Deputy John Deasy, Public Accounts Committee chairman, John McGuinness TD, and Comptroller & Auditor General Seamus McCarthy prior to this morning’s private meeting with John Muwanga, Auditor General of Uganda, who uncovered a fraud which included €4 million of Irish aid money in 2012. As a result the Irish Aid programme was suspended and the money subsequently repaid in full. The PAC examines the controls on the Overseas Development Aid budget with the Department of Foreign Affairs on an annual basis, with delegations to two programme countries — Mozambique and Ethiopia — having looked at how risks can be mitigated.
PAC Meeting | March 6,2014
International Co-operation: Foreign Affairs and Trade; Official Development Assistance
Mr. David Cooney (Secretary General, Department of Foreign Affairs and Trade) called and examined. Also in attendance: Mr. Joe Nugent, head of passport services;Mr. John Conlan, chief financial officer; Mr. Fergal Mythen, head of corporate services; Mr. Brendan Rogers, Deputy Secretary General and head of Irish Aid; Mr. William Carlos, head of evaluation and audit unit; Mr. Dermot Quigley, Department of Public Expenditure and Reform.
Deputy John Deasy: I heard the Tánaiste speak in the Dáil a couple of days ago about the new missions. He said the centre of economic gravity is shifting to the east. He spoke about the further development of our presence in the United States of America and a reconfiguration of our approach in Africa. He spoke about new missions in, for example, Indonesia. Can we go through the continents? It relates to the Vote. Mr. Cooney mentioned that we will have five new embassies and three new consulates. Where are we going to have them? That would be interesting to know. Where are we shutting down? That would also be interesting to know. What is the rationale for the shift?
Mr. David Cooney: The Government decided to open eight new missions which comprised five embassies and three consulates general. We have 73 missions with a further two in Armagh and Belfast. In addition to the eight openings, the Government decided to close the embassy in Lesotho. The rationale behind that closure is that while we have had a programme there of very long standing, there are absorption capacities in Lesotho. It has become a middle income country and is the most wealthy country per capita among those in which we have aid missions. The assessment after consideration was that the remaining programme in Lesotho could be handled effectively from South Africa. Pretoria is very close. We will maintain a small office but it will not be staffed by headquarters staff. It will be staffed by a local employee. The rationale is sound although it is never a happy occasion to close an embassy or to pull out of a country with which we have had a long relationship. In terms of rationalisation, we felt the resources could be used better elsewhere.
In terms of the embassies we are opening, the emphasis is on Asia where three of the missions will be located. We will have embassies in Indonesia and Thailand and a consulate general in Hong Kong. The lack of embassies in Indonesia and Thailand has represented a significant gap in our service. Certainly, pressure has been applied through the Global Irish Network and the three meetings of the forum have all pointed to this absence. I am delighted to be able to plug that gap. Indonesia is a huge country with enormous potential. Thailand is a very significant economy. Having missions on the ground in those states will allow us to exploit to a much greater extent the economic potential there. The decisions to open the missions have been welcomed greatly by the Irish communities in those countries but also by the agencies. The absence to date of a consulate general in Hong Kong has been a significant gap in our network of missions. There is huge potential there.
We feel we will be able to exploit that considerably working with the agencies, which are in Hong Kong. We think that having an embassy will assist in dealing with Chinese authorities. They are very focused on the state. It is very difficult for companies to do business in China even in a place like Hong Kong without the backing and presence of the state.
Moving on to the US, we have been very pleased with the activities of the consulate general we opened in Atlanta a few years ago. It has made a real difference on a very small budget. One career consul is in that consulate.
John Deasy: What does Mr. Cooney mean when he says it has made a difference?
David Cooney: It has made a difference on the ground in respect of the reach we are able to achieve regarding interaction with business. Atlanta is a very significant hub for business. Certainly, the feedback we have got from the agencies and business presence on the ground is that this has made a big difference to the profile of Ireland. Texas is the same. It is a very significant economy that is bigger than many national economies around the world. Putting someone into Austin, which is the political capital of Texas, will help us significantly. We decided on Austin rather than Houston. Other countries have gone to Houston but they tend to be countries that have a significant interest in the oil business which, unfortunately, is not a business in which we have a high profile. Our analysis was that we would be better focused on Austin. Again, for a very small outlay, we expect to get a decent return from that.
We have an embassy in Brasilia. Brazil is a huge country but São Paulo is the economic capital. The agencies do not have a particularly big presence there. Enterprise Ireland has a part-time presence. I think it is a Portuguese national who is operating on the ground in São Paulo. We think this will make a significant difference in establishing an Irish profile in São Paulo, which is non-existent at the moment. Brazil is a huge country with a huge and growing economy. One cannot operate consulates without first having a embassy, which we have. However, the embassy is in the centre of the country and is some distance from São Paulo so we think having a small mission on the ground will make a significant difference for us.
Kenya is the economic powerhouse of east Africa. We do not have an embassy in Kenya. We are re-opening one that closed many years ago. I think it was back in the 1980s.
Brendan Rogers: It was 1988.
David Cooney: It is the economic powerhouse of Africa and an economy that is growing significantly. Clearly, it will be different in profile compared to our embassies in Tanzania or Uganda, which are mainly development-focused. We see the Kenya mission as looking at development and having a significant role in promoting business with the region. As we can see in a country like Kenya, promoting business is a significant aspect of development. People who suggest that development and business are totally separate are making a big mistake. We have seen from this country that we only really achieved significant social and economic development when our economy grew. One can pour all the money in the world into-----
John Deasy: I agree with Mr. Cooney. However, the fact that we have opened an embassy in Africa for that reason is a pretty significant shift when one considers our recent history and the reasons that we set up missions in our programme countries. It is a significant shift to do it for those reasons.
David Cooney: I agree with Deputy Deasy. It reflects the Africa strategy and the work we have been doing. If one looks at the different stages, with an absolute disaster, humanitarian aid is going in to keep people alive. One then moves on to development where one is trying to get basic development going but then one moves on to trying to stimulate and assist with economic development. We also have a mission in Nigeria which is mainly focused on economic matters.
Croatia is completing our network of missions in EU countries which I said here before is absolutely crucial to Ireland. Every EU member state has a vote in the EU institutions - a vote that has a direct impact on the lives of Irish people. We need to be in contact with the institutions, parliaments and government departments in those countries to intervene. We had a value-for-money review of our missions in EU countries over the course of the last year. The report is available. It involved our own evaluation. An audit unit was chaired by an independent chairman and included representatives of various Government Departments, including the Departments of Public Expenditure and Reform, the Taoiseach and Finance. That report, which is a quite thorough and a very good piece of work, came to the conclusion that our missions in EU countries were value for money and that we should have a mission in every EU state.
John Deasy: Mr. Cooney mentioned eight missions. Are we including the Holy See in this?
David Cooney: No, I will come to the Holy See last. That is a separate case. Croatia will have a small one-diplomat mission. We are at the cutting edge of trying to develop new forms of diplomatic representation at a low cost. Our one-person missions have attracted quite a lot of interest from other EU member states who are interested in seeing how we can operate them. The report on the EU missions pointed out that another one-person mission is not all good news. There are stresses and pressures on a one-person mission and expectations that are difficult to achieve. We are looking at the one-person missions network to ensure we can maintain it at an effective level and provide the necessary support. It is a good idea that is working but, understandably, these missions need a bit more support from home than if they were larger missions.
I know why the embassy to the Holy See was closed. It was genuinely closed for cost reasons but it is interesting that nobody in the world believes me so I am very happy to go on the record to explain why it was closed and re-opened. It is very interesting. People are very reluctant to believe something if it does not conform with their beliefs or prejudices or the need for a good story. It was closed for cost-cutting reasons in 2011. We carried out an analysis of how we could find savings. Every Government Department was required to find savings at the time. The Department of Foreign Affairs and Trade only has two ways of making savings. We either cut the aid budget or we close embassies. I believe very firmly that had we offered significant cuts in the aid budget at that time, it would have been an ongoing process of significant cuts. The Tánaiste was very keen to protect the aid programme. I think he had considerable support for that so, therefore, we had to look at closing embassies. There were those who suggested that we should close embassies in EU countries. Again, I believe that had we closed embassies in EU countries, I do not know how many we would have lost by now. We needed to protect that network which left very few alternatives. The embassy to the Holy See was closed because it was genuinely believed, and I believe this is right, that the relationship could be most effectively handled on a non-residential and care and maintenance basis. I hoped that it could be re-opened in due course when the situation improved and that has been the case.
We have reopened it. I think there is a considerable attachment to the relationship with the Holy See among a considerable portion of the population; that was made clear. Also the direction and the leadership of Pope Francis in relation to issues of hunger and poverty very much chime with our own policy. The Tánaiste recommended to the Government that we reopen the Embassy to the Holy See. Again it will be on a very modest basis. It will be a one-diplomat mission.
We have saved, in the meantime, a considerable amount of money. The Villa Spada, which was one of our biggest embassies and which was the location for the residence and the chancery to the Holy See, is now the residence and the chancery for the Embassy to the Italian Republic, to Italy. It contains a much larger number of staff members. It is used far more intensively. It is now used very thoroughly. Ironically, of course, the Villa Spada is where Garibaldi made his last stand against the French at the time of the Roman Republic. It is an iconic building from the point of view of the Italian Republic and perhaps more appropriately hosts that embassy.
John Deasy: When will it reopen?
David Cooney: It will reopen over the summer. Hopefully in the next month or so the Government will decide on the appointment of ambassadors. The new embassy will be located modestly. We saved €435,000 in rent that we were spending on the accommodation of the embassy to Italy. We will be accommodating the Embassy to the Holy See for considerably less when it is reopened.
John Deasy: On the subject of presence, I wish to ask about Crimea. Somebody helpfully pointed out to me that the Department has an advisory note on its website about Ukraine. De we know how many Irish nationals are in Ukraine or how many are in Crimea? What kind of system do we have if there is a serious problem in that area?
David Cooney: At the moment we have as far as possible established there are no Irish citizens in Ukraine, other than, obviously, reporters from the media who go there. However, we have not been able to identify any Irish citizen resident in Ukraine. It does not mean to say they might not be there, but we are not aware of anybody. Nobody has been notified to us. Nobody has notified themselves to us. We have an ambassador to Ukraine. It is a non-resident ambassador, based in Prague. They have been going to Kiev on a regular basis over the last few weeks.
We have an online system where we ask citizens to register to us in all countries so that we have as good an idea as possible of how many citizens we have in each country. At the moment we have no special arrangement in place. We co-operate very closely with our EU partners and there is no move under way to arrange for the evacuation of citizens at the moment.
John Deasy: Is Mr. Cooney saying he is not aware of any Irish nationals in Ukraine apart from journalists?
David Cooney: Not Ukraine. I did not say Ukraine. If I did, I apologise - Crimea. If I said Ukraine, I apologise; it is Crimea I was referring to.
John Deasy: I am glad I clarified that. I refer to the Synthesis report. As I understand the process after what happened in Uganda, the heads of mission reviewed their own programmes; there was a meeting and they dealt with common themes. After what the Comptroller and Auditor General reported on in 2012 with regard to a risk dashboard, this is the report and recommendations we arrived at. Some of these recommendations are pretty obvious and one would question whether we should not have been doing these anyway. Point 5.4 states: "The overall finding is that there are weaknesses in this area with insufficient elaboration of the flow of funds and structures around the management of complex modalities". Did we find anything else when these missions undertook their own internal reviews, when there were comparisons? While we were investigating for this report, published in February, did we find anything else about which we should be worried within our systems and procedures in any programme country?
David Cooney: I will respond and with agreement I might ask my colleagues Mr. Rogers and Mr. Carlos to speak. When we came here in December 2012, we had all been very shaken by what had happened in Uganda. We put our hand up at the time and said we had already identified areas where things could have been done better by ourselves. We followed up very robustly. When we came here the last time, the interim report of the evaluation audit unit had already been published. Following that, the first thing to say is that we got the money back, very significantly due to the efforts of Mr. Brendan Rogers and our ambassador.
John Deasy: I apologise for cutting across Mr. Cooney. Did we not get more than the money back? Am I right in saying that because of the currency exchange rate, we actually achieved more than the €4 million as it turned out?
David Cooney: Yes, they gave us back the same Ugandan shillings but it turned out that exchange rates in the meantime meant that the Ugandan shillings were worth a little bit more in terms of euro than we had actually given it.
John Deasy: How much did we make?
David Cooney: It may have paid for some of the airfares down there to try to sort out the mess. So I do not feel too bad about it.
John Deasy: So we made €100,000 on the deal; we got our money back and we made €100,000 on top of it.
David Cooney: We got our money back, but, as I said, there have certainly been costs involved in following up on the mess that was created by the Ugandans in the first place. However, we got more back than we gave them; that is true.
We got the money back. We asked the embassies to review their risks situation and their procedures. We had a meeting with the heads of mission in Lusaka. Mr. Rogers, Mr. Carlos and I went through it and emphasised the need for vigilance. We effectively pointed out that we needed to make sure that we upped our game in terms of vigilance. The evaluation on audit unit carried out its inspections of the various missions. We had the nine missions and that has arrived at the Synthesis report, which is before us.
I went out, as I said earlier, to Kampala in July where I met the Attorney General and the Minister at the department of foreign affairs. In addition to the Synthesis report, we have also had the final report of the evaluation and audit unit into the fraud in Uganda. The two reports that have just appeared and which members of the committee have, the Synthesis report and the final report of the evaluation and audit unit into the fraud in Uganda, represent an impressive piece of work. Our evaluation and audit unit is independent of the development co-operation division and independent of Irish Aid. It is important that it can call it as it finds it and that it points out failings. As I said when I was here the last time, if there are failings, I am much happier that they are pointed out and I do not mind them being pointed out because if we do not face up to them, confront them and deal with them, we surely will fail again.
John Deasy: I wish to go through the process here. The report has just been published and obviously Comptroller and Auditor General would not have had a chance to go through the report and the effect of the recommendations. He has not had a chance to review and analyse it. However, the process is that he would review these recommendations from the report which he instigated.
Mr. Seamus McCarthy (Comptroller and Auditor General): We will assess the implications of the recommendations and take them into account in forming our opinion on the financial statements for 2013.
John Deasy: I refer to recommendation No 3 which states that a diagrammatic flow of funds for all grants to partners should be prepared at country level that will clearly illustrate the flow of funds from initial disbursement to final beneficiary. This would seem to be obvious and one would ask why this procedure was not in place previous to this. Is that a fair question?
David Cooney: I think there are matters which have been highlighted about which one would wonder why they were not done. I refer to the Comptroller and Auditor General's report. He picked us up on the fact that in his view we should have been informed earlier of the reports of the deterioration of the situation in Uganda. I cannot argue with that. I fully accept the Comptroller and Auditor General's proposal that we should have a risk dashboard put in place and we are working on that. I agree that perhaps we should have had systems in place before. That is the value of these reports. I refer to paragraph 6 of the Synthesis report which sets out a number of proposals, some of which one might legitimately say we should have had in place. I do not mind accepting that there were weaknesses and if there were, I am glad they have been pointed out and we will put them right. Mr. Brendan Rogers is responsible for this area and he may have a different perspective to me.
Brendan Rogers: I do not think so. I agree that those questions are fair. The Synthesis report is a summary of nine reports, reflecting the significant work carried out since we last met in December 2013. Uganda has been visited approximately 12 times. I have been to Uganda three times. It has been very intensive work. The reports cover the nine programme countries and they conclude that the systems are fairly strong and pretty adequate in a lot of cases but like every forensic audit, there are all kinds of gaps and areas that need to be strengthened.
The Department has accepted all those recommendations. Standardisation of the management systems is where the greatest gap occurs. The management systems were reasonably strong but they had grown separately under different heads of missions and different personnel. We have to implement a standardised system. These recommendations are telling us to standardise the management systems, the floor funds, the MOUs and the work with NGOs. As a result we have established a task group which is chaired by the head of our programme-country section. Over the next few months we will be working very hard to ensure that when we next meet the committee, there will be a very high-level strong and standardised system in place. Some of this will involve cross-learning because some of the missions have done excellent work and we need to cross-fertilise that learning into the other systems.
Deputy John Deasy: I refer to the Uganda programme for 2013. Apart from €300,000 which is being examined by the Comptroller and Auditor General, there is a misconception that Ireland has suspended aid to Uganda but this is not the case. Apart from that €300,000 we have merely stopped putting money through the governmental systems. Is this the case?
Brendan Rogers: Yes.
"I have been involved in this area for a good few years and it has been beaten into me that the best way of spending our money is by means of the governmental systems. There is a reason we are not doing this in Uganda."
John Deasy: Mr. Rogers has listed where the money has gone in Uganda in the past year, a total of €21.7 million. How are these programmes determined? It is clear that the Department diverted money quickly.
Brendan Rogers: With reference to one of the issues pointed out by the Comptroller and Auditor General, I admit we should have been aware of that information intelligence sooner. We are on the ground talking to our donors and there are various rumours and views. We should be transmitting them more quickly to headquarters. That is what the dashboard system will do. However, we were picking up issues and we made a decision a few years ago that we should begin to move away somewhat from government systems. We were on that course and it was not a case of having to change the ship. We are now managing our major school-building programme in Karamoja for ourselves, using management agents. The schools are still needed by the system and they were to be built in the national system but we intend to build them ourselves and we will put an Irish flag on them. This was a major change of policy.
John Deasy: This is the point of my questions. I have been involved in this area for a good few years and it has been beaten into me that the best way of spending our money is by means of the governmental systems. There is a reason we are not doing this in Uganda. Has the Synthesis report changed the Department's view with regard to that approach anywhere else? It has always been the policy mantra that this is the most effective, sustainable way of achieving a bang for our buck. There are inherent dangers in using this system but has there been a change?
Brendan Rogers: If development is to be sustainable in the long term a country must have a national plan, a democratically elected government and a sustainable form of government. The best way that we can exit from provision of aid is when these factors are in place. There has been a major hit in Uganda because of corruption and fraud. As a result we have had to carry out a forensic and detailed analysis on our other countries. The Deputy has visited Mozambique and Ethiopia. We are still working through government systems in those countries to a greater or lesser extent because there are different levels of governance. I do not think our core belief in the need for creating good democratic institutions of state has been fundamentally shifted. However, on a practical level, if we cannot trust the systems we cannot take part. We have taken a clear decision with regard to Uganda and I do not foresee us returning soon.
John Deasy: Has the Department made decisions about any other missions or programmes?
Brendan Rogers: We have not taken any major decision as a result of fraudulent activities but we constantly analyse our own thought processes. For example, budget support was very important a few years ago when taxation revenues and remittances in Africa were very low. However, government systems are much improved now compared to when I started in this business 20 years ago. Taxation revenues are coming in and governments have capacity. As a result we have to slightly change the way we do business and look at how to do business differently. The new policy, One World, One Future, was published last year and it examines those areas.
John Deasy: I understand this may be the last time Mr. Cooney and Mr. Rogers will be attending the Committee of Public Accounts. I wish them both the best in the future.