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 2013 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 2013.

In my opinion, proper books of account have been kept by the 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
• 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

27 June 2014

Accounting Policies

(a) Background

Under the National Treasury Management Agency (Amendment) Act, 2000 (the “Act”), the management of personal injury and property damage claims against the State 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 (the “SCA”).

The Act sets out two objectives for the SCA:

• To manage claims so as to ensure that the State’s liability and associated legal and other expenses are contained at the lowest achievable level; and,
• To provide risk advisory services to State Authorities with the aim of reducing over time the frequency and severity of claims.

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 (including An tSeirbhís Oideachais Leanúnaigh agus Scileanna, the Higher Education Authority and the National Education Welfare Board) 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. In addition, during 2012 the Government announced its decision to establish a State Legal Cost Unit within the SCA to deal with third party costs arising from certain Tribunals of Enquiry. The unit was set up in February 2013. 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.

The significant accounting policies adopted are as follows:

(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 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 and claims settlement expenses are recognised on receipt of a validated approval or the validated settlement of such claims. Lodgements to court are recognised as expenditure on behalf of State Authorities at the date of lodgement.

(e) Amounts Receivable from State Authorities

Amounts are treated as receivable from State Authorities in line with the recognition of the related expenditure.

Claims Statement Account

Year ended 31 December

		2013	2012
	Note	€000	€000
Received and receivable from State Authorities in Respect of
Claims and Expenses	1	139,592	100,224
Costs Recovered on Behalf of State Authorities		1,738	3,818
		141,330	104,042
Paid and Payable in Respect of Awards		92,521	56,847
Other Expenses	2	47,071	43,377
Reimbursement of Costs Recovered to State Authorities		1,738	3,818
		141,330	104,042

 

Notes 1 to 8 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

25 June 2014

Balance Sheet

31 December

		2013	2012
	Note	€000	€000
Assets
Investments	3	5,623	5,327
Debtors	4	15,096	13,831
Cash		2,126	2,048
		22,845	21,206
Liabilities
Special Obstetrics Indemnity Scheme	3	5,623	5,327
Borrowings from Post Office Savings Bank Fund	5	14,300	13,800
Creditors	6	2,922	2,079
		22,845	21,206

Notes 1 to 8 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

25 June 2014

Notes to the Financial Statements

1. Income

		2013	2012
	Note	€000	€000
Opening Balance	4	(13,827)	(3,807)
Received from State Authorities		138,272	89,559
Received from the Special Obstetrics Indemnity Scheme		65	645
Closing Balance	4	15,082	13,827
		139,592	100,224

 

2. Other Expenses

	2013 €000	2012 €000
State Claims Agency Expenses
Legal Fees	18,759	16,497
Medical Fees	2,674	3,317
Engineers’ Fees	265	278
Other Fees (including investigation and actuary fees)	1,107	992
	22,805	21,084
Plaintiff Expenses
Legal Fees	24,233	22,271
Other Expert Fees	2	–
Travel Expenses	12	13
	24,247	22,284
Witness Expenses	19	9
	47,071	43,377

 

In addition to the above expenses, the administrative costs incurred by the NTMA in the performance of the SCA’s functions amounted to €11,466,570 (2012: €10,308,315). 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 State Authorities.

Remuneration and Expenses (included in the administration expenses of the NTMA)
Remuneration of State Claims Policy Committee members is set by the NTMA with the consent of the Minister for Finance. Remuneration in respect of 2012 and 2013 is set out below:

		2013 €	2012 €
Noel Whelan	(Chairperson – reappointed 1 July 2012)	13,713	10,918
Anthony Delaney		9,142	9,142
Christopher Moore		9,142	9,142
Niamh Moran		9,142	9,142
Fachtna Murphy	(appointed 1 July 2012)	9,142	4,571
Wendy Thompson	(appointed 1 July 2012)	–	–
Charlie Hardy	(appointed 1 July 2012)	–	–
Board Fees		50,281	42,915

 

Charlie Hardy, appointed in his capacity as a civil servant, did not receive any remuneration in respect of his Committee membership. Wendy Thompson waived her fees as a Committee member for 2012 and 2013.

No Committee member related expenses were paid for 2013.

3. Special Obstetrics Indemnity Scheme/Investments

In 2008, the Minister for Health established the Special Obstetrics Indemnity Scheme (the “Scheme”). Under the Scheme, the Minister agreed to indemnify the Bon Secours and Mount Carmel Hospitals in respect of specified obstetric claims. The Government delegated managing claims under the Scheme to the NTMA under (S.I.) 628/2007 National Treasury Management Agency (Delegation of Functions) (Amendment) Order, 2007 (the “Order”). 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. In addition, the Order delegated to the SCA the management of historical claims against consultant obstetricians which were previously managed by the Medical Protection Society (“the MPS”).

The Minister for Health authorised the SCA to draw down amounts from time to time 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 or on behalf of any person covered by the MPS.

During 2013, following an agreement between Mount Carmel and the Department of Health, Mount Carmel made a contribution of €350,000 to the fund towards the cost of prospective claims.

As at 31 December 2013 Scheme funds are invested in Exchequer Notes. Income earned on the Scheme’s investments is paid into the fund and is not recognised as income of the SCA.

The movement on the Special Obstetrics Indemnity Scheme during 2013 was:

	2013 €000	2012 €000
Opening Balance	5,327	5,936
Contributions to Fund	350	–
Claim Settlements and Expenses	(65)	(645)
Income Earned	11	36
Balance Available for Settlement of Claims	5,623	5,327

Investments comprise Exchequer Notes, which are invested on behalf of the Department of Health.

4. Debtors

	2013 €000	2012 €000
Receivable from State Authorities	15,082	13,827
Other	14	4
	15,096	13,831

 

5. Borrowings from the Post Office Savings Bank Fund

Under section 16 of the National Treasury Management Agency (Amendment) Act, 2000 the Minister for Finance may advance moneys 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 State Authorities. The SCA then receives reimbursements from the State Authorities and repays the POSB on a regular basis throughout the year. No financing costs are charged to the SCA from the POSB.

6. Creditors

	2013 €000	2012 €000
Payable in respect of Expenses	1,423	874
Payable in respect of Awards	521	785
Professional Services Withholding Tax due	405	335
Amounts due to State Authorities	573	85
	2,922	2,079

 

7. Estimated Liabilities of State Authorities

During 2013, 2,242 (2012: 2,276) new claims were received and almost 1,861 (2012: 1,951) were settled. At 31 December 2013, the SCA had a total of 6,188 (2012: 5,755) claims under management.

At 31 December 2013 the estimated liability of State Authorities in respect of claims under management by the SCA was €1.23bn (2012: €1.1bn), of which €1.04bn (2012: €970m) was attributable to Clinical Claims and €187m (2012: €157m) to Employer Liability, Public Liability and Property 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.

8. Events since the Balance Sheet Date

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

In May 2014 the Government published the National Treasury Management Agency (Amendment) Bill. The Bill will, when enacted, streamline and simplify the NTMA’s governance structures to enable a more integrated approach to the performance of its functions. The NTMA will be reconstituted as a body with a Chairperson and eight other members who will have over-arching responsibility for all of the NTMA’s functions (excluding NAMA which will continue to have its own separate board). The National Development Finance Agency Board, NTMA Advisory Committee, NPRF Commission and State Claims Policy Committee will be dissolved.