Teagasc facing ‘significant difficulties’ in terms of cash flow management

In recent years, Teagasc has faced “significant difficulties” when trying to manage its cash flow, the authority’s director, Prof. Gerry Boyle, has said.

He appeared before the Public Accounts Committee (PAC) today (Thursday, October 4) to discuss Teagasc’s financial statements for 2017.

On the topic of an operating surplus, Prof. Boyle stated that Teagasc doesn’t ever aim to have a surplus – as it is obliged to match expenditure with income.

In its financial statements for 2017, Teagasc’s operating surplus dropped from €7.95 million in 2016 to €5.023 million in 2017. In terms of its surplus for the financial year, that figure dropped from €6.152 million in 2016 to €2.398.

Addressing the committee today, Prof. Boyle said: “In recent years, we have been having significant difficulty in trying to manage cash flow. So we sought leave to put in place an overdraft facility and that wasn’t forthcoming from our parent department.

“The decision was taken then to try and build up a capital reserve in order to be able to meet, on a sustainable basis, our recurrent capital requirements.

In 2016, we were able – through prudent management – to generate such a surplus. But, I want to emphasise, that that would not be the norm.

“But we felt that was a prudent thing to do because we were quite concerned about our ability to manage cash flow in a prudent way, and the department did support us in this respect.

“In 2017 then, because this is an opportunistic type of activity, the same opportunity didn’t generate itself because of demands on current expenditure,” he said.

The director of Teagasc noted that the authority would like to build that surplus – or rainy day fund, as it was also referred to – up over the next couple of years to a “significantly higher sum given the nature of Teagasc’s activities”.

‘Ring-fenced’

Continuing, he said: “This fund will be ring-fenced and only used as we need it. I would far prefer to be able to use a fund like this for long-term capital investment, because we have serious deficits in the organisation in infrastructural terms.

“But, at the same time, we are being prudent here in saying: ‘We want to ring-fence a fund to ensure that we can meet our recurrent capital requirements.’

“For example, a lot of the time we incur activities before we get paid for those activities. Also, sometimes it can take a long period of time to recover monies on projects where we have actually spent resources on. So we have a very clear cash flow issue.”

Procurement practices

Meanwhile, the PAC also wished to quiz Teagasc on its procurement practices.

Prof. Boyle told the committee that the authority is making “every effort to be as fully compliant as possible” in regard to its procurement practices.

Significant improvements in procurement procedures have been implemented in recent years through the recruitment of specialist staff and the development of robust systems.

“Procurement, it should be noted in Teagasc, is complex due to our diversified activities and the geographical dispersal of our sites. The issues reported in the financial statements were discovered and brought to the attention of the comptroller and auditor general by Teagasc.

“In the main, the reported matters were due to two factors. Number one, quotes being sought from a number of local suppliers rather than advertising through eTenders.

“We are satisfied that this did not adversely impact value for money, given the number of quotes sought and the type of services procured,” he said.

The second factor arose regarding the extension of existing contracts – for services where the requirement was being reviewed – where there were delays in the implementation of the office of government procurement process or where a similar service had already been procured from that supplier, Prof. Boyle added.

Concluding, he said: “While no breaches can be tolerated, it is noted that the breaches amounted to tender values of €1.35 million out of a total expenditure of €42 million or 3.2%.”