22/06/2011: DofF latest fiasco

A very revealing article in today's Irish Times - link here and a HT to Prof Brian Lucey - states that "The memo from a senior official in the department rejected the assertion from UCD economist Morgan Kelly of a possible 60 per cent fall in values over nine years. It also advised Mr Cowen, who was minister for finance at the time, that he should warn against overreacting to falling house prices. The document, drawn up by economist John McCarthy in July 2007 and sent to the former taoiseach pointed out that the housing values remained above 2006 levels."

This is another piece in a long string of evidence trickling down from the Merrion Street that points to the nature of advice and analysis conducted by the DofF. In Summer 2007 Irish property markets started showing signs of significant stress and by August we experienced the first slowdown in the rate of growth in stamp duty receipts. National average asking prices for homes, according to Daft.ie, posted seasonally unexpected decline of 0.34%mom in March, bouncing off the historic peak in February 2007. This was followed by another seasonally unexpected decline of 0.44% in April, rebound of 0.69% in May, a decline of 0.09% in June (again out of line with seasonal patterns) and a drop of 0.56% in July. The signs of some sort of sickness in the market were already visible, therefore, at the time the DofF note was issued.

Of course, DofF can be excused for not spotting the turning point in the property market - after all, virtually all data through July 2007 was at the very best inconclusive. But, the report leaves several issues worth addressing:

1. By August it was clear that the global financial markets were suffering significant pressures, which warranted some DofF attention, including on the side of the property markets;
2. What was DofF's business in advising the Minister to 'warn against overreacting to falling house prices'? Should, in an ethical society, the Minister for Finance make any calls whatsoever on private asset markets? Or should, in a functional economy, DofF job cover the need for preparing a policy response to the potentially dangerous situation developing in the major sector of the economy? In other words, was DofF doing its job advising the Minister on a PR exercise, and was it not doing its jobs in not preparing for the contingency of a property market collapse?

Of course, all of this remains academic compared to the brutish bullying stupidity of Mr Cowen's boss who famously barked in response to Prof Morgan Kelly’s articles in 2007 that: “Sitting on the sidelines, cribbing and moaning is a lost opportunity, I don’t know how people who engage in that don’t commit suicide.” (see full record here).


Oh, and just in case you might think DofF has learned any lessons from the July 2007 note debacle? Think again. Per same Irish Times report: "According to fresh analysis conducted by department economist Ronan Hickey – and published yesterday – house prices had fallen by 40 per cent from their 2006 peak by the fourth quarter of 2010." (emphasis is mine)

Err, what a wonderful revelation that is. In fact, the DofF 'analysis' is so ground-breaking that it simply confirms the data released by CSO last month - see report on that here.

But don't blame Mr Hickey for this - blame Irish Times bizarre reporting style. Mr Hickey didn't carry any 'fresh analysis' that Irish Times claims he did. instead, Mr Hickey clearly and transparently quotes from a now discontinued time series data from ESRI and ptsb index that were publicly available for ages now.

You can see this in his own paper/presentation/post available here. Just go to page 10 to see this 'fresh analysis'. Again, Mr Hickey is not doing anything wrong here, it's just the excited Irish Times failing to read his paper reporting old news and new news.

What is, however, amazing about Mr Hickey's paper/presentation/post is that this very information and the same analysis is being provided for free on a number of blogs around the country. In many cases, blogs analysis is actually way better, more data-intensive and detailed. Yet, in age of austerity, the Gov see fit to spend thousands on wages of PR-spin economists working for DofF.

Department of Finance I: We love Ourselves and our Bosses

So Department of Finance has released its Capacity Review, 2009 a 61-page long document that is a gem of obtuse, double-speak bureaucratise, can't-get-my-head-out-of-that-rare-end-of... language that only a human pickled for decades in some sort of a secret Soviet Preservative can produce. It is, as I said, a gem and it is available here.

First, the off-the-starting-line analysis - the fact that this document was actually published is not a testament to the Department's 'openness' or 'transparency', but to the arrogance of its managers, who think that its contents actually present some sort of a strategy blueprint for the future and a fair assessment of its capabilities as of today.

Now, to the details (italics are mine):

Page 4 of the Executive Summary reads "The outcome of the consultation process and the discussions of the steering group for the review highlight 5 key messages which should shape and guide the future development of the Department’s role and capability. These 5 messages are:

1. The Department must continue to rise to the new challenges it faces, not because it is not
already doing a lot of things well, but in view of the combined impact of the internal and external
challenges set out in Chapter 5. [So, things are fine folks, we are just going to be doing what we've been doing to date. No need to stare. Oh, and by the way - the Department is clearly aiming to rise to the challenges, which should really be the same as in 'should be doing it's job', but hey - that would be too prosaic for warranting a Capacity Review...]

2. The Department must take a stronger outcomes-focused leadership role within the public service. This means taking a lead role and exercising central co-ordination and oversight in a more proactive and direct way in future. However, this must NOT mean micro-management or an over emphasis on process management. [Hold on, who appointed the DofF to the function of leadership within the Public Service?]

3. The quality of the Department's staff and a culture of excellence in performance are integral to meeting the challenges; these must be supported and enhanced through significant organisational and cultural change. [And that change would be?.. Oh, sorry - that would be a matter for another Strategic Review, then...]

4. Resources need to be continually deployed to match emerging priorities as has recently arisen in the financial services area. This includes the identification of functions the Department should not be performing or should be doing in different ways; and [Yes, you read it right - the DofF will be identifying itself those functions it should not be performing... Like a sovereign Legislature of sorts, not a Civil Service department (reporting to the elected Government)...]

5. Delegation and accountability must travel hand in hand, internally and externally. This should
allow for necessary streamlining of management grades. [This amazing - delegation and accountability normally start with the ability to hold the job, then with promotion - at least in the private sector. But in DofF - both are all about the management grades... This is our public sector culture at its worst].

And now to Staretegic Recommendations (note the word - recommendations):

Recommendation 1: Take a pro-active role in the modernisation of the Public Service
...In partnership with the Department of the Taoiseach, implementation of the Government Decision in relation to the Task Force on the Public Service must be a key task of the Department of Finance. [It is a real testimony to the arrogant, self-serving nature of the Public Sector in this country that DofF needs a statement of the bleeting obvious - it is required to implement the Government Decision, without questioning it, and without an external Capacity Review... They are being paid to do their job, they are not being recommended to do it!]

Recommendation 2: Lead e-Government
This recommendation complements (1) – progress in this area is crucial to the delivery not only of Public Service Reform and Modernisation and [sic] but also to development of the economy and society overall. [Without the DofF efforts on e-Goverment, it is clear that the entire humanity will suffer irreversible damages... This is from a Department that cannot produce a simple excel format for its own expenditure and revenue statements, reliant on a pdf format that is so far into the Stone Age version, you can't read it as a table into any spreadsheet...]

Recommendation 3: Take a more pro-active role in co-ordinating the State’s response to all spending proposals emerging from Social Partnership and any negotiations which ensue [The real masters of this country - the Social Partners... that routinely bite the dust on disagreements with the Trade Unions only to be resurrected like Phoenix from ashes to arrive at another carving up of the taxpayers' wealth pie between various cronyist interests... And this is a great benchmark of policymaking to pin your country's Fiscal and Financial Stability on?]
Recommendation 4: Support the development of a modern and sustainable Pension System
The Department of the Finance must continue to work with other Government Departments to meet the key pensions policy challenge of ensuring self-sustainability over the long term in a situation where the task of financing increased spending demands on the pensions system will fall to a diminishing proportion of the population. [Here is an amazing statement - the DofF should be fully aware that Public Sector pensions are not sustainable and that they cannot be made self-sustainable, for in order to pay for them, some grades and employees will be required to contribute more than 100% of the own salaries to pension funds.]

Recommendation 5: Ensure the maintenance of financial stability, the repair and long-term viability of the banking system and the reform of financial regulation [This does not refer directly to NAMA, but it talks about minimising the risk to the Exchequer. Incidentally, the word 'taxpayer' is not mentioned in the entire document even once. This is also an important recommendation from the point of view of human capital resources that DofF does not possess - discussed below]

Recommendation 6: Optimise Civil Service Training and Development [AKA, blabber]


(II) STRUCTURE

Recommendation 7: Develop a more flexible team based organisational structure [all about processes - not goals or objectives, but processes].

Recommendation 8: Streamline the Management Structure of the Department
The top management structure should be de-layered over time from the current sixteen positions at Assistant Secretary level and higher. This will involve both a greater degree of direct responsibility for the two top posts and a greater delegation of responsibility to the next management layers (Assistant Secretaries/Directors). [Notice, over time... indeterminate and ultimately not goal-posted - a train to nowhere].

Recommendation 9: Streamline requests for returns from other Departments and Offices
The Department of Finance should take further steps to eliminate duplicate requests for returns and statistics from Departments by increasing internal coordination and the management of such information. ICT has a crucial role in this area. [The fact that DofF employs no statisticians, and that its own staff ability to process and manage data in modern ways (see my comment on its disclosure documents format) is legendary for being poor, I guess 'streamlining' is really a secondary problem - getting basics right would be a much higher priority].
Recommendation 10: Develop HRM function; reorganise Corporate Services Division
[Yeah, folks, they have no HRM and CSD is their word for Services to DofF employees - in case you though it is about services provision for private sector...]

I skip 11 - too much Orwelian speak for a human being to wade through...
Recommendation 12: Increase delegation of work and accountability at all levels to allow for a more balanced structure and the development of staff at all levels The organisational re-design ...must be underpinned by fundamental changes in the approach to delegation of work and accountability for decision-making in the Department not only to remove the requirement for senior management to be occupied by day-to-day operational and routine decision-making and
allow more time to be directed at high-level strategic issues and planning but also to develop and provide opportunities for staff. The HRM function recommended at 10 above should support this by facilitating Divisions to build capacity at all levels. [I would have thought that this is about accountability for getting things wrong, but oh, no - we can't have that in our public sector. It is about who is accountable for making sure the loo has TP in it in ample supply - a Principal Officer or a Director?]

Recommendation 13: Enhance communications
The Department should further develop both its internal and external communications to reinforce roles and responsibilities and to optimise the flow of information to and from Departments, staff and external customers [This is like telling a elephant to be more graceful in polka dancing].

Recommendation 14: Enhance and support Mobility Policy
[No - not mobility of key specialists from the private sector to the desperately under-skilled 9more on this below) DofF - mobility of its own staff, lest they become bored of their menial tasks before Recommendation 12 takes hold at that TP-in-the-loo supply function junction].

Recommendation 15: Access to Specialist Skills
The Department should consider designating a greater range of posts for the redevelopment of specialist skills within the specialist areas of ICT, economic, accounting/actuarial and HR disciplines [Yeah, right... finally they are admitting they have no expertise in economics, accounting and actuarial sciences... but more on this below]
Recommendation 16: Pro-active staff-development
...a specific commitment to on-the-job training and mentoring of staff, including those who are newly recruited, promoted or assigned. Performance issues must be addressed and remedied at the earliest possible stage. [You mean there is no performance assessment in place already? There are no adequate remedy strategies in place? Newly recruited staff is not encountering a commitment to on-the-job training? How long has DofF been in operation? Months? Weeks? Days?]


Before we move on to the beefier parts of the Review, here are some facts:

• 70% (table 4.4) of DofF employees thought they were doing a good job, even though they were concerned with losing institutional memory and lacked the skills to do core work. Preciously incongruous!
• (table 3.1) shows that DofF has more chiefs per employee count than the rest of the core Civil Service - they all are Chiefs, because the taxpayers are their Indians...
• Assistant Principals' grade - the core of the DofF - per page 28 upwards of 10% appear to have no degree level educational attainment and less than half have MA or MSc or MBS qualifications.
  
• Principal officer level only 20% seem to have any qualifications in economics, and there are only 4 degree holders in banking or banking and finance or finance or accounting;
  
• Administrative Officer level 23% have “single” degrees in economics and 28% “joint”. There appears to be nobody with MSc-level qualifications in accounting/finance, actuarial studies or statistics.
  
• There are no qualified PhDs, or Doctoral level graduates of any kind mentioned in the document.
• There are no CFA, QPA, CPA, no certified professionals mentioned at all.
  

Yeah, right... so let us take out the Degrees in Underwater Basket Weaving:
MSc in Economic Policy Analysis - a joke that wouldn't get you employed in a small regional bank as a bank teller in a proper country... -2
MSc in HRM - well, they've admitted this function is not working anyhow so -5
Industrial relations - since Social Partners are all about that, cut this out too as a non-core thing for DofF -1
MSc in Others (apparently from Rosswell or Plant Mars) -2
MSc in Public Management / Public Administration / Public Service Studies - you can get that one by literally going to work in the public sector and doing not much else -12
Training and Education - what is this? a secondary school? -2

So total number of MSc holders = max 84 relevant/remotely relevant to the job... not exactly an overly-educated (but certainly a well paid) bunch... that is supposed to lead the Public Sector in reforms and blah-blah-blah in the age of knowledge economy...

End Part 1