Mr. Seamus McCarthy:

I thank the Chairman. Apologies for the technical problems this morning. Apologies also if I repeat some of the information that the Secretary General has already imparted to the committee.

As the Secretary General said, the Department operates a wide range of income support, welfare and labour activation schemes.

The Department’s overall expenditure on scheme payments in 2019 totalled just over €20 billion. Expenditure on administration of the schemes amounted to a further €639 million. Expenditure on the schemes is divided between the two accounts, namely, the appropriation account for Vote 37 and the account of the Social Insurance Fund. An appendix to the appropriation account provides a useful summary of the combined programme expenditure and sets out the expenditure on a scheme-by-scheme basis.

The Vote account is funded mainly through direct Exchequer issues. In contrast, the Social Insurance Fund is financed mainly from pay-related social insurance contributions. Receipts into the Social Insurance Fund in 2019 totalled €12.3 billion, including some €708 million in National Training Fund levies collected together with PRSI contributions. These levy receipts are transferred to the Department of Education, which manages the National Training Fund.

The surplus in the Social Insurance Fund for 2019 was over €1.5 billion. This left the fund with accumulated reserves of €3.9 billion at the year end.

I gave a clear audit opinion on the accounts of both the Vote and Social Insurance Fund for 2019. However, I drew attention in my report on both accounts to a material level of irregular payment. This is explained in the chapter on control over welfare payments which is before the committee this morning. I also drew attention in my report on the Vote account to a material level of non-compliance with procurement rules, as disclosed by the Department in the statement on internal financial control.

Turning to the chapter, income support is payable when the Department is satisfied that applicants meet the conditions that apply to the relevant schemes. This typically requires applicants to provide certain information and-or evidence of entitlement, and for that information to be correctly processed by the Department’s staff. Incorrect amounts may be paid where errors are made by claimants or by the Department’s staff, or if an applicant misrepresents his or her circumstances, either inadvertently or deliberately. This may result in a claimant being underpaid or overpaid relative to his or her entitlement. There is evidence that payments in excess of claimants’ entitlements occur on a scale that requires me to bring them to the attention of the committee.

The Department applies a range of controls and strategies to prevent incorrect payments. Chapter 4 presents an overview of the Department’s activities and evaluates their effectiveness. The Department carries out control surveys on individual schemes on a cyclical basis. This generally involves comprehensively reviewing up to 1,000 randomly selected claims in payment. The results of the reviews indicate the estimated level of incorrect payment on the scheme. The control surveys also assist the Department to identify scheme-specific risks and necessary changes to scheme control measures.

Excess payment rates vary between the schemes, as the Secretary General has pointed out, and generally are higher for means-tested schemes funded under the Vote than for Social Insurance Fund schemes where a substantial element of eligibility and entitlement relates to an individual’s recorded history of PRSI contributions. Control surveys may also identify cases where claimants are being paid less than their entitlement but the incidence and value of this is much less than the excess payments that are identified.

The Department also carries out a programme of reviews of individual payment cases, usually selected on a risk assessment basis. In 2019, some 609,000 such control reviews were carried out. The results indicate that the targeting of cases for review is relatively effective, generally identifying a higher percentage of cases with overpayment than would be expected if cases were selected randomly. However, the Department conducted only 80% of the control reviews it had planned for 2019.

The examination also looked at a sample of control reviews the Department had conducted in 2019 and found that in 10% of cases a clear record of the review work undertaken was absent. This made it difficult to assess what assurance was gained from the control reviews.

Where the Department finds evidence that a welfare recipient has been paid in excess of entitlement in the past, an overpayment may be raised. Overall, the detected level of overpayments has been relatively consistent in recent years and amounted to €117 million in 2019. In general, overpayments attributed to suspected fraud have trended down in recent years.

Overpayments detected that resulted from official error were also trending down, but problems arising from a change in the processing of illness benefit payments in August 2018 resulted in a significant spike in overpayments. The Department transferred the claims processing from an old IT system to its core IT system. Because of ensuing delays and problems in processing medical certificates, the Department decided to implement an auto-certification process, allowing payments to be made without an updated medical certificate. The Department did this to ensure that qualified claimants would not be deprived of financial supports. While the Department recognised that some overpayments would occur as a result, it did not have an estimate of the likely amount. Subsequently, the Department identified overpayments of illness benefit totalling €12.2 million related to auto-certification.

Separately, due to an error in the processing of a weekly payment run in December 2019, 11,000 claimants of illness benefit received duplicate payments at a cost of €2.5 million. The Department has made arrangements to recoup the overpayments and has made changes in its procedure that it believes will ensure this does not recur.