Mr. Liam Woods:

I thank the Chairman and members of the committee for the invitation to attend the committee meeting to discuss last Thursday's "Prime Time" programme. In order to assist in providing as much information to the committee as possible, I am joined today by a number of my colleagues, namely, Mr. John Swords, HSE head of procurement; Mr. Michael Flynn, national director internal audit; Dr. Geraldine Smith, assistant national director internal audit; and Mr. Tom Lynch, who is here today in his capacity as both chairman of Ireland East Hospital Group, of which St. Vincent's University Hospital is a constituent element, and as an experienced chartered accountant and auditor.

Health business services, HBS, is a division of the HSE. HBS procurement is responsible for sourcing, purchasing, storage and distribution of goods and services within the HSE. The value of goods and services that the HSE procures on an annual basis is approximately €1.6 billion. The total spend on non-pay goods and services in the public health environment is just under €4 billion, some of which is in voluntary bodies and some in the Office of Government Procurement. Significant procurement savings have been achieved by the health sector of €230 million between 2010 and 2014 across a wide range of goods and services. A further saving of €28 million has been achieved in 2015 to date. The HSE and all section 38 and section 39 agencies funded by the HSE are required to comply with the HSE's procurement policy, national financial regulations and framework for corporate and financial governance, and with the code of practice for the governance of state bodies. The HSE's national financial regulations, NFR 1 purchase to pay, sets out, inter alia, the requirements for sourcing suppliers and the tendering and contracting requirements.

Procurement throughout the HSE is subject to internal audit by the HSE's internal audit division and external audit by the Comptroller and Auditor General. Procurement is reviewed as part of the HSE's annual internal audit plan and the findings of all audits are regularly reported to the HSE management and audit committee. In the past two years, 42 audits dealing with procurement, or aspects of procurement, have been completed. Recommendations to address control weaknesses identified as part of these audits are advised to management for implementation and the control weaknesses are reflected in the HSE's annual review of the statement of internal financial control. The status of management implementation of the audit recommendations is regularly tracked and reported to the HSE's audit committee and leadership team.

Section 38 and section 39 agencies are independent entities with their own boards of directors and management teams. As independent entities, they are responsible for establishing and overseeing their own systems of internal control and are subject to audit by their own internal and external auditors. St. Vincent's is a section 38 agency. As part of the one voice for health sector procurement reform plan, future contracts for St. Vincent's hospital will be included in the overall health sector requirements. Other non-health goods and services outside of this will be channelled through the Office of Government Procurement. We are currently working with all the newly established hospital groups to generate a three-year procurement plan.

With regard to the "Prime Time" programme, which outlined a number of allegations regarding two staff members of St. Vincent's University Hospital and a medical and surgical company, these allegations referred to the provision of holidays, the receipt of a gift voucher and the provision of confidential commercial information to a particular medical and surgical company. Should these allegations be proved, the actions are entirely unacceptable and ones that the HSE would condemn in the strongest manner. The actions are only allegations. St. Vincent's is investigating them and it is important to allow due process to take its course. The actions alleged would be unfair to competitors and minimise the opportunity to obtain best value for money. As per the Ethics in Public Procurement document, public procurement must at all times be discharged with probity, transparency and accountability in a manner that secures best value for public money.

In September 2014, the Minister for Health received correspondence from Deputy Emmet Stagg, which was copied to the Minister for Justice and Equality, enclosing specific allegations made to the Garda Síochána in June 2014 against named staff at five private, voluntary and statutory hospitals. The HSE's national director of internal audit met with the Garda Bureau of Fraud Investigation, GBFI, in November 2014 and offered to provide any possible assistance it might require in respect of the two HSE hospitals referred to in the communication from the Department and agreed to carry out a review in the HSE hospitals named by the whistleblower, namely, Mullingar and St. Columcille's, to ascertain any evidence to support the claims made and so assist the GBFI in its overall investigation into the allegations.

The internal audits of St. Columcille's and Mullingar identified deficiencies in procurement controls but no evidence of wrongdoing. Collusion between supplier and purchaser, as alleged in this case, is very difficult to be detected by management, internal audit and external audit. The whistleblower contacted and met gardaí with specific allegations but did not meet or provide the Department or the HSE with any direct evidence of the allegations made. The allegations are the subject of an ongoing Garda investigation and care must be taken not to prejudice or hinder the Garda investigation in any potential prosecution.

I will outline the actions the HSE has taken regarding the allegations raised in the "Prime Time" programme. The HSE has suspended payments to Eurosurgical pending further clarification and investigation. The HSE has arranged and met with the company to outline its concerns and, in particular, to seek assurances from the company regarding security of supply and patient care. The HSE has requested full disclosure regarding allegations of Eurosurgical's involvement in arranging holidays etc. for health procurement staff or any health staff, and on receipt of this will conduct a comprehensive investigation. The HSE has sought and received information regarding Eurosurgical's internal investigation. The HSE has been in contact with St. Vincent's University Hospital and has been informed that it has suspended, without prejudice, the two members of staff in question, pending the completion of an internal forensic investigation by the hospital. A communication was issued to procurement staff reaffirming their obligations under the HSE's procurement rules and regulations.

The overall HSE expenditure with Eurosurgical for 2014 is €6 million of which approximately €4 million relates to the HSE directly and approximately €2 million to the voluntary sector funded by the HSE. Since the "Prime Time" programme, the HSE has reviewed €1.08 million worth of contracts with the company and the HSE has no concerns arising at this time. Regarding the balance of the expenditure, HSE procurement is in the process of reviewing it. HSE is currently in a tender process for surgical consumables, including the type of items provided by Eurosurgical, and the outcome of the process is near completion.

The health service is currently undergoing a series of further reforms which will see the development of hospital and community groups to strengthen the delivery of front-line health and social care services. To support these changes, the directorate of the HSE has established Health Business Services, HBS, a shared service division which includes procurement in its range of functions. The HBS strategy was adopted in February 2014 and is currently being implemented. A key component of this strategy is "one voice for health sector procurement". In accordance with the Government decision of 23 April 2013, all agencies funded via the HSE are required to collaborate regarding procurement, delivering "one voice for health sector procurement". The HSE Director General has requested HBS procurement to lead the development of the concept and its subsequent implementation. Requirement for additional procurement capacity has been identified as part of the reform programme to meet the increasing complexities of the procurement process.

In implementing the strategy, the section 38 and section 39 agencies are mandated to use framework agreements and contracts awarded by HBS procurement and the Office of Government Procurement. This is in line with a recommendation by the Comptroller and Auditor General in his 2013 report regarding the wider use of framework contracts. The HSE has in place a national financial controls assurance group that is a evaluating areas of expenditure with a view to reviewing risk, and will undertake detailed further review in areas of deemed high risk. I am happy to take questions and may ask my colleagues to answer some of them.