CIE lost €2.5m 'to fraud and poor cash controls'
Staff sold equipment and colluded with contractor
Wednesday October 28 2009
POOR financial controls and fraud cost the state public transport company CIE almost €2.5m in four years.
CIE chairman Dr John Lynch -- who is a former FAS director general -- denied claims that the state transport company was "rife with backhanders, collusion and fraud" yesterday.
The Dail Transport Committee heard yesterday how fraud cost CIE €665,807.
Only €100,000 of this sum had been repaid -- and poor financial controls relating to procuring goods and services had cost the company another €1.8m.
A draft report from forensic accountants Baker Tilly suggested the losses could be as high as €8.7m -- but CIE ordered that the reference to this amount be removed from the final report because it was a "guesstimate" and could not be proved. The company ordered the accountants to only outline the losses that could be proved.
"Iarnrod Eireann is portrayed as rife with backhanders, collusion and fraud," Dr Lynch said. "Three people out of a staff of 11,300 hardly warrants headlines of backhanders. It is grossly untrue and unfair to workers.
"The European Commission this year has said that procedures are excellent and monitoring good. There is one credit card in CIE, and two credit cards in Irish Rail. The reason we took on Baker Tilly was to see if our systems were robust enough."
The committee was told that in 2005, an internal unit set up to establish where money could be saved became concerned about a number of issues at the company's North Wall site in Dublin.
Following investigations, gardai became involved and it emerged that employees had been selling disused railway equipment including railway sleepers.
Forensic
It also emerged that one employee was in collusion with a contractor, who had falsely billed the company for work not done. When these issues were addressed, the company began a review of its financial systems and also hired forensic accountants Baker Tilly Ryan Glennon in 2007. The firm was asked to investigate financial controls in the company and make recommendations on improving systems, and to look at the actual losses incurred.
The report cost €450,000 to compile, and while it did not identify further instances of fraud it identified losses of almost €2.5m because of weaknesses in the system.
It also made over 100 recommendations.
But independent senator Shane Ross said that the consultants had used a figure of €8.7m in a draft report when estimated historical losses were included.
"It's quite devastating, a litany of woes in Iarnrod Eireann," Mr Ross said. "I counted 19 times the word 'fraud'. It (the report) talks about malpractice which is endemic; this is a semi-state company which is completely out of control. It's quite obvious this has been going on for a long time."
Fine Gael transport spokesman Fergus O'Dowd said the Baker Tilly report showed the need for CIE's exemption from the Freedom of Information Act to be lifted.
- Paul Melia
Irish Independent
