Public Accounts Committee: HSE Financial Statements 2023

Deputy Marc Ó Cathasaigh: I thank the witnesses for appearing before the committee and
for their opening statements and briefing documents attached.
I will begin on a very generalised issue. It is a gargantuan budget and it always seems to be
spiralling. We know we are heading to a €1.2 billion overrun again this year. From the point of
view of the body within the Oireachtas that is supposed to have oversight of public funding, it
is well acknowledged that between HSE service plans and financial statements, Vote 38, and all
these different spending classifications, it is very difficult for anybody outside the organisation and I suspect within the organisation – to have a clear grip on the funding, budgeting and the
control of spending in an organisation that is one of the largest spenders of public money in the
State; probably the largest. Does Mr. Mulvany have any active and specific plans to streamline
how that reporting process happens so that bodies like the Committee of Public Accounts and the Comptroller and Auditor General can have a clearer view of the spending that is happening
with in the Department?

Mr. Stephen Mulvany: One of the recent reports, which probably goes to the heart of the
Deputy’s question, is from the Parliamentary Budget Office, PBO, which notes that while the
HSE under legislation is required to report on an accruals basis, the Oireachtas naturally deals
in cash and Vote accounting. Currently, our capacity to report on cash and Vote is largely limited to those former health board areas. However, the new integrated financial management
system, IFMS, which went live in July in the east of the country, will give us the capacity to
report in cash terms by what we call profit centres; in other words at whatever level the Departments of Health and Public Expenditure, National Development Plan Delivery and Reform,
agree they want. Regardless of whether this is by care group or by location, we will be able to
report both in INE and in cash terms, and cash is very close to both. That will make it much
more straightforward to address the point the PBO raised, which is when one body is by legislation dealing in INE terms, but is being funded in cash terms, it is difficult to do, for example,
cash-based programmatic budgeting. We do programmatic budgeting on an INE basis but we
cannot do that because of the systems on a cash Vote basis. In the coming months, we will be
able to turn that on in the part of the country where we have gone live with IFMS. By the end
of 2025, when all the HSE statutory part is on that system, we will be able to do that for the full
statutory system. Seeing how money flowing from the Oireachtas is getting spent is one thing
that will make it more straightforward.

Mr. Bernard Gloster: There is a fundamental challenge to this. There might be a view
abroad that we started this year with a flat budget adequate for what we needed and we overspent that by €1.5 billion. That is not the case. We started the year with an inadequate level of
existing service funding. I am sure members have heard the Minister’s comments in the last
fortnight. To be fair to him and to the cabinet committee on health which I attended two weeks
ago, there is a real effort and commitment to try to sort out the existing level of service cost in
real terms and to put in the proper controls to not breach that once we have it in certain parts of
the organisation, and to do that before we start adding more new developments that will give us
more existing level of service, ELS, problems next year and the year after.

Deputy Marc Ó Cathasaigh: To try to translate that into layman’s terms, Mr. Gloster is
saying that different languages are being spoken and that the HSE is attempting to translate into
the language it would be more comfortable in. If the Comptroller and Auditor General and the
PBO are telling me they find it difficult to get a handle on the spending, that means it is not readily understandable to the lay person. One of the issues with that and with the narrative around
overruns is that it occludes the fact that we have very good health outcomes for people who get
access to the services. It changes and alters the narrative when we discuss the health system
in Ireland when we are not communicating in two languages that are mutually compatible and
when bodies such as ourselves do not have adequate insight into the spending.

Mr. Stephen Mulvany: The last question about reporting is what I answered. To be clear,
internally in the HSE where we use the accrual-based accounting that is specified in legislation
by the Minister, there is full clarity down to cost centre and activity type as to what the costs
and the budget are, what is cost against budget, and the variance. I am responding to the fact
that the PBO has rightly said that if you are sitting here trying to track money from the State in
cash through the HSE and back out again, that is difficult. That is an entirely separate matter.
It is not a cause or a causal effect of what the CEO described, which is the fact that a big chunk
of this year’s overrun was brought in from last year because the ELS was not funded. They are
two entirely separate things.

Deputy Marc Ó Cathasaigh: I understand that. My counterpoint to that is that when it
becomes difficult to understand in that way, people who are within this House are going to the
people trying to explain why there is a budget overrun. When you do not have clarity in that
communication between the HSE, the Department and the Members of the Oireachtas, that creates difficulties.

Mr. Bernard Gloster: It is a fair point regarding the large elements of confusion about it.
I hope what we have attempted to do, certainly in the last two to three weeks during which I
have been publicly commenting on this, is to try to reduce it to very simple terms: what we are
overspent by, why we are overspent, and what we are trying to do about it.

Deputy Marc Ó Cathasaigh: I will move on to the issue of non-compliant procurement. It
is a very substantial amount. The exercise that was carried out indicates about 7%. Only about
half of the procurement spent was analysed and it came up with this 7% figure. I do not know
whether that adequately captures the non-compliant procurement.
Is there any local aspect to this? Are there places where that level of non-compliant procurement is worse than in others? I know we are inheriting a regional health board model. Are
we seeing that translating into non-compliant spending?

Mr. Stephen Mulvany: There is no direct correlation between the regional health areas,
RHAs, that are being introduced and non-compliant procurement. We would not disagree with
the CEO and the Comptroller and Auditor General’s assessment in this regard. It is a requirement that we look at payments over €25,000, which is what we have done. We have not looked
at payments below that, but there will be non-compliance in that as well. As the Comptroller
and Auditor General rightly says, it is not a full picture but it is a picture which we could not
provide a number of years ago. Now we can and we do it quarterly. There is local variation.
We have put additional procurement compliance officers out into our hospitals and our CHOs
with central co-ordination.

Deputy Marc Ó Cathasaigh: The next logical question is where are we finding higher
levels of non-compliance, geographically.

Mr. Stephen Mulvany: It will vary by service and by which particular suppliers people are
using. I do not have the specifics for the local CHOs but certainly we have all that data. The
vast bulk of the 12% that came back as non-compliant is in a process to get it tendered and to
compliance. There is only about 3% where we are chasing down the relevant service to get it
into that type of process. It is on track—–

Deputy Marc Ó Cathasaigh: The eye-watering scale of the money we are talking about
means that even when it is reduced down to 3%, it is still a significant chunk of change. Are
there sanctions within the organisation if a manager is consistently procuring goods in a noncompliant manner? Is there some way of oversight or of identifying somebody who is not adhering to these procurement procedures? Has there been any instance of someone being hauled
over the coals for that?

Mr. Stephen Mulvany: Not yet. We start with making sure that people can, and understand
how to, comply. We then help them to comply. Ultimately, it will become a performance issue
if someone is repeatedly not complying after being given all the tools to do so. We do not find
that to be the issue. Once we provide the contracts that people can comply with and provide
them with some analysis and support, people generally want to, and will, do the right thing.
However, if we reach a point where there are individuals who fail continually when they have
no good reason to, that will become a performance issue and they can and will be sanctioned.

Deputy Marc Ó Cathasaigh: A follow-on issue is particularly germane, given the scandal
in scoliosis operations. At a local level, how does the HSE ensure that products or devices that
go through a procurement process are adequate and comply with the relevant standards? Are
there controls? We have seen a failure of controls in this high-profile instance. Will the witnesses outline what controls are in place?

Mr. Bernard Gloster: To be fair, I would not say that there is a correlation solely between
procurement and the use of the springs in the hospital. There were much bigger breakdowns
than just in procurement. One of the complaints we get from the section 38 or 39 agencies that
we fund is that our service-level agreement documentation is too cumbersome for them. We are
clear, in that we expect them to comply with the same legislative standards with which we have
to comply. As Mr. Mulvany stated, we try to help and enable them to comply. Ultimately, we
have to call them out when that does not happen.