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Warning over payment units cost

Finances

Finances

Spending overheads at a government payments unit in Northern Ireland are extraordinarily high, a public finances watchdog warned.

More than £3 million a year could be saved if Account NI reduced costs to the international average, the Stormont assembly’s Public Accounts Committee (PAC) said.

The primary purpose of the shared financial service centre is to generate efficiency savings by reducing duplication, standardising processes and generating economies of scale in paying government bills.

Stormont finance minister Simon Hamilton said the performance against the prompt payment target was recognised as world class.

However, the PAC report said: “It is clear to the committee that the Department (of Finance and Personnel) is in denial about the extent to which Account NI is a very high cost operation.”

Account NI is a financial shared service centre serving Executive departments and 18 other public bodies.

It costs Account NI £9.73 to process and pay an invoice. The DFP argued that only £2.05 of this amount is directly related to staff costs, broadly in line with other public bodies.

But the PAC said: “This ignores the fact that elements of the remaining overhead figure are extraordinarily high.”

It costs £2.39 per transaction to pay the IT contractor, a quarter of the total.

The Audit Office has estimated that if Account NI could reduce costs to the level of the average international performer it could save £3.4 million a year.

The group of MLAs said: “In our view, the factors contributing to the high level of costs must be subject to a detailed analysis, with a focus on identifying potential cost savings.”

The committee made six recommendations including that the department undertakes a detailed review of Account NI costs for staff and overheads to significantly reduce them.

It recommended a review of staffing levels within Account NI and the elimination of unnecessary checking or duplication of work performed by the organisation within departments.

The report said: “The committee finds it unacceptable that Account NI has operated for five years without putting in place a basic performance measure which would allow it to monitor the cost of the service it provides.

“The committee is also concerned to find Account NI failed to benchmark its performance against other shared service centres.”

There has been an enormous increase in the estimated cost of developing and operating Account NI since the first substantive estimate of £114 million in 2003, the committee said.

The Audit Office calculates that the total project cost, from inception in 2001 to the end of the contract with the IT provider in 2018, will be at least £213 million.

MLAs said, given this huge investment of public funds, they expected to see clear evidence that the project has delivered value for money.

“Instead, we found that there is considerable uncertainty as to whether the project has achieved either the £43.1 million in savings or the wider non-financial benefits on which the business case for the project was based.

“It is not acceptable that the public purse is committed to spending millions more on this project without clear evidence that it has delivered, or will in future deliver, value for money.”

Mr Hamilton said the figure of £9.73 quoted by the PAC is not an appropriate basis on which to make a valid comparison with other bodies and the report’s analysis therefore is insufficiently robust for the PAC to reasonably draw such a definitive conclusion on cost. The direct staff cost per transaction in Account NI is around £2.05.

He added: “Thus, the PAC has overestimated the potential savings of £3.4 million per year, if Account NI reduced its costs. The annual cost of staff in the accounts payable function is in the region of £1.5 million therefore it is impossible to make a saving of this magnitude.

“I always want to see services like Account NI improving continuously and my department is working towards improving the service, particularly through the process of benchmarking on a like-for-like basis, but I also expect the PAC to produce a solid case on which to base their conclusions.

“Northern Ireland’s shared services are an exemplar not just in Europe but in the world. I’ve personally spoken with the representatives of other governments who are keen to learn from what we’ve already achieved in Northern Ireland. Whilst acknowledging that there is always room for improvement, we should celebrate the success of our shared services.”

 

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