"Did anyone in the Department or the HEA contact the then chairman, who stated that he was not aware of this overspend but about which everyone else in Waterford knew because it had been widely reported?"
Deputy John Deasy: I will begin by thanking the institute for the effort it has made in the context of making full disclosure to the committee. Reference was made to chick lit and other issues. I need to balance such references with the fact that the institute is now ranked first among all the institutes of technology in Ireland in the context of attracting research funding. WIT does some very serious work and when I consider that with which we have been presented, I come to the conclusion that it does not contain a great deal of new information. Basically, it is a rehash of previous reports. I hope we will conclude our deliberations on this matter today because I am not sure whether they are doing anyone any good. This matter is the subject of a High Court case and I am of the view that it should be dealt with in that venue. It is very difficult for the current president of WIT to answer questions about this matter, particularly as he was not on the staff at the time. It is also very difficult for him to understand the mindset which obtained at the institute some years ago. He has been placed in a very difficult position and he cannot answer these questions. Dr. Neavyn has done a very good job in dealing comprehensively with this matter, particularly as he has no responsibility in respect of it. I hope that after today's deliberations the committee will move on.
In view of what I have just said, I wish to shift the focus away from the institute and direct a couple of questions to the Department and the HEA. How rigorous was the oversight function employed by the Department and the HEA 11 or 12 years ago? What is the nature of its current oversight function in respect of institutes of technology? What happened in the president's office during the period in question? Was the level of oversight which previously obtained sufficiently rigorous? Did people inform the Department or the HEA that guidelines were potentially being breached? It is not just the institute which had a function here in terms of oversight. The Office of the Comptroller and Auditor General, the Department and the HEA also had responsibility in this regard.
A former chairman, Mr. Redmond O'Donoghue, has stated that he was unaware of the excessive spend in the president's office. The controversy relating to this matter ignited in May 2011. Two years previously it was widely reported in local newspapers - the story even made the front page of the Waterford News and Star - that there might have been an overspend in respect of the president's new office, which cost almost €160,000. Did anyone in the Department or the HEA contact the then chairman, who stated that he was not aware of this overspend but about which everyone else in Waterford knew because it had been widely reported? Did anyone outside the college with an oversight function in respect of it raise any of these issues with the then chairman? Was he questioned as to whether he knew, or should have known, about what was widely publicised in local newspapers?
Mr. Seán Ó Foghlú (Secretary General, Dept of Education & Skills): Perhaps I will return to the beginning of the period of the over-expenditure on expenses. From our point of view, there is a cascade of responsibility in the context of ensuring that expenditure is undertaken in an appropriate manner within institutes of technology. The first part of that cascade is the senior management of the relevant institute. The senior management at Waterford Institute of Technology had a responsibility to ensure that the issues were addressed. Following on from that there is the governance of the institute, namely, the audit committee and the governing body. We all agree and accept there was a failure at governance level in respect of the expenses and in the context of the nature of the interaction with the senior executive of the institute. The approach we have adopted places primary responsibility on institutions to ensure they address those issues. A code of practice for the governance of State bodies was not in place when all of this started. However, it was put in place as the expenditure was under way. Clearly, the Department had a direct role in respect of the institute until the transfer of responsibility to the HEA in 2007 or 2008.
The Department has maintained its role and in the meantime it has have been strengthening the nature of governance and setting down clearly the responsibilities of institutions in terms of their internal audit committees, the need for chairpersons to sign off on appropriate expenditure, etc. The Department was not aware of difficulties and challenges in respect of the expenses.
We were not aware of them in the early part of the last decade. The issues the Deputy has referred to relate to the end of the last decade. It was shortly after that - in 2011 - that we became aware of them. We do not monitor local media in various parts of the country. We are not aware that any formal or informal feedback about over-expenditure in the institute was received in the late part of the last decade.
Deputy John Deasy: Fair enough. After the fact, did anyone ask the president and the chairman of the board what he knew and when he knew it?
Mr. Seán Ó Foghlú: The Department and the Higher Education Authority asked Waterford Institute of Technology that question. As part of Deloitte's process with the institute, it asked the former president and chairperson that question. He engaged in the first Deloitte review, but he has not engaged since that time. Those questions were all asked as part of the first WIT process that was conducted by Deloitte.
Mr. Tom Boland (Chairman, Higher Education Authority): I would like to mention that as far as those of us present this morning are concerned, the Higher Education Authority had no knowledge of the matters mentioned by the Deputy that were raised in the local media.
Deputy John Deasy: The process has changed. Can Mr. Ó Foghlú explain how the relationship between the institutes and the Department has changed?
Mr. Seán Ó Foghlú: We have made significant changes over that period of time. The code of practice for State bodies, which is now in place for the institutes of technology, is the most significant change. There is enhanced co-ordination among the internal audits of the various institutions. The institutes commonly outsource those audits and collectively learn lessons from them. Those are two of the key elements. As we discussed last October, we now have a memorandum of understanding with the Higher Education Authority which sets out our respective responsibilities.
Deputy John Deasy: Okay.
Mr. Seán Ó Foghlú: We do not think that is sufficient. We are looking further at the nature and the role of the Department and the authority in the context of the new performance framework we have put in place. We are at the final stages of a service level agreement with the authority in that regard. As a final part of that, having regard to the sorts of issues that have arisen in the Comptroller and Auditor General's report and at this committee, the Higher Education Authority is currently preparing advice for us on accountability issues. We hope to agree a revised accountability framework with the authority for the higher education sector in the near future.
Mr. Tom Boland: I would like to add, in the context of the code of governance mentioned by Mr. Ó Foghlú, that all institutes of technology are now required to submit to the Higher Education Authority an annual governance statement signed off by the president and the chair of the governing body. One of the elements of that comprehensive statement on a range of governance issues is a statement that they are acting in accordance with approved procedures regarding travel and subsistence expenses, etc. The overall governance structure has been strengthened not just because of that, but as a result of a general evolution in the understanding and knowledge of best governance practices in public sector organisations.
Deputy John Deasy: Has what happened in Waterford acted as a catalyst for change in this entire regime, when it comes to what Mr. Ó Foghlú called the cascade of responsibility?
Mr. Tom Boland: I would not go that far. Some of this work was well in place before any of this information came to light.
Deputy John Deasy: Okay.
Mr. Tom Boland: I assure the Deputy that the situation in Waterford Institute of Technology has reminded all institutes of technology of their responsibilities across a range of issues. It has also led us to review how well the code of governance and other regulatory regimes are working. We did that shortly after the last meeting of the committee. The board of the Higher Education Authority has asked the executive to review the entire governance and regulatory arrangement between the authority and the entire system - not just the institutes of technology - having regard to issues like academic freedom and institutional autonomy. To some extent, this has been prompted by the situation in Waterford. It has also been prompted by the significant change in the Higher Education Authority's mandate with regard to the higher education sector. The executive has been asked to review what that relationship should be and whether the authority would recommend to the Minister any legislative changes with regard to our regulatory function. That work is in train. As chief executive, I have given a commitment to report to the board on that matter early in the new year. It arises from elements of what has happened in Waterford and, more broadly, from the new mandate of the Higher Education Authority.
Deputy John Deasy: Okay. Fair enough. Can I ask the Comptroller and Auditor General, who obviously was not in this position back then, a variation of that question with regard to his office and auditing going back ten years? Is he happy that it was carried out as it should have been with regard to the potential breaches of the expenses guidelines?
Mr. Seamus McCarthy (Comptroller and Auditor General): When we discussed this previously, I mentioned there has been a substantial change since 2009. That year was a bit of a turning point because that was when concern arose about matters in FÁS. We recognised at that stage that we needed to do something fundamentally different in our financial audits if we were to identify similar situations in other organisations. At that stage, we instituted a different approach and added onto the normal financial audit testing, whereby we specifically target issues of propriety. There is now a long schedule of matters, including remuneration of chief executives and chief officers, expenses, credit card policy, procurement, capital projects and financial reporting to audit committees and boards, etc. I think there are 14 or 15 items on the list.
When we were looking at travel and subsistence claims during the period prior to 2009, we would have taken a sample across the whole organisation. The sample would have been drawn from the full spectrum of charges. I have to say that in general, we did not find many problems with it in Waterford. I think there were other reviews of expenditure in Waterford over that period, including the Deloitte report which looked at other expenses in Waterford and found it was generally clean. Under the system of governance laid down in the code, which was being applied in Waterford, an internal review of the effectiveness of controls is required every year. I think it was generally coming up fairly clean in Waterford. It is probably quite an unusual and unexpected thing to find. There were problems in Waterford, obviously, but they were confined in a very narrow sphere.
Deputy John Deasy: Okay.
Mr. Seamus McCarthy: The financial audit obviously focuses on the financial statements. One of the exercises we do involves analysing the expenditure under the headings that are reported in the financial statements. When we look at variances and trends from year to year, we look for explanations if it transpires that expenditure is increasing significantly. As there was no line in the financial statements that drew attention to the budget of the president's office, we were not looking at that. The internal reporting to the governing body and the audit committee would not generally have been focused on those kinds of cost centres. The president will correct me if I am wrong in that regard. One of the recommendations that has been made is that there should be formal reporting of some of those key cost centres as part of the normal financial reporting to those involved in the governance of the organisation. When we instituted the change in our procedures - in relation to propriety - in 2010, we picked up three or four instances in which difficulties arose with regard to expenses relating to the president's office.
We would probably have raised those in the normal way, as management letter items, with the president. They would have been dealt with and there would have been an opportunity for the institute to reflect and to investigate further to see if there was a deeper problem. Subsequent to our reporting at the end of the audit in 2010, the freedom of information request was made and it became apparent that there was a deeper problem then we had identified at that stage.
Deputy John Deasy: I raised this question because of something the Chairman said at the September meeting. He asked about the other arms of the State with an oversight function and whether they performed properly outside of the internal oversight in the institute. Mr. Boland said that certain things were in train but things have changed and are changing dramatically since 2010. At the meeting of last September, the blame focused on one individual. Sometimes people need someone to blame. It is clear that the oversight structures may not have been there as far as looking at the propriety of the decisions and the expense concerned. Everyone needs to fess up to that. It has changed since then and it must be acknowledged that there was a deficit when it comes to the arms of the State and their oversight functions. I am glad to hear that people recognised that and are changing accordingly.
I want to ask the Department and the HEA about the findings of the Quigley report. Specifically, when talking about structures within WIT, the report says that the Department was aware of the structures but did not pursue the issues raised regarding the structures adequately and that the HEA should have taken more urgent and decisive action. Can the witnesses deal with that in respect of the Quigley report?
Mr. Seán Ó Foghlú: I acknowledge the assistance of the Comptroller and Auditor General in our final decision-making approach on initiating this. I also acknowledge the impact of the Committee of Public Accounts considerations on that decision. Following our last appearance at the committee, when the issue of the companies was addressed and while we were already in detailed engagement with the HEA and WIT, we met with the current chairperson and the current president. Arising from that meeting and the manner in which WIT did not have access to full information, we felt we needed to initiate an inspection. We did so in the context of trying to protect the academic reputation of WIT. As the president said, we were extremely conscious of it. The inspection process was helpful and it has given us real confidence about the information we needed on what was happening in WIT. We all learned a lot. I am not trying to avoid Deputy Deasy's question and I will come to it in a second. We have a way forward on the report that we find very helpful. It involves an additional investment from the State, which will be repaid. We were being asked to make a call about paying it without enough information. We now have that call and, most importantly, the companies are being restructured and coming into the ownership of WIT.
The report also identified a number of governance changes. WIT has bought into that and we are glad that it has done so. It will take some time to implement. The Department and the HEA have notified WIT that, in an unusual step and in a non-statutory way, on completion of the work within WIT we will have a further expert or group of experts to check on the company issues and the governance issues. It is an external check on behalf of the Department and will also assist WIT on these procedures. We are seeking to put in place something as close as we can get to a guarantee about its effectiveness. In no way are we questioning the appropriateness of WIT to undertake the changes. However, given the importance of the issues and the need to ensure they are sorted out, we thought we should do so.
With regard to the history of the companies, the Department had a number of concerns about the relationship with the companies in the late 1990s and in the early part of last decade, in 2001. We had a good bit of dialogue with WIT around some of the issues. In particular, there were concerns of the student union, which were addressed by WIT. The other issues were perceived to be not as important and they were not followed up sufficiently by us and WIT. WIT assured us they were separate companies and they continued not to be included in the accounts. We recognise that we did not follow up sufficiently in regard to those issues. The fact that we did not follow up on these issues led to the continuing uncertainty. From the Quigley report, we can see that this uncertainty increased in the past decade. A number of issues arose in the report and at times they were treated as if they were separate companies while at other times they were treated like companies of the institute.
Mr. Tom Boland: From the HEA prospective, the Secretary General has said much of what I wanted to say. Over a period of about two years, from the end of 2010 until the inspector was appointed, the HEA sought to get information on the situation in WIT regarding the companies, even to the extent of nominating to a working group a retired senior civil servant to get access to sufficient information to allow the HEA and the Department to understand the relationship between the companies and the institute. For a variety of reasons that do not lie at the door of the institute, it proved impossible to get the kind of detailed information necessary. This, ultimately, led to the appointment by the Minister of an inspector. In hindsight, it is not appropriate that a body like the HEA must wait two years and wait for the exercise of fairly extraordinary statutory powers to get information of this kind. The reason we were reluctant to recommend to the Minister the appointment of an inspector earlier is that it is a draconian action, potentially seriously impacting upon the reputation of an institution. This is only the third time an inspector has been appointed.
I mentioned earlier that we are looking at the area of governance and regulation and the role of the HEA. One of the areas I am interested in exploring is whether there are activities we can engage in that are less draconian and less impactful on the reputation of the institution. If the appointment of an objective person to an institution to investigate an issue was more commonplace in circumstances where there are difficulties without necessarily requiring the involvement of the Minister, it does not become such a major issue in reputational terms. It would enable an agency like the HEA to have a more forensic examination of particular issues at particular times. I say that with the benefit of hindsight. It took two years and then six months for an excellent report from Mr. Quigley. Had we waited six months and had the Minister appointed Mr. Quigley sooner, it would have been resolved in that way. That is not to rationalise it out of existence but to explain the situation.
Deputy John Deasy: Getting away from all this, I have number of questions for Dr. Neavyn. He mentioned in his opening statement that WIT is moving away forward to stage 2 of the university designation process.
Can Mr. Neavyn outline what that process is, the timeframes involved, where WIT is right now with regard to Carlow, what we can look forward to over the next year with regard to that process and the potential for both institutions to amalgamate and become a technological university?
Dr. Ruaidhrí Neavyn: It has been a long-term ambition for the south east to have a university. The main reason is that having a higher education institute at university level is fundamental to the infrastructure to support sustainable economic development in the region. That is the clear message we want to give here. We hope that university designation and a higher education institute operating at university level will be key to sustainable economic development for the region. In that regard, the two institutes of technology in the south east - Waterford and Carlow - have agreed to combine forces to make this happen. We very much welcome the recommendations in the national strategy for higher education for a process to create a technological university. We jointly applied in that process, which has four stages. The first stage was an expression of interest. That also entailed developing a detailed MOU of operation in respect of how to achieve university designation, which requires us to produce a business plan to meet the criteria for technological university designation. These criteria revolve around research and development and academic achievement.
On top of that, we are also looking at the consolidation process, because there is a requirement that the two institutes become one as part of the technological university process. We hope to move the business criteria plan - the plan for the creation of a university and how it proposes to meet the criteria to function as a university - forward this year. Allied with that are a consolidation plan and the due diligence process associated with that.
Once we submit the business plan, we will then move to stage three. This involves an analysis of our capability of meeting the criteria for a university. The final stage is stage four, which involves an assessment by an international panel of how we meet the criteria. In terms of overall timeframes, we have set a very ambitious target and would like to see that achieved within a three-year time frame. We think it important that we set an ambitious timeframe and believe we are capable of meeting the criteria. The Deputy spelled out some of the notable achievements of Waterford Institute of Technology, and they are notable achievements of our partner as well. We certainly believe that, in tandem, we can achieve these criteria.
Deputy John Deasy: I am glad to hear it, because we are dealing with legacy issues with regard to expenses and all of that. There are legacy issues with regard to the previous president when it comes to Carlow. What Mr. Neavyn is effectively telling me is that they have been dealt with, that this is a harmonious arrangement with regard to a joint application being made and that everything is moving along quite well.
Dr. Ruaidhrí Neavyn: In the past, the application process made by Waterford Institute of Technology would have been an application process under section 9 of the Universities Act 1997. That particular application would have been funnelled more towards the technological university process that is now there, so, effectively, multiple institutes of technology must apply for designation as a technological university, and that is what we are doing in a south-east context. There is obviously a great level of co-operation between the two institutes. Indeed, both governing bodies, both management teams and members of the institute community are behind this effort. There is very strong support from stakeholders in the region, including Members of the Oireachtas and members of the business community, who want see this happen.