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Weight of numbers
Sunday, November 30, 2008
The bloated ethos of Fas and the cash-draining waste of its business practices ensured that the Rody Molloy controversy was an accident waiting to happen. Ian Kehoe and John Burke report.

To read financial and regulatory Fas documents is to get an intriguing insight into the inner workings of the state training agency.

It is a picture of rapidly increasing budgets, growing staff numbers, fast-expanding Irish and international training initiatives, and a plethora of advisory boards and committees. Although the country’s workforce has verged on full employment in recent years, the state agency responsible for getting people back to work has seen its budget increase to more than €1bill ion, a 20 per cent revenue hike in a five-year period. Despite the growth in size and scale, Fas remained confident that its financial procedures were robust and its expenditure sound.

As recently as June 28, Fas chairman Peter McLoone was content to confirm the overall health of the agency’s internal financial control system. The agency, McLoone said, had a comprehensive budgeting system, monthly board reviews and regular performance targets. At a board meeting at the end of last year, McLoone and his boardroom colleagues at Fas actually reviewed the effectiveness of the financial checks and balances in the organisation. They were happy to report to government that everything was fine.

‘‘No weaknesses were found in the system of internal financial control,” McLoone told the government in his annual submission, which he signed at the end of June. However, while McLoone was signing his declaration to government, problems were starting to mount. As part of what started out as a routine inspection, the Comptroller & Auditor General uncovered a litany of overspending and procurement irregularities in Fas advertising contracts.

Seeking assurances, Tanaiste and enterprise minister Mary Coughlan picked up the telephone and had a lengthy conversation with the Fas chief executive, Rody Molloy. Week by week, month by month, further damaging details began to trickle out about the inner workings of the agency. Fas, however, said nothing. Calls to the communications office in recent months were routinely batted away with either a ‘‘no comment’’ or a generic statement advising that Fas was committed to best practice.

As a number of public bodies began to investigate the agency, McLoone was still reporting to government that everything was fine. Just a few months later, entirely different noises are emanating from the state agency. Last Thursday, Niall Saul, the head of the audit committee in Fas, told the Dail Public Accounts Committee (PAC) that certain practices at the top level of the organisation were ‘‘fundamentally wrong’’.

Saul said that ‘‘a number of activities and practices’’ in Fas, particularly in its high-spending corporate affairs division, ‘‘constituted failure of control and oversight of expenditure’’. Saul also conceded that there was a failure at executive level to detect these problems. The fact that Saul was forced to field questions at all tells its own story. His boss, Rody Molloy, was scheduled to attend the meeting, but tendered his resignation last Tuesday, as even more details of financial irregularities began to leak out.

The PAC, however, was still hopeful that Molloy would turn up and provide them with some answers. Molloy declined the invitation. ‘‘I find it incredible that people think they can just ride away into the sunset and leave the investigation into the expenditure of taxpayers’ money handicapped,” said PAC chairman Bernard Allen of Fine Gael. It was a bad end to a dreadful week for Molloy, who had managed to avoid the shrapnel as the controversy rumbled on over the past few months.

But last Monday, Molloy went on RTE Radio’s Today with Pat Kenny, putting himself directly in the crosshairs. Within 48 hours, Molloy was out of a job, while the politician who once oversaw Fas, current Minister for Health Mary Harney, had been engulfed in the seemingly never-ending farce over who paid for her wash and blow-dry in a Florida hotel in 2004. Harney’s follicular faux pas was one of a litany of unusual expenses racked up by Fas management and their entourage on a series of costly transatlantic trips. More than €642,000 has been spent on flights to North America since 2003. Out of 11 trips, Molloy was accompanied by his wife on five occasions, paid for by Fas.

Trips to Florida centred around Fas’s involvement in a €1.5 million venture called the Science Challenge, which gives young Irish students access to the US space agency Nasa, in Cape Canaveral, as well as to aeronautical industry experts. Molloy and Harney were not the only people in Florida meeting and greeting. Corporate affairs director Greg Craig took ten flights to the US. One 2004 trip to Orlando for Craig and his wife cost €9,648. Serious sums of money were spent on hotel room movies, golf courses and meals.

There was a €6,962 dinner in the Merrion Hotel, Dublin, for 33 people in June 2006,understood to have been held in honour of visitors from Nasa. The tip paid by Fas after the dinner came to €908. Molloy took to the airwaves to defend the spending, but only succeeded in talking himself out of a job. His scalp, however, might not be enough. The list of issues which Allen and the PAC are examining is long and quickly growing.

The name that keeps popping up is Greg Craig. The PAC’s inquiries relate to the findings of a special internal audit inquiry into expenditure and other matters at Craig’s former corporate affairs division at Fas.An internal audit uncovered alleged breaches of financial controls in his division over a number of years. Corporate affairs was criticised by the Comptroller& Auditor General, which said the agency was failing to achieve value for money in its dealings with its principal advertising agency.

It also said that funds had been misdirected from a major website project. As the pressure mounted, divisions began to emerge in the upper echelons of Fas. When he first obtained the internal audit into the division, Molloy went on the defensive and criticised parts of it. Saul, head of the audit committee, wrote back to reject each of its criticisms in turn.

Earlier this month, Molloy told the PAC that legal reasons prevented him from saying why a senior internal audit official at Fas, Terry Corcoran, was moved to another position after completion of the internal audit report. Allen and the PAC are not the only ones asking questions. The Tanaiste has instructed the Comptroller & Auditor General to conduct a thorough investigation of the entire agency, while the Garda Siochana has requested files, documents and statements from Fas executives. Given the size of the agency, all investigations will be lengthy. Fas is a mammoth organisation with literally hundreds of functions, divisions and training programmes.

Its annual budget dwarfs most other state agencies - and even a number of government departments. Its income in 2007 increased from €974 million to €1.07 billion. Almost all the money came from the state, directly from the exchequer and the National Training Fund, which advanced €363 million. Its accounts showed that staff costs came to €131 million for the year, while a further €30.5 million went towards meeting pension contributions. The staff travel and subsistence bill for the year came to €5.6 million, broadly in line with the figure for the previous few years, while €198,000 was paid in fees and expenses to board members.

Some 56 per cent of the overall budget, or €592 million, was for training allowances and payments to Fas participants. The largest scheme was the community employment scheme, which had a bill in 2007 of €357 million. Overheads amounted to €49.3 million, about 4.6 per cent of the overall budget. When all the expenditure was taken from its overall income, Fas actually recorded a surplus of €5.7 million last year, reversing a deficit of €572,000 for 2006.

Fas has a range of advisory boards which complement the main board. There is a 23-member National Apprenticeship Advisory Committee, a 19-person Advisory Board for the Construction Industry, a 16person committee advising on disability, and an employment services committee with 13members. There are 12 people on the national Advisory Board for Engineering, 10 members of the Excellence Through People committee and another 12 people providing advice through the National Advisory Board for Film and Television.

The operational structure is heavy and complex. Below the director general, there are seven assistant director generals overseeing different areas of the organisation. There is also a regional network, with senior officials taking charge of eight designated regions. There are 66 offices and 20 training centres around the country.

It is likely that the Comptroller & Auditor General will spend much of his time in the coming months visiting many of the offices and finding his way through the complex organisation and financial structure. Molloy might have fallen on his own sword last week,but the real investigations into the high-spending agency are still to come.

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