Mr. Seamus McCarthy:

Go raibh maith agat, a Chathaoirligh. It is a broad agenda this morning. As members are aware the Department of Social Protection operates a wide range of income support, welfare and labour activation schemes. Expenditure on the schemes is divided between two accounts: the appropriation account for Vote 37 and the account of the Social Insurance Fund. 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.

The Department's overall expenditure on scheme payments in 2022 totalled nearly €23.9 billion. This was down from the €29.6 billion expended on schemes in 2021 reflecting mainly the tailing off of Covid-19 supports for workers. The reduction in that area was offset by significantly increased spending on State pensions, which was up 5.7%; on illness, disability and carers, which was up 10.6%; and on supports for children, which was up 10.6%. Fuel allowance payments in 2022 amounted to €576 million, which was up 82% from 2021. The Department's expenditure on administration totalled €696 million in 2022. This included staff salary costs of €329 million, payments for agency services totalling €195 million, and payments for medical certification totalling €44.6 million.

The audits concluded that the accounts of both the Vote and the Social Insurance Fund properly present the transactions for 2022, resulting in clear audit opinions in both cases. However, I drew attention in my report on both accounts to the likelihood of a material level of irregular payment on welfare schemes. This is a concern that arises each year and the basis of that concern is explained in chapter 13.

An excess payment arises where a claimant receives a social welfare payment to which he or she is not entitled or the level of payment exceeds his or her entitlement. Depending on the circumstances, when the Department identifies an excess payment, it may seek to recover some or all of the amount overpaid. The total value of overpayments raised in recent years has been relatively stable, in the range of €100 million to €125 million per annum.

Chapter 15 reviewed the Department’s processes in place when raising scheme overpayments. The examination found that there is considerable variation between schemes in the proportion of overpayments being raised and that, in some cases, there is insufficient documentation of the rationale for the deciding officer’s decision as to whether to raise overpayments. The report also recommended that the Department seek further opportunities to engage with claimants to make them aware of their responsibilities to inform the Department of any changes in their circumstances that could affect their payment entitlements.

Chapter 16 focused on the Department’s debt recovery process. At the end of December 2022, the Department had total outstanding overpayment debt of €495 million. The examination found that the key factors that determine the success of the Department in recovering welfare overpayments are the age of the debt, whether the claimant is in recent of a welfare payment, and the value of the debt. I recommended that the Department carry out a formal review of the reasons debt may not be recoverable in an effort to reduce the requirement for debt write-offs in future periods.

The report also recommended that the Department expedite the raising of overpayment debt arising from excess payments issued under the pandemic unemployment payment, PUP, scheme. The Department has estimated that there are a further 20,000 overpayment cases to be raised with a potential recovery in the region of €70 million. These cases relate to claimants receiving PUP during a period that overlaps with a period of employment.

Social welfare branch offices are privately managed by branch managers who operate under what is called a contract for services with the Department and who meet their costs from payments received from the Department. The remuneration terms of branch managers’ contracts were revised in 2018 and were sanctioned by the Department of Public Expenditure, National Development Programme Delivery and Reform to continue only until 2020. The Department continued with the same remuneration terms in 2021 and 2022. It explained that it assumed the sanction automatically continued to apply due to the circumstances imposed by the Covid-19 pandemic.

In addition, the Department made ex gratiapayments totalling €1.425 million to 56 branch managers in 2022. These payments were over and above the contract terms with the branch managers and, under public financial procedures, required the specific approval of the Department of Public Expenditure, National Development Programme Delivery and Reform. However, that approval was not sought.

Turning to chapter 17, the latest statutory five-yearly actuarial review of the Social Insurance Fund projects that there will be an increasing annual shortfall in the fund from 2034 to the end of the projected period, which is 2076, and that on a current policy basis, substantial Exchequer subventions will be required in the long term to meet ongoing scheme expenditure shortfalls. The review projects a shortfall of €10 billion a year by 2050 rising to €16 billion a year by 2060 and €20 billion a year in 2070. It is interesting to note that when the projections of prior statutory reviews are compared with outturns, the fund appears to have performed better in the past decade than was previously projected, notwithstanding the unanticipated impacts of the 2008 financial crisis and of the Covid-19 pandemic.

Finally, I 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.