Committee Reports::Report - Appropriation Accounts 1965 - 1966::14 July, 1967::Appendix

APPENDIX XXXV.

REVENUE COMMISSIONERS: HIREAGE OF EQUIPMENT

An Cléireach,


An Coiste um Chuntais Phoiblí.


At the meeting of the Committee of Public Accounts on the 9th March, 1967, in connection with the Appropriation Accounts, 1965-66, Office of the Revenue Commissioners, I undertook to furnish a note on the question of the hireage of certain equipment which had been accounted for under the Vote for the Stationery Office.


The matters had been referred to in the following paragraphs from the relevant report of the Comptroller and Auditor General:


Paragraph 29. “Two address-card cutting machines were hired for the Revenue Commissioners from November 1961 pending the purchase of similar machines for permanent use. These were delivered in June 1962 at a cost of £91 each but the hired machines were not returned until May 1963 when charges accrued amounted to £468. The claim for hireage, received from the contractor in May 1963, was not settled until February 1966, the delay being due to the practice whereby the Stationery Office obtained through the Revenue Commissioners the sanction of the Department of Finance for the expenditure.”


Paragraph 30. “A considerable number of other claims for hireage of office machinery for the Revenue Commissioners were overdue for payment at 31 March 1966 and I was informed that payment had been withheld in some cases because the Stationery Office had not Department of Finance authority to pay and that in other cases information was required from the Revenue Commissioners to vouch the claims.


Having regard to the comments of the Public Accounts Committee on the question of delay by government departments in settling accounts I have deemed it necessary to draw attention to these matters.”


As regards Paragraph 29, two new address-card cutting machines were ordered in November 1961. These were required for immediate use but were not available for delivery for some time. The Revenue Commissioners were offered two similar machines on hire at a weekly rental of £3 per machine pending delivery of the ones on order. The machines were required for the purposes of mechanising the work of issuing P.A.Y.E. forms in the Central Collection Branch and also to relieve pressure in the Dublin General Tax District. These arrangements, including the temporary hireage of two machines, had the prior sanction of the Minister for Finance.


The two purchased machines were delivered in June 1962 and in the normal course the two machines on hire would then have been surrendered. In the meantime, however, the Commissioners had become involved in the very extensive and urgent preparatory work required for the installation of the Computer which was scheduled to commence operations in the Autumn of 1963. This meant that there was then an immediate need for further address-card cutting machines, to enable basic data to be processed in time for the commencement date of the computer operations. There was a shortage of such machines at the time with a protracted delivery time. Negotiations were entered into with the supplier for the purchase of the two machines which were on hire as well as for four additional machines. The supplier was not prepared to sell the machines in question and there was no alternative but to give an order for six new machines and retain the two machines which were on hire pending the delivery of the new ones. Finance sanction was obtained for the purchase of the six new machines but, unfortunately, the necessity for obtaining sanction for the continuance of the hire of two machines was overlooked. This regrettable oversight was largely due to the fact that the computer project was in the implementation stage at the time and the address-card work was to a very great extent involved in it. When the oversight was discovered, some time was subsequently spent in discussions with the suppliers with a view to having the charges reduced for the extended period of hire. The Commissioners’ efforts in this regard were unsuccessful, but, nevertheless, seemed justifiable in the circumstances, even though they contributed to further delay in vouching the amounts actually demanded.


As regards Paragraph 30, these other claims for hireage also related to the computer project. In many cases the contracts originally entered into had to be altered because circumstances arose subsequently which affected the substance of the contracts. For example the introduction of the five-day week affected the charges for computer maintenance outside normal working hours. These alterations necessitated the recalculation of charges and the agreement of the parties to the new bases of calculation. It is generally accepted by suppliers that circumstances such as these frequently involve protracted negotiations and they do not expect settlement on the same basis as would apply in simple contracts for outright purchase.


Further examples of factors which affect hiring charges are


(a) conditions as to the length of time per day during which the equipment is to be used. Thus, the standard charge would be related to single shift working, and provision would be made for an excess charge for hours worked in excess of a single shift. This would be to compensate for the extra wear and tear on the machine;


(b) variations in the cost per hour of maintenance men’s wages;


(c) variations in the price of spare parts.


When a hiring period is completed items such as these come up for examination and discussion, and the vouching of accounts must necessarily be deferred until agreement is reached between the suppliers and the users of the equipment. There is seldom, if ever, any delay about vouching the outright purchase of a piece of equipment.


The accounts outstanding at 31/3/66 between the Stationery Office and the suppliers, International Computers and Tabulators Ltd., were concerned with (1) computer maintenance outside normal working hours; (2) rental of machines; (3) additional shift working on the I.C.T. computer and (4) minor matters in connection with the supply of cards.


The question of maintenance was complicated by the fact that up to July 1964, charges for maintenance carried out on Saturdays were paid by the Stationery Office on Revenue certifying that the work was done. On the introduction of the 5-day week in the Civil Service all maintenance on the computer was arranged for Saturdays to avoid interruption of Revenue’s work flow, and the Stationery Office intimated that sanction should be sought for charges arising from this arrangement. This sanction was obtained in January 1965, but stipulated that a contract should be entered into by the Stationery Office and International Computers and Tabulators Ltd. Difficulties arose between the parties in framing this contract, and in the event substituted sanction was obtained in January 1967, for the payment of the charges without entering into a contract.


The computer was employed on a complete second shift from 21/2/66 and part of the charges in the outstanding accounts are in respect of two-shift working and stand-by maintenance during the second shift. The charges for this additional work were the subject of negotiation and the position has been now finally clarified. The rental charge has been sanctioned by the Minister for Finance. The validity of the additional maintenance charge made by I.C.T. was, however, disputed by Revenue and the Company eventually agreed to waive this charge. This latter charge would have amounted to approximately £300 per month.


Similarly sanction has been obtained for half shift working from 1/1/65 to 20/2/66.


The items of rental and maintenance are the major items on the outstanding accounts and it may be noted that these are additional charges for equipment already sanctioned. In a large machine installation which comprises a computer and a number of other machines for essential preliminary processing, new work, pressure of events and increase in work loading often demand the immediate use of additional capacity on the machines, or an alteration in the manner of their use. If the cost of the additional or altered use must be the subject of negotiation, there will necessarily be an interval between the immediate undertaking of the new work and the settlement of the accounts position; and, subject to the agreement of the Minister for Finance, there seems little alternative to the acceptance by the user Department of responsibility for direct negotiations with the suppliers in these circumstances, since, at this stage of computer development, only the user can have a full and immediate understanding of what in fact has been involved in the technical application of the equipment.


This point is further illustrated by a number of other smaller items outstanding on the accounts. Some of these are concerned with a type of punched card equipment which it was originally expected to surrender in March 1965, but which could not be surrendered until May 1965. Another small item relates to two I.C.T. punches used in conjunction with N.C.R. accounting machines. Sanction for these items was obtained in January 1965 at £12 17s. 0d. per month, but it transpired that there was in fact another item required with each punch, i.e., a linking device between the N.C.R. machine and the I.C.T. punch, for which a separate charge arose which had not been included in the original sanction. The settlement of the bills for hireage of the two punches was deferred pending the receipt of revised sanction to include the marginal charge for the linking devices.


The Revenue Commissioners greatly regret that, notwithstanding the views already expressed by the Public Accounts Committee in this general connection, oversights in their Office were responsible in any instance for delays in the settlement of outstanding accounts. They recognise that, with the introduction into the Office of large-scale computerised operations, they must now take responsibility for seeing that similar oversights do not occur in the future; and they have therefore given instructions that all matters involving direct negotiations for the purchase or hire of equipment are to be notified immediately to their Director of Establishments. He will be required to give special attention to the question of eliminating any avoidable delays which might hold up the settlement of the relevant accounts.


(Signed) S. RÉAMONN,


Chairman,


Revenue Commissioners.


6 Aibreán, 1967.