Questions on Globalisation Fund at Public Accounts Committee

Secretary General of the Department of Education and Skills Brigid McManus is questioned about "maladministration" in the Globalisation Fund by members of the Public Account Committee on Thursday, 9 February 2012

Deputy Mary Lou McDonald:    The Chairman is possibly correct. I understand four separate applications have been made to European Globalisation Adjustment Fund in respect of Waterford Crystal, Dell, SR Technics and a large cohort of construction workers. Due to what has been described as maladministration by the Department, a substantial part of the fund is to be returned. How much of the €60 million allocated to the fund is to be returned and how does Ms McManus respond to the charge of maladministration?

Ms Brigid McManus:  I do not accept there was maladministration. It is the Minister’s word and I do not accept it. What he was referring to as maladministration was that he was concerned that at a stage national announcements, and in some cases EU announcements, were being made about availability and our system of communication with local FÁS and social welfare offices was not sufficiently efficient to ensure people on the ground knew what was happening. I would not accept this as maladministration. Maladministration is-----

Deputy Mary Lou McDonald:    What is it then?

Ms Brigid McManus:  It depends; there were issues, as the EGF is a very complicated system at European level. It is not the easiest system to operate and many countries have had difficulties with it.

Deputy Mary Lou McDonald:    I accept that.

Ms Brigid McManus:  I deal with the European social fund and I spent a considerable period of my career dealing with the ERDF and other EU funds. I managed the national development plan from 1994 to 1999 at the Department of Finance and the EGF is more complicated than most I have seen.

There is no doubt there were things we did not do. There was a learning curve, and there were things we did not do well. We have changed many of the processes, for example with regard to TalkTalk which we are working on now, and changed the way we engage and design programmes. It is complex to administer and we could have done things better in the first couple of cases but this is part of a normal learning curve in administration.

The Deputy asked about money. The way the EGF works is one makes an estimate of how much one thinks one will draw down under a particular set of design measures. Effectively, one is in a range of what one thinks one will achieve. In other words one takes the number of workers, makes an estimate of the number of interventions and the money, and one estimates the programme. If one does not come up to the full expenditure - this is how it differs from other EU funds - one then returns the money but if one makes a wrong estimate because one estimates a certain number of interventions and estimates the programme at the lower end of the range one has no capacity to ask for more. Naturally if one looks at a range of what one thinks one will use one will always go for the upper end of what one thinks one will use because there is no penalty from an EU point of view.

Deputy Mary Lou McDonald:    What exactly are you driving at? Was the estimate €60 million?

Ms Brigid McManus:  With regard to the programme allocation for Dell, Waterford Crystal, SR Technics and three subsets in construction I have a table I can provide to the Deputy. A total of €22.8 million was allocated for Dell, €3.955 million for Waterford Crystal and €11.455 million for SR Technics. This is probably the €60 million. With the three construction subsets it amounts to €93 million as they amount to €19.5 million, €33.3 million and €2.1 million. This means the programme allocation is €93 million and the EGF receipts associated with this at a 65% rate are €60.589 million.

Deputy Mary Lou McDonald:    How do you account for the difference?

Ms Brigid McManus:  Those figures are in respect of the EU aspect. Of the €60 million, to take Dell where the allocation was approximately €14.8 million, there was a spend estimate of €22.8 million, of which an EU receipt would have been €14.8 million. We spent €13.6 million rather than €20 million. Therefore with Dell we spent approximately 60% of what we estimated we would spend. With Waterford Crystal it was 78% and that is just about finalised now. We do not have estimates for the others because they are still ongoing.

Deputy Mary Lou McDonald:    If in the case of Dell 60% of the estimate was spent, what happened to the-----

Ms Brigid McManus:  We will draw 60% of the EGF receipts allocated to it.

Deputy Mary Lou McDonald:    I understand, but what I am asking is why 100% of an allocation from the globalisation fund was not spent.

Ms Brigid McManus:  We overestimated the amount of programmes that would be drawn on. In the Dell case we estimated more would take up higher education programmes so there was a significant underspend in this area. Further education and training was broadly drawn up but not as many people took up training and education on offer. The breakdown in the estimate of how much we used in higher education as opposed to further education was different to what we estimated.

Deputy Mary Lou McDonald:    So what you are saying, in plainer language, is that the spend returned to the European Union is as a consequence of workers in the respective sectors not taking up various opportunities. Is that the case?

Ms Brigid McManus:  What I am saying is that in designing it, and this is probably where some of the lessons about this have been learned, there was not sufficient engagement to identify the interventions needed. There is very tight timeframe for making applications, so for example with TalkTalk, which is the latest case we have-----

Deputy Mary Lou McDonald:    I want to concentrate on the four-----

Ms Brigid McManus:  What I am saying is that we are sitting down with people and asking what exactly they need and establishing how much it would cost. This will enable us to put in a more accurate application. The application put in was not as accurate as it should have been.

Deputy Mary Lou McDonald:     Ms McManus, if I understand the globalisation fund correctly, funds are sought in respect of identified individuals. Is this correct?

Ms Brigid McManus:  That is right, yes.

Deputy Mary Lou McDonald:    Are you telling me that in making your calculation on Waterford Crystal, Dell, SR Technics and the three categories of construction workers, this type of consultation with those workers did not take place? Is this what you are saying?

Ms Brigid McManus:  It probably did not. The timeframe of putting in something was such that there probably was not enough identification of needs. It is easier in a----

Deputy Mary Lou McDonald:    I am asking a very direct question. Did consultation happen or did it not?

Ms Brigid McManus:  There was some consultation but it probably was not specific and identified enough to develop a programme.

Deputy Mary Lou McDonald:    In the case of construction workers-----

Ms Brigid McManus:  A sectoral application will always be somewhat different because it will be national so one will always be in the space of making more estimates. Particular issues arose with regard to the construction application because it was the first sectoral application we made. We put in a full application across the entire sector and the Commission wanted it broken down by specific NACE codes and we have trouble identifying some of the workers and employers by NACE codes because of how our redundancy system captures the material. The ability to engage on direct identification of need prior to submitting an application as opposed to engaging after an application has been approved will always be more difficult in a sector-wide application than if one is looking at a particular factory.

Deputy Mary Lou McDonald:    Despite the fact it was a sectoral application, there was still the same requirement to identify identifiable workers in respect of the fund draw-down. Am I correct to state this?

Ms Brigid McManus:  Yes, that is right.

Deputy Mary Lou McDonald:    To summarise, an application was made to the tune of €93 million.

Ms Brigid McManus:  Different applications were made.

Deputy Mary Lou McDonald:    I am giving the global figure. This was made with regard to identifiable sections of workers. A chunk of the money has been returned because according to Ms McManus there was not sufficient take up in respect of different initiatives.

Ms Brigid McManus:  And we may not have designed initiatives.

Deputy Mary Lou McDonald:    I am summarising here Ms McManus. Ms McManus is also telling us the individual identification of workers for the purpose of consultation for a correct design did not happen. Ms McManus rejects the charge of maladministration. I must put it to her that this sounds to me like a case of maladministration in respect of a very valuable fund on which many people who lost their jobs were relying. I imagine that anyone in that position and who has just tuned in will be alarmed to hear that the State is returning moneys to the EU because the system was incorrectly designed at a time when people desperately needed retraining and upskilling. It sounds like maladministration. Ms McManus is the Accounting Officer and it occurred on her watch.

Ms Brigid McManus:  I do not accept that it was maladministration. I accept that we did not manage it as well as we might have. It did not all occur on my watch, as it started in the then Department of Enterprise, Trade and Employment, but I will not resile from it. Whenever one starts a new scheme under a complex piece, one will get some elements right and others wrong. For example, had we as administrators taken the most risk-averse action, had I made a safer application of half of the actual one and had the spend proved greater, the committee would be asking me questions about why I did not make a higher application.

Deputy Mary Lou McDonald:    With respect, Ms McManus understands that is not my suggestion. This is a matter of public interest and a topic for the committee. I query how the scheme, instead of having its maximum use facilitated, fell short due to a form of maladministration, to use the Minister’s term, leading to moneys being returned to the European level instead of being put to productive use in Ireland. To me, this is maladministration. Perhaps we will not agree on the term.

I am conscious of my time. To conclude on the issue, who within the Department other than the Secretary General is responsible for the European Globalisation Fund, EGF? What conversation did the Secretary General have with said person or persons about the fund and the return of moneys from this jurisdiction to Europe?

Ms Brigid McManus:  A section that is part of the skills division manages the EGF. There is ongoing monitoring. As the Deputy is probably aware, we have submitted for public consultation a review document on how this matter has been handled in each of the measures that have been managed to date. The intention is to consider the further improvements that can be made. We are often benchmarked against other countries. It is fair to say that, in terms of our programmes and the percentage of spend thereon, we compare reasonably favourably with the percentage spend draw down of other countries.

Deputy Mary Lou McDonald:    What about the returns?

Ms Brigid McManus:  Up to 97% of a few programmes in other countries have been returned to the Commission. The nature of the programme is such that one is in a position to make estimates. We are providing normal programmes with a top-up and using it to draw down EU money to help with the costs of those programmes, which we are providing for the unemployed out of scarce Exchequer resources.

Deputy Mary Lou McDonald:    The purpose of identifying in a systematic way the workers concerned is to make the best use of those resources. Failing to carry out consultation in the most thorough manner represents a failure in administration. I wish to ask a further question.

Chairman:    Before the Deputy does, I wish to raise a point of information. In terms of the figure of €93 million, the analysis was carried out by the skills division, which was located in the Department of Enterprise, Trade and Employment at the time. Is this correct?

Ms Brigid McManus:  Some of the applications were made when it was in the Department of Enterprise, Trade and Employment. The last application in question, which was the full construction application, was made just as the division was transferring to my Department. We needed to resubmit it because the Commission subsequently stated that we could not make an aggregate construction application of that type. It was the first time that type of application had been made. The Commission preferred us to split it into three. The three formal applications into which the aggregate was divided were made under our Department, but the original Dell-Waterford Crystal-SR Technics application was made by the Department of Enterprise, Trade and Employment.

Chairman:    The Secretary General’s Department inherited it.

Ms Brigid McManus:  Yes.

Chairman:    For the sake of clarity, the skills division was transferred from the Department of Enterprise, Trade and Employment to the Secretary General’s Department.

Ms Brigid McManus:  Yes. Some of the people were then transferred onwards to the Department of Social Protection, as the responsibilities were split in two.

Deputy Mary Lou McDonald:    I have a final question on this issue. Are there workers, particularly construction workers, in respect of whom an application for funding was made in the absence of their knowledge?

Ms Brigid McManus:  The application was made for named workers without any advance consultation with workers. Since one does not know to what extent people will be deemed eligible, one gives the Commission an estimate of the employees that fall within the period. There is a rather complex iterative process in which the Commission tells us it does not regard one type of employees as being covered in, for example, the construction NACE code, so we take those employees out of the application. Waterford Crystal, SR Technics and Dell represented a type of specific employment with specific companies and their named workers were aware that we were submitting applications.

Deputy Mary Lou McDonald:    It was more straightforward.

Ms Brigid McManus:  Sector-wide applications are difficult. To be honest, one wonders whether one should make them at all, but we need the money.

Deputy Mary Lou McDonald:    I can understand the toing and froing. At the end of the iterative process, were there individuals in respect of whom applications were made who were unaware that they fell within a specific cohort?

Ms Brigid McManus:  Following what was, for many reasons, a protracted process and the approval of the Commission, the managing authority issued letters of notification to the 8,779 eligible construction workers with home addresses in the State. These letters drew their attention to what was available to them.

Deputy Mary Lou McDonald:    Did they all participate?

Ms Brigid McManus:  No. Some had moved on, given the delay. We set up a dedicated construction contact centre to provide telephone and online information and support facilities and to make referrals to other service providers. The Minister referred to the case of construction. We made leaflets and information available in every employment service and social welfare office. Our new website went live in December and provides information on the programmes. We have some money available in training grants for people who do not want to get into the main public service programmes. These can be applied for through the website. We have contracted WRC Social and Economic Consultants Limited, which did work for us in respect of Waterford Glass, to handle the management information end. We have a central helpline in FÁS.

While the Department managed it, we had steering committees for the Dell, Waterford Crystal and SR Technics cases. In Dell’s case, the local steering committee was chaired by the FÁS regional manager. In the case of Waterford Glass, the city manager chaired the committee. Each steering committee manages some of the interaction, but there is a dedicated centre for construction. We have tried, in terms of website access and so on, to make it easier for people to access some of the information on construction.