Ciarán Lynch (Cork South Central, Labour)
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Question 2: To ask the Minister for the Environment, Heritage and Local Government the actions that he has taken on foot of the Ernst and Young report on capital projects funded by his Department; the cost of commissioning this report; the measures that have been taken to curb the series of concerns expressed in this report regarding the attitude of local authorities to project fund management; the measures that have been taken to ensure current and future projects each have a project brief based on a thorough appraisal of project requirements; if direction has been provided to local authorities on the implementation of the report's recommendations; if so, if he will outline same; and if he will make a statement on the matter. [16176/10]

John Gormley (Dublin South East, Green Party)
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In 2008, in the context of requirements relating to capital funding, my Department, following a competitive tendering process, commissioned Ernst and Young to carry out spot-checks on capital projects, at a cost of €545,048. It involved the examination, in local authorities and my Department, of 143 projects valued at a total of €330 million in nine programme areas to assess adherence to capital appraisal guidelines.

In general, the report found good performance concerning procurement and that local authorities comply with the relevant guidelines. The report also found that, in a large number of cases where significant capital expenditure was involved, processes adopted by local authorities mirrored the formal appraisal guidelines.

However, the report also records deficiencies in formal appraisals and project briefs, and completion of documentation, as well as delayed submission of final accounts. In particular, the report identified 11 issues concerning appraisal and management of projects, and made recommendations to accompany those findings.

Many of the projects examined were undertaken when strengthened capital appraisal guidelines from 2005 were relatively new and before the introduction of fixed price contracts from 2007. On this basis, I hope and expect that the situation will improve significantly and that this will be reflected in subsequent spot-checks.

I am concerned, nonetheless, by the findings of the report. Accordingly, my Department wrote to local authorities on 22 March 2010 re-emphasising the importance of adherence to the capital appraisal guidelines. In this respect, all project managers have been asked to review current arrangements for the management of projects to assure themselves that they are being appraised, managed and monitored sufficiently in line with Department of Finance guidelines, as well as with relevant departmental circulars.

As far as the nine specific programme areas are concerned, issues arising from the report will be taken forward by the relevant sections in my Department dealing directly with those areas. I will also be considering what further, more general steps should be taken, including in the area of training, with a particular focus on the issues referred to in the report.

By way of follow-up, spot-checks on capital projects are now being undertaken both by the local government audit service and my own Department's internal audit unit in respect of 2008 projects. I look forward to seeing a significant improvement in the results.

Ciarán Lynch (Cork South Central, Labour)
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I thank the Minister for his response, but I am baffled by the manner and tone of that reply. This is a damning report. The only conclusion that can be drawn from it is that we had runaway over-spending by local authorities involving hundreds of millions of euro. If the Minister wants to make light of that, I would ask him to re-examine the report. For example, it shows that almost one third of work was over budget and there were no contingency plans when costs overran. The auditor has said that it was considered a success to secure funds and how they were spent was considered a secondary measure. In addition, one in every 25 cases revealed showed that there was no prior departmental approval for their expenditure.

The report showed that over 30% of projects ran into over-spend. What is the monetary value of that sum? Can the Minister provide a breakdown by relevant headings and individual local authorities? What efforts has the Minister made to recoup the costs and sanction local authorities that went ahead with projects without his Department's approval?

Oddly, the Minister says that guidelines at the time were quite loose, but they were not. European directives and procurement process were in place at the time. The report shows that European procurement procedures were breached concerning tendering processes for some of these projects. Will the Minister indicate how many local authorities this matter relates to?

John Gormley (Dublin South East, Green Party)
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I do not think the Deputy can say that I am taking this matter lightly. He must remember that my Department commissioned this report and even though it came in at the lowest tender it is certainly a fair amount of money when one is talking about €545,000. In no way can the Deputy say that I am taking this lightly. I have clearly said that I have concerns about overspending, be it in capital projects or current spending. As well as taking this measure, the Deputy also knows that I have established an efficiency group to examine current spending. We discussed that matter the other day.

The Deputy has asked a number of questions about specific local authorities. I will get back to him in writing about them. If the Deputy provides specific questions, I will give him a breakdown. I will give him every answer that he is looking for in that regard. There is no difficulty there, although it will take some time to examine each and every local authority to see what is actually going on. In general terms, however, local authorities are responsible for an expenditure of approximately €11 billion. In looking at the national accounts, one must ask some searching questions. In my own backyard I have seen what happened concerning the waste treatment plant in Ringsend where I had to cough up a further €30 million because they got the contract arrangements wrong. This is of great concern to me and I share the Deputy's real concern about this matter. I will try to get back to him as quickly as possible on any of the questions he has on specific local authorities.

Ciarán Lynch (Cork South Central, Labour)
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I welcome that the will provide a response on the detailed questions I will list for him on the conclusion of this debate. In addition to those questions, were there bonus payments attached to those projects and if so, what were the criteria for the bonuses? In light of the report, has the Minister given consideration to the fact the bonuses may not have been merited? We had a situation where money was given out by the Department where the project plan, if it was in place, was a secondary measure. This was a recipe for a disaster. It was a self-fulfilling prophecy that the projects would overrun.

Who ultimately sanctioned the budget overspends outlined in the report? Did the additional permission come from the Department or was the overspend made by the local authority and did it then come looking for the money? Surely the issue should have been flagged earlier, when the overspend was happening and the local authorities needed the Minister's permission. It should not have required a report to bring it to our attention. The audit outlined in the report relates to a sum of approximately €330 million, but that is out of a total capacity expenditure of €5 billion. Can the Minister indicate the actual overall spend for the period in question, because Ernst & Young only examined a percentage of the expenditure for that time? If we apply the report to the overall sum of €5 billion, I am sure the sum in question is appalling.

John Gormley (Dublin South East, Green Party)
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On the question of bonuses, the Deputy has made valid points and I have always shared his view. As mentioned on the previous question, we lost the run of ourselves in terms of bonus payments during the Celtic tiger years. The Deputy's question is specific and I will have to come back to him on it. On the question on the role of the Department, where I see a gap is that often managers take decisions and are not accountable for those major financial decisions. The person who then has to take the rap and has to go before the PAC is the Secretary General of my Department. I have discussed this with other Deputies and it makes sense that in the context of reviewing local government structures, we look at the possibility that managers go before the PAC and account for the financial decisions they have made.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Hear, hear.