Oireachtas Joint and Select Committees
Thursday, 27 February 2014
Public Accounts Committee
Payments to Section 39 Companies: Discussion
10:05 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are dealing with payments made by the Health Service Executive to the Rehab Group under section 39 of the Health Act 2004, the operation of the charitable lotteries scheme and payments made to the Rehab Group from the Vote of the Department of Justice and Equality and payments made by SOLAS to the Rehab Group for the provision of specialist vocational training.
Before we begin, I remind members, witnesses and those in the Public Gallery to turn off their mobile telephones as the interference from them affects the sound quality and transmission of the meeting. I also ask members to keep their mobile telephones away from the desks and microphones.
I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in respect of a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that where possible, they should not criticise nor make charges against a Member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provision within Standing Order 163 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government or Minister of the Government or the merits of the objectives of such policies.
I welcome Mr. Brian Purcell, Secretary General of the Department of Justice and Equality, and ask him to introduce his officials.
10:10 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Could Mr. Tony O'Brien introduce his officials?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Could Mr. Paul O'Toole introduce his officials?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Could Ms Angela Kerins introduce her colleagues?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I intend to take opening statements in the following order: Mr. Purcell, Mr. O'Brien, Mr. O'Toole and Ms Kerins. Ms Kerins asked about showing a video. Our technical people tell me that is not possible. I invite Mr. Purcell to make his opening statement.
Mr. Brian Purcell:
I am pleased to assist the committee with its inquiries into the operation of the charitable lotteries scheme and payments made to Rehab and its subsidiaries from the Vote of the Department of Justice and Equality. The charitable lotteries scheme was established in 1997 by the Minister for Finance. The purpose of the scheme is to supplement the income of the promoters of private charitable lotteries conducted under the Gaming and Lotteries Act 1956. The scheme applies only to lotteries with products similar to products sold by the national lottery. The Department of Justice and Equality only assumed responsibility for the administration of the scheme in mid-2011. Prior to that, responsibility for the scheme rested with the Department of Public Expenditure and Reform and previously the Department of Finance. The charitable lotteries scheme is currently administered by staff in the charities regulation unit of the Department of Justice and Equality. Applications are invited each year from charities that have been operating a charitable lottery since at least 1 January 1997.
Following processing of applications, the total available fund for the year is divided among successful applicants on the basis of their gross sales of eligible lottery products averaged over the previous three years. By eligible lottery products, I mean certain products similar to products offered by the national lottery, chiefly scratch cards, regular draw lotteries, and bingo. The criterion used to apportion funding under the scheme ensures that charities whose lotteries have the highest proportion of gross ticket sales secure the highest proportion of the overall fund. A single payment is made to each successful applicant, typically in late November or early December in respect of that year.
The scheme was initially financed entirely from the national lottery surplus, but since 2005 it has been financed jointly by the national lottery surplus and by the Exchequer. In 2013, the ratio of national lottery surplus to Exchequer funding was at almost 3:1. That is, 73% of the funding was from the national lottery surplus with the remaining 27% provided through direct Exchequer funding. Shortly before the transfer of the scheme to the Department of Justice and Equality, the total funding available under the scheme was reduced from €8.6 million in 2010 to €6 million in 2011.
Following the transfer and a review of these payments by the Department of Justice and Equality, the Minister for Justice and Equality announced his decision in 2012 to phase out the scheme over a period of three years, with no further payments to be made after 2015. Beneficiaries of the charitable lotteries scheme were advised in October 2012 that the scheme would be phased out over a three year period beginning in late 2013. This was necessitated by the urgent need to make savings in Government expenditure across many programmes. The decision was further informed by a concern that the scheme did not represent an efficient use of funds and did not incentivise effective fund-raising practices by the charities benefiting from the scheme. It was decided to phase out the scheme on a gradual basis to give affected organisations as much time as possible to adjust to the change and to consider alternative methods of charitable fund-raising.
In the meantime, we are continuing to administer the scheme in the usual way. A total of 20 applications for funding were received in 2013, of which 19 qualified for funding. Each of the 19 applicants that qualified for funding also received funding in 2012. The scheme is only open to organisations that were already running charitable lotteries in 1997 and so the beneficiaries have remained relatively constant over time. The full €4 million allocated to the scheme for 2013 was disbursed in late November 2013.
Since the scheme's inception in 1997, payments totalling almost €86 million have been made to the Rehab Group. This is out of a total of almost €124 million paid out under the scheme since 1997. Rehab typically receives almost two thirds of the funding available under the scheme each year. This is because the total funding available is divided among successful applicants in direct proportion to their gross annual sales of eligible products averaged over three years. Under this formula, Rehab receives the majority of the funding due to the sales volume of its lottery.
It is a condition of the scheme that any funding provided must be applied to the charitable activities of the organisation and cannot be used for administrative purposes. This condition is included in the documentation provided to applicants. In 2012, in response to a recommendation from the internal audit unit of the Department of Justice and Equality, the supporting documentation for the scheme was amended to include an indicative list of administration costs ineligible for funding under the scheme. The main purpose of this change was to help recipients to ensure they were adhering to this condition of the scheme and to give the Department greater confidence that this was the case.
In addition, and again in response to the audit findings, a new requirement was introduced in 2012 whereby recipients were advised that they would have to supply a report to the Department of Justice and Equality not more than 12 months following receipt of the funding detailing the uses to which the funding was put and the outputs achieved. In line with this requirement, a report in respect of Rehab's use of the funding it received in 2012 was provided to the Department by Rehab in 2013. This report detailed expenditure by Rehab of the €3.9 million in assistance received in 2012 under the following headings: building and other capital expenditure costs for the provision of new and enhanced services; information technology used directly in front-line services; promoting and creating awareness of Rehab's services and disability issues; expenditure on the development of service delivery; and carry-forward of the prior year's application.
Assistance in the amount of €2.58 million was provided to Rehab under the scheme in 2013. In addition to the funding provided under the charitable lotteries scheme, a number of other payments to Rehab over the period 2009 to 2013 were drawn on the justice Vote. These totalled approximately €250,000 over the period and related primarily to disability services. I can provide the committee with further detail on these payments if that would be of assistance. I thank the Chairman and committee for their attention.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. Purcell. I now call Mr. O'Brien to make his opening statement.
Mr. Tony O'Brien:
I thank the Chairman and the committee for the invitation to attend the meeting this morning. Voluntary non-statutory service providers have a long history of providing health and personal social services in Ireland. These organisations vary in scale and complexity, ranging from large acute hospitals to local community-based organisations providing social care services. The HSE acknowledges the role and significant contribution of such organisations in the development and provision of health and personal social services and is committed to the continuing improvement of effective governance arrangements with the sector in accordance with the legislative intent of the Health Act 2004 and in accordance with the requirements of good practice.
The HSE funds more than 2,600 agencies which operate more than 4,200 separate funding arrangements to a value of approximately €3.3 billion. A total of 39 of these agencies, accounting for €2.4 billion, are funded under section 38 of the Health Act 2004, while the remaining agencies, of which there are more than 2,500, are funded under section 39 of the Act.
Under section 38 the HSE may enter into an arrangement with a service provider for the provision of health and personal social services on its behalf. Under section 39, the HSE may give assistance to a person or body to provide a service that is similar or ancillary to a service that the executive may provide. The governance context in which the HSE engages with section 39 agencies is distinctly different from that which applies in the case of section 38 agencies. For example, the employees of section 39 agencies are not public servants, are not members of public sector pension schemes and, unlike their section 38 counterparts, are not directly bound by the Department of Health's consolidated salary scales. In a situation where a funding arrangement under section 39 was reclassified as coming under section 38, the cost to the State of providing that service would likely increase in a material sense in the immediate and long term due to increased public sector numbers, pay rates and pension costs as well as a loss of the current flexibility around development and reorganisation of services. No such reclassification has taken place in recent years.
RehabCare and National Learning Network, NLN, are wholly owned subsidiary companies of Rehab Group and the HSE has contracted these two organisations to provide a range of services to support children and adults with a range of disabilities and mental health needs across our four regions in line with the agreed service arrangements under section 39 of the Health Act 2004. The HSE has service arrangements with RehabCare to deliver day services delivered through resource centres, residential and respite care, supported accommodation, outreach and home-based services. The HSE provided funding of just over €41 million to RehabCare in 2013 which, based on 2012 published accounts, is estimated to constitute approximately 92% of the company's total turnover for last year.
The HSE has service arrangements with NLN to provide rehabilitative training and related services across our four regions to enable people with a disability to achieve their potential in a manner which takes account of their personal, social and environmental needs. The HSE provided funding of just over €13.5 million to NLN in 2013 which, based on 2012 published accounts, is estimated to constitute approximately 30% of the company's total turnover last year. In the printed version of my statement, there is a detailed statement which sets that out. As the tables demonstrate, just over €40 million is provided to RehabCare for the provision of a very wide range and quantum of important client-facing services. There are 219 service users receiving residential support nationally, over 1,500 receiving day service support and 962 receiving home support. They also have a capacity of 31 respite beds nationally which is a very important service component in the overall spectrum of services funded by the HSE for persons with a disability.
The HSE provides just over €13.5 million in funding to NLN to provide over 1,000 rehabilitation places nationally. The HSE is satisfied that in general both companies are discharging their roles and responsibilities under their respective service arrangements to an acceptable standard in terms of service delivery, quality and cost effectiveness. A more detailed briefing on the service arrangements and service quantum has been provided to the committee.
The HSE has a governance framework in operation for all agencies funded to provide health and personal social services. This framework applies a standardised approach to our engagement with agencies according to the level of funding and the scale and range of services provided. The significant funding to both NLN and RehabCare is managed by the application of the national standard section 39 service arrangement. Under the HSE's governance framework for section 39 agencies where the HSE's annual funding exceeds €250,000, the arrangement is required to be covered by a standard service arrangement which consists of two separate but interrelated parts. Part one is the main contract document setting out, inter alia, the principles of the arrangement, the roles and responsibilities of the parties and dispute resolution mechanisms. Part two consists of a series of schedules specifying the detail in relation to, inter alia, service quantum, staffing, funding, and quality and service standards. For the purpose of administrative coherence, agencies are only required to sign one part one per region but are required to ensure that each funding arrangement is covered by a set of schedules. Where the HSE's annual funding is below the €250,000 threshold, the arrangement is required to be covered by a grant aid agreement.
Service arrangements are managed on a day-to-day basis at local area level by the relevant disability manager and team, reporting to the integrated service area, ISA, manager. Regional co-ordination of services provided across a region is managed by a lead area manager reporting to the regional director. As part of this process, all agencies including RehabCare and NLN are monitored via regular review meetings with HSE management at area and regional level. These review meetings address financial reports, human resources, activity data, planning, review of agreed performance indicators and compliance with quality and standards, etc. Operational service planning meetings are held regularly regarding individual service users. There is an increasing focus on the use of internal audit in monitoring the operation of section 39 agencies where warranted, and this process will increase in line with the 2014 service plan.
In line with the requirements of the service arrangement, part one, and the schedule, part two, all agencies including RehabCare and NLN are required to submit information returns as follows: audited financial statements; annual report; memorandum and articles of association; mission statement and aims and objectives; tax clearance statements-charitable status; insurance and indemnities; key performance indicator, KPI, reports; activity reports; service reports; detailed service specification templates with resource allocation information to unit of service delivery; and human resource information. The human resource information includes general all-grades numbers and a detailed senior staffing template.
The national business support unit of the HSE, under the leadership of a health service senior manager, provides business and technical support to the local areas on the implementation of the governance framework with nonstatutory agencies. With the implementation of the new national structure for the health service, there is now for the first time a national director of social care with responsibility for all of these services across elderly and disability, which provides an opportunity to develop an overall national process on the management of service arrangements across the sector. The 2014 operational plan for social care outlines work to be undertaken on streamlining governance arrangements and maximising efficiency including the introduction of a new IT-based system to support the management of service arrangements.
Since the introduction of the national standard governance framework with the non-statutory sector, the HSE has been continually reviewing and strengthening these arrangements in accordance with the requirements of sound governance and accountability and in order to ensure that it is aligned with the ever-changing exigencies of our health and personal social services. One such enhancement was the introduction in 2013 of a requirement on all agencies covered by a service arrangement, both sections 38 and 39, to complete a template setting out details of the remunerative arrangements for senior managers, defined as grade VIII and above, as defined in the consolidated pay scales.
The HSE placed priority focus on senior managers' salaries in the section 38 agencies as they account for €2.4 billion, or 74%, of the €3.3 billion allocated by the HSE to non-statutory providers. In prioritising the section 38 agencies, the HSE had regard to the fact that their employees are public servants, are members of public sector pension schemes and they are directly bound by the Department of Health's consolidated salary scales. Notwithstanding the foregoing, it is important that all agencies in receipt of public funding would have due regard for overall Government pay policy. The HSE's director of human resources wrote to the CEOs of the section 39 funded agencies on 10 December 2013 stressing the importance for each such organisation to have due regard for overall Government pay policy in respect of the remuneration of their senior managers.
The HSE is currently involved in a process of verifying and validating the service managers' remuneration templates with a priority focus on the larger section 39 agencies which receive in excess of €5 million in funding annually from the HSE. The HSE hopes to have a report on the outcome of this validation process by the end of the first quarter of 2014. This concludes my opening statement and together with my colleagues I will endeavour to answer any and all questions the members may have.
10:20 am
Mr. Paul O'Toole:
I welcome the opportunity to assist with the committee's examination of payments made by SOLAS to Rehab for the provision of specialist vocational training and other services.
I am accompanied by Ms Mary Lyons who is currently director of community training provision.
On 18 November 1997 the Minister for Justice, Equality and Law Reform announced that the Government had approved, in principle, the establishment, on a statutory basis, of a national disability authority and a disability support service. The Government also approved the formation of an establishment group which was tasked with the preparation of detailed proposals for the establishment of the National Disability Authority and the future location of departmental responsibility for the functions of the National Rehabilitation Board, NRB. The establishment group recommended, inter alia, that responsibility for vocational training for people with a disability transfer from the Department of Health and Children to the Department of Enterprise, Trade and Employment.
Following the passage of the National Disability Authority Act 1999, the issuing of the National Rehabilitation Board (Transfer of Property, Rights and Liabilities) Order 2000 and the National Rehabilitation Board (Dissolution and Revocation) Order 2000, the NRB was dissolved on 11 June 2000. FÁS then assumed responsibility for labour market services for persons with a disability, including people with physical, intellectual, mental health or sensory disabilities. This was a major new responsibility for it, encompassing a range of services and supports. It included responsibility for vocational training for people with disabilities provided by specialist training providers.
The main provider of specialist training at the time FÁS assumed responsibility in 2000 was the National Training and Development Institute which subsequently became National Learning Network, NLN. National Learning Network Limited is a wholly owned subsidiary of Rehab Holdings Limited. Details of the 30 NLN locations across the country which had agreements at a local level with FÁS and, with effect from 2014, the relevant education and training boards - some from 1 January 2014 and the balance from 1 July 2014 - are listed in the information already submitted to the committee.
The system of payment to specialist training providers which was inherited by FÁS was a whole-time equivalent annual rate per place. The current whole-time equivalent annual rate is €14,956 per capita.
We have placed a priority on continuous improvements to the quality of training and governance to ensure we are providing the best possible service for the learner. We have developed a process to ensure National Learning Network, as well as other specialist training providers, meet our approved quality control systems and are regularly monitored. Detailed information and copies of relevant documentation have been supplied to the committee. Payments to specialist training providers are made on the basis of vouched claims, based on the approved capitation fee per whole-time equivalent.
During 2010 we initiated processes to enhance business planning and service level delivery; reduce the effective capitation fee; and develop a new procurement process for specialist training. The first two parts of this programme have been delivered. In the intervening period, however, very significant institutional changes have happened. Policy and budgetary responsibility for the activities of FÁS was split in January 2011 between the Department of Education and Skills and the Department of Social Protection. In July 2011 the Government decided to abolish FÁS. In January 2012 operational responsibility for employment and community services transferred from FÁS to the Department of Social Protection.
The new education and training boards came into existence on 1 July 2013 and already some have taken and others will be taking over operational responsibility for the majority of the former training activities of FÁS, including the provision of specialist training for persons with a disability. FÁS was dissolved on 26 October 2013 and SOLAS was established on 27 October 2013. On 31 December 2013 the former training activities of FÁS in Cork, Dublin and Kerry transferred to the Cork, City of Dublin, County Dublin and Dún Laoghaire and Kerry Education and Training Boards. The balance will transfer on 1 July this year.
SOLAS is preparing a strategy for further education and training for submission to the Minister for Education and Skills by 31 March 2014. Following determination by the Minister of the future strategy for further education and training, SOLAS will review existing provision across all aspects of the sector, including specialist training provision, with the objective of ensuring the optimum approach for the future.
NLN also registered as an approved training contractor with FÁS. It can compete with other such companies for contracts, awarded by FÁS in the past and education and training boards in the future. It has been successful in this regard. The aggregate values of such contracts have been included in the information already supplied to the committee.
We will be pleased to answer whatever questions committee members wish to raise regarding SOLAS payments to National Learning Network.
10:30 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. O'Toole. I invite Ms Kerins to make her opening statement.
Ms Angela Kerins:
I thank the Chairman and members for giving me the opportunity to address the committee. For almost 70 years the Rehab Group has been at the forefront in providing support and services for people with disabilities and others who need support. It was established as an independent not-for-profit organisation with the purpose of promoting equality and fighting disadvantage through quality services and initiatives. We are here on a voluntary basis following an invitation to assist the committee to understand the type, volume and outcomes of the services we provide from payments from the HSE and SOLAS and to clarify the nature of the charity lottery compensation fund.
I want to state clearly at the outset that ours is not a State-run organisation, nor is any of our staff a public servant. Our staff do not have access to public pension funds and, like any other independent organisation, we are responsible for paying all our own bills. Our contracts with Government agencies, otherwise called, as the committee has heard, service level agreements, SLAs, are of one year duration and often less - about four months - and we have no guarantees from Departments to cover our deficits.
Many people will not be aware that the Rehab Group is made up of a number of charities and commercial companies in Ireland, England, Scotland, Wales, Poland, the Netherlands and now the Middle East. We are headquartered in Dublin and employ over 3,500 people. We reinvest any profit back into our services, in projects which benefit individuals with disabilities and social initiatives. We also provide support for other disability organisations, both nationally and internationally.
In addition to what members will hear from my colleagues whose divisions contract with the HSE and SOLAS, we are Ireland's largest glass recycler, processing 96,000 tonnes of glass each year, 10,000 tonnes of electronic equipment and 2,400 tonnes of aluminium. We also operate a number of retail shops and logistic facilities, including warehousing, assembly, work-wear manufacturing, keyboard printing, document scanning and destruction and packaging facilities. We are also the largest employer of people with disabilities in Ireland and working not only to maintain these jobs but also to increase the number of jobs here every year.
We have grown from small beginnings to become a major Irish company, with over 2,300 employees in Ireland and a further 1,200 internationally. We face the same challenges as all other companies and charities owing to difficult economic environments, changes in market conditions and the need to attract highly able and skilled staff. In all of this activity we affect the lives of some 60,000 clients group-wide, including 11,300 individuals the length and breadth of Ireland. Each of our clients is someone's child, brother, sister, parent or friend. Our ethos is to help our clients achieve their potential, live and work as independently as possible and promote their skills and abilities. Rehab supports people with every kind of disability, as well as people with mental health difficulties. Those who are unemployed who need additional help to get back to work are also assisted.
The clients of our services include children with autism who need respite care or after-school services. We support young people who have challenging behaviour and can no longer live at home, perhaps having spent time in an inappropriate placement in psychiatric care. Our day services give support to people with intellectual disabilities to plan their goals and support them in their achievements, be it getting a job, learning how to cook or moving into their own home. We provide highly specialised support for people whose lives have been turned upside down by a catastrophic brain injury following an accident or a stroke. We help them to relearn the skills they need to live independently. We help people for whom a mental health difficulty or a setback in life has meant that they cannot continue in their career and need help to rebuild their confidence and skills, retrain and get back into the workplace.
We are proud of what we do and how we do it. We are most proud of the achievements of our clients. Ours is known, both nationally and internationally, as an entrepreneurial "can do" and innovative organisation, willing to take risks for our clients, to enable them to live as full a life as possible, and we do this while, at the same time, thankfully, giving value for money to our customers.
As I understand it, the remit of this committee is to review public expenditure and to ensure that the State is getting value for money and that services are delivered efficiently. I will take this opportunity to thank the HSE and SOLAS for their positive comments regarding our services. In addition to the review of Government spend on services provided through the National Learning Network, NLN, and RehabCare, the committee has a great opportunity today to commence an important conversation regarding service provision.
There are some 2,932 not-for-profit agencies delivering services to the HSE at a cost of €3.46 billion in 2012. The HSE is committed to ensuring value for money and has undertaken a number of measures to do so. We support it in this goal. There is potential to get even more value for money while building capacity, innovating and improving outcomes for clients. It is the view of the Rehab Group that the coming together of these organisations could release funding to help deliver more services for clients. Mergers would enable many organisations to build operational capacity, further reducing overheads by sharing technology and assets and creating a more flexible, exciting and sustainable future. By sharing, organisations can focus their resources and capabilities, thereby enhancing service delivery. Over a period of time, savings of approximately €200 million per annum could be achieved, which could then be applied to the development of new and additional services for the many thousands of children and adults with disabilities who are currently in need. With funding such as this, significant progress could be made on the implementation of the Disability Act, providing an independent assessment of needs for all children and adults with disabilities and much-needed therapies, residential and respite services. Were the Government to lead a positive and proactive partnership project to bring together those organisations of similar ethos that could be merged, the Rehab Group and other not-for-profits would rally behind it and give any assistance that we could.
Our structure is unusual and we are unique, but that makes us no less valuable or effective. Our independence helps us articulate the needs of our clients and our financial independence allows us to invest in new ideas and services. Our independence has allowed us to defend the ethos of our organisation and our ability to do our job for our clients.
The committee's letter of invitation for today specifically mentioned three areas it wished to discuss: services delivered on behalf of the HSE, services delivered on behalf of SOLAS and the charity lottery compensation fund. Rehab fulfils a major role in the provision of services and we value our strong and robust working relationships with the HSE and SOLAS. There is a great deal of confusion in the public mind as to how independent not-for-profit companies such as ours receive funding from the public purse. The two main Rehab Group companies that contract with the State are RehabCare and NLN, which are represented at this meeting by their respective executive directors, Ms Laura Keane and Ms Marie Kelly. We have provided all of the detailed information that both contracting organisations require, including details of salaries and other costs. Mr. John McGuire, who is a director of Rehab Lotteries, is also present to help with the discussion on the charity lottery compensation fund and the unfair cap on charity lotteries. We have attended this meeting at short notice to provide support to the committee in its examination of public expenditure in these areas, but we have also attended to clear up some misleading information regarding our lottery business and its related income.
I wish to mention the issue of salaries, which has been given some media space in recent months. The salaries of the Rehab Group's chief executive and management team are set by the board following advice from independent remuneration experts as to the rate for those jobs in the market. This team oversees not just one charity but an international group of charities, commercial companies, joint ventures and limited liability partnerships. We are also involved at policy level and are recognised internationally as experts in our field. Such a diverse organisation needs expert management capable of operating across this wide domain.
While I am not privy to all of the deliberations of the Rehab Group board, I am aware of the methodology used. Each job is evaluated by size, function and the sector in which it has relevance. There is a comprehensive scoring system and the comparators are from a representative sample of private sector, State and semi-State companies. This system works out the market median, that is, the salary level in the middle of the market. For well over a decade, all senior salaries in the Rehab Group have been advised by independent assessment and set in the median. While the market median is the desired Rehab Group position, however, the group management team has been at least 20% below that level for total remuneration for some years. I can go through this methodology in more detail later if the committee so wishes.
Regarding the specific State contracts being discussed at this meeting, all relevant details of the management salaries of the companies that contract with the HSE have been made available on a confidential basis to the HSE and are compliant with public pay guidelines of the funding agency. For clarity, the salary of the Rehab Group's chief executive is not being paid out of the funding under discussion.
In seeking to provide information about salaries, Rehab needed time to take legal advice on the matter of further disclosures and has also received advice from the Data Protection Commissioner about salary disclosures, as we are subject to the data protection legislation and the right of individuals to privacy. In response to calls for the remuneration of the group's chief executive to be disclosed, these rights were waived by me and Rehab in order that this could be done. We are now considering ways of publishing other salary data. This would give salary band information to those interested. Taking into consideration the size and needs of the organisation, we aim to have this in place by the end of the year.
There has been much comment on this matter, on market rates for salaries and, indeed, on the unique structure of the Rehab Group. Many have acknowledged this and the Minister for Transport, Tourism and Sport, Deputy Varadkar, recently used the analogy that Rehab was more like a semi-state company. It is not a bad comparison. We have a turnover similar to semi-State organisations and employ close to the average in the semi-State sector. It is interesting to examine the 2011 McCarthy report on State assets, which found that the average salary was €291,000 and the average total remuneration package was €439,767 within the ten semi-State organisations reviewed.
In going about our business and dealing with our challenges, we must re-examine our corporate structures and seek to develop a structure that is easier for everyone to understand while providing for our complexities. This is currently under way. Although it will undoubtedly be challenging, it should result in more clarity for everyone about who we are and how we operate.
The last few weeks have taken a heavy toll on the wider Rehab Group, our clients, our staff and their families. We have wondered what we have done wrong. We do not recognise the picture of the Rehab Group that has been painted in recent weeks. In our long history, we have had a constructive working relationship with the State. Our attitude has always been proactive, businesslike and professional. The issue of my salary has been a focus, as has our participation in the charity lotteries compensation fund. My total remuneration has been published and the Rehab Group has committed to publishing the total remuneration of the senior management team.
For the purpose of clarity, allow me to explain the charity lottery matter. There is an unfair cap on the prizes that charity lotteries can offer. This does not apply to the national lottery. We must try to compete with a national lottery that has no limits on its prizes while charity lotteries must limit their entire prize funds to €20,000 per week. The Government, which owns the national lottery, makes the rules for the charity lotteries. All of this has a devastating effect on the ability of charity lotteries to compete against the national lottery, which has free rein.
For decades, the charity lotteries have been seeking fair play through the removal of the prize fund cap placed on them. In recognition of this inequality, the Government, in agreement with the charity lotteries, set up the charitable lotteries compensation fund in 1997. This agreement allowed the cap on charity lotteries to remain, thereby protecting the national lottery and allowing it to grow, while compensating the charity lotteries. The fund was reviewed periodically and found to be working well and achieving its objectives. In 2004, a major review of the fund by the Department of Finance recommended its continuation and acknowledged that the payments were compensation payments. I did not see this review included in the papers submitted to the committee by the Department of Justice and Equality, so I have brought along a copy for members.
In 2012, the Minister for Justice and Equality announced the termination of the charity lotteries compensation fund without any discussion, warning or meeting. There is no sense in any argument that the fund should be abolished without the removal of the cap on the prize fund for charity lotteries. The conditions that pertained when the fund was established still remain. The cap is unfair and does not allow fair competition.
We now find ourselves under attack through misleading information about our involvement with this scheme and also for trying to get the unfair cap removed. If the purpose of these attacks was to put us off, it has not worked, and our resolve on this matter has become stronger. The sad thing about this is that our door has been open at all times to any reasonable discussion with a view to resolving this, but we could not get engagement. We have been forced to take court action to try to vindicate our rights. We did not want to take the Minister for Justice and Equality to court but we were left with no choice, and charity lotteries will be eliminated if nothing is done.
Many of the recent comments about the Rehab Group relate to the charitable lottery compensation fund. A report furnished to the committee found its way to the front page of a daily newspaper, with the headline and the article giving an impression that substantial funds were used for lobbying and public relations, and a reference was made to hospitality associated with lobbying. The impression given conjured up images of entertaining politicians, but this is entirely false. Funds were not were used for lobbying but for our advocacy work with clients, to help our clients advocate for themselves and to make submissions on major areas of policy. The hospitality refers to a total amount of €119 over one year for teas, coffees and refreshments for clients and staff who travelled to meetings and training sessions, not for lavish lunches with politicians.
There is one other matter I wish to raise. We are very concerned that comprehensive details of our service level agreements and lottery business appeared on the Committee of Public Accounts website, as these details could bestow a commercial advantage to our competitors. We gave this information to Government agencies confidentially. We are regularly in competitive tender with both the private and not-for-profit sectors for contracts, and this undoubtedly puts as at a disadvantage in future tendering, so we need to bring this to the committee's attention. Overall, we are glad of the opportunity to provide relevant information on our service delivery and to address the issues that have been causing concern.
The Rehab Group has been working in communities all over Ireland for decades, and it has often been described as an organisation with social values commercially underpinned. Rehab has a double bottom line, a mission and a margin, and if one does not maintain financial sustainability then one will not be able to maintain a mission. There are many individuals and families depending on the services of the Rehab Group and we need to ensure that we continue to be there for them and that, whenever possible, we help them with their needs. Our clients are very much part of the fabric of Rehab and are involved in how the services are run. There are many families right across Ireland depending on their income from the Rehab Group. One of the key resources of the Rehab Group is our 3,500 professional and talented staff. Their skills and abilities make us who we are today, and their commitment and willingness to go the extra mile is evident in the outcomes that our clients achieve every day.
The Rehab Group is both fortunate to have and proud of the many thousands of volunteers and family members who support its activities in very many different ways and at different levels of the organisation. They ensure that we are relevant and connected to local communities. We also operate in partnership with a wide range of stakeholders, including our clients and their families, commercial customers, public bodies, State agencies and community organisations, all of which play a crucial role in enabling Rehab to provide a high quality and value for money service which impacts positively on the lives of our clients.
I was about to say that the best people to tell the committee about Rehab are the people using our services, and we brought a video of National Learning Network and RehabCare clients, but it seems it is not possible to show it. It is not possible to provide the sound on its own either. Is it possible for my colleagues, Ms Laura Keane and Marie Kelly, to say a couple of words instead?
10:50 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That would be okay.
Ms Laura Keane:
I am responsible for the health and social care services of the Rehab Group. I welcome the words of the HSE, which confirm our compliance with the service arrangements in place. RehabCare is the health and social care division of the Rehab Group. We are a not-for-profit voluntary organisation and a registered charity. We are located in every county and structured to deliver our services through operational regions, with a devolved management responsibility and accountability. RehabCare has developed significantly and we are currently one of the main employers in the health and social care sector. We work closely and collaborate with the Health Service Executive disability services and services for the older person. We have developed a reputation for being a solution-focused can-do organisation which responds promptly and flexibly to complex situations, many of which involve people in crisis.
From a contractual perspective, we have 22 service level arrangements with additional grant aid agreements that we deliver. These contracts clearly set out budgets, performance targets, quality standards, monitoring and compliance requirements. Planned meetings take place on an ongoing basis to review compliance with service arrangements, formulate solutions for people in difficulty and consider key developments in networking and partnership. We have recorded 122 review meetings with the HSE to consider all the areas in which we deliver regarding compliance. We submit quarterly returns to the HSE regions in respect of key performance indicators and regional national returns such as complaints, Children First compliance, monthly respite key performance indicators and service user attendant records. That has been confirmed this morning.
Since 2008 RehabCare has experienced cuts of €6.4 million, in line with annual funding cuts across the sector. Naturally, cuts of this nature have a significant impact on the independent organisation, resulting in deficits for three years. However, we are committed to protecting front-line services and we implemented challenging cost-containment plans which resulted in our coming in line and managing within our budget for 2012 and 2013. Not only that, we also increased the number of service users by 838 during this time.
Our resource centres are our day facilities and there are 48 across the country, all of which are accredited with EQUASS assurance, or the European Quality in Social Services Award. We deliver services on a daily basis to 1,500 people attending those facilities. They have individual person-centred plans, programmes, outlines and goals in their lives to enable them to achieve their potential. There are seven respite centres, which are residential services with a two-pronged approach to supporting people with disabilities. Three of these deal with children and four deal with adults. We delivered 7,294 bed nights for people with disabilities in 2013. Within our residential services we support 219 people, with 79 having very complex care needs. In most cases, our services must have waking night duty and sleep-over staff. Many of the people in those services are unable to articulate needs and they must often resort to challenging behaviour to be able to communicate needs, which results in very difficult and challenging environments.
Our supported accommodation services support 140 people living in their own homes within communities. We support 962 people in the country with home services. In 2013, we delivered 190,569 hours of home support, which involves helping the person get out of bed in the morning, administering medication, providing meals and supporting the person in going to bed at night. Many of these people would not be able to survive in their own homes in the community without the support of our highly qualified staff. We provide individual packages of support to 85 service users and 22,560 hours of outreach services were delivered in 2013.
We do not only deliver and comply with contractual arrangements, as RehabCare is able to produce enhanced services and value for money. I will give one example before I finish, that of HeadsUp, a RehabCare service targeted at improving young people's mental health and well-being. HeadsUp was set up as part of a fund-raising and health promotion initiative for young people.
We have a free automated text support service which has been used by 28,709 people. We have a HeadsUp website which provides information on mental health issues, promotes positive mental health and provides information and support to those in need. In 2013, 53,731 unique visitors accessed the site. We train people to assist in suicide prevention programmes - there were 80 people last year - and 100 people were able to receive training in recognising and preventing suicide. We received a grant of €7,000 towards the HeadsUp service.
I have given examples of the added value that an organisation such as ours can bring. I shall hand over to my colleague, Ms Marie Kelly, from the health and social services division.
11:00 am
Ms Marie Kelly:
Good morning, Chairman and members of the committee. I am the director of training, education and employment services for the Rehab Group.
The National Learning Network is about removing the barriers that prevent people from progressing. I refer to people who have barriers in their lives, such as early school leavers, people with sporadic work history, low literacy and numeracy ability, acquired brain injuries and illness and mental health issues, including not being able to function, not being able to get out of bed in the morning and looking at suicide as the only option. I refer to people who are really suffering. We work with people who are recovering addicts and with ex-offenders. More recently, we have been awarded contracts to assist the long-term unemployed.
Our programmes are equally applicable to many people. We work with people and explore what they want to achieve and analyse what is needed to educate them and what will improve their social inclusion. Our clients range in age from three to 65 years and we work with primary schools, further education and SOLAS. I wish to acknowledge the positive comments made by SOLAS and the HSE earlier. Our outcomes speak for themselves. On average, 90% of the people who complete our programme get into employment or further education every year. We have highly qualified staff who form multidisciplinary teams. An interesting staff statistic is that 75% of our costs relate to pay, of which 91% is spent on front-line services provision.
We have recently entered into a FÁS contract for training, which we tendered for. We have been successful in the provision of courses for the long-term unemployed. We have tried to diversify our business because we believe the skills we have acquired through the provision of support services to people with disabilities represent an opportunity for the wider population.
All of our work is underpinned by service level agreements. We have had 23 service level agreements with the HSE and a similar number with SOLAS. The agreements govern quality as well as the various Acts that we work under. They also govern outcomes and key performance indicators. We exceed our quality standards. The National Learning Network has been awarded a level 5 excellence award in every centre in the country. We have also been awarded the European quality and social services excellence award. Last year we had 159 review meetings with SOLAS and 235 review meetings with FÁS.
NLN is about working within the community. It is about dealing with people who are marginalised - people who are looking to remove barriers but need support to pursue further education, training or employment. We provide a wide range of courses such as culinary skills, catering skills, business, IT, games design and web design. We work with 3,500 employers. They work with us to provide real jobs and real work experience. We have 50 locations in Ireland and we now provide services to more than 7,000 people through a range of very well qualified staff, teachers, psychologists, programme development officers and rehabilitation officers. We put the client at the centre of everything we do.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the witnesses for their opening statements and ask them for permission to publish the statements. Is that agreed? Agreed. If Ms Kelly and Ms Keane have a copy of their statements, perhaps they will circulate them to the members and to the press gallery.
Before calling Deputy McDonald, I must say something to Ms Kerins. There might be people who will hang on her every word and might consider her comment on what we published on the website as a bit of a ticking off for the Committee of Public Accounts. I must say that in preparation for this meeting we had to ask each of the agencies for a submission. As we do our business in public, that submission is then published on our website. If she has a concern about that - which she has articulated - then I suggest that she take the matter up with the agencies that provided us with the information. We would not be aware of the commercial sensitivity or otherwise of the documents. Generally speaking, if there is something sensitive in them, it would be redacted for us. We published the documents as we got them from the different agencies.
I ask Deputy McDonald to commence.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Go raibh maith agat agus cuirim fáilte róimh go léir. I welcome all of the witnesses. We are in the strange situation whereby the number of witnesses equals the number of members. That will make it a fair match this morning.
I shall start with Ms Kerins. When the committee invited her to attend we were quite specific about the witnesses that we asked her to bring along. The clerk had been in communication with her in respect of the remuneration committee of Rehab and specifically regarding Mr. Flannery, her predecessor. Why are those persons not in attendance today?
Ms Angela Kerins:
Of course we have come here today as witnesses, as the Deputy has said, in relation to the three areas that the committee wishes to cover. We have brought along representatives of RehabCare, the National Learning Network and our charitable lotteries.
Frank Flannery is no longer working for the Rehab Group and has not been an employee of the Rehab Group for what must be seven years now. I will be in a position to deal with issues in relation to remuneration, should they come up. Our whole focus - and that is why we required clarity on what we needed to prepare today in relation to what that we are working on - is on the three areas mentioned in the invitation letter. It was felt that the team that has been fielded today were the best placed to respond to those questions.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That might well be the case. None the less, the committee considered it important to have people with specialist knowledge in respect of pay and pensions in attendance. It specifically asked for the attendance of Mr. Frank Flannery, who is quite a regular attendee around the Houses of the Oireachtas. Did Ms Kerins pass the invitation on to him? Did she invite him to attend? Is there a reason, from his perspective, why he is not here?
Ms Angela Kerins:
I am sure Frank Flannery is a regular attendee here but I cannot speak on his behalf. Obviously people would be aware of any invitation. To reply to the Deputy's question, the comittee members have in front of them the people who are most competent to speak about the salaries and remuneration of the staff who are funded through the HSE and SOLAS. There are no staff funded through the charitable lotteries compensation fund.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Ms Kerins has correctly pointed out that Mr. Flannery, her predecessor, has not been in that position since 2006. Can she tell us what, if any, commercial relationship Mr. Flannery may have had with Rehab in the intervening years? Has he undertaken consultancy work?
11:10 am
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I would like that detail.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I would like Ms Kerins to state whether there is a current relationship between Mr. Flannery and Rehab and what it is.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It would be useful if Ms Kerins came back with more detail. The reason Mr. Flannery is significant is the same reason Ms Kerins is significant in an assessment of Rehab. It is because she, as Mr. Flannery did before her, occupies the position of CEO of the Rehab Group. We will come to the issue of pay and pensions in due course. The committee believed Mr. Flannery would have something to say and contribute on these matters. Ms Kerins has reassured us that any question we have to put to Mr. Flannery can be fielded and responded to by her and her team.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The opening statement from Mr. Kerins underscores the fact that she is here on a voluntary basis, which is true. It is important to state she found it necessary for her legal representatives to make contact with the committee yesterday afternoon. Will she explain to the committee why she thought it necessary to do this?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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In fact, that was not it. The communication from Ms Kerins's legal representative was to set down a marker and what they regarded as the parameters of the discussion she deemed appropriate to have at the committee meeting.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The problem is that Rehab is an agency in receipt of €83 million of public funding in the last year. The problem is that Ms Kerins, publicly and stubbornly, has maintained a position that, because she has commercial interests, the public, including volunteers and those who contribute to the organisation in charitable donations, are not to meddle, interfere or ask questions that Rehab, in its collective wisdom, deems to be inappropriate or commercially sensitive.
Ms Angela Kerins:
There are separate issues. To ensure we were properly prepared and that we knew what was required of us apropos of the letter of invitation for us to come here today, there was nothing wrong with our legal adviser seeking clarity and to be assured of the parameters. I do not see what was wrong with it. It is a reasonable thing to ask.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It was probably quite reasonable in Ms Kerins's mind to write to IrishCentral.com. I am sure she is familiar with IrishCentral.com, an Irish-American news outlet. She sent a lawyer's letter because she did not like an article reproduced on the IrishCentral.comwebsite.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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As the CEO of the Rehab Group that receives substantial State funding, Ms Kerins defends that action from her personal perspective and cites her personal rights. Does she have any concept of her accountability and responsibility in her public position? It is a public position she occupies.
Ms Angela Kerins:
There is no difficulty, or there should be, with any citizen, irrespective of where he or she works, seeking to have issues clarified. I do not see any connection between that issue and the reasons we are at the committee to give witness to the income of €86 million and provide a reasonable and open account of how the money is spent.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Let us test that statement. In her opening statement Ms Kerins emphasised that Rehab was not a State-run organisation and that its staff were not public servants. This has been reiterated by the HSE. Interestingly, I have a copy of a recommendation from the Labour Court. In 2010 Ms Kerins sought to impose pay cuts on staff in line with those in the public sector. It makes for interesting reading because the argument of Rehab, as stated in the document, makes a very clear link between public service pay rates and Rehab staff, irrespective of the fact that they are not public servants. The second prong to the argument is that the group is fully dependent on funders, in other words, public funders such as SOLAS, the HSE and the Department of Justice and Equality. Will Ms Kerins explain the anomaly to me?
Ms Angela Kerins:
At the end of 2009 National Learning Network, NLN, and RehabCare were advised that FÁS and the HSE intended to reduce the fees paid for the provision of services by between 5.7% and 8%. We had to make a difficult decision about the services being delivered and to make pay adjustments for all staff in the relevant companies from February 2010. As soon as the organisation was advised of the reduction in fees, management immediately engaged with the staff working in the relevant divisions to inform them of the need for adjustment. The pay adjustments were applied to all grades of staff, with the reductions ranging from 5% in the case of staff on lower incomes to more than 10% at higher management levels. The management team met staff all over the country to communicate the necessity for the reductions within the organisation. Following implementation of the pay reductions, SIPTU, in representing a number of staff who had been impacted on, brought the matter to the Labour Court which in a ruling in January 2012 found that the reductions were necessary to maintain the viability of the organisation and the employment it provided. It recommended that the union accept the pay adjustments. Subsequently, the organisation agreed a solution with SIPTU and staff representatives and the matter was resolved in 2012.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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In the argument made in that set of circumstances Ms Kerins was quite happy to recognise and align Rehab with public pay policy for the purposes of the argument made in front of the Labour Relations Commission, yet in respect of her salary and the salaries of higher executives in the organisation, a very hardline view was taken that Rehab was not linked with the public service, that they were not public servants and that they did not have to have regard to any of this.
Is that right?
11:20 am
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That is not what I am asking.
Ms Angela Kerins:
I think I need to say it because I need to answer in this way. The group chief executive is responsible for the totality of the organisation, not only in Ireland but elsewhere also. As I said - I will go back through the methodology we have used for many years; in fact, for well over a decade - it has always been the case that there has been independent assessment by experts of the remuneration of the group management team within the Rehab Group. It is not a case of people deciding what they earn themselves; it is independently and expertly done. The organisations which do this are well recognised for what they do. The salaries of the staff within the organisations about which we are talking, as the Deputy heard my colleagues say, are benchmarked, if that is the appropriate word - I ask my two colleagues to comment on this - against salaries within the sectors in which they are operating.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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If Ms Kerins does not mind because time is limited, I want, with all due respect, to stay with this line of questioning. We have the position where the staff are benchmarked within their sector. I am not speculating, as I have it in the recommendation, that Ms Kerins argued vigorously that public service rates of pay and pay movements had to be observed for the staff. Then we find she takes a very different approach in her own case and that of her senior executive colleagues. We have established this and I find that it jars with me. I imagine it jars with a lot of people looking at her organisation that some are more equal than others and that some categories of staff further down the line have regard to public pay policy but those at the top do not. In fact, that is shocking, but it is the situation as she has set it out.
Let us talk about Ms Kerins's salary and the benchmarking process to which she referred. Am I correct that her salary is €240,000?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The first thing that jumped out at me was that it represented an increase of €6,000 from the previous year. Some of her colleagues referred to cutbacks. She also made reference to them, pay moderation and so on. How does she account for an increase of €6,000 for herself?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I realise that.
Ms Angela Kerins:
I did not have to, but as I said, I volunteered to do it. I have given total and conclusive information and read all sorts of articles that talked about balloon payments, hidden bonuses and under-the-counter payments. There is a lot of speculation, but there is nothing there. The Deputy has the information in full.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What about the €6,000 increase?
Ms Angela Kerins:
As I said, my salary was given - again, voluntarily - a couple of years ago. By the way, nobody, other than through the media, has asked me for my salary, including no Government agency. I have had no formal request for it, but I have given it. I can go through the methodology used in establishing salaries for the-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What I would like Ms Kerins to do is to explain briefly and clearly in laywoman's language how she accounts for an increase of €6,000 at a time of cutbacks and pay moderation in her organisation?
Ms Angela Kerins:
I do not decide what my salary is. The remuneration committee, with the board, decides not only my salary but those of the group management team. As I said, I will go through that process for the Deputy in more detail. I have given - more than many people - a significant amount of personal financial information and do not intend giving and would prefer not to give any further personal financial information. I think I have done everything I need to do. I have waived entitlements and told the Deputy what I am getting. That is what it is and what the Deputy sees.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Some €240,000.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Therefore, we have no answer on the €6,000 increase. Ms Kerins referenced the remuneration committee. I remind her that this committee specifically asked for those people to come here because she had passed the buck, not unreasonably, and said it was their kick. In addition to the €240,000, I understand she has the use of a company car and a fairly attractive pension arrangement which stands at 6%. I understand it is a defined contribution scheme.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I will come to that. Does Ms Kerins have any notion - just to hark back to her predecessor, Mr. Frank Flannery, to get a sense of how this works out for a person in her position - of what the value of her pension pot might be? Has she benchmarked herself against Mr. Flannery? Can any of her team tell us what Mr. Flannery's pension pot might be?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does Ms Kerins or any of her team have any notion of what Mr. Flannery's pension pot is? Are they just disinterested or is it unknown to the organisation?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is there somebody within the Rehab Group who knows it? There is bound to be, surely to goodness.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am exploring the issue of reward, pay and pensions within the Rehab Group. Ms Kerins is the serving CEO. As she has said, unreasonably, that she cannot categorically state what her own pension pot will be, I am not asking unreasonably because she has used the word "benchmarking" time and again if perhaps she benchmarked herself against her predecessor, Mr. Frank Flannery, whom, let me remind her, the committee also invited to be in attendance today. If he were here, we would not have to engage in this rigmarole. I am sure he would be more than happy to furnish the committee with that piece of information.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I see from the accounts that there were two kinds of pension scheme within Rehab. There was the defined benefit scheme, which has been wound up, and the defined contribution scheme. Who was in the defined benefit scheme?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I thank Ms Kerins. She has cited a number of times the benchmarking system used in the establishment of her own salary and identified the fact that, according to this measurement, she is below the median. She has cited the figure of 20% below the median.
I can only take it then, according to Ms Kerins, that rather than being paid €240,000, she should be paid, in order to be on track, €240,000 plus another 20%. What is that?
11:30 am
Mary Lou McDonald (Dublin Central, Sinn Fein)
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So €288,000, according to Ms Kerins' reckoning, is the market rate for her job.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That really should be €264,000 then.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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So Ms Kerins is underpaid by €24,000.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Ms Kerins made a point of raising it so I want to explore it with her. She is down 10% on her base salary. Where is the other 10% shortfall?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is Ms Kerins prepared to publish, even in a redacted form, the report that has given her this measurement and turned up this result? Who did that piece of research for Rehab?
Ms Angela Kerins:
Towers Watson did that piece of research. I will be speaking from it today and I am sure there would not be problem with publishing it. I will come back to the Deputy on that point. There is a lot of interest in this. As the Deputy has said, we can just redact some parts of it, if necessary, although it may not even be necessary to do so. I am sure the content of that report could be shared.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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So Ms Kerins would be prepared to share that with the committee.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That would be helpful because many people would want to have sight of it, not least people within Ms Kerins' own sector, that is, the charitable sector. Ms Kerins will be aware that when her salary became a matter of public knowledge, colleagues within her sector were very critical of, if not shocked by, the level of her pay. They cited research which might interest Ms Kerins, in terms of benchmarking, which showed that the average remuneration for CEOs and managers in charities is €59,000 per year, with no bonuses or top-ups. Most CEOs of charities earn less than €72,000 per year. Ms Kerins' pay is considerably at variance with those levels of remuneration. Is that not so?
Ms Angela Kerins:
I think Deputy McDonald has raised a very good point. If I could de-personalise this by talking about the post of chief executive of the Rehab Group, the issue or difficulties with the information Deputy McDonald has just given us is that the not-for-profit sector is a broad church. There are people in the not-for-profit sector who are running one reasonably large charity who are earning €100,000 to €140,000. Then there are other smaller charities with approximately €2 million in turnover and their CEOs would be on salaries of between €80,000 and €90,000. What I am trying to say is that the post of chief executive cannot be evaluated in name only. One needs to look at the total size of the organisation and its breadth in order to establish the proper remuneration for the leadership of that organisation.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Ms Kerins-----
Ms Angela Kerins:
If I could just finish my answer. The Rehab Group is a group of charities. The Rehab Group is not just one organisation, nor is it in just one sector. I can really understand that when people look at the Rehab Group, they do not really know the totality of what it is and they would probably just see it as a particular charity. We span general industry and the benchmark for the post of group chief executive is based on general industry.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Can I thank Ms Kerins for the sympathetic view she has of those of us who are ignorant of the full magnitude of her role? I can tell her that the public is well aware that Rehab is a group. We are well aware and well conversant in this committee with the variety of activities in which Rehab is engaged. I put it to Ms Kerins that she earns more than the President of the United States of America. She earns more than the Taoiseach, senior Ministers and people who hold very significant briefs. She operates in a sector and to an ethos, according to Ms Kerins, of social inclusion and social engagement. She relies on very large quantities of State moneys. In fact, they form the backbone and the bedrock of the entire Rehab enterprise in my view. She also relies on charitable donations - which we will come to in moment - and on the voluntary effort of people who get paid nothing. Seen through that prism, does Ms Kerins understand that it is very difficult to square the mission of the Rehab Group, its reliance on the State and on voluntary effort and contributions with a basic salary of €240,000 per annum. Is that an alien concept to Ms Kerins? Are we operating on completely different planets?
Ms Angela Kerins:
Deputy McDonald said that she thoroughly understood the Rehab Group and that is good to hear. However, in her commentary, she forgets that there is a significant other part of the Rehab Group. There is a significant part of the group that is not in Ireland and a significant part that is commercial. In addition to all of the very important work that Rehab Care, NLN and other organisations within the Rehab Group do, there is a very significant commercial organisation and the running of businesses within that organisation. I mentioned our recycling business already today, which is the largest recycling business in this country. Regarding social progress, I have said it many times, a social enterprise is about creating jobs. We have created quite a substantial number of jobs and continue to do so, but there is a huge challenge in maintaining jobs, particularly in this country. It is not just the delivery of services, which is very important and terribly challenging at times. There is also the issue of ensuring the 2,300 people in this country who are working for us continue to work for us and not just in the charity arena but also in the broad church-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I will come to that in a moment but before I do, can Ms Kerins tell me whether she is paid additional expenses or allowances?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What would Ms Kerins' expenses run to, on average?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Ms Kerins does not have that information.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I was alarmed to hear - although I am confident Ms Kerins will tell me it is not the case - that she regularly commutes by helicopter to different locations.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That could make a whole other interesting conversation. Let us turn now to the commercial aspect because Ms Kerins has laid emphasis on it. I wish to ask about one specific commercial venture and ask Ms Kerins to shed some light on it. Rehab had a relationship with an organisation called Complete Eco Solutions Limited. I checked it today and it is currently described as being involved in the wholesale of electrical household appliances and radio and television goods. It has two named directors, Mr. Frank Flannery, to whom we referred earlier, and Mr. Joseph McCarthy. I understand that both gentlemen are known to Ms Kerins.
We know Mr. Frank Flannery but will Ms Kerins identify Mr. Joseph McCarthy?
11:40 am
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Will Ms Kerins talk us through the relationship between Rehab and Complete Eco Solutions Limited? I understand it relates to the coffin business.
Ms Angela Kerins:
There is no relationship between these two organisations. A number of years ago, Rehab Group wanted to get into this business. In piloting and checking to see if that venture is what it wanted to do, it was helped by this organisation. There was no financial benefit to anybody. The Complete Eco Solutions Limited, having done some trading in China, agreed to help Rehab Group. It was a pilot project that did not progress. There was no further involvement by Complete Eco Solutions Limited.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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In what year did Rehab Group decide to try out the coffin making enterprise?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Perhaps in the course of this meeting, one of Ms Kerins' colleagues could check the year with Rehab Group head office. I am sure the matter could be established quite easily.
Complete Eco Solutions Limited set up shop in 2009. As I understood the turn of events, Rehab initially imported materials for the construction of these coffins directly from China and that afterwards, Complete Eco Solutions Limited became an intermediary, a third party. In other words rather than the raw materials coming directly to Rehab, Complete Eco Solutions Limited was an agent.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does Ms Kerins refute that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is Ms Kerins stating that at no stage, and there is no paper trail to confirm that materials from China came to Rehab via this agent or third party?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That is what I said.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does Ms Kerins have a means of confirming that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Would it be too ambitious to suggest that Ms Kerins would confirm that during the course of this meeting? I am sure one of Ms Kerins' colleagues could step out and contact somebody at head office.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is Ms Kerins uncomfortable with the idea of family members and people close to her having a commercial relationship with Rehab, given her position? Does it cause Ms Kerins to worry?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am referring specifically to a commercial transactional relationship, not voluntary effort.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How long did it go on for?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Were any other family members of Ms Kerins involved in this enterprise or any other commercial venture?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Okay. Does Ms Kerins have any further detail than that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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When did it cease?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It only became operational in 2009. By the way Complete Eco Solutions Limited is still operational to this day.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy's time is drawing to a close
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Thank you, Chairman. I wish to put a question to Ms Kerins on her earlier contribution this morning on the Rehab lottery. Ms Kerins disputes the audit claim that €700,000 was spent on communications, publicity and so on. Ms Kerins stated that the funds were not used for lobbying but for advocacy work with clients. Will Ms Kerins tell me in the simplest terms she can muster what that means? I might ask Mr. Purcell to comment on this matter also.
Ms Angela Kerins:
On the question of advocacy, many years ago Rehab group established advocacy organisations, which are client representative organisations. We have put quite a bit of effort and we continue to develop the advocacy skills of the clients across Rehab Group. We have a number of advocacy officers working with Rehab Group. One of the delegates heads that up. Some members will have been involved in our voter education programmes that were run through the advocacy service. Leading up to an election we bring in local authority members or politicians running for election in order that the politicians would meet and talk to our clients. All the political parties have done that.
There are many aspects to this service. It is a pity in some ways that members cannot see the video because it would give them a very good view of what advocacy means to our clients.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am not detracting for a moment from the value of that kind of work but €700,000 is a great deal of money.
Will Mr. Purcell comment on that issue and on the audit itself and the level of co-operation by Rehab with the audit process?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I would like Mr. Purcell to comment on the audit that he produced; on whether in his assessment, Rehab co-operated with the process; and on the level of expenditure on marketing, communications, hospitality or advocacy, as Ms Kerins claims?
Mr. Brian Purcell:
On the basis of the audit work carried out and the evidence presented, our internal audit was of the view that the systems of internal control operating within Rehab in respect of fund-raising and information to the Department was adequate and was being effectively applied. The report recommends that a funding contract specifically state the deliverables and the reporting and monitoring processes in place. The report also found that some of the cost to which the charitable lotteries funding had applied appears to have been of an administrative nature and the recommendations were that allowable costs and the specific use of the funds should be clearly defined and agreed annually. The report noted that the Rehab lottery had high costs. The internal audit recommended that ongoing funding to the scheme required that findings and recommendations outlined by it be taken into consideration.
The various elements of cost that were included there would have been accreditation and professional subscriptions, professional fees, advertising and hospitality associated with advocacy and lobbying. It was the audit's opinion that some of the costs would not be in line with the condition that the grant could not be used for administrative purposes.
11:50 am
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What figure does Mr. Purcell have there in terms of hospitality?
Mr. Brian Purcell:
The audit report did not actually cover the figures. There was no breakdown for hospitality. It was included in a list that informed the committee that some of these costs were administrative. It was not the amount that was issued - it was the nature of the costs and whether they would be included in a category or heading that would not be considered appropriate for application.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I understand that. The reason I raised it is that Ms Kerins mentioned the quite specific amount of €119.28. I presume they did not furnish that level of detail to the Comptroller and Auditor General.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Okay.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Obviously, €700,000 is a substantial proportion of the overall moneys. How would Mr. Purcell regard this figure? It is not insignificant in terms of it-----
Mr. Brian Purcell:
This is precisely why we carried out the audit. As I said in my opening statement, the Department took over the administration of the charitable lotteries fund in the middle of 2011. In light of what was going on at that time with regard to general Government expenditure and the expenditure of individual Departments and agencies, I think it would have been prudent for the Department, in the context of the overall review it was doing, to conduct a review of all lines of expenditure within the Department, which is what we were doing. As the Deputy will recall from her experience in the Committee of Public Accounts, a comprehensive expenditure review was carried out at the time by the Department of Public Expenditure and Reform. This would have been a follow-on from a part of that process as it applied to the Department of Justice and Equality, so it would have been entirely prudent to carry out that audit at the time.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Absolutely. I am not disputing that for a second.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I ask the Deputy to move on.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I will finish on this. I thank the Chair for his forbearance. The Comptroller and Auditor General's key concern related to the profit margin on the lottery scratch cards. A profit of €10,000 was made on card sales of €4 million. Bingo sales of €3.2 million resulted in profits of €548,000. Rehab had gross lottery sales of €7.2 million, but this resulted in profits of just €558,000, or 8%. What does Ms Kerins have to say about that?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I have to ask Deputy McDonald to finish on this question because we have to bring in Deputy Áine Collins.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Sure.
Ms Angela Kerins:
I would like to clarify the first issue. There was no definition of "administration" prior to the audit for 2011. Indeed, the audit itself recommended that there should be a definition of what constituted "administrative costs". The rules that are now set down in this regard were drawn up in 2013. I suggest that one cannot judge the submissions of 2011 on the basis of the rules of 2013. It just does not work. The funding we get from the charity lottery compensation fund is purely based on our sales and the percentage of our sales. Regardless of what we would like to submit in relation to items, the only way we can draw money down from the charity lottery compensation scheme is through the amount of sales we have in the charity lottery market, averaged over three years. First and foremost, the amount of money we draw down is limited by that, rather than by the list of items we shove in.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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We are aware of that.
Ms Angela Kerins:
I just wanted to clarify that. It may be the case that not everybody is aware of it. We submit, or over-submit, a list of items that the Department can take from as eligible. In the year the Deputy is talking about, we submitted items to a greater value of €250,000 above what we can claim from. We have no idea what items were chosen and what items were not chosen. Not in any year would we get a report on our drawdown, setting out what items were deemed eligible and what items were deemed ineligible. We never had any difficulty regarding our claim with the Department of Finance at the time, and we have no difficulty regarding our claim with the Department of Justice and Equality now. We cannot itemise, or say that X, Y and Z were chosen by the Department, because we do not know. All we did was submit what we considered to be eligible in relation to the scheme. I remind the committee that there was no definition of "administration" at that time. We would have submitted what was eligible. The Department of Finance and, following on, the Department of Justice and Equality, which has now taken over the scheme, would make those decisions. They have never come back to us and said "this or this" or "you do not have enough eligible claims here to draw down your whole amount to which you are entitled within the scheme". That is all I can say on the matter of clarity.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call Deputy Áine Collins.
Áine Collins (Cork North West, Fine Gael)
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I thank the Chairman. The witnesses are all welcome. I would like the Chairman to clarify something. The media reported this morning that the committee received legal letters from Rehab yesterday. Can the Chairman explain what happened? I understand the clerk received a phone call.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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My understanding is that a phone call was made to the legal adviser to the House, a certain conversation was had and legal advice or commentary was passed on by the person in question to the members of the committee.
Áine Collins (Cork North West, Fine Gael)
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The advice was that we should concentrate on the three areas that have already been discussed. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes.
Áine Collins (Cork North West, Fine Gael)
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That was a legal-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Ms Kerins can qualify that for the Deputy.
Áine Collins (Cork North West, Fine Gael)
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Ms Kerins did not contact the committee. A legal representative contacted the committee. My understanding - just for clarity - is that the legal advice was that we should concentrate on three areas and stay within those parameters. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The solicitor for Rehab contacted the parliamentary legal adviser. They had a discussion, arising from which the legal adviser reminded us of our remit and other matters. The clerk circulated that to every member of the committee. That is about the size of it.
Áine Collins (Cork North West, Fine Gael)
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It is just that there was some media coverage this morning to say that we had received a letter from the solicitors of Rehab. That was not the case. That is the point I am trying to clarify.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Members received an e-mail arising from a conversation-----
Áine Collins (Cork North West, Fine Gael)
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Did we receive an e-mail?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Sorry, I will clarify it. The fact of the matter is that we received a phone call from the legal adviser to Rehab, who had a conversation with the legal adviser here in the House, who in turn sent an e-mail to the clerk, who in turn sent a copy of it to each member of the committee.
Áine Collins (Cork North West, Fine Gael)
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Which we got.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Which we got.
Áine Collins (Cork North West, Fine Gael)
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Yes. I am aware of that. It was suggested this morning that we had all received a copy of a letter from the solicitor. I just wanted to clarify that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, it was not from the solicitor. It was from our legal adviser.
Áine Collins (Cork North West, Fine Gael)
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I will move on. Can I ask Mr. O'Brien about the staff of the section 39 organisations. Does the HSE audit section 39 organisations?
12:00 pm
Áine Collins (Cork North West, Fine Gael)
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I accept that it is not a section 38 organisation and they are not public employees. Is it correct that there is guidance in place on pay?
Mr. Tony O'Brien:
The same guidance as applies to public employees is available. Arising from the section 38 audit, which led to a request from the Health Service Executive, via the Department of Health, for clarification on public sector pay as it related to section 38 organisations, the Department provided us with a letter, which it asked us to circulate to section 39 organisations confirming, as I stated, that employees of section 39 organisations are not public employees and that section 39 organisations are not bound by public pay policy, but asking them to have due regard to public pay policy.
Áine Collins (Cork North West, Fine Gael)
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On a point of clarification, I understand that, prior to the Haddington Road agreement, staff in section 38 and 39 organisations continued to receive annual pay increases. Some section 39 organisations were implementing such pay increases as if it was public policy.
Mr. Tony O'Brien:
We have to go back a little further to the Croke Park agreement, rather than the Haddington Road agreement. After those agreements, section 38 organisations and direct public employees would not have received pay rises other than in the form of allowable increments. In fact, they would have had pay reductions. Section 39 organisations, which are a variety of organisations in both the profit and not-for-profit sectors, would have had a variety of arrangements in place. At a global level, they would have had reductions in funding from us but we would not have visibility and nor would we have directed them in relation to the pay rates of their personnel.
Áine Collins (Cork North West, Fine Gael)
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It may be worth auditing some of the section 39 organisations but that is another day's work. I thank Mr. O'Brien.
I welcome Ms Kerins. I am very much aware of the work done by Rehab. We have received much information on the group and how it operates this morning. I have accounts here for National Learning Network Limited and RehabCare and I appreciate there are other enterprise services with an annual turnover of approximately €103 million - that was the figure last year. It is very hard to identify who pays for whom and how the organisation manages to spread around shared administration costs. I ask Ms Kerins to explain the position. I have seen staff salaries in the accounts. Are the directors of any of the companies paid? Is it correct that all directors and members of the board work on a voluntary basis?
Áine Collins (Cork North West, Fine Gael)
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I do not understand how salaries work. I ask Ms Kerins to clarify the position in respect of pay.
Áine Collins (Cork North West, Fine Gael)
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I see that, yes.
Áine Collins (Cork North West, Fine Gael)
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I accept that.
Ms Angela Kerins:
It has spread in many directions. In Ireland, the three main operators are the National Learning Network, Rehab Care and a number of enterprise activities. We also have our lotteries. What the Deputy has before her is not a company structure but a management structure, which seemed to be the easiest way to talk about it. There would be a number of not-for-profit charities and commercial companies in there. Some of them are based here, some are based in the United Kingdom, particularly in Scotland where there is a lot of development, and some are based in Eindhoven in the Netherlands and Poland. The array of enterprise activities is quite spread.
The training activity is in Ireland and the UK. People have made comments already in relation to the wider Middle Eastern development, which is in the whole area of training. The training division and the health care division span the geographies, some more than others. The enterprises are wider. They are the ones that are in Poland.
Áine Collins (Cork North West, Fine Gael)
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I apologise for interrupting but I am conscious that we do not have much time. I understand how the group works. What I am trying to establish is how it spreads its costs. For example, where is Ms Kerins's salary in the group? Who pays it? I am sure other administration costs are spread across the whole group? How is this established? What are the principles around it and where does it feature in the accounts?
Áine Collins (Cork North West, Fine Gael)
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The salary of Ms Kerins is not included in the accounts of RehabCare or the National Learning Network, which means it is obviously in the enterprise accounts or somewhere else.
Ms Angela Kerins:
Yes, it is throughout. To go back to Rehab Care and the National Learning Network, it is not charged in there. Some people may ask why it is not charged in there. There has always been a reason that it does not need to be, so why encumber the services with the charge? However, it might be better in the future to actually put it across all of the operations.
Áine Collins (Cork North West, Fine Gael)
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Where is it charged?
Áine Collins (Cork North West, Fine Gael)
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I notice in Rehab Care there was a surplus for the financial year last year of €285,000. Is that correct?
Áine Collins (Cork North West, Fine Gael)
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There is, however, a deficit carried forward.
Ms Angela Kerins:
The group would have funded RehabCare. RehabCare would not return a surplus every year. It would have debts most year and we would put group funds into RehabCare to develop its services. A huge amount of support from the group would have gone into setting up and developing RehabCare. That is what the Deputy is seeing in there.
Áine Collins (Cork North West, Fine Gael)
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I note in 2011 there was a loss of €309,000. Have the activities of RehabCare increased in the past two years?
Ms Laura Keane:
As I mentioned in my opening statement, in the years when the funding cuts were imposed, RehabCare had a significant reduction in funding totalling €6.4 million. However, in that time, we increased our service provision and we are currently delivering services to 838 more people than we were at that point in time. We have increased our staff numbers and the number of locations from which we deliver our services has increased by 25.
Áine Collins (Cork North West, Fine Gael)
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What has been the increase in staff numbers?
Áine Collins (Cork North West, Fine Gael)
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We will return to the issue later. Does RehabCare engage in fund-raising?
Áine Collins (Cork North West, Fine Gael)
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How is this done and how much was raised last year?
Ms Laura Keane:
The fund-raising activity is generated by people at a local level. Fund-raising projects are usually developed for specific initiatives. All of RehabCare's funds that are raised through various entities and fund-raising go directly back to the service. The way this operates is that any funds generated are usually for a very specific project and are then accounted and maintained within that service.
Áine Collins (Cork North West, Fine Gael)
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Does it include cake sales, collections and so forth?
Áine Collins (Cork North West, Fine Gael)
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How much income did RehabCare receive from donations?
Áine Collins (Cork North West, Fine Gael)
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Is that all accounted for in the accounts, as part of turnover?
Ms Laura Keane:
It is accounted for against every single unit centre. The way we operate is on a unit cost so every single centre has its own individual identity and every single cent that is raised is applied and maintained for that specific service and is only drawn down by that service for the specific service they are raising funds from.
Áine Collins (Cork North West, Fine Gael)
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I appreciate that. However, I asked where this is recorded in the accounts. Is it recorded as income or where is it recorded?
Áine Collins (Cork North West, Fine Gael)
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We do not have a breakdown because the income is not broken down. I thank Ms Keane.
On the service agreements with the National Learning Network, the Indecon report expressed some concerns about the way in which training is delivered, including that it is not sufficiently flexible, and in relation to some of the outcomes.
This Indecon report that was provided to the committee - I am sure the witnesses are aware of it - stated that there could be more bridging of performance and more job coaching, and that there is a 23% transfer to other courses. Are those other courses provided by Rehab or outside? If they are other courses in Rehab, does that mean that another €14,500 is provided for the next course and, if so, how does that operate?
12:10 pm
Áine Collins (Cork North West, Fine Gael)
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Is it that old?
Áine Collins (Cork North West, Fine Gael)
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I have the recommendations.
Áine Collins (Cork North West, Fine Gael)
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Were the 144 places paid for out of capitation or was it extra? My understanding is that Rehab gets-----
Áine Collins (Cork North West, Fine Gael)
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Right.
Áine Collins (Cork North West, Fine Gael)
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When it went down to €14,498 Rehab was able to increase the number of courses delivered.
Áine Collins (Cork North West, Fine Gael)
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Because Rehab is paid based on the number of people on the course.
Ms Marie Kelly:
Yes. Our clients are funded only on the days they are in. They are not funded if they are off the course. We need to work on full occupancy. We provided an additional 144 places at the reduced fee. That was part of our efficiency. We changed the assessment process quite significantly in that we changed the application, we interviewed candidates, we carried out health reports for individuals before they started on the programme, including assessing their risk factors, and there was greater involvement by psychologists. We looked at the motor reviews of the individuals by the rehabilitation officer and the regional psychologist. We streamlined and made the process more focused on the learner in order to reduce the number of people who were placed on a course that did not suit all their needs.
Áine Collins (Cork North West, Fine Gael)
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Has that improved the outcomes in respect of the participants? The report states that only 34% of those who completed the training course entered employment, of which 7% was open employment.
Áine Collins (Cork North West, Fine Gael)
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How does that compare with international standards in relation to disability? Rehab has international experience, as it operates in other sectors. How does Ireland fare in that? Does Rehab have contracted agreements with SOLAS? I presume it has a service level agreement. If so, what are the key performance indicators, and are they being achieved?
Áine Collins (Cork North West, Fine Gael)
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Completed training?
Áine Collins (Cork North West, Fine Gael)
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So if people do not complete the course Rehab does not get the capitation.
Áine Collins (Cork North West, Fine Gael)
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If they do not complete the course, obviously Rehab still gets paid.
Ms Marie Kelly:
We do. If the Deputy understands, our clients have many difficulties including injury and mental health. Quite often they will have an episode in which they will come off the programme for a period of three or four weeks and re-enter the programme. Once they are off a certain length of time we are not funded. Plus, this allows another person to come onto the programme. Really, it is about making the most efficient use of the programmes. We also operate a flexible intake, which means people can come onto our programmes at any time, so one is not waiting for the start of an academic year. As in the case of many colleges, there is a difficulty in retaining the numbers. Having started with the full number, by the end of January or February they have lost probably 40%. Of the number of non-completions or drop-outs - which is a horrible term - 50% of those will return because they leave the programme for medical reasons. At the moment we are looking at a discharge rate of 37%, half of whom will come back in when they have dealt with their difficulties.
Our outcomes are very strong and they are much stronger by international comparison. We would be seen as the leading edge across Europe. On average, 90% of those who complete our programmes enter into employment or further education and training. Many of our clients progress to FÁS courses, now provided by the local education and training boards, which will provide further continuing education. It is about getting people on the first step of the ladder and giving them the confidence to go back to education and achieve some level of certification and some level of work experience and scope outside the academic world. We give them certification but also the supports they require to deal with keeping well and any other difficulties.
Áine Collins (Cork North West, Fine Gael)
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Is there a tender process? Does Rehab have competitors in Ireland for the service it provides?
Ms Marie Kelly:
At the moment we tender for the FÁS-contracted training. Discussions have taken place previously between SOLAS and ourselves about starting the tendering process. SOLAS has set out three priorities, including streamlining - that is, making the programmes more efficient - which is the key priority, and changing the programmes to reflect labour market awareness. We provide labour market activation programmes and look at what is required in the local area. We are in every county in Ireland and have 50 locations. We have strong relationships with employers and try to design our programmes around-----
Áine Collins (Cork North West, Fine Gael)
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I appreciate that. Maybe I should be asking Mr. Paul O'Toole this question. Are there other competitors with Rehab in that space or is Rehab the only company in Ireland that can provide what SOLAS is seeking in terms of training for disabilities?
Mr. Paul O'Toole:
It is the main provider by far. Within that group, which we call specialist training providers, there are another 16 organisations which provide more specific services to particular cohorts. They are much smaller. They are all not-for-profit charities in their own right. In terms of a commercial competitor, there is no obvious one at present. It does not mean there cannot be one, but there is no obvious one at present.
Áine Collins (Cork North West, Fine Gael)
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So even though there is a tender process, there is nobody else right now.
Áine Collins (Cork North West, Fine Gael)
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So the answer is that there is no tendering process.
Áine Collins (Cork North West, Fine Gael)
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Are they smaller training contracts?
Áine Collins (Cork North West, Fine Gael)
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So the majority of the funding that Rehab gets from SOLAS is for specialist training, as there is really no other competitor in Ireland.
Áine Collins (Cork North West, Fine Gael)
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Has SOLAS looked to see if there are other providers?
Mr. Paul O'Toole:
We have not done so to date. It has certainly been considered. It was considered by FÁS in 2009-2010. We discussed the issue internally and we discussed it with the Department of Enterprise, Trade and Innovation at the time. We set out a path of three points, which are set out in my statement. We thought there were three important building blocks: efficiency - that is, reducing the rate; improving the service - we have been on a programme of continuous improvement; and testing the market, although we have not to date tested the market. The organisation is no longer FÁS, as it has been dissolved. In future those contracts will be offered through 16 separate organisations. We will, however, revisit future provision when we bring forward our SOLAS strategy to the Minister at the end of March.
Áine Collins (Cork North West, Fine Gael)
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I would have thought one of the greatest ways of reducing costs was competition.
Áine Collins (Cork North West, Fine Gael)
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It might be looked at in the future in terms of getting value for money.
I am very conscious of time as I know others want to come in. May I ask Ms Angela Kerins about her company car? What kind of company car does she have and what is the value of it?
Áine Collins (Cork North West, Fine Gael)
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Based on her salary, Ms Kerins obviously pays benefit in kind, BIK, on her company car.
12:20 pm
Áine Collins (Cork North West, Fine Gael)
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Rehab is a 50% shareholder in Care Trust Limited. The other 50% is owned by the Friends and Supporters of the Central Remedial Clinic. What income does Rehab's 50% produce, particularly in the light of it being reported here previously that €700,000 from the Friends and Supporters of the Central Remedial Clinic goes into a pension fund? What is the position in that regard?
Áine Collins (Cork North West, Fine Gael)
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Is it correct that the owner of the other 50% of Care Trust Limited is the CRC?
Áine Collins (Cork North West, Fine Gael)
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Yes, as I said initially. What does Care Trust Limited do? Where does it raise money?
Áine Collins (Cork North West, Fine Gael)
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It is part of the lottery.
Áine Collins (Cork North West, Fine Gael)
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Is this separate from Rehab Lotteries?
Áine Collins (Cork North West, Fine Gael)
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Are the accounts for Care Trust Limited available?
Áine Collins (Cork North West, Fine Gael)
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I understand we cannot get the accounts of Rehab Lotteries. Is there a reason for this? Are they published?
Áine Collins (Cork North West, Fine Gael)
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Rehab Lotteries is a separate entity. I imagine that, even with consolidated group accounts, as Rehab has many subsidiaries, there is a set of accounts prepared for Rehab Lotteries.
Áine Collins (Cork North West, Fine Gael)
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They are not published and I cannot get them from the Companies Registration Office. Are they filed anywhere?
Áine Collins (Cork North West, Fine Gael)
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They are guaranteed by the Rehab Group, but that exempts Rehab from filing them and they are not available in the public domain, as opposed to the other accounts.
Áine Collins (Cork North West, Fine Gael)
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Would it be possible to get a copy of the accounts or could a copy be furnished to the committee?
Áine Collins (Cork North West, Fine Gael)
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That information would be useful from the point of view of transparency.
Áine Collins (Cork North West, Fine Gael)
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I appreciate that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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All the Deputy is asking is whether a copy of the accounts can be made available.
Áine Collins (Cork North West, Fine Gael)
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I am very much aware that Rehab Lotteries makes very little money on the sale of its lottery tickets, only the money being provided by the Government.
Mr. John McGuire:
That is not quite correct. As an overview, every year Rehab makes in excess of €2.5 million on its lottery activities, including the income from Care Trust Limited.
To go back to what the Deputy was hinting at, last year Care Trust Limited contributed approximately €1.7 million or €1.8 million to both shareholders. It is a very different lottery from the national lottery and our other lotteries. Tickets are sold through a different distribution mechanism, through subscription, and because of this it is a very efficient lottery, on which the return last year was 54%. Therefore, the proceeds were 54%. I am relating this to indicate that we do run and are involved in some very effective and high profit lotteries. For reference, the national lottery provides a return of 31%, based on a massive turnover and volume of €730 million last year. Separately, Rehab has another subscription lottery which has a net profit of approximately 36%.
Coming to the two lotteries to which the Deputy probably wants to refer, these are the two lotteries that directly face the national lottery. We sell through retail outlets our radio bingo and scratch cards. They contributed in the year referenced in the Dáil by the Minister, Deputy Alan Shatter, €560,000. Members of the committee may think this is a small amount of money, but it is very important to us in the context of the services we provide in the way they have been explained to the committee. In percentage terms, the amount is small and we would dearly love it to be greater. The only reason it is so low is the unfair cap on lottery prizes in that sector in which we are competing head-on with the national lottery. Our response to the Government is that if there is a genuine interest in having highly profitable authority lotteries, with returns comparable to those for the national lottery, the unfair cap on lottery prizes must be removed to enable us to compete on a fair basis.
Áine Collins (Cork North West, Fine Gael)
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I am happy to hear that. I am sorry to interrupt, but does the Care Trust lottery have the same cap?
Áine Collins (Cork North West, Fine Gael)
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It is profitable, at a figure of 54%, but the cards being sold through retail units in direct competition with the national lottery are not.
Áine Collins (Cork North West, Fine Gael)
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Is it still capped?
Mr. John McGuire:
It is. All charity lotteries in Ireland are subject to the conditions and regulations set under the Gaming and Lotteries Act 1956 which, as I am sure committee members will appreciate, is very outdated. The national lottery is covered by separate legislation. There is no cap and the legislation allows it to give out whatever prizes it wants.
Áine Collins (Cork North West, Fine Gael)
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I am fully aware of that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I suggest we now take a break because the witnesses have been here since 10.30 a.m. and a number of others wish to ask questions. In the meantime, the secretariat will copy the report on salaries.
12:30 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are back in public session. The broadcasting unit has complained that there was huge interference in the first half of the meeting, so please keep mobile phones away from microphones. I call on Deputy O'Donnell.
Kieran O'Donnell (Limerick City, Fine Gael)
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I welcome the witnesses. In his review of section 39 of the Health Act, what has the HSE found to date in respect of declarations on salaries for CEOs and senior management in organisations covered by that Act?
Mr. Tony O'Brien:
The vast majority of section 39 organisations have provided returns on time. In many instances, Rehab would be included in that. We sought additional information or clarification of information from at least one Rehab organisation. That validation process is ongoing and is intended to be completed by the end of March, at which time we will have a validated view of the completeness and accuracy of all the information. This relates specifically to the requirement under the 2013 arrangements for the disclosure of management salaries above the equivalent to level grade 8, as per the consolidated pay scale. At the moment, we have drawn no conclusions.
Kieran O'Donnell (Limerick City, Fine Gael)
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Is the HSE still awaiting further information from the Rehab group at this point?
Kieran O'Donnell (Limerick City, Fine Gael)
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What was the median of salaries applied across the section 39 organisations?
Kieran O'Donnell (Limerick City, Fine Gael)
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In terms of public pay policy, what is the level of salary deemed to be the maximum?
Mr. Tony O'Brien:
If the public pay policy applied on a compulsory basis in the section 39 agencies, that would require us to take a view on job size and where it would sit in a public sector pay scale. While those agencies are asked to have due regard, they are not strictly speaking obliged to do that. It is important to stress that if we applied full public sector norms, in many instances it is likely that we would find that the range of benefits available to staff in section 39 organisations are below those that would apply if they were in section 38 or public agencies. There was some discussion earlier about defined benefit pension schemes. Such schemes would be absolutely standard for the vast majority of staff in section 38 organisations, and would be more exceptional in current day terms for section 39 organisations. We do not see like-for-like benefits, so doing exact comparisons is not really practicable. Equally, it is not in the public interest, or in the interest of the HSE as the funding body, to seek to drive section 39 organisations into being equivalent to section 38 organisations, because that would inevitably reduce the flexibility of that service provision and increase the cost of it in an overall sense.
We are focusing specifically on disclosure of pay at the higher levels of the entities with which we have contracts, which are these two subsidiaries in this instance, as opposed to Rehab Group as a whole.
Kieran O'Donnell (Limerick City, Fine Gael)
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These are RehabCare and the National Learning Network.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the maximum salary that is facilitated under section 38? Is there a figure?
Mr. Tony O'Brien:
The highest approved salary in a section 38 organisation is that of a chief executive of a Dublin academic teaching hospital, which is currently the equivalent of a level one national director in HSE consolidated pay terms, which is slightly in excess of €134,000.
Kieran O'Donnell (Limerick City, Fine Gael)
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Does that apply across the board to section 38 organisations?
Mr. Tony O'Brien:
Most of the section 38 organisations would be smaller in scale than a large Dublin academic teaching hospital. From the exercise we have gone through with section 38 organisations, we know there are instances of payments that bring the total remuneration package to a level that is in excess of the maximum provided. However, the largest job in a section 38 organisation is that of chief executive of one of the big academic teaching hospitals, and that comes in at around €134,000.
Kieran O'Donnell (Limerick City, Fine Gael)
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What model of Audi is Ms Kerins's car?
Kieran O'Donnell (Limerick City, Fine Gael)
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It is four years old. When will the car be changed next?
Kieran O'Donnell (Limerick City, Fine Gael)
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If it recently passed its MOT, it has another two years at least.
Is it fair to state that RehabCare and National Learning Networks are the two companies that deliver the bulk of training and employment at the Rehab Group?
Kieran O'Donnell (Limerick City, Fine Gael)
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I am talking about companies. Are RehabCare and the National Learning Network the two main training and employment companies?
Kieran O'Donnell (Limerick City, Fine Gael)
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I have just done a rough calculation. They make up between them about 48% of the overall turnover. They are 95% funded by the State. They are getting roughly €83 million from the State. Over 40% of the turnover comes from the State, but it comes to about 95% for these two organisations. Is that a fair statement?
Kieran O'Donnell (Limerick City, Fine Gael)
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If the two main organisations in Ireland are being funded to that level by the State, how does Ms Kerins reconcile being paid outside the norms of public pay policy? Our role as a committee is to examine public funds. Virtually all funds are going into two organisations: RehabCare, which has a turnover of about €44 million, and the National Learning Network, which has a turnover of about €43 million.
They are each getting approximately €41 million or €42 million. That amounts to approximately €83 million a year, which means that approximately 95% of the income of the two organisations comes from the State. The logical question is: if that is the case, how does one reconcile the level of funding from the State with an income that appears to be above public pay policy guidelines. Will Ms Kerins flesh this out?
12:40 pm
Ms Angela Kerins:
I am glad to do so. First and foremost, as I have said before, my salary is not paid from any of the income from the State for National Learning Network and RehabCare, as the organisations funding them can confirm. We have a much bigger organisation. Our enterprise organisation which is based in Ireland but trades in many countries is nearly as big as these two organisations.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the turnover in Rehab Enterprises?
Kieran O'Donnell (Limerick City, Fine Gael)
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From where is Ms Kerins’s salary paid?
Kieran O'Donnell (Limerick City, Fine Gael)
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Will Ms Kerins define "general income"?
Ms Angela Kerins:
All of the income raised through the various activities of the group, group-wide activities and contributions. There is more than enough income coming in to cover my salary. It does not depend on fund-raising income and is not associated with any of the income covered here. As we grow the group, we hope to have more of it. My salary - I am happy to share this information with the Deputy - is independently assessed by external experts, as are those of other members of the Rehab Group management team. We have no say in it. It is independent of us and goes to the board which decides whether to accept it. That is how it has always been. It is benchmarked against general industry. We have all taken pay cuts, management as well-----
Kieran O'Donnell (Limerick City, Fine Gael)
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How does Ms Kerins explain that the salaries are benchmarked against industry, yet it is a charitable organisation?
Kieran O'Donnell (Limerick City, Fine Gael)
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Am I correct in assuming Rehab is exempt from tax?
Kieran O'Donnell (Limerick City, Fine Gael)
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Does the organisation have charitable status?
Kieran O'Donnell (Limerick City, Fine Gael)
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It is slightly different from a commercial concern in that it does not pay corporation tax.
Kieran O'Donnell (Limerick City, Fine Gael)
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Are management charges submitted to RehabCare and National Learning Network for Ms Kerins’s time?
Kieran O'Donnell (Limerick City, Fine Gael)
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Do they have anything to do with Ms Kerins’s salary?
Kieran O'Donnell (Limerick City, Fine Gael)
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Are there chief executive officers in RehabCare and National Learning Network?
Kieran O'Donnell (Limerick City, Fine Gael)
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We are here to represent people up and down the country. They see an organisation that receives significant funding from the public purse and in which Ms Kerins’s salary does not specifically come from the private, enterprise company but from the group company above it. It comes out of a pool of funds, 95% of which comes from the State for RehabCare and National Learning Network. For the overall Rehab Group, State funding is just short of 50%. Does Ms Kerins understand that the person looking in will ask how she reconciles taking €83 million of taxpayers’ money with having a salary that exceeds public pay guidelines? That is the question.
Ms Angela Kerins:
We do not take €83 million from the State. We deliver €83 million worth of services to the State. Every penny of that money is associated with a cost in service delivery and within the organisations and the service level agreements in the organisation represented here. It is important that people do not think the State just gives us money. We sign contracts, like any other subcontractor, with the State and deliver services for that money. It is not free money rattling around; it is directly associated with the cost base for service delivery. The HSE and SOLAS have to ensure that is the case and they are validating this now. We all want to ensure they are reassured.
The Rehab Group is much broader than these two companies; there is much more going on in many countries. The remuneration of the management team is fairly and independently assessed for its size. The Rehab Group has been compared with semi-State bodies; it is not a section 39 organisation. The funding stream for National Learning Network and RehabCare is through section 39. Approximately €40 million worth of services are purchased from the private sector and I am not sure whether it comes through section 39 or another section. They are disability services. There are private for-profit companies competing with not-for-profit organisations for the contracts to deliver residential, respite and day care services. It is not the case that Rehab simply gets a pile of money from the two organisations and can do what it likes with it - it cannot. We have to meet very specific and comprehensive contracts. There are also quality measurements, as my colleagues said. We have a level 5 award from the European Foundation for Quality Management, EFQM, and there are European quality systems. We put all of these through and support them from a company and a group perspective.
It would be narrow and misleading to compare Rehab with a normal, regular charity because it is much broader than that. Neither can it be compared with the private sector because the private sector does not have a not-for-profit ethos. It cannot be compared with the State because we have to pay our own bills. If contracts are withdrawn, which sometimes happens, or we lose one, the cost base of redundancy, etc. sits with us. The Rehab Group does not enjoy the comfort of being a public sector organisation. I am not saying it is easy to be a public sector organisation, as people work very hard in the public sector and there are some very good people working in it. Most of them are superb, hard-working individuals. The matter is complicated. It is neither a private nor a public sector organisation; it is a not-for-profit organisation which combines all of these aspects.
Then there is the international side in that we also work with other governments.
12:50 pm
Kieran O'Donnell (Limerick City, Fine Gael)
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I refer to Mr. O'Brien's comments. What is his view of the profile of the organisation which Ms Kerins has provided, having regard to section 39 and public pay policy? Has this shed new light on anything?
Mr. Tony O'Brien:
It is fair to say there is a mix of organisations funded under section 39 which include those which I would not call charities but which have the benefit of the charities exemption, charitable status, and other entities which are more commercial in nature. Therefore, there is a good spread of organisations among the 2,500 funded under section 39. For the purposes of competition and procurement, under the section the HSE is not an entity for the purposes of the legislation; therefore, we are not required, provided we are satisfied there is good value and so on, to enter into competitive procurement in the way we would in the case of some purely commercial services we purchase. There is a great variety of organisations of various scale doing a variety of things. The chief executive of the Rehab Group has just given a fair overall description of the diversity in the sector.
Kieran O'Donnell (Limerick City, Fine Gael)
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On a point of clarification, I ask Ms Kerins about bonuses. It was mentioned in the press statement that she had not taken a bonus in the past four years. Can I take it that she would have received a bonus in 2009? What criteria were used in paying bonuses? Did Ms Kerins defer or waive the payment of a bonus? What were the amounts involved? What does she anticipate her view will be on bonuses in the future?
Ms Angela Kerins:
Performance-related pay is part of some people's contract. Bonuses, or performance-related pay, are paid on the basis of key targets being reached. For example, in the sales area which most people can understand better a person getting a bonus must achieve a certain level of sales. It is no different in the case of any other staff member in the organisation who may or may not in the past or may have in the future performance-related pay. Targets are set at the beginning of the year in the budgets and business plans for the year. That is how the bonuses are established, to what percentage was the target or a number of targets achieved.
Kieran O'Donnell (Limerick City, Fine Gael)
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Who sets the targets for Ms Kerins's bonus payments?
Ms Angela Kerins:
First and foremost, the Deputy asked the value of the bonuses. I do not know because I waived them before they ever had time to evaluate them. In other words, I cannot tell the Deputy. However, I am disclosing my own personal circumstances, but I can tell the Deputy that my contract provides for a bonus of up to 30% to 35%.
Kieran O'Donnell (Limerick City, Fine Gael)
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Of the base salary.
Ms Angela Kerins:
Yes, but I have never received that figure. I would have to meet particular targets to achieve a bonus. That is the extent of it. The reality is that I have not had a bonus for many years. To be quite honest, I do not know what it was in 2009. It is not my intention to look for it in years to come. A lot of organisations buy out bonus payments if they do not wish to pay them any longer or if people do not wish to receive them. There are formulas for the buying-out of bonus payments.
Kieran O'Donnell (Limerick City, Fine Gael)
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Ms Kerins's bonus payment has not been bought out.
Ms Angela Kerins:
To be quite honest, my colleagues and I have not required the organisation to buy us out. If, some day, the cap is lifted on the lotteries and we have loads of money in income and it might be relevant to my income, maybe, but we did not seek any buy-out; we just waived the bonuses. When and if bonuses are done, they have to be done independently and based on fact and delivery.
Kieran O'Donnell (Limerick City, Fine Gael)
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Mr. Brian Kerr stated in the press statement, "We are satisfied that this is a competitive and fair remuneration for this person," referring to Ms Kerins. What is her view of that statement?
Kieran O'Donnell (Limerick City, Fine Gael)
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The ordinary person will look at the figure of €240,000 and regard it as a substantial amount of money.
Kieran O'Donnell (Limerick City, Fine Gael)
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I have a fair idea. The point I am making is that the Rehab Group appears to contain an even mix of private and public funding, in that 50% of its turnover comes from the State, yet it is all under the one umbrella. Was separating the public side from the private side ever considered to have absolute clarity? I agree that the group delivers services, but the funding is coming from the public purse, no matter which way one looks at it, and there is a cloud. Was dividing the group to make part of it private and part of it public ever considered? That would provide absolute clarity about the public funding mechanisms.
How does Ms Kerins explain to an outsider that in respect of one element of the lottery - the scratch card - it virtually made no profit - €10,000 - in the past couple of years on a turnover of €4 million? It is a little like chasing the dragon. Is it an inefficient lottery system, with the public purse providing matching funding? How can Ms Kerins justify having a lottery scratch card resulting in a profit of €10,000 on of a turnover of €4 million? On a turnover of €3.2 million in the case of bingo cards, there was probably a profit of €450,000. I ask Ms Kerins to deal with these questions.
Ms Angela Kerins:
About eight or ten months ago we started to look at this structure. The organisation is a very busy one and this issue has really started to rear its head again in the past couple of months. I said in my opening statement that we had to look at the structure of the organisation to see how effectively it could restructure the commercial side and the not-for-profit side in order that there was absolute clarity for everyone. Our organisation is terribly complex and very complicated to explain. No matter how many times-----
Kieran O'Donnell (Limerick City, Fine Gael)
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I hate the word "complicated" because everything can be explained.
1:00 pm
Ms Angela Kerins:
That is right. However, when one is trying to talk about an organisation that is involved in so many different areas - and most people know the Rehab that they face, whether it is through its services or our recycling companies and whether it is in the UK, Scotland or Poland - everybody has a different view of it. They think they know what it is. It is amazing how many times we have to break through the barrier of people thinking they know what it is in order to try to explain it. The Deputy is absolutely right. We have got to make matters clearer and we need to restructure our operations in order to do that. This matter is heavy on our minds. There is already a committee in place within the Rehab Group which is taking advice from our auditors, the PwCs of the world and our legal people as to how best we might do this. If anybody has an interest in contributing to that process, we would be delighted to hear from them. We need to do it because it is more than overdue. We need to get it done this year. The sooner we can complete it, the better. There are areas in respect of which we require, for very good reasons, quite a number of these company structures. It could be as a result of grant-aid issues or because they are in a different jurisdiction or whatever. Without a doubt, however, the Deputy is absolutely right. Hopefully we will have this piece of work done by year end. It will be good and positive for the organisation to ensure that it underpins our growth. We want to grow the organisation and create more services and jobs.
I would like Mr. McGuire to answer the Deputy's second question. Mr. McGuire has been involved in Rehab Lotteries for many years. If the Deputy does not object, I will pass that question over.
Mr. John McGuire:
In the context of the profitability of the scratch cards, as has already been mentioned, Rehab has a portfolio of lottery products, and unfortunately the scratch cards are the sick baby in the family in that they are not as profitable as the other products we offer. Each year we are making in excess of €2.5 million in net proceeds from all our lottery activity. Scratch cards have suffered because sales have gone down. Sales in the year to which the Minister referred in the Dáil, 2010, were just under €4 million. They have dropped progressively over the years, because of the unfair cap on charity lotteries, from €10 million to just under €4 million.
Kieran O'Donnell (Limerick City, Fine Gael)
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In the context of the €4 million, how much would Rehab have received from the State in matching funding?
Mr. John McGuire:
One must look at it in its totality. There are two products that qualify for the charitable lotteries compensation fund: radio bingo and scratch cards. It is a little artificial to separate the two because we are relying on the same system to sell them both. They are sold in the same type of shop and the same overhead looks after both products. To answer the Deputy's question, as a result of the fact that we are the dominant player in the market we have been receiving a percentage in the high 60s of the total fund in any one year. As the representatives from the Department of Justice and Equality have explained, the fund has varied from year to year. The maximum value was €8.6 million. It was down to €4 million last year and is due to fall to €2 million this year. Of that amount and between the two qualifying turnovers that we have, we receive approximately 68% of the total.
Kieran O'Donnell (Limerick City, Fine Gael)
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What expenses does Rehab incur which mean that it only makes approximately €10,000 from gross sales of €4 million in respect of scratch cards? On bingo sales, it only makes a profit of approximately €450,000 from a turnover of €3.2 million. How is that happening?
Mr. John McGuire:
It is purely a factor of volume. I will focus first on our biggest cost in respect of scratch cards. In order to be competitive we give back to the public the same prizes as the national lottery. So for every €1 scratch card we sell, 66 cent goes on prizes. That is a big chunk. Many people are of the view that if they spend €1 on a scratch card, Rehab receives the full amount. It does not work like that. The other direct cost relates to the commission of 12.5% we give to the retailers that sell our tickets. In the context of income to us, we do not get 100%. Another very obvious direct cost relates to the fact that these tickets must be printed.
Kieran O'Donnell (Limerick City, Fine Gael)
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So 90% of what is taken in from card sales goes on prize money or commission to retailers.
Kieran O'Donnell (Limerick City, Fine Gael)
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I apologise. It is just short of 80%.
Mr. John McGuire:
We have other costs. Our biggest cost relates to the infrastructure we have in place to run the business. We need people to sell tickets and invoice retailers and we need credit control. We have streamlined that cost over the years. There are ten people working for Rehab Lotteries now. The annual payroll is, from memory, €430,000. That includes everything: pension contributions, PRSI, etc. At one point we were turning over €10 million and making a profit each year of between €2.5 million and €3 million from our scratch cards - which were a brilliant product for us - but our business has been decimated over the years by the aggressive tactics of the national lottery on one hand, and the unfair cap on lottery prizes on the other. As the lottery market developed and people began to understand it better, the national lottery started to bring in new products. Initially it was just scratch cards but then the lotto was introduced, with mega-prizes of up to €190 million. How could we compete with that? Our sales went like that and that. When we go to the retail trade, we are stronger going with two products than with one. Will we get out of the scratch card business, even though the profitability might be great? I would say "No". Why not? Because we would always be hopeful that a fair Government at some time - either the current Administration or a future one - would address this issue and bring equality and fairness into the market. There should not be one set of rules for the State-owned national lottery, which can do anything it wants. The charities are trying to compete with their hands tied behind their backs. That is why the Government, recognising this, introduced the charitable lotteries fund.
I am very pleased to be here today in front of this committee because other committees have considered the situation and that led to the charitable lotteries compensation fund. The former Select Committee on Legislation and Security examined this matter in 1996. The committee, which was chaired by Deputy Charles Flanagan, unanimously recommended that the cap on prizes be removed. For the committee's attention, one of the members of that committee was the current Minister for Justice and Equality, Deputy Shatter, who at that time-----
Kieran O'Donnell (Limerick City, Fine Gael)
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Politics is beckoning for Mr. McGuire.
Kieran O'Donnell (Limerick City, Fine Gael)
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I hope he is not being selective.
Mr. John McGuire:
-----from the Chairman of that committee, Deputy Charles Flanagan, who stated,
The greedy tentacles of the national lottery have spread to every parish in the country, wiping many legitimate and genuine charitable organisations off the map. Charities are being squeezed by the national lottery, which enjoys an unfair and dominant marketplace position.
That is the end of what I have to say on that.
1:10 pm
Gerald Nash (Louth, Labour)
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I join my colleagues in welcoming the representatives of Rehab here today. Picking up on the point regarding salaries on which Deputy O'Donnell finished, it is clear from Ms Kerins's earlier contribution that there is some clarity around the fact that the bulk of State funding goes to two particular companies in the Rehab Group. Is it all of it?
Gerald Nash (Louth, Labour)
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All of it goes to RehabCare and to the National Learning Network. On that basis, would Ms Kerins accept that it is reasonable for this committee to try to establish what the salaries of the senior management are and to put that on record here today? I further note that Ms Kerins, in her opening statement said that total remuneration of the senior management team would be published at some stage. I note she said "total remuneration" and not individual remuneration packages for senior management teams, which would generally be the requirement for positions that are essentially funded by the public purse.
Ms Angela Kerins:
In general, for instance, if one takes RTE, it publishes its full remuneration package for the director general of RTE; it does not publish it for anyone else. Even if one looks at the new FR102 coming through, that is about publishing all together the total remuneration package of the management. If one looks at SORP, it is another way of disclosing salaries.
Gerald Nash (Louth, Labour)
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Ms Kerins might explain what SORP is.
Gerald Nash (Louth, Labour)
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I am aware of it but she might explain it for the record.
Gerald Nash (Louth, Labour)
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Why has there been the resistance to disclosing the salaries that are available to senior staff members? This was never about Ms Kerins's individual salary - that may have been her interpretation. It certainly was a matter of keen interest for the media and I understand that. It was probably a matter of keen interest because Ms Kerins was so reluctant to disclose it in the first place. Can she see the point I am making, that there is a logic in disclosing the salaries, at the very least, of the senior staff members who are in receipt of substantial public funding for the services that they operate? Would she accept that?
Ms Angela Kerins:
Can I make a comment or two on that? I have never been asked formally for my salary. It is the media that have been looking for my salary. I have never been asked by anybody. In fact, this is the formal arena in which I had a discussion in relation to it. The last time it was disclosed, we were asked by the Minister, Deputy Reilly, what my salary was. While it was not relevant or he did not have authority over that, we did disclose it, so it is not as if we were reluctant - we were never asked. I have never been asked by any Minister or any-----
Gerald Nash (Louth, Labour)
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Ms Kerins is at pains to describe the division of labour within the organisation, rightly or wrongly, and I may agree with that or I may not, but that is an objective fact. The logic then surely follows that the organisation would have an interest, and there is a public interest, in establishing where that money goes, including the level of salaries. Does Ms Kerins accept that?
Ms Angela Kerins:
I do, of course, but can I also say that there are data protection issues and privacy issues here for individuals? We have consulted the Data Protection Commissioner in relation to disclosure. One cannot disclose private information on individuals if they do not give one the permission to do so. That is the law and we cannot break it. I waived all that. That is why Rehab could do that because it was waived. If somebody does waive their rights, it can be seen as that they are doing it under duress. Let us put that into context. I agree with the Deputy that we need to get a system of disclosure that is appropriate and acceptable in relation to our senior management. I think that is important. The board of the Rehab Group, in responding, said that it would disclose. It mentioned, if my memory serves me right, FR102. I think we should do it before that; I think we should do it far sooner than that. We should try to ensure we can do it in relation to this year. That is my hope and I hope that is what we will do.
Gerald Nash (Louth, Labour)
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There is a pattern here with the Rehab organisation. That is reflected in an article in yesterday's Irish Independent, if I may discuss that for a moment, and it was touched upon to a degree by Deputy McDonald earlier, particularly around the necessity to cut pay packets and for wage moderation in the organisation in light of the situation in which the country found itself and in which Rehab's core funders from the State side found themselves. In that article, and I am sure Ms Kerins will recall this, a reference was made to getting, as I understand it, staff and union representatives who would have an interest in establishing financial information about the company in the normal course of events to sign confidentiality agreements in the context of a due diligence process around the financial position of the company. In the normal course of events in my experience, if a company goes to a trade union and says it is in difficulty, the union often requests financial information, which is usually made available, and they can also request an independent financial adviser, a financial consultant, to do a due diligence exercise. It is often then requested by the Labour Court but there seemed to be serious resistance to that at the time. Can Ms Kerins, as the chief executive of Rehab, recall asking those who had that information in relation to the financial position of the company to sign confidentiality agreements? This is in regard to the article in yesterday's Irish Independent.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I think it is Ms Kerins's phone that is causing interference.
Ms Angela Kerins:
My apologies, it is now turned off. I know the issue to which the Deputy is referring. It is normal practice if one gets an independent financial consultant to come in and evaluate any company's financial records for a particular reason that this is confidential and confidentiality agreements are signed. There was no particular issue raised against people receiving information on a confidentiality basis. I am not aware that became an issue at the time in relation to the negotiations.
Gerald Nash (Louth, Labour)
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Is Ms Kerins aware that reference was made in the article yesterday, and I would pleased if she would respond to it, to the locks having been changed in the finance department around that time? Was there any connection in terms of that particular dispute?
Gerald Nash (Louth, Labour)
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Yes. That is a reference made in the article. I am sure Ms Kerins has a position on that and that she is aware of it.
Gerald Nash (Louth, Labour)
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Changing locks in the finance department.
Gerald Nash (Louth, Labour)
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So that is wrong?
Gerald Nash (Louth, Labour)
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I wish to move on to the organisation's memorandum and articles of association and I want to refer to three of the articles, 33, 37.1 and 37.2. They generally refer to the fact that directors are explicitly forbidden from receiving remuneration from the organisation. That is a fact, reflected in the organisation's memorandum and articles of association - in articles 33, 37.1 and 37.2, to the best of my recollection. In most charities where a member of a board receives remuneration of any description, whether it be consultancy fees or anything else, the widespread practice would be that there may be an identifiable conflict of interest and it is usually the case that the director would stand down. The person to whom I am referring is Frank Flannery. It has been in the public domain, and Mr. Flannery has responded to this in the public domain, that he charged the organisation a total of €77,000 for services in 2011 and 2012.
Is he still a director of the organisation?
1:20 pm
Gerald Nash (Louth, Labour)
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Is that not in direct conflict with the organisation's own memorandum and articles of association?
Ms Angela Kerins:
No. No director of the organisation, no member of the board of the organisation can take fees in respect of being a member of the board. From time to time - Frank Flannery is not the only person - we engage with companies in which directors have interests. The proper way to deal with this is all activities in which directors are involved are disclosed fully in the accounts. The Deputy will see that in all our accounts. When a director is engaged or in receipt of any fees for service, that is fully disclosed. That is the proper way of dealing with this.
Gerald Nash (Louth, Labour)
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Can Ms Kerins confirm that is the case for this consultancy?
Gerald Nash (Louth, Labour)
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I have a couple of further points in respect of Rehab's annual accounts in 2012. I believe Deputy O'Donnell also may have viewed its annual accounts, based on his line of questioning. All of the legal material related to the establishment of Rehab, the ongoing work of Rehab, as well as its memorandum and articles of association, all state clearly that it is a charitable organisation, which is designed to support people with disabilities and those who experience disadvantage and I accept all of that. At the same time however, notwithstanding the restrictions Ms Kerins states she is under, some of which I accept are quite valid, when seeking financial information from the organisation members are constantly referred to the issue of commercial sensitivity. Deputy O'Donnell referred to a point regarding the position in which Rehab finds itself. This is not an academic or an abstract point and it may be in the best interests of the organisation at some stage to find a way of addressing that issue because in my opinion, it is an extremely opaque way in which to operate. Ms Kerins referred to how complicated it is but I would say it is opaque and I have formed the view it is deliberately opaque. There are many efforts to hide behind the idea of commercial sensitivity that simply do not add up to me. It is clear that the organisation, because of its charitable status, does not pay corporation tax in Ireland. That is the case. However, some notes in Rehab's accounts suggest it has paid an amount of corporation tax abroad. Where was that?
Gerald Nash (Louth, Labour)
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It was Poland and the tax bill was €74,000.
Gerald Nash (Louth, Labour)
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The organisation in its entirety, commercial and not-for-profit, if I can use that description, paid nothing in Ireland because it is not liable for corporation tax, as it is exempt under the Charities Act and the charities regulations. Is this not the case? It paid €74,000 in totality. I note the organisation made an operating surplus of €2.944 million in 2011 and €1.546 million in 2012. This also is reflected in Rehab's accounts.
There are a couple of other issues in the accounts to which I wish to draw Ms Kerins's attention. Rehab does not pay deposit interest retention tax, DIRT, either and according to its most recent set of accounts had interest income of approximately €1 million in 2011 and 2012. Moreover, the company holds more than €35 million in cash on deposit in banks, on which no DIRT was paid. This is a situation that pertains, generally speaking, to charitable organisations. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is the Deputy's point regarding the €35 million?
Gerald Nash (Louth, Labour)
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A sum of €35 million is on deposit in the bank and it is the case that no DIRT is paid by any organisation that is a registered charity. Is that not the case?
Gerald Nash (Louth, Labour)
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Yes. I thank Ms Kerins for clearing that up. I refer to page 17 of the accounts and have a question regarding the closure of the defined benefit pension scheme. I am happy to give Ms Kerins a moment if she wishes to access that information. On page 17 of Rehab's 2012 accounts, reference is made to the defined benefits scheme being closed down in 2012. Is that correct?
Gerald Nash (Louth, Labour)
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It was in 2012 and Ms Kerins put that on the record earlier. From an accounting point of view, there was a total gain to the company of €59 million. That is an accounting mechanism to reflect the wind-down of the defined benefit pension scheme. On page 17, there is a point in respect of a settlement obligation of €7 million in respect of the defined benefit scheme. I ask Ms Kerins to elaborate on this. What does it involve?
Ms Angela Kerins:
I apologise for the delay in responding, as I wish to get one piece of information. It relates to the closure of the scheme. It had to do with the deferred members and the retiring members and so it was the total settlement in trying to close down that scheme. May I come back to the Deputy with that? I want to make sure I answer that properly.
Gerald Nash (Louth, Labour)
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I am also interested to understand who benefited from that.
Ms Angela Kerins:
In the main, the people who benefited were the deferred members and members who were retiring. At present, the contribution to the defined contribution scheme is 6% and there are still discussions with the trade union in respect of the go-forward in this regard. I ask the Deputy to allow me to get some further information from my colleague who has been involved in this pension negotiation in order that I answer him correctly on that. May I come back to him in a moment on that point?
Gerald Nash (Louth, Labour)
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If I may, I will ask a final question that is directed towards SOLAS but I am happy for Rehab representatives to answer it as well. Can Mr. O'Toole confirm my understanding that the unit cost, if I may put it like that, for trainees who are engaged in programmes with the National Learning Network on average is approximately €15,000? Alternatively, does it vary?
Gerald Nash (Louth, Labour)
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From reading some of the reports Mr. O'Toole has forwarded to the committee, I note it is often the case that participants in programmes drop out early. There is quite a high attrition rate. Is it then the case that the National Learning Network receives all of the money allocated for that year? Is there some retrenchment process or is some money returned if, for example, a trainee only spends a month or two in a programme due to a range of different factors that tend to occur in everyday life? How does that operate? Does SOLAS seek the return of such money if a programme or project is not completed or if a participant does not complete his or her training programme?
Gerald Nash (Louth, Labour)
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In arrears. Does SOLAS pay monthly in arrears?
Mr. Paul O'Toole:
It is linked to that. We make the contribution in respect of it. The Deputy is right, in that there is an intake, which can happen throughout the year. It varies by centre because 30 centres are involved and this is monitored by my colleagues and now, in some cases, my former colleagues in the relevant training centre, who manage the relationship with the local National Learning Network centres.
Gerald Nash (Louth, Labour)
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Can Mr. O'Toole put on the record what payment is made to the individual trainees per week?
Mr. Paul O'Toole:
It varies. I must ask my colleague regarding the payments. I know they are analogous to social welfare payments. While I can get that information for the Deputy and can give him a schedule of the various rates, I simply do not have that information to hand. However, it is analogous to social welfare payments.
Gerald Nash (Louth, Labour)
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Attrition rates.
Ms Marie Kelly:
Our attrition rate is 37%, which is quite low. As I mentioned earlier, half of these clients will come back in again because they leave for medical reasons. The Deputy needs to understand that our service is a lot more than simply certification or education.
It is about giving a service to people who have never had a chance in the normal education system, which has failed them or has not worked for them for whatever reason, and it can be for personal, emotional or psychological reasons. It is about also giving them a wider service, a service that deals with their other issues that prevent them from going on to training and education and employment. These are people who, generally, would not have gone to other training courses because they did not provide the necessary supports.
1:30 pm
Gerald Nash (Louth, Labour)
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In conclusion, I will ask a related question. Would there be a considerable number of trainees at any given time on a Rehab NLN training programme who would then go on to work with the commercial element of Rehab? In other words, is the organisation training individuals with State funding to continue to work in Rehab centres? Is there a defined job path programme? Subsequently, is there a form of mentoring? In general, how many trainees would move out into the open employment market?
Ms Marie Kelly:
I can give the Deputy percentages. We would break down our percentages in our returns to SOLAS as: open labour market; open, part time and full time; and then there would be the subsidies.
A very few individuals might apply for work within Rehab enterprise. They all tend to go outside, and we encourage people to go outside into employment. From the day they arrive into our centre, we are almost saying to them, "There's the door. This is your goal. Your goal is to go out there. It is for community integration. We want you to be a living, breathing member of a community and you can achieve that through your employment, or education might be your pathway to employment".
I can give percentages if the Deputy likes. It is quite a long analysis.
Eoghan Murphy (Dublin South East, Fine Gael)
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I thank everyone for attending today.
The area I want to look at is the charitable lotteries scheme. I would like to get a rundown of that scheme and how it works in practice, and I will base some of my questions on the internal audit that was done by the Department of Justice and Equality in 2012.
To be clear on how the scheme works, Rehab gets an amount of funding from the Department based on its level of ticket sales. For example, in the year 2010-11, Rehab had nearly €4 million of sales. Is that sales by newsagents?
Mr. John McGuire:
The only sales of our total lottery sales which qualify for assistance under the charitable lotteries compensation scheme are the products which are competing directly with the national lottery. In our application, we have to give proof of how those games are similar so it is a matter of being down to such aspect as is it like a scratch card or is it sold through retail?
Eoghan Murphy (Dublin South East, Fine Gael)
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Let us focus on the scratch card because that is sold through newsagents-retailers. When we get a figure of €3.9 million in scratch cards sold, are they sold through newsagents?
Eoghan Murphy (Dublin South East, Fine Gael)
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In return, does Rehab get matched funding from the Department based on that level of sales in newsagents?
Eoghan Murphy (Dublin South East, Fine Gael)
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On the level of sales?
Eoghan Murphy (Dublin South East, Fine Gael)
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The higher Rehab's level of sales, the more funding it will get from the Department.
Eoghan Murphy (Dublin South East, Fine Gael)
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I understand why the scheme is in place. Essentially, for nearly €4 million of sales, Rehab got approximately €4 million from the Department in 2011 which came across through that scheme.
Eoghan Murphy (Dublin South East, Fine Gael)
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But for the scratch card portion, would it have been approximately €3.9 million?
Eoghan Murphy (Dublin South East, Fine Gael)
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It is almost equal funding. It is almost like-for-like funding with the scratch cards. If one sells-----
Eoghan Murphy (Dublin South East, Fine Gael)
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Rehab had €3.9 million in sales of scratch cards, and what funding came across from the Department?
Eoghan Murphy (Dublin South East, Fine Gael)
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Yes, in 2011.
Eoghan Murphy (Dublin South East, Fine Gael)
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Was that coming across from the Department for the scratch card sales?
Eoghan Murphy (Dublin South East, Fine Gael)
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The total payout. Did that also include the bingo? I am sorry, it is just to clarify it.
Eoghan Murphy (Dublin South East, Fine Gael)
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Did the €3.9 million cover scratch card sales and the bingo card sales?
Eoghan Murphy (Dublin South East, Fine Gael)
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I thank Mr. Purcell for the clarification.
I want to understand how this scheme works in terms of how the newsagents come to make the sales of this amount. Rehab sells batches of tickets to newsagents and they pay a cost price for that. For example, where Rehab would sell a batch of 200 cards to a newsagent and those cards would sell for €200, what figure would the newsagent pay Rehab for that batch?
Eoghan Murphy (Dublin South East, Fine Gael)
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Two hundred tickets at €1.
Mr. John McGuire:
Two hundred at €1, that is €200. What we take off that, off the top, is the retailer's commission, so they keep that. This is where it gets a little bit complicated to explain. When printed tickets like these are used there are two types of prizes in the ticket. There are what we call low-end prizes and high-end prizes. In each pack, it is, if you like, a promise. We give a guaranteed amount of low-end prizes so on the €100, there might be, say, €44 in guaranteed prizes.
Eoghan Murphy (Dublin South East, Fine Gael)
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I am sorry, I will stop Mr. McGuire for a moment. I will talk him through it, as I understand it, and he can correct me if I am wrong. I have seen the scratch cards, thank you. I do not need to see them again.
The newsagent pays Rehab upfront for that batch of €200 tickets.
Eoghan Murphy (Dublin South East, Fine Gael)
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Separate from commission, does Rehab invoice the newsagent for that?
Eoghan Murphy (Dublin South East, Fine Gael)
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Separate from the commission that the newsagent takes, Rehab charge a fee for that batch because he is responsible for managing the €200 in sales of those scratch cards.
Eoghan Murphy (Dublin South East, Fine Gael)
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What would be the typical amount for that gross invoice?
Eoghan Murphy (Dublin South East, Fine Gael)
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As was explained to me, the newsagents are responsible for selling the €200 individual scratch cards. They take a commission on that. Did Mr. McGuire say that was 12%?
Eoghan Murphy (Dublin South East, Fine Gael)
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As Mr. McGuire stated, there are two ends of the prizes here. This newsagent who, in the particular example given to me, is a 65 year old, gave €50 to Rehab, the newsagent takes a commission additional to that and then the remaining money is used by the newsagent to pay out the individuals who come to them who have one prizes at the low-end of the market. Anything under €20, the newsagent is paying out in his or her shop. Is that how it operates? The €200 in sales is not going back to Rehab. Only a percentage of that goes back and it is roughly 30%.
Eoghan Murphy (Dublin South East, Fine Gael)
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That is how, when we look at something like €4 million in sales, we see only €10,000 in profit, after we have taken into account the costs of running the scheme. It is not really €4 million in sales by Rehab, is it? Rehab's sales are sales directly to the newsagents because 70% of that money is being managed by the newsagents who are making the sales and paying out the winners.
Eoghan Murphy (Dublin South East, Fine Gael)
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Rehab's true sales figure is the money it gets back from the newsagents.
Eoghan Murphy (Dublin South East, Fine Gael)
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Why is Rehab recording it as €4 million in sales to the Department?
Mr. John McGuire:
It is because those tickets that are issued are issued under a licence granted by the courts and the promoter of the game. The owner of the tickets, is the charity which applies for the lottery licence, which is Rehab.
Rehab Lotteries Limited manages that lottery on behalf of the charity. Under the licence, the owner of the ticket is the licence holder, the charity.
1:40 pm
Eoghan Murphy (Dublin South East, Fine Gael)
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Bills to the public are all made by the newsagents and 70% of the money used in the scheme, through sales, is administered by the newsagents in terms of the payouts to the low-end winners. Only 30% is coming back to Rehab. Let us consider it from a commercial point of view. If I supplied to a sports company T-shirts for €1 apiece and it sold them for €10 apiece, I would not go back to my board of directors or shareholders and tell them my sales in the year were the sports company's takings on selling those T-shirts. I would tell them my revenue was what I received from the sports company for the T-shirts. It is the same arrangement with the newsagents.
Mr. John McGuire:
I am not sure about the point the Deputy is making. We would invoice for the €100. From that, we take off the commission and the allowance for the low-end prizes. Therefore, they are our sales. We have to account for every ticket we issue so it is important we know where every ticket is. That is the way we operate it. In effect, the Deputy is correct that the only real money we actually get back is net of the prizes and commission.
Eoghan Murphy (Dublin South East, Fine Gael)
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When someone buys a scratch card in a newsagent, he is not giving any money to Rehab at all.
Eoghan Murphy (Dublin South East, Fine Gael)
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It is tiny, a fraction of a fraction.
Eoghan Murphy (Dublin South East, Fine Gael)
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Is there anything on the scratch card that states the destination of the money?
Mr. John McGuire:
No, because our promise to the public is that they are not making a donation but buying a lottery ticket, a chance to win. If somebody wants to give a euro to Rehab, we have our collection box on the counter into which they can put it. In that case, we get the full €1. It is not the same with the scratch card when one spends a euro. It is a chance to win a prize.
Eoghan Murphy (Dublin South East, Fine Gael)
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The purpose of the scheme, as far as Rehab is concerned, is not to make money because it does not make money from it. The purpose of the scheme, as it sees it, is to get money from the Government.
Mr. John McGuire:
No, that is not true. We are and always have been incredibly focused on maximising the return on our scratch cards. This was a cracking business for us for many years. We had sales of up to €10 million per year, and this was bringing in almost €3 million in profit. Right through the years, we have had a good business. Now, we have stripped back the number employed in the company from 36 to ten or 11. We need a basic amount of infrastructure to support it, and that has a cost. Unfortunately, when one pays the prizes, commission and other bills, there is very little left. We accept that and we are unhappy with it, and we would like it to be better. We hope there will be better days ahead and we will stick in there hoping that. Both the scratch cards and radio bingo product go into the same types of shops. In their totality in the year to which the Minister referred, they were bringing in €560,000 net. This is wonderful income for us. We would prefer it to be €1 million or €2 million. We would do that.
We are of the view that if there were fairness in the market in terms of there being no cap on the prizes, and if we could offer similar prizes to a competitor, we would have at least 10% or 15% of the market, representing turnover of approximately €75 million or €100 million, which would bring us in approximately €30 million in profit.
Eoghan Murphy (Dublin South East, Fine Gael)
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What if the cap is not lifted?
Mr. John McGuire:
The charitable lotteries fund for the Government has a great deal because it is spending a few million euro but in return it is getting a competition-free market.
For the benefit of the committee, let me outline an example from other jurisdictions. There are many examples in Europe of markets in which there is not such an unfair situation. Those who go to Spain on holidays will be familiar with the ONCE lottery, which is huge. Take the case of Holland, for example.
Eoghan Murphy (Dublin South East, Fine Gael)
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I do not want to get into the dispute Mr. McGuire is having with the Department on the cap and its lifting. Would it be fair to say that if the cap is not lifted, Rehab will not be able to continue to run the scratch card scheme?
Mr. John McGuire:
The matter is before the courts. We have two options. We have a Government taking a position that what is going on is unfair and discriminating. The position is that we have two suppliers to the market, one of which has its hands tied behind its back and cannot offer a comparative product. We will address that or else the courts will take that view. We are continually looking for other ways of developing our scratch card business.
Eoghan Murphy (Dublin South East, Fine Gael)
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Under the scheme as it operates, it is in Mr. McGuire’s interest to have a high volume of sales because that would increase the amount of funding received from the Department.
Eoghan Murphy (Dublin South East, Fine Gael)
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To a limit, obviously, in terms of the fund that is available.
Eoghan Murphy (Dublin South East, Fine Gael)
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The money received from the Department of Justice and Equality goes into the total Rehab pot and is not designated for a particular front-line service.
Eoghan Murphy (Dublin South East, Fine Gael)
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What service is that?
Eoghan Murphy (Dublin South East, Fine Gael)
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Being applied to administrative costs?
Eoghan Murphy (Dublin South East, Fine Gael)
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Mr. McGuire will have seen the audit from 2012 by the Department. It claimed that money was-----
Mr. John McGuire:
In the years preceding the audit there was but a one-word description, and not even a one-line description, of administration costs. There was not clarification on that. In fairness to the Department of Justice, following the audit in 2010 and in the subsequent applications with which we have complied, it provided a more complete definition of what it understands to be administration costs. We have complied with all of that.
Eoghan Murphy (Dublin South East, Fine Gael)
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Did it never occur to Mr. McGuire that IT costs might be administration costs?
Eoghan Murphy (Dublin South East, Fine Gael)
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It is all an administrative cost. Is it good enough to say the Department did not define administration and that Rehab did not know what it was?
Mr. John McGuire:
As far as we were concerned in interpreting the spirit of what was in the application prior to the audit referred to, we gave the Department each year full details of what we were spending the money on. It was running from 1996 to 2010. Year in, year out, we sent in what the money was being spent on and we had no queries. We had assumed that our interpretation of what was not administration was correct. All the amounts were paid in full without any query.
Eoghan Murphy (Dublin South East, Fine Gael)
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Mr. McGuire had a problem that was carried out by the Department in 2012. He does not accept it.
Eoghan Murphy (Dublin South East, Fine Gael)
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Rehab did not respond to it.
Eoghan Murphy (Dublin South East, Fine Gael)
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Perhaps the Department wants to respond on this. Ms Kerins responded to it in a letter. Is the response Ms Kerins talks about the response in question? The Department stated, in respect of the audit report, that it should be noted that it was not possible to fully conclude the internal audit process as the management response to the audit findings and recommendations sought from Rehab as a routine element of the audit process was not received.
1:50 pm
Eoghan Murphy (Dublin South East, Fine Gael)
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Yes.
Eoghan Murphy (Dublin South East, Fine Gael)
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May I ask the Department of Justice and Equality about that?
Eoghan Murphy (Dublin South East, Fine Gael)
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The question of why the meeting that Ms Kerins sought was not facilitated.
Mr. Brian Purcell:
The audit took place in 2012, as indicated. Then the audit was completed and the findings were outlined. At that point the decision was taken, as I indicated earlier, because of the review of our expenditure, and that was simply one line of the expenditure. Given what we had identified, the audit raised a concern that the costs associated with the Rehab lottery were very high, including the issues the Deputy mentioned about percentages, etc. I should point out that there was full co-operation with Rehab during the course of the conduct of that audit. In late 2012, the decision was then taken that we would move to reduce the amount of money available for the charitable lotteries fund over the next period of time.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The question Deputy Murphy is asking is why you did not arrange the meeting with Rehab. Those at Rehab asked for a meeting and the correspondence is there. It would seem as if they were stuck on a particular query concerning an audit. They raised the question of a meeting with your Department, so why did you not meet them?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why did you not meet them? Did you write and say, "Sorry, Ms Kerins, the meeting won't happen because the scheme is-----"
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Would it not have been courteous to acknowledge it?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It was a reasonable request from Rehab to meet with them about this. As I understand it from Deputy Murphy's question, there was no response from the Department.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that the way it does business?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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You just ignored them.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did you communicate that decision to Ms Kerins?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did you explain it and then say "We can't meet"?
Eoghan Murphy (Dublin South East, Fine Gael)
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There was no dispute on the findings from the internal audit report between the Department of Justice and Equality and Rehab?
Eoghan Murphy (Dublin South East, Fine Gael)
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Does Ms Kerins agree?
Ms Angela Kerins:
There were a number of issues that we needed to address concerning the findings. We wanted to sit down with the Department and go through this report line by line to deal with the issues, and the overall context of how the Department saw the scheme. In other words, it was not a grant scheme but a compensation scheme. That is where the issues broke down.
Eoghan Murphy (Dublin South East, Fine Gael)
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I find it interesting because when one looks at the letter Rehab wrote to the Department of Justice and Equality on 23 August 2012, Ms Kerins makes that point very forcibly. It is a scheme of compensation that Rehab receives because competition in the market has been altered by Government legislation. However, when one looks at something like the document from the Department of Finance in 2004, those involved do talk about it as a grant scheme.
Eoghan Murphy (Dublin South East, Fine Gael)
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They talk about its being provided in accordance with the terms of the scheme. In Ms Kerins's letter to the Department of Justice and Equality, she says there is not an Exchequer grant to organisations to provide services but according to the Department of Finance it is a grant scheme. Ms Kerins says it is not appropriate for the Department of Justice and Equality to seek to influence the operations of a private body by insisting that its earned income be applied to certain areas. When Ms Kerins made that point to the Department of Justice and Equality, was she saying that the Department could not tell Rehab whether it could spend this money on administrative services, IT procurement, bank interest fees, professional fees or advertising, as she had been spending the money prior to that point in time?
Ms Angela Kerins:
Can I make two points on that? Mr. McGuire may wish to come in on this. We have always considered this as a scheme to compensate charity lotteries. The point I was making is that it is not like a normal grant scheme that is advertised and to which organisations apply for grant aid. As Mr. McGuire said earlier, if the cap was scrapped on the charitable lotteries we would be in a much better position to increase our income, which would be our independent income, into the Rehab group. Instead of that, in 1996, following a lot of lobbying - not only by us, by the way; we are not the only charity lottery - the decision was taken and the agreement was reached between the charity lotteries and the Government that a charity lottery fund would be established to support that. The issue for us was that, for the first time, this audit was auditing that scheme as if it was a grant-in-aid scheme for specific purposes. The scheme was never for that.
We supplied to the Department of Finance and the Department of Justice and Equality a wide list of activities that we had engaged in. As I said earlier, they could choose what activities or areas of spending they felt were compatible with the fund, but we would have spent this funding. Therefore, it was not a grant scheme. It was not a scheme that the Government put up and said we could apply to for particular items. It was a far freer environment in relation to the organisation being able to apply it to certain areas.
Eoghan Murphy (Dublin South East, Fine Gael)
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It was not a completely free environment, however. I accept that it is a compensatory scheme, but it is a grant given by the Department with conditions. Does Ms Kerins accept that?
Eoghan Murphy (Dublin South East, Fine Gael)
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Too broad?
Ms Angela Kerins:
I would not say it was. The authorities that decided whether our submissions were compliant were the Department of Finance and the Department of Justice and Equality, not us. We over-submitted in so far as we provided an awful lot more activities in relation to our application than the scheme was worth in terms of its value.
Eoghan Murphy (Dublin South East, Fine Gael)
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According to the Department of Finance document from 2004 that Ms Kerins brought in to us, the conditions of the scheme stipulate that any funding provided under the scheme must be spent on the charitable activities of the organisation and cannot be used for administrative purposes. Ms Kerins said it was a very broad interpretation of the administrative purpose definition because it was not actually laid out in the document. However, it is quite clear that it cannot be used for administration.
Ms Angela Kerins:
What we submitted as the areas of activity that the moneys from this scheme were spent on were quite broad. At no time when we were submitting for this scheme were we told that any of the areas we submitted were non-compliant. We never got any feedback on our submission, but we got paid.
Eoghan Murphy (Dublin South East, Fine Gael)
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By the Department of Finance previously.
Eoghan Murphy (Dublin South East, Fine Gael)
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Ms Kerins's view was that the money was being spent appropriately even within the terms of what constitutes administrative costs. The first time that was flagged with her was in the internal audit report in 2012 from the Department of Justice and Equality, following which she wrote back to that Department saying, in effect, "We have a different view of what you're saying, and we'd like to sit down with you."
Eoghan Murphy (Dublin South East, Fine Gael)
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I want to go back to the Department of Justice and Equality on this point. Was it Mr. Purcell's view that because the scheme was being wound down it was pointless to complete the audit process?
Mr. Brian Purcell:
No. There were no disputes about the factual element of what was in the audit. The scheme was then being wound down. Litigation commenced quite shortly after the letter issued informing not just Rehab but everyone else that we were moving to wind down the scheme.
Litigation commenced very shortly after this. Once it commenced, there was no question of having a meeting.
2:00 pm
Eoghan Murphy (Dublin South East, Fine Gael)
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When did the litigation commence?
Eoghan Murphy (Dublin South East, Fine Gael)
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The request for a meeting came in a letter from Rehab in August 2012.
Eoghan Murphy (Dublin South East, Fine Gael)
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Is it the case that once litigation was initiated, the Department felt it could not sit down and meet Rehab?
Eoghan Murphy (Dublin South East, Fine Gael)
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However, the Department did not communicate this to Rehab.
Eoghan Murphy (Dublin South East, Fine Gael)
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The October letter prompted the litigation. When Rehab was informed the scheme was being wound down, it decided it needed to fight it.
Simon Harris (Wicklow, Fine Gael)
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I thank Ms Kerins and her team, as well as the various officials, for being here.
I am a little confused about the paper trail with the charities lotteries fund. We know the internal audit was carried out in June 2012. Did Mr. Purcell and the Department then send the internal audit to Ms Kerins or to Rehab?
Simon Harris (Wicklow, Fine Gael)
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The committee has a letter sent to it by the Department from Ms Kerins to Mr. Walter Johnston, head of internal audit, on 23 August. Was that Rehab’s response upon receipt of the audit?
Simon Harris (Wicklow, Fine Gael)
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The audit was completed in June and Rehab responded on 23 August. I am a little confused because the committee wrote to Mr. Purcell on 24 January 2014 requesting information on the funding stream from the Department to Rehab, as we had written to SOLAS and the Health Service Executive. We received a letter from Mr. Purcell on 30 January 2014 in which it stated:
Since we received that letter, I have been livid at Rehab for not responding to the audit and not allowing the Department to conclude it.
In respect of the audit [report], it should be noted that it was not possible to fully conclude the internal audit process as the management response to the audit findings and recommendations sought from Rehab as a routine element of the audit process was not received.
Simon Harris (Wicklow, Fine Gael)
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Is it a fair assertion that Rehab never dealt with the recommendations, or is it the case that it wrote to the Department requesting a meeting? What is it?
Mr. Brian Purcell:
We did not regard the letter it had sent as a full response to the audit. It was clear enough that there did not appear to be any dispute with the findings. Essentially, the audit showed up particular weaknesses in the system. In a nutshell, the funding was to cover charitable activities, not administrative costs. What had happened previously was that it had been pretty much accepted on a straightforward basis whatever was put in. The audit identified weaknesses within the internal system for the disbursement of the fund. Following on from this, the recommendations were made that there would have to be a more concise and comprehensive application process whereby the various elements that made up, say, the administrative costs would be dealt with. There was an indicative list of items that could not be included unless they were incurred directly in the provision of front-line services.
Simon Harris (Wicklow, Fine Gael)
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I have read the audit report. However, I am somewhat confused about the paper trail.
Mr. Brian Purcell:
Our understanding was that there was no problem with the factual findings of the audit report in terms of the weaknesses in the system. It appears that there was more of an issue of principle as to whether the audit should cover this. To some extent, it would probably hinge on the case we had to deal with this as it was, while Rehab, perhaps, viewed it as a compensation fund.
Simon Harris (Wicklow, Fine Gael)
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I really do not want to revisit that issue because that is a row for another day. I am wondering why Mr. Purcell wrote to the committee telling us the audit could not be concluded because Rehab did not respond to the Department.
Mr. Brian Purcell:
We would have expected a formal response to each recommendation, but we did not get that. If we had received a formal response to indicated what the problems were, then, possibly, it would have moved on to a meeting. However, there was no formal response to the recommendations raised. We then moved to wind down the fund and the litigation commenced.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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For clarification and to assist Deputy Simon Harris, Mr. Purcell keeps mentioning recommendations. How many came from the audit?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many were directed at the Department?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I will tell Mr. Purcell - three. Out of the four recommendations, three were directed at the Department and one at Rehab. The recommendations were almost stating everything was going to continue.
Ms Angela Kerins:
To clarify, when we sent the letter, I had already had a conversation with the auditor and pointed out we had some issues but that we wanted to meet. I sent him the letter subsequently. A number of people in my office tried to have this meeting established on a number of occasions to progress the issue. What we really wanted to do was sit down with the Department and the audit section to go through these issues. There was a very clear discussion where we felt the best thing to do was write down the key issues for us. As the Chairman said, most of the recommendations concerned the Department. There was at least one conversation and several attempts by Rehab to set up that meeting.
Simon Harris (Wicklow, Fine Gael)
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I want it to be noted, Chairman, that I made comments at previous committee meetings, as did other members, on the basis that I had been given the clear impression from the correspondence I had received from Mr. Purcell that he was not able to complete the audit process because the implication was that Rehab was not responding to recommendations. An earlier letter states Rehab wants to help to finalise the report and it now seems the Department dropped the ball by not getting back to it. On 30 January 2014 the Department wrote to the committee informing us it could not complete the audit because of Rehab.
I want to give Mr. Purcell an opportunity to correct the record.
2:10 pm
Mr. Brian Purcell:
There was no formal response. The two core elements are, first, we had to look at this fund in the context of the overall spend within the Department, the expenditure review and where we would have to make savings within the departmental budget. The other issue flagged by the audit was the actual scheme itself and the fact that there were very high costs. That was a flaw in the system. The decision-making process to wind down the scheme was under way at that point. Once the audit was there and we did not get the formal response, the letter issued. The letter invited submissions in respect of that issue. No response was received and the next thing was that the litigation was launched in November.
Simon Harris (Wicklow, Fine Gael)
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In the view of the Department, the four recommendations in the report ceased to be relevant because a decision had been taken to wind down the scheme?
Simon Harris (Wicklow, Fine Gael)
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The Department then took a policy decision to wind down the scheme?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Department is implementing the three recommendations. The first recommendation says that an agreement shall be put in place. Part of what the first recommendation states is that there should be conditions to end the funding. That is what it says here. The Department did not implement that because it did not write back to Rehab. The second recommendation relates to monitoring and reporting how charitable lottery funds are allocated. The third recommendation refers to the internal audit recommendation that Rehab review all aspects of the fund-raising scheme to determine its viability and address the level of costs. It said that Rehab must seek to increase the surplus on lottery sales through a reduction in the associated costs. That is for Rehab. The fourth recommendation said that there was a lack of clarity on what constitutes an administrative expense and asks for the Department to clarify that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Hold on a second. Did the Department fulfil all of the first recommendation? "Yes" or "No" will do.
Simon Harris (Wicklow, Fine Gael)
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Shall I continue while Mr. Purcell is doing that?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy can continue.
Simon Harris (Wicklow, Fine Gael)
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In her presentation, Ms Kerins made much of the good work done by Rehab and the National Learning Network, as did Ms Kelly and Ms Keane. Let us take that as read. We have all seen it and I have certainly seen it in my constituency. We have met with service users so let us decouple that issue as we have had to decouple the issue when St. Vincent's hospital and other organisations have been here before us.
The issue is more to do with what is going on at a senior and corporate level. I want to return to the issue of Ms Kerins's salary. Obviously, we have discussed it extensively. The board of Rehab has now revealed her salary and this is in the public domain. Does Ms Kerins intend that it will be published annually or will we have a situation whereby there must be continual calls for it to be published?
Simon Harris (Wicklow, Fine Gael)
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I note Mr. Brian Kerr's statement in respect of senior managers. He has said that he would publish the salaries by 2015, which would mean the public could see them by 2016. Ms Kerins has indicated today that she would like that to happen this year. Can she outline how many senior managers we are talking about? Who falls into this bracket of senior manager?
Simon Harris (Wicklow, Fine Gael)
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Ms Kerins has given the impression that there is a process under way or that Rehab is beginning to look at ways of publishing them. What does that process involve? Has Ms Kerins begun consultation with her senior colleagues or has the board begun consultation with senior managers?
Ms Angela Kerins:
All of us at senior management level believe we should disclose the remuneration of senior management. We are talking about how we do that. I would like to get to a system regardless of whether it is a statement of recommended practice, SORP, or whatever. Many organisations do different things. Many organisations just disclose the chief executive's remuneration and then everybody else is in a total group. One could use the other way where one uses the bands where so many people are within so many bands. We need to ensure that we find the best way forward for us. My colleagues and I would like to see disclosure in respect of their-----
Simon Harris (Wicklow, Fine Gael)
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I am happy to hear that because my reaction when I read the Rehab Group's statement was "one step forward, two steps backwards". It is basically saying that it will tell us the chief executive's salary and then tell us what everyone else is earning in a couple of years time. I do not think that is in anybody's interest, including that of Ms Kerins's colleagues and the service users of the Rehab Group. In respect of the idea clearly stated in the statement that one would have to wait until the 2015 accounts, I urge Rehab to do this as quickly as possible.
Ms Angela Kerins:
Absolutely, let us take it that our aim relates to 2014 onwards. That would also be the position of my colleagues. The issue relates to the methodology, what the most acceptable one is and what we can disclose, taking on board the issues of data protection and privacy. We need to be respectful of that. There is a genuine desire to do this and we would like to do it in respect of this year so that is where we are going with it.
Simon Harris (Wicklow, Fine Gael)
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I welcome that move forward in terms of the date. Does Rehab receive public funding from other governments or states?
Simon Harris (Wicklow, Fine Gael)
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As we go about setting up a charity regulator, is there a requirement in other countries in which Rehab has operations to disclose salaries?
Simon Harris (Wicklow, Fine Gael)
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What would happen in respect of Rehab's senior managers in the UK?
Simon Harris (Wicklow, Fine Gael)
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I want to get Ms Kerins's thoughts on the public-private mix. In her opening statement, she referred to the Rehab model. I think she used the word "unique". Again, there are other organisations, some of which we have met, about which I have concerns regarding how one separates and puts protections in place for the public or charity element versus the private or commercial element. What protections or safeguards are in place in the Rehab Group? To be clear, this is not about the transfer of money. I am not necessarily talking about safeguards in respect of money. I am talking about corporate governance safeguards in terms of when decisions are being made; who is wearing what hat and when; when Rehab is making decisions as a charity, when it is making decisions as a commercial entity and when it is making decisions for its profitable companies; and what consideration it gives to its not-for profit sections. I would really appreciate an answer as it would be useful to have an insight into what safeguards are in place in terms of those two elements.
Ms Angela Kerins:
Each company has its own board. In respect of corporate governance, if one is on the board of a company, one must work in the interest of that organisation. We comply with all of the necessary company laws in respect of that. It is irrelevant as to whether one is a not-for-profit or commercial entity. It makes no difference. One has to behave and work in the interests of that organisation.
There are always competing issues from a group perspective. I return to this double bottom line. While one might like to make a commercial decision to shut down something that is not commercial, particularly in the employment of people with disabilities, we have to factor in that we will not do this and we are doing this now. In our social enterprises we want to create as many jobs as possible, which is not necessarily the focus of a commercial company. The focus of a commercial company is to make as much profit as possible, but our focus and that of social enterprise is on job creation and maintenance. Our mission overrides our margin many times. We support employment opportunities, particularly for people with disabilities but also for those with other disadvantages, whereas a normal commercial company would not stay with it. This has proved to be a good strategy because we have been able to change the work activities or product lines in organisations to preserve jobs, which is very important for us. We are the largest employer of people with disabilities.
2:20 pm
Simon Harris (Wicklow, Fine Gael)
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Ms Kerins mentioned the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, and his comment that Rehab was more akin to a semi-State body. I heard that radio interview, in which he also asked when was a charity not a charity, when did it become a commercial entity and that, if one reached a point where a certain proportion of one's work was commercial, it was better to be called a commercial entity with a certain ethos rather than a charity. I am paraphrasing, but Ms Kerins probably heard the interview. I would be interested in her views.
Ms Angela Kerins:
The charity owns the assets of the organisation and we cannot decouple them. We cannot turn around and decide something is now commercial and no longer owned by the charity, unless it wants to sell it, but then the money would have to come back to the charity. If one closes down a charity, its assets must transfer to a similar charity with a similar ethos. Trying to define a new structure is a green field. We are on our own in Ireland, if not elsewhere. We have built a commercial side to the organisation which is wholly owned by the charity. In the United States and perhaps elsewhere there are examples. Bupa is a not-for-profit organisation which owns substantial businesses. We have work to do. We have grown significantly and now need to stand back, challenge the structure and see if it is fit for purpose.
Simon Harris (Wicklow, Fine Gael)
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Is that review ongoing?
Simon Harris (Wicklow, Fine Gael)
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When is it expected to be concluded?
Ms Angela Kerins:
It would be in everybody's interest if we could do it this year. I also ask people here if they could help us in this task or give us some ideas. We would love to receive people's contributions, as it is not easy to solve. I remember eight or nine months ago having this discussion before it became more of an issue for us. I have seen no solution so far, but I have a big "L" on my back in trying to create a structure that would be a fit for us. We are determined to do it and would welcome all the help we could get in doing so.
Simon Harris (Wicklow, Fine Gael)
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As Mr. O'Brien is not used to sitting on the sidelines and being on the periphery of these meetings, I will ask him a question to bring him in from the cold. We would not want him to think we had forgotten him. I heard his exchanges with my colleagues. Where, exactly, are we going with this review of the section 39 organisations? I understand where we are going with the section 38 organisations. People must be in compliance with pay policy; the HSE is introducing new corporate governance standards and we are engaging and working with the HSE in that regard. Regarding the section 39 organisations, of which there are many and one of which is before us today, what is the HSE's end game for the sector?
Mr. Tony O'Brien:
In the context of this process, it is around full compliance with the service level agreement process, which in this context alone is about the disclosure, through the template process, of the numbers of personnel employed, the roles they perform, who they are and if they are paid at the level of grade VIII or above. That is in the context of transparency between us and the entities we fund under section 39 recognising, as I said, that they are required to have regard to public pay policy. When processes such as those in the Haddington Road agreement arise, we pass on the cuts commensurate with what we expect these agreements to yield in terms of extra hours, etc. However, as they are not formally subject to public pay policy, we are not in the same ballpark as section 38 organisations. That fits into an overall process designed to ensure all section 39 funded entities are providing the right type, volume, scale and quality of services for which we are paying. As I emphasised before, in that regard we are generally satisfied that the two companies the subject of today's discussion are doing exactly this.
I do not envisage our getting into the space we are in with the section 38 organisations. However, we are going through a validation process and where disclosures are made which may suggest to us there are disproportionately high numbers of staff paid at whatever grade levels, this will be the subject of discussion between us and the entities involved. That will not purely be in a pay-compliance space but around the overall metric and nature of the organisation having regard to the fact that many of these organisations are either in the elderly or disability care space. There is a disability service value for money review which has been published by the Department of Health in the past 18 months which forms part of our objectives in the 2014 service plan. Some of the issues Ms Kerins raised about consolidation of service providers and back offices and generating better value which my colleague, Mr. Healy, will lead out will be informed by what we see in these disclosures.
Robert Dowds (Dublin Mid West, Labour)
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I thank the witnesses for coming. As somebody who for many years worked with people with disabilities, I acknowledge the important work done by Rehab in that regard. It is important to do so on a day like this. Rehab Enterprises is involved in work such as recycling. Does it get any money from the State for the employment of people with disabilities?
Ms Angela Kerins:
Yes, the Department of Social Protection has a scheme in place. It started out many years ago in the then Department of Enterprise, Trade and Employment. It has had a few names, but it is called the wage subsidy scheme under which funding is provided for any employer - it does not have to be Rehab - towards meeting the productivity deficit in respect of an employee with a disability. Many years ago we campaigned for and promoted the employment of people with disabilities.
Also we wanted to develop - this is how Rehab Enterprises actually started out - real employment opportunities for people with disabilities, getting the same wage as everybody else. We wanted a mix of able-bodied and disabled, also sort of a 50:50 mix and moving away from this whole sheltered workshop activity, where somebody with a disability doing the same work as a person without a disability would actually get the same wage. That was the start of the-----
2:30 pm
Robert Dowds (Dublin Mid West, Labour)
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How much is Rehab subsidised per hour?
Robert Dowds (Dublin Mid West, Labour)
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Presumably Rehab adds to that in terms of the-----
Robert Dowds (Dublin Mid West, Labour)
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Approximately how much per hour would each person get-----
Robert Dowds (Dublin Mid West, Labour)
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-----from Rehab?
Ms Angela Kerins:
First and foremost, for people in enterprises one is looking at a little greater than the people who are on the lower wage. We have people with disabilities within the Rehab Group at management level and at all levels of the organisation. If I just could go back to the lower level, we would be a little bit higher than the minimum wage. That is not just for people with disabilities; it would be for the able-bodied person who would be working in the same job.
Robert Dowds (Dublin Mid West, Labour)
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So Rehab would top it up to the €8.65 or a bit more than that?
Robert Dowds (Dublin Mid West, Labour)
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Does Mr. O'Toole on behalf of SOLAS have any comment on that? Is that his understanding of how this operates?
Robert Dowds (Dublin Mid West, Labour)
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There is nobody here who can comment on that from the Government side.
Ms Angela Kerins:
We would pay market rates for the job, whatever the market rate is for whatever job it is, but this is not just a scheme for organisations like ourselves. Any employer, in fact many employers out there utilise that scheme to take on people with disabilities. It is a very positive scheme because it encourages employers to do that. Not all of our people with disabilities would actually be on that scheme either. It is a positive mechanism to encourage all employers.
Robert Dowds (Dublin Mid West, Labour)
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What are the criteria for a person qualifying for that top-up? To what degree does a person have to be disabled? For example, I could argue that I am disabled, but I have never got any extra bonus for that.
Ms Angela Kerins:
One has to qualify for the disability allowance, but, as I said, not all our people with disabilities would qualify for the wage-subsidy scheme because, as the Deputy rightly says, they do not all require the wage subsidy scheme.
Robert Dowds (Dublin Mid West, Labour)
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How many people with disabilities does Rehab employ?
Robert Dowds (Dublin Mid West, Labour)
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I wish to ask about the care trust and its relationship with the Friends and Supporters of the Central Remedial Clinic. What is involved there? How did that come about? How does it operate?
Mr. John McGuire:
The care trust is a pure, if one likes, lottery-management company. So it sells the tickets, takes in the money, and hands the money over to the two shareholders and the third beneficiary, which is the Mater Foundation. However, the care trust has no role to play in what the money is actually used for. That is in the gift of the two shareholders when they receive the money from the care trust.
Robert Dowds (Dublin Mid West, Labour)
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This would include things such as the care bears that the CRC had.
Robert Dowds (Dublin Mid West, Labour)
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What was the raison d'êtrefor operating together in that way? It clearly goes back some time.
Mr. John McGuire:
It does. The origins of the care trust go back to the 1950s, before my own engagement with it. I think at the time two organisations, which were in regular contact with each other and of similar purpose, just came together and said, "Is this something we would like to do together?"
Robert Dowds (Dublin Mid West, Labour)
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What sort of annual income does that produce?
Robert Dowds (Dublin Mid West, Labour)
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Is that takings or profit?
Robert Dowds (Dublin Mid West, Labour)
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Is that equally divided between the CRC and Rehab?
Mr. John McGuire:
There is an amount paid to the Mater Foundation, which is not a shareholder. That is an amount in the order of €250,000, so once that is paid, the remainder of the surplus is divided 50:50 between Rehab and the Central Remedial Clinic. As I mentioned earlier, from memory - I do not have a note on it - in 2013 that was around €1.7 million each.
Robert Dowds (Dublin Mid West, Labour)
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Has Mr. McGuire noticed any change in patterns of donations since the CRC scandal emerged?
Mr. John McGuire:
It is very difficult to make an assessment because of, as I think I mentioned earlier, the basis on which that particular lottery operates. It is a subscription lottery where people agree to pay in so much each month and are entered into three draws during the month. So it is really when it comes around for a renewal of their direct debit or whatever that we would see the impact. I think it is fair to say there is going to be a negative impact.
Robert Dowds (Dublin Mid West, Labour)
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Does Mr. McGuire have any estimate of what that might be?
Mr. John McGuire:
Not at this point because people renew their commitment to this particular form of lottery at different stages of the year, so I think it will take some time for us to gauge that. For the further information of the committee, we have in total about 60,000 people subscribing to that. I think it would be fair to say in 12 months' time there probably will not be the same number of subscribers.
Robert Dowds (Dublin Mid West, Labour)
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This brings me-----
Robert Dowds (Dublin Mid West, Labour)
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That is the mysterious organisation about which I knew nothing even though I worked in a CRC school. I thank Mr. O'Brien for that.
This brings me back to the issue of Ms Kerins's salary. Does she see a connection between the discussion of her salary, Mr. Kiely's salary and so on, and the negative impact this is having not just on the Rehab organisation and the CRC, but on other charitable organisations that may have no skeletons in their cupboards and whose CEOs are paid relatively small salaries?
Ms Angela Kerins:
I do.
To be honest, one of the reasons I wanted to ensure that I made a full declaration and waived any right to privacy was because I believed that this situation had gone on. It is important that we deal with whatever impact and negative issues it has caused and move on.
However, this is not just about salaries. The sometimes incorrect information on the charity lotteries compensation fund has been damaging. I wish that we had come out with my salary a little earlier. That said, the board needed to handle a number of issues, for example, data protection, to be sure about where I was coming from and the salary levels. People were trying to ensure that, when they provided information, it was accurate and relevant.
The Rehab Group and I have a responsibility to try to deal with the negative impacts. From our perspective, the charity lotteries compensation fund and the wide-ranging and incorrect reports in the media on same have also caused us some difficulties.
2:40 pm
Robert Dowds (Dublin Mid West, Labour)
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Does Ms Kerins not believe that, since charities depend to one degree or another on the public's generosity, there is a moral obligation on all charities to ensure that senior staff are paid at a moderate level as opposed to a high end one, as in her case? She is paid more than the Taoiseach and, as someone mentioned, President Obama.
Ms Angela Kerins:
I could be going back over this ground in respect of my post. I donate money to various charities. One hears much about senior salaries and people earning more than €70,000, €80,000 or €90,000. Some people believe these are too high. Some charities depend on their entire fund-raising incomes to pay for everything, including salaries, pensions and activities, whereas others do not because they have other incomes. It is important that the public knows to what it is contributing. It would be wise to make this point clear. I have no problem with contributing to the total running costs of a charity, but some may. They may wish to contribute to front-line service delivery only. I have spoken much about myself. My work goes way beyond the charitable activities of the Rehab Group. We can argue this-----
Robert Dowds (Dublin Mid West, Labour)
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I appreciate that, but Ms Kerins is mixed up with the charity. I appreciate that Rehab is a particularly unusual creation, but the public views it as a charity because a part of it is charitable. The message to Rehab and all charitable organisations should be to keep their books clear and their salaries to as a moderate a level as possible. It is a lesson that must be learned from this debacle.
If I may, I will ask a final question on the National Learning Network, NLN. From my experience, this is a difficult area to discuss in terms of achievement, etc. What is possible for one person with a disability is not possible for another. Does it concern the witnesses that there is such a high drop-out rate among the NLN's participants? Reference has been made to illness, which is a genuine reason for dropping out, but has this matter been examined closely and has the question of whether what is being provided is appropriate for the individual concerned been asked? From my experience of working with people with disabilities, what is possible for one may be impossible for another. As such, I appreciate that people must cut their cloth to suit their measure in a way they might not need to do in other areas of life.
Ms Marie Kelly:
That is a genuine question. We have done a great deal of work on analysing the drop-out rate and what is creating it. Given the norm, 34% is not huge by the standards and the clients we deal with, although that is how it might sound. The level is usually 34% to 37%. It must also be taken into account that the majority, some 17%, who drop out for medical reasons return.
To break down the remainder, some people found the courses too difficult to cope with and dropped down a level. They are also considered drop-outs even though they return. Obviously, people also have personal reasons for dropping out. For example, ten people dropped out last year due to maternity issues. I have an analysis that will give the committee a flavour. Seven people's benefits or allowances were withdrawn. One person was dissatisfied with the course. Death was obviously a genuine reason. Some people went to the Department of Justice and Equality, others went on maternity leave, had personal commitments or were unable to cope and transferred to a lower level of training or, in some cases, to a day service. There might be other issues, for example, returning to hospital. There is a significant variety.
With SOLAS, we considered ways to prevent people from dropping out. Our psychologists have done a great deal of work on the assessment process so that it is tailored to focus people on the right courses. According to the Higher Education Authority, HEA's figures, 31% of people drop out in the IT sector. I do not have access to drop-out rates in the further education system, but SOLAS might be able to give us an indication.
Overall, the numbers are comparable at this level of education. People do not tend to drop out of medical school, but there tends to be a higher drop-out rate in other fields, for example, IT and business. Given the fact that the people we are discussing have disabilities, there is additional pressure.
Robert Dowds (Dublin Mid West, Labour)
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Do SOLAS and the HSE monitor how the NLN is operating?
Mr. Paul O'Toole:
Indeed. We undertake comprehensive monitoring on an ongoing basis. We have quarterly reviews of each of the centres and we get a great deal of information from the NLN. We are trying to ensure a process of continuous improvement. We have been working on many of these issues. As to the specific one mentioned by the Deputy, we have worked constructively with the NLN to consider assessments of suitability before people start courses. Instead of accepting someone onto a programme and then finding out that it is not the correct one for him or her, a little bit more could be done up front in the form of an assessment process. We have worked constructively with the NLN and other specialist providers to work on this and improve ratios.
Robert Dowds (Dublin Mid West, Labour)
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I appreciate that. An assessment of each individual is essential, given his or her disability. I thank the witnesses.
Shane Ross (Dublin South, Independent)
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I thank Ms Kerins and everyone else for attending.
I was struck by something Ms Kerins mentioned to Deputy Harris. She indicated it is her hope to publish the salary structure in the next annual report.
2:50 pm
Shane Ross (Dublin South, Independent)
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Other senior management will support Ms Kerins in her crusade for disclosure and believe in it.
Shane Ross (Dublin South, Independent)
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Is that correct?
Shane Ross (Dublin South, Independent)
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Will the witnesses tell us their remuneration?
Shane Ross (Dublin South, Independent)
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If they believe in it, why will they not tell us now?
Shane Ross (Dublin South, Independent)
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Ms Keane does not want to tell us her salary. What is Mr. McGuire's remuneration?
Shane Ross (Dublin South, Independent)
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He is on a contract.
Shane Ross (Dublin South, Independent)
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Will the witness tell us what he was paid when he left?
Shane Ross (Dublin South, Independent)
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What about Ms Kelly?
Ms Marie Kelly:
I completely understand Deputy Ross's question and from where he is coming. We work with State contracts but we are a private company. The salary and related details constitute personal data and as such, the employees have a series of rights under data protection and EU legislation. I am not going to break those rights and protections. If I speak about my salary I will, de facto, breach their confidentiality. My salary has been returned to the two main bodies that fund us.
Shane Ross (Dublin South, Independent)
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Who are they? Is that the former FÁS entity and the HSE?
Shane Ross (Dublin South, Independent)
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I could turn to the HSE representatives in that case. Perhaps they could tell us what these people are paid?
Mr. Tony O'Brien:
It is my understanding that I am here pursuant to the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013 and, consequently, I am obliged to provide information available to me to the committee when asked to do so. I have the information and I am not proposing to go through it and read it out. I am prepared to provide the documentation to the clerk, who can share it with the committee. I do not have copies for everybody. In light of the conversation that occurred earlier, I should stress that we have had correspondence from the Rehab Group asserting its rights to confidentiality in providing that information to us. It is my understanding that a request from the committee to me in these circumstances and in accordance with the 2013 Act would override that consideration and provide me with absolute privilege if I provide the information to the committee. If the Chairman believes anything I have said is not correct, I would appreciate his advice on the matter. I have a set of documentation which I can provide to the clerk.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I would never challenge Mr. O'Brien on that.
Shane Ross (Dublin South, Independent)
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Will Mr. O'Brien also provide the information on Ms Kerins's salary over the past ten years?
Mr. Tony O'Brien:
Ms Kerins is not an employee of either of the entities with which we have a service level arrangement. We have service level arrangements with RehabCare and the National Learning Network but not with the Rehab Group. As I understand it, Ms Kerins is not an employee of either of those two entities, although she chairs the boards of said entities. Equally, the most senior posts - occupied by the colleagues from RehabCare to which the Deputy addressed questions - are employees of the group but because of their executive roles within these two entities, in one case we are effectively funding 84% of the salary and in the other case we are effectively funding 23% of the salary. In those cases the information has been returned.
Shane Ross (Dublin South, Independent)
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I ask Mr. O'Brien to provide us with all available information about senior staff at Rehab.
Shane Ross (Dublin South, Independent)
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I thank Mr. O'Brien.
Shane Ross (Dublin South, Independent)
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Is Mr. O'Toole privy to the same information?
Mr. Paul O'Toole:
I do not know the information that Mr. O'Brien has but my colleague received a letter from Rehab setting out salaries within groups, not with individuals, for parties associated with the National Learning Network, with which we are involved. It was pointed out in that correspondence that the information was provided for a specific purpose under the data protection legislation and could only be used for that purpose, save for the individual agreement of relevant management staff. This relates to management staff charge-outs in respect of the National Learning Network.
Shane Ross (Dublin South, Independent)
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Will the witness provide that information? I apologise if there is an overlap.
Mr. Paul O'Toole:
I will seek guidance on balancing the obligations under the data protection legislation and to the committee as an Accounting Officer. I had not considered the question before today and became aware of the issue yesterday. If the Deputy does not mind, I will reflect on it but we will of course seek to be helpful to the committee while trying to manage both aspects of our responsibilities under the law.
Shane Ross (Dublin South, Independent)
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When will the witness be able to revert?
Shane Ross (Dublin South, Independent)
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That is fine. Who is Ms Kerins's employer? Is it the Rehab Group?
Shane Ross (Dublin South, Independent)
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That is where the remuneration is charged to in the accounts. Does Ms Kerins understand that this is disappointing? We have asked representatives of Rehab here today because of what is obviously perceived as a massive lack of transparency. She is as aware as anybody else of the problems in the charity industry. I do not dispute the great work done by the group; nobody would do so as it is fantastic. We have not achieved further transparency today, and that opacity was symbolised by Ms Kerins's salary issue.
As Deputy McDonald indicated earlier, we specifically asked for the remuneration committee to come before us, along with the chairman and former chief executive. That was for the specific reason of finding out the matters exercising the public and which concerned us because we are examining the charities sector. Instead of bringing in the people we asked for, Ms Kerins brought along three people we did not ask for. They have mentioned some very useful things in a different context. Why is Mr. Flannery not here? As far as I can see he is on the board of five subsidiaries and the main company. He is also on the board of the National Learning Network. Why is he not here?
Ms Angela Kerins:
We agreed to come here to speak on the three items, which are funding from SOLAS, funding from the HSE and the charity lotteries compensation fund. It was on that basis that we came here on a voluntary basis. To clarify an issue, we got an e-mail seeking the attendance of the remuneration committee and Mr. Flannery. We have never directly been asked for the attendance of our chairman, who happens to be on the remuneration committee.
The Rehab Group believes that the team to appropriately respond to the issues for discussion today, or these three areas, are sitting before the committee. I think that we have aptly responded to much of the detail we have been asked for and we will come back with statements.
3:00 pm
Shane Ross (Dublin South, Independent)
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Why does Ms Kerins think we invited the remuneration committee to attend?
Shane Ross (Dublin South, Independent)
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Perhaps she will tell us who is on the remuneration committee - I am sorry to interrupt - but maybe that would help. Who is on the remuneration committee at Rehab?
Shane Ross (Dublin South, Independent)
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Four, yes.
Shane Ross (Dublin South, Independent)
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Why does she think we asked them in?
Ms Angela Kerins:
It is believed that it was up to the Rehab Group to field the team to answer the questions that we are here to answer today regarding our public funding and the remit of the committee. The questions we were being asked were in regard to the National Learning Network, RehabCare and our charitable lotteries compensation fund spend.
Shane Ross (Dublin South, Independent)
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That statement is somewhat difficult to take. We are entitled to ask to attend the people who we think will be useful to us. For Ms Kerins to come back and say Rehab has decided the other people will or somebody else will attend is absurd. It is clear that we wanted to ask questions on this whole issue of remuneration, and on which this whole meeting has concentrated more than any others. That is not just a prurient matter, it is because the health and the transparency of an organisation is decided by how much information comes out. Where Rehab is seen not to be transparent is on remuneration. We have seen that just now when Ms Kerin's colleagues refused to outline their salaries, which meant that we had to extract that information from somewhere else. That information is important, and is also important to the public. That is why we asked them to attend this meeting.
Ms Angela Kerins:
My two colleagues are not public servants. They are not on the public payscale. They are not on public pensions. They are entitled by right - and the law of this country - to their protection and privacy. That is where we are with this matter. They, and others, are working to ensure that there is adequate disclosure regarding their pay and conditions of employment. We have said that we would do that and today we have said that we will do that sooner than we thought. I would like the Deputy to let us get on with that so that we can get this issue out of the way. It is very important that we do that. The Deputy has seen, I would hope, nothing but goodwill from Rehab to ensure that is now achieved, as soon as possible and currently. I ask him to do that.
In regard to the remuneration committee, as I have said before - I have not had a chance to do this yet but I have said it many times today - we are going to give the report, albeit we need to check if there are any issues that need to be redacted, to the Chairman. I am also very willing to go through the issues here today, as to the methodology and how the independent assessors or salaries - the independent organisations - came to their position. I can provide all of the information the Deputy needs and I am willing to do that.
Shane Ross (Dublin South, Independent)
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Can we also have the Hay report that Ms Kerins referred to?
Shane Ross (Dublin South, Independent)
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Ms Kerins referred to it in her statement.
Shane Ross (Dublin South, Independent)
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When was the Towers Watson report written?
Shane Ross (Dublin South, Independent)
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When was it given to Rehab? If it was for 2014 then it must have been in the past couple of months.
Shane Ross (Dublin South, Independent)
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That is when it was written so it must have been updated in the past few weeks.
Shane Ross (Dublin South, Independent)
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Can we take it that there has been an alteration to Ms Kerins' salary in the past few weeks?
Shane Ross (Dublin South, Independent)
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Was there a reduction in Ms Kerins’ salary this year?
Shane Ross (Dublin South, Independent)
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There was an increase.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is it €240,000? That is what Ms Kerins has asked us to believe. I apologise for cutting across.
Shane Ross (Dublin South, Independent)
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That is fine. Go ahead.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I asked a specific question and Ms Kerins gave a clear-cut answer.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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She has stated that, as we speak, her salary is €240,000.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That is the position.
Shane Ross (Dublin South, Independent)
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And it was not changed by the Towers Watson report.
Shane Ross (Dublin South, Independent)
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I find that unacceptable. Will Ms Kerins help us with something else that she put in the public arena through her statement? Is it correct that she has not taken any bonus in the past four years?
Shane Ross (Dublin South, Independent)
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Did she take bonuses before then?
Shane Ross (Dublin South, Independent)
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Was it €70,000?
Shane Ross (Dublin South, Independent)
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What was it? How does Ms Kerins know it was not-----
Shane Ross (Dublin South, Independent)
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Does Ms Kerins not know what her bonus was?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I must interrupt Deputy Ross, but Mr. Purcell must attend another meeting.
Shane Ross (Dublin South, Independent)
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That is fine. I have no purpose-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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He might revert to us on the recommendations. We will not interrupt the meeting now.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Deputy Ross is in possession, so I will allow him to continue. By way of explanation to Ms Kerins, I am allowing Deputy Ross to pursue these questions because she stated that, in terms of her salary, she would waive her right to privacy. That opened this line of questioning.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is fine, but I want to be clear – the information that we have been given is Ms Kerins’s salary, which was in the public domain before she attended this meeting. I am not making an issue of this but she stated that she had waived her right to privacy in that regard. Deputy McDonald asked a question about the €6,000 figure and Deputy Ross has now asked Ms Kerins what her salary was for the past number of years and if she had bonuses.
Shane Ross (Dublin South, Independent)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Ms Kerins has answered that she has waived all of her bonuses and that she had not approached Rehab to buy out bonuses or anything like that. I am just clarifying what was said earlier. That much is on the public record.
Shane Ross (Dublin South, Independent)
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I thank the Chairman.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Whether Ms Kerins wants to talk about her 2009 bonus or whatever, she might provide that information if she does not know it today.
Shane Ross (Dublin South, Independent)
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That is a perfectly reasonable suggestion. Can she provide it to us?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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For clarification, in answer to Deputy Harris she said that she would publish the salaries of the other executives this year, for this year. I want her to clarify the matter because in another answer I thought that was not the case.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is the case.
Ms Angela Kerins:
To clarify, we did say, in the statement that was issued, we were talking about the financial reporting standard 102. As Deputies have said, that is for 2015 and would not be available until 2016. Today we are trying to move that forward quicker and are trying to deal with it this year for colleagues and the management team.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will Rehab publish it?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will Rehab publish the 2014 figures?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am trying to be helpful and clarify the matter. The 2014 figures will hopefully be made available and they are working on it.
3:10 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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But Ms Kerins would like to do it as soon as possible.
Shane Ross (Dublin South, Independent)
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I do not understand what is booked to what in the company. We are talking about the National Learning Network, RehabCare and the Rehab Group. Are all senior salaries in global terms all booked to the Rehab Group? Are they all charged to it?
Shane Ross (Dublin South, Independent)
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The companies are wholly owned subsidiaries. In what financial state is RehabCare?
Shane Ross (Dublin South, Independent)
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The accounts say that is the only reason it is a going concern. It is dependent on the continued financial support of the Rehab Group.
Shane Ross (Dublin South, Independent)
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It is a basket case if it is not supported by the Rehab Group.
Shane Ross (Dublin South, Independent)
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The financial statements say that the ability of the company to operate as a going concern is dependent on the continuing financial support of the Rehab Group. On its own, it would not survive.
Shane Ross (Dublin South, Independent)
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Yes, but the loans are there.
Shane Ross (Dublin South, Independent)
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That brings me on to my next question. No. 17 on the RehabCare accounts refers to the directors having availed of the exemption on financial reporting standard No. 8, related party disclosures, which permits qualifying subsidiaries and undertakings not to disclose details of transactions between wholly owned group entities that are eliminated on consolidation and that there were no other related party transactions. Can Ms Kerins explain that?
Shane Ross (Dublin South, Independent)
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Can Ms Kerins expand on that? What are the related party disclosures?
Shane Ross (Dublin South, Independent)
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Including the value.
Shane Ross (Dublin South, Independent)
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Does Ms Kerins have no idea what it is?
Shane Ross (Dublin South, Independent)
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Is it normal for there to be a large number of related party disclosures in Rehab?
Shane Ross (Dublin South, Independent)
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It is an important issue. Can any of Ms Kerins's colleagues help?
Ms Marie Kelly:
I cannot give a value until I check at the office, but we have small transactions, or it could refer to what the group charges. On a monthly basis, the Rehab Group charges a portion of my salary as it relates to my work in the National Learning Network. We avail of additional shared services for efficiencies. We have group shared services because it is good practice to have efficiencies. Various group companies avail of different levels of the group services.
Shane Ross (Dublin South, Independent)
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I take it I will be provided with details.
Shane Ross (Dublin South, Independent)
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Perhaps I can have details of the people involved.
Regarding corporate governance, the opaqueness of the Rehab accounts is extraordinary and I have not sorted out the problems I had because of the refusal of the witnesses to answer questions I asked. I find this whole experience pretty worthless. The opaque nature of the accounts is one issue. What rules of corporate governance does Rehab operate to? How is the board chosen?
Ms Angela Kerins:
We can get the memorandum and articles of association if committee members do not have them. The members are the board. Board members have terms of office. There was a corporate governance review a number of years ago. Board members can only do three terms of three years and then they must leave. There is a nominations committee of the board and it has criteria for membership selection. They seek out people who are suitable. I am talking about a number of things related to the skills base, geography and many other criteria. The committee makes recommendations to the board regarding people to be proposed. There is also an audit committee, a remuneration committee and a best practice committee. Our annual report refers to these matters. There are governed by the memorandum and articles of association, which we can supply to members.
Shane Ross (Dublin South, Independent)
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The board is self-perpetuating in that it goes out and chooses another lot. Does Rehab advertise for board members?
Shane Ross (Dublin South, Independent)
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I did not ask that.
Shane Ross (Dublin South, Independent)
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And then they are chosen by the last board.
Shane Ross (Dublin South, Independent)
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Yes, and the nomination committee proposes people. How come a former chief executive is on the board?
Shane Ross (Dublin South, Independent)
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It is against corporate governance rules to have a former chief executive on the board.
Shane Ross (Dublin South, Independent)
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It is considered extremely bad, certainly in the world of public companies, to put a former chief executive on the board because of the difficulties of their having control after they leave.
Shane Ross (Dublin South, Independent)
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I do not think Ms Kerins is right. I do not want to mention any high profile cases, but Ms Kerins will find there are such cases.
3:20 pm
John Deasy (Waterford, Fine Gael)
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I do not necessarily have any questions. I have been here for hours listening to this and I suppose I had a pretty open mind before I arrived here at 10 a.m. Over the past few weeks, there have been a number of differences of opinion between committee members as to how to deal with Rehab, including the timing of the meetings, who should come in, etc. The private session has got pretty heavy. I have to say that after listening to the interaction between Ms Kerins and various members of the committee, I have come to the conclusion that she has made a big song and dance about this and it is unnecessary. She has been evasive and I do not think any of this has been necessary at all. As €82 million of public money goes into Rehab, she should have been far more forthcoming, even before today. This evasion and this subjective opinion with regard to what she should and what she cannot say is ridiculous. I really think Ms Kerins needs to get a grip on herself, because this event today is completely unnecessary.
Rehab is a charitable organisation, with charitable status. Some of us on this committee have tried to make sure the charitable sector is not further damaged as time goes on, and it has been damaged over the last few months because of the CRC, etc. Now we are in a situation where Ms Kerins is being forced to give information when it comes to Ms Keane. RehabCare is 98% funded by the HSE. Mr. Tony O'Brien has had to say that if the clerk to the committee asks for this information, the committee will be given it. It is unnecessary. That did not need to happen and that should have been thought about before Ms Kerins arrived in here today. It had to be dragged out of her. The manner in which her solicitors contacted this committee yesterday was incredible - informing us as to what our remit is. It was completely unnecessary. All this has done is to prolong this for another couple of days, maybe another week. Ms Kerins and her executives in Rehab should have a long hard think and whatever information, within reason, this committee wants and expects and that the HSE expects - I know a process is ongoing - should just be given, because she is doing more damage than good to the entire charitable sector as this goes on.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Maybe Mr. O'Brien would help us to clarify some issues. Does the HSE pay RehabCare in the order of €40 million? I do not need the exact figure, but is it of that order? Am I reasonably accurate?
Seán Fleming (Laois-Offaly, Fianna Fail)
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I welcome Ms Kerins and her colleagues. I have the RehabCare accounts for 2012. The total income is €44 million, so it would appear that well in excess of 90% of RehabCare's income comes from the HSE. Am I right?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Well in excess of 90% of the income of RehabCare comes directly from the taxpayer.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Can Ms Keane understand why the Committee of Public Accounts, when talking to an organisation 98% of whose total income comes directly from the taxpayer, feels entitled to have full access to the information?
Ms Laura Keane:
I can understand that. RehabCare has its contract with the HSE to deliver the services and it has provided all the information to the HSE as part of that. A staffing template was introduced this year to provide salaries and all of the rest. As part of our compliance, as part of my responsibilities in complying with legislation and in complying with my obligations under the contract of RehabCare, as data controller for RehabCare and in terms of disclosing salaries - as it is a private entity we must consider the whole area of data protection legislation - I sought advice from the Office of the Data Protection Commissioner in relation to that. It advised that there were a certain number of parameters by which I had to abide as a data controller. I have done my best to provide the information the HSE required as part of that while also fulfilling my obligations and ensuring I do not break the law or the data protection issues around the staff.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I understand all that. I look at the Rehab Group in totoand I believe it has a turnover somewhere in the region of €180 million, of which approximately €80 million, or 40%, comes from the Irish taxpayer. Less than half of the income of the group comes from the Irish taxpayer. I can understand why an organisation might make the case, when the majority of its funding does not come from the taxpayer, that it is not fully answerable here. However, RehabCare is a State agency in all but name because it is 98% funded by the State. I would like to ask Mr. O'Brien about that, because people get lost in the debate. There is a general understanding that the vast majority of funding for the section 38 organisations comes from the HSE and that it is a lower percentage in the case of section 39 organisations, perhaps with a service level agreement or a grant payment. Will Mr. O'Brien very simply define the two types of organisation? The public often asks what is the difference between a section 38 and a section 39 organisation. Will Mr. O'Brien tell the public in a nutshell what is the difference? We are in a bubble here and use these phrases all the time but the public is utterly mystified as to the difference between the two.
Mr. Tony O'Brien:
It is not, strictly speaking, related to the proportion of funding in that a number of section 38 organisations would have separate sources of funding too. Section 38 is a reference to section 38 of the Heath Act 2004, which sets out in quite considerable detail the criteria and characteristics of a section 38 organisation. Essentially, it is one that has been classified by a formal process as being a public sector body and all of its personnel are classified as public servants, are treated as such and, therefore, are admitted to public service pension schemes of one kind or another - in most cases, it is the voluntary health bodies superannuation scheme. Therefore, they are in general entirely bound by public sector policies.
Section 39 organisations range quite considerably in terms of their size and scope. There are more than 2,500 of them and some of them are very small, such as small voluntary bodies providing an early morning call service or a meals-on-wheels service, while others are much larger entities which can be either not-for-profits or for-profits. They are simply entities providing services which are similar, or ancillary, to our activities, where we are entitled to support the provision of services through them. By virtue of section 39, we are not recognised in our capacity as an entity for the purposes of normal competition and procurement law, so it is not like procuring other general services in the way we would from other purely commercial suppliers. Those entities are not regarded as public sector bodies, their staff are not regarded as public sector staff and they are not admitted to public sector pension schemes.
3:30 pm
Seán Fleming (Laois-Offaly, Fianna Fail)
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I understand that. I would like to put something to Mr. O'Brien and the HSE, which has been giving RehabCare 98% of its funding each year. As a member of the Committee of Public Accounts, I would have hoped that Mr. O'Brien, as the HSE's Accounting Officer, would have had a far greater handle on the activities of an organisation that gets 98% of its money from the HSE. However, it seems that this template was not sent out until recently. Was that not in place before now, given that over €40 million of this organisation's funding of €43 million comes from the taxpayer? Why did we have to wait until now to talk about this template?
Mr. Tony O'Brien:
First of all, in my opening statement and the accompanying briefing note that was circulated in advance, I described the precise mechanism we use to get a close handle on the provision of activities or services by RehabCare, NLN and others on foot of the funding we provide. Essentially, we are purchasing services from RehabCare and we are doing so at what we consider to be a fair cost. What differentiates this from our relationship with the ESB, Vodafone or any other company that we might buy services from is that in this case, the services are provided to people who are beneficiaries of health care. That is not the case with the other types of service we buy. Our service arrangement sets out in very fine detail the detailed process, as described today by the HSE delegation and the team from Rehab, that is used to hold service providers to account in terms of the quantum, the nature, the standards and the quality of their services. We do not seek to micro-manage their business in the same way we are often accused of doing with section 38 organisations. We have a different relationship with these organisations. During the course of 2012, in light of the overall level of concern we had about efficiency and value for money and in the context of the value for money report that was published in 2012, we introduced for 2013 a template requiring all salaries paid at or above the public sector pay grade known as grade 8 to be disclosed to us. That was a new thing that was introduced. During the course of 2013, entities such as RehabCare and the NLN have been coming into compliance with that process. As it is a new process, there has been a process of clarification, as I have said. Both entities made certain disclosures to us. We needed a bit more information to understand it fully. During the last few weeks, they have provided in full the information we have required. This continued until last week. Indeed, we got some additional information yesterday. All of this information has formed the basis for some of the information I have provided for the consideration of the clerk.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Is Mr. O'Brien in a position to say to us that the organisations he has just mentioned are in line with Government pay policy?
Mr. Tony O'Brien:
No, I am not in a position to say that. We have received the data. I appreciate that the Deputy was not in a position to be in the room when I made my opening remarks. I mentioned during those remarks that we are doing a detailed analysis and validation, which we expect to complete by the end of March and which will enable us to form a view. I also said in response to a question asked by Deputy Harris that we are not in a section 38-type process here. We are using this information to inform our overall view of the value we get and the opportunities for increased value in this sector as a whole. I am not really going to be in a position to judge whether entities are in compliance with a policy that does not apply to them, and it is not necessary to do so.
Seán Fleming (Laois-Offaly, Fianna Fail)
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It does not strictly apply to them. I would like to ask about the review the HSE is doing. Mr. O'Brien said earlier this morning that the HSE is dealing in the first instance with organisations that receive in excess of €5 million and hopes to have a report on those organisations by the end of March. How many such organisations are there? Can Mr. O'Brien list them? Is there a list? There cannot be too many organisations receiving over €5 million. Can the list be supplied to us? Do we have the list?
Mr. Tony O'Brien:
We have received inquiries in this regard from two Oireachtas committees. I am a little unclear on which of them the list was provided to. If it was not provided to this committee, we will certainly make sure that is done. It may have been provided to the Joint Committee on Health and Children, which has a-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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A list of the organisations is available.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Almost 12 months have passed since the compilation of the internal audit report on the section 38 organisations. All the HSE can confirm is that just ten of the approximately 40 organisations or agencies are fully compliant. Most of them have made a business case at this stage, but just ten of them have been accepted by the HSE as being fully compliant. That happened after confirmation was received on foot of an internal audit report. How can we be confident that the HSE will have confidence in the information it gets back from all the bodies when the validating exercise is completed between now and the end of March? How will the HSE be able to come to an understanding that what it is told is the case? That was not the experience in the case of the section 38 organisations. A year on, we are a long way from concluding the process. What does Mr. O'Brien see as the position regarding the section 39 organisations? Will the HSE do a sample test? I understand that it does not intend to check them. Given that there are so many section 39 organisations, I suggest that the HSE internal audit committee should do some sample audits of some of the section 39 returns. As we have heard, some of them are 98% funded by the State.
Mr. Tony O'Brien:
Interestingly, the information provided to the audit process by the section 38 organisations has turned out to be open and full information. We have differed on the interpretation of whether the information means they are in compliance. We have not really had any failure to disclose, other than in the case of a few genuinely marginal issues. We are going through a validation process with respect to the section 39 organisations. As this committee is aware from various reports that have been before it, the internal audit service in the HSE is quite sophisticated. Section 39 organisations are likely to be sampled in relation to the accuracy of the information they supply to us. We have the ability to do that under our service level arrangement. Our internal audit service will be deployed in the section 39 space as part of this ongoing process.
Seán Fleming (Laois-Offaly, Fianna Fail)
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My final question relates to the NLN and to SOLAS. Approximately how much money goes to the NLN from SOLAS?
Seán Fleming (Laois-Offaly, Fianna Fail)
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What proportion of the network's total funding is that?
Seán Fleming (Laois-Offaly, Fianna Fail)
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SOLAS is carrying out a similar exercise to that being carried out by the HSE. As we have established, they are not public servants. What kind of check is SOLAS doing, given that two thirds of all payments in that organisation are funded by the State?
Mr. Paul O'Toole:
We carry out an extensive set of monitoring on a monthly and annual basis. We conduct quarterly reviews. We have a capitation fee arrangement. There is a set fee per whole-time equivalent. The NLN is paid on the basis of the delivery of those whole-time equivalents over the year. Obviously, we have access to its accounts. We ensure the payments we make are consistent with the delivery of the service by the NLN. We do that on a continuous basis. We account for that fully in our operations.
Seán Fleming (Laois-Offaly, Fianna Fail)
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How does that capitation fee compare with the capitation fees that SOLAS pays to other organisations? Is there a set fee for all organisations, or does it vary from organisation to organisation?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Would SOLAS be able to send the committee a list of all the organisations that receive more than €1 million per annum?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Maybe SOLAS can give us the full list.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Ms Laura Keane would like to comment.
Ms Laura Keane:
I would like to take this opportunity to clarify the Deputy's remark that Rehab is almost a public entity. Rehab is not a public entity. It is a private organisation. We contract for all the services we deliver. We have very specific contracts in place. As I explained earlier, those contracts are monitored. We have to deliver on a very specific quantum or number of services. All of those are divided up and are reported on. We are expected to deliver on certain standards and report on our monitoring and performance data. In addition, the people we employ are privately employed. We are not on consolidated pay scales. We do not have the same opportunities or benefits from a superannuation scheme perspective. We pay a separate scheme ourselves. If we do not perform, in relation to our business, we can lose that business.
There is that risk to us as a private entity. We do not have security of tenure as employees and if we are not competitive and performing, we will lose that business and it will be up to us as a private agency to recoup or manage these losses. During the years, perhaps because we were not as competitive, we have lost certain contracts to for-profit agencies which may be operating on different terms and conditions. They are not expected to disclose a number of elements of their contacts.
On the other element that separates us, we are already undergoing tendering and procurement processes for our business. We recently went through the public procurement process and won a tender. We competed against for-profit agencies and came out as the preferred provider based on value for money and finance. From that perspective, ours is a different entity.
3:40 pm
Seán Fleming (Laois-Offaly, Fianna Fail)
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I appreciate Ms Keane's correcting my comment. Although I said Rehab was almost a public entity, I did not suggest it was. Having looked at the figures, I will compliment it because everybody has been having a go at the salaries paid in the organisation. Based on the audited accounts for RehabCare in the year under review, staff costs, including PRSI and pensions, were €33.53 million. On page 3 it is stated the organisation had an average of 1,052 employees in the year. This gives an average salary per employee, including PRSI and pensions, of €31,873 per annum, which is less than the average industrial wage. Including PRSI and pensions, this amounts to an average weekly salary of €613. The salaries paid in the organisation generally appear to be modest. We have concentrated on the salaries of a few key personnel.
Without wishing to bore members, I have produced similar figures for the National Learning Network. The accounts show that payroll costs were €31.11 million and that there were 705 employees. This gives an average salary of €44,000 per annum or €849 per week. While the figures for both organisations are not excessive, the average salary in the National Learning Network is higher than that in RehabCare, although neither figure is excessive. What is the difference in the pay structures between the two entities? I apologise for giving so much detail, but I am thinking of the 3,800 employees who will get it in the neck tomorrow morning for purportedly having high salaries. I want those who avail of Rehab's services to know that the average person working on their behalf receives less than €600 per week.
Ms Marie Kelly:
I can understand why the Deputy would make that comparison. When one looks at figures for numbers of employees, it is an average figure. Not everybody works full time, which can distort salaries. Often, even in the care sector, people work part-time. They are predominately women and sometimes part-time hours suit them. One would need to break down the analysis to the number of hours provided.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I understand.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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This type of analysis is the very reason for providing information on the pay scales of senior executives. This type of analysis in which one produces an average salary gives rise to the wrong conclusions because it includes many part-time, low paid workers. We need to single out senior executive pay scales and obtain the relevant information. This informs public opinion. Deputies Mary Lou McDonald and Áine Collins would like to ask some brief questions before we conclude the meeting which started at 10 a.m. Mr. Purcell wishes to clarify a matter before we conclude.
Mr. Brian Purcell:
I thank the Chairman for allowing me to speak again. I must leave in a moment.
I wish to restate my earlier comment. We carried out the audit and got the letter back. We would have expected a formal response to some of the recommendations made, but we did not get it. At that stage, a policy decision was taken that the scheme would be wound down and the matter proceeded on that basis. A letter issued on 5 October, inviting submissions that people wished to make. We were then notified that leave to take a judicial review had been sought in November. There was no question of a meeting after this. As I stated, the decision to wind down the scheme was taken in the context of our examination of our overall budgetary situation and the need to find savings. In addition, we felt there were issues in relation to the scheme. The audit brought to the fore the issue that there were very high costs involved. The main reasons were that we believed the existing criteria for the scheme created an incentive to run these charitable lotteries at a very low profit margin or even, in some instances, at a loss. Further, there was no incentive to keep administrative costs down and, of the profits generated, the amount going to the charitable causes was often very low, given the first two reasons I gave. In addition, the lotteries had effectively come to service vehicles for the generation of charitable lotteries funding rather than as mechanisms for raising charitable funding directly from the public, as originally intended. Those were the reasons the policy decision was taken. We regarded the implementation of the recommendations made in the report as a proportionate response in circumstances where the policy decision was taken to wind them down. They were mainly administrative outcomes to the audit and have been put in place. As the funding continues to be dispersed for the period that the fund will remain in place, the recommendations which the audit identified are being carried out.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What are the three recommendations?
Mr. Brian Purcell:
Our three recommendations are being carried out. The Chairman referred to the fact that one of the recommendations stated there was to be an agreement. The fact is that there was no specific objection to, if one likes, the administration issues in relation to them. In fact, as we have continued to pay out the money under the schemes which we will continue to do until the end of 2015 when the final payments will be made under the schemes, these new arrangements will continue to be in place. Notwithstanding the one line in the first recommendation that there be an agreement and even if there was no formal agreement, these procedures are in place and accepted.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am sure Rehab would take a different view on some of these issues.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes.
Ms Angela Kerins:
We discovered through freedom of information that there was a memorandum within the Department of Public Expenditure and Reform from August 2012 to the assistant secretary to the Minister recommending the abolition of the charitable lotteries fund. That discussion started long before the 2012 audit.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I ask Ms Kerins to make a copy of the memorandum available to the committee.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I have a question for the Chairman. How or when does he propose to give members the information provided for him by the Health Service Executive in response to Deputy Shane Ross's questions?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy cannot ask me a question. I am not a witness today.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I can and I just did.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The information has been given to us by the HSE. I want to double check, through the clerk to the committee, that it is okay for us to release it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That is fine.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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If the information can be released, we will release it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I just wanted to clarify that.
To return to Ms Kerins, I asked her two specific questions on which we drew a blank. I believe she took up my suggestion that her colleagues check two matters. The first was when I asked to get a sense of the value of the pension pot of her predecessor. The second related to Complete Eco Solutions and my attempt to establish the relationship between Rehab and that entity. What progress has been made in answering these questions?
3:50 pm
Ms Angela Kerins:
I do not have those pieces of information for the Deputy right now. We have gone into the archives for the second one. I do not know whether I am in possession of the information on the first one. I need to go back and check that myself, so we will come back to the committee with those pieces of information.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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We have an assurance that Ms Kerins will furnish us with-----
Ms Angela Kerins:
I will come back with the information in as far as I can, because I do not know what information there is, which is seven years old, in relation to my predecessor. I will check on the other matter which is archived because it is a number of years ago. To the best of my ability I will return.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I appreciate that there may be some issues in sourcing information but I cannot imagine that information on both issues is not within Ms Kerins' organisation. In fact it has to be, and if it is not, one would wonder as to why not.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I thank Ms Kerins.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that in relation to both items, the question in relation to Mr. Flannery and in relation to Eco Solutions?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Has Deputy McDonald finished?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call Deputy Áine Collins to be followed by Deputy Nash.
Áine Collins (Cork North West, Fine Gael)
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I wish to ask a question on the accounts of National Learning Network Limited. It is stated in the documentation that a float of €1.5 million is provided by FÁS.
Áine Collins (Cork North West, Fine Gael)
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What is the context of having €1.5 million of a float from FÁS?
Ms Marie Kelly:
That goes back a number of years. When the National Rehabilitation Board, NRB, was dissolved and FÁS was set up and became responsible for budget service provision, we had to pay training allowances on behalf of FÁS. We are like a managing agent which is just part of the process. There is no administration charge. We pay the allowances to the clients and then we bill FÁS and because there was a timing difference, FÁS gave a float of €1.5 million a number of years ago at the very start. Discussions have taken place recently with SOLAS on how such funds are to be distributed and managed in future. The float goes back a number of years. It allowed us to pay the allowances while we recoup them later from FÁS, so it was a timing issue.
Áine Collins (Cork North West, Fine Gael)
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Ms Kerins said earlier she would appreciate some advice on how she would reconfigure the group. It is evident from today that it might be a good idea to take out the charity section and put it in a separate entity.
Ms Angela Kerins:
That is not a straightforward issue because one cannot separate the commercial activity from the charity element, because the charity owns it. The only way the charity would divest itself of Rehab is if it sold it or transferred it as an asset to a similar charity. There are serious complications involved. We have been examining this issue for the past nine months. There has been a slowdown in recent months but we are speeding it up again. We need to work this through. There are some experts helping us on this and they have not come up with a solution yet. It would seem that the top organisation would need to stay as a charity, otherwise it is divesting its assets and it is not permitted to do that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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There is need for someone on the board to guide them if Ms Kerins has any more suggestions.
Áine Collins (Cork North West, Fine Gael)
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The group is a charity but it also has profitable enterprises that are outside the charity. How is that allowed?
Ms Angela Kerins:
A charity can own assets. That is not a problem. However, one cannot take the assets away from the charity without giving it proper value for them. Therein lies the problem. One cannot just say here is the commercial and over there is the charity and the two do not meet, because the actual charity, Rehab, owns the commercial. That is the problem. Somewhere there must be a solution to this problem. Our motivation is to get clarity here for everyone in order that people are not delving in and trying to find things out in relation to the structure of the organisation.
Áine Collins (Cork North West, Fine Gael)
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Does Ms Kerins think that would be an advantage? I am going through the accounts and I find there is no breakdown of any administration costs. What does Rehab pay to its solicitors every year?
Áine Collins (Cork North West, Fine Gael)
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Does Rehab have one firm of solicitors in Ireland or many?
Áine Collins (Cork North West, Fine Gael)
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Does Rehab have a legal firm, or does it tender or appoint somebody or get a quote?
Áine Collins (Cork North West, Fine Gael)
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Roughly, what kind of figure would Rehab pay in legal expenses?
Áine Collins (Cork North West, Fine Gael)
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I would imagine it is substantial. I notice Rehab auditors are paid in and around €500,000.
Áine Collins (Cork North West, Fine Gael)
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According to the group account, for auditors, tax consultants-----
Áine Collins (Cork North West, Fine Gael)
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I appreciate that but I estimate that if the solicitors-----
Áine Collins (Cork North West, Fine Gael)
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I estimate that if the solicitors' fee is similar, there would be about €1 million in professional services.
Áine Collins (Cork North West, Fine Gael)
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I am sure there are people out there who can help make this company more transparent and operate within the law which would be very important, because Rehab is a charity.
Áine Collins (Cork North West, Fine Gael)
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I am not saying Rehab is not operating within the law, but as Ms Kerins has said, it is complicated to break it down. I suggest there are people who can help.
Áine Collins (Cork North West, Fine Gael)
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On the question of reconfiguration, has Ms Kerins thought about moving the headquarters out of Ireland as it is an international company?
Ms Angela Kerins:
Some might ask that question of us. I would say the chances of that happening are pretty slim, for the simple reason that we an Irish-based organisation and are very proud of it and we have 100 or more people in Sandymount working for us for many years. People might challenge us from a cost base and ask why we are still here. I cannot see that happening because there is too much of the heart and the spirit of the Rehab Group in Ireland. It would be a most unusual step.
Áine Collins (Cork North West, Fine Gael)
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Can I ask if it has been considered or has it been talked about within the group and at senior management level?
Áine Collins (Cork North West, Fine Gael)
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I did not pick that up from the street, so to speak. May I put a question to Ms Laura Keane about the care issue? We spoke about the increased number of employees in recent years. Did Rehab close a service in the west in the past two years, in Rehab Group or RehabCare?
Ms Angela Kerins:
I think the Deputy is talking about the Rehab enterprises. There were some reductions in the activity in Rehab enterprises and some significant losses happened. Now, thankfully, that is turning around because not all the facility was shut down. It was kept and built again and is beginning to move very positively. That is what underpins what I was saying in relation to supporting enterprises. If it was a commercial decision, that would be gone totally.
Áine Collins (Cork North West, Fine Gael)
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Did people lose their jobs and were people made redundant?
Áine Collins (Cork North West, Fine Gael)
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Were they all people with disabilities?
Áine Collins (Cork North West, Fine Gael)
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What were the significant losses?
Ms Angela Kerins:
I do not have that information. This happened a couple of years ago.
They all got their redundancy payments, but we also decided to establish a specific purpose service for them. That was costly and perhaps Ms Marie Kelly will want to tell the committee a little about that service. It was about supporting and retraining, and there was no cost to the State at all in establishing that for those individuals for a year or more.
4:00 pm
Áine Collins (Cork North West, Fine Gael)
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I would appreciate it if we could get the information on the loss from that, considering the profit Rehab makes overall and that it is part of its ethos to help people with disabilities.
Ms Angela Kerins:
We support enterprises and areas that are not doing well in order to protect jobs. It was a difficult move for us, but we were able to save quite a number of those jobs and we have now moved them into a more sustainable situation. We do have a problem. It is a very difficult decision to make. One minute it is being said there should be equal pay for people with disabilities. Our philosophy is they should be paid for doing an equal job, but there is a downside to this also and that comes about if the commercial activity is not doing well and if the business is down. What do we do in that situation? We underpin quite a few jobs within Rehab Enterprises to ensure there are as few job losses as possible during the downturn.
Áine Collins (Cork North West, Fine Gael)
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Have the 18 people in question, particularly those with a disability, found employment elsewhere?
Áine Collins (Cork North West, Fine Gael)
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If there is an upturn, I assume Rehab will reconsider the situation.
Ms Marie Kelly:
It is not unique, but the National Learning Network, NLN, has grown its staff by 24% in five years, which is significant growth. This is strong growth for any company in Ireland. It is just one company, within one division of Rehab. There are other success stories within the Rehab Group.
Áine Collins (Cork North West, Fine Gael)
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I appreciate that and congratulate the NLN on the great work that has been done. I was concerned about the centre in the west. In the current situation, we would like to ensure people can retain employment.
I have one last question for Ms Kerins. I congratulate her on the new contract, just announced, for the Rehab Group in Saudi Arabia. I understand Rehab will deliver training and education programmes. How many Irish jobs will be involved in delivering this service?
Ms Angela Kerins:
First, I have just been handed a report from Galway and will pass it to the Deputy now.
We were invited to Saudi Arabia for advice. We are a service provider, not consultants. We decided, with the support of the ministries there, that we would set up a service. There are many people there with disabilities, over 20% of the population.
On jobs, there is a great opportunity for Irish business in Saudi Arabia and there is significant interaction between the Saudi-Irish business councils, and Enterprise Ireland is also doing work. Small and medium Irish businesses have an opportunity, but Saudi Arabia is a difficult place in which to do business if a company does not have support. What we are doing in the organisation we are associated with in the Saudi-Ireland visit is creating links and connections for young businesses. We have begun this and a growing number of Irish businesses are now taking the plunge.
For us and the wider disability sector, particularly in areas where there may be some challenges with employment, there is a huge opportunity for us to grow services out there in regard to people with disabilities. This is true not only for the Rehab Group, but for other organisations, and also for younger and older people who wish to go overseas for a period. We have very talented and very skilled people here and that is recognised. To answer the question, there is a great opportunity. We will move forward with this and will provide, not only colleagues from within the Rehab Group, but others who may be interested in coming and working under our umbrella there. Generally, there is a great opportunity, particularly for SMEs, in the Middle East and particularly in Saudi Arabia.
Áine Collins (Cork North West, Fine Gael)
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Ms Kerins said Rehab was invited to Saudi Arabia. Who invited it in and what is being delivered? I understand Rehab is delivering training and education. Is that correct?
Ms Angela Kerins:
Let us just say we were asked for advice. This happens from time to time. It is not just that government that asked. Other governments have sought advice also in regard to the employment and training of people with disabilities and others. In Saudi Arabia they want us to engage in delivery also.
Áine Collins (Cork North West, Fine Gael)
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Will we have Irish people working there under Rehab?
Áine Collins (Cork North West, Fine Gael)
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Are some of those Irish women?
Áine Collins (Cork North West, Fine Gael)
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How many?
Gerald Nash (Louth, Labour)
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I have a question relating to our earlier discussion on the settlement obligations of €7 million in the context of the closure of the defined benefit pension scheme. Will Ms Kerins get back to us with the information that is not available at the minute?
Gerald Nash (Louth, Labour)
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Does Ms Kerins have that information with her now? Will she furnish the information to us?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We spoke about social welfare earlier. What other moneys does Rehab get from the Department of Social Protection? Is there other funding from that source.
Ms Marie Kelly:
We successfully tendered for a programme, the disability activation programme, that was announced a year and a half ago. The value of the tender was €20 million for a three year programme. It is ESF funded. We were successful with our tender and were awarded €7 million of that funding, spread out over the three years.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is involved in that?
Ms Marie Kelly:
These are disability activation programmes. These programmes work with students. One programme in Donegal is for helping people make the transition from second level.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Can the witnesses tell us about the money that comes from SOLAS? Does that go directly to supporting income?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In terms of payment to individuals, how much do they get per hour?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that SOLAS money?
Mr. Paul O'Toole:
That is, but not out of the €27 million. We fund the trainees separately. That is tied up with the float question Deputy Collins asked on that. In other words, our contractors pay the trainees directly on our behalf and we keep them in funds to pay those trainees. The payments they get are analogous to their social welfare entitlement.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How much an hour does that work out at? How much an hour are the trainees paid?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Does any other money come from the Department of Social Protection?
Ms Marie Kelly:
No. Obviously, we also work with the Probation Service and there is funding of €200,000 for that for 2013.
We mentioned the FÁS contracted training. We would have two retail units and then we would do work on behalf of a number of universities, which again would be under a contract we have with them.
4:10 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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These figures are above and beyond the €82 million figure. Is that right?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How much money generally would Rehab Group receive from the State in total? How much more than €82 million?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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So there is €42 million and then the other moneys. How much is the Rehab Care money?
Ms Laura Keane:
The service arrangements at the start of the year would have contained a figure of €41,957,000, but additional services were delivered during the year, so the total HSE income comes to €43,800,000.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What are the other two amounts?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That €42 million to the NLN is inclusive of-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The group also gets €3 million from the Department of Justice and Equality.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How much comes from the HSE?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I wanted to clarify a number of points that were made. When I was looking at the figures going from Departments and agencies to Rehab, I considered that they were going directly to services. I was not aware until today of the detail of the service level agreements. That service level agreement in respect of Ms Kerins's operation is over 90%. Therefore, it comes to the question of the disclosure of salaries at executive level. I believe that because of the amount of money that goes into her section, such money should be declared. I encourage Rehab and the other organisations we have been speaking about to put that information into the public domain as quickly as possible. Obviously the information is with the HSE. Mr. O'Toole has been asked for information today, and I would much prefer to see Rehab volunteering the information. It removes the cloud that some of the committee members were speaking about earlier on. The sooner that happens, the better.
I want to go back to something Deputy Deasy said because I agree with him. I did not want to say this at the outset, because I did not want to cause the meeting to go in any particular direction. I thought that the telephone call from Rehab's solicitors to the legal service in the House was unnecessary. Having gone through the hearing from 10 a.m. until now, much of the information that we sought was given by Ms Kerins without this perception that there was going to be a stand-off at today's meeting. It would have been much more helpful if that legal issue did not arise. We have acted generally within our remit. We may have gone a little bit beyond it in pursuing salaries and so on, but that was because we wanted to get an overall view of the organisation. Today's exchange has helped that. What has not helped us has been the lead-up to this and having to drag that information into the public domain. As Mr. O'Toole and Mr. O'Brien have the information, it would be important for Ms Kerins that this information would be put into the public domain. That gives everybody a clear picture of what is happening within Rehab and of its funding from the Government.
The details of the transaction between whatever section within Rehab and Complete Eco Solutions should be made available. Deputy McDonald has asked for it, and the sooner it is cleared up, the more it will help the public image of Rehab and the charities sector. It was in the past - I think it was 2009 - that the company started.
The point I am going to make about Mr. Flannery and the remuneration committee relates to the wishes of the Committee of Public Accounts. It was clearly expressed by the members of this committee at our last meeting that Mr. Flannery and the remuneration committee be asked to attend, and the report on the benchmarking of the salaries be made available as well. Did Ms Kerins ask Mr. Flannery to attend? Did she ask the remuneration committee to attend?
Ms Angela Kerins:
Of course I do not hide information that comes into the organisation. We have the report and we said that we would provide it to you. I am fully prepared to go through the methodology and the information that would have been given to the committee. With the exception of past chief executives' pension scenario, which I do not have, I would have been able to deal with everything. The decision made by Rehab Group was that this team which would answer the three areas of concern-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did Ms Kerins extend the invitation to Mr. Flannery and to the remuneration committee? Or did she decide that they were not to be asked and that this was what they were going to do?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Were they asked? Did they say "No"?
Ms Angela Kerins:
The decision for the people to come here was a Rehab Group decision. I do not personally decide when somebody is or is not to be present at something. From a Rehab Group perspective, it was felt that we were the appropriate people to be here today to discuss the three issues concerned.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I understand that, but I want to be clear. The invitation was extended, and I want to know were they asked or who made the decision that they would not come. Ms Kerins expressed the view that the team here would cover all aspects of the inquiries that we wish to make.
The Committee on Public Accounts had, however, decided earlier that the remuneration committee and Mr. Flannery should attend, along with your group. Were they asked? Was that discussed at a board meeting?
4:20 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did Ms Kerins speak to Mr. Flannery and ask him to come here?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did Ms Kerins speak to Mr. Flannery and ask him to come?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What was his view of that? Did he wish to come?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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My difficulty with all that has happened today is this particular exchange about this piece of information has gone around and around. That was the same with other pieces of information we tried to get from Ms Kerins. I will finish on this point because obviously we will not agree on it. The Committee of Public Accounts has a job to do. I told Ms Kerins that the legal end of it, the lead-up to this, how to present it and so on, was unhelpful. The exchange today has been constructive. We got excellent information about everything we needed to know.
It would be helpful if the remuneration committee and Mr. Flannery were here. The Committee of Public Accounts extended an invitation to them. I would have thought that Ms Kerins would have thought long and hard about that and the wishes of the Committee on Public Accounts and have brought them along. It is unhelpful it did not happen. It gives rise to unnecessary speculation and tension. The exchange we have just had is typical of some of the questions that were asked. I know they were difficult and that it is not easy for all of the people invited to be here but we have a job to do. We have done that job today. We could have done it with much less tension had it been approached differently.
What coaching and so on went into the witnesses' preparation for this meeting?
Ms Angela Kerins:
The Chairman is looking at three or four people who have been working. We came in at short notice. We have done a significant amount of work going through all our data to ensure we could answer the questions put here. Most of what we have done is go through our information to ensure we are as prepared as we can be. We have to come back to the committee on some of these questions. We did not have everything here.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The witnesses were very well prepared. I compliment them on coming in and for being here since 10.30 a.m. It is not an easy process. We could have made it much easier had it been approached differently. I thank the witnesses for being here and for giving the information. We are much clearer now on the salaries and everything else, and the structure. We may have other queries, which we will put to Ms Kerins again. The clerk to the committee will contact her about the outstanding information we need. If anything else arises from that, we will speak to Ms Kerins again.
I thank the various Departments and Mr. O'Toole for being here. It was a long day but it is important to deal with this matter. We will return to it in more detail at a later stage.