Mr. Seamus McCarthy:

As the members are aware, the National Paediatric Hospital Development Board is responsible for the planning, design, construction and fit-out of the new children's hospital at the St. James's campus, together with the construction of two paediatric outpatient and urgent care centres located at Tallaght and Connolly hospitals. Children's Health Ireland, CHI, will operate the services in the buildings into the future. Construction and fitting out of the centres at Tallaght and Connolly hospitals has been completed and they are now being operated by CHI. As members are aware, construction of the main hospital at St. James's is ongoing.

The overall budget approved by the Government in December 2018 to get the hospital and both satellite centres up and running was €1.73 billion. The budget for the physical development and equipping of the hospital and the satellite centres is the responsibility of the National Paediatric Hospital Board and amounts to €1.43 billion. The budget for the parallel CHI integration projects is €300 million. The development board is funded by Oireachtas capital grants provided via the HSE. In 2021, the grant funding provided amounted to €302.8 million, matching the expenditure in the year. The 2021 financial statements were certified by me on 22 September 2023 and have just been presented to the Oireachtas. I issued a clear audit opinion. However, my report draws attention to a disclosure in the statement on internal control of a board payment in March 2022 of almost €1 million in penalties to the Revenue Commissioners in respect of the board's non-compliance with certain tax obligations in the period 2016 to 2019.

Note 2 to the financial statements indicates that the total accumulated project costs incurred by the board to end 2021 amounted to €923.5 million including VAT. This included €86.3 million spent on the construction of the assets at Tallaght and Connolly, which have been transferred and are no longer included as assets of the board.

In note 8, the board indicates that at the end of 2020-21 it had future capital payment commitments estimated at €527.8 million. Combined with the expenditure already incurred, this implies an expected total project expenditure of at least €1.45 billion, which exceeds the approved project budget. Further commitments yet to be contracted for and the value of claims yet to be finalised will raise the overall cost further.

Notes 12 and 13 to the financial statements disclose that the board has been notified of a large number of claims by the main contractor. The note also outlines the structures in place for the resolution of such claims, as provided for in the contract and the board's intention to strongly contest the claims.

CHI was established as a legal entity on 1 January 2019 through an amalgamation of the existing children's hospitals located at Crumlin, Temple Street and Tallaght. CHI operates as one of the section 38 agencies supported by grant funding from the HSE. In 2021, income totalling €459.4 million was recognised by CHI. Grant funding received amounted to €415 million including €17.5 million provided to fund hospital integration programmes.

Retained staff superannuation contributions amounted to a further €15.5 million. Income from patient charges amounted to €19.1 million and other income was €9.3 million. Expenditure in 2021 totalled €462.1 million. This comprised €327.1 million spent on pay and pensions and €135 million on non-pay. The deficit for the year was €2.3 million.

The 2021 financial statements were certified by me on 14 October 2022. I qualified my opinion on the financial statements on the basis that, in compliance with the directions of the Minister for Health, CHI accounts for pensions only as they become payable. The standard accounting approach requires that financial statements recognise the costs of retirement benefit entitlements earned in the period and the accrued liability at the reporting date. The audit report also draws attention to non-compliant procurement by CHI, about which the committee has previously corresponded with the chief executive officer.