Special Report 78: Matters Arising out of Education Audits Press Release   5 June 2012

The Office of the Comptroller and Auditor General has today published a report on certain matters arising out of audits in the education sector. The report was completed by the former Comptroller and Auditor General, Mr. John Buckley, prior to his retirement in February 2012.
The report deals with a range of matters, including
  • the management of resources in third level education institutions
  • reporting and governance issues concerning subsidiaries and foundations of third level institutions
  • an update on certain remuneration and accountability matters raised in a previous special report published in September 2010.
The key conclusions are as outlined below.
Resource Management
At the end of the academic year 2011, it is estimated that the total cash on hands across all third level education institutions was in excess of €700 million. The report concludes that it may be worthwhile reviewing the State’s wider treasury management policy and considering the merits of providing for a sweeping up of surplus funding in third level institutions and other State bodies.
Many third level education institutions receive concession fees from commercial banks in return for the right to deliver banking services on campus. The amount received across the sector in respect of recent academic years averaged around €10 million. The practice has evolved of assigning revenue from bank concessions for a range of current and future development activities. The report concludes that there would be merit in a review of the application of such concession income across the sector so as to ensure that there is an agreed State policy covering its use in accordance with wider education objectives. 
Funded pension schemes in five universities closed to new entrants in 2005. From then on, new staff joined a university ‘pay-as-you-go’ model pension scheme. The Higher Education Authority (HEA) has historically included an additional 15% of salary costs, by way of an employer pension contribution, in the annual core funding provided to universities. Although the normal practice in respect of ‘pay-as-you-go’ model schemes is that employer contributions are not made, the HEA has continued to pay the additional 15% in respect of staff covered by the model schemes. These payments represent an advance of funding in excess of current requirements.
An Employment Control Framework introduced in July 2009 succeeded in reducing staff numbers within the third level education sector by over 7%. However, the terms of the Framework were breached when Trinity College Dublin promoted 27 academic staff with effect from 1 January 2011.
A number of instances have come to light where procedures were breached in relation to transactions administered through the President’s Office at Waterford Institute of Technology. The report concludes that the Institute, the HEA and the Department of Education and Skills have taken appropriate steps since the matters were surfaced.
Subsidiaries and Foundations
Many third level education institutions have established subsidiary companies, which typically provide campus services such as catering, accommodation and sporting facilities. While universities produce consolidated financial statements incorporating the results of subsidiary companies, some institutes of technology do not. The report concludes that to ensure transparency and comparability, it would be desirable for institutions to adopt a consistent approach to reporting the results of subsidiaries.
At Waterford Institute of Technology, a wide range of campus services is provided by a group of companies but the results are not consolidated in the financial statements of the Institute. The HEA has requested the Institute to review the position and submit proposals for any necessary changes in corporate governance.
At Dublin City University (DCU), the results of eleven subsidiary companies are included in consolidated financial statements. Three DCU subsidiaries had accumulated substantial losses by September 2009. The balance sheets of two of the subsidiaries were repaired at September 2010 through capital contributions from DCU totalling €9.8 million. The University has committed to providing €100,000 per annum for 19 years to meet a funding shortfall for the other subsidiary.
Foundations are often established with the aim of raising philanthropic funding for associated third level institutions. However, given the lack of discretionary income available to foundations, it is common practice for the institutions to provide funding or other support to their respective foundations. It would be desirable to ensure that transfers from third level institutions to foundations are reported in a transparent manner and only occur on the basis of a demonstrated business case.
Remuneration and Accountability
Special Report 75, published in September 2010, reported on payments in excess of entitlement which had been made to senior university staff.
The results of a detailed follow up review carried out by the HEA show that estimated payments to senior university staff over the period June 2005 to February 2011 were of the order of €8 million in excess of ministerially approved rates. Some individual cases are subject to ongoing discussion between the HEA and the universities concerned. The Department has indicated that, once the discussions are finalised, the HEA will take steps to reallocate or attach conditions to the use of an appropriate level of funding in each university.
A backlog in the production and audit of university financial statements, also noted in Special Report 75, had been virtually eliminated by February 2012.    
Notes for editors
For further information about the report, please contact Maureen Mulligan at (01) 6031020 or at Maureen_Mulligan@audgen.irlgov.ie