Mr. Seamus McCarthy:

As the Chairman stated, the committee is examining the accounts for 2011 of the Health Service Executive. To give the background, it may be useful to explain that the HSE is required to produce two sets of accounts each year - the financial statements prepared on an accruals basis and a cash-based appropriation account for Vote 40. The accounts in question provide two views of the same set of financial transactions and balances, with different forms of analysis and detail. Two audit reports also issue. The HSE publishes the accruals-based financial statements each year, with its corporate annual report. The statements for 2011 were presented to Dáil Éireann around the first week of June last year. The HSE's appropriation account for 2011 was published by me, together with all of the other appropriation accounts, last September. The audit of the HSE's financial statements for 2012 is almost complete and I expect to sign off on it around mid-May. The audit of the appropriation account for 2012 is ongoing and should be completed by July.

The appropriation account indicates that the HSE's gross expenditure in 2011 amounted to €13.9 billion. The outturn was approximately 4% below the 2010 gross expenditure level and 8% below peak expenditure in 2009. Appropriations-in-aid in 2011 amounted to €1.45 billion, down from €3.5 billion in 2010. The decrease reflects the ending of earmarked health contributions collected through the PRSI system with effect from 1 January 2011, when the universal social charge was introduced. The outturn for 2011 was close to the amount appropriated by Dáil Éireann, resulting in a surrender of just under €16 million. This was achieved after provision to the HSE of an additional €148 million by way of a Supplementary Estimate in December 2011. Two thirds of the additional provision was for increased spending under subhead B6 which covers spending on medical card schemes and community services. The outturn for these services was €2.58 billion, which was 6.8% above the original Estimate for the year. The provisional outturn for 2012 indicates that spending in these areas continued to run ahead of the Estimate provision last year, ending approximately 9% up on the Estimate provision. This was one of the main reasons a Supplementary Estimate, amounting to a net €360 million, was also required in 2012.

The financial statements present an analysis of the HSE's expenditure that distinguishes between pay and non-pay elements. The HSE's direct pay expenditure in 2011 amounted to just over €5 billion, or 36% of the total spent. This included pension payments to retired staff totalling €567 million and payments to agency staff amounting to some €177 million. Grants to outside agencies in 2011 amounted to €3.5 billion or 25% of the total. This includes funding of the order of €2.5 billion to voluntary hospitals and other major agencies providing services on behalf of the HSE, mainly in the disability and mental health sectors. A further €1 billion was distributed as grants to some 3,000 smaller agencies, including community and voluntary bodies providing a wide range of services ancillary to the HSE's activities. A significant part of that grant funding is also applied in the payment of staff salaries and pensions.

The audit report on the financial statements draws attention to note 35 which deals with the matter of entitlement to means-tested medical cards. At the end of December 2011, a total of 1.7 million medical cards and 126,000 GP visit cards were in issue. The total related expenditure in 2011 was in the region of €1.8 billion. Administration of the card issuing and renewal system was centralised in July 2011. Changes were made in the related control systems and procedures were standardised. Following the centralisation, over 231,000 applications for the renewal of expired cards were processed. Of these, 97.5% were renewed. However, 1.2% of applicants were found not to be eligible for a new card and almost 1.3% were found to be eligible for the more limited GP card instead of a full medical card.

The review process did not record the financial impact incurred, such as the cost of services provided in respect of ineligible persons while they held cards. This matter is being examined in more detail in the course of this year’s audits and, depending on the outcome, I may report further on the matter.