Serious governance failures at CIÉ uncovered


BUSINESS OPINION:CA&G should look at relationship between CIÉ and Department of Transport, writes JOHN McMANUS

SO THE Public Accounts Committee is to take up the cudgels on the taxpayers’ behalf and investigate the waste, inefficiency and other issues highlighted by the report of the Auditor and Comptroller General.

One suspects the committee will engage in the usual self-serving theatrics, but if they really do want to do the taxpayer a favour they could take a look at the rather peculiar relationship between CIÉ and the Department of Transport, as revealed in the C&AG report. Given that CIÉ got a €315 million subvention last year, it’s worth a look.

One of the areas the C&AG is charged with looking at is the management of State bodies. In his most recent report he decided to look at “progress in establishing mechanisms to supervise the performance of State bodies and confirm their adherence to governance norms”.

This was done by picking two departments with oversight of a significant number of State bodies, namely the Department of Transport and the Department of Communications, Energy and Natural Resources (DCENR). They then chose a State body in each department, CIÉ in the case of Transport and the National Oil Reserves Agency in the case of DCENR.

It was not CIÉ’s lucky day. The C&AG found plenty to concern it when it pulled back the covers on how the State transport company interacts with its shareholder.

One of the issues the C&AG was particularly concerned about was the extent to which bodies such as CIÉ – which are funded and capitalised by the State – report material problems to their line department.

Its trawl through CIÉ threw up a textbook example of when this should have been done and wasn’t. It was so good, the C&AG decided to give it a panel all of its own in his report. The issue was the failure of Iarnród Éireann to follow infrastructural procurement procedures and internal controls. The issue was so serious that CIÉ deemed that it merited an investigation in 2009 by external consultants Baker Tilly Ryan and Glennon. However, it did not think it worth keeping the department in the loop about the problem and more seriously, the executive chairman of the company, John Lynch, did not mention the issue in his annual statement on compliance by the company to the department. When tackled on the issue Mr Lynch acknowledged his mistake and explained that “as the issues arising were being dealt with, he felt that there was no need to make specific mention in that regard”.

The Minster only became aware of the problem when it broke in the press and the resulting hullabaloo meant that he was all over it like a rash. Lynch and the CIÉ board were duly hauled over the coals and the problem addressed.

But the real problem – the failure of the CIÉ board and its executive chairman to disclose what at the very least was an embarrassing problem that did not reflect well on them – to its shareholder is not so easily fixed.

It might be possible to dismiss the issue as a once off, but for the fact that the C&AG’s limited enough study found other serious governance failures.

According to the report CIÉ was a month and a half late submitting its unaudited interim accounts to the department in 2009. It was also late with its draft unaudited annual accounts and over two months late in the submission to Government of its annual report and accounts.

The other issue raised by the C&AG was the failure of Lynch to submit his chairman’s report for 2009 under the 2009 Code of Practice for the Governance of State Bodies. He submitted it instead under the older 2001 code of practice and when requested to resubmit it under the new code, he did so in July 2010.

When you take all this together the picture that emerges of CIÉ is that it is some sort of independent fiefdom, rather than an organisation that treats its relationship with the department with the seriousness one might expect. It’s not surprising. The company long ago stopped publishing its results and accounting in public for how it spends annual subsidies in the region of €315 million.

It now appears that the department and the Ministers are treated with similar disdain.

It’s very hard to imagine shareholders in a public company tolerating a decision by its executive chairman and board to brush an inquiry into €2.3 million worth of purchasing irregularities under the carpet.

Likewise an executive chairman and board that failed to deliver accounts to shareholders on time would be quite quickly out of a job unless there was a satisfactory explanation. Equally, the laissez-faire attitude to compliance indicated by the use of an out-of-date code of governance is unlikely to be tolerated in a well-run public company.

The fact that CIÉ is a State company really shouldn’t make any difference but apparently it does.