“The potential negative feedback between poor budget setting and poor expenditure management now appears particularly marked in the health area, with expenditure over- runs leading to significant upward revisions to future annual ceilings,” said the IFAC.
It said that the largest single overrun in the past two years was in health.
In 2014, health spent more than €647m than it was allocated, and is now due to exceed its spending by €600m this year.
IFAC found that in both years the health overruns were accounted for by both pay and non-pay items.
But it concluded that most of the problem remained focused on the pay budget in hospitals and the failure to get to grip on staffing numbers and staffing costs.
“Given that over 70% of spending is in the hospitals area, this would indicate that much of the pay issue arises in this area,” the watchdog said.
“This seems to indicate specific problems with the Department of Health’s pay budget that have not been resolved through the change in 2015 from a system of limits on staffing levels, the employment control framework, to Departmental pay ceilings.
The watchdog said: “These problems may arise from difficulties in implementing pay-related reforms leading to higher average pay than expected, larger than planned staffing or a combination of both.”
The watchdog said that the majority of over-spending was in the hospitals and the so-called Primary Care Reimbursement Service.
“Until 2013, overruns in this area (public health) was largely offset at the aggregate level by below budget spending by other departments,” IFAC said.
However, it said that the latest available information, for August, showed big overruns in both hospitals and primary care areas.