Ms Teresa Cody:

I am assistant secretary in charge of the national HR division in the Department of Health. I am making a joint statement on behalf of the Department of Health and the Health Service Executive. I am joined by Ms Sorcha Murray, principal officer in the national HR unit in the Department of Health. I am also joined by HSE colleagues, Stephen Mulvany, chief financial officer; Anne O’Connor, national director for community operations; and Rosarii Mannion, national director of HR. I thank the Chairman and the committee for inviting us here today to discuss issues in respect of the section 39 organisations.

The committee has already heard from representatives of the Disability Federation of Ireland, the National Federation of Voluntary Bodies and the Not for Profit Association, through their collective presentation. I understand that representatives of the ICTU health sector committee were also in attendance.

The Government, the Department of Health and the HSE recognise and appreciate the important work carried out by staff who work in section 39 funded agencies. In the recent Dáil debate on this issue, the Minister of State spoke at length on the role played by voluntary agencies and the efforts under way to address the complex issues that have arisen.

Voluntary organisations have been engaged in and have contributed significantly to the provision and ongoing development of the health and social care services in Ireland over many generations. An important point to note at the outset is what is meant by the term "voluntary sector". Agencies funded by the HSE under both section 38 and section 39 of the Health Act 2004 go to make up what is often referred to as the voluntary sector. While section 38 funded agencies are not the focus of this discussion, it is important to recognise that they too make a valuable contribution. The HSE provides a total of €3,576 million to the voluntary sector, with 78% allocated to section 38 organisations and the remaining 22% going to section 39 organisations.

Under section 39 of the Health Act 2004 the HSE provides financial assistance to organisations by means of a grant. Section 39 legally underpins the provision of services similar or ancillary to a service that the HSE may provide. To put it in context, the HSE provides financial assistance to 2,224 section 39 organisations. In 2017, the HSE provided funding of approximately €800 million to these agencies. These grants can range from very large amounts in their millions to much lower amounts of just a few hundred euro. The services covered by the funding to these agencies include: services to people with disabilities; services to older people; mental health and primary care services; social inclusion; palliative care services; and health and wellbeing services. The chief officers in the community health organisations have delegated accountability for the funding they release to these agencies. The profile of the agencies ranges from large, long established and nationally recognised service providers, providing essential services to small organisations that have evolved over the years, providing non-acute services, advocacy or other related support to local communities. Equally, some of these bodies are large employers and others may rely on volunteers with very few staff employed.

The HSE is very reliant on section 39 organisations to deliver services. In the case of disability services for example, approximately 25% of the disability services are delivered by section 39 providers. Again, for mental health services, the statutory services are primarily provided by the HSE directly but valuable additional services are provided by the section 39 providers which add value and capacity to the HSE directly provided services.

Representatives of these providers also over the years have been involved in working with the State sector to help shape policy and strategies for the ongoing development and improvement of these services. The HSE is held accountable for the use of public funds and it in turn must ensure transparency and accountability in how section 39 organisations spend the grants provided for services. The monitoring which the HSE has in place seeks to be proportionate to the nature of the services provided and the scale of financial assistance provided. We are aware that during the financial crisis, as public spending was reduced, section 39 agencies looked to reduce costs, including pay costs. Where staff in these organisations had their salaries reduced, there is an understandable desire to see these reductions unwound, particularly where such adjustments are under way across the public and private sectors. However, in assessing and seeking to address this issue in conjunction with the Department of Public Expenditure and Reform and the HSE, the Department of Health must be mindful of a number of considerations.

Employees of section 39 organisations in the health sector are not public servants and are therefore not covered by the public service stability agreements. Staff in these organisations were not subject to the financial emergency measures in the public interest, FEMPI, legislation, passed by the Oireachtas, which imposed pay reductions on public servants. Neither do the recent revisions made to this legislation cover employees of section 39 agencies. As the employer, it is a matter for section 39 organisations to negotiate salaries with their staff as part of their employment relationship and within the overall funding available for the delivery of agreed services. All agencies had their budgets cut during the financial crisis and were expected to make savings. Given that a large part of the budgets of these organisations are spent on pay, the pay budget was a logical place to start. While it is understood that pay cuts were imposed on section 39 employees, this was not uniform. Even where pay reductions were made, it is not clear how and when these cuts were actually employed in each case. We understand that different organisations did different things depending on their specific circumstances. There may have been increment freezes. There may have been a stop put to all recruitment. The number of staff working in the agency may have been reduced over time. They needed to do more with less and this is what they did.

This issue has been the subject of detailed consideration by officials in the Departments of Public Expenditure and Reform and Health and discussions have taken place between the Minister for Public Expenditure and Reform and the Minister for Health. The urgency around this issue is also heightened as industrial action is threatened from the 14 February 2018 in a number of these organisations. It is clear that in order to redress the problem there is a need for a much deeper understanding of the funding position in these grant-aided voluntary organisations, the extent to which pay reductions were made and the manner in which they were applied. The Minister for Health has asked the HSE to take forward as a matter of urgency an evidence gathering exercise with section 39 organisations to establish the factual position regarding pay reductions and pay restoration. It is important that such an exercise is properly conducted, having regard to the need to ensure value for money for the taxpayer, given the significant sums involved and the appropriate treatment where the approach taken by agencies differs. Although this will be a very complex piece of work, it is anticipated that this process will bring about the necessary clarity and transparency and ultimately an agreed way forward for all parties involved.

The Minister for Health, his officials and the HSE are working to address the matter. We are committed to doing all we can to ensure there is no disruption to the delivery of health services.