Grant Funding and Financial Reporting for Section 38/39 Organisations

If your organisation receives HSE funding as a voluntary or non-statutory provider, you're almost certainly operating under a Section 38 or Section 39 arrangement — named after the relevant sections of the Health Act 2004. The two routes carry very different financial reporting obligations, and getting them confused (or under-resourcing the compliance side) can put funding at real risk. Here's what each requires.

For the broader regulatory context, see our guide to healthcare compliance and CPD training in Ireland.

Section 38 vs Section 39: not the same thing

Section 38 of the Health Act 2004 covers organisations providing a health or personal social service that is broadly similar to a service the HSE itself would provide — larger, more integrated providers such as major voluntary hospitals and disability service providers typically fall here. These organisations generally operate under a formal Service Arrangement with the HSE, and staff are frequently employed on public-sector-aligned pay and conditions.

Section 39 covers organisations that provide a service similar to, or ancillary to, a health or personal social service — typically smaller, more independent bodies funded by grant rather than a full service arrangement, with more operational autonomy over how they're run. The compliance obligations scale with this: Section 39 organisations generally carry a lighter reporting burden than Section 38, but that gap narrows significantly for larger Section 39 providers, as set out below.

The Annual Compliance Statement

The centrepiece of HSE's governance framework for funded organisations is the Annual Compliance Statement (ACS) — a self-certification, signed off at Board and Executive level, confirming that the organisation's governance procedures meet HSE requirements. All Section 38 providers must complete an ACS annually. The requirement was extended to larger Section 39 providers too — specifically those receiving significant annual HSE funding — bringing a substantial share of total non-statutory HSE funding within the same governance assurance framework.

The ACS isn't a financial statement in itself, but it sits alongside one: boards are expected to actively examine recurring financial-control issues raised by internal audit — things like bank account management, credit card usage, cash-handling procedures and segregation of duties — and be able to stand over their governance arrangements, not just their year-end accounts.

What has to be submitted, and when

Funded organisations under both Section 38 and Section 39 arrangements are expected to submit, as part of their annual funding cycle:

• Signed Service Arrangements (Section 38) or Grant Agreements (Section 39). These set out the funding terms, service specification and governance obligations for the year, and are a precondition for funding release — the HSE has historically withheld a portion of funding where these documents remain unsigned by the relevant point in the year.
• Annual Financial Monitoring Returns (AFMR). A structured financial return submitted alongside the organisation's annual financial statements.
• Annual financial statements. Audited accounts appropriate to the organisation's size and structure.
• The Annual Compliance Statement (where applicable, per the thresholds above).
• Activity and service specification reporting. Sector-specific templates reporting on KPIs and service delivery against what was funded — disability providers, for example, typically report against a standard composite schedule template.

Why this matters beyond the paperwork

None of this is bureaucracy for its own sake. Section 38 and Section 39 funding collectively represents a very substantial share of total HSE-released funding each year, and the compliance framework exists because taxpayer money is flowing through organisations the HSE doesn't directly control day-to-day. Weak financial reporting or a missed Service Arrangement signature doesn't just create an audit finding — it can trigger funding delays or conditions that directly affect service delivery.

For finance managers in these organisations, the practical takeaway is to treat the annual cycle — Service Arrangement/Grant Agreement signing, AFMR submission, audited accounts and (where applicable) the ACS — as a single coordinated process with a shared calendar, not four separate deadlines managed in isolation.

Frequently asked questions

Does every Section 39 organisation need to file an Annual Compliance Statement?

No — the ACS requirement is generally reserved for larger Section 39 providers above a significant HSE funding threshold, alongside all Section 38 providers. Smaller Section 39 bodies still have financial reporting obligations, just a lighter governance-certification layer. Check your specific Grant Agreement, since thresholds and requirements are set by the HSE and can be updated.

What happens if a Service Arrangement isn't signed on time?

The HSE has historically applied funding consequences — including withholding a portion of scheduled funding — where Service Arrangements or Grant Agreements remain unsigned past the point required in the annual cycle. Treat this as a hard deadline, not an administrative formality.

Who is accountable for the Annual Compliance Statement?

It's signed off at Board and Executive level — it's a governance self-certification, not something that can be delegated entirely to the finance function, even though finance typically does the underlying preparation work.

Is a Section 38/39 organisation treated as a public body for procurement purposes?

Often, yes, depending on the degree of HSE funding and control — see our dedicated guide to HSE procurement and financial-control training for how that interacts with EU and national procurement rules.

Section 38 and Section 39 status determines a great deal about your organisation's financial reporting calendar — get the classification right, build the annual cycle around it, and the Annual Compliance Statement becomes a formality rather than a scramble.