RDG Priority Setting Questionnaire

RDG 2016/item number9/EN

5th Meeting of the
ESS ResourceDirectors Group

Luxembourg, 27-28June 2016

Cost analysis of European Statistics(by products)

Item9of the Agenda

1

Report on Cost analysis of European Statistics (by products)

1.Recommendation for action by the RDG

The RDGis invited todiscuss the outcome of the pilot phase of the project on ‘Cost analysis of European Statistics (by products)’and to decide on the next steps.

2.Cost analysis of European Statistics (by products)

2.1.Background

The public sector is constantly challenged to improve its performancein an always more and more resource constrained environment. As a fact, the ESS human and financial resources were continuously reduced over the last years.Therefore, a detailed information on costs is needed for an efficient steering of resources, cost transparency, and priority-setting.

As a consequence Eurostat launched the project on ‘cost-merit analysis’ for 2014 statistical outputs (products/services). The action started in April 2014and was limited to Eurostat.First results on the cost side of the production units were presented to the ESS RDG in December 2014and the outcome which included the horizontal units as well to the ESS RDG Task Force in June 2015.The results were encouraging and allowed Eurostat to continue its reflection to cover the whole ESS.

2.2.Start of the project

In order to get a complete cost view atthe ESS level, the RDG members in December 2015 agreed to start the project ‘Cost analysis of European Statistics (by products)’ with a testing phase[1].

The aim of the project is to produce an estimation of the human and financial costs on product level (‘Catalogue’) at the aggregated ESS level – including the ONA part[2].NSIs will coordinate this exercise in their countries including the ONA part and submit the corresponding country estimate (=NSI and ONA) on direct/indirect costs and on FTE for the European statistical products to Eurostat. The success of this project will rely heavily on the complete and timely input of all NSIs (and ONAs).

2.3.Testing phase

The project started with a testing phase.Eurostat provided the list of expected Edamis data flows together with the information of the corresponding data sender(s) for each of the‘2016 statistical products to the members of the pilot group (11 NSIs)[3].

The pilot group discussed and agreed on the methodology. Further to NSIs’ comments - the initial proposal of nine products was reviewed and amended[4]. The coverage of the ONA part (and regional offices) was optional and the reporting year was 2015, as agreed with the pilot group for the testing phase.

The pilot groupmade a test run on the following eight products:

The testing phase was successful and the work on estimating the ESS costs by products could start.SixNSIscalculated the costs (by applying the underlying methodology) and submitted the corresponding estimates on the selected products to Eurostat(bythe foreseen deadline of 18 May), Whileone NSI delivered even estimates for the year 2016, the coverage on ONAs is in general very limited at this stage[6].

ThreeNSIs announced that the cost calculation is ongoing and the results will be delivered at a later stage. One NSI informed Eurostat that the data could not be provided because the registration system is based on individual EU legal acts (instead of statistical activity areas[7]).

As expected the biggest challenges during the testing phase consisted in identifying the Europeancost layer and in covering the ONA part. In addition the starting point for the NSIs was not the same - seen the cost accounting system is structured differently in the reporting NSI and therefore theinformation on costs by product is not easily extractable as such within all reporting NSIs.

Indirect costs implies to estimate total (direct and indirect) costs of all products first, which is difficult as the testing phase was limited to eight products. As a consequence the information on indirect costs was not submitted by all NSIs. Several options were discussed for calculating indirect costs:

- to apply a pre-fixed rate (of 30% without measuring the block of indirect costs),

- tocalculate the amount of the indirect costs and then to apply the same (fixed) rate,

- to calculate the amount of the indirect costs and then to spread the amount of indirect

costs by using the ratio which was calculated as the proportion of their direct costs,

- tocalculate the direct and indirect costs for each product.

However, none of the reporting NSI opted for using a pre-fixed rate.

2.4.Next steps and timetable

The strong support ofthe pilot group helped to improve the underlying methodology – which was tested by several NSIssuccessfullyand resulted in obtaining the corresponding cost information on the selected products.The testing phase ended with the debriefing to the RDG in June.

The next step consists in estimating the ‘2016 production costs of European statistics(by product)in the ESS as a whole. For this, Eurostat will provide the NSIs with a correspondence table between countries’data files (provided via Edamis, Census Hub, etc.)[8]and the correspondingEuropean statistical product – together with the information on the data sender.

NSI will be invited to start the work estimating costs in September 2016. In the context of this project, the smooth coordination between NSIs and ONAs is one fundamental elementof the project success.The table below summarizes the deliverables and milestones for the project.

2.5.Cost side is a key element in priority-setting setting

Priority-setting is needed to ensure balance between statistical requirements and available resources at both national and Europeanlevel[9]. A new procedure was discussed and approved in the December RDG meeting. As approved, the RDG will select each year a ‘cluster of selected statistics’ (several statistical products out of the Eurostat’s Catalogue) and mandate the relevant Director Groups(s) being responsible for the statistics in the cluster - to carry out a cost-merit screening.

Collecting information on costs and assessing the merits is not a simple exercise. In a first step information on costs are collected. It is proposed to start the work on the merits only after the exercise on cost collection has been started by all NSIs.

Based on the progress of the cost exercise at the end ofthis year, the next RDG will decide if the pilot group (the eleven NSIs and Eurostat) will be mandated to start working on the merit side.

Annex :Methodology for the cost assessment by products

ANNEX

Methodology for the cost assessment by products (starting from September)

Reference year is 2016

The exercise should be based on accrual accounting rules and the reference period will be2016.The best possible estimate on costs (in national currency) and on human resources (as FTE) will be reported and it will cover NSI and ONA(s).

Expenditures which do not occur every year (e.g. Census) will be included as well.

The aim is to cover the whole production cycle - from collecting the information via a survey or administrative sources, applying the corresponding legislation, the methodological work, the verification of the data in the country, all work related to dissemination - until the moment of sending the data to Eurostat.

Direct and indirect costs

Direct and indirect costs[10] of these outputs ought to be quantified - in terms of human and financial resources. The following table displays the elements needed for the statistical product, i.e. information on contracts and grants from Eurostat, direct costs and FTE, indirect costs.

Contracts and grants

Contracts and grants received from Eurostat and costs in NSIs/ONAs,should be reported in national currency.This information is needed to avoid a double counting on ESS level (when Eurostat figures will be added on a later stage). No information is requested on human resources nor on indirect costs for contracts/grants – only the information on the amount itself.

If corresponding expenditure e.g. on grants/contracts/IT-investment/… is running over several years, an estimate for the work of the year in question should be given (2016 for this exercise).Additional information of this could be added in the field for ‘comments’ (while the cost assessment is limited to one year, priority-setting could benefit from this additional information).

Human resources

a)Human resources costs are part of the ‘total’ costs of a statistical product.

Guidelines on unit costs or direct personnel costs’ will be used in the context of calculating FTEs (see document on unit cost[11]).

b) For collecting the information on ‘FTE’ – only ‘permanent’ staff will be included.

For the cost side - ‘permanent’ and ‘non-permanent’ staff will be included.

A distinction between the two categories, the following definition is suggested:

Permanent staff

People having a structural employment relationship with the NSI (or ONAs) or its regional subsidiaries, e.g. civil servants, private labour law contracts of a usual duration of more than 1 year.

Non-permanent staff

People working for the NSI (or ONAs) and its regional subsidiaries under a service provision contract submitted to public procurement procedures (and private labour law Contracts of less than one year). Subcontracting staff will fall under this category.

1

[1] In order to ensure a consistent approach - the methodology of the two project on costs (“cost assessment survey” and

the “cost analysis of European statistics by products)” is aligned as much as possible.

[2]If absolutely needed, NSIs could label submitted information as confidential. Based on MS and EFTA cost figures,

Eurostat will calculate the ‘global’ product costs for each product ataggregated ESS level.

[3]Based on available information on Edamis and from Eurostat’s production units (November 2015).

It was agreed to merge the three different RDG pilot groups (on ONAs, on cost assessment survey of production of

official statistics, on cost assessment of European statistics by products) into one group. Eleven NSIs participate in this

pilot group (DE, SI, ES, EL, EE, HR, PT, IE, SK, DK, NL).

[4] Initial proposal on the following nine products: Balance of payments and international investment positions, Housing

price indices,Animal production – meat, Regional environment, Waste statistics and chemical indicators, Earnings,

Income andliving conditions, Digital Agenda for Europe, Trade in goods by enterprise characteristics.

[5]For the product ‘earnings’ the scope was limited to the data files sent via Edamis to Eurostat.

[6]As the discussion on the methodology took longer than planned, the time for the cost calculation was shorter–this

had especially an impact on the ONA cost collection for those few NSIs which intended to include the ONA part.

[7] Which would require additional resources and time to adapt the current system to the ‘product’ (activity area)

approach.

[8]Based on the available information in mid-June 2016.

[9]The legal context of priority-setting is laid down in Regulation no99/2013Article 6.

[10]Direct costs (e.g. staff working for a product, expenditure like missions, meetings, IT-expenditure) could be usually

directly linked to a product.However, in order to ensure a consistent approach for all countries, overheads (staff) are

considered as indirect costs.

[11]See document: Guidelines on unit costs for direct personnel costs applicable to all grants awarded by Eurostat.

This document was sent to the financial services of all potential Eurostat beneficiaries in the beginning of the year.