Mr. Tony O'Brien:

I thank the Chairman and the committee for the invitation to attend the meeting this morning. Voluntary non-statutory service providers have a long history of providing health and personal social services in Ireland. These organisations vary in scale and complexity, ranging from large acute hospitals to local community-based organisations providing social care services. The HSE acknowledges the role and significant contribution of such organisations in the development and provision of health and personal social services and is committed to the continuing improvement of effective governance arrangements with the sector in accordance with the legislative intent of the Health Act 2004 and in accordance with the requirements of good practice.

The HSE funds more than 2,600 agencies which operate more than 4,200 separate funding arrangements to a value of approximately €3.3 billion. A total of 39 of these agencies, accounting for €2.4 billion, are funded under section 38 of the Health Act 2004, while the remaining agencies, of which there are more than 2,500, are funded under section 39 of the Act.

Under section 38 the HSE may enter into an arrangement with a service provider for the provision of health and personal social services on its behalf. Under section 39, the HSE may give assistance to a person or body to provide a service that is similar or ancillary to a service that the executive may provide. The governance context in which the HSE engages with section 39 agencies is distinctly different from that which applies in the case of section 38 agencies. For example, the employees of section 39 agencies are not public servants, are not members of public sector pension schemes and, unlike their section 38 counterparts, are not directly bound by the Department of Health's consolidated salary scales. In a situation where a funding arrangement under section 39 was reclassified as coming under section 38, the cost to the State of providing that service would likely increase in a material sense in the immediate and long term due to increased public sector numbers, pay rates and pension costs as well as a loss of the current flexibility around development and reorganisation of services. No such reclassification has taken place in recent years.
RehabCare and National Learning Network, NLN, are wholly owned subsidiary companies of Rehab Group and the HSE has contracted these two organisations to provide a range of services to support children and adults with a range of disabilities and mental health needs across our four regions in line with the agreed service arrangements under section 39 of the Health Act 2004. The HSE has service arrangements with RehabCare to deliver day services delivered through resource centres, residential and respite care, supported accommodation, outreach and home-based services. The HSE provided funding of just over €41 million to RehabCare in 2013 which, based on 2012 published accounts, is estimated to constitute approximately 92% of the company's total turnover for last year.
The HSE has service arrangements with NLN to provide rehabilitative training and related services across our four regions to enable people with a disability to achieve their potential in a manner which takes account of their personal, social and environmental needs. The HSE provided funding of just over €13.5 million to NLN in 2013 which, based on 2012 published accounts, is estimated to constitute approximately 30% of the company's total turnover last year. In the printed version of my statement, there is a detailed statement which sets that out. As the tables demonstrate, just over €40 million is provided to RehabCare for the provision of a very wide range and quantum of important client-facing services. There are 219 service users receiving residential support nationally, over 1,500 receiving day service support and 962 receiving home support. They also have a capacity of 31 respite beds nationally which is a very important service component in the overall spectrum of services funded by the HSE for persons with a disability.
The HSE provides just over €13.5 million in funding to NLN to provide over 1,000 rehabilitation places nationally. The HSE is satisfied that in general both companies are discharging their roles and responsibilities under their respective service arrangements to an acceptable standard in terms of service delivery, quality and cost effectiveness. A more detailed briefing on the service arrangements and service quantum has been provided to the committee.
The HSE has a governance framework in operation for all agencies funded to provide health and personal social services. This framework applies a standardised approach to our engagement with agencies according to the level of funding and the scale and range of services provided. The significant funding to both NLN and RehabCare is managed by the application of the national standard section 39 service arrangement. Under the HSE's governance framework for section 39 agencies where the HSE's annual funding exceeds €250,000, the arrangement is required to be covered by a standard service arrangement which consists of two separate but interrelated parts. Part one is the main contract document setting out, inter alia, the principles of the arrangement, the roles and responsibilities of the parties and dispute resolution mechanisms. Part two consists of a series of schedules specifying the detail in relation to, inter alia, service quantum, staffing, funding, and quality and service standards. For the purpose of administrative coherence, agencies are only required to sign one part one per region but are required to ensure that each funding arrangement is covered by a set of schedules. Where the HSE's annual funding is below the €250,000 threshold, the arrangement is required to be covered by a grant aid agreement.
Service arrangements are managed on a day-to-day basis at local area level by the relevant disability manager and team, reporting to the integrated service area, ISA, manager. Regional co-ordination of services provided across a region is managed by a lead area manager reporting to the regional director. As part of this process, all agencies including RehabCare and NLN are monitored via regular review meetings with HSE management at area and regional level. These review meetings address financial reports, human resources, activity data, planning, review of agreed performance indicators and compliance with quality and standards, etc. Operational service planning meetings are held regularly regarding individual service users. There is an increasing focus on the use of internal audit in monitoring the operation of section 39 agencies where warranted, and this process will increase in line with the 2014 service plan.
In line with the requirements of the service arrangement, part one, and the schedule, part two, all agencies including RehabCare and NLN are required to submit information returns as follows: audited financial statements; annual report; memorandum and articles of association; mission statement and aims and objectives; tax clearance statements-charitable status; insurance and indemnities; key performance indicator, KPI, reports; activity reports; service reports; detailed service specification templates with resource allocation information to unit of service delivery; and human resource information. The human resource information includes general all-grades numbers and a detailed senior staffing template.
The national business support unit of the HSE, under the leadership of a health service senior manager, provides business and technical support to the local areas on the implementation of the governance framework with non­statutory agencies. With the implementation of the new national structure for the health service, there is now for the first time a national director of social care with responsibility for all of these services across elderly and disability, which provides an opportunity to develop an overall national process on the management of service arrangements across the sector. The 2014 operational plan for social care outlines work to be undertaken on streamlining governance arrangements and maximising efficiency including the introduction of a new IT-based system to support the management of service arrangements.
Since the introduction of the national standard governance framework with the non-statutory sector, the HSE has been continually reviewing and strengthening these arrangements in accordance with the requirements of sound governance and accountability and in order to ensure that it is aligned with the ever-changing exigencies of our health and personal social services. One such enhancement was the introduction in 2013 of a requirement on all agencies covered by a service arrangement, both sections 38 and 39, to complete a template setting out details of the remunerative arrangements for senior managers, defined as grade VIII and above, as defined in the consolidated pay scales.
The HSE placed priority focus on senior managers' salaries in the section 38 agencies as they account for €2.4 billion, or 74%, of the €3.3 billion allocated by the HSE to non-statutory providers. In prioritising the section 38 agencies, the HSE had regard to the fact that their employees are public servants, are members of public sector pension schemes and they are directly bound by the Department of Health's consolidated salary scales. Notwithstanding the foregoing, it is important that all agencies in receipt of public funding would have due regard for overall Government pay policy. The HSE's director of human resources wrote to the CEOs of the section 39 funded agencies on 10 December 2013 stressing the importance for each such organisation to have due regard for overall Government pay policy in respect of the remuneration of their senior managers.
The HSE is currently involved in a process of verifying and validating the service managers' remuneration templates with a priority focus on the larger section 39 agencies which receive in excess of €5 million in funding annually from the HSE. The HSE hopes to have a report on the outcome of this validation process by the end of the first quarter of 2014. This concludes my opening statement and together with my colleagues I will endeavour to answer any and all questions the members may have.