IRELAND 24 May 2013
Statement by C&AG
Arising out of a letter from the former Head of Internal Audit at FÁS which was sent to the Committee of Public Accounts on 11 February 2010 there have been some press enquiries of my Office concerning my views on the interaction of management and internal audit in FÁS.
At the time that I commenced work on Report No 73, the Committee of Public Accounts had already taken evidence and reported on the interaction between internal audit and FÁS management. The Committee consulted me when it was preparing its report which was published in February 2009 and I gave my views at that time.
In commenting on the interaction between senior management and internal audit, the Committee said “The findings in Inv 137 were extremely serious. Senior management, while anxious to ensure that fair procedures were followed, took issue with the way some of the investigation had been conducted, in particular, the fact that the investigation team had contacted parties outside FÁS (in particular the Independent Newspaper Group) without first informing senior management. The Committee does not accept this criticism of the investigative team and commend the Internal Auditors for conducting their investigation in a thorough manner.”
The Committee concluded that “ FÁS senior management were wrong to take issue with the way the audit investigation was conducted.”
I considered that since the matter that had already been dealt with and concluded upon by the Committee and having been consulted in the process additional work by my Office was not warranted. Such duplication would not be an efficient application of the scarce resources of the Office.
Reports No 66 and 73 are in the nature of follow up work arising from the Committee’s review of Report Number 10. In deciding the subject matter of the reports, I took account of specific recommendations made to me by the Committee.
The relevant chapter of the Committee’s report of February 2009 is set out below and the full text of the Committee’s interim report can be accessed at
Chapter Four: Response to the Findings in Inv 137
As outlined in Chapter Two, the receipt of the anonymous letter in November 2004 set in train a chain of events that culminated in the publication of the C&AG’s special report in April 2008. An indicative timetable of events is attached in Appendix 3. While disciplinary action is dealt with in Chapter Five of this Report and this was part of the response by FÁS, other issues relating to how the matter was handled by FÁS are the subject of this Chapter and these are:
- the interaction between senior management and the Internal Audit Unit;
- the need to be able to address, without prejudice, issues that are the subject of an ongoing investigation;
- Action taken by the Board;
- implementation of the Recommendations contained in Inv 137;
- specific action taken by FÁS since the presentation of the findings in Inv 137.
INTERACTION BETWEEN SENIOR MANAGEMENT AND INTERNAL AUDIT
Given the nature of the allegations contained in the anonymous letter, the investigation arising therefrom was conducted by the Head of the Internal Audit Unit. That investigation commenced in November 2004. By February 2005, the Investigative Team had concluded that it could not get sufficient evidence to substantiate the anonymous allegations, some of which were of a criminal nature, but it had found evidence relating to breaches of procurement rules which required to be followed up. This was reported on 28th February, 2005 to senior management who approved the continuation of the investigation which concluded in December 2005 and a draft report was given to senior management on 30th January, 2006.
The findings in Inv 137 were extremely serious. Senior management, while anxious to ensure that fair procedures were followed, took issue with the way some of the investigation had been conducted, in particular, the fact that the investigation team had contacted parties outside FÁS (in particular the Independent Newspaper Group) without first informing senior management. The Committee does not accept this criticism of the investigative team and commend the Internal Auditors for conducting their investigation in a thorough manner. Evidence seen by the Committee also shows that senior management gave certain assurances to the Director of Corporate Affairs during the course of the investigation to the effect that the matters being investigated by Internal Audit were procedural and, by implication, not of a serious nature; this should not have happened.
THE NEED TO ADDRESS ISSUES THAT ARE THE SUBJECT OF AN ON-GOING INVESTIGATION
The Director of Corporate Affairs remained in his post during the course of the investigation until he went on sick leave in June 2008. As outlined to the Committee, an individual who is the subject of a disciplinary process is entitled to appropriate fair procedures in the investigation of any complaints. The Committee naturally accepts that this is and, indeed, must be so. However, where an allegation that an employee has undermined the integrity of the procurement processes in an organisation is being investigated, it should be possible, in order to protect public funds, for an employer to put interim controls in place or to give that employee different work, without prejudice, until the investigation is complete. The failure to move quickly and decisively in order to protect public funds, while allegations are being investigated, raises a broad issue for all public sector organisations and will form part of the recommendations of this Report.
IMPLEMENTATION OF RECOMMENDATIONS IN INV 137
The Committee reviewed the implementation of the nine recommendations contained in Inv 137. Whilst many of the recommendations had been accepted by management and were in the process of implementation, FÁS had initially been hesitant in relation to conducting an evaluation of its media spend over the previous three years as the value of such an evaluation was regarded as questionable. The Committee has now been informed that an audit to establish the position of the FÁS brand among key stakeholders had commenced and also that an internal cross-functional group dealing with communications and market strategy group, which is to meet quarterly, had been established. The Committee welcomes the movement by FÁS on this issue.
The Committee notes that the recommendation to split the Corporate Affairs portfolio was not accepted albeit new structures are now in place to ensure the implementation of controls. The Committee also noted that a value for money evaluation of the annual Opportunities event was not accepted but that customer surveys would continue. While the Committee now understands that the annual Opportunities event will not be run in 2009, FÁS should establish the value and appropriateness of such events, especially to the Irish labour force.
SPECIFIC ACTION TAKEN BY FÁS SINCE THE PUBLICATION OF INV 137
In addition to the implementation of the recommendations in Inv 137, the Committee heard evidence that FÁS took the following steps to strengthen internal controls in the Corporate Affairs area:
- the appointment in March 2008 of a financial controller to Corporate Affairs directorate;
- the decisions to undertake audits of the Discover Science Programme and to bring forward the audits of the Opportunities event and advertising;
- the allocation of extra resources to the Internal Audit area to undertake work at 2 above;
- a new “belt and braces” procurement policy being finalised for roll-out in early 2009;
- the undertaking of a further audit of Corporate Affairs, covering the period from 2006 to early 2008. The Committee understands that, arising from this audit, that a decision was taken by the HR Manager in FÁS to suspend from duty the Director of Corporate Affairs.
The audit investigation that led to Inv 137 was comprehensive but lengthy. FÁS senior management were wrong to take issue with the way the audit investigation was conducted. Where serious procedural irregularities arise during audit investigations, some early warning signals need to be put in place where there is a prima facie risk of loss to the organisation. Senior managers should, without prejudice, remove individuals who may be implicated in the findings of investigations. Finally, FÁS has informed the Committee that it has commenced a process that will ensure that stronger controls are in place and this will minimise the risk of a repeat of the irregularities identified in Inv 137.