Mr. Seamus McCarthy:

The 2017 appropriation account for Vote 11, Office of the Minister for Public Expenditure and Reform, records gross expenditure of almost €53 million. This was an increase of €9.8 million, or 23%, on the prior year, due in large part to additional spending of €7.4 million by the Office of the Government Chief Information Officer. At the end of 2017, the Department had underspent by €2 million relative to its budget. Unspent capital funding of €685,000 was carried forward to 2018. The remaining €1.3 million was liable for surrender back to the Exchequer. The surrender at the end of 2016 was €2.5 million. I issued clear audit opinions on both the 2017 and 2016 appropriation accounts for Vote 11.

Vote 12, superannuation and retired allowances, is used to pay pensions to civil servants and prison officers.

Pension payments for other public servants are charged, directly or indirectly, to other Votes, including those for education, health, An Garda Síochána and Army pensions. The gross spend on Vote 12 in 2017 amounted to €535.5 million. This represented an increase of 7% from 2016. Appropriations-in-aid, mainly comprising employee pension contributions, amounted to €202.5 million in 2017, which was up 28% from 2016. The increase was mainly due to increased employee contributions in respect of the single public service pension scheme. The net result was a surrender at the year end of €33.5 million in respect of 2017, and of €50.8 million in respect of 2016. I issued clear audit opinions in relation to the 2017 and 2016 appropriation accounts for Vote 12.

Chapter 2 of my annual report deals with the collection of pension contributions due to the Exchequer. The Department of Public Expenditure and Reform issued a circular in December 2016 requiring certain State bodies to make employer pension contributions to the Exchequer in respect of public sector employees pensionable under the single public service pension scheme, which commenced on 1 January 2013. As of 14 September 2018, only 14 bodies had made employer contributions, totalling €4.35 million. The Department had not yet completed the work required to identify all the bodies that will be required to make contributions. Because the contributions are payable with effect from 1 January 2013, at least five years’ contributions will become payable. This may impact on the cash flow of each entity concerned and on charges for the services they provide.

Members will be aware that the Constitution and legislation set out the framework underpinning the manner in which funds are appropriated for voted public services. The appropriation system in Ireland differs from that in other jurisdictions in that the passing of appropriation legislation is generally taken very late in the year, usually in December. As a result, an unexpected dissolution of Dáil Éireann later in the year could have two serious outcomes, unless agreement can be reached on the emergency passing of an Appropriation Bill. First, appropriations in the financial year would not legally be in accordance with the provisions of the Constitution. Second, spending on supply services in the following year could not proceed, creating a risk to the continuity of voted services. In my function as controller of issues of funding from the Central Fund, I want formally to draw the attention of the Oireachtas to this risk.

Vote accounting and budget management is a standard report that consolidates and summarises expenditure across all of the Votes. It highlights key variances relative to estimates and demonstrates medium to long-term trends in key Vote issues. The 2017 chapter also outlines the limited guidance provided by the current financial reporting framework regarding the accounting for capital assets in the appropriation accounts. These weaknesses are expected to be addressed in the comprehensive review of the accounting framework being undertaken in the context of developing the financial shared services model for Departments and offices.

I refer to the special reports on financial reporting in the public sector. As members are aware, timely preparation and presentation of audited financial statements is a key element of public accountability and in providing effective oversight. The three special reports before the committee today reflect a strategic focus by my office to drive greater timeliness of public sector financial reporting. I will focus my opening remarks on the most recent report, special report No. 100, which deals primarily with financial statements for periods ending in 2016. For that year of account, I had responsibility for the audit of the financial statements of 287 bodies and funds with an aggregate turnover of €218 billion.

Most public bodies should be able to prepare financial statements for audit within two to three months of the end of the relevant accounting period. All Government Departments and offices produce their appropriation accounts by the end of March, as required by law. Half of the other public bodies produced their 2016 financial statements within three months of the year end. This represents a progressive improvement since the 2014 year of account. Significant progress has been made in completing audits early. My office gives priority to higher value accounts and this is reflected in the graphic provided, which shows that 97% of the turnover subject to audit had been completed by the end of September 2017. This represents two thirds of the number of 2016 financial statements. Government Departments are generally required to present the audited financial statements of the public sector bodies for which they are responsible to the Oireachtas within three months of audit certification. Of the 2016 financial statements that had been certified and were due for presentation as of April 2018, some 80% had been presented on time. Arising from a recommendation in special report No. 95, Government Departments are now required to report in their appropriation accounts on the presentation to the Oireachtas of audited financial statements of the bodies and funds for which they are responsible. An example of this can be seen at the back of Vote 11 for 2017. This should increase the monitoring by Government Departments of the production of audited financial statements by the bodies under their aegis.

At the end of 2017, there were 13 sets of financial statements that had not yet been certified, representing a significant improvement since the end of 2015 when there were 25 sets of financial statements in arrears. All but two of the 13 arrears at the end of 2017 have now been certified. The university sector, which previously had a high incidence of arrears, has shown significant improvements in timeliness of financial reporting. The significant organisational change that the education and training board, ETB, sector underwent from July 2013 was a contributory factor to delays in the presentation of audited financial statements. However, as the Chairman has mentioned, much progress has been made in relation to the timely presentation of ETB accounts for audit, and achieving earlier completion of audits of ETBs.