Mr. Seamus McCarthy:

The National Shared Services Office, NSSO, provides a range of administrative support functions on a shared services basis for central government Departments and for certain other public service bodies. Since 1 January 2018, the NSSO has operated as a separate Civil Service office under the aegis of the Department of Public Expenditure and Reform.

The 2019 appropriation account for Vote 18 records gross expenditure by the NSSO of €47.5 million of which 60% or €28 million was on pay. The expenditure is distributed across four programmes. Three of these represent the direct expenditure incurred in the year in providing the target services: programme B relates to human resources functions, at a cost of €10.1 million in 2019; programme C relates to payroll shared services at a cost of €12.2 million; and programme D relates to finance shared services at a cost of €539,000 in 2019. System development costs for finance shared services in 2019, totalling €11.3 million in 2019, were charged to programme A, titled the NSSO function. This was the largest of the programmes at a total cost of €24.6 million in 2019.

There was also an underspend in the year of €9.8 million or 17% relative to the gross Estimate. This was mainly due to delays in the roll-out of the financial management shared service, which I will discuss in more detail in a moment.

Members may wish to note that the outturn on the Vote does not reflect the value of the payroll payments handled by the NSSO on behalf of its client bodies. These totalled €5.3 billion in salary and pension payments in 2019. The cost of the payments was charged back to the respective Votes and other client accounts.

I issued a clear audit opinion on the appropriation account. However, I drew attention to the statement on internal financial control, which discloses that the NSSO did not comply with national procurement rules in respect of a services contract that operated in 2019. Due to a misinterpretation, the NSSO continued to draw on the contract after the estimated value had been exceeded. When the misinterpretation was clarified, use of the contract ceased.

The report before the committee looks at the implementation of the NSSO's financial management shared services project. The project is a complex one as it aims to replace 31 disparate financial reporting systems across 48 central government Departments and offices with a single financial management system. At the point we were completing the report the project was significantly behind on delivery while costs incurred were considerably in excess of what was expected.

The business case, approved by Government in 2016, projected total expenditure for the project of €47.4 million, excluding VAT. To the end of 2019, the NSSO had spent €38.4 million, excluding VAT. The NSSO expected additional expenditure of €15 million in 2020.

Roll-out of the single financial system was planned to take place in several stages. The first group of client bodies was expected to start using the new system in the middle of 2018, with other waves of client bodies to follow. By September 2020, the new system was not yet ready for use.

A key deliverable for the project was the development of an agreed chart of accounts. This documents the accounts and account codes that an organisation requires for recording financial transactions. Agreement on a chart of accounts by the potential users of the financial system proved very challenging. While the original business case envisaged that a chart of accounts would be completed in late 2016, it was not signed off until 2020.

A large proportion of the work on the project was contracted out to a systems implementation partner. Disputes over the terms of the contract continued throughout the work on the project. In addition, a review by an external consultant completed in early 2019 identified significant design issues and weaknesses in the project governance framework.

As our report was being finalised in September 2020, a Government decision approved the continued development of the single financial system over an extended timeline to 2025. Additional funding was approved, bringing the total budget for the project to €115 million, including VAT.