Oireachtas Joint and Select Committees

Thursday, 11 October 2018

Public Accounts Committee

Business of Committee

9:00 am

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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As we have a quorum, the committee is now in public session. We are joined by the Comptroller and Auditor General, Seamus McCarthy, as a permanent witness to the committee and he is joined by Peter Kinsley, deputy director of audit.

Are the minutes of the meetings on 27 September and 4 October agreed? Agreed.

A couple of matters arise from the minutes which I want to move through quickly. Some are of particular interest to our work. In the minutes of the meeting of 27 September we referred to item of correspondence No. 1585 from the Minister for Finance, Public Expenditure and Reform, Deputy Donohoe, regarding the Tax Appeals Commission which is doing an independent review of staffing requirements and it was agreed that the Department keep the committee updated on the review. I do not think we have yet got a copy of the review. The Minister announced on budget day that it was published. It should be here by now and we want that urgently because the Department of Public Expenditure and Reform is coming in next week.

At that meeting we dealt with correspondence from Mr. Ó Foghlú, Secretary General of the Department of Education and Skills regarding the contribution of the religious congregations to the cost incurred by the State for residential institutional child abuse and he gave us an appendix in that letter, which we received on 23 July, about several properties and transactions that were to be completed by the end of quarter 3, 2018, which was the end of September. We expect to see the outcome of that by next Thursday and to see whether that the promise made in July has been fulfilled. We want that for next week because it should be completed. It is a question of sending us that summary.

In respect of correspondence No. 1507 from Mr. Watt, Secretary General of the Department of Public Expenditure and Reform regarding the general indemnity scheme that arose when we were talking about local authorities, he will be here next week to discuss the Office of Public Works, OPW. We want that report before he comes in. Nobody has any work to do on it. I do not know how long the report has been sitting there.

Mr. Seamus McCarthy:

It is also the insurer of the Education and Training Boards, ETBs.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We did say in the minutes that we would include the national broadband plan and the information and communications technology, ICT, programme for the Department in our work programme for that meeting. We want answers to every single item of correspondence we have sent to the Secretary General of the Department in recent months before he appears here next week. Maybe we have got all the replies but I would like that doublechecked.

The next item arising out of the minutes of the last meeting, on 4 October, is that we noted all the financial statements over the course of the summer. We noted with regard to No. 412, that the accounts of the Dublin Greyhound and Sports Association Limited were certified in June 2018 and were received in August 2018. It received a clear audit opinion and the Comptroller and Auditor General noted on the documents given to us last week that the committee ceased trading in February 2017 and the agreement was reached for the sale of the premises, Harold’s Cross Stadium, for €23 million, which is sufficient to allow the company discharge its residential liability. I think that is a fair assessment of how the price was arrived at.

Arising from the minutes we want a detailed report from the Department of Education and Skills on how it felt it was appropriate to spend €23 million of the schools land acquisition budget to bail out the Irish Greyhound Board, IGB. It would have been far more transparent if the Department of Agriculture, Food and the Marine had wanted to bail out the IGB and clear its debts to put in a supplementary Estimate and do it that way. That might have been in breach of state aid rules but maybe it said if it put a value on the asset and got another Department to buy the asset for €23 million perhaps that would not breach state aid rules. I do not know if that was a factor. Bord na gCon was in here some time ago a day or two after this sale was announced but there was a lack of candour. It did not tell us that it had two in-house valuations discussed by its own board of €6 million and €12 million. That was not made known to the committee.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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It was the methodology—–

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I am coming to that. I will call members to speak because I am not letting this issue pass. It specifically arises out of the minutes the last day when we noted the accounts. We want a detailed report from the Department of Education and Skills. It wrote the cheque. The IGB is the happy camper. It got its money. We want a detailed report on how it agreed to pay the €23 million and whether that was that included in its Estimates for that year.

Mr. Seamus McCarthy:

It is a 2018 expenditure. The agreement was made in 2017 but the payment occurred only in 2018 and it was provided for or at least it had budgeted for it in 2018.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It will talk about the Valuation Office. The Valuation Office is a State body and all State assets are a matter of concern to it, including the assets of Bord na gCon and the Department of Education and Skills. It was not working for the Department, it was working for the State. Whether that asset transferred for €2 million, €22 million or €42 million is a matter of indifference to the Valuation Office because the land was staying in State ownership, either with the Greyhound Board or the Department of Education and Skills. Its setting of a price is not the issue. The issue is why the Department agreed to proceed with the payment of €23 million. It is very coincidental. As the Comptroller and Auditor General remarked it was sufficient to allow the company, Dublin Greyhound Sports Association Limited discharge its residential liability.

I am suggesting that next Thursday, when the Department of Education and Skills is here with the Higher Education Authority, HEA, we must allocate a separate portion of the meeting, maybe before we bring in the HEA, whether it is 30 minutes or an hour, to discuss this payment out of its budget, if members are agreeable. It is fishy to say the least that the Department of Education and Skills came up with €23 million to solve the greyhound board’s problem. This is arising strictly out of the minutes of last week’s meeting.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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There is a report today in The Times, Ireland edition, by Sean McCarthy who has done some good work on this through freedom of information. Under circular 11/15 Bord na gCon as the seller, being a State body, was obliged to go to the Valuation Office. It went to Savills, a private valuation company instead. It never went to the Valuation Office. My first question is why did it breach that circular. The purchaser, the Department of Education and Skills, then had the valuation done on a property which it did not own and is counter to the circular because it is the State body selling that goes to the Valuation Office. We now know the difference between the two prices which amounts to €11 million. We need to find out why the IGB did not go to the Valuation Office as it should have done and what prompted the Department of Education and Skills to go to the Valuation Office. Surely it is aware of this circular too. Would it not have found out that the IGB should have gone to it and if the IGB did not go to it and was aware of it did it not ask why?

Did the Department of Education and Skills not ask why it rather than the IGB was going to the Valuation Office, as per the protocol and the circular? A reason would have been needed for the Department to be informed that it had to take an action, that being, to get the valuations done. This brings me to the need to determine who knew what in the Departments of Agriculture, Food and the Marine and Education and Skills. There is no way that the latter could have gone to the Valuation Office, given that it would have been aware of the circular stating that the IGB should go to the Valuation Office. Who told it? How was the Department aware that it should go in breach of the circular? Were there discussions between the two Departments and between Bord na gCon, the Department of Agriculture, Food and the Marine and the Department of Education and Skills? We need to find out all of that. Ultimately, we need to find out why the Department of Education and Skills accepted the requirement to pay this amount of money, which I understand was €23 million of a total budget for land purchases of €28 million, or more than three quarters of its money for the year.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A number of members have indicated. I will call Deputy Cassells, followed by Deputy Cullinane.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Deputy Kelly has encapsulated everything well. The Chairman made the point, but the IGB is not “out ‘ the gap” on this issue.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Okay.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Recall the day when its delegates appeared before us. Their happy attitude, based on their understanding that this bailout was effectively coming anyway, raised questions about what it was that people understood was really happening. There was no transparency in the process.

What galls me is that the Department of Education and Skills wrote the cheque. Did the Department get value for money? We all have constituencies, and I have several schools on my books for which I am trying to get sites acquired. The Department has come back with reams of stuff to the effect that this or that site is not value for money, but those amounts pale into insignificance compared with Harold’s Cross. I would like to know how consistently the Department is applying its methodology if one deal can be justified as being value for money when the smaller projects that we are dealing with are not. It would shine a light on the situation.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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After Deputy Cullinane, I will call Deputies MacSharry and Connolly. I am not keeping an exact list.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I agree with the previous speakers. I will be as brief as I can. Questions were asked of the Department and Bord na gCon when they were last before us. Casting my memory back to the exchanges, it was not a good showing from the board and its CEO. Their performance left much to be desired. The overall question related to whether a bailout had been given by a Department to an organisation audited by the Comptroller and Auditor General, namely, Bord na gCon, which is accountable to us, and whether the sale of the property was effectively that bailout. I was not aware of the two valuations and I am unsure as to whether the Comptroller and Auditor General was at the time. Maybe that information would not have come across his desk anyway.

Mr. Seamus McCarthy:

I was aware that advice had been sought from Savills. My recollection is that it was not actually a formal valuation. It was not a red book valuation.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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What does that mean? Expand on that.

Mr. Seamus McCarthy:

A methodology is used. It is called the “red book” valuation. My memory is that the point being made was that there was not a valuation.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Then what was it if the board discussed these affairs?

Mr. Seamus McCarthy:

It was strategy advice for going to the market.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A public sale rather than—–

Photo of Marc MacSharryMarc MacSharry (Sligo-Leitrim, Fianna Fail)
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The record of our previous meeting does not show that. According to the record, the question was whether the IGB had a valuation, and the answer was that it did. When asked who did it, the answer was “Savills”. We asked whether we could have it, but we were told “No”. When we asked why, we were told it was because the deal had not been closed and it was sensitive information. That is what is in the transcript.

Mr. Seamus McCarthy:

I am sure the Deputy is right—–

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Is Mr. McCarthy saying that that in itself was not a formal property valuation in the normal context?

Mr. Seamus McCarthy:

That is my understanding. It actually says that in the document.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Was that the valuation that was over or under the odds?

Mr. Seamus McCarthy:

Under.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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My concern in dealing with this on Thursday relates to—–

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The time.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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There are many issues that we want to put to the HEA and the Department of Education and Skills. We need to be focused in how we approach this. It may require more than one session. There are many issues involved. Before Thursday, can we separate out the issues that we know will be returning to us, given the forthcoming reports from the Comptroller and Auditor General and other reports that we still must reach, for example, the Thorn report, the Comptroller and Auditor General’s report into Limerick and the Waterford report? We could deal with them when they are before us. I want to have a sense of what it is exactly that we will be doing on Thursday. What are the issues that we want to put to the HEA?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We will clarify that.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Otherwise, our discussion will go all over the place and will not be constructive.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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That is a fair point.

Photo of Marc MacSharryMarc MacSharry (Sligo-Leitrim, Fianna Fail)
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If this was banking, it would be called “kiting”. For example, if I owe €5,000 to Bank of Ireland and I have a €5,000 overdraft in Permanent TSB, I pay the cheque off that. When that is paid off, then I start paying off the Permanent TSB one and the money keeps going around in circles. If this was a bailout for Bord na gCon, it should be called that. Do not treat the people like fools and claim that this was worth €23 million. Pages 48 to 56 of the transcript of the meeting of 18 May 2017 contains the exchange on the valuation. Bord na gCon stated that it had received a valuation from Savills. Whether it was a red book valuation or one that was invoiced out at €10,000 plus VAT, companies like Savills are not going to risk their reputations over a Mickey Mouse fee, which is what that amount would be to it, by valuing it at €12 million and not referring to it as a formal valuation. A valuation is a valuation. It might not have been accompanied by the 50 pages and background material that accompany a full valuation, but neither was it a verbal or informal valuation of €12 million that then became €23 million. In fact, it would not even become €12.1 million.

This is a disgrace. This is Departments clearing up the sloppiness of organisations’ debts. Arguably, Dublin City Council is implicated. It voted down a rezoning for the private sector. I am not saying that was right or wrong, but everyone was at the party.

My next point probably feeds into some of the matters that we will discuss with the OPW, but no one is paying the price. Consider how this was structured. If it was a State bailout of Bord na gCon, that is fine. Was the Minister involved, did he know and did the Government sanction it? If so, fair enough. Alternatively, was this creative accounting by officials on the premise that a school was needed in that area – of course it is – and here was the money to pay for it? A figure of €23 million? Forget it. I valued it. I do not have the experience of Savills, but zoned as it was, I think it amounted to €750,000 per acre. If it had the appropriate institutional zoning, that could have increased to €1.5 million in cost to the Department of Education and Skills. The Savills valuation was slightly higher than that at €12 million. I said at our previous meeting that, once Bord na gCon was prepared to supply it to us, we would see that the Savills valuation would be substantially less than €23 million. Although the witnesses told us that it was sensitive information because the deal had not yet been closed, I asked them to provide it to us for our examination. I assume it did not come.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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No.

Photo of Marc MacSharryMarc MacSharry (Sligo-Leitrim, Fianna Fail)
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That is all right. A freedom of information request from a journalist trumps the constitutional committee of the State once again.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Correct.

Photo of Marc MacSharryMarc MacSharry (Sligo-Leitrim, Fianna Fail)
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In addition to the €23 million paid for the school, the Department of Education and Skills is not providing access for children in Dublin 8 or Dublin 12. A sum of €23 million was divvied out for a site and a school will be built on it. A football could be kicked to Dublin 8 or Dublin 12 from the site in Harold’s Cross, but the children in those areas will not be allowed to attend. That problem is in addition to dishing out €23 million of the taxpayers’ money.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Much has been said already. Like Deputy MacSharry, my memory is of a valuation being mentioned on the day.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It was referred to.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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It is a bit flippant to say “barking mad” in respect of Bord na gCon, but it appeared before us twice in rapid succession.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Its delegates clarified matters, for example, whether their wives owned hounds. A circus was at the back of the room watching. We were struggling in our questioning. We were informed that Harold’s Cross was a going concern and that, while it and Shelbourne Park were doing great, they had debts that had to be cleared.

There was a budget on Tuesday. What increase in resources was given to the Office of the Comptroller and Auditor General?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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A sum of €700,000.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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What increase in resources was given to this committee?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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None.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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David and Goliath does not capture what we are trying to do and the burden we are putting all the time on the staff and indeed on ourselves. It has taken hours even to read a little bit for today, and then we are waylaid into something else. There is the issue of Bord na gCon and the Department of Education and Skills, and I definitely agree with Deputy Cassells that we need a separate session. We struggled to try to make this open and accountable and it certainly did not happen. If a freedom of information request is trumping a constitutional committee, we are in serious trouble. It has serious implications for all the other work on our desk. I asked from the very beginning about staff, and the Chairman was very supportive of the staff, but this is a big issue. If this is the committee to which the public is looking to try to bring some measure of accountability, we cannot continue like this. It is not possible. I for one cannot continue like this. That is a bit of an exaggeration, but it has taken a huge amount of work for all the Deputies—–

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Every one of us.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Absolutely, and I am using myself as an example. Every single member who is turning up for these meetings is trying to keep up even with a small amount of work, not to mention the voluminous correspondence. That is also important.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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It is a full-time job in its own right.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Absolutely. There is Bord na gCon, the Office of Public Works today with another rental matter, etc. Maybe we can come back properly to this committee and discuss how we can work more effectively. I think we do a great job but we need help. I certainly want clarified what additional money the Office of the Comptroller and Auditor General got.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I will let in Deputy Catherine Murphy briefly. We will wrap up the questions because I think we are getting a consensus as to where we need to go.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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I think we all have a memory of those meetings because they were pretty exceptional. It seems to me, however, that there are two streams of issues for us. One is certainly value for money, but the other is the process. It seems to me that we were presuming that there were two separate processes, but there is a question mark as to whether that was the case. It is perfectly valid for the State to have first call on a—–

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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State property.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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—–piece of land if there is a need for something in an area, but it must be separated in terms of value for money. The €12 million valuation we hear about is now only €12 million if it was for housing. In fact, it was a lower valuation if it was for something else. I think I recall €6 million being talked about, so it is actually multiples of what the valuation was when one considers that if it had been a site for a school, the amount of the valuation would have been an issue. What is really getting to be more than infuriating is that the word “candour” has been used in here and commercial sensitivity almost inhibits the candour we require of public bodies to hold them to account. They can come in here and validly say a matter is commercially sensitive and that they cannot tell us whether there is a valuation, and then it can end up in the newspaper. The whole issue of commercial sensitivity is therefore something we must find some way of defining or find a way through when we are trying to deal with an issue such as this. It feels to me like they bought something in Limerick, they ran into trouble, they were not getting the numbers in Limerick, they had to sell one of the assets, the asset that would get them out of trouble was Harold’s Cross, but Harold’s Cross would not get them out of trouble unless it was of a particular value, and it was not of that particular value if the valuation that appeared in the newspaper at the weekend was the true valuation. Can we go back and get a valuation on it, even at this stage?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We will decide in a minute where we are going. Very briefly, Deputy Cullinane, and then we will try to get—–

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I was going to make the point, which An Teachta Murphy has made, that the valuation was based on the zoning and the use. The Accounting Officer for the Department, the Secretary General, when he was here, however, was absolutely adamant that they were paying at market value. It strikes me now that maybe they were not, given the information we have, which to me is serious. What was fishy, to use the Chairman’s word, at the time was that the valuation, or what was actually paid, almost hit the bulls eye in terms of the debts that were owed. That is what jumped out of the pages – why does the valuation pretty much come in at the amount in legacy debts the organisation had? It seems that our concerns and what was pretty obvious to many of us at the time have now come to pass. A separate session is therefore needed, to be fair, to get to the bottom of this. We need the Department and Bord na gCon in at the same time. To have them in separately would be wrong. Both need to be here at the same time for us to get to the bottom of this.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I wish to make a tiny point. I agree with what members are saying. I think it needs to be a separate session. This is a symbolic issue, however, given what is going on and what people are saying here and how we can actually do our job. There is the Department of Education and Skills, the Department of Agriculture, Food and the Marine, Bord na gCon, the Department of Housing, Planning and Local Government and the Valuation Office, which I think comes under the Department of Public Expenditure and Reform, does it not? I presume it does. Does it come under the Department of the Taoiseach?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It recently moved to the Department of Justice and Equality as part of the property registration—–

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Okay, but my point is—–

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes. The five State organisations.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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—–we should do this separately but we need all five in some capacity to make this jigsaw come together.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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