Oireachtas Joint and Select Committees
Thursday, 5 March 2015
Public Accounts Committee
2013 Annual Report of the Comptroller and Auditor General Appropriation Accounts
Vote 11 - Office of the Minister for Public Expenditure and Reform
Vote 12 - Superannuation and Retired Allowances
Vote 18 - Shared Services
Special Report No. 87 - Effectiveness of Audit Committees in State Bodies
Issues with Public Procurement
10:00 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will deal now with Vote No. 11- Office of the Minister for Public Expenditure and Reform, Vote 12 - Superannuation and Retired Allowances; Vote - 18 Share Services and the Comptroller and Auditor General's special report 87 - Effectiveness of Audit Committees in State Bodies and issues with Procurement.
Before we begin, I remindmembers, witnesses and those in the Visitors Gallery to please turn off their mobile telephones as they interfere with the sound quality of the transmission of the meeting. Witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House, a person outside the House or an official either by name or in such a way as to make him or her identifiable.
Members are reminded of the provision within Standing Order 163 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies. I welcome Mr. Robert Watt, Secretary General, of the Department of Public Expenditure and Reform and invite him to introduce his officials.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Thank you. I now invite Mr. McCarthy to make his opening statement.
Mr. Seamus McCarthy:
The 2014 Appropriation Account for the Vote for the Office of the Minister for Public Expenditure and Reform records gross expenditure totalling €38.5 million, divided about evenly across two programme areas dealing respectively with activities relating to public service management and reform and management of the system of public expenditure.
At the end of the year, the Department had underspent by €3.6 million relative to its budget and that amount was accordingly liable for surrender back to the Exchequer. Overall expenditure on the Vote for 2013 was down approximately 10% compared to the 2012 outturn. A significant factor in the reduced level of spending was the transfer of functions from the Department to the human resources shared services centre, with effect from 1 January 2013. For 2013, those functions are accounted for under Vote 18.
The committee may wish to note the inclusion in note 7 of an account of the non-statutory contingency fund, which is under the control of the Accounting Officer. The fund, which totals €1.2 million, is available for use when it would be impractical to seek immediate approval from Dáil Éireann to meet urgent or unforeseen expenditure not covered by ordinary votes. Previously, this was published as a separate account. The amount held in the fund is reviewed every five years.
Vote 12 presents the expenditure in respect of Civil Service and prison officer pensions. Pension payments for other public servants are charged to other Votes, including those for education, the HSE, Garda Síochána and Army pensions. The total spend on the Vote in 2013 amounted to €428 million. This compares to expenditure of approximately €520 million in 2012. Appropriations-in-aid in 2013 amounted to €89 million, with little change year on year. These mainly comprise employee pension contributions. The Department of Finance administers the pension payments charged to Vote 12 but the associated administration costs are borne on Vote 7 - Office of the Minister for Finance. Costs of policy formulation in relation to civil and public servants are borne on Vote 11 - Office of the Minister for Public Expenditure and Reform. As a result, no administration costs are reflected in the appropriation account for Vote 12.
Vote 18 for shared services is a new voted service that was established on 1 January 2013. The human resources shared services centre, now referred to as PeoplePoint, has taken on certain human resources management functions transferred from the Department of Public Expenditure and Reform with effect from that date. The 2013 appropriation account for the Vote for shared services records gross expenditure of €15.7 million. This comprises €11.8 million spent on activities related to PeoplePoint, and €3.8 million spent on other shared services projects. Most of this was spent on payroll shared services. Expenditure in the year on "other" services was significantly less than provided for in the Estimate, mainly because delays in progressing the financial management and banking shared services centre resulted in an underspend of €3.4 million. Overall, there was a net underspend of €5.6 million relative to the Estimate, and that amount was accordingly liable for surrender back to the Exchequer.
Along with the internal and external audit functions, an effective audit committee is one of the pillars of good corporate governance. A key contribution of audit committees is to provide management and governing boards with independent and objective assurance on a range of matters including internal controls, risk management, whistle-blowing procedures and financial reporting. The role of audit committees in the public service is essentially one of oversight, since management is ultimately responsible for matters such as internal controls and financial statements. As the external auditor of most non-commercial State bodies, staff of my office engage with the relevant audit committees as required, bringing matters of concern to their attention, and following up with them to see that appropriate action is taken.
The Department of Public Expenditure and Reform is responsible for the development and dissemination of guidance for State bodies in the area of corporate governance. The current corporate governance requirements, including those for audit committees, are set out in the Department’s Code of Practice for the Governance of State Bodies, which was last updated in 2009. In a number of sectors, including third level education, customised codes of governance have been developed, but the broad structure of requirements is the same. Apart from the codes of practice, there are numerous sources to which public bodies and their audit committees can refer for good practice principles and guidance. As part of the examination, we compared the Department’s 2009 code with those good practice sources. We found the code contained only basic requirements relating to the structure and operation of audit committees and recommended that it be updated. I understand that review process is under way.
Our examination of the operation of audit committees in a sample of six non-commercial State bodies found that, with one minor exception, there was full compliance with the code of practice requirements relating to audit committees. It is encouraging to note that the bodies we examined had progressed beyond the code requirements and had incorporated many features of good practice in respect of how their audit committees operate. However, the report also identified a number of areas where good practice is generally not being followed. Those areas related to the selection and appointment of new audit committee members, recording of conflicts of interest, performance appraisal for committee members and measuring the effectiveness of the committee as a whole.
The report concludes that the requirements for audit committees in State bodies should be updated to reflect current good practice. It recommends that, in developing updated guidance, the Department should pay particular attention to the areas noted where good practice is not currently being followed, as they offer the greatest potential for improving the effectiveness of audit committees. The report also recommends that the Department should develop and issue a self-assessment checklist for use by audit committees in State bodies to determine their own level of compliance with good practice principles. We have included our good practice checklist in the report as an aid for State bodies to use in the interim.
Following on from this special report, my office will be conducting a half-day briefing session for chairs and members of audit committees in May this year on the theme of increasing the effectiveness of public sector audit committees. The briefing session will be facilitated by the Institute of Public Administration and I am happy to note that it will include presentations by staff of the Department as well as from my own office. An invitation is being issued to all non-commercial State bodies within my remit to send representatives to that seminar.
Mr. Robert Watt:
Before addressing the items on the agenda, I would like to set out some of the main areas of our work programme during 2014. More details of what we have doing are set out in our annual progress report, which is available on our website.
One of the key roles of the Department is the management of public expenditure. In 2014, gross voted expenditure amounted to €54 billion, a reduction of over €9 billion from the peak that was reached in 2009. Current spending was reduced by 9.4% and capital spending was reduced by 52.7%. This reduction was done at a time of increased demands on public services due to both demographic changes as well as pressures related to the economic downturn. During this period, reductions have sought to prioritise key services. For example, social protection spending has been reduced by 3.4%; health by 8%; and education by 3.5%. These account for 85% of gross voted current expenditure. Meanwhile, expenditure across all other areas has been reduced by 25.4%.
Since the establishment of the Department in 2011, public spending has been managed close to profile each year. The net outturn was 1.3% below profile in 2011 while, in 2012, it was 1% above profile and it was again below profile in 2013 by 0.9%. The Comptroller and Auditor General's report notes that net expenditure was above profile in four Votes and was below profile in 36 Votes for 2013. This management of public spending contributed to a closing of the fiscal deficit and our successful exit from the troika programme. The benefits of this can be seen, especially in respect of ten year government bonds, which now yield below 1% having peaked at well over 10%.
In 2014, net expenditure was 2.4% over profile. This increase should be seen in the context of the consolidation of previous years. While maintaining the focus on efficiency and value for money, the improvement in Ireland’s fiscal outlook meant that the Government was able to increase investment in a number of important infrastructure and capital areas. An additional €162 million was invested in important public transport related capital projects and moneys were allocated to meet the cost of repairing the damage caused by the severe storms in 2014. Additional funding was also provided last year to relieve some of the pressure on essential public services.
For example, the Supplementary Estimate requirement of €680 million was provided for additional spending on our health services. An additional €177 million was required in the agriculture sector, related to the delayed receipt of an EU payment relating to the European Agriculture Fund for Rural Development. This payment will be received this year, 2015.
In the Department we are focused on the need to reform our approach to budgeting and execution of budget. The committee will be aware of the series of reforms to the budgetary and expenditure processes in recent years. These reforms were aimed at improving decision making and value for money, as well as increasing fiscal transparency.
I will just mention some of the initiatives. Initiatives relate to public spending code and value for money policy reviews which are now well established. The introduction of performance budgeting links expenditure more explicitly to departmental strategy and outputs, and involves greater levels of public information and Oireachtas scrutiny over spending. The establishment of the Irish Government Economic and Evaluation Service also continues to enhance the capacity of Departments to conduct value-for-money reviews and assess policy impacts of policy.
The committee will be aware of the second comprehensive review of spending, which was undertaken last year by our Department and published in October. This process allows for the prioritisation of public money into areas where it is most needed and seeks to develop a more strategic approach to the allocation of public funds.
In the area of fiscal transparency and accountability, a number of other important reforms have been introduced. The most obvious of these is the earlier publication of the budgetary documentation. The annual budget is published now in October and the Revised Estimates are now in December. This ensures the Oireachtas has time to debate and approve the budget in advance of the new financial year and to examine the Estimates much earlier than was previously the case. There have also been important improvements in how Ireland reports fiscal data, in particular extending the focus beyond the Exchequer to include all subsectors of the general Government.
Sustainable and far-reaching reform of the public service was identified as a priority for the Department on its establishment in 2011. The Government published its first public service reform plan in 2011 and its second reform plan in January last year, covering the period 2014 to 2016.
Yesterday, the Minister, Deputy Howlin, published a progress report on reform in the public service. This report sets out the main areas of progress made so far, as well as reflecting on some of the reform priorities and objectives for 2015. Copies of this report have been sent, I understand, to all Members of the Oireachtas. The public service is now smaller and a good deal less expensive that in was in 2009, and its work in continuing to deliver essential services as budgets and staff numbers were reduced deserves to be acknowledged.
I will briefly touch on some of the changes, but I will not go through all of them. The pay bill is now down by over 20% and as part of that staffing levels have been reduced by 10% over the period, from 320,400 in 2008 to 289,600. We have implemented a variety of initiatives in looking at new service delivery approaches, including JobPath, a new call centre for assisting in the collection of the property tax and initiatives to improve how we manage State property. Leadership has been enhanced across the services through the implementation of the senior public service leadership development strategy. We have also reduced the number of public bodies by 181 - the so-called "quango cull". That programme has now been successfully completed.
We believe that the need to improve productivity and efficiency in the administration and delivery of services will continue to be an important objective for the public service in the coming years, even as the public finances improve. This is particularly the case given the demographic challenges that we face. Our population has increased by 500,000 since 2005. We have the highest percentage of people aged under 15. Life expectancy has risen and almost 13% of our population are now aged over 65 years old. These trends will continue to place increased pressure on public services for the foreseeable future. In view of this the public service must become more innovative and efficient in its administration and in how it designs and delivers services. In this context, we are looking at alternative models of service delivery and more strategic use of technology to meet both current and future challenges.
I would like to highlight, if I may, some of these initiatives in more detail. At the beginning of this year, the Office of the Government Chief Information Officer published a new ICT strategy for the public service. This has five key objectives: build to share, creating ICT shared services to support integration and efficiency across the public service; digital first, the digitisation of key transactional services to improve service delivery; improve governance, to ensure that the ICT strategy is aligned across public bodies; and increase capability, to ensure the necessary skills and resources are available to meet current and future ICT needs. A big challenge that we have within the system is our ability to attract people with certain skills which are in very high demand now across the economy, particularly skills in relation to ICT and digitalisation. Data as an enabler, the final element of the strategy, is to facilitate increased data sharing and innovative use of data across all public bodies.
With regard to the issue of open data and the possibilities for us, the strategy reflects the need for public bodies to change and fully exploit the potential of an increasingly digital world. The continuing increase in the use of ICT by public bodies has resulted in the production of huge volumes of data. This volume is valuable and the technology is now being used to transform the way services are planned, delivered and managed. As public bodies have progressed in areas like e-Government and data analytics, the potential of data to help deliver economic, social and other benefits has become clearer. We must do this, of course, while respecting fully data protection rights.
The Department is leading the implementation of the open data initiative in collaboration with other public bodies. The public bodies working group is working on a technical framework for open data, to underpin the ongoing development of the open data portal and through consultation with stakeholders we wish to see how other ideas and expertise can contribute to this overall process. As part of it, last month the Minister, Deputy Howlin, launched a public consultation on open data licences, and I hope that citizens, businesses and other public servants will engage in this process.
A public consultation process was also undertaken to inform the drafting of a new data sharing and governance Bill, which we are developing. The objective of this Bill is to provide a legal basis for information sharing across public service bodies, with associated transparency and governance obligations. We are also, within our Department, driving the development of shared services to improve information management and integration, as well as delivering administrative functions more efficiently. The national shared services office is leading on the strategic direction of shared services policies and the implementation of shared services projects in the Civil Service. I will mention some very briefly. PeoplePoint, the HR and pensions administration shared service, has been in operation since March 2013 and already provides services for more than 26,000 employees across 21 organisations. We have also put in place a single payroll shared service centre for the Civil Service, which now services 22 clients and currently issues over 70,000 payments per month to over 21,000 employees.
Work is progressing on the financial management shared services project. We hope to issue a tender document in relation to this shortly. This will have significant implications for Government accounting, how accounts are presented and the quality of financial information we are able to produce. We might get a future opportunity to present separately to the committee on this project and what it means, if members felt that would be useful. The potential benefits of this shared service will include greater capability to respond to IMF and EU requirements; more time for organisations to focus on strategic financial issues; improved financial information to support better decision making around budgets and expenditure; and reduced costs, improved performance and increased financial control.
Turning to Government procurement, the programme to achieve greater efficiency in public procurement is being implemented by the Office of Government Procurement. Mr. Paul Quinn, who heads up the office, is with us today. This office is taking responsibility for the procurement of common goods and services across the public sector. The OGP also provides the national procurement policy function, customer support services and systems for all the sourcing organisations. While budget responsibility remains with the public service bodies, the contractual arrangements put in place help these bodies to remain compliant and to deliver value for money. The procurement functions have forecast a savings delivery of €63.5 million for 2014.
On Tuesday of this week, the Minister, Deputy Howlin, and the Minister of State, Deputy Harris, published the OGP’s report on public spend and tendering analysis. I have copies we can circulate to members. I understand it was published early on so members may have had a chance to see it. This is a major step forward. Prior to the establishment of the OGP we had no mechanism for collecting, analysing and reporting on spend data across the public service.
Some of the results from the work are interesting. The report indicated that 93% of Government expenditure is with firms within the State and that 66% of expenditure is with the SME sector. One of the objectives of this programme is to promote competition in markets and to fully support and encourage smaller suppliers in competing for Government business. In doing so, the OGP works with Government agencies and industry representative bodies in developing and implementing initiatives, and in driving supplier education and awareness for small and medium enterprises.
The Civil Service renewal plan was published in October 2014. This sets out a vision for the service and a three year action plan. It outlines 25 practical actions that will create a more unified, professional, responsive, open and accountable Civil Service. The plan responds to many of the criticisms that have been highlighted in many reports and in many discussions with the committee in the past. Since the publication of the plan, significant progress has been made. The Government has approved the terms of reference for the establishment of an accountability board for the first time, to strengthen accountability and performance across the service. A Civil Service management board has been established to provide collective leadership and management to the service for the first time. The board comprises all Secretaries General and heads of major offices and we are responsible for driving the implementation of the plan. Priority actions for completion by mid-2015 include the first performance review process for Secretaries General; identifying options to strengthen the disciplinary code and to address under-performance; extending open recruitment in key areas to fill skills gaps; and carrying out the first Civil Service wide employee engagement. Two weeks ago, we advertised, for the first time, a principal officer competition for middle managers across the service. We have opened up recruitment at that level and we are looking for candidates both within the service and externally.
As part of the Civil Service renewal programme, our Department is also implementing HR reform across the Civil Service to better support managers and to enhance performance. One of our major reforms in this area was the reduction in paid sick leave, introduced last year. The new scheme effectively halves the access to paid sick leave for public servants while still providing support for them when they are ill. I expect a downward trend in absenteeism following the introduction of the scheme last year. However, there remains a significant leadership and management challenge in tackling absenteeism across the public service. Today, we publish the public service sick leave statistics for 2013. The headline figures show that an average of 9.5 working days were taken per full-time employee. In effect, 4.3% of working days were lost to sick leave in the public service in 2013. While these figures do not reflect the impact of last year’s sick leave reforms, it is clear that this level of absenteeism is not acceptable.
We also have been implementing a programme of political and legislative reforms to increase accountability, and to improve the quality of decision making and transparency in public administration. I will not go through all the reforms as members will be aware of them but they include the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013, Freedom of Information Act 2014, Protected Disclosures Act 2014 and Regulation of Lobbying Bill 2014. We are developing new legislation in respect of public sector standards Bill and the Department has initiated a new approach to appointments to State boards through which all appointments must be advertised openly on the State boards portal. The statute law revision (secondary instruments) Bill will be also published shortly. I have set out in an annex to my statement the legislation we have delivered since 2011. We have been responsible for preparing 23 Bills, which have been enacted.
I would like to turn to specific items on the agenda today. The first item is the 2013 appropriation accounts for the Department. The Estimate for 2013 was set at €36.4 million, a reduction on 2012 levels, reflecting the fact that a new Vote was established to separately identify costs associated with the transactional shared services projects. The surplus to be surrendered in 2013 was approximately €3.6 million, which arose mainly as follows: savings on administrative budget pay of almost €1 million arising from resignations, vacancies arising from outward secondments and slower than anticipated recruitment of replacements; lower than anticipated funding demands on PEACE and INTERREG projects; savings on the reform agenda fund due to reduced external support costs and the completion of work in-house where possible; and the timing of recoupments from the EU in relation to appropriations-in-aid.
The second item relates to Vote 12 – superannuation and retired allowances. The 2013 appropriation accounts for this Vote show a net outturn of €338.5 million compared to an estimate of €384.6 million, giving a surplus of €46.1 million for surrender to the Exchequer. The 2013 gross estimate was based on existing pensions in payment on 31 December 2012; provision for cessation of pensions in 2013; an estimate of retirements and deaths in 2013; and an estimate in respect of lump sum payments to established civil servants. It transpired that the number of retirements in 2013 was significantly less than anticipated, primarily because of the extension of the "grace period" and this led to lower retirements and, as a consequence, lower spending on the Vote than had been anticipated.
The 2013 Estimate for the shared services Vote was set at just over €21 million. The outturn for 2013 was €15.4 million leaving a surplus to be surrendered of €5.6 million. This surplus arose due to a delay in the transition of staff from originating Departments to programmes and the later than anticipated take-on of staff in PeoplePoint.
The Office of the Comptroller and Auditor General reviewed the operation of audit committees in a sample of six non-commercial State bodies and assessed their compliance with the requirements of the code of practice. With one minor exception, the review found full compliance among the bodies with the code of practice requirements for audit committees. The recommendations of the report are also being addressed by the Department in the context of the updated Code of Practice for the Governance of State Bodies, which will be circulated to Departments for consultation in the coming weeks. We will seek observations from both the parent Departments and the State bodies under their aegis.
The Department is almost four years in existence. Over this period, we have played a substantial role in addressing the economic and fiscal crisis that faced the State. We have also taken a lead role in driving the reform agenda, delivering much needed reform and renewal of our State institutions and our public services. Effective management of public spending goes hand in hand with the reform agenda. Reform supports the sustainability of public expenditure by delivering services in a more efficient, cost effective manner. In turn, a strong and stable public expenditure framework allows us to take a more strategic and planned approach to optimise outcomes for taxpayers and public service users.
I would like to acknowledge the hard work and contribution of the staff of the Department. The visible progress made would not have been possible without their commitment.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. Watt. Can we publish his statement?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Ba mhaith liom fáilte a chur romhaibh go léir. Mr. Watt said in respect of the audit committees in State bodies that the Department will circulate an updated code of practice in coming weeks. When does he expect it to be in place?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How long will that be?
Mr. Robert Watt:
We normally give a month or two. We have been debating with colleagues the types of issues that should be covered in the updated code, reflecting concerns that have arisen since the code was prepared. We have been taking account of learning and what colleagues are saying. They are reflected as best we can in the code and then we will circulate it. I presume at that stage we can make it publicly available in order that we can have as much consultation as possible.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I thank Mr. Watt. Presumably, the report of the Comptroller and Auditor General is the basis on which the code will be drafted. I appreciate the need for consultation but the outside audit was done by his office.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I hope it will incorporate all of them. What about the recommendation for a self-assessment checklist? Will the Department adopt that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It seems to be sensible. Will that be done in conjunction with the drafting of the new code?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Value for money reviews and so on are now a standard part of the vocabulary and I will come to procurement issues shortly, which is where the focus of my questioning will be.
I have a separate question, however, which may be more appropriate to the Minister. We debated in committee the Comprehensive Expenditure Report 2015-2017. It struck me in parts as a work of fiction. For instance, the forecast for health spending is entirely unrealistic.
The Minister has announced an open forum - a consultative process one presumes - to explore in an inclusive and all-hearing manner issues relating to taxation reform, spending and so on. How does that sit side-by-side with the expenditure plans that have been already hammered out?
Mr. Robert Watt:
In the past we used to prepare budgets on an annual basis and then we moved to a multiannual approach. As part of setting out three-year envelopes we decided it was appropriate to have a spending review, which stands back periodically and looks at the challenges facing the State, to look at progress, and to look at what is happening to key indicators like unemployment, the number of social welfare recipients, demands in the health system, the demographics in education and so on. So it is to stand back and set out, and to have a process then of engaging across the system both at a technical level and obviously at a political level in terms of what the demands are and what the allocations would be over a period ahead. The whole purpose of the review is for us to stand back from the annual hurly burly of Estimates, budgets and all that, and have much more of a strategic approach.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I understand the thinking, which I think is really smart.
Mr. Robert Watt:
We are aware that in a number of areas, particularly within the health area, it is extremely difficult to forecast demands and it is extremely difficult to forecast spending. I think that is something we have debated here previously. The Comptroller and Auditor General has set out in the reports that for some time now we have had very difficult issues in terms of budget execution and keeping close to profile for health. So clearly within the spending review allocations for health there is a much greater challenge to keep the outturns close to the profile and I think the Minister has been upfront about that.
It is interesting to look at the review we did in 2011. If the Deputy looks at the allocations for Departments for 2012, 2013 and 2014 compared with the outturns, most Departments actually stayed fairly close over the three-year period. In the last year of the period, which was 2014, there was slightly more slippage, but generally the majority of Departments were able to plan with much more certainty both in terms of the cash-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That is interesting but it was not my question.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Watt is becoming a politician.
Mr. Robert Watt:
I am getting there; it was a preamble.
In terms of the dialogue - of course this is based on commentary in the media and I do not think the Government has decided what that will take - I understand from the various comments from Ministers that they want to have a more inclusive discussion about the challenges the country faces and within that no doubt it is very difficult to have discussions about challenges we face without discussing budget issues and budget challenges, and what they mean.
We have set the review for three years and the Departments are working on those allocations. I have no doubt that if there is a process that some Ministers have been debating - a formal process of dialogue - issues around resource allocation will have to be considered.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Am I to take it that this review will feed into a process as envisaged? I do not have the detail.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I presume Department of Public Expenditure and Reform officials do all this work.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I do not think figures within it are credible. Nonetheless-----
Mr. Robert Watt:
Obviously there are issues in relation to health. We all know the challenges in health. Based on the experience for the view in 2011 for most Departments, I think we have written to the committee on questions from Deputy Fleming previously. We have set out that. In fact for most Departments and most Votes we came fairly close over the three-year period to the allocation in 2011. Of course, as the fiscal situation evolves and changes, it is up to the Government of the day to propose changes to Vote allocations and for the Oireachtas to vote on those. There is nothing in this that cuts across Deputies' prerogative to vote for additional spending in areas if that is what they so wish.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Absolutely. Hopefully we might have the numbers at some stage to get some changes in that.
Does Mr. Watt have the full list of State bodies?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I will submit a question to Mr. Watt again on State bodies and boards. To my astonishment a number of years ago I discovered that the Department did not have a full list, but Mr. Watt has the full list now.
Mr. Robert Watt:
Yes. Also as part of the reform in relation to State boards appointments, we are hoping that during this year for each board we will have an outline on the stateboards.ieportal of the membership of each board, vacancies, vacancies that are coming up, recent appointments and so on so that people will be able to see in an even more open and transparent way what is happening to the operation of these State boards.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I come to the issue of procurement. We have had testimony today from the Small Firms Association and the Irish Schools Art Supply Federation in respect of the operation of the Office of Government Procurement and the procurement regime in play at the moment. I know that Mr. Watt and Mr. Quinn are familiar with some of the dilemmas that face small and medium-sized enterprises with a particular emphasis on small and micro businesses. This is not the first time we have heard this story that is very critical and quite alarming in respect of how we are going about our business at the moment. I wish to put to Mr. Watt and Mr. Quinn a number of the issues and at the end we might come to some kind of discussion on how we resolve them, because they must be resolved.
I know - other members have had the same experience - that the stories today's witnesses tell tally exactly with the story I am hearing from small and micro businesses from every county. It certainly rang true.
Aggregate contracts essentially lock out small players. The notion of smaller players coming together to develop consortia is the stuff of fairy-tales. We are advised by those on the front line that it is not practical. It is a theoretical construct rather than being deliverable in real time and in real space. The failure to unbundle down to an appropriate level and to regionalise tenders is devastating. We were told earlier this morning that if this part of the puzzle does not change it will result in very significant job losses. That is what we have heard.
On the manner of deciding on the successful tender there is a focus on price only rather than looking at the most economically advantageous bid that would capture issues such as regional balance, social objectives, environmental objectives, taking people off the live register, creating new work, all of those sorts of things. The Welsh model has been cited as a successful operating model in that regard.
There is the issue of the Department's gathering and analysis of data. In his opening remarks Mr. Watt conceded the point when he talked about the efforts that had been made and said that this was actually a great step forward because previously there were no data or analysis. I draw his attention to the outworking of that statement. No analysis and no data up to a couple of years ago mean that we established this new office, Mr. Quinn came into the position and a regime was put in place in the absence of overall data and analysis. That is just a statement of fact unfortunately. I recognise that Mr. Watt seems to have taken steps to remedy that position and I know it is a huge job of work.
It is a very problematic, however, for those of us who are legislators and policy makers, and more problematical again for people on the front line that we still have what seems largely to be a vacuum. Even the data that have been pulled together are partial. It is not the full picture of the €9 billion spend. I am not sure what one can glean from the data.
I have not read the document from cover to cover, so I am not familiar with the methodology the witnesses have employed. I would like them to address those issues in the spirit of understanding that we do not have to go through the whole palaver around the need for efficiencies to save money for the Exchequer, which I acknowledge we need to do. The issue here is the means of assessing what matters, what is valued, the quality and the social objectives, all of which are allowed within the EU framework, as the witnesses know. We are told that the manner of assessment is heavily weighted in respect of price, to the degree of 35% of more, which is counterproductive. Crucially, the issue of aggregating the contracts locks people out. It was said earlier, and Deputy Connaughton may have said it most clearly, that we have here, as it seems to some of us at least, a problem in the remit and orientation of the office in respect of what it has set out to do. It has a crude approach in regard to moneys saved and expenditure avoided, and it misses the real bang for the buck, and the €9 billion of them that could be achieved.
Mr. Robert Watt:
We welcome the discussion. When we set out on this programme of reform, we never suggested that we had all the answers or that we had a monopoly on wisdom. When one starts off on a programme like this one, there are unintended consequences and we are very happy to learn from what has gone on. We did not have the advantage of listening to the contributions of two groups the committee had in this morning but I had the advantage of reading their submissions last night and, to an extent, I and Mr. Paul Quinn can reflect on some of those.
We are very much conscious all the time of the need for us to balance the need to save money and the need to support a very important sector in the economy, the small and medium enterprise, SME, sector, which employes many people. The president of the Small Firms Association, SFA, set that out this morning in terms of the contribution that the sector makes to the economy, the number of people employed in it and so on. Our mandate is not around purely accrued value for money. If it comes across like that, I and Mr. Paul Quinn will have to reflect on that, but that is not our agenda. Our mandate, which we were given by the Government, is to drive reform, professionalise this function, save money, provide supports to the SME sector in accessing contracts and to do everything we can to ensure there is a level playing field in terms of the assessing of contracts. For example, we have tried to reduce the administrative burden tenderers face. I was on the other side of the table for eight years in my career responding to public tenders and I am very much aware of the demands, as is Mr. Paul Quinn, and we have put in place steps to try to reduce the burden. There are some crazy onerous requirements on companies to have turnover that is multiples of the value of the contracts, various indemnity insurance requirements and so on. We have set guidance on this now. I accept that issuing guidance and ensuring its implementation takes time. Some public bodies may take longer than we would like for them to fully understand the impact of some of the measures we are proposing.
The office does not purely focus on achieving value for money, rather it is about procuring in a sensible and professional way, which drives economies and efficiencies and provides access to as many players as possible. However, we accept there are occasions when that does not happen in practice and we are happy to learn and happy and to figure out better ways of proceeding.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What does that mean?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Willingness to learn is relevant here because it is a new office. Rather than the Secretary General coming into a committee meeting and responding to questions, does that mean that he is willing to have a deeper engagement on these issues?
Mr. Robert Watt:
We are happy to have as much engagement as is appropriate on these issues. Mr. Paul Quinn can talk about some of the engagements that have already taken place.
Regarding a few issues the Deputy mentioned, in terms of aggregation, as a State we have an onus to get value for money for taxpayers. There are occasions when we need to aggregate, or we need framework contracts and so on. Within that we are aware of two things. First, we accept the comments about the difficulty of developing consortia and we are examining that and are happy to consider if there is a better way in which we can facilitate the development of consortia to enable smaller firms to come together to compete. I accept there is an issue there.
There is a question about lots, and Mr. Paul Quinn will answer this in more detail. We encourage the separation of contracts into lots. We can talk about what we have done in one of the cases. Part of the policy response to these concerns is that we have much more engagement with entities procuring to ensure that we are dividing up in a way that makes sense and that enables SMEs to access contracts.
The second point around this is that when we decide on contracts it is not purely on the basis of price or cost, rather it is on the most economically advantageous tender. In some cases the weightings might be too much in one direction and we do not take account of other factors, and Mr. Paul Quinn can talk about that. Overall, it is not based purely on price, it is based on quality and service as well.
Third, in terms of data gathering, we have undertaken an exercise, and it involved a very detailed report, and I know the members have not had a chance to read through it. It is important that the policy here is guided by evidence. I am not saying that what the members heard from the SFA this morning is wrong because I need to note what has been said. However, we need to reflect upon the evidence, given the new information we have, and then reach a sensible view. We have undertaken a review of the practices of 64 public bodies, involving 35,600 suppliers with a spend of €3.5 billion. This is not a small but an enormous sample which, we believe, is representative of the procurement spend right across the system, and I would imagine the standard of error in this sample is quite low. That would be my assessment. This is quite comprehensive. The results of this are very different from the numbers the SFA provided this morning. I am not saying that we are right and it is wrong but we need to reflect and have a shared understanding. Our data show that 93% of the spending we sample goes to firms within the State while the SFA's figures suggest it is 72%. There is an enormous difference between the two. We need to understand the data and the evidence and that can better inform our policy.
Before Mr. Paul Quinn responds, I advise the committee that we are very happy to consider any form of engagement that we think is appropriate with the committee, the SFA or other groups to see if we can move this forward. We are very open to considering how we can improve the way we function to achieve the objectives that, I believe, everybody shares. I will ask Mr. Paul Quinn to respond now.
Mr. Paul Quinn:
I thank the Deputy for her questions. To add to what the Secretary General said, the committee will be aware that after our meeting last year in April 2014, the Minister, Deputy Howlin, and the then Minister of State, Deputy Brian Hayes, issued a new guidance circular to the public sector around covering quite a degree of policy guidance for people on the issues we are discussing. In particular, it requests people to do their market analysis, to understand the impact of their actions on those individual markets in order to make sure that whatever we take we sustain competition in the various markets. Not all markets are equal. Markets in the cleaning sector are very much locally delivered while, on the other end of the scale, markets in the energy sector are nationally delivered. The actions and the strategies procurers have to take are fundamentally different. Breaking contracts down into lots is very much a core element of that. We have also reminded public procurers that value for money is not simply around price, it must balance the quality, overall life-cycle costs and the terms and conditions. Providers who are prepared to stand behind their offerings and underwrite risk for the State is also a key part of determining value for money.
The Deputy referred to the report. As she recognised, a great deal of work was involved in bringing that report to the table. It has taken 16 months of gathering data from various public sector bodies. She was right in saying it is not a 100% sample. I can be clear in saying it will never be a 100% sample because some of the State bodies from which we have to collect data are literally one-room schools dotted around the country from which we will never be able to get that information.
We may be able to sample. Our intention is to reach a sample size of 80% to 85% of overall public expenditure. In the report we have been able to produce in the past week is 63% of the estimated public expenditure of €6 billion on goods and services for 2013. It is a very large sample, and we believe it is representative because it looks not only at large organisations such as hospitals but also covers smaller organisations in education and local government. It also covers organisations which are regionally based.
We spoke about regionalisation, and procurement can be broken down into lots. Where appropriate, regional lots will be offered in the market. It is down to the procurers to decide what is the appropriate strategy to deliver value for money for the taxpayer. A prime example might be that every post office in the country would like if public bodies were to buy stamps there, but this would not be an efficient way for the State to buy its postal services. We aggregate up the relationship we have with An Post, and the cost of delivering postal services for large Departments is done at national level and not by going to the local post office to buy a book of stamps which would be inefficient from a State perspective. We must be very mindful of value for money.
Some of the push back we sense in certain sectors is driven simply by a lack of procurement in the first place. It is not about aggregation in all cases. The committee has come across in its deliberations quite a number of public bodies with an absence of procurement activities, let alone good procurement. It is not surprising in one sense that as we look into certain markets long-standing relationships which have existed between suppliers and State agencies are being put to the test. Ultimately this is at the need of the taxpayer, because simple direct relationships with suppliers without any competition do not deliver value for money for the taxpayer.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It is not the taxpayers' interest either that jobs are lost in small firms and micro-enterprises, perhaps in rural areas. As the Department calculates what is in the best interests of the State and the taxpayer, which is entirely legitimate, there must be a calculation also of potential offsetting measures such as the loss of jobs, which is costly. Having additional people on the live register is extreme costly.
This is an enormous amount of data, and I am not gainsaying this. This is not a simple matter. The Department is balancing using moneys smartly in every dimension and I understand this, but it is very troubling that there is such consistent criticism from the small and micro enterprises the Department purports to support, protect and facilitate. They state it is not working, particularly the aggregation of contracts. They tell us it is not that they do not know how to go about creating a consortium, it is just it is not a realistic ask or doable in business terms, not least because to bid in this manner one needs one entity to be the lead entity and take on all of the risk.
Mr. Paul Quinn:
We enable bodies to come together under any individual structure. We do not require any one party to meet all of the requirements. They can collectively meet all of the requirements with regard to how the consortium is put together. We do not require them to take on any individual form.
I will speak about engagement because it is important to reflect upon it. From an Oireachtas perspective, this is the third committee I have come before in the past three months to explain what is happening in procurement. We are certainly listening to what Deputies tell us and we are very open, as the Secretary General stated, to learning, listening and adapting our approach and processes. We also have in place a high level group on SME access through which we meet the business development entities of the State such as Enterprise Ireland, the Department of Jobs, Enterprise and Innovation and InterTradeIreland. We come up with programmes and solutions to assist SMEs compete. It cannot simply be to the exclusion of other parties that we support SMEs. We want to make SMEs fit to compete fairly and have a level playing pitch. The Deputy is well aware of the work we do with IntertradeIreland and Enterprise Ireland on supporting training and awareness programmes-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am aware of that.
Mr. Paul Quinn:
We also have an SME working group which is chaired by the Office of Government Procurement, which enables the Small Firms Association, ISME, IBEC and Chambers Ireland to come together with us, InterTradeIreland, Enterprise Ireland and the Competition and Consumer Protection Commission to discuss these matters and come up with solutions and ideas on how to support and assist SMEs. The numbers indicate 66% of our expenditure is with SMEs directly and EU statistics indicate - we do not have statistics for Ireland - that an additional 16% flows indirectly to SMEs through subcontracting and supply arrangements. In total probably in excess of 80% of business finds its way to SMEs in the economy. It is very difficult to separate out micro-enterprises and small businesses because we do not have the data in the infrastructure of the State or privately to assist us to separate out this information. At this time we cannot reliably break expenditure information down to micro level because we do not have the data to tell whether many of the businesses are micro, large, medium or small.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am a bit bothered to hear that it is about supporting SMEs but not to the exclusion of others. I understand Mr. Quinn is making a point on competition-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I understand what Mr. Quinn is bound by and I am not arguing the toss with him on the directives or the legislation within which he must operate. It is entirely as it should be. My concern is all of us know the vast majority of employers in the State are SMEs; for all of the hype sometimes about large multinationals and as valuable as they are, this is how we tick economically. I believe Mr. Quinn that it is the Department's objective to support the model because it is what employs our people, and so far so good, but then we look at how the Department is going about things, particularly in terms of aggregating contracts. I grant that Mr. Quinn made a fair point on energy supply. We are told by the employers that aggregation locks them out of the game. In a scenario where the majority of jobs are created by smaller entities the State procurement system is heavily biased in favour of bigger players because they do not face the same challenges as the SMEs and smaller businesses. There is something incongruous in this.
Mr. Robert Watt:
There is no intention to lock out any sector or SME companies from competing.
We saw these reports last night which the committee is debating this morning. We would be very happy to sit down with the different groups - Mr. Quinn and I can meet them and members of the committee can engage in the conversation - and go through each of the points of contention. If there are issues of dispute, we should clarify them so we can respond. The committee has had dialogue with a group of people but we were not part of that dialogue and we are trying to respond.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I accept that.
Mr. Robert Watt:
I am not sure how much progress we can make. We would definitely be very happy to sit down with the groups and any members who wish to participate. There are differences with regard to the data. We have a different data source and we may disagree with some of what the members have said. When the members have a look at the data, they may or may not reconsider the position. The data suggests that 93% of the spend is within businesses in Ireland, as Mr. Quinn has mentioned. That is much more than we thought. What is happening? There are some sectors that are different. The spend is much lower in utilities and medical, surgical and pharmaceutical supplies; small and medium enterprises do not dominate those sectors. Much depends on the sector. One can do a sectoral analysis and consider some of the more recent contracts that have given rise to concern. If there is a concern, let us debate it and hear it. If it relates to scale of contract and that lots have not have been broken up enough, we would be happy to engage in any way the committee wishes to have a discussion. There are sectoral issues, so could we get to that level of detail and consider the issues?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is the witnesses' definition of a medium company?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is your definition?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is a small company?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is a micro-company?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Some of those who attended this morning are still with us in the Gallery. Is Mr. Watt suggesting he can meet them next week? What kind of timeframe are we talking about?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I understand.
Mr. Paul Quinn:
The groups were in last year and I met some representatives then, although I cannot remember how many weeks it was after the meeting. My team and I met the Irish School Art Supplies Federation within weeks, although I do not have the date in front of me. I am happy to meet them again. We had quite a productive meeting. With the Small Firms Association, through the small and medium enterprise, SME, working group there is ongoing discussion and engagement. We would be very happy to meet them.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What alarmed me about the exchange earlier this morning was that those who attended indicated that if the rules did not change almost immediately, they would not be here to talk to us next year. The other alarming statement came from Mr. Noonan; I am hope I am paraphrasing him correctly but he indicated the office was not fit for purpose. That is what he said. That concerns me. The witnesses have been before other Oireachtas committees, which demonstrates that the Oireachtas is concerned about the sector. It is extremely difficult for small companies to come together, as they are competitors, and be part of a consortium to make a bid. They are a prisoner to such a system, as the price is forced downwards.
Another area of concern is the potential for job losses in the small and micro sector. They are anchored in community and the business life of a particular town of village. This cannot be just about money and we must consider social and economic consequences for rural Ireland, which is in deep difficulty now and could not sustain further job losses. The Small Firms Association this morning suggested removing the price priority and the setting of targets for SME procurement, as may be witnessed in other jurisdictions. Scotland, Wales and, to a degree, France look after small businesses in their economy and do not pay much attention to Europe when it suits. The Small Firms Association also argued to change the provisions around subdividing a contract into lots as is currently set out in Circular 10/14, as it is easier for procurers to opt out than opt in. I asked particularly about that circular and I was told it is, by and large, aspirational and does not really fit the bill for the sector we are discussing this morning. The argument was for the implementation of an appeals mechanism that would include mandatory feedback on lost tenders so parties can learn through mistakes and be open to changing the style of a process to suit the appropriate level of tendering and competition. At the same time, it should protect the SME infrastructure as we know it in Ireland.
I find it difficult to comprehend the witnesses' argument, which does not at all reflect what was said to us this morning by the other group. The meeting that has been suggested would be very important and a step forward. I am only surprised it was not suggested earlier.
Mr. Robert Watt:
I cannot comment on what was said in meetings I did not attend. If somebody makes a statement with which I do not agree at a meeting, I can respond if I am there but I cannot respond if I am not present. I would have asked about the evidence supporting the statement. We would like to have that meeting so that if people say the office is not fit for purpose, I can explore what they mean. If there is evidence, I will listen to it, but if there is no evidence, those people will need a different description of the office the next time they come before this committee. I am happy to engage with those parties and we will do it this month.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Okay.
Paul Connaughton (Galway East, Fine Gael)
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I welcome the witnesses. Much has been said already so I will not go over all the issues again. The idea of a meeting is a very welcome step forward but my fear is that if we read the transcript of the meeting from last April and compared it with today's comments, they would be similar. A meeting was supposed to take place at that stage too and I have no doubt it happened. Nevertheless, the process is moving at a slow pace. I admit this is a relatively new departure for a very large sum of money, so there will be teething problems. We saw evidence this morning of frustration because the process is taking so long, and by the time solutions are formulated, the relevant parties may not be there to feel the benefit.
This is a major area that cannot be covered today and we are trying to save money. Has there been a conversation between the witnesses and the Minister about a potential problem with the remit, which may not be broad enough? Has there been a question of whether we should go back to the starting blocks to look at the process again?
Mr. Robert Watt:
No, we have not had conversations about looking again at the remit of the office, which is very clear. We understand what it is about. Based on what we discover as we roll out this programme, Mr. Quinn and I are happy to meet the Minister, Deputy Howlin, and discuss how we are getting on and whether we need a revised or new mandate. We have not had that conversation as we are delivering, and we report to the Minister based on implementation of what we have been asked to do.
Paul Connaughton (Galway East, Fine Gael)
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Are the witnesses getting much kick-back from other groups with regard to procurement?
Mr. Paul Quinn:
I am a little over two years in the role and we have had issues, largely in the education space, to be fair, and almost none in any other sector. In terms of the ones we were getting, we had some in the school arts, some on book sellers and one other to do with photocopiers and ICT. In regard to other sectors or industries coming forward saying they have significant issues, they have not beaten a path to my door or written to me. It is not coming through in any of the individual reflections from any of the industry representative bodies either.
Mr. Robert Watt:
We are happy to collate where we receive strong representations but there are sectors which are being affected by other technological changes as well as impacting on lower spend, which is independent from procurement, and also changes in procurement. There are many other factors going on here which I am sure are impacting upon what is happening in particular sectors.
Paul Connaughton (Galway East, Fine Gael)
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The overriding concern, in terms of what the Department is trying to do in saving money for the taxpayer and so on, is that it must be balanced with what these companies can and cannot afford to do. I welcome the idea of a meeting but I would not like to find out here in 12 months time that another request for a meeting has been submitted and nothing has changed. Perhaps what should happen now is that the witnesses would be upfront, which they will be, and say that this is as far as the Department can go and the business owners can say this is as far as they can go because all we are doing is having a conversation every 12 months, and many of these small businesses are under great threat.
On the PeoplePoint system, will one of the witnesses give me some general background on that? What was the logic behind it, and where is it at now?
Mr. Robert Watt:
Within the Civil Service there are about 48 bodies, so we have what we call transactional HR. In terms of the recording of leave, absenteeism, the basic infrastructure, data management that underpins a HR system, which determines ultimately what people get paid, their pension and their entitlements, those transactional HR activities were undertaken by each public body in the past. Each Department, and it could be a small Department or the Revenue Commissioners, would be dealing with their own transactional HR.
There are benefits in consolidating the system in terms of reducing the costs, reducing the numbers of people involved, getting economies of scale from technology, and also getting a more standard approach to information across the system so that we get much better information in common.
PeoplePoint, in effect, is a shared service which is consolidating transactional HR into one place, which previously was devolved across the system. That is the motivation for it. The motivation is twofold: to save money over time but also to improve the quality of information.
To give one example of it, in the past it would be very difficult for us to get common information on sick leave across Departments. It would have been a major exercise for us to go to HR managers; it would take weeks. With PeoplePoint we will be able to generate a report, say, on overtime allowances, or the numbers of people in different offices. It provides us with information to enable managers to manage more effectively.
The other key benefit is Departments can focus on what we call the retained or strategic HR. Rather than engage in personnel functions the HR transactional function is to engage in strategic HR around finding out what is happening with sick leave, what is happening with underperformance, whether we are allocating staff in the right places and investing in learning and development. It is to enable the HR units to focus on what we call strategic as opposed to transactional HR. That is, in a nutshell, the essence of what we are trying to achieve.
Paul Connaughton (Galway East, Fine Gael)
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Is it correct that, so far, it has cost €6.5 million to set it up?
Paul Connaughton (Galway East, Fine Gael)
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Can Mr. Watt give me a brief breakdown of those costs?
Mr. Robert Watt:
In terms of the main costs, we had a supplier contract, which I think was about €5 million or €6 million. We had project managers so we had staff involved in project management. There was a big payroll element to it, and then there is the technology solution that we had to pay. I do not have the breakdown of the numbers to hand; we can send them to the Deputy. It would be start-up supports people-----
Paul Connaughton (Galway East, Fine Gael)
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Would it be for consultancy fees and so on?
Mr. Robert Watt:
Consultancy fees, yes. We would have partnered with an external provider to help us with this. This is an enormous change management project. We went from 48 public bodies doing it in a particular way to a cleaning data, and then transferring it into a centre with all the complications. It has thrown up a number of issues that are now coming to light, which are very helpful for managers.
We will not see the benefits for a number of years. Elements of the start-up were slower than we thought. We made some mistakes along the way so it has been slower, but progress is reasonable and we believe we will get to where we want to get to after a period.
Paul Connaughton (Galway East, Fine Gael)
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What were some of the issues that arose?
Mr. Robert Watt:
They were around some of the technology bugs. We had some fixes for the technology. There were issues around staff in terms of whether we had the right people with the right skills in the right places - management issues. Those were the sort of issues. We have learned a lot within the Department which we have applied to the payroll shared services, which is the second project, and also the next one, financial management, which is more significant again. We are trying to learn the lessons from PeoplePoint in terms of-----
Paul Connaughton (Galway East, Fine Gael)
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In terms of the €15 million to set it up, that is finished. There will be no additional amount.
Paul Connaughton (Galway East, Fine Gael)
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How much does Mr. Watt believe the Department will be able to save because of this change?
Mr. Robert Watt:
We had an original assessment where we set out the staff setting. We will save about 250 staff, and the yearly cost saving is several million euro. I will come back to the Deputy on the numbers but it will be several million each year over the period. What we are now looking at, based on what has been happening in the past number of years, is reassessing what we call the business case to see where we are, and we can share that with the Deputy. There will be savings of €12.5 million and 149 staff, who previously would have been on transactional HR, are now involved in other functions. We are refreshing the numbers and we can come back to the Deputy with our assessment of that.
On the savings, there will be cost savings. There is always a danger that we will focus on what we can just measure. There are very significant benefits in the system from the new information we will get to enable HR managers understand what is going on, and then to drive change. We will set out some of those benefits as well. They could be of much more significance and strategic importance to the system over time than the actual cash savings from more efficient practices and better technology.
Paul Connaughton (Galway East, Fine Gael)
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The same argument could be made for the SMEs, and procurement as well. Is the project far behind schedule? When was it expected to be up and running, and where is it now?
Mr. Robert Watt:
There was slippage on the timeframe. It took us longer to do the baselining when we established the migration of the different waves. We did it in different waves, so there was some slippage compared to where we were of about 12 months.
We had a timeframe but when issues arose in the first wave of Departments we paused and tried to address those because PeoplePoint was under pressure in terms of the level of activity and the volumes they were dealing with - the outstanding cases. We slowed down the transition of the various waves to give staff more time to get on top of it.
In simplistic terms, this is meant to be a self-service portal. Rather than applying to a HR manager through paper or through the system, the person is meant to do it online and through the portal, and the manager gets notified by e-mail. Some elements of it did not work as well as we had hoped at the start, and we spent a longer time ironing out those difficulties before we increased up to where we had hoped to be. It is about a year longer than we thought to make the transition.
Paul Connaughton (Galway East, Fine Gael)
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Mr. Watt might send me those details.
Paul Connaughton (Galway East, Fine Gael)
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Thank you.
John Deasy (Waterford, Fine Gael)
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I hope the Chairman will give me some latitude on this. This document arrived in our pigeonholes this morning. It is the annual progress report on the public service reform plan from Mr. Watt's Department. I find the section on performance and accountability, local government, interesting because-----
John Deasy (Waterford, Fine Gael)
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Local government, and it is slightly non-germane to what this meeting is about, but I will get to that. Considering the comments that Mr. Watt's boss, the Minister, made in recent days about the abolition of town councils being a mistake, the accountability and performance part of this document refers to the National Oversight and Audit Commission for Local Government, which undermines that to some extent.
It states the national oversight and audit commission for local government will do a list of things but that it was mistake to do this in the first place. The funny thing from my perspective is that Mr. Watt might be right, but it needs to be spelled out what exactly the national oversight and audit commission for local government will do. There is a relationship with the Committee of Public Accounts because one of its roles will be to engage in financial scrutiny of revenue collection across the 31 local authorities to see how efficient it is. That is of relevance to the committee, but is there a contradiction? The Minister and the Department issue a document such as this which states, effectively, that it was a mistake to abolish town councils. I think, therefore, that Mr. Watt might be right. I had meetings with the Minister for the Environment, Community and Local Government who had drafted the Act, but what I said fell on deaf ears. I now realise that he probably had his mind made up before that debate started on town councils. I took my own town council in Dungarvan as an example - its staff, the town clerk in particular, were outstanding - and what I knew would happen when he left when it came to local administration is happening. What exactly will the national oversight and audit commission do because already I see the cracks when it comes to services provided when town councils were in place? I am thinking, in particular, about housing and the way people are dealt with from Dungarvan to Waterford city. The consideration necessary when it comes to dealing with individuals and their families is missing.
Mr. Robert Watt:
I did not get a chance to read the Minister's comments. In referring to town councils what I think he said was that he had regrets. I do not think he was making any comment about implications for the audit office or the oversight group being established. He was making a point about town councils because I am sure he supports the new-----
John Deasy (Waterford, Fine Gael)
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One does lead to the other.
Mr. Robert Watt:
He supports the architecture put in place by the previous Minister, former Deputy Phil Hogan. He supports achieving more value for money and undertaking more assessments. I do not know whether there is a crossover from his views on town councils to the other, but he may clarify his comments. The Deputy can ask him at a future date what he had in mind. I can speculate on his motives for making the comments, but it is beyond my remit. We are still friends and I would like to keep it that way, as long as we can manage it. I do not see an issue in terms of the structures in place. The Chairman probed me on this question in the past and there were issues around the independence of the local government audit service within the Department of the Environment, Community and Local Government and whether it should be merged with the Office of the Comptroller and Auditor General in a new office and the need for greater oversight in this space. I will support whatever mechanisms are required to ensure the achievement of value for money is pursued and that things are done properly. As the Deputy knows better than I do, the biggest reform introduced concerns how the vast majority of the money spent at local level is raised. Over time, presumably, this will lead to councillors having much more oversight of what is going on within local authorities because they will be saying to ratepayers and property holders that they are paying to them; therefore, they will have to account for it.
John Deasy (Waterford, Fine Gael)
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I understand that; that is exactly what I am getting at. Mr. Watt knows that we have talked about rates during the years. It is devolving power to local authorities so far as revenue collection in their own areas is concerned. Mr. Watt is announcing that this is happening around the country, but will he talk about the quality of the service provided, regardless of whether there are revenue raising powers locally? What I have seen to date is a dip in the quality and level of service provided. I do not know what is within the remit when it comes to making a determination on how successful the change has been in the services provided for ratepayers and ordinary citizens, but that is an issue that needs to be looked at. How else is one going to find out if it is working? Initially I advise that we survey ratepayers and ordinary citizens who have been subject to the change and speak to Deputies and Senators because they deal with the issue every day in their offices to find out if it has worked. What the Minister said might have been a political statement to a certain extent, but we need to revisit the issue if it is found that the service has reduced.
Mr. Robert Watt:
One of the roles of the oversight group is to look at benchmarking across local authorities. Unlike other parts of the public service, there are many entities which provide comparable services. I know that they are different as one cannot compare Dublin to County Leitrim or Dublin to County Waterford, but there should be a way to benchmark the cost and quality of services provided. One of the roles of the group, as I understand it, is to do this and, to an extent, respond. If a different service is provided in Waterford with which people are dissatisfied, it might indicate where there is room for improvement. I am not exactly sure where we stand on this issue. If the Deputy wishes, I will come back to him and see what the remit is and what it is doing.
John Deasy (Waterford, Fine Gael)
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Yes. May we have a short passage on what thematic reviews of local authority function mean? The only point I am making, even though I might agree with the Minister, Deputy Brendan Howlin, is that there is a slight contradiction and a subtle undermining of what those on the commission might be tasked to do, while at the same time saying the abolition of town councils was a mistake. Spelling out the role of the group and how it will perform its functions and come to conclusions is important because I already see cracks since the town councils were abolished.
John Perry (Sligo-North Leitrim, Fine Gael)
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I compliment Mr. Watt on his four year tenure and obtaining funds for key Government services. Following on from Deputy John Deasy's point, does Mr. Watt consider it would be better to have the new audit committee which will audit local authorities under the Comptroller and Auditor General in order that the CEOs would be more accountable to the Oireachtas?
Mr. Robert Watt:
I have to be careful in suggesting the remit of another body under another Department should be changed. I would have thought that in making a change in local government funding arrangements there would be much less reliance on the centre and much more on local sourcing of money. I would have thought this would change the nature of the debate such that over time, as mentioned by Deputy John Deasy, local councillors would be called to account not only for spending but also advising on how money should be raised. Therefore, there will be a different type of accountability mechanism. The centre will be providing funding to a figure of 10% to 15%; therefore, the role of the Department of the Environment, Community and Local Government or our Department will be diminished when it comes to the provision of funding. We are in a different place. I presume the establishment of the oversight board will have implications for the local government audit committee in the Department of the Environment, Community and Local Government. I presume there will be a collapsing of one into the other.
John Perry (Sligo-North Leitrim, Fine Gael)
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What percentage of the figure of €54 billion will be disbursed to the 26 local authorities?
John Perry (Sligo-North Leitrim, Fine Gael)
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Who is auditing it?
John Perry (Sligo-North Leitrim, Fine Gael)
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To whom is it accountable?
John Perry (Sligo-North Leitrim, Fine Gael)
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In light of the fact that there are many different situations of debt by local authorities at the moment, which has prevented them from taking advantage of the upturn, as many are heavily indebted at the moment. They are not in a position to engage in different developments. Is it not a huge difficulty when it comes to essential repair grants or housing development grants? Is it not a difficulty that is slowing down the growth of the economy currently?
Mr. Robert Watt:
As the local government system is part of the general Government sector, there are limits on local authorities' new borrowings or the reduction in their cash balance where they do have cash balances. As they contribute to the general Government deficit, for Maastricht reporting reasons there is a limit of about €200 million on the addition to the general Government deficit that the local authority sector can engage in. That was put in place in 2009 when the financial emergency began. There is a constraint on their ability to borrow because of the financial situation they face. As the Deputy is aware, local authorities have reduced staff numbers dramatically and have reduced their costs more than the wider public sector has done. I have no doubt that their ability to raise funds is impacting on their ability to draw down-----
John Perry (Sligo-North Leitrim, Fine Gael)
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I compliment the work the Department of Public Expenditure and Reform is doing, but in regard to the ability of local authorities to borrow, who is the assigned, statutorily responsible body that takes responsibility for the loan if in default?
Mr. Robert Watt:
Responsibility rests with the local authority. As the local authority is part of the general Government sector, restrictions are imposed on its ability to borrow, but ultimately it is a matter for the local authority. The Comptroller and Auditor General has done a review of the land aggregation scheme, which was partly a response to the indebtedness of some local authorities who had gone into debt through buying up land for developments that were subsequently deferred or phased because of changes in the property market. The central Government stepped in to provide support to some of those local authorities and the Comptroller and Auditor General has done an assessment of that scheme.
John Perry (Sligo-North Leitrim, Fine Gael)
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Mr. Watt referred to the reduction of the 180 State bodies. He might explain the overall effectiveness of that programme.
Mr. Robert Watt:
There was a great deal of political support in 2011 for reductions in the number of agencies, or quangos, as they are known colloquially. Our Minister was charged by the Government with this programme. The Minister and his colleagues have delivered on 181 of the closures or mergers and the Government is committed to doing that. From central Government, there are savings of around €20 million. For local authorities there are savings of around €40 million. However, there are also changes due to the simpler landscape. There were overlaps and duplication between different agencies, which affected their ability to deliver, so merging and streamlining will bring benefits over time, in addition to the monetary benefits. That programme has come to an end. It was very time-intensive, because it required us to go back and change legislation. Many new Bills had to be enacted. There were also major challenges for the management and staff of the organisations. Although an agency might have been merged, collapsed or abolished, the functions it was carrying out continued in most cases, because people believed they were valuable, and still do. In that sense, it was a difficult programme.
John Perry (Sligo-North Leitrim, Fine Gael)
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I have a question on the single licensing portal. That was for the issuing of statutory licences to the retail trade. Mr. Watt might give an update on it. That was the situation where 25 licences could be applied for on the single portal, which would cut down on administrative costs for anybody in the retail trade. This was a far-reaching policy. How far has it advanced?
Mr. Robert Watt:
I am not sure of the exact details, but I can write to the committee setting out the progress. There was concern about the number of licences and the complexity and administration involved in getting licences. There is a work programme to consolidate and move them online, so I can check where we are with that.
John Perry (Sligo-North Leitrim, Fine Gael)
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I was reading the note about directives 06/12 and 10/14. This might defuse some of the issues about school supply. A directive was given that where the accounting officer could be deemed the principal of a school, and they felt they were getting value for money and equality of standard, if they signed a statutory declaration, as the accounting officer for the school, they could deal with the supplier of choice. Can the witnesses explain that?
Mr. Paul Quinn:
The circular is 16/13, which was issued from the Department and reminded all public bodies that framework contracts offer very good value to them, but could not take away from their statutory obligations regarding providing value for money for the taxpayer and therefore, if a public body is in a position to secure better value for money, it may do so but must be in a position to stand over that and justify it. That latitude is there for all public bodies. However, I remind people that there is also an obligation on public bodies that are funded by the State to go through a procurement process. They are not relieved of that at all. If they find that by running a local procurement they can get better value for money than through a State framework, they can avail of that local framework.
John Perry (Sligo-North Leitrim, Fine Gael)
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Once products are subject to centralised contracts, purchasers in schools are often afraid to purchase from any other supplier in fear of losing central funding. Is there a real risk if they sign up to 16/13? One is dealing with competent people who are in a job for 20 years and know exactly the quality of the product they are getting. If they give a statutory declaration that they are in compliance with 16/13, are they contravening any Government policy by attempting to get the best value for money?
John Perry (Sligo-North Leitrim, Fine Gael)
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In another role I have dealt with a supplying a school and I know it is very important. Mr. Quinn was very helpful about that issue with regard to clarification. While I respect small businesses, it is very hard to keep everybody happy when one is dealing with €9 billion of procurement contracts, no matter how one does it. There is an issue of supply and demand and the economy of scale with 4.5 million people. This is one of the most persistent issues at the moment. Procurement in general is a bigger issue but we are dealing here mainly with the small firms issue, while this morning we dealt with supplying schools. Would it be possible to issue a letter of clarification from the Department of Education and Skills to schools, stating that the principal officer of the school would do this without ambiguity or fear of repercussion afterwards? This is a very important point because I know of several schools at the moment that are very happy to sign 16/13 on value for money and on quality. It would defuse much of the confusion that prevails at the moment if clarification could be issued from the Department. Every national school I know of operates by a circular. They get a circular from the Department indicating that they are entitled to purchase following the 16/13 criteria and they can deal with their local suppliers. Many of them prefer to do so. The debate today would be resolved through that.
John Perry (Sligo-North Leitrim, Fine Gael)
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I would like to get clarification that this clarification could be sent by circular from the Department of Education and Skills to schools, giving them a clear undertaking that they could adhere to 6.13 without any repercussions.
John Perry (Sligo-North Leitrim, Fine Gael)
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That would be very much appreciated. I thank Mr. Watts.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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To finish on the procurement process, predatory pricing was also raised earlier. I know it was agreed to hold a meeting on this matter. Members of the Committee of Public Accounts should be notified of this meeting, so that they can attend if they want to.
Another question that has been raised with us concerns having a survey on the impact current policy has on this small group of companies. The Department collected data which we received during the week. Earlier the group focused on some of that data, particularly the fact that 28% of tenders go outside the State. These are the issues that they want to get to grips with. As part of gathering data by the Department and also its obligation, as a public body, to seek and establish value for money, is there a possibility it might embark upon sourcing that type of data from this sector that was represented here? I would like to see such an initiative form part of the Department's agenda when it deals with the group. I ask the Secretary General to include all of those issues in the meeting.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I wish to raise a couple of issues about the Secretary General's correspondence received this morning and dated 4 March. It reads, "[T]he changes or developments that are necessary to enable the PAC to examine monies that went into Irish Water". We are currently doing so on the basis that the Department suggested.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That work will be ongoing over a number of years, according to the plan that we sought when we dealt with the Department. It is something we can easily pursue.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The local government issue is a little more difficult. The Secretary General has not been much help to us on that in his letter. On the last occasion, he suggested there might be a role for us.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What he set out in his letter is a role that already exists. I argue with him that the way local government is developing is nonsense for the following reason. Last month, there were two days of one week where two full pages of a newspaper was taken up through listing the losses and inefficiencies of spend by local government. I presume the journalists got their information from the audit office. Had that not happened we would have had no public consciousness about the losses. Like it or not, the Committee of Public Accounts exposes what has happened, looks at all of the issues and then makes recommendations. One does not get that with a local government audit and I do not question the ability of their audit team to do their job. I am saying it would be far more beneficial, in the context of the reform of the State, and reforms that his Department is engaged in, to adopt a management tool. The Department should say to the Minister that he should do so.
A sum of €6 billion is allocated to local government. I am not saying that the allocation is not audited. I am saying audit committees are not necessarily established in every local government area. There is also no public debate about waste in local government. I shall cite two of the examples of information that have come to us - the land aggregation information and information on the Poolbeg incinerator. There is not a defined line for debate and I am extremely disappointed that such an initiative has not materialised in policy.
Was the Secretary General at the conference last weekend?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes. Did the Secretary General attend the conference to listen to his Minister?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Minister replied that he would answer "in a way that might surprise you" when asked a question about local government.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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He said, "The one thing I regret the most about the last four years was that decision" which was the decision to abolish town councils. The restoration of local democracy and town councils is essential, which is what he wants to happen. I agree with him. The Minister is of the view that there is something wrong with the way we manage local government, an issue which arises here on an ongoing basis. I would like to see some way of addressing this within the remit of the Committee of Public Accounts.
Mr. Robert Watt:
I responded to the matter concerning Irish Water. I think that provides an opportunity and avenue for this committee to be involved.
In terms of local government, as I mentioned in response to Deputy Deasy, the vast majority of the spend by local authorities will now be raised locally. There will be a greater role for members of councils and their governance structures to ensure the money is well spent. I have never had an issue with any proposal which would involve the Office of the Comptroller and Auditor General merging with the Department of the Environment, Community and Local Government and taking over that function. I have no problem with that initiative. If that is the way people want to go or proceed then that is fine. There is a role for this committee to look at Exchequer funds through the local government fund into local authorities. Over time it will become a good deal less significant, as we know. I do not think there is any issue why the Comptroller and Auditor General cannot perform that role.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Watt has covered a great deal of ground this morning with his 19 pages. He is pushing forward with reforms in other areas, yet I do not see the same commitment. He has said it umpteen times before that he would like to see it happen. I would very much like to see it happen because it is a waste of public money to have two different audit teams in place in a country where it would be far easier merge them. The Department is bringing teams together elsewhere.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Earlier the Secretary General said that 180 quangos will be eliminated.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why have them separate? I shall keep returning to this matter and working on it because merging must be done.
In regard to procurement, and not about this morning, is the Secretary General happy with the way the HSE conducts its procurement process? Every week his Department's officials attend the weekly meeting of the Committee of Public Accounts.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Every single week it is the same thing. Yesterday they released, by mistake or whatever knowing the games that are being played, a report which raises further questions about procurement.
I do not expect the Secretary General to know the following. This morning the clerk to this committee received an analysis of a dossier which showed that contracts were being awarded without procurement - it was just ignored - even though some of these contracts were in the region of €100,000. A contract was then awarded to check on the contract that was issued for €100,000 which cost €58,000. Then there were recommendations by staff to use a consultant who would cost €1,000 per day. I have just touched on these matters which have happened within the HSE.
Yesterday the committee went to the Department of Communications, Energy and Natural Resources to meet its counterparts from Northern Ireland. We discovered that our counterparts in the North paid out €1.3 million, not just without proper procurement procedures being acknowledged but without paperwork. They paid €1.3 million for an obsolete piece of equipment that was valued at €30,000 but was never used. The reason I say this to the Secretary General is because he oversees these Departments. Is that correct?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I listened carefully to him this morning about the way the Department spends and seeks value for money. Not enough care is given to the spending of taxpayers' money on the other side of this issue. My evidence for saying so is that the HSE day-in and day-out wastes money. Yesterday, we saw a scandalous waste of €2.3 million by the Irish State. A total of €4.3 million was wasted between the North and South and they failed to pick up on EU funding. These are the things that we are missing.
What penalties or sanctions, can the Secretary General take to deal with a spending Department that completely ignores the process, which is what has been borne out in the evidence from the HSE and other Departments?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We do not get the leaked reports. They press get them before we do.
Mr. Robert Watt:
I have not read the report. In relation to inappropriate claiming for travel, as I have not seen the details I will not comment on the case, but should a person make an inappropriate claim, the expectation is that the money will be recouped and the money will be paid back to the Exchequer. We will ensure that the Department of Health together with the HSE will pursue the case in order that people who make claims which are not appropriate will repay the money which will be recouped to the taxpayer. The guidelines from the Department are crystal clear and there is no doubt whatsoever on the issue. We expect the money will be repaid to the Exchequer.
I will now respond to the question on procurement. I read the Comptroller and Auditor General's report on procurement in the HSE. Clearly the approach is not satisfactory. The level of non-compliance is not satisfactory. We absolutely agree with the recommendations of the Comptroller and Auditor General. We do not believe those practices are appropriate. Mr. Paul Quinn from our office has been engaged with the procurement side in the HSE to improve and professionalise practices. We have signed a memorandum of understanding with them on how we will help them in the procurement of common goods and services, but the non-addressable spend will remain the responsibility of the HSE. To answer the Chairman's question directly, we are not satisfied with procurement and we are working with the HSE to professionalise procurement procedures and to ensure that in cases such as contracts, where we do not have basic competitive processes, we have procedures.
The Comptroller and Auditor General reported a number of years ago on such spending in Departments. I think €140 million of the spend involved non-competitive processes. In most cases there are good reasons for that but within the HSE it is not appropriate to have that level of spend which is not subject to a competitive process. We will be following up the report. Mr. Quinn has already done some of the work in following up the case.
We also agree with the Comptroller and Auditor General's comment about sanctions on units and staff who have not complied or have not provided the basic information. Our system is governed by circular 40/02 which provides that I must sign on the occasion that we do not go through a competitive process. We go through a process in the Department where colleagues come to me with examples and we review them and we must ensure we are happy with them. The Comptroller and Auditor General has identified that this is not happening in the HSE. That is not acceptable. There were various discussions about IT systems and manual systems but I absolutely agree with the Chairman and do not disagree with anything he said at all.
The Chairman raised the issue of the Bytel project and the Department of Communications, Energy and Natural Resources. This is unusual. It involved EU funding. The project involves the Department and an equivalent Department in the North as well as the Department of Public Expenditure and Reform, which was not the lead Department. I know the Chairman has been briefed separately on that. Public money has not been spent appropriately and if there is any misappropriation, we will need to do everything we possibly can to recover that money. I am not exactly sure where we are going with this so I do not want to prejudice anything that might happen. We are very concerned that what happened should not have happened and it is a clear example of where taxpayers' money was not spent appropriately. The Chairman has probably been briefed better than I have been about this but we will follow it up.
Let me make a general point about EU projects and EU funding. We have extensive audits of this and the Comptroller and Auditor General would be aware of this. Thankfully we have not come across many cases like this. I am not for a moment excusing it, but we are confident that more than 99% of the spending co-funded by the EU is appropriate. We have done well from this fund over the years. This is not satisfactory and given that there were two Departments involved in a North-South project, we need to learn the lessons from it.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In the particular cases of HSE procurement we were looking at this morning, the contracts went to individuals within companies in the private sector who at one time worked for the HSE. We have seen this time and again. It is as if nobody in the Departments learns the lesson. I have never seen anybody being sanctioned. Mr. Watt referred in a speech during the week that it is hard to get rid of people when they do something wrong.
Mr. Robert Watt:
If there is a case of a clear conflict of interest, then there will be very clear sanctions. I will take on board what the Chairman says. If there is a case that a contract has been awarded without a competitive process to somebody who had a relationship and a connected relationship previously with the entity, we do not believe that is appropriate and we would expect that there would be some response and action taken. I do not want to go into the details of what that might be because it will depend on the circumstances. Clearly, if anybody who is present saw that in their organisation, he or she would immediately ask what was going on. It is not correct that it is not a competitive process. Clearly if it goes to a company that has a previous connection with the body, then immediately there will be a perception of something not being correct. I absolutely agree.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Does an official from the Department pick up the phone and ring the HSE to see what is wrong?
Mr. Robert Watt:
We would respond to the Department and the HSE on foot of the Comptroller and Auditor General's recommendations and the findings of the report.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is too late. Does Mr. Watt know what I mean? We know as from yesterday when the documents were leaked about the procurement in the HSE because it has been reported to us. It will be a while before a hearing and a report and recommendations are put in place. It is similar for the procurement process for the people who were before us this morning. By the time one learns about it, some of them will have closed. Let me give an example of a chemist who had the contract to supply medication to ten nursing homes where people are being cared for. I have examined the case where a chemist was told one day that he or she had lost the contract, but he or she had not been asked to tender for the contract when the HSE were renewing it. That chemist has spent 14 months arguing with the HSE about the fact that the procurement process excluded him or her. Meanwhile some other chemist is supplying the nursing homes. While he is arguing that the paperwork was not correct and that he was not asked to tender, he does not have the contract. The system has a way of trundling on and the dogs will bark and the caravan moves on. I think somebody should stop the caravan. Somebody has to stop the HSE in its tracks.
In respect of the North-South case, a whistleblower had known about it since 2006. How many more mistakes were made from 2006 to the present day in respect of procurement simply because nobody cried stop? If this happened in a private business, there would be a board meeting and somebody would get the sack. The system would be changed. I do not think we should have to wait until recommendations are made. I am saying that with due respect to Mr. Watt and his officials. I think there should be a procedure at the end of each meeting of the Committee of Public Accounts that somebody should make a phone call to the relevant person, asking what is happening in their section. It is farcical to listen to these stories every single week. We propose to bring in the HSE next week, if we can. We will hear what has been going on. I think it is a terrible reflection on the system how correspondence from the Office of the Comptroller and Auditor General to the audit section of the HSE is dealt with. The HSE, rather than reply efficiently and well, waits until the last minute and then does what so often happens here, it leaks it to the newspapers. That is not acceptable.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. McCarthy does not know that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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When one is in politics, one tends to see a lot of things differently.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, I am not. We are doing well.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are doing well today.
Mr. Robert Watt:
The system is enormous. A total of €54 billion has been spent and there are 290,000 people so there will be issues. One cannot extrapolate from one issue and then say that it is endemic across the system or that the issue arises, but clearly if the same types of issue come up within organisations, then obviously that is a flag and it is something that requires a response.
I have two further comments to make on the specifics. In terms of whistleblowers, the committee is aware our Department drafted legislation which has been enacted to provide protection for people who want to reveal things that are going on, and they now have protection to do that which they did not have previously. Our Minister has responded to this agenda and has now enacted very important legislation which enables people to identify wrongdoing and ensure that if they do, they will not be subjected to any adverse pressure or be treated unfairly.
We have embarked on the largest programme of public procurement reform ever. We have done that because of a series of reports produced by the Comptroller and Auditor General and a series of discussions at the Committee of Public Accounts going back over a generation which identified not an amateurish but not a sufficiently robust and professional procurement function. That is why we have a procurement office staffed with procurement people who are doing an amazing job in establishing this entity. That is what we are doing. We responded to concerns and the Department is working on them, but certainly in terms of the HSE, we would be interested in the committee’s discussions next week. We will follow the debate and see what more we could do. We have a memorandum of understanding now and we are working with the HSE on common goods and services on which we will assist it to procure. We encourage the HSE to have a professional approach to procurement in line with the guidelines and to address very seriously the issues raised by the auditor.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How is the request for one accounting system progressing?
Mr. Robert Watt:
We are waiting the next iteration of the HSE’s plan. There have been further discussions about it and we are waiting for the HSE to come to us with the revised business plan to support a single financial platform. We will do a peer review of it then and that will be the end of the process if we are happy that it meets the procurement requirements and the technology requirements.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I wish to ask a few short questions. I refer to Mr. Watt’s letter this morning about the Tipperary hostel, which I went to see. I keep on asking the Departments about it but nobody wants to step in to protect the millions that have already been spent on it.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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A number of agencies are involved. I think the total involved was €10 million. The money that was spent on the church was well spent. The completed job looked splendid, but now that is falling into rack and ruin. We know now that there are no prosecutions in relation to the other allegations that were made. It is now a case of trying to protect the taxpayers’ money that was already spent.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In relation to Departments that appear before us which do not have certain information at the time that say they will send it in, is there any way Mr. Watt can write to the Secretaries General to say that when they say that at the Committee of Public Accounts, they have a certain number of days to send back the information? Some Departments do not get back to us.
The second question on timely responses relates to reports the Comptroller and Auditor General submits to Ministers. Two relate to the Department of Education and Skills at the moment, one on the VEC in Cork. Such reports can remain with the Minister for up to three months. What do they do with them? I refer to a stage following which the report has been sent to various people for comment. Could Mr. Watt put an agreed reasonable protocol in place for a response from the Minister?
Mr. Robert Watt:
When I was appointed in 2011, you raised the issue with us, Chairman, that a large number of ministerial minutes were outstanding. The clerk, Mr. McEnery, might know. Over a period of six months we cleared a load of them and since then we have improved the timeliness dramatically. The clerk will be able to give you the details on it, Chairman. We have improved our record dramatically compared with what happened in the past.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes, the Department did, but this was in relation to final special reports that are given to Ministers where they can take up to three months to lay them before the House and therefore we cannot deal with them.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes, they have already been submitted to the Ministers.
Mr. Seamus McCarthy:
The reports are completely cleared. I have signed off on the reports. The statutory provision allows a Department up to three months. In fairness, any time we have sent a report to the Department of Public Expenditure and Reform, it has been very prompt in getting it into the Oireachtas but other Departments have a different process.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Watt might ask the Departments to streamline their processes along the lines in operation in his Department.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The final question relates to education. Again, I ask this because Mr. Watt’s officials are present at the meetings. The Higher Education Authority was before us to discuss universities and institutes of technology. Mr. McCarthy’s report dealt with the audit committees in various places. What we heard that day about how the Department oversees the spend in third level institutions and ITs was shocking. Nobody had an idea. The HEA does not have the staff to ensure compliance within the university and institute of technology sector. Governance issues arise in terms of Waterford IT and the Institute of Technology, Cork. Queries arise in terms of the amalgamation process between the institutes of technology in Carlow and Waterford. There is no business plan for that process as it has not been worked out yet. In Cork and Tralee the figure was in the region of €6 million and yet no one was able to set out for us how the money was to be spent, and the structures to deliver compliance, transparency and accountability were simply non-existent in some cases. Would the section in the Department of Public Expenditure and Reform that overlooks the issue have a chat with Mr. Ó Foghlú and Mr. Boland because the system is not working?
Mr. Robert Watt:
I imagine that it is the responsibility of the CEOs of the universities and institute of technology presidents, namely, the leadership of the institutions, to be accountable to the boards that are established and that they would have proper procedures and audit committees to ensure public money and other moneys, because in most cases a large proportion of their funding is not from the Exchequer. In Trinity College now it is almost half and half Exchequer and non-Exchequer, and the ratio has changed for other institutions.
I presume that, in the first instance, it is a question of the leadership of those institutions having proper governance structures and audit committees to ensure that money is spent appropriately and that the HEA receives proper assurances that those structures are in place. Someone on Marlborough Street cannot ensure that every pen is accounted for properly. Instead, people can ensure that there are proper structures in place to govern how moneys are spent. I can raise the matter with the Secretary General, Mr. Ó Foghlú, and ask him about the arrangements that are in place. I am not familiar with them, but there are service level agreements between the HEA and bodies. Money is dispersed to achieve various public policy objectives. I can check exactly what the position is. The Comptroller and Auditor General might know, but I presume that, at a minimum, they have audit committees. These are large institutions with large budgets.
Mr. Seamus McCarthy:
The context to which the Chairman is referring is a report that we did on the National College of Art and Design, NCAD. The college's systems were not working. The issue that was raised with the HEA was why its systems of oversight of the college did not react sooner to the difficulties.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I will ask the clerk to send Mr. Watt copies of the-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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One whistleblower sent three different reports. I raised this matter with Mr. Watt the last time he appeared before us. We will send him copies of the reports in order that he can see what we are dealing with in terms of the HEA.
Speaking of whistleblowers, while I appreciate that the legislation was passed, in cases where people decide to come forward - I view them as concerned citizens or employees rather than whistleblowers - to tell their stories, how the system treats them afterwards is shocking. The most recent case of whistleblowing came forward from an agency and has proven helpful in a Garda inquiry and work that we are undertaking. Since then, funding to the agency has been cut each year. I am not asking Mr. Watt for a comment on that matter, but it is not just a coincidence.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I should say that Sergeant Maurice McCabe has already written to the Minister to complain about how he has been treated after doing the State considerable service by coming forward with his information. Some whistleblowers' descriptions of how they have been treated are revolting.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It has not worked.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What will happen in the meantime to those who have been treated in this way?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, the way they are being treated is happening now.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is not working for the people whom I have met.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I have given it a chance. The committee has held hearings and I am dealing with issues that are happening right now in the HSE, the Garda Síochána and an agency that is delivering services on behalf of the Department of Health. It is shocking. Sometimes, bodies pay no attention to the regulations on procurement. They are not impressed by the legislation. They have cultures and so on that need to be broken. I am making my view known to Mr. Watt.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That ends our hearing for today. I thank the witnesses for attending.