Mr. Seamus McCarthy:

Expenditure in 2015 on social welfare and labour activation schemes totalled €19.3 billion, which was marginally up on the 2014 level. Some 60% of the expenditure in 2015 was funded by the Exchequer through the Vote for Social Protection, with 40% funded by social insurance contributions. The annexe to the Appropriation Account provides an analysis of the total programme expenditure under the Vote and the Social Insurance Fund. The total cost of administration of the programmes in 2015 was approximately €584 million, or 3% of the programme spend. The proportion spent on administration has remained relatively stable, averaging 2.9% over the past four years.

PRSI contributions are the main source of income for the Social Insurance Fund. Since 2008, contributions received have been insufficient to meet the expenditure of the fund. Initially, accumulated surpluses of the fund were used to fund the deficit but from 2010 the Exchequer met the shortfall. The amount of subvention to the fund from the Vote has fallen, reducing from €1.3 billion in 2013 to €119 million in 2015. The Social Insurance Fund is expected to record a surplus of contributions over expenditure amounting to €200 million in 2016.

I have given a clear audit opinion on both the appropriation account of the Vote and the financial statements of the Social Insurance Fund for 2015. However, I draw attention to the issues reported on in the chapters that are before the committee this morning.

Irregular welfare scheme payments arise where welfare recipients are paid amounts to which they are not entitled or which exceed their entitlements. Such payments can arise as a result of deliberate fraud by claimants, from claimant errors or as a result of the manner in which claims are administered by departmental staff. Fraud and error random sample surveys of welfare schemes carried out by the Department are intended to identify the types of cases where excess payments arise. The results of those surveys suggest that there was a material level of payment in excess of entitlements in 2015 on both the Vote and the Social Insurance Fund, and I have drawn attention to this in both audit certificates.

Chapter 9 of my report presents the results of the two most recent surveys completed at the end of July 2016 relating to farm assist and household benefits. The farm assist survey estimated a level of payments in excess of entitlement of 10.4% of the total amount in payment, which was €88 million in 2015. The equivalent value of household benefits in excess of entitlements was 5.4% of the cost of benefits, which was €221 million in 2015.

The chapter notes that the report on a family income supplement fraud and error survey had not been finalised, but I understand this is due for completion shortly. A separate exercise will be carried out by my office later this year to review the Department’s surveying methodology and to verify the rates.

Chapter 10 presents the results of the examination of the Department’s project to develop and roll out the public services card. At its inception, it was envisaged that the card would be used to access public services more securely, thereby helping to reduce the level of identity fraud. However, no single business case document was produced for the public services card project. I would have expected that a formal business case for a project of this kind would have set out, at a high level, all of the key information for the project, including scope, justification, funding required and project roles and responsibilities. It would also have provided a plan for setting out how and when the project’s benefits would be measured and who was responsible or accountable for their delivery.

The contract with the service provider commenced in 2009, with the intention to have 3 million public services cards issued by the end of 2013. As of June this year, just over 2 million cards had been issued. I understand that this has since risen to about 2.2 million cards.

Project delays led to a renegotiation of the contract on two occasions, namely, in 2012 and 2016. The delays included identification of the need to update the Department’s IT infrastructure; the project coinciding with an increase in demand for the Department's schemes; delay in receiving a technical specification for integrating the card with the integrated ticketing system from the Railway Procurement Agency; and the introduction of increased security features in the card.

Cost estimates for the card project prepared in 2012 provided only for the service provider's contract at €19.8 million, excluding VAT. This has increased by 16% to €23.1 million, excluding VAT, as a result of increased security features and delays. A substantial part of implementing the public services card project involves the Department’s own staff. The cost of those staff is projected to be an estimated €28.8 million by the end of 2017. The overall projected cost of the project is just under €60 million, including VAT.

The Department did not set a target for the potential savings that could be achieved from the card, given the difficulties in assessing the extent of identity fraud. Some €2.5 million in estimated savings to the end of July 2016 have been attributed to the card since its introduction.

At the beginning of the project, it was envisaged that the card would be used by a wide range of public bodies to authenticate the identity of users of their services. Wider use of the card required implementation of identity access management or IAM measures. The Department launched the IAM system in February 2016, which is available to other public bodies to authenticate service users online based on the card. Currently, the only services available online, using the card, are provided by the Department and relate mainly to jobseekers. The Department of Public Expenditure and Reform is working on legislation for the regulation of data sharing between public bodies and to provide the necessary safeguards.