I welcome the opportunity afforded by this meeting to respond to the issues raised by the special report of the Comptroller and Auditor General. It is important to set the context within which the Blood Transfusion Service operates. Blood transfusion is an essential part of modem health care. Used correctly, it can save lives and improve health. It is expensive and uses a scarce human resource. Everything we do is based on the provision of adequate supplies of safe blood to hospitals.
It is generally accepted that blood collected, processed and tested by the IBTS has never been safer with respect to the risk of transmission of infectious diseases. We collect approximately 145,000 units of blood per annum and issue them to hospitals throughout the country for the essential care of patients. This is vital work for the health care system and I believe we do it very well.
Let us consider the three shortcomings raised in the special report of the Comptroller and Auditor General, Financial Control and Management in the Irish Blood Transfusion Service, namely, the deficiencies in budgeting and costing, the lack of adequate cash management and project management deficiencies. In 1999 and 2000 the IBTS was planning to move its headquarters and processing and testing facilities in Dublin from Pelican House to James's Street. This decision had been taken in line with the recommendation of the Finlay tribunal that the IBTS's Dublin centre should be on the site of a teaching hospital. Considerable resources were devoted to the implementation of a number of IT projects, i.e., a new payroll system, financial control system, and a blood bank control system, to the establishment of a decentralised collection centre in Carlow and to the move to the headquarters in James's Street.
The IBTS had not implemented devolved budgeting to heads of departments or sections where cost centres would be assigned to specific areas of activity. However, for the financial year 2002, budgets were devolved to budget holders throughout the organisation and this has been continued into 2003. A capital expenditure budget is set at senior management level to meet the requirements of the IBTS in the upcoming 12 months and to ensure that priorities are appropriately resourced.
During 2000 there were some major issues concerning cash resources and cash flow difficulties. One was the carrying of the costs associated with the Lindsay tribunal, estimated at €2.4 million at the end of 2002. We still have not got paid to date for the costs of the tribunal. In the area of fixed assets there was a shortfall between the amount of assets purchased and capital grants received in that year, amounting to €3.7 million. There was also a timing delay between our having to incur costs and our being reimbursed by the Department once they had been incurred. The problem experienced with the integration of the new financial system with the existing blood control system meant that invoices could not be printed for the first quarter of the year, which had serious implications with regard to cash flow.
The serious comments in the report relate to the administration of cash. We have dealt with the issues raised and is important to emphasise that all transactions were clearly documented and there was no loss of money either to the organisation or the State.
There is little doubt that the implementation of the Progesa system has cost much more than originally budgeted and is a number of years behind schedule. The increased cost is due to many factors and these have been outlined in the report of the Comptroller and Auditor General. One of the major issues was the under-estimation of costs at the beginning of the project, particularly with regard to hardware. There was a lack of appropriate expertise within the organisation to implement such a major system in a pharmaceutical grade operation.
At the outset of the project, the Irish Medicines Board insisted that the project manager had to have been involved in the implementation of a major computer project within a pharmaceutical facility. This appointment ensured that we got somebody with the necessary expertise and it was due to his expertise that we uncovered the locking issue in March 2000, whereby one person could issue a product while another could quarantine that product simultaneously. This is a serious issue. The supplier refused to accept that there was a problem with the software and it was with our procedure rather than with their software. This involved serious retesting of the system.
In July 2000 the supplier acknowledged the existence of a problem with the design of the locking issue. However, it was unwilling to fix it in our version 4.4E, but it would in a future release. The locking issue resulted in a delay of nine months and a cost of €524,000.
I will move to the industrial relations issues. While the industrial relations issue are ongoing and being discussed with the Labour Relations Commission, we made a decision whereby one module of the system, which involves recording and giving results for patient samples, would go live. That happened in Cork in April and in Dublin in July 2002.
Industrial relations issues cost the IBTS an additional €333,000 in 2001 and €179,000 in 2002. The other additional costs were hardware, validation of the existing system, the provision of networks for new centres in Carlow and Ardee and consulting costs, which because of the overrun in the time of the project, ran for two or three years longer than budgeted.
At the beginning of this year we set a date of 18 March for going live in Cork and 6 May for Dublin. I am happy to report that the Progesa system core modules went live in Cork on Monday, 17 March at approximately 9 p.m. It has been operating efficiently since and there have been no major difficulties with the system. The project resources have now been assigned to ensuring that the project goes live in Dublin on 6 May.
The internal audit function was established in 1999 and has operated successfully. The function has added value to the operations of the IBTS by providing assurance to management on internal controls, procedures and policies, and accurate accounting records.
The board operates within the code of practice for governance of State bodies and recently, in line with the requirements of this code, the finance committee and board approved the internal audit charter. Since 2000 the following developments have taken place in the financial management of the IBTS: a director of finance and a management accountant were appointed in early 2001; the finance committee has received monthly financial accounts along with cashflow projections at its monthly meeting since June 2001; the finance department has been restructured and additional financial skills recruited; all suppliers are paid by electronic transfer and all staff expenses are paid directly into staff members' bank accounts; and consultants have been recently appointed to draw up a specification for an integrated computerised HR payroll system to be implemented before 31 December 2003.
In 2001, we had a surplus of €1.6 million for the year and a clear auditor's report from the Comptroller and Auditor General. We are in full compliance with the requirements of financial reporting standards and in 2002 we will again show a considerable surplus for that year with little cashflow difficulties and much reduced prompt payment interest paid. The organisation is now moving to the next stage in the development of management of its cash resources and budgeting. During 2003 and into 2004 we will develop a more sophisticated mechanism for the pricing of individual products thereby ensuring the economic price for each individual product can be ascertained.
We in the IBTS are conscious of the important role we play in the health care system of this country. I take this opportunity to thank the loyal donors who have supported us over the years and who in 2002 came out in increased numbers such that donations for that year were 8.2% higher than 2001. We have been able to supply hospitals throughout the country with 100% of their requirements for the past 15 months and this has been due to the loyalty of our donors and the professionalism of our staff. We ask that donors continue to supply the patients in our hospitals so that we can ensure that all activities planned by hospitals can happen without interruption.
We are also conscious of the need to provide value for money and we will be ensuring that we provide a cost-effective system designed to meet the current requirements of hospitals and deal with the emerging threats posed to all transfusion services throughout the world. We must ensure that the IBTS can respond to any emerging threat and has the resources and skills base necessary to do so. The appendices are attached to my submission.