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.