Mr. Seamus McCarthy:

I thank the Chairman. As a result of the number of items on the schedule today, I propose to outline very briefly the results of the four 2014 appropriation accounts before summarising the key points of the four reports. I should say at the outset that I have issued clear audit opinions for each of the accounts.

On Vote 11, the 2014 appropriation account for the Office of the Minister for Public Expenditure and Reform records gross expenditure totalling €36.8 million divided across two programme areas. The programme of activities relating to public service management and reform accounted for 54% of the expenditure, while the programme comprehending the management of the system of public expenditure accounted for 46%. At the end of the year, the Department had underspent by €3.8 million, or just under 10% of its gross Estimate provision. That amount was accordingly liable for surrender back to the Exchequer.

Vote 12 presents the expenditure on Civil Service and prison officer pensions. Pension payments for other public servants are charged to other votes, including those for education, the HSE, An Garda Síochána and Army pensions. The gross spend on Vote 12 in 2014 amounted to €474 million, which was up 10.8% compared with 2013. Appropriations-in-aid, mainly arising from employee pension contributions, amounted to €105 million in 2014, which represented a year-on-year increase of almost 18%. A Supplementary Estimate amounting to a net €22.25 million was provided for the Vote in 2014. At the end of the year, a surplus of €16 million was liable for surrender. The Department of Finance administers the pension payments charged to Vote 12. The associated administration costs are borne in Vote 7 - Office of the Minister for Finance. Costs of policy formulation relating to public service pensions are borne in Vote 11 - Office of the Minister for Public Expenditure and Reform. The absence of administration costs is reflected in the format of the appropriation account for Vote 12.

The 2014 appropriation account for shared services records gross expenditure totalling €23.2 million. This mainly comprises €13.2 million spent on activities related to PeoplePoint which handles HR activities centrally; €7.6 million spent on payroll shared services; and €1.6 million on other shared services projects, including a shared financial management system project. Vote expenditure in the year was significantly less than provided for in the Estimate mainly because of delays in recruitment and progressing projects. Overall, there was a net underspend of €10.3 million or approximately one third relative to the Estimate.

Vote 41, Office of Government Procurement, was a new Vote in 2014. On its establishment, the office took over the activities of the former National Procurement Service in the OPW and those of the former national public procurement policy unit in the Department of Public Expenditure and Reform. The Vote Estimate provided for gross expenditure by the Office of Government Procurement totalling €12.8 million in 2014. The outturn was €6.4 million. After a deferred surrender of €125,000, the amount due for surrender was €6.1 million. Note 3 explains that the underspend in the year arose from slower than anticipated recruitment of staff, with knock-on effects in other areas of planned expenditure, including certain planned projects.

Turning to the chapters, Chapter 4 is a standard report that aims to consolidate and summarise Vote expenditure for 2014 and to demonstrate medium to long-term trends. Gross voted expenditure across all Votes in 2014 was €46 billion. This represents a cumulative reduction of almost 13% since 2010. The report also compares net Vote expenditure with the original budget allocations and identifies those that were granted additional funding by way of Supplementary Estimates. Figure 4.5 in the chapter indicates that three Votes each required Supplementary Estimates every year from 2010 to 2014, inclusive. They were the Votes for the HSE, An Garda Síochána and Army pensions. There were Supplementary Estimates for the Department of Transport, Tourism and Sport in each of the last three years.

In 2014 grant funding issued from Votes amounted to a total of over €11 billion. Chapter 5 describes significant changes made by the Department of Public Expenditure and Reform to the framework for the control and management of such grant funding. Previous reports from my office and the committee identified certain weaknesses in these arrangements. In particular, the special report on the national health and local authority levy fund made a number of recommendations for improvements in grant control and accountability arrangements. The revised control framework was set out in Department Circular 13/2014 and took effect from January 2015. The revised arrangements introduce a number of additional requirements for both funding bodies and those in receipt of grant funds. These measures should increase the transparency and accountability arrangements for grants and address the identified weaknesses. Meeting the new or extended requirements may present a significant challenge to both funding bodies and grant recipient bodies. The exercise of judgment will be required to ensure the requirements are applied in a proportionate way, taking account of the size and capacity of the grant recipient and the scale of the grant involved. Compliance with the new requirements will be examined during the course of the 2015 audits of Departments and agencies.

Chapter 6 is a technical report, prepared to meet a specific requirement of the CSO for audited accrual-based payroll information for national accounts purposes. Members will be aware that appropriation accounts are prepared on a cash basis and record transactions when payment is made or income is received. Accordingly, public service staff pay costs and payments to pensioners are recognised in the appropriation accounts at the point of payment. Payments are made either weekly, fortnightly or monthly, as appropriate, and normally in arrears. Most years there are 26 fortnightly payroll runs and 52 weekly runs. However, because the number of days covered by pay periods does not exactly match the number of days in the calendar year, an accrual element builds up over time. There is an additional pay period every ten to 11 years for fortnightly paid staff and every five to six years for weekly paid staff. This results in spikes in pay expenditure in the appropriation accounts in years when there are extra pay days. I should perhaps point out, to allay concerns, that no one receives any extra pay beyond his or her annual salary as a result. This is purely an accounting and a timing issue.

Payroll accrual information submitted by Departments with the appropriation account was audited as part of the statutory audit of the accounts. By agreement with the Department, we have presented the information in the annex to this report in the format specified by the CSO. The table also includes information on the Houses of the Oireachtas Commission which does not have a Vote. Although the Commission is funded directly from the Exchequer, it prepares its financial statements in the appropriation account format used for voted expenditure.

Chapter 7 was undertaken in the light of the significant changes implemented as a result of the National Lottery Act 2013. It aims to outline the process used to distribute the proceeds of the national lottery among the good causes specified in the Act. It also explains how the application of the funding is accounted for in the appropriation accounts. Annex 1 of the report summaries the funds flow. Exchequer funds totalling €217 million were provided to fund a range of designated national lottery supported programmes that fitted within the "good causes" categories. The finance accounts show that a total of €178 million was paid from the national lottery fund to the Exchequer in 2014. For 2014, we can, therefore, establish that the national lottery provided 82% of the funding applied across national lottery supported programmes. However, because national lottery funding is not formally allocated on a subhead or programme basis, the percentage national lottery funding level cannot be identified at a programme level.

The report also outlines the receipt into the Exchequer in 2014 of a licence fee totalling €405 million for the operation of the national lottery over a 20 year period, following a competitive tendering process.