Mr. Tony O'Brien:

I thank the committee for the invitation to attend this part of the meeting to discuss chapter 19 of the Comptroller and Auditor General's report for 2016. The Chairman has introduced my team.

The HSE previously acknowledged that it had concerns about aspects of the monitoring and oversight arrangements for the grants paid to outside agencies. The report of the Comptroller and Auditor General is, therefore, timely and will further assist the HSE in ensuring both the HSE managers responsible for the oversight and monitoring of grants and the agencies in receipt of them will continue to work towards a comprehensive and effective oversight process. The HSE has provided a briefing paper for the committee which describes the overall governance system in place for the management of the relationship with funded agencies and outlines the various elements introduced to ensure greater accountability and compliance with public sector norms.

The HSE's relationship with the voluntary sector should not be framed in purely negative terms. I highlight the valuable role the sector plays in the delivery and development of health and personal social services. The HSE funds 2,279 section 38 and section 39 agencies. The reality is that the State depends on the voluntary sector for the delivery of many services and voluntary organisations are often the first to identify gaps in services. At this stage, the agencies accept that expenditure of public funds and, just as importantly for their reputations, other charitable funds will attract greater scrutiny by the funder and the public at large. The Comptroller and Auditor General's audit shows that there is adequate specification of outputs, that is, that the HSE is clear on what it expects in terms of the quantum and quality of services for the grant to be paid, but that some further work is required on other aspects of the oversight system.

The audit report speaks for itself regarding the Comptroller and Auditor General's assessment of the HSE's approach and performance. I do not propose, therefore, to recite the detail of the report. The Comptroller and Auditor General has made three recommendations: the need for the HSE to include an assessment of the effectiveness of governance structures in its monitoring procedures; a need to highlight responsibilities for the monitoring of key performance indicators; and a need for compliance with the monitoring arrangements specified in service arrangements. These recommendations are agreed to and progress on their implementation is being made.

The Comptroller and Auditor General acknowledges that the annual compliance statement process, the external governance reviews commissioned by the HSE, the HSE internal audits and the work of the Comptroller and Auditor General in this examination and previous audits all point towards a number of governance issues arising across the sector, in particular non-compliance with procurement rules and regulations, non-compliance with public sector pay policies and the absence of internal audit functions.

To address these governance issues, the HSE has taken steps to enable agencies to have greater access to the HSE procurement systems and has provided training and guidance to external agency staff. The executive has also taken steps to maintain the focus on compliance with public sector pay policy by all agencies and it will continue to subject agencies to greater scrutiny, in particular, through the HSE's national HR processes. The HSE has also taken steps to emphasise a requirement for the establishment of an appropriate internal audit function, or the accessing of internal audit resources, as set down in the service arrangement.

There has been significant progress in effectively overseeing and monitoring the payment of grants, and compliance levels by agencies have improved. The HSE will continue to develop its systems and it will, for example, establish contract management support units in the community health care organisations, CHOs, to ensure that matters such as the recommended frequency of monitoring meetings is met in all cases and that the oversight of multi-agreement agencies is co-ordinated.

The HSE will also further develop its IT system to streamline the oversight and monitoring administrative processes. However, irrespective of how sophisticated and extensive the HSE systems are, the HSE cannot guarantee that every agency it funds will meet all its obligations. In the past, the challenges faced by the sector vis-à-visthe HSE are rooted in governance issues. Good governance is fundamental to the effective delivery of services and the sustainability of agencies. The HSE is not, and does not wish to be, the regulator for the sector and neither does the HSE wish to micromanage external agencies. The HSE, like all public funders relies, and must be able to rely, on agencies' audited accounts. The importance of a robust statutory external audit process cannot be overestimated. Like all public funders, the HSE cannot audit all agencies as that would require an army of auditors. While agencies should be accountable for the grants made available to them, they should continue to be independent and they should not be so constrained that the innovation and drive they bring to services is lost.

Once again, I welcome the Comptroller and Auditor General's report and I can confirm that the HSE is working to implement the recommendations made and address the concerns identified.