Business Irish

Monday 25 September 2017

Catalogue of errors led to €3.6bn debt blunder, say reports

Peter Flanagan

Peter Flanagan

A catalogue of errors and structural problems in the Department of Finance and the Central Statistics Office led to the accounting error that overstated the government debt by €3.6bn.

That is the conclusion of two confidential reports, seen by the Irish Independent, into the now notorious mistake that was uncovered last November.

The reports -- one compiled by the department and the other by the consultants Deloitte -- will be published today when the Oireachtas Public Accounts Committee (PAC) questions the current secretary general of Finance, John Moran, about the mistake.

The error reduced the general government debt by 2.3pc when it was discovered.

Up to now, both the Department of Finance's own statistical unit (SU) and the Central Statistics Office (CSO) have calculated the government debt figures, but these reports recommend only the CSO should do this task in the future.

Both reviews paint a bleak picture of the department and calls for a radical overhaul of how data is compiled and tasks are completed by both Finance and the CSO.

Deficiencies

According to Deloitte, there were "general deficiencies in organisational arrangements and in particular a lack of clearly defined roles and responsibilities", while a "lack of an overarching quality assurance programme across the relevant agencies" meant the debt calculation was not covered by auditors in either the department or CSO.

Processes and systems were "inefficient, involved duplication, and lacked documentation", Deloitte concluded, but neither agency had registered that there was a risk of a miscalculation.

On top of these problems, the consultants found that templates used to collect data for debt calculations were inadequate and there was no central holding area for what information had been gathered.

The department's own report is no less scathing.

The error could have been discovered as early as 2010 but the SU did not query references from the National Treasury Management Agency (NTMA) about cash it had placed with the Housing Finance Agency (HFA).

Miscalculation

The miscalculation came about when €3.6bn worth of funds of the HFA were counted twice.

An email to the statistical unit in March last year also should have prompted an investigation by the unit, the internal report states.

The review, which was conducted by the department's 'budget and economic division' and its internal audit unit, agrees with an assertion from the CSO that the method for gathering and recording data is "not fit for purpose and urgently needs improvement".

The terms of reference of the report do not require that culpable individuals be named, and instead are focused on methods and procedures. That prompted an angry response from PAC chairman John McGuinness, who branded the reviews a "whitewash".

"The reports do not name specific individuals, which is disappointing given the salaries of some of the people involved in the problem.

"They indicate it was a failure of the system, but do not say who was at fault for either allowing the system to fail or setting up a flawed system in the first place.

"If it was the responsibility of a small number of people, they should have been trained to the highest standards for that task. Why was this not the case?"

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