Details of financial control problems at NCAD not surprising

New financial statements highlight the challenges facing the new board at the National College of Art and Design, writes Education Correspondent Niall Murray.

Details of financial control problems at NCAD not surprising

New financial statements highlight the challenges facing the new board at the National College of Art and Design, writes Education Correspondent Niall Murray.

Details of financial control problems at the National College of Art and Design during 2015 and 2016 will not come as a surprise to many familiar with the operation of the Dublin inner city college.

But questions over its future operation as a standalone institution could arise in the coming months as consideration is given to a report recommending its merger with the Institute of Art, Design and Technology (IADT) in Dun Laoghaire.

The idea is one of the recommendations in a progress report for the Higher Education Authority (HEA) on a significant 2013 review of third-level provision for education in the creative arts in Ireland.

However, some HEA members pressed the point at their meeting in May that the proposal might be pushing a solution to a problem that does not exist.

Although largely reflecting the situation as it was two to three years ago, the financial statements just published highlight the challenges facing the relatively new board and senior management team.

NCAD has 1,000 full-time and around 600 evening students and had a budget of over €18m in the year to the end of September 2016 which the latest accounts cover.

The income for that year included €6.6m in State grants, and payment from public funding of undergraduate fees of around €5m.

But the ongoing challenges stem partly from the range of financial control weaknesses identified four years ago during the preparation of accounts for the 2011/12 financial year.

These matters, and their knock-on effects, continue to create a considerable workload for the board appointed earlier this year, and for the senior staff.

Considerable deficiencies in NCAD’s system of internal financial control were found by the previous board appointed in June 2015, the 2015/16 statements state.

They say those problems would have taken some time to put right when they were found, and were being remedied during the period covered in the latest accounts.

The current board was appointed last April and it reports that the members and the college’s senior management remain focused on addressing these control weaknesses.

Significant changes in NCAD staff involved in finance were cited as a factor in the delayed presentation of the 2015/16 accounts.

Senior management and the former NCAD chairperson appeared before the Dáil Public Accounts Committee three years ago in relation to “fundamental flaws in the internal financial control environment” for the 2011/12 financial year.

While the college’s financial statements for the five years up to and including 2014/15 came with a qualification by the Comptroller and Auditor General (C&AG) for reasons including not keeping adequate accounting records, the latest accounts say that “corrections to systems of internal control are starting to take effect.”

But issues of particular concern in 2011/12, and identified in August 2014, had not all been addressed early enough to make improvements in the 2015/16 accounting year.

Some of the issues highlighted in those new records show, however, that other issues or efforts to deal with more historic ones have not gone entirely smoothly.

The “non-effective” spending (the phrase adopted in an accompanying report to the Oireachtas by C&AG Seamus McCarthy) of €138,000 on a HR management project initiated in 2014 was blamed on its poor management.

As so simply put in Mr McCarthy’s report, the direct spending over three years “did not achieve the intended objective.”

That objective had been to correct weaknesses in control over HR and payroll records, but concerns around other accounting practices are also detailed.

Because income and spending related to research were categorised similarly to all other income and expenditure in 2014, it had been difficult to accurately reflect research-related transactions as research spending had to be extracted from the college’s total expenditure.

The college did an exercise to extract research income and spending relating to specific projects when 2013/14 accounts were being prepared.

In addition, all research projects beginning in 2015 and 2016 were allocated their own unique income and expense codes so they could be accounted for accordingly.

“However, some uncertainties remain around older projects and the system is being further developed to clearly categorise ‘other income’ and ‘research income’ for reporting purposes,” the latest financial control statement said.

Ahead of becoming NCAD board chairman in June, former Institute of Technology Sligo president Richard Thorn told the Oireachtas Education Committee that the college “will not get its long-term budgeting right unless the underlying functions and processes of HR and finance are well and truly embedded and working seamlessly.”

His selection for the role was doubtless connected to his recent experience in governance and financial oversight, having conducted external reviews on such matters at University of Limerick and Kildare-Wicklow Education and Training Board.

A key question for policymakers and sectoral oversight bodies — namely Education Minister Richard Bruton, Higher Education Minister of State Mary Mitchell O’Connor and the Higher Education Authority — is whether the challenges can be met by a new NCAD board and the current senior management team.

The problems that have hit individual colleges in the past decade have sometimes been used to justify policy and legislative decisions on those institutions or the wider sector; sometimes wisely, but sometimes prompting understandable questions about excessive external control in the operation of higher education institutes.

Some HEA members suggested in May that there may be other ways to address NCAD’s current financial and governance difficulties than to simply merge it with another institution.

The report of the review that is recommending the NCAD-IADT merger will be considered this month by the authority’s system development and performance management committee, and the outcome of their deliberations and any ministerial response will be worth watching.

The subject of a possible merger was addressed briefly by Mr Thorn when speaking to TDs and senators in May.

“Over a quite short period, the board will have to come to a position on what will be in the best interests of the NCAD,” he said.

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