State Claims Agency

Comptroller and Auditor General Report for presentation to the Houses of the Oireachtas

State Claims Agency

I have audited the financial statements of the State Claims Agency (the Agency) for the year ended 31 December 2014 under the National Treasury Management Agency Act 1990. The financial statements, which have been prepared under the accounting policies set out therein, comprise the accounting policies, the claims statement account, the balance sheet and the related notes. The financial statements have been prepared in the form prescribed under section 12 of the Act, and in accordance with generally accepted accounting practice in Ireland.

Responsibilities of the National Treasury Management Agency

The National Treasury Management Agency is responsible for the preparation of the financial statements, for ensuring that they give a true and fair view of the state of the Agency’s affairs and of its income and expenditure, and for ensuring the regularity of transactions.

Responsibilities of the Comptroller and Auditor General

My responsibility is to audit the financial statements and report on them in accordance with applicable law.

My audit is conducted by reference to the special considerations which attach to State bodies in relation to their management and operation.

My audit is carried out in accordance with the International Standards on Auditing (UK and Ireland) and in compliance with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements, sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of

• whether the accounting policies are appropriate to the Agency’s circumstances, and have been consistently applied and adequately disclosed
• the reasonableness of significant accounting estimates made in the preparation of the financial statements, and
• the overall presentation of the financial statements.

I also seek to obtain evidence about the regularity of financial transactions in the course of audit.

In addition, I read the information about the Agency in the annual report of the National Treasury Management Agency to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report.

Opinion on the financial statements

In my opinion, the financial statements, which have been properly prepared in accordance with generally accepted accounting practice in Ireland, give a true and fair view of the state of the Agency’s affairs at 31 December 2013 and of its income and expenditure for 2014.

In my opinion, proper books of account have been kept by the National Treasury Management Agency. The financial statements are in agreement with the books of account.

Matters on which I report by exception

I report by exception if

• I have not received all the information and explanations I required for my audit, or
• my audit noted any material instance where public money has not been applied for the purposes intended or where the transactions did not conform to the authorities governing them, or
• the information about the Agency in the National Treasury Management Agency’s annual report is not consistent with the related financial statements, or
• the statement on internal financial control does not reflect the Agency’s compliance with the code of practice for governance of State Bodies, or
• I find there are other material matters relating to the manner in which public business has been conducted.

I have nothing to report in regard to those matters upon which reporting is by exception.

Seamus McCarthy
Comptroller and Auditor General

16 June 2015

Accounting Policies

(a) Background

Under the National Treasury Management Agency (Amendment) Act, 2000, the management of personal injury and property damage claims against certain State Authorities (“Delegated State Authorities”), and of the underlying risks, was delegated to the National Treasury Management Agency (“NTMA”). When performing these functions, the NTMA is known as the State Claims Agency (“SCA”). The SCA incurs expenditure on awards, claim settlements and associated costs. The SCA recovers this expenditure from the Delegated State Authorities who are liable in respect of claims.

The SCA has three objectives as follows:

• A duty to act in the best interest of taxpayers. It also has a duty towards persons who have suffered injuries and who take legal actions against the State or Health Enterprises, and the families of such persons. It acts fairly and ethically in its dealings with injured persons and their families and in the management of all cases that fall within its remit;
• To provide risk advisory services to Delegated State Authorities with the aim of reducing over time the frequency and severity of claims;
• To deal with third-party costs arising from certain Tribunals of Inquiry.

In February 2003, the management of clinical negligence claims and associated risks under the Clinical Indemnity Scheme (the “Scheme”) was delegated to the SCA. The Scheme was established in order to rationalise medical indemnity arrangements for the health service. Under the Scheme, the State assumes full responsibility for the indemnification and management of clinical negligence claims.

The SCA’s remit was further expanded in February 2011 with the delegation of the management of personal injury and property damage claims against 13 new authorities and several additional classes of claims (including personal injury related to bullying / harassment, members of the Defence Forces and An Garda Síochána while serving abroad and prisoner in-cell sanitation claims).

Claims alleging personal injury in respect of the medicinal products Thalidomide and Nimesulide were delegated to the SCA in April 2012. Following a Government decision in 2012, a State Legal Cost Unit was set up within the SCA in February 2013 to deal with third-party costs arising from certain Tribunals of Enquiry. In October 2013 the Government delegated to the SCA the management of personal injury claims concerning the ingestion of the medicinal products Celvepan and Pandemrix.

In April 2014 the claims management of a further 61 public bodies (including the Voluntary Hospitals’ Group Delegations) was delegated to the SCA, bringing the total number within the SCA’s remit from 56 to 117.

Under the National Treasury Management Agency (Amendment) Act 2014, as commenced by Statutory Instrument (S.I.) No. 586 of 2014, the State Claims Policy Committee was dissolved on 22 December 2014. On this date, the NTMA was reconstituted as a body with a Chairperson and eight other members reporting to the Minister for Finance with over-arching responsibility for all of the NTMA’s functions (including the functions of the SCA).

(b) Reporting Currency

The reporting currency is the euro, which is denoted by the symbol €.

(c) Basis of Accounting

The financial statements are prepared on an accruals basis under the historical cost convention. The functions of the SCA relate to the management of claims on behalf of Delegated State Authorities who are liable in respect of claims and from whom the SCA recovers the amounts of any awards and associated costs.  The financial statements report only on the transactions of the SCA and therefore no amount is included for the value of outstanding claims.

(d) Expenditure

Expenditure on awards, claim settlements and associated costs are recognised on receipt of a validated approval or the validated settlement of such expenditure.

(e) Amounts Receivable from Delegated State Authorities

The SCA recovers the amounts of any awards, claim settlements and associated costs from Delegated State Authorities who are liable in respect of claims. Amounts are accounted for on an accruals basis and are treated as receivable from Delegated State Authorities in line with the recognition of the related expenditure.

Claims Statement Account

Year ended 31 December

	Note	2014 €000	2013 €000
Received and receivable from Delegated State Authorities
In respect of claims and expenses	1	141,400	139,592
Costs recovered on behalf of Delegated State Authorities	2	2,789	1,738
		144,189	141,330
Paid and payable in respect of awards and claim settlements	3	86,852	92,521
Other Expenses	4	54,548	47,071
Reimbursement of costs recovered on behalf of Delegated State Authorities	2	2,789	1,738
		144,189	141,330

 

Notes 1 to 13 form part of these financial statements.

On behalf of the Agency

Conor O’Kelly, Chief Executive
National Treasury Management Agency

Willie Walsh, Chairperson
National Treasury Management Agency
15 June 2015

Balance Sheet

31 December

		2014	2013
	Note	€000	€000
Assets
Investments	6	5,522	5,623
Debtors	7	11,834	15,096
Cash at Bank		1,444	2,126
		18,800	22,845
Liabilities
Scheme Liabilities	6	5,522	5,623
Borrowings from Post Office Savings Bank Fund	8	3,800	14,300
Creditors	9	9,478	2,922
		18,800	22,845

Notes 1 to 13 form part of these financial statements.

On behalf of the Agency

Conor O’Kelly, Chief Executive
National Treasury Management Agency

Willie Walsh, Chairperson
National Treasury Management Agency
15 June 2015

Notes to the Financial Statements

1. Received and receivable from Delegated State Authorities

		2014	2013
		€000	€000
Amounts receivable at 1 January (Note 7)		(15,082)	(13,827)
Receivable from Delegated State Authorities		144,559	138,272
Receivable from Scheme funds (Note 6)		111	65
Amounts receivable at 31 December (Note 7)		11,812	15,082
		141,400	139,592

Amounts receivable from Delegated State Authorities comprise reimbursements of any awards, claim settlements and associated costs incurred by the SCA from the Delegated State Authorities who are liable in respect of claims.

2. Costs recovered on behalf of Delegated State Authorities

	2014 €000	2013 €000
Costs recovered on behalf of Delegated State Authorities	2,789	1,738

In certain cases, whether by adjudication of the court or agreement with the third party / co-defendant, a specified percentage contribution in relation to a particular claim may be paid by a third party / co-defendant to the SCA. These amounts represent costs recovered by the SCA on behalf of the Delegated State Authorities.

3. Paid and payable in respect of awards and claim settlements

	2014 €000	2013 €000
Paid and payable in respect of awards and claim settlements	86,852	92,521

Expenditure on awards are recognised on receipt of a validated approval of the validated settlements of such expenditure.

4. Other Expenses

	2014 €000	2013 €000
State Claims Agency Expenses
Legal Fees	20,520	18,759
Medical Fees	3,360	2,674
Engineers’ Fees	350	265
Other Fees (including investigation and actuary fees)	1,312	1,107
	25,542	22,805
Plaintiff Expenses
Legal Fees	28,913	24,233
Other Expert Fees	76	2
Travel Expenses	10	12
	28,999	24,247
Witness Expenses	7	19
	54,548	47,071

 

5. Remuneration and Expenses (included in the Administration Expenses of the NTMA)

The administrative costs incurred by the NTMA in the performance of the SCA’s functions amounted to €13.5m (2013: €11.5m). These costs are included in the administration expenses of the NTMA and are charged on the Central Fund. The NTMA does not seek reimbursement of these costs from Delegated State Authorities.

State Claims Policy Committee

Remuneration of State Claims Policy Committee members is set by the NTMA with the consent of the Minister for Finance.

Remuneration in respect of 2013 and 2014 is set out below:

		2014 €	2013 €
Noel Whelan (Chair of Committee)		13,317	13,713
Anthony Delaney		8,877	9,142
Christopher Moore		8,877	9,142
Niamh Moran		8,877	9,142
Fachtna Murphy		8,877	9,142
Wendy Thompson		–	–
Mary Jackson		–	–
Charlie Hardy (Resigned 15 November 2013)		–	–
		48,825	50,281

Wendy Thompson waived her fees as a Committee member for 2013 and 2014. Mary Jackson, appointed in her capacity as a civil servant, did not receive any remuneration in respect of her Committee membership. Charlie Hardy, appointed in his capacity as a civil servant, did not receive any remuneration in respect of his Committee membership.

No Committee member related expenses were paid for 2014 (2013: Nil).

Under the National Treasury Management Agency (Amendment) Act 2014, as commenced by S.I. No. 586 of 2014, the State Claims Policy Committee was dissolved on 22 December 2014. On this date, the NTMA was reconstituted as a body with a Chairperson and eight other members reporting to the Minister for Finance with over-arching responsibility for all of the NTMA’s functions (including the functions of the SCA).

6. Investments / Scheme Liabilities

In 2008, the Minister for Health established the Special Obstetrics Indemnity Scheme (the “SOIS”). Under the SOIS, the Minister agreed to indemnify the Bon Secours and Mount Carmel Hospitals¹ in respect of specified obstetric claims. The Government delegated managing claims under the SOIS to the NTMA under S.I. No. 628 of 2007, National Treasury Management Agency (Delegation of Functions) (Amendment) Order, 2007. The named participating hospitals made contributions to a fund which is managed by the NTMA on behalf of the Minister for Health under section 29(2) of the National Treasury Management Agency (Amendment) Act, 2000.

The Minister for Health authorised the SCA to draw down amounts from the fund to reimburse the SCA under section 16(2) of the National Treasury Management Agency (Amendment) Act, 2000 for any amounts paid by the SCA on behalf of the participating hospitals.

In 2008, the Government delegated the management of historical claims against consultant obstetricians which were previously managed by the Medical Protection Society (“MPS”) to the NTMA under S.I. No. 628 of 2007, National Treasury Management Agency (Delegation of Functions) (Amendment) Order, 2007. The delegation of the management of the claims included the transfer of an existing fund to the SCA. Following draw down of the balance of the fund in 2013 (€13k), any remaining claim settlements and expenses are being met by the SCA under the Clinical Indemnity Scheme, and reimbursed to the SCA by the Health Service Executive (the “HSE”).

Scheme Funds

Scheme funds are invested in Exchequer Notes on behalf of the Department of Health. Income earned on the Schemes’ investments is paid into the fund and is not recognised as income of the SCA.

The movement on the Scheme funds is set out below:

	2014 €000	2013 €000
Balance at 1 January	5,623	5,327
Contributions to Fund	–	350
Claim settlements and expenses	(111)	(65)
Income earned	10	11
Balance at 31 December available for settlement of claims	5,522	5,623

The amounts remaining in the Scheme funds at 31 December 2014 relate to the SOIS.

¹Mount Carmel went into liquidation in January 2014 and was subsequently purchased by the HSE in September 2014, to be utilised as a step down facility. It is expected there will be future claims in respect of its obstetric activities.

7. Debtors

	2014 €000	2013 €000
Receivable from State Authorities	11,812	15,082
Other	22	14
	11,834	15,096

 

8. Borrowings from the Post Office Savings Bank Fund

	2014 €000	2013 €000
Borrowings from the Post Office Savings Bank Fund	3,800	14,300

Under section 16 of the National Treasury Management Agency (Amendment) Act, 2000 the Minister for Finance may advance monies from the Post Office Savings Bank Fund (the “POSB”) to the SCA for payment of the amount of any costs, charges and expenses in respect of the services of professional and other expert advisers, the amount of any award or settlement to be paid to a claimant in respect of a delegated claim, and the amount of interest, if any, payable thereon. Funds are drawn from the POSB Fund as required during the year to cover the above costs incurred by the SCA on behalf of the Delegated State Authorities. The SCA then receives reimbursements from the Delegated State Authorities and repays the POSB on a regular basis throughout the year. No financing costs are charged to the SCA by the POSB.

9. Creditors

	2014 €000	2013 €000
Payable in respect of expenses	5,943	1,423
Payable in respect of awards	2,561	521
Professional Services Withholding Tax due	225	405
Amounts due to Delegated State Authorities	749	573
	9,478	2,922

 

10. Estimated Liabilities of Delegated State Authorities

During 2014, 3,003 (2013: 2,242) new claims were received and 1,939 (2013: 1,861) were resolved. At 31 December 2014, the SCA had a total of 7,221 (2013: 6,188) claims under management.

At 31 December 2014 the estimated liability of Delegated State Authorities in respect of claims under management by the SCA was €1.47bn (2013: €1.23bn), of which €1.16bn (2013: €1.04bn) was attributable to Clinical Claims and €309m (2013: €187m) to General Damage Claims. The liability is an estimate calculated by reference to the ultimate cost of resolving each claim including all foreseeable costs such as settlement amounts, plaintiff legal costs and defence costs.

The estimated liability calculation is based on actuarial assumptions including a real rate of return of 3%. There has been a recent High Court ruling that a real rate of return of 1% should apply to Court Awards, however the SCA has appealed that decision to the Court of Appeal. The SCA has not adjusted its estimated liability to take account of this reduction, pending the outcome of the Appeal.

A change in the real rate of return to 1% would, based on actuarial assumptions, result in an estimated increase in the yearly CIS budget of between €80m and €100m.

11. Contingent Liabilities

The State Claims Agency had no contingent liabilities at 31 December 2014.

12. Related Parties

Minister for Finance

The members of the State Claims Policy Committee, as set out in note 5, were appointed by the Minister for Finance under section 12 of the National Treasury Management Agency (Amendment) Act, 2000.

13. Approval of Financial Statements

The financial statements were approved by the Agency on 26 May 2015.