Mr. Seamus McCarthy:

The appropriation account for Vote 38 records gross expenditure of €23.7 billion in 2022, up €1.9 billion from the spend in 2021. The vast majority of the expenditure, amounting to just over €23.3 billion, spread across 14 of the Vote subheads, was paid to the HSE. A further €125 million was allocated to the National Treatment Purchase Fund, NTPF. Receipts into the Vote in 2022 totalled €458 million. At year end, net expenditure under the Vote was €42 million less than provided for, and this was liable for surrender to the Exchequer. I issued a clear audit opinion in relation to the appropriation account.

Members will have noted during previous meetings that appropriation accounts are usually presented in terms of output-focused expenditure programmes. The appropriation account for Vote 38 has not been organised in that way. Instead, it remains in the original appropriation account format, with expenditure subheads for administrative resource inputs, and various grant funding lines for bodies under the aegis of the Department of Health. Appendices to the Revised Estimate for the Vote provide ancillary information on an output programme basis, such as primary care, mental health, disability services and acute services. While this spending analysis is presented with certain performance metrics, the link between those metrics and the voted expenditure subheads is difficult to follow.

Chapter 18 of my report on the accounts of the public services examines how grant funding from Vote 38 to the HSE is accounted for in the HSE's annual financial statements and in the appropriation account of the Vote. Voted grant funding accounts for the majority of the HSE’s annual receipts.

The Minister for Health is required by law to issue formal notices of determination to the HSE setting out its annual funding allocation. In effect, this is the budget it is expected to manage within for the year. Separate determinations are issued for capital and non-capital amounts. The HSE is required to respond to these budget determinations by outlining an annual national service plan and capital plan.

Different approval processes apply for the determination of the annual capital and non-capital funding amounts. Under the Health Act 2004, as amended, the approval of the Minister for Public Expenditure, National Development Plan Delivery and Reform must be obtained for the capital funding determination, which for 2022 amounted to €1.2 billion. However, the Minister for public expenditure's approval is not required for the much larger non-capital funding determination, which in 2022 amounted to €22.5 billion.

The actual cash issued from Vote 38 to the HSE in 2022 was €439 million less than the amount determined by the Minister. This was significantly up from the €25 million gap between the funding and budget figures that occurred in 2021. In prior years, such differences between the figures generally did not occur.

As a result of the funding gaps in 2021 and 2022, the HSE’s 2022 financial statements recognise a funding debtor of €464 million for the cumulative amounts not drawn down. It should also be noted that, at the end of 2022, the HSE had an accumulated deficit of €1.24 billion, which will require to be funded in the future.

However, the Health appropriation account statement of financial position does not recognise liabilities to the HSE in that regard. It is not permitted to do so under Vote financial reporting rules set by the Minister for public expenditure.

A report by the Parliamentary Budget Office in 2018 noted that the HSE’s funding allocation is not separately set out in the Revised Estimate for the Vote, and that the realignment of the programmes in the Vote has been recommended for reform since 2008. Progress in this area has been impeded by the HSE’s legacy financial reporting system. When we were finalising the report, the Department indicated that it is planning a restructuring of the Health Vote along output programme lines for the 2025 Estimate.