{Internal Audii

INTERNAL AUDIT REPORT

Corporate Affairs
i

Ref.: INV137

18 May 2006 I / 68
 FAS Corporate Affairs Investigation

1. Introduction
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

18 May 2006 2 /68

 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

18 May 2006 3/68

 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 e-
mail 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.

18 May 2006 4/68

 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.

18 May 2006 5/68

 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
i 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

18 May 2006 6/68

 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

18 May 2006 8/68

 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.

1 8 May 2006 9/68

 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.
>

18 May 2006 10/68

 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

18 May 2006 11/68

 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

8 May 2006 12/68

 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.

18 May 2006 13/68

 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

18 May 2006 14/68

 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.

18 May 2006 15/68

 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.

18 May 2006 16/68

 3.3 Recommendations

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

18 May 2006 17/68

 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.

c
Joe Roe Tony Killeen Terry Corcoran
Manager IT Audit/Support Director Corporate Director Corporate
- Internal Audit Governance/Internal Audit Governance/Internal
Audit
(to December ] 6 2005) (from December 19 2005)

18 May 2006 21 / 68
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.

4.1 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

8 May 2006 22 / 68
 • 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.

4.2 Findings regarding the specific allegations in the letter

4.2.1 • • • • • • • / Kingram Studios

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.

18 May 2006 23 / 68
 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.

18 May 2006 24 / 68
 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 as a consultant and is receiving

half salary

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

8 May 2006 25/68

 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.

4.3 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; in Euro RSCG and

AFA O'Meara.

had been employed in a critical role in relation to the FAS

account within Euro RSCG.

When interviewed, Greg Craig spoke highly of

the role that had played in relation to the FAS account. He

8 Mav 2006 26 / 68
 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 tQ as
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

18 May 2006 27/68

 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

18 May 2006 28/68

 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 mm I In i
given the position o f | t f ^ ^ ^ H I B L t 0 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

18 May 2006 29 / 68
 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.

18 May 2006 30/68

 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.

18 May 2006 32 / 68
4.4 Role of within AFA O'Meara.

As mentioned 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

18 May 2006 33 / 68
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

1 8 May 2006 35 / 68
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.
4.6 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

18 May 2006 41 / 68
 / 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 of

OSK in which he stated

"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

18 May 2006 42 / 68
 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"

18 May 2006 43 / 68
 | 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

18 May 2006 44/68

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 of OSK to

H H H H I dated 9 November 2004 in which was directed
as follows

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.

18 May 2006 45 / 68
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.

18 May 2006 46 / 68
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 who in turn

forwarded the e-mail to Greg Craig with the comment,

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.

18 May 2006 47/68

 /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.

4.7 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. 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,

18 May 2006 48 / 68
 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

8 Mav 2006 49/68

 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.

8 May 2006 50 / 68
 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.

18 May 2006 51/68

 (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

18 May 2006 52 / 68
 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

ii
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,

18 May 2006 53 / 68
 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.

4.8 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.

18 May 2006 54/68

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

8 May 2006 55/68

 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 e-
mail 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

18 May 2006 56/68

 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

18 May 2006 57/68

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

18 May 2006 58/68

 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.

4.9 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. 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.

18 May 2006 59 / 68
 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

18 May 2006 60 / 68
 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

18 May 2006 61 / 68
 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

8 May 2006 62/68

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

18 May 2006 63/68

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

18 May 2006 64 / 68
 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.

18 May 2006 65 / 68
 • 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

18 May 2006 66 / 68
 *****. 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

18 May 2006 67/68

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
il
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.

18 May 2006 68/68