A-03

General Conditions of Sanction for Capital

A-03 

Document Update Log

General Conditions of Sanction for Multi Annual Capital Envelopes _________________________________________________

Capital investment allocations are typically made on a multi-annual basis by the Government, so that Government Departments can undertake proper medium-term planning for the cost-effective delivery of investment projects. Sanction from the Department of Public Expenditure & Reform to each other Department for the multi-annual investment framework is subject to the following conditions:

(a) Contractual commitments

The level of contractual commitments (meaning formal legal contract or grant approval) made in the current year in respect of 2014 will not exceed 75% of that year’s allocation for the department. The corresponding limits in subsequent years are 60% and 50%of each year’s allocation. These limits will be rolled over each year. No contractual capital commitments beyond these ceilings can be entered into without the explicit sanction of the Minister for Public Expenditure and Reform.

(b) Virement

The Multi-Annual Investment Framework does not affect the normal rules for operation of virement between Vote subheads. Virement between capital and current sub-heads should only occur in exceptional circumstances and with the prior approval of the Department of Public Expenditure & Reform. Virement from capital to current should not be used as a tool of expenditure management. Where Public Private Partnership (PPP) contracts were signed before July 2010, a separate subhead has been established in your Vote to meet unitary payments arising under those contracts. Unitary payments from this subhead under contracts in respect of projects delivered by PPP will be “ring fenced” and regarded as non-discretionary current expenditure. Unitary payments for PPP projects signed in or after July 2010 will be met from your Vote’s capital envelope. Virement will not apply to the carryover sums at (g) below.

(c) Programme contingency provision

The Department will make a contingency provision within its overall envelope to meet any unforeseen demands or additional costs which might emerge for the programme as a whole.

(d) Project contingency

In making provision for each project, account should be taken not just of the contract price but limited provision should also be made for likely price increases for inflation for projects with a construction duration of more than 3 years, and unforeseeable variations that might arise during project construction. In this respect, the project contingency shall have regard to the extent of risk that is retained by the contracting authority having undertaken adequate risk analysis prior to tender.

(e) Project costings

Departments must in their evaluation of a project satisfy themselves that any staffing and other current costs arising are consistent with Government policy on staffing and should be fully consistent with the figures in the Employment Control Framework (ECF).  Given current and foreseeable budgetary circumstances, resources are and will be very limited and Departments must take account of this.

(f) Grants to private companies, individuals and community groups

An appropriate contractual arrangement must be put in place by the Department or its agencies, as appropriate, for all significant grants of public funding to private companies and individuals or community groups relating to the State’s interest in the asset. In such cases they should, in particular, have in place a written contract to safeguard the Exchequer interest in the event of change of ownership. The contractual provisions should also provide for the repayment of such grants where the terms are not adhered to and in the event of sale of the asset.  Departments should also take account of the requirements set out in Circular 17/10- Requirements for Grants and Grants-in-Aid issued by this Department on 22 December 2010.

(g) Carryover of unspent annual allocations

Any proposal by a Department to carryover unspent capital will be subject to a ceiling of 10% of the current year’s Voted capital allocation (excluding Dormant Accounts capital funding) as adjusted by any pertinent Government decision.  Any such sums approved for carryover will be lodged to the credit of the Department’s PMG Account and may, in accordance with the provisions of Section 91 of the 2004 Finance Act, be spent in the following year upon approval by the Dáil of the Ministerial Order specifying the amounts by subhead.  Any sum which is carried over and not spent in the following year will be surrendered to the Central Fund.

(h) Reporting requirements

The Department should make arrangements:

(i)    to report regularly (at least every six months) to its MAC on the appraisal of capital projects prior to approval, the management of capital projects and on progress on its capital programmes;

(ii)  to highlight variances against the agreed budget; and,

(iii)  to undertake an annual Quality Assurance exercise to ensure compliance with the Public Spending Code and to report the findings of such Quality Assurance exercises annually to the Department of Public Expenditure & Reform. This new Quality Assurance procedure replaces and updates the “spot check” requirements previously laid down in Circular letter dated 15th May 2007 and should take the form of a short summary report which will be generated as a matter of course through compliance with steps 1-4 of the quality assurance procedures of the Public Spending Code (see section A04 of the Code). This report should be submitted by the end of February each year in respect of the previous calendar year. The report should be certified by the Accounting Officer and published on the Department’s website. The Central Expenditure Evaluation Unit will carry out reviews of these Quality Assurance reports. These periodic assessments may also be published on the Department of Public Expenditure and Reform website.

(i) Adherence to National and EU requirements in relation to capital appraisal, public procurement etc.

The Department will comply fully with:

  • The Department of Public Expenditure & Reform’s Public Spending Code including the requirement that projects over €20 million are subject to a Cost Benefit Analysis (CBA) or Cost Effectiveness Analysis (CEA). Prior to Approval in Principle the CBA (or CEA) should be submitted to the relevant vote section in the Department of Public Expenditure and Reform who may seek the views of the CEEU. The CEEU will give its views on the appraisal to the Sponsoring Agency and may publish their review of the CBA (or CEA) on their website, with any necessary redaction to protect the State’s interest in the tender process and commercial sensitivity.;
  • Where appropriate, requirements for undertaking Public Private Partnerships as set down by the Department of Public Expenditure & Reform, including the requirement to consult with the National Development Finance Agency on financing options for all projects in excess of €20 million;
  • Public Procurement Procedures – both National and EU; and
  • Tax clearance requirements as laid down by the Revenue Commissioners.

(j) North-South commitments Departments will fulfil all commitments entered into in respect of the North-South Bodies established under the Good Friday Agreement.