The Minister for Education & Skills, Ruairí Quinn T.D., has today published a report on the statutory inspection of the relationship between Waterford Institute of Technology (WIT) and a group of companies that provide services to the Institute. The inspection was conducted by former Revenue Commissioners Chairman Mr Dermot Quigley.
This review focussed solely on the relationship between the Institute and the group of companies that have supplied services to WIT. It does not relate to the academic reputation or day-to-day operations of its academic programmes.
The report found that the relationship between WIT and the companies is unique in the Institute of Technology sector. Mr Quigley noted that while the arrangements were well motivated and assisted with the development of the Institute, the current relationship is not considered appropriate and should be regularised immediately. The report concludes that there was no evidence, or suggestions, of any misappropriations of funds.
Minister Quinn fully accepts the report’s findings and has charged the Higher Education Authority (HEA) with ensuring that WIT implements the recommendations to restructure campus services at the Institute.
As a result, WIT will move to quickly advance the acquisition and consolidation of the companies as subsidiaries of the Institute. WIT must submit a progress report to the Minister and the HEA within three months.
The Minister has also sanctioned the capital allocation of €10m to WIT this year to meet the once-off costs of acquiring the Manor Village student accommodation development and completing the Carriganore Sports Complex, due to the importance of these facilities for WIT. This funding will be fully recouped from the Institute through an annual charge.
ENDS
Notes for Editors:
The report is available on the Department’s website at http://www.education.ie/en/Publications/Education-Reports/Report-to-Minister-for-Education-and-Skills-on-the-relationship-between-Waterford-Institute-of-Technology-and-Companies-providing-Campus-Services-to-it.pdf
The statutory inspection, pursuant to Section 20 of the Institutes of Technology Acts, 1992-2006, into the relationship between Waterford Institute of Technology (WIT) and a group of companies which provide a range of services to the Institute was announced by the Minister last November.
Why was the inspection necessary?
A broad range of services at WIT, including student accommodation, catering, transport, sporting facilities and student support services, are provided by a group of private companies (DCS group of companies). While these companies are legally separate from the Institute, an arrangement has been in place since 1990 whereby WIT transfers a proportion of the Institute’s student charges income (€2.5 million in 2011/12) to the companies for these services. This arrangement has never been tendered and the companies’ activities are not subject to audit by the Comptroller and Auditor General.
These arrangements were not considered appropriate by the Department and the Higher Education Authority (HEA) in terms of good governance and accountability, and the HEA has been liaising with WIT since 2010 in efforts to regularise these arrangements in line with best practice across the sector.
In June 2012, WIT’s Governing Body agreed to acquire and consolidate the companies as subsidiaries of the Institute but as part of this process, issues came to light about impending financial requirements. In order to ensure a full examination of options and implications for WIT, the Minister appointed the Inspector in November last year.
Were the companies separate from the Institute?
The report concludes that the companies were legally separate from the Institute, but had extensive linkages, both in terms of financial and staffing arrangements.
What will happen next?
WIT will immediately put in place a process, in full consultation with the companies, to advance their consolidation within WIT. The report outlines a series of steps to achieve this. The HEA will be charged with ensuring this process is advanced speedily and WIT must submit a progress report within 3 months.
The HEA will also liaise with WIT in relation to the provision of capital funding to ensure the buy-out of the student accommodation development within the required timeframe and the completion of the sports development in a timely manner.
What will consolidation entail?
Effectively this means that the membership of the companies will be changed, with the agreement of the companies, to include representatives of WIT, and the Boards of the companies will be reconstituted. The companies will become full subsidiaries of WIT and their accounts will be consolidated with WIT’s accounts, so that they will be subject to C&AG audit. Service provision and staffing arrangements will not be affected.
Was there any improper financial activity?
The report clearly concludes that there was no evidence, or suggestions, of any misappropriations of funds. The problems relate to governance and accountability deficiencies.
What are the capital funding arrangements announced?
The Minister is making some €10 million available to WIT from the capital budget this year to acquire the Manor Village student accommodation and complete the Carriganore sports development. This will be recouped from WIT through an annual charge.
These are important assets for WIT and the report recommended their retention within the Institute. The HEA is liaising with WIT in relation to appropriate arrangements for repayment.
Similar to other HEIs at the time, WIT developed a student accommodation facility under a tax-based scheme in 2002. The development was arranged by DCS and involved a bank and external investors. The tax scheme expires this year and WIT/companies have the option to buy-out the investors for some €15 million. In addition to a sinking fund and funds on deposit, a further €7.25 million will be required to meet the purchase price.
DCS commenced work on the third phase of the Carriganore sports development in 2012. However, as a result of the proposed consolidation, it was unable to access borrowings it had arranged. Instead alternative financing were found within WIT and from working capital of the companies. Funding was only available to bring the development to a weathered state - €2.5 million is required to complete it.