Mr. Seamus McCarthy:

Special report 98 looks at the arrangements in place for the provision of school transport. The examination was carried out to ascertain whether the Department of Education and Skills can demonstrate that it is achieving value for money through its arrangements with Bus Éireann to deliver the school transport service and whether there is adequate oversight of the service by the Department. The special report was based on financial and service data relating to 2015. The briefing material provided by the Department includes data for later periods and there have been some significant subsequent developments which the Accounting Officer will explain. However, as the key findings of the report are likely to still apply, I will present them as reported.

Primary school children are eligible to avail of school transport services if they live not less than 3.2 km from their nearest suitable school. The eligibility minimum distance for post-primary pupils is 4.8 km. Pupils who do not qualify under the eligibility rules may use the school transport service if there is spare capacity on a bus route. Such users are known as concessionary ticket holders. Eligible children who hold a medical card and special needs pupils are exempt from charges for availing of the service.

The cost to the Department of school transport services in 2015 was €173 million, or close to €1 million per school day. The bulk of the cost is accounted for by payments to Bus Éireann, which received €149 million in 2015, or 86% of the amount spent by the Department. Bus Éireann also collected a little less than €14 million in fees from fare-paying pupils. The balance of the expenditure by the Department is accounted for by various grants, including for special needs escorts and transport grants. The average annual cost of transporting eligible pupils was approximately €1,800 per head in 2015. Fees recouped from fare-paying pupils amounted to a little more than 8% of the costs.

Although there has been a steady increase in the total number of enrolments in primary and post-primary schools over the past decade, the number of pupils who are eligible for and avail of the school transport service has fallen significantly.

In 2007, the number of eligible pupils who availed of the scheme was 127,000 or 16% of enrolled pupils. By 2015, this had dropped to 89,000 or 10% of enrolled pupils.

The school transport bus fleet is made up of a mix of large, medium and small buses. Taxis are also used to transport some pupils with special needs. Much of the service is subcontracted by Bus Éireann to private bus and taxi operators. Payments to subcontractors accounted for 71% of the cost of the service provided by Bus Éireann in 2015. Based on assumed average carrying capacities for vehicle types, we estimated the bus fleet as a whole had a potential carrying capacity of 163,000 pupils in 2015. Relative to the number of eligible pupils, the estimated level of spare carrying capacity in the fleet was 48%. Some of this spare capacity is taken up by concessionary ticket holders but the estimated residual spare capacity in 2015 was still significant, at about 35%. There was also evidence that some ticket holders do not use the transport available on a daily basis resulting in further underutilisation. At the same time, there is local demand in certain areas for concessionary access to school transport services that cannot be accommodated.

The examination also looked at the oversight arrangements in place between the Department and Bus Éireann. We found that in 2015 the Department was still relying on arrangements that had been in place for over 40 years contained in a 1975 document entitled, Summary of Accounting Arrangements. I concluded that the accounting arrangements provided for in the 1975 agreement are inadequate given the level of costs involved. Reporting requirements are weak and there is an absence of key performance indicators or other metrics that would allow the Department to assess service performance and the achievement of value for money. I recognise there have been some developments since the report was completed on a service level agreement.

The accounting arrangements provide for the Department to pay an annual lump sum transport management charge to cover Bus Éireann's indirect and unspecified other direct costs. The charge is provided for in the agreement at 13% of direct costs. By agreement between Bus Éireann and the Department, the management charge was capped at €16.7 million in 2011, at €15 million a year between 2012 and 2014 and at €11.3 million for 2015. Information provided by Bus Éireann to the Department and the costs to be met from the management charge indicate that, notwithstanding the cap, the amount paid was in excess of costs in each of the four years to 2014, resulting in an accumulated surplus being held by Bus Éireann estimated by the Department at €11.2 million at the end of 2015. The report includes a number of recommendations for improvement in the oversight and accounting arrangements. The Accounting Officer will be able to brief members on implementation progress in that regard.