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.