Joint written evidence submitted Dr Muiris MacCarthaigh and Martin O’Halloran (QPD0006)

 

Summary of key points

Context

Crises

Accountability

Relationship with central government departments


Rationale for public bodies

Value for money

Complexity

Appointments

 

Introduction

  1. This submission is made by Dr Muiris MacCarthaigh of Queen’s University Belfast who has conducted research on the Irish state agency sector for several years, and Martin O’Halloran, CEO of the Irish Health and Safety Authority and current chairperson of the Irish Association of Chief Executives of State Agencies (ACESA – www.acesa.ie ). ACESA provides a forum for chief executives of non-commercial State Agencies to discuss issues of mutual concern and enables them to develop and express a collective voice on issues that affect the sector.

 

  1. Like its UK counterpart, the Irish administrative system employs a wide variety of state agencies in the performance of public functions.  Within the state agency sector, different forms of governance and accountability arrangements are to be found, reflecting differing legal, financial, policy and corporate governance responsibilities.  However, in recent years, there have been significant reforms of these governance and accountability arrangements, as well as a drop of 21% in aggregate personnel since 2008. At time of writing, a large number of agency mergers are also taking place.

 

  1. The responses set out below are organised in direct response to the questions posed by the Select Committee, which form the headings in each case.

 

How well public bodies handle crises, compared to central government departments.

  1. By definition, crises are impossible to predict.  It is our view, however, that state agencies have a deeper and more extensive level of direct engagement with the public and stakeholder groups than government departments, and as such, are in a better position to detect and mitigate circumstances that could in time contribute to a crisis.  In order to maintain their ability to survey their respective policy landscapes, state agency autonomy should not be undermined by over-zealous control or undue accountability burdens. It is worth noting that a number of state agencies have been created as a consequence of policy failures and crises at central government level, as well as the need to avoid crisis in particular market sectors by means of creating regulatory authorities that have demonstrable independence from the political system. State agencies also tend to have personnel with specialist skills in different functional areas that bring technical and other expertise to bear on averting and dealing with crises.

 

The accountability of public bodies to ministers and Parliament. 

  1. Irish state agencies have multiple accountability requirements, though these do not apply uniformly across the sector.  The majority of state agencies will be accountable to their parent Department and respective Minister for the achievement of policy goals and statutory obligations. In some cases, such as Ombudsman offices, the primary accountability requirement is to the parliament, the Oireachtas. In recent years it has become increasingly common for agency CEOs and senior managers to appear before parliamentary committees and in many cases this is a requirement of the establishing legislation to ensure full accountability to parliament rather than solely to the government of the day.

 

  1. The governance and accountability models have evolved over the last two decades or so and in many cases the particular model is given expression in primary legislation establishing the agency and conferring powers, rights, roles, duties and responsibilities on it. However, the experience of many agency managers is that the accountability process within the parliamentary arena is highly politicised and occasionally personal in nature, and does not contribute to the achievement of a successful accountability regime.  This is not unique to Ireland, and given the range of other actors to whom agencies are directly accountable (such as public auditors or ombudsman offices) there seems to be considerable merit in looking at how best parliament can best perform its distinctive accountability function.  The experience and views of parliamentarians are of keen interest to agencies, and as parliament is a primary stakeholder for most agencies, it is important that their contribution to the strategic role of individual agencies in maximised.

 

The relationship between public bodies and central government departments.

  1. A variety of arrangements exist in respect of how agencies are formally represented in key Departmental fora, including the Management Advisory Committee (MAC) or Management Board.  In some Departments, the agency CEOs attend all meetings of the MAC, while in others they do not.  From the perspective of state agencies, it is essential to have formal and strong connections with their parent Department. This connection should also be at the appropriate senior level within the Department.

 

  1. Agency CEOs report to Boards/Councils (where they exist) and the Chairs/Presidents are accountable to the relevant Minister.  Departmental officials also have direct lines of communication to agencies. It is important that there be distinctive roles, responsibilities and lines of communication between Ministers and their advisers, agency Boards/Councils, agency senior management and department officials respectively.

 

  1. In recent years, and particular since 2008, there has been a more extensive use of Service Level Agreements between Irish government departments and agencies.  While this has been a useful development in respect of clarifying roles and responsibilities in more straightened financial times, the experience of many state agencies appears to be that the onus is on them, rather than the Department, to achieve expectations. Some agencies have also voiced concern that the economic circumstances of recent years have resulted in a more ‘command and control’ management style which undermines a co-operative basis for achieving common goals.

 

The reasons for placing functions with public bodies, rather than within central government, and the strengths and weaknesses of the public bodies model.

  1. We would like to draw the Select Committee’s attention here to an OECD review of the Irish public service published in 2008[1].  Sub-titled Towards an Integrated Public Service, it paid particular attention to the work and role of agencies, and recommended a number of factors that should guide their creation.  These were:

-          Matching the organisational form to the reasons for agency creation. Essentially, the report argued that independent statutory bodies can ‘improve performance when a governance board provides strong leadership and effective monitoring and/or a differentiated control environment is better tailored to the entity’s function. The legitimacy of decision-making can be improved through involving external expertise or broader civil society or through using organisational form to signal independence’. By contrast, a ‘department agency’ can be used ‘to improve performance through better focus and more performance contracting when there is a cohesive functional grouping of tasks predominantly delivering tangible services’ (OECD 2008: 301).

-          Establish clear guidelines and criteria for agency creation. The report recommended that a clear rationale be devised for establishing new agencies and for operating existing ones. This rationale ‘should prohibit the creation of agencies solely for increasing resources and personnel allocated to a specific policy priority. If a capacity need is identified in a sector, a review of the relevant departmental mandate should be carried out first. The decision to create an agency should only be made following an assessment of personnel and capacity needs, and of the best type of governance structure needed to conduct government policy in this area’ (OECD 2008: 301).

 

  1. Other recommendations from the OECD report (2008: 300-1) which we believe to be relevant to the Select Committee’s work include:

-          Rebalancing ‘the autonomy of agencies between policy and managerial autonomy in favour of more managerial autonomy’ in order to reduce mission creep.

-          Increasing managerial flexibility to facilitate a performance rather than managerial focus. This might include flexible budgeting between years, the removal of more ex ante controls on spending, flexibility in allocating funds between different types of spending and, most importantly, between personnel and other expenses.

-          Rewarding good management in agencies with more managerial flexibility, building on evaluation mechanisms in place.

 

  1. It is important to note that the management ‘churn’ between the private sector and agencies in Ireland has traditionally been significantly greater than in the civil service. It is estimated that about 50% of CEOs of current state agencies come from the private sector, with experience of a much stronger focus on operational and service delivery, as opposed to policy formulation. 

 

  1. The current Irish government’s ‘Programme for Government 2011-16’ envisages reducing the overall number of state agencies, and also notes that ‘In future, when proposing a new agency, it will be necessary to prove that the proposed new functions cannot be carried out within the existing framework.’

 


The extent to which public bodies provide value for money for taxpayers. 

  1. A common rationale for the creation of autonomous state agencies is that they will achieve more effective use of public money, and in an increasingly efficient manner than a more diverse and complex organization such as a government department. We believe that there is strong evidence that state agencies deliver value for money and also savings to the state that may otherwise accrue.

 

  1. State agencies can in many cases achieve greater innovation in delivery of services arising from their scale and flexibility and direct contact, interaction and close working with the service recipients.

 

  1. The concept of ‘materiality’ should be considered in the public accounting domain as there can be disproportionate amounts of times focussed on non-material issues while major issues of national concern go almost unnoticed. In the context of the understandable need to closely monitor public finances, civil and public servants are encouraged to operate in a risk averse manner as the tolerance for error is very low. This has an effect of slowing down productivity in some cases, and stifling innovation.

 

The complexity of the public bodies landscape: for example, the differing structures and powers of arms-length bodies, non-ministerial departments and executive agencies.

  1. It is not uncommon for reform plans to seek uniformity and standard practice across and between organisations, and to reduce perceived complexity. However, it is our view that diversity is an essential element of the state agency sector, and the ability to tailor structures and allocate different powers to agencies in order to achieve policy goals is an asset of the Irish administrative system. While standard rules on, for example, public financial procedures clearly apply to all public service organisations, governments should be cautious when seeking to reduce variety in autonomy and accountability arrangements that may serve to undermine the raison d’etre of public bodies.

 

The appointment of Chairs to public bodies.

There has been a welcome move towards having an open transparent process for the appointment of Chairs and Board members, where such Boards exist. However, from contact with those involved it seems that the process of obliging candidates to appear before parliamentary committees for questioning prior to appointment may be discouraging promising candidates to put their names forward for selection.   We would see merit in a post-appointment meeting between parliamentary committee and incoming Chair or Board as the best means to clarify roles and expectations, and begin a formal and productive relationship.

 

April 2014

 

[1] OECD (2008). Ireland: Towards an Integrated Public Service. (Paris: OECD)