed backward but are now termed less able. Below that, people are exempted from Irish. There is, however, a view in national schools and among the Department’s own psychologists that many of those in the 70 to 89 category - who represent about 10 per cent of pupils - have great difficulty with English not to mention Irish. There is a view that the exemption for Irish should be extended to cover a fair percentage of those students, yet it is not happening within national schools at present. Has anything been done about that? Have reports been received about that, because there is great unease about it?


Dr. Thornhill: I am aware of this unease which, going back to your earlier question about gaelscoileanna, comes from two different directions. As you know, two years ago a revised circular was issued concerning exemption from Irish criteria being applied in second-level schools. That introduced a more flexible administration system as well as broadening the criteria concerned. At primary level a circular will be issued shortly to bring that sector into line with second-level - in other words making sure there is a greater consistency between both systems.


Deputy B. O’Keeffe: When is that likely to happen?


Dr. Thornhill: We are talking about sometime in the very near future.


Deputy B. O’Keeffe: That is good.


Deputy Ellis: I wish to return to the point that Deputy Doherty raised about approved lists for Department of Education tenders. What is the procedure for a contractor to get himself on the list? I have had cases similar to Deputy Doherty’s involving part of a plumbing contract where somebody’s tender was refused by the Department without reason. He was told he was not on the approved list. How do you get on the approved list to be accepted as a reputable tenderer?


Dr. Thornhill: As I said in response to Deputy Doherty, the procedure is to reply to the advertisements. If you wish to ask that particular contractor to contact me, I can——


Deputy Ellis: For the benefit of the general public and the general contractor services that are available, I want to know how they get on the list. What is the mechanism, and is there a list of criteria that they must fulfil? Certain contractors on the approved list get this work and are subcontracting it to people who are not allowed to tender. The latter group are doing the work for the tenderers and are taking 15 to 20 per cent off the top which the Department could save.


Dr. Thornhill: There is no single list. Deputy Doherty has already gone through that issue with me. As I explained, at primary-level there is an open advertisement procedure. Tenders are then invited from people who meet the pre-qualification criteria which includes things such as their capacity to undertake the work, the financial stability of the contractor involved, previous experience, and whether they can present a tax clearance certificate.


Deputy Ellis: I take it the last item should be first on the list, and the next one should be their competency to do the work. Who decides their competency?


Dr. Thornhill: That assessment would be carried out by professional staff in the building unit.


Deputy Ellis: Yes, but who can say? If a new company makes an application to do it and if they are able to provide the necessary financial back-up by means of a bond or otherwise, should they not be entitled to tender? Would that not be preferable to the selective tendering that has been occurring because there is an approved list? If you are not on that list you are not accepted. The knock on effect of that is that people who are on the approved list are selecting what they will do and in many cases they are subcontracting work to people who are not allowed to tender. They are taking anything from 20 to 30 per cent off the top without touching the project.


Chairman: We note paragraph 33 but urge your Department to collect all outstanding moneys.


Deputy Ellis: I would like Dr. Thornhill to answer the last question I put to him, and say what he intends to do about it.


Chairman: Right, that will be the final question.


Dr. Thornhill: I have difficulty in giving you fresh information because I have already told the Committee that there is no inside list.


Deputy Ellis: Will your Department set up a list of criteria that will have to be fulfilled in future by people who wish to apply for contracts? Will you issue that to anybody who wants it? Will the Department set up a criteria list which will have to be fulfilled by people who wish to apply for contracts in future and will it be issued to anyone who wants it?


Dr. Thornhill: When contractors apply in response to the advertisement they would supply information under the headings I listed. That information would be assessed by our professional staff in the Department and by OPW staff.


Deputy Ellis: Is there an independent arbitrator if a dispute arises between a contractor who says he is confident and capable of doing work and a Department official who decides he is not? Is that the end of it or is there an ombudsman system?


Dr. Thornhill: If someone felt unfairly treated in this instance he would have recourse to the Office of the Ombudsman.


Chairman: We note Paragraph 33 but urge the Department to collect all outstanding moneys.


Paragraph 34 of the Report of the Comptroller and Auditor General reads:


VOTE 29 - THIRD LEVEL AND FURTHER EDUCATION

Subhead G. - Dublin Institute for Advanced Studies

(Grant-in-Aid)

(National Lottery Funded)

Issue of Grant in Excess of Requirements

34.The Dublin Institute for Advanced Studies is funded by a grant-in-aid provided under this subhead.


The Department of Finance instructions to Accounting Officers on the payment of grants-in-aid provide inter alia that payments to grantees should be issued in instalments as needed unless otherwise agreed with the Minister for Finance. There should be no automatic issue of the full provision in the subhead without ascertaining if the funds are needed to meet the grantee’s actual requirements.


The following information was noted in the course of audit of the Institute’s accounts:


Yearr

Operating Surplus

Cash @ Bank at 31 December

Cash @ Bank as % of Annual Income

1993

231,933

622,428

21

1994

93,116

719,674

22

These figures seemed to indicate that the Department had not followed the procedures set out by the Department of Finance in relation to the payment of grant-in-aid and that the amounts paid to the Institute in 1993 and 1994 exceeded requirements.


In response to my inquiries the Accounting Officer informed me that the balance on hands included moneys paid to the Institute in respect of research work undertaken on a contract basis and these moneys could not be used to offset State funding. For the years 1992, 1993 and 1994 the income from these contracts was over £650,000. He stated that the grant-in-aid had been paid quarterly in advance on foot of requests for funding received from the Institute and this procedure was not specifically approved by the Department of Finance. The Department of Finance instructions were not followed in this instance due to administrative shortcomings.


He explained that with effect from January 1995 the Department had amended the payment procedure to comply with the Department of Finance instructions. The Institute is now required to submit a profile of its proposed expenditure for each quarter together with a statement of its cash balance at the beginning of each quarter. The payment of the grant-in-aid is then made on the basis of the information supplied. New procedural checks are also being introduced.


The Accounting Officer also stated that when the Institute sought its first quarterly grant for 1995 the Department only issued the difference between the expenditure profile submitted for that period and the balance of funds on hand thereby regularising the matter of surplus funds.


Mr. Purcell: Rules laid down by the Department of Finance provide that bodies in receipt of grants-in-aid from the State should only receive instalments of grants as needed. The relevant Department is required to obtain cash flow statements before moneys are issued to such bodies to ensure substantial amounts of surplus funds are not being built up in bank accounts. Paragraph 34 refers to a case where the rules were not followed by the Department, in relation to grants to the Dublin Institute for Advanced Studies. As a result, the institute had substantial bank balances at the end of 1993 and 1994 in excess of requirements.


The Accounting Officer informed me the rules were not followed in this instance due to administrative shortcomings, which led to the instalments being automatically issued quarterly on foot of requests from the institute without any checking of its cash position. He pointed out that the extent of the over-issues was not quite as bad as it looked because the bank balance included moneys received by the institute on foot of research contracts. The position has since been regularised and revised procedures have been put in place.


Chairman: Can you elaborate on why this situation occurred?


Dr. Thornhill: As the Comptroller and Auditor General has reported, it was an oversight which we regret. The position has been rectified. There has been comprehensive circulation of the Department of Finance regulations within the Department and everyone’s attention has been drawn to it. The particular position in regard to the Dublin Institute for Advanced Studies has also been corrected.


Chairman: Why were the Department of Finance guidelines not adhered to?


Dr. Thornhill: We looked into that question. Those guidelines were issued in 1986 and I have not been able to determine what happened.


Deputy Byrne: Dr. Thornhill told the Comptroller and Auditor General that the Department of Finance instructions had not been followed due to administrative shortcomings. Could he outline what he is referring to? Has he now dealt with those shortcomings?


Dr. Thornhill: What happened in 1986 was that a circular from the Department of Finance was not brought to the attention of the line sections in the Department — that is all we have been able to determine. As the Deputy knows, the Department has gone through quite extensive staff changes in the interim, in particular because of the decentralisation programme. To rectify those shortcomings, a formal procedure was introduced in the Department — the circular was re-circulated to all principal officers in May 1995 and we also produced an internal circular on the control of payments which included a specific reference to the 1986 Department of Finance circular. Our payment authorisation forms have been amended to make specific reference to compliance with the procedures and the control of payments circular. In other words, officers who authorise payments will have to confirm that the requirements of the Department of Finance circular were adhered to.


Deputy B. O’Keeffe: As to the self-financing element, the review taking place will take account of the book balance at the end of each period. Does this safety provision apply to other institutions, like RTCs and universities? A sizable amount of money is being made by each of these in research and development on behalf of Government Departments, the EU and private business — I am told this could be worth up to £80 million per year to the third-level sector. Are those institutions allowed to hold onto that money and does it impact on the grants made available to them?


Dr. Thornhill: We had a similar discussion at this Committee in the second half of last year. The DIAS case is more at the end of the spectrum than would be the case for RTCs and universities. From what I recall offhand, self-generating income for RTCs would be of the order of 13 per cent; in the case of DIAS it would be a higher proportion. We have instituted a new system of payments to the RTCs, which means the Exchequer advances to them are much more tightly attuned to their financing needs. That is being done across the spectrum.


Deputy Broughan: What exactly does the Dublin Institute for Advanced Studies do nowadays? I know it was set up to engage in pure research in astrophysics, the Irish language and other areas.


Dr. Thornhill: It operates through three schools — a school of cosmic physics, a school of Celtic studies and a school of theoretical physics.


Deputy Broughan: How much does it cost to run and how much does it earn from pure research?


Dr. Thornhill: The annual provision for the institute is about £2.8 million. It is set up under its own legislation dating from the 1940s.


Deputy Broughan: Will the requirements made here by the Comptroller and Auditor General impede its approach to pure research? Is there a necessity for this type of institution now?


Dr. Thornhill: On whether this will impede its approach to research, we would say no. Although I was not involved in detailed discussion with the institute, I am sure it would argue that the situation which prevailed prior to this was more favourable to it. We would not see the tighter budgetary control as impeding its capacity to do the work.


Chairman: We will note the paragraph and trust that the Department of Finance procedure will be strictly adhered to in future.


REPORT OF THE COMPTROLLER AND AUDITOR GENERAL ON THE AUDIT OF THE 1994 ACCOUNTS OF NON-COMMERCIAL STATE SPONSORED BODIES, HEALTH BOARDS AND VECS.

Part III - Vocational Education Committees.

Dr. Thornhill further examined.

Chairman: This will be brief, it is for information only.


Mr. Purcell: Part III of the special report refers to the VEC sector. It arises from the audit of that sector for 1994 and the comments are general in nature. They should not be confused with my audit reports on individual VECs which will come before the Committee in due course.


Paragraph 3.1 is for information and sets out in summary form the receipts and payments for the VECs for 1994. Paragraph 3.2 highlights the way in which some VECs have circumvented the archaic financial rules which have applied to this sector since 1931, by using petty cash accounts to discharge their liabilities. Other VECs have informal arrangements with their banks and in the short term it would be prudent at least to formalise the practices employed. In the longer term the system needs to be modernised and the Department is currently doing some work in this regard. Paragraph 3.3 refers to other aspects of the inadequacy of the financial regime applied to VECs: the first is the outdated form of accounts, which does not allow for accounting for the fixed assets of the committees; and the second is the limbo which dormant capital balances fall into in the absence of positive action by the Department. My office is having ongoing discussions with the Department on these matters but the level of uncertainty arising from the intended rationalisation of the VECs and the possible role for the proposed education boards makes it difficult to determine a firm course of action to address the current shortcomings.


Chairman: A sum of £26.3 million was paid through a VEC’s petty cash account during 1994. Would you be concerned with such an amount being paid by way of petty cash?


Dr. Thornhill: The term “petty cash” is probably misleading because it gives the impression the money was spent without any form of control. I agree with the Comptroller and Auditor General. We are talking about anachronistic regulations from 1931. In a modern commercial financial operation one would not expect that all payments should be scrutinised by the board of directors. The current regulations in strict form require that the members of the VEC scrutinise every payment above the petty cash limit which is £5, I think. It is clearly an anachronism.


A programme is underway to deal with this and the other accounting issues that arise in relation to the VECs. This programme will have a number of features. We intend to revise the regulations in consultation with the Comptroller and Auditor General. The objective will to be make sure the regulations are more suited to modern circumstances, allow for greater transparency and improve the capacity for financial control.


Chairman: What level of control does the Department have over the VECs?


Dr. Thornhill: At one level quite a substantial level of control in that the VECs have to negotiate their annual grant with it. That has to be justified by the activities they propose to carry out. At another level, the VECs are not agencies of the Department but are independent. We do not have an ongoing financial inspection of the VECs when the work is underway. We have learned the value of the exercises the Comptroller and Auditor General is carrying out in relation to the VECs. A lot of issues which developed over time in relation to financial systems and mechanisms are now being brought rapidly to a head. They are not easy matters to deal with; we have had to bring in additional professional assistance to the Department but we intend to deal with them.


Deputy Broughan: Is it a weakness of the VECs that so much of their funding comes from Central Funds? Little of it is raised locally. It should be an arm of local government but it has little to do with local government apart from the fact that the boards of the VECs are selected through the mechanisms of local government.


Dr. Thornhill: Yes. That is a good reading of the situation.


Deputy Broughan: At what stage are the plans in relation to the regional education boards?


Dr. Thornhill: The Government has approved draft legislation which is being prepared in the Department. It is a detailed fleshing out of the model set out in last year’s White Paper. The legislation is now with the parliamentary draftsman. I cannot anticipate what the programme there is, but I anticipate publication of the draft legislation by the summer.


Deputy Broughan: You mentioned modernising aspects of financial controls and reporting. Will the legislation ensure that such shortcomings in relation to petty cash and the capital account will no longer exist?


Dr. Thornhill: The objective would be to install a system which relates to modern circumstances and takes account also of the reality that what were once largely self-funding local authorities are now effectively agencies which receive most of their finance from the Exchequer.


There are two elements to this. The new education boards, when established, will have a supervisory role over the VECs, and there is an objective in the White Paper to introduce reforming legislation for the VECs themselves. The first task will be to exploit, to the utmost, the capacity within the existing legislation to bring the financial systems and the statutory framework for them up to date.


Deputy Broughan: With the Comptroller and Auditor General’s additional powers, this Committee will examine individual VECs. In terms of financial control do you have a means of categorising the VECs in terms of being good or less good?


Dr. Thornhill: We would have our experience of day to day contact with the VECs, and particularly from the new information supplied to us by the Comptroller and Auditor General, we would have a view of the different capacities of VECs as far as their administrative systems are concerned. We are dealing with the VECs at a certain arm’s length remove. The establishment of the education boards and the more detailed financial and educational supervision which they will exercise over the VECs will be an advance on the present situation. At the moment the Department is highly centralised and carries out a lot of activity, including the supervision of 38 VECs.


Deputy Broughan: Are there any VECs you might particularly monitor because of past indications that they did not measure up administratively or financially?


Dr. Thornhill: It is no secret that one County Westmeath VEC has been the subject of a lot of time and activity by the Department and we are pleased with the work the new acting chief executive officer has carried out there in putting in new systems.


Deputy Broughan: With regard to EU funds and schemes such as Youthreach and VTOS, how much EU funding do VECs receive and what controls are exercised in that regard?


Dr. Thornhill: I do not have a precise figure to hand. The main contribution from the EU to the VECs would arise under programmes such as the VTOS programme, which is substantially grant aided by the EU, and the Youthreach and PLC programmes. In those instances there is an additional layer of evaluation which has been put in place by the EU itself. There is an evaluation unit, a management committee and in addition to the auditing work carried out by the Comptroller and Auditor General, the European Court of Auditors and the EU Commission require reports and carry out inspections.


Deputy Broughan: In relation to those schemes have you a cost benefit analysis of how the funding was employed? In the case of Youthreach it would have been used for children who dropped out of school to help them achieve a basic education.


Dr. Thornhill: There was a report produced recently on Youthreach by the evaluation unit. It pointed out a number of weaknesses, for example, the need to cater for those who leave school with junior cycle qualifications and the need for more systematic progression opportunities. The certification structure and the qualifications framework which is being put in place under the framework of the new organisation, Teastas, directly addresses that.


The Teastas objective is to put in place a progressive certification system with all the necessary links and ladders from a very basic foundation certificate level right up to entry to university degree level. The Deputy will also be aware that there is a very ambitious programme on the way in second-level, that is the Leaving Certificate Applied Programme, which is being developed as a non-academic but very credible second stream within the Leaving Certificate framework.


Deputy Byrne: I may need the assistance of the Comptroller and Auditor General with my figures in this series of questions. I refer to paragraph 3.1 under the general heading. I am not an accountant and find the paragraph confusing. Are any of these accounts qualified?


Mr. Purcell: In regard to the audited reports on the VECs, I have certified 30 out of the 38 VECs. Of those, one has been the subject of what we call a section 7(4) report. This means there was something that I felt would need be brought to attention. The remaining eight, which are uncertified by me at the moment, are all likely to require section 7(4) reports. I do not want to use the phrase “bad boys” but they would be matters which to varying degrees I feel should be brought to attention and on which I should report under section 7(4) of the 1993 legislation.


Deputy Byrne: That was an important question to ask, with all due respect. The Secretary has mentioned Westmeath. I am looking at figures for the Westmeath VEC here; perhaps you can assist me. I understand the VEC in Westmeath claimed £400,000 from the Department of Education for the rental of property over a 20 year period for which no rental charges were affixed. I am looking at figures here under schedule 1. Accumulated current balance at 31 December 1994 is £470,000. The audited deficit rose to a peak of £698,000 at the end of 1993 and the unaudited deficit at the end of 1994 is given at £578,161. I do not see any relationship between the two sets of figures. Would the Comptroller and Auditor General explain this to me? My source for that is a Parliamentary Question asked of the Minister for Education. Could you explain why there is such a difference in figures? Could you confirm that you had to bail out Westmeath VEC to the tune of £1.3 million?


Dr. Thornhill: The Comptroller and Auditor General expressed concern about using the term “bad boys” but this was a horror story from our point of view. Westmeath VEC had to be bailed out. I explained the circumstances at the Committee last year. We are not dealing here with a commercial entity, the VEC is almost totally dependent on its Exchequer subvention. It had spent money which it was not authorised to spend in relation to educational activities. Those debts remained and would have been a burden on the Exchequer through bank borrowings or whatever, so from a financial management point of view the correct course was to deal with the deficit.


Dealing with the deficit was only part of an overall strategy in dealing with the committee. A new acting chief executive has been appointed. He was chosen because of his expertise and reputation within the system. He has done tremendous work in dealing with very difficult circumstances and putting in new systems. He has made progress in sweating down some of the deficits which have arisen, but the sheer scale of the deficit was too big to be dealt with by ongoing economies alone. The Comptroller and Auditor General said he has made a number of queries in relation to some of the VEC accounts. Some of those are related to Westmeath and we are dealing with the consequential action of those. The story is not finished yet.


Deputy Byrne: Could we have it confirmed that the section 7(4) report is Westmeath VEC?


Mr. Purcell: There will be a section 7 (4) report on Westmeath VEC. The confusion in the figures arises from a point that was made earlier by both the Accounting Officer and I about the need to bring the accounts of VECs up to an acceptable modern standard. The £470,000 deficit is really the reconciled bank balance, that is, the difference between receipts and payments. We are not really talking about income and expenditure there. It would not take into account the extra liabilities which have not manifested themselves in payments or receipts.


Deputy Byrne: Would it be fair to ask you if the Minister’s figure is more likely to be correct?


Mr. Purcell: I would not like to comment on that but it is likely. Systems are being put in place in the VEC and there has been a fair amount of attention, Departmental and otherwise, to the financial activities of that VEC. I have no reason to doubt that the figure is of the scale mentioned.


Deputy Byrne: I know you do not want to replay all the VECs, but given the figures before us, it strikes me that the figure of £400,000 is a new set of figures for the rental payment for buildings over 20 years for which no liability had been accrued. Is that a new piece of information?


Dr. Thornhill: I do not think so, Deputy, although I am not up to speed on this. My colleagues will correct me if I am wrong, but I recall that at the time the VEC presented its statement of its financial position - this is going back some time - it indicated among its assets a sum of that order of magnitude owed to it by the Department. The inspector found out that there was no basis for that figure. You will remember that we went through the whole saga of the erroneous information etc. being supplied to the Department. That was one of the issues highlighted by the inspector in his report at the time.


Deputy Byrne: Can you explain to the Committee at this time if the VEC was involved in unapproved plans, which we know have been proven, and if £1.3 million additional funding was made available to assist them with their deficit? What is the present deficit?


Dr. Thornhill: The £1.3 million figure the Deputy talks about was paid over a number of years but the end 1994 position, this is an unaudited figure, is £578,000 approximately. An estimate of the current deficit position of the VEC would be £200,000. That is very approximate.


Deputy Byrne: When Westmeath VEC entered into and offered a computer course in conjunction with the National Rehabilitation Board, which ultimately led to a charge of Approximately £100,000, presumably the National Rehabilitation Board was an innocent victim of a course that could not be funded. Does any liability fall on the National Rehabilitation Board as a result?


Dr. Thornhill: We have no reason to suggest that there would be any liability. It is fair to say that we should look at the work which has been done by the Department in co-operation and by the acting chief executive officer. The first priority of the new acting chief executive officer was to put new systems in place; in other words, to ensure that the future situation was managed effectively and properly. He has made considerable and substantial progress in doing that and he has worked very closely with the Department on it.


There is now the task of sweating it down and dealing with the issues from the past, many of which were highlighted or signalled by the inspector. We impressed on the acting chief executive officer the need to do that and he is doing it. The audit activities carried out by the Comptroller and Auditor General are also an important part. As a personal judgment, it will be some time before some of these issues are laid to rest.


Deputy Byrne: Can Dr. Thornhill assure the Committee regarding what happened in Westmeath, which was scandalous and frightening in that it involved so much money and unauthorised spending, that the Department has got its act together in controlling VECs and that nothing on the scale of the Westmeath case could recur? Have the bits and pieces regarding the scandal in France been sewn up? Has it been resolved?


Dr. Thornhill: It has been largely resolved. An agreement is close to finalisation with an agency, which is part of a local education authority in Northern Ireland, to take over that operation.


Deputy Byrne: The scandal in Westmeath is something that should never recur. We are still gobsmacked as to how it happened. Does Dr. Thornhill think the politics of the era played a role in terms of the VEC thinking it could go ahead and enter into unauthorised spending? Was there a sympathetic Minister for Education at the time? Was it a politically lopsided committee? It seems scandalous that this could be allowed to go on undetected for so long?


Dr. Thornhill: I described what happened in very strong terms. It was something we would never want to happen again. A number of things have been put in place to stop it happening. We have put those VECs which we feel are not sufficiently conscious of their financial responsibilities on severe notice. The effect of that notice means that if a VEC strays from the financial fold, the Minister could then consider invoking powers which would allow her to abolish it. With reference to Deputy Broughan’s point, that is a situation which is quite constrained. They are not agencies of the Government and they can only be abolished under one or two circumstances. One is if there is an inquiry or, second, if they wilfully - that word is probably very demanding in legal terms - disobey an instruction from the Minister. In cases where we are concerned, the Department ensures that that instruction is issued in the name of the Minister.


Deputy Byrne: I suppose nobody ended up in jail.


Chairman: The Committee notes the paragraphs and urges that the accounting procedures of the VECs be updated.


Deputy Broughan: On a point of information, who audited these accounts before the Committee got that power? Was the local government auditing service responsible for this?


Mr. Purcell: The local government audit service was responsible for the audit and reported to the Minister for Education. However, the reports did not go into the public domain until the passage of the Comptroller and Auditor General (Amendment) Act, 1993.


Deputy Broughan: Deputy Byrne was told that eight of these would be qualified in some way. Does it indicate that the Committee should be concerned about the general performance of the local government auditing service as local authorities will still be audited by it? The Committee still does not have the power to audit local authorities.


Mr. Purcell: I have a liaison function with the inspector of audits. That has been formalised and strengthened and if the Committee has concerns about particular aspects of the use of central Government moneys by local authorities, I will convey them to the local government audit service and follow up those particular points with it.


Deputy Broughan: Does the Comptroller and Auditor General find it in any way disturbing that these accounts passed through the local government audit service for a number of years and that the concerns which are evident in a number of VECs did not come into the public domain?


Mr. Purcell: To be fair to the local government audit service, they did draw some of these matters to attention. They did not draw others to attention but an audit cannot uncover everything. It was within the confines of the Departments, whether it was the Department of the Environment, the Department of Health in the case of the health boards or the Department of Education in the case of the VECs. In order to fill that void in the public accountability process for these moneys, it has been my office’s policy over the years to highlight matters such as this in the annual report even before my office had full statutory authority to audit. In that way these matters came before the Committee. Regarding Westmeath VEC, the fact that the local government auditor there had qualified the accounts over a number of years was highlighted in the 1992 or 1993 report. These matters were debated at that stage and examined by the Committee.


Deputy Broughan: I know it is a matter of policy but does the Comptroller and Auditor General think it is a problem that significant sums of public money are spent through local government and are audited by an authority or body which does not have the constitutional independence of the Comptroller and Auditor General’s office and the Committee? Is it possible that problems in the local government spending area may have been glossed over or ignored in the past because a function independent of Government Departments was not involved?


Mr. Purcell: It is a very good point but the audit was carried out by the local government audit service in accordance with auditing standards which are quite precise and comprehensive. The problem was not so much in the audit as in the follow up to it. The availability of a public forum here in which matters arising from audits can be debated and examined draws and focuses attention on them. In that way things are corrected. It was more a lack in the public accountability process rather than any failure of the local government audit per se that perhaps contributed to the type of situation the Deputy describes.


Deputy Byrne: I think the Committee of Public Accounts is a premier committee but does the Comptroller and Auditor General think it is adequately investigating all the Votes? Sometimes I think the Committee should be given a higher standing in the parliamentary structure and that perhaps it should go into greater detail on many more issues. Perhaps one morning a week does not give us the power to attend to all the issues which should be teased out and we are only scraping the surface.


Mr. Purcell: I can only offer an opinion in that regard. Obviously the new Act has meant a large increase in the work of my office and there has been a commensurate increase in the work of the Committee. How the Committee wishes to deal with that is very much up to itself. From attending meetings I am aware of the difficulties the Committee has in trying to address the increased number of reports which are coming before it. This number will increase further. I spoke in terms of eight or nine VECs and there will be something on them for the Committee to consider specifically.


There will also be specific matters to look at in the case of each of the health boards. That is in addition to the value for money reports which will average ten a year. It is a difficulty for the Committee but I cannot express an opinion on how it can be met.


Chairman: The Committee notes these paragraphs and orders that the accounting procedures of the VECs be updated immediately.


VOTE 26 - OFFICE OF THE MINISTER FOR EDUCATION.

Dr. Thornhill further examined.

Chairman: Can you give us details of the consultancies and IT projects which were delayed, why this was the case and the total cost?


Dr. Thornhill: I gave a figure which I said was highly qualified. I was very wrong about the number of psychologists in the Department. The total number is 38.5 as there is one part-timer. I can only put my mistake down to the stress levels which this Committee induces!


In regard to the previous exchange, I can only say that, judging by the amount of material here, this Committee is extraordinarily well regarded in Government Departments.


Deputy Ellis: Do you mean to say you took along a full team?


Chairman: Could you give us details of the consultancies and IT projects which were delayed under subhead A.7?


Dr. Thornhill: Some of the IT projects did not proceed at the anticipated pace. A consultancy provision was made for the White Paper on education which was not used as the need for it did not arise. I do not have the details here on the specific IT——


Chairman: You can send them later. Under subhead B.10 there was a saving of £481,000 because the construction of a number of projects did not proceed at the anticipated rate.


Dr. Thornhill: Grants for recreational facilities are dispensed to voluntary organisations. One of the conditions is that the voluntary organisations must come up with a certain amount of counterpart funding, which they did not in this case. The money was, therefore, withheld until such time as they got the funding.


Deputy Ellis: Under schedule B - disadvantaged youth - of the list of National Lottery funding, the National Association of Training Centres for Travelling People got £302,000, to which I have no objection. Which centres received funding and how much was dispensed to them?


Dr. Thornhill: I do not have that breakdown here but we can supply it.


Deputy Ellis: I am worried there may not be equal disbursement to areas with settled travellers. How is the disbursement of those moneys audited?


Dr. Thornhill: The organisation has to present audited accounts. Where such organisations distribute money to other organisations, cross checks are made within the Department.


Deputy Ellis: Udarás na Gaeltachta received £107,000 under the same heading, which is the only funding of any consequence under the disadvantaged youth scheme which went to rural Ireland. How did it qualify for funding as I thought it was in a different sort of business?


Dr. Thornhill: Udarás na Gaeltachta received £33,000. It has a developmental role. It is associated mainly with the area of industrial promotion but it has a wider remit than that. It submitted a proposal in relation to a disadvantaged project which met the criteria of that scheme.


Deputy Ellis: Only one county VEC received money under that heading whereas practically all of the town VECs received money. What was this funding used for?


Dr. Thornhill: The type of activities include staffing and equipment for outdoor education centres, some local level programmes, grants to youth and sports clubs and local organisations and special projects aimed at people from disadvantaged backgrounds.


Deputy Ellis: Were there applications from any other county VECs?


Dr. Thornhill: I am sure there were.


Deputy Ellis: Can you tell us which counties applied?


Dr. Thornhill: I do not have that information here.


Deputy Ellis: You can send it to the Committee.


Dr. Thornhill: Certainly.


Deputy Ellis: Under subhead B.9 special campaigns and programmes received £394,000. Which programmes were those?


Dr. Thornhill: Those funds were allocated to Cospoir, the national sports council. Its main activity was the “Be Active, Be Alive” campaign, the development of long distance walking routes.


Deputy Ellis: The Olympic aid for Atlanta was £150,000. Has the Olympic Council given you a breakdown of how it intends to spend that money?


Dr. Thornhill: That programme was a grant provided through the Olympic Council to allow potential medal winners to go into full time training.


Deputy Ellis: Would it not be more advantageous to give that to the elite sportspersons grant aid system which is already in the Department?


Dr. Thornhill: That issue could be considered in terms of the relative effectiveness of getting the money to people.


Deputy Ellis: The Olympic Council will, naturally, take a certain amount for administration. Would it not be more effective to pay the money directly to elite sportspersons? Many of the grants are very nominal and would not allow them to compete with professional athletes in other countries.


Dr. Thornhill: We will look at that.


Deputy Ellis: Are you happy with how the Olympic Council spends its money?


Dr. Thornhill: This issue has been highlighted recently. We receive audited accounts from the Olympic Council. Our concern is to ensure that Exchequer money is spent for the purpose for which it was allocated to the Council. As I explained earlier, most of that funding is disbursed by the Council to other bodies. There seems to be some internal controversy within the Council in relation to the raising and expenditure of sponsorship money. I do not feel I should comment on that issue.


Deputy Ellis: Yes, but do you not feel entitled to receive the full audited accounts of the Olympic Council?


Dr. Thornhill: We get those accounts.


Deputy Ellis: But under which heading? We saw earlier that questions were raised in regard to petty cash in VECs. Is a petty cash system operated from which certain items not of direct benefit to the Olympic Council are paid for?


Dr. Thornhill: We have the full set of audited accounts here which were produced by a firm of commercial accountants in line with accounting conventions. The type of items listed include money spent on marketing and promotions which, in 1995, amounted to £17,000. The Olympic Games preparation cost £8,000; salaries and PRSI cost £15,000; rent and rates cost £10,000; legal fees were £2,000; the audit fee was £1,900 and there were also insurance costs. Those are the normal categories under which auditors present information.


Deputy Ellis: Do you have the right to raise questions?


Dr. Thornhill: Yes.


Deputy Ellis: I take it the one which has received much media attention recently will be fully examined by your Department?


Dr. Thornhill: The Deputy can take it that we are paying quite a bit of attention to the affairs of the Olympic Council. If there are public concerns about an organisation which receives grant aid, the first prudent step for us to take is to ensure that our systems and our relationship with the organisation are working properly.


Deputy Ellis: Will you get a full breakdown of all travel expenses paid by the Olympic Council and ensure that they were relevant to its promotions?


Dr. Thornhill: We could certainly ask the question and evaluate the answer.


Deputy Ellis: Can we take it that if, in your opinion, money has been spent otherwise than under the category for which you gave it, you will try and recoup that money from the relevant organisation? Have you a mechanism to recoup money that, in your opinion, has been misappropriated by organisations? I am not talking specifically about the Olympic Council but about the various organisations you fund.


Dr. Thornhill: If money is misappropriated there are a number of ways to deal with it. We can see if legal action would be appropriate and in some instances it might be. Most of these organisations receive a recurring grant so we could pick up on a situation in the following year, arising from a concern that occurred in the previous year.


Deputy Ellis: I take it you do not pay the following year until the previous year’s accounts have been audited.


Dr. Thornhill: That is right.


Deputy Ellis: What happens if the auditing company has not given you a true picture? Will you accept the same company auditing the accounts the following year or will you request that new auditors be appointed?


Dr. Thornhill: If an auditor does not give an adequate picture, the auditor is open to legal action. The Comptroller and Auditor General is more expert in this area than I.


Deputy Ellis: If you are not happy with an auditor, have you the right to ask the relevant organisation to change its auditor before you will pay any further funds?


Dr. Thornhill: If we were uneasy and concerned about the financial reporting of an organisation we would seek more information. We have some auditing capacity ourselves and we would consider what steps would be appropriate in that instance. We would also look at whether the particular body was in receipt of funds which were more than the critical threshold of 50 per cent which gives the Comptroller and Auditor General the right to carry out an audit.


Deputy Ellis: I notice there is duplication. One organisation received funding under two or three headings. Is there any way that can be stopped? Organisations should only receive moneys under one heading.


Dr. Thornhill: This is a problem of funding organisations and funding programmes. Where funds are allocated for particular programmes and the organisation’s objectives are linked to those programmes, it can happen that an organisation will get funding from a number of programmes. The concept of programme budgeting is regarded as desirable from a transparency and accountability point of view.


Deputy Broughan: Subhead B.14 is for publications in Irish. This came up recently at the Coiste Gaeilge, of which I am a member. Does that include funding for Anois?


Dr. Thornhill: No, it is purely for educational publications.


Deputy Broughan: What is covered by subhead B.4, international activities?


Dr. Thornhill: It is primarily our contribution to UNESCO. The contribution to UNESCO in 1994 was £447,000.


Deputy Broughan: How was there an underspend in subhead B.6, for career development, given that first and particularly second-level education is changing so dramatically? Our teaching unions would feel that expenditure in this area is below what it should be. How is it that we spent less than the £5 million allocated?


Dr. Thornhill: There would have been some liabilities under that subhead which would have been incurred in 1994 but were not met within the calendar year. This programme has stepped up its activities considerably from a very low base, a base which we all believed to be inadequate. As it is an EU funded programme, the saving under B.6 is being brought forward into subsequent years of the programme. There is a five year plan for this area. There has not been a loss to the programme.


Deputy Broughan: Are you happy with the programmes you have referred to such as the Applied Leaving Certificate? This September we will start civic and political education at both first and second-level. This is a subject which Deputies of all parties have long felt needed to be addressed in view of the lack of civic culture in our country. In that regard, is it not astonishing that the provision is relatively low and was not all taken up?


Dr. Thornhill: The in-service area has not been without its controversies. You will remember that last September there was concern about the disruption to schools as a result of some in-service programmes. This programme is developing in consultation with the education partners and it is a long and involved process. However, because it is a major programme we are concerned to plan it properly to ensure that the programmes meet the needs, particularly in the new areas you have mentioned such as civil and political education and the Applied Leaving Certificate.


Deputy Broughan: With regard to B.12 for major sports facilities, £5 million of the £9 million went to the GAA to assist its major redevelopment of Croke Park. Has all that money been spent?


Dr. Thornhill: In other words, has the GAA drawn down the funds?


Deputy Broughan: Yes.


Dr. Thornhill: It has.


Deputy Broughan: Would you be concerned if any of the political parties were to have a private box in the facilities being created at Croke Park? Has anything like that come to your attention?


Dr. Thornhill: The management of Croke Park would not be an issue in which we would get involved.


Deputy Byrne: That would come under the Ethics in Public Office Act.


Deputy Broughan: With regard to lottery funds, as a result of the investigations of this Committee over the last three years, we now have application forms and basic guidelines on which applications can be made. Would you accept that one of the major problems for sporting organisations is that unless they have a capital facility it is impossible for them to get lottery funding? The lottery programme was put in place to assist areas of spending which had not usually been taken care of in the Estimates. However, in some of the most deprived areas of Dublin city, sporting organisations cannot benefit because current expenditure is totally excluded. That is a basic requirement although this is a grey area and it was even greyer two or three years ago. Even in last year’s and this year’s applications it still seems impossible for small soccer clubs and GAA clubs in very deprived areas of the northside of Dublin to get access to this funding. However, Roscommon Golf Club got about £30,000. Sporting organisations in Darndale, Priorswood and Kilbarrack did not qualify for a penny last year and will not do so this year. I Know this is a policy area but the Civil Service is also involved in it. Should we re-examine this area in order to give an opportunity to sports organisations which cater for hundreds of children but do not have a capital facility? They are effectively precluded. If they do not have capital facilities such as grounds and dressing rooms, they will not partake of this money. yet, groups of wealthy individuals, such as golf clubs, receive major grants whereas kids in the most deprived areas do not get even small grants to pay for their shirts, boots or hurleys. This area should be investigated.


Dr. Thornhill: Current funding is available from the VEC mechanism.


Deputy Broughan: That is very small.


Dr. Thornhill: I agree it is small but demands for funding far exceed the supply and are often persuasive and for good causes.


Deputy Broughan: I know groups of harassed parents who are constantly fund raising and who spend about £5,000 a week to run small soccer or GAA clubs. We are not helping them in any way. In some of these areas there are serious youth crime problems. We should be aware of this during 1996.


Deputy Byrne: Dr. Thornhill will be aware of a critical report which has been published recently on the handling of National Lottery funds. The report found that lottery money is being used more and more as a substitute for Exchequer funds rather than for what they were originally intended. Some £0.5 million was paid in grants to colleges providing courses in Irish. A layman might think that such courses are an educational matter and should be funded directly by the Department.


Dr. Thornhill: I am familiar with the report to which you referred; it was produced by the National College of Industrial Relations. This issue waxes hard and hot at the policy level. It is the case of substituting lottery expenditure for mainstream Exchequer expenditure. As an Accounting Officer all I can say is that the sources of the funding are identified in the various subheads.


Deputy Byrne: We wear other hats when we go through the books of the National Lottery. We would like to see lottery funds spent the way they should be. Evidence is presented to us on a day to day basis that Departments, including the Department of Education, use lottery money for day to day projects which should be funded directly by themselves.


Dr. Thornhill: The sources of finance are decided during the Estimates campaign when Departments agree their subheads with the Department of Finance. Line Departments are not involved in deciding the sources of funding.


Deputy Byrne: Why was there expenditure of £80,000 in 1994 in respect of the national educational convention, which took place in Dublin Castle?


Dr. Thornhill: Some of the Bills did not come through until then. The convention was held in late 1993 and the publication of its report took place in late 1994.


Deputy Byrne: There is a cumulative total of £178,000. How much was budgeted for the convention?


Dr. Thornhill: That figure represents the total expenditure on the convention.


Deputy Byrne: By anybody’s standards, £178,000 is a great deal to spend on a convention. Do you think it was costly?


Dr. Thornhill: This convention ran for a fortnight and brought together all the main interest groups concerned with education. From the Department’s point of view it was enormously valuable in terms of having a debate taking place in public between groups with an interest in education. The work of the convention’s secretariat in distilling conclusions from that debate provided a basis for a policy which reflected a high degree of consensus and which was laid out in the White Paper. The interest paid internationally to the convention was remarkable. A major policy exercise was carried out in Ireland with a great deal of good will and an absence of the type of fractious debates which tend to take place in other countries.


Deputy Byrne: Some £0.5 million of National Lottery funding was spent on capital services for special schools and children in care. Is the Department not stretching the lottery money?


Dr. Thornhill: I commented on this already. We negotiate the Estimates but funding issues are decided at another level.


Deputy Byrne: The then Minister for Finance, Deputy Bertie Ahern, announced in the budget that he was allocating £5 million to the GAA. The accounts show that this money was paid by the Department of Education. I would have thought that if a grant was being allocated by the Minister for Education or the Minister of State at that Department, they would have announced the allocation. How can a Minister for Finance announce a lottery grant of £5 million from the budget of another Department?


Dr. Thornhill: That announcement was made during the Budget speech. It would be normal practice as part of the Budget speech for a Minister for Finance to refer to allocations which had been agreed by the Government in respect of departmental Votes over and above those published in the Estimates.


Deputy Byrne: Is it fair to say that the Minister for Finance can direct other Ministers on how lottery funds should be spent?


Dr. Thornhill: The Budget is agreed by the Government.


Deputy Byrne: A sum of £27,500 was spend on a feasibility club for a 50 metre swimming pool. There is no such pool in Ireland and there is no immediate likelihood of one. What was this £27,500 spent on?


Dr. Thornhill: There is a typing error in the accounts. There was a feasibility study, not a feasibility club. A feasibility study was commissioned from a firm of consultants to examine the viability of a 50 metre pool.


Deputy Byrne: There is a group of wealthy business people. Does the word “club” refer to this group?


Dr. Thornhill: The study is separate. There is another group, the DISC, which is an advocate of a 50 metre pool?


Deputy Byrne: My next question is not a reflection on the scouts. We grant assist by over £0.5 million the Catholic Boy Scouts of Ireland and the Federation of Irish Scouts. I have not seen a scout on the streets of Dublin in the past ten years. How many scouts are there? I am particularly interested in the figure for Dublin. Are you happy that the number of scouts, leaders and dens are sufficient to quality for such a substantial sum of money? There are scouting dens in my constituency, but I have not seen a scout near some of them.


Dr. Thornhill: The grants would have gone through the appraisal process in the Department. When I am not working at home at weekends preparing for this Committee, I occasionally go hill walking and I often meet scouts doing the same.


Deputy Byrne: I do a lot of hill walking but I never meet any scouts.


Deputy Broughan: There are also scouts on the north side of Dublin.


Dr. Thornhill: Some of the scouts in the groups I met were from the north side of Dublin. I was never a scout so I do not have much knowledge of the movement. However, they place great emphasis on outward bound activities, such as weekends away, etc. Tiglin is used frequently by scout groups.


Deputy Hogan: Deputy Ellis inferred that there was some misappropriation of funds in the Olympic Council of Ireland. It behoves the Committee to clarify that point.


Chairman: I do not think he inferred that.


Deputy Hogan: He did. He mentioned the Olympic Council of Ireland and then he asked if the Secretary was happy with its auditing procedures. Perhaps Dr. Thornhill could tell us if he is satisfied with the latest accounts from the Olympic Council of Ireland.


Dr. Thornhill: The accounts meet accounting conventions and they are accompanied by a report from the auditor. It states:


“that in the opinion of the firm of auditors the financial statements give a true and fair view of the state of the company’s affairs at 31 March 1995 and have been properly prepared in accordance with the Companies Acts, 1963 to 1990. We have obtained all the information, explanations we consider necessary for the purpose of the audit. In our opinion proper books of accounts have been kept and the financial statements are in agreement with the books of the account.”


Deputy Hogan: I am happy with that clarification. The youth and sport recreational facilities scheme, which was set up through the National Lottery, is excellent because youth organisations and clubs need assistance to supplement their voluntary activities and fund-raising measures. Are you happy that community groups are giving good value for money and that this scheme is providing recreational facilities throughout the country?


Dr. Thornhill: Yes. The amount being spent is only a drop in the ocean compared to the demand which exists for worthwhile projects.


Chairman: We note Vote 26. I thank Dr. Thornhill for coming here today. He will be back before us on 3 April when we will take the three Votes.


The witness withdrew.


THE COMMITTEE ADJOURNED.


AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Dé Céadaoin 3 Aibreán 1996


Wednesday 3 April 1996


The Committee met at 11 a.m.


MEMBERS PRESENT

Deputy Tommy Broughan

Deputy Michael Finucane

Deputy Deputy Eric Byrne

Deputy Batt O’Keeffe

Deputy John Ellis

Deputy Desmond O’Malley

DEPUTY DENIS FOLEY IN THE CHAIR


Mr. John Purcell (Comptroller and Auditor General) called and examined.

Public Session.

Chairman: All the correspondence is to be noted, unless Members have any points to make on it.


Deputy Byrne: I wish to make a point on the correspondence under the Office of Public Works. The Committee will remember that I asked about deer poaching in the Wicklow mountains.


Deputy Ellis: Is that what you are at when you are walking out there?


Chairman: Let him proceed.


Deputy Byrne: Under item 2 we see prosecutions as a result of the activities of wildlife rangers. When the Secretary comes back in we should congratulate them for arresting a well known Wicklow poacher who has been selling venison to a highly respectable company of restaurateurs in Dublin. A restaurant managed by the company and the poacher were convicted in the courts. We should congratulate all involved in putting an end to the activities of this poacher. Given the penalties and the publicity surrounding this restaurant chain’s activities, hopefully, they will be sufficiently embarrassed never to engage in the illegal purchase of venison from poachers again.


It is outrageous for restaurants that carry such a high level of respect from the middle classes to engage in such low level purchasing of illegally killed game from the Wicklow mountains. I hope that conservationists, environmentalists and food loving people will take appropriate action when it comes to deciding where they will eat their venison next time.


Chairman: Members should note that our next meeting is on Tuesday, 16 April.


EDUCATION GROUP OF VOTES

VOTE 27 - FIRST-LEVEL EDUCATION

Dr. Thornhill, (Secretary, Department of Education) called and examined.

Mr. Eugene O’Sullivan and Mr. Noel Kerins (Department of Finance) in attendance.

Chairman: I welcome Dr. Thornhill. We are taking up where we left off on the last occasion. We will go straight to Vote 27.


Deputy Ellis: I welcome Dr. Thornhill back. Subheads D and E concern grants towards clerical assistants and caretakers in national schools. The outturn in both seems to be roughly £400,000 less than had been anticipated.


What size of school is such assistance available to?


Dr. Thornhill: To deal with the variation, on the clerical side the savings arose for a number of reasons. One was because the number of staff who availed of, or extended, their career breaks during the year was beyond the level anticipated. Savings also arose because a number of posts fell vacant that were not replaced or were replaced at a lower incremental salary.


There are two schemes which provide for clerical assistants and caretakers in national schools. The old scheme was introduced in 1978 as part of a job creation programme at the time. That involved the appointment of people to positions that were met from the central payroll, but the scheme was later phased out.


Subsequently, in the Programme for Economic and Social Progress - the PESP, which was introduced in 1992, grants were given to schools for the appointment of caretakers and clerical assistants. This is a capitation grant and schools were given the discretion to recruit and appoint people out of that budgetary allocation.


As regards the numbers on the limit for the schools, under the PESP all primary schools with an enrolment of 500 or more pupils receive the capitation grant. Where the schools had an enrolment less than 500, there has been a gradual implementation of a phasing in arrangement and a reduction of the ceiling. In September 1994 it was reduced to 350 generally and 200 where a school was designated as disadvantaged.


Deputy Ellis: Is that the number required?


Dr. Thornhill: That is right.


Deputy Ellis: A sum of £7.8 million was spent on special services for children in care. The courts regularly have problems finding places of detention for disturbed children. Has the Department any input in that regard or is it totally a matter for the Department of Justice?


Dr. Thornhill: A new Children’s Bill is being drafted and that is being co-ordinated by the Department of Justice. The scheme of the Bill will establish and set out, in statutory form, the distinction of the roles between the Departments of Justice, Health and Education. In the meantime, planning is underway on the basis of an enhanced role for the Department of Health in relation to younger children who need special care or who need to be catered for in an institutional setting.


One of the problems encountered by the health boards, which has repercussions on the special schools under the aegis of the Department of Education, is that they have not had the capacity to deal satisfactorily with unruly children, who need to be kept in a secure environment. That has been perceived as putting pressure on the places in the institutions which are under the aegis of the Department of Education. I say “perceived” because there is always argument as to the dimensions of the problem.


In March 1995 the Minister of State, Deputy Currie, who has responsibilities in the Departments of Education, Health and Justice, announced a number of measures. As far as the education sector is concerned, they involve 20 extra places for boys in the 14 to 15 age group. These will be developed in Oberstown in Lusk which currently contains the boys’ centre, the girls’ centre and Trinity House; eight to ten extra places in the 14 to 15 age group in the grounds of the Finglas centre and eight extra places for girls at the Oberstown girls’ centre.


Deputy Ellis: Is it the Department’s opinion that the new places are sufficient to deal with the problem?


Dr. Thornhill: The planning exercise going on has to take account of what the demand will be. The answer is a considered “yes”. One of the objectives in the new Children’s Bill, which is being drafted, will be to ensure that when a problem case comes to light there will be an array of measures, facilities and strategies available for dealing with the children. These would range from health board intervention, the young offenders centres operated under the aegis of the Department of Education, some of the non-custodial measures which would involve the Department of Justice, for example, the probation and welfare service. There will certainly be an emphasis in all of this to ensure that custodial action would be the action of last resort.


Deputy Ellis: Expenditure from subhead F1 included payment of over £207,000 in respect of a High Court case involving a pupil with special needs. What was the background to that payment?


Dr. Thornhill: That is the Paul O’Donoghue case. The mother of this child with very severe disabilities, took a case in the High Court that his constitutional rights were not being adequately met by the State’s services, particularly in the educational domain. The High Court upheld the mother’s case and costs and a small amount of damages were awarded to the mother. That is the element in the subhead. The costs were assessed by the Taxing Master at £207,386.


Deputy Ellis: Was that for both sides or for the plaintiff?


Dr. Thornhill: That would have been the State’s side - the Departments of Health and Education.


Deputy Ellis: Who paid the other side’s costs?


Dr. Thornhill: I am sorry Deputy, that is the total including the O’Donoghues’ costs.


Deputy Ellis: How does that breakdown?


Dr. Thornhill: I have not got that information with me.


Deputy Ellis: If we know how much was paid to the O’Donoghues’ solicitors it would then be a simple calculation.


Dr. Thornhill: It is a straightforward matter. I will arrange to have the figures sent to the Deputy.


Deputy Ellis: Are any other similar cases pending?


Dr. Thornhill: Aspects of the Paul O’Donoghue case are being appealed by the State in the Supreme Court. This is because, in a case of this matter, the judgement raises issues of general concern, primarily to do with the separation of powers and the duties of the executive and judicial arms of the Government. These are constitutional issues which have a relevance across the spectrum of State activities. The Government has been advised by counsel and the Attorney General that the Supreme Court should be asked to consider these aspects of the judgement in the public interest.


There is another case going through the preliminary stages of legal action. There are some cases in the pipeline. The feature of all these cases would be the view on the part of the applicant about the adequacy of the measures in place. In all of these cases the Department is in touch with the applicant in an effort to try to produce outcomes which would meet their needs.


Deputy Ellis: What is the potential exposure for the State from the amount of claims lodged? Is that for the courts to decide?


Dr. Thornhill: That would be for the courts to decide.


Deputy Ellis: How many cases are there?


Dr. Thornhill: There are about 18 cases in the High Court at present. The main implication of those cases would be related to the staff:pupil ratio in the educational establishments.


Deputy Ellis: What was the amount of the award to the O’Donoghues, excluding legal costs?


Dr. Thornhill: £8,409.


Chairman: With regard to expenditure under subhead H, there was a payment of £30,000 in settlement of a compensation claim by a staff member in a special school for injuries received in an assault while on duty. The legal costs amounted to about £11,000. That is a total of £41,000 in total. What were the circumstances of that case?


Dr. Thornhill: A payment was made of £30,000 in settlement of a compensation claim by a staff member in a special school for injuries received in an assault while on duty and there were legal costs of £11,000.


Chairman: What kind of assault took place?


Dr. Thornhill: I do not have the full details. One of the boys in the school assaulted a member of staff while that member was going about his work.


Chairman: £179,656 was received as Appropriations in Aid in respect of handling charges involved in making certain reductions from teachers’ salaries. What is the basis for this agreement?


Dr. Thornhill: If deductions are made from salaries in respect of insurance policies taken out by members of staff, there is a charge paid to the Department from the insurance company for providing that service. It is a handling charge.


Deputy Finucane: What are the names of the institutions which provide special services for children in care and how many places are available in them?


Dr. Thornhill: Trinity House has 30 places. In Finglas, St. Michael’s remand and assessment centre and St. Lawrence’s industrial school have 20 and 55 places respectively. St. Joseph’s special school in Clonmel has 75 places. In Lusk the Oberstown boys’ centre has an overall capacity of 30 and the girls’ centre has a capacity of 16 - eight on long stay and eight on short term remand.


Deputy Finucane: What is the age bracket of people who are confined to those special schools?


Dr. Thornhill: The upper age limit for admission is 16. Children under 15 would be sent to industrial schools and children over 12 and under 17 are sent to reformatory schools. The age spectrum would vary. On my last visit to one of the schools I was introduced to a girl who was about 13 years old. She was in a state of extreme risk to herself and others and needed to be kept in a secure environment.


Deputy Finucane: Trinity House, Lusk and Finglas featured prominently in the news in recent times with regard to their operations and the kind of people who go there. Is there a high level of reoffending by people who go to Trinity House? What is your response to people who say that, in these institutions, the State is killing young offenders with kindness and that many of them reoffend?


What statistics are compiled by the Department of Education and the Department of Justice to see if people who attend Trinity House, Oberstown and other institutions continue to be involved in crime when they become adults and if they are sent to Mountjoy and other prisons? The barometer of whether special schools are effective is whether people reoffend and commit crimes when they are adults. I think there are statistics on the level of reoffending by young offenders but there may be no statistics or follow up between the Department of Education and the Department of Justice to see how effective special schools are in preventing people from reoffending as adults and being sent to Mountjoy. If there is research on this, could you elaborate on it?


Dr. Thornhill: There has been a development in the management philosophy in Trinity House and there is a much greater emphasis on reducing recidivism. During my visit there I was extraordinarily impressed by the professionalism and high levels of motivation of the people working there. This also applies to the other offender centres I have visited. As far as killing the boys with kindness is concerned, Trinity House is not a cheerful place to visit and I do not think this view is merited. The boys are certainly treated with a degree of dignity but kindness in inappropriately luxurious conditions is not part of the picture.


Internationally, recidivism rates of 70 to 75 per cent are not unusual. Results from the UK and the US show this to be the case. A study carried out on Trinity House in 1988–89 indicated a recidivism rate of 68 per cent. The figure the previous year was 80 per cent. We are dealing with small numbers and statistical outcomes are probably not reliable.


It is interesting that in the last few years the numbers of social contacts with Trinity House, by former inmates, have increased. There is a perception on the part of staff that many former inmates see their stay there as a period when there was a degree of stability and certainty in their lives. Staff members draw encouragement from the fact that former pupils voluntarily make contact with the school for counselling or ad hoc advice.


The level of co-ordination between Departments has been recognised to be a problem. There was a Government response to this in the form of the appointment of a Minister of State with responsibilities in the Departments of Health, Education and Justice. This will be given more specific organisational expression in the Children’s Bill which we expect to be published after the summer recess.


Deputy Finucane: Approximately £8 million is spent by the State on special services for children in care. You mentioned a recidivism rate of 68 per cent for the period 1988–89 and compared to 80 per cent the previous year. Special schools have been in operation for some time and I am amazed that no statistics have been kept, or analyses carried out, on people who go through them, to see if juvenile repeat crime leads to adult crime. There has been no liaison between the Department of Education and the Department of Justice to see if this is the case. Surely this would be a barometer of whether special schools are successful. One must question the efficiency of the methods used in Trinity House. As a priority such research should be carried out because it would indicate whether the Department should change what it is doing in Trinity House and it would enable comparisons to be made with the situation internationally. It surprises me that this has not been done already because there has been such emphasis on crime.


Dr. Thornhill: I appreciate the constructive way the Deputy makes these points. We have commissioned a study to track outcomes with regard to mainly male offenders and we hope to have this information in the not too distant future. The questions raised by the Deputy go to the core of the policy debate on this issue and they parallel the approach to prison policy. There are three reasons why people are taken into custodial care and society makes its choices as to what emphasis it wishes to place on them. The first reason is to protect society from the people concerned. The second is to punish them through deprivation of freedom, and the third is to carry out rehabilitation.


Unfortunately, international experience shows that rehabilitation attempts involve a ferocious uphill struggle. The backgrounds against which many of these boys, and for a lesser number of girls, come from is extremely disturbed. By the time they come to the attention of the authorities in these detention centres they are difficult cases. When their detention period is at an end, despite the best efforts of the attempts at rehabilitation, there is a high risk that they will go back into the environment which may have created the conditions under which they committed crime in the first place. Those are the dimensions of the problem which is fundamentally a policy matter. It is a choice made by society as to what the emphasis is between those three policy criteria.


Deputy Finucane: Subhead G concerns child care assistants in national schools for the handicapped. Does Dr. Thornhill recognise that there is a specific problem with primary school children who may have spina bifida? Parents of such children may want them to be educated in the local school rather than going to a special school. They may be happier with that educational environment but there is an acute problem in the system actually catering for that person.


They are fobbed off from the Department of Education to the Department of Health and to FÁS to see if they can cater for their needs. Such children whose parents want them to be educated in their own area are often deprived. In many cases, you depend on the goodwill of teachers to lift a person in a wheelchair to the toilet for example.


Has the Department of Education addressed this difficult area? Admittedly, it may be confined to certain locations but it is there.


Dr. Thornhill: There has been a big improvement in the number of child care assistants. To deal with the main thrust of your question, there is a problem which relates to the whole issue of integration as opposed to special provision. It cuts across a whole range of areas where pupils have special needs.


At one extreme, there is a view that all children should be educated together in a single environment. The other extreme view is that all children with special needs should be catered for in special institutions. The policy approach taken is to allow children to go to their local school in all instances, to the extent that that is feasible, and to put in place measures in the local school to enable that. Child care assistance is one aspect of that and resource teachers are another dimension.


The White Paper on Education sets out a particular policy on this which will help to deal with the co-ordination dimension the Deputy mentioned, and the fact that people can find themselves falling between different agencies. The White Paper’s concept is that where a child is identified as having a special need, the child will be assigned to a designated special school in that area. But that does not necessarily mean that the child will go to school in that area. The authorities in that special school may recommend that it would be more appropriate for that child to go to their local school but special support services may have to be provided to the school to enable the child to do so. There is a need for flexibility and a sophistication of approach which, as the Deputy indicated, has taken some time to develop.


Deputy O’Malley: According to the accounts for first-level education, in 1994 a surplus of £10.5 million was surrendered. In the same year, a surplus of £42.5 million was surrendered at third-level, while at second-level a surplus of £43 million was surrendered. This makes a total in excess of £96 million which was surrendered in 1994. All Deputies are subject to constant complaints from people that there is not enough money for school buildings or for teaching. In all parts of the country many schools are in bad repair. Why do you so run your affairs that you surrender a vast amount of money, nearly £100 million, that the Dáil voted to your Department?


Dr. Thornhill: The big element in terms of the overall figure was an unexpected early receipt of European Social Fund (ESF) receipts which had a big impact on the second and third-level Votes. The Deputy will know that there is a rigidity between the Appropriations in Aid and the sub-heads in the Estimates.


At primary level there was a saving of over £4 million in building because the projects could not go ahead at that point. In other words, planning permission or certain technical work had not been met. Another element relating to the Appropriations in Aid was a £3 million excess in pension receipts. These were contributions made by teachers under the pension heading.


Deputy O’Malley: In primary education there is almost no contribution from the European Social Fund.


Dr. Thornhill: That is correct, Deputy.


Deputy O’Malley: Unfortunately, they contribute to all kinds of rubbish in this country, such as training schemes of one kind or another, when I would like to see it going to primary education which is one of our great problem areas. Your excuse that we got in a lot of money from Europe more quickly than we anticipated does not apply to primary education. Could you not expend this £10.5 million on the emergency repair of buildings?


Dr. Thornhill: The Deputy is absolutely right in saying that £10 million was surrendered. I hope I made it clear in my reply that the ESF funds related to the overall picture and not to the primary Vote. There was a £10 million surrender on the primary Vote. Some £3 million of that came in on the Appropriations in Aid heading under pension receipts. The single biggest element was building with a saving of £5 million in major projects. It is not possible to turn building schemes on and off like a tap because various procedures have to be gone through as well as ensuring value for money and proper building standards.


Having said that, we recognised there was a management problem and we were not happy having to surrender that amount. It was possible through a supplementary provision to spend £5 million extra under the second-level heading. In the 1995 outturn there was no surrender of capital on the primary Vote, so we did get the project management system geared up and in better running order.


Deputy O’Malley: People who constantly complain that they are being told by the Minister and by the Department that there is no money for this or that, will note with some interest that in 1994, which is only 15 months ago, the Department surrendered almost £100 million. That is wrong given the circumstances in which so many schools, particularly primary schools, find themselves.


Dr. Thornhill: Over £80 million of that £100 million was early receipt of ESF receipts.


Deputy O’Malley: If we are fortunate to get it early - frequently we get it too late - can the Department not make arrangements to spend it rather than surrendering it?


Dr. Thornhill: My colleague advises me that some of that money came in in the late days of December. As an Accounting Officer, I cannot allow for a situation where I would have expenditures based on anticipated receipts. The Comptroller and Auditor General would take a dim view if expenditures were committed and implemented in the hope that money would arrive from Brussels in the final days of the financial year.


Deputy O’Malley: The figure of £207,386 which Deputy Ellis asked you about ——


Dr. Thornhill: In relation to the Paul O’Donoghue case?


Deputy O’Malley: Yes. You said that included the Department’s and the State’s costs, but those costs fall under the Vote for the Attorney General.


Dr. Thornhill: I was confused when reading my brief. That figure was the applicant’s costs.


Deputy O’Malley: Deputy Ellis should have been told that because he left under a fairly serious misapprehension.


Dr. Thornhill: We will arrange to contact Deputy Ellis.


Deputy O’Malley: The amount of costs paid to these people is extremely large. Under subhead H you paid a settlement of £5,000 to a staff member who had an accident. However, they were also paid £4,447 in costs, which is approximately 90 per cent of their damages. It seems an extraordinarily high amount. I am a long time out of legal practice, but we thought in terms of 20 per cent in those days. My career choice may not have been a wise one from a personal point of view. Why did the Department pay out 90 per cent in costs for what was obviously a fairly minor accident?


Dr. Thornhill: All costs are taxed by the taxing master. The sanction in that particular case was given by the Department of Finance on the basis of advice from the Chief State Solicitor’s Office.


Deputy O’Malley: Only a small proportion of costs are taxable by the taxing master.


As regards primary education, we are now enjoying a considerable decrease in pupil numbers. The result is that many schools in the larger urban areas are either fully or partially vacant. The majority of these were paid for by the State. Has the Department any plans to utilise these schools in the centre and older parts of the cities rather than building new schools every time there is a new housing development on the outskirts of the cities? Could the Department bus pupils to these schools rather than allowing them to go derelict or to be sold by diocesan or other authorities for other purposes?


Dr. Thornhill: The Deputy is identifying a significant number of issues. As regards the State’s position in relation to these properties, the traditional method of providing primary schools was that the site would have been provided by the patron. In most cases it was the Catholic church, but the Church of Ireland and other Protestant churches did so for a smaller number of schools. In recent times we have had the development of the gaelscoileanna and the Educate Together movement. The school patron also made a contribution towards the building costs, but the lion’s share was met by the State. The State’s involvement relates to the buildings, not the total property. Up to now the position has been that the reuse of the property or the release of the State’s interest has been on a case by case basis. We are putting together proposals to deal with this on a more systematic basis.


As regards the more efficient use of accommodation, a proposal in the White Paper sets out that where new school buildings are provided in the future they will be owned by the education boards and then leased by the boards to the school patron. The lease will be for a particular period of time and, at the end of the lease period, the property will revert to the education board. Another arm is that the Minister recently established a commission on school accommodation which has a remit to look at the accommodation needs in the education sector at primary and post-primary level over the medium and long-term period. We also expect the report of that commission to make an input into strategies for dealing with properties.


Deputy O’Malley: Dr. Thornhill did not answer the main question I put to him. Many schools are now fully or partially vacant, yet the Department still persists with a policy of building new schools at great cost. Some of these schools were only built 25 years ago and they are of good quality.


Dr. Thornhill: The problem is particularly acute in the larger urban areas where there have been shifts of population from the inner parts of the cities to the suburbs. At junior level we have not noticed any willingness among parents to bus four and five year old children from outlying areas of the city to locations in the city. There is a view that the concept of parental choice in terms of where parents send their children is underpinned by the Constitution. Where a school is no longer required and there are proposals to put it to an alternative education or community use, the Department’s approach would be to facilitate that move so as not to allow the buildings to lie idle. We appreciate there is a problem and that a variety of strategies are needed to deal with it.


Deputy Byrne: Deputy O’Malley raised a point I mentioned on the last occasion. Is it not ironic that we have targeted the inner city for renewal and we have attracted a substantial number of people to live there through tax incentives, yet the schools issue is like mixing water and oil? The new arrivals - I do not want to say yuppies which is a derogatory term - do not want to send their children to the local schools. They are bussing their children out of the inner city to the suburbs to schools with a perceived record of good education. Is there any way that the Department of Education can develop policies with, for example, the Department of the Environment to create a social mix in our inner cities and encourage this social mix at school level? This would result in a healthier community.


Dr. Thornhill: There is a complex mix involving the planning approaches of all the authorities. It extends beyond the Department of Education and encompasses the local authorities, the Department of the Environment and so on. People make choices as to where they are going to live and where they will send their children to school.


I base this on second-hand knowledge but I was disturbed to read a survey of people who moved into new privately owned apartments in the inner city. The expectation on the part of most of these people was that they would spend no more than two to three years living in those apartments. They clearly saw it as a first step into the property market and were going on to somewhere else. From the point of view of where we sit in Marlborough Street, with many of these developments going up around us and a school in our own yard, that did not strike us as an encouraging result from a survey.


Deputy Byrne: I agree. That is the survey about which I am talking. However, I also speak from the practical experience of a fine school principal in the south inner city, not far from the Merchant Quay centre, who received preliminary inquiries from the new arrivals who were professional people. Having heard the socio-economic make up of the majority of children in attendance, they were not going to send their children to school. This is a terrible shame but at the same time is, in a sense, understandable.


It may be a policy question and therefore not necessarily one for you but how do we break this? One could envisage that these people would be campaigning for schools or gael scoileanna or some other alternative school as against sending their children to local schools. Have you noticed any particular pressure for that type of alternative use of resources from the Department?


Dr. Thornhill: Alternative to established gaelscoileanna?


Deputy Byrne: There might be a ground swell of public opinion looking for a different kind of education for their children, other than the education provided in established schools.


Dr. Thornhill: The view has certainly been expressed to us but I have no substantive evidence to back it up. Sometimes demands for gaelscoileanna in an area can be a demand from a group of parents, not necessarily based on social class but rather to ensure their children go to a school where they will meet children of parents who attach a similar high priority to education. This can transcend social class. It certainly is a problem. When we look at second-level, the results of a study published recently by the ESRI show that where there is a high concentration of disadvantage in a school, the overall outcomes in the school suffer. A mixture of children of different motivations and backgrounds in schools does uplift the whole school.


Deputy Byrne: I come back to the question to which Deputy Finucane referred and that is Trinity House and spaces for young offenders. He was suggesting that maybe there was too much love and kindness being bestowed on the children and therefore they were reoffending. Would you agree that the vast majority of these children from 12 to 13 years of age are so emotionally and psychologically damaged when they arrive in the system that part of the damage is that they have never had or experienced any love or attention in their lives? It would be rather draconian to suggest, as I think the implication of Deputy Finucane’s remarks was, that somehow we are too soft on these children and should take a hard-line approach to them in the sense of the concept of brutalisation in the institutions. You clearly would not support that direction.


Would you share the growing concern of people, including health board officials and, presumably, people from the Department of Education, about the increasing numbers of out of control children? It is phenomenal and very worrying and I do not think the wider community has come to terms with this growth. With so many out of control children presenting either through the courts or for special schooling, why is there no policy whereby primary or second-level schools are compelled to inform the Department of Education that they have expelled students?


Dr. Thornhill: The school expulsion issue is one which, as you rightly say, is looming larger. If we cast back our minds to 40 or 50 years ago, we dealt with the problem of out of control children or children whose family networks had collapsed in a different way. There is now some concern in society about that. The Government proposes to publish new legislation later this year to set up the education boards. One of the roles of education boards will be to deal with the expulsion and admission issue. The education boards will have appeal functions in relation to expulsions and admissions.


Deputy Byrne: The Minister answered a parliamentary question today which said that there are in excess of 30 students rambling the streets of Cork who have been expelled or suspended from schools and there is no obligation on these schools to inform the Department of Education. If there are as many as 30 rambling the streets in Cork, I would not be surprised if there are literally hundreds of children rambling the streets of Dublin, having been suspended or expelled from school. It is outrageous that, in 1996, there is no compulsion on school authorities to inform the Department of Education so we can get a clear picture of what is happening.


We spoke about how we treat these children and we hear a figure of £40,000 for incarceration in jail and so on. Is the figure of £70,000 to maintain a child in one of the special schools correct?


Dr. Thornhill: At the highest end of the scale, it is £74,000 for Trinity House. The main element there is the very high staff:pupil ratio. As you rightly said, these boys are extremely damaged when they arrive into Trinity House. They live there with very close attendance by the care workers and the teachers working there. The costs are not out of line with international comparators. When I first saw them I was quite taken aback but having looked at it and visited Trinity House I do not think the regime is unreasonable in terms of value for money.


Deputy Byrne: It would seem that we are losing the battle at primary level. There is an ever increasing number of out of control children, presenting at various agencies, be it health boards, special schools or the justice system. We are losing out. These children are coming out on a rapid basis and it is phenomenally frightening. Why is it that the primary education system is not preventing this, given the money going into it?


I understand there is a new pilot project for teacher counsellors. Given that it costs £70,000 to keep an out of control child in Trinity House, would you not agree that it would be better to start pumping that money into the teacher counsellor form of education at primary level. We could try and keep as many children as possible in society and working in a healthy way rather than let them slip through the system and into all the other expensive agencies that must pick up the tab at the end of the day.


Dr. Thornhill: I agree that early intervention is the most appropriate strategy. There will always be cases where early intervention will not work and there will always be a need for some elaborate institutional response. For example in the 1940s there were 6,500 boys and girls in orphanages here. That shows that society at that time was also experiencing problems and was responding to them in a different way.


I should have mentioned that aside from the establishment of the education boards and the introduction of the Education Bill, the Government legislative programme also includes a plan to publish a Truancy Bill. That will include provisions for tracking and intervention for pupils who are at risk.


Deputy Broughan: The convicted murderer, Brendan O’Donnell, was previously in Trinity House.


Dr. Thornhill: Yes, he was there for a period of just over a year.


Deputy Broughan: One of the Oireachtas committees visited Trinity House and this Committee has kept an eye on that part of the service in the last couple of years because of events that occurred in some of the schools over the years. Despite what Dr. Thornhill has said about the cost of the schools, perhaps specialist training is not sufficient to pick up people who may be psychopathic or developing a psychosis and may need specialist care at an early age. Do you think that would be the case?


Dr. Thornhill: I do not think so. The array of services is available in Trinity House. I do not want to talk about individual cases because I would need a detailed briefing on them. An assessment by a professional may indicate that somebody has the potential to be very dangerous, but I am not sure any professional would sign a document to say that person’s freedom should be restricted for the rest of his or her life on the basis of a potential or propensity to be a risk to themselves and society. That is a fundamental problem that would be faced. I suspect that in such a case the individual concerned could take the Minister to court.


Deputy Broughan: Could it be the case that some of the professionals involved in looking after that man at that time transmitted views that he was dangerous and, therefore, there should have been follow up with other agencies. Otherwise what is the point of the service?


Dr. Thornhill: Your point is well made. The Children’s Bill will provide for that by putting in place a system whereby the agencies will not be operating in a disconnected way from one another. Without meaning to reflect adversely on the professionals involved, the problem is that professionals differ. In that recent court case we heard persuasive and cogent analyses put forward by different professionals upon which I am not in a capacity to pass judgement, as a layman.


Deputy Broughan: You spend £74,000 per annum on each of the individuals in schools such as Trinity House and for expenditure of that kind one would expect to have recommendations and interlinking with agencies. This case has been a tragedy. The purpose of spending about £8 million in 1994 was to avoid such dreadful circumstances.


Dr. Thornhill: The obvious link up here is the probation and welfare service which is there already. The Children’s Bill will provide for much improved institutionalisation and co-ordination of that.


Deputy Broughan: Generally, you have managed the disposal of some of your excess buildings well, particularly in north Dublin. Some of them in my constituency have become vibrant centres for the community. For example, the Coolock Development Council, of which I am a member, is in a former primary school. It is becoming a fine campus for local community small business. We are grateful for being facilitated by the Department and the local Church.


When do you expect the reduction in the number of children coming into primary schools to rise again?


Dr. Thornhill: We do not know as demography is a most imprecise area. Family size is falling. In countries where there was a long term secular trend towards falling family size, the family size has increased again - Sweden is an example of that. I think that has been a response to conscious Government policies to affect that. We have projections of about five years and we do not see any bottoming out of the trend in that period.


Deputy Broughan: What proportion of the budget in 1994 went to the primary gaelscoileanna?


Dr. Thornhill: We would have to look back at the enrolments and work through it from there. I do not have that information to hand. We can certainly send it to you.


Deputy Broughan: Apart from the Irish language and culture, what other advantages would a prospective parent of a pupil going to a gaelscoil get?


Dr. Thornhill: I can only talk about what my view of the perceptions would be. I think they would perceive as advantages the Irish language ethos and all the aspects associated with that ethos. They would also be impressed by the record of high academic achievement in these schools.


Deputy Broughan: Are there additional staffing advantages?


Dr. Thornhill: There is a more favourable staffing schedule at the moment.


Deputy Broughan: What is the difference between the ratios in the ordinary national school and the gaelscoileanna?


Dr. Thornhill: As a teacher the Deputy will know that it works on the basis of the staffing schedules. The position is more favourable on the way up and on the way down. That is a technical point and we will get the information for you.


Deputy Broughan: There are advantages in terms of teacher allowances and staffing ratios.


Dr. Thornhill: There are. There is also an advantage in terms of building costs. These reflect policy decisions made at the time. In the White Paper there is a policy decision to put all schools on a level playing field. That is a policy that would affect them and would be developed over a period.


Deputy Broughan: The heads of a Bill are in circulation with regard to the regional boards. I know it is a policy matter, but from a technical point of view do you have any view on whether there should be an eleventh board for the gaelscoileanna and the meánscoileanna?


Dr. Thornhill: The Deputy is right to say it is a policy matter. The position on the education boards Bill is that it has been approved by Government and has been sent to the parliamentary draftsman. It has not been published as yet.


The Minister’s position on the establishment of a separate board for the gaelscoileanna is that it would not be consistent with the policy thrust of her proposals. It would create a situation of ghettoisation of the gaelscoileanna. It would also run the sizeable risk that the teaching of Irish would then be seen to be a matter for the board responsible for the Gaeltacht schools if one were set up, and could adversely affect the status of Irish in other areas. It would lead to problems of co-ordination.


We had a discussion earlier about resource teachers or special facilities being made available in different areas. The whole rationale behind the establishment of education boards as seen by the Minister is to put in place mechanisms to allow for more efficient co-ordination of education services. At the moment. schools are almost stand alone entities without any support.


The Minister believes that if there was a separate board for the gaelscoileanna, it would intensify rather than ease the co-ordination problems. I am talking about a policy area. Maybe prudence should stop me from speaking on it any further.


Deputy Broughan: By definition, the eleventh board could not be a regional but a national one.


Dr. Thornhill: It would be dispersed.


Deputy Broughan: When a number of primary schools in an area are being amalgamated, is it not policy that boards of management, parents and staff must be closely consulted? If all those entities were deeply opposed to an amalgamation, could it still go forward?


Dr. Thornhill: An amalgamation would never be forced against people’s will. However, most people behave reasonably. The reasons for an amalgamation would often be because, for example, a certain school was not viable etc. and most people would see the logic of that position.


School amalgamations are generally very emotive and difficult events. The staff that deal with them in the Department have developed a considerable amount of skill and patience over the years in dealing with them. However, there is certainly no question of men or women coming from Dublin and telling people that their school is closing. There are often other attractions, such as a better school building etc. Of course, school transport is another aspect.


Chairman: We note Vote 27.


VOTE 28-SECOND-LEVEL AND FURTHER EDUCATION

Dr. Thornhill further examined.

Chairman: Can you outline the main components of subhead H, miscellaneous post-primary services?


Dr. Thornhill: Certainly. The elements are the leaving certificate vocational programme, funding for the National Council for Vocation Awards, an Ceard Teastas Gaelige, and Teastas i Teagasc na Gaelige and the typewriting teacher’s diploma. There are special initiatives for retention of pupils from disadvantaged areas, which includes special measures for junior cycle education for travellers, aid towards school books and special initiatives for disadvantaged adults.


Chairman: Under category 6 of Appropriations-in-Aid, there was a shortfall of approximately £66,000 in receipts due from contributions towards the building and equipping costs of community schools due to the non-signing of the deeds of trust. What caused this delay and has this problem been rectified?


Dr. Thornhill: There are 61 community schools and deeds have been signed and the local contribution paid in full in respect of 25 of them, which leaves 36 schools. Some 20 of them are at various stages of preparation of drafting, while this has not yet commenced for 14 others. Bray VEC has refused to nominate a trust for Ballywaltrim Community School and in another case, the religious order involved in the community school are seeking an amended deed of trust.


We are looking at the residue of the consequences of an intense dispute and debate between the VECs and the other parties about community schools which went back to the early 1980s and earlier.


Chairman: That £66,000 is not lost? It can be recouped?


Dr. Thornhill: Yes, it can.


Deputy Byrne: I am disappointed that the £10,838,000 was not taken up under subhead F. The notes remind us that these savings arose mainly because the level of activity in the Vocational Training Opportunities Scheme and the Youthreach programme did not reach the anticipated levels. We referred to disadvantaged children earlier. One of the most excellent educational methods, used to bring these children in, is the Youthreach programme. Why is it, with so much disadvantage and alienation being experienced by so many children leaving school early, that this £10 million was not used under subhead F?


Dr. Thornhill: Is this non-capital grants to Vocational Education Committees?


Deputy Byrne: Yes.


Dr. Thornhill: Savings were made when some courses which were due to start in September did not get off the ground until November because of difficulties in recruiting people for them. That led to a saving of £1.6 million. In some cases, no summer programmes were provided for most of the participants. This involved people who attended the dispersed mode of VTOS. These people went to courses in normal schools, no special provision was made for them and a saving was made. Those people would have returned to the Live Register for the summer months and would not have been receiving training allowances under the VTOS subhead.


Another substantial saving was made when a third of participants were accommodated on existing courses where pay and equipment costs were not charged to the VTOS heading. The services of a number of supernumerary teachers were appointed at no cost to the VTOS programme.


Deputy Byrne: That might explain the £10 million but this saving does seem to be a starting sum of money. There must be something fundamentally amiss with the scheme. Dr. Thornhill mentioned that £1.3 million was saved because some schemes earmarked for September did not start until November. Whoever is managing the funding of these projects or schemes does not seem to be doing so efficiently.


Dr. Thornhill: As the Deputy knows, it is a decentralised scheme with the VECs playing a big role in the provision of courses. It is also expensive in terms of unit costs in that participants in the course also get allowances. If there is a shortfall in the projection of the number of participants, that will knock its way to the budget fairly quickly. We do not take any great comfort from this outcome.


Deputy Byrne: Are you saying there is not sufficient interest by participants in the scheme; the schemes are there but the participants are not?


Dr. Thornhill: It is very much locally based and that would be one of its dimensions. However, interest might be the wrong word. We are dealing with a programme targeted at people who have not fared well in the education system and there is a need to develop their interest in it. That often means dealing with the perceived relevance of the courses. There must be a development of responsiveness to customer needs. The identification of that and then finding the right people to teach the courses is another problem. There is a need for careful lead in and planning. The programme has, of course, been expanding rapidly. There were only around 600 people on the VTOS course five years ago. There is a substantially greater number of people on it at this point.


Deputy Byrne: Under subhead K, there was a small overrun of £38,000 because of additional education costs for the Bosnian refugees. Is there any way of indicating how we underestimated these requirements?


Dr. Thornhill: Very simply, more turned up than we expected.


Deputy Broughan: There are quite a number of Bosnians in my constituency. Is the Department providing special classes for these refugees because some of them seem to have gone straight into the primary and secondary school systems? Indeed, a couple of them graduated recently with the leaving certificate. Can Dr. Thornhill elaborate?


Dr. Thornhill: The Deputy is correct. The emphasis for many of them would be on participation in the mainstream system but there is a need for English language training. The main item under this subhead would be English language training for Bosnian refugees. That training would have been carried out mainly in specialist institutions.


Deputy Broughan: Under subhead J, the budget for examinations is about £12 million at second-level. The second-level examinations have become more complex, in particular, as we have introduced oral language examinations. Is Dr. Thornhill confident that the recent problems with a number of the examinations, which have been highlighted in the Dáil, will not recur?


Dr. Thornhill: This problem has been addressed and the Minister has made a number of statements in the Dáil about it. Price Waterhouse management consultants are undertaking an inquiry at present but we have not received its report. We took absolutely no comfort or joy from those incidents - far from it. It has encouraged us to redouble our efforts to appraise the efficiency of those systems. Our objective would be to make sure those problems never occur again.


Deputy Broughan: If we do not undertake continuous assessment, is there a danger that the end of term or year, exams tend to get too complex with a number of different sittings? Have we got to the stage where we need a more simplified structure where examination papers cannot go missing and this kind of problem cannot occur?


Dr. Thornhill: The Deputy is right. The operation of the examinations has become enormously complex - we are talking about 120,000 people sitting a range of 30 or so subjects at two or three different levels with two papers and different components, that is, oral and aural exams, etc. It is a huge logistical operation. It is, and has been, policy to encourage a much greater amount of in-school assessment, not just for those organisational reasons, which the Deputy mentioned and which are appropriate and valid, but also because it seemed to be desirable educationally to do so. There is a concern that the system is one where the pupil is pitted against the examiner.


Frankly, there is not an identity of views here between the different partners in education, certainly between the Department and the trades unions representing the second level teachers. The view among the Association of Secondary Teachers of Ireland, in particular, is that the nature of Irish society is such that if they were to engage in in-school assessment, it would put there members in an impossible position. In-school assessment is done in other countries. It is an issue which will not go away and which we must continue to address.


Deputy Broughan: Does Dr. Thornhill accept that if somebody takes an examination, part of the papers go missing and that person’s life and career is effected deeply, it is a serious matter?


Dr. Thornhill: Yes.


Deputy Broughan: In the past, we allocated moneys towards the private operators of schools and it is difficult to know exactly how it was spent. Is Dr. Thornhill confident with the auditing of the vast bulk of the present budget for running and ongoing costs, that is, at least £130 million of the second-level budget and about £60 million of the primary school budget? Is he confident that we know what is happening to the money and all of it is spent on the children?


Dr. Thornhill: The vast bulk of the money is spent on teachers’ salaries and without teachers there would be no education system. As somebody said, it would be a funny looking education system if there were no teachers it in. It would be equally funny if there were no pupils in it.


The auditing arrangements are that the VEC sector is now being audited by the Comptroller and Auditor General and the community schools sector is being audited by the Department’s internal audit team - we discussed this at previous meetings of the Committee. The voluntary second level sector, which is the biggest sector, receives non-teacher pay funding by means of a capitation grant. The main complaint from that sector is that the capitation grant is not sufficient and most schools in the voluntary sector engage in fund-raising activities to supplement that grant.


The White Paper proposes that the education boards, when established, will also have an audit programme within their areas of jurisdiction so, in fact, there will be a fully fledged audit procedure in place at that stage but there is no auditing procedure for the voluntary second-level schools at present.


Deputy Broughan: You could’nt say how, since the State was established, the money voted by the Oireachtas under these subheads for voluntary schools at primary or second level, was spent. For example, allegations would have been made years ago that funding for one school was used to build another school hundreds of miles away, and there is no way, in fact, that the Department can prove whether that was or was not the case.


Dr. Thornhill: We would have to look here at the plausibility of the overall outcome. First, if we are going back over a long period of time, significant State funding of voluntary secondary schools did not begin until the 1960s so prior to that those schools were reliant purely on their fees, fund-raising activities and the resources of the organisations which ran them. If one looks at the size of the State capitation grant and compare it with the data we have on the costs of running those schools ——


Deputy Broughan: You could say that even since the 1960s hundreds of millions of pounds have been allocated to voluntary schools but we did not have any auditing system in place and will not have it in place, according to Dr. Thornhill, until the regional boards are set up. Even at that stage, will it be possible for an auditor to assure the public that all of the moneys given to a relevant school are spent on the children or school?


Dr. Thornhill: The boards of management of these schools have a responsibility for financial management.


Deputy Broughan: It is an important point.


Dr. Thornhill: It is. The joint managerial board of the Association of Management of Voluntary Schools encourages all boards of management to follow specific financial guidelines and every school is asked to produce a financial statement prepared by an accountant. If we can distinguish the Deputy’s question on a micro and macro; on a micro level I cannot sit in front of the Committee and say there may not have been a misappropriation in the past. What I can say is that if we look at the aggregate outcomes, the schools have functioned on the basis of a level of funding which we know has not met their full costs and the outcomes in terms of education have, by and large, been quite good and will be judged to be so.


Deputy Broughan: Over a considerable time this State allocated hundred of millions of pounds to the voluntary sector at primary and second-level and there were no auditing procedures of any kind in place. Is that not the reality?


Dr. Thornhill: The factual situation the Deputy describes is correct. There was no auditing procedure reporting to the State.


Deputy Broughan: This is the Committee of Public Accounts and we are talking about large amounts of public expenditure here. It is important that that fact would be clear. We do not, as of yet, have an auditing procedure in place of considerable amounts of moneys. We could include some elements of third-level also in addition to primary and second-level. It remains for the State to take an interest in and to ensure that taxpayers’ money is properly audited.


Dr. Thornhill: I concur absolutely with that point.


Chairman: We may note Vote 28.


VOTE 29 - THIRD-LEVEL AND FURTHER EDUCATION

Dr. Thornhill further examined.

Chairman: With regard to Appropriations in Aid, the accounts state that the reason for the variation between outturn and Estimate provision was that payments of European Social Fund aid were received in late December 1994, which had expected to be delayed until 1995. For what reason did you expect this delay?


Dr. Thornhill: Deputy O’Malley raised this earlier. A certification procedure has to take place for ESF moneys. Once this occurs, the application goes to Brussels. We cannot always predict how quickly Brussels will deal with it.


Deputy Broughan: Why was the outturn for subhead A.6, which deals with the ESF programme, so much less than the provision?


Dr. Thornhill: This relates to ESF grant aided programmes in regional technical colleges. The number of students was less than anticipated and this was the first year that the total cohort of students was subject to a means test for maintenance grants. The number of students who qualified for the lower home maintenance grant, instead of the away grant, was greater than we expected. When I appeared before the Committee last year, there was an audit query about payments to RTCs and their phasing. The Comptroller and Auditor General drew attention to the fact that RTCs had substantial cash balances. We made a clawback from the colleges and this is reflected in the outcome.


Deputy Broughan: What is the net cost this year of free third-level education?


Dr. Thornhill: By net cost do you mean the gross cost of the grants minus the savings on covenant relief?


Deputy Broughan: Yes.


Dr. Thornhill: Covenant relief is an estimation issue for the Revenue Commissioners. From memory, we were working on a projection of £6 million to £8 million at the time. I cannot think of anything which would cause us to revise this. We are dealing with two widely seperated parts of the account - income and expenditure.


Deputy Broughan: How much additional moneys are we putting forward to cover the situation which will exist this October?


Dr. Thornhill: The 1996 Estimates provide for gross expenditure of approximately £50 million on third-level education.


Chairman: We can note Vote 29.


The witness withdrew.


THE COMMITTEE ADJOURNED.


LIST OF APPENDICES

1.Correspondence from the Office of the Revenue Commissioners regarding:-


(a)tax yields from the farming community,


(b)payments made to Revenue Solicitors,


(c)operations of the Revenue Sheriffs and a copy of the Sherriff Operational Guidelines, and


(d)the number of people prosecuted and imprisoned for non-payment of tax.


2.Correspondence from the Office of the Revenue Commissioners regarding payments to external solicitors.


3.Correspondence from the Department of Transport, Energy and Communications regarding:-


(a)fees paid in relation to the restructuring of the ESB,


(b)the level of EU funding that was provided for energy conservation (Subhead B.3),


(c)information in relation to an impounded Yugoslavian aircraft, (Note 2, Statement of Current Assets),


(d)action being taken by the petroleum industry and the Health and Safety Authority in relation to the training of Irish workers to work on offshore oil rigs, and


(e)land owned by the State adjacent to Dublin Airport.


4.Correspondence from SIPTU regarding the cost of employing Irish workers on offshore oil rigs.


5.Correspondence from the Department of Justice regarding the collection of parking fines (Ongoing correspondence in relation to the collection of on-the-spot parking fines).


6.Correspondence from the Department of Justice regarding information requested on:-


(a)Vote 19 - Office of the Minister for Justice,


(b)Vote 20 - Garda Síochána, and


(c)Vote 21 - Prisons.


7.Correspondence from the Department of Tourism and Trade regarding:-


(a)information requested in relation to a review on Bord Fáilte Éireann, and


(b)information in relation to Vote 35 - Tourism and Trade.


8.Copy of Department of Finance Circular on Tax Clearance Procedures and Public Sector Contracts.


9.Correspondence from the Department of Education in relation to:-


(a)the estimated value of the primary school network,


(b)participation in the Home School Liaison Programme,


(c)remedial teachers,


(d)further information regarding projects mentioned in Paragraph 33 of the 1994 C&AG’s Report,


(e)psychologists and counsellers employed in the primary sector,


(f)consultancy,


(g)National Association of Training Centres for Travelling People, and


(h)county VECs that applied for grants under Schedule B - Disadvantaged Youth.


10.Correspondence from the Department of Education in relation to:-


(a)expenditure under Subhead F1 in relation to the O’Donoghue High Court action,


(b)gaelscoileanna, and


(c)information in relation to the release of the Minister’s interest in the primary school network.


11.Correspondence from the Department of Finance in relation to:-


(a)Paragraph 31 of the 1994 Report of the C&AG, and


(b)the distribution of National Lottery funds in relation to community recreation funding.


12.Copy of the Department of Finance circular regarding revised arrangements for dealing with Extra Exchequer Receipts (Ref: Paragraph 31 of the 1994 Report of the C&AG).


13.Correspondence from the Department of the Environment in relation to the disposal of impounded vehicles (Ref: Minute of the Minister for Finance in response to the Final Report of the Committee of Public Accounts on the Appropriation Accounts 1993).


14.Correspondence from each Government Department and Office in relation to the Procurement of Goods in the Civil Service.


APPENDIX 1

Mr Cathal MacDomhnaill


Chairman


Office of the Revenue Commissioners


Dublin Castle


Dublin 2


1 March 1996


Dear Mr MacDomhnaill


I refer to your recent appearance at a meeting of the Committee. During the meeting a number of issues were discussed and you undertook to provide additional information on the following:-


1.In relation to tax yields from the farming community in 1993, 1994 and 1995 the Committee requested the number of farmers to which these figures referred.


2.The terms on which payments are made to Revenue Solicitors and details of the largest payment made.


3.The average period the Revenue Sheriffs are permitted to retain the proceeds of an enforcement before they are forwarded to your office. The Committee also requested a copy of the guidelines issued by your office to Revenue Sheriffs in relation to their duties.


4.The number of people prosecuted and jailed for non-payment of tax.


The Committee would be grateful if you could provide this information by 22 March 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee



OIFIG na gCOIMIŚINÉIRÍ IONCAIM


(Office of the Revenue Commissioners).


CAISLEÁN BHAILE ÁTHA CLIATH


(Dublin Castle).


BAILE ÁTHA CLIATH 2


(Dublin 2)


20, March, 1996.


Ms. Cliona O’Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke,


I refer to your letter of 1 March, 1996 and enclose the information requested by the Public Accounts Committee in connection with the Appropriation Accounts for 1994.


Yours sincerely,


C. C. Mac Domhnaill,


Chairman.


Appropriation Accounts 1994

The numbers of farmers represented by the income tax yields from the farming community in 1993, 1994 and 1995


Income Tax paid on farming profits:-


In Year

Amount Paid

Estimated number of farmers

1993

£55.0 million

28,000

1994

£66.5 million

29,000

1995

£70.0 million

29,000

These figures do not include PAYE tax paid on employment income earned by farmers or their spouses. Such tax is included in the overall collection of PAYE and is not distinguishable until after the income tax returns submitted by farmers have been analysed. An analysis of the returns for the income tax year 1992–93, the latest available, indicates that some £56 million in PAYE tax was paid by 18,018 farmers or their spouses.


Farmers also paid income levy amounting to £2 million in 1993, £0.3 million in 1994 and £1.5 million in 1995.


Note: The figures for income tax yields do not include any yields in 1993 and 1994 under the 1993 tax amnesty. Also excluded from the figures are tax receipts from deposit interest retention tax attributable to interest from farmers deposits as it is not possible to apportion that tax between particular classes of taxpayers.


The terms on which payments are made to External Solicitors and details of the largest payment made.


1.Commission is paid by Revenue at the rate of 10% on the first £2,500 collected, 2.5% on amounts between £2,500 and £15,000, and 0.5% on amounts in excess of £15,000, together with actual outlay incurred. However, the minimum payment payable shall be that which would otherwise have arisen under either 2 or 3 below as appropriate.


2.Where cases are withdrawn prior to papers having been lodged for judgement and no money is collected, a professional fee of £55 where the case was proper to the High Court, or £25 where proper to the Circuit Court or £17.50 where proper to the District Court is paid by Revenue together with actual outlay incurred.


3.Where papers have been lodged to obtain judgement and no money is collected, a professional fee of £95 for a High Court case, £50 for a Circuit Court case and £35 for a District Court case is paid by Revenue together with actual outlay incurred.


4.Two external solicitors are engaged by the Collector General to act on his behalf. Payments are made to each on a monthly basis. The largest monthly payment made in 1994 was £148,164 and in 1995 £132,424.44. Total gross payments to both solicitors amounted to £1,165,897 in 1994 and £975,933.95 in 1995.


The average period the Revenue Sheriffs are permitted to retain the proceeds of an enforcement before forwarding to Revenue and a copy of the Sheriff Operational Guidelines


Where certificates are paid in full, the amount collected in a month should be transmitted to the Collector General by the middle of the following month.


Instalment / part payments should be transmitted only following the final payment.


The duration of an instalment arrangement should not exceed six months. If the final instalment is not paid within six months, the money on hands should be paid over with the next monthly return and the certificate retained by the Sheriff to pursue the balance of tax, interest and poundage.


The balance held by the Sheriff at any one time should not exceed the total of the previous 4 months payments.


A copy of the Sheriff Operational Guidelines is attached.


Sheriff Operational Guidelines

- General -

1. Sanctions against late payment by taxpayers

The crucial operational requirement is that the taxpayer always finds it more expensive to deal with his tax liabilities through the Sheriff than to deal with these liabilities in a timely fashion through the Collector-General.


2. Enforcement

Certificates are issued in batches; each batch covering one taxhead only. Subject to the necessity to avoid undue delay in executing individual certificates, the Sheriff may, it he so chooses operate geographically and/or coordinate certificates (across taxheads).


Statutory interest charges are computed to the date of issue of enforcement certificates and any delay in execution dilutes the impact of sanctions against late payments. If, therefore, after a letter and a call to the defaulter payment is not made, the Sheriff should seek seizure clearance from the Collector-General. On receipt of clearance a seizure should be made of whatever is there to be seized even if it does not result in full discharge of the liability. The requirement applies regardless of what the certificate contains e.g. equitable and/or estimated tax and corresponding interest or interest only.


It is not necessary to seek clearance to seize if the defaulter pays the tax to the Sheriff but not the interest and/or poundage and the Sheriff may enforce immediately.


3. Estimated Assessments

In the absence of returns, liability has to be estimated. The defaulter will have had ample opportunity to lodge returns or to avail of the “Appeal” procedure and there is therefore no option but to enforce estimates as if they were the equitable tax even of this involves seizure.


4. Interest

The basis of calculating interest is as set out in 2. above and collection of the total interest as well as the tax, due on foot of the certificates is required. Transmission to the Revenue of the tax element only is not acceptable.


5. Instalment Arrangement

See Appendix 1.


6. Sheriff Costs etc.

Costs and poundage are to be borne by the defaulter and should not be deducted from the tax/interest payments made. Where costs and poundage are not paid the Sheriff should transmit the payment to the Collector-General but retain the certificates and pursue the fees from the defaulter.


7. Nulla Bona

The Sheriff should indicate the basis on which a “Nulla Bona” return is made and should furnish any other available information which would help Revenue in the case.


8. Out of date Certificates

As in the case of High Court Fi-Fa a section 485 certificate is valid for twelve months after the date of issue. After twelve months they must be renewed and should be returned endorsed “expired”. The legal requirement that the amounts certified should be levied immediately upon receipt of the certificate should however, not be lost sight of and Revenue would wish to have all certificates disposed of within six months of the date of issue.


9. Conflict of Interest

Enforcement certificates relating to a party with whom the Sheriff has a professional association or relationship giving rise to a conflict of interest should be returned indicating accordingly.


10. Action in Specific Circumstances

See Appendix II.


11. Technological Communications

Revenue would wish to have commitment in principle from the Sheriffs to technological advances and would expect to sponsor change, in consultation with the Sheriffs, for the benefit of the enforcement operation and in order to prevent a proliferation of different solutions and possible duplication of facilities.


12. Transmission of Money

Where certificates are paid in full the amount collected in a month should be transmitted to the Collector-General by the middle of the following month.


Instalment/part payments should be transmitted only following the final payment.


The duration of an instalment arrangement should not exceed six months. If the final instalment is not paid within six months the money on hands should be paid over with the next monthly return. The certificate should be retained by the Sheriff to pursue the balance of tax, interest and poundage.


The balance held by the Sheriff at any one time should not exceed the total of the previous four months payments.


If the liability is amended for any reason subsequent to the issue of the certificate to the Sheriff, the Sheriff should amend the amount on the certificate to correspond with the revised liability when transmitting the payment.


13. Reporting

Revenue requires a monthly report incorporating


(i)a running account, by taxhead, for certificates on hands, received, disposed of, remaining on hands together with a note of the oldest certificate by date of issue on hands for each taxhead (table A) and


(ii)returned certificates segregated by categories i.e. paid in current money transmission, withdrawn from enforcement on Collector-General’s instructions, Nulla Bonas, unenforceable because of cessation of trade, left address, clients, out of date and unenforceable for other reasons (segregated further to highlight any recurring reason, if necessary) [table B] and


(iii)List payments in current money transmission showing the date of payment, certificate number, name, registration number or serial number, face value, revised amount, amount paid (table C)


(iv)the balance on hands at the end of each month (table D). For example the April report should show the amount on hands at the end of March.


Revenue requires a 6 monthly report incorporating the opening balance, the amount collected in the six months, the amount remitted in the same period, the balance on hand verified by a bank certificate and by a bank reconciliation certificate from the Sheriff’s own auditor (table E).


Appendix 1.

Instalment Arrangements

Section 485 (2) of the Income Tax Act, 1967, requires that “immediately upon receipt of the certificate the Sheriff shall proceed to levy the sum therein certified to be in default by seizing all or any of the goods, animals and other chattels within his bailiwick belonging to the defaulter etc.” and following from this the Revenue would wish to have all certificates disposed of within six months of the date of issue.


Within these parameters the Revenue accepts that the Sheriff must be allowed some discretion in particular cases in so far as the assessed taxes, i.e. Income Tax and Corporation Tax, are concerned, where a defaulter might be faced with payment of a large bill which related to past accounting periods when times generally were better. However, in relation to PAYE/PRSI and VAT liabilities it should be borne in mind that third party interests are involved and payment of arrears is not to be regarded as payment out of the defaulter’s own resources. In addition PAYE/PRSI and VAT liabilities recur at a frequency which could result in even greater amounts being due in respect of current liability by the time an instalment arrangement would have run its course.


Furthermore, interest ceases to be calculated from the date of issue of the certificate and any delay in enforcing for the full amount benefits the defaulter because the interest certified for collection is less than the statutory amount which would be due by reference to the actual dates of payment. An application for an instalment arrangement may therefore be a ruse on the part of the defaulter to gain the benefit rather than an indication of inability to pay.


Where an instalment arrangement cannot be avoided the duration should not exceed six months.


Appendix II

Sheriff Operational Guidelines

Action to be taken in specific circumstances


A.The sheriff is told by the defaulter that

1. The tax was paid to Revenue some time ago.

Ask the taxpayer for the date of payment and the receipt number and notify the Collector-General’s Office. If the receipt does not relate to the period and tax on the certificate the Sheriff should proceed with enforcement.


2. He recently sent payment to the Collector-General.

The Collector-General will notify the Sheriffs of any payments received and the Sheriffs should pursue any balance of tax due together with interest and poundage.


3. The tax is not payable and the taxpayer has been/will get in touch with Revenue.

Tell the defaulter that the Sheriff must proceed with enforcement. It is up to defaulter and not the Sheriff to get matters sorted with Revenue. Section 9 of Finance Act, 1983 provides that before a late appeal in respect of tax at enforcement can be admitted, payment in full of the estimated tax and interest, as shown on the certificate, must be made. Where a taxpayer applies for admission of a late appeal or for the admission of an appeal the Inspector of Taxes or the Appeal Commissioners will require evidence of payment to the Sheriff. The taxpayer will therefore require a receipt showing the amount of tax and interest paid. This receipt should quote the number of the relevant Revenue Certificate.


4. The tax payable is less than that shown on the certificate and the taxpayer or his accountant has been/will get in touch with Revenue.

As for 3. above.


5. The liability is more than the amount on the Certificate.

Accept payment of the amount of tax and interest on the certificate. Tell the taxpayer to send the balance of the tax due to the Collector-General together with the relevant returns.


6. He cannot pay the full amount or he needs time to pay.

Tell the defaulter that the Sheriff must proceed with enforcement and if the defaulter makes no effort or cannot raise the necessary funds you should seize whatever goods are available for seizure (after first obtaining seizure clearance from the Collector-General).


7. Taxpayer lodges a claim for a VAT repayment as payment of a liability on a certificate.

The Sheriff should not accept the VAT claim. The VAT is not available for offset until the claim has been verified by the Collector-General.


B.Circumstances changed since the issue of the certificate.

The Collector-General will withdraw the certificate in the event of the taxpayer not being liable for any tax or interest for the period on the certificate. If the taxpayer is liable for a reduced amount the Collector-General will notify the Sheriff of the new amount.


The number of people prosecuted and jailed for non-payment of tax.


On the Inland Revenue side, two jail sentences were imposed in recent years for tax offences. In 1993 an individual was sentenced to 6 months jail for failure to file tax returns but the sentence was quashed in the Supreme Court on appeal. In 1994 another individual was sentenced to 10 months’ jail for making a false claim to a VAT repayment; a stay has been put on this sentence, for review in June, 1996.


Since January, 1993, a total of 90 persons received jail sentences for failure to pay penalties imposed by the Courts following successful prosecution and conviction for various Excise offences, namely, misuse of marked gas oil, evasion of betting duty and unlicenced liquor trading. In addition, in period 1993 to 1995, some 1,760 cases were successfully prosecuted and fines imposed by the Courts for either failure to file tax returns or for customs and excise offences.


Mr Cathal MacDomhnaill


Chairman


Office of the Revenue Commissioners


Dublin Castle


Dublin 2


28 March 1996


Dear Mr Mac Domhnaill


I am directed by the Chairman, Mr Denis Foley TD, to refer to your correspondence dated 20 March 1996.


At its meeting today, the Committee considered the correspondence and requested clarification in relation to the following matters:-


1)In relation to payments made to external solicitors


-the reasons external solicitors are engaged and the basis on which they are engaged.


-the names of the external solicitors and where they are based.


-the criteria that apply in the appointment of external solicitors and the type of contract that applies to them.


-Whether a panel exists for the engagement of external solicitors or if the contracts are publicly advertised.


2)In relation to prosecutions for tax offences, whether anyone had, in fact, served time in jail for non-payment of tax.


The Committee would be grateful if you could provide this information by 12 April 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



OIFIG na gCOIMISINÉIRÍ IONCAIM


(Office of the Revenue Commissioners).


CAISLEÁN BHAILE ÁTHA CLIATH


(Dublin Castle).


BAILE ÁTHA CLIATH 2


(Dublin 2)


15, April, 1996.


Ms. Cliona O’Rourke


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin, 2.


Re: Appropriation Accounts 1994.


Dear Ms. O’Rourke,


I refer to your letter of 28 March, 1996 and enclose the information requested by the Public Accounts Committee in relation to prosecutions for tax offences.


Material in relation to the query on external solicitors is currently being compiled and I will revert to you shortly in the matter.


Yours sincerely,


C.C. MacDomhnaill,


Chairman.


Appropriation Accounts 1994

In relation to prosecutions for tax offences, whether anyone had, in fact, served time in jail for non-payment of tax.

On the Inland Revenue side, in addition to those cases referred to in the note enclosed with my letter of 20 March, 1996, there are two cases on record where individuals actually served time in jail (although the length of time is not known) for tax offences. The first was in 1988 when an individual pleaded guilty to eight charges of obtaining VAT refunds by false pretences and was sentenced to 2 years imprisonment on each charge, all sentences to run concurrently. The second was in 1993 when an individual was imprisoned for failure to pay the Court fine imposed following successful prosecution for failure to file tax returns.


On the Excise side, I can confirm that the 90 persons mentioned in my note who, since January, 1993, received jail sentences for failure to pay Court penalties imposed following successful prosecution for various excise offences, actually served time in jail.



OIFIG na gCOIMISINÉIRÍ IONCAIM


(Office of the Revenue Commissioners).


CAISLEÁN BHAILE ÁTHA CLIATH


(Dublin Castle).


BAILE ÁTHA CLIATH 2


(Dublin 2)


8, May, 1996.


Ms. Cliona O’Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Re: Appropriation Accounts 1994.


Dear Ms. O’Rourke,


I refer further to your letter of 28 March, 1996 and enclose the information requested by the Public Accounts Committee in relation to external solicitors.


Yours sincerely,


C. C. MacDomhnaill,


Chairman.


Appropriation Accounts 1994

The reasons external solicitors are engaged and the basis on which engaged.

External solicitors have been utilised by the Collector-General since 1973, to assist in dealing with the large volume (5,000 per annum on average) of cases which need to be pursued by civil proceedings. The intention is that the external solicitors deal with cases of relatively small size and little complexity in the District and Circuit Courts. High Court cases, which are generally more complex and more strongly defended, are usually handled by the Revenue Solicitor. At the time of first appointment, the view taken was that external solicitors, devoted solely to debt collection, were better equipped to process the large volume of cases involved and, notwithstanding the passage of time, Revenue remains of the view that this is still the case and that the external solicitors provide an efficient and cost-effective service. The terms of remuneration have already been communicated to the Committee.


The names of the external solicitors and where they are based.

The external solicitors are P.J. Brady & Co., based in Dublin, and Fitzmaurice Ludlow & Sons, based in Dunmanway, Co. Cork (with a Dublin sub-office).


The criteria that apply in the appointment of external solicitors and the type of contract that applies to them

The external solicitors were selected by the then Revenue Solicitor on the basis of their competence and capacity to perform the duties involved. The agreements entered into with the solicitors were by way of exchange of letters and as such are typical of a solicitor-client relationship. The appointments were sanctioned by the Department of Finance.


Whether a panel exists for the engagement of external solicitors or if the contracts are publicly advertised.

The performance of the solicitors is continuously reviewed, both in comparison with other methods of enforcement, and by reference to previous solicitor performance. The service they have provided has been found to be consistently satisfactory and has improved with the advances in information technology. In general, some 60% of cases referred to the external solicitors result in payment within three months.


The value of a long-term relationship with the external solicitors is high. Many cases run for several years as they progress through the various stages of the legal debt collection process. In this context, the maintenance of a panel of external solicitors would not be considered an advantage as any change of solicitor would involve considerable disruption of the conduct of cases underway at the time and additional cost and delay to Revenue. The Revenue Commissioners are satisfied that there is no loss of efficiency through the absence of a regular tendering process.


The arrangements will continue to be kept under review.


APPENDIX 2

Mr Cathal MacDomhnaill


Chairman


Office of the Revenue Commissioners


Dublin Castle


Dublin 2


16 May 1996


Dear Mr Mac Domhnaill


I am directed by the Chairman, Mr Denis Foley TD, to refer to your correspondence dated 8 May 1996 in relation to the appointment of external solicitors.


At its meeting today, the Committee considered the correspondence and requested the following information:-


1.The identity of the Revenue Solicitor at the time of the original selection.


2.The selection method used in appointing the external solicitors in 1973 and whether the criteria have changed since then.


3.Clarification of your statement “the agreements entered into with the solicitors were by way of exchange of letters and as such are typical of a solicitor-client relationship”.


In addition, the following matters were of particular concern to the Committee and your observations in relation to those concerns are requested.


1.The absence of public tendering in relation to the appointment of external solicitors on an annual or bi-annual basis.


2.Whether the Office of the Revenue Solicitor has the necessary skills to carry out a detailed review of the current system.


3.Whether it would be more appropriate for the Chief State Solicitor’s Office to select external solicitors for engagement by the Revenue Commissioners.


4.The reason the Office of the Revenue Commissioners would not support the concept of having a panel of solicitors from which external solicitors could be selected.


The Committee would be grateful for a reply before 7 June 1996.


Yours sincerely


Cliona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



OIFIG na gCOIMISINÉÍRÍ IONCAIM


(Office of the Revenue Commissioners).


CAISLEÁN BHAILE ÁTHA CLIATH


(Dublin Castle).


BAILE ÁTHA CLIATH 2


(Dublin 2)


17 June, 1996.


Ms. Cliona O’Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Re: Appropriation Accounts 1994


Dear Ms. O’Rourke,


I refer further to your letter of 16 May, 1996 and enclose the information requested by the Public Accounts Committee in relation to the appointment of external solicitors.


Yours sincerely,


C. C. MacDomhnaill,


Chairman.


Appropriation Accounts 1994

The identity of the Revenue Solicitor at the time of the original selection.

Alexander C.P. Ross


The selection method used in appointing the external solicitors in 1973 and whether the criteria have changed since then.

As previously indicated, the firms of solicitors were selected because of their proven competence and capacity in the handling of large volumes of debt collection work on terms as to remuneration and other conditions which, to the Revenue Solicitor, the Revenue Commissioners and the Department of Finance appeared to be reasonable. The criteria have not changed in the intervening years.


Clarification of your statement “the agreements entered into with the solicitors were by way of exchange of letters and as such are typical of a solicitor-client relationship”.

This statement was made in response to the query as to “the type of contract that applies to” the external solicitors to indicate that these are the normal arrangements made in engaging the services of solicitors.


The absence of public tendering in relation to the appointment of external solicitors on an annual or bi-annual basis. The reason the Office of the Revenue Commissioners would not support the concept of having a panel of solicitors from which external solicitors could be selected.

The nature of the work, including as it does a large number of cases whose life extends to several years, results in a large block of work on hands with the solicitors at any given time and there is therefore no natural cut-off point at which work could be offered to tender. This is due in the main to the taxhead driven method by which cases are refered for enforcement. Computerised scanning of taxhead files, by reference to various parameters, selects cases for a particular tax and adds these to other cases for the same taxpayer which are already with a solicitor. There is therefore no tranche of readily available work for assignment elsewhere.


In this context, as previously stated, the maintenance of a panel of external solicitors would not be considered an advantage as any change of solicitor would involve considerable disruption of the conduct of cases underway at the time and additional cost and delay to Revenue. As the performance of the external solicitors, which is continuously reviewed, has been found to be satisfactory there was no special impetus to seek new agents, whether by tender or otherwise but the Commissioners are satisfied that there was no loss of efficiency through the absence of a regular tendering process.


However, Revenue is now developing a caseworking approach to collection. This initiative has far-reaching implications for the manner and volume of enforcement activity, as the new approach will progressively reduce reliance on high-volume enforcement of single tax period liabilities. This reliance will be replaced by more extensive caseworking, taking account of the overall position of the taxpayer. Enforcement will be less frequent, and when it is necessary it will encompass all outstanding liabilities and all interest due. We are currently reviewing the impact our new case-working approach will have on our need for solicitors’ services. Our review will deal with the likely nature and content of the service required in the future. Once the new service requirement has been quantified, we will then be in a position to consider further the possibilities of tendering.


Whether the Office of the Revenue Solicitor has the necessary skills to carry out a detailed review of the current system.

As mentioned above the impact of the new case-working approach on our need for solicitors’ services is currently being examined in Revenue. This review of the system is being carried out by the Offices of the Revenue Solicitor and the Collector General and will take all relevant factors and conditions into account including effectiveness, efficiency and value for money. We are satisfied that the necessary skills and expertise are available in Revenue for this review.


Whether it would be more appropriate for the Chief State Solicitor’s Office to select external solicitors for engagement by the Revenue Commissioners.

The Office of the Chief State Solicitor would not appear to have any function in this matter. That Office provides legal services to the Attorney General, the Director of Public Prosecutions and all Government Departments other than the Revenue Commissioners. The Office of the Revenue Solicitor exists to provide legal advice and services to Revenue and is fully competent to evaluate and arrange for such advice and services.


APPENDIX 3

Mr John Loughrey


Secretary


Department of Transport Energy and Communications


Kildare Street


Dublin 2


19 March 1996


Dear Mr Loughrey


I refer to your recent appearance before the Committee of Public Accounts.


During that meeting you undertook to provide the following additional information which was unavailable to you at that time.


1.The amount of money paid to McKinsey Consultants and Electricité de France in consultancy fees in relation to the restructuring of the ESB.


2.The level of EU funding that was provided for energy conservation, which was referred to under subhead B.3.


3.In relation to the impounded Yugoslavian aircraft, referred to in Note 2 of the Statement of Current Assets, the Committee requested information on the type of aircraft involved and the standard depreciation policies of airlines for aircraft such as this.


In addition you undertook to provide notes on the following matters:-


-the action being taken by the petroleum industry and the Health and Safety Authority in relation to the training of Irish workers in order to facilitate their work on the offshore oil rigs.


-the current position in relation to land owned by the State adjacent to Dublin Airport,


-the recent difficulties in relation to a planning application in the vicinity of Dublin Airport to which the Department objected and on which agreement was subsequently reached; and the details of the agreement.


The Committee would be grateful if this information could be provided before 11 April 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



An Roinn lompair,


Fuinnimh agus Cumarsáide


Sráid Chliara,


Baile Átha Cliath 2.


Department of Transport,


Energy and Communications


Clare Street,


Dublin 2.


Telephone: (01) 6707444


Direct Dial: (01) 604——


Fax: (01) 6773169



26 April, 1996


Ms. Cliona O’Rourke


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke


I refer to your letter of 19 March in relation to additional information that I undertook to provide to the Public Accounts Committee which was unavailable to me at the time of my appearance on 14 March.


The information requested is as follows:-


1.The consultancy fees paid by the ESB to McKinsey Consultancy and Electricite de France were £966,000 and £71,000 respectively.


2.The level of EU funding provided for energy conservation in 1994 was £476,000, 58% of the £818,000 total spent under Subhead B3 in this area.


3.The type of aircraft involved is a Boeing 737–300 manufactured in 1985. Inquiries made with the aircraft industry have ascertained that standard airline depreciation policies range between 5% and 10% per annum as generally aircraft are considered to have a useful life of between 12 and 25 years depending on the use to which they are put.


Notes on the matters requested are provided on the following pages. It should be noted that there has been no change in the amount of land owned by the State adjacent to Dublin airport since my letter of 28 June 1995 to the Committee.


Yours sincerely


John Loughrey


Secretary


Training of Irish Workers on offshore oil rigs

Since the early 1970’s, Irish rig workers have been employed offshore Ireland by international operators and drilling companies. In the early stages the majority of these workers were unskilled but were given on-the-job training on the rigs with the more technically demanding positions being generally held by non-nationals. Several of the Irish rig workers have since been involved in the offshore internationally and have built up a good expertise and experience of the technical aspects of a rig.


FÁS over the years have sponsored many training programmes to maximise Irish employment in the offshore industry, such as, courses in sea survival and fire fighting. They do not however have facilities to provide a course in helicopter ditching but having discussed such training with the Department, FÁS have expressed a willingness to explore possibilities for its provision. Such training facilities at home would require a substantial financial input especially for start up costs and the cost may be prohibitive. However, an alternative possibility would be to offer assistance towards training in the UK.


The major obstacle to employment of Irish labour on drilling rigs operating in Irish waters is the labour rate demanded by SIPTU members which is approximately twice the rate charged for similar work in North Sea operations. The high cost of employing Irish labour has been the single greatest stumbling block to ariving at reasonable solutions to employment of Irish rig labour. In the absence of any reasonable agreement in that area it is considered that the operators would be slow to offer assistance towards any training which we might propose.


We are anxious that the Irish labour content on drilling rigs operating in the Irish offshore should be as high as possible, but this of course has to be within the constraints of competitiveness, the highest safety standards operating in the industry and has to meet the requirements of European Union law. The Petroleum Affairs Division (PAD) of this Department has liaised closely with Irish Offshore Operators Association (IOOA) on attempts to arrive at solutions to problems for Irish workers seeking employment on drilling rigs.


The Health and Safety Authority monitors the observance of the legislation at workplaces and applies a range of enforcement measures up to and including prosecution. It is required by statute to keep safety and health legislation under review. My Department liaises with the Health and Safety Authority in relation to each drilling operation and intends to meet the Authority shortly to discuss areas of mutual concern.


Land owned by the State adjacent to Dublin Airport.

 

Acres

Aer Rianta Lands

328

Minister’s Lands

2,187

Total at Dublin Airport

2,515

Developed Lands

2,025

Undeveloped Lands

490

Lands earmarked for future development (13 acres for proposed new hotel, 108 for rapid exit taxi way)

121

Lands available for future development (Hanger facilities, second terminal)

369

PLANNING OBJECTIONS TO PRIVATE DEVELOPMENT ADJACENT TO DUBLIN AIRPORT

1.It is understood that the Committees query refers to the development of the Cargobridge site.


2.In March 1995, Aer Rianta, as agent of the Minister, appealed to An Bord Pleanala against two of the conditions attaching to the planning permission granted by Fingal County Council to Cargobridge for their proposed warehouse development. These conditions related to sewage disposal and the requirement for a co-ordinated approach to the access to the site.


3.An Bord Pleanala confirmed the Cargobridge planning permission in July 1995.


4.The Minister concluded a licence agreement with the individual members of the Cargobridge consortium in October 1995 which allowed access to the site along a temporary right of way in return for a consideration of £155,000 as advised by the Valuation Office.


5.The temporary right of way was granted pending an agreement in respect of a permanent right of way, which is currently under discussion between the parties concerned.


Mr John Loughrey


Secretary


Department of Transport Energy


and Communications


Kildare Street


Dublin 2


3 May 1996


Dear Mr Loughrey


I am directed by the Chairman Mr Denis Foley TD, to refer to your letter dated 26 April 1996.


At its meeting on 2 May 1996, at which your letter was considered, the Committee requested further clarification in relation to the following matters:-


1.The current value of the impounded Yugoslavian Boeing 737–300, taking standard depreciation into account.


2.The plans that exist for all of the undeveloped land adjacent to Dublin Airport and the current value of the land.


2.In relation to the training of Irish workers on offshore oil rigs:


(i)Whether the National Nautical Centre, based in Cork RTC, has been involved, or considered for involvement, in the training programmes for possible Irish employees in the industry. If not, the reason it was not so involved.


(ii)Whether there is a policy in existence that requires the employment of a certain percentage of Irish workers on the offshore oil rigs.


(iii)Whether there is a particular reason for the non-employment of Irish personnel.


(iv)The type of assistance that would be offered towards training in the UK. Whether funds have issued to the UK in relation to this issue and, if so, the amount.


The Committee discussed the statement at paragraph 3 of your note, regarding the labour rates demanded by SIPTU members, and has requested the basis for this particular statement. It has also requested details of the research, if any, that was carried out in this regard and the results of any such research. The Committee has sought the comments of SIPTU in relation to this matter.


The Committee would be grateful for a reply before 24 May 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.


Mr John Loughrey


Secretary


Department of Transport Energy


and Communications


Kildare Street


Dublin 2


3 May 1996


Dear Mr Loughrey


I am directed by the Chairman Mr Denis Foley TD, to refer to your letter dated 26 April 1996.


At its meeting on 2 May 1996, at which your letter was considered, the Committee requested further clarification in relation to the following matters:-


1.The current value of the impounded Yugoslavian Boeing 737-300, taking standard depreciation into account.


2.The plans that exist for all of the undeveloped land adjacent to Dublin Airport and the current value of the land.


2.In relation to the training of Irish workers on offshore oil rigs:


(i)Whether the National Nautical Centre, based in Cork RTC, has been involved, or considered for involvement, in the training programmes for possible Irish employees in the industry. If not, the reason it was not so involved.


(ii)Whether there is a policy in existence that requires the employment of a certain percentage of Irish workers on the offshore oil rigs.


(iii)Whether there is a particular reason for the non-employment of Irish personnel.


(iv)The type of assistance that would be offered towards training in the UK. Whether funds have issued to the UK in relation to this issue and, if so, the amount.


The Committee discussed the statement at paragraph 3 of your note, regarding the labour rates demanded by SIPTU members, and has requested the basis for this particular statement. It has also requested details of the research, if any, that was carried out in this regard and the results of any such research. The Committee has sought the comments of SIPTU in relation to this matter.


The Committee would be grateful for a reply before 24 May 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



AN ROINN IOMPAIR FUINNIMH AGUS CUMARSÁIDE


(Department of Transport, Energy and Communications)


BAILE ÁTHA CLIATH 2.


(Dublin 2.)


14 June, 1996


Ms. Cliona O’Rourke


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke


I refer to your letter of 3 May about additional information requested by the Committee as a follow-up to my letter of 26 April.


I am sorry it has taken longer than I would have wished to respond; the additional information is set out below:


1.It is not possible for the Department to give a current value for the impounded Yugoslavian Boeing as this would require an expert’s valuation as well as knowledge of JAT Yugoslav Airlines depreciation policy - as stated previously airlines standard depreciation policy ranges between 5% and 10% per annum.


2.There are 480 acres of undeveloped land at Dublin Airport of which 155 acres have been earmarked for the East lands car park, rapid exit taxi way and the Dublin Airport Hotel. This leaves 325 acres for the development of hangers, terminal development and their ancillary facilities.


All of this land is zoned for agricultural use and in normal circumstances should attract agricultural prices if sold on the open market. However there are a number of variables which can impact on the actual price paid for any particular holding and so it is not possible to put a current value on the land. Aer Rianta has no plans to sell any airport lands and is of the view that it will be necessary to acquire further lands to provide for the future development of the airport.


3. (i)FÁS organises courses on an “as needed” basis for workers involved in offshore exploration activities and involves relevant organisations in conducting appropriate elements of the courses. ‘Offshore Survival, Fire Fighting, and First Aid Certificates’ are issued to participants who successfully complete the course. The National Nautical Centre provides the sea survival element of the courses. Two intensive courses were held in May this year for personnel involved in the 1996 drilling operation.


(ii)It is the policy of this Department to maximise the benefits to the Irish economy from hydrocarbon exploration activities in the Irish offshore. Officials have pointed out to operators that Irish goods and services and Irish workers should be given opportunities to participate in exploration activities. Notwithstanding this it is now not possible to impose any minimum levels of employment of Irish workers on licence holders and operators for particular drilling operations.


(iii)Irish personnel have always played important roles in offshore drilling operations and Irish workers are currently employed in the 1996 drilling operations. This year Maersk and Enterprise Oil agreed with SIPTU to employ 26 Irish people on the drilling of two wells by Enterprise in the Slyne Trough off the west coast. The Petrolia drilling rig, operated by Maersk is being used and the operations are being serviced from Foynes. Operators maintain that high daily rates requested by trade unions based in Ireland prevents the maximisation of Irish personnel in offshore drilling. It is of course a matter for employees and employers to negotiate the wage rates and employee content on the rigs


The hydrocarbon exploration business in North East Europe is an internationally mobile business centred on the North Sea involving a wide range of nationalities. Drilling rigs carry out their operations in a number of jurisdictions and the norm is to employ the same crew at competitive rates in the different jurisdictions leading to continuity and familiarity with working and safety procedures resulting in high productivity and good safety records. Drilling companies would prefer to retain an experienced crew on a continuous basis.


(iv)The seasonal nature of exploration activities in Ireland, with short term temporary employment and the temporary nature of employment does not readily meet the requirements for FAS assisted UK training courses. However, Irish exploration workers did receive funding of approximately £3,500 to attend UK based courses in 1994.


Yours sincerely,


John Loughrey


Secretary


APPENDIX 4

Mr William Attley


General Secretary


SIPTU


Liberty Hall


Dublin 1


2 May 1996


Dear Mr Attley


I am directed by the Chairman, Mr Denis Foley TD, to refer to a recent meeting of the Committee of Public Accounts at which the issue of the training of Irish workers on offshore oil rigs was discussed.


During the discussion a reference was made to correspondence from the Accounting Officer at the Department of Transport Energy and Communications, part of which stated the following:-


“The major obstacle to employment of Irish labour on drilling rigs operating in Irish waters is the labour rate demanded by SIPTU members which is approximately twice the rate charged for similar work in North Sea operations.”


The Committee has sought your comments in relation to this statement and would be grateful if they could be provided as soon as possible.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



HEAD OFFICE: LIBERTY HALL, DUBLIN 1 TELEPHONE (01) 874 9731


19th June, 1996.


Mr. Denis Foley, T.D.,


Chairman,


Committee of Public Accounts,


Dail Eireann,


Dublin 2.


Dear Mr. Foley,


This is to acknowledge receipt of your letter dated 2nd May, 1996 and your reference to the statement of the Accounting Officer at the Department of Transport, Energy and Communications:


“The major obstacle to employment of Irish labour on drilling rigs operating in Irish waters is the labour rate demanded by SIPTU members which is approximately twice the rate charged for similar work in North Sea operations.”


We do not accept this statement as being accurate and would like to make the following points:


1.Pay rates in the Off-Shore Industry are not a unilateral decision of SIPTU and never have been. They arise from negotiations with Off-Shore employers and represent agreements which are arrived at (annually) on the basis of numerous factors such as existing national agreements in Ireland and comparable Irish pay rates in the Off-Shore Industry.


2.A hidden factor in the figures quoted is of course the virtually zero tax regime which applies to UK Off-Shore workers, which results in them having dramatically more take home pay than our members. I am attaching a copy of an article which might be of interest on that subject.


3.Pay is a relatively minor factor in the Off-Shore Industry and the argument being advanced reflects more the desire of companies in the North Sea to retain their own contract style employment i.e. instant hire and fire practice in relation to people employed by agencies, rather than dealing with a unionised labour-force. A better comparison for Ireland would be the Norwegian agreements which apply in the Off-Shore Industry and are more akin to the European norms than the British North Sea practices.


4.As there is a significant drilling programme now being proposed in Irish waters, our union would be anxious to sit down with representatives of the Department of Transport, Energy and Communications and the Irish employer interests at an early date to ensure that we develop a regime in the Irish Off-Shore sector which maximises the return to the Irish economy in terms of jobs, services, and economic benefit generally.


Yours sincerely,


William Attley


General Secretary


REPORT 8


TAX-BREAKS…


NEW DRILL FOR SEMI’S


Sweeping new tax rules which apply to semi-submersible drilling rigs and florels dramatically change the way many British rig workers will pay tax. In fact some may not now pay tax at all. Furthermore, the Inland Revenue is currently considering claims for rebates going as far back as 1991. Biowatt has information about one refund of £49,000 and as many as seven thousand offshore workers could be eligible.


Since October 1995 semi- submersible vessels which have a capability for self propulsion are now accepted by the Revenue as ships for the purposes of Foreign Earnings Deduction.


Legislation. Another important change is that a Foreign Voyage no longer has to include a call into a foreign port. All that is required now is that you must at some time be outside the UK


Designated Area which is the 12 mile limit, and the area specified in the Continental Shelf Act 1964.


The new rules and the conditions needed to qualify for zero taxation are mind bogglingly complex. But put in simple terms, if an offshore worker earns wages in full or in part outside the designated area-even for just one day-he or she may claim back all UK tax paid in that tax year. Have you, for instance-worked in the Norwegian, Danish.


Dutch or Irish sectors since 6th April, 1991? Has your unit visited dry-dock or been stocked in a non-UK area? Have you worked west of the Shetlands? If the answer to any of these questions is yes you possible qualify. You therefore are urged to contact the union as soon as possible. Even if you have made a claim in the past which has failed it may be that the recent rule changes now bring you into eligibility. Here is the check list of the points to look out for


All semi-submersible type vessels with a capability of self propulsion are now accepted as ships by the Inland Revenue for the purposes of the Foreign Earnings Deduction Legislation.


A foreign voyage is any voyage which begins or ends in the UK whether or not the ship calls at a foreign port.


The UK designated area is all areas within the 12 mile limit and those areas specified in the Continental Shelf Act 1964.


Absence from these areas for more than half the days in any 365 day period must be shown. The rule that 90 of these days must be consecutive does not apply. But at no time must the running total of days spent in the UK exceed the total of days spent out. Holidays abroad count towards your total of days out.


If 183 days or more in any 365 day period are spent outside the UK 12 mile limit, any earnings made, in whole or in part, (even one day) outside of the UK area as defined by the “Continental Shelf Act”, means that the earnings for that entire tax year will qualify for 100% Foreign Earnings Deduction.


Non Salaried Day Rate/Ad Hoc employees will be considered individually subject to providing answers to the following:


Terms and Conditions of Employment must be subject to a contract of employment (copy of contract required) or subject to the Offshore Diving Industry Agreement or other such Agreement.


Are you included upon and for provided with a Roster or Schedule covering periods to be spent offshore.


Are you advised when required back offshore.


How long have you worked for the company and details of periods spent on and offshore in each year (completed form P84).


Are payslips received whilst onshore.


Are you entitled to Summary Sick Pay whilst onshore.


Are P45’s issued after each offshore period.


A full review of all claims is now being undertaken. The Revenue Inspector asks that where possible you should avoid telephoning or writing to Cease 1 regarding claims previously submitted until this review is complete.


If you have yet to claim do contact the union urgently and if you need advice about whether or not you qualify let us know what the position of your unit was at the time for which you wish to claim. We will let you know.


Of course, members of the OILC will have Foreign Earnings Deductions Claims pursued absolutely free with no commission, fees or claw-back of expenses. Non-members will not be so fortunate. A bevy of agencies and consultants have sprung up offering their services- at a price. Some are taking £120 per year plus a registration fee on top. Others are demanding a betry commission. If you are not a member of OILC what are you writing for? Join now.


Members phone now for Information Pack MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE 210118.


APPENDIX 5

11 January 1996


Mr Tim Dalton


Secretary


Department of Justice


723-76 St Stephens Green


Dublin 2


Dear Mr Dalton


I refer to the meeting of the Public Accounts Committee on Tuesday 9 January 1995 at which it discussed your report to the Committee on the collection of parking fines.


The Committee is anxious to know what amount of arrears of fines is currently outstanding and would be grateful for the information by Tuesday 23 January 1995.


Yours sincerely


Kevin Kirwan


Committee Secretariat.



ROINN DLÍ AGUS CIRT


(Department of Justice)


BAILE ÁTHA CLIATH


(Dublin)


22 January, 1996


Dear Mr. Kirwan,


I refer to your letter of 11 January, 1996 to the Secretary concerning the amount of parking fines currently outstanding. I am responding in the Secretary’s temporary absence.


The total estimated amount outstanding from the Parking Fines Office in respect of 1994 and 1995 is £1,628,665 based on 71,406 tickets which were unpaid.


With regard to the fines imposed in Court in respect of 1994 and 1995, the total estimated amount outstanding is £1,195,612 based on 16,055 cases outstanding.


Yours sincerely,


Frank Dunne


Assistant Secretary


Mr. Kevin Kirwan,


Committee Secretariat,


Committee of Public Accounts,


Leinster House,


Dublin 2.


APPENDIX 6

Mr Tim Dalton


Secretary


Department of Justice


72/76 St Stephen’s Green


Dublin 2


1 February 1996


Dear Mr Dalton


I refer to your recent appearance before the Committee of Public Accounts. During that meeting you undertook to provide the following additional information to the Committee which was not available to you at the time.


Vote 19 - Office of the Minister for Justice


1.A total breakdown of Subhead A3 - Incidental Expenses- including full details of the miscellaneous items of expenditure.


2.Full details in relation to Miscellaneous Receipts under Appropriations in Aid.


3.Information on the Criminal Legal Aid Scheme (Subhead C) particularly in relation to fees payable to barristers and solicitors. The Chairman specifically enquired whether fees are paid on a case basis or on each individual appearance by legal representatives.


4.A copy of the Annual Report of the Garda Complaints Board and specific information on the number of complaints received by the Board.


6.Detailed information in relation to fees paid for Nationality and Citizenship Certificates and the number of applications for nationality and citizenship that were rejected after the five year period.


Vote 20 - Garda Síochána


1.The cost of operating the Cash Escort Service.


2.The amount of money invested in media relations, including information leaflets, TV programmes etc.


3.Whether fax machines are available at district and regional headquarters.


4.The number of Gardaí who retired in 1994.


Vote 21 - Prisons


1.A full breakdown of the £5.1 million paid for Miscellaneous Extra Remuneration and specifically the reason one individual received £6,980.


Chairman: Mr Denis Foley T.D.


2.In relation to prisoners the following information was requested:-


-A list of the categories of crime for which people are imprisoned.


-Details of the early releases made in 1994 and the categories under which those released early were originally imprisoned.


-The numbers given early release and subsequently rearrested and brought before the courts for other offences.


-When the policy of not given early release to sex offenders was first introduced and the numbers of sex offenders who, prior to that date, were given early release and were subsequently rearrested for other offences.


-The number of offenders who were refused entry to prisons due to the non-availability of places.


The Committee would be grateful if the information could be provided before 23 February 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee



ROINN DLÍ AGUS CIRT


(Department of Justice)


BAILE ÁTHA CLIATH


(Dublin)


Mr. Denis Foley, T.D.,


Chairman,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Chairman,


I refer to my appearance before the Committee on the 1st February, 1996 at which I undertook to supply the following information:-


Vote 19- Office of the Minister for Justice.


1.The breakdown of expenditure in Subhead A.3.5. Incidental Expenses (Miscellaneous) for 1994 is as follows;


Uniforms

2,178

Newspapers/Periodicals

91,112

Advertising

9,329

Immigration Cases (Legal Costs)

152,575

Joint Project with Northern Ireland Office

5,248

Installation and maintenance of a Security system

3,289

Supply of Archive Storage Boxes

1,694

Miscellaneous

58,410

Total

323,835

Items of expenditure categorised as miscellaneous relate to a wide variety of items which do not fall directly into the other defined areas of expenditure within the vote. Many of the items are in fact for amounts of less than £500.


2.The breakdown of Miscellaneous Receipts in Appropriations-in-Aid is as follows:


Refunds from Council of Europe

£12,584

Fees- training and examination of drivers re explosive substances.

£ 1,200

Sale of Government Publications

£ 4,445

Refunds of Travel Expenses for Forensic

 

Science Laboratory Personnel

£1,067

Refund from Aer Lingus

£2,679

Other Receipts

£38,239

Total

£60,214

The “Other Receipts” category of miscellaneous receipts is comprised primarily of payable orders which had been issued during the previous accounting year (i.e 1993) and required to be cancelled in 1994. Accounting guidelines set down by the Department of Finance stipulate that the unexpended monies in question should be credited to Appropriations-in-Aid.


Legal Aid


3.There are two separate systems in place in relation to the remuneration of solicitors under the Criminal Legal Aid Scheme. One system operates in respect of appearances in the District Court and appeals to the Circuit Court and an entirely separate method of remuneration exists in respect of appearances in the Circuit, Central Criminal, Special Criminal Courts and the Court of Criminal appeal.


The fees paid to Solicitors for Legal Aid cases in the District Court and appeals to the Circuit Court are controlled by way of Regulations which have been made under the Criminal Justice (Legal Aid) Act, 1962. The latest scale of fees are as set out in S.I. No. 57 of 1993. Solicitors are paid in respect of such cases on the basis of individual appearances rather than on the basis of the case as a whole.


The fees paid to Solicitors and Counsel in the Circuit and higher Courts in respect of indictable offences are determined entirely by the fees which the Director of Public Prosecutions (DPP) pays the prosecution Counsel, through parity agreements introduced by Regulations made in 1976 and 1978 under the Criminal Justice (Legal Aid) Act, 1962. The fees paid to Solicitors in respect of their services in the higher Courts are related to the fees payable to the defence counsel which are in turn based on the fees paid to the prosecution counsel.


Fees paid to Solicitors and Counsel in respect of Circuit and Higher Court cases are paid on the basis of appearances rather than the case as a whole, though it should be pointed out that a fee would not always be paid in respect of each appearance made during a trial.


garda complaints


4.I enclose a copy of the Annual Report of the Garda Complaints Board for 1994 which outlines in paragraph 2.1 of page 6, the number of complaints received.


Irish Citizenship - Fees


6.The following is the amount paid in fees by persons obtaining Irish citizenship in the period 1991 to 1994 inclusive:


YEAR

AMOUNT

1991

£51,518

1992

£54,842

1993

£69,608

1994

£146,854

The amount shown is the total amount of fees received in respect of the processing of applications for certificates of naturalisation and declarations of post-nuptial citizenship. Records are not maintained in a manner which permits a breakdown of fees between the two categories of receipt.


Records of refusals in respect of naturalisation only date back to 1st April, 1992. There were 116 applications refused between 1st April and 31st December 1992. Refusals for 1993, 1994 and 1995 were 107, 81 and 100 respectively. Records in existence for post-nuptial citizenship indicate only positive decisions.


Vote 20 - Garda Siochana.


1.The estimated annual cost of operating the Cash Escort Service based on the 1995 expenditure level is £3,018,000.


2.The amount of money invested in media relations, including information leaflets, T.V. programmes etc. is as follows-


(a)Crime prevention exhibitions

£3,777

(b)Printing of leaflets e.g. Community Relations etc.

£65,707

(c)Advertising - General, firearms cert. renewals.

£3,800

(d)Recruitment campaign

£9,481

Total

£82,765.

3.The Garda Authorities have confirmed to me that fax machines are available at all District and Divisional Headquarters.


4.The number of Gardai who retired in 1994 was 426.


Vote 21 - Prisons.


1.The breakdown of £5,148,837 in respect of Miscellaneous Extra Remuneration is as follows;


Handyman Allowance

£ 390.

Cook Allowance - Mountjoy

£ 9,729.

Butchering Allowance

£ 5,182.

Laundress

£ 2,688.

Assistant to Detail Officer

£ 8,896.

Searching Duties

£ 26,670.

Substitution Allowance

£ 34,686.

Trades Allowance

£ 96,569.

Driving Allowance

£ 36,348.

Environmental Allowance

£ 478,371.

Rent Allowance

£ 3,919,128.

Instructors Allowance

£ 115,158.

Spike Island Allowance

£ 77,554.

Clerk to Visiting Committee

£ 8,133.

Plain Clothes Allowance

£ 124,138.

Hospital Orderly

£ 123,368.

Industrial Manager Allowance

£ 2,313.

Industrial Supervisor Allowance

£ 7,132.

Court Escort Allowance

£ 38,615.

Assistant Chief Officer - Hospital Wing

£ 526.

Occupational Injuries Allowance

£ 33,243.

Total

£ 5,148,837.

The breakdown of allowances in the case of the individual in receipt of £6,980 in miscellaneous extra remuneration is as follows:


Court Escort Duty

£ 21

Industrial Supervisor Allowance

£ 5,221

Rent Allowance

£ 1,738

Total

£ 6,980.

2. -Categories of Crime for which people are imprisoned.


A list of the categories of crime for which people are imprisoned is set out in the attached extracts from the latest annual report (1992) on Prisons and Places of Detention. They are categorised as follows:- offences against the person, offences against property with violence and without violence and all other offences (RTA, possession/supply of drugs, robbery, possession of firearms).


-Details of the early releases made in 1994 and the categories under which those released were originally imprisoned.


The latest statistics available in relation to early releases, compiled for the Annual Reports on Prisons and Places of Detention are set out as follows:


Year

No. granted full temporary (i.e. the offender not liable to recommittal if conditions are observed.)

No. granted varying period of “renewable” temporary release (i.e. the offender required to have temporary release renewed at stated intervals.)

1990

1,979

3,087

1991

1,619

3,895

1992

2,782

3,233

1993

3,564

4,212

The information in respect of 1994 is expected to be available before the end of this year and the number of releases are expected to be greater than those for 1993.


It should be noted that an individual offender may be counted in both categories i.e. an offender who progresses from “renewable” to “full” temporary release.


The categories of crime for which offenders were originally imprisoned would cover the full range of categories as described above with the exception of sex offences and certain other serious offences.


-The numbers given early release and subsequently rearrested and brought before the Courts for other offences.


Statistics are not maintained at present in such a way as to permit compilation of the number of offenders whose crimes were committed while on temporary release. These could only be compiled through a manual examination of thousands of individual prisoner records held in Prisons/Places of Detention and this would involve the expenditure of a disproportionate amount of staff time. However, ways of using information technology to improve statistical information available are currently being reviewed. As soon as this has been completed, it will be expanded and updated as necessary to allow for the provision of these and other meaningful statistics quickly and easily.


-When the policy of not giving early release to sex offenders was first introduced and the number of sex offenders who prior to that date, were given early release and were subsequently rearrested for other offences.


It has always been the policy, in general, not to grant temporary release to those offenders convicted of sex offences. This means that they are released only on the expiry of the sentence imposed upon them by the Court, less standard one-quarter remission to which all offenders are entitled, dependent on good behaviour.


International experience suggests that the grant of additional, controller parole concessions to those who take part in group therapy and personal psychologic treatment programmes may play an important part in their success. The Minister is not, therefore, totally ruling out such developments here since it is so important to obtain maximum benefit, in the interest of the community, from such programmes. However, no significant change will be made in this regard without extremely careful consideration being given to the implications involved.


-The number of offenders who were refused entry to prisons due to the non-availability of places.


I wish to state that no offender has ever been refused entry to a Prison/Place of Detention due to the non-availability of a place.


There are no statutory limits on the numbers that can be held in custodial institutions in this country. There are, however, practical considerations such as call space, ability to provide reasonably tolerable facilities for prisoners and so on, which, in practice, means that there are limits to the numbers that can be held at a particular time. These limits may vary depending on refurbishment works that may be ongoing at institutions and other factors. This leads at times to overcrowding. This has been a feature of prisons in this country for some time and the daily numbers in custody for many years now are above what could be regarded as ideal, given the size and quality of facilities available at many of the institutions concerned.


Accounting Officer


22 March, 1996.


TABLE 7A


Imprisonment and Penal Servitude, 1992


Offences classified by Sentence Length — Males


Offence Type

Sentence Length

 

 

 

 

 

 

 

 

 

Offence Expressed as % of Total Convictions

Group 1: Offences against the Person

<3m

3–6m

6m–1y

1–2y

2–3y

3–5y

5–10y

10y+

Life

Total

 

Murder

 

 

 

 

 

 

 

 

4

4

0.09

Attempted Murder

 

 

 

 

 

 

 

2

 

2

0.04

Manslaughter

 

 

 

 

1

1

6

2

 

10

0.22

Shoot at with Intent

 

 

 

 

 

 

 

 

 

0

0.00

Wounding

 

3

2

9

10

8

4

 

 

36

0.80

Assault

62

52

72

32

9

7

 

 

 

234

5.17

Assault/Resist Garda

31

12

27

16

1

2

 

 

 

89

1.97

Rape

 

 

 

 

2

2

10

5

 

19

0.00

Attempted Rape

 

 

 

 

 

 

 

 

 

0

0.00

Indecent Assault

 

2

2

6

2

6

1

1

 

20

0.44

Indecent Exposure

1

 

1

 

 

 

 

 

 

2

0.04

Other Sexual Offences

 

 

1

1

1

5

1

1

 

10

0.22

Other Group 1 Offences

 

 

3

3

1

2

6

1

 

16

0.35

Total Group 1

94

69

108

67

27

33

28

12

4

442

9.76

Offence Type

Sentence Length

 

 

 

 

 

 

 

 

 

Offence Expressed as % of Total Convictions

Group 2: Offences against Property with Violence

<3m

3–6m

6m–1y

1–2y

2–3y

3–5y

5–10y

10y+

Life

Total

 

Burglary

7

11

22

58

20

4

5

 

 

127

2.81

Aggravated Burglary

1

 

1

 

 

6

3

 

 

11

0.24

Robbery

1

1

22

34

15

39

19

 

 

131

2.90

Attempted Robbery

1

 

 

 

 

 

 

 

 

1

0.00

Malicious Damage

93

16

54

57

13

2

 

 

 

235

5.20

Arson

 

 

 

3

 

 

 

 

 

3

0.07

Other Group 2 Offences

9

26

39

52

20

33

16

1

 

196

4.33

Total Group 2

112

54

138

204

68

84

43

1

 

704

15.57

TABLE 7Acontinued


Offence Type

Sentence Length

 

 

 

 

 

 

 

 

 

Offence Expressed as % of Total Convictions

Group 3: Offences against Property without Violence

<3m

3–6m

6m–1y

1–2y

2–3y

3–5y

5–10y

10y+

Life

Total

 

Larceny

70

62

103

89

13

3

 

 

 

340

7.52

Attempted Larceny

 

 

 

 

 

 

 

 

 

0

0.00

Trespass with Intent

9

11

35

41

1

 

 

 

 

97

2.14

Trespass and Larceny

9

16

61

72

22

 

 

 

 

180

3.98

Receiving Stolen Goods

16

16

37

31

8

3

1

 

 

112

2.48

False Pretences

4

3

2

3

2

 

 

 

 

14

0.31

Forgery/Uttering

7

10

16

12

6

 

 

 

 

51

1.13

Take Possession of Vehicle without Owner’s Consent

3

5

38

51

7

1

 

 

 

105

2.32

Allow Self to be carried in Stolen Vehicle

2

4

24

10

2

 

 

 

 

42

0.93

Unauthorised Interference with Vehicle

9

17

1

 

 

 

 

 

 

27

0.60

Found Enclosed

4

 

 

 

 

 

 

 

 

4

0.09

Other Group 3 Offences

70

17

23

9

 

 

 

 

 

119

2.63

Total Group 3

203

161

340

318

61

7

1

 

 

1,091

24.12

TABLE 7A—continued


Offence Type

Sentence Length

 

 

 

 

 

 

 

 

 

 

Offence Expressed as % of Total Convictions

Group 4. All Other Offences

<3m

3–6m

6m–1y

1–2y

2–3y

3–5y

5–10y

10y+

Life

Unspec.

Total

 

Drunkenness

165

3

1

 

 

 

 

 

 

 

169

3.74

Road Traffic Act Offences

917

96

163

54

6

 

 

 

 

 

1.236

27.33

Dangerous or Drunken Driving

138

10

20

11

5

1

2

 

 

 

187

4.13

Sale/Supply of Drugs

3

9

11

10

4

4

2

 

 

 

43

0.95

Possession/Production/Cultivation/Import/Export of Drugs

32

5

16

22

2

3

4

 

 

 

84

1.86

Forging/Altering prescription or having same

 

 

 

1

 

 

 

 

 

 

1

0.02

Possession of Explosives

 

 

 

 

 

 

 

 

 

 

0

0.00

Possession of Firearms

 

 

2

1

2

5

6

1

 

 

17

0.37

Possession of House Breaking Implements

3

 

12

4

1

 

 

 

 

 

20

0.44

Debtors/Sureties/Contemp of Court

203

13

2

 

 

 

 

 

 

16

234

5.17

Offences under the Fisheries Act

44

3

 

 

 

 

 

 

 

 

47

1.04

Other Group 4 Offences

166

28

40

12

 

 

 

 

 

2

248

5.48

Total Group 4

1.671

167

267

115

20

13

14

1

 

18

2.286

50.54

Grand Total

2.080

451

853

704

176

137

86

14

4

18

4.523

100.00

Sentence categories expressed as a % of total

45.99

9.97

18.86

15.56

3.89

3.03

1.90

0.31

0.09

0.40

100

 

APPENDIX 7

Ms Margaret Hayes


Secretary


Department of Tourism and Trade


Kildare St,


Dublin 2


26 January 1996


Dear Ms Hayes


I refer to your recent appearance before the Committee of Public Accounts.


During its consideration of Paragraph 48 of the Report of the C&AG, in relation to a Review of Bord Fáilte Éireann, the Committee requested information on the following:-


1.The names of the five consultancy companies who submitted costed proposals, to undertake the review, to your Department.


2.Whether the firm chosen had ever provided consultancy services to either the British Tourist Board or the Northern Ireland Tourist Board.


3.The cost of the current consultancy contract in relation to the Operational Programme for Tourism 1994–1999, and specifically whether the contract is fee based.


In addition, during consideration of Vote 35, you undertook to provide the following information which was not available to you at the time.


4.A full breakdown of the allocation, and a list of the beneficiaries, of grants for sporting/artistic promotions which are allocated by Bord Fáilte under the Tourism Promotion and Development fund.


5.A break down of EU expenditure on capital development and a comparison of this with subheads B1 and B2 allocations, which deal with grants under section 2 of the Tourist Traffic Act, 1961 and the Tourism Development Works.


The Committee would be grateful if this information could be provided before 16 February 1996..


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.


An Roinn Turasóireachta agus Trádála

Department of Tourism and Trade

Telephone (01) 662 1444

Sráid Chill Dara, Baile Átha Cliath 2

Kildare Street, Dublin 2

Fax (01) 676 6154


20th February, 1996


Cliona O’Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms. O’Rourke


I refer to your recent letters concerning my appearance before the Committee of Public Accounts on the 1994 Appropriation Accounts.


The additional information requested by the Committee is set out in order on the attached pages. With regard to the A.D. Little consultancy specifically, members of your committee requested the names of the other companies who submitted proposals to carry out this study. As I indicated in my reply to the Committee, publication of such information would normally be considered commercially sensitive by the companies involved. However, for your Chairman’s information to deal with as he deems fit, the other companies who submitted costed proposals were:


-Price Waterhouse


-KPMG Stokes, Kennedy and Crowley


-Deloitte and Touche


-McKinsey and Company


While not specifically requested in your letter, I did promise to provide the Committee (see page 19 on the attached minutes) with details of any services provided to A.D. Little by Irish consultants during their Review and these are supplied in Paragraph 5 of my note.


I also enclose a copy of the minutes of evidence which have been amended and certified as requested.


I trust that my reply is to the Committee’s satisfaction.


Yours sincerely


Margaret Hayes


Secretary



1.Whether the firm chosen to carry out the Review of Bord Fáilte in 1994 had ever provided consultancy services to either the British Tourist Board or the Northern Ireland Tourist Board.


The tender submission from Arthur D. Little, which gave a very detailed account of the previous consultancy work carried out by the firm along with precise details of work undertaken by the individual personnel who would be involved in the Review of Bord Fáilte, gave no indication that the firm had ever provided services to either the British Tourist Board or the Northern Ireland Tourist Board.


2.The cost of the current consultancy contract in relation to the Operational Programme for Tourism 1994–1999, and specifically whether the contract is fee based.


The current consultancy contract to act as External Evaluator for the Operational Programme for Tourism 1994 – 1999 was awarded to Fitzpatricks Associates, Economic Consultants for an initial period of one year from 5th October 1995. The gross contract price for the year is £50,723, of which three quarters will be covered by the European Regional Development Fund.


The appointment of the External Evaluator may be renewed at the end of the first year or the contract may be re-advertised.


3.A full breakdown of the allocation, and a list of beneficiaries, of grants for sporting/artistic promotions which are allocated by Bord Fáilte under the Tourism Promotion and Development Fund.


Organisation/Event Name

Amount (£m)

Jordan Grand Prix

0.400

World Equestrian Games

0.250

Delta Golfing Promotion

0.250

Ladies Golf Tournament

0.125

Murphy’s Irish Open

0.100

Ladies Hockey World Cup

0.050

National Hunt Promotion in UK - Adrian Maguire

0.025

Promotion of International GAA Tournament

0.015

Birr Historic Science Centre

0.015

Mayo Heritage Promotion

0.010

Out of Ireland TV Show

0.0045

Cavan International Song Contest

0.004

“Blazing Saddles” Maracycle Promotion in Australia -

 

National Council for the Blind

0.003

Promotion of N Ireland GAA/Simonstown Gaelic Football Competition

0.003

TOTAL

1.2545

4.A break down of EU expenditure on capital development and a comparison of this with subheads B1 and B2 allocations, which deal with grants under section 2 of the Tourist Traffic Act, 1961 and the Tourism Development Works.


The Operational Programme for Tourism 1994 – 1999 was agreed between the Irish Government and EU Commission on 29 July, 1994 and launched shortly afterwards. In 1994 total Capital Expenditure amounted to £7.009 million, of which £5.256 million was contributed from the ERDF.


The 1994 allocations under Subheads B1, which is for Bord Failte’s operating costs, and B2, which is for its capital development works, were £21.775 million and £0.500 million respectively.


5.Details of Irish consultants, if any, used by A.D. Little in carrying out the review, including the follow-up work.


While no Irish consultants had any imput into the conclusions or recommendations of A.D. Little’s Report nor were any Irish consultants involved in any of the work which arose as a result of the Report’s recommendations, I understand that earlier on in their studies A.D. Little used the Dublin based firm of Tourism and Leisure Partners to provide local independent knowledge and insight into the Irish tourism industry and institutions.


APPENDIX 8

To each Member:


Further to a meeting of the Committee on 25 January, 1996, at which the representative from the Department of Finance undertook to obtain information in relation to tax clearance procedures, I attach, for your information, a copy of a circular from that Department which outlines the current procedure in relation to this matter. Members are referred particularly to Section 6 on page 5 of the circular, which sets out the position in relation to non-resident tenderers.


Clíona O Rourke


Clerk to the Committee


1 February 1996



An Roinn Airgeadais, Sráid Mhuirfean Uacht,


Baile Átha Cliath 2.


Department of Finance, Upper Merrion Street


Dublin 2. Tel. (01) 676–7571 Fax. (01) 678–9936/676–7335 GTN 7109


F49/29/84


CIRCULAR 22/95 TAX CLEARANCE PROCEDURES - PUBLIC SECTOR CONTRACTS


Notice to Government Departments and other public authorities concerned with awarding public sector contracts


Contents

Page

1.Introduction

2

2.Tax Clearance Procedures

2

3.Scope of Tax Clearance Procedures

3

4.Sub-contractors

4

5.Duration of Certificates

4

6.Non-resident Tenderers

5

7.Application for Certificates

5

8.The Issue of Certificates

6

9.Other Issues

6

10.General Government Contracts Procedures

7

     Appendix I - contact addresses

8

     Appendix II - Section 177 of the Finance Act, 1995

10

1. Introduction

1.1The Minister for Finance has directed that the following revised procedures are to be followed in relation to the operation of the tax clearance scheme with respect to the award of public sector contracts from the date of issue of this circular. Department of Finance Circular F 49/29/84 of July 1991 is accordingly rescinded.


1.2Copies of this circular are to be made available to the public on request.


1.3A separate Circular F 49/13/87 sets out the tax clearance procedures in relation to the payment of grants, subsidies and similar type payments by Government Departments and other public authorities.


2. Tax Clearance Procedures

2.1In the case of all public sector contracts of a value of £5,000 (inclusive of VAT) or more within any 12-month period, the contractor (and agent as appropriate) will be required to produce either a valid tax clearance or C2 certificate.1


2.2It will not be necessary for a tenderer to obtain a tax clearance certificate if he holds a current C2 certificate. Subcontractors who do not already hold a C2 certificate should apply for a tax clearance certificate even where they are not legally required to produce a C2 for the purpose of the contract.


2.3The Collector General shall, on application, issue a tax clearance certificate if satisfied that certain conditions are being met by the applicant. These conditions are set out in section 177 of the Finance Act, 1995 (copy at Appendix II).


Scope of Tax Clearance Procedures

3.1The public sector includes all Government Departments and Offices, Local Authorities, Health Boards and other Health Agencies, Educational Bodies and all semi-State Bodies whether commercial or non-commercial (statutory or otherwise).


3.2For convenience, the word contract is used in this circular but this should be interpreted to cover situations where public sector authorities are buying, hiring or leasing goods, services or property or generally expending public moneys including, for example, contracts for cleaning or security, consultancies for management, legal or design services, purchases of materials or commodities, leases of property, plant hire etc. It is not necessary that a contract be the subject of formal documentation or a tendering process for the tax clearance procedures to apply.


3.3A contractor for the purposes of this circular includes any individual, partnership or company in receipt of payments of £5,000 or more from the public sector.


3.4The procedures should be applied to all public sector contracts of a value of £5,000 (inclusive of VAT) or more. It should be noted that individual contracts with any person or firm with a cumulative value of £5,000 or more during any 12-month period are subject to the tax clearance procedures. A standing arrangement with a supplier as a result of which purchases of a value of £5,000 or more are made during any 12-month period is also within the scope of the scheme. If any Public Authority is in doubt as to whether the procedures should apply the Department of Finance should be consulted.


3.5Tenders should be invited for public sector contracts in the normal way, but advertisements and tender documentation should state that it will be a condition for the award of a contract that a firm or individual must comply with the terms of this circular. Where an agent is acting on behalf of a potential contractor both the agent and the contractor will be required to comply with the terms of this circular.


3.6In the case of a non-resident, a statement from the Revenue Commissioners (see paragraph 6) will be required.


3.7Tenders or prices should be sought and assessed in the normal way. The tax clearance requirements under this circular should be applied by the contracting authority only to the person or firm submitting the successful tender. The requirements should not accordingly be applied in the case of all tenderers for contracts.


Sub-contractors

4.1In the case of sub-contractors on any public sector contract of a value of £5,000 or more, the contracting authority should, when advertising the main contract, state that it will be a condition for the award of the contract that all sub-contractors employed on the project must produce a tax reference number where payments exceed £500. Records of tax reference numbers must be kept by the contractor and be available for inspection where requested by the Revenue Commissioners. Where payments exceed £2,000 in any 12 month period the sub-contractor will be required to produce either a current tax clearance certificate or a current C2 certificate. It should be made clear to sub-contractors that payments under a contract are at all times conditional on compliance with these requirements.


4.2It will be the responsibility of the relevant contractor to ensure that any sub-contractor employed by him complies with these requirements. In all cases contracting authorities must ensure that contractors have complied with these requirements and where appropriate should insist on seeing the relevant certificates. Any failure to comply with this requirement will affect a contractor’s prospects of obtaining future public contracts.


4.3It should be emphasised in the case of sub-contractors in the construction, forestry and meat processing industries, that in the absence of a C2 certificate, tax must continue to be deducted at source at the rate of 35 per cent, in accordance with section 17 of the Finance Act, 1970, notwithstanding the fact that a tax clearance certificate has been furnished under these arrangements.


Duration of Certificates

5.1Successful applicants will be issued with a single tax clearance certificate valid for contracts awarded by any public authority. Normally, the tax clearance certificate will be valid for 12 months.


5.2Contracting authorities should take the necessary steps to ensure that contractors are in possession of a valid appropriate certificate at all times. Accordingly renewed certificates should be sought when an existing certificate expires and the contractor or sub-contractor is still engaged on the contract. It should be made clear to contractors and to sub-contractors that payments under a contract are at all times conditional on the contractors being in possession of a valid appropriate certificate.


Non-resident contractors or sub-contractors

6.1A successful non-resident contractor or sub-contractor will be required by the contracting authority to produce a statement (in lieu of a tax clearance certificate) from the Revenue Commissioners confirming suitability on tax grounds to be awarded the contract. Such a statement will be valid for contracts awarded by any public authority. Application forms (TC3A) for such statements may be obtained from the Supply Branch of the Revenue Commissioners and the completed forms should be sent to the Residence Branch of the Revenue Commissioners (addresses at Appendix I).


Application for Certificates

7.1Stocks of the application form (TC I) for a tax clearance certificate are available to public authorities by written request by post or by FAX on headed paper from the Revenue Commissioners Supply Branch (address at Appendix I).


7.2The application forms will be issued by contracting authorities only to the person, firm or agent submitting the lowest suitable tender or price. The application (form TC I) must be stamped, dated and have the tenderer’s name entered by the contracting authority. Either the tenderer or the contracting authority can send the completed form (i.e. including all tax numbers) to the Collector-General at the address indicated in Appendix I.


The Issue of Certificates

8.1The issuing of tax clearance certificates will be the responsibility of the Collector-General. Successful applicants will be issued with a single tax clearance certificate, valid for contracts with any public authority. This certificate will be retained by the contractor but each authority, before awarding a contract, must see the original tax clearance certificate or an authorised duplicate and take a copy for its own record. The Collector General will issue duplicate certificates to a contractor where this is considered necessary and appropriate. On expiry, single tax clearance certificates can be renewed by direct application to the Collector-General.


8.2In normal circumstances, the Collector-General will be able to issue or refuse to issue a tax clearance certificate within six working days from the receipt of the application for a certificate. In exceptional cases, e.g. where the taxpayer has not quoted proper references, the process may take longer.


8.3A successful tenderer should be given ten working days to produce the tax clearance or C2 certificate. If they have not done so within that period, enquiries may be made in respect of tax clearance certificates by the contracting authority concerned from the Office of the Collector-General as to the position. If there are bona fide reasons for giving the tenderer an extension of the ten day period, this extension may be allowed at the contracting authority’s discretion in the light of information received from the Office of the Collector-General. If not, a certificate should be sought from the person or firm which submitted the second most suitable tender and the process repeated. The contract should be awarded to the most suitable tenderer who can produce the appropriate certificate.


Other Issues

9.1Should cases arise where only one tender is received and the firm involved cannot produce the appropriate certificate, it may be necessary for the contracting authority


(i)to hold a new competition;


(ii)if (i) is not possible, to exert pressure on the firm involved to make arrangements with the Collector-General to clear tax arrears before the contract is awarded; or


(iii)to postpone the awarding of the contract.


9.2A contract should not be awarded to any firm which cannot produce a tax clearance certificate except as a last resort. In such a case, the advance approval of the Department of Finance must be obtained.


General Government Contracts Procedures

In addition to the tax clearance procedures set out in this Circular, the procedures set down in the booklet entitled “Public Procurement” issued by the Public Procurement Section, Department of Finance should be followed by the bodies which it covers.


D. McNally


ASSISTANT SECRETARY


DEPARTMENT OF FINANCE


11 July, 1995.


Appendix I

Contact Addresses

(i)Tax Clearance certificates are issued by:


The Office of the Collector-General


Sarsfield House


Limerick


Tel: (01 area) 6774211


(outside the 01 area) 061 - 310310


(ii)Statements for non-resident tenderers issued by:


Office of the Revenue Commissioners


Residence Branch


Government Offices


Nenagh


Co.Tipperary


Tel: (01 area) 6774211


(outside the 01 area) 067 - 33533


(iii)Stocks of application forms TC1 and TC3A are available to public authorities on application to:


Office of the Revenue Commissioners


Supply Branch,


Unit 1,


Airways Industrial Estate,


Santry,


Dublin 9


Tel: (01) 8425777


Fax: (01) 8427146


(iv)General queries in relation to the application of the tax clearance procedures should be directed to:


Tax Clearance Section


Department of Finance


Merrion Street


Dublin 2


Tel: (01) 6767571


Ext: 5597


(v)Tenderers in the Dublin area requiring further information on C2 certificates should contact:


The Office of the Inspector of Taxes


Dublin Audit District 1


Findlater House


Cathal Brugha Street


Dublin 1


Tel: (01) 8746821


Appendix 2

Finance Act 1995


Part VII Miscellaneous


Chapter II General


Section 177 Tax clearance certificates in relation to public sector contracts.

177 (1)In this section—


“the Acts” means—


(a)the Tax Acts,


(b)the Capital Gains Tax Acts,


(c)the Value-Added Tax Act, 1972, and the enactments amending or extending that Act,


and any instruments made thereunder;


“the scheme” means a scheme of the Department of Finance for the time being in force for requiring persons to show, by means of tax clearance certificates, compliance with the obligations proposed by the Acts in relation to the matters specified in subsection (2) before the award to them of contracts that are specified in a circular of the Department of Finance entitled ‘Tax Clearance Procedures — Public Sector Contracts’, numbered F 49/24/84 and issued on the 30th day of July, 1991, of any such circular amending or replacing that circular.


“tax clearance certificate” shall be construed in accordance with subsection (2).


(2)Subject to the provisions of this section, where a person who is in compliance with the obligations imposed on the person by the Acts in relation to—


(a)the payment or emittance of any taxes, interest or penalties required to be paid or remitted under the Acts to the Revenue Commissioners, and


(b)the delivery of any returns required to be made under the Acts,


applies to the Collector-General in that behalf for the purposes of the scheme, the Collector-General shall issue to the person a certificate (in this section referred to as “a tax clearance certificate”) stating that the person is in compliance with the obligations aforesaid.


(3)A tax clearance certificate shall not be issued to a person unless—


(a)the person, and any partnership of which the person is or was a member, in respect of the period of the person’s membership thereof,


(b)in a case where the person is a partnership, each person who is a member of the partnership, and


(c)in a case where the person is a company, each person who is either the beneficial owner of, or able directly or indirectly, to control, more than 50 per cent. of the ordinary share capital of the company,


is in compliance with the obligations imposed on the person and each other person (including any partnership) by the Acts in relation to the matters specified in paragraphs (a) and (b) of subsection (2).


(4)Where a person (hereafter in this subsection referred to as “the first-mentioned person”) applies for a tax clearance certificate in accordance with subsection (2) and the business activity to which the application relates was previously carried on by, or was previously carried on as part of a business activity carried on by, another person (hereafter in this subsection referred to as “the second-mentioned person”) and—


(a)the second-mentioned person is a company which is connected within the meaning of section 16 (3) of the Finance (Miscellaneous Provisions) Act, 1968, with the first-mentioned person or would have been such a company but for the fact that the company has been wound up or dissolved without being wound up, or


(b)the second-mentioned person is a company and the first-mentioned person is a partnership and—


(i)a member of the partnership is or was able, or


(ii)where more than one such member is a shareholder of the company those members acting together are or were able.


directly or indirectly, either on his, her or their own, or with a connected person or connected persons within the meaning of the said section 16 (3), to control more than 50 per cent. of the ordinary share capital of the company, or


(c)the second-mentioned person is a partnership and the first-mentioned person is a company and—


(i)a member of the partnership is or was able, or


(ii)where more than one such member is a shareholder of the company, those members acting together are or were able,


directly or indirectly, either on his, her or their own, or with a connected person or connected persons within the meaning of the said section 16 (3), to control more than 50 per cent. of the ordinary share capital of the company,


then, a tax clearance certificate shall not be issued to the first-mentioned person unless, in relation to the business activity to which the application relates, the second-mentioned person is in compliance with the obligations imposed on that person by the Acts in relation to the matters specified in paragraphs (a) and (b) and subsection (2):


Provided that this subsection shall not apply to a business the transfer of which was effected before the 9th day of May, 1995, or a business the transfer of which is or was effected after that date if a contract for the transfer was made before that date.


(5)Subsections (4), (5) and (6) of section 242 of the Finance Act, 1992, shall, with any necessary modifications, apply to an application for a tax clearance certificate under this section as they apply to an application for a tax clearance certificate under that section.


(6)A tax clearance certificate shall be valid for the period specified therein.


(7)This section shall come into operation on the 1st day of July, 1995.


APPENDIX 9

Dr Don Thornhill


Secretary


Department of Education


Marlborough St.


Dublin 1


22 March 1996


Dear Dr Thornhill


I refer to your recent appearance before the Committee of Public Accounts. During that meeting you undertook to provide some additional information which was not available to you at the time.


Additional information was requested on the following:-


1.The estimated value of the primary school network.


2.The number of people who took part in the Home School Liaison Programme.


3.In relation to remedial teachers:-


-the number of rural schools that requested remedial teachers and did not obtain them,


-the breakdown of the latest allocation of remedial teachers between rural and urban schools,


-the number of remedial teachers that would be needed to fill current vacancies.


4.Of the 50 projects referred to in Paragraph 33, of the Annual Report of the C&AG, the number that exceeded the original contract price.


5.In relation to psychologists employed in the primary sector:-


-the number employed, their location and their duties.


-the number it is hoped to employ in the future.


6.In relation to trained counsellors:-


-the number employed and their location,


-the way in which they interact,


-the amount of money expended on this service.,


-the number of children in need of the service.


7.Under Subhead A7, the details of the consultancies referred to, the IT·projects that were delayed and the total cost in relation to this matter.


Chairman: Mr Denis Foley T.D.


8.A full breakdown of the funds paid to the National Association of Training Centres for Travelling people and where they were distributed.


9.The county VECs that applied for grants under Schedule B - Disadvantaged Youth


The Committee would be grateful if this information could be provided before 12 April 1996.


Yours sincerely


______________


Clíona O Rourke


Clerk to the Committee



Oifig an Rúnaí


An Roinn Oideachais



Secretary’s Office


Department of Education


Ms. Cliona O’Rourke,


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


16 April, 1995.


Dear Ms. O’Rourke


I refer to my appearance before the Committee of Public Accounts on 21 March last and to your letter of 22 March which sought information on a number of matters raised.


The position in relation to these matters is set out in the attached document.


Yours sincerely,


Don Thornhill,


Secretary.


1. THE ESTIMATED VALUE OF PRIMARY SCHOOL NETWORK

In 1994, there were 3,319 schools in operation. Of these, 32 were Gaelscoileanna which had a total estimated value of about £7m.


In so far as the other schools are concerned, the Department of Education could not realistically estimate their value. In these cases, the sites were provided by the promoters of the schools, while the buildings would have been grant-aided by the Department. Thus, the Minister has no claim on the sites in question, but does have a claim on the buildings. The Minister’s interest is protected by her being party to a lease ( usually for 99 years ), involving the owners ( as lessors ) and trustees for the school ( as lessees ). The release of the Minister’s interest is then a matter for negotiation between the school owners and the Department.


In cases where the building is to be used for community purposes the Minister releases her interest free of charge.


2. THE NUMBER OF PEOPLE WHO TOOK PART IN THE HOME SCHOOL LIAISON PROGRAMME

In 1995/96, 81 Primary schools with 53,000 pupils participated in the programme. At second-level, 87 schools with 49,000 pupils participated.


3. IN RELATION TO REMEDIAL TEACHERS:-

1.The number of rural schools that requested remedial teachers and did not obtain them;


2.the breakdown of the latest allocation of remedial teachers between rural and urban schools;


3.the number of remedial teachers that would be needed to fill current vacancies.


1. Number of Rural Schools requesting service.

(i)A total of 924 applicant schools (urban and rural) are currently on hands.


Of the 924 schools, 791 are schools in rural areas. The term “rural” in this context is used in reference to schools in areas with populations below 10,000.


(ii)However, it should be noted that of the 791 rural applicants, 185 already have some service. They are seeking an improved level of service. For example, they could be sharing the post with other adjacent schools and want to share with fewer schools or have a post of their own.


(iii)The number of rural applicants who currently have no service is 606.


(iv)Of the 133 urban applicants, 74 already have a service but are looking for an improvement. For example, a school with 500 pupils and one remedial teacher would be looking for a second post.


Breakdown of latest remedial allocation - urban/rural.

(i)55 extra remedial teacher posts were allocated to the Primary sector with effect from September, 1995.


This allocation impacted positively on the position of 208 schools. Some got a service for the first time. Others got an improved level of service as the group they were sharing with was reduced.


(ii)Of the 208 schools assisted in 1995, 191 (92%) were “rural” schools.


(iii)Nationally at present, 71% primary schools have access to a remedial service and it is estimated that 87% of primary pupils now have access to a remedial service.


(i)Number of posts needed to fill current remedial vacancies.

There are no current vacancies in the primary remedial service. Where vacancies do arise, they are filled in the normal way through the Panel system.


There is no automatic entitlement to a remedial service. Decisions on remedial teacher allocations are taken having regard to resource availability; the level of identified need; and competing demands from other special needs areas.


(ii) Remedial provision at second level

Second level schools were not required to submit formal applications for remedial posts which became available for allocation in 1994 and 1995. All schools were considered. The available posts were allocated on the basis of priority of need and having regard to the existing teaching provision in the schools.


There are no vacancies for remedial teachers at present. Should a vacancy arise it would have to be filled through the normal appointment process. In the case of the Catholic secondary sector the terms of the Redeployment Scheme would have to be complied with. In the vocational and community/comprehensive sectors the posts would have to be filled through publicly advertised competition.


With regard to the distribution of posts as between urban and rural schools, a difficulty arises in relation to defining rural/urban in respect of second level schools because of the fact that the catchment areas of schools are much broader at second level.


The Department estimates that the distribution of the 350 remedial teachers between urban and rural participating schools is Urban - 159; Rural - 191.


OF THE 50 PROJECTS REFERRED TO IN PARAGRAPH 33 OF THE ANNUAL REPORT OF THE C&AG, THE NUMBER THAT EXCEEDED THE ORIGINAL CONTRACT PRICE

Paragraph 33 in the 1994 Appropriation Account refers to contributions totalling £206,647 due from national schools in respect of all the 50 projects in question.


The additional cost on the 50 contracts is of the order of £1.5m. Such additional costs are a normal part of all construction contracts, but they are generally covered by the inclusion of a contingency sum in the contract documentation. Where a price variation clause is applied, a contractor is entitled to recover vouched wages and materials increases during the course of contract. Some changes to contracts are made also at the request of the school, or the design team.


The Department now proposes to include a contingency sum in all major contracts. This is normal practice in other Departments which deal with capital projects.


IN RELATION TO PSYCHOLOGISTS EMPLOYED IN THE PRIMARY SECTOR:-

-the number employed, their location and their duties;


-the number it is hoped to employ in the future.


The Psychological Service of the Department of Education provides psychological services in both primary and post-primary schools. The service includes the assessment and counselling of pupils, together with consultation with teachers and parents arising from this work with pupils.


Members of the service work mainly with class teachers, remedial teachers and teachers with particular responsibility for children with special educational needs.


In deploying psychologists in primary schools, priority is given to schools in disadvantaged areas. At post-primary level all schools are covered by the service.


Location

Primary

P/Primary

Total

Dublin

9 ½

11 ½

21

Cork

2

5

7

Galway

 

3

3

Wexford

 

1

1

Limerick

1

 

1

South Tipperary

1 ½

 

1 ½

Donegal

 

1

1

Sligo

 

1

1

 

14

22 ½

36 ½*

* In addition to the above there are 2 psychologists on special assignments.


PRINCIPAL DUTIES:-


(i)Primary

The principal duties of a psychologist in relation to primary schools are:


Assessment and counselling of individual pupils;


Preparing reports and recommendations relating to individual assessment and counselling;


Assisting teachers in developing appropriate programmes for the pupils assessed;


Monitoring the implementation of special provision arising from assessments of individual pupils and the quality of special measures being implemented in schools;


Assisting schools and teachers in respect of a range of disabilities and problems, such as bullying, disruptive behaviour, emotional difficulties and adjustment to school;


Assisting parents, individually and in groups, to promote the educational development of their children;


Liaising, as appropriate, with local and school authorities, members of the inspectorate, health services and other relevant agencies;


Preparing necessary reports, memoranda and analyses on all aspects of their work;


Providing appropriate expertise and inputs to policy development and evaluation at local and national level through participation in committees, meetings - both internal and with outside bodies, as required by the Department.


Special assignments as designated by the Department of Education.


(ii)Post-Primary

The duties of a psychologist at post-primary level include all of the above with particular emphasis placed on the following:


to support and monitor the provision of guidance and counselling;


to support the development of social, personal and health education;


to be available as resources allow to offer advice in relation to students having learning or behavioural difficulties.


FUTURE OF THE SERVICE

The White Paper on Education states that the psychological service will be progressively expanded to support teachers in their task of identifying and responding to learning difficulties and to ensure that every student with learning or behavioural difficulties has access to help, at the earliest possible stage. (White Paper - Charting our Education Future)


6. IN RELATION TO TRAINED COUNSELLORS:-

-the number employed and their location;


-the way in which they interact;


-the amount of money expended on this service;


-the number of children in need of the service.


NUMBER OF TEACHER COUNSELLORS AND WHERE LOCATED

There are 27 counsellor posts, serving 31 schools in the Dublin North Inner City area, Tallaght and Clondalkin. The scheme began in September 1995.


DUTIES OF THE TEACHER COUNSELLORS

The posts have been allocated to schools for the purposes of supporting these schools in their efforts to manage the behaviour of pupils who are disruptive/disturbed, and to enable the schools to teach these pupils and their peers effectively. The role of the teacher-counsellor is two-fold:-


(a)to co-ordinate a whole-school approach to devising and implementing good practice and strategies that will help to prevent the occurrence of disruptive behaviour;


(b)to teach and counsel small groups and individuals who exhibit persistent behaviour difficulties in the classroom.


COST OF SCHEME

The estimated annual cost is of the order of £540,000.


NUMBER OF CHILDREN IN NEED OF THE SERVICES OF TEACHER-COUNSELLORS

The scheme is a pilot scheme which began in Sept. 1995 and which will be carefully monitored by the Inspectorate to evaluate its effectiveness in dealing with the problems it seeks to address. Precise details on the numbers of pupils who might benefit are not currently available.


The children being targeted under the pilot scheme are those who would otherwise be at serious risk of becoming involved in truancy and/or delinquent behaviour. The absence of up to date data in relation to such children is one of the areas being addressed by the Truancy Task Force.


7. UNDER SUBHEAD A.7, THE DETAILS OF THE CONSULTANCIES REFERRED TO, THE IT PROJECTS THAT WERE DELAYED AND THE TOTAL COST IN RELATION TO THIS MATTER

The main IT project on which savings arose on consultancy expenditure in 1994 was one to computerise the administration of ESF-aided programmes. The first stage of the Project (a Pre-Analysis Study) had been completed in 1993. Further stages did not proceed, as originally expected, in 1994 as it was felt that it would be better to postpone them until the position regarding overall developments proposed in the Green Paper had been clarified. This related particularly to the proposed development of intermediate structures which would impact on overall accounting and reporting relationships between schools, VECs and the Department. The second stage of the Project was completed after publication of the White Paper in 1995 and implementation of a computer system in the Department’s ESF Section is now underway.


Some further savings arose as the amount of consultancy assistance required on the maintenance and enhancement of existing computer systems such as the Primary Teachers Payroll and Personnel System and the Post-Primary Pupils Database did not reach the level originally anticipated.


The total IT consultancy projects saving was £364,000. The other principal savings in subhead A.7 were on postponement of the publication of the White Paper(£54,000), re-structuring of Student Support schemes(£30,000) and evaluation of VTOS (£23,000). The total saving on consultancy in 1994 was £492,000.


8. BREAKDOWN OF THE FUNDS PAID TO THE NATIONAL ASSOCIATION OF TRAINING CENTRES FOR TRAVELLING PEOPLE AND WHERE THEY WERE DISTRIBUTED

Attached is a tabulated breakdown of the funds paid to the National Association of Training Centres for Travelling People from the Grant Scheme for Special Projects to Assist Disadvantaged Youth, by expenditure heading (see notes below) and area of distribution.


Information note

In relation to each of the expenditure headings in the attached table:


grants made to Junior Training Centres are used to provide sports and leisure activities for young Travellers in these centres. Each centre caters for approximately 12 Travellers in the 12–15 age group


distribution of the amount made available for local Traveller youth services is decided by the National Association which further funds 26 local “Lottery Committees” (each attached to a Traveller Training Centre) for the provision of Traveller youth and community services and projects in their areas


part-time community youth workers have been employed in a number of areas in order to identify Traveller needs, initiate developmental programmes and liaise with local and national Traveller organisations. The areas involved are Cork, Navan, Tullamore, Letterkenny, Galway, Rathkeale, New Ross, Athlone and Loughrea


►the Traveller’s magazine, “The Voice of the Traveller”, provides a channel through which the centres can liaise with each other and with other groups. It has also been instrumental in raising self-esteem projecting a positive image of the travelling community and it is hoped that, in time, it will become a commercially viable project in its own right


►the administration grant provides for the employment of a Lottery Administrator and the co-ordination of services at national level.


THE COUNTY VEC’s THAT APPLIED FOR GRANTS UNDER SCHEDULE B - DISADVANTAGED YOUTH

With the exception of County Dublin VEC, no applications were received from county VEC-s under the Grant Scheme for Special Projects to Assist Disadvantaged Youth, according to records held by the Youth Affairs Section.


NATIONAL ASSOCIATION OF TRAINING CENTRES FOR TRAVELLING PEOPLE BREAKDOWN OF EXPENDITURE FOR 1994


 

Junior Training Centres

Grants for Youth Services

Others

TOTAL

CARLOW

 

 

 

 

Carlow

 

£8,450.00

 

£8,450.00

CLARE

 

 

 

 

Ennis

 

£13,000.00

 

£13,000.00

CORK

 

 

 

 

Cork

£1,000.00

£7,700.00

 

£8,700.00

DONEGAL

 

 

 

 

Letterkenny

 

£4,500.00

 

£4,500.00

DUBLIN

 

 

 

 

Clondakin

£1,000.00

£8,000.00

 

£9,000.00

Coolock

£1,000.00

£4,500.00

 

£5,500.00

Finglas

£1,000.00

£12,000.00

 

£13,000.00

Milltown

£1,000.00

 

 

£1,000.00

Taliaght

 

£8,300.00

 

£8,300.00

GALWAY

 

 

 

 

Ballinasloe

£1,000.00

£8,000.00

 

£9,000.00

Galway

£1,000.00

£7,200.00

 

£8,200.00

Loughrea

 

£3,000.00

 

£3,000.00

Tuam

£1,000.00

£13,500.00

 

£14,500.00

KERRY

 

 

 

 

Killarney

 

£9,500.00

 

£9,500.00

LAOIS

 

 

 

 

Portlaoise

 

£9,000.00

 

£9,000.00

LEITRIM

 

 

 

 

Carrick—on—Shannon

 

£5,700.00

 

£5,700.00

LIMERICK

 

 

 

 

Abbeyfeale

 

£1,500.00

 

£1,500.00

Newcastlewest

 

£3,200.00

 

£3,200.00

Rathkeale

£1,000.00

 

 

£1,000.00

LONGFORD

 

 

 

 

Longford

 

£8,000.00

 

£8,000.00

LOUTH

 

 

 

 

Dundalk

 

£7,000.00

 

£7,000.00

MEATH

 

 

 

 

Navan

 

£6,300.00

 

£6,300.00

MAYO

 

 

 

 

Ballina

 

£11,750.00

 

£11,750.00

OFFALY

 

 

 

 

Tullamore

 

£6,500.00

 

£6,500.00

TIPPERARY

 

 

 

 

Thurles

 

£2,000.00

 

£2,000.00

WESTMEATH

 

 

 

 

Athlone

£1,000.00

£3,000.00

 

£4,000.00

WEXFORD

 

 

 

 

New Ross

 

£7,000.00

 

£7,000.00

WICKLOW

 

 

 

 

Bray

 

£5,500.00

 

£5,500.00

TOTAL

£10,000.00

£184,100.00

 

£194,100.00

PART-TIME

 

 

 

 

YOUTH WORKERS

 

 

£53,500.00

£53,500.00

TRAVELLER’s MAGAZINE

 

 

£12,200.00

£12,200.00

ADMINISTRATION

 

 

£42,702.00

£42,702.00

GRAND TOTAL

 

 

 

£302,502.00

APPENDIX 10

Dr Don Thornhill


Secretary


Department of Education


Marlborough St.


Dublin 1


3 April 1996


Dear Dr Thornhill


I refer to your appearance before the Committee of Public Accounts today. During that meeting you undertook to provide the following information which was not available to you at the time:-


1.A full breakdown of the expenditure under Subhed F1 in relation to the O’Donoghue High Court action.


2.In relation to Gaelscoileanna


-the proportion of the first level education budget which is allocated to gaelscoileanna, and


-the way in which the staffing ratio in gaelscoileanna compares to that in other first level schools.


The Committee would be grateful if this information could be provided before 23 April 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Folev T.D.



Oifig and Rúnaí


An Roinn Oideachais



Secretary’s Office


Department of Education


Ms. Cliona O’Rourke


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


16 April, 1995.


Dear Ms. O’Rourke,


I refer to my appearance before the Committee of Public Accounts on 3 April last and to your letter of 3 April which sought information on the O’Donoghue High Court action and Gaelscoileanna.


The position in relation to these matters is set out in the attached document.


Yours sincerely,


Don Thornhill,


Secretary.


1. Expenditure under subhead F.1 in relation to the O’Donoghue High Court action

The total amount in respect of the O’Donoghue High Court action paid from Subhead F.1 of Vote 27 was £207,386.65 in 1994 and £23,693.96 in 1995.


The breakdown of this amount was as follows. The amount in respect of the Applicant’s costs was £222,670.62. These were certified by the Taxing Master and communicated to the Department by the Chief State Solicitor.


The High Court also awarded the sum of £8,409.89 as damages.


TOTAL: £231,080.51


***


2. Gaelscoileanna

It is estimated that a total of 3.08% of the First-level provision, (salaries and capitation), will be allocated to Gaelscoileanna in the current calendar year.


The staffing schedules for the current school year for Gaelscoileanna and ordinary schools are attached at Appendix A.


It will be noted from the schedules that Gaelscoileanna generally enjoy a more favourable staffing schedule compared with ordinary schools. For example, a Gaelscoil with an enrolment of 127 or more pupils is entitled to one additional teacher compared with an ordinary school.


With lower enrolments, also, Gaelscoileanna enjoy preferential staffing allocations. With 59 pupils, a Gaelscoil qualifies for its second assistant. The corresponding figure for an ordinary school is 61. Likewise, a Gaelscoil with an enrolment of 80 or 100 pupils qualifies for the appointments of the third and fourth assistants respectively. Corresponding enrolments required from ordinary schools are 94 and 127 respectively.


APPENDIX A.

Schedule of enrolments of pupils governing the appointment and retention of assistants in national schools


The figure required for these purposes are the figures of enrolments on 30th September of the preceding school year.


This schedule will come into effect for the 1995/96 school year.


 

Appointment

First Retention Figure

1st Asst.

28

25

2nd Asst.

61

58

3rd Asst.

94

91

4th Asst.

127

127

5th Asst.

160

160

6th Asst.

192

192

7th Asst.

222

222

8th Asst.

251

251

9th Asst.

263

263

10th Asst.

295

295

11th Asst.

327

327

12th Asst.

360

360

13th Asst.

392

392

14th Asst.

424

424

15th Asst.

456

456

16th Asst.

488

488

For 17th assistant and upwards, add an additional 32 units of enrolment.


Gaelscoil ó 1/9/95.


 

Don Chéad Chaepachán.

Figiúr Coinneála.

1ú Cuntóir.

28

25

59

58

80

80

100

100

127

127

160

160

192

192

222

222

251

251

10ú

263

263

11ú

295

295

12ú

327

327

13ú

360

360

14ú

392

392

15ú

424

424

16ú

456

456

17ú

488

488

Téann an figiur ceapacháin don ochtú cúntóir déag agus níos mó in airde faoi 32 aonad de rolluchán.


Dr Don Thornhill


Secretary


Department of Education


Marlborough St.


Dublin 1


25 April 1996


Dear Dr Thornhill


I am directed by the Chairman, Mr Denis Foley T.D., to refer to your correspondence dated 16 April 1996.


The Committee considered the correspondence at its meeting today and requested that you clarify the following matters:-


1In relation to the O’Donoghue High Court Action:


(i)whether the case has been appealed to the Supreme Court.


(ii)the amount of the State’s costs in relation to this case.


(iii)whether there are any other ways of dealing with cases such as this other than through the Courts.


2.In your explanation in relation to the value of the primary school network you informed the Committee that the release of the Minister’s interest was a matter for negotiation between the school owners and the Department. The Committee wish to be informed whether any income has been accrued by the schools as a result of these negotiations and if so, the amount.


The Committee would be grateful if this information could be provided before 10 May 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Folev T.D.



Oifig an Rúnaí


An Roinn Oideachais



Secretary’s Office


Department of Education


Ms Cliona O’Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2.


16 May 1996


Dear Ms O’Rourke


I refer to your letter of 25th April, 1996 in which you convey the Committee’s request for clarification of a number of issues relating to the O’Donoghue High Court action and the release of the Minister’s interest in primary schools.


The information requested on both of the above matters is attached.


Yours sincerely


Don Thornhill


Secretary


A.O’Donoghue High Court Action.


(1).Appeal to Supreme Court.


The Minister for Education has referred this case on Appeal to the Supreme Court. The date for hearing the Appeal has not yet been set.


In appealing this case, the Minister for Education does not seek in any way to withdraw or in any way diminish the services made available, after the judgment, to Paul O’Donoghue or other children with similar needs. The Appeal is being pursued entirely without prejudice to present and future levels of service.


The judgment raises issues of more general concern, primarily to do with the separation of the powers of the Executive and Judicial arms of Government. These are matters of such constitutional importance that it is considered that the Supreme Court, which has a special role in interpreting the Constitution, must in the public interest be asked to consider the judgment and its implications.


(2).Amount of State Costs in the O’Donoghue case.


The costs of the State’s legal team in the O’Donoghue case which were paid by the Office of the Attorney General amounted to £12,871.40. This figure includes VAT and is net of Witholding Tax.


(3).Alternative methods of dealing with cases other than through the Courts.


The Department of Education would strongly share the Committee’s anxiety to ensure that adequate educational provision is made available for all children, including those with special needs, and that recourse to the Courts should not prove necessary for parents seeking such a service.


However, decisions to resort to litigation are ultimately a matter for the parents of the children concerned and can be outside the control of this Department.


Since the O’Donoghue judgment was delivered, very significant improvements have been put in place in provision for children with severe or profound mental handicap. The measures in question were in accordance with the recommendations of the Special Education Review Committee. They also reflect the judgment in the O’Donoghue case.


Among the actions taken was a reduction in the pupil teacher ratio for children with severe or profound mental handicap from 12:1 to 6:1 and an improvement in Child Care Assistant support at a similar level. The special rate of capitation funding provided in respect of each such child has also been substantially increased from a figure of £92.70 per child in 1993 to £341 per child in the current school year.


The Department of Education is confident that the action which it has taken to improve provision for special needs children represents a very significant response to the needs of such children. It is considered that as a result of these measures, the likelihood of further litigation in this area has been substantially reduced.


B.Release of the Minister’s interest in primary schools.


The income in the period 1990–95 which accrued to the Department of Education arising from the release of the Minister’s interest in properties which ceased to be National Schools is as follows:


1990

£ 6,361.

1991

£ 5,300.

1992

£ 2,653.

1993

£23,855.

1994

£24,938.

1995

£23,184.

Dr Don Thornhill


Secretary


Department of Education


Marlborough St.


Dublin 1


23 May 1996


Dear Dr Thornhill


I am directed by the Chairman, Mr Denis Foley T.D., to refer to your correspondence dated 16 May 1996.


The Committee considered the correspondence at its meeting today and requested that you clarify the following matters:-


1.The Committee noted that the State’s costs were £12,871.40 and expressed considerable surprise that the figure was so low. The Committee requested that you provide a full explanation of the costs and the reason for the significant difference between the costs of the applicant and those of the State.


2.In relation to the release of the Minister’s interest in primary schools:-


(i)The number of primary schools from which the Minister’s interest was released, the names of the particular schools, where they were located and the owners of the schools at the time of the release.


(ii)The reason the income accruing to the Department of Education is so low, particularly in view of the fact that state support to schools can amount to 85%.


(iii)Whether the position in relation to secondary schools is similar to that which applies to primary schools.


The Committee would be grateful if this information could be provided before 13 June 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D



Oifig an Rúnaí


An Roinn Oideachais



Secretary’s Office


Department of Education


Ms. Clíona O’Rourke,


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


13 June, 1996


Dear Ms. O’Rourke,


I refer to your letter of 23 May last.


The information sought by the Committee is attached.


Yours sincerely,


Don Thornhill,


Secretary.


1. Costs in the O’Donoghue case

The reason for the significant difference between the States’s costs and the costs allowed to the Plaintiff is as follows:


The figure already notified to the Committee in respect of the State’s costs represents the costs incurred by the State in engaging Counsel to represent the State in the above case.


The figure in question does not include costs associated with the involvement of legal and other representatives of the Attorney General’s Office, the Chief State Solicitor’s Office and the Departments of Education and Health and their agencies. The involvement of all such officers formed part of their normal duties.


In contrast, it should be noted that the plaintiff’s costs, as certified by the Taxing Master, encompassed all approved legal expenses associated with the case, including solicitors costs, together with the costs incurred by the plaintiff in engaging a number of expert witnesses on her behalf.


2. Minister’s Interest in Schools

(i)The details of Primary Schools from which the Minister’s interest was released in the period 1991 to 1995 is provided in the attached tables (Appendix 1).


All of the schools were owned by the relevant Diocesan Authority


(ii)The most important factor which determines the amount recoverable is the fact that the school sites are not owned by the Minister and, for the most part, when former schools are being sold, it is the site that has most value. In many cases, the old school building is demolished. The Department has no right to claim a portion of the value of a site it does not own.


The current policy on releasing the Minister’s legal interest in vacant schools is as follows:-


Interest is released free of charge where:


(a)School Lease (usually 99 years) has expired. This simply reflects the legal position.


(b)Property is being transferred to a Community Group.


The Minister’s interest is released on payment of a charge in other cases. The charge is calculated on the basis of 85% of the current market value of the school building.


(iii)The position in regard to the release of the Minister’s interest in Secondary Schools differs considerably from the Primary Sector.


The most common reason for Secondary Schools to cease is as a result of rationalisation. In such circumstances the Department decides on the location of the new school, which can be one of the original buildings or a greenfield site. In other cases the decision to close is taken for educational and economic reasons. In most cases the buildings do not have any commercial value.


Secondary Schools are the property of the owners/managers who are mostly religious orders.


A capital grant may be paid towards the cost of building, furnishing and equipping a new secondary school or major refurbishment of existing secondary schools. The cost of providing the site is not grant aided.


The current rate of grant paid by the Department of Education is 90%, the balance must be paid by the school authorities who are also required to meet the full cost of providing the site.


The Grant Scheme for Secondary Schools which was introduced in 1967 as part of the Free Secondary Education initiative provided a grant of 70%. This was increased to 80% in 1975, to 85% in 1982 and to 90% in 1985.


Prior to allocation of funds each application is considered in terms of enrolment, future viability and cost implications.


When a Secondary School obtains grant-aid for capital purposes the Manager is required to sign an undertaking which obliges the school authorities to refund the unexpired portion of the grant should the accommodation cease to be used for educational purposes within a specific period.


The amount recoverable is based only on the grant-aid given in respect of the buildings. The Department does not fund the purchase of the site and has no claim on it. The figure to be refunded by school authorities is negotiated on the basis of the amount of grant aid and the period of time from when the funding was granted.


In the past five years 26 Secondary Schools have ceased to operate as Secondary Schools of these


17 continue to be used for educational purposes.


7 did not receive any capital aid and therefore the question of a refund does not arise.


One has been sold and the Department has recouped £83,116, that being 50% of the capital grant.


In the case of one school the question of the release of the Minister’s interest is under consideration.


APPENDIX 1

1995 - Primary Schools in which the Minister’s interest was released


Name of School

Location

St Patrick’s Convent Girls

Carndonagh


Lifford,


Co. Donegal

Ballyweelin N.S.

Doonfore


Ballinfull,


Co. Sligo

Scoil Naomh Attracta N.S.

Trentamucklagh,


Lifford,


Co.Donegal

Mount Devlin N.S.

Ballyhaunis,


Co. Mayo

St Canice’s Co. Ed. N.S.

Granges Road,


Kilkenny

Laggan N.S.

Laggan,


Co. Monaghan

Scariff N.S.

Scariff,


Co. Clare

Clare School

Drung,


Co. Donegal

Clunelly N.S.

Clunelly,


Co. Donegal

Millstreet Boys N.S.

Millstreet,


Co. Cork

1994 - Primary Schools in which the Minister’s interest was released


Name of School

Location

St Bernard’s N.S.

Clonbrony,


Co. Longford

Clifden Boys N.S.

Clifden,


Co. Galway

Brownstown N.S.

Suncroft,


Curragh,


Co. Kildare

St Joseph’s N.S.

Wellington Street,


Dublin

1993 - Primary Schools in which the Minister’s interest was released


Name of School

Location

Delgany N.S.

Delgany,


Co. Wicklow

Dunmore East N.S.

Dunmore East,


Co. Waterford

Tisrara N.S.

Cuilnakeava,


Four Roads,


Co. Roscommon

Castleview N.S.

Castleview,


Co. Cork

Carnagans N.S.

Ballintemple,


Ballinagh,


Co. Cavan

Skerries N.S.

Skerries,


Co. Dublin

Culfodda N.S.

Ballymote,


Co. Sligo

Clarinbridge Boys N.S.

Clarinbridge,


Co. Galway

Tawin Island N.S.

Oranmore,


Co. Galway

Kilmaine Boys and Girls N.S.

Claremorris,


Co. Mayo

Killcarnan N.S.

Killcarnan,


Co. Monaghan

Reengarooga N.S.

Baltimore,


Co. Cork

Firies N.S.

Killarney,


Co. Kerry

1992 - Primary schools in which the Minister’s interest was released


Name of School

Location

Kiltycreevagh N.S.

Ballinamuck,


Co. Longford

Glascorn N.S.

Mullingar,


Co. Westmeath

Jamestown N.S.

Carrick-on-Shannon,


Co. Leitrim

Rathangan Boys N.S.

Rathangan,


Co. Kildare

Drung N.S.

Quigley’s Point,


Lifford,


Co. Donegal

Feamore N.S.

Feamore,


Kiltoom,


Co. Roscommon

Toames N.S.

Macroom,


Co. Cork

Ballincarrig N.S.

Ballincarrig,


Co. Wicklow

1991 - Primary Schools in which the Minister’s interest was released


Name of School

Location

Aughnadarry N.S.

Strokestown,


Co. Roscommon

Portrane N.S.

Donabate,


Co. Dublin

Ballyroe N.S.

Tralee,


Co. Kerry

Cathedral Boys N.S.

Cathedral Road,


Cork City

Abbeyleix Boys N.S.

Abbeyleix,


Co. Laois

Kiltimagh N.S.

Kiltimagh,


Co. Mayo

Dramkeen N.S.

Ballybofey,


Co. Donegal

APPENDIX 11

Mr P Mullarkey


Secretary


Department of Finance


Government Buildings


Merrion Street


Dublin 2


21 December 1995


Dear Mr Mullarkey


At the meeting of the Public Accounts Committee yesterday, a number of matters were raised which require the clarification of your office.


1.During its discussions on Paragraph 31 of the Report of the Comptroller and Auditor General on the Appropriation Accounts 1994, which dealt with an irregularity in the receipt by your Department of a cheque in respect of Exchequer Extra Receipts from the Department of the Environment, the Committee requested that you clarify the date on which it was agreed with the Department of the Environment that this money would be owing. In addition, the Committee wish to be kept informed regarding the progress of the Garda investigation in relation to this case.


2.The Committee also discussed the distribution of lottery funds to agencies and requested your view as to whether there is a need for a return to the situation where the Department of the Environment and the Local Authorities had a major role in relation to community recreation funding.


The Committee would be grateful if this information could be provided before 12 January 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



Roinn Airgeadais,


(DEPARTMENT OF FINANCE)


Baile Átha Cliath 2.


(Dublin 2)


11 January 1996


Ms. Cliona O’Rourke


Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


I am to refer to your letter of 21 December, 1995, concerning enquiries arising from the meeting of the Committee on the previous day. The requested information is as follows:


1Enquiry in relation to Paragraph 31 of the Report of the Comptroller & Auditor General on the Appropriations Accounts for 1994.


The Department of Finance (Pensions Section) was in correspondence with the Department of the Environment during the course of 1991 concerning the accounting arrangements that would apply to the eventual surrender value of an insurance policy in respect of the National Safety Council pensions scheme. A written direction, that the eventual sum to be realised was to be treated as an Exchequer Extra Receipt, was issued by this Department on 28 November 1991.


The Gardai have informed this Department that their investigations are nearing completion.


2Enquiry into distribution of lottery funds in relation to community recreation funding.


In 1990 and 1991 the Minister for the Environment allocated lottery funds to local authorities under the Amenities/Recreational Facilities Grants Scheme (also referred to as the Amenity Grants Scheme). This combined an existing amenities scheme and a recreational facilities scheme formerly operated by the Department of Education. Spending on the Environment scheme was £1.5m in 1990 and £4.1m in 1991.


At the end of 1991, a decision was taken, as a matter of policy, that no new allocations should be made under the scheme.


Residual payments were made under the Environment scheme in 1992 (£3.43m) and 1993 (£1.67m). The Scheme was terminated with effect from 31 December 1993 and funding was again provided for the Department of Education’s recreational facilities scheme.


I understand from the Department of the Environment that there are at present no proposals for the reintroduction of the scheme.


Yours sincerely


P.H. Mullarkey


Secretary


Mr P Mullarkey


Secretary


Department of Finance


Government Buildings


Merrion Street


Dublin 2


26 January 1996


Dear Mr Mullarkey


I am directed by the Chairman, Mr Denis Foley, TD, to refer to your letter dated 11 January 1996.


During its meeting on 25 January 1996, the Committee again discussed National Lottery funding and, notwithstanding the recommendations contained in its Third Interim Report, on the 1991 Report of the C&AG, which was published by the Committee in April 1994 and commented on in the Minute of the Minister for Finance on 9 June 1994, recommend that an independent body be set up, as a matter of urgency, to deal with the disbursement of National Lottery funds.


The Committee would be grateful for any comments you may have in relation to this recommendation before 9 February 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Chairman: Mr Denis Foley T.D.



Roinn Airgeadais,


(Department of Finance)


Baile Átha Claith 2.


(Dublin 2)


23 February 1996


Ms Cliona O’Rourke


Clerk


Committee of Public Accounts


Leinster House


Dublin 2


National Lottery


Dear Ms O’Rourke


I refer to your letter of 26 January 1996.


I note that the Committee of Public Accounts, at its meeting on 25 January 1996, decided to recommend that an independent body be set up, as a matter of urgency, to deal with the disbursement of National Lottery funds. The Committee has asked for any comments I may have in relation to this recommendation.


You will appreciate that a proposal to change the procedure for allocating lottery funds from one of direct accountability of Ministers to the Dail as at present to the establishment of an independent agency for this purpose touches on issues of policy on which I am precluded from expressing an opinion by Section 19(2) of the Comptroller and Auditor General Act 1993.


That said, the Committee should be aware that the Revised Guidelines issued to Departments in October 1994 for the invitation and processing of applications for grants for projects eligible for support from the proceeds of the National Lottery were expressly designed to enhance the transparency of lottery-funded grant schemes. The Department of Finance is monitoring compliance with these guidelines by the Departments concerned and I will ensure that the continuing concern of the PAC with the issue of transparency is brought to their attention.


Also, the Department has been working for some time past on the compilation of a detailed compendium of all projects which have received lottery funding since the introduction of the Lottery in 1987. Material covering the period up to end- 1994 will be presented to the Oireachtas in the near future.


Yours sincerely


P.H. Mullarkey


Secretary


APPENDIX 12


An Roinn Airgeadais, Áras Talmhaíochta,


Sráid Chill Dara, Baile Átha Cliath 2.


Department of Finance, Agriculture House,


Kildare Street, Dublin 2. Tel. 676-7571 Fax 661-6570 GTN 7109


18 April 1996


Ms Cliona O’Rourke


Clerk


Committee of Public Accounts


Dear Ms O’Rourke


I enclose, for the information of the Committee, a copy of this department’s circular 4/96 regarding revised arrangements for dealing with Exchequer Extra Receipts. This circular has been sent to all Accounting Officers.


Yours sincerely


Deirdre Moran


Government Accounting Section


Telephone: (01) 676-7571 Ext:


Fax: (01) 679-1745


Telex: 91948 FNAC


GTN: 7109



4/96


An Roinn Airgeadais, Urlár a dó, Ionad Setanta


Sráid Nassau, Baile Átha Cliath 2.


Department of Finance, 2nd Floor, Setanta Centre,


Nassau Street, Dublin 2.


Ref: F4/1/96


21 February 1996


Circular 4/96: Revised procedures for Exchequer Extra Receipts


A Dhuine Uasail


1.I am directed by the Minister for Finance to outline revised procedures for the lodgement of Exchequer Extra Receipts.


2.Exchequer Extra Receipts (EERs) are defined as1


“Receipts which the Department of Finance directs must be credited directly to the Exchequer and cannot be retained by Departments for their own use. Large Receipts which have no direct connection with the Vote expenditure and ‘windfall’ receipts are brought to account in this way. They include such items as:


-proceeds on important sales of property


-receipts on foot of surplus income or profits of State companies


-interest, dividends or capital repayments


-compensation.”


3.In practice, EERs may be classified into two types: (a) those remitted regularly, and (b) the irregular ‘windfall’ type.


(a)Those remitted regularly include:


OPW:

Sale of properties

Justice:

Fees for Nationality & Citizenship Certificates

Courts:

Court fees, Court percentages

Land Registry/Registry of Deeds:

Fees

Agriculture Food & Forestry:

Agricultural levies

Enterprise & Employment:

Companies’ Registration fees

Foreign Affairs:

Passport, Visa & Consular Fees

Any Office:

Conscience money.

TO: ALL ACCOUNTING OFFICERS


(b)The ‘windfall’ variety very often require a specific direction from the Department of Finance (usually Public Expenditure Division) that the item be lodged as an EER. If there is any doubt on how a particular receipt is to be treated, a specific direction should be sought from the Department of Finance.


4.The revised procedures for the lodgement of EERs are as follows:


Exchequer Section will acknowledge all EERs; Departments and Offices should nominate an addressee for these acknowledgements and ensure that they are regularly reconciled with the original payments.


Dublin-based offices:


All payable orders in respect of EERs should be hand-delivered to Exchequer Section2, Department of Finance, Setanta Centre, Nassau Street, Dublin 2 in preference to being sent through the post. [If the postal option is necessary, the address to be used is “Exchequer Section, Department of Finance, Upper Merrion Street, Dublin 2”.] The payable order should be accompanied by appropriate documentation to identify the nature of the lodgement. At the same time, a copy of this documentation should be sent, separately, to the Estimates Office3. Separate arrangements will apply to those offices which send in EERs on a regular basis.


Offices outside Dublin:


EERs should be transferred by Bank Giro to the PMG’s Sundry Moneys Deposit Account at the Central Bank in preference to being sent by post; the requisite documentation should be sent to Exchequer Section as well as to the Estimates Office.


If payment of an EER is delayed for more than a week after the issue of a direction by the Department of Finance, the Department or Office involved should notify the Estimates Office of the likely date of transfer.


5.Best practice in relation to the transmission of Payable Orders generally


I am also directed to bring to the attention of Departments and Offices the following best practices in relation to the general transmission of payable orders between Government offices.


Payable orders to other Government Departments or Offices should use an appropriate format for the payee’s name, for example, “The Accountant”;


There should always be a letter, issued separately or otherwise, notifying the relevant Department or Office of the purpose of the payable order;


Acknowledgements should be issued as a matter of course in respect of receipts from other Government Departments and Offices; and


Such acknowledgements should be used for the purposes of reconciliation by the office that issued the payable order.


Mise le meas


Phelim Molloy


Assistant Secretary


APPENDIX 13

Mr Brendan O’Donoghue


Secretary


Department of the Environment


Custom House


Dublin 1


2 May 1996


Dear Mr O Donoghue


I am directed by the Chairman, Mr Denis Foley TD, to refer to today’s meeting of the Committee at which the Minute of the Minister for Finance in response to the Committee of Public Accounts Final Report on the Appropriation Accounts 1993, was discussed.


The Committee referred to a section in relation to motor tax evasion and requested information in relation to the impounding of vehicles for motor tax offences. The Members were particularly interested to know whether the impounded vehicles are sold and if so, to whom the money accrues.


The Committee would be grateful if this information could be provided before 16 May 1996.


Yours sincerely


Clíona O Rourke


Clerk to the Committee


Office of the Secretary


Oifig an Rúnaí



DEPARTMENT OF THE ENVIRONMENT


AN ROINN COMHSHAOIL


CUSTOM HOUSE, DUBLIN I


TEACH AN CHUSTAIM


BAILE ÁTHA CLIATH I


TEL 01 679 3377


FAX 01 874 0693


GTN 7 1 08


16 May 1996


Ms Cliona O Rourke,


Committee Clerk,


Public Accounts Committee,


Dail Eireann,


Dublin 2.


Dear Ms O Rourke


I refer to your letter of 2 May 1996 requesting information on the disposal of vehicles impounded for motor tax offences.


The Garda Commissioner is empowered, under the Road Traffic Act, 1994 (Section 41) Regulations, 1995 (S.I. No. 89 of 1995), to dispose of an impounded vehicle in any manner he thinks fit, where the owner has not claimed the vehicle, or has not paid the charges due for detention, removal and storage. The proceeds from any such disposal accrue to the Exchequer.


I understand that, in practice, unclaimed vehicles are sent for scrap or sold periodically at public auction, and any proceeds are taken into the Garda Siochana Vote as an appropriation-in-aid.


Yours sincerely,


Brendan O Donoghue


Secretary


STATUTORY INSTRUMENTS


S. I. NO. 89 OF 1995.


ROAD TRAFFIC ACT, 1994 (SECTION 41) REGULATIONS, 1995.


Dublin


Published by the Stationery Office


Pn. 1575


Price: £1


S. I. No. 89 of 1995


Road Traffic Act, 1994 (Section 41) Regulations, 1995


The Minister for the Environment in exercise of the powers conferred on him by sections 3 and 41 of the Road Traffic Act, 1994 (No. 7 of 1994), having consulted with the Minister for Justice, hereby makes the following Regulations:-


1.These Regulations may be cited as the Road Traffic Act, 1994 (Section 41) Regulations, 1995.


2.These Regulations shall come into operation on the 19th day of April, 1995.


3. (1)In these Regulations:


“the Act” means the Road Traffic Act, 1994 (No. 7 of 1994);


“the Act of 1961” means the Road Traffic Act, 1961 (No. 24 of 1961);


“the Commissioner” means the Commissioner of the Garda Síochána;


“day” means any period of 24 hours or part thereof.


(2)In these Regulations, a reference to an article which is not otherwise identified is a reference to an article of these Regulations.


4.Where a member of the Garda Síochána is of opinion that an offence to which section 41(1) of the Act refers is being or has been committed in respect of the driving or use of a mechanically propelled vehicle, such member may take such steps, including the making of an arrangement with any other person as the member thinks fit, for the detention, removal and storage of the said vehicle.


5.(1)Subject to articles 6, 7, 8 and 9, where a vehicle has been detained, removed and stored in accordance with article 4, there shall be paid by the owner of the vehicle to the Commissioner a charge for the detention and removal of the vehicle and a charge for the storage of the vehicle as follows -


(a)for the detention, removal and for storage for one day of the vehicle - £100.


(b)for each further day of storage - £25.


(2)Subject to articles 6, 7, 8 and 9, a vehicle which has been detained, removed and stored in accordance with article 4 shall not be released until -


(a)the person claiming the vehicle produces, to the member of the Garda Síochána in charge of the place at which the vehicle is stored, satisfactory evidence of ownership of the vehicle or authority from the owner to claim the vehicle and,


(b)the charges due for the detention, removal and storage of the vehicle have been paid in accordance with sub-article (1).


(3)A charge under this article may, in default of being paid, be recovered as a simple contract debt in any court of competent jurisdiction.


6.Where a vehicle has been detained, removed and stored in accordance with article 4 in respect of an offence to which section 41 (1) (a) of the Act refers and the owner establishes, to the satisfaction of the member of the Garda Síochána in charge of the place at which the vehicle is stored,


(1)that the vehicle had been taken without the owner’s consent, and


(2)that the vehicle was being used without the owner’s consent at the time at which it was detained,


the member may release the vehicle to the owner without payment of the charges set out in article 5.


7.Where a vehicle has been detained, removed and stored in accordance with article 4 in respect of an offence to which section 41 (1) (b) of the Act refers and the owner establishes, to the satisfaction of the member of the Garda Síochána in charge of the place at which the vehicle is stored, that an approved policy of insurance within the meaning of section 56 of the Act of 1961 was in force in respect of the use of the vehicle at the time it was detained the member shall release the vehicle to the owner without payment of the charges set out in article 5.


8.Where a vehicle has been detained, removed and stored in accordance with article 4 in respect of an offence to which section 41 (1) (c) of the Act refers and the owner establishes, to the satisfaction of the member of the Garda Síochána in charge of the place at which the vehicle is stored, that excise duty payable under section 1 of the Finance (Excise Duties) (Vehicles) Act, 1952 (No. 24 of 1952) in respect of the vehicle had been paid, prior to the detention of the said vehicle, in respect of the day on which the vehicle was detained, or in respect of any part of the period of three months immediately prior to the detention, the member shall release the vehicle to the owner without payment of the charges set out in article 5.


9.Where a vehicle has been detained, removed and stored in accordance with article 4 and the said vehicle was at the time of the detention abandoned or illegally parked, the charges set out in article 5 shall not be applied in addition to the application of charges set out in Regulations made under section 97 of the Act of 1961.


10.Subject to the provisions of section 41 (3) of the Act, the Commissioner may dispose of a vehicle which has been detained, removed and stored in accordance with these Regulations in any manner he thinks fit where the owner of the vehicle has not claimed it or has not paid the charges due in accordance with article 5.


11.Where the Commissioner proposes to dispose of a vehicle in accordance with these Regulations, the Commissioner, shall


(1)serve on the owner a notice of intention to dispose of the vehicle or,




(2)where it has not been found possible after reasonable enquiry to ascertain the name and address of the owner of the vehicle, publish in at least one daily newspaper circulating in the area where the vehicle was detained notice of the intention to dispose of the vehicle.


12.(1)Monies received by the Commissioner on foot of the detention, removal, storage or disposal of a vehicle shall be paid into or disposed of for the benefit of the Exchequer in such manner as the Minister for Finance may direct.


(2)Notwithstanding the provisions of sub-article (1) of this article, where before the expiration of the period of one year commencing on the date of the disposal of a vehicle by the Commissioner a person satisfies the Commissioner that he was the owner of the vehicle at the time of its disposal, the Commissioner shall pay him a sum by which the proceeds of the disposal exceed the charges due for the detention, removal and storage of the vehicle, together with the expenses reasonably incurred in the disposal of the vehicle.


GIVEN under the Official Seal of the Minister for the Environment this 11th day of April, 1995.


L.S. BRENDAN HOWLIN


Minister for the Environment


EXPLANATORY NOTE


(This note is not part of the Instrument and does not purport to be a legal interpretation.)


These Regulations give effect to the provisions of section 41 of the Road Traffic Act, 1994 and outline the procedures governing the detention, removal, storage and subsequent release or disposal of vehicles detained under that section.


APPENDIX 14

FIELD (name)


FIELD (adr1)


FIELD (adr2)


FIELD (adr3)


FIELD (adr4)


FIELD (adr5)


6 February 1996.


Dear FIELD(sal)


I am directed by the Chairman, Mr Denis Foley TD, to refer to a meeting of the Committee on Thursday 1 February 1996 at which the procurement of goods in the public service was discussed.


The Committee was particularly interested in the cost of imported goods and has requested that each Accounting Officer outline, in detail, the procedures being used in his/her Department when goods are being purchased.


The Committee wish to be informed whether, notwithstanding EU requirements, your Department in deciding contracts, considers the possibility of purchasing particular goods from Irish, as opposed to non-Irish, manufacturers. In addition, the Committee has requested that you provide statistics in relation to the cost of imported goods that are purchased by your Department.


The Committee would be grateful if this information could be provided before 23 February 1996.


Yours sincerely


________________


CLÍONA O ROURKE


Clerk to the Committee.


SENT TO ALL ACCOUNTING OFFICERS.



Oifig an Choimisineåra Luachåla


(Office of the Commissioner of Valuation)


6. Plás ile


‘6 Ely Place’


Baile Åtha Cliath. 2.


‘Dublin 2’


28 February 1996


Ms Cliona O Rourke


Clerk to the Committee


Committee of Public Accounts


Dear Ms O Rourke


I refer to your letter of 6 February 1996 regarding procurement of goods by the Valuation and Ordnance Survey Offices.


The purchase of imported goods arises only in relation to the Ordnance Survey Office and a list of non-Irish purchases in 1995 is attached. National guidelines and EU requirements in relation to procurement are observed by both Offices.


Yours sincerely


James V Rogers


Accounting Officer


Imported Goods 1995


Jan/Feb ’95:

 

 

 

 

A/C No:

 

 

 

 

39014

Scitex Ltd

UK

Paper

£4009.10 + £841.91 = £4851.01

Mar/Apr ’95:

 

 

 

 

10805

Cam Computers

UK

Dispersant Ink

£673.07 + £141.34 = £814.41

10801

Zeiss Ltd

UK

Computer Cables

£728.91 + £153.07 = £881.98

43000

Xerox Engineering

UK

Matt Film

£3462.18 + £727.06 = £4189.24

10805

Cam Computers

UK

Ink, Dispersant

£895.32 + £188.02 = £1083.34

10408

Pershke Price

UK

Parts for Roland

£306.02 + £64.26 = £370.28

May/June ’95:

 

 

 

 

40004

Trimble Navigation

UK

GPS Equipment

£27,601.34 + £5796.28 = £33,397.62

10805

Cam Computers

UK

Inks

£207.25 + £43.52 = £250.77

29002

J.B. Sales

UK

Trivet Plates GPS

£164.44 + £34.53 = £198.97

43000

Xerox Engineering

UK

Inks

£88.99 + £18.69 = £107.68

10271

Leica

UK

Graph Chart Paper/Pens

£116.57 + £24.47 = £141.04

43000

Xerox Engineering

UK

Dry/Imager Chemicals

£1107.21 + £232.51 = £1339.72

40004

Trimble Navigation

UK

GPS Equipment

£559.41 + £117.47 = £676.88

July/Aug ’95:

 

 

 

 

29002

J.B. Sales Ltd

UK

Levelling Plates 9

£1161.69 + £243.95 = £1405.64

10805

Cam Computers

UK

Film

£188.11 + £395.03 = £2276.14

29002

J.B. Sales Ltd

UK

Levelling Plate 1

£162.26 + £34.07 = £196.33

Sept/Oct ’95:

 

 

 

 

10805

Cam Computers

UK

Ink, Dispersant

£1461.56 + £306.93 = £1768.49

33006

I.J. MacLead

UK

3-m. Tapes

£1897.13 + £398.40 = £2295.53

10805

Cam Computers

UK

Ink, Dispersant

£2021.91 + £424.60 = £2446.51

10487

Survey Inst. Services

USA

Photogrammetric Eq.

£302,927.26

Nov/Dec ’95:

 

 

 

 

10487

Survey Inst Services

USA

Photogrammetric Eq

£225,819.49

 

Services

 

 

£200,000.00

10805

Cam Computers

UK

Dispersant

£143.50 + £30.14 = £173.64

30208

KLT Int.

USA

Software DSR’s

£70,196.03 + £14,741.17 = £84,937.20

39014

Scitex

UK

Inks

£2539.21 + £533.23 = £3,072.44

36025

Pearson Professional

UK

Software

£208.06 + £43.69 = £251.75

10805

Cam Computers

UK

Inks, Dispersants

£2468.57 + £518.40 = £2986.97

 

 

 

 

Total: £878,860.33

Note 1:In relation to the photogrammetric equipment totalling £728,746.75 Survey Instrument services are an Irish Company acting as an agent. The parent company Helava Systems is based in the United States.


Mr James Rogers


Commissioner of Valuation


Valuation Office


6 Ely Place


Dublin 2


13 March 1996


Dear Mr Rogers


I am directed by the Chairman, Mr Denis Foley T.D. to refer to your letter dated 28 February 1996.


The Committee considered your letter at a recent meeting and requested that you clarify the position with regard to the tendering process in relation to awarding of the contracts referred to in your letter. The Committee were particularly interested to ascertain whether Irish companies were invited to submit tenders for the software contracts and if not, the reason they were not invited to do so. In addition, in cases where tenders were submitted by Irish companies, the reason they were not considered suitable.


The Committee would be grateful if this information could be provided before 26 March 1996


Yours sincerely


Clíona O Rourke


Clerk to the Committee



Oifig an Choimisineåra Luachåla


(Office of the Commissioner of Valuation)


6, Plás ile


‘6 Ely Place’


Baile Åtha Cliath. 2.


‘Dublin 2’


26 March 1996


Ms Cliona O’Rourke


Clerk to the Committee


Committee of Public Accounts


Dear Ms O’Rourke


I refer to your letter of 13 March in relation to contracts for the provision of software.


The software in question is of an advanced technical nature and is very specialised. There are no Irish developers in this field and consequently no Irish companies were invited to tender.


Yours sincerely


J V Rogers


Accounting Officer



Priomh-Oifig


Oifig na nOibreacha Poibli


51 Faiche Stiabhna, B Á C 2, Ėire


teil (01) 6613111, fax (01) 6619897


GTN 7119


Ó Oifig an Chathaoirligh


From the Office of the Chairman


Ms. Cliona O’Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


DUBLIN 2.


Re: Procurement of goods in the Public Service


Dear Ms. O’Rourke


I refer to your letter dated 6th February last in relation to the Committee’s queries on Public Procurement issues.


A summary of the position in relation to the procurement of supplies by the Government Supplies Agency from Irish and non-Irish suppliers is provided on the attached sheet.


In relation to the procedures adopted by the G.S.A. when purchasing goods, we observe the basic principle of competitive tendering as a general rule, except in exceptional circumstances such as confidentiality or urgency - these situations are covered in the guidelines laid down by the Department of Finance in its booklet “Public Procurement”, which we must of course comply with.


The Committee will be aware that the expression of “national preference” provisions are precluded under EU and other international obligations.


I trust this answers your queries.


Yours sincerely,


BRIAN MURPHY


CHAIRMAN


15 March, 1996.



Purchases by Government Supplies Agency in 1995


Category

Period

Total Value

Placed Irish Firms

Placed Irish Agents

Placed Foreign Firms

Printing

1995

£ 8.63m

£8.576m

Nil

£54,000 of which £35,000 was for items only manufactured abroad

Transport

1995

£10.2m

Nil

£10.2m

Nil

Misc. Stores

1995

£ 0.5m

£0.5m

Nil

Nil

Paper and Office Requisites

1995

£ 3.265m

£2.87m

£ 0.15m

£245,000 all of which was for items only manufactured abroad

Garments

1995

£ 4.22m

£3.94m

Nil

£280,000 of which £212,000 was for items only available abroad.

Fabrics

1995

£ 2.4m

£2.06m

£ 0.24m

£100,000 of which £30,000 was for items only available abroad

In summary, out of total purchases valued at £29.215m, £28.536m was placed in Ireland with £679,000 placed abroad; of this £522,000 was for items only manufactured abroad. The value of items sourced abroad on a purely competitive basis was £157,000.



Priomh-Oifig


Oifig na nOibreacha Poibli


51 Faiche Stiabhna, B Á C 2, Ėire


teil (01) 6613111, fax (01) 6619897


GTN 7119


Ó Oifig an Chathaoirligh


From the Office of the Chairman


FS/BB2


Ms. Cliona O’Rourke


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


DUBLIN 2.


Dear Ms. O’Rourke,


I refer to the query contained in your letter of 22nd March, 1996, with regard to a number of contracts placed with foreign firms, to the value of £212,000, which were only available abroad.


The breakdown of the amount in question is as follows:-


(i)Combat Fatigue Uniforms, manufactured in herringbone American style fabric, was purchased on behalf of the Department of Defence from Messrs J & S Franklin Ltd., London, at a cost of £180,000.


A tender competition was held in 1995 for the manufacture of these Combat Fatigue Uniforms, used by Army Personnel serving overseas on United Nations duties. Only two tenders were received, one from J & S Franklin Ltd. and one from an Irish Company. While there wasn’t any guarantee that the Irish Company could produce the garment to the required specification the price quoted by the Irish company was more than twice the price quoted by J & S Franklin Ltd.


Efforts have been made by this Agency’s Inspectorate over the past two years to source the fabric required from within the State, all to no avail.


(ii)Re-sizing of Motorcycle Helmets, purchased from Messrs. Thomas Townsend Ltd., London at a cost of £9,680.


Standard sized helmets are carried in stock. However, on occasion, it may be necessary to have these helmets re-sized because of a non-standard size requirement. In this instance, it was necessary to have this re-sizing performed by the original manufacturer of the helmets.



(iii)Supply of woollen gloves by Capemist Gloves Ltd., Ballymena, at a cost of £10,400.


There was no response to a 1995 tender competition other than Capemist Gloves.


(iv)Combat Suits for Army Ranger Wing, purchased on behalf of the Department of Defence from Arktis Ltd., Exeter, at a cost of £12,400.


Arktis Ltd. were the only company to respond to a tender competition to manufacture this Distorted Military Pattern (DMP) Style Combat Suit.


Yours sincerely,


BRIAN MURPHY


CHAIRMAN


3 April, 1996.



Oifig an Ard-Reachtaire Cuntas agus Ciste


Office of the Comptroller and Auditor General


Dublin Castle.

Telephone: (01) 6793122

GTN Telephone: 7116–0

Dublin 2.

Fax: (01) 6793288

GTN Fax: 7116–222

Ms Clíona O Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin. 2.


13 February 1996


Dear Ms O Rourke,


I refer to your letter of 6 February 1996 requesting information relating to the procurement of imported goods in the public service.


This Office adheres to the public procurement procedure in seeking tenders for the provision of goods. Our only purchases are of administrative equipment and computer software. The level of purchases are such that they fall below the limit which would require the seeking of competitive tenders from outside of Ireland as required under EU regulations. I should add that in 1995 this Office did not procure any goods from foreign suppliers.


If you require any further information, do not hesitate to contact me.


Yours Sincerely


Joseph Meade


Accounting Officer


Any reply to this letter should be addressed to the Secretary


OUR REF; EAB/ SB


YOUR REF;


PLEASE QUOTE OUR REF;



COIMISINÉIRI NA dTABHARTAS AGUS


NA dTIOMANTA DEIRCIÚLA I nÉIRINN


(Commissioners of Charitable Donations & Bequests for Ireland)


12 Clare Street, Dublin 2.


Telephone 766095


CHARITY 8th day of February, 1996


Ms. Cliona O’Rourke,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke,


I refer to your letter of the 6th instant. This Office has never entered into a contract to purchase goods from outside Ireland. All stationery, furniture etc. is purchased locally.


Yours sincerely,


Antoinette Doris


Accounting Officer.



Office Of The Ombudsman


52 St. Stephen’s Green, Dublin 2


Telephone (01) 678 5222


Fax (01) 661 0570


14 February, 1996


Ms Clíona O Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O Rourke


I refer to your letter of 6 February, 1996 concerning the cost of imported goods purchased by this Office.


This Office had a small non-pay budget of £236,000 in 1995. Of this only about £50,000 was spent on the type of goods covered in your letter. The remainder was spent on items such as the upkeep of the office (OPW), travel and subsistence, staff training, Annual Report, postal and telecommunications charges, legal fees etc.


Information Technology purchases accounted for a large portion of the £50,000 spent on the purchase of goods in 1995. In line with Department of Finance procedures we operate a tendering process with the contracts being awarded to the lowest most suitable tenders. Department of Finance approval is obtained in cases of equipment which involves significant expenditure. While all goods purchased by this Office are from Irish suppliers, a requirement that goods be sourced from Irish manufacturers would not be a condition in the specification sent to suppliers.


In order to determine how much, if any, of the goods were produced by non-Irish manufacturers it would be necessary for us to firstly identify each of the suppliers involved and then to request from them details of the country of origin of the goods purchased. In view of the relatively small amount of money involved I am not sure that such an exercise would be justified or that it would assist the Committee greatly in relation to this matter.


If you require any further information please do not hesitate to contact me.


Yours sincerely


Pat Whelan


Accounting Officer



Oifig Aire Na Mara


(Office of the Minister for the Marine)


Baile Átha Cliath 2


(Dublin 2)


19 February 1996


Ms Cliona O Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O Rourke


I refer to your letter of 6 February requesting specific information relating to the procurement of goods in the public service. The following is provided by way of background to the Committee of Public Accounts on the procedures used in the Department of the Marine in regard to the procurement of goods.


The procedures to be followed by Government Departments with regard to the purchase of goods are well established. It is a basic principle of Government procurement that a procedure based on competitive tendering should always be used, unless exceptional circumstances apply, in which case the approval of the Government Contracts Committee must be obtained. Tendering must be open to competition from as wide a range of firms as possible. Contracts for the supply of goods are awarded on the basis of either the lowest suitable tender or the most economically advantageous tender. In the case of a contract of a value of £20,000 and over, the permission of the Government Contracts Committee must be sought if it is proposed to pass over the lowest tender.


In addition, in the case of all public sector contracts of a value of £5,000 (inclusive of VAT) or more, evidence from the Revenue Commissioners that the tenderer’s tax affairs are in order must be provided before a contract is awarded.


Public procurement is an important part of the European Union’s Internal Market Programme and there has been a very significant widening of EU involvement in this area in recent years.


EU Directives set legal obligations on Contracting Authorities. The procurement of goods in the public service is covered by EU Supplies Directive 93/36/EEC. Under the terms of the Directive if the estimated value of a contract for the supply of goods exceeds the threshold of £99,557 the contract must be open to competition across the EU, by means of advertisement in the Official Journal of the European Communities. This Department like all Government Departments is subject to the terms of this Directive. I should also mention that an annual return relating to the procurement of all goods is made by Government Departments under the terms of the Supplies Directive. The Commission actively monitors compliance. In addition, suppliers who consider that they have been discriminated against have rights to obtain legal redress.


With regard to the cost of imported goods purchased by the Department of the Marine the following statistics are provided:


Year

EU

Non EU (all USA)

 

£

£

1993

301,741

22,665

1994

180,761

46,400

1995

307,805

42,403

I would add that the purchases comprise, in the main, publications and highly specialised scientific or electronic equipment, in addition to office machinery of a type not manufactured in Ireland.


If I can be of further assistance to the Committee, please revert to me.


Yours sincerely


Tom Carroll


Secretary



State Laboratory


Abbotstown


Dublin 15


Ireland



Telephone: +353–1–8217700


Fax: +353–1–8217320


An tSaotharlann Stáit


Baile an Aba


Baile Átha Cliath 15


20 February 1996


Ms Clíona O’Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


In reply to your letter of the 6th inst., concerning procurement of goods in the Public Service


The mandate of the State Laboratory revolves around the provision of chemical analytical service in support of legislation and Government policy.


Being a laboratory the vast bulk of expenditure on “goods”, is centered around laboratory supplies (equipment and chemicals) and falls under Subhead A5. The highly specialised nature of the goods purchased under Subhead A5 means that virtually none of it is manufactured in Ireland. Consequently, even though all purchases of this nature are done through Irish laboratory supply companies most of the equipment acquired is of non Irish manufacture.


Should you require further clarification please contact Mr C Murphy, at the above address.


Yours sincerely


Dr Máire C Walsh


STATE CHEMIST


GAILEARAÍ NÁISIÚNTA NA hÉIREANN


Office of the Director



Ms. Clíona O Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin 2


Dear Ms. O Rourke,


I reply to your letter of 6 February requesting information on the purchase of goods, with particular respect to the origins of such goods.


The cost of goods purchased outside of Ireland in 1995 was £242,00.


Statistics are as follows:


1.Purchase of picture

£187,000

2.Software for Library

£10,000

3.Storage Racks for Paintings

£33,000

4.Journals and publications

£7,000

5.Restoration materials

£6,000

Apart from paintings, the purchase of all goods are put to tender unless there is only one supplier, in which case sanction is sought from the Public Procurement Section of the Department of Finance for orders over £5,000 in value.


I trust this information is sufficient to your needs.


Yours sincerely,


Raymond Keaveney


Director



An Roinn Talmhaiochta, Bia agus Foraoiseachta


(DEPARTMENT OF AGRICULTURE, FOOD AND FORESTRY)


Baile Átha Cliath 2


(DUBLIN 2)


21 February 1996


Ms Cliona O’Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


I refer to your letter of 6 February concerning procedures for purchasing of goods in this Department.


The position is as follows:


(a)Tenders are sought from the maximum number of possible suppliers for goods whose value is in excess of £1,000.


(b)The lowest tender must be accepted, subject to suitability regarding specification etc. If the tendering procedure is not adhered to for any reason and the cost of the item is in excess of £20,000, prior written approval for purchase must be obtained from the Government Contracts Committee.


(c)If the contract price is in excess of £5,000 (including VAT), a current tax clearance certificate must be received before the contract is placed.


(d)Quarterly returns of all purchases in excess of £1,000 are sent to the Government Contracts Committee of the Department of Finance.


(e)For contracts which are estimated to cost more than the thresholds set out in EU Directives on Public Procurements (the present threshold is £110,418), the invitation to tender is advertised in the Official Journal of the European Communities. (As far as this Department is concerned, this rule applies only in the purchase of tuberculin, blood testing kits and computer equipment).


The expenditure for 1995 totalled £6,152,622 and, of this, £632,681 was paid directly to companies located outside Ireland. While £5,519,941 was paid to Irish based Companies, it is fair to assume that a considerable proportion of the goods purchased, e.g. laboratory equipment, computer equipment, farm machinery and office equipment, were of foreign manufacture.


Supplies of stationery, print matter etc are purchased through the Government Supplies Agency of the Office of Public Works.


While consideration is always given to Irish manufactured goods, we are bound by the tendering procedures as laid down by the Government Contracts Committee, i.e. lowest price (subject to suitability of item), tax clearance and, of course, by EU requirements.


Yours sincerely


Michael C. Dowling


Secretary


An Roinn Turasóireachta agus Trádála

Department of Tourism and Trade

Telephone (01) 662 1444

Sráid Chill Dara,


Baile Átha Cliath 2

Kildare Street.


Dublin 2

Fax


(01) 676 6154


Ms. Cliona O’Rourke.


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2.


22 February 1996


Re: Procurement of Goods


Dear Ms. O’Rourke


In your letter of 6th February last, you asked for details of the procedures used in this Department when goods are being purchased.


The Department’s procedures are in accordance with national guidelines and EU requirements in relation to procurement as summarised in the booklet “Public Procurement” issued by the Department of Finance (P.38154, May 1994).


In practice, competitive tendering is the norm with the lowest tender being accepted provided the goods are of the required specification. National preference provisions are precluded under EU and other international obligations.


Departmental records relate only to suppliers and they show that all purchases of goods in 1995 were from Irish suppliers. However, it may be the case that suppliers source goods from both Irish and overseas manufacturers.


Yours sincerely


Margaret Hayes


Secretary




OIFIG na gCOIMISINÉIRÍ IONCAIM


(Office of the Revenue Commissioners).


CAISLEÁN BHAILE ÁTHA CLIATH


(Dublin Castle).


BAILE ÁTHA CLIATH 2


(Dublin 2).


23 February 1996


Ms Cliona O’Rourke,


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms O’Rourke,


I refer to your letter of 6 February concerning the procurement of goods in the Public Service.


The procurement of goods is governed by national, EU and GATT provisions, as contained in the booklet Public Procurement (1994 Edition) and other instructions issued from time to time by the Department of Finance.


Procurement of supplies coming within the scope of national provisions is made in accordance with the National Guidelines on Government contracting (as contained in Part 1 of the above booklet) while procurement of supplies which come within the scope of the EU and GATT procurement regimes (i.e. where certain value thresholds are exceeded) are made in accordance with the provisions of the relative EU Supplies Directive (No 93/36 EEC), as contained in Part 2 of the above booklet.


With regard to the purchase of Irish manufactured goods as opposed to non-Irish, purchases made directly by this Office are made in accordance with the basic principle of competitive tendering and value for money. However, as stated in our Strategy Statement in relation to the Small Business and Services Sectors, when selecting suppliers (or potential suppliers) we try to ensure, while having due regard for the above principle, that we do not favour larger firms at the expense of small business and service firms and that we give due weight to the personal, specialist and locally responsive service that can often be provided by these sectors. While the majority of those suppliers with whom this Office deals are Irish, information on the origin of goods supplied by them is not readily available.


In addition to purchases made directly by this Office a significant amount of our supplies are also ordered through the Government Supplies Agency (GSA), for example motor vehicles, paper, stationery, printing, clothing, cleaning materials and general office supplies. Likewise, contracts for furniture and carpets are placed by the Office of Public Works. Information in regard to the sourcing of goods by the GSA and the OPW is not available.


Yours sincerely,


C.C. MacDomhnaill


Chairman


Oifig an Runai,


An Roinn Leasa Shóisialaigh,


Áras Mhic Dhiarmada,


Sráid Stórais, Baile Átha Cliath 1.



Office of the Secretary,


Department of Social Welfare,


Áras Mhic Dhiarmada.


Store Street. Dublin 1.


☎: (01) 8748444. Fax: (01) 7043721


Ms Cliona O’Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin 2


February 21st, 1996


Dear Ms O’Rourke


Your letter of 6 February 1996 refers.


The Department, as is the case for all state agencies, is bound by general Civil Service procurement procedures. These procedures which comply with EU Directives are set out in guidelines issued by the Department of Finance and the Government Contracts Committee. The expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) are precluded under EU and other international obligations. The guidelines also require that all purchases are completed by way of competitive tendering.


In this regard the Department of Social Welfare invites tenders from a range of suppliers in relation to all goods and services required. Where the value of goods exceeds the EU threshold (137, 537 ECUs or IR£110, 418 in 1996) an advertisement is placed in the Official Journal of the EU as required under the European Directives on Public Procurement.


For practical and business purposes e.g. service, repair and supplies, the Department places orders with Irish based suppliers whenever possible. In the case of Accommodation supplies (e.g. furniture) and stationery many items are purchased through the Office of Public Works (OPW) or the Government Supplies Agency (GSA). In addition, a significant proportion of direct ordering is done through OPW designated suppliers - required under Department of Finance Circular 1/94. This applies particularly to standard furniture items such as chairs, filing cabinets etc.


It is impossible to determine the Irish content of goods purchased as, given the nature of modern manufacturing processes, goods sourced in this country may comprise parts made in a wide range of different countries. In addition a large number of Irish Companies are involved in sub-assembly, their end-product is then exported to a foreign based concern for assembly in the final product which may then re-imported to this country for sale.



The Department of Social Welfare spent the following amounts on Computers, Office Equipment and Supplies in 1995.


 

-£5.675m on Computer Hardware and Supplies

 

-£ .447m on Office Machinery and Supplies

 

-£ .093m on Photocopying and Supplies.

Total:

£6.215m

In addition it purchased the following goods related to accommodation, stationery, maintenance, security etc.


 

£

% through OPW/GSA

Furniture

588,254

64%

Stationery

1,686,533

32%

Small Stores/Rubber Stamps

69,297

 

Cleaning Supplies

62,277*

 

First Aid

2,766

 

Personal Protection Equipment

13,551*

 

Maps

201

 

Queuing Tickets

696

 

Xmas Decorations

318

 

Misc Tags, Invitations

2,341

 

Medical Supplies

489

 

Misc Gifts

595

 

Plastic Sacks

796

 

Uniforms

3,750

100%

Total

£2,431,864

38%

* Suppliers designated by GSA


Overall Total: £8.647m


The Department does not keep figures in a manner which would provide a breakdown of Irish and non Irish manufacturers. However, payments made in 1995 for goods supplied by foreign based Companies amounted to £35,164. This represents 0.41% of total expenditure relating to procurement of goods in 1995.


Yours sincerely


E. McCumiskey


Secretary



Telephone: 616944


Telex No: 90879


Fax No: 761806


OIFIG AN ÁRD-AIGHNE


(Office of the Attorney General)


GOVERNMENT BUILDINGS


UPPER MERRION STREET


DUBLIN 2


Our Ref.


Your Ref.


23 February, 1996


Ms Clíona O Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O Rourke


I refer to your letter of 6 February, 1996 concerning the procurement of goods in the public service and of imported goods in particular.


Non-pay expenditure in 1995 covering both the Office of the Attorney General and the Office of the Chief State Solicitor was £1,015,000. Of this amount approximately £467,000 related to the purchase of items referred to in your letter. The balance was incurred as a result of expenditure on office premises, travel and subsistence, incidental expenses, postal and telecommunications services etc.


Of this £467,000 over half of the expenditure relates to the purchase of Information Technology equipment (and related supplies). The balance was spent on a range of items and services such as printing, binding, stationery, general office equipment and supplies. The purchase by this Office of such equipment and related items is in accordance with Department of Finance and EU procedures and requirements in this area. Where significant amounts are being spent Department of Finance approval is required in advance of the purchase. Of course it is our general policy to source items domestically insofar as it is permissible and practical to do so. As you will be aware the expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) are precluded under EU and other international obligations.


You also ask about the cost of imported goods purchased by us. The position here is that it would be necessary for us to undertake the following tasks for each of our purchases:


identify each supplier involved


request each supplier to provide us with details about the source of the goods provided


This would be quite a time consuming venture for us to undertake given the amount of moneys involved. I might also suggest that engaging in such an exercise with our suppliers might only serve to draw attention to an exercise which we might find difficult to justify in the EU context.


Please feel free to contact me if I can be of further assistance.


Yours sincerely


James Hamilton


Accounting Officer


(18COR232.96C)


Office of the Secretary


Oifig an Rúnaí



DEPARTMENT OF THE ENVIRONMENT


AN ROINN COMHSHAOIL


CUSTOM HOUSE DUBLIN I


TEACH AN CHUSTAIM


BAILE ÁTHA CLIATH I


TEL 01 679 3377


FAX 01 874 0693


GTN 7 1 08


26 February, 1996


Ms. Cliona O’Rourke,


Committee Clerk,


Public Accounts Committee,


Dail Eireann,


Dublin 2.


Dear Ms. O’Rourke,


I refer to your letter of 6 February, 1996 in regard to the procurement of goods in the public service.


National guidelines and EU requirements in relation to public procurement generally are summarised in the booklet “Public Procurement”, which I assume is available to the Committee. The Department observes the procedures set out in the booklet when purchasing goods and services.


I am sure the Committee is aware that the expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) is precluded under EU and other international obligations. In these circumstances, our guiding principle in procuring goods and services is to obtain best value for money.


As the Department is not, in general, involved in the provision of major services direct to the public, or in the carrying out of major projects, its direct purchases tend to involve the usual range of office machinery, furniture, supplies, as well as other products and services necessary for the maintenance and operation of its offices. Many of the items in question would contain components manufactured in different countries, and any attempt to disaggregate the cost of imported and domestic elements would be unlikely to give useful results.


Yours sincerely,


Brendan O’Donoghue


Secretary



Oifig an Tánaiste


Office of the Tánaiste


23rd February, 1996


Ms Clíona O’Rourke


Clerk to the Committee of Public Accounts


Leinster House,


Dublin 2.


Re: Procurement of Goods in the Public Sector.


Dear Ms O’Rourke,


I refer to your letter of 6 February, 1996 on behalf of the Public Accounts Committee concerning the issue of procurement of goods in the public service.


In reply, I would like to state that the Office of the Tánaiste complies with all purchasing procedures as laid down by the Department of Finance.


In situations where competitive tenders must be obtained - e.g. computer hardware - the lowest suitable tender is chosen. Where small single purchases are being made, a number of suppliers of the relevant product are contacted by telephone and requested to submit details of the terms they are prepared to offer. Furniture and Fittings have, in the main, been sourced from the Office of Public Works.


Expenditure by the Office on goods in any one year is relatively small. In 1995, for example, £42,000 was expended on Office Machinery and Other Office Supplies. With such small levels of expenditure the Office has not, to date, placed any contract which exceeded the thresholds of EU Public Procurement Directives (£100,000 for purchase of goods).


With regard to the PAC’s request for details on any imported goods purchased by the Office, it is not possible from available records to identify the value of imported goods as opposed to home produced goods. However, to date, all goods purchased by the Office have been sourced from Irish/Irish based suppliers.


Yours sincerely,


Julie O’Neill


Accounting Officer


Oifig an Tánaiste, Tithe an Rialtais, Baile Átha Cliath 2.


Office of the Tánaiste, Government Buildings, Dublin 2.


An Roinn Comhionannais agus Athchóirithe Dlí


Dún Aimhirgín


43–49 Bóthar Mespil


Baile Átha Cliath 4


☎ (01) 667 0344



Department of Equality and Law Reform


Dún Aimhirgín


43–49 Mespil Road


Dublin 4


Fax: (01) 667 0366/7


Ms. Clíona O’Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin 2.


23 February, 1996.


Dear Ms. O’Rourke,


I refer to your letter of 6th February, 1996 concerning the procurement of goods in the public sector.


The procedures followed by this Department when goods are being purchased follow the standards appropriate to public procurement and incorporate (a) competitive tendering and (b) seeking Government Contracts Committee sanction where appropriate. The Department also adheres to EU requirements relating to procurement, including advertising where necessary.


The question of choosing Irish as opposed to non-Irish manufacturers does not really arise in this Department, as very few purchases are made outside of the State. In 1995 the total cost of purchases made from non Irish based companies is estimated at £2,500. These goods were in the vast majority of cases books, periodicals, etc. of a specialist nature which related to aspects of the Department’s activities and were not available from any Irish company. The Department is not in a position to say what proportion of goods procured from Irish suppliers originated outside the State.


Maírtín de Burca


Finance Officer



An Roinn Gnothai Eachtracha


MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Baile átha Cliath 2


27 February 1996


Ms Clíona O’Rourke


Clerk


Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


I refer to your letter of 6 February 1996 relative to the procurement of goods in the public service.


You will be aware that the Department of Finance has summarised national guidelines and EU requirements in relation to procurement in its booklet entitled “Public Procurement”. National preference provisions or practice are precluded under EU and other international obligations. This Department abides by national guidelines and EU requirements in its procurement policy.


It is not administratively feasible to give a detailed breakdown of the cost of imported goods purchased by the Department. Goods are procured from many sources both in Ireland and abroad and centralised data are unavailable on their point of origin.


In general terms purchases are made to cover Departmental needs as such and the needs of the Irish Aid Programme. Relative to the former most purchases are made either through the Government Supply Agency or through Irish suppliers. The majority of purchases in the latter case, because of the particular needs of the aid programme, are made either through our Missions in Bilateral Aid countries or through overseas suppliers.


In 1995 purchases of stationery and general office equipment amounted to £1.578m All of it was purchased in Ireland and at least 60% was of Irish origin. In the lead-up to the EU Presidency the Department is engaged in implementing a comprehensive Information Technology plan and as a result expenditure on I.T. equipment in 1995 amounted to £1,135m approx. All of the latter was subject to the normal tendering process and was purchased through Irish suppliers. It is estimated that 20% approx. is of Irish manufacture.


Under the Irish Aid Programme in 1994, a total of £645,000 approximately was spent on the procurement of goods for our priority country programmes in Lesotho, Tanzania, Zambia, Sudan, Ethiopia and Uganda, about 30% of it in Ireland. No statistics exist on the actual origin of the goods. Under the Irish Aid Programme in 1995 a total of £804,000 was spent. Equipment and supplies for aid programmes abroad are often of a specialised nature and for this reason a significant proportion would be manufactured outside Ireland.


I trust that the above, which in the circumstances can only be illustrative, will be of assistance to the Committee.


Yours sincerely


Pádraic Mac Kernan


Secretary



National Treasury Management Agency


28 February 1996


Ms. Clíona O Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin 2.


Dear Ms O Rourke


I refer to your letter dated 6 February 1996 requesting certain information regarding the purchasing of goods and services by the Agency.


Attached is our response to the questions raised in your letter. Should you require further information please let me know.


Yours sincerely


Michael J. Somers


Chief Executive


PURCHASING PROCEDURES

The Agency has comprehensive procedures in place to ensure that the procurement of all goods is undertaken in the most cost effective and efficient manner, consistent with the State Bodies guidelines issued by the Department of Finance. Compliance with the Tax Clearance Procedures as they relate to Public Sector contracts is also part of the Agency’s procurement policy.


The following sets out in some detail the procedures which the Agency follows in purchasing goods.


A budget is prepared annually covering purchases of all goods. This budget is approved by the Chief Executive (the Accounting Officer for the Agency):


PURCHASES

The Purchasing Officer must countersign all purchase orders. It is the purchasing officer’s responsibility to ensure that all necessary approvals have been obtained. Under no circumstances may anyone commit the Agency to the purchase of goods without the approval of the Purchasing Officer.


All technology related purchases are subject to the additional approval of the IT Head who will satisfy himself that such purchases are compatible with existing technology and future requirements.


All goods, other than IT equipment, are subject to the approval of the Personnel Manager who satisfies himself that they are compatible with existing equipment and future requirements.


The Purchasing Officer maintains a list of approved suppliers for standard items which are frequently ordered. The list is reviewed annually by the Director of Operations and Head of Control for price, quality and service. Except in the case of propriety items a minimum of two separate quotations are obtained prior to the purchase of items with a value in excess of IR£2,500. Orders for amounts less than IR£2,500 are not necessarily subject to a formal quotation procedure but the Purchasing Officer satisfies himself that a competitive price is being obtained.


USE OF TENDERING

A formal tendering process is used to award contracts for purchases of goods in excess of IR£50,000. The tendering process incorporates the following:


the preparation of a specification by the party requiring the particular item


the use of pre-designed tender envelopes for all bidders


the use of a closing date and time for the acceptance of bids


date and time stamping of all bids when opened


recording of all bids received by the Purchasing Officer


A tender evaluation committee consisting of at least three people including the Purchasing Officer and the Head of Control is responsible for selecting the appropriate tender. Records are maintained of the basis for awarding the contract to the successful bidder. All bidders are notified of the outcome after the selection process.


CONFLICT OF INTEREST

All individuals performing purchasing duties are required to sign a statement affirming their knowledge of and intention to adhere to the policies and procedures laid down by the Agency with regard to conflict of interest. Persons found to be in violation of such policies and procedures will be subject to disciplinary action including possible termination of employment.


IMPORTED GOODS PURCHASED BY THE AGENCY

In 1995 the Agency purchased goods to the value of IR£353,000, all of which were sourced from domestic suppliers. In procuring goods the Agency endeavours, in so far as possible, to work with suppliers in the local market.



Oifig an Rúnaí


An Roinn Oideachais



Secretary’s Office


Department of Education


4 March, 1996.


Ms Clíona O Rourke


Clerk


Committee of Public Accounts


Leinster House


Dublin 2.


Dear Ms O Rourke


I refer to your minute of 6 February, 1996, regarding the procedures for the procurement of goods in the public service and the cost of imported goods purchased by the Department of Education.


At the outset, I wish to state that the expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) are precluded under EU and other international obligations.


In relation to contracts for works, supplies, or services which exceed the relevant EU Directive threshold, these are dealt with in accordance with the provisions of the relevant Directive.


In relation to contracts below the thresholds, it is standard practice to seek at least three tenders or quotations. While the lowest, or any tender or quotation need not necessarily be accepted, it is normal practice to accept the lowest tender, provided it conforms to the specifications drawn up by the Department. In certain situations where the product or service is a specialised one, invitations to tender may be restricted to those firms who can provide the product conforming to the Department’s specification.


I enclose for the information of your Committee details and costs of imported goods and services purchased by the Department of Education for the years 1994 and 1995.


Yours sincerely,


Don Thornhill


Secretary.


EXPENDITURE ON IMPORTS BY DEPARTMENT OF EDUCATION

1994


ITEM

COUNTRY

EXPENDITURE

Playground Equipment for a Special School

U.K

stg.£6,224.00

Computer Software (including Licence Converters)

U.K

stg.£7,058.00

Video Conference Equipment

U.K

stg.£39,444.72

Books and Periodicals

U.K

stg.£10,389.29

 

U.S.A

$681.97

1995


Computer Software

U.K

stg.£1,918.41

100 Urine Sampling Kits

U.K

stg.£435.60

Printing of Examination Papers

U.K

stg.£112,101.79

Purchase of Paper for White Paper

U.K

stg.£3,182.00

Books and Periodicals

U.K

stg.£9,894.96

 

U.S.A

$133.95

COIMISIÚN NA STÁTSEIRBHÍSE


CIVIL SERVICE COMMISSION


COIMISIÚN NA STÁTSEIRBHÍSE


1. SRÁID NA MÓRCHANÁLACH ÍOCHT.,


BAILE ÁTHA CLIATH. 2.


CIVIL SERVICE COMMISSION


1. LOWER GRAND CANAL STREET.


DUBLIN. 2.


☎ (01) 661 5611


FAX (01) 661 5909



IN REPLY PLEASE QUOTE REFERENCE NUMBER.........


27 February 1996


Dear Ms O’Rourke


I refer to your letter of 6 February 1996 regarding the procurement of goods in the public service.


The main component of this Offices’ purchase of goods comprises IT equipment. In regard to this equipment the procedures adopted by this Office are as set out in the National guidelines and EU requirements of the Public Procurement booklet, as part of the Administrative Budget Agreement (EU Directive 87/95 EC refers), and in accordance with DPS Circular 13/86. The steps detailed in these documents are followed by this Office in issuing Requests for Tender and obtaining the necessary prior sanctions for IT expenditure.


With regard to non IT equipment the number of purchases are small and are normally made through the Government Supplies Agency or the Office of Public Works.


The cost of imported goods in 1994 was £17,164.59


The cost of imported goods in 1995 was NIL.


Yours sincerely


Joseph Boyle


Secretary


Cliona O Rourke


Clerk of the Committee


Committee of Public Accounts


Leinster House


Dublin 2



Roinn Airgeadais,


(Department of Finance)


Baile Átha Cliath 2.


(Dublin 2)


27 February, 1996


Ms. Clíona O’Rourke,


Clerk to the Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke.


I refer to your letter of 6 February, 1996 regarding the procedures being used in this Department for the procurement of goods.


Our primary concern when purchasing goods is to ensure that we maximise value-for-money. We are particularly conscious of our obligations to observe strictly the provisions of the EU Directives in relation to Public Procurement. The expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) are precluded under EU and other international obligations.


We do not keep statistics of the type requested in relation to the cost of imported goods.


I trust that this clarifies this Department’s position.


Yours sincerely,


P. H. Mullarkey,


Secretary.



Oifig Thithe an Oireachtais


(Office of the Houses of the Oireachtas)


Teach Laighean


(Leinster House)


Baile Átha Cliath 2


(Dublin. 2)


February 1996


Ms Cliona O’Rourke


Clerk


Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


I refer to your letter of 6 February regarding the procurement of goods in the public service.


As regards the query as to whether this Office considers the possibility of purchasing particular goods from Irish as opposed to non-Irish manufacturers, the Office is precluded from this course of action under EU obligations which require that any proposed contracts or purchases over set thresholds be advertised throughout the EU. Naturally, all guidelines and obligations in this regard are followed by the Office.


On the question of imported goods, the total value of such goods imported directly by this Office amounted to £34,000 approximately in 1995 and in the main covers the Library area such as books, publications, CD Roms, etc.


Yours sincerely


Kieran Coughlan


Clerk of Dail Eireann



SECRETARY’s OFFICE


DEPARTMENT OF DEFENCE


717/95


5 March, 1996.


Ms. C. O’Rourke,


Clerk to the Committee,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke,


I refer to your letter of 6 February last regarding procedures employed for the procurement of goods by this Department.


The procurement of goods is undertaken on the basis of open competitive tendering in accordance with national guidelines and EU requirements as outlined in the booklet “Public Procurement” issued by the Department of Finance. In particular where contract values are likely to exceed the specified threshold amounts prescribed in EU Directives the tender competition is advertised in the Official Journal of the European Union.


The Department purchases a wide range of equipments and associated spares for use by the Defence Forces. These supplies are of a specialised nature and include purchases of defensive equipment, aircraft, vessels, electronic equipment etc. An Irish manufactured alternative is not generally available. Contracts for these supplies may be placed with a foreign supplier, an Irish agent acting for a foreign supplier, or an Irish firm which imports the goods.


The value of goods purchased in 1995, which originated abroad, is estimated at £30m. Of this amount £7.3m related to direct supply of commodities to the Department by foreign suppliers and the balance was handled by Irish agents or firms.


Department Of Defence, Coláiste CaoimhíN, Dublin 9.


An Roinn Cosanta, Coláiste Caoimhín, Baile átha Cliath 9.


Telephone: (01) 8042000 Fax: (01) 8374535 Gtn: 7105


Irish manufactured goods are supplied mainly in the food, clothing, general stores and computer/office equipment categories. The Department endeavours to identify Irish sources for the supply of goods and services and to encourage Irish firms to participate in all tender competitions.


Yours sincerely,


DAVID J. O’CALLAGHAN


SECRETARY



An Roinn Iompair Fuinnimh Agus CUMARSÁIDE


(Department of Transport, Energy and Communications)


Baile Átha Cliath 2.


(Dublin 2.)


12 March, 1996


Ms. Cliona O’Rourke


Clerk to the Committee on Public Accounts


Leinster House


Dublin 2


Dear Ms. O’Rourke


I refer to your letter of 6 February, 1996 arising from a meeting of the Committee of Public Accounts on 1 February, 1996 regarding procurement of goods in the public service.


The procedures used in this Department follow the national guidelines and EU requirements as outlined in the booklet “Public Procurement”. All officers in my Department involved in the procurement of goods and services adhere to these guidelines.


While my Department considers the possibility of purchasing goods from Irish as opposed to non-Irish manufacturers, where appropriate, we are aware that the expression or employment of national preference provisions (either by direct or indirect means such as non-tariff barriers) are specifically precluded under EU and other international obligations.


Statistical information in relation to the cost of imported goods, purchased by my Department in 1995, is attached.


Yours sincerely,


John Loughrey


Secretary


Department of Transport, Energy and Communications


The following table represents statistical data relating to the importation of goods for this Department - year ended 1995.


£000’s


JANUARY

FEBRUARY

MARCH

APRIL

MAY

JUNE

40,119.00

8,055.00

7,489.00

1,798.00

8,301.00

2,957.00

JULY

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

373,694.00

378.00

165,813.00

5,660.00

4,616.00

13,785.00

TOTAL OF IMPORTED GOODS DURING YEAR ENDED 31 DECEMBER, 1995 - £632,665.00


The figures relate to the importation of commodity items such as:-


Information Technology Equipment.


Miscellaneous Equipment/Subscriptions - Journals, Books etc.


Technical Equipment/Parts and Accessories.



DEPARTMENT OF HEALTH


AN ROINN SLÁINTE


Shaping a Healthier Future


Office of the Secretary


12 March 1996


Ms Cliona O’Rourke


Clerk to the Committee


Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke


I refer to your letter of 6 February, 1996 regarding a request from the Committee for details on the procedures being used when goods are purchased.


Under EU and other international obligations Departments are precluded from giving national preferences in the purchasing of goods. The guidelines on this matter are contained in the booklet “Public Procurement” which has been circulated to all Departments by the Department of Finance.


In general terms all goods are purchased on the basis of getting the best value for money. Other matters taken into account are after sales service, call out times for breakdowns and availability of spare parts.


Statistics are not readily available which would give a clear breakdown of purchases between Irish manufactured and imported goods. However, most of the Department’s office furniture requirement is supplied by the OPW and would therefore be almost totally of Irish manufacture. Many of the large computer firms have manufacturing plants in Ireland whose outputs are used in the making of a whole range of computer equipment both nationally and internationally. Similarly, photocopiers, fax machines etc. are also manufactured by a range of multi-national companies whose products are sold by Irish based distributors/agents.


Yours sincerely


Jerry O’Dwyer


Secretary


GD2.D78.PG


Hawkins House Dublin 2


Teach MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE 2


MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

☎ (353 21) 359000


Fax (353 21) 359090


GTN 7214 (+5098 for FAX)



An Phríomh Oifig-Staidrimh,


Bóthar na Sceiche Airde, Corcaigh, Éire.


Central Statistics Office,


Skehard Road, Cork, Ireland.


28 March, 1996


Committee of Public Accounts


Leinster House


Dublin 2


I refer to your letter of 6 February, 1996 concerning a query raised by the Committee in relation to procurement of goods.


Goods purchased by the CSO comprise almost entirely of office machinery and other office supplies. In 1995 the provision for such supplies was £1.076 m. Almost half of this was spent on computer related equipment and the other half was spent on office supplies which were in the main purchased through the Government Supplies Agency.


In the case of non GSA goods, normal tendering procedures as set out in the booklet “Public Procurement” were strictly adhered to and the CSO was conscious of the fact that the purchase of Irish goods in preference to non-Irish goods is precluded under EU and other International obligations. A breakdown of the value of imported goods purchased by this office is not available.


Yours sincerely


Donal Murphy


Director General



Department of Enterprise & Employment


Ms. Cliona O Rourke


Clerk to Committee of Public Accounts


Leinster House


Kildare St.


Dublin 2.


Dear Ms. O Rourke,


I refer to your recent letter concerning the procurement of goods by this Department.


Typically, the Department of Enterprise and Department would purchase goods to the value of about £2 m per annum. This would mainly comprise computer equipment and general office supplies, including furniture: Goods are purchased on the basis of competitive tendering. Having regard to price and quality, departmental policy is is to opt for items of Irish manufacture where this does not conflict with EU obligations.


It is not possible to provide statistical information in relation to the cost of imported goods. We have found that many items sourced in Ireland and in respect of which one would reasonably expect to be actually produced here, are not necessarily of Irish manufacture at all.


Yours sincerely


Gerry Wrynn


Personnel Division


27 March, 1996


Department of Enterprise and Employment, Kildare Street, Dublin 2


An Roinn Fiontar agus Fostaiochta, Sráid Chill Dara, Baile Átha Cliath 2



Roinn Dlí Agus Cirt


(Department of Justice)


Baile átha Cliath


(Dublin)


Mr. Denis Foley, T.D.,


Chairman,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Chairman,


I refer to your recent enquiry in relation to the procurement of goods in the public service and to state that the procedures used in this Department are in accordance with the National Procurement Guidelines as laid down by the Department of Finance, and where appropriate, the various E.U. Directives on the awarding of public contracts.


The various criteria used in awarding contracts and their order of application would be dependent on the particular nature of the goods required. However in general terms the most economically advantageous tender (established by applying various award criteria according to the contract in question e.g. price, technical merit and quality, after sales service, performance, running costs etc.,) is the most often used option for determining to whom a contract should be awarded. It must be remembered that the E.U. Directives in this area are designed, inter alia, to obviate any national bias in terms of placing purchasing contracts. Accordingly the possibility of purchasing Irish as opposed to non-Irish manufactured goods is not or cannot be the premier concern in making a decision to award a contract to purchase goods.


There is no comprehensive central record maintained of the cost of imported goods that are purchased by my Department.


Accounting Officer,


22 March, 1996.



An Roinn Ealaíon, Cultúir MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE Gaeltachta


DEPARTMENT of ARTS. CULTURE and the GAELTACHT


Ms. Clíona O’Rourke


Clerk to the Committee


Public Accounts Committee


Dáil Éireann


Dublin 2


Re: Procurement of Goods in the Public Service


Dear Ms. O’Rourke


With reference to your minute of the 6 February 1996 regarding the above matter I wish to confirm


(a)that this Department adheres to the conditions in the Public Procurement Booklet (1994 Edition) when purchasing goods; and


(b)expenditure on goods purchased abroad accounts for only a very small amount of our total expenditure e.g.


(1)during 1995 the sum of £2,383.49 was spent on various publications purchased abroàd, mainly from the U.K.


(2)legal services were required during a visit to the U.S. in 1995 in connection with the Lusitania. The cost involved was £5,516.74 including Retention Tax.


In general, this Department does not specify goods of Irish origin when seeking tenders for the supply of goods.


John Walsh


Finance Section


4th April 1996


Dún Aimhirgin


Bóthar Mespil, Baile Átha Cliath 4, Éire.


Mespil Road, Dublin 4, Ireland.


Teileafón: 353 1 667 0788.


Facsuimhir: 353 1 667 0827.



Roinn an Taoisigh


Department of the Taoiseach


23 April, 1996


Ms. Cliona O’Rourke,


Clerk,


Committee of Public Accounts,


Leinster House,


Dublin 2.


Dear Ms. O’Rourke


I am writing in response to your letter of 6 February, 1996 on behalf of the Chairman, Mr. Denis Foley, T.D., in relation to the procurement of goods in the Public Service.


The types of goods purchased by this Department are furniture and fittings, computer equipment, office machinery and related supplies. The Department follows the guidelines as set out by the Department of Finance in the booklet on Public Procurement.


In the normal course, the Department orders stationary and supplies through the Government Supplies Agency and furniture through the Furniture Division of the Office of Public Works. In the event of the Office of Public Works not being able to meet our requirements the Department tenders for the goods required. This involves getting a number of quotes and selecting items giving the best value for money. This may occur with goods such as photocopiers, fax machines, telephones, dictaphones and other office machinery. Purchasing of computer equipment is also by competitive tendering procedures. The Department complies with the EU Public Procurement Directives in regard to tendering procedures. It has not, to date, imported goods directly from non-Irish manufacturers.


In relation to the Committees request to obtain statistics on the cost of imported goods purchased, I am unable to provide statistics of this type because this Department does not maintain information on imported goods.


Yours sincerely,


Paddy Teahon


Secretary


Stiúrthóir lonchúiseamh Poiblí


14 – 16 Sráid Mhuirfean


Baile Átha Cliath 2



Director of Public Prosecutions


14 – 16 Merrion Street


Dublin 2


TEL: (01) 678 9222. FAX: (01) 661 0915. GTN: 7129–0.


OUR REF:

YOUR REF:

DATE: 28 May 1996

Ms Cliona O’Rourke


Clerk to the Committee of Public Accounts


Leinster House


Dublin 2


Dear Ms O’Rourke,


I refer to your letter of 6 February 1996 conveying a request from the Committee for an outline of procedures used in this office when goods are being purchased together with some statistical information relating to the cost of imported goods.


It will be noted that payment of fees to Counsel, legal costs and full-time staff costs accounted for over 94% of expenditure incurred by this office in 1995. It is estimated that £78,000 approx, or just over 2% of total expenditure, may be attributed to the purchase of manufactured goods for use in connection with the running of the office. These goods mainly consisted of office machinery including computer related items and other office supplies, furniture and fittings and the supply of law books, other legal publications and periodicals both foreign and domestic.


Goods are purchased by the office in accordance with guidelines governing public sector contracts which are summarised in the booklet ‘Public Procurement’. Additional instructions regarding such purchases are issued from time to time by the Department of Finance. Competitive prices are sought from various suppliers of office goods not sourced through the Government Supplies Agency. The prior sanction of the Department of Finance is obtained where the cost of goods being purchased is in excess of £5,000. A Tax Clearance Certificate is sought as appropriate before a contract to supply is awarded. Any tenders made are evaluated and the lowest suitable tender is accepted.


The answer to the question raised in the first sentence of the third paragraph of your letter is yes.


Insofar as it has been possible to ascertain the origin of manufacture of those goods the cost of imported goods bought in 1995 can be estimated at £37,000 approx. Most of this expenditure was incurred on office equipment and supplies and computer related items.


The delay in forwarding a reply to your letter is much regretted.


Yours faithfully,


MICHAEL LIDDY


Accounting officer


* Currently Standing Order No. 131.


1 A “C2 certificate” is a certificate of authorisation issued by the Revenue Commissioners, in accordance with the terms of section 17 of the Finance Act 1970, to qualifying subcontractors carrying out construction, forestry or meat processing operations as specified in that section. The certificate authorises a principal contractor to make arrangements to make payments to such subcontractors without deduction of tax. In the absence of a C2 certificate, the principal contractor must deduct tax at the rate of 35% from payments to subcontractors. Tenderers requiring further information on C2 certificates should contact their local tax office or, in the Dublin area, contact the Dublin Audit District 1 at the address in Appendix 1.


1 Public Financial Procedures: An Outline, para. 3.17


2 Exchequer Section, Department of Finance, Setanta Centre, Nassau Street, Dublin 2. Phone: (01)6045243, (01)6045242, (01)6045241. GTN 7109, extensions 5243, 5242, 5241. FAX: (01)6791745.


3 Estimates Office, Department of Finance, Upper Merrion Street, Dublin 2. Phone: (01)6045681, (01)6045682. GTN 7109, extensions 5681, 5682. Fax: (01)6785272.