Mr. Seamus McCarthy:

The Health Service Executive's financial statements for 2021 reflect the continuing impact of the Covid-19 pandemic on the HSE's finances. Total expenditure in 2021 was €22.7 billion, an increase of approximately €1.7 billion or 8% when compared with 2020 and an increase of almost 27% when compared with 2019. Total operating expenditure in 2021 exceeded income by €195 million and this deficit was carried forward to be met from the funding provided from the health Vote in 2022.

The revenue income and expenditure account analyses expenditure between pay and pensions - €7 billion - and non-pay - €14 billion. The biggest components of non-pay are the primary care and medical card schemes, accounting for €3.9 billion, and grants to section 38 and section 39 agencies of €5.7 billion. The section 38 bodies provide health and personal social services on behalf of the HSE, while the section 39 agencies provide services similar or ancillary to those provided by the HSE.

The bulk of the HSE's funding comes from the health Vote, amounting to a total of €21.6 billion in 2021, and including just under €1 billion in funding for capital projects. Other, though much smaller, sources of income for the HSE were receipts of €343 million in respect of patient charges for hospital treatment or for long-term residential care and retained employee pension contributions deducted from staff salaries, which amounted to approximately €356 million in 2021.

The HSE has disclosed its estimates of the expenditure incurred in 2021 on items directly related to dealing with the pandemic in Note 1 (b) to the financial statements. This includes an estimated €719 million on testing and tracing and €530 million on the vaccination programme.

In my report on the audit for 2021 I draw attention to a number of matters disclosed by the HSE. I will briefly outline the matters here but further detail is in the audit report and in the financial statements.

In 2020 and 2021, the HSE spent an estimated €1.1 billion on the procurement, transport and storage of personal protective equipment, PPE, supplies. Impairment charges of €374 million were recognised in the 2020 financial statements, reflecting a loss of value due to falling market prices and expected obsolescence of goods purchased.

In 2021, the HSE incurred further impairment charges of €109 million on PPE. This comprised €25.6 million in respect of hand sanitising gel that the HSE anticipates will pass its expiry date before it can be used, €12.7 million on other PPE items that are unlikely to be used, and €70.6 million in respect of the further write-down of stock values to replacement cost at year end 2021. The 2020 impairment charge included a €64 million provision for obsolescence in respect of protective suits that were unlikely to be used. Due to the fact that the HSE had not decided how to dispose of the suits, it incurred additional costs of €1.25 million to store them during 2021.

Once again, my audit report for 2021 draws attention to non-compliant procurement which remains a significant issue for the HSE. A self-assessment exercise carried out by the HSE on individual invoices above €20,000 estimated that non-compliant procurement in 2021 was around 9%, or 16% if Covid-related procurement was excluded. However, I concluded that this estimated rate of non-compliance with procurement rules may not accurately represent the scale of the underlying problem because in 2021, 44% of the HSE’s total procurement involved invoices under the €20,000 threshold and were therefore outside the scope of the self-assessment exercise, and 13% of the expenditure within the scope of the exercise could not be assessed for various reasons.

Finally, my audit report also draws attention to the disclosures made about the HSE’s actions in the aftermath of the cyberattack in May 2021. Members may wish to be aware that, as part of my annual report tomorrow, I will be publishing a report on the costs incurred as a result of that incident.