Mr. Seamus McCarthy:

As members will be 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, while the Social Insurance Fund is funded mainly from pay related social Insurance contributions.

The Department’s overall expenditure on scheme payments in 2020 totalled nearly €30 billion. This represented an increase of 48% on 2019 scheme expenditure, and included just over €9 billion incurred in 2020 across three new Covid-19 related schemes: the pandemic unemployment payment, PUP, scheme; the temporary wage subsidy scheme, TWSS; and the employment wage subsidy scheme, EWSS. The Department’s expenditure on administration of the schemes amounted to a further €635 million.

At the end of 2019, the accumulated reserves in the Social Insurance Fund were €3.9 billion. During 2020, receipts into the fund totalled €11.4 billion, while expenditure totalled €14.8 billion. The result was a deficit for the year of €3.5 billion, and the accumulated reserves had fallen to €453 million at the end of 2020. I gave a clear audit opinion on the accounts of both the Vote and the Social Insurance Fund for 2020. However, I drew attention in my report on the Vote account to a material level of non-compliance with procurement rules as disclosed in the statement on internal financial control.

I will now turn to chapter 9: regularity of social welfare payments. For a variety of reasons, some welfare recipients may be paid amounts to which they are not entitled, or that exceed their entitlements. These are classified as "irregular payments". The Department conducts periodic control surveys of scheme payments to understand the level and causes of the excess payments that occur. The results of the surveys point to a material incidence of payments in excess of entitlements under many welfare schemes. As has been the case for several years, I have drawn attention to this in both audit certificates.

Chapter 10 covers management of social welfare appeals. When a person is refused a social welfare payment by the Department, he or she can, in most cases, appeal the decision to the social welfare appeals office. Overall, the rate of appeal of the Department’s decisions on applicants’ claims is low. In 2020, appeals lodged represented around 1.3% of the approximately two million decisions that were made in respect of claims for income support and other benefits. However, the rate of appeal varies between schemes. For example, more than 40% of the appeals received in 2020 related to just two schemes: disability allowance and carer’s allowance. In 2020, just under 26,000 appeal decisions were finalised. In more than half of the finalised cases, the appeals were successful from the perspective of the claimant.

As part of the examination, we analysed a sample of successful appeals in respect of three schemes, to identify why they succeeded. This indicated that in 70% of the cases examined, material new evidence had been supplied as part of the appeal. We found in the majority of these cases that the additional information provided at appeal augmented information provided at the original application stage, and that the appeals might have been avoided if the additional information had been provided or elicited earlier.

Chapter 11 examines controls over the Covid-19 PUP scheme. As members will be aware, the scheme was devised and implemented in a very short period, at the same time as the Department had to adopt significantly restricted work practices. I am happy to acknowledge that delivery of the scheme on such a scale and in such a short time represented a major achievement. Given the volume of claims that were expected, and the potential loss of staff due to Covid-19, the Department implemented reduced take-on controls over PUP scheme claims when compared to other income support schemes, and recognised at the outset that the risk of overpayments would be higher than normal. The Department deemed this to be necessary and appropriate, and in the public interest. I do not disagree with that assessment. However, the examination found that there was scope subsequently for the Department to make more timely use of opportunities to confirm eligibility for ongoing PUP payments. The examination reviewed a random sample of claims from employees on the basis they were out of work due to Covid restrictions. Such employee claimants accounted for 80% of the scheme expenditure in 2020. We found evidence in records available to the Department that more than 9% of the claims reviewed were not eligible for the payments received on the dates tested. This suggests there may have been a material level of irregular payments of employee claimants under the PUP scheme. However, more extensive testing would be required to reach a precise estimate of the level of excess payment for the scheme.

The examination also reviewed a random sample of self-employed PUP claims. We found that it was not possible to conclude on the eligibility of these claimants, due to the absence of evidence about the level of loss of business turnover due to Covid-19.