COMMITTEE of PUBLIC ACCOUNTS debate -
Tuesday, 19 Mar 2002

Vol. 4 No. 8

Department of Finance - Report on Value for Money Examination-Expenditure Review Initiative.

Mr. T. Considine (Secretary General, Department of Finance) called and examined.

Chairman

Members and witnesses should be aware that, as and 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. Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, either by name or in such a way as to make him or her identifiable. They are also reminded of the provisions within Standing Order 149 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such a policy or policies.

On behalf of the committee, I wish Mr. Considine well in his new position as Secretary General and look forward to meeting him at various stages in the future. I ask him to introduce his officials.

Mr. Considine

I am accompanied by Mr. David Doyle who is a member of the committee which monitors the expenditure reviews, Ms Áine Stapleton, Ms Úna Nic Giolla Choille and Ms Marie O'Neill.

Chairman

I ask Mr. Purcell to introduce the contents of the report.

Mr. Purcell

In many ways, this is one of my most important reports of recent years. I say this because it examines how the Civil Service is evaluating the value for money it receives and the impact of the money it is spending. Gross public expenditure has doubled during the past five years. The Estimates for 2002 show anticipated expenditure at nearly €32 billion. This upsurge in public expenditure levels makes it all the more important that the programmes underlying the expenditure are rigorously evaluated to ensure they are having the desired effect at an acceptable cost. This need was recognised back in 1997 when the expenditure review initiative was launched by the Department of Finance as part of the modernisation of the Civil Service. What is involved is the systematic review of existing public expenditure programmes from a results perspective with a view to ultimately making an impact on spending decisions. The intention was that each programme of expenditure would be reviewed at least every three years, but it soon became clear that this objective was over-ambitious. We calculated that by the end of 2000 about 37% of expenditure at most had been subject to review.

With the help of outside experts, my staff examined 13 of the reviews in some detail to assess the quality of the work undertaken. Our examination showed that three of the reviews had been carried out to a sound professional standard on all the criteria set down by the Department of Finance. These related to the clarity of objective; assessment of cost efficiency; identification of performance indicators; and evaluation of effectiveness. Eight of the reviews partially met the criteria to one degree or another, but two failed the test under all four headings. The results are summarised in the table on page 20 of the report.

The patchy performance across Departments probably reflects the fact that the reviews examined were among the first to be undertaken by some Departments while others already had some expertise and experience in evaluation techniques. Overall, the programme of reviews had a beneficial effect in that some assurance was obtained that public money was being spent to good effect in many cases. It also served to highlight some areas of expenditure which had never been properly analysed before.

The initiative was overseen and monitored by a high level central steering committee chaired by the Secretary General of the Department of Finance. Part of its function was to assess the review reports for thoroughness and recommend what action should be taken on foot of them. In practice, however, it produced no recommended action reports, although in a few cases Ministers brought proposals to Government based on the reviews.

While the initiative has, undoubtedly, helped to foster an evaluation culture in Departments, there is very little evidence of a change in expenditure patterns as a result of the reviews having been carried out. Realistically, it is probably too early to expect that it would be otherwise. Very few reports proposed large-scale change or revised priorities. The close association with the schemes being reviewed by many of those involved may be the reason for the lack of radical proposals emanating from the review process.

The central steering committee instigated an assessment of the review process in mid-2000, culminating in a number of refinements which were approved by Government last year. These included a more focused approach to the selection of programmes for review; better central support for the process; a need for cross-departmental reviews; and a requirement to measure the impact of the reviews. These proposals are welcome and, coupled with the implementation of the findings of my report, should help to put the expenditure review initiative on a sound footing going forward.

In summary, systematic evaluation of Government spending is a formidable undertaking that takes times to develop. A start has been made and reasonable progress achieved, but much still needs to be done. It is imperative that we keep our foot on the pedal if we are to have the process fully embedded by 2004 as envisaged.

Chairman

I ask Mr. Considine to summarise his opening statement which he has issued to the committee and for the agreement of the committee that it be published.

Mr. Considine

We welcome this opportunity to talk to the committee about the report prepared by the Comptroller and Auditor General. It is a very useful and constructive report and, as he rightly said, it focuses on the early stages of this initiative. We hope the publication of this report would of itself help to improve the climate and the level of support for this kind of work throughout the Civil Service. In 2000 we were also beginning to look at how this was working and the report of the Comptroller and Auditor General dovetailed very well with this. Mr. Purcell has made reference to the changes that have been agreed by Government as a result of the review that took place. Many of these changes are very close to the recommendations that he made. I would like to think that when all these are in place we will have a system, which is a very significant support to the whole area of developing policy on public expenditure.

The main initiatives approved by Government were, specific criteria for selection of topics for review; improved central supports for the process; the inclusion of crosscutting issues in the next phase of the process; and the encouragement for publication of future reviews. The report of the Comptroller and Auditor General recommended that the Department of Finance should put in place a strategy for developing and embedding the expenditure review process over the next three years. The central steering committee has asked Departments and offices to adopt a three-year planning horizon in relation to their expenditure review activities and to formulate three-year plans for expenditure review activities in their organisations. The central steering committee is currently reviewing these plans and will be submitting proposals to the Minister for Finance shortly. The Minister's decision on these will then be submitted to Government.

Another recommendation of the Comptroller and Auditor General is for the Department of Finance to provide central supports and build up stronger support mechanisms. We have now put in place arrangements to design and deliver a structured training programme in expenditure review. We have also established a network which will allow those involved in reviews to share knowledge and experiences about best practice. We have allocated a full-time dedicated Department of Finance staff member with extensive experience in this area to provide advice and guidance.

Turning for a moment to the wider issue of analytical and evaluation training for the Civil Service as a whole, the Department of Finance has since 2000 designed and delivered a five day course in policy analysis. This course, which also benefits from the active co-operation of the Office of the Comptroller and Auditor General, covers analytical methods and tools to help staff appraise and evaluate Government programmes, capital projects and activities. Since 1999, Departments have also participated in the two year TCD course in economic policy studies, which provides participants with a deeper knowledge of many of these skills and analytical tools. For the longer term, the Department of Finance is engaged in a comprehensive review of options for improving further analytical and evaluation skills in the Civil Service and I will shortly be finalising proposals in this regard.

The report of the Comptroller and Auditor General also recommended that selection criteria should be specific. The criteria agreed upon by Government in June 2001 highlight the need to focus on strategic areas of expenditure. The central steering committee has asked Departments to prepare their three-year work strategy based on these criteria.

The report of the Comptroller and Auditor General also recommended that the central steering committee should, in consultation with Departments, identify and prioritise crosscutting issues for review. Government also agreed in June last to include crosscutting issues in the next phase of reviews. As part of our consultation process with Departments we have asked for proposals in this regard and these will be incorporated in the next phase.

With regard to publication, the central steering committee is of the view that completed expenditure reviews should generally be presented to the Oireachtas and be available to the public. Such an approach would be helpful in generating informed debate within select committees on the issues arising from the review process. While the decision as to publication of completed expenditure reviews is primarily a matter for the Minister concerned, they have been encouraged to do so by Government in its June 2001 decision. A number of reports have already been published and a number of others have been released in response to requests under the Freedom of Information Act.

I would like to comment on one particular aspect of the Comptroller and Auditor General's report, the assessment of quality of the earliest reviews undertaken by the London School of Economics as part of the examination. The expenditure review initiative was targeted at fostering evaluation in a climate of variable capacities. Some Departments were very skilled in this area because of national development plan and community support framework related evaluation experience, but others were not. The expenditure review initiative strove to apply and mainstream an evaluation culture and to encourage the conduct of such reviews. Indeed the report acknowledges that we made progress in that regard. However, for some Departments it was an activity they had to conduct from a standing start.

The central steering committee wishes me to emphasise that the expenditure review initiative is, like many other strands of SMI, an evolving process. Since 1997, Departments have been developing their approaches and skills while undertaking actual evaluations of programmes. In practical terms, this has meant "learning by doing". The very useful input from the London School of Economics did not evaluate this aspect. The Comptroller and Auditor General's report, of necessity, selected reviews which had been completed during the first part of the period in order to examine the impact of the reviews. However, the central steering committee is of the view that this learning dimension is reflected by a quite perceptible and understandable trend over the period of improvement from the initial baseline set of studies. The completion of over 70 reviews to date represents a very significant achievement.

We are, as I have mentioned, establishing a new network for those engaged in reviews to facilitate learning and sharing of experience. We hope to build on what has been achieved by the Department of Social, Community and Family Affairs, which has led a previous such network, by disseminating best practice in terms of structures, skills and approaches to expenditure review.

The need for all concerned to strive for higher quality standards attracted much attention in the Comptroller and Auditor General's report. Both the Department of Finance and the central steering committee believe that the new initiatives and structures described above will help Departments and offices to improve the quality of expenditure reviews. In addition, the committee will consider how best to secure the most efficient, effective and timely quality assessment of expenditure review reports completed by Departments and offices under their 2002 work plans.

On finalisation of the overall work plan for 2002, the central steering committee will shortly address a number of other issues: monitoring systems for completed expenditure reviews; progressing the conduct of cross departmental reviews; and the question of providing additional supports, such as links with academic institutions and research bodies, a central help desk and a reference database on methods and approaches.

In summary, I wish to express my gratitude to the Comptroller and Auditor General and his staff for their contribution to the development of the process. The Department's aim is to put in place an effective and sustainable expenditure review process with high quality reviews being produced on a systematic basis. Much solid work has already been done to implement the recommendations of the report and to underpin the new phase of the process.

My colleague from the Department of Social, Community and Family Affairs, Mr. Edmond Sullivan, is also a member of the central steering committee.

Chairman

Before I hand over to Deputy McCormack, I have one question in relation to the paragraph which states, "Publication of expenditure reviews is primarily a matter for the Ministers concerned, who are encouraged to do so by the Government in its decision of June 2001." Some of the reports have been released under the Freedom of Information Act. In this context, is it not regrettable that expenditure reviews are not released automatically?

Mr. Considine

I would not disagree, in general terms, but one cannot rule out the possibility that there might be something in a particular review which, for one reason or another, is very sensitive. The Freedom of Information Act provides for exemptions, in recognition of the fact that such situations can arise.

Chairman

I accept that, but is it not contradictory that many of the expenditure reviews are released under the Freedom of Information Act to certain bodies and individuals, while not accessible to Members of the Oireachtas?

Mr. Considine

We encourage Departments to lay the expenditure reviews before the Houses of the Oireachtas and publish them, where there is no particular problem in that regard.

Chairman

When will that begin to happen?

Mr. Considine

Many have already been published. From now on, I hope any new reports will be looked at with a view to publishing them as soon as they have been completed.

Deputy McCormack

I have a general question to start with. Is it a satisfactory arrangement that reviews of the Civil Service are carried out by civil servants? Could some other arrangement be put in place for expenditure reviews?

Mr. Considine

This is not the only area in which expenditure reviews take place. This is part and parcel of the management of the Civil Service. It is a normal function of management to review programmes of expenditure among others. For example, EU expenditure has been subject to review at various times, separate from these reviews. Many areas of policy are also reviewed. Tax policy is reviewed in various areas by the tax strategy group. Before the national development plan was published, the ESRI was asked to do a study of how it might best be targeted. There are many such general reviews. What we are discussing is a system of management review, in order that management can systematically look at what it is doing, consider whether it still needs to be done, whether it can be done better and whether better value for money can be obtained. Some of these studies have had outside input. I do not rule out this approach, but what we are discussing is a normal function of management.

Deputy McCormack

Yes, but expenditure has doubled in the past two years, as the Comptroller and Auditor General said. It appears that only about 40% of the reviews have been completed, if I understand the position correctly. Is that the position?

Chairman

The Comptroller and Auditor General referred to the last five year period.

Mr. Considine

As I said, I accept that the target we set ourselves back in 1997 was rather ambitious. One is always faced with a conflict that, in setting out on something like this, one tries to put pressure on the system to do as many reviews as possible. What we are now doing, under the new set of arrangements approved by the Government last year, is prioritising certain areas - for example, programmes reflecting Government priorities and strategic result areas; programmes involving significant areas of expenditure; programmes where expenditure has been growing unusually fast; programmes where the external involvement has changed substantially since the programme in question was introduced and programmes, the objectives of which are proving to be particularly difficult to achieve. We are now trying to focus on the areas which appear likely to yield the best results and draw up a programme, over the period to 2004, using these criteria.

Mr. D. Doyle

I wish to add to what Mr. Considine has said. First, in relation to who carries out the reviews, in my considered view there is nothing intrinsically wrong with having them done by the programme managers directly concerned. They are the experts. A critical part of their job, on behalf of the taxpayer, is to make sure programmes are administered properly and efficiently to achieve their targeted goals. As Mr. Considine noted, there is a skills issue in relation to the evaluative capacity of programme managers which is being addressed. I would not at all favour recourse to external consultants as a matter of course, first, because it diminishes the drive by programme managers to be in a position to evaluate what they are actually doing on behalf of the taxpayer and their Ministers and, second, because consultants are extremely expensive. While we have recourse to them on a very wide scale, it is not our preferred approach - we prefer to have the work done within the system.

Deputy McCormack

Let us look again at the Comptroller and Auditor General's opinion on the process. He looked at a sample of 13 reports and it seems the findings are not very encouraging. Only three of the 13 reports were found to have achieved a sound professional standard across all four elements the Department of Finance sought to have included in the reviews, two failed to reach sound professional standards on any of the criteria and two were rated below the acceptable standard on three of the four elements. That is not a very satisfactory conclusion to the expenditure reviews, from the 13 programmes sampled by the Comptroller and Auditor General.

Mr. Considine

Without doubt, we fully agree there is a lot of room for improvement in this area. Equally, as the Comptroller and Auditor General also acknowledged, many of the Departments concerned were starting from a low base. They did not have experience of this kind of evaluation and the required skills were not present. As they have continued, they have been developing the skills required and gaining experience. The central review committee is of the opinion that this is evident in the improving quality of reports. The fact that we are developing these skills is of value in itself and, as I said, the Government decision of last June will actually result in further significant improvements in these skills as a result of training and direct support from the Department of Finance. A full-time person with a track record in this is being provided in that Department. In general, we will have a situation where the framework is much more targeted. We will be focusing on areas that are a cause for concern and trying to improve the internal management of expenditure through these. As my colleague, Mr. Doyle, said, that is the function of management and reviewing these programmes is what management should be doing.

Deputy McCormack

That is fine. However, I have to deal with the report that is in front of me and it does not indicate a great level of satisfaction. If one takes figure 3.4, approximately 44% of them were below a standard. Figure 3.5 on the assessment of the effectiveness of spending shows that 80% were below standard. About 20% of them or less were very good and none were regarded as excellent. Taking a line through any of those reviews of cost efficiency, over 40% were below standard. That is only to take the 13 that were reviewed and it does not indicate great satisfaction from the examination of the Comptroller and Auditor General with the expenditure reviews of that 13.

Mr. Considine

I agree that the results are as the Deputy presents them. However, that this initiative has commenced is an advance in itself. When one starts from a point where this kind of activity was not widespread in the Civil Service, there is a problem in that the poor starting situation in some areas is highlighted. There is no disputing that is the position. What I am saying to the committee is that we are improving in a number of ways. We have learned by doing, and those Departments that did not have experience in this area have improved. The central steering committee is quite clear about that. Government decisions that were taken in the middle of last year have put in place a tighter framework, greater supports and greater training, and that will yield dividends as we go forward. That has to be encouraged and I hope the net effect of it all will be that, over the period when this is bedded down, we will have a sound basis for evaluating individual public expenditure programmes.

The Comptroller and Auditor General made a point about priorities. I am not sure that this will deal with that issue as it has to be a matter of choice by Government. However, it will provide the backup data and evaluation to enable good quality decisions to be made.

Deputy McCormack

Perhaps Mr. Considine could outline where most improvement has been achieved. I take his word that improvements are now being achieved.

Mr. Considine

Chairman, with your permission I will ask my colleagues on the central steering committee, who has more relevant experience of this, to deal with that question.

Mr. D. Doyle

At a general level, the overall approach that is being followed has improved. The capacity of Departments to evaluate——

Chairman

Mr. Considine, could you introduce the other speakers? I would like their names mentioned for the record.

Mr. Considine

This is Mr. David Doyle.

Mr. D. Doyle

It has increased the capacity of Departments to evaluate the policies they are implementing. That has been an improvement at a general level. On a more specific level, in a number of key Departments, such as the Department of Social, Community and Family Affairs, the Department of Health and Children and the Department of the Environment and Local Government, there has been a significant advance in both the degree to which the programme expenditures are being progressed and their quality. It is clear from reviewing the papers from the committee over recent years - I joined about nine months ago - that the satisfaction of the committee with quite a number of their reports has improved. It is still the case that a number of the reports done in recent times are not up to the very high standards that one would expect. However, quite a number of them have been of a very high standard and that has been commented on by the committee.

That is not to say that we are in a perfect state. The Department is concerned that the evaluative capacity across all public service managers - not just for the purpose of the expenditure reviews but for the purpose of normal approach to their work in relation to evaluating policy developments - and the participation in national development plan reviews for Europe should be of the highest level. We are anxious to move that capacity to a higher plane. Work on that has commenced. Mr. Considine has intimated in his paper that he intends to finalise proposals shortly that will formalise a new approach to training enhancement in this area. I expect we will move from the patchy performance reviewed in figure 3.10 to one that is much better.

Mr. Sullivan

I apologise for being late. I have only recently joined the central steering committee but from the perspective of our own line Department we have found the initiative to be invaluable. It provided a very useful framework for undertaking research across a range of issues. The initial reviews that were carried out were a learning process for us and it took time to gear ourselves up. We were fortunate in having a number of people who had policy analysis skills and that helped us a lot. Looking at reviews that we have done over recent years, they have improved as we have gone along and as the process has become more embedded in the Department.

It is an extremely time consuming process although I do not say that in a negative sense - it is a matter of fact. To carry out a review on any area of public policy is extremely time consuming, particularly when one wants to involve any of the other stakeholders in a Department or outside it with other Departments or Government agencies, or if there is public consultation on the process. It is time consuming but, in my experience, it has improved greatly over recent years. I am very confident about the process and the benefits we are getting out of it.

Deputy McCormack

Two long answers to a very short question.

Deputy M. Ahern

I want to congratulate Mr. Considine on his appointment as Secretary General of the Department and wish him many years of success. He has agreed with the assessment of the Comptroller and Auditor General with regard to his report. Does each Department have a dedicated team to carry out the review or is there a central review team?

Mr. Considine

The central steering committee is located in the Department of Finance. Its composition deliberately included two outside secretaries and an independent person, Professor Brendan Walsh of UCD, first, to highlight the fact that the ownership of this is, as my colleague, Mr. Doyle, stated, with the management which has responsibility for the expenditure as is proper, and, second, in order that Departments will feel this is part of their normal management process and will give it the required support.

There would be an element of outside objectivity brought to bear on examining the whole issue. We have seen as a result of our own review and the review of the Comptroller and Auditor General that it needs more support at the centre in the Department of Finance. As a result, we have taken two roads, one of which is training while the other is to appoint a dedicated official with a background in this area to provide the central support.

The third part of this is networking to bring together the people who are doing this work in the various Departments in order that they can learn from best practice and so on. A committee, usually with a representative from the Department of Finance, was involved in the last review. The idea with which we are now moving forward is to be clearer about who in each Department has responsibility for carrying out each review. The other point is that having the central steering committee reviewing the reports is probably not the best idea. The best idea would probably be to apply a more professional process, perhaps similar to the one used by the Comptroller and Auditor General - it need not be the London School of Economics, but a similar reviewing arrangement.

It might be useful for Mr. Sullivan to add to my comments. We asked him to come along because the Department of Social, Community and Family Affairs has led the field in this area.

Chairman

Before he comments, the Committee of Public Accounts in its interactions with the Departments of Health and Children and Social, Community and Family Affairs and others has come across some very interesting expenditure reviews. You stated that some of the information will not be released because it is sensitive. I am aware that a large body of reports have been produced whether on nursing home subvention, various aspects of social welfare and so forth. It would have been extremely helpful to members of the committee to know which of these had been published, released under the Freedom of Information Act or made accessible and which you feel may not be made available because they contain sensitive information. While I am aware these are internal expenditure reviews, it would be worthwhile, in the interests of openness, if other people were made aware of this body of knowledge which is available in the Civil Service.

Mr. Considine

We would have no problem about informing the committee on a regular basis about output in terms of the number of reports produced, where they were produced and so on in order that it has this information. However, as I stated, it is our view that these should be laid before the Houses of the Oireachtas so that they are made generally available. You should not misunderstand my comment that some reports may be held back for sensitive reasons. I mean using these grounds very restrictively, only in terms of the kind of information that the Freedom of Information Act would consider appropriate to be withheld. I do not otherwise consider that there is a case for holding it back.

Chairman

You called on Mr. Sullivan to elaborate. He can talk about the success of his Department which appears to have completed many of these reports. How many of these are in the public domain and how many have been released to politicians?

Mr. Sullivan

I am not aware of any that have been held back for any reason.

Chairman

They are all available

Mr. Sullivan

Yes, I cannot recall any occasions when this came up or any issue which came up. In relation to how it operates in the Department, we have a steering committee jointly with the Department of Finance which oversees the various expenditure reviews. I chair the committee which meets fairly regularly - every six to eight weeks - in order to review progress on the various projects under way. The reviews are undertaken by a small working group on which, again, the Department of Finance is represented. They are generally conducted by the official of the Department with responsibility for the policy area in question.

As I stated earlier, where necessary we invite representatives of other Departments, such as the Department of Health and Children, to join the review for their knowledge and expertise. This group is responsible for drawing up the terms of reference and the work programme of the review and then carrying out the work. Along the way, there may be a requirement that some people are familiarised with some of the techniques that might be used. The working group then reports back to the steering committee which approves the report in terms of whether it has covered all the various issues. We then submit it to the central steering committee and it is generally made available. That is basically how the system operates in our Department.

Deputy M. Ahern

Has there not always been reviews of the programme? What is the main difference between the old and new systems?

Mr. Considine

The Deputy is right, most managers did review what they were doing from time to time. However, they did so only when there was a reason for doing so. What we had here was part of a wider management system. It was felt - correctly I believe - that it should not be left to something coming up which suggested that perhaps it was time to have a review. What was involved here was an attempt to have a more systematic review. To be fair, however, this was extremely ambitious and the decisions we have taken are trying to focus the reviews and have criteria which will establish what is to be reviewed as a priority and so on. Ultimately, the more this is done and the more it is built into the management system, the more one improves the quality of one's management. It provides an opportunity to assess the objectives one had for a programme, if they are being delivered and if there are gaps in it. Sometimes there is a feeling of unease on the ground about a programme and a feeling that something should be done. This provides an analysis of what exactly needs to be done rather than just shove money at it. In that sense, therefore, it is more structured.

Deputy M. Ahern

Does the Comptroller and Auditor General propose to undertake another study on these in a couple of years' time?

Mr. Purcell

Yes, I have. We are looking at 2004, the year in which the Department has indicated it wants to see this fully embedded. However, to be fair to the steering committee and the Department generally, they have taken on board generally what we have said, taken our findings in good faith and responded to them. They had already been doing some work in that regard and taken together this provides a blueprint for the future. As well as being an exercise in accountability, I would like to think this report acts as a support to the process.

Deputy C. Lenihan

I welcome Mr. Considine on the occasion of his first appearance before us. Like all his predecessors in the Department, I am sure he is as anxious as we are to control public spending. He talked about the overarching figure of a doubling of public spending in the past five years in the round. What percentage of that is attributable to growth in spending as opposed to growth in salaries etc? Will he distinguish between the salary and non-salary inputs?

Mr. Considine

Before I ask my colleague, Mr. Doyle, who has more direct experience in that regard, one should note that much of the output of the public service is in respect of services provided by people. In a sense, the volume change is largely reflected in salaries. In terms of the numbers of public service employees, there has been an increase over the period in question. That is particularly true in the health area, where there was a very significant increase in numbers, and also in the general Civil Service.

Mr. D. Doyle

I cannot recall the exact answers to the Deputy's question. I will furnish the Deputy with a separate note on that. In respect of what Mr. Considine has said, about 40,000 more people have been employed in the public service over the past five years, a large proportion of whom were employed in the health services and education.

There have also been significant increases in infrastructural spending and in the levels of social security payments. The trend and pay per head would be significantly ahead of inflation also. If it is in order, I could furnish the Deputy with a separate note.

Deputy C. Lenihan

I am looking for a general figure, given that looking after the pay is almost Mr. Doyle's full-time occupation.

Mr. D. Doyle

I did not bring those particular statistics with me and cannot recollect on that level of detail. As I said, the main focus in respect of the 40,000 people——

Deputy C. Lenihan

That obviously pertains to pay.

Mr. D. Doyle

If one takes an average of €50,000 per head, it works out at about €2 billion.

Deputy C. Lenihan

So the cost of the extra employees is €2 billion.

Mr. D. Doyle

There is a similar figure relating to infrastructure - a real increase of €2 billion. Do not hold me to that figure.

Deputy C. Lenihan

So Mr. Doyle cannot give us the profile of the overall level of spending in terms of pay versus non-pay. Can he give us the percentage of the increase or doubling of public expenditure which is attributable to pay or pay-related costs?

Mr. D. Doyle

I can certainly give the Deputy a note.

Deputy C. Lenihan

In respect of overall spending, what is the pay take-up?

Mr. D. Doyle

In respect of the figure of which the C&AG spoke, pay would be in excess of one third of total spending by Departments. I will give the Deputy a full note.

Deputy C. Lenihan

With a percentage of the increase.

Mr. D. Doyle

Yes.

Deputy C. Lenihan

I do not want to make Mr. Doyle's life more difficult, but I would like to have figures pertaining to the distinction between the existing employees and the standing workforce as it was five years ago——

Mr. D. Doyle

Yes, I will do that for the Deputy

Deputy C. Lenihan

——as distinct from the €2 billion, because there are obvious reasons for that figure if one hires 40,000 extra people.

What is the attitude of the review group on internal spending in the Civil Service to having an internal auditor, which was suggested in a report by this committee at one point? The Comptroller and Auditor General, who is here today, looks retrospectively at overall spending and potential spending overruns. What is Mr. Doyle's attitude to that? Is it a good way of curtailing spending?

Mr. D. Doyle

I do not know whether it will control spending, but the general view of the Department of Finance is that the function of accounting officers is to make sure they have a system of controls which enables them to have confidence in the accounts they sign and confidence that the assets of the Department are being managed correctly.

Most Departments, if not all, have their own internal auditors or access to internal audit. The objective of that is to make sure the systems in operation are adequate to safeguard the assets of the Department and make sure proper accounting arrangements are in place. I imagine the C&AG does, to some extent, take note of what Departments are doing in this respect.

Deputy C. Lenihan

How many Departments have internal auditors in place?

Mr. D. Doyle

Virtually all have, or have access to, internal auditors. We can seek to confirm that for the Deputy.

Deputy C. Lenihan

By way of a note, I am interested to find out how many have internal auditors in place. Internal auditors are operating separately in Departments, which draws on the point I made about having an internal auditor. Is it the case that there is not much co-ordination between internal auditors? I am suggesting, as this committee has, that there be an internal audit service that would bring all of them together. How independent is the internal auditor within the Department?

Mr. Considine

The best practice in respect of that relates to audit committees. Many of the audit committees in individual Departments have a representative from outside the Department on them. There is direct access to the Secretary General, who is the accounting officer for the Vote. It is important to understand that the purpose of the internal audit is not to control expenditure as such, but to make sure the systems in place are adequate to ensure money is spent only in the way it is supposed to be spent, that it is properly authorised, that receipts are brought to account in the proper way and that the assets of the Department are managed and protected correctly. This is so one can have confidence that the accounts represent a true and fair view of what takes place in the Department when signing those accounts.

Deputy C. Lenihan

But the internal auditors are drawn from within the Department.

Mr. Considine

Yes, they are part of the Department staff. That is the distinction in both the public and private sectors - internal auditors are staff of the company or Department, whereas external auditors, whether operating under the Companies Act or the C&AG in the public service or Civil Service, are external to the system. However, subject to what the C&AG might say, I am sure it is a great help that there is somebody within the Department doing this exercise, even though he or she is not independent in the way the C&AG is. The C&AG, if he wished, could review internal auditors' papers to see if they are doing their work and review their work programmes.

Whatever the C&AG might do about it, it is important that the management of the Department is satisfied that there is a system in place for checking and making sure the accounting etc. is being done correctly.

Deputy C. Lenihan

That is interesting because this committee has taken an active role in respect of the DIRT inquiry in terms of strengthening the internal audit function within the private sector. In fact, we have been importuning the private sector, including banks, to strengthen it. It seems odd that while we are urging the banks and the private sector to be more vigilant and independent we are not doing it to a huge extent in the public sector. How many meetings——

Deputy Rabbitte

The public sector is not losing money at the same rate as the banks.

Deputy C. Lenihan

Is there any co-ordination or meetings, in respect of best practice and the audit committee within the Department, between internal auditors of different Departments, although there is no internal service independent of each Department? If so, on what basis? Does it happen every six months?

Mr. Considine

There is a network of internal auditors. I know because I went to Kilkenny last year to talk to them about what we were doing in the Department in respect of the strategic management initiative, in which they were particularly interested. This network of internal auditors is in place to spread best practice, enhance training opportunities and so on.

Deputy C. Lenihan

Does it have a status, or is it simply an informal network which is in place to ensure best practice?

Mr. Considine

It is not compulsory, but internal auditors will find it very useful. One of the advantages is as follows: the internal auditor's job and that of the external auditor can be a lonely exercise as one is there to identify areas where things might not be perfect. Within the organisation this can be even more difficult. The support that such a network provides is quite important for this kind of work.

Deputy C. Lenihan

Is it the internal auditor in the Department of Finance who leads the process, bringing together lonely, isolated internal auditors?

Mr. Considine

No, I do not think so. There is a Government accounting section in the Department, of which I am sure the Department's own internal auditor is a member because I know I met him when I was in Kilkenny last year.

Deputy C. Lenihan

It is your section and Department which brings these people together to investigate the controls.

Mr. Purcell

I confirm what Mr. Considine has said about the existence of internal audit across the public service. We carried out a review some years ago when matters were not as well developed. Mr. Sullivan was a notable exception to the rule at that stage in what was then the Department of Social Welfare, which had a highly developed internal audit section. Many other Departments have developed internal audit since that time and also have external expertise on steering committees, audit committees and so on. I can also confirm that we rely on internal audit. Where it exists, we can take certain assurance from this which enables us to gear our work in particular directions. We also take account of internal audit plans, to which we have access and which we discuss with the internal auditors without compromising them vis-à-vis their own Department.

It is seen as the total audit effort because one Department, I think the Department of Agriculture, Food and Rural Development, was thought to have been almost over-audited at one stage, with the internal audit, the Comptroller and Auditor General audit, the European Commission audit, the European Court of Auditors audit, the evaluations unit audits and so on resulting in huge overheads for it. There is, clearly, a duty for all those involved in audits to co-ordinate the audit activity to the best end.

Chairman

Are there professional, qualified accountants in every Department?

Mr. Considine

I am not sure. In the internal audit section of our Department there is at least one qualified accountant, but I could not say that there is one in every Department. We were to come back to Deputy Lenihan with some information - we shall see whether we can extract that information also.

Chairman

It would be useful, because it appears that with this year's level of expenditure predicted to be €31.8 billion, one imagines that in the huge Department that is the Department of Justice, Equality and Law Reform, and others, it would be of value to have a professional accountant. We have found at the Committee of Public Accounts that different aspects of a problem are often traced back to accountancy problems, with regard to controls. We found this recently in the context of the Department of Justice, Equality and Law Reform. It would be interesting from the point of view of the committee to find out whether the different Departments have accountants, especially if the range of investigations into expenditure is to be increased. I would be very interested in the answer to this question. We presume the Department of Finance has professional accountants within its ranks - we would be disappointed if it did not.

Deputy C. Lenihan

Even we, in this committee, now have one.

Deputy Rabbitte

I want to join in the good wishes for Mr. Considine and wish him well as Secretary General. Deputy Lenihan expressed the hope Mr. Considine is as interested as we are in controlling expenditure. I do not know whether he is referring to this committee or the Government, but the people at large should be alarmed if he is only as interested as the Government in controlling expenditure. However, he does not need to reply to this.

Mr. Considine

I am relieved to hear it.

Deputy Rabbitte

In terms of corrective action that might be taken as a result of any of these reports, is there any structure in the system to respond to a programme, for example, that has gone off the rails? Is it left to the individual Department merely to act on the report?

Mr. Considine

I think it is. Essentially, what it does is to let some fresh air into the system. Once this process gets under way the Department of Finance will be involved in the review on a number of fronts: first, as part of the steering committee doing the reports and, second, as part of the central review committee. A couple of other Secretaries General are involved in the central review committee as well as an outside person. The way public expenditure works, as the Deputies know, is that there is a very close relationship between the Vote section of the Department of Finance and the actual spending Department. I would not imagine there is a specific need for another arrangement.

The first port of call, as for any management, is with the management of the Department itself. We know from the case of the Department of Social, Community and Family Affairs - if Mr. Sullivan wishes, we will elaborate on this - that what one may find is that either there are gaps or that matters are not being done as well as they might be. Particularly in the case of the big programmes, it is very unlikely that an audit is not required because they are so large and part of the system. If management finds that matters are wrong, it is up to the Department and its Minister to follow up on it.

Deputy Rabbitte

This committee does not question the policy origins of any big project, but have you ever encountered a situation - leaving aside Mr. Sullivan's Department - where, if a review of a big project was throwing up disturbing information about costs which were going off the rails, the programme might be reconsidered?

Mr. Considine

Yes, that would often be the case, apart from these reviews. I can recall examples from the past where programmes about which one had concerns would be reviewed. I am sure the Deputy knows that in that situation the programme would be referred back to the Government for review if the concerns were serious. For example, if there was a capital project, lasting three or four years, for which certain costs and parameters had been agreed at the outset, which, halfway down the road, was seen to be going off the rails, it would be normal - or we would expect - that the Vote section and the spending Department would review the programme and, if necessary, go back to the Government for a renewed mandate for it. I do not see anything different in this case. With the permission of the Chairman, Mr. Doyle, who is head of the public expenditure division and a member of the central steering committee, might have something to say on the matter.

Mr. D. Doyle

Mr. Considine has touched on the essence of the matter. If there are serious concerns about the efficiency of a particular programme, we would expect that the normal dynamics would apply and that the relevant Department management would raise the matter with its own Minister and suggest appropriate action at that level. If the Department of Finance, through the annual Estimates, was concerned that insufficient action was being taken or felt there were other reasons to take action it would put the issue before the Minister for Finance for consideration at Cabinet.

Deputy Rabbitte

Mr. Considine was not confining it to efficiencies in the programme alone. He said the raison d'être of a project might have to be rethought in circumstances where it went off the rails.

Mr. Doyle

My remarks were not confined to efficiency. General principles would apply. If the original raison d'être of a project no longer applied, or if a project went off the rails, the same considerations would apply in terms of the action by the relevant Minister and through our own process we would expect some action to be taken. It is possible the political process would conclude that the evaluation of a particular project was incorrect.

Deputy Rabbitte

The process does not include measuring tax exemptions and reliefs. What is the Department of Finance's view on that?

Mr. Considine

It does not but the tax area has its own review process - the tax strategy group. Its papers are published after the budget. Although it has not been part of the expenditure reviews, individual projects have been evaluated, such as business expansion schemes and film relief schemes. Whether that evaluation should go further is another question.

Deputy Rabbitte

I would like the Comptroller and Auditor General to respond to Mr. Considine's point. Surely it is not difficult to envisage programmes where measuring the value of tax reliefs or exemptions is a major matter in terms of assessing the merits of that programme. I do not know if the example he has given is the best but what was the cost of industrial policy if, in the days when the BES and section 87 loans were at their peak, tax reliefs were not taken into account?

Mr. Purcell

The tax expenditures in the report should be encompassed by the review process because it is an alter-ego of the expenditure - it is taxation forgone. That is why I refer to it as tax expenditure. In the past, despite the presence of tax strategy groups and the like, my predecessor carried out some work on the BES scheme that contributed to an amendment in the way of a restriction of the scheme and on section 84 loans. There is a value outside the tax strategy group regime for selective reviews of some of these tax expenditures which tend to take on a life of their own and have dysfunctional effects that were not intended when they were introduced. Sometimes the annual Finance Bill mechanism is not reactive enough to correct that dysfunctional effect.

Mr. Considine

Not to undersell what has been done by successive Governments, the tax strategy group has looked into many of these areas - environmental taxation, the business expansion scheme, revenue powers, shipping tax, EU AIDS policy, employee share options and gainsharing, tax relief on medical expenses and related insurance, a framework for greenhouse gas taxation and reports from the green tax group and renewable energy. In many ways the tax strategy group has developed further than the general expenditure reviews. The areas that are left, such as capital reliefs, are harder to get at because of the way tax returns are made by individuals. There has been a lot of work done by the group through its reviewing individual schemes but, in principle, we would not be disposed to its extension given the information that can be obtained through the tax system.

Mr. Purcell

On the location of the reviews, I go along with Mr. Doyle. This work is best carried out by management as a self-assessment exercise. I point out in the report, however, that need not always be the case. It depends on the type of review and the basis upon which it is carried out. Those that deal with the operation of programmes are better reviewed by management. In those that question the success of the programme and its delivery, maybe there is a case for some input from an independent evaluation unit within the Department. There are also those that examine more fundamental issues about the continued need for the programme and, in making that distinction, we looked at the evaluation processes that have evolved in a number of countries. It is best done by management, although not in all instances.

Deputy Rabbitte asked what action takes place as a result of evaluation. I expressed some disappointment at one aspect of this review when I looked at the role originally envisaged for the steering committee. First, it was supposed to consider each report and it did that. It was to report to the Minister for Finance and to the Minister responsible for the programme review recommending what action should be taken on the report, including, where appropriate, submission of proposals to the Government for approval. We could not locate any such recommended action reports at the time although, as I said in my opening remarks, some of the reviews led to proposals being presented to Government by relevant Ministers. The Department has taken on board that criticism. Appendix E of the report states that the central steering committee will address that issue. I hope that clarifies some of the matters which were left hanging.

Sitting suspended at 3.32 p.m. and resumed at 3.33 p.m.