Mr. Seamus McCarthy:

I thank the Chairman. I would like to begin by giving a little outline of our approach to the audit of the HSE's funding of section 38 and 39 bodies. The HSE's expenditure for 2015 amounted to almost €14 billion. Grants to section 38 and 39 agencies accounted for €3.6 billion, or just over a quarter of the HSE's spend. The HSE's annual financial statements include a comprehensive statement on the system of internal financial control. This includes disclosures in relation to the HSE's regime of monitoring and oversight of grants to outside agencies. Further details on this can be found on pages 120 to 124 of the HSE's financial statements for 2015. Our audit of grant expenditure in the HSE includes an examination of the operation of the HSE's monitoring and oversight arrangements for grants advanced to a small sample of section 38 and 39 agencies. This includes visits to the selected agencies. Such visits are undertaken by agreement. As this work is conducted as part of the HSE audit, any audit issues identified are communicated to the HSE by way of management letter.

In our consideration of grantee oversight, we use a general model that focuses on the key functions that are indicated on the screen that can be seen by members. I will go through that briefly. The first issue that arises is the assessment of grantees when they are being considered for funding. The allocation of funding is another area of interest and concern. When decisions are being made on how much funding is to be provided to an agency, particular attention must be paid to the balance between the level of funding and the service that is expected to be delivered. When a service agreement is put in place, it should formally explain the amount of funding that is being provided, the service that is expected in return for that funding and any conditions that attach to the granting of that funding. The monitoring and reporting mechanism that needs to be in place usually focuses on three areas: financial reporting, governance issues and performance issues. The HSE should have a facility for the audit or investigation of grant-funded agencies, as required. This would be equally true of any organisation that has a significant grant funding structure in place. It is important that mechanisms are in place to evaluate the outcomes so that the Oireachtas can be assured that where moneys have been provided, the services for which they were provided have actually been delivered.