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News : Irish Economy Last Updated: Sep 16, 2010 - 8:32:22 AM

C&AG says accrued liability for Irish public pensions is €129bn; Government pays writer €341,714 for history on OPW and 2 chapters delivered in 7 years
By Finfacts Team
Sep 15, 2010 - 3:56:19 PM

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The Comptroller and Auditor General John Buckley today issued his annual report for 2009 and said the accrued liability for Irish public pensions is €129bn. The C&AG also reports that the Government has paid a writer €341,714 for the history of the Office of Public Works (OPW) and 2 chapters were delivered by Dec 2009 after 7 years.

The C&AG said the number of civil servants fell from 317,274 in 2008 to 310,208 in 2009 while public service pensioners increased from 113,384 to 123,954  -- 1 pensioner  for 2.56 workers.

The accrued cost outstanding of pensions has risen 7.4% from €108bn to €116bn and adding in the Sate pension costs bring the total to €129bn.

The report says the total outstanding commitments of central Government departments and agencies in respect of contracted PPP projects at end 2009 is estimated at €4.1bn. A further significant number of PPP projects were in development at the end of 2009 but had not yet reached contract stage.

Based on the assumption that the projects will progress as scheduled at July 2010, the Department of Finance has estimated that the potential total expenditure on currently contracted projects and projects expected to commence construction by 2016 will be approximately €24bn over the period 2010 to 2053. Expenditure is projected to average €730m a year over the 30-year period from 2010 to 2040.

Up to the end of July 2010, the State had spent or committed a total of €24.35bn on the direct provision of financial support to credit institutions. This comprises

  • €7bn invested by the National Pension Reserve Fund in AIB and Bank of Ireland, in return for which it has become a substantial shareholder

  • €4.2bn spent supporting Anglo Irish Bank and taking the INBS and the EBS into State ownership

  • the issuing of promissory notes to the value of €10.3bn to Anglo Irish Bank, €2.6bn to the INBS and €250m to the EBS — this mechanism will spread the Exchequer cash payments over a number of years into the future.

  • In addition, the Minister for Finance has indicated an intention to provide up to €10bn in further support for Anglo Irish Bank and up to €437m for the EBS, if required.

Apart from the capital injections for individual financial institutions, the State has provided substantial guarantees in respect of banking liabilities. At end June 2010, the extent of the credit institutions liabilities covered by such schemes was estimated to be €334bn. This included €78bn covered under the Deposit Guarantee Scheme.

The State has received some funding in return for the guarantees it has provided in respect of bank liabilities. By end July 2010, it had collected guarantee fee payments totalling €1,026m. A small amount of the costs of developing and administering banking stabilisation measures has also been recovered from the institutions availing of the guarantee cover. In addition, substantial balances were held in the Deposit Guarantee Account in the Central Bank (€608m at the end of 2009).

The report says administrative costs incurred by State agencies in relation to banking stabilisation measures have been substantial in absolute terms, but are small relative to the scale of the costs, financial commitments and risks associated with the banking stabilisation measures. Access to timely and professional advice is a vital input to decision making in this context. At the same time, it is important to ensure that sound procurement and contracting practices are followed to ensure that the expenses being incurred are no more than is warranted in the circumstances.

Public agencies paid consultants €34m to the end of July for advice on the banking crisis. Law firm Arthur Cox received €11.6m in fees, followed by US investment bank Merrill Lynch at €7.33m.

Accountants PriceWaterhouseCoopers (PwC) made €6.65m and investment bank, Rothschild, which took over the advisory role from Merrill Lynch in 2009, earned €4.54m.

Data on public procurement in 2009 indicate that payments were made under 473 contracts concluded without competition. The total value of the contracts reported in 2009 was €69.1m. Both the number and value of non-competitive procurement payments reported decreased in 2009 relative to 2008 (522 contracts with a combined value of €79.1m).

The Irish Prison Service (IPS) had the highest reported level of contracts awarded without a competitive process, with expenditure of €22m on 154 contracts in 2009, and expenditure of almost €28m in 2008. The Department of Finance has stated that the position of the IPS is receiving particular attention. The IPS has indicated that it has put new contracts in place where existing ones had been extended beyond their original term — a particular issue identified by the Service in analysing its purchases.

It is expected that the drop in the level of expenditure by the Service under contracts not subject to competitive tender will continue in 2010 and beyond.

The report says that in January 2002, following a request for proposals from interested persons, the OPW entered into a two-year contract with a professional historian to research and write a text for publication on the history of the OPW from the seventeenth century to 2000. The total fee specified for this commission was €76,184, with a completion date of January 2004.

In January 2004, the OPW agreed a further two-year consultancy contract with the author at a revised fee of €78,470. The deadline for the production of the final text was extended to January 2006. No signed contract beyond this date was entered into.

Up to 31 December 2009, the author has been paid a total of €341,714 (inclusive of withholding tax of €68,172). Two completed chapters of the book have recently been received by the OPW.

The Dáil Public Accounts Committee (PAC) said it intends to closely probe the findings of this report in order to establish why, in some instances, value for money was not achieved and how in future, improved procedures should be put in place to ensure a better return for the State’s investment

Committee Chairman, Bernard Allen TD said today: “The Committee welcomes the publication of the C&AG’s report today. It draws attention to situations in which public money may not have been prudently spent and where practices in State bodies and departments were lax.

During the coming months, the Committee will call witnesses to the Committee from the relevant State bodies and agencies identified in the report to get responses concerning the findings of the report and to find out how they intend to address the matters raised.

In particular the Committee will prioritise areas such as:

  • The escalating cost of bank stabilisation measures in particular relation to Anglo and Irish Nationwide Building Society.
  • The delays in winding down or amalgamating quangos arising from Government decisions.
  • The cost of decentralisation, including what can only be described as waste or nugatory expenditure on this programme.
  • The exorbitant cost of farm inspections.
  • The issue of measuring those waiting for in-patient procedures and out-patient appointments in our public hospitals.
  • The use of public money to enable some officials to travel on loosely defined fact finding missions to places such as Hong Kong, Australia and Los Angeles under a skills programme operated by SIPTU as part of an agreement with the Department of Health and Children."

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