I thank the Chairman and members for affording me the opportunity to make a statement today. As they are aware, the agenda covers, as mentioned by the Comptroller and Auditor General: the appropriation accounts 2019 for Vote 11, which is the Department of Public Expenditure and Reform, and Vote 12, which relates to superannuation; chapter 3 of the report on the accounts of the public services on Vote accounting and budget management; and chapters 4 and 5 of the Report on the Accounts of the Public Services 2018 in relation to accounting for capital assets and accounting for allied services.
In 2019, the two strategic goals of the Department were to manage public expenditure at sustainable levels and ensure effective and responsive public management and governance structures. These goals are fully aligned with the two programmes set out in my Department's appropriation account for 2019. I will address each of the agenda items now and return to reference some of the Department's key priorities in respect of expenditure management and reform before I conclude.
In the context of my Department's financial performance in 2019, its appropriation account shows a gross outturn of 97% of the budgeted allocation when capital carryover of €144,000 is taken account. The Department surrendered just under €2 million of its €59 million allocation to the Exchequer at the year end. The increase in the allocation in 2019 over 2018 was due to recruitment costs that have since levelled out as headcount has remained largely static from the end of 2018 to the present. While programme expenditure remained flat overall in 2019 when compared with 2018, financial resources moved between some programme subheads. For example, from Civil Service learning and development - the OneLearning initiative - on the completion of its Civil Service-wide IT training and development system to other areas in the Department to progress cross-Government reforms such as the Office of the Government Chief Information Officer's Build to Share programme, which is a significant centralised shared service that we are providing in our Department for Departments and offices across the system.
This year is particularly significant for the Office of the Government Chief Information Officer, OGCIO, and the Department with the establishment of the new OGCIO Vote, which has an Estimate of €21.7 million net in 2020. The creation of this Vote, for which I am also the Accounting Officer, will help support the digital transformation agenda across government, while providing and developing pan-public service ICT infrastructure, service delivery models and cross-government applications.
The new OGCIO Vote is being financed solely by Exchequer neutral transfers from client Departments and Government offices, including my own. The Department provides the OGCIO, which remains part of the Department, with corporate services, human resources and finance support at no extra cost to the Exchequer or client organisations, ensuring value for money through enhanced labour productivity.
The development of various shared IT services and platforms in the Civil Service and the wider public service has provided an enormous impact during the Covid pandemic. Our ability to provide significant online services, whether people applying for pandemic payments, the wage subsidy scheme through Revenue or for a driver licence, has shown the value of the investment made over the past several years.
In respect of Vote 12, superannuation and retired allowances, the net outturn for 2019 was €261 million, compared to an Estimate of €371.3 million, giving a surplus to surrender of €110.3 million. This surplus arose mainly on account of underspending on established lump sums and greater than expected receipts from the single public service pension scheme. There was an additional once-off remittance in 2019 for contributions which had accrued in previous years which were not remitted until 2019.
Chapter 3 of the Report on the Accounts of the Public Services 2019 addresses Vote accounting and budget management. Looking at overall expenditure in 2019 in gross terms, voted spending for the year amounted to €67.3 billion. This is €649 million, or 1%, above the amount that was set out in the Revised Estimates Volume 2019 and reflects several Supplementary Estimates including in the areas of health, justice and education.
It is the role of my Department to implement a strong and sustainable public expenditure framework, as well as to drive the reform programme across the Civil Service and public service in order to support the delivery of services in the most efficient and effective manner. To achieve this goal, my Department sets out clear and accessible structures and guidelines for Departments to follow. In order for effective management of public expenditure to succeed, it is important all colleagues across the public service apply these policies and guidelines in their own organisations.
The Department fully agrees with the recommendations made by the Comptroller and Auditor General in both his chapters on capital assets and allied services. All recommendations have been accepted and significant progress has been made to implement these recommendations. Additional guidance on the accounting treatment for capital assets was provided for in the appropriation accounts circular for 2019 and the guidance manual for the preparation of the appropriation accounts relating to clarifications on the treatment of depreciation of capital assets.
More generally, in September 2019, prior to the publication of the Comptroller and Auditor General's chapter, the Department established a working group with finance officers of Departments to review the accounting policies for capital assets and to develop a new policy. Work has been ongoing with the working group in reviewing the accounting treatment of fixed assets and working through the various complex historical issues, such as depreciation rates and valuation methods, as well as the different classes of capital assets involved.
While we agree with the Comptroller and Auditor General's report, when it comes to evaluating capital assets for public bodies, there are a variety of complications which may not arise in respect of a private entity. What is the value of Dáil Éireann or the GPO, for example? How do we put a value on the 770 monuments managed on behalf of the citizens by the Office of Public Works? When it comes to more standard buildings, lands or IT, it is more straightforward and the recommendations set out should be more easily implementable.
We are finalising a draft new policy document on capital assets. This is being developed as part of the phased implementation of the financial reporting reforms recommended by the OECD and will address the Comptroller and Auditor General's recommendations.
The accounting treatment for allied services has also been addressed by my Department. Substantial clarification was produced in the appropriation accounts circular for 2019 and the guidance manual for the preparation of the appropriation accounts, which we understand has assisted in improving the presentation of allied services in the accounts. The Department will keep this area under review. This is a key issue of the operating costs statements of Departments to the State as opposed to actual cash spending on their appropriation accounts. This is an area more generally which gives a more accurate assessment of the actual cost of services run by Departments as opposed to cash appropriation on which we tend to focus.
The work in both these areas is underpinned by the wider strategy for the reform of Government financial reporting. This is on foot of a major OECD review of financial reporting in 2019, which recommended that Ireland move to an international standards based accruals system of financial reporting. The broad approach proposed by the OECD has been accepted by the Government. Work is under way to examine the relevant international standards to be used as the basis for future Government accounting policy. This will be the most significant reform in how we implement financial and accounting policies since the foundation of the State. We have been operating on the basis of the Exchequer and Audit Departments Act 1866 which is a cash-based system. We have moved gradually to an accruals system in terms of the balance sheet information provided and the operating costs statement. To move to a full accruals system will be an enormous cost and change but, over time, the better information will assist in assessing the value for money of spending and to report and account more accurately.
The progress we made in the sustainable management of public expenditure and driving and supporting the reform programme in 2019 is set out in considerable detail in my Department’s 2019 annual report. Due to the Covid-19 public health emergency, the context for the Department’s work changed enormously between the end of 2019 and today. This has led to significant changes in the Department’s work and how it does that work. The landscape for managing public expenditure and leading public service reform is now different.
I would like to take this opportunity to highlight that we have seen incredible commitment, flexibility and responsiveness from civil servants and public servants in dealing with the Covid-19 crisis. The public service has shown a sense of common purpose and an ability to deliver at a pace not seen before.
Looking ahead, our priorities will continue to be focused on implementing a strong and sustainable public expenditure framework and driving and supporting the reform programme. In terms of public expenditure, a key focus will be to continue to manage public expenditure effectively, while addressing challenges such as the Covid-19 pandemic, Brexit and climate change.
In addition, the Department will continue to mainstream budgetary reforms, such as the spending reviews, enhancement of performance information and ongoing development of the evidence-based approach to expenditure policy formulation through the role of the Irish Government Economic and Evaluation Service, which produces significant numbers of reports looking in detail at spending programmes and the value for money of State spending. We will oversee the review of the national development plan and alignment with the national planning framework as part of Project Ireland 2040. Another key priority will be to manage public service pay and pension costs on a fiscally sustainable basis using agreed industrial relations frameworks. We will also work to address the challenges posed by Brexit, while maximising the opportunities presented by EU membership in a range of EU policy areas.
With regard to public service reform, we will continue to lead the implementation of Our Public Service 2020. The Department is also leading the development and implementation of a ten-year Civil Service renewal vision. Aligned with this, we will lead and support the development and implementation of a new Civil Service people strategy, which reflects the workplace transformation that has taken place as a result of Covid-19. The Department will continue in its leadership role to drive digital transformation with particular focus on those initiatives which will improve delivery of services to citizens and business in the most efficient manner.
I want to take this opportunity to pay tribute to my colleagues in the Department for their hard work and the contribution they have made to delivering on our objectives during 2019 and this year.
Like any organisation, we look to the future and we advise the committee that along with other Departments we are now implementing a new statement of strategy to cover the next three years. I am happy to receive the views of members on that strategy. I thank the Chairman and look forward to discussing the various items on the agenda.
