COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 20 Jan 2005

Beaumont Hospital Board — Annual Financial Statements 2000, 2001 and 2002.

Mr. J. Purcell (An tÁrd Reachtaire Cuntas agus Ciste) called and examined.

Mr. L. Duffy (Chief Executive, Beaumont Hospital Board) called and examined.

Chairman

Witnesses should be aware that while members have absolute privilege, witnesses before the committee do not enjoy such privilege. The attention of members and witnesses is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce and send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents, and the right to cross-examine witnesses. For the most part these rights may only be exercised with the consent of the committee. Persons being invited before the committee are made aware of these rights and any persons identified in the course of the proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in any such way as to make him or her identifiable.

Members are also reminded of the provisions within Standing Order 156 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.

I welcome Mr. Duffy. Will you introduce your officials?

Mr. Liam Duffy

With me are Mr. Gus Mulligan, our financial controller, and Mr. James Rogan, our internal auditor.

Chairman

Will the delegation from the Department of Health and Children introduce themselves?

Ms Dympna Butler

I am a principal officer in the PPP unit.

Mr. Peter Finnegan

I am a quantity surveying adviser in the hospital planning office.

Mr. John Purcell

There are three years' accounts before the committee. The committee may wish to note that I certified the 2003 accounts in December 2004.

The matter at issue here today arises on the 2001 accounts which contains a supplement to my audit report which draws attention to control weaknesses in the hospital's procurement procedures, particularly in the technical services department in the years 1999-2001. The report notes that normal tendering procedures were not being adhered to and that required approvals were not sought either before undertaking work or awarding contracts and that arrangements to permit urgent minor repairs to be carried out without recourse to tendering were being used to circumvent previously agreed procedures.

Consequent on difficulties being experienced in being notified of the time and location for the opening of tenders, internal audit carried out the first of its audits of procurement in the technical services department during the first quarter of 2001. This audit focused on security installation contracts awarded by the hospital since November 1999. This and further audits carried out in 2001 confirmed there were serious problems with the way in which procurement was operated in the department.

Ultimately, it was established that all construction work in the hospital from 1998 to 2001 to a value of €3.3 million had been carried out by one contractor. While this of itself would not necessarily point to anything untoward, the fact that there was evidence of retendering for work already completed, payment for work that had not been done and reasons to doubt the authenticity of certain tenders strongly suggested irregularities in the procurement process in the department. A firm of quantity surveyors was engaged to report on the value of works executed. On the basis of examining eight projects, the firm concluded that a reasonable cost for works undertaken was €368,000 while the amount charged to the hospital in respect of those eight projects was more than double that. On foot of the quantity surveyor's report, the hospital withheld €200,000 which had been invoiced by the contractor. The technical services manager resigned and the matter was referred to the Garda Síochána whose investigations, I understand, are still ongoing.

Apart from the issue covered by the supplement, the committee may wish to get the up-to-date position on the multistorey car park which was the subject of a value-for-money report in the recent past. I understand the illegal parking which gave rise to the payment of substantial amounts in fines to the operator has been addressed with the result that the hospital is now receiving a reasonable level of income from the arrangement.

For completeness, I should also mention that my special report on the health sector audits published late last year refers to difficulties encountered by Beaumont Hospital in collecting charges for laboratory services provided for patients of the Beaumont Private Clinic which is located in the grounds of the hospital. These difficulties are part of a wider problem regarding the charging for services by public hospitals to private medical institutions and their patients. I have suggested to the department that certain aspects of the charges regime need to be clarified.

Chairman

Thank you, Mr. Purcell. I thank Mr. Duffy for forwarding his opening statement to the committee. We have already had a short discussion in private session, but we must thank you for it and publish it in full. For the purposes of the public session, there was a view that it was quite a detailed statement. The committee would, therefore, prefer it if you could speak to the statement and highlight the principal issues and, in particular, take up the three issues referred to by the Comptroller and Auditor General.

Mr. Duffy

As the chief executive of Beaumont Hospital, I am pleased to have this opportunity to appear before the Committee of Public Accounts and to give account of our management of the hospital for the period under review.

My statement is quite detailed and covers the background to where the hospital is at at present, the services it is providing and the initiatives we are developing, particularly our recent acquisition of St. Joseph's Hospital in Raheny, which is a significant development from our point of view. I have also alluded to the fact that we are committed to the implementation of the ten-point plan published by the Tánaiste and Minister for Health and Children to address accident and emergency issues. I have also referred to our role as a national and regional centre for the delivery of health care and the complicated environment in which we operate. Having said that in my statement, I will concentrate on the issues referred to by the Comptroller and Auditor General.

In the Comptroller and Auditor General's supplement to his audit report he provided a detailed report on the question of procurement policies and internal controls within the hospital, particularly in respect of the contracts awarded by the technical services division. These arose from certain concerns raised by me in my previous position. I was appointed chief executive in December but prior to that I was the general manager with responsibility for the technical services department as well. At that stage, in May 1999, I raised issues with the technical services department regarding the use of service request authorisations for the awarding of contracts rather than proper tendering procedures.

Arising out of this concern and investigations undertaken by our internal auditor, additional concerns were identified in respect of certain works commissioned by the same department. The Comptroller and Auditor General identifies this matter in his report on this matter. Our internal audit function identified and pursued the issue further, including an undertaking to review all of the construction work on the hospital site between 1998 and 2001, which raised further concerns from our perspective. As the Comptroller and Auditor General indicated, we also employed a firm of quantity surveyors and they identified that in respect of eight projects, the amount charged was significantly greater than what it deemed would be a reasonable cost.

I would point out that our internal controls did work, although we learned considerable lessons and made fundamental changes in procedures on foot of that. Formal policies and procedures for purchasing in TSD were introduced in April 2001 and further instructions introduced in 2002. New quotation and tender procedures for the department were introduced in June 2003 and a formal policy covering procurement in tendering throughout the hospital was approved by the board in August 2003. Sign-off procedures have been strengthened and provision for examination of tenders before payment has been included in the procedures of the finance function. We have also employed external project managers to monitor all major projects on the campus and capital expenditure of a significant nature. That also refers to the fact that we are implementing a €30 million refurbishment programme under the auspices of the national development plan.

At this stage I can say that the controls are in place. I agree with the findings of the Comptroller and Auditor General. The issue is with the appropriate authorities and a decision has not been made on whether this issue is to be taken further. That is in regard to the issues that arose in the technical services area. If the Chairman agrees I will move on to the issue of the multi-storey car park.

Chairman

Yes.

Mr. Duffy

As the Comptroller and Auditor indicated, in 1999 the hospital developed a multi-storey car park in a public private partnership which utilised tax incentives then available for such purposes. Certain problems subsequently emerged with both implementation and operation of the scheme and in November 2002 the Comptroller and Auditor General published a report on the multi-storey car park scheme.

As noted by the Comptroller and Auditor General in his report, the hospital had identified all relevant problems and was in the course of addressing them. I can confirm that the transfer of the site back to Beaumont Hospital has been registered. No fines or charges have been incurred since March 2002 as per a new agreement negotiated with our private sector partner in the venture and the car park is now operating as originally planned, with an annual income of some €750,000 accruing to the hospital. Ownership of the car park will revert in full to the hospital in 2011.

There is an outstanding issue in relation to the hospital's liability to tax and income from the car park in respect of the years 1999 to 2003 and we have made provision in full in respect of this in the 2003 accounts. However, we are appealing against this potential liability and the hospital has, in effect, reserved its position with respect to recouping any potential liability from certain advisers involved in the structuring of the original deal.

The third issue under review also reflects an outstanding issue concerning the liability, if any, of consultants using the Beaumont Private Clinic to pay for laboratory services provided to them. This issue is by no means unique to Beaumont. At its core is the question of whether they are entitled to free laboratory services as part of their entitlement under their contracts with the hospital because the private clinic is deemed on site.

Under instructions from the Department of Health and Children, Beaumont has invoiced the private clinic for these services but has not received payment and the issue has not been resolved, despite a number of attempts at negotiation. This is not a simple issue. The private clinic is clearly classified as on site for the purposes of the consultants' contract and is also treated as such for the purpose of the clinic indemnity scheme. We have taken our own legal advice, which is equivocal on the issue, and discussions are taking place with the Department of Health and Children regarding the next steps in this issue. As I stated earlier, this is an issue which affects other hospitals as well as Beaumont. That is my response to the three issues raised.

Chairman

Thank you, Mr. Duffy. May we publish your statement in full as presented to us?

Mr. Duffy

You may.

Chairman

Thank you. Deputy Ardagh and Deputy Hayes, who is substituting for Deputy Rabbitte, will begin the examination. As we agreed in our protocol, Deputy Ardagh has 20 minutes and Deputy Hayes has 15 minutes. Other members will have ten minutes when called on subsequently.

Deputy Ardagh

On the three items highlighted, what did the Comptroller and Auditor General mean when he referred in his opening statement to circumventing previously agreed procedures? What were the previously agreed procedures and how were they circumvented? Will he give more background on that?

Mr. Purcell

The prime example of what I meant was the use of these works orders for urgent small works instead of putting a significant amount of work out to tender. These so-called SRAs, service request authorisations, were used which were only meant to be used for urgent work such as a leaking roof about which something had to be done quickly. That would be a prime example. Procedures were in place and it has always been the policy of Beaumont Hospital that there should be open and transparent tendering for public work because it is a publicly funded organisation. Some of those procedures were not as developed as they should have been. That was corrected, as the chief executive officer said, in 2003 and clear sets of procedures are now in place.

Deputy Ardagh

The Comptroller referred also to the irregularities in the procurement department. There is a lot of meaning in words and the word "irregularities" is very strong. Could he elaborate on that?

Mr. Purcell

One has to be careful about what one says in matters which potentially allude to fraudulent situations. Evidence produced by the internal auditor, who went into these matters in great detail, would suggest things like the construction of quotations from non-existent companies to portray a situation where there was a competition when in fact there was no competition and the work was given to a particular firm. That is one indication of that. It would be irregular also to pay for work that had not been carried out or carried out unsatisfactorily or to have work done and then construct a fictional tender competition after the work had been done. They would be examples which would lead me to using that strong word "irregularities" but I am aware that this matter has been referred for some time to the Garda Síochána and it is up to it ultimately to decide whether there is a case for that kind of activity to be dealt with through the courts.

Deputy Ardagh

I see from Mr. Duffy's report that certain concerns were raised by him but he also states that he had responsibility for the technical services division. How can he reconcile a situation where there was an obvious failure in procedures? He was responsible for it and now he is the chief executive of Beaumont Hospital. Can he tell me how that happened?

Mr. Duffy

The department reported to my division. I realised there were irregularities in the process but not the extent of them. I identified that SRAs were being used for small works which amounted to the equivalent of €5,000 each. Therefore, if a contract was awarded for €20,000, four orders were issued for €5,000 each which circumvented the process. It was from that practice that I initially established they were circumventing the tendering process. The other issues only came to light after that. I dealt with that issue and put procedures in place, but underlying that issue another set of irregularities taking place. I then enforced the disciplinary processes in the organisation. I was not directly involved in the issuing of tenders etc., but I identified there was a problem and then put in place the process to deal with it.

Deputy Ardagh

It does not sound as if Mr. Duffy had full hands on control of the situation at the time.

Mr. Duffy

The department operated within its remit, and within the structures it reported to the chief executive, or to the deputy chief executive as was the position in my case. That I identified there was a problem is indicative of the fact that I was managing it. I obviously would not have had hands-on experience in the area. My brief covers the role of deputy chief executive which covers the whole remit of the hospital. The manager for the area has overall responsibility for what happens within that.

Deputy Ardagh

Were their shortcomings in the reporting structures which led Mr. Duffy to miss this practice until he came across it? How long was this happening before he was concerned about it?

Mr. Duffy

It was probably going on for about a three to four month period prior to my identifying it. One is reviewing expenditure and controls. Our internal audit department was only established in 1998. When I identified the issue I worked closely with the internal audit department to establish what was going on.

Deputy Ardagh

Mr. Duffy said that the internal audit department started operation in 1998. What was the internal auditor's input into dealing with all these irregularities, concerns and the technical services department's tendering process at that time?

Mr. James Rogan

The internal audit established in 1999 that there would be provision for attendance at tender openings. Each department was notified who tendered in regard to the hospital and that we be notified of tender openings. In that way we could spot check and do random checks as the tenders were opened. As indicated in Mr. Duffy's report and the Comptroller and Auditor General's report, it was 2001 before we attended a tender opening for technical services. It was at that tender opening that we discovered there were problems and that led to the issuing of the three reports in the first quarter and the second quarter of 2001. As regards our involvement with the general manager, as Mr. Duffy said, we work closely with him. He would seek advice, information and statistics from us.

Deputy Ardagh

To whom does Mr. Rogan, as internal auditor, report?

Mr. Rogan

I report to the audit committee and the CEO. My direct line of responsibility is to the CEO of the hospital.

Deputy Ardagh

I notice there is audit committee and also a finance committee. At any time is there a situation where Mr. Rogan reports to members of the board without the CEO being present?

Mr. Rogan

I report to the audit committee and the CEO would be present.

Deputy Ardagh

In regard to corporate governance generally, my understanding is that it is preferable if the internal auditor can report to a finance committee without the CEO being present at a particular time so that the internal auditor can openly discuss matters with board members without the restraining influence of the CEO being present. Does Mr. Duffy plan to give that opportunity to the board in the first place and to the internal auditor, which would also effectively help to strengthen his role?

Mr. Duffy

We have reviewed the range of governance within the organisation in the past two years and have strengthened governance not only in the area of internal audit but across the spectrum. The internal auditor is invited to the board meeting; apart from the sub-committee, he is also invited. I have been in my current position for only two months and I have not been asked to exclude myself from the meetings, but the option is there for the chair — the chair of the audit committee or the chair of the board — to do that.

Deputy Ardagh

Would Mr. Duffy consider that——

Mr. Duffy

Absolutely, I would have no problem with that whatsoever.

Deputy Ardagh

——to allow more open questioning from board members who may not be as professional in their questioning as he may be? Such questioning would allow interaction which is important.

Mr. Duffy

That is a fair comment.

Deputy Ardagh

In regard to the car park, what was the arrangement on fines for illegal parking and how much was involved in that?

Mr. Duffy

Illegal parking referred to people who were not staff members parking on the campus, namely, members of the public who parked outside the multi-storey car park. The car park operator was able to fine the hospital for such illegal car parking.

Deputy Ardagh

Fine the hospital?

Mr. Duffy

Yes. The agreement was that if people did not use the multi-storey car park, the hospital was obliged to put in place systems that protected the staff car parks and stopped illegal parking on the campus, but the hospital did not do that at the time.

Deputy Ardagh

How many motorists were fined, how much was the fine for each car and what was the total amount involved for each of the years this scheme was in operation?

Mr. Gus Mulligan

I cannot say how many cars were involved, but the total amount in fines was about €1.2 million between the start of the scheme and the time imposing of fines ended. That amount effectively equalled the car park income, the normal car park rental for that period.

Deputy Ardagh

Was that the total rental or the hospital's share of the rental?

Mr. Mulligan

The hospital's share of the rental. The original idea of imposing fines was a legitimate one because it meant it placed an obligation on the hospital to control parking on the site in order that the car park operator would be able to earn money from the car park without such unofficial car parking being allowed. This happened before I joined the hospital. It is well known that is the way in which the scheme operated. The car park operator went around the site, identified cars which he deemed to be illegally park and imposed a fine on in respect of each of those.

Deputy Ardagh

How much was that fine?

Mr. Mulligan

The fine was meant to be a fine for a day, which was €7 at the time and then the operator applied a multiplier. He said that if he saw a car parked illegally, he then applied a multiplier. Therefore, he could theoretically charge €13.

Mr. Rogan

Around €13.

Deputy Ardagh

What was the multiplier?

Mr. Mulligan

The amount was something like 60% of the daily charge.

Deputy Ardagh

The amount of €13 represents 60% of the daily charge.

Mr. Mulligan

It was in or around that number. The multiplier being applied to the fines did not have a basis in contract. The operator was imposing fines and withholding the rent until the matter was resolved through very extensive negotiations.

Deputy Ardagh

I apologise for interrupting, but as Mr. Mulligan heard the Chairman say, our time is limited. I hope he does not mind me interrupting him; in doing so, I am not being rude. Is Winston Properties Limited the operator of the car park, or is it the management company, Car Parks Ireland Limited?

Mr. Mulligan

Winston Properties is the car park operator.

Deputy Ardagh

Is it correct that the hospital was to get a proportion of the car park income?

Mr. Mulligan

No, it was to get an agreed rent for each year. If the car park income was above a certain level, it would get a share of the excess.

Deputy Ardagh

Is it correct that the fines for illegal parking exceeded the rent the hospital got from the car park?

Mr. Mulligan

That is correct.

Deputy Ardagh

Was the car park full?

Mr. Mulligan

No, as it never reached its planned usage, the operator was achieving a far lower income than he had originally planned.

Deputy Ardagh

The next item concerns the consultants and the private clinic. I read through the accounts and note that the hospital has a number of properties from which it gets rental income. Some of them generate commercial rental income and some are rented on a preferential basis. One of the latter is the private clinic. How many consultants are involved in the private clinic?

Mr. Duffy

There are over 100 consultants involved in the private clinic.

Deputy Ardagh

What rent does the private clinic pay to the hospital?

Mr. Duffy

It is €12,000 per annum.

Deputy Ardagh

Therefore, the rent for the private clinic is €120 per consultant per annum.

Mr. Duffy

The history of the private clinic goes back to the transfer——

Deputy Ardagh

Is that true?

Mr. Duffy

Yes, that is true.

Deputy Ardagh

What is the value of the laboratory services provided for the approximately 100 consultants in the private clinic in terms of services rendered to their patients in the years 2002 or 2003?

Mr. Duffy

It is worth about €260,000 per annum, which represents approximately 2% of the laboratory costs.

Deputy Ardagh

It is, effectively, €2,600 per consultant per annum on average. Some consultants in certain specialties would use the service more than others. Is there any layering of the value that is given to each of these consultants in terms of laboratory services?

Mr. Duffy

We do not have that information in terms of individual consultants.

Deputy Ardagh

Okay. How much time do the consultants spend on their private patients as against the time spent on public patients?

Mr. Duffy

The agreement is 70:30. That is part of the consultants' common contract. It is 30% for private patients and 70% on public patients. That is reflected in the throughput of private patients in the organisation.

Deputy Ardagh

In Mr. Duffy's experience and taking into account the total amount of time worked by a consultant, be it eight or 18 hours, does it work out at that percentage?

Mr. Duffy

If one looks at measures relating to the volume of public patients versus private patients in the organisation, there is a 70:30 ratio. We do not have measures for monitoring consultants' performance. No hospital has.

Deputy Ardagh

It is 70:30.

Mr. Duffy

That is in the throughput of patients. It is 70% public patients and 30% private patients.

Deputy Ardagh

The patients treated in the private clinic are not included in that cohort.

Mr. Duffy

That group of patients is outside Beaumont Hospital.

Deputy Ardagh

Mr. Duffy, therefore, would not know how many patients are treated in the private clinic.

Mr. Duffy

No.

Deputy Ardagh

The benefits, therefore, are unknown.

Mr. Duffy

Absolutely.

Deputy Ardagh

The Hanly report recommends a consultant provided service rather than a consultant led service. How many non-consultant hospital doctors and consultants are there in Beaumont Hospital?

Mr. Duffy

There are 250 NCHDs and approximately 140 consultants. The number of consultants includes areas such as X-ray and laboratory services as well as admitting consultants.

Deputy Ardagh

How many consultants work with the patients and admit them?

Mr. Duffy

Approximately 120.

Deputy Ardagh

It is 120 and 250. Does Mr. Duffy envisage that ratio changing over the next five to ten years?

Mr. Duffy

It is planned that the ratio will change.

Deputy Ardagh

To what?

Mr. Duffy

I do not have the figures. At present, for example, we have ten additional appointments as a result of taking over St. Joseph's Hospital in Raheny. We have taken on new consultant posts but we are not taking on support staff such as junior hospital doctors. There will certainly be a reverse of the ratios. The working time directive will also have an impact on the number of consultants in the system.

Deputy Ardagh

With regard to the hours that are worked——

Chairman

The Deputy should conclude.

Deputy Ardagh

Mr. Duffy is aware of the hours worked by the NCHDs because the hospital pays for them. What is the average number of hours worked by the NCHDs?

Mr. Duffy

At a rough guess, it is 75 to 80 hours per week. That includes on-call from home in some cases and on-call within the institution.

Deputy Ardagh

How many hours do the consultants work in the hospital, apart from the private clinic and other work they might do? How does it compare with the 75 to 80 hours worked by the NCHDs?

Mr. Duffy

I do not have the factual information. In terms of evidence, our consultants are on the premises every day. The majority of them work five days per week and work long hours. They are on-call at the weekends as well. There is a significant contribution from the consultants. Due to the low number of consultants there is already a demand on them to work in excess of the contracted hours. I cannot give the factual information in terms of the average number of hours. We do not have mechanisms for measuring it.

Deputy Ardagh

The Chairman has cut me off, although I have many other questions.

Chairman

I might come back to the Deputy.

Deputy Hayes

With regard to the public procurement, on what date did Mr. Duffy first recognise that there was a problem?

Mr. Duffy

It was approximately May 1999.

Deputy Hayes

When did it come to a head?

Mr. Duffy

It came to a head in early 2000, when the issue came to my attention.

Deputy Hayes

When was the quantity surveyor appointed?

Mr. Duffy

In summer 2001.

Deputy Hayes

Was there any indication earlier than in 1999 that there might be a problem?

Mr. Duffy

No; the initial indication was in 1999. That was related to a separate issue from what we ended up dealing with in 2001. What happened in 1999 related to the process of issuing orders, which was completely different from the issue of bogus contractors submitting tenders. It was a separate issue.

Deputy Hayes

How many issues were there?

Mr. Duffy

There were two separate areas. The initial one was about not using the tendering process. We resolved that.

Deputy Hayes

When was that?

Mr. Duffy

In 1999. In that year we put the procedures in place to ensure that the tendering process must be used. It was used. However, when it was being used it appeared — as the Comptroller and Auditor General said, I must be careful in how I put forward that evidence — that companies that did not exist submitted tenders. That was a second issue. We put tendering procedures in place. Quotations for contracts which were within reason of each other were received from companies which appeared to be legitimate. For example, the first was for €20,000; the second, €25,000, and the third, €26,000. Contractor A was given the business.

Deputy Hayes

Obviously, the hospital had a problem but from my perspective its failure to get to the nub of it was the problem. Can Mr. Duffy explain why it took so long to deal with it?

Mr. Duffy

The time taken to resolve it was not the issue. We had procedures in place. People had gone out of their way to circumvent the system and thwart the processes in place. The information was not available to show this was happening. It was following our investigation and ongoing monitoring by the audit department that we discovered what was happening.

Deputy Hayes

Money was being lost or it was costing the hospital money. Somebody in control was not obeying the guidelines or doing his or her work properly.

Mr. Duffy

They appeared to be applying the guidelines. The documentation submitted gave the impression that they were adhering to them. Genuine quotations were submitted and the work was being undertaken. That one company was given the business in certain areas did not cause alarm because this can happen.

Deputy Hayes

Why did it not cause alarm?

Mr. Duffy

There were seven contracts and at that stage it did not seem to be an issue. The contractor had been on site undertaking the work. We had issued contracts for another project on site using an external project management team. The same contractor was given the business. In respect of the tendering processes we had applied and the professional bodies employed, it looked as if the procedures were in place and that there was nothing wrong with them.

Deputy Hayes

The system in place was not fool-proof.

Mr. Duffy

That is correct; it was not. That is why the additional work we have done has copper-fastened the situation.

Deputy Hayes

What has been put in place to ensure this problem will not recur? Obviously, there are other areas within the establishment in which this could happen.

Mr. Duffy

In the first instance we advertise publicly for contractors without specifying the jobs on offer. We advertise for contractors for various projects. We interview them, place them on a short list and create a panel. We rotate the contractors which will be given work over a two year period. We then readvertise.

Deputy Hayes

If a problem was detected in a particular area in regard to such matters, is there any fire brigade or urgent action that could be taken? It seems the hospital was unable to identify or get to the nub of the problem. If there was a problem in the hospital tomorrow and there was a worry about a procedure, is there any action that could be taken immediately to get to the nub of it?

Mr. Duffy

It depends on the issue involved. Action would be taken urgently to remove the authority of the person concerned to sanction payments. That would be the remedy one would use. That we now have different people involved in the process rather than just one makes a difference. There are checks in the system. We have strengthened our audit department to deal with these potential issues. However, one cannot say such a problem will not recur. We have strengthened the procedures which we constantly monitor. It is an issue both for the management team and the board.

Deputy Hayes

If procedures have been strengthened, what have been the results?

Mr. Duffy

We are demonstrating that we are getting value for money in the contracts we are awarding.

Deputy Hayes

Is Mr. Duffy happy with that?

Mr. Duffy

There are procedures in place with which I am happy. That we advertise for contractors in the first place and then rotate them avoids collusion between any group of people.

Deputy Hayes

Is Mr. Duffy happy with the position in respect of the car park and that the maximum benefit is accruing to the hospital?

Mr. Duffy

Absolutely. We are receiving an income from the car park. We have also been in a position to get spaces for hospital staff. This has allowed us to build service buildings on the campus. We have been able to create space for our staff in the multistorey car park. Because of the leasing arrangements, the hospital will own the car park in 2011.

Deputy Hayes

In regard to the accounts, I noticed that the salaries of non-consultant hospital doctors had increased by 48% in one year compared with 1999 whereas nurses' salaries had reduced by 0.5% compared with the same year. Does Mr. Mulligan have any comment to make on this?

Mr. Mulligan

There are two factors at work, one of which is that back pay was paid to nurses in 1999. This artificially inflated the 1999 figure. The 2000 figure is more normal. The increase in respect of NCHDs in recent years has been driven by the increase in overtime. In 2000 it was beginning to bite. One will notice that through 2001 into 2002 it increased. It is now at an exceptionally high level nationally.

Deputy Hayes

How many nurses are employed by the hospital?

Mr. Mulligan

There are 965 nurses.

Deputy Hayes

How many non-consultant hospital doctors are employed?

Mr. Mulligan

There are 252 non-consultant hospital doctors.

Chairman

Before I call Deputy Smith, I wish to raise one question with Mr. Duffy. The area in question in the hospital is the technical services division. The person now subject to a Garda inquiry was manager of that division at the time. Is that correct?

Mr. Duffy

The Garda inquiry is focusing on events at the time. It may involve the then manager of the department.

Chairman

When was he employed by the hospital?

Mr. Duffy

In December 1998.

Chairman

When did he resign?

Mr. Duffy

In 2001.

Chairman

When the audit committee finally decided something was remiss, external quantity surveyors were employed to investigate the matter. Is that correct?

Mr. Duffy

Following the resignation. That was a separate item of work we did afterwards.

Chairman

After 2001——

Mr. Duffy

Yes.

Chairman

——the then manager resigned and external quantity surveyors were brought in.

Mr. Duffy

To value the work.

Chairman

To evaluate the work. They considered his qualifications and discovered that at the time he had applied for the job he had falsified them. Is that correct?

Mr. Duffy

Internal audit had uncovered this, not the external surveyors.

Chairman

What was uncovered?

Mr. Duffy

I am concerned about discussing this issue further because of where it stands at present.

Chairman

The report of the Comptroller and Auditor General states:

In September 2001, the TSD Manager resigned following the submission of his response to matters arising in the internal audit reports. On subsequent examination it was found that documentary evidence of educational qualifications submitted by the manager of TSD in support of his application for the position had been falsified.

Mr. Duffy

Following the internal audit, as part of our review of what had occurred at the time and our ongoing review of the whole process——

Chairman

Would Mr. Duffy agree with that statement?

Mr. Duffy

I would.

Chairman

Would he also agree that the gentleman had purported to be an engineer but was not?

Mr. Duffy

His qualifications did not subsequently back that up.

Chairman

Is it correct that his application had suggested or claimed that he was a qualified engineer?

Mr. Duffy

That is correct. It stated his qualifications were equivalent to those that apply in Ireland.

Chairman

What procedures are in place in the hospital to check the qualifications of employees?

Mr. Duffy

In that case what appeared to be an original certificate of qualification was produced. The person involved had worked with other reputable companies in the State from which he had references. As regards the certificate, we did not have a procedure in place for checking qualifications with particular institutes. We took the parchment given to us as a bona fide document and did not consult the institution from whence it had originated. We are trying to tackle this issue because many people who work in our organisation and the health care environment come from outside the jurisdiction. The process related to trying to track back and check their qualifications is difficult. Health care professionals such as nurses and doctors are obliged to register with particular boards. However, in the case of non-medical or non-nursing professionals there is no registration body. If a similar problem arose, we would check with the relevant university to ensure a qualification was bona fide. We must also ensure the person with whom we are dealing is, in fact, the person who originally obtained the qualification.

Chairman

Mr. Duffy will be aware that in Ireland and elsewhere there have been several incidents of persons who purported to be medically qualified but who were not so qualified and ended up working in hospitals. There was a famous case in the part of the country I represent where a paramedic who had work experience in the United Kingdom was appointed to the post of and served as an orthopaedic surgeon in Croom Orthopaedic Hospital for over two years. That was not an isolated incident. There is a record of people who for reasons best known to themselves think they have the expertise to work in hospitals and fabricate qualifications to that end. Is Mr. Duffy stating that if the hospital receives a certificate which looks like a diploma or degree or references which appear authentic, it does not check them?

Mr. Duffy

Absolutely not. Our nursing staff must register with An Bord Altranais while our doctors are obliged to register with the Irish Medical Council. There is a process for verifying their qualifications and registration. We check their details with An Bord Altranais and the Irish Medical Council. In the case in question there was no body to which we could have referred back. We could have contacted the institute which had issued the qualification. That is all we could have done. We did not do the latter then but do so now.

Chairman

In the case in question all the documents were accepted at face value.

Mr. Duffy

At that stage, yes.

Chairman

Did the hospital check the references?

Mr. Duffy

Yes. We wrote to the companies involved for references. The only thing we had that had been produced by the person involved was the certificate. We wrote directly to the companies involved for references.

Chairman

I thank Mr. Duffy.

Deputy M. Smith

I welcome our guests. It is obvious from the report that apart from the difficulties, Beaumont Hospital is a busy institution. My extended family and I have reason to be grateful to it.

While the car park earns approximately €750,000 per year, the hospital paid €1.2 million in fines in the previous couple of years. Therefore, one could add the €750,000 loss which should have been income during the period. Was the lease arrangement changed? Who was responsible for the first lease which had enabled the lessor to virtually deprive the hospital of what would have been an expected income for the use of the car park during those years?

Mr. Mulligan

There was no change in the lease. The way in which the entire system operated sounded fine, in theory, but the operator was, in fact, much better at organising matters for his benefit than the hospital. For example, the fines were legitimate but the operator was able to identify an enormous number of cars and state they had been parked illegally. He was then able to apply a multiplier. As the latter was not included in the contract, it should not have been agreed to. It was agreed to by the hospital at one stage but that should not have been the case. Generally, it was the way in which the hospital which was probably entering new territory at the time found itself dealing with a car park operator who was much better at working the system.

The new arrangement worked out gave the hospital €100,000 each year, access to car parking spaces and got rid of the fines. The hospital is now in a better position than it would have expected to be if the problems had not arisen. However, it took a long period to negotiate on those issues. To some degree, it was merely a case that the car park operator was diligent about pursuing the fines. At that stage the hospital did not have a way of contesting them.

Deputy M. Smith

Aside from the car park owner and the builder doing the work, were there many others who were outmanoeuvring the hospital authorities?

Mr. Mulligan

We do not believe so and are not of the opinion that the car park operator is outmanoeuvring us at this stage.

Deputy M. Smith

No, I am not referring to the present. It would be difficult to persuade members that the hospital was not outsmarted during the period in question.

Mr. Mulligan

There were good procedures in operation under which many other contracts were dealt with and evaluated. It was just that the contract with TSD was not submitted for evaluation with evidence which did not stand up. The overall system of control in the hospital at the time was comprehensive and applied to all the other departments fairly well. The hospital dealt fairly with the majority at the time and still does.

Deputy M. Smith

A total of 3,000 were on the payroll. The hospital had a substantial number of patients, particularly outpatients. Is it possible to run a hospital of that size efficiently or did it get too big for everybody?

Mr. Duffy

The hospital was developing systems. It is 18 years old and had teething problems at the beginning. This difficulty then occurred. We have strengthened our management team, structures and information systems. We are operating as a business unit but, following what happened, have learned the hard way. The board is resolved to ensuring value for money is achieved. Although these issues arose, we are managing a budget of more than €210 million, a staff of 3,000, 100,000 outpatients and 50,000 accident and emergency attendances. It is complex but structures are being developed internally to support this. Where appropriate, we are bringing in expert advice because we do not necessarily have all the health care experts. For example, on project management, we have brought in external supports because we are not project managers. While staff may have administrative experience, they do not have project management skills. Where we do not have such skills, we buy them in appropriately.

Deputy M. Smith

If Mr. Duffy made the same report in the private sector, does he think many people would lose their jobs?

Mr. Duffy

It is difficult to comment based on what happened at the time.

Deputy M. Smith

Did anybody lose his or her job?

Mr. Duffy

A number of people are no longer in the organisation. They resigned in advance of action being taken. I refer to technical services, not the car park or other issues.

Deputy M. Smith

Mr. Duffy mentioned that the division of responsibility means that a number of people rather than one must cope with myriad problems. That system has weaknesses in terms of passing the buck.

Mr. Duffy

I referred to the processes in place to manage procurement. It does not always lie with one person. One person has overall responsibility but when tenders are being selected, different people are involved in selecting and approving the contracts and making the payments. The responsibilities are divided but the overall responsibility of the organisation remains. Total control is not assigned to one individual. That is good audit practice. It is recommended in an audit environment that duties should be segregated. That is what I was referring to.

Deputy Fleming

: Have the accounts for 2003 been approved?

Mr. Rogan

They were signed off by the Comptroller and Auditor General in December 2004.

Deputy Fleming

When will the 2004 accounts be signed off?

Mr. Mulligan

We are in the middle of the audit of the 2004 accounts which we expect to complete by May 2005 and have the accounts signed off by the board in June.

Deputy Fleming

They will, therefore, be reasonably timely from now on.

I refer to the car park issue. My main concern is the management time it took up which should have been devoted to patient care. This is a hospital, not a property company. Should management deal with such issues which are a diversion from its core activity? The hospital should be devoted to other issues. It is probably impossible to quantity the time taken up with this issue.

I refer to page 19 of the 2002 accounts which relates to other income. Mr. Mulligan said in his opening statement that there was a possibility of a tax liability on the car park income and recouping the liability from advisers, depending on what happened. Why is there is a potential liability?

Mr. Mulligan

The car park provides two streams of income. One is called the first rent, the rent that accrues to the hospital, while the other is a payment into a sinking fund which will be passed over to the operator in 2011.

Deputy Fleming

Do these payments come from the operator?

Mr. Mulligan

They were part of the agreement. It was originally intended that the hospital would receive the rents and that it would not have a tax liability on them. A special purpose company was set up to develop the car park which continued to receive the rents for a number of reasons, although the board was advised it was receiving them as an agent for the hospital. However, the tax authorities deemed the company was receiving them in its own right, not as an agent for the hospital, and that, therefore, they were taxable in the hands of the company because it did not have a tax exempt status similar to the hospital. The hospital is contesting the view that the car park company was acting as an agent of the hospital in the collection of rents which point is being used to appeal to the Appeals Commissioners. I hope we will be successful in that contention but it arose because of the view of Revenue that the car park was receiving the rents in its own right, not as an agent of the hospital.

Deputy Fleming

Is the company a fully owned subsidiary of the hospital?

Mr. Mulligan

Yes but it does not have tax exempt status.

Deputy Fleming

Should the hospital have applied for such status on its activities if it believed it was an agent, given that the issue would probably have been resolved?

Mr. Mulligan

The purpose of the company was to secure the building of the car park. It does not have a connection to the provision of health care.

Deputy Fleming

Mr. Mulligan is making a good case for Revenue.

Mr. Mulligan

Our contention is not that the company is involved in providing health care but that it collected rents as an agent of the hospital, not as income in its own right.

Deputy Fleming

: When will the issue be resolved?

Mr. Mulligan

We have been requested to provide information for Revenue which we have done. It is likely that it will respond with an assessment in the next two months and we will immediately appeal to the Appeals Commissioners. We expect the case will be resolved in a number of months. If the Appeals Commissioners decide against us, we have other avenues but a decision would have to be taken on whether we would pursue them.

Deputy Fleming

How much is involved?

Mr. Mulligan

A sum of €792,000.

Deputy Fleming

Has this been provided for in the accounts?

Mr. Mulligan

We provided for it in the 2003 accounts.

Deputy Fleming

Which we will see in due course. Mr. Mulligan referred to laboratory facilities provided for private doctors and consultants. I understand this happens throughout the country. If the amount of activity is small, it might not wholly justify the costs involved in terms of administration. One could argue that some of the people concerned could have gone to a public hospital in the first instance. This is an issue about which we could get unduly concerned. Has this income been taken into account?

Mr. Mulligan

No. We invoiced the hospital.

Deputy Fleming

The invoices are not included in the accounts.

Mr. Mulligan

We invoiced the private clinic but did not take the income into account since we did not receive any cash. There was sufficient doubt about its collectability to omit it from the accounts.

Deputy Fleming

Have the invoices been issued?

Mr. Mulligan

Yes.

Deputy Fleming

Inpatient charges are marginally down from €1.496 million to €1.434 million. What is the collection rate of accident and emergency fees and inpatient charges?

Mr. Mulligan

I do not have the exact numbers but think we have a very high collection rate of private charges. There is approximately a 7% write-off on the charges we invoice.

Deputy Fleming

On private charges?

Mr. Mulligan

No. There are practically no write-offs on private charges.

Deputy Fleming

To the VHI and BUPA?

Mr. Mulligan

There is approximately a 7% write-off on statutory charges.

Deputy Fleming

Therefore, there is a collection rate of more than 90%.

Mr. Mulligan

Of the ones we invoice.

Deputy Fleming

Is Mr. Mulligan satisfied that everyone who should be invoiced is being invoiced?

Mr. Mulligan

We certainly are in regard to inpatients. I am not 100% sure with regard to accident and emergency cases.

Deputy Fleming

There appears to be a grey area in respect of accident and emergency cases. Will Mr. Mulligan explain the difficulties involved? Obviously, people with medical cards are not invoiced. Is it just a question of identifying people at different stages? What is the procedure for collecting accident and emergency charges?

Mr. Mulligan

When people come in, they are identified and asked if they have a medical card and so on. Identifying patients in accident and emergency departments is the most difficult part of the process. I cannot say each patient who should be paying accident and emergency charges is identified but there is a procedure in place for identifying them. Those who are identified are issued with an invoice and asked to pay. Those who leave without paying receive a bill for €45 which is difficult to collect. If people do not respond, we follow them up in the normal way.

Deputy Fleming

Is Mr. Mulligan saying that, where possible, the payment is taken from the patient there and then?

Mr. Mulligan

Yes.

Deputy Fleming

There are administrative staff in the accident and emergency department handling the issue, as well as nursing and medical staff.

Mr. Mulligan

There is a separate invoice.

Deputy Fleming

Are there administrative staff available at night?

Mr. Mulligan

Yes.

Deputy Fleming

How many visits are there each year through the accident and emergency unit?

Mr. Duffy

There are 50,000 attendances per year at the accident and emergency unit.

Deputy Fleming

That appears very little for a hospital of this size. Portlaoise General Hospital would deal with that number.

Mr. Duffy

It depends on what is counted as an accident and emergency visit.

Deputy Fleming

A guy with a fractured finger following a hurling match.

Mr. Duffy

Some hospitals include in their accident and emergency figures patients attending fracture clinics or receiving follow-up treatment. Our figures are at the top end of the scale in regard to what is provided for in acute care hospitals. The Deputy can visit the accident and emergency department of our hospital to see the impact. We have the second highest number of attendances by a margin of approximately less than 1%. Of the 50,000 attendances, approximately 10,000 are new attendances, the balance being return attendances. There is a charge for the first attendance.

Chairman

Does the Deputy wish to pursue this issue?

Deputy Fleming

No, I have ventilated the points about which I wanted to speak.

Chairman

I would like to ask Mr. Duffy about the possible tax liability on rental income from the car park. This arises from the fact that the hospital is a charity. Revenue is challenging whether its charitable status extends to the subsidiary. Is the subsidiary still in place?

Mr. Mulligan

It is. A number of issues have still to be completed in terms of signing contracts with the bank. The intention is that the subsidiary will be wound up as soon as these issues are completed which should be relatively soon.

Chairman

It should have been done sometime ago.

Mr. Mulligan

It was complicated by the fact that there was a charge on the sinking fund account which the bank would not lift until someone else provided a guarantee. The hospital will have to provide that guarantee. Other issues also had to be resolved with the bank. They have all now been resolved and the contracts are ready for signature on which agreement has been reached with the Department of Health and Children. Therefore, there is nothing standing in the way of the process.

Chairman

Mr. Duffy has said that when he receives the assessment from the Revenue Commissioners, he will appeal immediately. Someone said that if the matter was referred to the Appeals Commissioners and the appeal failed, other courses of action would be contemplated.

Mr. Duffy

Going back to the advisers we employed at the time the project was initiated, there are issues which need to be addressed.

Chairman

Is Mr. Duffy saying the hospital will sue its legal advisers?

Mr. Duffy

I am not saying who we will sue at this stage but tax advisers, legal advisers and accountants were involved in the process.

Chairman

The other courses of action would involve litigation.

Mr. Duffy

We will review the situation.

Chairman

From a political perspective, whether Revenue takes the money, or the hospital succeeds in holding onto it, it is still public money. Costs will be incurred which the taxpayer will have to pick up while the issue is being resolved.

Mr. Duffy

We said it is an option.

Chairman

It really does not matter to the taxpayer whether the money is held or collected by Revenue because two public bodies are involved. If it involves a legal rigmarole, from the political perspective all that will happen is that the taxpayer will have to pick up more bills.

Mr. Mulligan

We have the right to appeal and the costs will be small. After that, we could go to court. The real cost would arise in the High Court. I do not think there is any situation in which the hospital would incur legal fees going to the High Court against the Revenue Commissioners. We will probably feel we have exhausted our appeal remedies when we have gone through the appeals process.

Chairman

Is Mr. Mulligan saying the hospital may go back against the advisers who left it in this position?

Mr. Mulligan

We have put some of the advisers on notice that we will have this option if we incur a liability. We are not clear on whether they will be liable.

Deputy Boyle

If we go back to the chronology of what was known and what action was taken, I am finding it difficult to understand the previous responses. Am I correct in thinking Mr. Duffy's concern as hospital manager was expressed for the first time by way of a caution to the technical services manager in May 1999 and that at that stage there was no involvement on the part of the internal auditor? A second caution was expressed to the technical service manager in July 2000 and again there was no involvement by the internal audit department. A third caution was expressed to the technical service manager in October 2000 yet the internal auditor did not get involved until January 2001, close on a two year period from the time the initial concerns were identified and adequately audited and reported on. Why the delay? Why the use of cautions? What is the procedure for involving the internal audit department? Does it have an independent role in that it can ask questions of its own accord or must such questions be asked by the hospital manager or senior management?

Mr. Duffy

I will take the last question first. The internal auditor is free to pose any question to the organisation as governed by the terms of reference of the audit committee and audit department. It has carte blanche to evaluate any issue in the organisation.

Deputy Boyle

Is that compromised by something we deal with quite often in the Dáil in that if one does not know the right question to ask one does not get the opportunity to ask a question?

Mr. Duffy

The auditors have a programme of work which they undertake during the year. They have a formal programme and an informal programme and they rotate their programmes to different departments in the organisation.

Deputy Boyle

That process, namely when a caution is issued — I presume it is a fairly strong sanction — does not involve the internal auditor.

Mr. Duffy

The internal audit department was involved. As I explained earlier, two separate issues occurred. One related to the issuing of urgent orders, what are known as service requisition orders, for work to the value of €5,000. If four such orders were issued the project is then valued at €20,000. It was around that issue that the first difficulty arose. The problem did not relate to irregularities but with avoidance of going to tender. We then worked on putting the tender procedures in place. That is what happened. While it appeared the tender procedures had been put in place and were being adhered to, other companies which did not exist were in fact being selected to tender.

Deputy Boyle

The first caution was made in May 1999. What was the reason for the delay between the issuing of the first caution and the second in July 2000? What is the reason for the short period between the making of the second and third caution in October?

Mr. Duffy

I am trying to recall what happened at that stage. The issue had not gone away. The cautions made were formal ones. Informal meetings were also held. The internal audit department was actively involved in the process. An issue of bullying which also arose during that period meant some things had to be put on hold pending investigation. A number of different things were happening. The first issue related to using orders to have work done without using a tendering process. We then put procedures in place and monitored them. They appeared to be working but eventually it was discovered that in one particular case quotations were being received from one area with a particular postmark. That put a different perception on the situation because everything else appeared normal. The internal audit discovered that tenders for a particular project came from the same franking machine. That highlighted that there was more to the situation than appeared initially to be the case.

Deputy Boyle

Mr. Duffy has stated the internal auditor was involved during the period in which the cautions were made. However, we have heard formal involvement of the auditor dates from January 2001. I am not sure what was the situation at that time.

Mr. Rogan

The senior internal auditor would be involved in particular issues. We would have compiled some information on the misuse of the service request authorisations. As was pointed out, a programme was put in place for the technical service in terms of how service request authorisations were used in the past and should now be used. We have compiled information about the abuse of service request authorisations and put forward recommendations to prevent such abuse. That is the reason for the initial involvement of the technical service department.

Deputy Boyle

We still have a chronology of it taking almost two years between identification of a problem and that problem being addressed.

Mr. Duffy

There were two different problems. The first problem was dealt with and resolved. The second problem was a separate issue.

Deputy Boyle

Were they not related and were the systemic flaws that existed in the particular department or the people responsible for that department not ongoing?

Mr. Duffy

The evidence only came to light in the second incident.

Deputy Boyle

Therefore, the matter was dealt with on a problem by problem basis rather than by examining whether systemic flaws existed in the department.

Mr. Duffy

There was a major review of the department at the time. We have two reports on the department but they did not highlight this issue. The process had been reviewed but it did not highlight the fact that tenders were being received from companies that did not exist. The paper trail existed which showed these companies had tendered for work.

Deputy Boyle

There was no background check.

Mr. Duffy

Exactly. It was not until the audit department did a background check that we discovered what was going on. Although we are discussing the issue in terms of the three year period the same people were involved but on different issues.

Deputy Boyle

That situation is still unsatisfactory. I understand issues must be dealt with as and when they happen but a series of incidents would seem to indicate there were bigger problems which should have been tackled at an earlier stage.

Mr. Duffy

In retrospect, I accept that. However, at the time the documentation available at source indicated a great deal of work was being done on an ongoing basis. The Comptroller and Auditor General has identified that the hospital was trying to manage the issue.

Deputy Boyle

I will deal briefly now with the carpark issue. I share the Chairman's reservations that the subsidiary company remains in place. On the last occasion we were given an account of proceedings in Beaumont Hospital we received an undertaking it would be wound down as soon as possible. Another issue which arose at the time was that the subsidiary company was skating on very thin ice in terms of its compliance with company legislation because the directors of the company were not meeting. I am wondering whether that situation has been overcome.

I must place on record again that the cost overrun allied with the tax relief gained for the carpark cost €50,000 per additional carpark space provided. It was a serious matter. I would also like to know if the hospital availed of other tax relief and whether particular lessons have been learned from the fiasco that has been the carpark in terms of how one creates such infrastructure, seeks to fund it and how it is subsequently paid for.

Mr. Mulligan

On the question of compliance with company law, the carpark company is up to date with its returns and is being compliant. The directors' meetings have been held and we have no doubts in that regard. On the question of whether the hospital has availed of other tax reliefs, we have not. The carpark was the only such scheme.

Chairman

I call on Mr. Purcell to conclude.

Mr. Purcell

On the issue of procurement, while appreciating what the chief executive has said about the issues being separate, I agree with Deputy Boyle that they were related. There was a concentration of responsibility in the Department but clearly that has been changed and there is no point in going over it again.

I would not agree with what the chief executive said in his opening remarks that the system of internal control worked, as patently it did not. The involvement of the internal audit team and its persistence ultimately did work. This is a credit to the team because it also had to deal at the time — this is part of the problem — with the matters arising from the car park which came to light around the same time and also had to be resolved. The audit team was therefore trying to tackle two significant problems at the one time.

On the matter of what the Chairman said about the tax, this does not really matter to the Exchequer in the end. We do not want to see significant amounts of money going to either tax or legal advisers when the issue is really about robbing Peter to pay Paul. It is quite easy when involved in a particular organisation to only think of the organisation's interest and not see oneself as part of the broader State apparatus.

I will not rehearse the issue of the carpark. At the time it appeared to be the only game in town, albeit a very expensive game. I agree with the chief executive officer that the people on the other side of the partnership seemed to be more in tune with what was required and ensured that what they got out of it was satisfactory. There is a danger in such areas. It was fairly clear that the hospital management, despite its banks of advisers, got in over its head on this and did not really understand the implications of setting up these arrangements and what would unfold as a result. I am thinking in particular of the setting up of the subsidiary company and the making of charges against it. These are complex arrangements. Not only must one have advisers, but one must know what those advisers need to do for one in that kind of situation.

On the issue of charges, that does not arise on Beaumont Hospital board accounts but forms part of the general report on the health sector. The only reason it comes up here with regard to Beaumont is that as far back as 1997, I reported that at that time the hospital was not invoicing the adjacent private clinic for tests and where it was making charges for laboratory services, these did not bear any relationship to the economic cost of supplying the services. If we consider the amount of money involved in the case of Beaumont — I accept Deputies' argument that when there is not much involved one does not want to set up an administrative procedure that will cost more or be bureaucratic — we estimate that €2.7 million in revenue from the Beaumont private clinic was forgone as a result of its not being billed over a period from 1997, or between January 1998 and December 2002. That is a significant amount of money but how much it is per annum is not clear. It is a broad issue that will be addressed when the committee examines the general report on the health sector. It was because I raised the issue when discussing Beaumont previously that I used Beaumont as an example of the type of difficulties that exist.

Deputy Fleming

The chief executive mentioned a figure of approximately €260,000 per annum. The figure for over the five or six-year period is closer to twice that.

Mr. Purcell

That is a figure based on an estimate or average rate of €23 per test. This does not include costs like overheads etc., but only approximates to the direct costs that would apply to the tests.

Chairman

Can Mr. Mulligan reconcile the figures?

Mr. Mulligan

Yes, the figure we use is for tests the private clinic states account for approximately 2.3% of the total volume of tests carried out by the clinic. We take 2.3% of the total cost of the private clinic, pay costs and non-pay costs, which comes to some €260,000 a year. However, the Comptroller and Auditor General is referring to the potential revenue, which would include a profit element. We just refer to the actual cost to the hospital of the tests whereas the comptroller's figure takes into account the profit from those tests.

Mr. Purcell

It does not take in profit, but it includes overheads for services, equipment and non-pathology staffing. We do not suggest the hospital would be looking for a profit.

Deputy Ardagh

Does the figure of 2.3 % of the costs refer to the hospital or the private clinic?

Mr. Mulligan

It is 2.3% of the cost of operating the laboratory.

Chairman

Is it agreed that the accounts be noted? Agreed.

I thank Mr. Duffy and his officials and the representatives from the Department of Health and Children. The discussion was rather quiet today, but it will not always be so.

The witness withdrew.

Sitting suspended at 1.38 p.m. and resumed at 1.45 p.m.