Mr. Seamus McCarthy:

The first segment of chapter 16 was prepared by drawing together relevant information from a number of accounts to give an overview of the level of central government funds provided to local authorities and the purposes for which those funds are provided. In 2011, central government funds provided to local authorities totalled just over €3.5 billion. That represented a reduction of more than €900 million on the amount provided in 2010 and was down over €2.2 billion from the peak in 2008. Directly or indirectly the Vote for Environment, Community and Local Government provided €1.3 billion to local authorities in 2011 and the Vote for Transport, Tourism and Sport provided €1.2 billion. A further €561 million in non-Exchequer source funding was paid to local authorities from the local government fund. Over the year, the local government fund has been financed mainly by motor tax receipts and an annual Exchequer contribution. In 2012, the Exchequer contribution has been replaced by the proceeds of the household charge payable by owners of residential property. This charge which is being collected by the Local Government Management Agency is an interim measure and is to be replaced by the property tax announced yesterday by the Minister for Finance in his budget speech.

Just over one third of the centrally sourced funding was applied to road improvement and maintenance, with a further one fifth used for housing and urban regeneration projects. The general purpose grants are provided to assist local authorities to bridge the gap between their other income and the cost of services they provide. These also accounted for one fifth of the funding provided. Chapter 16 also looks at the measures available to assess the performance of urban wastewater treatment infrastructure. In the past decade over €3 billion has been spent on wastewater infrastructure. Overall responsibility for water services in the State lies with the Department of the Environment, Community and Local Government, while the local authorities provide and maintain public water services. The new commercial semi-State body, Irish Water is to take over that responsibility from the local authorities. The 1991 EU Directive on Urban Waste Water required different levels of waste water treatment depending on the characteristics of the catchment area and the type of water body into which the waste water is discharged. It also requires regular monitoring of the discharges from treatment plants. The Environmental Protection Agency reports on the level of treatment in place and the performance of treatment plants which enables the level of compliance with the directive to be assessed. However, the 2008 and 2009 data was published only in February 2012. The data for 2010 was published in June 2012. The usefulness of the data is reduced by the delay in publication but both the Department and the EPA have indicated that the causes of these delays have been addressed and from now on the performance data for any given year will be published by the end of the following year.

Treatment plants where secondary treatment is provided can fail to meet the directive requirements for two main reasons, either because too few discharge samples are tested or because the samples failed to meet the quality standards. In 2010, 94% of plants provided the required minimum number of test results. Included in the 6% of plants that did not meet the testing requirements are five that did not submit any results to the EPA. Just over 40% of plants did not meet the required minimum discharge quality standards. Given the level of investment that occurred over recent years, there is a need to identify the causes of this and the corrective action required. In addition in 2010 there were 18 catchment areas where the level of wastewater treatment required by the EU directive is not yet in place. It is estimated that the required treatment will not be in place in all areas until 2015. Information is not available on the cost per unit of waste water treatment which is a central aspect of performance. The report recommends that the Department examines the feasibility of providing such costs measures.

Chapter 6 focuses on the Exchequer's financial commitments under public private partnerships, PPPs. In many cases, local authorities use PPPs to provide for the treatment of water and wastewater. At the end of 2011, the Department had incurred expenditure in relation to 20 PPP projects, two of which reached contract stage in 2011. Total expenditure by the Department up to and including 2011 was approximately €648 million, with future commitments amounting to €37 million. While these figures relate to local authority schemes that receive an Exchequer contribution, it should be noted that all PPP contracts entered into by local authorities require prior approval by the Minister for the Environment, Community and Local Government. PPP projects entered into by local authorities without direct Exchequer support are not included in the figures in the chapter.

A value for money review of the water services investment programme that was undertaken by the Department of the Environment, Community and Local Government in 2010 concluded that the use of PPPs to provide water treatment plants can offer benefits over traditional procurement, including quicker construction, greater certainty of final capital cost, increased use of newer technologies and guarantees of performance and maintenance standards. The Department has indicated that compared with traditional procurement, PPPs can provide savings of between 10% and 20% on capital costs and savings of between 5% and 10% on operational costs. Department of Public Expenditure and Reform guidelines require that an assessment of the value for money to be achieved from a PPP project be carried out before a project proceeds. As few of these assessments have been published, however, public understanding of the factors affecting the achievement of value for money is limited. The chapter recommends that such assessments should be published.

Value for money testing is based on comparing the long-term costs of PPP procurement with those associated with direct public investment and operation. The new forms of contract that were introduced for major public works contracts in 2007 increased the level of certainty of final capital costs for non-PPP projects. This may have implications for the relative value for money to be achieved from PPP projects. It is important that the testing reflects this change in the nature of conventional public procurement. When projects have been in place for a number of years, an evaluation of the value for money actually achieved would be useful in identifying lessons to be learned for future projects. Such post-implementation reviews are important in identifying actual value achieved and ensuring the lessons learned from PPP projects are identified and used to inform decisions about future publicly-funded investments regardless of how they are procured. I will deal further with these general points in the context of next week's meeting with representatives of the Department of Public Expenditure and Reform and the National Development Finance Agency.