Fás internal audit report raises serious concerns

Worrying practices were uncovered by an inquiry into control systems within a Government agency, writes Colm Keena

INTERFERENCE IN the employment practices of an advertising agency with which it has agreed a valuable temporary contract; seeking to use its advertising spend to influence newspaper coverage of its affairs; sudden temporary jumps in the amount it pays for a recurring annual service; and the setting up of a website without consulting its own internal IT department.

These are just a few of the items listed in an internal audit report written by three senior figures within Fás following a year-long inquiry. The period covered by the report stretched from 2000 to 2004. Although the audit work was completed in December 2005, the final report was not copied to the Fás director general, Roddy Molloy, until May 2006.

A copy of the report was released to The Irish Timesunder the Freedom of Information Act. Whole sections of the report are blacked out, but the bits that were released raise very serious concerns about control systems within a Government agency with an annual budget of €1 billion.

The audit inquiry included not just internal interviews but also interviews with parties who supplied services to Fás, the training and employment authority. As a result of what was discovered, information was passed to gardaí in June 2006.

According to Fás, the Garda inquiry is ongoing.

At the centre of the whole affair is the apparent freedom with which the director of corporate affairs at Fás, Greg Craig, engaged contractors to work for Fás and spent Fás money. Attempts to get a comment from Craig have been unsuccessful.

Solicitors acting on his behalf wrote to The Irish Timesthis week complaining that its coverage of the story failed to mention "an assessment by Fás of its internal auditors report which concluded that the report was flawed and seriously deficient".

A spokesman for Fás said no such assessment had been made by Fás and that it stood over the internal auditors report.

As various spokespeople for Fine Gael have fairly pointed out in the past week, an arguably more important issue than the apparent breach of guidelines and rules by Craig is the apparent failure of senior Fás management and its board to put in place structures that would have provided more oversight. Indeed, a series of changes introduced by Fás since the internal audit inquiry are an implicit acceptance that structures were not as they should have been.

In defence of Craig and Fás, it should be said that it is not the first, and won't be the last, public body to circumvent public procurement guidelines, which many have complained can be restrictive and make it difficult to get things done.

However, the matters detailed in the audit report go beyond what could be considered an understandable breach of the rules and illustrate an example of an executive with a large budget operating without sufficient oversight.

For instance, the report found that in 2004 Craig made direct approaches to an advertising firm which was appointed to carry out work for Fás and sought the appointment of specific staff to the firm. A person who had worked on the Fás account with the previous advertising firm that had worked for Fás, was among those recommended to the new firm by Craig.

In relation to one person, according to the report, Craig even "appeared" to have played a role in relation to the person's terms of employment and financial package. Craig accepted that he had also requested that certain staff not work on the Fás account.

"The commercial reality of this situation is that an agency, which has just been awarded a highly valuable temporary contract, and has the opportunity to win that contract on a permanent basis, is most unlikely not to recruit staff that are suggested/recommended by the client. In the view of Internal Audit, Mr Craig would have been aware of this commercial reality."

The report also looked at the relationship between Fás and a firm of accountants and business consultants that had done a considerable amount of work over the years for Fás.

It found that Craig had a "conflict of interest in the award of work" to this firm as he had been provided with financial advice on personal matters by someone associated with the firm with whom he had a social relationship.

The report found that this firm was granted "unusually generous conditions on their contracts with Corporate Affairs through up- front payment of invoices". Also, during 2003, the fee paid to the firm for particular work "was doubled without any reasonable explanation. The output from this work did not appear to match the cost."

The report looked at the Fás Opportunities fairs, which involve significant expenditure. It found that in some instances awards were made without "real competitive tendering" and that "contractors were aware that they were getting the work before they tender".

The audit formed the view that one business had been awarded a contract to do with the event for every year since 1995 "on the basis of familiarity".

In another instance, Fás signed a sales contract that included incentive payments after the event and the sales were completed.

Someone who appeared to have taken part in planning meetings prior to being awarded a contract was paid £250,000, a fee that seemed "very high when compared to those awarded" for the same contract on previous and subsequent years.

In a rare instance of tentative finger-pointing upwards, the report stated: "The level of annual expenditure associated with Opportunities events has been very high. Much of the decision-making associated with the awarding and pricing of contracts for elements of the event remain under the control of Corporate Affairs. The board of Fás has not played a role in the approval of this large expenditure. In addition, there has been no independent evaluation of the value for money that the event represents to Fás."

The report detailed how Craig dealt directly with newspapers when booking advertising for Fás campaigns, even though this was among the duties covered by the contract Fás had with its contracted advertising firm. When asked about it, Craig - who had responsibility for PR as well as advertising and the procurement of related services - justified the practice on two grounds.

"Firstly, the ability to be seen to have a media spend could potentially influence how Fás was portrayed in the newspaper or magazine in question." The second ground was that Craig felt he could obtain substantial reductions on the standard rate card amounts.

"From an ethical viewpoint, it would be questionable for Fás to use its substantial advertising buying power to ensure that newspapers and magazines are positively disposed towards the organisation in the event of a negative story emerging about Fás," the report stated.

When asked why the Lucan and Blanchardstown Gazette, now owned by The Irish Times, was selected for advertising, Craig claimed he was requested to place the ads with the newspaper by the Fás director general. The director general denied this and Craig later withdrew the remark.

The report found that Craig contracted out work on a new website, Jobs Ireland, without first consulting the Fás IT department and despite the fact that Fás already had a website.

The report said that while Craig and his department "were under some pressure to deliver the overseas jobs fairs as part of Jobs Ireland, it should have been possible to meet their web requirements from internal Fás IT resources".

The audit team estimated that €1.7 million was spent on the new website. "Fás probably paid €1 million more than should have been the case." The board was never informed of the cost of the external development of the Jobs Ireland website, the report said.

The company awarded a contract to manage the Jobs Ireland programme was incorporated 10 days before getting the contract. It was paid €3.55 million in the first 12 months after the date of its incorporation.

The finance department within Fás is working on a plan aimed at ensuring that all staff engaged in procurement are aware of their responsibilities and of how compliance will be monitored by Fás. The plan is due for delivery next month.

Craig declined to comment this week.