Mr. Seamus McCarthy:

The main responsibilities of the OPW relate to management and maintenance of the State's property portfolio, day-to-day management and operation of national monuments and historical properties, and flood risk planning and management. The appropriation account for the OPW Vote shows gross expenditure of €399 million in 2013, mainly comprising expenditure of €71 million on flood risk management and €323 million on estate portfolio management. Expenditure of €5 million was incurred in 2013 on the national procurement service, which engaged in central procurement of goods and services for public bodies. Since 1 January 2014, the service has been incorporated into the Office for Government Procurement, and the related expenditure is accounted for in the Vote for that office.

Under its flood risk management programme, the OPW spent approximately €35 million on flood relief schemes, €15 million on ongoing maintenance of arterial drainage and flood relief schemes, and €2.3 million in the form of contributions to minor flood relief works carried out by local authorities. Over €7 million was spent on studies and development of river catchment flood risk assessment and management plans, referred to as the CFRAM programme.

These are required to meet Ireland's obligations under the 2007 EU floods directive. My office has examined progress on the CFRAM programme and a special report on the findings is being drafted. I expect to complete that report in the next couple of months.

Expenditure by the OPW on estate management included €97 million spent on rent and other charges related to property rented for use by public bodies; €54 million was spent on maintenance of Government property and related supplies; and €48 million was spent on new works, alterations, and additions. The committee may wish to note that the latter included payments in 2013 totalling €8.9 million in relation to an unsuccessful land swap deal at Harcourt Terrace, which I have previously reported on, and which has previously been examined by the committee. Payments under a public private partnership contract relating to the National Convention Centre in Dublin in 2013 amounted to just over €48 million, while expenditure of €36 million was incurred on heritage properties and related visitor services.

Apart from the estate management expenditure accounted for in Vote 13, the OPW also incurred expenditure of the order of €59 million in 2013 on a range of services and capital projects that it was carrying out on an agency basis for other public bodies, including other central Government Departments and offices. Chapter 4 of my report outlines the results of our examination of the manner in which the accounting for this arrangement was managed in 2013.

The concept of providing certain required services on an agency basis on behalf of other public bodies is potentially useful, such as where the agent makes available specialist skills and expertise to other organisations that have no long-term requirement for such services, and which it would be costly or complex for the principals to procure in other ways.

The standard procedures to be applied by agents and principals in controlling and in accounting for such arrangements in cash-based appropriation accounts are set out in the Department of Public Expenditure and Reform’s Public Financial Procedures.

In most cases, the OPW receives funds in advance from the principals for each project or service required. The OPW operates a separate suspense account for each project or service, with a corresponding suspense account on the principals' side. Corresponding entries should be made in each account pair. The amounts paid out by the OPW to suppliers should be notified promptly to the principals, who adjust their own suspense accounts accordingly and charge those costs to their own appropriation accounts. In 2013, the OPW operated suspense accounts in respect of around 3,700 projects being carried out on an agency basis for a variety of principals.

Allowing for inevitable timing differences, balances in the OPW suspense accounts should match the balances in the corresponding principals’ suspense accounts. However, our analysis found that at the end of 2013, the OPW recorded that it held €20.8 million in respect of 35 vote principals. In contrast, the principals’ accounting records indicated that the OPW held funds of €11.4 million. There were both positive and negative variances, resulting in a net difference of €9.4 million. As a result of this analysis, the Department of Children and Youth Affairs made an adjustment of almost €7 million in its appropriation account. This reduced the difference between the OPW and the principal suspense accounts to a net €2.4 million.

The examination found that some departments did not operate suspense accounts when they made advances, which they charged directly to their appropriation accounts. In other cases, confusion about who was principal for individual projects had arisen when functions were transferred between Departments. The OPW was late in notifying principals of some payments made in 2013, with the result that a number of appropriation accounts under-recorded their 2013 spend. Unspent balances from advances on some accounts had not been refunded to the principals, and there were many cases of transfers and reallocation of fund balances between projects.

Overall, I concluded that the system of accounting for agency services provided by the OPW did not appear to be operating efficiently and effectively. Improvements in accounting and control systems need to be made both by the OPW and by the Departments availing of its services. I have made a number of recommendations for improvement, which have been agreed by the Department of Public Expenditure and Reform and by the OPW. My Office will monitor the implementation of changes to ensure that a more rigorous system evolves, and that any discrepancies in records are reconciled promptly.