Mr. Seamus McCarthy:

This morning the committee is considering the 2012 financial statements of the national paediatric hospital development board. The board was established in 2007 to oversee the development of a national hospital for children on a site at the Mater hospital. As members are aware, following the decision of An Bord Pleanála on the proposed development there, a Government decision was taken in November 2012 to discontinue the project at the Mater site and to relocate the development to a site at St. James's Hospital. The term of appointment of the original board members expired in December 2012. Interim appointees to the board served between January and July 2013. The current board members were appointed in August 2013.

Between 2007 and December 2012, the board incurred costs totalling just under €40 million. Funding for the board's expenses was provided by the Health Service Executive. The cumulative expenditure by year is shown on the screens before us in figure 1. The profile of expenditure is influenced by the rate at which the project advanced with most of the expenditure incurred in the years 2009 to 2011. The breakdown of total expenditure to the end of 2012 is shown in figure 2. Expenditure of €24.5 million was incurred on the business services team, which has responsibility for business and health care planning and overall programme management. Expenditure of just over €6 million was incurred on the integrated design team whose responsibilities relate mainly to development of architectural designs, engineering and quantity surveying activities. Cumulative expenditure on the project management team amounted to €3.2 million. This related to project planning and management, management of design quality and procurement management. A further €6.2 million was incurred in relation to administration costs including support staff salaries. I am sure the board representatives will be able explain if I have got any of the assignments of responsibilities incorrect. It should be noted that the board has not incurred site acquisition costs either at the Mater site or at St. James's. I understand that the HSE and St. James's have incurred costs for site assembly.

Since the board exists solely to develop a major physical asset, all of the expenditure incurred was capitalised and recognised as a construction work in progress asset in the board's balance sheet. That persisted from its establishment. Accounting standards require that if circumstances or events indicate that the carrying value of an asset may not be recoverable an impairment review should be conducted. The carrying value of the asset at 31 December 2012 was impacted by the Government decision of November 2012 to change the location of the hospital. Given that the required impairment review had not been completed, the audit certificate on the 2012 financial statements drew attention to the uncertainty in relation to the value of the main asset included in the board's balance sheet at the year-end. Following its appointment in August 2013, the board commenced a review of asset values in relation to all costs incurred up to July 2013. The review took account of the extent to which the outputs produced could be used on the project at St. James's and was completed in August 2014. The resulting write-down of the asset will be reflected in the 2013 financial statements. The audit by office of the impairment exercise and its impact on the draft 2013 financial statements has been completed and our views on the matter have been communicated to the board.

I understand the board has now considered the impairment review and the audit comments and wrote to the Department of Health on 16 October detailing the process and its outcomes. I believe the Department is considering the matter in consultation with the HSE and with the Department of Public Expenditure and Reform. As soon as the board presents signed financial statements in relation to 2013, we will be in a position to close the audit and issue the audit opinion.