Urgent reality check should dissolve the board of the Health & Safety Executive

Last week the spending proclivities of taxpayers’ money by the board of the Health & Safety Authority on themselves got an airing at the Public Accounts Committee. They apparently spent €625,000 from 2005 to 2011 but the explanation of this sought since last July is still not forthcoming.

The Chairman of the Committee, John McGuinness TD referred to spending on wine, flowers and restaurants. A trip to Paris apparently cost €1,250. Dinners’ two days apart from each other
cost €2,208 and €2,220 each and the restaurant tip was €300! A total of €4,086 was spent on
travel in a single day, the purpose of which was ‘unexplained’. Purchases from a health centre in Limerick cost €200.

Public curiosity in this matter started on 6 July 2011 when an internal audit got under way. The Department of Jobs, Enterprise & Innovation reported to the Public Accounts Committee 17 November that the internal audit took five months to complete and that the report of it would be issued, but that no evidence has emerged of ‘wholesale, or systematic abuse of corporate credit cards at the Health & Safety Executive’. Apparently more questions have arisen for the HSA.

Up to €25,000 of this expenditure was ‘questionable’. My curiosity became agitated. I am puzzled to understand if the Members’ appetite for corporate governance has been as refined and elegant as their passion for epicurean splendour and fresh flowers. Furthermore, is this form of institutional governance really fit for purpose in a State that has endured 338 workplace fatalities
during the 6-year period of this splurge?

Compliance is the cornerstone of the HSA regime. Achieving and maintaining a high level of compliance requires effective enforcement and uncompromising efficiency. Is this achievable under the auspices of a 12-person board, comprising lobbyists’ and ‘happy-clappy’ political appointees of a chronically failed government who are supposed to determine ‘operational policy’? There is not a single word in the HSA annual reports from 2005 to 2010 to describe the
leadership, governance, technical and professional credentials of the Members of the Authority.

The annual reports of 2005, 2006 and 2007 did not include detailed audited accounts. This blatantly disregards the Code of Governance of State Bodies published by the Department of Finance over a decade ago. The toleration of this must have required the blind-eye of the former
Secretary-General of the parent Department. He was once a member of the board that presided over the rampant, inept corporate governance and delinquency at FÁS and who allowed Rody Molloy depart for good in a taxpayer-owned Audi, as if that was Molloy’s inalienable right.
The published HSA financial data from 2005 to 2008 could have been printed on a bus ticket. No wonder it takes over nine months to conduct an internal audit of boardroom spending for the Public Accounts Committee in such a self-serving culture of mottled opacity and muddled priorities.

The annual reports of 2009 and 2010 contained somewhat more detailed information that included a reference to a fund called Grant XO1 (Note 11 Board Members Disclosure of Transactions).This amounted to €410,000 over these two years. While the name of this grant sounds like a washing powder additive intended to take stubborn stains out of old men’s underwear, it was, apparently, supposed to fund a number of ‘external organisations’ and ‘strategic partnerships’, which were directly connected to Members’ of the Authority who presumably enjoyed the hospitality of the corporate credit card. The approved fund was paid into that most ambiguous of cul-de-sacs, a ‘partnership account’, which was “controlled” by the
noblesse oblige of the Construction Industry Federation, an entity which has not issued audited accounts for public inspection, or an explanation of what becomes of ‘partnership money’.

It is impossible for taxpayers to discern if Grant XO1 had a legacy prior to 2009 because of sparse information but I would like to know who the actual beneficiaries were; how this money was spent and what was accomplished throughout the life cycle of this grant.

Substantial money spent by the National Health Service Partnership Forum allocated to SIPTU never even found its way onto the SIPTU financial radar. This is the reason that there is no difference in the mind of taxpayers’ between a ‘partnership account’ and a slush fund for self-important apparatchiks’ of elite soviets to attend foreign sporting events at taxpayers’ expense.

This board structure is obsolete. It ought to be promptly replaced by a Health & Safety Commissioner whose reporting protocol would not be dissimilar in nature to that of the Director of Office of the Director of Corporate Enforcement – and without a board of directors.

The immediate impact of this would save taxpayers €120,000+ per annum in fees and direct expenses and the public would have a clear-sighted, unambiguous understanding of where precisely responsibility and authority rests for the promotion of health and safety on the farm and in the workplace and compliance with the law.

The British counterpart of the Health & Safety Authority is the Health & Safety Executive. It has a board of nine members. Detailed biographical details are available on each director together
with extracts from the Register of Interests. The budget of the British body is £236 million – ten times larger than the HSA. It has in the region of 3,500 permanent employees compared to 175 in the HSA.

There were 48 workplace fatalities in Ireland in 2010 compared to 152 in the UK. Radical change might lead to radical improvement.

Rambling, shambolic Irish Red Cross stumbles on

Despite admitting to being in what was termed 'uncharted waters', on the groundsthat the Irish Red Cross Society does not fall under its direct remit, the Public Accounts Committee of Dáil Éreann was treated to a mind-numbing account this week of its unfinalised response to dealing with areas of governance, financial control and the management of its headquarters. This session followed a prior session with the Committee last October when the Vote of the Department of Defence was being examined.
It beggars belief that the State is continuing to provide close to €1 million in annual funding to the Irish Red Cross Society. This wretched organisation has been in existence for over 70 years and its primary function is to support the military and tend to prisoners-of-war, but it has never engaged in either function.

Instead, it is a generic charity that had no strategic relationship whatsoever to the nation that could not be adequately and more competently catered for by other charities and Civil Defence.

The sponsor of its State funding is the Department of Defence. The former Secretary-General of this Department from 1995 to 2003, David O’Callaghan told the Public Accounts Committee meeting on 19 January that for nearly ten years he 'had been racking his brain as to how many times the Red Cross appeared on his radar of top-ten issues' and 'could remember no time when we had difficulties with it’.

That is despite the fact that in December 1999 there was major public concern about the conduct of this Society. The Minister of Defence at the time, Michael Smith, told the Dáil that a new secretary-general had been recruited by the Red Cross earlier in 1999 and that ‘one of his first tasks … was a strategic review of the operation of the Society, encompassing the views of all organs of the Society to ‘ensure the strengthening and development of the Society' and that the review will be completed by mid-2000.

Twelve years later and O’Callaghan, as Chairman of the Red Cross, tells the Public Accounts Committee that the Red Cross ‘did not keep pace with standards of best practice in respect of governance and oversight’, but that ‘the Society has recognised that weakness and responded to it in a substantial and convincing manner’.

Their response includes an overhaul of the Constitution which would preclude members of the Executive Committee from serving more than two consecutive three-year terms. However, this will not mean that the current Vice Chairman of the Society, who was one of two cheque signatories of one of 49 undisclosed bank accounts, can continue in the role of Vice Chairman for a further six years. Putin could not devise a more self-serving response to governance.

The existence of the missing bank accounts was exposed in August 2008, but it took until November 2009 before the matter reached the agenda of the 12-member Executive Committee and the member representing the Department of Finance became aware of it, despite it meeting meets each month, except August. The Society's Head of Finance had attemtped to bury the matter as an 'administrative error' until the Fourth Estate made the public aware of the latest of shenanigans which trace their origin as far back as April 1991.

O’Callaghan’s successor as Secretary-General of the Department of Defence since 2004, Michael Howard was asked by the Public Accounts Committee if he had any recollection of a Government appointee to the Executive Committee of the Red Cross resigning in 2009 citing loose financial controls, impropriety or undisclosed bank accounts, but Howard said ‘it does not spring to mind’

It was also disclosed to the Public Accounts Committee that the Red Cross has a portfolio of 17 properties but the accounts it presents that incorporate the State subsidy only include Head Office property and income.

It was confirmed to the Committee that €136,000 was spent on legal fees in 2010 by the Red Cross prosecuting Google so as to identify a blogger who blew the whistle on the undisclosed bank account which contained public voluntary donations amouting to €160,000 and on 'how t manage information that was appearing on a blog'. The cover of the Head of Finance who was apparently trying to keep the undisclosed bank accounts that the Vice Chairman of the Red Cross was a signatory to was blown apart. The €140,000 spent on legal fees was from money collected from members of the public or recevied from the State.

During these controversies the Irish Red Cross retained an acting secretary-general on a consulting basis for a fee of €160,000 per annum, prior to acting on a consulting basis as Head of Finance. Professional fees charged to the Red Cross in 2010 were €211,000 and in 2009 were €288,000 while the Society ran a deficit of €12,000 and €64,000 in these years.

O’Callaghan in his opening contribution to the Public Accounts Committee defined his Society as ‘an independent charitable organisation’ and when Smith spoke in the Dáil in 1999 he stated that a fundament principle of Red Cross societies is that they enjoy freedom from political involvement worldwide. If the Government stopped the State subvention, removed the patronage of the President and its nominees to the Central Council the Red Cross would be free of political oversight and the resources of the Oireachtas could be deployed more prioductively.

How would you cope with an annual pension of €1 million +?

The Irish financial institutions dealt with by the Covered Institutions Remuneration Oversight Committee are those that have obtained financial support from the State since 2008. They include AIB, Bank of Ireland, Anglo Irish Bank, Irish Nationwide Building Society, Irish Life & Permanent and EBS. Postbank Ireland had been included but has subsequently ceased to operate.

This CIROC members were mandated to investigate the remuneration of those in charge of these institutions and to recommend pay ceilings to the Minister for Finance – which they did in February 2009.

One facet of remuneration they investigated was pensions. They noted that cash allowances had been paid to compensate for the effects of the ‘pension cap’ imposed by the Finance Act 2006 and that it was unacceptable that pension schemes should be inconsistent with the intent of relevant legislation. The found that top management made little, or no contribution for their own pensions and that in future an appropriate balance was necessary between employee and employer contributions with the former being increased to achieve this balance. They also recommended that bonus payments should not be pensionable and that pension arrangements for top management should be at least broadly similar to those of the generality of staff of the institution.

The pension arrangements of Michael Fingleton, formerly head bottle-washer at Irish Nationwide Building Society were published by the Public Accounts Committee.

Fingleton accumulated a pension fund for himself at Irish Nationwide with assets of over €29 million when it was wound up in 2007 when Fingleton was 67 years old. A pension insurance policy was established for the benefit of Fingleton and other employees in 1975. This INBS pension scheme was originally set up in 1981, 10 years after Fingelton became connected to it. A second which was to directly benefit Fingleton was established in 1995 with the transfer of accumulated assets of €4.5 million too which a further €3.4 million was added in 2005. Various other enhancements, including serial annual pay increases of the order of 8 – 10%, were made throughout the existence of the scheme including an average of the bonus payments over the previous three years. Investments by the scheme by directed by the beneficiary.

The benefits to be provided to Fingleton include:

• His spouse’s benefit was increased from ⅔ to 100% of his pension entitlement
• The final salary, for pension purposes, was to have been the final calendar year salary – including basic salary and an average of the three prior years ‘annual bonus payments.

Fingleton’s remuneration for the final three calendar years of his employment at Irish Nationwide were as follows

Year	Salary	Bonus	Fees	Benefits	TOTAL
2006	738,000	1,000,000	48,000	50,000	1,836,000
2007	813,000	1,400,000	53,000	48,000	2,313,000
2008	893,000	1,000,000	4,000	520,000	2,417,000

His pension would therefore have been based on ⅔ of his final’s calendar year’s salary €589,380 plus ⅔ of an average of his bonus for the final three years of his employment - €528,000 providing him a potential  annual defined benefit pension of €1,117,380.

That perhaps explains why the ‘pre-contracted’ bonus of €1 million has not been repaid. Fingleton’s remuneration from 2003 until his employment at Irish Nationwide terminated was €11, 322,000

NTMA defy Public Accounts Committee

I have been observing the relationship between the National Treasury Management Agency and the National Assets Management Agency with the Public Accounts Committee with increasing concern.

NTMA and NAMA Remuneration

The activities of the NTMA and NAMA have been examined on several occasions by the Public Accounts Committee in 2010, most recently on 18 November when the Committee sought a breakdown of the remuneration paid to NAMA employees – all seconded to NAMA from NTMA. The Chief Executive of NAMA, Mr Brendan McDonagh in a letter to the PAC dated 7 December 2010 defied the Committee and advised:

That he discussed the Committee request with Mr John Corrigan, Chief Executive of NTMA – but not, curiously, with the Secretary General of the Department of Finance,  an ex officio member of the statutory  NTMA Advisory Committee and principal advisor to the Minister for Finance to whom both agencies are accountable.

• That the pay structures in NTMA are outside of public service pay structures (as authorised by the National Treasury Management Act 1990).
  
• That the NTMA recruit mid-career specialists in banking, property, corporate finance and law for NAMA on what he termed a ‘fixed purpose’ contracts.
  
• The contract and remuneration arrangements of each employee are unique  to a particular individual and are treated as confidential.
  
• The NTMA/NAMA staffing ‘operating model’ is shrouded in so much secrecy and opacity that colleagues do not know how much each other is paid and that NAMA would apparently be seriously compromised in the conduct of its mandate were it to be exposed – (presumably, to the rigours of public and media scrutiny and that of the marketplace  from which NAMA seeks to determine  ’ market competitive’ salaries). 
  
• ‘Operational freedom to negotiate’, authorised by legislation, in NTMA has apparently become seamlessly synonymous with clandestine secrecy by the Chief Executive of a State agency which does not have a conventional board of directors and where the same chief executive, rather than an independent chairman, corresponds with the Minister for Finance on the performance of the entity that he manages on a day-to-day basis.

McDonagh’s letter and Corrigan’s patrician perspective on the Committee’s request is such an appalling indictment of these State agencies that a citizen would wonder about its capacity to fulfil its core objectives in a culture clearly devoid candour, accountability and transparency.  NTMA and NAMA need to be advised in blunt and uncompromising terms  by the PAC  that the principles of transparency and accountability expected of the Irish public sector are not those of the nod, wink and handshake that prevail, for example,  in the dictatorships of North Korea and Burma. The standards espoused by NTMA also directly contravene the policy of the Department of Finance with respect to the governance of commercial State entities.

Furthermore, this is precisely the self-righteous, conniving, corporate attitude which champions generic, non-itemised accounting that prevailed in FÁS, the HSE SKILL Programme, the Health Services National Partnership Forum and other grossly dysfunctional State entities which have shattered public confidence after the wanton squandering of hundreds of millions of euro with abandon.

Transparency has not compromised the ‘operating model ‘or the efficiency and effectiveness of any the debt management agencies in any other OECD country.  The transparency of these agencies would also suggest that the NTMA is an excessively costly agency compared to its counterparts.

NTMA Costs and Operating Efficiency

The activities of NTMA remained substantially the same in scope between 2000 and 2008 with the exception of the establishment of the National Development Finance Agency in 2003.  Between 2000 and 2007 Ireland’s national debt ranged from €36.5 billion to €37.5 billion.  It increased to €50.3 billion in 2008, an overall increase of 38% since 2000.

But the operating costs of NTMA in that period increased by 314% and remuneration, including superannuation, by 365%.

NTMA held nine bond auctions in 2009 and raised €35.4 billion which brought the National Debt to €75.1 billion.  Salary and pension costs were €22.86 million, or an average of €135,384 per person.  Total expenses in 2009 at €39.4 million were significantly ahead of other OECD government debt management offices.  Debt servicing costs as a percentage of year-end national debt, excluding sinking fund payments, in this period were:

 

2000	5.74%
2001	5.25%
2002	4.66%
2003	4.78%
2004	4.53%
2005	4.61%
2006	5.31%
2007	4.29%
2008	5.24%

Australian Office of Financial Management

The Australian counterpart of NTMA is the Australian Office of Financial Management (AOFM). It raised €38.9 billion by approximately 100 competitive tender in the year to 30 June 2010. Apart from managing the Australian national debt AOFM invested €12 billion in residential mortgage-backed securities to provide funding for small mortgage lenders.  Total expenses for the year amounted to €11.5 million – less than ⅓ of what it costs to run NTMA.  The salary, pension and fringe benefits of Neil Hyden, the recently retired chief executive of AOFM, cost €250,000.  The remuneration, superannuation and fringe benefits of the 36 staff of AOFM amounted to €3.94 million in the year to 30 June 2010, or an average of €109,502 per person.   Approximately 60% of Australia’s government bonds are held by non-Australian residents - compared to 84% foreign ownership in the case of Ireland’s Government bonds.

HM Debt Management Office

The British counterpart of NTMA is the Debt Management Office.  Employing a staff of 112 persons, it raised €267 billion on the bond market in the year ended 31 December 2009 in 58 major and 13 minor auctions – a scale of borrowing 7.6 times greater than that of NTMA.  The activities of the DMO also include the administration of the UK Credit Guarantee Scheme in respect of debt issued by banks and building societies and the Emissions Trading System in the UK.  The salary, pension and fringe benefits of Robert Stheeman, Chief Executive of the DMO was €188,000 – some €12,000 less than the 2009 bonus of Dr Somers.  The net operating cost of DMO operating in the City of London in 2009 was €18.5 million – less than 50% of the overhead to run the NTMA in Grand Canal Street Dublin.

Chief Executive’s Bonus

It was officially disclosed last week that Dr Michael Somers, the founding chief executive of NTMA received a bonus of €200,000 in respect of 2009.  It was reported in the media last September that Dr Somers received a bonus of €400,000 apparently bringing his total remuneration to €1 million.

Ireland enjoyed the considerable advantage of lower level government debt relative to GDP for much of the decade to 2008.  Investor perception of Ireland was positive and reflected in excellent credit ratings; an economy that was perceived to be robust; a positive fiscal outlook and attractive yields on Irish debt.  Irish debt was adopted enthusiastically by investors.  There is no withholding tax on Irish bonds thus removing a barrier to investment for foreign investors unwilling, or unable to invest in assets subject to withholding tax.  Was this bonus merely based on surfing these positive circumstances or what precisely was Dr Somer’s contribution to making a distinctive difference which benefited taxpayers?  The citizen is left scavenging the internet for clues because the agency conveys no information whatsoever  on this issue.  The public are treated with the same bland contempt that occurred days before the recent arrival of the IMF and ECB to take economic control by the scruff of Ireland’s emaciated neck.

It would be helpful  if this key agency of the Department of Finance were to publish the fullest details of all executive remuneration for each of the last 10 years.  This, in the case of bonus payments should identify achievements against particular objectives and confirmation of who approved objectives, achievement and bonus payments. 

Department of Finance Code, 2 October 2001

State bodies, including the subsidiaries of such bodies, are required in the conduct of their operations to adopt this Code of Practice promulgated by the Department of Finance and advocated by the Director of Corporate Enforcement.

The Code of Conduct for the Governance of State Bodies states that the remuneration of a chief executive of a State agency and the remuneration of the chief executive of any subsidiary should be subject to audit and set out in the entities annual report which should state:

• The basic salary
• Payments made under a performance-related pay scheme
• The total value of the chief executives superannuation benefits, with a breakdown between standard entity superannuation benefits and any additional benefits  being provided for the chief executive

NTMA has consistently disregarded this guidance.  S6.(3) of the National treasury Management Act 1990 provides that the terms and conditions relating to the remuneration of the Chief Executive of NTMA are determined by the Minister for Finance after consultation with the Advisory Committee – on which the Secretary General of the Department of Finance is an ex officio member.  State agencies are required to implement Government pay policy, as expressed from time to time, in relation to other staff, including the chief executive and other staff of any subsidiary.

The Department of Finance, in the case of NTMA, is expected to be consulted, according to this guidance,  in good time on any pay proposal, or likely development, that could have significant implications for (i) general Government pay policy (ii) NTMA finances (iii) charges for goods and services provided and / or (iv) other areas of the public sector.  Compliance with Government pay policy, or with any particular Government decision, should not be effected in ways which cut across public service standards of integrity or conduct or involve unacceptable practices which result in a loss of tax revenue to the Exchequer.

The annual report of a State entity should include a schedule of the fees and aggregate expenses paid to each of the directors – or, presumably, in the case of NTMA, to each member of the Advisory Committee

There is, therefore, an obligation on the Secretary General of the Department of Finance to explain the remuneration trends at NTMA and very particularly, the remuneration arrangements between the chief executive and the Minister for Finance to the Public Accounts Committee.  How can he sit on the Advisory Committee and observe long-standing policies of his own department ignored?  That slipshod attitude to supervision allowed FÁS function as a ceded territory dominated and unilaterally controlled and dominated by the chief executive who, in practice was accountable to nobody.

Consultancy & Legal Expenses

NTMA has become a large-scale purchaser of legal and consultancy services.  Details should be provided of the number and value of contracts in each financial year, differentiating between new and existing contracts. 

The annual report should, in the case of consultancy contracts with a value of €10,000, or more, identify the consultant concerned; describe the service provides; confirm the price of that service; details of the selections process and the justification for using the services – to demonstrate transparency and compliance with relevant regulations and directives.  Taxpayers should not have to scavenge internet search sites or surveys of the highest revenue earning professional firms in Europe to distil how much revenue Irish professional firms are obtaining from public sources.

Údarás na Gaeltachta at the Public Accounts Committee

When the Secretary-General of the Department of Community, Equality and Gaeltacht Affairs was recently examined at the Public Accounts Committee he responded to charges that the travel expenses regime at Údarás na Gaeltachta  read like ‘a mini FÁS’ by indicating  that the agency has provided him with assurances that ‘all spending was within rules’.

It is noteworthy that the board of the Údarás did not facilitate public understanding of this important examination by publishing their 2009 annual report on the web months beforehand.  However, a review of the annual reports from 2002 to 2008 suggests that there is ample scope for the Public Accounts Committee to ask some penetrating and insightful questions.

The Údarás has a staff of 107 persons, whose travel expenses between 2002 and 2008 were €7.17 million, an average of over €67,000 per employee – sufficient to cover the cost of 19 round-the-world business class airline tickets for each and every employee.

The Gaeltacht has a population of approximately 90,000 persons – about the same as the population of Co. Wexford.  This represents 5.4% of the 1.66 million people in the country, aged 3 and over, who can speak Irish.  There are 775,000 persons in the national workforce who can speak Irish.

The primary function of Údarás na Gaeltachta is enterprise development.  Total employment in grant-supported firms increased by 622 to 8,193 between 2002 and 2008.  But the total amount of grants approved during this period was €201.47 million and the total amount of grants paid was €122.8 million.  If tax credits rather than grants had been approved the recipient businesses would have been required to generate a profit in the region of €1.6 billion and sales perhaps ten times greater than this sum to qualify for this scale of incentive.

Total expenditure by Údarás na Gaeltachta in this 8-year period was €429.3 million, €19.1 million more than its income.  Expenditure between 2002 and 2006 exceeded income by €30.2 million, attributable mainly to a more aggressive depreciation policy of buildings from 2002.  Why does the Gaeltacht not enjoy the economic vitality of Qatar with such a massive investment inflow to a relatively small population? 

Údarás na Gaeltachta spent over €80.6 million on buildings in that 8-year period.  That expenditure presumably made some vendors very rich.  A total of 1.5 million was spent on ‘building projects that did not go ahead’. But if there was no growth in overall employment why was it necessary for the State to spend so much on construction, especially a time when the construction industry was expanding at breakneck speed and on auto-pilot, heading eventually to its own self-destruction and obliteration?  What proportion of this construction expenditure has yielded an economic return?  Who now bears the risk in respect of that part of the buildings portfolio which is fallow or redundant? 

If the provision of infrastructure was the primary argument for the provision of these buildings, how much was spent on broadband infrastructure given that enterprise is much more dependent on adequate broadband connectivity.  Fast broadband, Facebook, Twitter and Skype removes the disadvantage between the Gaeltacht and the rest of the universe, not empty buildings.

The Údarás is governed by a 20-member board of directors elected by plebiscite.  The cost of members’ fees and expenses of that board during these 7 years was €2.13 million but the PAC might like to examine the context and circumstances of how €8.2 million was paid in grants, or other transactions, to enterprises which employed board members or in which they were otherwise personally interested.  Annual Reports indicate that board members complied with Department of Finance guidelines covering situations of personal interest and did not receive documentation or participate in the board discussion relating to such matters.  But the nature of the these payments remains as watertight as the Third Secret of Fatima while there is some detail provided of grant payments to the general public.  The PAC might enquire with respect to grants, the extent to which recipients invested their personal resources, particularly their own cash, in grant supported projects and what sustainable value the State obtained for the peoples’ money and the peoples debt.   

The Committee might also consider how a 20-person board can possibly govern a 107 person organisation and function as coherent, focused and inspiring thought leaders to an 11-member management.  Should politicians be directly involved in disbursing public money?

85% of Ireland’s sovereign debt is held by foreigners.  The ‘men-in-red-braces’ reflect their verdict on Ireland’s economic leadership at all levels – including the A-team at the Department of Finance and its agencies, through level of credit available and the interest charged on sovereign debt.  Has the time arrived for a review of the State’s efforts to develop the Gaeltacht and is there an opportunity to try a fresh approach that is much less complex in organisational structure, fosters a more enlightened culture of accountability, is considerably less expensive; operates with simpler, but realistic, goals and where those who incur risk also bear the burden of delivery?

Constructing a residence fit for the President of the University of Limerick

Last February a statement on behalf of the President of the University of Limerick to the Public Accounts Committee indicated that €2,317,000 was provided by The Atlantic Philanthropies towards the complete cost of constructing an official home for the President on the campus, of which €347,000 was for associated infrastructure.

The Atlantic Philanthropies have been extraordinarily generous to the University of Limerick and provided grants of €29.65 million towards 15 different projects in the past decade. These included the funding of €3.61 million for a faculty and staff common room in 2001 and €1,075 million for core support for the University of Limerick Foundation in 2007. But the latest list of grant-aided projects does not mention the Presidents House, despite other grants being paid to the University in 2009.

Perhaps, Chuck Feeney, the founder of The Atlantic Philanthropies made the funds available through some other means. However, the statement to the Public Accounts Committee emphasised that the Higher Education Authority had been very supportive of campus development and had been regularly briefed 'in the context of seeking State funds for campus development through various submissions and reports'. But it did not explicitly state the Higher Education Authority or the Department of Education & Skills were aware of the initiative to build the President's House before this matter was discussed at the Public Accounts Committee. Would it not have been astute of the University to keep these bodies abreast of both thinking and developments as these are planned and take place rather than run to very real risk of being subsequently left out in the bitter cold by them at another time?

The generosity of Mr Feeney was a critical catalyst in launching the Programme for Research in Third Level Institutions throughout Ireland. He approached then Taoiseach Bertie Ahern and then Minister for Education Micheál Martin in 1998 offering to put up £75 million for research if the Government would match it. Third level research has subsequently benefited from funding of €1.22 billion provided by exchequer and matching private funds, of which €749.9 million was spent on research buildings and €429.4 million was spent on research programmes.

This raises the question that if Mr Feeney provided the funds to build a house for the President of University of Limerick why a matching contribution was not solicited from the State or some other partner. The value and yield from the investments that provide the funds donated by The Atlantic Philanthropies have been hit by the recession and administrative expenses as a percentage of donor expense has increased from 10% to 13% between 2008 and 2009. How could it have made sense for The Atlantic Philanthropies to bear the bear the total burden and the total risk of this project against this background, especially when their main mission is to redress social injustice and disadvantage? Why would no credit be claimed by the donor in its publicity?

The cost of constructing this residence at €4,378 per metre ²
in 2009-2010 was very high given
the depressed state of the construction sector and the economy – did moral hazard creep in and inflate the cost when the funding was provided without quibble by a third party? Is this residence owned by the source of the funds, by the University or by the State? While no State funding was apparently sought for its construction who picks up the tab for upkeep and maintenance, given that it is intended to accommodate distinguished visitors to the University of Limerick?

Time for The Public Accounts Committee to make its mark

THE Chairman of FÁS has resigned and the rest of the board is set to resign. When the Public Accounts Committee considered the examination of the Comptroller & Auditor General into FÁS affairs last week, Bernard Allen, the Chairman of the Committee rebuked Niall Saul, the Chairman of the Audit Committee and non-executive Director of FÁS, who was contemporaneously giving a radio interview while the Committee proceedings were under way, - for doing so. He would have preferred to hear Saul’s views directly at the Committee.

I listened to a recording of this interview this evening. Saul was at pains to point out that the Audit Committee conducted its role vigorously but were impeded and frustrated by the leadership of the agency, as was the Public Accounts Committee. The Audit Committee were presented with 22 complaints against the Internal Audit team, none of which were upheld. The Audit Committee may have conducted its affairs with textbook perfection but the hidden hand of vested interests lurked persistently in the twilight until the C&AG shone a penetrating light into the murkiness the debacle in April 2008 and, again, in June 2009.

The FÁS controversy was exposed by the Sunday Independent and that publicity was the catalyst for the urgency of resolution. The preliminary comments made by Rody Molloy, on this day twelve months ago, are interesting to revisit in the light of what is now known. Molloy stated then that “FÁS is not a perfect organisation” and “unfortunately, the internal audit reports released by us under the Freedom of Information Act have been sensationalised by the media and used by some with a destructive agenda towards FÁS”. While Molloy stated that he recognised the efficacy of the audit function he also expressed concern “that anything written will be used by persons outside the organization with a negative agenda” and that “if these reports were released into the public domain they could be damaging to the organization”.

Did he not consider that the media would have no credibility if damaging insinuations had no real substance? These were surely the comments of a person whose own organisation was imploding under him and who had isolated himself to the point of downfall. The C&AG Report has borne this out, not the use of the word ‘entitled’ in place of ‘eligible’.

But these comments also offered a rich insight into the culture of FÁS – an agency whose scope and budget had grown so much that a great many more snouts were feeding at its trough than was ever envisaged. The Prime Time investigation into meals-on-wheels in Castlebar did not inspire optimism that all the effort and expenditure was wise, prudent and appropriate. The importance of an organisations culture should never be underestimated. It is culture that facilitates change; guidelines incur inertia.

The persistent use of the legal fig leaf by other FÁS contributors to The Public Accounts Committee was another symptom of a death rattle and reminded me of the defenders of the ‘B’ Specials police reserve in Northern Ireland decades ago.

Mirror, mirror on the wall,
Who is the fairest of them all?

It was the same newspaper that blew the gasket of the DIRT controversy, submerged since 1991, with a headline on 5 April 1998 ‘AIB Had £600 million in “Bogus” Accounts’. The role played by the Public Accounts Committee in the 1999 – 2000 Parliamentary Inquiry into DIRT was pivotal in charting a new direction with respect to this particular issue.

Impact of DIRT Inquiry

The economic, social and political impact of the DIRT Inquiry was comparable in scale and importance to a grand slam rugby victory.

One constituency embraced radical change because they felt they had no other choice – their survival was at stake. The game changers were The Revenue Commissioners. Not alone did they eventually collect hundreds of millions of euro due in taxes, interest and penalties, but a new generation of competent leadership successfully reformed their own organisation. Reform did not come easily, nor did it come quickly. It came with painstaking effort - but it came and it endured.

The other constituency – the banks did not fundamentally change because those in charge believed that change and reform was beneath them. They knew they were systemically important. They also knew their influence could prevail against all comers in most circumstances. Why else would they have overcharged customers with impunity?
They, of course, paid whatever they were obliged to pay and complied, in certain respects, with other mandatory matters.

But the fundamental self-serving, obscenely remunerated culture prevailed because nothing impacted on them personally to make change happen or threaten their personal status or income until they scuttled the economy last year. Four of them were so nonchalant that they were cited for personal income tax evasion by The Revenue Commissioners on 28 March 2006. Reform, it seems, was only for the ‘little people’. Their legacy is now overwhelming.

Taxes and penalties amounting to hundreds of millions of euro were recovered by the Revenue Commissioners, whose own organisation was radically overhauled and invigorated to make it fit for purpose and recognised as such across the world. The DIRT Inquiry did not, unfortunately, lead to a a similar cultural renaissance in the banking system, where rampant overcharging of customers and shoddy standards became endemic and some of whose senior executives were cited for personal tax evasion by the Revenue Commissioners in March 2006.

Department of Finance Guidelines

Much has been made of the Department of Finance Guidelines with respect to the retirement terms of Rody Molloy. These Guidelines were created in 1998 by John Hurley, the retiring Governor of the Central Bank. They were intended primarily to deal with circumstances in State bodies where chief executives were recruited on fixed-term contracts. Their purpose was to establish clear and consistent maximum limits on the pension and lump sum payments that could be provided to a CEO who was either retiring at the natural conclusion of a contract or was retiring prior to that at the request of his board for relatively benign reason – such as a desire for a change of leadership, or direction at the agency concerned.

The Guidelines provide for the payment of a pension and a lump sum to a retiring chief executive aged 55, having acted in that role for at least 6 years, with 15 years pensionable service in the public sector based on actual reckonable pensionable service. A retiree could possibly be granted one added year of pensionable service for each year in excess of 15 years overall actual service in the public sector, subject to a maximum of 5 years.

A person who voluntarily retires does not qualify for these arrangements. Alternative arrangements are in place for younger retirees.

The Guidelines particularly stress that the board of a State body is free to apply lesser benefits or not to apply early retirement benefits at all. Bearing in mind the Guidelines were created to deal with benign circumstances the example of a board desiring to reappoint a chief executive to another fixed term as an instance where such additional benefits would not be offered, is cited. There is no reference in the Guidelines to retirements in controversial circumstances, which is not surprising.

Public Accounts Committee
a potential game-changer

Where does this leave the Public Accounts Committee in its deliberations with respect to FÁS? The side issue of the company Audi has surfaced but this matter, which is now to make its fifth appearance before The Public Accounts Committee since 2 October 2008, has ramifications that transcend FÁS. Their deliberations will have a profound impact on the entire State sector.

The implications of the recent retirement of Paul Moloney as Chief Executive of Dublin Docklands Development Authority have similar, but unascertainable and potentially serious implications, when the details of the transactions involving Anglo Irish Banks and the Irish Glass Bottle Co site are disclosed. Moloney held this position since 2005 having worked previously with Dublin City Council. His appointment to the Authority was blessed with superlative tributes by then Chairman, Lar Bradshaw, who was to resign from the board of Anglo Irish Bank last December, along with his close friend Sean FitzPatrick.

The entire State sector is observing unfolding developments closely to glean what the consequences of the C&AG examination are. They are also closely watching how Sean FitzPatrick deals with his debts due to Anglo Irish Bank and whether the Minister for Finance is kept appropriately abreast of developments by those acting in the public interest.

If there are no apparent consequences, apart from the thrashed reputations of the institutions connected FÁS and the burden that is borne by those who represented these institutions together with the personal distress that Molloy must inevitably endure, then a damaging vacuum is established. How is it possible to clearly identify the boundaries of what is acceptable and what is not acceptable when standards fall well short of acceptability and serious damage ensues? If the boundaries are unclear, or there are no boundaries, the State sector will convulse itself to avoid ignominy - but will probably do so in a manner that is ineffective and at a cost to its own productivity, agility, sense of integrity and effectiveness.

If there are no consequences, how can the characteristics of stable governance with integrity and commitment flourish in any State agency? Mr Saul confirmed that the procedures and protocols in FÁS. That is the case in most public bodies. Paper doesn’t refuse ink ~ but it is the culture , dynamism, passion and energy of an entity that makes things happen –for better, or worse.

The deliberations of The Public Accounts Committee could therefore result in another ‘grand slam victory’ and have a profoundly positive impact as a consequence of this crisis if the outcome successfully redefines and refocuses FÁS and individuals emerge of the calibre and ambition of those that emerged in The Revenue Commissioners a decade ago. FÁS has been a major by-product of social partnership. Social partnership could also get new life and sense of purpose but the fuel to ignite that will not be found in damp deadwood hidden behind legal fig leafs.

It would, on the other hand, be most disappointing if the enduring outcome of The Public Accounts Committee was merely to record the frustrations, impediments and difficulties in conducting its examination of this matter the only practical outcome is one of Plus sa change, plus c'est la meme chose.

Charity Begins at Home!

The Irish Government may not have anticipated the grave extent of the exchequer deficit at the end of February, but this deficit, the enormous increase in unemployment and the threatened reductions in welfare in the forthcoming budget are all indicators that must surely alert the Government to rising levels of destitution, neediness, distress and desperation in this country. Ireland will no longer be a rich nation and the national economic wellspring is severely weakened.

The Survey on Income and Living Conditions (SILC) 2007 published by the Central Statistics Office indicated that the risk of poverty in Ireland at that time was 16.5% and that 5.1% of the Irish population endured consistent poverty. There is now a compelling need for urgent new thinking, fresh priorities and new practical initiatives, beginning with a separate approach to aid and welfare by the Government.

The Irish Government, through Irish Aid, has spent more than €5.3 billion on overseas development assistance making the nation one of the most generous donor countries in the world. Ireland committed to spend 0.7% of GDP on official overseas development assistance by 2012 at the UN Millennium Summit in 2000. That ambition is laudable and realistic when the resources to achieve it are ample but this is not the case in the foreseeable future and the Government needs to pardon itself from fully meeting this objective within that timescale. Charity begins at home and a portion of these resources are now badly needed to provide aid at home.

This arises in the context of the number unemployed in Ireland escalating from 165,000 to 365,000 requiring a further €200 million in welfare support and with singificant further increases anticipated. There has been a 19% drop in tax revenues in January and a 20% drop in retail sales in 2008.

A significant amount of FÁS resources are distributed to community related initiatives at least some of which, like meals-on-wheels in provincial areas, have essentially a charitable purpose and need to be realigned and accounted for as such.


The Government could begin by diverting at least €100 million to augment the diminishing resources of credible long-established voluntary charities, such as The Society of St Vincent de Paul, The Simon Community and others that directly alleviate dire need and galvanise their voluntary efforts. Their reputation is impeccable and their integrity above challenge. Their overheads are modest. Their modus operandi is focused, practical, widely understood and readily acclaimed. Their reach is extensive and their impact is mighty.


The Department of Community Rural & Gaelteacht Affairs could be augmented to act as overseer of such an initiative and create inspired guidelines and policies. The distributions of funds to the charities could be controlled by an independent commissioner operating to specific guidelines and accountable to the Public Accounts Committee.


There is a well developed and experienced set of voluntary agencies in this country that operate overseas and which demonstrate great flair in fund raising and promoting their work. The Irish people are deeply compassionate and demonstrate enormous generosity in their support of these, particularly at Christmas, Lent and in response to catastrophes’, strife and famine. There is no reason to believe that this spirit will abate and Ireland should continue to be a prominent donor to the relief of distress throughout the world while the Government is not ignoring the consequences of imminent poverty at home.