Committee Reports > List of Committees > Dáil > 1990 > Committee of Public Accounts > Final Report - Appropriation Accounts 1988

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of Public Accounts)

Déardaoin, 11 Deireadh Fómhair, 1990

Thursday, 11 October, 1990

The Committee met at 11 a.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Mr. P. Ryan (Department of Finance) called and examined.

VOTE 43 — HEALTH.

Mr. J. Hurley called and examined.

Chairman.—The Committee of Public Accounts is this morning examining Mr. John Hurley, Secretary of the Department of Health, in his capacity as Accounting Officer for that Department. It is your first appearance, Mr. Hurley, and you are very welcome.

Mr. Hurley.—Thank you, Chairman. I am very pleased to assist the Committee in any way I can. It may be that during the course of this examination there will be some details that I will not have but I will see that they are supplied to the Committee.

Chairman.—Thank you, Mr. Hurley.

Paragraph 64 of the Report of the Comptroller and Auditor General reads:

Non-Exchequer Funded Capital Suspense Account.

Article 11 of the Constitution provides that all revenues of the State from whatever source arising shall, subject to such exception as may be provided by law, form one fund and shall be appropriated for the purposes and in the manner and subject to the charges and liabilities determined and imposed by law. The Constitution (Consequential Provisions) Act, 1937 designated the fund referred to in the Constitution as the Central Fund. The banking transactions of the Fund are effected through the Exchequer Account maintained at the Central Bank. In compliance with this provision of the Constitution it is normal under Government Accounting procedures that Departments pay into the Exchequer large receipts not provided for in their annual estimates. Where receipt of certain sums is provided for in the estimates they may, under Section 2 of the Public Accounts and Charges Act, 1891, be used to meet departmental vote expenditure and the specific amount which may be so used in the case of each Vote (Appropriations-in-Aid) is authorised by the annual Appropriation Act. These provisions ensure that all public moneys are duly brought to account and cannot be expended without the authority of Dáil Éireann.

Following negotiations between the Department of Health and certain voluntary hospitals concerning the sale of hospital lands and buildings and the disposal of the proceeds of sale, contributions totalling £1,313,390 were received in 1988 by the Department from the Boards of Governors of two such hospitals. These moneys were not paid into the Exchequer but were retained by the Department in a suspense account from which they were paid to three other voluntary hospitals as building and equipment grants. Such building and equipment grants are normally voted annually and charged to Subhead J of the Vote for Health. Having regard to the Constitutional provision regarding State revenue and expenditure and the prescribed accounting procedures for dealing with receipts of this nature and the fact that moneys made available by the State for the building and equipping of hospitals is normally voted by Dáil Éireann, I sought the observations of the Accounting Officer on the matter. In addition to the amounts referred to above it was agreed as a result of the negotiations that a further £75,000 of the proceeds of sale of one of the voluntary hospitals as well as £100,000 from the proceeds of sale of a third hospital should be paid directly by their Boards of Governors to the Boards of two other voluntary hospitals to fund capital projects.

The Accounting Officer stated that while the cost of building and equipping hospitals was frequently met from moneys voted by Dáil Éireann, capital investment in voluntary hospitals was by no means met exclusively in that way. The disposal of the proceeds of the sale of voluntary hospitals was, he maintained, essentially a matter for the hospital authorities concerned and only in very rare cases did the Department of Health or any State agency have a lien on these proceeds. However, the Department was, by virtue of its position as the main funding agency for the health services, in a position to influence them to use such proceeds or portions of them for the benefit of the health services generally.

He stated that the £1,313,390 represented contributions negotiated in this way which were voluntarily handed over to the Department for distribution and as it was clear that such receipts were not ‘proper to the Vote’ a suspense account was used as the accounting mechanism. The Department of Finance was fully aware of the accounting approach adopted and the status of this approach was recognised by the classification of such receipts as ‘non-Exchequer’ in the Capital Budget approved by Government. The Accounting Officer intimated that he understood that a similar type of approach was adopted in the Department of Education when dealing with local contributions to the capital costs of building national schools.

He also stated that the £175,000 not passed through the suspense account also represented contributions negotiated with hospital authorities but where the Department did not succeed in having the funds transferred to it for distribution. It did however succeed in so influencing events that the contributions concerned were used to fund identified priorities in the Capital Programme.

Mr. McDonnell.—In this paragraph I am dealing with how a sum of £1.3 million, which was paid to the Department of Health from the proceeds of the sale of two voluntary hospitals, was handled. That is to say it was held in a suspense accounts to go towards meeting the cost of building and equipment at three other hospitals. The point at issue here is that I felt the money should have been brought into the Exchequer under the normal procedure and that it would be up to the Dáil to decide if and how it should be used in the normal course of its consideration of estimates or supplementary estimates.

The Accounting Officer for the Vote for Health took a different view. He said that the Department had no lien on the proceeds of sale and that the money represented contributions which were voluntarily handed over to the Department for distribution and as such he did not see that it should be paid into the Exchequer. He also indicated that the Department of Finance were fully aware of the arrangements which had been made and the procedure which was followed. Obviously my next step was to ask the Department of Finance what they thought about that. That Department have since informed me that they were not aware of the detailed accounting arrangements which were used by the Department of Health to earmark these moneys to fund part of their capital programme. He also said that in his view any payments made by hospitals to the Department should have been paid into the Central Fund as Exchequer extra receipts or else treated as appropriations-in-aid of the vote. I saw that as endorsing my view of this.

I would like to stress, Chairman, that this is not just an issue relating to the finer points of Government accounting. It relates to the fundamental principle that all public money should be duly brought to account and that it is for the Dáil to decide whether or not they should be spent and how they should be spent. If you look at these as moneys which, perhaps, were refunded in recognition of the fact that public moneys had been put into these hospitals over the years, even though the Department had no legal claim on the assets, I think that supports the view that they should have been paid into the Exchequer.

Finally, Chairman, I would like to mention and to remind you of another point which you yourself mentioned at a recent meeting of the Committee in connection with the Department of Education when the Committee were discussing the Carysfort Training College. One might wonder about this question of the State part-meeting the cost of assets which are managed by third parties without in some way securing its interests by way of some kind of lien on those assets.

Chairman.—Article 11 of the Constitution is very specific. Why was the law not followed in this case? Why are the statutory provisions not followed in this case?

Mr. Hurley.—I think the key issue here, so far as the Department are concerned, is whether the properties in question were State properties or not? These are independent institutions, voluntary hospitals, not owned by the State. They are very different, we would have thought, from properties which are owned by the State. For example, a further query which will arise later on in the course of this hearing relates to the Health Education Bureau. When that property, a State property, was sold, it was brought to account in the usual way as an appropriation-in-aid. The view was taken in relation to voluntary hospitals that they were not State properties and therefore that the correct procedure was to bring the moneys to account in a suspense account. That ensured that the very stringent audit procedures of the Comptroller and Auditor General are applied to the proceeds of the suspense account.

Perhaps I could go back and talk briefly about how the capital budget was made up in that particular year. The health capital budget for 1988 included a £2 million non-Exchequer contribution. It was described as non-Exchequer. The Government decision on the capital programme described it as “non-Exchequer” and indeed our correspondence with the Department of Finance approving the situation also described it as non-Exchequer. It was for this reason that it was brought to account in the way it was. Although the receipt of the particular funding in question was not guaranteed, nevertheless we were instructed to include it in the capital programme. The Department of Finance were aware of what was happening. They issued a letter indicating that it was non-Exchequer funding. This is a traditional procedure. It is not something new and it is not even unique to the Department of Health.

May I say that while expenditure on building and equipping hospitals is frequently a charge paid out of moneys voted by Dáil Éireann, capital investment in voluntary hospitals is by no means met exclusively in that way. That was the reason behind the particular accounting procedure adopted. We felt that it was correct to bring it to account by means of a suspense account and that it ought not to come in as appropriations-in-aid or Exchequer extra receipts.

Chairman.—What do the Department of Finance have to say about this, that it is not unique and that it is followed in other Departments. Why is it being followed in other Departments and why is it not unique?

Mr. Ryan.—We did a check on this because of the view we had received from the Departtment of Health that this practice was followed by other Departments and we were unable to find any instance where it was practised by other Departments.

Chairman.—What hospitals are involved here?

Mr. Hurley.—The two hospitals involved were Dr. Steevens and Jervis Street. There was a small figure of £2,500 involved from the Richmond Hospital. It was certainly our understanding that a similar arrangement applied in relation to certain schools in the Department of Education.

Chairman.—Mr. Hurley, you are the Accounting Officer and I do not want to be very harsh on your first appearance before the Committee, particularly since you probably were not the Accounting Officer in situ on the day, but the Committee expect the constitutional and legal requirements of the State to be followed under pain of surcharge on you personally. It is not a matter of who follows what in any other Department or what the Department of Finance say; it is your personal responsibility, and in the future it is to be followed in the way that the Constitution and the law say it is to be followed. I would expect that this will not be repeated. I hope that that point is taken on board.

Mr. Hurley.—Certainly the Department will follow the instructions of the Committee. May I say that the institutions in question are bound by their own governing instruments. They are independent institutions. Our track record in getting into public funds the proceeds of sale has been very successful over the years in relation to hospitals. By and large this has arisen because of the terms of the trusts or the terms of the charities by which they are bound. Essentially in most cases they are required to devote the proceeds of sale to a health purpose. We would have to consult further with the Department of Finance as to whether it will be possible to do that if in fact the funds are brought to account in the way suggested. By all means if that is the decision, that is the decision, but it may well mean that we will find it far more difficult to achieve substantial returns from the institutions in question as we have in the past, and I think we have been very successful in achieving very significant returns, even in relation to capital investment for the institutions in question. They are bound by their governing trusts. They are charities in many cases and must apply the proceeds of sale in a particular way.

Chairman.—How they apply the proceeds is one thing, Mr. Hurely; how we take them into the Exchequer is another. The Constitution sets down the way that that is to be done and the law sets down the way that that is to be done, and that is the way it is to be followed. Is there anything else to be said on this paragraph?

Deputy Connor.—Do we know how the £1.3 million was spent? Where exactly did it go? Perhaps this point was made and missed by me.

Mr. Hurley.—Yes, Deputy, it was applied to the priority requirements of the capital programme. The bulk of the funds would have been applied to the Mater Hospital, Our Lady of Lourdes Hospital, Drogheda, and St. James’s Hospital for equipment and building projects which were priorities within our capital programme. Essentially Exchequer funding would have been required for these had this funding not been available.

Deputy Connor.—Did I hear you say that this was part of a new Exchequer programme?

Mr. Hurley.—No, Deputy. What I meant there was that when the capital budget was being made up, these were described as non-Exchequer funds, and in our correspondence with the Department of Finance they were described as non-Exchequer funding. It was because of this and also because of the governing trusts of the institutions in question that it was brought to account in the way it was, and because the properties were owned by the voluntary hospitals themselves. Needless to say, the Committee have their view but there are problems associated with the mechanism you describe and we will discuss them with the Department of Finance and try to find a way of resolving them.

Mr. McDonnell.—May I make two brief comments in relation to what the Accounting Officer said? Of course, the expenditure which would be charged to a suspense account would come under my audit in the normal way — that is how I saw it — but the important point is that expenditure out of a suspense account in this way does not have the prior approval of the Dáil. Secondly, in relation to public or private institutions, the Accounting Officer made the point that these were private institutions. I accept that the Department’s claim on the proceeds from the sale of private institutions may not be as strong as it would be in the case of public institutions, but once the money comes in it should be treated in the same way. If it did not accrue to the Department, that is fair enough but once it has it should be treated in the proper way.

Deputy Flood.—In relation to the moneys which were placed in the suspense account, did the voluntary hospitals dictate how they were to be expended once they arrived in the suspense account? Did they have any control over how these moneys would be utilised?

Mr. Hurley.—In accordance with their governing instruments they would need to be assured in many cases that these moneys were applied for the purposes of the health service.

Deputy Flood.—Does it follow that they received a commitment from the Department of Health that their views on the expenditure of this money would be adhered to?

Mr. Hurley.—The practice applied by the Department of Health up to then was to hold these funds in a suspense account for specific purposes. Therefore, it went without saying that they would be applied for the purposes of the health services and, therefore, all discussions with them in relation to negotiating the particular funding that was to come from the sale of those properties would clearly have referred to that. It was an incentive to increase the take for the Exchequer.

Deputy Flood.—As the Chairman pointed out, that is not the manner in which moneys of this kind should be expended in future. We should be very careful about accepting the conditions or organisations who are making moneys available — in this case the voluntary hospitals — so that they will not be entitled to lay down conditions on the expenditure of moneys that are rightly the prerogative of the Dáil to vote. Is that what you were saying, Chairman? We must be very careful about this matter in the future.

Chairman.—I think that point has been made forcibly enough. We will note this paragraph for now.

Paragraph 65 of the Report of the Comptroller and Auditor General reads:

Subhead J — Buildings, Equipping and Furnishing of Hospitals and other Health Facilities. Subhead 9.4 — Grants on behalf of Health Boards to certain other health bodies.

Section 33 of the Health Act, 1970 authorises Health Boards to borrow money subject to any conditions specified by the Minister and in accordance with any directions given by him. Voluntary hospitals may borrow under the terms of their charters. In 1987 the consent of the Minister for Health and the Minister for Finance was obtained for Beaumont Hospital and the Mater Hospital to borrow £15m by way of bank loans and for three Health Boards and one hospital authority to borrow a total of £10m from another bank. There is no statutory provision for giving Ministerial guarantees in respect of such borrowings but the Health Boards and the hospital authorities and the two banks were each provided with a letter by the Minister for Health stating that sufficient moneys out of the Health Board’s or hospital authority’s allocation from the Vote for Health would be disbursed to these agencies’ separate accounts in the banks for the exclusive purposes of meeting all sums due in respect of the repayment of principal and interest falling due under the terms and conditions of the loans. At 31 December 1988 the Health Boards and hospital authorities had drawn down a total of £14.1m of the loans negotiated and a sum of £2,716,645 was paid from Subhead G.4 to the Beaumont Hospital Board to meet repayments of principal and interest due to the bank in 1988 on the loan drawn down.

A total of £41.03m was also provided in 1988 from Subhead J for building, equipping and furnishing of hospitals and health facilities in addition to the sums totalling £1,488,390 referred to in the previous paragraph and a sum of £2m made available from National Lottery Funds.

In paragraph 80 of my 1982 Report I referred to the practice which had developed in some Departments of issuing letters which could be interpreted as a form of assurance to lending institutions in regard to the repayment of the borrowings of public and private sector bodies in circumstances where statutory authority to guarantee the repayment of such borrowings did not exist or had been exhausted. Such assurances were being given by means of various types of official authorisation for or acknowledgement of the borrowings acceptable to the lending institutions and were commonly described as “letters of comfort”. Following my advertence to this practice in my 1982 Report, strict instructions regarding such letters were issued by the Department of Finance to all Accounting Officers in May, 1984. These instructions expressed the Minister for Finance’s insistence that under no circumstances should a letter be issued which gives a guarantee or undertaking not already authorised by legislation and that even the issue of a letter stating a Minister’s intention to approach the Oireachtas for authority to give a financial guarantee could only be permissible in compelling circumstances (timing difficulties in processing legislation) and as an exceptional measure. I am not aware of any intention to authorise the giving of Ministerial guarantees for borrowing by health agencies.

The Public Accounts Committee in its 1982/83 Report of 29 January 1988 recorded its disapproval of the practice of issuing letters of comfort and stated that it was the Committee’s express wish that no further letters of comfort of any kind should issue without the specific approval of Dáil Éireann. I asked the Accounting Officer what was the statutory basis for the undertakings given to the banks which provided the loans to the Health Boards and voluntary hospitals. I also sought information on the difference between the interest rates charges on the loans and the Exchequer borrowing rate prevailing at the time.

The Accounting Officer informed me that the letters which were issued to the banks dealt with details of the mechanisms for repayment and therefore did not constitute letters of comfort as specified in the Department of Finance instructions nor did that Department view them as such. He pointed out that there was statutory authority for the payment arrangements in the Helath Acts, 1953 and 1970 and in Establishment Orders made under the Health (Corporate Bodies) Act, 1961.

He informed me that the borrowing arose out of Government decisions to fund the equipping of health facilities at the Mater, Beaumont, Cavan, Castlebar, Mullingar and St. James’s Hospitals on a deferred payments basis. The Department of Finance was at all stages fully aware of the progress of negotiations with the banks and gave prior written approval to the finalisation of arrangements on the basis negotiated.

He also informed me that the rates of interest on these borrowings were in line with and indeed in most cases lower than the Exchequer borrowing rates.

Mr. McDonnell.—The Committee will recall previous discussions on letters of comfort and how the Minister for Finance, in the early eighties, sought to outlaw this practice by instructing Departments that under no circumstances should a letter be issued which gave a guarantee or undertaking which was not already authorised by legislation. The reason Departments cannot be allowed to issue such letters as they see fit is that they can, whether or not one likes it, represent a financial commitment by the State without the Dáil’s authority to do so. It may be a clear commitment or it may be an implied commitment but there is an element of commitment. In the course of the audit of the Department of Health I saw a number of cases of what I regarded as letters of comfrot because it was clear to me that without them banks would not have put up the moneys. These letters had been issued by the Department to banks providing loans to voluntary and public hospitals and health boards. These letters confirmed, and I quote: “… that sufficient moneys, independent of the normal allocation for funding, will be disbursed by us” —that is the Department —“to an account to be specified by you”— that is the bank — “the exclusive purpose of which will be to meet all sums due in respect of principal and interest under the terms and conditions of the facility.” As can be seen from the Accounting Officer’s reply, he did not consider these to be letters of comfort as specified in the 1982 Department of Finance circular. In fact, he said the Department of Finance did not see them as letters of comfort either, although I find it difficult to see how they could be regarded as anything else in the light of what I have just read out to the Committee. He also told me that the Department of Finance were at all stages fully aware of the progress of the negotiations with the banks and gave prior approval to these arrangements.

Obviously my next step was to ask the Department of Finance for their views on this matter. They told me that on two occasions — in January 1987 and in January 1988 — the Government authorised the Department of Health to purchase equipment for hospitals on deferred financing terms and that subsequently the Department of Health, who were co-ordinating all of this and arranging for the moneys to be raised through the various financial institutions, consulted the Department of Finance about the terms of the offers made and the Department of Finance advised them on which were the better ones to accept but the Department of Finance did not see and were not asked to approve of any of the letters sent by the Department of Health to the health agencies. I want to emphasise that I am not taking issue with the decision that health agencies fund certain capital expenditure by borrowing — that is a policy matter — but I am only concerned about the administrative actions taken in the course of implementing that decision.

An ancillary point you might note, is that at the end of the paragraph the Accounting Officer says that the rates of interest charged on the borrowings were in line with or in most cases less than the rate at which the Exchequer could borrow. If this is the case it might need some explanation because I do not have any for it.

Chairman.—In 1982-83 the Committee of Public Accounts recorded their disapproval of the practice of issuing such letters and stated that it was the Committee’s express wish that no further letters of comfort of any kind should issue without the specific approval of Dáil Éireann and strict instructions regarding such letters were issued by the Department of Finance to all Accounting Officers in May 1984. Yet the Accounting Officer informed the Comptroller and Auditor General that the Department of Finance were at all times fully aware of the progress of negotiations with the banks and gave prior written approval to the finalisation of arrangements on the basis negotiated. Is that correct Mr. Ryan?

Mr. Ryan.—That is correct.

Chairman.—Why?

Mr. Ryan.—We approved the terms of the loans as negotiated. As we stated in our communication to the then Comptroller and Auditor General, we did not see and were not asked to approve of any of the letters sent by the Department of Health.

Chairman.—So you did not approve of the letters of comfort?

Mr. Ryan.—No.

Chairman.—Why did these letters issue, Mr. Hurley?

Mr. Hurley.—Basically, the Department were faced with the urgent need to replace some hospital equipment and to commission some newly built hospital units but the money required could not be made available from the capital programme as it then stood. As the Comptroller and Auditor General has said, there was a specific Government decision to raise a specific sum of money for specific purposes, so it was not an unlimited amount of funding, and it was decided that it would be raised by way of loans, and we explored various ways of doing this. We were in consultation with the Department of Finance who, as the finance official has said, approved the loans in question but did not approve the specific wording of these letters. At that time, we certainly did not regard these letters as “letters of comfort” within the terms that had previously been set out by the Committee of Public Accounts and also referred to in the Department of Finance circular of 1984.

First, there was a statutory legal basis for the borrowings by the institutions involved and we did not feel there was any guarantee implicit in the letters — no security was given and this was accepted in writing, by the banks in question. Having said that, I can assure the Committee that what was done was done in good faith and once the query was raised by the Comptroller and Auditor General, which led to this examination, the practice of issuing those letters stopped. We were in consultation with the Department of Finance and no such letters have been issued in connection with similar loans which were approved for 1990. As I said, what was done was done in good faith and at the time we did not think we were in breach of the guidelines set down by the Committee of Public Accounts or the Department of Finance circular on the two grounds I mentioned. It is only now that the Comptroller and Auditor General has raised this query that this practice has been stopped.

Chairman.—Can you tell us about the interest rates? You said that in most cases they were in line with or lower than the Exchequer borrowing rates. How did you negotiate that?

Mr. Hurley.—Essentially,. the loans drawn down on the first date — 28 April — would have been marginally above the State-sponsored body rate of borrowing. The loans negotiated subsequently — on 12 April — would have been about 0.8 per cent below the Exchequer rate, which is a very favourable rate. It appears from going through the papers that the basic point at issue here in relation to the banks in question was the statutory basis of borrowing. They seemed to attach great significance to that. The quote referred to by the Comptroller and Auditor General was indeed contained in the letters. At the time the Department saw this as details of a mechanism of funding rather than a guarantee. As I said, the banks in question indicated that they did not regard these loans as secured.

Deputy Connor.—You stated that the borrowings and the manner in which they arose was something of an emergency in places in relation to the opening up of new hospital units etc. Could you detail for us the projects, units or whatever that had to be financed so urgently on this occasion?

Mr. Hurley.—The moneys were applied to Beaumont Hospital, St. James’s Hospital, the Mater Hospital, the Midland Health Board, the North Eastern Health Board and the Western Health Board for bringing into use new facilities which were needed.

Deputy Connor.—Could you give more specific locations in relation to the health boards you mentioned and where they might be applied?

Mr. Hurley.—In relation to the health boards, the institutions in question were Castlebar, Galway Regional, Cavan and Mullingar hospitals.

Deputy M. Ahern.—With regard to the loans given in 1990, did the banks require any security?

Mr. Hurley.—No Deputy, the only requirement was the legal basis for the making of loans for the institutions in question. Following consultation with the Department of Finance we have refused to issue any correspondence which might be interpreted in any way as being a letter of comfort.

Deputy M. Ahern.—There would not be a problem in the issuing of those loans by the banks to the institutions?

Mr. Hurley.—No, we have received good terms on the loans, but the terms received earlier were very favourable.

Deputy Flood.—In making these loans available were the banks of the opinion that they had security for their repayment?

Mr. Hurley.—No, in fact they indicated to us in writing that they regarded the loans as unsecured.

Deputy Flood.—Do you have that in writing from them?

Mr. Hurley.—Yes, and we regarded the loans as unsecured. In the quotation they gave us they stated that the loans were unsecured. We saw the quotation that the Comptroller and Auditor General referred to as a mechanism of payment. For example, if I get an overdraft, very often the bank will require me to have my cheque lodged to the bank. There is no guarantee if I am unemployed that I will continue to be in a position to do that. Similarly in the case of an allocation to a hospital it is very unlikely that the hospitals in question would cease to exist, they are very important institutions, but we do not have the ability to make an allocation if the institutions do not exist. There could be no guarantee of continuing funding. Essentially, the loans would then have to be made good by the realisation of the assets of the institutions. In good faith, we regarded this as purely a mechanism of payment, not a guarantee to the continuing funding or financing of these loans. Having said that, and that decision was taken in good faith, if this Committee have a different view, and the Comptroller and Auditor General has raised a query, then that practice will cease. It has ceased in relation to 1990.

Deputy Flood.—Were letters issued to the banks stating that moneys would be lodged in separate accounts to effect the repayment of the loans to the banking institutions?

Mr. Hurley.—Yes, moneys would be lodged to a specific account for that purpose.

Deputy Flood.—Where would the money come from? Would it be first given to the health board or the hospital by the Department of Health or would it go from the Department of Health directly into those special accounts?

Mr. Hurley.—The moneys would have been applied, as an additional provision, to the health boards and hospitals in question and would be brought to account in the overall allocation for those institutions at the end of the year. The loans were taken out by the boards and it was the board’s money that was transferred to the accounts in question.

Deputy Flood.—By the board or by the Department of Health?

Mr. Hurley.—By the Department, but it was the board’s money.

Deputy Flood.—Is not that really the guarantee that the banks had? They obviously got a commitment, in other words a guarantee, that repayments would be made in that fashion. The hospital or the health board had no option, because they did not have access to those finances. I suggest that they are the guarantees that were given to the lending institutions.

Mr. Hurley.—The only guarantee implicit in that was that if there was an allocation portion of that allocation would be devoted to the accounts in question. If we were not making an allocation to the institutions, no funding or financing of those loans could have been made. That is what I really meant, when I said that this was a payment mechanism. The only guarantee that could be implied was that if an allocation was made part of that would be devoted to finance the loans in question. There is not a guarantee. We could not give a guarantee in the environment we were in at the time, that those institutions would continue. They are the leading institutions in health care in the State and it was very unlikely that any of them would close, but a guarantee could not be given.

Deputy Flood.—A certain portion of any allocation of moneys, instead of going into the general account of the hospital or the health board had to be set aside and placed in a different account which would meet the repayments to the lending institutions?

Mr. Hurley.—That is correct, Deputy.

Deputy Flood.—That is the guarantee that the lending institutions had. Whether one calls them letters of comfort or whatever, they certainly had specific guarantees on the repayments. That is my interpretation.

Mr. Hurley.—We had a mechanism through which the loans would be funded and the Comptroller and Auditor General referred to that earlier, and it was specifically referred to in the letter. Going back to the Committee’s view on letters of comfort, as I said at the beginning, this was done in good faith, and if the Committee have a different view that is fine, and it will not happen again. The two ingredients, as I understand it, of the letter of comfort is that there is a legal basis for the loans and that there is no absolute guarantee given. There was a legal basis. In relation to the guarantee we were not in a position to guarantee that an allocation would be made to the institutions in question. We could only agree that if an allocation was made, portion of it would be devoted to finance these loans. There is room for debate on the issue of whether or not these were letters of comfort. It is not absolutely clear. In view of the Comptroller and Auditor General’s query, and the Committee’s view on this, no such letters have been issued in 1990 and will not be issued if that is the Committee’s view.

Deputy Flood.—It is time to redefine a letter of comfort but that is another matter.

Chairman.—Mr. Hurley, when you say that the banks took the view that the loans were unsecured, they took the view that they were unsecured on the particular assets, but certainly the guarantee was a security or otherwise why were not the interest rates higher? Would they not be higher if there was not the security or a guarantee?

Mr. Hurley.—Going back through the papers, it is my understanding that the key issue that the banks were interested in at that time was the legal basis for the making of the loans. The rates received were very competitive rates. I reiterate that the Department did not feel at the time that these were letters of comfort. While the Department of Finance, as indicated earlier, did not approve the exact wording of the letters they were aware of the negotiations, of the terms that were offered and the manner in which those terms would be met. They did not approve the specific wording, because we did not feel that they were letters of comfort. We, as a Department, do not wish to be in contravention of any rules that this Committee may lay down, and we will not be. If the Committee’s view is that letters of this nature are letters of comfort, they will not be issued again. In relation to a query that will come up again on delays in commissioning hospital units and new facilities — we were going through a very difficult time in trying to bring these units into account — we would be grateful for any wording which would not be regarded as a letter of comfort that would help us get more competitive rates in relation to loans. We accept that letters of comfort cannot be issued. Clearly it was a question of interpretation in this case and it seems that our interpretation would not be agreed by the Committee.

Chairman.—It is clear from the advice given to the Committee by our constitutional and independent officer that these were letters of comfort. If you have any doubt as to what is a letter of comfort, it would not be too difficult to consult with the Comptroller and Auditor General who I am sure would tell you what is and what is not a letter of comfort. If the Department of Health are able to negotiate these sorts of interest rates will Mr. Ryan of the Department of Finance explain what is wrong with the rest of the Exchequer borrowing that we cannot get the same favourable interest rates? What is your view on this?

Mr. Ryan.—Borrowing takes place at a certain time. Banks have times when they have funds at their disposal and they are perhaps ready to quote keener rates. The fact that one part of the Health borrowing was at lower than the Exchequer rate would reflect just the timing of that particular borrowing.

Chairman.—Administrative necessity or convenience is one thing but the authority of Dáil Éireann is what is required. You might take advice in advance regarding any difficulty as to what is a letter of comfort but we do not want any repetition of letters of comfort or any of this sort of letters being issued. The Committee and the Department of Finance have laid down guidelines very clearly on this matter which are to be followed.

Mr. Hurley.—Yes, Chairman, we did consult the Department of Finance earlier in the year and in relation to 1990 loans no such letters have been issued.

Chairman.—We will note the paragraph for now.

Paragraph 66 of the Report of the Comptroller and Auditor General reads:

It was noted that certain hospital facilities which involved the construction and equipping of buildings and for which certificates of practical completion has been issued by architects had not been fully commissioned in April, 1989 and that expenditure had been incurred on maintaining and securing the facilities in an unused state. The Accounting Officer has furnished me with the following information:—

The Accounting Officer explained that the major cause of delay in commissioning was that the Government did not regard the equipping of these facilities as a contractual commitment and, because of overall constraints in the Exchequer position, provision was made in the Health Vote only for building contracts already entered into and some delays occurred in getting Government approval to raising the further necessary finance for the equipping of these projects.

I was concerned that, because of delays in commissioning, faults might not be discovered during the defects liability periods of the contracts but the Accounting Officer assured me that where facilities had been handed over and ‘moth-balled’ for a period before commissioning, they had been regularly inspected and equipment and plant had been checked out. He stated that, to date, the non-discovery of faults had not been a problem.

I also sought information on whether any constructive losses had been incurred as a result of the scaling down, deferment or abandoning of projects during or after the planning stage. In this respect the Accounting Officer considered that design changes arising from advances in medical technology and changes in treatment techniques must be regarded as part of a necessary ongoing planning process which resulted in most cases in actual building cost savings and in all cases in a more effective and cost efficient service and consequently could not be viewed as giving rise to constructive losses. Similarly, he felt that expenditure on projects which were subject to temporary deferment or necessary design changes arising from changes in the Exchequer position or in Government policy could not be regarded as a constructive loss.

He stated that none of the projects to which I drew his attention had been formally abandoned but that the financial constraints which had been a feature of public services since the early 1980s had, however, necessitated going ahead with certain projects on a phased basis and deferring other projects until later in the Department’s capital programme.

However, in regard to a mental handicap centre at Loughlinstown on which planning costs in excess of £1 million had been incurred he stated that further planning had been deferred pending an assessment of new approaches to the overall organisation of residential accommodation for mentally handicapped persons.

Mr. McDonnell.—The purpose of paragraph 66, as can clearly be seen, is to draw attention to the fact that several newly built hospitals and health facilities were left either partially or totally unused for long periods. The explanation for this is stated there immediately after the table, that is to say that while funds were made available to meet the contractual commitments for the building of the various units, funds could not be immediately made available to equip them because of financial constraints. The table also shows some direct spin-off costs paid by the Department itself on maintaining the unused facilities. I do not know — there is a footnote there to that effect — if there were further costs incurred, for instance by the health boards, but one could argue perhaps about indirect costs in terms of the lack of return on investment or indeed perhaps the costs associated with having to continue to use maybe less efficient facilities. Just to update you, Chairman, as far as I am aware, some of the facilities have become operational since the date of my report but some others still have not. For instance, if you look at the second last one on the table, Cheeverstown, I believe that is still uncommissioned. If you look at the very end of the paragraph where I referred to the planning costs of £1 million on the Loughlinstown mental handicap centre, that is not in the table because it had not been built; it was simply planning. I believe that no decision has yet been taken as to whether to go ahead with that.

Chairman.—What is the position, Mr. Hurley, with regard to the commissioning of the various units referred to there on the fourth heading from the left, uncommissioned at September 1989? Perhaps you would run down through them. Mullingar General, Phase I, and so on.

Mr. Hurley.—In Mullingar the paediatric unit is scheduled to open in a few weeks’ time. In relation to the Mater this was officially opened in September 1989 and all 66 beds are now commissioned. St. James’s. Outpatients and Accident and Emergency Departments are in operation since December 1989, and it is hoped to bring into operation day facilities in November 1990 and the burns units on 1 February 1991. The question of opening the remaining facilities will depend on the availability of resources next year. In Cavan the 25 bed psychiatric unit is due to open within a matter of weeks. Castlebar General was fully operational by the end of 1989. In relation to Tralee, 300 beds are currently open and a further 50 psychiatric beds will be open early in January. There are some difficulties in relation to Cheeverstown that I might speak about later on. In relation to Aras Attracta, basically we have now 51 residential places and 60 day places open. We are currently considering the transfer of 40 further people from St. Mary’s Hospital, Castlebar, and possibly some people from Stewart’s Hospital who come from Mayo and who could benefit from going back to their own locality. But in relation to Aras Attracta, the regional committee of the Western Health Board dealing with mental handicap are currently considering all the needs in that area. We will have that documentation by the end of the month and we will be in a better position to see what further needs to be commissioned there. We are not happy with the position in relation to Cheeverstown. We have been attempting to bring more of those facilities into use in Dublin where there is a need for such places. The position is that a number of attempts have been made to unblock the situation. At this very moment very sensitive discussions are taking place, led by the Federation of Voluntary Bodies providing services for people with Mental Handicap. Some meetings will be taking place within the next 48 hours. This is another attempt to resolve the problems of Cheeverstown. The Department are very anxious to see this situation resolved and intend to see it resolved. Discussions are very sensitive and I would not like to say any more about it at this stage.

Chairman.—What specifically is the problem?

Mr. Hurley.—Essentially it has to do with a lack of agreement between the Eastern Health Board and Cheeverstown in relation to how the places are used in Cheeverstown House. As I said, sensitive discussions are taking place at present. I am keeping in touch with them and I would hope that very quickly I will have the result of those. If the discussions are not successful, other ways will have to be found to bring Cheeverstown House into operation.

Chairman.—Let me run down through a couple of these before I come back to the question of Cheeverstown. Aras Attracta, completion date May 1985, 160 residential beds, 60 day places. We still do not know when these beds are to be occupied. What number are occupied at present?

Mr. Hurley.—Fifty-one.

Chairman.—Two-thirds of the beds are unoccupied?

Mr. Hurley.—In relation to the non-commissioning of particular units you have to think back to the position of the health services over the last few years. There was a significant reduction in health expenditure.

We had to make a management decision, would we try to limit the number of beds which were closing, beds currently in use, or would we push ahead and bring new units on stream which would essentially threaten or damage some of the existing insitutions? We had specific authority, as I referred to when we were dealing with the previous questions, to borrow up to certain sums to equip and fit out some of these institutions, but within limits. The public expenditure situation in relation to the health service must be taken into account in relation to what has happened in recent years. Going through each of the ones I have mentioned, I think that certainly in the last 12 months, very substantial progress has been made, and currently in relation to Aras Attracts specifically, a number of different measures are being considered which, hopefully, will not take too long to resolve and which will bring more of that institution into use. But we have to live and cope within the resources made available to us in particular years.

Chairman.—The point is that Aras Attracta was completed in May 1985 with 160 residential beds but that less than one third of them are occupied at present; Cavan General Hospital was completed in October 1987 and is to open shortly. What about the question of the faults which might be discovered during the “defects and liability” period? How is that covered contractually? If, for instance, you discover when you do eventually open these institutions that there are defects in the buildings, how will this be covered contractually if the faults period has passed by?

Mr. Hurley.—Essentially the buildings are inspected regularly and are heated and maintained during the period of non-commissioning. It has never been a problem in the past. These inspections take care of any difficulties that might arise.

Chairman.—In relation to the last heading, maintenance security costs while unopened, I think I totalled that to come to £1.3 million. What is the current total cost? That was at the date of the Comptroller and Auditor General’s report. How much has been spent to date?

Mr. Hurley.—I do not have that figure with me but I will supply it.

Chairman.—Would you not want to know, for instance, if the cost of security compared to the cost of actually opening the institutions was relative? Have you looked at the figures from that point of view? What would it have cost to have the institution open to a greater extent than it has been as against having it in mothballs with security men minding the building?

Mr. Hurley.—These trade-offs are looked at constantly and you can take it that there is no doubt about where the balance of advantage lies. I have not got the specific figures in question and the exact up-to-date position, but I will supply it to the Committee.

Chairman.—Would it have exceeded £2 million?

Mr. Hurley.—I doubt if it would; I would imagine that is the bulk of the cost but I will confirm it.

Chairman.—What about expenditure by the health boards in addition to this expenditure? Was there additional expenditure by the health boards in securing these buildings?

Mr. Hurley.—No, this would have been the expenditure involved and I think anything else would have been marginal. I think very marginal expenditure is permitted, not just under this heading but under other headings.

Chairman.—One million pounds was spent on the planning stage of Loughlinstown. What has happened since?

Mr. Hurley.—Loughlinstown is a particular case. Essentially the planning of Loughlinstown began in the late seventies and very significant developments have taken place since that time in the treatment and care of people with mental handicap. Essentially the philosophy is that people ought to be taken care of in the community where this is possible. As this new approach to mental handicap was evolving in the early eighties, a decision was taken to review the necessity for Loughlinstown. With the establishment of the regional committees dealing with mental handicap in the health board areas, assessments are now being made of the various needs that are required and the situation in relation to Loughlinstown has to be reviewed in the light of that assessment. I cannot say at this stage whether Loughlinstown will go ahead but there are possibilities that the plans or portions of them will be used elsewhere — if not on that site, on other sites. I am not in a position at this stage to say it is not going ahead.

Deputy Cullimore.—I understand that patients spend a lot less time in hospitals now than in the early seventies. In view of that, do we need the same number of beds?

Mr. Hurley.—It is true that changes have taken place and that there has been a very significant drop in the length of stay of patients in hospitals. This has in some cases affected the necessity to bring all the institutions into use at particular times. We have to take stock of that, depending on the needs in particular areas and on the resources which are made available to us in a particular year. We have to apply those resources to ensure that the facilities we have are not closed to make way for other institutions which are not absolutely necessary for service reasons.

Deputy Connor.—Under paragraph 66 in relation to the heading “Maintenance Security Costs while unopened”, I notice that of the eight projects, four did not have any costs while unopened. That is a bit difficult to understand given that you said they were heated, lighted and so on. There must have been some maintenance costs.

Mr. Hurley.—I suppose the difference stems mainly from whether there is an existing institution there. The costs would be reflected in that. If there is a new institution the costs are likely to be higher; I think that would be the reason.

Deputy Connor.—In other words the procedure is that if the unit is part of an existing institution, its maintenance, heating and lighting costs, even though it is unused, is included in the heating and lighting costs of the main institution that is being used.

Mr. Hurley.—In some cases there would be very little additional cost involved. If you look at the end of that table you will see there is a footnote which covers a very small additional expenditure. New institutions clearly cost very much more to maintain during this uncommissioned phase.

Deputy Connor.—I do not know where the responsibility lies here, but do you believe that the health board or your Department make sufficient efforts to bring these new institutions on stream? They make great news while they are being planned and built. However, in my own county of Roscommon, attached to the county hospital for the last year there stands an unopened psychiatric unit with 30 or 40 beds. The whole floor of a hospital is unopened — completely furnished, heated, lighted and so on. Taking that as an example, I am not satisfied that sufficient efforts have been made to open these very necessary units.

Mr. Hurley.—Very strenuous efforts are being made to open that facility. I think that at the moment negotiations are taking place with the unions in question to see how the staff required can move to the new institution. Every effort is being made by the Department of Health to commission all new units as quickly as possible. At the outset I said that this was very much dependent on the overall level of resource provided to the Department of Health and — going back to the previous question — of the extent of capital or loans that we are permitted to raise for that purpose. It is for this reason — referring to previous questions — that we make such strenuous efforts to get very favourable terms and on it depends then how many of these units can be brought on stream. There are no delays as far as the Department are concerned. These institutions are needed and we are very anxious to commission them but we are constrained by the overall level of resource.

Deputy Connor.—You talked about management decisions being taken at the commencement of the year when you know what your resources are. Could you give us an insight into how these management decisions are made between the Department and the health board — this is in relation to those institutions which are built and ready for opening but have to remain closed until further money comes on stream? Could we get some insight into how these management decisions are taken? Who has the greater influence or is that the way it works? Apparently there is some kind of joint management decision between the health board and your Department.

Mr. Hurley.—Essentially we lay down the policies and guidelines for the implementation of those policies and we try to see that they are implemented right across the country, whether the area is psychiatric, care of the elderly or acute hospitals and so on. It then becomes a function of the level of resource that is available in a particular area.

Deputy Rabbitte.—Congratulations Mr. Hurley on your assumption of the office of Secretary. In terms of the questions you have answered and in the context of the resources constraint on you, which we all understand and with which we sympathise, in the case of Cheeverstown House it is not really a question of resources. You have asked us not to probe that matter too deeply but is the Cheeverstown situation not reaching scandalous proportions? There is a crying need for the places that are there, and here we have this purpose-built institution, with every modern convenience and so on, yet we seem to be as far from resolution as we were five years ago.

Mr. Hurley.—The Department are very unhappy about the situation in relation to Cheeverstown House. Clearly more of that facility would need to be in use to meet the needs in the Dublin area and I can assure you that we are making every effort to bring that about. We have to acknowledge that we are dealing with voluntary institutions and we have to recognise the contribution which voluntary institutions have made to our health service over a long period of time. Normally we do not have difficulties but in this case we have. It is not for me to apportion blame at this stage. The discussions are continuing between the parties. Knowing that a meeting is coming up within the next 48 hours, all I can say is that we want to see progress in relation to Cheeverstown House and at the moment we are trying to achieve that by negotiation.

Deputy Rabbitte.—Do you accept that there will come a stage — it probably has been reached and passed — when decisions will have to be made? Is it two years or more since the Minister appointed the former commissioner of the Garda Síochána to facilitate a solution in this respect? I do not know whether he is still in place and trying to deal with it; all I know is that I, like, I am sure, every other Deputy on the west side of Dublin and, indeed throughout Dublin, have the most harrowing cases on hand of parents who feel they are no longer able to cope with the problem in the home or parents who have to deal with it Sunday, Monday and Tuesday — everyday. It is not a political lobby of any significance but people who have this problem go through a terrible personal crisis. Here we have the finest of institutional care but we cannot commission it because of a dispute that seems to the public to be incomprehensible.

Mr. Hurley.—The Deputy is correct. A number of attempts have been made to rectify this over the past year. I am keeping in very close touch with the current initiative. The urgency of the matter has been brought home to the people in question and I hope it will be resolved very quickly. If the matter is not resolved, then we will have to consider alternatives. We are very anxious to protect the voluntary tradition in our health service and we should try to resolve this matter by negotiation first.

Deputy Flood.—With regard to the commissioning of the various projects, could you explain what precisely is meant by “commissioning” with regard to the structure and equipping? Is that usually regarded as one specific exercise?

Mr. Hurley.—No, Deputy, equipping comprises another stage and very often that is the reason we are given authority to raise loans to equip institutions which need to be commissioned. Commissioning takes place some time after that. In relation to the cost of maintenance, security, heating and so on there is always a lead-in time between the building, equipping and commissioning of an institution. Costs will always arise under that heading. It could be argued that they are greater than they should be in this case but there will always be costs under that heading; it will never be blank.

Deputy Flood.—What is the strength of an architects’s practical completion certificate relative to the ongoing liabilities of the contractor for works carried out? Is he, in effect, handing over the building with no further responsibility accruing to the contractor?

Mr. Hurley.—Except in accordance with the contract but I would have to look up a specific case. The normal liability, in relation to buildings would continue but the building would be handed over to the board or hospital authority in question. As a result the costs in the right hand column of the table under discussion would arise. As I said earlier, inevitably, even when there are very few constraints on expenditure, there will always be a gap between the building, equipping and final commissioning of institutions, and there will always be a cost.

Deputy Flood.—With regard to Cheeverstown House you referred to efforts and initiatives, were those undertaken by the Minister for Health?

Mr. Hurley.—Deputy Rabbitte referred to a specific one undertaken recently. Further initiatives will be undertaken by the officials of the Department to try to get the parties to reach agreement. We are keeping in close touch with the present initiative and are hopeful the matter will be resolved quickly. The Department are not happy with this situation.

Deputy Flood.—Can you confirm that the reason beds remain unopened or unused in Cheeverstown House is not the lack of financial commitment but rather the lack of an appropriate agreement?

Mr. Hurley.—The primary reason is the lack of an agreement between the Eastern Health Board and Cheeverstown House on the placement of people. The extent to which any institution can be commissioned depends on the overall level of resources made available. This is a problem that arises in relation to all institutions. The Department are very anxious to commission more places in Cheeverstown House given the need for such places in Dublin.

Deputy Flood.—Were the committee, set up under former commissioner Garvey on 1 January 1989, not given a term of one year? What became of that initiative and are that team still in position?

Mr. Hurley.—The Committee did not succeed in getting the board and Cheeverstown House to reach agreement and are not currently in place. That initiative was not successful. Further attempts are now being made to try to resolve this matter.

Deputy Flood.—What happened and what became of that committee?

Mr. Hurley.—They are no longer functioning. Various difficulties and legal problems arose in connection with the role of the committee, Cheeverstown House and the health board. The committee failed to resolve the impasse. As a result other efforts are now being made. The officers of the Department are encouraging those efforts, are keeping in very close touch with them and expect to see progress soon.

Deputy Flood.—Did that committee issue a report or memorandum on their activities and, if so, what were their conclusions? Did they just disintegrate?

Mr. Hurley.—They were set up to do a particular job but they did not succeed in completing that task. As a result other efforts are now being made.

Deputy Flood.—Did they produce any written report?

Mr. Hurley.—As far as I am aware no formal report was issued by that group.

Deputy Flood.—Would it not have been reasonable to expect such a report which could have been part of this discussion? Obviously, we are all interested in the project and wish to ensure that the house is utilised to the maximum possible extent.

Mr. Hurley.—The Department kept in close touch with the chairman and members of that committee and were made aware of the difficulties which arose. As far as I am aware, no formal report was issued. When success was not achieved we made other efforts, recognising the ethos of the voluntary institution involved in Cheeverstown House, and tried to resolve this by negotiation. We are not happy with the situation, we want to see the matter resolved and it will have to be resolved.

Deputy Flood.—I do not have to point this out to you but just for the record, are we not talking about capital grants of almost £9 million together with an annual subvention to Cheeverstown House? I accept we are talking about a voluntary institution but huge amounts of taxpayers’ money are involved. It continues to be the case, as Deputy Rabbitte has already said, that many residential beds are urgently required by people in the area. In your contact with Cheeverstown House are you dealing with one board? What is the management structure of Cheeverstown House? This is important because it might help us to understand exactly where we are in relation to this matter.

Mr. Hurley.—Cheeverstown Convalescent Home emerged in 1904 and is an unincorporated charitable association. In 1975, Cheeverstown House Limited was incorporated, a company limited by guarantee, for the purpose of providing services for the mentally handicapped. We were involved at that stage in the planning of the project. The responsibility for the funding of the project was transferred to the Eastern Health Board in 1986. Cheeverstown House Limited remains responsible to the the charity for the property itself and for its maintenance and repairs. It is a complicated situation. The complications have not helped us in resolving this matter. I can say very little else other than what I said already, which is that we are making every effort to ensure that the problem is resolved. We do want very much to respect, as I said, the voluntary traditions of the institutions contributing to our health service and that is why we want to resolve this by negotiation.

Deputy Flood.—You referred to Cheeverstown House Limited being formed in 1975 and Cheeverstown Convalescent Home which came into being in 1904. Are there any other companies, limited or otherwise, as part of what we know to be Cheeverstown House?

Mr. Hurley.—The only other body that is involved in relation to Cheeverstown House seems to be a fund raising body which was established in 1986 or 1987 and I think that is called Cheeverstown Home Limited. Cheeverstown House Limited remains responsible to the charity for the property itself and for its maintenance and repair. The only other body is the fund raising body I referred to.

Deputy Flood.—Why would there be a separate body for that purpose? Is it to deliberately cut off the control of fund raising from the management of Cheeverstown House 1975 Limited? What are the implications?

Mr. Hurley.—I cannot say, Deputy. Perhaps this was the most efficient way of fund raising. Perhaps they found it more efficient to have a separate organisation to do that.

Deputy Flood.—Do you know if it has any assets?

Mr. Hurley.—I do not know. I am not aware of that.

Deputy Flood.—Are you entitled to seek that information?

Mr. Hurley.—I think that there is quite a bit of information in this whole area that, given the legal structures, I am not entitled to.

Deputy Flood.—It seems that every time we ask a question to try to unravel this situation, which obviously takes us right back to the initiatives of the Department of Health in trying to resolve it, we come up against another company that has been formed to put distance between the management board of Cheeverstown House, however it is constructed or wherever it draws its personnel or membership from, and the actual day-to-day running of Cheeverstown. It is somewhere in there that the initiative by Mr. Garvey seems to have broken down.

Mr. Hurley.—Could I say that it seems to me that the type of funding arrangements and the type of incorporation for funding arrangements that have taken place would not be unusual in relation to voluntary hospitals and to voluntary homes. This has happened before, but I do not have the detailed information in relation to the financial operations of that organisation.

Deputy Flood.—If these initiatives fail, what powers are available to the Minister for Health to bring an end to a situation where this facility is totally under-utilised?

Mr. Hurley.—The position is that clearly legal advice is being taken by the Department in relation to all of these possibilities, but we are far more anxious to resolve this by negotiation. We believe that the contribution by voluntary organisations to our health service has been a key one in the past. We do not have difficulties with the bulk of those organisations. We have a difficulty in this case and we want to resolve it by negotiation. If the current initiative fails we will simply have to take stock as to what action needs to be taken but I would not like to make any definitive statement on it now.

Deputy Flood.—Bearing that in mind I think it should be the view of this Committee that, since this facility which has been provided largely at taxpayers’ expense is vastly under-utilised, the Minister take whatever action is ultimately necessary if this particular initiative fails. I would like to suggest that that ought to be the position of this Committee because of the expenditure implications involved.

Chairman.—This is something which is of great concern to the Committee and to individual members. It might be the sort of facility the Committee might wish to visit in the event that some reconciliation to this problem is not soon found, Mr. Hurley, because as Deputy Flood and Deputy Rabbitte both state, a lot of State funds have gone into this facility. It might be described as the jewel in the crown of health services if it were open. It is certainly something exceptional even by European standards. I happen to be personally familiar with it. This whole sad saga has to be somehow brought to a close. It might help to concentrate minds if the Committee were to go there and inspect the assets which are lying dormant, but perhaps we would not do that in the immediate future but give you an opportunity to come to some reconciliation and if that does not work we might think of a visit there perhaps in the new year.

Mr. Hurley.—I think that might be appropriate. I would be hoping that our current efforts will resolve the problem but if they are not successful we will have to go back to base and see what can be done and we would be delighted, if at that stage, you were interested in visiting the facility.

Chairman.—Would the Committee agree with that?

Deputies.—Agreed.

Deputy Dennehy.—To go back to the question of the unopened facilities and the implications for maintenance particularly, and for responsibility and the Comptroller and Auditor General’s comments that he was concerned that because of the delays in commissioning faults might not be discovered during the defects liability periods of the contracts, could I ask is there any specific time allowed for structural defects to show up? Let me quote two specific examples of institutions that were open a while, Cork Regional Hospital and Tralee General. They both had major collapses of brickwork and this kind of thing which were totally unexpected. Would the delay factor affect charge on these in any way or the responsibility for them? Is there an automatic recovery mechanism for such defects or is it necessary to go to law each time to have legal recourse? In the regional hospital in particular, there was a major defect. This could be ongoing because it is obvious there could be a repeat of a particular incident where brickwork just collapsed and fell outwards from the building.

Mr. Hurley.—On the first question, I think that the contracts in relation to Cork Regional and Tralee protected a situation there and both hospitals had been commissioned and the defects occurred some significant time after they had been in operation. I think that the legal situation was clear there. On the second question as to whether one has to go through the courts or what the legal process is, this would depend on the circumstances and on the detail of the contract. Up to now that has not been necessary but it might well be necessary depending on the willingness of the particular contractor to put right the problems that had arisen. We would hope that that would not be necessary. These are people who have contracts throughout the health service so they would be very anxious to put right some of the problems that have arisen. But this does not happen very often. It has happened in relation to those and I think the contracts stood up.

Chairman.—Will you send the Committee an update on the maintenance and security costs involved.

Mr. Hurley.—I will, Chairman. I will send you the up-to-date cost.

Chairman.—We will note this paragraph for now and in regard to the Cheeverstown situation you have noted the Committee’s decision on that.

Paragraph 67 of the Report of the Comptroller and Auditor General reads:

Health Education Bureau

The Health Education Bureau was established under the Health Education Bureau (Establishment) Order, 1975 with the objectives of advising the Minister on the priorities of health education and of drawing up, promoting and funding programmes of health education, including research at local and national level in co-operation with statutory and voluntary bodies engaged in health education. In the period 1975 to 1986 its activities were funded from the Health Vote and a total of some £13.9 million was issued to the Bureau from voted moneys. In 1987 the National Lottery became the source of its funding from which it received £1,783,000. Following a Government decision to transfer the functions of the Bureau to a Health Promotion Unit within the Department, the Bureau was dissolved on 31 December 1987 by way of a revocation order and its functions, assets and liabilities were transferred to the Minister for Health.

The main asset of the Bureau was its premises. These were sold in 1988 and the proceeds, £635,932. were brought to account as Appropriation in Aid of the Health Vote and the same amount was provided by Supplementary Estimate to meet the 1988 cost associated with the refurbishment of Hawkins House for the Department of Health. The furniture and equipment of the Bureau were taken over by the Department. The realisation of the Bureau’s current assets was used to fund the discharge of its liabilities to the extent possible. The shortfall was met from National Lottery moneys and £205,207 was made available in 1988 for this purpose. All the staff of the Bureau were offered redeployment within the health sector but most opted for redundancy. The cost of redundancy payments to these staff was £146,428 which was met from the Vote for Public Service Early Retirement Payments.

The final accounts of the Bureau have been audited by me.

Mr. McDonnell.—Paragraph 67 is for the information of the Committee. It deals with the closure of the Health Education Bureau and gives you the details of what it has got by way of State funds during its existence. You will see that altogether it got approximately £16 million. Its assets have been disposed of — the main one being the building, which realised £636,000. In fact all the loose ends in relation to the closure of the Bureau have been now tied up.

Chairman.—We will note the paragraph. On subheads A.1. to G.2. — I want to ask a specific question in relation to Beaumont Hospital. Was there any suggestion that, shortly after the hospital opened, some of the windows had to be replaced?

Mr. Hurley.—It is possible, But I am not aware of that.

Chairman.—Can you have that specific question examined and let us know if that was the case, the cost and why that happened?

Mr. Hurley.—I will.

Deputy Dennehy.—With your permission, Chairman, I would like to include three extra subheads —G.3, G.4 and G.5 — because I have a question on them. When these are added up they amount to £1.2 billion. Can Mr. Hurley tell me if there is any mechanism to inform me exactly how much of this money, and other sources, would go into each of the eight health boards’. Is that the total amount made available for health care? Are there hidden budgets for voluntary agencies and for various things? Can we actually identify the amount under all the headings? The reason I am asking this is that we get a blanket figure for the health boards allocation for the eight regional health boards and it appears to be evenly divided.

For instance, the recent figures for the appointment of consultants throughout the country are disgraceful, to put it mildly. The Eastern Health Board whether because Comhairle na nOspidéal are biased or whatever, would appear to be creaming off a minimum of 50 per cent of the total appointments under new and replacement positions. When we start questioning that we are told somebody can save money or this or that can happen, but there is a perception by the Southern Health Board that through various mechanisms and money put through different headings, block grants, etc., the Eastern Health Board are getting more than the pro rata share. Is it possible in any given year to tell us the amount of money allocated for health care under every heading in the Eastern and Southern Health Boards so that we can compare those figures?

Mr. Hurley.—There is no problem supplying those figures. I think that they would have been given in reply in parliamentary questions at some stage.

Deputy Dennehy.—The only figure I have managed to find is the board allocation for a given year — say 1987-88, or any year you want, that is the global figure, of, say, £134 million for the Southern Health Board — end of story. There are many things we cannot easily dig out in respect of balances of grants for years prior to 1988. The Beaumont Hospital figures are covered under various headings and we have a feeling——

Mr. Hurley.—There is no difficulty giving details of whatever is required. The only subhead that is not included — I think the Deputy referred to subhead G.3 — is the GMS which would not, of course, go directly to the boards; it would be funded through the GMS (Payments) Board. There is an abstract of accounts for each health board which give substantial details in relation to the financing and funding of those boards. There is no great difficulty here as I am sure that information is available.

In relation to the Eastern Health Board area, what has to be remembered when you refer to appointments in health board areas is that many of the tertiary referral hospitals in the State would be in the Eastern Health Board area. Their consultant and medical staffing is quite substantial and they would be larger, with a few exceptions, than the hospitals in some of the other health board areas. That would probably be the reason for the increased numbers being appointed. The Eastern Health Board is the largest area and encompasses the highest number of acute and tertiary referral hospitals.

Deputy Dennehy.—We are a small board covering Cork and Kerry but we do have a few major hospitals and quite a few consultants. When you get a figure for the replacement appointments — 37 in total — and the Eastern Health Board get 17, 18 or 19 and the Southern Health Board nil, there must be something wrong. We would get six out of 92 appointments, and that is not relative to population or any figures we use. That is why I wonder is there some other mechanism used. Cheeverstown was mentioned quite often and I presume there was a facility under the mental health programme. Are payments made under different headings that would not go through the boards, or would not be accounted for in the direct heading? We have the GMS breakdown, so there is no problem there but there are the other areas.

Mr. Hurley.—In many of these institutions, particularly in Cheeverstown, the payment would go directly through the Eastern Health Board in terms of current costs. Building this facility was a different matter and would have been handled via our capital programme. Regarding the question of appointments, the same criteria are applied nationally. The only thing that is different is the capacity of a particular institution to pay for increased numbers of staff at a particular time. That is a function of that institution. Very often that will determine the priorities being employed by different institutions in relation to filling posts.

Comhairle na nOspidéal I am quite sure deals with this in a very even handed way; it is a very prestigious body and is representative of the country at large. I do not believe there would be any in-built bias to any part of the country. The Eastern Health Board encompasses by far the very largest of the tertiary referral hospitals. I come from Cork and I would not want to be accused of saying anything negative in relation to the Cork Regional Hospital or the Tralee Hospital but the reality is that by and large the major tertiary referral hospitals are in Dublin and they encompass very significant levels of staffing.

Deputy Dennehy.—Not taking from the integrity of the members of Comhairle na nOspidéal, if the Dublin hospitals are so short of cash how are they getting the same treatment as the rest of the country? How can they afford all these consultants at any given time? In relation to the money for Cheeverstown — which you say it goes through the health board — how would it be shown in their budget for the year in the revenue account, the capital account or would it be a separate top up mechanism?

Mr. Hurley.—I understand it is a separate heading within the overall health board allocations. On the question of posts again I would make two points. When you are looking at posts you need to look over a number of years. It could be that a particular institution did not fill a number of posts in a particular year and it would be “catching up”. Also, a number of the appointments made by Comhairle na nOspidéal would not be new appointments but would be replacement appointments and they would depend on how vacancies arise and the frequency with which such vacancies arise. There are good reasons the pattern is as it is, and I am certain that the criteria are applied nationally and on an evenhanded basis.

Deputy Dennehy.—Under either heading the Southern Health Board fared badly while the Eastern Health Board fared very well. The figures at last Monday’s meeting show this to be the case. If I could have a breakdown of the figures for any given year — say, 1988 — I would be quite happy.

Mr. Hurley.—In relation to consultant appointment?

Deputy Dennehy.—No; for the overall funding made available for health care under all headings for the eigth regions; I would be quite happy with that.

Mr. Hurley.—I will get the figures and send them on to you, Deputy.

Deputy Flood.—The Chairman asked for a report on the windows at Beaumont Hospital. Can we also get a report on the communications system there as I understand you had serious difficulties with the communications system in the hospital after it was opened.

Mr. Hurley.—On the communications system, telephones?

Deputy Flood.—Yes. Are we dealing with the items on page 180?

Chairman.—I think at this stage we can take the items on pages 179 and 180 together.

Deputy Flood.—With regard to Subhead G.6, how many claimants do you now have in respect of disablement payments to Thalidomide victims?

Mr. Hurley.—I think there are 32 cases.

Deputy Flood.—Can I take it that there is an average payment?

Mr. Hurley.—The lump sums range from £5,051 to £16,892.

Deputy Flood.—Are the cases located throughout the country?

Mr. Hurley.—Yes, they are scattered all over the country.

Deputy Flood.—Are any of the claimants institutionalised?

Mr. Hurley.—I cannot say for certain what the position is on that but clearly it would depend very much on parents, etc.

Deputy Flood.—With regard to Subhead G.8, Grants to Research Bodies, is an amount included in that for AIDS research?

Mr. Hurley.—No, there is not a specific sum included. Of course, this would be additional to the normal research which takes place in hospitals and which is covered via the normal subvention made to the institutions in question. I do not see a specific sum for AIDS research in this subhead but I will check this out. The only area covered is immunology which might well embrace AIDS research. I do not think AIDS research is covered specifically under that heading and it probably may be covered via the funding for the institutions in question. I will check this out for you.

Chairman.—The question of the arrears of audit of health boards was of major concern to the Committee. Do you have a schedule of the current situation in relation to that?

Mr. Hurley.—All the boards have been audited up to the end of 1988.

Chairman.—And the 1989 audits are well in hand?

Mr. Hurley.—They would be. The achievement of the up-to-date position should allow audits to take place on a yearly rather than a two yearly basis. The situation has been much improved.

Chairman.—Are there any other questions on the Vote?

Deputy Cullimore.—The Irish Society for the Prevention of Cruelty to Children have been allocated £90,000. I understand the Childline provided by the ISPCC had over 25,000 callers every year. Do you have any idea of the type of calls they are receiving and is there any co-ordination between the Department of Health and the Irish Society for the Prevention of Cruelty to Children?

Mr. Hurley.—There is a good deal of contact by the Department with the organisation in question but I do not know if we are actually monitoring the specific nature of the calls. I can follow that up and communicate with you. Any pattern which would emerge would be considered by the child care unit in the Department of Health——

Deputy Cullimore.—Is there any tie-up between the health boards and the ISPCC given the large number of calls? These children must have some very fundamental problems and it is important that they be helped.

Mr. Hurley.—I think all of the institutions, including the ISPCC, who get aid from the State, whether from the Department or the health boards, would have a great deal of contact. I understand — I do not have specific figures — that the ISPCC get significant funding from the health boards in addition to departmental funding. Therefore, there would be very strong liaison between the boards and the organisation.

Chairman.—Are there any other questions on the Vote? That completes the examination, Mr. Hurley. Thank you very much. I hope it was not as bad as your first confession.

Mr. Hurley.—No, it was not as painful.

The witness withdrew.

The committee adjourned.

* Any expenditure which may have been incurred and charged to the health authority’s revenue account is not reflected in these columns. State capital grants do not include moneys paid to hospital authorities to meet their repayments of borrowings to fund expenditure on equipment.