Mr. Tony O'Brien:

I thank the committee members for the invitation to be here today. As they will be aware, we recently submitted to the committee a copy of the HSE's internal audit report, entitled Internal Audit Report - Section 38 Agencies Remuneration, which is the subject of today's hearing. I do not propose to go into the detail of the report in my opening statement as we will discuss it but I would like to make the following points.

Between March and November 2011, the HSE, at the request of the Department of Health, sought to establish the level of compliance by section 38 agencies with various aspects of approved public sector pay policy. In March 2011, the HSE sought confirmation from section 38 agencies of their adherence to approved health salary scales. Later in July of that year, we requested each section 38 agency to confirm their compliance with the Financial Emergency Measures in the Public Interest Act, FEMPI, and that the performance related award scheme continued to be suspended. At that time, the HSE reiterated that, in compliance with Government policy, bonus payments should not be made. In September of 2011, the HSE sought confirmation that section 38 agency chief executive officers were not in receipt of additional remuneration for any services or duties required by virtue of their role.

That was followed up in October 2011 when we sought information on allowances and regrading and whether they had appropriate approval. Later in November 2011, we sought confirmation of compliance with the one person, one salary principle that board fees should not be paid to public sector employees who sit on their own organisation's board or the boards of other public sector organisations.

Between March and May 2012, there were media reports that executives in a HSE-funded agency were in receipt of additional remuneration and a HIQA report identified that an executive in another HSE-funded agency was in receipt of additional remuneration. In May 2012, the HSE wrote to the section 38 agencies requesting that they provide the HSE with the remuneration details of senior managers employed or contracted by the agency, including pay, allowances, grants, bonuses, foundation payments and payments from any other body or organisation to the individual managers. The human resources section of the HSE received the requested information from the section 38 agencies.

In June 2012, the then CEO of the HSE requested HSE internal audit to undertake a review of the remuneration paid by section 38 agencies to their senior management. The audit identified significant key findings, which we will discuss during the hearing. The auditor's overall assessment of the control environment was that it was considered to be seriously inadequate due to the significance of the issues identified. The internal audit report, which was presented at a meeting of the HSE board on 23 July 2013, made 22 recommendations to address the issues and HSE management unreservedly accepted the recommendations and immediately set about putting into action the recommendations in conjunction with the Department of Health. To date, nine of the 22 recommendations have been fully implemented, a further eight are in progress and five have been identified as superseded. A copy of the status update on the recommendations in the report was previously provided to the committee on 14 November 2013.

In response to a number of the recommendations contained in the audit report on 27 September 2013 the Department of Health, following consultation with the Department of Public Expenditure and Reform, issued Circular 11/2013 on compliance with health sector pay policy as it applies to the health services and in particular to those bodies funded by the HSE in whole or in part. The circular reflects Government policy on senior public service pay. The policy makes it clear that bodies funded under section 38 of the Health Act 2004 may not supplement approved rates of remuneration either with Exchequer funding or non-Exchequer sources of funding. The Department of Health circular was issued to the health sector by the national director of human resources by way of HSE HR Circular 016/2013 on 30 September 2013. This communication issued to the CEOs of the section 38 agencies. It included a copy of the audit report and sought confirmation of compliance with the terms of the Department of Health circular. Agencies were requested to confirm their unequivocal confirmation of compliance by 28 October 2013 and were advised that failure to provide a reply by that date would be considered an unqualified confirmation of compliance with the pay policy.

By 28 October 2013, responses had been received from 33 of the agencies, with a number of agencies responding with a holding position stating that additional time was needed to consider the implications of the circular. Some agencies also identified the need to seek legal advice in respect of existing contractual arrangements. On 5 November 2013, the national director of HR sent a further letter to agencies that had responded with a holding position. This letter reiterated the requirement to deal with this issue as a matter of urgency and requested a comprehensive response no later than 19 November 2013. On 22 November 2013 the national director of HR wrote to five agencies that had not provided a response to the initial letter in September, which indicated unqualified compliance, requesting that for completeness and in an effort to avoid any confusion they would provide a formal response to the confirmations sought by return. Of the 42 responses received to date, 30 agencies have categorised themselves as compliant and 12 non-compliant. Of the 30 confirming compliance it should be noted that seven agencies are considered as being in compliance; 15 agencies indicated remuneration being paid which is not in compliance with the pay policy; seven agencies were identified through the information provided to internal audit as paying non-compliant remuneration; and one agency submitted formal approval from the Department of Health for the non-compliant allowance being paid. To date, one agency has not yet responded.

For the avoidance of doubt, my position on this matter is that the HSE will deem to be non-compliant any agency that has one or more employee whose pay does not conform to health pay policy. Some agencies currently claim to be compliant while at the same time identifying individual exceptions. For this reason a further process of verification and clarification is required for agencies categorising themselves as compliant where there is recorded deviation from the pay policy, and until the situation in each organisation has been fully verified, none of these organisations can be deemed fully compliant. Further action will be taken by the HSE to ensure the full implementation of the provisions of the health sector pay policy as a matter of priority, and in this regard we intend to work with each agency to ensure compliance with Government pay policy.

As set out in section 7 of the pay policy, if an organisation wishes to make a business case for the continuation of an unapproved allowance, it is open to it to do so and any such cases will be considered by the HSE, with the involvement of the Department of Health and the Department of Public Expenditure and Reform. A business case will also be required for the continued payment of allowances which are not encompassed by or in line with the Department of Health consolidated salary scales but which may have been sanctioned in the past. There has been much media focus on the individual recipients of payments encompassed by this audit report. Our focus is on the governance of the agencies that have acted, or in some instances may have acted, outside their authority in inappropriately offering and then paying amounts that are neither sanctioned nor authorised. It is those who purported to authorise such payments rather than those who received them who have serious questions to answer.

I would also like to refer briefly to the speculation in the media about the timing of the HSE's provision of the internal audit report to this committee and in particular the manner in which it was presented to the committee, namely, during the committee's examination of the Comptroller and Auditor General's chapter on medical cards on 14 November. I wish to state categorically that such speculation is without foundation. The facts are simple. The HSE had been in receipt of two freedom of information requests from the media for the release of the report. In addition, the Department also had a freedom of information request from the media for the report as well as all correspondence between the Department of Health and the Department of Public Expenditure and Reform relating to the matter. The material was due to be released in compliance with freedom of information legislation on 15 November. It was important for the HSE, as a matter of due respect to this committee and the Oireachtas, that the committee would be provided with the report before it appeared in the media. Accordingly, we provided the report to the committee on 14 November on that basis. I referred to that in my opening statement on the day. That concludes my opening statement and, together with my colleagues, we will endeavour to answer any questions members may have.