Most people have an intuitive feel for what constitutes value for money, whether dealing with their own spending or with expenditure from the public purse. In very simple terms value for money is achieved when you are:
- doing the right thing – that is, spending money to achieve the right objectives, and
- doing it right – that is, spending money as efficiently as possible, avoiding waste.
This means that:
Good choices are made on the areas where money is spent. Resources (including all of the costs that arise over the lifetime of a project) are allocated to meet priority needs identified and the most cost-effective interventions are chosen to meet those needs. This involves good appraisal of proposals for new expenditure. Having made good choices on how resources are allocated, projects and programmes are then implemented efficiently i.e. minimum input is used to generate the outputs required and projects and programmes are only continued if they are effective in achieving the outcomes intended.
Ensuring that the State achieves value for money demands more than an intuitive feel. A disciplined approach needs to be applied to all aspects of the expenditure life-cycle, from the moment a proposal is put together, through its implementation and beyond when ex-post reviews are undertaken. The Public Spending Code brings together in one place details of the obligations that those responsible for spending public money are obliged to adhere to as well as guidance material on how to comply with the obligations outlined.
Elements of the Public Spending Code apply to any project or programme that:
- may incur expenditure in the near future (Appraisal, Planning)
- is currently incurring expenditure (Management, Monitoring, Evaluation)
- has incurred expenditure in the recent past (Review, Evaluation)
The Public Spending Code applies to both Capital and Current expenditure. The Code sets out to explain what is required of public service managers at different points of the expenditure lifecycle and offers advice on how to fulfil those requirements.
All Government Departments and public bodies and all bodies in receipt of public funding must comply, as appropriate, with the relevant requirements of the Public Spending Code. In the case of State Companies, the Board of each must satisfy itself annually that the Company is in full compliance with the Code.
Nothing in the Public Spending Code should be taken as precluding Government or Ministers, under the delegated sanction arrangements set down by the Minister for Public Expenditure & Reform, from deciding to approve projects independent of the detailed application of the Public Spending Code. Such decisions still require Departments to ensure that best practice is adhered to as regards public financial procedures generally, in terms of ensuring that necessary terms and conditions are applied to secure full accountability and transparency for the funds concerned.
General Points on the Public Spending Code:
- Building on Good Practice
The Public Spending Code builds upon some long-established elements of the VFM arrangements that have been in place in Irelandover many years. In particular, public service managers who are familiar with the Capital Appraisal Guidelines from 2005, as they have been expanded in subsequent Circulars and advice notes, and with the previously issued Working Rules on Cost-Benefit Analysis, will already have a good grounding in the main elements of the Public Spending Code. Equally however, there is a need to consolidate all of the previous advisory material, to bring procedures up to speed with best national and international practice, and to strengthen procedures so that citizens can be assured they are getting the best value for scarce public funds.
- Aids to good decision making
Programme evaluation and project appraisal are aids to inform decision making. They do not constitute final decisions in themselves. The basic purpose of systematic appraisal is to achieve better investment decisions. Proposals for public sector investment invariably exceed the resources available. Choice and priority setting are inescapable. It is not enough to be satisfied that investment is justified; it is also necessary to ensure that it produces its planned benefits at minimum cost. This cost includes the ongoing current costs generated by the use of capital assets, as well as the initial capital cost. The systematic appraisal and professional management of all capital projects and current expenditure programmes helps to ensure that the best choices are made and that the best value for money is obtained. It should also be noted that in arriving at policy decisions on investment programmes or individual projects, Ministers have to take all relevant factors into account – the economic costs and benefits are not the only relevant factors, and a judgement on social or public-good expenditure (which may not be directly amenable to costing as regards economic impact) will also be brought to bear. Accordingly, the Public Spending Code does not preclude Government or Ministers from deciding to approve projects independent of the detailed application of the Code.
The complexity of the appraisal or evaluation of a project or programme and the methods used will depend on the size and nature of the project or programme and should be proportionate to its scale. The resources to be spent on appraisal or evaluation should be commensurate with the likely range of cost, the nature of the project or programme and with the degree of complexity of the issues involved.
- Appraisal never to be “case-making”
The Sponsoring Agency is responsible for ensuring that the appraisal is done on an objective basis and not as a ‘case-making’ exercise. Good quality appraisal at this stage will make it easier to complete the planning and implementation stages and minimize the potential for difficulties and risks to arise in the later stages.
- Avoiding Premature Commitments
All involved in the appraisal and management of expenditure proposals should guard against the danger that when a project is mooted, it is given a premature commitment. This must be avoided. A sequence of considered decisions will lead to progressively greater commitment of resources, but an irrevocable commitment to a proposal should only be made after all appraisal stages have been satisfactorily passed, and final approval obtained.Where necessary, Departments and public bodies should be prepared at any stage, despite costs having been incurred in appraising, planning and developing a project, to abandon it if, on balance, continuation would not represent value for money.
- EU Funding
Aid from the EU is a national resource and must be used as effectively, and economically, as any other national resource. The EU expects us to ensure this. The availability of EU aid for a project is not a justification for investment in that project. The consideration that the EU may aid a project must not lead to less rigorous appraisal and decision making than if that aid was not forthcoming. If the project does not go ahead the EU aid can be applied to better effect elsewhere. In addition to the national project appraisal procedures outlined in the Public Spending Code, projects aided by the EU Funds must meet specific Community appraisal requirements. As a general principle, the provisions of the Public Spending Code should be at least as rigorous – and applied at least as rigorously – as Community appraisal. Irish citizens are entitled to know that they are getting the maximum value-for-money for their funds.
- Adapting Guidelines to suit the decisions you have to make
Obligations and good practice are generally described at a high level and these should be taken and adapted to suit your organisation’s own circumstances. It is the responsibility of each Sanctioning Authority to ensure that Departments and agencies draw up their own procedures for management and appraisal of programmes and projects consistent with the principles set out in these guidelines.
- A responsive and evolving Code
The Public Spending Code will change as needs be to incorporate new requirements, better practices and other revisions to keep the code relevant and as user-friendly as possible. Since the Code represents an evolution of established VFM procedures, in which all Government Departments and agencies are stakeholders, a new model of consultation and quality-proofing is being introduced. Several elements of the Code are flagged as “Consultation Drafts” and should be regarded as provisional for the present: these will not be formally instituted as binding elements until they have been subject to peer review by all relevant stakeholders. In particular, the Central Expenditure Evaluation Unit (CEEU) of the Department of Public Expenditure & Reform will engage actively with the broader evaluation community, in the public and private sectors and in academic life, to ensure that Ireland’s Public Spending Code evolves to keep pace with best practice both nationally and internationally.