Committee Reports::Report on the audit of the 1994 Accounts of: Non-Commercial State Sponsored Bodies Health Sector Bodies and Vocational Education Committees::05 May, 1997::Report


Report on the audit of the 1994 Accounts of: Non-Commercial State Sponsored Bodies Health Sector Bodies and Vocational Education Committees

1. Introduction

1.1 Background

The Comptroller and Auditor General (Amendment) Act 1993 widened the remit of the Comptroller and Auditor General (C&AG) to include some Non-Commercial State Sponsored Bodies, Health Sector Bodies (including Health Boards) and Vocational Education Committees and allowed him to prepare a special report on any general matters arising from his audit of these bodies.

In January 1996, the C&AG published a report which set down matters of a general nature arising from his audit of the various bodies within his statutory remit, and to which he believed attention should be drawn. On publication of his report the Committee decided that, as it was the first occasion that such a report had been published, each of the bodies referred to in the report should be invited to attend the Committee for examination in relation to the matters raised and also in relation to their audited accounts.

Subsequently, certain Non-Commercial State Sponsored Bodies, Health Boards and Vocational Educational Committees were, following the presentation of their accounts to the Dáil, also examined by the Committee for the first time.

This report is the result of the Committee’s deliberations in relation to certain Non-Commercial State Sponsored Bodies, Health Sector Bodies (including Health Boards) and Vocational Education Committees.

1.2 Matter of Particular concern to the Committee

Section 19 of the Comptroller and Auditor General (Amendment) Act, 1993 states specifically that an Accounting Officer must give evidence to the committee of Dáil Éireann established under the Standing Order of Dáil Éireann to examine and report to Dáil Éireann on the appropriation accounts (i.e. the Committee of Public Accounts). Accounting Officers also have specific duties under Section 22 of the Exchequer and Audit Departments Act, 1866.

During the Committee’s examination of Health Boards and VECs it came to the Committee’s notice that, not only were CEOs not statutory accounting officers, no similar provisions in relation to the giving of evidence existed in relation to State Sponsored Bodies, Health Boards or VECs. Indeed, there is some doubt as to whether the Chief Executive Officers of these bodies are legally accountable or not. In addition, as there is no compellability on witnesses (other than Accounting Officers) to attend meetings of the Committee, it is open to CEOs to refuse to appear before the Committee for the examination of the accounts of their organisations.

The Committee is of the view that this situation is untenable and should be altered by way of legislation as a matter of urgency. The Committee requests that Chief Executive Officers of Health Boards, VECs and other bodies be appointed as accounting officer (or equivalent) to these bodies and that the provisions of Section 19 of the Comptroller and Auditor General (Amendment) Act, 1993 be extended to include these officers. Otherwise the extension of the Committee’s terms of reference, which was agreed by Dáil Éireann in 1994, is meaningless.

2. Non-Commercial State Sponsored Bodies

2.1 FÁS

2.1.1 Surplus Office Accommodation

Following its establishment in 1988, FÁS set up a regional structure which, together with the effect of an early retirement scheme, reduced the number of staff at its head office. As a result approximately 9,000 square feet of office accommodation were surplus to requirements. The surplus accommodation was rented initially to the Health and Safety Authority, between 1990 and 1992 but, when that authority moved to alternative premises in 1992, FÁS was left with 9,000 square feet of surplus office space which, at the time of the examination, was unoccupied.

The lease agreement was negotiated for a 40 year period on the establishment of AnCO in 1972. The lease has no lease break options and, as a result, FÁS does not have any means of avoiding the costs in question unless it sublets the unoccupied portion of the premises. Despite its attempts to do so it has not managed to achieve this. At the time of the examination, the estimated cost of the unoccupied space since 1992 was almost £0.5 million.

In evidence, the CEO told the Committee that, of the 65 buildings taken over by FÁS when it was established, the building at Baggot Street involved the only lease for which there was no break clause. In addition, the building was found to be both dated and substandard and required the investment of substantial capital before a sublettor could be obtained. As the building has many restrictive covenants it cannot be disposed of by FÁS and any efforts to sublet have been unsuccessful. He also stated that in order to refurbish the vacant part of the building the cost would be approximately £3 to £4 million and refurbishment of the entire building would cost around £8 million. As it was, the building was costing £200,000 annually in rent.

The Committee is disappointed that this building is costing so much in taxpayers money and that there is no way of reducing the cost. It agrees, however, that the lesson to be learned from this situation is that State agencies should try to ensure that lease break options are built into their tenancy agreements, as they would allow the flexibility to cope with periodic changes and rationalisation, whether due to centralisation, decentralisation, regionalisation or other changes. The Committee wishes to remind State organisations of the importance of the careful negotiation of leases for both non commercial State-sponsored bodies and Civil Service departments alike.

The Committee wishes to be kept informed of any developments in this case.


2.2.1 Project Failure

On its establishment in 1994, Forbairt inherited the operations of Eolas. Some years previously, Eolas had been contracted to develop a range of miniature circuit breakers for a £175,000 fixed fee. In the event this development could not be successfully completed and ultimately, it was necessary to pay £850,000 in settlement of a claim for non-completion in addition to the ongoing development costs of about £1.5 million. The total cost of the project at the time of the examination amounted to £2.4 million

In evidence, the CEO outlined the background to the situation. In 1986 the then IIRS carried out a feasibility study for this particular company and subsequently decided to carry out a development project of extraordinarily wide scope which involved:-

a)the design of a new product;

b)ensuring that patents were not infringed in the development of those products;

c)getting the product to a position where it could be manufactured on a cost effective basis; and

d)taking responsibility for the commissioning of the physical plants to bring the product into production.

The CEO admitted that there had been an error of judgment in that a fixed time had not been imposed. He believed that there was a need to ensure that, where product development programmes are being undertaken, firm deadlines are set and performance barriers are established. In this instance, legal proceedings were being taken against the insurers, with whom Eolas had professional indemnity insurance up to a limit of £1.5 million, who were disputing their liability as a result of non disclosure of material information on the part of Eolas. The outcome of the proceedings was awaited.

Regardless of the outcome of the case, the CEO believed that two main lessons had been learned from the situation, particularly that a project of this scope should not be undertaken without previous experience and that negotiating a price on fixed terms had not been a good decision. He stated that the management of the project had not been successful as it had continued to run for a very extended period without a key decision being taken as to when the cut off point should be.

The product development department, who had undertaken the project initially, were no longer active in this area. In addition, a number of procedures had been established to ensure a high level of protection for the organisation including the following:-

1)Any development projects being carried out in Ireland for Irish companies, and for which the contracts exceed £50,000, are approved by a committee which includes the chief accountant and senior members of the staff of the organisation;

2)A legal department with solicitors and legal advisers had been established to vet the suitability of the contracts in order to ensure that the interest of the organisation was properly protected;

3)An audit committee and an internal audit procedure had also been established to overview the efficiency and effectiveness of the organisation.

These, he believed, were important steps to protect the organisation both in terms of who takes decisions and the design and propriety of the contracts.

While it welcomes the changes that have been made in the procedures in relation to project development, the Committee must express its deep concern at the wasteful expenditure that occurred in this instance and trusts that a similar situation will not arise again. It wishes to be kept informed of any developments in relation to this matter.

The Committee believes that the situation has lessons for the wider research community, including that conducted by universities, whether directly or through programmes for advanced technology. In this context the Committee urges all those involved in spending public funds for research purposes to take note of problems that can arise and urges the relevant bodies to take all the necessary steps to ensure that public funds are correctly used and not wasted. The Committee also advises that, in future, no undertakings to develop a new product at a fixed cost or for a fixed price should be given.


2.3.1 Losses arising on investment in fishing vessel

The report of the C&AG outlines the events which followed the investment by Bord Iascaigh Mhara (BIM) in late 1992 of over £275,000 in loans and grants in a vessel built for crab fishing at a cost of £504,000. No loan repayments were made on the vessel, as it was operated unsuccessfully from the time it commenced fishing, and BIM was obliged to repossess the vessel in early 1994. After a tender competition, the vessel was subsequently sold it for £120,000 however, the Board were subsequently required to take the vessel back again and to compensate the purchaser for his losses arising from the vessel’s stability problems.

Ultimately, BIM was left with an unstable fishing vessel, on which there had been expenditure of £370,000. The vessel was finally sold for £62,000, for use on a fish farm, for which a grant of £75,000 was obtained. The net loss to the Board was calculated to be £300,000, which excluded the grant sum of £75,000.

In evidence, the Chief Executive Officer (CEO) explained that when the vessel was originally approved in 1990, following construction but prior to commissioning, there was a suggestion that it was unstable - a claim that was disputed by the surveyors and the applicant. BIM requested the observations of the Marine Survey Office of the Department of the Marine, who stated the vessel would be stable but only if certain specific conditions of operation were met. As this was the best technical information available to BIM at the time, there was no option but to accept that the vessel should go into operation. The particular modifications suggested were made to the vessel before any grants were made. The vessel was subsequently returned, modified, sold again and returned again before its final sale, which had been at a substantial loss. He admitted that the outcome was not good from the Board’s point of view but said that the Board had learned from the problems that had arisen and that it would look closely at any similar situation in the future.

The Committee is disappointed that a loss of this magnitude was made, particularly as it could have been avoided. It is disturbing to find that procedures operating in BIM and in the Department were not adequate to prevent such a loss. It hopes that lessons have been learned following the losses and that a similar situation will never again arise.

The Committee wishes to be kept informed of the result of any reviews made in relation to this situation.

3. Health Sector Bodies


3.1.1 Pharmacists Claims

The Report of the C&AG drew attention to the level of control exercised over two drugs refund schemes, operated by the GMS (Payments) Board, which together accounted for over £30 million of expenditure in 1994. The Drugs Cost Subsidisation Scheme (DCSS), which was an offshoot of the refund of drugs scheme, covers monthly prescription costs in excess of £32 while the Long Term Illness Scheme (LTI) provides for the supply of certain prescription items free of charge for the treatment of specific long-term illnesses.

The C&AG’s particular concern, which was shared by the Committee, was that the schemes, as implemented, only required the pharmacist’s copy of a docket as supporting documentation for claims on the GMS and did not require the pharmacists to obtain the customer’s signature on the dispensing document as evidence that the type and quantity of the medicines listed had been received. He believed that there was a danger that, notwithstanding some compensating controls, spurious claims could be introduced into the system and paid and, while there was no evidence that this was occurring, there was a risk that it could. The pharmacists had refused to allow customer verification but, at the time of the examination, negotiations were ongoing.

In evidence, the Chief Officer stated that the Board shared the concern that incorrect claims could be made but he pointed out that, although patient verification was not available, a number of other controls were in place, particularly within the Board’s computer processing facility where sophisticated controls were in place. In addition, in the course of post processing, an examination of a random sampling of claims (including requesting sight of original prescriptions in some instances) was carried out in order to satisfy the Board that only correct claims were being paid. There was an onus of responsibility on the Board to establish the reasonableness and accuracy of a claim, particularly if there was any doubt, and he stated that there had been several cases where the issue had been pursued through to a disciplinary level.

The Committee was surprised not only at the non-verification of claims but also at the retail markup of 50% that is paid to the pharmacists on prescriptions under the GMS which, it believes, to be excessive. It was explained that this large amount had its origins in the original GMS negotiations, which had taken place some time previously.

The Committee accepts that schemes such as these depend largely on the constant input of pharmacists whose involvement has to be negotiated, but is concerned that the demands of those involved are being paid for by the taxpayer. The Committee welcomes the fact that the negotiations in relation to third party verification were satisfactorily concluded in recent months and hopes that the new agreement will operate successfully from the taxpayers point of view.

The Committee welcomes the fact that the C&AG’s office is currently undertaking a value for money examination on the indicative drugs target scheme, part of which will involve an examination of the development of general practitioner’s services and looks forward to the publication of that report which it will examine with interest.

3.1.2 Rebates from Pharmaceutical Manufacturers

Under an agreement between the Department of Health and the Federation of Irish Chemical Industries (FICI), which was negotiated in 1993, the GMS advises each company of the value of its products dispensed each month and the companies undertake to make a rebate of 5 per cent of the value to the GMS within 30 days of the date of the invoice. The normal elapsed time for the issue of the invoices is, generally, two to three weeks after the pharmacists’ claims have been paid. However, during 1994 the GMS had performance and capacity problems with its computer system and, as a result, no invoices for the rebates issued for the first eight months of the year.

Although billing recommenced in September 1994, it was not until January 1995 that invoices to a value of about £1.6 million, going back to October 1993, were issued. The net result was that the GMS was at a loss of the use of a considerable amount of money in 1994 and the shortfall had to be met by increasing its overdraft which the C&AG estimated cost at least £200,000.

In evidence, the Chief Officer stated that the Board did not have a computer system until 1993. Up to that time it had availed of the services of the Department of Finance computer system in Kilmainham, the services of which were to be withdrawn at the end of 1993, with no possibility of an extension. This was acceptable to the Board as it was developing its own system. However, at the time of the withdrawal by the Department of Finance, the Board’s system, which had cost a total of £1.7 million, was not fully developed nor had it been volume tested. Nevertheless, as the Board had no choice but to go live, it did so in November 1993.

A number of problems had arisen at this time not least in relation to the capacity, the sizing and planning of the computer system. The original strategic plan, which had been in place from 1991, set the broad guidelines for the design of the system, however as the DCSS had only started the previous year and the LTI had only commenced being administered by the Board in 1991, it was discovered that the capacity to deal with both schemes had been greatly underestimated.

In view of the numerous problems that had arisen, a decision was made in early 1994, to deal with as much of the work of the Board as possible with a system that was not fully operational. The Chief Officer stated that, at the time, he had no other option but to concentrate on certain aspects of the work at the expense of other areas, including the issuing of demands to manufacturers. However, at the time of the examination, the Committee was told that the problems had been solved and was assured by the Chief Officer that the billing system, the production of reports from manufacturers and the issuing of invoices to the manufacturers were up to date. In addition, further enhancement of the system was planned.

The Committee is concerned that losses such as those calculated by the C&AG could have occurred in this situation. While it welcomes the fact that the problems seem to have been solved in this instance, it regrets that the problems could not have been avoided at an earlier stage.

The Committee urges all public services bodies to use great care when estimating future requirements, particularly in relation to computer facilities, as underestimation can be very costly to the taxpayer.


The report of the C&AG draws attention to the scale of extra payments made to radiography and laboratory staff for work outside normal hours, which in 1994 amounted to over £1 million. The rates at which the on call payments were made, had been agreed at national level some time previously. The C&AG was of the opinion that the agreements were inappropriate by present day standards.

In evidence the Chief Executive Officer stated that in relation to on-call costs, account had to be taken of two main factors:

1)the rate of on-call payments that apply nationally to radiology and pathology staff was as a result of an agreement that had existed since 1982, and

2)Beaumont Hospital operates its radiology and laboratory departments on a 24 hour basis.

The CEO had no control over the rates which could only be altered with the agreement of the relevant unions and if the changes had been accepted nationally. He pointed out that a number of hospitals, including Beaumont, had grouped together to negotiate collectively for a revised arrangement which would recognise that the rate of payment and the type of rostering mechanism would require change in the future to reflect the changes that had occurred in the operation of the service. He agreed that it is not appropriate to be applying the same system now that had applied in 1982, particularly in view of the ongoing increase in the out of hours activity due to the nature of the demand in the acute hospitals.

The CEO explained that the operation of the radiological CT unit was the biggest component of the X-ray on-call and amounted to £400,000 of the £1 million spent in 1994. In view of the fact that the national neurosurgery centre was located in Beaumont hospital, the CT unit there was operational 24 hours a day. There existed an on-call mechanism in relation to the operation of CT scans which had been agreed nationally, but he agreed that the rates in operation required review particularly in view of the volume throughput out of hours.

In relation to the overtime that was incurred by laboratory staff, he informed the Committee that some 50 per cent of the out of hours activity in the laboratory was as a result of the work load in the Accident and Emergency department, for which the laboratory is available on an emergency basis. The other 50 per cent of activity related to in-patient work load, including intensive care units, emergency theatres and other areas in the hospital which would require staff to be available overnight. However, he stated that the current policy of the hospital was to control the volume of outside normal hours demand so that only necessary tests were requested after hours. The consultants were reviewing their requirements and the level of ordering outside hours was being reviewed. In addition, general hospitals collectively had, through the value for money group that had been established by the Department of Health, carried out a complete review of the out of hours workload and the source of the workload in hospitals and had come up with recommendations as to what the best mechanism would be for paying for out of hours work in the future. At the time of the examination the recommendations were under negotiation with the relevant unions and a final decision was not expected for some time.

While the Committee appreciates that out of hours work is a necessary part of the provision of health services, it must express its concern at the level of on-call payments and stress the need for reducing the charge to a reasonable level. It urges all hospitals to examine their out of hours costs and make arrangements which will reduce the high level of expenditure in this area. The Committee notes that numerous hospitals and health boards had problems in relation to their out of hours payments and hopes that the issue will be addressed nationally.

The Committee will keep the matter under review.


The Report of the C&AG refers to a stock misappropriation amounting to some £42,000 which came to light when an investigation was initiated in the technical services stores of St. James’s hospital following the discovery of apparent discrepancies in stores issue vouchers.

The investigation revealed another discrepancy which showed that, although 336 electric shower units had been ordered and paid for in the period 1985 to 1994, inclusive, only one of these units had been installed within the hospital and no units were in stock at the end of 1994. The investigation also revealed that the inadequacy of the records made it virtually impossible to establish conclusively whether other items had also been misappropriated.

Shortly after the discrepancies were discovered in January 1995, a member of the stores staff tendered his resignation, which was accepted. A settlement was subsequently reached with the legal representative of the ex-staff member to the effect that he would forgo his retirement lump sum of £25,700, that his pension would be paid from the date of his retirement, and that each party would bear its own costs. This settlement was on a no liability/prejudice basis and £14,976 was received from the hospital’s insurers under a fidelity guarantee policy.

In evidence, the Acting Chief Executive Officer (ACEO) told the Committee that the technical services stores (where the discrepancy arose) was in existence some time before the hospital itself had developed to its current level of activity. As a result, the stores arrangements had remained in a very traditional format, which relied excessively on the integrity and honesty of individuals and not sufficiently on contemporary control systems. The main contributing factor to the discrepancy was as a result of the fact that the purchasing function and the receipt and distribution function which, in the case of the hospital’s engineering stores, were held and dealt with, by and large, by the same individual. Subsequent to the discovery, the hospital authorities had immediately separated the two functions of purchasing and stock control and had introduced other changes. At the time of the examination tenders had been received for consultancy services to review the entire purchasing and stock control provisions in the hospital. In addition, computer software had been acquired, which incorporated provisions for stock control and steps were being taken to implement the new system.

There was also considerable criticism of the fact that the hospital lacked a stock control system in other areas of its operations and the Committee was informed that the hospital had been actively pursuing, as part of its information systems, a strategy in relation to the individual departmental systems, which included provision for stock control systems. In addition, he pointed out that the hospital authority was aware that controls of the type outlined by the Comptroller and Auditor General were necessary in this area but pointed put that there was a need to achieve a balance between the cost and benefits that would accrue from them.

Following the examination, the Committee visited the hospital to examine the new stock control system which had been put in place. The Committee was impressed with the improvements that had been made but is disappointed that such a large misappropriation was required before the system was overhauled. It hopes that the strengthening of the internal controls outlined by the ACEO, which were evident during the visit, will prevent a similar situation from arising again and it urges all public bodies and organisations to examine and review their stock control systems to prevent similar problems arising in future.

4. Health Boards


The Committee examined the accounts of a number of Health Boards and noted various common problems that existed in many of them. The three main areas which were of concern to the C&AG applied across the health service and related to inadequate control over pharmacy stocks, poor stock control generally and the incurring of substantial call out payments to radiographers and laboratory staff, which amounted to over £40,000 in the case of one individual employed by the Southern Health Board.

The Committee was assured by each of the Boards examined that the issues raised in the reports were being addressed and some remedial action had been taken. In relation to inadequate stock control areas, some of the Health Boards had dealt with the problem by undertaking a major re-organisation of central and hospital pharmacy structures or by the introduction of new systems which would involve the implementation of enhanced stock control procedures. The Eastern Health Board told the Committee that it had introduced a computerised pharmacy system and that a stock control element is being added to it. The Committee welcomes the improvements and hopes that continued action will be taken to deal with the problems identified in the area of stock control, particularly where dangerous and valuable substances are involved.

From its examination of the accounts and various comments in relation to the cost of on call and overtime allowances, the Committee believes that the present system of on call allowances needs to be examined at a national level. It urges all the relevant organisations to come to a national agreement in relation to the remuneration for on-call that occurs in the Health Boards as it believes that the payment of the current amounts is untenable and the situation should be reviewed.


(i) Western Health Board - Billing of Patients

The C&AG referred to a problem that exists in relation to the amount of patients bills outstanding in the Western Health Board area. At the end of 1994 some £3.6 million was outstanding, excluding road traffic accident cases, outpatient charges and bad debts written off. Of the £3.6 million outstanding, almost £1.2 million fell into the doubtful debt category. The Committee was told that the decision not to have a direct payment arrangement with the VHI may have had an impact on the high level of debtors but that the operation of the patient debtors system in one of the Board’s main hospitals seemed to contribute greatly to the problem.

In evidence, the CEO told the Committee that a number of factors had contributed to the problem including the absence of the relevant officer due to illness. In addition, as it is the Board’s policy to charge for all services provided, even though the charges might not be collectable, he thought that the problem could have been exacerbated. He stated, however, that matters had been rectified since the publication of the C&AG’s report and a proper system was now in place. Financial regulations had been drawn up by the Finance Officer and a procedure in relation to the prompt collection of accounts was in place.

The Committee notes that the Board has rectified the system in use in the Board, and hopes that the outstanding bills will not remain so for long.

(ii) North Eastern Health Board

During the course of the audit of one of the hospitals in the North Eastern Health Board area, it was noted that accounts totalling £67,000 in respect of the treatment of patients billed in the four years 1985 to 1989 were outstanding, as were accounts totalling £73,000 billed in the period 1989 to 1992. Further inquiries revealed that the bills related to the treatment of private and semiprivate patients who were members of the VHI. It was discovered that there had been a failure on the part of one consultant to certify the VHI claim forms for the patients and they in turn had not paid the hospital as they were unable to make a claim on the VHI. The VHI subsequently agreed with the Board that it would meet the claims if they were submitted promptly. However, having succeeded in getting some patients to complete the claim forms again, it transpired that the relevant medical charts could not be located to enable the claims to be processed. As a result, amounts totalling £140,000 are being written off by the Board.

In evidence, the Committee was told that the hospital had made efforts to have the consultant sign the VHI forms, but with only limited success. There was no way of enforcing any consultant to sign the documents because they relate to private work between the consultant and the patient. However, it was pointed out that the Board had been a net beneficiary of the consultant’s inaction as he had not cashed a large number of his salary cheques, had not claimed amounts due under his contract, had not taken full leave entitlements and had provided full cross cover, thereby avoiding the need to engage locum. The CEO estimated that taking interest into account, nearly £300,000 had been saved by the Board, or £160,000 in net terms. In that respect he felt the Board was justified in not pursuing the consultant.

The Committee recognises that the non-completion of the relevant forms was not as a result of any wrongdoing on the part of the consultant, but urges the Health Boards and the VHI to devise an alternative arrangement which would address this issue if it arises again and although the Health Board was the net beneficiary of this situation, it may not be in other circumstances and the issue could have had much more serious consequences.

5. Vocational Education Committees

5.1 General Issues

Section 7 of the Comptroller and Auditor General (Amendment) Act, 1993 requires the C&AG to audit the accounts of the 38 Vocational Education Committees (VECs). The first year of accounts audited by him was the year ended 31 December 1994 and the reports of the C&AG in relation to each of these accounts were presented to Dáil Éireann and it was open to the Committee of Public Accounts to examine the reports.

In view of the number of accounts which can now be examined by the Committee, it decided that only some of the VECs would be examined in 1996. Six VECs were chosen for examination five of which were examined and the minutes of evidence of each of these examinations is published herewith. The sixth VEC, Longford, was scheduled for examination but the ACEO was removed from office before the examination had taken place. The Committee postponed its consideration of these accounts until such time as the judicial review of the situation is complete and the post is filled.

The comments of the Committee in relation to the role of Chief Executive Officers at the start of this report are of particular relevance in relation to VECs and the Committee requests that the necessary action be taken as a matter of urgency.

5.2 Donegal VEC

The C&AG drew attention to the purchase of a site, in 1982, by Donegal VEC at a cost of £80,000 for the purpose of building a school. In the event, construction work was not undertaken as the need for the school did not materialise due to demographic trends. At the time of sale the VEC, on legal advice, agreed to the insertion of a special condition that the vendor would have the use and occupation of the lands until such time as construction work commenced on the site. The same solicitor acted for both the vendor and the committee.

The VEC tried for some time to obtain possession of the lands but the vendor refused to relinquish possession. The VEC subsequently obtained Departmental approval to erect a field studies education complex on the site and instituted proceedings in the Circuit Court for the possession of the lands.

The C&AG’s concerns in relation to this matter were twofold:-

1)the acceptance of the special condition by the committee, although the Department’s sanction was on the basis that the site should be conveyed in fee simple, free of all charges and obligations; and

2)the fact that the same solicitor had acted for both parties.

Since the C&AG had raised these concerns the Department had written to all VECs stating that they should not share the same legal adviser or solicitor with any persons with whom they are concluding contracts.

In evidence, the CEO informed the Committee that from 1977, County Donegal VEC had sought to purchase a site for the provision of a new vocational school in Stranorlar. The purchase of the actual site chosen had three special conditions attached to it, one of which stated as follows:-

“The vendor shall be entitled to use and occupation of the lands until such time as construction work commences on the site. The vendor shall be a permissive occupant of the lands during any period after the closing of the sale and the commencement of construction which at a later date shall be notified to the vendor in writing by the purchasers when he, the vendor, will then vacate the lands.”

He agreed that the condition should probably not have been agreed to at the time and admitted that if such a condition were put into a contract coming to a VEC at present it would be included on an agenda. He also confirmed that the Department’s advice in relation to the inclusion of the special condition was not sought and that the Department had not become aware of it until 1990.

Since the examination, the VEC had obtained an order giving it possession of the land and forwarded a copy of the order to the Committee.

The Committee is very concerned at the expenditure of £80,000, in these circumstances, by the VEC in 1982. The taxpayer had not received any benefit from the substantial expenditure. The Committee finds it hard to believe that the VEC agreed the conditions attached to the purchase of the property and allowed a situation to arise where the same solicitor acted for both the VEC and the vendor. The Committee notes that the Department of Education has issued instructions to VECs regarding the sharing of the same legal advisers with persons with whom they are conducting business. The Committee welcomes the fact that this matter has been resolved at last and urges VECs and other bodies to ensure that a similar situation never arises again.

5.3 City of Dublin VEC

The audit report on the City of Dublin VEC, drew attention to a situation which had been detected in relation to buildings and maintenance where contractors and suppliers were being selected by the VEC without recourse to normal competitive tendering procedures or Government procurement procedures.

The Committee was told that contracts, amounting to some £1.4 million, had been allocated on this basis in 1994. The largest share had gone to a building firm which got £673,000 worth of business, including emergency work to a value of £552,000 which had been carried out to a school after extensive storm damage. The C&AG cited other instances where individual companies got business and which amounted to £89,000 for floor coverings, £55,000 for boiler maintenance and £77,000 for lighting. This practice was not only not in accordance with procurement procedures for the public sector it did not conform with the VEC’s own regulations.

In evidence, the CEO informed the Committee that in relation to the City of Dublin VEC the area subject to public procurement would, in total, come to approximately £4 million. He admitted that although the VEC had regulations in relation to issues such as this, they were not applied in these instances although they would have applied in relation to £3.2 million of the £4 million. Of the £800,000 referred to in the report, £580,000 related to storm damage which required to be secured immediately to prevent further damage. A contractor was required immediately to do the emergency work. Although normal tendering procedures were not adhered to, the contractor chosen was insured, met the requirements in relation to the tax clearance certificate and also met other regulations. He was contracted to do the immediate covering and securing of the building. The CEO pointed out that as it was the insurance company, not the State, who were paying for the damage in this instance it was particularly important that the VEC met the insurance company’s requirements with the contractor that was chosen.

In relation to the other areas referred to, the CEO explained that there had been procedures in place prior to 1990, but that the records had been destroyed by a fire in the buildings maintenance section which gave rise to difficulties. As a result, in the majority of cases, companies on the existing tenders tended to be used and when the contracts were renewed, they were not readvertised. However, he assured the Committee that rigorous steps had recently been taken to ensure that the correct procedures were applied.

The Committee is extremely concerned that these contracts were awarded without recourse to competitive tendering procedures. It believes that in the interests of public accountability it is important that all expenditure which should be subject to the tendering process goes through prescribed procedures. It trusts that a lesson has been learned in this instance and that a similar situation will never arise again.

5.4 City of Limerick VEC

The Committee was told of the circumstances in which a school principal has been receiving a salary from the City of Limerick VEC for some 20 years despite not attending for duty during that period. The origins of the case date back to June 1976, when the principal was. suspended without pay for alleged misconduct. Initially, there was a statutory departmental local inquiry into the suspension. Later a number of legal actions were taken by the teacher culminating in proceedings in the High Court against the VEC and the Minister. The High Court found against the teacher but on appeal to the Supreme Court it was ruled that the teacher was entitled to be reinstated in a position of principal, although the judgment also made reference to the possibility of making her redundant if the committee did not have a vacancy at the level of principal.

There had been a difference of opinion between the Department and the VEC about the way in which the matter might be resolved, which was of primary concern to the C&AG. He believed it unacceptable that it had taken two State bodies five years to agree on an appropriate course of action. At the time of the examination, the gross cost to the State stood in excess of £500,000, including legal fees, and the situation was continuing.

In evidence, the CEO informed the Committee that the teacher had been suspended as she had failed to co-operate in an administrative inquiry into her school, which had been ordered by the VEC and conducted by the CEO. When the teacher’s non-cooperation was reported to the VEC, it regarded her conduct as undermining its authority. As a result, the VEC, in accordance with Section 7 of the Vocational Education (Amendment) Act, 1944, suspended the teacher without pay as was required by the Act. In 1980, on instruction from the Minister, the VEC requested the teacher to resume duty with retention of a principal’s allowance although there was no equivalent principal’s post available at the time. The teacher did not comply with the Minister’s directive, as conveyed to her by the VEC at that time, and the VEC obtained legal advice which stated that the teacher, by not returning to duty in contravention of the request of the Minister and the VEC, had effectively repudiated her contract. The teacher then initiated the legal action which was ongoing for some years.

On being asked the reason for the 20 year delay, the CEO outlined the circumstances and expressed hope that the issue would be solved in the near future as negotiations had reopened in the case - a contention that was denied by the teacher’s legal advisor in a letter to the Committee subsequent to the examination. The first four years, 1976 to 1980, were taken up with a Ministerial inquiry which was held into the suspension by the VEC in 1976, and the Minister’s decision thereon. The inquiry took place in 1977 and the Minister came to a resolution of the matter in 1980. Litigation initiated by the teacher through the High Court and the Supreme Court took place between 1980 and 1991 and, in an effort to finally resolve the matter, there had been ongoing correspondence between the VEC and the Department correspondence, since 1991.

The CEO further informed the Committee that, because the VEC followed the Department’s instructions, £0.5 million of public money has been expended in this manner and he assured the Committee that the VEC was most concerned at this misuse of public funds.

The representative from the Department of Education informed the Committee that, at the time of the original suspension, there had been some disquiet regarding the status of the dismissal and whether it would stand up if challenged in court. As a result, the Department lifted the suspension pending the holding of an inquiry, and subsequently decided that the issue should be resolved amicably if possible.

Unfortunately, the attempt to broker a solution which would have been acceptable to those involved was not successful. Subsequently, the Department formally reinstated the teacher, however, the post from which this teacher had effectively been suspended was no longer in existence and the legal process commenced.

Following the Supreme Court judgment it was clear that the teacher had an entitlement to a position and the Department was extremely reluctant to embark on further litigation on the issue and was concerned when the avenue of involuntary redundancy / dismissal was suggested by the VEC as it appeared that sufficient account of due process and natural justice had not been taken. There appeared also to be a risk of acting in contempt of the Supreme Court judgment if this action was taken. The Department stated, however, that a solution might be found to the situation in the near future.

The Committee deplores the wasteful way in which taxpayers’ money amounting to £500,000 has been spent over a 20-year period. The Committee is concerned that there is potential for further substantial costs as there appears to be no sign the situation being concluded. The Committee hopes that every effort will be made to resolve the matter without further delay and wishes to be informed of the outcome in due course.

5.5 Westmeath VEC

The Comptroller and Auditor General drew the attention of the Committee to issues which had their origins earlier than 1994, the year of the report being considered. With the exception of 1989, Westmeath VEC had incurred deficits in all years since 1987 and during that time the VEC received, in addition to its normal funding, a total of £1.3 million in grants to cover the deficits referred to.

The local government audit reports had made reference to the deficits as they developed. At 31 December 1992, the deficit stood at £553,000. In 1993 the VEC undertook to take steps to contain and reduce the deficit. This did not happen and the deficit rose to a level of £698,000 by the end of 1993. As a result the Minister appointed an inspector in June 1994 to examine the management and operation of the VEC. The inspector’s report was highly critical of the financial system in operation in the VEC and the Comptroller and Auditor General, as part of his report on the Appropriation Accounts for 1993 reported his concerns on these matters to the PAC.

1994 was the first year for which the Comptroller and Auditor General had direct responsibility for the audit of the accounts of the VEC and in his report, he indicated that, in 1994, the deficit had again risen, despite the receipt of a special grant of £425,000 to reduce the cumulative deficit, and stood at £740,000 by 31 December 1994. In response to the Comptroller and Auditor General’s queries, the ACEO attributed the increase in the deficit to a serious lack of financial control.

The C&AG also referred to other actions of the VEC which were of concern to him including :-

1.exceeding authorised staff levels;

2.acquiring property without authorisation both in Ireland and abroad, including the situation in relation to the purchase of a property in France (i.e. the Montbard project) which had been the subject of numerous reports in the past;

3.using lease arrangements to obtain working capital

4.borrowing without the approval of the Minister;

5.opening bank accounts without authorisation; and

6.overpayment to a member of staff and incorrect claiming of expenses.

However, he stated that these matters were symptoms of the lack of internal financial control already admitted by the ACEO.

In evidence, the ACEO told the Committee that the VEC was now operating within its annual allocation on a year to year basis and that he hoped the outstanding deficit would be eliminated by the end of 1997. The systems of control referred to by the C&AG were in the process of being implemented. He told the Committee that the property register was now up to date and he outlined the current position in relation to the property in Montbard.

It had not proved possible to dispose of the Montbard property since the interest of the Enterprise Centre in Omagh, to the effect that it might agree to take over the property, had not come to fruition. It transpired that the Centre had disengaged from the property in Montbard, that no quarterly payments had been made on it since 1995 and that £20,000 in quarterly payments was outstanding for which County Westmeath VEC were liable.

He confirmed that the VEC did not own the property but that it had an agreement with the municipal authorities in Montbard to lease-purchase the property over a five year period in 20 quarterly instalments. At the conclusion of the payment of the 20 instalments, the title of the property would transfer to the VEC. There was no educational involvement from Westmeath VEC and the Department of Education had been informed of the disengagement of the enterprise company in Omagh from the project. Arrangements were being finalised with the Department of Education for the disposal of the property in France.

During the Committee’s consideration, Mr Henry Abbott, the Chairman of Westmeath VEC sought to participate in the hearings of the Committee. The Committee did not consider it appropriate to allow this, but in the light of the particular circumstances, it decided, exceptionally to permit Mr Abbott to attend voluntarily and make a statement and be questioned. Mr Abbott expressed a wish to draw attention to issues which, he believed, would not otherwise have been brought to the attention of the Committee, particularly in relation to the Local Government Auditor and matters referred to by her.

During questioning by the Committee, the Chairman of the VEC told the Committee that, in relation to 1993, both he and the VEC had been given inaccurate information by the then ACEO. The ACEO had assured them that the VEC had met its target for 1993, which was to break even. This he discovered, after the event not, to be the case. He stated that there was nothing visible in the accounts that would have drawn his or the VEC’s attention to the fact that there was a problem. He further explained that it had emerged that had been large borrowing in the petty cash/ imprest account. At that time it was not the practice in Westmeath VEC or in any other VEC to keep accounts of petty cash drawings. As a result, the large borrowing did not come to the notice of the chairman or to that of the other members of the VEC.

In relation to the Montbard project, he stated that there was still some doubt as to whether the Minister had granted outline approval for the project or not. He informed the Committee that the VEC had been under the impression that sanction had been given for the project at the time and his viewpoint had been recorded by the C&AG in his report. In addition, the VEC were not aware that such a large deficit existed and believed that the accounts were in order, and although he may have supported the concept of a foreign module he admitted that if he had known in late 1993 and early 1994 that the committee was not as financially sound as it had been led to believe, the project in France would have, been postponed until the situation had been clarified.

The representative from the Department of Education informed the Committee that a number of lessons had been learned by the Department in relation to the accounts and financial activities of VECs as a result of its experience in relation to Westmeath VEC, particularly in the area of accountability. He stressed that it was important that there is accountability at local level in respect of certain decisions and it will, in future, involve individual CEOs answering for the stewardship of their committee’s affairs. He admitted that it also imposed an obligation on the Department, the controlling entity, to set out clear guidelines, which were being prepared as a result of the issues that had been raised.

The Committee is concerned that Westmeath VEC ran up deficits over a decade which resulted in the taxpayer having to pay £1.3 million to eliminate them. It finds the situation to be most unsatisfactory and believes that there is a clear need to ensure that the VEC is administered in such a way which will ensure that it will operate within budget and avoid losses and overruns from now on. The Committee is glad to note that, finally, the situation seems to have improved, that staff numbers are being kept within approved allocations and that non-pay items have been eliminated and hopes that this improvement will continue and that the deficit is eliminated in the near future. It welcomes the commitment by the Department to issue clear guidelines to VECs in relation to their operations, but believes that the guidelines are well overdue. The Committee urges the Department of Education to ensure that each of the VECs operate in accordance with its guidelines from now on and requests that deficits, staff numbers and other areas of concern are correctly supervised in future.

In relation to Mr Abbott’s appearance, the Committee wishes to emphasise that this was an exceptional course, and it is not one which it would envisage recurring. It is undesirable that the Committee should be deflected from its principal role of questioning the Accounting Officer or Chief Executive Officer of Boards on the report prepared by the C&AG. It is also unsatisfactory that any voluntary witness should have no privilege in attending before the Committee. The Committee also emphasises that it considers that the appropriate course is for the C&AG to investigate matters and for any representations or information to be provided to him during the course of the investigation. Thereafter, the Committee proceeds to hear and consider the report, and to require the Accounting Officer or CEO to account for the matters set out therein. In future, the question of the attendance of witnesses is a matter which the Committee will decide in the light of the legislation intended to be enacted permitting for the compellability of witnesses before Committees of the Dáil.

Other Reports and Accounts Noted

6. Other Reports and Accounts Noted


The reports and the accounts in relation to the following organisations were also noted and the Minutes of Evidence are published herewith:

Central Fisheries Board

Environmental Protection Agency



National Roads Authority

National Rehabilitation Board

Drug Treatment Centre Board

St. Luke’s and St Anne’s Hospital

Blood Transfusion Service Board

Dublin Dental Hospital

Eastern Health Board

Southern Health Board

Co Kilkenny VEC




8 May 1997