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INTERNAL AUDIT REPORT Corporate Affairs
18 May 2006
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FAS Corporate Affairs Investigation
Internal Audit was made aware of an anonymous letter containing allegations relating to the Director of Corporate Affairs in October 2004. The letter had been passed to the organisation from the Department of Enteiprise Trade & Employment where the original recipient was the then . Minister, Ms Harney. Internal Audit commenced its investigation in early | November 2004. The following report details the findings of Internal Audit on this matter and in relation to matters, which were raised/identified during the investigation work.
2. Background and methodology
The nature of the allegations were such that they covered a considerable number of years and specifically mentioned the last 3 advertising agencies with whom FAS has had contracts; Helm O'Connor O'Sullivan, Euro RSCG and AFA O'Meara. Internal Audit decided in the first instance to examine Corporate Affairs activity from the year 2000 up until the end of £004. From the outset of the investigation it was recognised that the allegations were of a highly sensitive nature and that they were potentially extremely damaging both to the individual named and to the organisation as a whole. Internal Audit decided that the investigation would be conducted by two staff, the Director Corporate Governance / Internal Audit and the Manager IT Audit & Support. The initial phase of the investigation involved an internal examination of transactions relating to the two most recent advertising agencies, Euro RSCG (contracted between November 2001 and November 2003) and AFA O'Meara (contracted from November 2003 to date). The Director of Corporate Affairs was interviewed twice in November 2004 regarding the specific allegations in the letter. Members of staff working in the Corporate Affairs Department were also interviewed by
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Accounts Payable material from the years 2000 and 2001 was supplied to Internal Audit in January 2005 and was thoroughly examined. In January 2005 it was agreed that Internal Audit would commence interviews with a number of individuals, external to FAS, who had either provided services directly to FAS i.e. the contracted advertising agencies or who had provided services to FAS via these advertising agencies. |
Arising from its initial meeting with the current advertising agency (AFA O'Meara), Internal Audit was approached by the Managing Director of that agency in relation to serious concerns he had regarding the operation of the FAS contract. In due course, statements were provided by a number of staff from AFA O'Meara. The content of these statements was investigated in detail by Internal Audit. 'Interviews were also held with a number of senior ex-employees of the previous FAS advertising agency (Euro RSCG) but these individuals were unwilling to make detailed statements to Internal Audit at the conclusion of discussions. A number of individuals who had provided services to FAS via the current advertising agency were interviewed and where necessary, statements were taken. Internal Audit attempted to interview a sufficient number of people external to FAS bearing in mind the sensitivity of the allegations. Arising from the examination of material from 2000 and 2001, which largely related to the interaction between Helm O'Connor O'Sullivan and FAS, interviews were held with two former staff members of Corporate Affairs who now work elsewhere in the organisation. Statements were also taken from these individuals. On the basis of the work completed up until that time, Internal Audit met with the Director of Corporate Affairs in late April 2005 and provided him with copies of material which had arisen during the investigation that required either comment or clarification. This material included statements, correspondence, copy invoices and other schedules. Internal Audit then met' with the Director of Corporate Affairs in May 2005 to discuss these issues. The Director of Corporate Affairs brought a substantial amount of information to this meeting and arising out a number of discussion points he agreed to follow-up and provide Internal Audit with some further information, material and clarifications. This
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material was provided to Internal Audit in late May 2005. Internal Audit then reviewed all material supplied by the Director of Corporate Affairs. At the conclusion of the meeting with the Director of Corporate Affairs in May 2005, and after a review of the material provided to Internal Audit, there were a number of areas where the Director of Corporate Affairs disagreed strongly with the content of various statements previously provided by individuals to FAS Internal Audit. In a number of other matters the Director of Corporate Affairs was unable to provide comprehensive answers to specific queries. After seeking legal advice, Internal Audit decided to review the FAS email correspondence to and from the Director of Corporate Affairs for the calendar year end of 2002, 2003 and 2004. Internal Audit requested that the Director of Information Technology provide these files to Internal Audit. These files were reviewed by Internal Audit exclusively in regard to areas where there were differences between the views expressed by the Director of Corporate Affairs and, either views expressed in statements made to Internal Audit by individuals or material available to Internal ^ Audit. Material extracted from the analysis of e-mails, as well as an additional statement from the Managing Director of AFA O'Meara were supplied to the Director of Corporate Affairs in advance of a final interview held with him in June 2005. From September 2005 Internal Audit engaged in correspondence with a number of parties external to FAS whose names appear in the body of this report. The objective was to give these parties an opportunity to comment on a number of specific matters raised in the report. These individuals *******| of OSK, *********** of Posterplan and After a considerable amount of correspondence between September and December 2005 the outcome was that declined to be interviewed and-( were interviewed in mid December 2005. The investigative and audit work covered by this report, and the bulk of the drafting of the report and its main findings, was carried out over the period November 2004 to December 2005 by Joe Roe, Manager IT Audit and Support, and Tony Killeen, Director Corporate Governance / Internal Audit.
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Tony Killeen retired from FAS on December 16, 2005, and his responsibilities were assigned to Terry Corcoran with effect from December 19. From that date on Terry Corcoran, with Joe Roe, took an active role in the editing of the final report, including the drafting of the conclusions and recommendations.
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3. Executive Summary
The executive summary deals initially with the findings of Internal Audit regarding the anonymous letter of allegation submitted to FAS. The second part of the executive summary covers a number of other matters that arose during the course of the investigation. This executive summary mirrors the conclusions made in the Detailed Findings section below. The Executive Summary also includes the recommendations made by Internal Audit arising from this investigation. 3.1 Letter of Allegation Internal Audit found that there was no evidence to support the allegation made that Greg Craig received money from j j j g ^ g g g g g g ^ of Kingram Studios. No evidence was found by Internal Audit that Greg Craig had an arrangement with individuals in Arks RSCG and O'Connor O'Sullivan. ^ There was no evidence to suggest that Mr Craig had organised a fraud in relation to posters Internal Audit found no evidence to support the allegation that the then Chairman of Euro RSCG, H H H H H I , resigned the FAS account because of "problems with the account". Internal Audit found no evidence that fraud was being conducted via the current advertising agency. ^ '\L/0 ' In regard to the allegation that Greg Craig appointed H H B as a consultant, Internal Audit found that Greg Craig did not appoint him as alleged but did play a significant role in his appointment. Internal Audit found no evidence to support the allegation that Greg Craig had received a percentage of H U H B salary. Internal Audit found no evidence that a named individual in the company called Print & Display had an arrangement whereby expensive goods are sent to Mr Craig's home. / 3.2 Other matters
Contract with AFA O'Meara
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Notwithstanding this, the timing of this accusation appeared unusual, coming as it did shortly after the signing of the contract with AFA O'Meara and the comprehensive tendering process during which time the issue was never rai
|. Internal Audit believes that the timing of this allegation is likely to be connected to the investigation covered by this report ******* departure from AFA O'Meara and the statements made by
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OSK and Corporate Affairs OSK are a firm of accountants and business consultants that have completed a considerable amount of consultancy type work for FAS over the last 5 years, the majority of which related to Corporate Affairs. OSK have been consistently successful when applying for work from Corporate Affairs, whether directly, via advertising agencies or via FAS Procurement. Corporate Affairs have dealt with a number of staff within OSK over the 5 year period but the main contact has been who is a tax partner with OSK. Greg Craig had a conflict of interest in the award of business to OSK through ******** providing financial advice to him on personal matters and through his close friendship. Greg Craig told \ Internal Audit in May 2005 that he discussed the details of the letter of allegation with ***** before initially meeting Internal Audit having previously told Internal Audit that he had not discussed the matter with anyone other that his legal advisors.
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Corporate Affairs appear to have been regularly involved in discussions with OSK staff regarding tenders for consultancy, in advance of those contracts being put out to tender. OSK organised the Employers Conference as part of the Opportunities 2003 event. FAS Financial Approval Levels were not complied with as this contract should have been approved by the Board of FAS and was not. * In the case of the Science Challenge review in late 2004 OSK, while itself tendering for this project, provided*******-whowasmanagingthe tender - with the names of two other companies to who tender documents should be sent. The contract was subsequently awarded to OSK. One of these two companies suggested to ****** had also been unsuccessful in a separate tender process for the evaluation of the temporary AFA O'Meara contract. This latter tender process was handled via FAS Procurement and again the successful company was OSK. The contract for the budget management of FAS Opportunities 2005 was also awarded, via AFA O'Meara, to OSK. This process again featured a company that appeared as an unsuccessful applicant for a separate internal tendering process handled by FAS Procurement. This company had no previous track record of working with FAS'. i When interviewed by Internal Audit ***** stated that OSK had been awarded the contract for the previous year's Opportunity event, that in his view that they had done a good job and would be awarded the work again for 2005 as long as their price was reasonable. He stated that he therefore contacted ******************************************** OSK and one other group to submit tenders. OSK submitted tenders and OSK was subsequently selected. ***** accepted that there were other accountancy firm with the expertise to manage the budget for the Opportunities event but that they were not asked to tender. Internal Audit was unable to find an explanation as to why the same companies (such as *******) appeared to have submitted unsuccessful tenders both internally within FAS and via AFA O'Meara. In the view of Internal Audit the process of tendering via FAS Procurement and advertising agencies was flawed and in some cases contracts were awarded in the absence of genuinely competitive tenders. >
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OSK were granted unusually generous conditions on their contracts with Corporate Affairs through up-front payment of invoices.^/ rx During 2003, the fee paid to OSK for the review of internal financial controls within Corporate Affairs was doubled without any reasonable explanation. The output from this work did not appear to match the cost
FAS Opportunities The FAS Opportunities event represents by far the single biggest piece of expenditure for Corporate Affairs in any given year. For Opportunities 2005 the expenditure budget for the event was close to €2 million. In the context of the Opportunities event the investigation concentrated on a discrete number of issues that had either been raised in the course of statements or which came to the attention of Internal Audit as a result of the review of Corporate Affair's transactions. In a number of cases where the advertising agencies had played a role i the selection of contractors for Opportunities events, it seemed that no real competitive tendering took place and contractors were aware that they were getting the work before they tendered. It also appeared that Greg Craig exercised the ultimate decision as to which contractors received work for Opportunities events. In the view of Internal Audit, the over-riding reason for the award of the contract for the exhibition build to just one company, Display Contracts, for every year since 1995 was on the basis of familiarity. ^— In the case of the Opportunities 2005 event management contract, the process of tendering was undermined by the increases awarded to Bravo after the completion of the work. Bravo had been one of a number of companies that submitted tenders for the event management. In addition, Bravo was also awarded the sales contract for Opportunities 2005. However, the sales contract, which included incentive payments, was not signed until after the event and the sales had been completed. The gross additional cost to FAS of these transactions was in excess of €67,000. / Deirdre Lynam was awarded the contract for exhibition sales at the Opportunities 2002 event via the then advertising agency Euro RSCG. The total cost to FAS of this service was approximately €250,000. This fee appeared to be very high when compared to those awarded for the sales contracts for Opportunities in previous and subsequent years. It was
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not possible to determine who agreed her fee. However, material reviewed by Internal Audit suggested that the tendering process appeared to have been flawed in that Deirdre Lynam participated in a number of Opportunities 2002 planning meetings prior to being awarded the contract, some of which the Director of Corporate Affairs attended. The tender process handled by FAS Procurement for the sales contract at Opportunities 2003 was bypassed by Greg Craig in the awarding of the contract to an individual who had not been one of the parties that submitted a tender. E-mail correspondence reviewed by Internal Audit indicated that the Director of Corporate Affairs had been in communication with this individual both before and after the tendering process,
The level of annual expenditure associated with Opportunities events has been very high. Much of the decision making associated with the awarding and pricing of contracts for elements of the event remain under the control of Corporate Affairs. The Board of FAS has not played a role in the approval of this large expenditure. In addition, there has been no independent evaluation of the value for money that the eventrepresentsto FAS.
Services proviaed by advertising agencies From an analysis of material supplied by AFA O'Meara it appeared that, in the majority of cases, the Director of Corporate Affairs dealt directly with the newspapers when booking advertising for FAS campaigns. Effectively, this part of the expert media service being paid for by FAS, via the AFA O'Meara contract, has not been used. When interviewed by Internal Audit, Greg Craig justified the direct purchase of newspaper
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advertising by stating that AFA O'Meara had a "poor media buying capacity". This comment was difficult to understand in the light of the fact that FAS had recently signed a contract with AFA O'Meara (November 2004), part of which specified media buying as one of the key services. f The Director of Corporate Affairs justified the direct approach on two main grounds. Firstly, the ability to be seen to have a media spend could potentially influence how FAS was portrayed in the newspaper or ^magazine in question. The second point that justified the direct purchase of advertising was that the Director of Corporate Affairs felt that he was able to obtain substantial reductions on the standard rate card amounts. He felt that AFA O'Meara would not be able to match the reductions he achieved. From an ethical viewpoint, it would be questionable for FAS to use its substantial advertising buying power to ensure that newspapers and magazines are positively disposed towards the organisation in the event of a negative story emerging about FAS. In relation to the point on rates, AFA O'Meara assert that there are compensating costs because these lower rates are achieved by agreeing to book advertising over longer time frames, leading to advertisements for certain campaigns running at inappropriate times. No valid explanation was provided as to why the organisation agreed to place considerable advertising in the Lucan & Blanchardstown Gazette. This newspaper was the only local newspaper that FAS regularly used for advertising. The material to hand suggested that the Director of Corporate Affairs was the prime mover from the FAS viewpoint in agreeing advertising details. While Greg Craig claimed that he placed business at e request of the Director General, the Director General has denied that he ever made such a request and Internal Audit found no evidence to support Mr Craig's claim. Corporate Affairs and the Director of Corporate Affairs had consistently bypassed advertising agencies and allocated FAS work directly to Kingram Studios and others. Internal Audit concluded that, based on the material to hand, a significant amount of this FAS business had been awarded to Kingram Studios by Corporate Affairs without being subject to a tendering process or a system of quotations. During the audit it was ascertained that the FAS Services to Business Division had also placed a certain amount of business with Kingram Studios and OSK. The relationship between FAS Services to Business and both Kingram Studios and OSK was not examined during this investigation.
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AMAS were awarded a substantial amount of work from FAS in 2004 for web-related development without any system of quotation or tenders applying. Jobs Ireland Jobs Ireland was a FAS campaign that had at its centre a number of recruitment fairs run in places such as North America, Europe and South Africa. The overseas fairs commenced in approximately April 2000 and the last fair occurred in approximately April 2001. At some stage during the latter part of 2000, Corporate Affairs took the decision that a separate website specifically for Jobs Ireland would be developed. FAS made a serious and costly error in relation to the tandem development of two similar web based job vacancy and client registration systems; Job Bank and Jobs Ireland. The error was compounded by the fact that Corporate Affairs did not approach the IT Department to ascertain whether the Jobs Ireland requirements could be met but rather contracted out the website development work without informing the IT ^ Department. While the Corporate Affairs Department and Greg Craig were under some pressure to deliver the overseas job fairs as part of Jobs Ireland, it should have been possible to meet their web requirements from internal FAS IT resources. The Jobs Ireland website when developed did not appear to address the shortcomings of the Job Bank as perceived by Greg Craig insofar as \ many clients details were not actually entered onto the website online but \ rather recorded on paper at the job fairs and then keyed onto the system at j a later stage (in Ireland) and at an additional cost to FAS. The Jobs Ireland website was not integrated with the existing systems and services-^ available to FAS Employment Services, neither from a client nor from a staff viewpoint. After the demise of the Jobs Ireland campaign the / vacancies and client details were never integrated into the mainstream / FAS systems and any residual value of the investment was lost. From an analysis of invoices from 2000 to 2003 Internal Audit estimate that the total cost of developing, maintaining and hosting the FAS Jobs Ireland website was €1.7 million. FAS probably paid at least €1 million more than should have been the case. It also appeared to Internal Audit that a large percentage of FAS advertising expenditure was directed towards promoting the Jobs Ireland website and little evidence of any expenditure on promoting the Job Bank system. The Board of FAS were
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never informed of the costs of the external development of the Jobs Ireland website. The contract with Ultimate Communications for the Jobs Ireland website was more likely than not based on a verbal agreement for 36 months, the details of which Greg Craig was probably aware of from the outset. The agreement was unlikely to have commenced without his approval. Ultimate Communications was awarded the contract to manage the Jobs Ireland Programme on 3 August 2000, less than 10 working days after they were incorporated. In total, FAS paid Ultimate Communications €3.55 million in the first 12 months after the date of their incorporation for Jobs Ireland events, web development and Opportunities.
FAS Procurement handled the tendering process for the Jobs Ireland programme and website in January 2001. This tendering process ignored the fact that there was a de facto 36-month contract in place from September 2000 for the website. This tender process may have been an attempt by Corporate Affairs to retrospectively justify the role of Ultimate Communications in regard to the Jobs Ireland website. In mid 2002, as a result of the negotiations between ******** Ultimate Communications, Euro RSCG sent an invoice to FAS covering 5 months of the 36-month Jobs Ireland website agreement. This invoice was to be afinal settlement between Ultimate Communications and FAS. Euro RSCG records show that this initial invoice was returned by FAS to Euro RSCG with an insistence that this figure was to be invoiced as 5 separate invoices (per month amounts). It is unclear as to why this was done but when the split invoices were regenerated by Euro RSCG the total value had increased by €32,000 through a doubling up of the VAT figure. The circumstances of the overpayment in relation to Ultimate Communications of €32,000 in mid 2002 were very difficult to understand. Considering the level of interest in this settlement within Corporate Affairs, the large volume of correspondence, the threat of legal action, the fact that an original single invoice was returned from FAS to Euro RSCG with a request that it be split into 5 separate invoices and the number of hands that all this passed through, it is hard to understand how the error occurred and was approved for payment by Greg Craig.
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The process of using advertising agencies as a medium to develop and host websites with third parties made little sense from a value for money viewpoint. This was never part of what the core functionality of an advertising agency was supposed to be. The view of Internal Audit is that this approach was taken by Corporate Affairs so that the cover of agency contracts could be used without having to formally go through a procurement process. Greg Craig's conduct during the investigation. The investigation has taken a considerable period of time to complete and has undoubtedly put pressure on many people both inside and outside the organisation but most specifically on Greg Craig. Notwithstanding this however, it has been the experience of Internal Audit that in regard to a number of critical matters of fact, Greg Craig has changed his statement when presented with additional material which had become available to Internal Audit.
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3.3.1 Advertising and the support of the organisation's goals and strategy The findings of the investigation identified a large level of what appeared to be direct bookings of media advertising. The FAS advertising agencies had been largely bypassed and advertising booked directly by Corporate Affairs with third parties. Bookings have been made for programmes such as Excellence Through People, as a form of generic FAS advertisement to obtain a large reduction from published rate card values by running advertisements over long duration rather than for a targeted specific campaign. The current combined role of Corporate Affairs in regard to public relations and advertising services has meant that advertisements have sometimes been placed at the discretion of Corporate Affairs primarily to have a PR impact rather than an advertising impact. In order to address this issue three recommendations are made. The first recommendation is that an independent media audit is commissioned, by FAS to examine how the organisation has used media advertising over the last 3-4 years and what changes should be made. It is recommended that an independent selection process should take place to identify the group to carry out this audit and that the group selected should not have been used previously by FAS in any related capacity. Secondly, allied to the requirement for a media audit there is a need for FAS to develop a medium term (3-4 years) communications and publicity strategy in a similar way that a multi-annual strategy was produced for ICT within the organisation. The strategy should address the issues of key communications objectives (e.g. corporate/identity advertising; promotion of individual programmes; discharging FAS' broader public information responsibilities) and how these relate to overall FAS strategy; key messages and their target groups; preferred channels for each type of message/target group; indicative budgets for spend by channel/campaign; and metrics for impact Thirdly, clear annual Business Plans need to be developed in the area of advertising and related services to link expenditure to the overall
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organisation's strategy and to monitor this through the development of an effective monitoring and evaluation model. In the short term it is recommended that an annual budget should be produced for aggregate advertising and related expenditure, including that allocated to departments / programmes outside Corporate Affairs. Actual expenditure against this budget should be reported as a separate item in the monthly financial monitoring report to the Executive Board, 3.3.2 Services to be provided by the Advertising Agency The relationship between FAS and the appointed advertising agency needs to be reviewed. FAS cannot continue to deal directly with third parties for services, whether these be newspapers, magazines, design consultants, etc, bypassing the advertising agency and ignoring the fact that there is a contract in place. This approach also ignores the fact that the advertising agency was selected on the basis of having specific expertise to supply these services to FAS and for which they are being paid. FAS must therefore identify the key services where the advertising agency or agencies provide expertise and capabilities that FAS lacks, e.g. concepts, design work, media planning and monitoring, TV, radio, outdoor advertising, etc. These key services, once specified, must be contracted for with the agency or agencies and provided at an agreed fee with the necessary controls put in place. All other services i.e. those not handled by the agency or agencies must be handled via the Procurement function directly. With the separation of media and PR handling from advertising (as recommended at 3.3.3 below), the Procurement function must have a much greater involvement in the acquisition of advertising services and products in the future. It is not recommended that FAS pursues the route of hiring in specific experts, whether on contracts or as permanent staff, as this, in the view of Internal Audit, represents a false economy, is harder to control in the medium term and does not allow for flexibility going forward, particularly in terms of responding to changes in the external environment.
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3.3.3 Splitting of the current Corporate Affairs function. The current Corporate Affairs structure is such that it handles two distinct tasks. On the one hand it handles media and public relations for FAS. On the other hand it is responsible for advertising and the procurement of related services and products. The findings of the report point towards a conflict between these roles in the FAS case. It is recommended that these two functions be separated and that the reporting structure be amended so that these functions report separately at ADG level. Allied to this recommended split is the need to review the financial control requirements for what currently constitutes Corporate Affairs and to make recommendations how these can be best addressed. One area that was identified as being particularly weak was the controls around outdoor media. 3.3.4 Independent evaluation of FAS Opportunities The FAS Opportunities event had a cost of approximately € 2 million in 2005. The investigation raised a number of areas of concern. It is recommended that FAS identify an external group to complete an independent evaluation of the annual Opportunities event. The evaluation should examine the event in terms of overall value for money for the organisation. It should also look in detail at the specific cost centres associated with the event; budget management, event management, event sales, web design, advertising campaigns, event location, event build, event staffing and other costs. It should also consider what role the advertising agency should play in the event. It is recommended that an independent selection process should take place to identify the group to carry out this audit and that the group selected should not have been used previously by FAS in any related capacity. It is also recommended that the planned costs associated with specific Opportunities events be put before the Executive Board and Board of FAS in advance of each event.
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3.3.5 Web-related developments The findings in relation to Jobs Ireland and the FAS corporate website have shown that where Corporate Affairs has been involved in commissioning web related work of a technical nature this has been less than successful. It is recommended that in future its role be restricted to managing the corporate image and that matters that involve web development, hosting and maintenance are approached on the basis of relying on the technical expertise of the FAS IT Department. Technical web related work should not be processed through the FAS advertising agency as this has added little to the process previously but incurred significant costs.
3.3.7 Review the tendering process for advertising and related services The Procurement function's role in relation to advertising related services must be reviewed in the light of the findings of this report and specifically in relation to tendering. The new Procurement Procedures, issued in April 2005, address some of the areas of concern but these areas are highlighted again here. Specifically the following areas must be addressed • The existing system whereby the names of companies to be issued with Invitation to Tender documents are provided to the Procurement function by the end user department was seen to be inadequate in the case of Corporate Affairs. Only groups who are willing and capable of submitting a tender and providing the service required should be asked to tender. FAS must put in place a revised system whereby bona fide groups can be added to a list of those that can be asked to tender. • No pre-tendering negotiations should take place.
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• All fees quoted in tender documents must be captured in a standard format document submitted with each tender to allow for ease of comparison both during and after the selection process. • Original tender documents must be retained by Procurement after the selection process is complete. • All tender evaluation documentation and selection documentation conforming to the Procurements Procedures must be returned to Procurement after selection. • All correspondence in regard to the outcome of the tendering process must be issued by the Procurement section. • The contract for the work must in all cases be given to the named group which submits the preferred tender as part of the process. • Under no circumstances can the preferred tender group, with whom the contract is signed, be awarded a fee in excess of the tendered figure. 3.3.8 Interaction with Greg Craig during the audit Section 4.10 of the report details a number of instances where, in the view of Internal Audit, Greg Craig changed his statement in regard to critical matters of fact when presented with additional material which had become available to Internal Audit.
Joe Roe Manager IT Audit/Support - Internal Audit
Director Corporate Governance/Internal Audit (to December ] 6 2005)
Terry Corcoran Director Corporate Governance/Internal Audit (from December 19 2005)
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4. Detailed Findings
The detailed findings of this report cover the Internal Audit investigation into the allegations contained in the anonymous letter. The detailed findings also cover other matters that Internal Audit have examined arising from various statements made and interviews held with individuals and also from an examination of Corporate Affairs transactions and related documents between 2000 and 2005.
Allegations made in the anonymous letter received by FAS
Internal Audit was made aware of an anonymous letter containing allegations relating to the Director of Corporate Affairs, Mr Greg Craig, in October 2004. The letter had been passed to the organisation from the Department of Enterprise Trade & Employment where the original recipient was the then Minister, Ms Harney. The letter made the following 7 allegations • 1. Mr Craig had obtained sums of money from / Kingram Studios for many years in return for business and the marking up of invoices 2. Mr Craig had an "arrangement" with a number of named individuals in Arks RSCG and O'Connor O'Sullivan. * |3. Mr Craig has used a defunct company previously owned by a to organise a fraud on FAS
4. Mr was recruited by Arks RSCG to clean up the FAS business but after looking at the problems he resigned the FAS account. 5. Fraud is being conducted via the current advertising agency AFA O'Meara
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• 6. Mr Craig has appointed ****** as an advertising consultant being paid €80,000 per annum and that half of that fee is being paid in cash to Mr Craig. • 7. A named individual in the company called Print & Display has an arrangement whereby expensive goods are sent to Mr Craig's home.
(* Arks was one of the previous names for the advertising agency which FAS contracted with as Euro RSCG. O'Connor O'Sullivan became Helm O'Connor O'Sullivan in the last year of its contract with FAS) Where appropriate, the contents of the anonymous allegations were put to named individuals for their response. In certain instances, this was felt unnecessary and the allegations were not put to the persons named where, for example, there was no corroborative evidence to support the allegation made and it was not being pursued by Internal Audit.
Findings regarding the specific allegations in the letter
/ Kingram Studios
4.2.1 • • • • • • •
Over the period of the investigation Kingram Studios received and continue to receive a substantial amount of FAS business. In the years 2001 to 2004 the company received on average € 300,000 worth of business per annum. This business was in large part carried out via the contracted advertising agencies in more recent years but in the period 2000 to 2001 Corporate Affairs did a considerable amount of business directly with Kingram Studios. ******* was originally an employee of O'Connor O'Sullivan and he had significant responsibility for running the FAS Opportunities events that were run in the nineties. In the FAS context the majority of the business for Kingram Studios related to the annual Opportunities event, design and print work and work commissioned from the Services to Business Division in Head Office such as Community Initiative Awards, Apprenticeship Graduation and other work. When interviewed by Internal Audit, Mr Craig denied the allegations in regard to ********* Kingram Studios. Internal Audit found no evidence to support the allegations made in the letter.
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4.2.2 Mr Craig had arrangement with individuals in Arks RSCG and O'Connor O'Sullivan. This allegation is not specific as to the type of arrangement that is alleged to have been in place. Mr Craig denied any allegations of inappropriate behaviour when this was put to him by Internal Audit. Mr Craig also emphasised that he had authorised a review by OSK Accountants of the fee structure of Euro RSCG (see Section 4.6 below) which resulted in significant savings to FAS. Internal Audit found no evidence to support this allegation. A number of other matters which arose during the audit, and which occurred during the time that FAS were contracted with Euro RSCG and Helm O'Connor O'Sullivan, are highlighted below in this report.
4.2.4 • • ^ • • l ^ l resigned the account because of problems with the FAS account. During 2003, ******* acted as Chairman of Euro RSCG for a relatively short period of time. In the latter part of 2003 there was a considerable degree of uncertainty in regard to the future of Euro RSCG. In particular there was the possibility of Euro RSCG being merged with another agency, Young's, which was owned by the same parent company; Havas. In the event all the staff employed by Euro RSCG were made redundant. Mr Craig denied that at any point in time did ****** resign the FAS account and Internal Audit found no evidence to support this allegation.
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4.2.5 Fraud was being conducted via the current advertising agency Mr Craig denied this general allegation. The investigation found no evidence of Mr Craig being involved in fraud with the current advertising agency (AFA O'Meara).
4.2.6MrCraigappointed salary half
as a consultant and is receiving
Internal Audit found no evidence that FAS were paying /***** his salary directly. Nor did Internal Audit find evidence that FAS were paying AFA O'Meara for ******* services. In addition no evidence was found to support the allegation that Mr Craig was receiving half salary. At the meeting with Internal Audit in November 2004 Mr Craig denied any role in the appointment of **************** However, in May 2005 he confirmed that he had suggested **************** to the Managing Director AFA O'Meara. Internal Audit confirmed that AFA O'Meara was paying approximately €80,000 per annum to *************** has ceased to be a consultant with AFA O'Meara since February 2005. **** when interviewed in December 2005, stated that negotiations regarding his terms and conditions within AFA O'Meara did not involve Greg Craig, ******* stated that it was ********** who made the initial contact with him. ******* stated that he did discuss the question of his willingness to work with AFA O'Meara with Greg Craig. The role of is detailed below in Section 4.4.
4.2.7 Arrangement with Print & Display. Internal Audit found that Print & Display had been used exclusively to print FAS posters for outdoor campaigns for the last number of years. in his statement to Internal Audit maintained that Greg
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Craig had insisted that all poster printing for FAS must be handled by Print & Display. Greg Craig denied the allegations in the letter and Internal Audit found no evidence to support them.
Contract with AFA O'Meara
In the latter part of 2003 Euro RSCG resigned the advertising contract with FAS. As there were a number of ongoing media campaigns it was necessary to appoint an interim advertising agency until a formal process of appointing a new advertising agency could be completed. The selection and appointment of this interim agency was handled by the Director of Corporate Affairs. According to a memo sent to the Director of Internal Audit in December 2003 by Greg Craig, the interim agency was selected by contacting 3 agencies that had done some business previously with FAS by phone, asking them to submit their credentials and making a selection based on criteria used in previous evaluations of advertising agencies. As a result of this process a contract was signed between AFA O'Meara and FAS dated 7 November 2003. This interim contract between FAS and the advertising agency stayed in place for 12 months until November 2004 when the current contract was signed between FAS and Aubrey Fogarty Associates Ltd (AFA O'Meara) as a result of the full tendering process. The process of selecting the advertising agency in 2004 was a comprehensive and lengthy exercise that involved placing a contract notice in the Official Journal of the European Union. FAS received 12 valid expressions of interest in the contract and eventually 3 groups were short listed and asked to tender. These were Owens DDB, Hunter / Red Cell and AFA O'Meara. The selection panel consisted of the Director of Corporate Affairs, one manager from Corporate Affairs, the Director of Internal Audit and the Manager of Procurement. A significant amount of assistance and expert advice was supplied to FAS from William Fry Solicitors. The cost to FAS of legal advice in relation to this process was in the region of € 50,000. 4.3.1 Role of; AFA O'Meara. in Euro RSCG and
had been employed in a critical role in relation to the FAS account within Euro RSCG. When interviewed, Greg Craig spoke highly of had played in relation to the FAS account. He
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the role that
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said that had played a key role in sorting out problems in regard to the Job Ireland web site (see Section 4.9 below), Deirdre Lynam's sales contract for the FAS Opportunities 2002 (see Section 4.6 below) and for renegotiating the Euro RSCG contract terms in mid 2003. Up until approximately one year before the take over of Euro RSCG and the end of the contract with FAS, had been an employee of Euro RSCG. From that time on (late 2002), RSCG on the FAS account. Payments were made by Euro RSCG to
When interviewed, stated that the employment of individuals in a consultancy capacity was commonplace in the industry. ********** former CFO of Euro RSCG was of the opinion, in discussions with Internal Audit, that the arrangement of a consultant acting as a CFO and account manager was an unusual one. It is the view of Internal Audit that this arrangement was not commonplace. Some staff who had been formerly employed by Euro RSCG stated that ***** may have been employed in this consultancy role at the behest of Greg Craig and FAS. From the commencement of the interim contract with AFA O'Meara (November 2003), again took on the role of **** *******Rather than being retained as an employee he was employed a consultant with payments again being made to his company H • I H When Internal Audit queried Greg Craig on 18 November 2004 as to whether he played a role in ****** appointment with AFA O'Meara, Mr Craig said that ****** was appointed to AFA O'Meara without his knowledge and that he "would never do that type of thing". However in his statement to Internal Audit, dated 14 April 2005, ^******** AFA O'Meara that Greg Craig had suggested to him around the time of the commencement of the interim contract with AFA O'Meara, that he should consider employing which he did, along with some other ex-employees of Euro RSCG. When interviewed in May 2005, Greg Craig said that he^did actually suggest as tQ as this made sense from a continuity viewpoint. when interviewed on this matter, stated that all negotiations regarding his terms and conditions within AFA O'Meara had been
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directly between himself and ****** and did not involve Greg Craig. ****** stated that it was ****** who made the initial contact with him. According to ****, ****** was the only person who knew the terms of his engagement as a consultant with AFA O'Meara.********* discussed with Greg Craig the proposed move of the contract to AFA O'Meara and his willingness to work with According to ******, ***** would have done some work in the preparation of the AFA O'Meara tender document for the FAS contract. when interviewed estimated that he may have written up to 50% of the tender submission and stated that his contribution was largely in the area of ensuring that AFA O'Meara met tender compliance requirements. 4.3.2 Employment of other ex-Euro RSCG staff within AFA O'Meara. In addition to ******* number of individuals who had been employed by Euro RSCG appeared to have been taken on as employees by AFA O'Meara, having been recommended by Greg Craig. These were When the employment was raised with Greg Craig his response was that they were members of a good team in Euro RSCG and that they were suitable individuals to fill the vacancies that had arisen as a result of AFA O'Meara having secured the interim contract. No adverse comments were made to Internal Audit regarding the quality of the work provided by any of these staff. ********** had been employed within Euro RSCG, working on the FAS account. However, she had left some time before the FAS contract ceased. In a statement made to Internal Audit she maintained that she left Euro RSCG in response to being removed from the FAS account by Greg Craig but that she was subsequently approached by Greg Craig on a number of occasions with a view to working as a consultant on various pieces of FAS work. stated that in October / November 2003 she held discussions with Greg Craig with a view to working for AFA O'Meara. Greg Craig responded to Internal Audit that while he had spoken to about the position of ******* AFA O'Meara, he had only done so at the request of ****** who was then a director with AFA O'Meara. Material from e-mails between Greg
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Craig a n d ^ ^ ^ ^ ^ ^ H suggested that he was strongly involved in advising H I H ^ ^ I regarding her financial package from AFA O'Meara prior to her appointment as account manager. 4.3.3 Appointment of as Account Manager
stated that Greg Craig had requested him to interview with a view to giving her the position of J J J did interview ^ ^ B B B B B m I In i m t0 given the position o f | t f ^ ^ ^ H I B L work w i t h ^ ^ ^ j ^ ^ B who held the more senior position. In his statement, H B H ^ H ^ t a t e d that he believed that H B H I H i w a s daughter of a well known property developer and a friend of Greg Craig. According to B H ^ K this request regarding H H I ^ ^ H occurred after AFA O'Meara was successful in the tender process for the full contract (September / October 2004). In Greg Craig's statement he said that he had simply asked for £ to be interviewed for the position and that it was not his decision whether she got the position or not. Greg Craig has stated that ^ m m father was not a friend of his but that he had met him on a couple of occasions From e-mail material examined during the investigation it appeared that, in early 2004, a number of months prior to her appointment with AFA O'Meara, that Greg Craig had been in communication with ^ H H I of OSK regarding the steps required to set up a public relations company in which ^ ^ | H H | | H w a s to be involved. The correspondence f r o n i ^ m ^ ^ B suggested to Greg Craig that he should permit ^ ^ ^ ^ ^ ^ ^ j - e n c j e r f o r w o r j c j n her own capacity rather than via a company. Greg Craig has stated that he was giving advice to | | H H ^ I a n c ^ that the reference to allowing H l ^ l ^ l to tender may not have been in relation to FAS work but work elsewhere that Greg Craig was involved in. Greg Craig acknowledged that M I ^ ^ H father is a client of OSK (See Section 4.6 below). 4.3.4 General relationship with Agency staff According to flHHH statement, Greg Craig had, at various times, insisted on the removal of four or five staff who had been working on the FAS account within Euro RSCG (including H H H ^ ^ ^ ^ ^ B ) discussions with Internal Audit, Greg Craig has denied this and commented that it was most likely the agency that had removed these staff and blamed FAS. m ^ j j j ^ m of AFA O'Meara had likewise stated that Greg Craig had insisted that a number of agency staff no
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longer have any dealings with the FAS account. Greg Craig insisted that where he no longer wished to deal with AFA O'Meara staff that there were genuine reasons on his part. In the case of the opposite seemed to have been the case. m m m stated that AFA O'Meara no longer wanted I ^ ^ ^ H working as a consultant as they hadIrecruitedHJ^Hl as a media expert but Greg Craig insisted that H H H should be retained to work on the FAS account and that he had no wish to deal with In e-mail correspondence Greg Craig insisted that if | would not employ I ^ I ^ I H I Greg Craig would employ him directly. When interviewed by Internal Audit in May 2005 Greg Craig said that he had recently engaged ^ J H H H to work for his department for 2 days per week as a H H ^ ^ ^ I . continued to provide Corporate Affairs with consultancy services for a number of months after May 2005.
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ole Greg Craig played in securing this (the Euro RSCG) position While correctly pointed out that many individuals within the advertising industry are employed on a consultancy basis, it the view of Internal Audit that the employment of a consultant as Chief Financial Officer (while acting as Account Manager for one client) is unusual. |Greg Craig appeared to have suggested / recommended a number of the key personnel to AFA O'Meara for the FAS account both immediately before and during the period of the interim contract. The commercial reality of this situation is that an agency, which has just been awarded a highly valuable temporary contract, and has the opportunity to win that contract on a permanent basis, is most unlikely not to recruit staff that are suggested / recommended by the client. Mr Craig would have been aware of this commercial reality. This appears to have applied to ^ • but also seemed to have applied to In the case of ^ H ^ ^ H E Greg Craig appeared to have played an active role in her recruitment as the FAS account manager within AFA O'Meara. In the case of Greg Craig had suggested her as ******** AFA O'Meara when it was apparent that AFA O'Meara was to be awarded the full contract. It also appeared to be the case that Greg Craig actively assisted in the proposed setting up of a public relations company that ****** was involved in. On a number of occasions Greg Craig has specified to both Euro RSCG and AFA O'Meara that certain staff should not have any further dealings with the FAS account. The process of appointing the FAS advertising agency in 2004 was a comprehensive and lengthy exercise completed at considerable expense to the organisation. However the integrity of the process was undermined by the direct approaches made by Greg Craig to AFA O'Meara to appoint specific staff to the company.
Notwithstanding this, the timing of this accusation appeared unusual, coming as it did shortly after the signing of the contract with AFA O'Meara and the comprehensive tendering process during which time the issue was never raised. Throughout the tender process Greg Craig at all times spoke of AFA O'Meara in positive terms.
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within AFA O'Meara.
above,***** was engaged by AFA O'Meara as from approximately November 2003 until February was paid as a consultant and payments were made to Mr [. As such, **** was the key individual working on the FAS account for AFA O'Meara. He played the key role in the selection of OSK as the budget managers for Opportunities 2005 and to carry out the Science Challenge review (see below Section 4.6.5). He also represented the agency during the selection process of Bravo as event managers for Opportunities 2005. The relationship between **** and ****** seemed to have deteriorated during the latter part of 2004 and, shortly after******* made his initial statement to FAS Internal Audit, it appears that ******* stopped working as a consultant for AFA O'Meara in early February 2005. When interviewed by Internal Audit, ****** claimed that he had been dismissed by AFA O'Meara and
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4.4.2 Relationship between
and Greg Craig
As mentioned above, ***** played the key role in the relationship between both Euro RSCG and AFA O'Meara in relation to the FAS account. During that time he had a very close working relationship with
A number of individuals have commented during the course of the investigation that ****** and Greg Craig have more than just a professional relationship and that they regularly meet, attend matches together and socialise in pubs / restaurants. Greg Craig has stated that his dealings with********havebeenpurelyonthebasisof ****** ***** and he does not have a personal friendship with him. ' 4.4.3 Conclusions Based on the above Internal Audit concluded that
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4.5.3 Level of Outdoor media in 2004 One of the areas highlighted by ******* in his statement to Internal Audit was what he considered to be an unusually high level of outdoor media used by FAS when considered as a percentage of total media spend. The figure for FAS outdoor supplied by ******* was 30% of total media spend for 2004 which, in his view, should be below 10% for an average media campaign. When this matter was raised with Greg Craig he supplied a media analysis which showed the percentage for outdoor media as being 21%. However this analysis included expenditure up to May 2005 and, as there was significantly less expenditure on outdoor media in early 2005, this understated the percentage outdoor for 2004. The level of FAS expenditure on outdoor media was raised with of Posterplan. ****** stated that the size of the outdoor market had grown very significantly over the last number of years and that this may explain the greater use by FAS of outdoor advertising. He said that it was hard to generalise as to what percentage of media spend outdoor advertising should consist of but that an industry standard would be close to 10%. This issue was also raised with ****** and he stated that in his view it was not possible to generalise as to what percentage of total media spend outdoor media should be.
OSK and Corporate Affairs
OSK are a firm of accountants and business consultants that have completed a considerable amount of consultancy type work for FAS over the last 5 years, the majority of which related to Corporate Affairs. OSK have been awarded consultancy work by Corporate Affairs in the areas of Jobs Ireland (twice), Science Challenge, Financial evaluation of advertisers contracts (twice), Budget management of Opportunities (4 times including the recent award of the 2006 contract), Employers Conference and the evaluation of internal controls within Corporate Affairs. Corporate Affairs have dealt with a number of staff within OSK over the 5 year period but the main contact has been H H I I ^ ^ ^ ^ H H I i H I with OSK. Internal Audit offered I I H H H H I of OSK the opportunity to be interviewed regarding a number of specific matters addressed in this report. H H H declined and stated that OSK had acted in good faith at all times and that he had nothing further to add. 4.6.1 The awarding of contracts to OSK OSK have been awarded contracts with FAS via 3 routes; directly with Corporate Affairs without tenders, through FAS Procurement by means of a tender and lastly via the advertising agencies. From a review by Internal Audit covering the period up until early 2005 it seemed that OSK have been consistently successful when they have been required to tender competitively for FAS work. This applies equally via FAS Procurement or via the advertising agencies. There is evidence to suggest that there
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/ may have been a collaborative approach by Corporate Affairs to I consultancy work handled by OSK. When the matter was raised with Greg Craig he responded that because Corporate Affairs has not had adequate internal financial and administrative expertise it has used OSK as a support to the department's work. This approach had not been formally approved by the organisation but it was a decision that Greg Craig stated he took in the absence of resources. In March 2004 OSK produced a report on the part-commercialisation of Jobs Ireland. FAS agreed to pay OSK €25,000 for this work. Like most other Corporate Affairs activities the invoices related to this work were processed via the agency and attracted an agency fee plus VAT. The initial proposal document with proposed fee was dated October 2003 and directed to FAS. Greg Craig sent an e-mail to ^ H H H of OSK on 3 December 2003, in which he stated '7 have sorted out the job sir eland proposal and I need to sit down with you so on ETP so that we can prepare a. proposal". Prior to this on 14 October, Greg Craig sent an e-mail to OSK in which he stated of
"this is not what 1 want, I need a 4 page paper not unlike the draft paper that 1 gave you when we started this". This material does not suggest that proposals and tenders were developed and submitted against a particular specification. Nor does it suggest that this was a competitive tender. 4.6.2 Employers Conference - Opportunities 2003 Corporate Affairs decided to plan and run an employer's conference as part of the Opportunities 2003 event. A tender process was organised through FAS Procurement in Head Office. Three companies were requested to tender for the event and two tenders were received. The contract was awarded to OSK at a price of €45,000 plus VAT. Bearing in mind the size of the consultancy fee, Internal Audit requested that Corporate Affairs provide the documentation supporting the selection of OSK as part of this tender evaluation process. In response Greg Craig said that this and other material relating to the evaluation of tenders received via Head Office Procurement was no longer available. When queried on this point, Greg Craig stated that he believed that all tender
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documents received by Corporate Affairs from Procurement were copies of the originals and that there was no need to keep these after the tender evaluations were complete as Procurement kept the originals. On that basis, no material on the selection of OSK for the Employers Conference was available to Internal Audit. At the time of this process the Purchasing Policies & Procedures policy number FAS-02-08 (dated November 2001) stated that Materials Control (Procurement) had the responsibility for ensuring that "Tenders must be initialled by those present\ listed and. entered on analysis sheets showing details of prices, rates, carriage charges, delivery, settlement terms and any other information necessary for their evaluation" While the policy gave little guideline on how documentation should be controlled once tenders had been opened and how tenders should be scored, it was custom and practice that tender documentation and evaluation documentation should be retained by the department evaluating the tenders. This procedural and control gap has been addressed in the new version of the Purchasing Policies & Procedures released in April 2005. /The Financial Authority Levels that were in place at the time of this / contract state that contracts with a value greater than €30,000 must be I approved by the Board of FAS. The contract for the Employers I Conference was not brought before the Board of FAS for approval. ! The approval of contracts within the control of the Coiporate Affairs I section is covered in more detail below. [/-••In relation to the tenders for this work, there is also some material from e~ \ mails to suggest that the relationship between FAS and OSK was not at arms length. On 30 September 2002, B M of OSK wrote to Greg | Craig and said I " Thanks for meeting me this morning to sort out the details of the two \ projects. I sent the letter to m as discussed and will post our first \ invoice to him tomorrow. \ We are due to meet |HH this week and I will discuss the tendering \process for the conference project with her then"
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| and m were working for Euro RSCG at this point in time. This e-mail was unusual on two points. Firstly, FAS Procurement did not issue the tender specification to OSK until 8 October 2002 and this e-mail was sent on 30 September and secondly, it is unclear why OSK should speak to an individual from the agency when the tender was being handled via FAS Procurement. 4.6.3 Quotation for the review of Corporate Affairs internal controls Aftei(oS^>had completed a financial analysis of the Euro RSCG contract, they were also asked to complete a review of Corporate Affairs expenditure controls and procedures. Neither of these pieces of work was tendered for. In the case of the financial analysis of Euro RSCG the fee was €10,000. In the case of the internal review the quoted fee on the contract documents for the project was initially €7,500 but within a month this had increased to €15,000 and a new contract issued. Greg Craig was asked to explain the reasons for the increase in fees and responded that he was unsure but the volume of work may have increased. Internal Audit has been shown the output from this review of internal Corporate Affairs controls and, while undocumented background researches may have been carried out, there appears to be very little other than 5-6 loose pages of diagrams and recommendations. ^ ^ 4.6.4 Budget Management for Opportunities 2005 OSK were contracted as budget managers for FAS Opportunities in the years 2003, 2004 and 2005. The budget managers for Opportunities have responsibility for managing a budget approaching €2 million for the event. The tender for 2005 was handled via AFA O'Meara and specifically by | According to the documentation reviewed by Internal Audit the two groups that submitted tenders were OSK and a firm of accountants called Hayes & Co. i m H I approved the selection of OSK. Shortly afterwards, Corporate Affairs instigated a different tender process through FAS Procurement for the financial appraisal of the interim AFA O'Meara advertising contract. One of the 3 companies that they requested to tender for the work was also flHIHH a n < ^ ^ e others were OSK and OSK were also awarded the contract for this financial appraisal. As far as Internal Audit can determine, I H H H I had not done any work for FAS previously. However Greg Craig has stated that at one
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stage he did meet a H H M who was looking for business from FAS. Internal Audit identified that j j j j j actecj as auditors for ^ ^ g g j j j ^ j ^ g g j g g ^ ^ ^ w a s unsure how this company was asked to tender by both «n AFA O'Meara and by FAS Procurement. When interviewed by Internal Audit ^ I ^ ^ ^ H stated that OSK had been awarded the contract for the previous year's Opportunity event, that in his view that they had done a good job and would be awarded the work again for 2005 as long as their price was reasonable. He stated that he did not have the time and resources available to him to go through a comprehensive tendering process and that he had to make a "commercial decision". He stated that he therefore contacted the auditors of his own company OSK and one other group to submit tenders. ( ^ j B H a ^ ^ O S K submitted tenders and OSK was selected, accepted that there were other accountancy firms with the expertise to manage the budget for the Opportunities event but that they were not asked to tender. 4.6.5 Science Challenge Tender In late 2004 ^ H H H a ^ s o handled the tender process for the Science Challenge review. After the departure from AFA O'Meara, Internal Audit was given copies of material relating to this tendering process. The first document provided was an e-mail from H H H H I dated 9 November 2004 in which as follows of OSK to was directed
You can send on invites to tender on the other project to: Gilhooley and Assoc, Ashfield House, Brookvale, Dublin 16 and BBC Financial, 24 The Court, Bettyglen, Raheny, Dublin 5" Material showed that H I ^ ^ H did send invitation to tender letters to these two groups on 16 November 2004 with a return date of 3 December 2004. He also sent a third invitation to tender letter to OSK. On 20 December 2004 H H H H I then w r ° t e to OSK informing them that they had been successful in their tender and that, subject to agreement on terms, the contract would issue shortly. On 5 January 2005 wrote to OSK enclosing a service agreement document for signature and return.
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However, AFA O'Meara claimed to have received an invoice from OSK covering the first instalment of the Science Challenge payment (€15,000) in early December 2004. This invoice was dated 6 December 2004. This date is two weeks before the outcome of the tender evaluation process was communicated to OSK and the other companies. When this matter was raised by H I H I ^ I H wrote to AFA O'Meara and claimed the original invoice date should have been January 2005 and not December 2004. As mentioned above, ^ ^ H B OSK suggested that an invitation to tender should be sent to Gilhooley & Associates. Again this company was included by FAS Procurement in the invitation to tender process for the financial review of the interim AFA O'Meara contract (along with Hayes & Co, see Section 4.6.4). when interviewed in December 2005, said that by the time he was asked to get two other names to tender for the Science Challenge review, a proposal and specification for this review had already been completed I H ^ ^ H H H H OSK at the request of FAS, and that FAS senior management was aware of this. In his view, therefore, the process was too advanced but he went through the motions. He contacted H H I I I I I ^ I a n ( 3 asked him to provide 2 names which I H H H I subsequently provided. m m i l also accepted that the initial invoice was received from OSK in December 2004 and not January 2005. 4.6.6 Pricing Structure in OSK contracts As outlined above, the majority of work completed by OSK has not been based on genuinely competitive tendering. One element of competitive tendering is the question of price. From the tender and contract information reviewed by Internal Audit it is not obvious as to how particular figures have been arrived at. Another aspect of most OSK contracts has been the agreement to pay between 33% and 50% of the fee immediately after the contract is signed This represents a very generous approach and would not be typical of consultancy contracts in the experience of Internal Audit.
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When Internal Audit initially interviewed Greg Craig in November 2004 regarding the letter of allegation, great emphasis was placed by Greg Craig regarding the potential damage to his reputation if the allegations contained in the letter were to be circulated, either internally within FAS but more significantly, externally within the media and advertising industry. In that context Greg Craig said that he had not discussed the contents of the letter with any of those named in the letter but that he had taken legal advice on his position. However, when H H H H I w a s interviewed by Internal Audit he said that he had been called to a meeting in Greg Craig's office in October 2004. That meeting was also attended by a n c j Qreg crajg, w a s H H H shown a copy of the letter and the allegations contained within the letter were discussed at length. As discussed above in Section 4.3.3, H ^ H H I a n c ^ Greg Craig corresponded about the setting up of a public relations company in which H H H I H H i w a s t 0 he involved. Included in the e-mail material examined by Internal Audit is an e-mail dated 14 November 2002 to • • • from • • • • • • I of Liberty Mortgage Corporation in which she says
I have gone through the clients file — before I go ahead and submit the file for approval, I just want to check the figures. How much do they require in total to refinance both properties " The e-mail requests certain documentation from forwarded the e-mail to Greg Craig with the comment, who in turn
See w m m below. All the stuff she requires is very recent and 1 do not have it. Please scrape together and get it to me " Another e-mail from Greg Craig to flUHH o n 24 July 2003 has attached the details of a property for sale in Co Wexford.
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/internal Audit raised these issues with Greg Craig and specifically the / question of whether financial adviser. w a s not ' In response Greg Craig said that flHB his financial adviser but that he had provided him with some specific taxation advice. Greg Craig also said that the reference to properties made in the email was connected to 4.6.8 Conclusion Based on the above Internal Audit concluded that Greg Craig had a conflict of interest in the award of business to OSK through H H H I ^ I r 0 ^ e ' n providing financial advice to him on personal matters and his close friendship. Corporate Affairs appear to have been regularly involved in discussions with OSK staff regarding tenders for consultancy, in advance of those contracts been put out to tender, The process of tendering via FAS Procurement and advertising agencies has been flawed and in some cases, contracts were awarded in the absence of genuinely competitive tenders. In the case of the Science Challenge tender in late 2004 OSK, while itself tendering for this project, provided H H I H B the names of two other companies to whom tender documents should be sent. Coiporate Affairs failed to comply with the Financial Approval Levels in the case of the Employers Conference OSK were granted unusually generous conditions on their contracts with Corporate Affairs through the up-front payment of invoices. The fee paid to OSK for the review of internal financial controls within Corporate Affairs has been doubled without any reasonable explanation. The output from this work did not appear to match the cost.
The FAS Opportunities event represents by far the single biggest piece of expenditure for Corporate Affairs in any given year. For Opportunities 2005 the expenditure budget for the event was close to €2 million. The current investigation did not complete an in-depth analysis of expenditure over the last 5 years, nor has it formed any view regarding the general value for money that Opportunities represents for the organisation. This, in the view of Internal Audit, is an exercise that needs to be completed,
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but as a separate exercise. The investigation concentrated on a discrete number of issues that had either been raised in the course of statements or which came to the attention of Internal Audit as a result of the review of Corporate Affair's transactions. 4.7.1 Exhibition Build - Display Contracts The Opportunities event was originally launched in 1995 and has been run in a number of locations, Jury's Hotel, the R.D.S. and most recently Croke Park. During that time the single largest expenditure per event has generally been the cost of building the exhibition stands. The budgeted cost for the exhibition build for Opportunities 2005 alone was €386,000. The selection process for contractors at Opportunities events has varied over the years. This process has been completed via the agencies, via Corporate Affairs directly or more recently via the Event Manager. Despite the variety of approaches, one company, Display Contracts Ltd has been successful in being awarded the contract for the exhibition building work of all Opportunities events from 1995 to date. I I H H stated to Internal Audit that in his view the tendering for the exhibition build had always been handled correctly but he highlighted that last minute decisions made by FAS had led to the problem of getting "real alternative quotes". highlighted the pivotal role that the exhibition builder occupied before the appointment of a separate event manager in the last few years.
4.7.2 Deirdre Lynam - Sales Contract for Opportunities 2002 Deirdre Lynam was awarded the contract for exhibition sales at the Opportunities 2002 via the then advertising agency Euro RSCG. The total cost to FAS of this service was approximately €250,000. This figure represents at least twice as much as was paid to those providing the exhibition sales service at Opportunities events both before and after 2002. According to material supplied by d H I ^ ^ I |) and from Euro RSCG, the timing and financial arrangements of this service were controversial. In her statement maintained that interviews and tender reviews in regard to various contracts for Opportunities were merely "going through the motions" as everyone was aware who was going to get a specific contract for Opportunities. According to Greg Craig this
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was not the case and he does not agree with any of comments regarding tendering via Euro RSCG. When interviewed by Internal Audit, stated that the process of tendering within Euro RSCG was a "loose arrangement" and that no defined methodology was in place. It appeared to him, he stated, that FAS Corporate Affairs had not got the necessary resources to address tendering for Opportunities events and that often the agency was asked to act at the last minute. I I ^ ^ H did not accept that discussions took place between FAS, the advertising agency and those tendering for contract before tenders were submitted. In the case of Deirdre Lynam's sales contract there are a number of inconsistencies which point to her seemingly having been awarded the / contract prior to her tender presentation in Euro RSCG offices on 24 / October 2001. This also applies to other contractors. • A contact report dated 13 August 2001 details an Opportunities 2002 planning meeting held in the FAS offices and attended by among others, Deidre Lynam, H H ^ ^ I (Display Contracts), m m ^ m (Kingram) and Greg Craig. Among many other details of planning for Opportunities 2002, Deirdre Lynam is given an action point of commencing her sales work in the last week in September 2001. • Evidence of two further meetings regarding Opportunities 2002 held in Euro RSCG that Deidre Lynam attended before the tender presentation. • Deirdre Lynam's contract also commenced from the 1 October 2001 for 5 months until the end of February 2002 which appears to contradict the fact that she only tendered on 24 October 2001. In addition Deirdre Lynam submitted a detailed breakdown of her activities from the start of October along with her October invoice. From material supplied, there was a deal of controversy regarding the financial terms of the contract with Deirdre Lynam. This included letters from Ms Lynam's solicitors to Euro RSCG regarding the contract remuneration. It is difficult from this material to determine where the final details of the figures for this sales contract were determined or by whom these figures were initially agreed.
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4.7.3 Donna O'Connor - Sales Contract, Opportunities 2003 FAS Procurement sent out tender documents to 7 companies on 25 September 2002 in relation to the sales contract for Opportunities 2003 and received back proposals from 3 companies in October 2002. However the contract for sales at Opportunities 2003 was awarded to Ms Donna O'Connor and her company Supply Chain Management, despite the fact that she was not connected to any of the 3 companies that submitted tenders. Initially, when this matter was discussed with Greg Craig he said that he was unsure as to how Donna O'Connor got the work and that she may have been working for one of the companies that tendered for the work. From an examination of e-mails it was apparent that Greg Craig had been in communications with Donna O'Connor before the tenders were issued by FAS Procurement. When these e-mails were raised with Greg Craig he commented that he had awarded the contract to Donna O'Connor on the basis that he she was a "better bet" to get a successful outcome than those that had submitted tenders. 4.7.4 Bravo and Event Management Contract 2005 The Bravo Group were selected as the Event Managers for Opportunities 2005. This selection process was completed in Corporate Affairs via a competitive tendering process and those participating from a selection viewpoint included staff from Corporate Affairs, H H H H (AFA O'Meara) and a representative from OSK previously selected as Opportunities Budget Managers. Five companies tendered for the event management role and the Bravo Group were selected. One of the selection criteria was obviously the fee submitted by the companies. The fee submitted by Bravo was €67,475 (including VAT) and this seemed to have been a competitive figure when compared to others submitted. However, at the end of the Opportunities event Bravo submitted a claim for additional costs associated with the event. Staff from Corporate Affairs met with Bravo and agreed to pay them an extra €34,000 on top of the tendered fee. This brought the gross charge to FAS for event management at Oppoztunities 2005 up from €81,645 to €122,784. This option to increase fees was not something that was built into the contract between Bravo and AFA O'Meara. Nor did it appear to have been mentioned to other companies tendering as part of the process. When this matter was raised with Greg Craig he said that while he was not directly involved in these negotiations himself, he felt that this approach was not satisfactory.
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(who had been a member of the panel that awarded the contract to Bravo) stated that he had been aware that Bravo had been paid more than their original tender price but said that he had not realised that this represented a 50% increase. 4.7.5 Bravo and Sales Contract 2005 The events management contract awarded to Bravo required them to arrange a number of additional services in relation to Opportunities 2005 such as exhibition build, exhibition sales, printing, signage, web development, ancillary staff, audio visual equipment, promotional material, support staff and other elements. This process was to be completed either by providing the service directly themselves or by sourcing third parties. In their tender submission Bravo suggested using Donna O'Connor for the sales element or alternatively completing this work directly themselves. With the agreement of Corporate Affairs, the contract was given to Bravo. As with the general event management contract, the contract for the sales contract was to be between AFA O'Meara and Bravo. From the material supplied by AFA O'Meara to Internal Audit, there was no sales contract signed before the Opportunities event. This was confirmed by Bravo and Corporate Affairs. The contract that AFA O'Meara were asked to sign after the event contained an incentive based plan in addition to a fixed fee. This incentive based plan provided for an extra payment to Bravo of €200 per stand sold if stand sales exceeded €180,000, or alternatively an extra €400 per stand sold if total revenue exceeded €230,000. The gross cost of this incentive based plan to FAS was €27,442 and the total cost of the sales contract payment to Bravo of €110,400. This contract was eventually signed after the event by 3 parties, Bravo, AFA O'Meara and FAS (Corporate Affairs). When this matter was raised with Greg Craig he said that he was unclear as to why a sales contract was not negotiated and signed prior to the Opportunities event and that this was an oversight. In an interview with Internal Audit M M H I accepted that the sales contract with Bravo had not been signed until after the completion of the Opportunities event. ^ M stated that efforts had initially been made to use the person who completed the sales for the previous two years (Donna O'Connor). B ^ H s t a t e ^ that Ms O'Connor was not
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willing to do the work and Bravo was asked to complete a difficult task which they managed to do well.
4.7.7 Conclusion Based on the above Internal Audit concluded that i i 5 • In a number of cases where an agency has played a role in the \ selection of contractors for Opportunities events, it seemed that no real competitive tendering took place and contractors were aware that they were getting the work before they tendered. . • It appeared that Greg Craig exercised the ultimate decision as to which contractor received work for Opportunities events. • In the view of Internal Audit, the over-riding reason for the award of the contract for the exhibition build to just one company,
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Display Contracts, for every year since 1995 was on the basis of familiarity. In the case of Opportunities 2005 event management, the process of tendering was undermined by the increases awarded to Bravo after the completion of the work. In addition, Bravo was also awarded the sales contract for Opportunities 2005. However, the sales contract, which included incentive payments, was not signed until after the event and the sales had been completed. The gross additional cost to FAS of these transactions (additional event management fee and sales incentive payments) was in excess of 667,000. In the case of the sales contract for Opportunities 2002, awarded to Deirdre Lynam, it was not possible to determine who agreed her fee. This fee appeared to be very high when compared to those awarded for the sales contracts for Opportunities in previous and subsequent years. The tender process handled by FAS Procurement for the sales contract at Opportunities 2003 was bypassed by Greg Craig in the awarding of the contract. The contract was awarded to an individual who had not tendered.
Services provided by advertising agencies
The nature of the contracts between FAS and the various advertising agencies over the last number of years have been such that the agencies provided various services and deliverables, primarily for creative and design work, media and "below the line" work which included Opportunities and other events. Agencies have also been asked to play roles in regard to a number of projects in other areas including web development. The fee structure that the agencies have levied has varied between Helm O'Connor O'Sullivan, Euro RSCG and AFA O'Meara. It is fair to say that the fee structure has become more favourable to FAS over the years. However the investigation found a trend that Corporate Affairs and particularly Greg Craig have bypassed the agencies and arranged services directly with third parties, who invoiced the agencies.
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The agencies in turn then applied their percentage fee and passed on their invoice to FAS for payment. 4.8.1 Direct bookings of media by Greg Craig From an analysis of material supplied by AFA O'Meara it appeared that, in the majority of cases, Greg Craig dealt directly with the newspapers when booking advertising space for FAS campaigns. Effectively, this part of the expert media service being paid for by FAS, via the AFA O'Meara contract, has not been used. The direct bookings of newspaper advertising also appeared to have been a feature of the relationship with Euro RSCG. However, under the terms of the current and previous agency contract, FAS paid the agency a percentage fee on each advertisement whether booked directly by FAS or via the agency. When these points were discussed with Greg Craig he said that he felt that all AFA O'Meara brought in terms of newspaper and magazine media buying was extra costs and that therefore he accepted that he did book directly with newspapers, Greg Craig justified the direct approach on two main grounds. Firstly, the ability to be seen to have a media spend could potentially influence how FAS was portrayed in the newspaper or magazine in question. The second point that justified the direct purchase of advertising was that Greg Craig felt that he was able to obtain substantial reductions on the standard rate card amounts. He felt that AFA O'Meara would not be able to match the reductions achieved. From an analysis provided by Greg Craig it appeared that FAS does command considerable reductions from the published rate card figures. • • • • • • • • I of AFA O'Meara stated that these reductions were made available to FAS because Greg Craig was willing to book advertising over unusually long time frames, thus getting lower costs. The view from AFA O'Meara was that, because at a given point in time FAS had no media campaigns running, certain advertisements such as Excellence Though People were "shoehorned" into newspapers and magazines that were inappropriate for the campaign because of timing or profile and that these therefore became generic advertisement for FAS. 4.8.2 Lucan < Blanchardstown Gazette & From an analysis of the FAS media spend in 2004 one newspaper was unusual in that it was not a national paper. The Lucan & Blanchardstown Gazette is part of the Gazette Group and has Mr Michael McGovern as one of its directors and principal shareholders. As discussed above in
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In two different e-mails Michael McGovern thanks Greg Craig for his support in 2004 and for a considerable commitment commencing in 2005. In the e-mail of 11 March 2005, Michael McGovern confirms details of a commitment of what appeared to be €100,000 in advertising in 2005-06 to the Lucan & Blanchardstown Gazette. When this matter was raised with Greg Craig he maintained that the email did not give an accurate reflection of what was agreed in regard to the Gazette Group. When asked about why business should be done with I a local paper when all other advertising was conducted with national i titles, Greg Craig told Internal Audit that he had been requested to place ; business with this group by the Director General of FAS. At a subsequent meeting with Internal Audit, the Director General of FAS denied that he had ever requested or directed Greg Craig to place business with the Gazette Group. 4.8.3 Direct bookings with Design House and Kingram Studios Internal Audit identified that i H H I I I I I ^ H I Kingram Studios had received a large amount of FAS business over the last 5 years. In ^ ^ H H statement he claimed that AFA O'Meara was consistently bypassed by Greg Craig and that work was arranged directly with third parties such as Kingram, OSK and AMAS (see below Section 4.8.4). In many cases the first thing that AFA O'Meara claimed they knew of the activity was when an invoice arrived from the third party. This mirrors the experience with Euro RSCG where senior staff likewise claimed that the agency was consistently bypassed and business given to Kingram and others. In addition to the high level of work received directly from Corporate Affairs, in particular in relation to Opportunities, Kingram Studios also did a considerable amount of work for the Services to Business division in FAS Head Office. This work often involved event management for events such as the Community Initiative Awards, Apprenticeship graduation and others. There did not appear to be an obvious process of tendering in place and significant amounts of business appeared to have been routinely awarded to Kingram. In addition, Services to Business
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have also used the services of another group frequently used by Corporate Affairs; OSK. However, in order to restrict the scope of the audit bearing in mind its sensitivity, it was decided not to interview staff in the Services to Business division of FAS who were responsible for allocating this business, in order to determine why Kingram and OSK were used. Design House also appear to have been requested to complete work directly for Corporate Affairs for the last number of years but on a significantly lower scale than Kingram Studios. 4.8.4 Web development and AMAS. AM AS are a relatively small company that specialises in web development. They were commissioned by Corporate Affairs to complete a review of the FAS corporate website which they presented in early 2004. The review contained a number of recommendations which were presented to Corporate Affairs and senior FAS management. Arising from these recommendations it was agreed to proceed with implementing changes to the corporate web site. The process by which AMAS were given this work over the remainder of 2004 is not clear. According to *****allagreements regarding AMAS work were completed by Corporate Affairs directly. AFA O'Meara had been asked to source a company for the work but Greg Craig maintained that he was unhappy with the cost structures proposed. For the remainder of 2004 AMAS invoiced FAS for a number of different pieces of web-related work none of which was tendered for in a competitive manner. These elements included • Project Management Services • Design Services • Search Engine optimisation • Discover Science In addition, contact reports with AFA O'Meara also mention some work completed in regard to Opportunities and Jobs Ireland. The total cost to FAS of these invoices from AMAS amounted to approximately € 65,000. However, from an examination of the FAS Corporate website, it appeared that very little has been achieved for this expenditure. The home page of the web site has been changed to a new look and feel but many of the other pages linked from the home page remained unchanged. It appeared
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that none of the work completed by AMAS for FAS in 2004 had been tendered for. Invoices for AMAS work were directed to AFA O'Meara which added its agency fee before invoicing FAS. One of the issues that Internal Audit became aware of during the course of the investigation was a history of internal disputes and conflict between the FAS Information Technology Department and Corporate Affairs. The IT Department have responsibility for what might be loosely called the technical element of the FAS web site and various links to FAS data, whereas Corporate Affairs have responsibility for the corporate image as portrayed via the FAS corporate website. The origins of these disputes between the two FAS groups are dealt with in more detail in Section 4.9 below dealing with the Jobs Ireland web site development. FAS has now commenced the process of tendering via the European Journal for the design, redevelopment and ongoing maintenance of the corporate website. The previous approach of channelling this type of work through the advertising agencies who had no expertise in regard to web development did not make sense other than to avoid complying directly with general procurement procedures. 4.8.5 Conclusion Based on the above Internal Audit concluded that The comments made by Greg Craig in relation to the poor media buying capacity of AFA O'Meara were difficult to understand in the light of the fact that FAS had recently signed a contract with AFA O'Meara (November 2004), part of which specified media buying as one of the key services. This selection of AFA O'Meara, as mentioned above, took place after a long and costly exercise for the organisation. • From an ethical viewpoint, it would be questionable for FAS to use its substantial advertising buying power to ensure that newspapers and magazines are positively disposed towards the organisation in the event of a negative story emerging about FAS. • No valid explanation was provided as to why Corporate Affairs agreed to place considerable advertising in the Lucan & Blanchardstown Gazette and not place advertising in other similar local newspapers. The material to hand suggested that the Director of Corporate Affairs was the prime mover from the FAS viewpoint in agreeing advertising details. While Greg Craig claimed that he placed business at the request of the Director General, the Director
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General has denied that he ever made such a request and Internal Audit found no evidence to support Mr Craig's claim. Corporate Affairs and Greg Craig had consistently bypassed advertising agencies and allocated FAS work directly to Kingram Studios and others. The relationship between FAS Services to Business and both Kingram Studios and OSK was not examined during this investigation. AMAS were awarded a substantial amount of work from FAS in 2004 without any system of quotation or tenders applying. The work completed by AMAS in relation to the FAS corporate website appeared to have produced little by way of tangible outcomes.
Jobs Ireland was a FAS campaign that had at its centre a number of recruitment fairs run in places such as North America, Europe and South Africa. The overseas fairs commenced in approximately April 2000 and the last fair occurred in approximately April 2001. The idea behind these fairs was that they would offer an opportunity for individuals to come to work in Ireland. As part of these fairs a number of Irish companies, that had particular employment needs, booked stands at these events. It had been envisaged that the overseas Jobs Ireland events would run for a three year period in total. However, the changing employment environment in early 2001 necessitated a review of this timeframe and the project was eventually wound down in 2001. 4.9.1 Jobs Ireland Website The events involved a large amount of expenditure and one particular aspect that was examined in detail in this investigation was the development of a separate Jobs Ireland website. Some initial work had been completed by Design House on the Jobs Ireland site in terms of links to the FAS corporate website and the Job Bank database. At some stage during the latter part of 2000, Corporate Affairs took the decision that a separate website specifically for Jobs Ireland would be developed. The objective of this website was to allow employers to add vacancies and for registrants to place their details on the Jobs Ireland database. The registrants were predominantly non Irish residents and were generally attendees at the overseas Jobs Ireland events.
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The existing FAS IT systems in the form of the WAITS / Job Bank, Client Database and other systems already provided the functionality to be provided by the proposed Jobs Ireland system. The Job Bank system in particular was the subject of significant FAS investment through the FAS IT Department. The decision to invest in a separate Jobs Ireland website created a second corporate website for FAS and led to very significant associated costs. When interviewed by Internal Audit, Greg Craig said that he was unable to rely on the systems supplied by the Information Technology Department within FAS and that he had been embarrassed by the unavailability of the corporate website at one high profile overseas event and had therefore taken the decision, in conjunction with senior management, to develop a separate Jobs Ireland website. Greg Craig maintained that the FAS IT Department were openly hostile to Jobs Ireland and that this was the reason that he never approached them to tailor the Job Bank system to meet the specific Jobs Ireland requirements. In addition, Greg Craig said that, in his view, the FAS IT Department did not have the capability to deliver what he required. Greg Craig maintained that the Jobs Ireland was an acclaimed success and had a very high level of foreign registrants. Internal Audit interviewed the current Director of Information Technology, Bernard Farry on this matter. He maintained that he was n asked to attend a meeting in the offices of the then advertising agency, Helm O'Connor O'Sullivan, in mid 2000. At that meeting he was asked to describe in detail the elements and functionality of the Job Bank system which had been formally launched in May 2000. Bernard Fairy claimed that this was used as the template for the development of the separate Jobs Ireland website. He maintained that the IT Department were never informed by Greg Craig or anyone else that the Jobs Ireland ! website was being developed. Bernard Farry stated that the IT Department found it extremely difficult to get the Job Bank system \ promoted as the corporate promotional budget was exclusively used for \ the Jobs Ireland website. In terms of job vacancies, Bernard Farry \ maintained that at peak there were less than 1,000 vacancies on the Jobs '••Ireland and that many of the vacancies were also on the Job Bank but as access to the Jobs Ireland database is no longer available Internal Audit were not able to independently verify this. j The Jobs Ireland website, because of the way in which it was developed externally to the organisation, did not integrate into the other FAS
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systems and databases, particularly those operated by Employment Services. This meant that the database was not available to clients using FAS Employment Services offices and FAS staff other than via the Internet and this represented a significant weakness. It appeared to Internal Audit that many overseas clients did not actually register on-line on the Jobs Ireland website but rather that their manually completed forms were brought back to Ireland and then keyed into the Jobs Ireland system at an additional cost to FAS. This fact is reflected in the data entry charges levied by Ultimate Communications (see below 4.9.2). With the completion of the overseas events in April 2001, the impetus for the Jobs Ireland website waned. As a result the existence of two corporate websites was addressed by internal working groups that examined content, specification and merits of both the Job Bank and the Jobs Ireland website. Despite a number of meetings on the matter the two systems were never integrated and the material registered onto the Jobs Ireland website was never integrated into the main corporate information systems, it therefore became outdated and the investment was effectively lost. 4.9.2 Job Ireland Website and Ultimate Communications Ultimate Events were the event managers for Opportunities 2000 (see above Section 4.7.6). The following year they were succeeded as event managers by Ultimate Communications which was incorporated on 21 July 2000. Ultimate Communications was effectively an offspring of Ultimate Events and both companies shared the same two directors, Audrey Browne and Niall Gallen, company address, etc. Ultimate Communications was awarded the contract to manage the Jobs Ireland Programme on 3 August 2000 (less than 10 working days after it was incorporated), up until 31 December 2000. Ultimate Communications was then subsequently awarded the event management contract for Opportunities 2001. While Design House had completed some work on the Jobs Ireland website initially, the main development work was handled by Ultimate Communications. Audrey Browne of Ultimate Communications and Robert Saunders who is a director of Design House are related and Greg Craig has said that this was how he was initially introduced to Ultimate Events / Ultimate Communications. j In total, FAS paid Ultimate Communications €3.55 million in the first 12 j months after the date of their incorporation. It seemed likely that FAS
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were the only customers that Ultimate Communications had during this time. In addition, FAS also paid the cost of Ultimate Communications finance on a number of occasions. In January 2001, Corporate Affairs commenced the process of tendering for the Jobs Ireland programme. The specification distributed by FAS Procurement identified two main elements of the programme to be tendered for; overseas event management and website maintenance. Seven companies were asked to tender for this work and four submitted tenders, including Ultimate Communications. As a result of the decision not to run any overseas events after April 2001 the tendering process for Jobs Ireland was cancelled. However, in July 2001, Ultimate Communications submitted 20 invoices covering website development, maintenance and various monthly costs associated with the leasing of the Jobs Ireland website. The total value of these invoices was €687,853, including agency fee from Helm O'Connor O'Sullivan. Many of the invoices quoted a 36-month leasing agreement which had September 2000 as the first monthly charge period. This is 4-5 months before a request for tender document was issued by FAS Procurement in January 2001. These invoices were approved by Greg Craig and paid at the end of July 2001. At the end of 2001 Greg Craig had extensive correspondence with Ultimate Communi cations about the transfer of the Jobs Ireland website from Ultimate to FAS. Audrey Browne of Ultimate Communications maintained that her company had a 36-month agreement with FAS that had been personally endorsed by Greg Craig. She insisted that if FAS wished to cancel this agreement then her company would have to receive compensation for the outstanding period. The existence of a 36-month contract has not been accepted by Greg Craig who emphasised that the original Jobs Ireland deal had been between Helm O'Connor O'Sullivan and Ultimate Communications but not directly with FAS. However, no contract has ever been produced (other than a letter from O'Connor O'Sullivan giving the management of the Jobs Ireland project to Ultimate Communications until the end of the year 2000). Greg Craig said in interviews with Internal Audit that there may have been a verbal agreement in the first instance. When Ultimate Communications, through their solicitors, insisted on payment from FAS in early 2002, Greg Craig passed the issue over to the new advertising agency Euro RSCG and its******************* *****tosolve this impasse. When Internal Audit queried Greg
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Craig as to why the FAS Legal Services Department were not asked to get involved, considering that there was probably no written contract and considering the size of the amounts involved, he responded that he wanted to get the issue dealt with quickly and so passed it to
stated to Internal Audit that he had been contacted by Greg Craig who asked him to negotiate an exit from an expensive 36 month contract that still had 12-14 months left to run. ***** said that he believed that there had been a written contract between O'Connor O'SuIIivan and Ultimate Communications for this work. He stated that his direct approach was taken to avoid costly and lengthy legal proceedings being required to resolve the issue. 4.9.3 Job Ireland Website and Euro RSCG In mid 2002, as a result of the negotiations between ****** and Ultimate Communications, Euro RSCG sent an invoice to FAS covering 5 months of the 36-month Jobs Ireland website agreement. This invoice was to be a final settlement between Ultimate Communications and FAS. Euro RSCG records show that this initial invoice was returned by FAS to Euro RSCG with an insistence that this figure was to be invoiced as 5 separate invoices (monthly amounts). It is unclear as to why this was done but when the split invoices were regenerated by Euro RSCG the total value had increased by €32,000 through a doubling up of the VAT figure. Despite all the communications on this issue including solicitor's letters, the significance attached to intervention and Corporate Affairs position, the 5 invoices totalling €252,000 were approved by Greg Craig, paid by FAS and, according to the Euro RSCG records, were paid on to Ultimate Communications. When these invoices were shown to ****** he stated that he was not previously aware of overcharging but accepted on the basis of the material reviewed that it appeared to have happened. Part of the solution that Corporate Affairs and Euro RSCG put in place was to continue the hosting of the Jobs Ireland website in Euro RSCG. This arrangement continued to cost FAS money right up until the latter end of 2003 but at a much lower level than was the case with Ultimate Communications. 4.9.4 The cost of the Jobs Ireland website
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From an analysis of invoices from 2000 to 2003 Internal Audit estimate that the total cost of developing, maintaining and hosting the FAS Jobs Ireland website was €1.7 million. Based on prevalent costs from the year 2000, the web site development, maintenance and hosting should have cost at most €0.5 million for a 3 year period. When this matter was raised with Greg Craig he initially said that an investment of €1.7 million for the development of the Jobs Ireland website was a "realistic" figure, he later changed his view to say that FAS may have got "exposed on this issue". From a review of O'Connor O'Sullivan invoices from the year 2000 and 2001 it appeared to Internal Audit that a large percentage of FAS advertising expenditure was directed towards promoting the Jobs Ireland website and little evidence of any expenditure on promoting the Job Bank system. While the Board of FAS was kept informed to some extent regarding the overseas Jobs Ireland events, the development of the Jobs Ireland website and the significant levels of expenditure involved were not put before the Board of FAS at any stage for approval or consideration. As in the case of AMAS (Section 4,8.4) the development for the Jobs Ireland website was channelled through the advertising agency at an additional cost to FAS of €130,000 in agency fees. In the case of the Jobs Ireland website, Ultimate Communications did not provide the end services but rather subcontracted the work of web hosting and other related work to groups such as Wolfe and Metamedia. Rather than the site being hosted by FAS it was hosted by Wolfe and others who invoiced Ultimate Communications who in turn invoiced Helm O'Connor O'Sullivan or Euro RSCG who finally invoiced FAS. 4.9.5 Conclusions Based on the above Internal Audit concluded that • FAS made a serious and costly error in relation to the tandem development of two similar web based job vacancy and client registration systems; Job Bank and Jobs Ireland. The error was compounded by the fact that Corporate Affairs did not approach the IT Department to ascertain whether the Jobs Ireland requirements could be met but rather contracted out the website development work without informing the IT Department. While the Corporate Affairs Department and Greg Craig were under some pressure to deliver the overseas job fairs as part of Jobs Ireland, it
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should have been possible to meet their web requirements from internal FAS IT resources. The Jobs Ireland website when developed did not appear to address the shortcomings of the Job Bank as perceived by Greg Craig insofar as many clients details were not actually entered onto the website online but rather recorded on paper at the job fairs and then keyed onto the system at a later stage (in Ireland) and at an additional cost to FAS. The Jobs Ireland website was not integrated with the existing systems and services available to FAS Employment Services, neither from a client nor from a staff viewpoint. After the demise of the Jobs Ireland campaign the vacancies and client details were never integrated into the mainstream FAS systems and any residual value of the investment was lost. From an analysis of invoices from 2000 to 2003 Internal Audit estimate that the total cost of developing, maintaining and hosting the FAS Jobs Ireland website was €1.7 million. The amount of investment in the Jobs Ireland website was far in excess of what was warranted and FAS probably paid at least €1 million more than should have been the case. In addition the organisation spent a large amount of its advertising budget promoting the Jobs Ireland website during this time. The Board of FAS were never informed of the external development of the Job Ireland website and the costs involved. Ultimate Communications was awarded the contract to manage for the Jobs Ireland Programme on 3 August 2000, less than 10 working days after they were incorporated. In total, FAS paid Ultimate Communications €3.55 million in the first 12 months after the date of their incorporation for Jobs Ireland events, web development and Opportunities. Based on the timing of the contract for the Jobs Ireland programme it seemed likely that
such a scenario it seemed likely that Ultimate Communications had been given certain indications from within FAS as to the level of business they were likely to receive. The contract with Ultimate Communications for the Jobs Ireland website was more likely than not based on a verbal agreement for 36 months, the details of which Greg Craig was probably aware of from the outset. The agreement was unlikely to have commenced without his approval.
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• The FAS Procurement tendering process in January 2001 for the Jobs Ireland programme and website ignored the fact that there was a de facto 36-month contract in place from September 2000 for the website. This may have been an attempt to retrospectively justify the role of Ultimate Communications in regard to the Jobs Ireland website. • The circumstances of the overpayment in relation to Ultimate Communications of €32,000 in mid 2002 were very difficult to understand. Considering the level of interest in this settlement within Corporate Affairs, the large volume of correspondence, the threat of legal action, the fact that an original single invoice was returned from FAS to Euro RSCG with a request that it be split into 5 separate invoices and the number of hands that all this passed through, it is hard to understand how the error occurred and was approved for payment by Greg Craig. \ • The process of using advertising agencies as a medium to develop \ and host websites with third parties makes little sense from a value \ for money viewpoint. This was never part of what the core functionality of an advertising agency was supposed to be. The view of Internal Audit is that this approach was taken by Coiporate Affairs so that the cover of agency contracts could be used without having to formally go through a procurement process.
4.10 Interaction with Greg Craig during the course of the investigation.
The investigation was a protracted affair based on the amount of material to be covered and the sensitivity of the initial allegations. Internal Audit met with Greg Craig on four occasions during the course of the investigation, twice in November 2004 and once each in May and June 2005. The following are some observations regarding those meetings and other general conduct. 4.10.1 Greg Craig's contact with
When was interviewed initially by Internal Audit in February 2005 he was contacted by Greg Craig shortly after he left the FAS offices with a request to meet him urgently. Greg Craig was **** ******************************.*******claimedthatGregCraig demanded that all material Internal Audit requested from AFA O'Meara as part of the investigation should be channelled back through Martin
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*****. While Greg acknowledged that he had requested meet him on that day and that they had met, he denied the allegation regarding the material requested by Internal Audit. 4.10.2 Instances where Greg Craig changed his statement.
As mentioned above in Section 4.6.7, Greg Craig initially emphasised the potential damage to his reputation that the allegations represented and he advised, in November 2004, that Internal Audit should not consider bringing this matter to the attention of any individuals external to FAS because of potential damage to his good name. He further said that he himself had spoken to no one except for his legal advisers on the matter. It emerged subsequently that Greg Craig had in fact discussed the letter in detail with ***** of OSK and ***** of AFA O'Meara before meeting Internal Audit for the first time. At Greg Craig's initial meeting with Internal Audit, he denied that he played any role in the recruitment of ************************* **** AFA O'Meara and said "would never do that type of thingHe subsequently admitted that he had in fact suggested********to****** of AFA O'Meara. In relation to the awarding of the contract to Donna O'Connor for sales at the Opportunities 2003 event, Greg Craig initially said that he had no idea how she was awarded the contract, not having submitted a tender. On receipt of a copy e-mail from Internal Audit he agreed that in fact he had intervened and given her the contract as she seemed like "a better bet" to get the work done. Greg Craig denied any significant role in the recruitment of | *******************inAFA O'Meara. He stated that he was merely passing on a message from a director of AFA O'Meara. However, e-mails suggest he played a very active role discussing details of her salary and financial package. Greg Craig offered no explanation as to the reasons for these e-mails to Internal Audit. and others stated that Greg Craig had made a number of requests for tickets for sporting and other events. When this was put to Greg Craig in May 2005 he denied ever having requested tickets for events. Material from e-mails seen by Internal Audit suggested that there had been a number of requests for tickets. In one e-mail dating from September 2003 there were details of approximately €25,000 worth of
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advertising booked directly by Greg Craig with an executive from LDP Ltd (Irish Daily Star). In body of the e-mail was included the following Greg Outlined in the attachment is the agreement from yesterday's meeting. Give me a shout if you have any problems. Can you text me your home address so I can get the tickets delivered to you. " When this was put to Greg Craig in June 2005 he admitted that he had indeed requested tickets but stated that he had never personally benefited from them. He stated that at all times he had himself been requested to supply tickets for events by other parties within FAS and generally at a level more senior to him. 4.10.3 Conclusions The investigation has taken a considerable period of time to complete and has undoubtedly put pressure on many people both inside and outside the organisation but most specifically on Greg Craig. Notwithstanding this however, it has been the experience of Internal Audit that in regard to critical matters of fact, Greg Craig has changed his statement when presented with additional material which had become available to Internal Audit.
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