The Citizens Information Board (CIB) provides information on a range of issues to Irish citizens to assist them in dealing with public institutions. A network of outlets had been developed over time whereby this information was provided through 93 local companies.
The CIB decided to reorganise its services delivery network of into a structure comprising 8 regional companies to deliver Citizens Information Services (CIS) and 8 regional companies to deliver the Money Advice and Budgeting Service (MABS).
The aim was to address issues in relation to governance and oversight that had been raised by the Department of Social Protection (DSP) and the Comptroller and Auditor General (C&AG).
The Joint Oireachtas Committee on Social Protection considered the proposed reorganisation and recommended that a cost benefit analysis (CBA) of the proposed 8 region mode be undertaken. KHSK Economic Consultants were commissioned by CIB to undertake the CBA.
The proposed reorganisation was based on earlier recommendations by other consultants. The study undertaken by KHSK reviewed but did not repeat this earlier analysis.
Consequently, it was not an assessment of the recommendations or of the Board’s decision. Instead, it concentrated on assessing the costs and benefits that would be associated with this approach and compared these to some possible alternatives.
Budgetary Impact Assessment
The budgetary impact assessment was undertaken on the basis of implementing the proposed change compared to a ‘no change’ counterfactual. Costings were provided to KHSK by CIB. These were examined to verify their validity and any assumptions.
The ‘no change’ counterfactual does not imply that the CIB does not act in response to the issues that had been raised. Some expenditure would be required to create a compliance unit within CIB in the absence of the proposed change. As this would not be required if the reorganisation was undertaken, this expenditure would be saved.
It was assumed that the new network would have an operating lifetime of 8 years. All costs were expressed in 2017 values and a real discount rate of 5% was used throughout the analysis. The present value of the total expenditure was estimated to be €7.47 million.
The reorganisation will allow for savings compared to no change as a result of the more efficient structure. The discounted present value of these savings was estimated to be €4.76 million.
When set up costs are added the estimated impact on the CIB budget is €4.55 million.
An exchequer flow analysis was also undertaken on the same basis. This differs from the above since both set up and operational costs include expenditure by the CIB that is directly returned to the exchequer, primarily through VAT and income taxes.
When these payments are netted out, the cost of the proposed reorganisation on the exchequer was estimated to be just under €3.2 million in present values.
Cost Benefit Analysis
The objective of the reorganisation is not to minimise CIB expenditure but to improve the efficiency with which its services are delivered. Therefore, to assess if the proposal should be implemented it is necessary to compare these costs with the benefits that can reasonably be expected. This was done by means of a socioeconomic cost benefit analysis (CBA).
The assessment of costs was based on the budgetary estimates above. Recommended social values for key variables published by the Department of Expenditure and Reform were used throughout. The calculation identified a total social cost of just over €8 million.
The benefits of the reorganisation would arise under four headings:
- new incomes as a result of the employment impact of expenditure during the setup phase and the subsequent employment of new regional managers;
- efficiencies that would be created within the network leading to higher output in frontline services for the same level of resources employed having allowed for the new regional managers;
- reduced usage of volunteers on boards thereby freeing up economic resources to the economy. This reduction of an opportunity cost is included as a benefit of the change;
- qualitative improvements in the overall service due to the CIB improving its ability to apply best practice in areas such as governance, consistency and communication. These are important, but it was not possible to apply a monetary benefit to these impacts.
The analysis showed that socioeconomic benefits with an estimated present value of €26.9 million would arise from the reorganisation when compared to the ‘no change’ option. This is in addition to the non-monetary benefits that would arise from qualitative improvements.
Given that estimated costs have a socioeconomic value just over €8 million, the result is that net socioeconomic benefits of €18.9 million arise. This outcome arises from net additional exchequer expenditure of €4.1 million giving a benefit cost ratio of 6.6.
This high ratio reflects that benefits arise from the expenditure that is required to implement the reorganisation and because the reorganisation would leverage efficiencies from all the existing funding that is provided by CIB.
A sensitivity analysis was undertaken on alternative assumptions. The net benefits remained positive in all scenarios.
Cost Effectiveness Analysis
A cost effectiveness analysis allows easy comparisons between different options to achieve similar outcomes. Four alternative options were included:
- the regional model which comprises the preferred approach of the CIB;
- the ‘no change’ counterfactual, better thought of a ‘do the minimum’ approach;
- national companies, one each for CIS and MABS;
- 30 companies using an integrated county-based model.
The approach taken was consistent with the approach taken in assessing the budgetary impact. The analysis was undertaken on the basis that the volume of output would be constant irrespective of the option implemented.
The analysis showed that the ‘no change’ option was clearly not cost effective. The ‘national companies’ option would be the most cost effective model. However, earlier studies undertaken by CIB had identified that there would be considerable disruption with this approach.
The outcome for the ‘integrated counties’ option was broadly similar to the regional model. However, it would not result in the qualitative improvements that are important to the CIB and are the main rationale for the change.
In effect, this option would provide a similar output in terms of the volume of services only through additional expenditure rather than greater efficiency.
The impact of the proposed reorganisation on the CIB budget would be additional expenditure of €4.55 million in present values over 8 years.
The net impact on the exchequer is additional expenditure with a present value of €3.19 million.
Socioeconomic costs with a present value of €8 million and benefits of €27 million would arise from the regional reorganisation compared to the ‘no change’ counterfactual. This means that net benefits of €18.9 million would arise.
This does not include qualitative improvements, such as better governance and consistency, that are important objectives of CIB.
The benefits of €27 million arise from expenditure with a socioeconomic value of €4.1 million giving a benefit cost ratio of 6.6.
Comparison with possible alternatives confirms the findings of earlier studies that a reorganisation that gets as close to the ‘national companies’ model while recognising the difficulties that could arise with that model is the best approach.
Based on these findings, it was recommended that CIB should proceed with the proposed consolidation and reorganisation of its network.