JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Wednesday, 23 Mar 2005

Expenditure Review Initiative: Presentation.

Chairman

We now move to No. 3(1) on our agenda, namely, a discussion with the chairman of the expenditure review initiative steering committee. This is the first of our main items of business to be dealt with today. We have to vacate this meeting room by 2 p.m. at the latest. The next item is a discussion with a delegation from the Irish Farmers' Association and farm creditors of Tralee Beef and Lamb. We will try to finish at 12.45 p.m. at the latest, which will give us an hour and a quarter to deal with both matters. We may run a few minutes over or finish a little earlier. I want to ensure we allow time for the second item with which we have to deal.

The committee is joined by Mr. Tom Considine, Secretary General of the Department of Finance and chairman of the expenditure review central steering committee, Mr. David Doyle, second Secretary General of the Department of Finance, Mr. Seán Gorman, Secretary General, Department of Enterprise, Trade and Employment, Mr. Tom Heffernan, principal officer at the Department of Finance, and Mr. Conor McGinn, assistant principal at the Department of Finance. On behalf of the committee, I welcome them and thank them for attending today's meeting. We are pleased to have such a high powered delegation here today.

Before we begin, I remind the visitors that the comments of members are protected by parliamentary privilege but those of visitors are not. I remind committee members that they should not comment on, criticise or make charges against a person outside the committee or these Houses.

We will hear a short presentation by the chairman of the steering committee, Mr. Tom Considine, which will be followed by a open discussion with members of the committee. We have already received a copy of the submission, which members should have before them. I call on Mr. Considine to proceed.

Mr. Tom Considine

As the chairman of the expenditure review central steering committee, I welcome this opportunity to discuss with the committee our report to the Minister for Finance on the expenditure review initiative for the period June 2002 to June 2004. We took the initiative in preparing this report and welcome the committee's interest in it.

It might help if I set out briefly the background to these expenditure reviews. The initiative began in 1997 as part of the financial reform agenda set out in Delivering Better Government. It was one of a number of initiatives taken by Government in the context of the strategic management initiative. The aim of it was to achieve better informed resource allocation decisions and enhanced accountability for the results achieved for these resources.

A central steering committee was established to oversee the review process. All Departments undertook to carry out reviews each year under joint steering committees comprising the Department of Finance and the spending Department. These reviews were to be submitted to the Minister for Finance and the relevant line Minister.

The first round of reviews covered the period 1997 to 2001. The number of reviews approved by Government for this period was 126. By April 2002, the number of reviews actually completed was 70. Of the remaining 56 reviews, 26 were carried over into the 2002-04 review period, five of the areas due for review were evaluated in another context and 25 were not proceeded with.

When the expenditure review initiative was first established, its objective was to review all expenditure programmes over a three-year period. The Government reviewed progress on the expenditure review initiative in June 2001 and again in spring 2002 and initiated a number of reforms to the process. It was clear, with the benefit of a number of years' experience of Departments and offices developing arrangements and operating the review initiative, that the arrangements for reviews were not satisfactory and that the original objectives of systematically reviewing all programmes over a three-year period was overly ambitious and simply not feasible.

These views were echoed by the Comptroller and Auditor General in the conclusions and findings of his value for money report, No. 39, on the expenditure review initiative published in January 2002. The report made the a number of recommendations including: a comprehensive strategy for the development of the expenditure review initiative should be put in place; stronger support mechanisms and central guidance should be provided; a systematic process of quality assessment of reviews should be implemented; a formal process for monitoring review impacts should be initiated; a clear set of principles should be established enabling areas of expenditure to be prioritised and scheduled for review; and review reports should be published, where possible. It is worth recalling that the Comptroller and Auditor General also found in his report that the expenditure review process despite its shortcomings "had the effect of directing attention to areas of expenditure which had not hitherto been analysed to any great extent and that the initiative provided some reassurance that taxpayers' money was generally being used to good effect in the areas under review".

The structural improvements to the expenditure review initiative arising from the Government's review of progress were designed to improve the efficiency and effectiveness of the expenditure review initiative as well as to address the shortcomings in the expenditure review arrangements confirmed by the Comptroller and Auditor General. The central steering committee has been working since then to implement the changes approved by the Government and recommended by the Comptroller and Auditor General. The recent report from the central steering committee to the Minister for Finance sets down the progress made and reviews the operation of the revised arrangements which have been put in place.

When I last appeared before an Oireachtas committee in regard to the expenditure review initiative in March 2002, it was to discuss with the Committee of Public Accounts the recommendations in the Comptroller and Auditor General's value for money report. I propose, therefore, to illustrate the changes made since April 2002 by reference to those recommendations. I also propose to make reference to the additional recommendations for improvements made in our recent report to the Minister for Finance.

As regards the recommendations of the Comptroller and Auditor General that a "Comprehensive strategy for development of the [expenditure review initiative] should be introduced and a clear set of principles should be established enabling areas of expenditure to be prioritised and scheduled for review", the Government had decided in 2001 that a more focused approach to the selection of reviews was appropriate. This decision set down clear criteria for the selection of topics for review emphasising that programmes of strategic importance or involving significant levels of expenditure should be selected for review. In May 2002, the Government agreed the arrangements for the 2002 to 2004 round of reviews and approved a list of 52 reviews to be undertaken in 2002. The list of reviews included 23 reviews carried forward from the previous round of reviews and Departments were given the option to reconsider and update their list of indicative reviews for the years 2003 and 2004 in the light of the prevailing circumstances.

The central steering committee subsequently added a further 53 reviews, including three carried forward from the earlier round, bringing the total of reviews planned for the 2002-04 round to 105. As part of an approach of ensuring greater co-ordination between Departments in regard to reviews, following consultation with Departments, the Government invited the central steering committee to include some cross-departmental reviews in the 2002-04 round of reviews. In response, two topics for cross-departmental reviews were selected to commence on a pilot basis in 2002, namely, programmes aimed at the long-term unemployed, to be led by the Department of Enterprise, Trade and Employment — the Secretary General of that Department, Mr. Seán Gorman is present this morning — and programmes on road safety to be led by the Department of the Environment, Heritage and Local Government. Responsibility for the latter transferred to the Department of Transport with the realignment of certain departmental functions following the change of Government in June 2002. These two reviews are included in the 105 reviews planned for the 2002-04 round of reviews.

Standard general terms of reference for expenditure reviews were also approved by the central steering committee in July 2003 with a view to improving the quality and consistency of reviews. The standard general terms of reference is included as Appendix 5 of the expenditure review report recently submitted to the Minister for Finance. The terms of reference for individual studies are based on this agreed standard and also agreed at senior management level before work commences on the review.

Notwithstanding the 2001 Government decision that reviews should focus on programmes of strategic importance or involving significant levels of expenditure, it is clear to the central steering committee that problems persist with getting Departments to focus on such programmes and significant areas of expenditure. Some of the topics selected for review by Departments remain relatively small in scale. In its recent report to the Minister for Finance the expenditure review committee recommended that future review reports should clearly indicate what percentage of the organisation's total budget the review covers and the specific business factors underlying the choice of review topic.

To provide stronger central support for the review initiative as recommended by the Comptroller and Auditor General, an expenditure reviewers' network was established in July 2002 with support from the central steering committee secretariat in the Department of Finance to provide central support to reviewers and direct training in expenditure review. It has developed a three-day training course in expenditure review which has been delivered to approximately 120 civil servants to date. It also holds seminars for network members on issues relevant to expenditure reviews. To date seven seminars have been held. The network is also supported by a computer extranet website which acts as a central source for information and guidance for all Departments and offices.

The recent report to the Minister proposes to build on the progress achieved by the reviewers' network by tasking it with further strengthening the supports to smaller offices to carry out evaluations and with improving the range of central supports available generally. Feedback from the people involved with expenditure reviews suggests that additional supports are required.

In addition to the specific training in carrying out expenditure reviews which has been put in place, the centre for management and organisation development, CMOD, in the Department of Finance has introduced a number of training programmes in policy analysis which will further strengthen the evaluative capacity of Departments. CMOD introduced a basic short course in policy analysis in 2000 which has since been continuously updated to reflect relevant developments. Approximately 200 staff have been trained under the basic programme since its introduction. Two new professional courses were introduced in 2003 — a two year part-time higher diploma programme and a two year full-time masters programme in public policy analysis. The first graduates of the diploma and masters programmes, 30 in all, will come on stream this year.

The recent expenditure review report recommends that Departments and offices should seek, in particular, to make more use of the participants in the masters programme in meeting their analytical requirements and in supporting the expenditure review initiative. This is already beginning to happen. Three of the participants in the masters programme are undertaking projects directly related to expenditure review. One of them has recently been assigned a project supporting the cross-departmental study on supports for the long-term unemployed in order to give greater impetus to the completion of this review. When arrangements for the establishment of a panel of external assessors to assess the quality of reviews being produced was completed in mid-2003 the systematic quality assessment of reviews recommended by the Comptroller and Auditor General was put in place. Some 25 expenditure reviews have been quality assessed to date and a further two have been submitted for review. The arrangements for assessing the quality of reports are now working well.

At departmental level the submission of draft reports to quality assessment and the resultant comments from the assessors is improving the quality of the final reports. The central steering committee's conclusions and recommendations for improvements to the expenditure review process included in their recent report to the Minister were greatly assisted by analysis of the views and experiences of the assessors' engagement with Departments and offices on their draft reports.

Monitoring the impacts of reviews, as recommended by the Comptroller and Auditor General, is being addressed through meetings between the central steering committee and Secretaries General. Seven such meetings have taken place in the past two years. While these meetings have been useful in monitoring overall activities in the Departments concerned in regard to expenditure reviews and evaluation generally, the central steering committee considered that more was required to strengthen both the potential and actual impacts of expenditure review reports at departmental level. In this regard, the recommendations in their recent report to the Minister for Finance were: each expenditure review should state the percentage of the organisation's total budget and the specific business factors underlying the choice of topic for review; Departments and offices should put systems in place to ensure that the responses to the expenditure review initiative recommendations by their organisations are tracked and reported regularly to their management advisory committee; Departments should provide details in their annual reports on all forms of evaluation activity, including expenditure reviews, and detail progress in implementing recommendations set out in the evaluation-review reports and the impacts achieved as a result. These recommendations were designed to achieve this objective by requiring more transparent, open and systematic monitoring and reporting of expenditure review recommendations.

In the interests of promoting greater accountability to the Oireachtas and the public in regard to the expenditure reviews, the Government decided in 2002 that the reviews should generally be made available to the Oireachtas and that they should be published on departmental websites. The central steering committee has sought to further strengthen these accountability arrangements by recommending that: Departments forward copies of their review reports directly to the clerks of the appropriate Oireachtas committees; and future progress reports on modernisation action plans to be submitted to the performance verification groups under Sustaining Progress should include details of current expenditure review plans.

It is clear from the foregoing that significant improvements have been introduced to the expenditure review initiative during the 2002-04 round of reviews to address the shortcomings identified in the review process by the Comptroller and Auditor General in his value for money report. The central steering committee, having reviewed their operation and taking account of the time it takes for the revised arrangements to become fully effective, took the view that further refinement of some of the improvements and some additional initiatives were appropriate. The committee believes that the recommendations made in its recent report to the Minister will further develop the procedures introduced in the 2002-04 period with particular emphasis on increasing the internal and external accountability of Departments and offices for their review activity with a view to achieving a volume of reviews and at the same time increasing their impact on decision-making.

The year 2002 was the first year of the new round. The Government approved 52 reviews for that year, including 23 carried forward from the earlier period. The 52 reviews included the two pilot cross-departmental reviews to which I have referred. Subsequently, the central steering committee approved a further 53 reviews, including three carried forward from the previous round, to be undertaken in the years 2003 and 2004. This brought to 105 the total reviews planned for the three years 2002-04.

The position at the end of last month was that 28 of these reviews have been completed, of which 14 were carried over from the earlier period. A further 12 reviews have been quality assessed or are in the quality assessment process and a further 41 are in progress. Of the remaining 24 reviews, ten of the programmes scheduled for review have been or are being otherwise evaluated, nine have yet to start and five are not going ahead.

In summary, the total number of completed reviews under both rounds of reviews is 98, with 70 under the 1997-2001 round and 28 under the 2002-04 round, of which 14 were carried over from the earlier round.

In its recent report to the Minister, the central steering committee noted that, while the number of expenditure reviews to which Departments had committed themselves was reasonable — taking into account evaluations under the national development plan and sectoral studies — there had been slippages in the completion of reviews by comparison with the approved programme. The conclusion in regard to the overall level of review activity was drawn against the background of the Government view taken in 2002, based on experience of operating the expenditure review initiative in the early years, that to attempt to review all programmes was overly ambitious. In arriving at the conclusion, the committee also took account of the fact that 13 national development plan evaluations, including the mid-term evaluation of the national development plan in 2003, and at least 100 sectoral studies or reviews had been undertaken outside the formal expenditure review initiative between 2002 to 2004.

The committee also concluded that some expenditure reviews were postponed and others were not proceeded with for perfectly valid reasons. These included organisational change or delays in the implementation of the programme in question, the review topic being included in another form of evaluation — for example, being part of the national development plan review or a sectoral evaluation review — that another key area has with the passage of time become a more important topic for the conduct of a review or that policy changes in the area in question have meant that the conduct of the review would not be meaningful or useful.

While there were mitigating factors in some instances, such as the transfer of departmental functions, new Government priorities to be implemented, etc., the recent expenditure review report to the Minister found that the evaluative capacity of Departments and offices was variable and there were some deficiencies in Departments and offices in planning, managing and resourcing expenditure reviews. These factors contributed to the slippages in completion of reviews as scheduled. While the training programme will remedy many of these deficiencies, the report to the Minister from the committee made several recommendations designed to further strengthen the arrangements in place in Departments and offices for planning and implementing reviews. It recommended that Departments and offices should properly resource reviews. To ensure that this will happen, the report further recommended that expenditure reviews should be included in statements of strategy and the role profiles of the relevant staff and that the management advisory committee in each Department and office should appoint one of its members to co-ordinate and report on the expenditure review process within the organisation.

In keeping with the whole thrust of the strategic management initiative, Departments are primarily responsible for the development of policy for their sectors and for management of their own expenditures. They are also responsible for carrying out expenditure reviews and implementing any recommendations arising therefrom and implementing change in their areas of responsibility. The Minister for Finance has accepted the findings and recommendations in the central steering committee's report. Upon receipt of the report, he wrote last November to all Ministers urging them to ensure that their Departments and offices take appropriate steps to implement the recommendations.

As chairman of the central steering committee, I have written to Departments and offices urging them to complete outstanding reviews as a matter of urgency and to report progress in this regard and inviting them to propose topics for the next round of expenditure reviews for 2005 to 2007 for submission to Government. I have also asked them to indicate the steps which they have taken to implement the recommendations of the expenditure review report. I also expect that the recommendations in the report to the Minister, which are designed to make Departments more accountable externally in regard to the expenditure review initiative — such as copies of all future reviews being forwarded to the appropriate Oireachtas committees and progress on reviews being included in reports on modernisation for performance verification purposes — will add to the pressure on Departments to make more progress on completing their reviews on time and to a high standard. The decision to bring to the attention of this committee the report to the Minister on the expenditure review initiative and the recommendation that the performance verification group be informed by each Department and office of the reviews in their area should also improve the quality and output of completed reviews.

I remind the joint committee that the expenditure review initiative is just one of several important developments in regard to the Government's continuing drive to secure better value for money and more effective and efficient management of public expenditure and that consideration of progress on the expenditure review must also be seen in this wider context. As I have already indicated, extensive evaluation also takes place outside the expenditure review initiative. Evaluation capacity within the Civil Service is being enhanced through the provision of targeted training and the introduction of professional courses in public policy analysis. In that context, the first masters and higher diploma graduates will be coming on stream this year. Work is progressing on the development of performance indicators with a view to shifting the focus more on the results being achieved by Departments and offices. A pilot project linking business planning to resource allocation in the Estimates and to performance measurement is due to report to the Minister for Finance shortly. The rolling multi-annual capital envelopes introduced in the 2004 budget will significantly improve the management of capital programmes and projects. Revised Department of Finance capital appraisal guidelines for the appraisal and management of public expenditure proposals were recently published.

The joint committee's deliberations will be helpful to the central review committee in continuing the process of improving the expenditure review initiative and in making preparations for the next round of reviews.

Deputy Bruton

This report is alarming. It is the most serious condemnation of the quality of public spending that could be conceived. It is withering evidence that outcomes and performance do not drive the allocation of moneys within the public service. After eight years of a programme of expenditure review, the committee is informed that only one quarter of reports to be compiled between 2002 and 2004 have been completed. Of this figure, half were carried over from the previous period.

Key Departments, particularly the Department of Health and Children and the Office of Public Works, have done nothing about expenditure reviews. Instead, they have received blank cheques. It is no accident that the Department of Health and Children is seriously failing to deliver any quality service for enormous sums of money. It has been decided that it is exonerated from completing any value for money reports. However, this Department has trebled its spending, particularly in the area of drug payments, in recent years. Staffing has increased by 30,000, but the ratio between frontline and administrative staff has been unbalanced. Frontline staff numbers have grown at one fifth of the rate of administrative staff numbers.

The Department has failed to develop adequate growth in the capacity of hospital services, despite trebling its budget. Access to medical cards is falling despite the doubling of the general medical scheme budget. Numbers of medical card holders have gone from 31% to 23% of the population. The handling of the extension of medical cards to those aged over 70 years resulted in a spending outcome that was six times higher than projected. Now the committee is informed that it is exonerated from expenditure reviews. Why is that, when this Department is failing to deliver key targets stated in the strategic management initiative?

The Office of Public Works has also been given a clean bill of health because it is engaged in the decentralisation programme. At times when it is making major commitments on public funds, the necessity of an expenditure review is at its most important.

The Department of Education and Science is another major spender. Why did it abandon studies on expenditure for special schools for young offenders? Even the courts have highlighted serious deficiencies in delivering in this area. The first and second level school building programmes continue to be obstacles for schools trying to identify developments that are needed. These programmes are not in any way delegated or run in an efficient manner. There is also the matter of targeting interventions to address disadvantage at primary level. In the period I considered in respect of this matter, it was clear that, despite certain programmes being expanded, no impact was being made.

Literacy levels in schools have not significantly improved and there are many serious problems relating to disadvantage. Statistics for progression to third level in disadvantaged areas have not improved and the numbers of those sitting the leaving certificate have doggedly refused to budge, notwithstanding the targeted initiatives in this area. Despite this lack of impact, however, schools have been informed that these programmes will no longer proceed following consultation with the Department of Finance. This is not good enough.

It seems those few expenditure reviews that have taken place have had no impact on any programme. After two years and seven meetings, it appears the steering committee has reached the extraordinary point of deciding that Departments should establish systems to ensure responses to ERI recommendations are tracked and reported regularly. Departments are not being asked to demonstrate what has been done to implement the recommendations but merely that they be tracked. It is unacceptable that this should be the case when the ERI has been in existence for eight years.

There is no outsider on the steering committee who might bring some external expertise to the manner in which it does its work. We are expected to tolerate the issuing of fruitless letters by Ministers and Secretaries General, albeit in good faith, while there is no effort to apportion responsibility. Accounting Officers should be responsible for the expenditure review and penalties should be imposed within the budgetary procedure if such is not satisfactorily undertaken.

Oireachtas Members have had to tolerate meaningless Estimates debates. The large volume of Estimates we are perusing today is useless in terms of the Dáil reaching conclusions as to whether these programmes are achieving their objectives. They are purely input documents which record how much has been spent and how many employees utilised. We are signing off on major sums of money but Departments make no effort to explain the targets for a given allocation and how we can discover in 12 months' time whether those targets have been delivered. There is nothing of this type of accountability in the Estimates procedure.

I welcome the pilot project linking business planning in the Departments of Agriculture and Food and Transport. However, this has been on the books for some time and it is unacceptable that we should be dining off a pilot project for so long. If we are to get to grips with delivering serious and high quality improvements in public services, we cannot tolerate this record of Departments thumbing their nose at the need to do serious evaluation work on their activities and to use this evidence to decide how money should be allocated.

Accountability in respect of the delivery of results is the most basic requirement in any efficient system. I am seriously alarmed not only at the initiative's poor results but at the weakness of the recommendations. Secretaries General should be hauled over the coals to explain why actions to which they have committed are not taken. It is no exaggeration to contend that this goes to the heart of why, despite the golden years our economy has enjoyed, our public service still cannot manage basic activities that any civilised society would expect in terms of accident emergency services, literacy standards and so on. There must be a sense of urgency in this matter. Such urgency has been evident neither on the part of Ministers nor of senior public servants to date.

Chairman

Mr. Considine or a member of his delegation may wish to respond to the points made by Deputy Bruton.

Mr. Considine

I respect the Deputy's concern in this area and the sense of urgency he has imparted. However, I wish to respond to a number of points. We produced this report ourselves, inadequate as it may be, and we are anxious that this issue should be publicly debated in an effort to improve matters. We sometimes tend to exaggerate situations as part of our attempts to make further improvements.

In the first round of reviews up to the end of December 2000, some 25% of annual gross expenditure was reviewed. Since then, reviews have taken place in regard to approximately 9% of expenditure. While this was ongoing, extensive reviews were undertaken of the national development plan, which accounts for some 88% of capital expenditure and a further 9% of current spending. Moreover, some 100 evaluations have been carried out since June 2002 outside of this expenditure review initiative.

Deputy Bruton highlighted failings in the performance of the Department of Health and Children but it has undertaken some major reviews in that period. For example, the Department was assisted by outside consultants in its review of the general medical service. It is carrying out an analysis of acute hospitals as part of the preparation of a national hospitals plan. In addition, a strategic review of disability services is under way. In this context, it is incorrect to contend that the Department of Health and Children has done nothing. The structures of that Department have been comprehensively reviewed of late and changes in this respect are being implemented.

The strategic management initiative process we follow is based on the principle of assigning responsibility to individual Departments to get on with their business. In regard to the expenditure review initiative and other areas, we have tried to support Departments in doing their work and to improve the quality of what is being done. Being totally objective, I acknowledge the reviews in the first round were not of a high quality. More recently, we have done much work to improve that situation, including the provision of appropriate training. Certain skills are required to perform this work satisfactorily. Some 30 graduates will come through this year and the programme will continue. Other training programmes and support systems are in place at a lower level within different Departments. Our objective is to improve the entire system and to avoid a repetition of current failings. The expenditure review initiative is just one element of our work.

Pilot projects, of which three are currently ongoing, are difficult to undertake because they require us to rethink our methodology. The Deputy is correct in his observation that our strategy statements are not linked to the Estimates. This is a major problem. The pilot studies aim to create that link so that Departments' end-of-year reports can focus on comparing targeted outputs with the actual outcome.

We have also put in place an accounting structure to support this new system. Until recently, the Civil Service accounting structure was essentially the same as that which we inherited in 1922. We have now completely overhauled the accounting system and only one or two offices have yet to install modern accounting systems which will allow mangement to get whatever reports it needs on outputs or anything else, on both a cash and accrual basis, if it so wishes. Progress is being made, albeit at a considerably slower rate than either the Deputy or I would like.

The Deputy stated that no outsider serves on the committee. Dr. Michael Mulreany from the IPA is on the committee and before that we had Professor Brendan Walshe of UCD. The central steering committee is anxious to be as open as possible in terms of reporting its activities and providing material to all relevant Oireachtas committees, including this joint committee. We would welcome a greater interest in the strategy statements and annual reports produced. They might be used as a lever to encourage Departments to do better and to move more quickly on to the road required.

Deputy Bruton

A Department would be brought to its senses if, for example, 5% was taken from its administrative budget in the year following a failure to reach its target. One must be tough and demand a change from slow to rapid progress. In the 1980s, when we did not have a seat in our pants, Mr. Considine's Department produced expenditure review documents that were worth reading. To take the Department of Enterprise, Trade and Employment as an example, the reviews would include FÁS's activities and budget, the number of people it trained, the number of its community employment trainees and the placement rate from these programmes. For key programmes, the reviews made a genuine effort to outline their purpose, achievements and progress. This gave the Oireachtas some impression as to what was good or bad and when proposals were made to cut one programme or expand another, one could see how this made sense. Now however, in the era of the Celtic tiger, with tax revenue at least four times and probably ten times higher than it was then, we cannot deliver the same kind of high-quality information on the performance of programmes. This is not good enough.

Similarly, it is not good enough that only now are Departments stating that they will begin to track the recommendations. If Departments were serious about expenditure review, had taken it to heart and were driven by a committee like the central steering committee to declare that expenditure review is central to their function and that there would be financial penalties for non-compliance, they would not be drifting along as they are at present, stating that perhaps they should track the findings of such committees or studies. They would use these studies constantly to try to improve the quality of their budgeting, programming and selection of projects to proceed with. I know Secretaries General must work within political constraints. However, if this is the core requirement, if this is the purpose of the strategic management initiative, SMI, and if the SMI is about delegating responsibility, then we have delegated the responsibility but they have not shouldered it. What will be done about it? To delegate responsibility is to imply there is also accountability and consequences for failure. There has been a failure to shoulder the responsibilities that were given.

I have tried to go through individual SMIs to look at progress, to ascertain what targets are being set and to examine the reports to establish whether they report on progress towards these targets. I tried to establish if the reports highlight the progress made on key targets when expenditure decisions are made. However, from the documents being produced, one cannot disentangle the key targets, their purpose, whether they are being achieved or if the targets influence how money is spent. Such information is indecipherable from the documentation, which is not good enough. It is not acceptable to talk about the importance of SMI but fail to put the boot into Departments that do not take up their responsibilities.

For instance, I went through the documentation for the Department of Justice, Equality and Law Reform. Their detection rates and drug seizures are down while the rate of violent crime is up. Their figures are totally contrary to their strategic objectives, but there is no indication that policy or spending patterns are changing to reflect the failure to meet key targets. This must be addressed and the impetus must come from the Department of Finance. Responsibility must be delegated in a framework where it is assigned to accounting officers in the first instance and beneath them to key line managers. We have not reached that point yet and people appear to believe they can ignore this. The extension of the GMS was scandalous. As for the national development plan review to which Mr. Considine referred, the Comptroller and Auditor General has produced a report on the roads programme that again indicates hopeless management of expenditure programmes.

Mr. Considine's group and the Minister for Finance must ensure that this is central to the manner in which money will be allocated and that Departments which do not shape up and match these expectations should expect to see their budgets pruned and that it will be tougher for such Departments to deliver until they change and begin to use the expenditure reviews to drive change within their budgeting. There must be a sea-change, other than just sending such Departments letters and memos. The only thing people will understand is if there are budgetary consequences and their pet projects are cut.

Equally, when sponsoring Ministers and Departments come up with ideas like medical cards for the over-70s, we have failed to require them to be accountable. No one was held responsible for that debacle even though there was no adequate data to underpin the decision. The Minister made the decision and is probably culpable, but no one was blamed. The system circles its wagons and no one puts up his or her hand to say he or she should not have carried out a particular action. We must have a system, driven from the Department of Finance, where people cannot circle the wagons and say "C’est la vie, something went wrong, although I do not know who or what is responsible”. The impetus must come from the Department of Finance.

Recently, the ESRI suggested to the Department of Finance that it should have its own review network to oversee the national development plan. The Department should not allow many of these projects proceed unless it is satisfied that there has been proper scrutiny. Although it has powers of scrutiny, it appears that the Department has decided not to pursue the ESRI's suggestion. If it continues to delegate the responsibilities, one must show teeth to a delegated authority that fails to act responsibly.

Mr. Considine

Before inviting my colleague, David Doyle, who is also on the central steering committee, to speak, I should state that we have administrative budget agreements with individual Departments and we try to use them to direct affairs in a manner that we consider to be helpful. However, there is a danger in the Department of Finance getting involved in the business of other Departments. Our function, as the Deputy has noted, is to try to establish the parameters and to delegate responsibility to Departments in an attempt to induce them to act coherently in accordance with Government policy. We are moving towards establishing greater accountability. A method to achieve this, which has already started, is to require reporting within Departments to their own management advisory committees, and perhaps, in some cases, for Finance to perform some spot checks when the reports come in from the Departments. This practice must be limited, however, because if Ministers and Departments are not given the responsibility and freedom to carry out their functions, other problems will arise. People will complain that the system is centralised and inflexible and militates against progress. My colleague, David Doyle, who is responsible for public expenditure, will now speak on this issue.

Mr. David Doyle

I empathise with much of the frustration expressed by Deputy Bruton regarding the public presentation of what is being delivered through Government services. The truth about Government achievements is not getting through to the public. For example, in the education sector, with which Senator O'Toole is familiar, there has probably been a 20% expansion in the number of teachers employed at first and second level since 1997, while there has been a 7% to 10% decrease in the school population. The message regarding what has actually happened in terms of the quality of educational outcomes is not reaching the public.

It is true that the Estimates volume is merely a collection of financial allocations and is the sole document that the Dáil debates when it comes to voting authority for those services. Government programmes are separate entities which set out policy objectives. They are then translated into strategic policy documents to be followed under each Minister's portfolio. Every year, an annual report is produced under those policy documents. There is a dysfunctionality between all of these presentations and the expenditures. It is impossible to move from the high level policy objectives through an annual report into the Estimates and finally to the appropriation account. It is necessary to modernise the process and a project that aims to address this dysfunctionality is being examined.

The situation is similar to that in the business community where a corporate entity will produce its business plan at the beginning of the year. This plan may relate to the short or medium term. At the end of the year, the company will present the report and accounts to its board and shareholders. The report and accounts will set out what the company actually achieved and spent compared to its original targets.

There is a considerable amount of documentation available to each committee of the House as well as the Estimates themselves. For example, the Department of Social and Family Affairs has produced strategy statements, annual reports and a huge number of reviews. The current project will address how all of this documentation regarding what are the outcomes can be joined up. In his budget statement, the Minister specifically referred to this when he mentioned the multiplicity of documents and the need to join them up. He invited the different elements in the political system to consider that and to come forward with their views. The Minister is also waiting for the House to put forward its own view on this issue. I expect we will see progress in this area.

Listening to member's views on the capital area would give one the impression that the €5 billion funding per year is being wasted and that little is being achieved. If one considers every programme, one will discover that there are many things happening and that a considerable amount of product is being delivered. I concede that there have been overruns and cases where the quality of management was poor. The reason for the overruns lies in the fact the people begin with an estimate that is inadequately analysed and they do not factor in improvements and specifications as the contract draws nearer——

Deputy Bruton

They do not observe what is contained in the Department of Finance's circular.

Mr. Doyle

If the Deputy will bear with me, I will come to that matter. In addition to what I have already stated, people do not factor in future wages, material prices and the probable unknowns that will emerge. In the past they failed to budget for those factors.

Another issue was the rapidly growing economy that produced a huge increase in labour costs due to shortages in the construction industry. That particular issue seems to have been addressed with an expansion in the capacity of the construction industry.

Under our new arrangements for capital expenditure, Departments, in addition to compiling desk estimates, must factor in what is likely to emerge in terms of cost increases. They must also build in for possible variation and specification when they are drawing up budgets. As the Secretary General said, we have asked Departments to establish a formal system of examining the way they manage their capital expenditure projects. They must report to their management, the Minister and the Department of Finance once a year. Those reports are due at present and we will be reviewing the outcome. We will undertake spot checks on the way in which that process is being observed.

The other way we have tried to address some of these problems, which was articulated most clearly by the previous Minister and is being followed up by the current Minister, is by trying to ensure that we place contracts on a modern business basis. In the private sector — unlike the public sector — consultancy firms do not receive a portion of the finished price of a project. Giving consultants a portion — for example, 10% — of the finished price acts as a disincentive for them to control costs. We will revise this arrangement and cap the fee related to an estimate. Second, we have set out our intention to put in place a system for contracts that will anticipate likely variations of costs, materials and risks in the future. The contractor would bear these risks but we would pay for them. The situation in the past was one in which we would have entered into a contract for €20 million that would have ended up costing €30 million. Consultants received €3 million instead of €2 million, which was silly. There was no incentive for the contractor to finish quickly to maximise profits. The incentive is to maximise the costs because the contractor has a profit margin on them. We are now willing to enter into contracts where we pay up front. For instance, we will sign a contract for €25 million or €28 million instead of €20 million. The contractor has an incentive to deliver on the project quickly and to maximise returns. It is possible that the contractors can benefit from this situation and the taxpayers and consumers win by getting better and quicker product delivery.

The move from prescription to execution is being pursued actively. The Government has endorsed the policy and consultations with the construction industry on turning this into a "go live" situation are about to commence. We hope to do this over the course of 2005. There are many vested interests in terms of what custom and practice, the industry and consultants are comfortable with. It will not be easy to get everyone to buy into a new approach that we see as offering benefits to both sides.

Senator O’Toole

I am not as despondent as Deputy Bruton about this report and I take to heart the point Mr. Considine made. I deeply appreciate that the visitors produced the report and it is very important to recognise it in this sense. I support this document's contents.

Many of the issues Deputy Bruton raised can be dealt with, although I do not disagree with all of the points he made. I agree with the Deputy in terms of his approach, as there must be a way to address this. The crucial aspect is the recommendation that the reviews be circulated to the appropriate committees and dealt with but this is very difficult to do. I have asked for monthly reports on decentralisation, which has upset many people in the Department. Two lines per month is very simple. The Department is not above suspicion in terms of its lack of enthusiasm for making PPP work. The visitors may argue with me but there has been a less than enthusiastic response in the Department of Finance. It was slow to implement its statements on the importance of multi-annual budgeting. These are issues that can be dealt with in various ways.

The points Mr. Considine raised in this document are highly significant. This committee could do its work more effectively if reports were brought to it for dealing with. This could resolve many of the arguments Deputy Bruton and I have had over the years, such as the modernisation action programmes being sent to the performance verification unit to determine whether benchmarking is delivering. If it is not, then we should say it is not. If it is, we should identify those areas.

Deputy Bruton

It is not the reports but the actions taken on them.

Senator O’Toole

Precisely. The verification is the action.

Deputy Bruton

They are paying more attention to the report.

Senator O’Toole

They are also speaking about the progress reports and action plans on modernisation, which is something I support. If benchmarking has not worked we should not do it. I am committed to it because I believe it does work and should be made to work if it does not. I do not support laggards on either side of the fence on this issue and I welcome the report.

I have difficulty with the points regularly made by Deputy Bruton. It was mentioned in a different context earlier that if something can be easily measured, one can be assured it will eventually be done. However, it is the matters that cannot be measured easily that are a part of our problem. I do not know how to get to the bottom of this but the first step could be some input into the topics to be removed.

On the issue of literacy I would welcome the opportunity to have a review of where this has been made an objective, how it has been invested in and how delivery of the results has been made. I proposed two or three projects over the years that could deal with this in some way. I quantified and costed them but I had nowhere to go with them. I sent the proposals to the Department of Education and Science but never saw them again. I would be happy to do something on this, as would educationalists.

Mr. Doyle made a point concerning the numbers in primary education, which he put in terms to get his reaction in first. It is important to ask why these figures were wrong. Would Mr. Doyle examine his Department's figures for 1989-90, a time when it was making prognoses in terms of figures on which we determined health and education policies? I examined that time and others since to investigate how many demographers were involved in making these decisions. However, I could only find economists and statisticians. This is why the figures were wrong and why we have found ourselves with overly large classes and unemployed teachers. We also found increasing numbers of teachers and dropping numbers. The two things were not tied in together because the people who examined the figures in 1989 gave the Department a medium term report to the extent that there would be between 25,000 and 40,000 of net emigration per year. This is the reality.

We must have a basis upon which building work can be done. Are we getting value for money on educational issues such as the building programmes? Are we getting value for money in the PPPs? The witnesses would have been interested in a very interesting discussion this committee had on the PPPs. This took place on the basis of what was happening in the UK but we were not told that there was very little in common between the two systems. The discussion and criticisms occurred in terms of outcomes but some outcomes cannot be measured easily. PPPs in education have produced a product better than anything that has ever been produced in building before. However, if our only means of measuring them is money costs in classical or historical terms, the product is significantly more advanced than what is available through other means.

The issues to be reviewed should be sent to this committee at the beginning of the year. The Department should set a rule that, before reviews start in the Department, the officials will determine what it is appropriate to review as some things may not need to be reviewed.

I am bothered by the point made that what is easily measured is easily managed. This goes back to a point Deputy Bruton made when he talked about detection rates. Today's news is about how easy it is to increase detection rates for crimes of certain types without meeting the objective at all, in order that even though the figures look right the outcome is completely wrong. Some Members of the Seanad recently deplored the good detection of road traffic offences. They felt, and I agree with the point they were making, that this is not the way it was intended to operate. It is not just quantity and measurement. It is also about quality. The same things will apply to this as apply to regulation. Regulation merely to do with quantification will never work. It will work with a proper balance between quantification and quality.

I agree completely with Deputy Bruton on the issue of disadvantage. I pleaded with the Department of Education and Science and the Minister's Department. Will somebody stand back, take a breath and look at the whole structure of disadvantage processes in Irish education? If the North is included following the Good Friday Agreement, it is impossible to find one's way through it. It is a maze instead of it being possible to have a clear and easy approach. What we are doing here would work. Some things have worked and are working quite well.

I agree with the point made on roads. It is a sad thing when the private sector is bothered that the cost of the new M4 proposals put forward by the public sector is so low that the private sector cannot put forward tenders to do it as cheaply. In fairness to Deputy Bruton that is the way he would like to see it going and in that I support him. The public sector must be equally efficient as the private sector. That is what we are about today. I welcome the movement on it and believe the committee should write to every Department and ask that we be circulated with copies of whichever reports are extant at this moment, and to have an indication of the topics that will be put forward for review in each Department.

In terms of listening to the issues where the fall-out has happened, the same Departments keep emerging. As I recall, these same Departments got poor mention in the Ombudsman's report. I welcome the work of the committee. We should support it, take on board the issues and push on the recommendations.

Chairman

I will now ask for concluding comments as we indicated we would close shortly.

Mr. Considine

I will ask my colleague Mr. Seán Gorman to speak on this. He may have a different view on this issue. I thank the Senator for his comments and, although we do not have time to go into it, I strongly dispute his views on the PPPs. On the multiannual budget——

Mr. Doyle

He was praising one of them if I remember.

Mr. Considine

I mean the Senator's general comments about the Department's approach to the PPPs.

Senator O’Toole

There are Ministers who would agree with me.

Mr. Considine

I cannot comment on that.

Deputy Bruton

Many people would praise the Department of Finance for its frugal approach.

Mr. Considine

One needs to be careful when preparing measures of output as they can be manipulated easily. I remember during programme budgeting — perhaps I have been around for too long — some of the indicators of output did not tell a whole lot about what was happening. I take the point that there is a need to carefully develop measures of output and that they give a meaningful insight into what is happening.

Mr. Seán Gorman

Where we fit in as a line Department gives us a slightly different perspective than the central view from the Department of Finance. We have participated in this initiative from the beginning. At this stage we have completed seven expenditure reviews and have two in the pipeline. We find it a particularly useful exercise because it gives us a structured way in which to bring a focus on value for money and outcomes. We have looked at a range of large spending programmes, such as the IDA property programmes, some FÁS training programmes, overseas offices of Enterprise Ireland, and community employment schemes. To date, our overall experience of the initiative has been very positive, but that is not to say it has not been without its challenges. We have learned much from the exercise, not least the problem for management in a Department of prioritising what is urgent and what is important. There is a tendency to focus on the urgent and the immediate over the important.

To pick up on the two contributions made earlier, this is very important in terms of what we do with this money and what we get for this money. It has also brought to the surface the issue of skills. It requires skill and training, and we have had to examine how we equip our people and the type of people we assign into these large spending areas. We have benefited significantly from the Department of Finance initiative of formally sending people to graduate programmes. As part of our PMDS system we identify individuals in the Department who already have the skills and can apply them to this type of project evaluation and value for money and outcome reviews. We match those skills to assignments where possible.

In my experience, an issue for us as managers in line Departments is that people assigned at middle and senior management to large spending areas are trained and given the necessary skills if they do not have them already, and this must be built in systematically. We try to do as many expenditure reviews as possible without recourse to outside consultants, as we try to build internal capacity and capability, grow the skills base and change the culture from the traditional one of accounting for where the money went as distinct from trying to measure the impact, the outcome and the value. Sometimes it is necessary to use outside consultants and we have used them on one study and on a narrow basis on another. We will continue to participate and hope to deliver a couple more studies very shortly. We continue to learn and have found it particularly valuable in helping us change the culture within the Department from one of accounting just for the money to one of focusing specifically on what we are getting for the money.

Chairman

At this stage I will draw the discussion to a close. As we have indicated we have another item on our agenda for the remaining part of the meeting. I thank all visitors for their attendance today. The discussion was informative. I consider this round one, there will be further debate on this topic.

Deputy Bruton

Perhaps a transcript of this meeting might go to the Minister if he is looking at the budgetary review process. It was an interesting exchange on different issues. It might inform his reform package.

Sitting suspended at 12.48 p.m. and resumed at 12.50 p.m.