I thank the Chairman and members of the committee for the opportunity to make a presentation to them today. The invitation from the committee advised that the matter under discussion would be to review oversight and accountability of Exchequer funding to Irish Water, which is one of the largest reform projects in the history of the State. I intend to cover two main issues, beginning with the oversight of the establishment of Irish Water.
The diagram in my presentation describes the model put in place by Bord Gáis Éireann to govern and oversee the establishment of Irish Water. The Irish water programme team, represented by Mr. John Dempsey, reports to the board of Bord Gáis Éireann every month. The board is ultimately accountable for all Irish Water establishment activities. Specifically, changes in programme direction, scope or budget allocation must be expressly approved by the board. The board also acts as an escalation point for the resolution of strategic issues and its input and review is requested on activities that pose significant risks to Bord Gáis Éireann.
The Irish water programme team also reports to the Irish Water board every month. Prior to the establishment of the Irish Water board, the programme team reported to a specific Irish Water sub-committee of the BGE board. The Irish Water board is briefed on all aspects of programme progress and is responsible for ensuring the enduring Irish Water organisation is compliant with legal and legislative requirements. Strategic issues and risks impacting Irish Water or Bord Gáis Éireann are escalated to the board of BGE.
The Irish Water programme management team reports to the Irish Water programme steering group every month. The steering group is convened more frequently when required to support programme decision-making. In addition to reviewing programme progress and risks, this body is also responsible for ensuring the programme is appropriately resourced and may redirect resources in response to issues arising within the programme to ensure the programme objectives and timelines are met. The steering group escalates any requests for changes in programme direction, timelines, scope or budget to the board.
The Irish Water managing director and programme director participate in the water services reform steering group. This forum is chaired by the Department and Irish Water programme participation is required to ensure dependencies, risk and issues that impact either the Irish Water programme or the water services reform steering programme are managed appropriately. The Irish Water programme management team and Irish Water also ensure appropriate input is sought for the resolution of key decisions across the programme and, critically, that the outcome and impact of these decisions are understood. I have listed the various groups in the documentation and these refer to some of the items in the earlier diagram.
On Irish Water governance arrangements and compliance with the code of practice for the governance of State bodies, the code provides a framework for the application of best practice in corporate governance by both commercial and non-commercial State bodies. Bord Gáis governance and approval structures have been developed over numerous years in line with best practice in corporate governance. Bord Gáis seeks to comply fully with the code and also complies, as appropriate, with the UK corporate governance code and the Irish corporate governance annex to the Irish Stock Exchange listing rules. Bord Gáis continually reviews and updates its policies and procedures to ensure compliance with the code and other best practice guidelines on corporate governance.
The code provides that State bodies and their subsidiaries are required to confirm to the relevant Minister that they comply with the up-to-date requirements of the code in their governance practices and procedures. Bord Gáis confirms its own compliance with the code and that of its subsidiary companies as part of its annual report. The chairpersons of each of Bord Gáis Éireann’s subsidiaries formally reports to the main Bord Gáis board on compliance with the code, in a similar manner as the Bord Gáis board chairperson reports to the relevant Minister. Irish Water is required to report to the Bord Gáis board on its compliance with the code in the same manner as all other Bord Gáis subsidiaries.
In regard to the formal schedule of matters reserved to the board for approval, the code contains a requirement for State bodies to maintain such a schedule of matters reserved for the board and specifies some of the items to be reserved. Bord Gáis Éireann's formal schedule includes matters such as the review of the effectiveness of the system of internal controls, the annual report and accounts and the review of the risk policy. Strategic Irish Water matters that fall within the scope of matters included on the formal schedule require Bord Gáis board approval and are controlled at Bord Gáis level, for example, the corporate plan, risk policy and review of internal controls.
On the matter of Bord Gáis approved policies, the board has reserved a number of corporate policies for its approval. Some of these derive from the formal schedule and others relate to matters that are of particular concern to the board. These board-approved policies include purchasing policy and procedures, authorisation levels and execution of contracts, diversification, and risk policy. Bord Gáis corporate policy documents have been adopted and applied by Irish Water and any changes to same require the approval of the Bord Gáis board.
On the issue of ministerial consents, the Gas Acts contain requirements for Bord Gáis to seek ministerial consent for certain activities. For example, diversification and entry into capital commitments require ministerial approval. Irish Water’s memorandum and articles of association, M&A, and the Water Services Acts set out the requirements for Irish Water to seek ministerial consent for certain activities, including entry into capital commitments, borrowing and allotment of shares. Irish Water’s M&A specify that the prior consent of Bord Gáis is required in regard to the submission of any ministerial consent request by Irish Water.
In regard to Irish Water governance, the Irish Water board is a 12 member board, mainly comprising non-executive directors. It is responsible for ensuring Irish Water complies with its governance obligations. As a statutory company, Irish Water is subject to a wide range of governance obligations, including those imposed on it by the Companies Acts, by common law and by the provisions of the Water Services Acts. In addition, as a subsidiary of Bord Gáis and as outlined earlier, Irish Water is required to report to Bord Gáis on its compliance with the code
As Irish Water’s parent company, Bord Gáis is responsible for ensuring the proper and effective management of its subsidiary. Irish Water’s M&A provide that all contracts in excess of €10 million must be approved by the Bord Gáis board. In addition and as outlined, Bord Gáis has implemented its own internal controls and policies, including its risk management policy, within Irish Water. Any matters requiring the submission of a request for ministerial consent by Irish Water, as in the examples provided, are reviewed and approved in advance by the Bord Gáis board.
On the issue of interactions with the State, Bord Gáis meets NewERA and Department officials every quarter and provides details on financial performance metrics for the previous quarter, along with details on forthcoming ministerial consent requests. Ministerial consent request applications can result in clarification meetings and the provision of additional material to deal with queries raised by NewERA and the relevant Departments.
They can come from either the Department of Communications, Energy and Natural Resources, the Department of the Environment, Community and Local Government or the Department of Public Expenditure and Reform. The annual report must be considered and approved by the Cabinet prior to publication. In accordance with the code, Bord Gáis Éireann provides the Department with a report on compliance with governance requirements.
We have not covered the material on the establishment budget because the budget, the process and the timelines were contained in our submission yesterday to the Oireachtas Joint Committee on the Environment, Culture and the Gaeltacht, but we copied the documents to the clerk to this committee. Obviously, we are happy to take questions on that as well.
The Commission for Energy Regulation is an independent State body that will regulate Irish Water's revenues and expenditure. The commission will provide a separate presentation. The regime will allow for a review of expenditure before and after it is incurred. It is also the independent State body advising the Minister on the establishment costs.
From a company governance point of view, as a commercial semi-state utility we follow all the codes of practice and seek approvals before any commitments are made. In respect of the topic today, there is a comprehensive set of systems to review and give oversight of Irish Water spending, including Exchequer funding.
