Charitable status of €450m ‘in-house’ State agency queried

Government departments are not obliged to seek tenders from "in house" State agencies for contract work, Minister for Children Katherine Zappone has said, even though an internal audit questioned the legality of such practices.

Ms Zappone was responding to Independents4Change TD Mick Wallace who questioned the awarding of contracts to not-for-profit agency Pobal.

The company, which has an annual expenditure of more than €450 million, is registered as a charity and disburses EU and Government funding on behalf of various departments.

Mr Wallace said that in 2016 Pobal distributed €204 million on behalf of Ms Zappone’s department. “Even though Pobal is a State agency it does not do this work for free and charges a fee. They were paid €13.5 million in 2016 for this work. They’re supposed to be a not-for-profit charity.”

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The Wexford TD also queried the agency’s charitable status and said he had written to the charity regulator, which said it would examine charities which are statutory bodies.

Ms Zappone said a review of the structure of Pobal’s charitable status would be undertaken.

Mr Wallace pointed to a 2014 internal audit carried out by the Department of Children on its Early Childhood Care and Education scheme, which Pobal disbursed funds for. He acknowledged this was before Ms Zappone’s appointment.

‘Worrying’

The audit was “pretty worrying”, he said. The auditors understood the department employed Pobal without a tender process and this approach had not been formally justified.

“The audit authors went on to state they did not know whether if legally challenged, this contract with Pobal would be in line with EU directives”.

He said that “from a business point of view it seems unlikely that best value is achieved by dealing with one supplier without the benefit of a competitive tendering process”.

Ms Zappone said legal advice sought by Pobal’s parent department “has indicated there is no obligation on Government departments to tender the contracts or arrangements made with Pobal for the management of funds”.

She added that this reflected the Teckal principle of EU procurement law “which states that open advertising and tendering rules for public contacts do not apply where a public body obtains services from in-house sources”.

Ms Zappone stressed that Pobal “has provided an important flexible and responsible service to our department”, but added that they would be conducting a review “as our budget increases and as we continue to work with Pobal”.

She stressed that “we are following legal processes which are in consonance with the law”.

The Minister told Mr Wallace he was raising “important issues” and “at an opportune time”, which needed to be examined.

Pobal states on its website that it aims to improve outcomes for people suffering disadvantage or social exclusion.