independent

Friday 18 April 2014

Daniel McConnell : 2012 - A year of State waste and incompetence

A SPECIAL REPORT

Over the past 12 months, despite ever increasing pressure on government spending, countless examples of shocking failures of competence, greed and waste across all departments and State agencies came to light before the Dail's Public Accounts Committee.

From the financial crisis in the health sector, to calamitous decision-making at the Dublin Docklands, to the extravagance at Waterford IT, to TDs' expenses, the scale of waste and incompetence that was uncovered at the PAC was simply staggering, and unforgivable given the savage €3.5bn cuts that were required in the recent Budget.

Today, the Sunday Independent recaps some of the most shocking examples.

'HSE'S DISGRACE'

The year began with testy exchanges between chairman John McGuinness and Siptu general secretary Joe O'Flynn over investigations into how €5m in taxpayers' money ended up in a HSE training fund account associated with the union.

Mr O'Flynn suggested Mr McGuinness was potentially not "impartial" given critical comments he made about the controversy to this newspaper. Mr McGuinness rejected the claim.

But the predominant scandal to blight the HSE was its budget overruns, which peaked at €700m, requiring a supplementary budget to fill the deficit at the end of the year.

Earlier in the year, then HSE boss Cathal Magee warned the PAC that savings promised by Health Minister James Reilly were not achievable. Such was the animosity between Reilly and Magee, that Magee was forced out of his job in the summer.

Tensions boiled over in October during Mr Magee's replacement Tony O'Brien's first hearing as HSE boss as he proceeded to stonewall repeated requests for answers from committee members.

Fianna Fail PAC member Sean Fleming branded both Mr O'Brien and Ambrose McLoughlin, the Secretary General of the Department of Health "a disgrace" and said neither was "fit for office", before walking out of the meeting.

"You should resign, if this is how you treat the public, how do you treat your patients?" he screamed before leaving in protest.

Amid much criticism the HSE eventually was forced to disclose earlier this month to the PAC a €266m bonanza in pay increases, top-ups, on-call and overtime payments including to middle and senior HSE staff, which it previously failed to disclose.

Amid deep rancour within the Government over the €26m budget cuts to respite care allowances, this year the HSE will spend €17.6m alone on incremental pay increases to staff.

Simon Harris TD said revelations meant that "the poor, the sick and the elderly are now paying for the retention of the Croke Park deal, which is clearly not fit for purpose".

Despite much government rhetoric that incremental pay increases are largely for lower paid staff, it emerged:

* 621 people in the HSE who earn €70,000 or more will this year receive a pay increase of more than €1,000 each.

* Worse still, in 2012, 221 senior managers and staff who earn more than a €100,000 will be in receipt of 'increments' or length of service pay increases.

Added to this were previous revelations that HSE managers and administrators clocked up €7.5m in travel and subsistence, while nurses and social workers got €55.3m in travel and subsistence during 2011.

A 'BORDERLINE' DICTATORSHIP AT WATERFORD IT

Allegations of avarice pop up from time to time at the PAC and none more so than the case of Waterford Institute of Technology (WIT) last September.

Extraordinary details about the tenure of former WIT president Prof Kieran Byrne were revealed.

Prof Byrne was not re-appointed to the job last year after revelations emerged that €3.7m was spent by his office since 2004, including almost €300,000 on hospitality and nearly €140,000 on taxis and couriers.

The committee heard that non-pay expenditure in the WIT president's office increased from €30,000 in 2000, the year before Prof Byrne took up the post, to a high point of €635,000 in 2008.

A further €126,000 was spent on taxis, €134,000 on fine art, €73,000 on rooms at the Arlington Lodge Hotel, Waterford, more than €18,000 on flowers and €4,200 to charter a plane to fly from Waterford to Dublin.

The spending was detailed in reports on Waterford IT by Deloitte and Grant Thornton, which were completed at a total cost of €130,000 to the college.

Then the following week, the PAC heard the controversial €4,200 flight chartered by Waterford Institute of Technology for official business was not the only occasion on which the college paid for private aircraft.

It emerged that information supplied about the €4,200 was incorrect – and that rather than being a flight from Waterford to Dublin, it was actually a return flight from Filton Airport in Bristol to Dublin in June 2007.

A second chartered flight, from Waterford to Dublin, had actually cost €760, the committee was told. PAC vice-chairman, Fine Gael TD Kieran O'Donnell described the anomalies in the paper trail as a "calamity of errors".

Higher Education Authority (HEA) Sean Boland admitted the situation was "completely unacceptable".

Department of Education officials were unable to explain to the TDs why the €4,200 invoice did not include a normal breakdown of flight costs.

"We received it at 4.26pm yesterday," said department secretary general Sean O Foghlu. "We have no further knowledge (of the second flight)."

Mr O'Donnell said it appeared Prof Byrne "rode roughshod" over the procedures of WIT and that it struck him that his tenure was "bordering on a dictatorship".

He asked Tony McFeely, WIT's chief financial officer, if he had sought advice or raised his concerns with board members or other managers, which Mr McFeely said he had done, but on a confidential basis.

Mr McFeely, said he stopped signing off on Prof Byrne's travel expenses claims shortly after he became president, because they did not "comply with college policies".

However, Mr McFeely did not publicly raise concerns about Prof Byrne's claims for fear it would appear like "sour grapes," he told the committee.

DUBLIN DOCKLANDS DEVELOPMENT AUTHORITY

One of the greatest State calamities to emerge in recent times came before the PAC in June. The head of the Dublin Docklands Development Authority was forced to deliver a humiliating public apology over the bungled €431m purchase of the Irish Glass Bottle site.

Of the €431m, the DDDA spent €52.1m of taxpayers' money on buying the land at the height of the boom, which is now valued at less than €45m.

DDDA CEO Loretta Lambkin apologised for the wasteful spending. "A serious error of judgment had led to the purchase and that it had been an expensive lesson for the authority," she said.

Ms Lambkin, who was only appointed chief executive in March of this year, said: "Expensive lessons have been learned and the docklands authority today is a very different organisation to what it was six years ago. On behalf of the authority, I want to apologise for past serious errors of judgement that were made."

The DDDA took a 26 per cent stake in a joint venture called Becbay, which was intended to acquire and develop the site. Becbay paid €412m for the site at the height of the property bubble. Stamp duty and other costs brought the bill to €431m.

Key members of the DDDA had included Lar Bradshaw of Anglo Irish Bank, which provided the loan to purchase the site.

PAC chairman John McGuinness said that, like Fas, the DDDA had been fatally damaged. He said: "The whole thing is utterly scandalous. We had a board stuffed with a tight-knit group of people who all had separate interests and had no regard for the taxpayer whatsoever."

There would be further controversy in early July when, in an unprecedented move, Environment Minister Phil Hogan issued a standing order instructing the committee to suspend its investigation, because of legal action surrounding the doomed project.

Mr McGuinness was furious and said it amounted to the Government attempting to curtail the powers of the PAC.

DECENTRALISATION/LOCAL GOV SPENDING

In May, the full failure of Charlie McCreevey's decentralisation policy was revealed as it emerged the Irish taxpayer paid €43m for 12 sites around the country – which are now worth just €500,000. As a result, the State is now sitting on a land bank of near worthless properties which were never developed.

The Office of Public Works (OPW), which handled the land purchases, was called "grossly incompetent" by Mr McGuinness.

Figures collated by Kieran O'Donnell showed that all of the land purchased on the 12 sites in towns like Drogheda, Portlaoise, Carlow, Claremorris and Waterford was bought without full planning permission and as a result is now worth less than €10,000 an acre.

Mr O'Donnell said: "We have to ensure this never happens again. For example, in Claremorris, the State spent almost €1m an acre. I checked this week, it is now worth as low as €7,500 an acre in some places for agriculture land."

In Mullingar, €8.3m was spent on a site for the Department of Education in 2007 for a 5.3-acre site, working out at €1.5m an acre. Again the site was never developed.

In Waterford, another €8m was wasted on a three-acre site for a proposed Department of the Environment building, working out at €2.6m an acre. This site has also remained idle.

There were other multi-million spends in Cavan (€2.9m); Claremorris (€2.5m); Dungarvan (€2.1m); Thomastown (€1.8m); Edenderry (€1.5m); Carlow (€1.4m); and Portlaoise (€1.1m).

In response to the PAC analysis, Clare McGrath, chairwoman of the OPW insisted that her organisation was merely carrying out the political policy wishes of her political masters. A week later, this newspaper obtained figures which showed that €500m worth of land bought during the boom by local authorities for social housing was now worth only €125m, a fall of €375m.

The horrific losses of up to 75 per cent were on lands bought by local authorities for social and affordable housing which were never built upon.

OUT OF THEIR DEPTH – WATERWORLD

In February, the PAC heard that legal action taken by the State against the former leaseholders of the National Aquatic Centre was based on flawed advice from the Revenue Commissioners.

The ins and outs of the saga are complex, but the State company Campus Stadium Ireland (CSI) pursued Dublin Waterworld for a €10m VAT bill it believed it was owed, based on Revenue's incorrect interpretation of the Finance Act.

CSI continued to pursue the matter despite a clear warning from the Comptroller and Auditor General (C&AG) that there was no economic benefit in continuing. In 2004, Secretary General of the Department of Sport, Tom O'Mahony, also advised dropping the VAT claim, but the Department of Finance and the Revenue Commissioners gave instruction that it be pursued.

Ultimately after an eight- year legal battle, by 2010, even after losing in the Supreme Court, the National Sports Campus Development Authority (which succeeded CSI) sought to bring the matter back into arbitration, only to be stopped by then Minister Mary Hanafin. Members of the PAC have expressed their "shock".

"Thank God for the Supreme Court," Fine Gael TD, Simon Harris, said. "It is an absolutely astonishing admission of such failure and incompetence by Revenue at an Oireachtas committee. To openly admit that for the best part of a decade the information they were issuing on VAT to the Irish taxpayer was incorrect and ran blatantly in opposition and contradiction to Irish law. It is a fiasco."

While legal fees have not yet been determined, some estimates have put them at several millions of euro. However, the Department of Sport disputes that, saying it is likely to be under €1m.

In May, Mr Harris rejected his own Finance Minister Michael Noonan's defence of his department's role in the €10m VAT blunder. "The simple fact is that Revenue failed to correctly interpret VAT law. I will be asking PAC to write to the Minister for Finance and ask him to reconsider his position."

John Moriarty, the leaseholder who defended the claim against the State for eight years, said it was his intention to seek compensation. "They sought to destroy me. They spent over €18m on advisers and they were wrong."

To date, the entire National Sports Campus project has cost the Irish taxpayer €190m.

NAMA

The PAC is where the widely criticised entity that is Nama has opened up for scrutiny. And in July, on foot of questions from Kieran O'Donnell, Nama eventually revealed it is extending salaries of €100,000 to 66 developers, figures first reported in this newspaper.

Nama had repeatedly remained opaque about its dealings with developers and it was confirmed that three developers were in receipt of salaries of €200,000, the same as Taoiseach Enda Kenny.

Nama defended the spend saying it is a fraction of what it would cost to use liquidators or receivers to manage the properties.

Many on the PAC remain unconvinced by Nama, with some calling for it and the C&AG to be given additional resources to ensure further controversies like the Enda Farrell affair are prevented.

BANKING INQUIRY

Apart from the litany of shocking examples of waste, greed and incompetence above, possibly the most important work done by the PAC during 2012 was the production of its report on the holding of a full public inquiry into the banking crisis.

In July, given the €64bn cost to the taxpayer to bail out the banks, the PAC produced an inquiry roadmap, but identified the night of the bank guarantee in September 2008 as a key aspect.

Despite its publication, committee members including chairman John McGuinness are angered by apparent moves by Brendan Howlin to deny the PAC the chance to hold the inquiry. Six months on, no final decision as to who will hold the inquiry has yet been made.

Sunday Independent

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