Fás auditor's version at odds with CAG's report

A letter that has recently come to light raises disturbing questions about how Fás was run and a CAG report on the issue

TWO IMPRESSIONS, neither of them comforting, spring from the lengthy letter from the former Fás internal auditor that has been published by the Dáil Committee on Public Accounts (PAC).

On the one hand there emerges a picture of the former director general of Fás, Rody Molloy, countenancing inappropriate expenditures while at the same time resenting inquiries from internal audit.

Secondly there emerges a picture of a Comptroller Auditor General (CAG) who reports on troubling lapses in Fás while seemingly pulling his punches.

Terry Corcoran, who remains an employee of Fás and who wrote to the PAC in his personal capacity, was director of internal audit at Fás in the period December 2005 to March 2007.

In that role he took charge of an inquiry into the Corporate Affairs division of the training authority, which had been initiated following the receipt of an anonymous letter detailing various serious charges.

His purpose in writing to the committee was to express concerns about a recent report on Internal Control and Governance in Fás, produced by the CAG, John Buckley, and being considered by PAC.

Corcoran focused on a short section or “summary box” of Buckley’s report in which he dealt with the “timeliness” of the internal audit inquiry.

Mr Corcoran said the inquiry involved outside parties and allegations that were “highly sensitive” and that the level of interest from and contact with senior management was “unprecedented”.

Most of the contact was with the assistant director general, corporate services, Gerry Pyke, but there was also contact with Molloy. Corcoran said internal audit was aware that adverse findings might reflect unfavourably on both men.

The inquiry, begun in November 2004, was “effectively completed” in June 2005, according to Corcoran.

The completed report was sent to Pyke on May 19th, with a request for a response within 15 days. It was standard practice to seek such a response from the person managing a unit covered by a report. The deadline was not met and this interfered with internal audit’s ability to forwarded the report to the CAG, as was standard practice.

Also, before the report could go to the CAG, it had to be reviewed by the Audit Committee of the Fás board, chaired by Niall Saul.

Molloy wanted the report to be split into two before he and Pyke would respond, but Corcoran was against such a move. Molloy said he would only deal with the matter in the context of a full meeting of the audit committee. This occurred in October 2006.

The arguments for both sides were put to the audit committee and it adjourned to consider the matter. It was early January 2007 before Molloy was told the committee thought the report should remain as a single report.

Corcoran said these events were known to Buckley but left out of his report. He said this was “remarkable”.

“The facts are that a properly constituted audit committee, a statutory subcommittee of the board of a non-commercial State-sponsored body with an annual budget of almost €1 billion, was faced with a refusal by the chief executive to respond to a major investigation report.

“As far as I am aware, this was an unprecedented event in the governance of the Irish public sector. Yet, in a report specifically devoted to internal control and governance in Fás, the CAG remains silent on these matters.”

Molloy gave his response to the report in February 2007, in which he made critical allegations about internal audit’s conduct of the inquiry. Internal audit responded to the criticisms; the board committee, in a letter to Molloy, rejected the criticisms he had made.

Two weeks later Corcoran was told by Molloy that he was being moved, and that the decision had nothing to do with the Corporate Affairs inquiry.

Corcoran, in his letter, said all these matters had not been reflected in Buckley’s report to the PAC. “Essentially, the CAG’s account obscures the main governance issue that arose, the response of senior management to internal audit’s conduct during the investigation and whether this amounted to interference.”

This gave credence to “the false impression” created at times by management, that internal audit was slow in its work.

Corcoran then listed some of the matters that have been the subject of much media attention and which in the end brought about Molloy’s resignation: breaches of purchasing procedures; expensive foreign travel; the use of credit cards; and expenditure on football matches and concerts at Croke Park, along with expensive hospitality.

All of this was approved by Molloy, Pyke or the Corporate Affairs department, Corcoran said, and occurred during the period when Molloy and Pyke were having their interactions with internal audit.

“Despite this, the CAG’s report gives little systematic consideration to top management behaviour taken in the round, and the question of whether the various problems identified within Fás were to do with culture at the top rather than more widely across the organisation.”

This failure to be precise about the location of the problem, Corcoran said, was unfair to the majority of management and staff at Fás, who had no knowledge of the expenditures covered in the CAG’s report.

The internal audit report was eventually given to the CAG and resulted in five pages being devoted to Fás in a more wide-ranging report on public bodies. There was nothing to indicate the CAG intended to take the matter any further but Freedom of Information requests from The Irish Times and Fine Gael’s Leo Varadkar led to details of the internal audit report being made public.

The ensuing controversy led to PAC hearings, disclosures about foreign travel, Molloy’s resignation, the introduction of new legislation and the appointment of a new Fás board.

Buckley, when asked for a response to Corcoran’s letter, said in a statement to The Irish Times that there was essentially no conflict between what was set out in his report, and in Corcoran’s letter.

“Because much of the detail he quotes had already been the subject of discussion at the PAC, only the important milestones relating to one prolonged investigation were included” in his report, he said.

He said the focus of his office was on the content of the internal audit report, and not on management’s stated concerns about the report. He said he has subsequently published reports that he is satisfied deal “exhaustively” with the public accountability of Fás “and that any issues of personal accountability will fall to be considered by Fás under its disciplinary procedures”.

He said that, overall, his reports are in no way critical of internal audit.