We will take the report of the Comptroller and Auditor General on the impact of the value for money examinations1994-6. I welcome Ms Áine Stapleton, Principal Officer in the public expenditure division, and ask her to introduce her colleagues.
Report on Impact of Value for Money Examinations 1994-1996.
Ms A. Stapleton (Principal Officer, Department of Finance) called and examined.
Ms Stapleton
Accompanying me are Mr. Cormac Cronin from the organisation, management and training division and Mr. Finbar Kelly from the Government accounting section of the organisation, management and training division.
I remind witnesses that they do not enjoy absolute privilege. I draw their attention to the fact that from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons identified in the course of the Committee's proceedings. These are outlined in the brief provided.
I call Mr. Purcell to introduce the report.
Mr. Purcell
This report on the impact of value for money examinations differs somewhat to other value for money reports in that it is a result of an exercise to follow up on the findings of all reports produced between 1994-96. Essentially, I wanted to see what happened as a result of our work in this area and, in particular, I wanted to gauge the extent to which the suggestions contained in the reports and subsequent dialogue between the committee and Accounting Officers on the issues made a difference.
What do we expect to achieve with the value for money reports? First and foremost, they serve as a means of bringing Accounting Officers to account for their stewardship of the organisations they head up from the point of view of economy, efficiency and effectiveness. Part of this accountability is a reasonable expectation that the organisations examined should be improving their performances over a period of time. The report records specific improvements made on foot of the recommendations and notes general areas such as the quality of information systems where one might have expected greater progress.
Among the more significant improvements identified in the report were direct savings to the taxpayer through better energy management in health boards; more economic procurement in An Garda Síochána and the universities; an increase in organisational efficiency in the Ordnance Survey Office and in the administration of the Leader programme; a heightened awareness of the need to tighten project planning and management, of which the report contains several examples and, most importantly, a growing recognition of the importance of building the infrastructure of objectives, targets and performance measures and indicators as a means of enabling a proper assessment of effectiveness to become a routine part of management activity in the public sector. Apart from these visible impacts, it is likely that value for money reports may have less visible and less immediate impacts in the sense that they may sow the seeds for longer term improvements in the delivery of public services.
It can be difficult to attribute improvements in performance to the effect of my value for money work because it is often claimed that such improvements would ultimately have occurred in the normal course of events. Even where that might be true, it is fair to say that the mere undertaking of a value for money examination usually acts as a spur to changing things for the better. Without overstating their impact, I would like to think that our work and that of the committee in this respect has at least been one of the contributory factors to a better performing public service. In this regard, I welcome the Department of Finance's statement that the value for money studies have contributed to actual savings in specific sectors and to a greater cost consciousness in general in the expenditure of Oireachtas moneys.
There are 16 reports in total and the subjects they cover pre-date the Public Service Management Act, 1997, which formally introduced strategic management to the Civil Service. The principles underlying that initiative are concerned with value for money in the broadest sense and provided a context for my reports since then. Recent developments on the introduction of performance management illustrate the ongoing nature of the fundamental changes which are occurring in the Civil Service. I have attempted to put my value for money work in the first few years in the context of what is happening generally throughout the Civil Service and the public service.
Ms Stapleton
Generally, the Department of Finance welcomes the value for money audits which are carried out, particularly the summary report which seeks to extract some of the key principles. We also welcome the attempt to follow up on implementation in the Departments and bodies which are audited. The report is a very useful one from our perspective.
We would also like to echo the comments that the value for money reports pre-date the strategic management initiative and a number of the developments referred to in the report have been initiated, for example the development of strategy statements and business plans. There is also a move towards the development of new financial information systems across the Civil Service and work on that is ongoing. In addition, there is a move towards performance management. All of these developments will help to address some of the issues emerging from this report, such as greater focus on outcomes and the indication of performance indicators, where possible.
I note that the Comptroller and Auditor General has indicated throughout the report that there have been evident savings in specific sectors, for example in regard to centralised procurement by the health boards and the substitution of cheaper for more expensive materials. Is there any way of quantifying the savings made across the board?
Ms Stapleton
We do not have that information but we can examine the matter further and come back to the committee with our findings.
Thank you, that would help to put a shape on the report.
Was a value for money study carried out on the rent subsidy scheme at one stage?
Mr. Purcell
That study was part of a broader review of the administration of the supplementary welfare allowances system. The question of the appropriateness of the rent supplement being included in the supplementary allowance system was taken up with a number of Accounting Officers and changes were certainly being considered, although I am not sure about the extent to which they have been implemented.
We did not consider the matter specifically in the context of value for money.
Mr. Purcell
The whole question of the appropriateness of where the rent subsidy sat had efficiency and effectiveness implications. It was felt that it would be more effective for the payment to be administered by the Department of the Environment and Local Government.
I note that 11% of the Comptroller's office time was spent conducting the value for money reports. Is that an appropriate amount of time or should more reports be carried out?
Mr. Purcell
The legislation underpinning my value for money work describes such work as being a discretionary function. The committee discussed the Vote for my office with the Accounting Officer and will be aware of the problems experienced in regard to retaining experienced staff. It is the discretionary functions which suffer in that instance. We are not carrying out the number of value for money studies we would like to carry out as something has to give.
Are you saying that it would be preferable for the overall development of the office and from the taxpayers' point of view if the value for money function were not designated as discretionary?
Mr. Purcell
I would be seeking a target nearer to 20%. That is the target which was envisaged when the division was established following the implementation of the 1993 Act. The level of value for money work varies in different countries. Deputy Ardagh spoke about Canada. Our British counterparts have a 50-50 split between financial audit and value for money functions. My counterparts in Northern Ireland would have a similar split. In places like New Zealand, it would be more similar to our current returns of perhaps 10%. We keep on eye on this and I do not envisage it going as high as 50% because we have not the critical mass of economic activity to satisfy that. We must also take into account a practical problem in carrying out value for money reports in that many consultancies and other bodies, such as the ESRI and so on, carry out reports which touch on certain aspects which we would be interested in studying.
You are not advocating a change in legislation so that it is not a discretionary function? If it is a discretionary function within your powers to investigate, it is not a particular problem?
Mr. Purcell
No, not at all. It is just that if one has a quantum of statutory work to do and there are statutory deadlines and demands on the resources, they must take priority. Having said that, there is an irreducible minimum of value for money work I would always consider doing. If that suffered, I would certainly bring it to the attention of this Committee.
The Chair might ask the secretariat to write to the relevant agencies in relation to the rent subsidy scheme, because I do not get a sense of urgency from any of the Departments. This was an urgent issue and at the time the Chairman, Deputy Mitchell, was worried about the development of the scheme. I do not think the Departments have got their act together.
As I recall, the Secretary General of the Department of the Environment and Local Government, Mr. Farrelly, was asked about that issue approximately six or eight weeks ago. He has written to the interdepartmental group.
It is still with the interdepartmental group.
The health boards and other agencies recently got briefings on the issue and have suggested changes. It was with the Southern Health Board two months ago.
Is there any problem with writing or asking for an update? It was listed as a very urgent item at the time.
We will pursue the matter and ask for a note.
I would appreciate a detailed note and background on the issue.
The Comptroller and Auditor General made numerous references to economic and centralised procurement and the obvious benefits accruing from that. To what extent has that been developed? Which Departments are taking on board the need to become involved in centralised procurement in a way which will impact beneficially on their costs, etc., and on the costs of other Departments? To what extent is there co-operation where possible between Departments in relation to this type of saving?
Mr. Purcell
There is a balance to be struck in all these matters. Centralised procurement is not necessarily the optimum response to every problem in this regard. However, in a general sense it can be a useful approach. There has been much greater centralisation of procurement in relation to Garda Síochána services and so on as a result of our work. We also brought that to light in the university sector and I understand significant economies have been achieved in that area. In relation to the procurement of energy in the health board sector, we made several recommendations which have been followed up and there have been hard cash savings as a result. Obviously, we could concentrate on that approach and look every year at the procurement procedures of the different organisations.
The reports must be seen as giving a hint to a broader public service, they are not just for the health boards. If something applies in a health board situation, it may apply also to something analogous in another area. The value of my reports getting an airing at this committee is that lessons can be taken on board. Officials of the Department of Finance - they will correct me if I am wrong - would take on board some of the issues which are generally applicable across the public service and perhaps stimulate action in that regard. This was the case in relation to inadequacies which we pointed out in relation to project planning and management. The Department of Finance wrote to every accounting officer reiterating the need for proper planning and costing of projects. Hopefully, it has that knock-on effect.
It is sometimes difficult to quantify or attribute the action to the particular value for money audit carried out. This was mentioned in the report and I mentioned in my opening remarks the question of attributability. I will not seek headlines such as my counterparts in other countries claim in their annual reports - "It costs X millions of pounds to run our office but we generate savings which are ten or 20 times that amount". I do not like that approach; I would prefer an understated approach. I reckon some of these things might have happened anyway because of better management or other developments throughout the public sector. However, I would like to think we make some contribution but I honestly think this would be impossible to quantify.
Is the Department of Finance satisfied with the degree to which the various Departments have taken on board the advice, comments or attention drawn by the Comptroller and Auditor General in his various reports and their ultimate discussion in the committee?
Mr. Cronin
That is a difficult question given that those of us present are not briefed to handle the business in relation to all Departments right across the board in this regard. Therefore, we are not in a position to answer honestly the question. The different sections of the Department of Finance charged with controlling particular areas of expenditure are responsible for looking at their narrow area, so to speak, therefore, we do not have this overview available to us. In fact, we did not expect to be sitting in this chair today; we thought we would be sitting elsewhere. We can produce a note for the Deputy fairly readily in relation to the particular areas which were examined by the Comptroller. We can also produce a departmental view.
That is an important issue. We should get a note not only on the areas examined by the Comptroller, but also on analogous areas, to ascertain, for instance, to what extent the Department of Finance takes on board what he has to say. It takes a great deal of time, energy and effort to produce a report which can have a very wide impact on the operation of Departments outside. It is important that the Department would send a circular to all agents, both within their own Department and outside it, to ensure the points raised are taken on board, because they are not raised for no reason.
In relation to centralised procurement, the drugs and medicines area of the health service is the largest single area where huge economies can and have been made a result of greater emphasis on centralised purchasing. We should not lose sight of having achieved a certain amount and having got things going up to a certain point. We should not relax on the basis that the job is done and we do not have to go back to it again. We must go back to it on a fairly regular basis because that is what keeps everyone motivated, focused and on their toes.
I am trying to figure out Mr. Cronin's reference to the different sections and perhaps the seating arrangements. It is most unusual to have two teams from the Department of Finance dealing with different sections of the Vote. I am surprised the witness is not briefed to cover the various Departments because the report is broken down into four sections and the Comptroller and Auditor General is happy enough with the economics of it. He is scathing, however, in terms of project management and effectiveness. It is very clear that there are weaknesses in key stages of project management. He also clearly states that the data collection system is totally inadequate. The effectiveness of direct assessment, which is essential for the Department of Finance, is also criticised.
In other sections he has been complimentary to the Departments. I presumed that the witness would have been prepared give us an overview of improvements to sections where criticisms have been made. I am stunned that the witness tells us she is not briefed to go into this.
Ms Stapleton
A number of initiatives are under way under the Strategic Management Initiative, which seek to address some the weaknesses that have been identified in the report. Across the Civil Service there is a financial management project underway which will seek, as part of its terms of reference, to assemble a system which will enable Departments to gather both financial and non-financial data. That will address some of the information deficiencies identified here. There will be a greater focus, not just on the inputs into programmes and schemes but also the outputs of those schemes and the identification of performance indicators, which will greatly assist Departments in assessing the effectiveness of particular expenditure. That is ongoing across the Civil Service.
Under the SMI, the Department of Finance has initiated a programme of expenditure reviews which are ongoing across Departments. There are two rounds of expenditure reviews agreed by Government. In the first round, approximately 60 programmes were identified for review. The majority of those have been completely and a second round is now under way. The Office of the Comptroller and Auditor General has recently indicated that it proposes to do a VFM audit of the expenditure review process to assess its effectiveness, the quality of the process and the systems and supports in place. That will help address a number of the key points raised in this report.
In response to the question on the individual VFM audits, and the action which has been taken on each detailed recommendation, we could give general impressions but we would prefer to give a more detailed, written response.
I agree with Deputy Durkan that should be put in place to evaluate if we are wasting time or if the Comptroller and Auditor General wasting time by doing value for money reports. It has been an innovative process and I am glad it is in place. The witness's Department would be seen as the big club in charge of everything. If pressure is not put on people as a result of the reports, they might feel it is a waste of time.
We will note the report from the Office of the Comptroller and Auditor General and the accounts. I thank Ms Stapleton, Mr. Kelly and Mr. Cronin for their answers and we look forward to the two notes.
The witness withdrew.