Dr. Ambrose McLoughlin:

I thank the committee members for the invitation to assist the committee in its examination of remuneration in section 38 agencies as outlined in the internal audit report of the HSE.

I am accompanied by my colleagues, Ms Frances Spillane, Mr. Fergal Goodman and Ms Lara Hynes. I thank the Chairman for acknowledging that the public health and social service system is hugely reliant on the contribution of organisations funded under section 38 of the Health Act 2004. Like the Chairman, I recognise the contribution made by the 35,000 dedicated staff and supporters of these organisations, which is highly valued. It is important to stress that the vast majority of staff in these organisations are paid in accordance with the Department of Health's approved salary scales. These staff are working within Government pay policy and have taken pay cuts while also playing their part in the reform of our health services through new working practices and co-operation with structural reforms. I wish, therefore, on behalf of the Minister, Deputy Reilly, and the Department of Health, to acknowledge the high quality care, support, services and treatment that these organisations have delivered for many decades, and continue to provide, to a wide range of patients and clients.

I would like to acknowledge the excellent work of the HSE in carrying out this comprehensive internal audit. For the first time and, despite efforts over a number of years, this exercise has succeeded in eliciting a much greater level of information on the remuneration arrangements in the section 38 organisations than had previously been obtained. The Minister, Deputy Reilly, initiated, through me as chairman of the HSE and then CEO of the HSE, the investigative process arising from the HIQA report on Tallaght in May 2012. The HSE conducted an audit of all section 38 recipients. As a result of this audit, a considerable number of funding recipients have been found to be in breach of Government pay policy in regard to the remuneration of their senior staff.

In response to the findings of the HSE's internal audit report, and following consultation with the Department of Public Expenditure and Reform, the Department of Health drew up a pay policy for the health service, with a particular focus on the section 38 organisations. This pay policy was issued to the HSE on 27 September 2013. The pay policy states clearly that section 38-funded agencies may not supplement approved rates of remuneration with Exchequer funding or non-Exchequer sources of funding. The HSE has taken decisive action to implement the terms of this pay policy and is keeping the Minister and Department of Health briefed on developments. The executive has a team of senior managers working with all of the organisations and hospitals concerned to ensure that a clear plan to achieve full compliance with health sector pay policy is developed by each agency. As set out in the Department's 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, as necessary.

I understand that the HSE is also instituting a new requirement in relation to an annual compliance statement, which will have to be approved by the board of each agency on an annual basis, signed by the chairman and another director on behalf of the board and submitted to the HSE together with the organisation's annual audited accounts. This is a major advance in the improvement of governance arrangements in these organisations. This annual compliance statement will be required in addition to the annual service agreement between the agency and the HSE.

As Deputies are aware, the HSE also grant aids a wide range of organisations - more than 3,000 - to a greater or lesser extent under section 39 of the Health Act 2004. Employees of section 39 organisations are not public servants. They are not included in the HSE employment control ceiling and are not bound by the Department of Health consolidated salary scales and are not members of a public service pension scheme. However, on foot of the findings in regard to pay arrangements in section 38 agencies, the Department, on behalf of the Minister, has asked the HSE to write to section 39 agencies asking them to have due regard to Government pay policy, in particular for senior managers. The committee may also wish to note that the HSE in its correspondence with the 353 section 39 agencies that receive more than €250,000 per annum in funding, has reminded these organisations that under the terms of their service arrangements, they are required to disclose the salaries of their senior managers to the HSE. Separately, I have issued a national pay policy to the health agencies under the aegis of the Department of Health.

I would also like to emphasise the priority with which the Minister, Deputy Reilly, and Ministers of State at the Department of Health, Deputies Kathleen Lynch and Alex White, are according to improving governance within all organisations in the health sector. One of the fundamental reasons for the major health reform programme now being delivered on is to enhance accountability across the whole health system, improve its governance and to deliver more cost-effective quality safe services that deliver best outcomesforthe patients and public we serve. The Minister has recently established a governance forum for the health sector to support and help chairpersons, board members and CEOs to fulfil their accountability and governance roles. We will be insisting on structured induction programmes for all new board members and a system of independent regular governance audits. As part of these new induction programmes, it will be made clear to new board members of section 38 agencies that they have no discretion to make extra payments to staff which are not encompassed by and in line with the Department's consolidated salary scales. All health sector agencies will be encouraged to publish details of payments, whether salary or otherwise, to all senior managers and senior clinicians in their annual reports and to make details easily accessible on websites. I would strongly encourage all agencies to publish their independent governance audits as part of their annual reporting process.

I wish to endorse the recent statement by the Chairman of this committee in which he encouraged the public to continue to donate to charities. I also want to acknowledge the important role of the Committee of Public Accounts in enhancing accountability and transparency and, thus, in maintaining public confidence in the civil and public service. I welcome the opportunity to answer any questions members may have.