Mr. Seamus McCarthy:

The appropriation account for Vote 26 for the Department of Education and Skills recorded a gross expenditure of €8.87 billion in 2011. Salaries and pensions accounted for more than three quarters of current expenditure, with approximately 95,000 whole-time equivalent staff in the sector. Capital services expenditure amounted to almost €590 million. The school transport service is funded from Vote 26 and payments amounted to €171 million in 2011. A sum of €152 million was paid to Bus Éireann which, under a long-standing arrangement, manages the provision of most school transport, using a combination of services contracted in from private bus operators and vehicles in its own fleet. The remaining €19 million was spent on direct school transport grants and school bus escort payments.

Chapter 6 deals with the Exchequer's overall financial commitments arising from public private partnerships, PPPs. Members will recall that various aspects of this chapter have been considered by the committee in previous meetings. Total expenditure to the end of 2011 on five education PPP projects was €255 million and the outstanding commitment with regard to those projects was just under €1 billion. The five projects comprise three groups or bundles of schools, the National Maritime College and the Cork School of Music, both of which are part of the Cork Institute of Technology. The chapter recommends publication of the value for money appraisals carried out before PPPs are contracted for to assist in improving public understanding of the factors influencing the achievement of value in public investment projects. The chapter also recommends, in the context of roads projects, that post-implementation evaluations of projects should be carried out so that lessons learned can be applied in development of later projects. This applies equally to other types of PPP projects, including those in the education sector. Ideally, projects to be evaluated should have been in operation for a sufficient period to allow them to have bedded down. As some of the education projects have been operational for a number of years at this stage, post-implementation evaluations would now be timely. I am not aware that any have been completed to date.

Four other education PPP projects are currently being developed and are at various stages of progress. These involve a further three bundles of schools dispersed across the State and the Dublin Institute of Technology campus in Grangegorman, designed to bring together the various schools and colleges of the institute on a single site. In 2011 the Department cancelled three bundles of third level education PPP projects that had been in planning for a number of years. The National Development Finance Agency had procured and provided technical, legal, financial, insurance and other services for those projects at a cost of almost €4.4 million, excluding VAT. The Department provided capital funding of €5.7 million to the colleges to prepare clean, serviced sites for the PPP companies. Some of the colleges incurred additional costs from their own resources. For example, the Institute of Technology, Tallaght incurred substantial additional PPP project related costs from accumulated reserves. The extent to which these sunk costs have potential future value has not been determined.

Chapter 18 deals with salary overpayments to teachers. As part of the 2011 budget, the Government applied a 10% reduction in the pay rates for new entrants to the public service on or after 1 January 2011. In addition, all new appointees to teaching and many retired teachers returning to teach were to commence at the first point of the relevant pay scales. The terms of the budget decision also applied to non-teaching staff employed in schools. It took the Department over seven months from budget day to prepare and issue a circular containing the revised pay scales and a further two months to implement the required changes to its payroll systems. When the report was being completed, the Department estimated that it had overpaid approximately €1.18 million to some 4,700 new entrants in 2011. I understand the Department has since revised up this estimate and now calculates that the overpayment amount was €1.745 million, paid to just under 5,000 employees. By September 2012, one year after implementation of the pay rate changes, the Department had not yet contacted the overpaid individuals or put in place repayment arrangements. The Department expected the repayment arrangements for the post-primary and non-teaching staff to be completed shortly and to commence with the primary sector in November 2012. I understand that, to date, around 29% of the estimated amount overpaid has been recovered. The Accounting Officer will be able to provide further information about payment recovery and whether recovery of the full amount overpaid is expected to be achieved.

The scale of the challenge in managing large public sector payroll systems was brought out clearly during the series of committee meetings last October and November that examined allowances in public sector bodies. I fully accept that time is required to implement budget and other changes in public sector pay. Nevertheless, I concluded that it would have been more efficient had the Department regarded all staff added to the payroll in 2011 as new entrants and applied the pay reductions earlier. Subsequently, pay rates could have been adjusted for eligible employees as evidence was supplied of relevant previous employment in the public service. This is likely to have been a more efficient approach because employees would have had a financial incentive to provide relevant information promptly. The operational lessons from this case may be of value in the context of the currently proposed pay reductions, the implementation of which presents a very significant challenge to all public sector payroll managers.