Mr. Seamus McCarthy:

The HSE funds over 2,270 service providers to deliver services on its behalf, as provided for in sections 38 and 39 of the Health Act 2004. The service providers include large acute hospitals, as well as services for people with a disability and older persons. They provide mental health, social inclusion, palliative care, primary care and health and well-being services. The funding to pay for these services is allocated to HSE annually from the health Vote. In 2016, €3.8 billion, or around 28% of the HSE's Vote, was for the provision of payments to agencies. It included a sum of €2 billion to be shared between 16 acute hospitals and a sum of €1.8 billion for voluntary and community groups.

Chapter 19 of the report on the accounts of public services for 2016 examines the HSE's framework for monitoring grants to service providers, drawing on the results of the audit of the financial statements of the HSE for 2016. The current grant funding system has evolved from a long established model of service provision, whereby the State relies substantially on the voluntary sector to provide certain health services. The formal arrangements with service providers are usually put in place by negotiation rather than through competitive processes. The HSE has two types of contractual arrangement with service providers, depending of the level of funding provided. Service arrangements are put in place with larger service providers, those operating on a for-profit basis and out-of-State service providers. In 2016 approximately 570 agencies in receipt of €3.75 billion were managed under these arrangements. Grant aid agreements are put in place with service providers in receipt of funding below €250,000 a year. Approximately 1,700 agencies in receipt of just over €32 million were managed under these arrangements in 2016.

The HSE has established a complex framework for the monitoring and oversight of these arrangements that is currently administered and overseen by nine community health care organisations, referred to as CHOs, located around the country and by six of the seven hospital groups, as summarised in Figure 19.1 of my report. Progress has been made by the HSE in putting in place a systematic process for the oversight and monitoring of grant funded service providers. However, the has report found that specified procedures within the HSE's monitoring framework were not applied consistently. For example, funding CHOs did not have details of all of the key governance arrangements for a sample of service providers examined. A service provider with multiple locations can receive funding from more than one of the HSE's CHOs and be subject to separate monitoring by each funding CHO. The examination found that in these circumstances the identification of responsibilities in the HSE for monitoring and oversight was difficult. The results of various audits and external reviews and compliance statements made by service providers highlight a number of governance issues arising across the sector, in particular non-compliance with procurement rules and regulations, non-compliance with public sector pay polices and the absence of internal audit functions. Service agreements specify key performance indicators and reporting frequency. Required key performance indicator returns were on file in just over half of the sample cases examined, of which over one quarter were not at the frequency specified in the service arrangement. In the sample cases examined required audited financial statements had not been provided for the funding CHO in just under one quarter of service arrangements and grant aid agreements.

The report makes a number of recommendations in regard to the HSE's framework for oversight and monitoring, including that the HSE be satisfied that service providers have appropriate governance structures in place; that the service arrangements clearly set out key performance indicators and associated monitoring arrangements, including the responsibilities of both parties; that the monitoring arrangements specified in the service arrangements be complied with; and that the roles and responsibilities for monitoring be clearer where a service provider receives funding from more than one CHO. The HSE has indicated that it accepted all of the recommendations made. The director general will be able to update the committee in that regard.