Committee Reports::Audit of the 1995 Accounts of: Non-Commercial State Sponsored Bodies::06 November, 1997::MIONTUAIRISC NA FINNEACHTA / Minutes of Evidence

Mr. Declan Purcell, (Principal Officer, Department of Enterprise and Employment) in attendance.

REPORT OF THE C& AG ON THE AUDIT OF THE 1995 ACCOUNTS OF NON-COMMERCIAL STATE-SPONSORED BODIES - FÁS.

Chairman: There are items of correspondence for noting, including a response from the Comptroller and Auditor General, on the awarding of a contract to Pierce Building Services referred to at a meeting of the Committee on 26 March. The first item is from the Department of Agriculture, Food and Forestry - the VFM Report on FEOGA borrowing.

Deputy O’Malley: It took the Department of Agriculture, Food and Forestry nine months to reply to the Committee’s letter. That is unsatisfactory. The Department was asked on 12 July last to reply before 2 August. The reply was received on 2 April 1997. The Committee should not accept that it takes nine months to answer a simple query. As far as the figures are concerned, it is disturbing that the total expenditure of the Department exceeded the amount received from FEOGA by £252.8 million. I understand that is a cumulative figure over a number of years but a breakdown should be given as the amount of money that has been lost to the Exchequer, probably much of it unnecessarily, is very large. Some of it was due to currency speculation but more of it was obviously due to other reasons.

Deputy Ellis: As we are discussing EU funding, will the Comptroller and Auditor General tell us the position on intervention funding?

Deputy Ellis: As intervention tenders last week stood at 86p and the prices offered for beef going into intervention was 80p we need to know who is responsible for setting a price guide within the State. Has the Department the right to refuse to accept the intervention beef which had been bought at 80p when it should have been bought at 86p? Who takes the six pence in the pound? The Department of Agriculture, Food and Forestry is the intervention agency for the country and is, therefore, responsible for the running of it.

Mr. Purcell: As the Department of Agriculture, Food and Forestry act as the intervention agent on behalf of the EU they must follow EU directives on this matter. To return to Deputy O’Malley’s point, as he rightly said, there is an accumulated difference between what we get from FEOGA and what has to be met by the Exchequer. It arises from the method of financing and the recoupment of storage and transport charges, etc. at standard rather than actual rates. That can fluctuate - sometimes it is in our favour, sometimes it is against us. Working from memory, three years previously the figure was not significantly greater than that at the end of 1993. Of course, the Deputy is correct in that there should be a breakdown.

Chairman: The Committee will request that information. There is a letter from the Secretary of the Department of Finance. We can note it.

Deputy O’Malley: The letter from the Department of Agriculture, Food and Forestry which, for some reason, is not signed by the Accounting Officer but by his Private Secretary as is the other one - I thought the Accounting Officer was bound to give information to the Committee - is completely unsatisfactory. Three points were raised in my letter. One was that the Accounting Officer agreed here on 7 March to provide the remainder of this correspondence. In case the Chairman is in any doubt his agreement to do so is set out on pages K2 and K3 of the transcript.

The Accounting Officer said: “we will ask UCLAF, if that is the wish of the Committee, if they wish us to supply the further documentation”, and I said “thank you”. There was earlier discussion in this regard on K2. In his reply, he refuses to provide the information and implies he does not know what it is about. He said “this Department is not aware of any UCLAF correspondence concerning the Bureau Veritas matter”. The UCLAF correspondence about Bureau Veritas was discussed at length on 7 March as the Accounting Officer is well aware but he is refusing to give the information. The Committee should insist on the information being provided based on what was said on pages K2 and K3.

The other two points I raised in the letter sent to the Accounting Officer was on the question of the complaint to the gardaí about the forging of documentation. That was totally ignored. Obviously, the Department has no intention of bringing it to the attention of the gardaí. If the Department fails to do this the Committee should do it.

The third matter was on the Emerald Meats damages in trying to obtain an undertaking from the Department to recover the sums lost to the Exchequer on foot of the indemnities. There are 11 indemnities from other parties but they have not made any attempt apparently to recover any of the money. That point was totally ignored in his letter also.

Perhaps the Clerk to the Committee should write to the Accounting Officer again, pointing out that two of the three matters were totally ignored and that the third matter has not been dealt with satisfactorily. It should also be pointed out that he knows well what the Committee is talking about and it is set out on pages K2 and K3 of the transcript of 7 March.

Chairman: The Committee will request that information and it will be taken up again.

Deputy O’Malley: There is a large sum of money outstanding which the Department is making no attempt to recover. It is outstanding under export refunds that were unduly paid. There is an obligation on the Minister to recover those amounts under Article 11 of the relevant regulation but he has failed to do that. Substantial damages have been awarded and will be further awarded against the Department in respect of the Emerald Meats matter. The Department has 11 indemnities from 11 companies and I am anxious that it would recover the moneys due to it on the indemnities so that the taxpayer will not end up paying this on top of everything else. Taxpayers have already had to pay in respect of the fines on the other matter.

Deputy O’Malley: He sent on three Bureau Veritas certificates he overlooked on 7 March. It is noteworthy that two of the three certificates are signed by Mr. Peyron, not Mr. Gurney. Attention should be drawn to that fact.

Chairman: The next item is correspondence from the Comptroller and Auditor General. As there are no questions arising I call Mr. Lynch.

REPORT OF THE C& AG ON THE AUDIT OF THE 1995 ACCOUNTS OF NON-COMMERCIAL STATE-SPONSORED BODIES - FÁS.

Mr. Lynch: I am accompanied by Mr. Henry Murdock, Head of Industrial Training, Mr. Donal Sands, Head of Finance, Mr. Gerry Pyke, Secretary and Ms Mary Dorgan, Head of the South-West Region.

Chairman: Paragraph 5 of the report of the Comptroller and Auditor General reads:

5.Industrial Training Levies

FÁS is empowered under the Industrial Training Act, 1967 to impose a levy on employers in designated industrial sectors.¹ At 31 December 1995, the total levy funds on hands amounted to £13.1m with a further £6.2m due for collection. Payments in 1995 totalled £2.2m. The levies ceased from 1994/95 in respect of the sectors covered by the new apprenticeship levy referred to in Paragraph 6.

Funds are disbursed on the approval or recommendation of Industrial Training Committees which have been established within FÁS for each sector.

Money is made available out of levy funds to finance

•training of all levels of staff within companies including management and supervisory grades

•specialist training programmes that relate to needs identified by sectoral studies

•research studies

•production of training materials and videos

•apprenticeship competitions

•programme development and evaluation

•a construction training incentive scheme

1 The designated sectors are: Construction, Chemicals, Engineering, Textiles, Clothing and Footwear, Food, Drink and Tobacco and Printing and Paper.

•a bursary for women

•purchase of training equipment in the chemical and construction sectors

•placement grants

•undergraduate training

•international study visits

•specialist technical training.

As the amount of the funds on hands or collectable was far in excess of the annual payments out of the funds in recent years, I sought information from the Director General on

•the current function of the funds and proposals for their use

•the extent of annual commitments over the next five years.

The Director General informed me that the function of the funds is to assist the development of each of the industrial sectors by ensuring that the sectors have available to them employees with skill levels compatible with best international practice. Funds are provided for the development of training programmes, for their certification and provision, and to reduce the cost to companies of having their employees trained. Funds are used in the provision of grants under Section 19 of the Industrial Training Act, 1967 and for meeting expenditure incurred in respect of training or related expenses under Section 21 of that Act.

FÁS sectoral studies have identified key training needs that have to be met in each of the industry sectors. The accumulated funds are being used to assist this process. Table 5.1 gives an indication of the extent to which the accumulated funds will be utilised in the years 1996 onwards.

Note:^a In addition a further £6.2m is collectable from firms and should become available for disbursement in the period.

Mr. Purcell: Industrial training levies are collected by FÁS from employers in certain designated sectors for the purpose of using the money to ensure the availability of a well trained workforce in those sectors. The levy is charged on each employer at a rate of 1.25 per cent of total emoluments. The paragraph shows that at the end of 1995 just over £13 million had accumulated in surplus levy funds and deposit interest, with a further £6.2 million due for collection. Bearing in mind that in the past three years outflows in terms of grant and administration expenses were in line with inflows from levy receipts and deposit interest, my concern was that FÁS was not implementing training schemes in sufficient quantity or in good time to meet the various needs of industry. Alternatively, it could be that the rate of levy has produced more money than is required for the necessary range of training schemes. The table in the paragraph indicates that FÁS is unlikely to be able to spend the levy funds available to it in the coming years on the basis of its current training plans for the sectors involved. The Committee might wish to note that the unaudited accumulated balance at the end of 1996 was of the order of £13.5 million.

Chairman: Why is there such a difference between the amount of money collected and the amount spent to date? Does this reflect a lack of planning?

Mr. Lynch: No. These levies are not FÁS levies. It is industry money and the levies can only be spent by the industrial training committees. These committees consist of both sides of the social partnership. When a decision is reached on how the money will be spent, it is passed to the board of FÁS for approval. In almost every case, to my knowledge, the board approves the spending. It is really the industrial training committees that decide on the spending of this money. We have pointed out that more should be done with this money and, as will be seen from the table, they plan to do so over the next few years.

Chairman: Have the industrial sectors involved benefitted from the training facilities? Are there long-term benefits?

Mr. Lynch: There are long-term benefits and improved training facilities for those sectors. For example, if the industrial training committee had not introduced training for those involved in erecting scaffolding in the construction sector many more scaffolds would have fallen down in the city. That is one area where money is spent and the engineering sector spends money in many areas. The construction sector has a mobile safety unit.

Deputy N. O’Keeffe: I welcome Mr. Lynch and his officials. FÁS is involved in the important areas of training and development. It was indicated that compliance by employers in the designated sectors is in the region of 50 per cent. How reliable are these figures?

Deputy N. O’Keeffe: The report of the Comptroller and Auditor General outlines the extent to which funds will be utilised in the year 1996 and beyond. Were the funds used as proposed?

Mr. Lynch: In 1996 the plan was to spend £2.1 million. We spent £1.9 million. That is not exactly on target but it is quite close. This money is collected by way of a levy and only the industrial training committees can decide how the money is spent. FÁS cannot do so but it can advise on how it is spent. It is important that the money is spent in the right way and not dissipated and wasted. I would have a problem if the money was spent just for the sake of spending it.

Deputy N. O’Keeffe: Is Mr. Lynch satisfied that the right approach to training is being taken?

Mr. Lynch: I am. If one takes what FÁS has done in the recent past, the report shows that there are 40,000 people on community employment schemes, 38,000 people are trained and another 31,000 are trained for industry. This is a big percentage of our industrial base. Some shortages have arisen but we have made plans to combat that.

Deputy N. O’Keeffe: You have been criticised in newspaper articles because people go from one FÁS training course to another.

Mr. Lynch: Public representatives and those in the State sector are familiar with criticism in the newspapers particularly when it comes to spending public money. It is not possible to go from one course to another, there must be a two year gap between courses. The only exception is community employment where anybody over the age of 35 years is allowed to stay on for three years. If somebody is under 35 years and on the course for one year we would encourage them to go from community employment on to a training or education course. This is important because these people have lower educational qualifications and are long-term unemployed. This would give them a better chance. I have already stated that you cannot go from one FÁS course to another.

Deputy N. O’Keeffe: What is the point in having training courses when there is no job at the end of it?

Mr. Lynch: I do not create jobs. All I can do is point out what jobs are available and the price of those jobs. Up to 70 per cent of FÁS participants get jobs. I have stated this several times but it is not taken up by the media.

Deputy N. O’Keeffe: Do you get requests from employers for training courses?

Deputy N. O’Keeffe: What type of involvement do you have with employers when developing training courses?

Mr. Lynch: We talk to employers all the time. Apprenticeship courses are designed in conjunction with employers and apprentices sit examinations which is a radical change from the past where one only had to serve time. All our courses must meet a placement target and, therefore, the employers needs are important. Before we run a course we talk to employers to see if it is relevant.

Deputy N. O’Keeffe: How does the rate of 70 per cent compare with the rest of the European Union?

Mr. Lynch: It is probably higher than most European countries. Recently we have decided to develop traineeships with employers in areas such as injection moulding and retail sales rather than apprenticeships. Traineeships will not replace apprenticeships but it will be expanded upon in the future.

Deputy N. O’Keeffe: What percentage of funding for industrial training is received from the EU?

Mr. Lynch: The levies are stand alone and we do not receive EC funding for industrial training. We receive a total of £427 million. In 1975 we received £70 million from the EU. It could be argued that some of that goes on industrial training but in the main it does not. The EU funds the apprenticeship levies.

Deputy Upton: Perhaps more of an effort should be made to inform the public of the 70 per cent placement rate for trainees. How do you anticipate training needs and how much effort is put into it?

Mr. Lynch: I already explained to Deputy O’Keeffe that we talk to employers all the time and we know their needs. We use very sophisticated methods to anticipate training needs. We have sector studies so that we know money is being spent in the right areas. The ESRI carry out research for us on future trends.

Deputy Upton: I have looked at figures on the planned utilisation of levy funds in table 5.1. In the chemical industry there was £57,000 in 1996, £700,000 in 1997-8 and it is £300,000 in 1999. Why is there such a difference in funding? The same pattern emerges in the engineering sector. In 1996 it is almost £500,000 and it is £200,000 in 1999. Does that reflect the need or the availability of money?

Mr. Lynch: The larger the industry, the larger the levy. The construction, chemical and engineering industries are substantial while the textile industry is smaller.

We conducted a study for the chemical industry and discovered safety and health were important issues, particularly the safety and health of employees. As a result of our study the chemical industry will embark on a safety and health programme over the next few years.

Deputy Upton: As regards overseas FÁS training schemes, in particular the Irish College in Louvain, how many students or apprentices are abroad on FÁS associated schemes? What are your future plans for these schemes?

Deputy Doherty: There is much speculation about FÁS being split up. What are the financial implications if that happens?

Deputy Byrne: Industrial training levies are drawn from industrial sectors. Is it only for in-house training, that is training those already in the industry, or is some of the money used to take people off the live register?

Mr. Lynch: It is primarily for training within the sector. It is to develop training programmes where there is a problem within the sector and to certify it. New entrants to the sector would be covered. For example, with regard to the chemical industry, if we set up a safety and health programme, anybody who comes into the chemical industry would then have to go through that programme. It is not designed to attract people into the industry; it is up to industry to do that. In 1995 the engineering industry may have been retracting rather than expanding but much has changed since then.

Deputy Byrne: A sum of £13.5 million remains to be used in the fund. The Accounting Officer says it is up to the industrial training committees to draw it down for particular training programmes.

Scaffolding was mentioned earlier. Will the Accounting Officer tell us what the industrial training committees were doing when the quality of scaffolding erection was so deplorable that men fell down and men were badly injured. In retrospect, were the sectoral studies which have identified key training needs, remiss in this area? Scaffolding is a key element in the building construction industry.

Mr. Lynch: We and the ITC anticipated this problem and we were training people at the time the scaffolding fell down. The people involved were subcontractors and had not been trained. The need for some degree of provisional training for scaffolders had been identified a year earlier. At that time 24 people had been trained even though the programme had only started which proved the industrial training Committee was right.

Deputy Byrne: They might have been right, but were they not a bit slow? It is a pity the training programme was not in place a year earlier. How many people trained as scaffolders?

Deputy Byrne: My background is in the construction industry. It disturbs me that well known tiling companies in the city - with all due respect to tilers, tiling is not the most technically skillful of the trades that exist - cannot get tilers. Can you explain why the industry has not realised that it needs more tilers? I understand that a major Dublin based tiling company is scouring England, Scotland and Wales for tilers and has brought over in excess of 30 tilers to work on contract for them. The industry was not proactive in that area. Sufficient people could be trained in a reasonable time to do tiling and that would take some of our long-term unemployed off the live register.

We see young marginalised children in Tallaght stealing cars, a problem that has been ongoing for years. These children can be mechanically motivated. I understand compulsory MOT testing of cars is to come into force soon. I hear rumours there is a skills shortage in motor mechanics. Are the proactive industrial training committees conscious of the skills shortages that are emerging and do they intend to do anything about them?

Mr. Lynch: With regard to tilers, the Deputy will be pleased to know tiling was designated an official apprenticeship about two months ago. Three years ago I met the construction industry and said it should take on more apprentices. It is the responsibility of industry to do so. I told the industry that when the recession ends there will be a huge demand for apprentices. Unfortunately, they decided not to take them on. It takes four years to train an apprentice and I advised them to plan accordingly. We now have more apprentices than ever because the industry is taking them on now. We may find in a couple of years time when there is a recession or when a major company folds, as one did, we have to take on all the redundant apprentices. It is a cycle. When there is a downturn in the cycle, we depend on employers to take on more apprentices during that time. There is a problem in the construction industry with which we have been trying to grapple for some time. It relates to C45s. If one visits any site one will find that big contractors have lots of work but very few people employed. Everything is subcontracted over and over again. We are grappling with C45s not from the point of view of Revenue but because there is a problem getting apprentices to a subcontractor. If the subcontractor has weaned work from Northern Ireland or the UK how do you get an apprentice in there?

Deputy Byrne: I thank the Accounting Officer for his reply and particularly the question at the end of his contribution. Is it satisfactory that a sophisticated developing economy such as the Irish economy is dependent on the private sectory industrial hierarchy dictating to the State its labour requirements? Is the Accounting Officer saying the boot is on the wrong foot? For example, the building industry is traditionally one of peaks and valleys. We all know it is outrageous that in the valley periods the employers offload their apprentices. They are the first fall-guys in a recession. Has FÁS ever recommended Government ----

Deputy Byrne: ----that rather than having an industry-led approach to training and labour force requirements it should be State-led?

Mr. Lynch: The Deputy is right. It is a cyclical industry. It tends to have been industry-led. It must be industry-led in some form because it is no use having children sitting in a training centre all the time; we must get them work experience on a building site or whatever. To overcome this problem we worked in conjunction with the ESRI and the industrial training committee to set up a special forecasting model for the construction industry to identify future requirements. This is the first time it has ever been done.

In answer to the Deputy’s specific question on whether it is the right thing, it is a little like democracy - it is probably a very imperfect system but it is the best one available. I do not mean to be glib in that respect. The problem is in getting them on-the-job experience.

Deputy Ellis: The Comptroller and Auditor General’s statement in Part II that the books and all other financial statements of FÁS are in order gives us all great heart.

There appears to be a reluctance, especially in regard to smaller companies, to take on trainees because of block releases, etc. Is there any way we could get over that? There is a lack of skilled people such as plumbers, electricians, carpenters and various building tradespeople. Smaller companies are afraid to take on apprentices because they feel they have let people down if they have to let them go. The block release scheme also causes problems for smaller firms. Could apprentices be transferred from one firm to another while they are on block release? Employers do not want to pay apprentices while they are on block release for training courses because it is a drain on their resources.

Mr. Lynch: FÁS has two schemes. The block release system is being phased out because employers are not happy with it. The new standard based scheme means apprentices must pass exams rather than just serving time. When an apprentice is with us we pay all the wages. An employer benefits when an apprentice is taken on and, therefore, pays the wages. This is a major departure from what happened before.

With regard to the Deputy’s other question about substituting one apprentice for another we found it causes problems because most people prefer to live close to their own areas. We are discussing this with the construction industry specifically because of its cyclical nature.

Deputy Ellis: The textile industry have provided £218,000 but it faces tough competition from the far east at the moment. Is there a need to invest more money in the industry to improve the cost base and provide more skilled workers for the future?

Mr. Lynch: There is a levy on the textile industry. The two major players in the industry are Comber International and Fruit of the Loom. These companies are very capital intensive and they retained their people. I am having ongoing discussions with one company to help them retrain their staff to work in teams and take responsibility for quality etc. I realise that £218,000 may not be sufficient for the industry to maintain its competitiveness.

Deputy B. O’Keeffe: The levy funds provide £7.5 million for the construction industry; £2.5 million for the chemical industry and £1.8 million for the engineering industry. Was the utilisation plan based on the levies received from the various sectors? Was it a pro rata scheme? In other words, do the contributions match the utility plan?

Mr. Lynch: The contributions from the construction industry are from people within the industry and, therefore, can only be used by the construction industry for its development, particularly the development of training programmes. Many people may say scaffolding is not construction work but all ancillary work in the construction industry is included. Likewise, pharmaceutical companies are part of the chemical industry. The pharmaceutical companies have a lot of money but it is their money and, therefore, they are entitled to spend it any way they want. Most engineering companies employ fewer people. Much money is spent on management training in these smaller companies. It varies from sector to sector.

Deputy B. O’Keeffe: The major construction companies employ very few people and employ subcontractors who also subcontract work. Is it difficult to create realistic management training programmes for the construction industry?

Mr. Lynch: It is difficult. We have to adopt different attitudes towards training in the construction industry. We have a new mobile training unit which moves from site to site. In the past courses were conducted at the Ballyfermot training centre.

Mr. Lynch: No, there is not. We have more apprentices today than we had in 1994.

Deputy B. O’Keeffe: I am talking about the intervening period. During the recession, employers took on very few apprentices with the result that now we have a shortage of skilled people. We are trying to attract people back to work in Ireland.

The regional technical colleges conduct two year certificate courses on construction studies, electrical engineering, mechanical engineering and wet trades courses. Have these courses been successful? I discussed this with the construction industry in Cork and it indicated it would approach FÁS about the possibility of transferring some people on RTC courses to apprenticeship courses. These people would be 20 years old. It might be possible to provide skilled people far earlier to make up for the current shortfall of skilled personnel.

Mr. Lynch: The shortage in skilled people in 1996 was caused by the intake of apprentices in 1992. There will be no shortage of apprentices in the year 2001 because there are more places than ever before. Regarding Deputy O’Keeffe’s question on RTC students we have discussed this matter with the Construction Federation of Ireland within the last two months. It could be a way of solving the problem of the shortage of skilled people. The Construction Federation of Ireland were surprised at the buoyancy in the construction industry.

Deputy B. O’Keeffe: There will be valleys in the construction industry and apprentices will be laid off. Is there a better mechanism for imposing levies to ensure we have a levelling off of the funds available to FÁS for training people when there is a downturn in the construction industry?

Mr. Lynch: There were cases where young people were unable to complete their apprenticeship because the employer went bankrupt during the recession. We took them on, paid their salary and tried to place them. That is why we have £13 million in reserve to pay apprentices if there is a downturn in the industry. The construction industry has changed in the last five years. Companies that previously employed up to 100 people now subcontractor the work. Subcontractors have no interest in taking on apprentices.

Deputy B. O’Keeffe: There is a shortage of companies and electronic engineering graduates. If the level of international investment continues the problem will be exacerbated. What is the role of FÁS in terms of meeting that need? There appears to be no funds available to develop telemarketing and language skills.

Mr. Lynch: The shortage in skilled personnel for telemarketing and the software industry was mentioned in the 1995 annual report. I do not think there will be shortages in other sectors. IBM informed us it had no shortages. Gateway said it had a shortage of people trained in languages. Universities can train people in languages but FÁS can only provide short-term training. For example, when you dial a 1800 number in Dusseldorf you expect to speak German whereas you could be speaking to someone down the road in Clonshaugh Industrial Estate. Language training is an area for the education system. FÁS recently set up a special project and trained 350 people in languages. We have a language register and there are more than 500 people on it.

Mr. Lynch: We trained 350 people in languages and some people have been placed in employment. We now have a register of 500 people who have been tested for their fluency in languages. Last year we offered to train 100 people for the Irish Software Association but it could only provide 34 people. This year the association wanted 200 people for the software industry which means there is now a major shortage of skilled people. From an industrial development viewpoint, if companies such as IBM and Hewlett Packard set up then everybody thinks there is a boom in telemarketing. It must be recognised that it takes a long time to train people. You cannot expect people to have a fluency in languages for telemarketing after just six months training. The software industry has only expanded within the last year.

I do not believe the shortages will occur in the software and telemarketing sectors but in ordinary trades. Sixty per cent of leaving certificate students are going on to third level but fewer people are entering the system. In the late 1980s and the early 1990s second level graduates were losing jobs to over qualified third level graduates. There are now fewer people in second level education so the price of labour will be increased.

Deputy Broughan: Is the Accounting Officer saying there will be shortages in the services sector?

Mr. Lynch: Yes. There are fewer second level graduates and as a result, they will be able to command higher labour prices. Some employers say there is a shortage of people but it is just that there is more competition for those jobs.

Deputy Broughan: I agree with Deputy O’Keeffe’s remarks on language skills. In Clonshaugh Industrial Estate, Coolock there is now an interesting mix of foreign companies. I know some young people were sent to France to learn French. Did FÁS organise this scheme? I know FÁS also has contacts with Holland and Germany.

Mr. Lynch: I do not know about that scheme but we have connections with France and Germany. FÁS conducts language courses and The Irish Times and other private companies arrange courses for us as well. We have an agreement with the German employment office to give work experience to Irish people so that they can learn the language. It is very difficult then to say we do not want Germans coming here to work in telemarketing.

Deputy Broughan: I am not taking that inference. I presume those students were recruited through your counterparts in other countries. It could work the other way around.

Mr. Lynch: It does. Most of the people who are working in the Clonshaugh Industrial Estate have come through a system in which we are involved called EURES. It is a European employment services computer system whereby if people want to come to Ireland and work in language based industries they can do so.

Deputy Broughan: According to newspaper reports recently, FÁS carried out a study called regional trends in employment growth. Dublin Deputies found some aspects of that report disturbing.

Chairman: I do not want to interrupt the Deputy but we are dealing with industries.

Deputy Broughan: We are dealing with CE schemes, apprenticeships and so on. In manufacturing industry between 1992-6 the growth rate in Dublin was in the region of 6 per cent whereas the growth rate nationally was 10.5 per cent. Manufacturing in the east, that is Dublin, Kildare, Wicklow and Meath, did less well. The perception is that because some hi-tech firms are located particularly in west Dublin, in unemployment blackspots such as Blanchardstown, this region is doing well but these figures show the opposite to be the case and the east is still struggling to hold onto its industrial base.

Mr. Lynch: Yes, the report was up to 1995. The impact of IBM could change that significantly, particularly in terms of output. There was a perception that all areas outside Dublin were doing badly and certainly figures up to 1995 show that was not the case. The swing will come back a little to Dublin areas if we take the figures at end 1996-7. What has happened in Dublin, and probably happened in Cork city also, is that the old small manufacturing companies have been driven out of the system over a period and the manufacturing base has not been replaced quickly enough, although it was replaced by very significant companies. One could imagine the impact if one of those companies, such as Hewlett Packard, pulls out. There could be significant consequences.

Chairman: That will be dealt with in the last paragraph. Deputy N. O’Keeffe: In regard to industrial training levies on page 10 of the general report, will Mr. Lynch elaborate on industrial study visits. I have some questions on training also.

Chairman: The industrial levies will be discussed as a supplementary. I ask Mr. Lynch to be brief.

Mr. Lynch: There is always a danger in the engineering industry that it does not understand there is competition. Management, unions and some staff are taken to countries, such as Germany, to have a look at their counterparts and see what their world class manufacturing is like. This is important.

Mr. Lynch: No, and I am sorry I did not reply to Deputy Upton when he asked me that question. We do not fund Louvain and have nothing to do with them in that respect.

Deputy N. O’Keeffe: But you do have links with other training authorities in the European Union?

Deputy N. O’Keeffe: It is an important issue. What type of training and benefits are in place for small firms? Is there a budget? Small businesses are important to our society as that is the growth area for jobs in the future.

Mr. Lynch: We have a small firms industrial training committee. We have a cluster programme in two of our ten regions where a series of small companies come together and have one programme. In other words, they can discuss the problems of production, personnel, finance and so on. Under our training support scheme most of the money, approximately £6 million, is given to small companies for training.

Deputy N. O’Keeffe: I welcome that. It is innovative and is something that should be fostered. It is the way ahead for the future.

Chairman: This Committee is concerned at the time involved in the projected spending schedule. Industrial training is such an important area and I would urge FÁS to ensure the proposed training is implemented and completed as quickly as possible. The paragraph has been noted.

Provision was made in the Industrial Training (Apprenticeship Levy) Act, 1994 for a levy on employers to part fund a new apprenticeship programme to be run by FÁS. On the implementation of the new levy the existing industrial training levies in the relevant sectors were to cease.

The Minister for Enterprise and Employment designated the following industrial sectors as liable for levy payment

•‘off the job’ wages or training allowances of apprentices engaged by employers who were liable for the levy

•costs incurred by apprentices while attending a training establishment approved by FÁS

•the monitoring, assessment and certification costs of the apprenticeship system operated by FÁS

•other expenses agreed after consultation with relevant industry representatives.

Levies collected were to be paid into the Social Insurance Fund and remitted to FÁS.

The function of collecting the levies rested with the Office of the Revenue Commissioners (Revenue). In February 1994, Revenue agreed to use a box on the annual P35 return from employers, previously used for Income Levy purposes, to capture the new levy details. It was also agreed that the P35 information would be processed by September 1995. At that stage a computer tape would be supplied to the Department of Social Welfare in respect of all employers who had recorded payment of the new levy.

However, it transpired that Revenue could not capture the data without major redesign of their systems and at significant cost and identification of the firms and the subsectors of the designated industries proved difficult. As a result, it was impossible to determine how much had been paid under the levy. Estimates based on industry categories by the Department of Social Welfare indicated that at full compliance the potential receipts for the tax year 1994/95 could be of the order of £3.6m. However, subsequent inspection work by the Department of Social Welfare and examinations by Revenue indicated that compliance by employers in the designated sectors was at a level of up to 50 %.

The Department of Social Welfare agreed to make payments to FÁS for the tax year 1994/95 on an estimated basis subject to Revenue confirming the actual levy proceeds in September 1995. However, when it became apparent that Revenue was not in a position to do this, payments ceased.

The Director General of FÁS has informed me that certain interim arrangements have been agreed with a view to progressing matters.

Based on codes² provided by FÁS, Revenue has been able to determine a list of companies in the relevant sectors and the appropriate VAT number. The VAT number will in turn enable Revenue to interrogate their system to establish an accurate estimate of potential levies receivable.

FÁS maintains that a compliance rate of 50% does not necessarily mean that only 50% of the levy is being collected. Rather, it is more likely that the 50% of companies paying the levy include many of the larger employers and accordingly, levy proceeds may be in excess of 50%. Revenue has agreed to re-examine their records on a survey basis to establish if this is the case.

The issue of improving the rate of compliance is also being addressed. FÁS is preparing a mail shot for issue by Revenue in February 1997. The mail shot will be issued to all companies identified by the coding exercise and will remind employers of their obligation to pay the levy.

²FÁS have assigned codes known as NACE codes to sectors of industry liable to pay the levy. While the codes assigned include the electronics sector, as that sector does not have a unique NACE code, FÁS has also provided a list of companies in that sector so that they can be isolated.

Following the various exercises undertaken, Revenue will be in a position to estimate the potential levy receivable and re-examine the compliance issue. As soon as this process has been completed, a meeting will be held involving all concerned in order to progress matters further and in particular to review the amount of levy being paid to FÁS.

£3.6m was paid to FÁS in respect of 1994/95. No payments have been made in respect of the 1995/96 collection. The Department of Social Welfare has agreed to recommence payments to FÁS on an estimated basis for the tax year 1996/97. However, the Department will only agree to pay half of the original estimate based on 50% compliance. This amounts to £1.8m in a full year.

Mr. Purcell: A new levy to replace the existing industrial levies on employers in the construction, engineering, printing and paper sectors was introduced with effect from April 1994. It was intended that the new levy would part fund the new apprenticeship programme to be run by FÁS. The levy was to be collected by the Revenue Commissioners as an additional employers’ PRSI of 0.25 per cent and paid over to the social insurance fund for onward transmission to FÁS.

The intention was that the Revenue Commissioners would furnish full details of contributors to the Department of Social Welfare so that it could pay the correct amount to FÁS. On this basis the Department paid a sum of £3.6 million to FÁS as an estimate of levy proceeds for the first year. However, it soon became clear that the Revenue Commissioners were unable to come up with the required information without an overhaul of their computer system and, therefore, it would be impossible to determine who paid the levy and how much had been paid without a manual trawl of the P35 returns, something which would be administratively expensive to carry out and possibly be inconclusive. On the basis of sample checks by the Revenue Commissioners, it was estimated that there had been a 50 per cent compliance rate among employers but a later exercise carried out by them indicated that the compliance rate was probably under 40 per cent.

To update the Committee on some matters mentioned in the paragraph there was a hope expressed that the sectoral codes supplied by FÁS to the Revenue Commissioners would help to identify relevant employers but that has not materialised. Neither has the proposed mailshot which was intended to remind employers of their obligation to pay the levy. It was intended that they should have been posted with the P35s. The position is unsatisfactory to say the least. We have an indicative compliance rate of less than 40 per cent in respect of a statutory levy. Sufficient urgency is not being shown to address the problem, which, admittedly, with the benefit of hindsight, should not have arisen in the first instance if proper procedures were implemented. The secondary but important issue, from a FÁS point of view, is that the arrangements have contrived to leave it without a source of income from which it was expected to fund a new apprenticeship training scheme. I have much sympathy for FÁS because although the impact is on its finances the resolution of the problem is largely beyond its control.

Chairman: Will Mr. Lynch outline the results of the Revenue Commissioners compliance survey and explain the ramifications of any change in the compliance percentage?

Mr. Lynch: Following on from what the Comptroller and Auditor General said I am despondent about this operation. The idea emanated from the CRC that they would use the PRSI system as the basis for collection. The Revenue Commissioners have been unable to do it and The Department of Social Welfare has refused to hand over any moneys since then. There have been interdepartmental committees and board meetings. At the last board meeting last Thursday, the board decided to request a meeting with the Minister for Finance. We will have to do something. We are dealing with apprentices and their salaries. We will have to pay, we know that. The compliance rate is marginally less than 40 per cent. I am going around like a headless chicken from one Department to the other looking for the money.

Chairman: Has the mailshot had any bearing on the level of compliance by employers? What additional action do you intend to take in an attempt to attain full compliance?

Mr. Lynch: The mailshot has gone out; I have not had any feedback on it. No more money has been forthcoming from the Department of Social Welfare or Revenue. The board has demanded to see the Minister for Finance.

Deputy Upton: The Accounting Officer says there is a 50 per cent compliance rate and a 40 per cent collection rate, is that right?

Mr. Lynch: Initially it was believed there was a 50 per cent compliance rate but after further testing, it was 40 per cent.

Deputy Upton: What is the attitude of the people who refuse to pay? What, if anything, do they say to you?

Mr. Lynch: We do not know what their attitude is because we do not have the records.

Deputy Upton: I know you are seeking a meeting with the Minister for Finance but is there any other way of finding out why these people do not pay? What is the connection between FÁS and those who do not pay? Can such a connection be established?

Mr. Purcell: It is not easy to identify who has and has not paid. It is a very serious problem which is why I spoke of it in such trenchant terms. Obviously the Chief Executive is also very disturbed by this because he is left in a very difficult position.

Deputy Doherty: If it is outside the control of the Chief Executive, what route does the Comptroller and Auditor General suggest should be taken?

Mr. Purcell: Revenue has the statutory responsibility for collecting the levy. That is where accountability should ultimately lie. The Department of Social Welfare who are in a position of paying or not paying, also has a certain responsibility in this matter. I suggest that is where the major portion of accountability lies. It may well be necessary for the Committee to ask representatives from those two Departments to appear before it to resolve this question.

Deputy Doherty: I propose we do that in case the position be represented as one that was within the control of the Chief Executive of FÁS. It is important that point be clarified and this Committee seek to find solutions to the problem.

Deputy Upton: I presume FÁS has been in touch with Revenue and the Department of Social Welfare. What response has it received?

Mr. Lynch: I have received replies from Revenue to the effect that it has a difficulty collecting sector levies and that if we bring in a system like this the computer system will collapse. I do not know what is the problem. All I know is that I am statutorily obliged to pay young apprentices. This money must be received. If I do not get it I will be before this Committee next year answering why I ran a deficit. The Department of Social Welfare is supposed to get the money from Revenue; Revenue say it is having difficulty collecting it for various reasons, the main one being that it is a sector levy. It was the CRC’s idea. All I know is that by July I will have to do something about the payment of young apprentices. I cannot stop it and it would be wrong to do so. A resolution will have to be found to this problem very quickly.

Deputy Upton: I was under the impression Revenue had a state of the art computer system.

Deputy Upton: As Revenue’s computer system is inadequate did it apply any of the old-fashioned methods of collection?

Mr. Lynch: Whether it has computers or other methods, it is able to get money out of me but it is not able to collect the levy. I do not wish to be evasive but all I can tell you is that on further. testing the compliance rate was 40 per cent. The Department of Social Welfare informed me in January 1997 it would not be giving us any more money. I am down £3.6 million which has to be paid to young apprentices. The money appears to be in a black hole somewhere between Revenue and the Department of Social Welfare.

Deputy Upton: It is extraordinary situation and it is very hard for the average person to understand given the way Revenue come down on people, and rightly so, if they do not pay their taxes.

Deputy Byrne: In so far as Revenue cannot confirm who is or is not complying has FÁS been in touch with the sectoral organisations such as the Confederation of Irish Industry to find out their attitude? If we are talking about the base line being honesty one would assume there would be 100 per cent compliance and there would not be any cashflow problems. It seems the policeman, Revenue, has had to put his baton away because he does not know who to clout on the head. Has FÁS and the federations of the three sectors about which we are talking tried to address the problem? There would not be a problem if people who are obligated to pay the levy did so.

Mr. Lynch: We have been in touch with CIF and it has sent a circular to its members. I do not know what the response will be. The engineering associations have done likewise. We may have to go to the industrial training committees to obtain some of their money.

Deputy Byrne: The new levy will release members of the Construction Industry Federation from the industrial training levy. If they are already paying that levy, is it just a matter of substituting one for the other?

Mr. Lynch: The construction industry has ceased to pay the industrial training levy.

Mr. Lynch: Yes, that has stopped even though £7 million is still there. They pay the new levy for apprenticeship. The problem is that other sectors are still paying the old levy but the money is not forthcoming from the new sectors who are supposed to be paying levies for apprentices.

Deputy Byrne: We will have to ask Revenue and Department of Social Welfare to attend the Committee.

Mr. Lynch: Training levies were collected by FÁS and there was a levy on companies.

Mr. Lynch: I would not object to that except that we handed over our database to the Revenue Commissioners.

Deputy Broughan: We get a lot of literature from IBEC and small and medium sized businesses. Are they not ashamed that they negotiated for this type of development and their members are not prepared to fund the industrial training schemes?

Mr. Lynch: I cannot say that. We brought it to their attention. To be fair, in the case of the construction industry, it sent a note to all its members. In the meantime, we are back to the Revenue Commissioners who are back to the Department of Social Welfare and it is back to FÁS.

Deputy Broughan: Surely the onus should be on the industries. They will be going crying to FÁS in a few years if they are not getting young skilled people.

Mr. Lynch: I agree with the Deputy but the construction industry has not rejected the levy; it is just that some of their members are not paying it.

Mr. Lynch: I have no way of knowing that. Not all members in the construction industry are members of the Construction Industry Federation.

Deputy Broughan: We had a system that worked quite well and perhaps we should have left it alone

Deputy Byrne: Some 60 per cent of employers are ignoring their statutory obligations. Is there a philosophy among the industrial sector that apprenticeship training is not its responsibility and, that the State is jumping on its back and extracting money from it? Is there a row about the role of the State in extracting money from industry to train the next generation of skilled workers? Does industry believe it has a statutory or moral obligation to contribute to the training of the next generation of workers? Is there a reluctance on its part to do so?

Mr. Lynch: If we take a broad view of industry, one is looking at in excess of one million people. Almost every sector pays its dues and has industrial training. It receives Government grants and is aware - certainly the engineering industry is - that it must retrain its staff, the era of low-cost wages is gone, it must be competitive and for that the most important ingredient is skills and knowledge. The way the construction industry has evolved in the past five years has caused problems for us and for the construction industry itself because of the C45s. There is a great deal of mobility in industry and, there is the perception that if an employer trains somebody for four or five years, as soon as he is trained he will leave that employment and go to somebody else. That does happen but it tends not to go on as much in the industry side.

Deputy Byrne: Mr. Lynch mentioned the evolutionary process within the construction industry and subcontractors employing subcontractors. What is motivating the industry to take this almost self-destructive path?

Mr. Lynch: Costs and C45s. Costs are being driven down all the time, therefore, by employing fewer people and subcontracting work out, costs can be reduced. The introduction of C45s encouraged this. There has been much discussion in the past six months regarding C45s but it has encouraged the concept of subcontracting.

Deputy Byrne: Is Mr. Lynch saying that in 1997 building costs are being driven down?

Mr. Lynch: I suspect the labour costs rates are; I would not bet on material costs going down.

Chairman: The Committee is aware that FÁS has very little input into the collection of this levy. I stress that it is incumbent on the Revenue Commissioners and the Department of Social Welfare to provide an accurate and efficient collection system for this levy, something they have not provided to date. The present system of relying on estimates for compliance to determine the payment to FÁS is unacceptable and an alternative should be sought as a matter of urgency. The Committee would like to see a great effort being made to attain full compliance in as little time as possible. The Committee is unable to conclude on this paragraph without hearing from the Revenue Commissioners and the Department of Social Welfare. Is that agreed? AGREED

The Community Employment Programme commenced in April 1994. It replaced the Social Employment Scheme, the Community Enterprise Development Programme and Teamwork. The programme operates throughout the country and provides part time work together with personal and skills development opportunities for the long term unemployed and certain persons who are experiencing social exclusion.

•provide temporary employment opportunities for long-term unemployed and socially excluded persons

•contribute to local strategies contained in the Local, Urban and Rural Development Programmes

The programme operates through sponsors who are given financial support for the employment of participants, the purchase of materials, the employment of a supervisor and the provision of training to participants. Schemes are approved by FÁS on the basis of work plans which may have durations of between one and three years.

Note:^a The 1994 comparative figures include the cost of schemes replaced by Community Employment.

The programme is administered on a regional basis. The total number of participants at 31 December 1995 was 40,304.

The primary responsibility in relation to internal controls within projects rests with the sponsor who acts as the employer. The primary role of FÁS is, therefore, to ensure that sponsor controls are adequate and to monitor and audit these controls.

In the course of audit I examined the internal control over the operation of the programme by

The examination indicated that there were some deficiencies in the monitoring and administration of the programme which the Director General has informed me are being addressed as part of the ongoing process of improving controls and procedures.

He assured me that a range of measures have been introduced which will significantly enhance the quality of monitoring. These may be summarised as follows

•A new application process now requires the submission of a project plan which will subsequently be used for monitoring purposes. The approval of each project will be preceded by the appraisal of plans by FÁS staff against quality criteria. A monitoring report form used by staff will include a requirement to evaluate progress and activity against the project plan. The final audit of a project will be both a qualitative and quantitative audit. A standard file will be maintained on each project so that the monitoring process and issues arising may be recorded and traced.

•Training and development sessions to standardise and improve practice in respect of project monitoring are taking place on an ongoing basis. These sessions include

•a module provided by FÁS Internal Audit Section to improve sponsor record keeping and improve financial monitoring

•The pending restructuring of FÁS Operations Division will result in staff becoming available for redeployment to this area which will allow for an increased number of monitoring visits.

In regard to administration at scheme level the Director General informed me that the problems noted were not widespread and that FÁS has issued guidance and action has been taken in regard to the instances noted as follows

•a new sponsor manual prohibits the practice of persons acting as both participants and members of sponsoring committees

•sponsors are continuously advised in regard to their responsibility to make prompt payment of tax deductions to the Revenue Commissioners and the position in this respect continues to improve

•the ongoing improvement in the quality of monitoring will address situations where

•audits of schemes are outstanding

•insurance cover is not in place

•jobsearch forms from the Department of Social Welfare are not on file³

•separate bank accounts are not maintained in respect of a scheme.

Mr. Purcell: This paragraph is for information purposes and it gives information on the operation of the community employment programme. It also shows how FÁS responded positively to the findings of its internal audit unit and the results of the sample check of projects carried out by my staff. I included it in the report because it covers £270 million in 1995, approximately 63 per cent of all FÁS expenditure for the year. The programme operates through sponsors who are paid by FÁS for the employment and training of participants, the employment of supervisors and for materials used. During 1995 at any one time there would have been 3,000 sponsors and approximately 40,000 participants involved.

When introducing the new programme in early 1994, the Government decreed that the number of participants should be double that catered for under the schemes it replaced. Obviously such a dramatic increase had implications for the way in which FÁS could exercise an effective monitoring function over the individual projects, and understandably it takes a little time to bring controls and procedures up to speed. New measures have been introduced by FÁS which are designed to improve the quality of its monitoring and there are some early indications that the measures are having the desired effect. However, I emphasise that it is a gradual process and it will be a year or more before definitive judgment can be made on their effectiveness.

Chairman: What expertise is required of FÁS advisers to carry out work and what additional training is required?

Mr. Lynch: The main requirement is the ability to control finances. That is the most important. We are dealing with a large amount of money which has been received quickly. In September 1993 the programme involved 15,000 people and in 1995 it involved 40,000 people. The staff of FÁS must be trained in the area of finances and monitoring quality. It is not just a case of training the staff of FÁS, we have had to train supervisors and sponsors in the recent past. There are three prongs to this - the training of the staff of FÁS to monitor quality and finances, the training of supervisors so that they are aware of their responsibilities and the training of sponsors who are responsible for the project and finances.

Chairman: Earlier this year there was a problem with community employment schemes in Kerry. I understand this was on the agenda for the February meeting but was subsequently postponed until June.

Mr. Lynch: It is a chief executive’s nightmare to come before the Committee and be asked specifically about a local project because there are 2,500 such projects. I cannot give the Chairman a definitive answer in relation to the Kerry project, but it would not have come before the board of FÁS; it would have come before a monitoring committee made up of the social partners. It would have been postponed for financial reasons. Most Deputies contact me from time to time regarding community employment schemes, and almost always it concerns the ending and starting up of projects. I said earlier that anyone under the age of 35 years can only stay on a community employment scheme for one year and anyone over the age of 35 years can stay on the scheme for three years. It is not in our interest to cut or stop these schemes but it is in our interest to tell someone they cannot stay on a scheme after one year and perhaps they should look at the education or training scheme. We must balance finances because new projects are often introduced and old ones are discontinued.

Chairman: Do you anticipate having the finances balanced before the general election so that these schemes can go ahead?

Deputy Upton: The schemes in my area are very good, particularly those involving sport. This is a new area for FÁS. How many of the schemes relate to the management and development of sports clubs and to the provision of ancillary services in schools? Some of the people involved in these schemes are very good with children and parents,

Mr. Lynch: Thank you, Deputy. Most of them work well. In the recent past there have been fewer people on community employment schemes working for local authorities. I have spoken to Dr. Tony O’Neill in UCD about the sports aspect of the schemes in the hope that we can devise a programme whereby people in sports programmes would get a diploma from UCD. That is a step forward. There are about 9 per cent involved in sports programmes and approximately 9 per cent to 10 per cent involved in schools programmes.

Mr. Lynch: The bulk of them are community and social projects, such as the Drimnagh Resource Centre. Twenty per cent of schemes involve the environment, 10 per cent involve sports and the same for schools, 2 per cent involve tourism, 4 per cent involve health and 4 per cent involve arts and culture. Most people involved in Temple Bar are on community employment schemes.

Deputy Upton: What proportion of schemes are specifically aimed at women’s groups?

Mr. Lynch: I cannot give a specific figure but 57 per cent of people involved in community employment schemes are men and 43 per cent are women.

Deputy Upton: In relation to sports and schools generally, is there a role for these schemes in combatting anti-social behaviour? Do they have a function in relation to young people who could be identified as being at risk in terms of becoming criminals in due course? Is there a role for FÁS in this area generally?

Mr. Lynch: Absolutely. Were it not for schemes such as this we would face mammoth problems. It is community-driven. All we are doing is helping communities. Thirty six per cent of those who participated in the schemes last year got jobs and another 30 per cent went into education. That is a phenomenal figure. Another 30 per cent went into education. We are working on the remaining 27 per cent. Community employment is probably the most significant programme from a social and educational point of view. Some 40,000 people are on community employment schemes and that is a very big number when you consider the electronics industry employs 41,000.

Deputy Upton: Is there anything planned in terms of interacting with the various agencies to develop that concept?

Mr. Lynch: We are working with the partnerships but we must work also with the communities. We try to ensure that people get jobs after coming off these schemes and if some people want to go into education and training we try to ensure they can do so.

Deputy Broughan: These schemes represent approximately 2 per cent of the workforce. My experience over the years of the work FÁS has done in supporting community projects and developing communities in the north side of Dublin, particularly the north east region, has been very positive. Is there any data relating to the significant section of the workforce who go into full-time employment?

Mr. Lynch: Thirty six per cent of the 40,000 people on community employment schemes got jobs. Of that 36 per cent, 24 per cent were working full-time and the remainder, 12 per cent, were working part-time. I have further data on the sectors they went to and I could forward it to the Committee.

Deputy Broughan: My experience is that a significant number of people receive valuable training through these schemes and that is borne out in the figures.

Deputy Broughan: When Fr. Healy attended a Committee of the House, he did not appear to be aware that there is community employment in other countries also. Is it the case that Germany, in particular, has a large scale community employment and that in other European countries, including Great Britain, it is also an important aspect of the social economy?

Mr. Lynch: I am surprised at that because most people who are in this business understand that most countries have this system, including Germany, France and Britain, although the British system is more market driven. We have more empathy with the German system in this case than with Great Britain. Our system is unique in so far as there is a training content. In the recent past many new countries, including Norway and Sweden descended upon me to have a look at this system and so too have many east-European countries because they have heard about our community employment system. I am not particularly proud that we are the experts on unemployment in Europe but at least we are the experts at intervening in the labour market which is terrific. I am surprised at what the Deputy said as most people in this business know there are other systems.

Deputy Broughan: You mentioned the quality of the training for these engaged in it. As the Comptroller and Auditor General said, the scheme accounts for a large part of the budget, much of which is derived from the European Union Social Fund. Are there aspects on which Mr. Lynch would advise the Government regarding how CE schemes should be further developed? Is it operating reasonably well given the fact there was a huge increase in numbers a few years ago?

Mr. Lynch: The changes only came into effect last April. The EU funding accounts for 11 per cent of the total funding of this programme. Therefore, it is funded predominantly by the Exchequer. I had two main concerns in the recent past. One was to ensure none of it went missing as otherwise I would have had to explain to this Committee what happened. The second is to train supervisors as their role is critical. We put much effort into training supervisors because they are the fulcrum of the operation and we had to ensure they knew about the system. The sponsors had to be trained because they are the employers and there is an onus on them to return PRSIs and various other forms as they are responsible for them. Over the next few years the system will certainly improve.

Deputy Byrne: The community employment scheme was conceived presumably in order to target the long-term unemployed, give them some hope and reintroduce them to the workforce. It has been relatively successful but I want to deal specifically with the long-term unemployed who are supposedly the targeted audience. How do we explain the ever increasing growth in the number of the long-term unemployed on the live register? I suggest what is happening with community employment is that it is drawing in a substantial number of lone parents and people who are not really long-term unemployed but relatively recently unemployed. To qualify for community employment one has only to be on the live register for a year. Having said that is Mr. Lynch satisfied that the scheme has been successful in introducing those who have been long-term unemployed and have been on the live register for three years or more, into employment?

Mr. Lynch: As I said earlier the refocusing occurred last April. The Deputy’s point about lone parents is correct. Two years ago lone parents accounted for 4 per cent of the number of people on community employment schemes. Today it accounts for 14 per cent so there has been a dramatic increase. Ninety three per cent of all people on community employment schemes are unemployed as per the definition set down under CEs. The remainder of the people, 14 per cent, are lone parents on unemployment assistance and unemployment benefit.

Deputy Byrne: We are applauding ourselves because 36 per cent got jobs. I could argue very strongly that those people would have got jobs anyway and that 30 per cent went into education, which is great, but then there is still the worrying figure of 34 per cent who, notwithstanding the scheme, have ended up back on the dole queues. If I am reading the socio-economic scene in the capital city and the monthly statistics properly, the number of the long-term unemployed on the live register is increasing. This is a scheme that was supposed to take people off the live register. There is a 34 per cent failure rate among the 40,000 and they are the relatively new unemployed as against the long-term unemployed. Do we need to fundamentally adjust our focus and target the hard core of long-term unemployed - those unemployed for three years or longer - and the blackspots we have talked about, for example, the inner city flat complexes and the Tallaghts of this world where there is such hopelessness and thievery by way of stealing cars and so on. Has the dream of community employment schemes taking people back from the margins and into employment not been realised?

Mr. Lynch: No scheme is perfect and the Deputy would accept that. The targeting occurred last year. More than 50 per cent are unemployed for over two years; 10,000 of the jobs are for people who are 35 years plus.

Deputy Byrne: If 50 per cent were unemployed for more than two years are there statistics to show how the 34 per cent who ended back on the dole queues relate to those who were two years——

Mr. Lynch: I do not have that information with me but I could forward it to the Committee.

Mr. Lynch: The Deputy can take it that most people on community employment schemes are difficult to place because of their education levels. Fifty per cent are two years plus unemployed; they could increase over the next couple of years. Ten thousand people over 35 years of age and unemployed for three years have been targetted. Twenty-five per cent of the places have to go to them. Sixty per cent of all people on CE schemes are aged between 25 and 45 years. It tends to drop off after 45 years of age. It is not entirely targetted at young people. Many people have problems in this area as Deputies will have experienced in their clinics. A married person, aged 20 years or 30 years, with two children and residing in a particular area will find it very difficult to get a job. It is not just a problem for children but their fathers. They set the trends at home. The figures show it is mostly people in the 25 to 45 years bracket who are on CE schemes; that figure will probably increase. The figures also show that those people have been unemployed for over two years. The scheme is not targetted specifically at the young person in Killinarden who is joyriding because one has to be 21 years old to get onto the programme and then can only remain on it for one year. It is targetted at people who have low educational qualifications, few skills and who want to learn new skills in order to get back into the workforce.

This is not unique to Ireland. I recently compared our problem with that in Hamburg where they have a booming economy in computer-related businesses. They experienced the same problem in relation to dockers and so on when business collapsed there.

Deputy Byrne: We are dealing with 40,000 people and a relative success story as things are structured today but there are 240,000 unemployed people on the live register. Does FÁS institute programmes and recommendations to Government about how to tackle the problem of the long-term unemployed? Unless they are specifically targetted the next generation of their families and communities will be lost to unemployment. Is FÁS structured in such a way as to be proactive and innovative about developments in this area?

Mr. Lynch: Yes, we have sent a document on a strategy for the unemployed to the Department in which we put forward a number of proposals we believe could be helpful.

Deputy Byrne: What is the attitude of FÁS to the NESF report on ending long-term unemployment?

Mr. Lynch: Our attitude is positive but it is not the absolute answer to the problem. We are in negotiations at present with our unions to restructure and get more people involved in the area of counselling and guidance. We agree with the broad thrust of the NESF report.

Chairman: This Committee welcomes every effort made by FÁS to reduce unemployment and improve the skills of the workforce but must emphasise the fact that controls must be maintained at all times to ensure value for money. This Committee wishes FÁS and you, Mr. Lynch, well with this programme.

On FÁS accounts and FÁS International Consultants Limited, will you update us on the paragraph in last year’s report concerning the unoccupied space at your headquarters?

Mr. Lynch: I am delighted to report that particular space has been rented. Not only has that space, one floor, been rented but the remaining four floors have also been rented. It gives me great pleasure to announce that.

Chairman: I note that a debtors’ figure of £7.4 million at the end of 1995 was more than double the figure for the previous year. Will you explain how this arose?

Mr. Lynch: There were two types of debtors, the EU and normal trade debtors. The amount for normal trade debtors was £4 million and the EU grant was £3 million. Of the trade debtors, two related to the surplus levy and apprenticeship levy. We were paid both in January 1996. That does not cause us a problem now. The EU grant of £3 million was a late payment of a final payment from the EU which we subsequently received.

Chairman: On training costs, you paid over £3.6 million in course fees to contracted trainers. How many trainers are on contracts and have you examined whether it would be feasible to employ the trainers on a full-time basis?

Mr. Lynch: I do not have the number of trainers involved. On whether they should be employed full-time, the answer is no. Trainers would be employed on one-off courses, for example something might be required for the Financial Services Centre or deep sea diving and it is better to have people on contract rather than have somebody permanently employed.

Chairman: Was any of the £6.1 million which was spent on training support to industry ever recouped from the industries involved and if not, why not?

Deputy Broughan: In relation to FÁS International Consultants Limited, how many people would be working abroad at any one time? FÁS made a gross profit of £300,000. I know it is not your primary function, but is there scope for raising more income for our domestic purposes through FÁS International?

Mr. Lynch: Yes. FÁS International is a fairly conservative organisation as far as money is concerned. It will only do something if a project is approved and paid for by the EU or the World Bank because there is a problem with payment in these countries.

We estimate that FÁS International creates between 40 and 50 jobs a year. If somebody leaves the Baldoyle training centre, he or she would have to be replaced because they could be away for three months, six months or a year. On the question of scope, the board of FÁS International has been looking at further areas. They have achieved a very good result at the end of the day because the 1995 accounts show a profit of £5,000 after tax; 1996 shows a profit in the region of £200,000 and I suspect it will be the same for 1997. The board is trying to expand it but it has to be cautious in relation to payments. It receives either bilateral aid, EU money or payment from the World Bank.

Deputy Broughan: I notice in those accounts that you spent about £500,000 on the local employment service. What is the expenditure on that scheme. What is its long-term future?

Mr. Lynch: The £500,000 spent on LES was once capital expenditure on computers.

Deputy Broughan: Are there ongoing costs in relation to LES or does that come through the partnership structure?

Deputy Broughan: How do you see LES evolving in relation to your own operation? I know FÁS is the driving force behind LES.

Mr. Lynch: LES is good because it is community based. We need an active employment service as well as LES. Forfás carried out a review of LES which came to the same conclusion as we did that an enhanced employment service is required to help LES. We do not consider LES to be a threat to FÁS. On the contrary we have seconded 25 people to it. No more than three people are seconded from the Departments of Social Welfare and Education.

Chairman: The profit margin is excellent. Is it correct that FÁS is breaking even while still taking account of staff costs and appreciation? The Comptroller and Auditor General informed me that you are liable for tax.

Mr. Lynch: This is a sore point. FÁS International started with £100 because the Department of Finance did not want any subsidiary to have a large ossied share capital due to a bad experience with a shipping company. The only way this company can expand is to retain its profits in good shape. I do not see why when we make a profit of £300,000 we must pay £114,000 of it to the Revenue Commissioners. If I wish to increase the capital base of this company I must approach the Department of Finance for more money but it will refuse because this is a £100 company. This is unfair. I have brought this matter to the attention of the Minister, Deputy Quinn but I do not think he is winning the battle with the Revenue Commissioners.

Mr. Lynch: No but FÁS International being a separate limited liability company does.

Mr. Lynch: Yes, that is its only capital base for further development in the future.

MINUTES OF EVIDENCE

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Deardaoin, 10 Aibrean 1997.

Thursday, 10 April 1997.

REPORT OF THE C& AG ON THE AUDIT OF THE 1995 ACCOUNTS OF NON-COMMERCIAL STATE-SPONSORED BODIES - FÁS.

REPORT OF THE C& AG ON THE AUDIT OF THE 1995 ACCOUNTS OF NON-COMMERCIAL STATE-SPONSORED BODIES - FÁS.