COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 3 Nov 2011

Debt Discrepancy in National Accounts: Discussion with Department of Finance, National Treasury Management Agency and Central Statistics Office

Mr. Kevin Cardiff (Secretary General, Department of Finance) called and examined.

Chairman

We are dealing with the issue of the error of €3.6 billion in the national accounts. Before we begin, I remind members and witnesses to turn off their mobile phones because they interfere with the transmission of the meeting.

I advise witnesses that they are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a member of either House, a person outside the House or a official by name or in such a way as to make him or her identifiable. Members are reminded of the provision within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Mr. Kevin Cardiff, Secretary General of the Department of Finance, and ask him to introduce his officials.

Mr. Kevin Cardiff

I am accompanied by Mr. Michael McGrath from the Department of Finance. Mr. Oliver Whelan is here from the NTMA, with Mr. Michael Cunningham, also from the NTMA. Mr. Aidan Punch and Mr. Mick Lucey are from the CSO.

Chairman

Before we commence the session, I thank the witnesses for arranging to be here at such short notice.

I want to deal with one or two points before calling on Mr. Cardiff to make his opening statement. While we are here dealing with an accounting error on one side from the Department of Finance, that is one issue. An issue that I want to make clear before we commence the full proceedings of the meetings is that of the comments of the Minister for Finance in the House yesterday where he said that it was not picked up when the Comptroller and Auditor General examined the 2010 accounts. He stated publicly afterwards, and he mentioned me, as Chairman, that we signed off on these accounts. It is bad enough that we have a Department not being able to count, but I would have expected that the Minister for Finance and former Chairman of this committee would have known that the Comptroller and Auditor General does not sign off on the accounts. In fact, EUROSTAT is probably a body to which we could point that signed-off or looked at these accounts, and the account of the general Government debt is not a set of accounts figures that is signed-off, as I understand it, by the Comptroller and Auditor General. These figures are presented for inclusion in the accounts and thereafter are presented to Europe. Second, this committee and the Comptroller and Auditor General do not sign off on the Housing Finance Agency, HFA, set of accounts. Those two facts need to be stated clearly in order to correct the record of the House and not to have any reflection in this regard on the Comptroller and Auditor General or the members of this committee. I would expect that the Minister in due course will reflect on that.

I ask for the statement from Mr. Smyth. The Comptroller and Auditor General is not available on this day, but Mr. Smyth is his second in command.

Mr. Gerry Smyth

I thank the Chairman. The committee has already considered chapter 2 of the report of the Comptroller and Auditor General for 2010 which sets out the outturn on State borrowing in both gross and net terms. The chapter reports this outturn for both the national debt that is managed by the NTMA, and which is audited by the Comptroller and Auditor General, and the wider Government debt which includes the State's obligations under promissory notes and further debt obligations arising from borrowing by other agencies, some of which, as the Chairman has indicated, are not audited by the Comptroller and Auditor General.

The chapter recognised that any related assets, including investment in Housing Finance Agency notes, has to be set against any gross figures quoted and the chapter set out the State's net indebtedness figures in its overall conclusion.

Today's meeting is concerned with how the gross debt was calculated for reporting under EUROSTAT rules. I would stress that notwithstanding the accounting base used by EUROSTAT, the effect of off-setting the related assets in chapter 2 of the report was to adjust the figures to give the true net Government debt for domestic accounting purposes.

I will leave it to the Accounting Officer to explain the basis of accounting for EU reporting purposes and to explain the revision to the gross figure that has now been made.

Mr. Kevin Cardiff

The committee has asked me here to discuss errors which have arisen in the calculation of the amount of the general Government debt, errors which, once calculated incorrectly, turn up in a number of different publications. Like the Chairman, I regard this as a most serious matter and I am having a report compiled internally on how this matter arose, as well as taking other steps. I will give the committee as good an account today of this matter as I can, but it will understand that we are looking into it in more detail. The fact that these errors arose also gives rise to questions about the systems used for these calculations, in some ways, more importantly. I will be arranging for a detailed external review of the processes concerned from a systems point of view.

Before getting into the detail of the error that arose, let me explain briefly that there are, at least, for this purpose, two separate measures of Ireland's State debt which ought to concern us. The first measure is the Exchequer or national debt. This amount represents the money owed by the Government, net of cash holdings, and does not include the separate debt of most State bodies, local authorities, etc.

Separately, there is the slightly newer, but still at this stage well-established, concept of the general Government debt, and it is this measure on which the error occurred. The general Government debt includes substantially the national debt, but is gross of cash holdings, and it also includes the debt of other State bodies within the general Government sector. The "general Government", for that purpose, does not include every State-owned body. It includes most public service bodies but does not generally include commercially-operated State companies.

I would like to explain, if I can, what went wrong in this case by way of an example. In the past if the Government borrowed €1 billion, that would add to the national debt, and if the HFA separately borrowed €1 billion, that would add to its debt. Both of those transactions would be handled by the NTMA, but the first €1 billion, the Government's borrowings, would be done by the NTMA on behalf of the Minister for Finance under his delegated authority, and that would impact on the national debt. The NTMA would arrange the second €1 billion but, in that case, as agent of the HFA, and that would increase the HFA's debt. In that case, the general Government debt - the debt of the Government sector combined - would go up by €2 billion because the central government would have borrowed €1 billion and the HFA would have borrowed €1 billion. The total would go up by €2 billion. In 2010 though, as market conditions changed, rather than borrowing as agent of the HFA, in other words, instead of the NTMA going into the market and stating that it wanted to raise there €1 billion, in this example, on behalf of the NFA, the NTMA would have gone into the market and stated that it wanted to raise €1 billion for the Exchequer which it would pass on to the HFA. In this example, the NTMA borrowed €1 billion for the Government's account and a further €1 billion on the Government's account which was passed on to the HFA as a type of loan. The HFA had €1 billion in borrowings and the Exchequer had €2 billion but because the HFA's borrowing was from another part of the Government sector, it should not have added to the overall general Government borrowings in presentation terms. Borrowings and loans from one part of the general Government sector to another ought to be consolidated out rather than presented as adding together. The additional borrowings for the Government sector reflect the overall Government position vis-à-vis the private sector. This is what went wrong because when the HFA began to be funded indirectly via the Exchequer instead of directly from the market, its borrowings continued to be reflected as if they had been from the market. They were added to the total instead of being treated as an intragovernmental transaction. This did not affect the HFA’s overall balance sheet position because it was still borrowing, in our example, €1 billion from somebody.

Specifically, the general Government debt figures reported to EUROSTAT, most recently at the end of September in respect of the period to the end of 2010, overstated the debt figure as a result of the double counting. The reported figure for the end of 2010 was €148 billion, which overstated the amount by €3.6 billion. An element of double counting has been ongoing since the CSO reported to EUROSTAT in mid-2010 in respect of quarter one of 2010.

This double count ought not to have happened. The potential for the change in the way the HFA was funded to have an implication for the preparation of the general Government debt figures appears to have been signalled at a technical level to the Department by the NTMA last year. It seems that the significance of the matter was not appreciated at that time nor was it appreciated when the quarterly figures and accompanying documentation were received from the NTMA. In the context of the work currently under way for the publication of the medium term fiscal statement later this week the matter arose again in discussions between the NTMA and the Department and at that stage an examination of the matter conducted by the Department, the NTMA and the CSO established that the double count had occurred. The CSO has already informed EUROSTAT about the double count and the information has also been communicated to the EU and the IMF.

As a result, our debt to GDP ratio for the end of 2010 is now 92.6% of GDP rather than the 94.9% previously published. This means our projected peak level of general Government debt will be lower than previously forecast. The details of this will be made clear in the medium term fiscal statement that will be published tomorrow. However, this revision did not change the net debt position for 2010, which is the general Government debt less liquid assets and cash, nor does it not have any effect on the general Government deficit for 2010 or for this year. In overall terms, Ireland is no better or worse off.

The questions we must now address are how these errors occurred, whether the mistake could happen again in the same way or in another guise and how we can ensure that such errors do not happen in the future. The systems concerned will be closely examined and made right as a matter of urgency.

Chairman

Can we publish Mr. Cardiff's statement?

Mr. Kevin Cardiff

Yes.

Chairman

When was Mr. Cardiff first notified of the error?

Mr. Kevin Cardiff

It was not the notification of an error. The issue was raised in e-mails from the NTMA to the Department of Finance in August 2010. Three or four e-mails mentioned this issue.

Chairman

What did the e-mails say? Did they state that there was an accounting error?

Mr. Kevin Cardiff

The e-mails did not report an error. They stated, in effect, that the treatment of this new practice of the NTMA, or the Exchequer in effect, lending directly to the HFA would have to be considered.

Chairman

What action was taken on foot of the three e-mails?

Mr. Kevin Cardiff

I cannot say exactly what action was taken. It will be part of our review but at this stage I cannot say that any formal action was taken.

Chairman

So no action was taken.

Mr. Kevin Cardiff

I cannot say that for sure but I have no evidence that any action was taken.

Chairman

Mr. Cardiff stated that the implications were signalled at a technical level. What does he mean by that?

Mr. Kevin Cardiff

I mean the people who generally speak to each other about these matters and who do the technical job of compiling the figures in the NTMA, the CSO and the Department of Finance. These people speak to each other on a regular basis and the discussion happened at that level.

Chairman

Has the Department of Finance appointed anybody to the board of the HFA?

Mr. Kevin Cardiff

No. We have done so in the past but at present we do not have anybody on the board.

Chairman

I am referring to 2010.

Mr. Kevin Cardiff

I do not recall. We probably did have a member.

Chairman

According to its report, the Department had a member. Would the Department have received any information from that board member on issues of this nature?

Mr. Kevin Cardiff

Not on this matter because there were no errors that we are aware of in the HFA's treatment of its accounts. The error was in the way its accounts were integrated and consolidated into the overall general Government position. I am not aware of any suggestion of fault on the part of the HFA or anything that anyone would have reported back from the HFA. The information that could have been used to get these figures right was in the system. It was not the case that there was a great secret or that the system was not aware of the change of practice in NTMA lending to the HFA. People were aware of it but the problem was at the point where that should have led to a change in accounting practice. I do not refer to accounts in the sense of the corporate accounts of the business lines concerned but the statistical, EUROSTAT, type of accounting. The thing broke down at the point where it ought to have been properly integrated into the EUROSTAT ESA system of accounts presentation

Chairman

I inquire because I want to understand the connection between the board of the HFA and the Department. There is also a connection between the NTMA and the Department. While Mr. Cardiff says it was not a great secret, it appears to have been secret. He knew that questions were being raised in the e-mails sent in August 2010 but when the NTMA and the Department appeared before this committee several weeks ago, no information was given to us. Was information given separately to the Comptroller and Auditor General or was there no intention to share the information about which concerns were expressed in 2010? I would have thought it proper that the Department or the NTMA would at least have alerted the committee and the Comptroller and Auditor General to these e-mails. As we can see from what has happened, fingers are being pointed at the Comptroller and Auditor General and the committee even though we are not responsible for some of these accounts. This begs a separate question about the role of the Comptroller and Auditor General regarding local government, which we have raised previously, because local government accounts and the accounts of the Housing Finance Agency are not audited. Yet the Department, which is central to this, had all the relevant information and the queries raised by the NTMA. I find it strange that when Mr. Cardiff appeared before the committee, they were not shared with us or the Comptroller and Auditor General and it was a secret. Perhaps if he had availed of the opportunity when he appeared before the committee and given a broad explanation of what was happening in the background, even though at that stage it might have been technical because it was being dealt with at a technical level, we would have known.

Mr. Kevin Cardiff

That is a perfectly understandable perspective but it is in the nature of an error that one does not know there is a mistake and that there is something to be explained. This was an error in presentation. If I were to turn up here and deliberately hide something, I would be wrong but I have never turned up here and deliberately hidden anything.

Chairman

We do not suggest that. I simply suggest that the information being given to Mr. Cardiff by the NTMA should have been made available to the committee or at least to the Comptroller and Auditor General so that we could understand what was going on in the background. In that regard, Mr. Cardiff has not told us and it was a secret in some way, shape or form. Can we have copies of the e-mails between the NTMA and the Department?

Mr. Kevin Cardiff

I will get the Chairman copies of those e-mails and when we have our internal report complied, I will get him a copy of that.

Chairman

How long will it take to compile the report?

Mr. Kevin Cardiff

I hope that will be compiled by the end of the month.

Chairman

Will that be done in-house or will tenders be invited to appoint a consultant to do it?

Mr. Kevin Cardiff

No, I want to do two separate things. The first thing is to have an internal management report compiled and that will be in-house. It will be done by the line managers concerned, as it is their line of responsibility, but we will also have a quality assurance check from a senior manager who is not in that line and we will use our internal audit resources if we need to do that.

Separately from that, I will have an external review done. The external review will be deeper and broader. It will deal with the same issues but will also deal with the systems and risk controls in and around the entire compilation and presentation of the national accounts and the EUROSTAT presentation of that. I expect with the agreement of the NTMA and the CSO that it will cover those organisations too since all three of us are involved in different parts of the process. That job will be done externally and as the committee can imagine we are anxious to get that started immediately. It will take a little bit longer because it will be more in-depth but my target is to have that by the end of the year.

There will be two separate things. The first is a quicker job that can be done internally and the second is an external job that will also look at the full range of systems involved here.

Deputy Sean Fleming

Mr. Cardiff said in his opening statement that the NTMA's quarterly figures and accompanying documentation would have referred to this issue when received by the Department but the significance was not appreciated. A number of e-mails and quarterly returns for March, June and September refer to this issue but the significance was not appreciated. It sounds a little like reports from banks going to the regulator's office where they were filed but not examined. Mr. Cardiff will publish all the documentation the Department received and we look forward to receiving it as soon as possible. Which Department is responsible for this consolidating error?

Mr. Kevin Cardiff

To be clear, the CSO and the Department of Finance have specific responsibilities in this regard. The Department does what we call the Maastricht returns for the excessive deficit procedures; the CSO is responsible under EU regulations for producing, in effect, the same figures for quarterly statistics. As far as I am concerned, that means the Department of Finance. I am sure the CSO will tell the Deputy that it is their job to get this right. It is also our job to get it right. It is not a question of there being----

Deputy Sean Fleming

It is worrying that Mr. Cardiff stated: "Some element of double counting has been going on since the CSO reported to EUROSTAT in mid-2010, in respect of Q1, 2010." He is saying there are other ongoing problems.

Mr. Kevin Cardiff

No, it is the same problem. It arose first and then the methodology used for the first iteration was continued-----

Deputy Sean Fleming

Is Mr. Cardiff saying four incorrect reports were sent to EUROSTAT for 2010 and three incorrect reports so far this year? The CSO quarterly report on 11 October 2011 in respect of quarter 3 still showed the figure of €148 billion. There have been seven incorrect quarterly returns since Q1 2010.

Mr. Kevin Cardiff

There is an update delay so it is six. It does not make it any better.

Deputy Sean Fleming

It was, therefore, misreported six times to EUROSTAT since the beginning of last year. I am disappointed that Mr. Corrigan is not present, as I expected him to be here. The NTMA and Department of Finance officials appeared before the committee on 6 October and the NTMA gave us a briefing document on the composition of the national debt. I picked up on the general issue of the work being done by the agency but I was not aware of any error. However, I refer to a short extract of exchange with Mr. Corrigan based on the briefing notes provided by the NTMA:

...it is very interesting that the national debt at the end of last year was approximately €94 billion but general Government debt was €148 billion. The difference pertains to promissory notes, the debt of other central government bodies, amounting to approximately €6 billion, local authority debt and other various items. The agency's role is only in regard to managing the national debt, the €93 billion, but no one person has control over the almost €50 billion in other debts that the European Union considers part of our general government debt.

I am disappointed that earlier this month the NTMA, in a briefing note to the committee, referred to the figure of €148 billion - and its officials were clearly aware of concerns on this issue - but when I read a summary of the note to the chief executive officer in layman's English referring to the €148 billion, he blithely let the comment go. Everybody watching that meeting was entitled to assume that the figures were accurate and he did not make a correction. He made corrections on Mickey Mouse, trivial issues relating to the advertising of positions within his agency but he let a significant issue that he was aware of pass and allowed the wrong information remain the public domain. Two officials from the Department of Finance were present that day who should have been aware of the issue and they also let the issue pass. Even if the issue was not resolved, Mr. Corrigan could have said some technical adjustments had to be made. Those figures were well known to the NTMA and I have to express my disappointment regarding Mr. Corrigan that when that summary was put directly to him he knew what was being said based on his briefing notes was not fully accurate.

The Minister for Finance is adamant that does not affect current budget figures. I want one of the witnesses to explain the position to me. I presume the interest Ireland had budgeted to pay on our national debt this year was calculated on an assumption that we owed €148 billion at, say, 5% interest and we are now told it is €3.6 billion less. It appears we over-projected the interest we would have to pay this year based on the higher level of debt. There would be a saving on that projected figure - it is not that we were going to pay it but we had over-projected. Is it right to say that the finances for the end of this year should show a figure of approximately €180 million less to be paid out of the current account on the national debt because presumably that figure was calculated on the higher opening figure, which we now know is not the case? Therefore, that figure does not have to be paid, there is an in-built financial gain to this budget for this year's figures and it will have an impact rolling forward to next year as well. This makes the budgetary process that little bit easier in that the interest will be based on a lower figure.

Can one of the witnesses explain the issue about the knock-on reduced interest charge and on what figure the original interest charge was calculated? This would appear to have a beneficial effect on the deficit for this year and next year in the current budget. Therefore, it has a positive impact in making the budget that bit easier.

I address my final comment to the Comptroller and Auditor General. On page 19 of the document it is stated that overall, public borrowing increased to €148.1 billion at the end of 2010 with gross national debt amounting to €109 billion of that liability. The Comptroller and Auditor General might explain if he includes commentary in his report. I would have assumed he included that figure as the figure he had audited and stood over but he might explain if there are further figures included in the commentary. It would be helpful if he would explain this, as we have often asked about the presentation of the Comptroller and Auditor General's report. There often appears to be figures in the commentary which are not figures he has audited but figures that were presented that he is just representing. Members of the public and this committee would be entitled to believe when we read a figure in his report that he was satisfied with that figure and that there is not a mix and match set of figures, some of which he has audited followed by a commentary on figures which he did not audit. I find that confusing and he might explain how that comes to be. I am not saying he made an error but it is confusing when we read it in his report. I felt I had to make that point as well. Those are my final questions.

Chairman

I will ask Mr. Cardiff to respond first.

Mr. Kevin Cardiff

On the question of what Mr. Corrigan said at the committee, I do not want to speak for him although maybe Mr. Oliver Whelan can, but I do not imagine he was aware that this error had been perpetuated in the way it has been, so I doubt he was in a position to tell the Deputy exactly that at the time.

Deputy Sean Fleming

Mr. Cardiff is saying this had not worked its way up to chief executive level either in his organisation or Mr. Corrigan's organisation at that stage - that it only emerged in the last week.

Mr. Kevin Cardiff

It certainly had in mine. I know Mr. Corrigan is an honest man. I doubt he would have tried to avoid the question if it had been put to him and he knew the answer.

Deputy Sean Fleming

It is even more disturbing that the chief executive of Mr. Cardiff's organisation, as the senior Accounting Officer in the State, and the senior Accounting Officer managing the national debt were not aware of that when they appeared here four weeks ago, given that Mr. Cardiff has already accepted that this was misreported to EUROSTAT six times in the meantime. That is an even worse situation.

Mr. Kevin Cardiff

I do not think it is a worse situation. The Deputy cannot imagine they we would have been aware of the error and continue to misreport it to EUROSTAT. The reason we are here is because an error was made and it was not stopped until during the past week.

Deputy Sean Fleming

Okay. We will move on to the interest issue.

Chairman

Mr. Cardiff might reply on the interest issue.

Mr. Kevin Cardiff

I will let Mr. McGrath deal with that issue.

Mr. Michael J. McGrath

Briefly on the interest issue, the figures we would get on the interest is in relation to the national debt, which would be the amount of money that is borrowed by the NTMA, and that would refer to the debt servicing cost and would be based on the bonds that are issued or on the programme financing that is now in place. On top of that there would be accrued interest and various other interest payments that are made in terms of the wider amount of borrowings that are done in terms of walking from the national debt, which was estimated at around about €94 billion, out to the general Government debt, which was estimated at around €148 billion. We now know it has been restated at €144.50 billion or thereabouts. There would have been interest in relation to that additional amount of about €50 billion. That was correctly accounted for in this; what was not accounted for was the double count, in that, in terms of the €3.6 billion, it was appearing on both parts and was not being netted out, but the interest in relation to the actual amount was being correctly attributed as far as we can see at this point.

Deputy Sean Fleming

I do not understand that and other members are saying they do not understand it. My understanding is the €94 billion in the national debt figure had included the figure of the €3.6 billion. Therefore, the interest on the national debt, which affects our budget, had the benefit of that extra-----

Mr. Michael J. McGrath

At what figure is the interest calculated?

Deputy Sean Fleming

I assume it was 5% for sake of argument but Mr. McGrath might tell me it is 4% or 6% but I took the rate of 5% to make the figures simple, and it is not too far off the mark. Surely, the Housing Finance Agency was accounting for the interest on its accounts? I find it strange how the principal was double-counted but the interest was not double-counted. To me, that would appear to follow, but there was another break in the chain. Mr. McGrath is now suggesting we had a figure included there as part of the national debt but we were not matching an interest charge for that part. That would seem to be another break in the chain, if that is what he is suggesting.

Mr. Michael J. McGrath

We are going through this at the moment, so we have to clarify exactly what the position is but, as we understand it right now, when HFA borrows from the NTMA, it pays interest back to the NTMA and the NTMA, in the receiving of that, nets off the interest, so that it presents to the Department of Finance a net interest for its borrowings. That is the figure that would be put in at that point in regard to the national debt.

Deputy Sean Fleming

I ask Mr. Cardiff to make sure this issue is explained in the report. I think he is essentially saying we have to wait for this report.

Mr. Kevin Cardiff

We will make sure there is a separate specific note on the interest implication.

Deputy Sean Fleming

Yes.

Mr. Oliver Whelan

When the NTMA was before this committee on 6 October, as Mr. Cardiff said, neither we nor anybody else was aware that an error had been within the system for a number of reports, so Mr. Corrigan would not have been aware of that error. Also, the NTMA's responsibility is in regard to the national debt, so the consolidation of the national debt with the broader general Government bodies is not something we would be aware of or see. Of the jigsaw that makes up the general Government debt, we would just see the national debt part of that. We had, as Mr. Cardiff outlined, flagged the potential for double counting. We understood, as everybody else did, that the matter had been correctly dealt with. Therefore, neither Mr. Corrigan nor anybody else would not have been aware at that time that there was any issue here.

Deputy Sean Fleming

The knowledge was there at the level below him in that three or four e-mails had been sent the previous year. Therefore, this issue was well known in the NTMA but not to the chief executive.

Mr. Oliver Whelan

The issue had been flagged. It was not well known that the error had occurred. We had flagged the issue and our assumption, as well as that of everybody else, was that it had been correctly dealt with. It was known that we had flagged the issue. It was not known in the NTMA or anywhere else until now that the-----

Deputy Sean Fleming

Was it Mr. Whelan's office, the Central Statistics Office, that flagged the issue, or when did Mr. Whelan become aware of it?

Mr. Oliver Whelan

It was in August. As Mr. Corrigan said, it was in August and September 2010 when it was first flagged as a result of the fact that the NTMA was funding the Housing Finance Agency. That was a new development and because it was a new development we flagged the issue at that time.

Deputy Sean Fleming

Could someone please explain the Comptroller and Auditor General's comment?

Mr. Gerry Smyth

First, it is necessary to distinguish between the Comptroller and Auditor General's annual report and his audit of the various accounts he audits every year. In the case of the audit of the accounts where he gives a report or certificate a full audit process is gone through. When it comes to the annual report there are, as the Deputy said, some figures which are audited - they have come from the audit of the accounts that the Comptroller and Auditor General has conducted but in other cases there is a less rigorous process which I do not think one could consider an audit. In regard to those figures, in some cases it is impractical to audit them. For example, if one quotes some third party such as an international comparison, one would have no way of auditing those figures. All one can do is attribute them to somebody.

In other cases, touching on this particular chapter, we rely on the source of the figures. We take cognisance of the source and we cite it. The figures come from the Accounting Officer and a rigorous clearance process is gone through where the Accounting Officer is asked to confirm the accuracy of the information being attributed to him or her. That is the process that was followed here, but I agree with the Deputy that not every figure in the annual report is audited in the strict sense of that word.

Deputy Sean Fleming

I must follow this point. We, as a committee, have to recommend that in future when we get reports from the Comptroller and Auditor General a clear distinction is drawn between what has been audited and what one can stand over and other figures that have been presented by various parties. I am sure that everyone in this country who received the first volume of the report of the Comptroller and Auditor General signed by Mr. John Buckley on 19 September 2011 assumed the figures on page 18 and 19 were correct. No caveat was entered by the Comptroller and Auditor General's office to distinguish between the two sets of figures. We are discussing a directly related issue. Had we known that some of the figures were audited we would have known what to accept and then to inquire about who audited the figures that were not audited by the Comptroller and Auditor General.

I wish to read two sentences from the certificate in this report. I refer to the report of the Comptroller and Auditor General and the accounts of the public services 2010, which was produced according to Article 33 of the Constitution. The Comptroller and Auditor General states:

I have certified each Appropriation Account for the year ended 31 December 2010 and submitted those accounts together with my audit certificates to Dáil Éireann. [That is in a separate book.] Separately, I report on matters arising out of my audit of the accounts of the public services. My report which is in two volumes is set out beneath.

Volume 1 [which is the one to which I refer] deals with matters arising out of the audit of Central Government and Revenue and the National Debt. I hereby present both volumes of my Report for the year ended 31 December 2010 in accordance with Section 3 of the aforementioned Act.

When I read that I am entitled to believe that those figures are, to quote the Comptroller and Auditor General "arising out of the audit of Central Government and Revenue and the National Debt". One might say I am splitting hairs but everyone in this country took it in good faith that the figures in volume 1 arose out of the audit that was carried out by the Comptroller and Auditor General. Could Mr. Smyth clarify that for me?

Mr. Gerry Smyth

Yes, I thank the Deputy.

Deputy Sean Fleming

I would have said it to Mr. Buckley had he been present. The question is not directed at Mr. Smyth personally. It relates to the process and the office.

Mr. Gerry Smyth

The chapter talked about the national debt. The difficulty, as we have heard this morning - the committee has recognised it is only one part of the debt - is that if one confines oneself to the national debt, in a sense it is misleading as well. Therefore, the Comptroller and Auditor General was in effect forced to give the full picture and to bring in those other figures. The question then is whether one has a responsibility to audit those figures. The Comptroller and Auditor General does not have the power at the moment to audit all of them, but I accept the Deputy's point.

Deputy Sean Fleming

The distinction should be made between audited figures and figures that have not been audited. Otherwise, it causes confusion.

Chairman

In support of the Office of the Comptroller and Auditor General, I presume the figures used are audited and certified by some other authority. Is that correct?

Mr. Kevin Cardiff

The figures used for the general Government-----

Chairman

The figures to which Deputy Fleming refers are ones that have already been audited because they do not come under the remit of the Comptroller and Auditor General. They have come from somewhere. Who audited them?

Mr. Kevin Cardiff

Those figures are compiled on the basis of information received from the National Treasury Management Agency, NTMA, and elsewhere. They are compiled in the Department of Finance-----

Chairman

Could Mr. Cardiff please repeat that?

Mr. Kevin Cardiff

Those figures are compiled from a group of different sources in the Department of Finance and the Central Statistics Office, CSO. Statistical reports are made on those, in effect, to EUROSTAT. EUROSTAT has a process of robust checking but it would not amount to a formal audit process. Perhaps Mr. Punch could outline the exact process. We call it the "walk". That "walk" of the data from the national debt into the general Government debt is looked over by EUROSTAT but not formally audited by it.

Deputy Sean Fleming

I wish to make a last comment.

Chairman

No. So the figures that are used by the Comptroller and Auditor General are not audited by the office in respect of the point raised by Deputy Fleming and neither are they audited by anybody else. They are simply figures that are put together by the Department of Finance and the CSO and they are looked at but not audited by EUROSTAT.

Mr. Kevin Cardiff

The check and balance system is that they are-----

Chairman

It is a "Yes" or "No" answer.

Mr. Kevin Cardiff

Then "No", but the check and balance in the system is that they are looked at closely by both the Department of Finance, the CSO and the NTMA. The difficulty in this case is that there was a contagion of the error from one organisation to the other instead of the issues being separately checked in each one.

Chairman

Is there not a specific certification?

Mr. Kevin Cardiff

There is a certification by the organisations concerned, the Department of Finance and the CSO, but there is no separate external check other than the EUROSTAT one which is important enough in itself and it would be worth-----

Deputy Kieran O’Donnell

I have a quick question.

Chairman

To finish the point, the Department of Finance and the CSO certified those figures and they gave those certified figures to the Comptroller and Auditor General and in turn the Comptroller and Auditor General used those figures in his report. Is that correct?

Mr. Kevin Cardiff

That is correct. We never had any sense that the Comptroller and Auditor General was auditing those figures.

Chairman

Who certified them then?

Mr. Kevin Cardiff

The Department of Finance certifies them.

Chairman

The Department certifies the figures. That is what we want to know. As Deputy Fleming has outlined, the figures in turn were put into the report by the Comptroller and Auditor General.

Deputy Kieran O’Donnell

There is much confusion. The Comptroller and Auditor General is saying that the figures used on page 18 of volume 1, which is figure 12, are provided by the Accounting Officer in the Department of Finance, which is Mr. Cardiff. Is that correct?

Mr. Kevin Cardiff

Yes.

Deputy Kieran O’Donnell

The Comptroller and Auditor General interacted with the Department of Finance to get to the point where it put those figures into its annual report. Could someone explain what that certification is? We accept that Mr. Cardiff certified the figures to the Comptroller and Auditor General.

Mr. Kevin Cardiff

Let me explain how these are done.

Deputy Kieran O’Donnell

Before we get to that point, could the Comptroller and Auditor General just explain what process it arrives at because if one looks at the figures in figure 12, the source is the Department of Finance, and to return to Deputy Fleming's point, when the Department of Finance and the National Treasury Management Agency were before the committee some time ago I would have thought both bodies would have looked at the report of the Comptroller and Auditor General. It was clear that the figure for the Housing Finance Agency was overstated.

Furthermore, when one looks back at the annual report of the Housing Finance Agency, it states in the accounting policies report that the Department of Finance, following the IMF-EU bailout, had considered the HFA's liquidity and funding position for the next 12 months and requested that the NTMA continue to provide guaranteed notes funding to the agency. Guaranteed notes involve a different arrangement whereby the NTMA arranges for the money to be borrowed by the HFA and to be put on its books as distinct from the HFA borrowing money directly from the agency. Clearly, the Department of Finance instructed the HFA to engage in this new practice with the NTMA, which would have involved a different accounting practice regarding the national debt. The NTMA should not have had to send an e-mail to the Department about this accounting treatment because, clearly, it instructed the HFA to carry out this practice.

I am confused. How did a situation arise where the change in accounting practice was not automatically factored into the consolidation process in the Department? How did it arise that when the Comptroller and Auditor General requested certification from the Department and Mr. Cardiff as Accounting Officer, the figures were certified based on the HFA continuing to borrow money on its own as distinct from borrowing money from the NTMA, which the Department had instructed the agency to do? How did a situation arise where departmental and NTMA officials appeared before the committee four weeks ago and a report was presented by the Comptroller and Auditor General in which the figures were clearly inaccurate?

The Department of Finance stated it takes its interest figure on the national debt from the NTMA. How does the NTMA calculate this? It should be easy to know whether the figure calculated was understated or overstated. Were the e-mails from the agency copied to Mr. Cardiff? Who else received the e-mails? We all have Blackberrys and we should be able to see the e-mails today. Did the NTMA receive replies to the e-mails? The devil is always in the detail. I find it difficult to understand how the Department, which instructed the HFA to indulge in this new practice, got to this point. I hate the words "seems" and "seemingly". These words are used a number of times by the Department. How did this error happen? Mr. Cardiff said the Department would compile an internal report. Will the Comptroller and Auditor General explain the process he went through to get certification from the Accounting Officer? Did the NTMA get a reply to the e-mails? Who sent the e-mails? How was the interest on the national debt calculated? We should be able to know today whether the interest calculation fed into the figures.

Our debt to GDP ratio is critical now because, ultimately, everything will be determined by it. Italy is on the precipice today because of its debt to GDP ratio. Ireland was to peak at 118% but I am mystified about how this error happened. We have had a nice discussion on reports here and reports there. The answer lies within the walls of this room today and that is what the public wants. Perhaps the Comptroller and Auditor General will comment on this.

Deputy Sean Fleming

The Comptroller and Auditor General has audited everything under his remit. The HFA is audited separately. Figures were sent to the Department of Finance and the mistake was made when the figures were consolidated. There is no independent audit procedure in respect of the consolidation process. It is like a large company having every one of its subsidiaries audited independently with nobody checking whether the consolidated set of figures is correct. The Department of Finance pulls the figures together but there is no audit procedure for the consolidation process and that is something on which the committee will make a recommendation when the internal report is completed.

Mr. Gerry Smyth

The process is, particularly in regard to figure 12-----

Deputy Kieran O’Donnell

That is the key figure.

Mr. Gerry Smyth

That is the key one. The process there is that the whole of the chapter would have been sent to the Accounting Officer for the Department of Finance and to the Accounting Officer in the NTMA and they would have been asked to confirm that everything in it was factually accurate. It is important to point out in regard to figure 12 that it does say clearly at the bottom of the figure that the source is the Department of Finance.

Deputy Kieran O’Donnell

The public is entitled to know the process because €3.6 billion is a large sum. If something happened that should not have happened, it should be out in the open. The problem is it has been fudged here and there.

Chairman

The Deputy might allow Mr. Smyth to conclude.

Mr. Gerry Smyth

Essentially that is the process. The Comptroller and Auditor General has a choice in any of these reports. Does he only put in figures that he has audited? The Deputy should remember audit has to be a rigorous process. For example, auditing the consolidated figure is more than just saying the Department added the figures to get it correctly and making the consolidation adjustment. One is asking whether all those figures have been subjected to audit by the Comptroller and Auditor General. It is not a simple process that can be done in a short time. It takes time and resources to do it. The Comptroller and Auditor General, therefore, has a choice to only put figures he has audited himself into his reports, which is not a good thing here because it gave the committee a very partial view of Ireland's debt situation. If he does not go down that track, then he must put the figures in. I take the Deputy's point about whether it is clear enough that they are unaudited. I suggest that what we intended to convey by saying "Source: the Department of Finance" was that they were not audited. The other figures do not have that caveat but perhaps we may need to make that clear in the future.

Mr. Kevin Cardiff

I would like to address Deputy O'Donnell's point. He is quite right. The reason the words "seemingly" or "seems" are used does not mean that we are trying to fudge. It is only a few days since this error became clear to me and I do not want to come in here and give the committee a story as I know it now and then discover that there is some nuance or it is slightly different----

Deputy Kieran O’Donnell

When precisely did Mr. Cardiff first become aware of it?

Mr. Kevin Cardiff

Friday evening.

Deputy Kieran O’Donnell

Was Mr. Cardiff the Secretary General in August 2010 when these e-mails were sent?

Mr. Kevin Cardiff

I have been Secretary General since 1 February 2010.

Deputy Kieran O’Donnell

Our debt to GDP ratio is critical in an Irish, European and global context and it is affecting people's daily lives as we try to make our debt burden manageable. That has implications for the general Government deficit and the cuts that have been made that affect people. Does Mr. Cardiff not find it extraordinary that this has only been uncovered 18 months down the line? Not only that, the Department went to the Housing Finance Agency at the same time and instructed it to continue to obtain €3.6 billion in funding directly from the NTMA as guaranteed notes, which is effectively a loan from the NTMA, rather than continuing to borrow on the market, which it could not do. Does Mr. Cardiff think €3.6 billion is a material figure?

Mr. Kevin Cardiff

I will just go back to the point-----

Deputy Kieran O’Donnell

Would the ordinary person looking in not find it extraordinary that it took 15 months for the Secretary General of the Department of Finance to become aware-----

Mr. Kevin Cardiff

The ordinary person looking in is entitled to be puzzled, and I am puzzled myself which is why we are conducting a review and which is why I am being slightly coy in what I say here and why I use the word to which the Deputy objected as being-----

Deputy Kieran O’Donnell

Does Mr. Cardiff have the luxury of being coy? The problem is the €3.6 billion.

Mr. Kevin Cardiff

I am being coy only in that I will not tell the Deputy I have a full story until I have a full story. I will not tell him something now that will turn out to be wrong; I will not tell him now that I know definitively that such and such is the case and that-----

Deputy Kieran O’Donnell

You signed off on figures for the Comptroller and Auditor General-----

Mr. Kevin Cardiff

I signed off?

Deputy Kieran O’Donnell

You signed off on figures that were inaccurate.

Mr. Kevin Cardiff

I sign off on thousands of pages of figures in any year. When I receive a request from the Comptroller and Auditor General I ask that the figures be checked against our knowledge in the organisation. The fact is that the knowledge in the organisation was incorrect. It was wrong; and I have to get to the bottom of it. More than this, I must ensure the same error or related errors cannot happen again. Incidentally, an audit of these accounts will raise its own issues. As well as arithmetical processes there are judgmental processes. There is a whole and very theological set of EUROSTAT rules, namely, the European system of accounts, ESA, rules which, like any set of accounting rules, involve issues of judgment and nuance-----

Deputy Kieran O’Donnell

There is very little judgment involved in double-entry.

Mr. Kevin Cardiff

What I am stating is that I presume such judgments would be included in any audit.

I agree entirely with the Deputy that we need to get to the bottom of this and people are entitled to know. This is what I intend to do. However, I will not tell the Deputy now that I have the full story because I do not yet have it.

Chairman

On an organisational matter, in terms of the question being raised by Deputy O'Donnell, the information was at a technical level in the Department and the NTMA. When Mr. Whelan was asked earlier when it was known to the NTMA, he stated August or September last year. Is this correct?

Mr. Oliver Whelan

We raised the issue.

Chairman

You raised the issue, that issue being the €3.6 billion.

Mr. Oliver Whelan

The issue was whether there was a potential double-----

Chairman

You raised the issue with the Department of Finance as to whether there was a potential accounting error or something wrong in how it was accounted for. In his remarks, Mr. Cardiff stated he did not know until last Friday. What is wrong with Mr. Cardiff's organisation and the Department's technical staff? In his opening remarks Mr. Cardiff stated, "It would seem that the significance of the matter was not appreciated at that time". The sum of €3.6 billion is not an insignificant sum and it is not insignificant that this error was allowed to happen and that it was not reported to Mr. Cardiff in that people in the Department acknowledging receipt of the information of the NTMA did not tell him. This seems to be a fact. One does not need a report to understand this is what happened.

Deputy O'Donnell raised the other significant question, which is whether we can have today the e-mails which were sent and the replies to those e-mails. The reason for particular interest in this is not just because of the €3.6 billion. This is an aside, and I will not go down this road, but I do want to state since 2008 the Department has received 22 recommendations from this committee to which it has not responded. It is a separate issue to which I will return but arising from it, it seems there is little response from the Department of Finance to outside agencies or organisations which offer corrections or advice or point out something that might have gone wrong. Not to lose sight of the question asked by Deputy O'Donnell, may we have the e-mails and the response to them today? What point in the pecking order of the organisation does Mr. Cardiff describe as a technical level? Is it close to his office or way down the pecking order? What reporting systems are available in the Department that allowed this to become a matter the significance of which was not appreciated at technical level?

Deputy Kieran O’Donnell

Perhaps Mr. Whelan will deal with this question. How many times in total did the NTMA raise the issue with the Department of Finance? The interest charged on the debt is calculated by the NTMA and forwarded to the Department and Mr. McGrath made reference to this. What is the basis for this calculation? Is it on general Government debt? What precisely is it on?

Show us the e-mails; the committee and the public are entitled to see them.

Mr. Oliver Whelan

We provide the figure for interest on the national debt to the Department of Finance and not on the general Government debt, and this figure is correct. Mr. McGrath alluded to the fact that it takes account of any interest we earned from the HFA on the money we loaned to it. We provide a net figure for net cost on the national debt.

Deputy Kieran O’Donnell

What Mr. Whelan is saying is that the figure is based on borrowings plus interest received from the disbursal of income-----

Mr. Oliver Whelan

And deposits.

Deputy Kieran O’Donnell

With regard to the link between this interest figure and the interest figure provided in the budget and accounts which will affect the general public through cuts, will Mr. McGrath indicate whether the interest figure calculated by the NTMA is the same as that which the Department of Finance will use for the budget and which will have an impact on ordinary people?

Mr. Michael J. McGrath

The interest figure supplied by the NTMA would be the figure shown in the Central Fund services element of the accounts and is normally referred to as the interest burden. In addition to this, part of the walk from the national debt to the general Government debt are elements of interest payments in terms of that wider borrowing, and they are picked up there.

Deputy Kieran O’Donnell

The simple question is whether the €3.6 billion error which has now been found could have implications for the interest charged on the general Government deficit.

Mr. Michael J. McGrath

Right now I do not believe so. I believe the interest was correctly accounted for in terms of the netting off of the interest paid between the HFA and the NTMA but obviously, as we already stated, we will send a note to the Deputy to clarify this specific point.

Deputy Kieran O’Donnell

It has yet to be clarified.

Mr. Michael J. McGrath

I want to ensure I do not mislead the committee and I will clarify it for the Deputy.

Deputy Kieran O’Donnell

Does this not seem extraordinary? Linking back to Deputy Fleming's point on the level of controls, in one breath Mr. McGrath is saying the €3.6 billion is included twice in the general Government debt but at the same time he is able to tell us the interest calculation included in the annual budget is correct. This tells me that there is a disconnect in the Department's accounting control procedures. Could we address the e-mails?

Mr. Kevin Cardiff

Yes. The Deputy is right on that point. Clearly, the lesson - one of many - is that we must find a way to link different parts of our knowledge to ensure there are greater checks so that one set of figures links to another accurately. The difficulty lies in the fact that this is a compilation of various bits of the Government system for our presentation to EUROSTAT rather than the Government's own account. Regarding e-mails, I would have no difficulty with giving the committee what we have.

Deputy Kieran O’Donnell

Could we see them now?

Mr. Kevin Cardiff

I would have no difficulty, but perhaps it is not good order to start throwing around documents. We would have no problem with sending them to the committee.

Deputy Kieran O’Donnell

They are central. This independent committee is charged with looking after the public and ensuring the public purse operates in the most efficient way. The e-mails are central. Will Mr. Whelan indicate the number of e-mails or communications with the Department of Finance? Given the backdrop to our conversation, I want to see those e-mails in cold black and white.

Mr. Kevin Cardiff

That is the Chairman's choice.

Chairman

I have asked for the e-mails.

Mr. Kevin Cardiff

We can give them to the committee now, but it is up to the Chairman as to how he wants to circulate them.

Chairman

With Mr. Cardiff's permission, we will circulate them.

Deputy Kieran O’Donnell

How many communications did the National Treasury Management Agency send to the Department of Finance?

Mr. Kevin Cardiff

These e-mails will have names on them. Depending on the outcome of the review, disciplinary matters or so on could arise. I suggest that we redact the names, if that is all right with the committee.

Deputy Simon Harris

Agreed.

Deputy Kieran O’Donnell

Absolutely.

Mr. Kevin Cardiff

It will take a few minutes.

Chairman

While that is being arranged, I call Deputy Harris.

Deputy Simon Harris

I thank the Chairman. I-----

Deputy Kieran O’Donnell

Could I clarify the number of e-mails? I apologise to Deputy Harris.

Deputy Simon Harris

It is okay.

Mr. Oliver Whelan

To my recollection, in late August and early September 2010 when we first flagged this issue, there were three e-mails in close proximity to one another. When we were providing material to the Department in respect of the Q3 Maastricht returns in December 2010-----

Deputy Kieran O’Donnell

That is four.

Mr. Oliver Whelan

-----we flagged the issue in the covering letter, as we did in March 2011 when a similar Maastricht return was being provided.

Deputy Kieran O’Donnell

That is five.

Mr. Oliver Whelan

To the best of my recollection, it was not raised again until last week when the problem arose.

Deputy Kieran O’Donnell

Half a dozen. Did the NTMA receive replies?

Mr. Oliver Whelan

There were replies on last week's e-mails.

Deputy Simon Harris

Where is Mr. Corrigan today and why is he not present? He is the head of the NTMA. I mean no disrespect to Mr. Whelan or his role, but Mr. Corrigan should be present. Perhaps he has a genuine reason for not attending. If so, is Mr. Whelan in a position to provide it?

Mr. Oliver Whelan

Yes. Had Mr. Corrigan realised that he was personally expected to attend-----

Chairman

I apologise but, before Mr. Whelan answers, I will clarify. As has been stated, we did not ask for Mr. Corrigan in particular. Rather, we asked for a representative of the NTMA.

Mr. Oliver Whelan

Yes.

Deputy Simon Harris

He was available to attend, but he chose Mr. Whelan.

Mr. Oliver Whelan

I was chosen as the representative. Mr. Corrigan was not.

Deputy Simon Harris

It is disappointing that he is not present. Mr. Whelan stated that the NTMA believed the matter had been handled when it sent the e-mails. Perhaps we will be able to tell from the e-mail exchanges, but what indication was the NTMA given by the Department that the matter had been handled? It is fair to presume that, when one contacts the Department of Finance about it possibly making an error of €3.6 billion, the contact will be acted upon. Did the Department assure the NTMA during their discussions that the former was heeding the latter's warnings?

Mr. Oliver Whelan

In our discussions - not e-mails - with the Department on, for example, the Maastricht returns in March and the preparation of our annual report, we had the impression that the Department was happy with how the matter had been handled. We do not see the details of the general Government debt, so we needed to assume that-----

Deputy Simon Harris

There was an assumption that the Department had acted upon the NTMA's concerns as opposed to any comment being made to that effect.

Mr. Oliver Whelan

Yes.

Deputy Simon Harris

As has often been stated in the media this past week, Mr. Cardiff mentioned that Ireland is no better or worse off after this adjustment, error or whatever. We are worse off in terms of public confidence in the accuracy of the Department's figures. Since that confidence had already been shattered and everyone involved in public life, including Mr. Cardiff, had been working to try to repair it, this development is damaging.

I appreciate that the investigation has not been carried out. From Mr. Cardiff's initial knowledge of the subject, what is the possibility of more errors existing? Is it likely or was this a one-off, albeit massive, error?

Mr. Kevin Cardiff

It is a one-off on this scale. There are always minor issues that must be judged. Often, statistical judgments must be made. At any given time there are significant statistical risks, in the sense that we may decide that something ought to be classified in a particular way whereas EUROSTAT or others might have a different view or might change the rules on us. This is the threat under which we spend the most time working. We stick as close as we can to the ESA booklet, but one must make judgments, just as any accountant or auditor must. One might find that one's judgment was wrong or, upon seeing the figures, EUROSTAT might believe the matter should have been treated differently. For no actual change in the underlying position, the budgetary position or the State's assets and liabilities, the presentation could change.

For example, take the treatment of the investment in Anglo Irish Bank. Depending on its treatment, it could have been regarded as being on or off the general Government debt. As matters have turned out, the investment is on the debt. The choice of treatments is based on fairly fine judgments about the intentions at the time the decisions were made.

In any statistical activity there are iterations, changes and adjustments. I am more worried about classification issues than I am about error issues. The former are quite large and a threat. As the Deputy stated, if there was a reclassification, there would be nothing dishonest or inaccurate about the figures presented, but they would appear to change more than they actually did. Markets do not always differentiate between net debt and gross debt or between debts that are classified for different purposes.

Deputy Simon Harris

I have grown up in a country where nobody ever made a mistake. When systems do not work or computer errors are made they are blamed on the famous systemic failure. Mr. Cardiff stated: "[i]t seems that the significance of the matter was not appreciated at that time". Presumably the significance of the matter was not appreciated by the individuals who received the e-mails from the NTMA. The NTMA assumed wrongly that the Department had acted on these e-mails. Mr. Cardiff implies that somebody made a mistake or messed up. It was not a systemic error. I do not expect him to apportion blame in advance of his inquiry but does he acknowledge that an individual made an error rather than it being due to a computer or systemic failure?

Mr. Kevin Cardiff

Yes, absolutely. The reason for systems is to reduce the level of error. When somebody makes an error one investigates the systems to find out how they could have reduced the probability of that error occurring.

Deputy Simon Harris

Who is heading the internal investigation?

Mr. Kevin Cardiff

As I have said, I have asked for an internal report rather than a formal investigation, to be compiled by the line managers concerned. I will ask another member of staff who is not in that line to perform a quality check on the report and we can also use our internal audit resources if we need them. That is not to say there should not be an external examination but that would be a separate exercise.

Deputy Simon Harris

What sanctions are available to Mr. Cardiff as Secretary General in respect of any individual who makes such an error?

Mr. Kevin Cardiff

I do not want to prejudice anything that might happen but there are disciplinary proceedings.

Deputy Simon Harris

My final question is one that must be asked. As the Accounting Officer for the Department, it is clear that Mr. Cardiff provided inaccurate figures to the Comptroller and Auditor General and EUROSTAT on half a dozen occasions. Does Mr. Cardiff take personal responsibility for these errors as Accounting Officer?

Mr. Kevin Cardiff

I am here as the Accounting Officer. My job is to account for the Department and of course I take responsibility and account for the errors of the Department. That is why I am here.

Deputy Shane Ross

I thank the Chairman. I ask Mr. Cardiff and, perhaps, Mr. Whelan to tell us the level in the Department at which the e-mails were communicated.

Mr. Kevin Cardiff

I would call it middle management level.

Deputy Shane Ross

In both cases?

Mr. Kevin Cardiff

Yes.

Deputy Shane Ross

Is that as far as the knowledge went?

Mr. Kevin Cardiff

It is as far as the knowledge of the particular issue of the statistical treatment went. Obviously the non-statistical and more real fact of actual Government money going to the HFA through borrowings undertaken by the NTMA was more widely known.

Deputy Shane Ross

Is Mr. Cardiff telling me that a €3.6 billion mistake was spotted at middle management level in the NTMA and the message was sent to the Department of Finance at middle management level? Deputy O'Donnell noted at least five occasions on which this was flagged -----

Deputy Kieran O’Donnell

Six.

Deputy Shane Ross

----- yet it never got any got any higher than that.

Mr. Kevin Cardiff

Had it been flagged as an error it is almost certain that it would have gone higher but what was flagged was an issue on which a person had to make a judgment. We have to find out whether the error was in the judgment, the making of the judgment without reference to more senior levels or not properly addressing the matter at all.

Deputy Shane Ross

Errors, or judgments, regarding €3.6 billion can be made at that level without being flagged at higher levels in either the NTMA or the Department.

Mr. Kevin Cardiff

It is disappointing that it was not.

Deputy Shane Ross

How did it happen in both organisations?

Mr. Kevin Cardiff

It happened in one organisation in the sense that the system works on the basis of a high level of co-operation and interaction between the CSO, the Department and the NTMA. The people concerned would have spoken with each other on a regular basis. To be clear, the e-mail did not say "here is an error"; it advised that there was something to consider in terms of how we classify.

Deputy Shane Ross

It could be an error.

Mr. Kevin Cardiff

It do not say that.

Deputy Shane Ross

It is more than a disappointment; it is a disaster. How big a figure would it take to reach as high as Mr. Cardiff? Would it have to be €100 billion? Was the figure set out in the e-mails? It was flagged in any event.

Mr. Kevin Cardiff

It was flagged. The figure grew over time because the NTMA lending out of the Exchequer into the HFA grew over that period.

Deputy Shane Ross

People in middle management in both organisations make judgments of that sort without involving Mr. Cardiff or Mr. Corrigan.

Chairman

We will deal with Mr. Cardiff first.

Deputy Shane Ross

They make judgments of that sort and Mr. Cardiff does not know about them.

Mr. Kevin Cardiff

I did not know that the judgment had been made. If I had I probably would have taken a different view of the account. We now know it was an actual error rather than a matter of judgment. It was a consolidation error. If it was a matter of how something is classified the question of judgment might have been more to the fore.

Deputy Shane Ross

Let me put it another way. Are they told not to worry if they make a judgment on these matters? Are there guidelines for referring issues of this sort to Mr. Cardiff?

Mr. Kevin Cardiff

It is a hierarchical organisation. Any time an issue arises on which people are unclear, they have a hierarchy to which they can put their questions and they are expected to do so. That is understood throughout the organisation.

Deputy Shane Ross

Somebody should have referred it upwards but did not do so.

Mr. Kevin Cardiff

If he or she had any doubt of course it should have been referred up.

Chairman

In regard to Mr. Whelan's response to Deputy Ross, will he clarify whether the matter involved middle management or someone more senior in his organisation?

Mr. Oliver Whelan

The correspondence in question took place at middle management level in my organisation. The NTMA flagged an issue to be considered rather than an error. We concluded that the matter had been correctly addressed because our remit is the national debt not the consolidation of the general Government debt figures.

Deputy Shane Ross

We are dancing on the head of a pin. This is nonsense.

Chairman

Who signed the two letters from the NTMA to the Department of Finance?

Mr. Oliver Whelan

I believe they were signed by the financial control person in the NTMA.

Chairman

The financial controller in the NTMA signed the two letters that went to the Department of Finance.

Mr. Oliver Whelan

I believe so.

Deputy Kieran O’Donnell

That is senior management.

Chairman

Yes, it is senior management.

Deputy Shane Ross

Was the matter not brought to the attention of Mr. Corrigan? I do not accept Mr. Whelan's claim that it was an issue rather than an error. That is complete and utter nonsense. Anybody could have seen that it was in danger of becoming an error once it was raised as an issue. The e-mail pointed out that a problem had arisen and that it should be investigated. It is not good enough to say it was an issue and hand it back to the Department of Finance. Obviously there was a danger of a big error and somebody spotted it. Fair play to whoever that was. To say now that it was an issue and it was handed over is extraordinary. It was raised three or four times, and it must have been clear to the NTMA that nothing was happening because it had to raise it three or four times. Why did the NTMA not alert someone higher up?

Mr. Oliver Whelan

We did send the letters across with the returns and we flagged this as an issue each time.

Chairman

To whom were the letters addressed?

Deputy Kieran O’Donnell

The title rather than the person.

Mr. Oliver Whelan

Does Mr. Cardiff know to whom they were addressed?

Mr. Kevin Cardiff

Yes, they were addressed to the middle management people we have been discussing.

Chairman

Senior management in the NTMA was writing to middle management in the Department of Finance on an issue - or error - of €3.6 billion and that middle management did not bring it to the attention of Mr. Cardiff.

Deputy Shane Ross

Surely this should have gone straight to the Minister.

Mr. Kevin Cardiff

Back in August 2010 it should have gone straight to me if there was any doubt-----

Deputy Shane Ross

And straight to the Minister from you.

Mr. Kevin Cardiff

It would not. The point is that an error of some sort was made at that point. Obviously if it had been treated correctly there would not have been any issue for the Minister at that point but the issue was not treated correctly so there is an issue and it is of great significance.

Deputy Shane Ross

This communication between the NTMA and the Department of Finance was obviously flawed to say the very least. Did nobody in the NTMA wonder what happened to all of the e-mails and whether the Department was worried about the €3.6 billion?

Mr. Oliver Whelan

Clearly, telephone discussions took place and discussions took place at all stages between-----

Deputy Shane Ross

As well as the e-mails?

Mr. Oliver Whelan

As well as the formal written letters.

Earlier, I referred to the Maastricht returns made each quarter and the preparation of our annual report. Ongoing discussions took place on these and it is from these discussions that the people at the NTMA had the impression that the matter had been satisfactorily dealt with and that the Department was happy it had been dealt with in a proper fashion.

Deputy Shane Ross

They were told it had been dealt with.

Mr. Oliver Whelan

We do not know when. Telephone conversations took place to which I was not party but I understand officials had discussions with people and the impression they formed was that the matter had been satisfactorily dealt with.

Deputy Shane Ross

You were told it had been dealt with. Somebody in the NTMA was told it had been dealt with.

Deputy Kieran O’Donnell

The NTMA would not have continued to issue e-mails.

Mr. Oliver Whelan

They were telephone conversations; they were not documented conversations.

Chairman

They are not documented but Mr. Whelan is aware these telephone conversations took place. Were they between senior management in the NTMA and senior management in the Department of Finance or was it, as the correspondence went, from senior management in the NTMA to middle management in the Department of Finance? What was the direction of the conversations?

Mr. Oliver Whelan

The conversations would have been between the people communicating on a technical level, sending the e-mails and the Maastricht returns, or the people working on those teams. It would have varied as a number of people were involved in the teams. The conversations would have been between those teams.

Chairman

Did the NTMA establish from these conversations that the Department of Finance had taken appropriate action?

Mr. Oliver Whelan

From these conversations we took the impression that the Department of Finance-----

Deputy Shane Ross

When did these conversations take place?

Mr. Oliver Whelan

They were on an ongoing basis.

Deputy Shane Ross

Yes, but when did NTMA get that impression?

Mr. Oliver Whelan

From conversations on the Maastricht returns of March this year, and other issues relating to the general government debt because it is one we use all the time, we formed the impression that they had been satisfactorily dealt with.

Deputy Shane Ross

So in March of this year you felt it was done.

Mr. Oliver Whelan

Yes.

Deputy Shane Ross

When did you discover you had been misled or had got the wrong impression?

Mr. Oliver Whelan

It was last week, as Mr. Cardiff said earlier, that-----

Deputy Shane Ross

Until last week you thought it was all done.

Chairman

Sorry Mr. Whelan, what is your answer again?

Mr. Oliver Whelan

It was last week it became known that there had been an error.

Mr. Kevin Cardiff

If I might, Deputy Ross's questions are very well taken. This is precisely why I want to have the matter inquired into. I would like to know, as I am sure does the Deputy, when the series of telephone calls was made and what was the nature of those calls and whether a specific conversation took place. I do not think any of the witnesses before the committee knows all of the answers yet. This is why we are having the matter investigated. I know it is frustrating for Deputy Ross and it is frustrating for us also but it takes a certain amount of effort to elicit this type of information. There is a danger we will say something now that will turn out not to be correct because we would be assuming what would normally happen rather than telling the committee what we know happened. This is important. I do not want to-----

Chairman

Mr. Whelan is telling us what did happen, as is the correspondence. I understand the predicament in which Mr. Cardiff and his officials find themselves, in terms of the reporting and the investigation to be conducted, but we are discussing facts. These are facts on the reporting and on the e-mails and correspondence, and there is public concern about the credibility of the accounts and the Department. We need to explain to the public, and this is by way of helping the public, and us, to understand.

Mr. Kevin Cardiff

That is right and I am not trying to interfere with that process. The facts as I have them now are that there was a series of e-mails which we will produce. I am not fully clear that no other e-mails exist. In the course of a year and a half's worth of e-mail traffic there could be other correspondence and we will dig through our files and e-mail records to check. I do not have any record of a telephone conversation or a set of conversations. These people speak to each other almost every day so I am sure telephone conversations took place. However, I do not have from my side a set of telephone conversations to discuss with the committee as a fact. I want to be clear that I do not have factual information about telephone calls.

Chairman

I ask members to understand this and I believe they do. However, at the same time we presume that when you learned of this last Friday you took immediate action and that you have already interviewed people in the Department and that this action is ongoing. Is this correct?

Mr. Kevin Cardiff

That is right. We have spoken to people in the Department and others who might be able to help. We are in the process of discussing it with the NTMA and the CSO also. On some issues, various parts of the system might be more advanced than others but we are all working towards finding-----

Chairman

So you are able to base your comments to the Committee of Public Accounts this morning on some issues of fact because you have discussed it with the staff concerned.

Deputy Shane Ross

It seems to me the communications between the two organisations are a complete shambles if impressions about €3.5 billion which are not confirmed can be given in telephone conversations and turn out six months later to be wrong. There must be something extraordinarily wrong in the communications. There also seem to be problems internally in that matters of this type do not get reported up the line but are left to people who clearly do not have the clout to push them.

Traditionally, there has been some fairly robust tension between the NTMA and the Department of Finance, to say the least. Is it possible there is an element of this in this particular lack of communication between the two?

Mr. Kevin Cardiff

No. Mr. Corrigan, the chief executive, and I have gone to great lengths to try to ensure our relationship is strong and carefully managed. It would be inappropriate for State bodies to have tensions, as the Deputy put it, between them. While past tensions have probably been overstated, they existed, and we have made efforts to ensure a lack of tension between our agencies. Where they arise, they are dealt with quickly and honestly.

That three systems must interact in the passage of data poses a difficulty for controls. Actually, the systems do not interact. Rather, there is a presentation of a set of figures, it goes via e-mail, spreadsheet or so on from one system to another where it is processed and it may be shared with another system where it is also processed. That three different systems are not integrated as a single internal system has given rise to occasional difficulties, but the Deputy need not worry about tensions giving rise to the wrong intentions on the part of our organisations or between us and the Central Statistics Office, CSO.

The fact that an error occurred is of great concern. The process of discovering how it arose and whether we could have created better systems to mitigate the danger of such errors is important. However, the committee need not worry about difficulties being exacerbated by a problem with the personal relationships between people in the Department and the National Treasury Management Agency, NTMA.

Deputy Shane Ross

It is normal audit practice for management to do a thorough reconciliation when an error of this sort is discovered. Has one been done?

Mr. Kevin Cardiff

We are in the process of trying to reconcile everything that might arise. One of the issues is that we do not have a standard balance sheet that reconciles in the usual way. The usual issue with a double account is to get it to balance on both sides. Our process will be detailed and will not be about checking this error alone. Now that it has been found, the process will be about checking for other errors.

Deputy Shane Ross

I will ask just a final question before I depart. Mr. Cardiff is due to head for the European Court of Auditors shortly.

Mr. Kevin Cardiff

Yes.

Deputy Shane Ross

Will Mr. Cardiff assure the committee that he will see this matter sorted before he departs? As he stated, it is his responsibility.

Mr. Kevin Cardiff

Yes. Accounting Officers must take responsibility for issues such as this and see them through. It was to allow this to happen that I stated that I would hope to have the external report on this by the end of the year.

Deputy Shane Ross

Mr. Cardiff will not depart until this matter has been resolved satisfactorily.

Mr. Kevin Cardiff

My departure is not entirely in my own hands, but I will press hard-----

Deputy Shane Ross

Mr. Cardiff cannot depart without his own consent.

Mr. Kevin Cardiff

I am not sure about how true that is.

Deputy Shane Ross

Does Mr. Cardiff have something to tell us?

Mr. Kevin Cardiff

No. In a technical legal sense, I am not sure that the Deputy is 100% correct. I will try hard to get this done before I go. Sometimes, a fresh pair of eyes can see things that the existing person cannot.

Deputy Shane Ross

Mr. Cardiff has responsibility. He is one of the two principal players. It would be wrong if he left the Department of Finance in a shambles, where its systems were not satisfactory and where something such as this could recur. It happened on his watch and he should not go to Europe until this committee, the Department and the Minister are satisfied that this problem has been resolved. Will Mr. Cardiff give us that guarantee?

Mr. Kevin Cardiff

No, I will not.

Deputy Shane Ross

Mr. Cardiff will just float off and leave the problem here.

Mr. Kevin Cardiff

No. I do not know what will happen in the next three months. As Secretary General, I have spent every waking hour and a lot more trying to do my best for the country. This situation is no different, in that I will do my best to get this done, but I will not give personal guarantees to Deputy Ross about what my future will bring. I do not always have control of it. I know of no other person who has given more to trying to do the best job in as honest and open a fashion where this committee is concerned as is possible. I do not like the suggestion that I should answer the question put to me.

At the outset, the Chairman mentioned a few issues that annoyed him about the Department of Finance. I am annoyed by a couple of issues, too. For example-----

Chairman

My point was on the Department of Finance.

Mr. Kevin Cardiff

Yes, but also on our relationship with the committee. It is important that we get matters right. When I was invited to this meeting, I sent the Chairman and the committee my entire brief. It includes many of the matters we are discussing and we have not had a chance to go through all of it, but I felt it needed to be given to the committee. We gave the committee the brief with the usual freedom of information-type extractions, as the information would also be put into the public domain. I then received a letter from the committee asking how dare I redact information and telling me that, apparently, I was not being fully open with it. I supplied the committee with hundreds of pages of documents that no Secretary General has ever provided. I held nothing back that I did not have to hold back, yet it is being suggested that we are trying not to co-operate.

Before I leave, I would like to put a few matters to bed. It is the responsibility of the Accounting Officer to be as open as is reasonably possible with the committee. I have tried hard to be so. We will address the issues that the Chairman mentioned, but on this and every other issue the job of the Accounting Officer is to be as open as possible. I have gone on a bit of a rant. It is not really-----

Chairman

It is not a rant. It is just inaccurate. We are asking Mr. Cardiff to do his job. I respect the fact that he is doing it to the best of his ability, but I will not accept criticism of the committee simply because we are asking the questions that are being put to us. We are exercising our responsibility. Mr. Cardiff is doing his job on one side and we are doing ours on the other. Sometimes, there is an exchange that can be to the centre of matters, but it is only because we want to get necessary questions. Mr. Cardiff has given us his job description and told us what he does for the committee, but it is only what I expect him to do, nothing more and nothing less.

Deputy Shane Ross

It is fair, Chairman. Mr. Cardiff is going off to Europe with his saddlebags full. It is fair to ask him not to leave the Department in a shambles. That is all I am asking him to do.

Mr. Kevin Cardiff

I will leave the Department of Finance in the best possible condition. The Chairman is quite right - I fully agree with his statement.

Chairman

Deputies Murphy, Ferris and McDonald are next.

Deputy Eoghan Murphy

I thank the Chairman. It is still difficult to figure out exactly what happened from the time the NTMA first reported the problem to the Department. We have been kicking a football around to some extent. Despite some excellent questions from members of the committee, the issue is no clearer.

Mr. Kevin Cardiff

Maybe this will clarify - I do not know whether this matter was actioned. The error may have been not to action it or to assume that the person concerned understood the particular way this was to be treated.

Deputy Eoghan Murphy

The person concerned. Does Mr. Cardiff have someone in mind?

Mr. Kevin Cardiff

A very small section of people deals with these matters.

Deputy Eoghan Murphy

"Very small" being two or three people.

Mr. Kevin Cardiff

Two.

Deputy Eoghan Murphy

Mr. Cardiff believes two people might be responsible for a critical lack of judgment in communicating to him and upwards an important matter rather than being responsible for the accounting error.

Mr. Kevin Cardiff

In fairness to the people concerned, that is something we should have investigated. That is precisely the point we are looking into.

Deputy Eoghan Murphy

The error was communicated to Mr. Cardiff on Friday evening last. What happened then and who did Mr. Cardiff contact when he heard of it?

Mr. Kevin Cardiff

It was already being actioned when I was told about it. People were already investigating how it happened. I had a discussion on Tuesday with some of the people now dealing with the issue.

Deputy Eoghan Murphy

Is Mr. Cardiff saying that someone had noticed the mistake that had occurred and had gone about trying to correct it prior to his being told about it?

Mr. Kevin Cardiff

No.

Mr. Michael J. McGrath

Perhaps I can clarify the matter. We are currently endeavouring to have copied a series of e-mails which I believe will assist Deputy Murphy and other members of the committee in this regard. I should perhaps put on the record at this point that there may be other e-mails of which we are not aware and as such we may be only giving the committee a partial set of information. However, it is the best available to us at the moment.

The most recent issue was raised again at technical level during the past week or so. When actioned, the matter was brought to the attention at senior level on Friday. When it was brought to my attention, subsequent to it having been brought to the attention of those at senior level on Friday, I directed that a note be immediately drafted informing the management committee, the Secretary General and the Minister of this issue. That note was done late on Friday and was delivered to the Minister's private office. Given it was a bank holiday weekend, I spoke to the Minister about the issue on Tuesday morning when back at work, with the intention of-----

Deputy Eoghan Murphy

Mr. McGrath waited until after the weekend to notify the Minister? I do not believe that the fact that last weekend was a bank holiday weekend is important in this regard.

Mr. Michael J. McGrath

No. A note was sent to the Minister's office on Friday.

Deputy Eoghan Murphy

Mr. McGrath was aware of the matter midweek.

Mr. Michael J. McGrath

No, I found out about it on Friday.

Deputy Eoghan Murphy

Someone in the Department knew midweek that there was a massive €3.6 billion error in the accounts. Mr. McGrath was informed about the issue on Friday and he then sent a note on it to the Minister. The Minister was not telephoned about it. This is a serious issue, which is the reason we are here discussing it today. Mr. McGrath only informed the Minister about this one week, perhaps longer, after it had been discovered in the Department. Mr. McGrath said earlier it had been discovered midweek on Tuesday or Wednesday.

Mr. Michael J. McGrath

What was established was that there appeared to be a double account and the issue was being examined. We flagged that issue in a note to the Minister's office late on Friday evening. I understand that the Minister was given the note after the weekend. I spoke to him on Tuesday morning last about the matter. The intention was that the point would be clarified prior to publication tomorrow of the medium term fiscal statement.

Deputy Eoghan Murphy

On what day last week was the double accounting error discovered in the Department?

Mr. Michael J. McGrath

From memory, I recall the matter was raised at technical level between the NTMA and Department officials on Monday of last week.

Deputy Eoghan Murphy

The Department discovered on Monday that a problem has arisen in regard to €3.6 billion in its accounts and the head of that Department is not told about it until Friday evening, which is at the end of the week prior to a bank holiday weekend. A note was then sent to the Minister but was not given to him until the following Tuesday morning, at which point Mr. McGrath contacted him. All the while, between the Monday in question and the following Tuesday week, more than a week later, €3.6 billion of an accounting error was known about by Mr. McGrath and no one else. Is that correct?

Mr. Michael J. McGrath

No. I knew about the error on Friday evening, following which I immediately-----

Deputy Eoghan Murphy

We are talking about problems that took place prior to the occurrence of this discrepancy. It appears there are still problems in the Department. An error of judgment was not deciding to call the Minister on Friday evening to tell him immediately of this significant error, news of which would break over the weekend or the following week. This is an important issue in terms of our public accounts, international perception of how we do business in this country and how our Civil Service is run. This is a huge issue. Why did it take so long to tell the Minister?

Mr. Michael J. McGrath

The intention, in terms of setting this out clearly so that it would be understood, was to clarify the matter prior to the publication tomorrow of the medium term fiscal statement, which was the next opportunity available to us to set out that information. Obviously, we wanted to get the facts straight.

Deputy Eoghan Murphy

Mr. Cardiff was told of the problem on Friday evening. What did he do then? Did Mr. Cardiff not think it prudent to contact the Minister directly on this matter? Did he contact the NTMA immediately or did he wait until the following Tuesday morning to do so?

Mr. Kevin Cardiff

I waited until Tuesday to do so. I understood on Friday that the matter was being looked into. I did not have the details and so did not immediately telephone the Minister. I did not know then the full significance of the problem. That is not the issue. The issue is how the error arose, how it came to notice, if there is a process by which it could come to notice and how we could have made that happen much earlier. In terms of the human systems, a question arises in regard to whether we left people with too much responsibility and not enough support. As regards whether there was lack of clarity in regard to people's responsibilities, I do not believe there was but we need to know that. Another issue is whether people were adequately equipped intellectually, in terms of training on this specific issue. No one else does this process so there is no place to go for training in this regard. On whether we as a system have formal reconciliations that would require these figures to be challenged against others that might arise, the fact that this error could arise suggests our system is not adequate. None of the systems in this process was adequate, which is the reason they are going to be properly reviewed.

Deputy Eoghan Murphy

Mr. Cardiff continually refers to the systems. He stated earlier that the systems were in place to reduce errors. There have been so many errors it appears the systems are not working. It appears the systems continued not to work even when the mistake was discovered. Mistakes were made and there was a lack of judgment at senior level. It was discovered in the Department on Monday week last that there was a problem. Almost a week and a half later, there is still no clarity between the Department and NTMA in regard to what happened, even in terms of how many e-mails or telephone calls were sent or made. Mr. Cardiff has stated that there may have been a lack of support or too much responsibility on the individuals in charge. I take it he is talking in that regard about the two people involved. A great deal could have been found out between now and when this was first notified. However, the problem is that the matter was not brought to Mr. Cardiff's attention in time. I also do not believe Mr. Cardiff notified the Minister of the problem in time. Having kicked this matter around for a couple of hours this morning, we are still no clearer as to what went on.

Mr. Kevin Cardiff

That is not the case. We have given as much clarity is as currently available. We have explained that there is a process for creating greater clarity. That process might not deliver any significant new information but it must be thoroughly engaged in to ensure we have all the facts. There will then be a review, not alone of the error that occurred and how it occurred but of the systems around it. The Deputy is correct when he says it is wrong to speak only about systems and not judgments. On the other hand, systems are in place to support judgments and to prevent error. We must look at both.

Deputy Eoghan Murphy

The systems are not working and someone must take responsibility for them.

Mr. Kevin Cardiff

The Deputy is correct.

Deputy Eoghan Murphy

Mr. Cardiff learned of the problem on the Friday evening and spoke about it to the NTMA on the following Tuesday.

Mr. Kevin Cardiff

I spoke to people in-house on the following Tuesday.

Deputy Eoghan Murphy

When did Mr. Cardiff contact the NTMA?

Mr. Kevin Cardiff

I spoke to Mr. Corrigan yesterday. I cannot recall whether or not I spoke to him on Tuesday.

Deputy Eoghan Murphy

Mr. Cardiff learned of the problem on the Friday but waited until either the following Tuesday or Wednesday to speak to Mr. Corrigan about it.

Mr. Kevin Cardiff

That is not a fair characterisation of what happened. Work on getting to the bottom of this was ongoing. It is not that this matter was being ignored, as is being suggested or, as might be suggested, that the Minister was being left out of the loop. He was not. We will work through this matter and people will be reporting up the line and cross ways on it.

Chairman

Mr. Whelan would like to come in at this point.

Mr. Oliver Whelan

The NTMA was made aware of this error on Friday.

Deputy Eoghan Murphy

Friday of last week?

Mr. Oliver Whelan

Yes.

Deputy Eoghan Murphy

The Department thought something was up that related to the NTMA on Monday but did not get in contact to ask what it was about until Friday.

Mr. Oliver Whelan

On Tuesday, the NTMA was informed that there was an issue and it was confirmed on Friday that consolidation had not been carried through.

Deputy Eoghan Murphy

Why did it take so long from Tuesday until Friday to work that out? It is a basic double accounting error as explained by Mr. Cardiff in his opening statement. The mistake made does not seem so complex but what seems complex is how this was not communicated to others and why systems did not work to ensure the error was corrected. The Department knew on Monday and passed on the message on Tuesday but it took until Friday to figure out where the mistake was made.

Mr. Oliver Whelan

Work was being done in the Department but not by the NTMA. We were alerted to it.

Deputy Kieran O’Donnell

The NTMA knew that there was a mistake 15 months ago.

Deputy Eoghan Murphy

When the NTMA was contacted on Tuesday, the Department knew about the mistake.

Deputy Kieran O’Donnell

Was this the first formal response from the Department to the NTMA to the effect that the Department acknowledged there was a problem or an error?

Mr. Oliver Whelan

Yes.

Deputy Kieran O’Donnell

That was after six e-mails and a large number of conversations. Is that not extraordinary?

Mr. Oliver Whelan

It was being worked on by the people responsible for producing the figures on debt and it was confirmed later in the week.

Deputy Kieran O’Donnell

The NTMA was being told something that it already knew.

Mr. Oliver Whelan

No-----

Deputy Kieran O’Donnell

Sorry, the NTMA was being told something that it had told the Department 15 months previously.

Mr. Oliver Whelan

We raised an issue but we did not know whether it was the case.

Deputy Kieran O’Donnell

It was obviously very slow broadband.

Chairman

Whether this is an error or an issue brings it back to the question of dancing on the head of a pin, as Deputy Ross referred to it.

Deputy Mary Lou McDonald

With all due respect to others and bearing in mind that Deputy Eoghan Murphy is in midstream, perhaps Deputy Anne Ferris and I can put our questions before other members come in with supplementary questions.

Chairman

Deputy Anne Ferris will be called next. Has Deputy Eoghan Murphy finished?

Deputy Eoghan Murphy

I wanted to continue on what happened but I am not sure we will get anywhere.

Deputy Anne Ferris

This situation beggars belief. The witnesses sit there and they come across as if they are shell-shocked. Mr. Cardiff portrayed a certain amount of hurt and emotion in response to Deputy Ross. Mr. Cardiff can understand how I felt when I picked up a newspaper yesterday and read that the Government was warned of a €3.6 billion error a year ago. In fact, it is not the Government and I would like that to be corrected. It was the Department of Finance. For over two hours, I have been listening to various questions and sometimes it pays off. I was getting somewhat frustrated that I could not talk to witnesses but it sometimes pays to sit back and listen. This is an embarrassment to the Committee of Public Accounts. The Chairman referred to the finger being pointed at the Committee of Public Accounts and people asking why this committee or the Comptroller and Auditor General did not see something and how the latter signed off on these accounts. In future reports we must make it quite clear that the figures from the Department of Finance are the source.

It is almost as if the witnesses are sitting there with their hands up and that it is a matter between the Department of Finance and the NTMA. Mr. Whelan said there was an assumption that the matter had been dealt with after it was first flagged in August or September 2010. The NTMA should not make such assumptions. In any other country or in private business and involving sums lower than €3.6 billion, people's heads would roll. It would not be acceptable. The responses received by Deputies and by the Chairman seem to suggest that we should not dare to ask these questions. I know that the witnesses are only beginning to investigate this matter and that there have been some delays, as Deputy Eoghan Murphy pointed out, between when the Department even began to communicate with the CSO. I find this so wrong.

In response to a question, Mr. Cardiff said that the figure of €3.6 billion was growing. I am not too sure what he meant by this comment, and whether there were more loans, but the question is how the public knows that there are no further errors in the Department. This error has been discovered but we do not know that there are not more. What measures have been taken to ensure that this will not happen again?

Most of the questions I would put have been asked. It makes me mad to see the witnesses sitting on that side of the table appearing so defensive because of the questions we are putting. We are trying to get answers for the public good about money that was misplaced or accounted for twice. We are trying to get answers about how that could happen and, if there were six communications from the NTMA to the Department of Finance over a period of time, why the communications were not brought to a senior level, such as to Mr. Whelan at the NTMA. Why was it allowed to sit, with a reminder every month or six weeks that the e-mail has not been replied to, as we all do with e-mails? Why was this matter ignored in the Department? I find it so hard to understand. I am lucky to get my newspapers delivered in the morning so that I can see what is going on before I start work. I read that the Government was warned of the €3.6 billion error and that officials were warned about the error a year ago. It is absolutely disgraceful and I understand that Mr. Cardiff has sat here for over two hours, being questioned, and is feeling that he wants to get out of here and find out what happened. I want Mr. Cardiff to understand how we are feeling because we represent the public good.

Chairman

Does Mr. Cardiff wish to respond?

Deputy Anne Ferris

There were two questions.

Mr. Kevin Cardiff

The Deputy's points are very well taken. Members of this committee represent the public good and if I feel defensive, it is because I feel I am on the defensive. There is much here to be explained and I want to get to the bottom of this as much, or almost as much, as the committee members. Deputy Ferris asked why this happened. A certain amount of information is available about the facts of what happened and the question of why this happened is puzzling us all. Why was this not raised? If a person had any doubts at all about the treatment of something as big as this, the big question is why this was not raised up the line. I do not know the answer to that. I will try to find out. Another good question is why it was not raised between the Department of Finance and the NTMA. I tried to say to Deputy Ross that we have tried very hard to ensure that communications between the Department and the NTMA are seamless and open. If senior managers on either side were aware of the issue having arisen, communication would have been fast.

Deputy Ferris also questioned how this is growing. The Housing Finance Agency borrows mostly in short-term money, although it has some long-term money. At the end of any given month, some of the money it borrowed from the broader market is then replaced by money borrowed from the NTMA. As the overdraft runs out with a particular person in the broader market, the agency borrows money from the NTMA. Over the course of the year, that builds up to the point where, in effect, all short-term money was coming from the NTMA. The build-up in this instance was quite fast. We can get the numbers. It was not that the €3.6 billion number was arrived at only now but the actual size of the error grew as the process of transferring the Housing Finance Agency's debt operations from the market to the NTMA-Exchequer happened.

Deputy Anne Ferris

Is Mr. Cardiff satisfied there are not other errors in the Department like this one or is he putting in place any investigation to ensure there are not?

Mr. Kevin Cardiff

I am sure, it being a human system, that there are other errors. We try to keep them to a minimum. That this one is so outrageous is very concerning. Therefore, we will be undertaking a very good investigation of it and we will be changing the systems.

Deputy Anne Ferris

Including putting in place measures to ensure nothing like this happens again, as best you can.

Mr. Kevin Cardiff

Definitely. The real issue is to predict the next one as well, not just to cover against this particular error arising again but also to get the system examined so as to limit the risk of other similar or broadly related errors.

Deputy Anne Ferris

To ensure that if something like that were to happen there would be a system in place whereby it would be flagged immediately and caught immediately and dealt with.

Mr. Kevin Cardiff

I understand the people concerned now are extraordinarily aware of the need to raise these things up the line immediately and will be for some time to come but the point is to make sure that one is not relying on human memory of the most recent difficulty and the consequences of that but that one is building the human lessons into the process.

Deputy Anne Ferris

I thank Mr. Cardiff.

Deputy Mary Lou McDonald

Mr. Cardiff is not the only person who is feeling a bit sensitive today. I raised this matter in the Chamber earlier with the Tánaiste and he took grave umbrage at me making a reference to Mr. Cardiff's good self, although not naming him specifically. I avail of this opportunity to put some matters directly to him. Who is carrying out the report or the investigation on this turn of events?

Mr. Kevin Cardiff

The line managers concerned. In other words, the division head, and his deputy, Mr. McGrath, are doing the immediate investigation. They will produce a report.

Deputy Mary Lou McDonald

Can I stop Mr. Cardiff there before he goes through that sequence? How appropriate is that, given that those individuals, so far as I can ascertain, are in the middle of this mess?

Mr. Kevin Cardiff

It is entirely appropriate that managers of an area would look into something that has gone wrong in that area and it would be strange if they did not. In addition, the report they produce will be looked at by someone else internal who is in a separate line relationship and, in addition to that, and more importantly, there will be an external review of the whole matter.

Deputy Mary Lou McDonald

Who will carry out that external review function?

Mr. Kevin Cardiff

I do not know yet who will carry it out but we will have somebody chosen, hopefully, within two weeks. There may be a need for a tender process but I am not sure.

Deputy Mary Lou McDonald

In other words, as we sit at committee today, not alone have the full facts not been established - I appreciate Mr. Cardiff will circulate the e-mails - but, in fact, he has not signed off on the precise mechanisms of the investigation and report. I am just checking that for accuracy. Mr. Cardiff is saying it will be two weeks before he has the full detail. That will be a key concern for this committee.

Mr. Kevin Cardiff

I have draft terms of reference that I will clear with the Minister and possibly with the Government. We will have to find a person who is adequately equipped to do this job properly. Finding people for those kind of jobs is not easy; it usually takes a few days even in an urgent case.

Deputy Mary Lou McDonald

Who drafted the terms of reference?

Mr. Kevin Cardiff

I have drafted the terms of reference.

Deputy Mary Lou McDonald

Mr. Cardiff has drafted the terms of reference. The procedure is that he will clear them with the Minister. Will they go to Cabinet?

Mr. Kevin Cardiff

That is up to the Minister.

Deputy Mary Lou McDonald

That is for the Minister. There is a two-week timeframe for all of this to happen. In Mr. Cardiff's judgment is that accurate?

Mr. Kevin Cardiff

My sense of how long these things take is that it is about two weeks.

Deputy Mary Lou McDonald

Approximately two weeks. Given that Mr. Cardiff has talked a good deal about the systems issues - I appreciate the rationale for that - I want to ask him about the accountability issue. Mr. Cardiff is the Accounting Officer for the Department. He is the boss and he is in charge. This happened on his watch. It is not a trivial matter but a matter that equates to 0.3% of GDP, so it is significant.

Mr. Kevin Cardiff

Yes.

Deputy Mary Lou McDonald

What are the consequences for Mr. Cardiff with this turn of events? Aside from investigating systems and looking at technical staff and middle management who, as Mr. Cardiff said, were in the middle of this mess, what of his own role in it?

Mr. Kevin Cardiff

The worrying thing in all of this, Deputy, is that I had so little role.

Deputy Mary Lou McDonald

Mr. Cardiff was in charge.

Mr. Kevin Cardiff

Exactly, and that this was not brought to the attention either of minor or senior managers more quickly. That is not to apply the blame for that to any more junior staff member because I do not know yet whether there was blame there or what the situation was. My role as Accounting Officer is to take responsibility for these things, to deal with them when they arise, to rectify them as best I can, to account for them to this committee, to account for them to the Minister and the Government and I do that to the best of my ability.

Deputy Mary Lou McDonald

Is it not also appropriate given that Mr. Cardiff is the Accounting Officer, the person in charge, that when an error of this magnitude occurs and is flagged, repeatedly flagged, not picked up on, not acted on for a very substantial period, he should take ultimate responsibility for this error?

Mr. Kevin Cardiff

I am the responsible person for the Department.

Deputy Mary Lou McDonald

What then are the consequences for Mr. Cardiff?

Mr. Kevin Cardiff

Apart from the obvious consequence of having to appear before the committee and explain the situation I have to do my best to ensure that the systems, the people and the errors are rectified to make sure they never happen again.

Deputy Mary Lou McDonald

So the Secretary General would not consider that there should be any consequence beyond what I would consider just the routine carrying out of his duties.

Mr. Kevin Cardiff

Well, I think it is not for me to say. I work for the Government and the Government makes those choices but I will also say that - I will just leave it at that.

Deputy Mary Lou McDonald

I put it to Mr. Cardiff that perhaps in other jurisdictions, in other scenarios, the lack of oversight of that error and the lack of correction of that error over such a period would have consequences not just for technical staff but for the person at the top and that they would be asked to consider their position on that basis. Does he think that is an unreasonable thing to say?

Mr. Kevin Cardiff

I cannot speak for other jurisdictions. All I can say in regard to this matter is that I have dealt with it as quickly and as professionally as I could, once I became aware of it. In regard to other matters, in which the Department is concerned, I seek always to do the same.

Deputy Mary Lou McDonald

Can I say to Mr. Cardiff that from my way of seeing things, he has failed utterly in his duties. This matter was flagged. We are looking at the e-mails, the names having been redacted, but it strikes me as unacceptable that an error such as this can happen and that an investigation aimed at technical and middle level staff would be carried out - that is fine - but that there is no ultimate accountability at the top. The Secretary General has accepted that it is a significant accounting error, a significant blunder. It highlights fundamental systems failures, management failures and communication failures within his Department. Mr. Cardiff is in charge of the Department, yet it seems he is not to be made accountable for that. I find that mind-boggling and I raised the issue in the Chamber today without naming Mr. Cardiff because this is not a personal comment. However, it strikes me that is unacceptable and does a grave disservice to the Civil Service.

Mr. Kevin Cardiff

How it strikes the Deputy is a matter for herself and I leave that as her opinion.

Deputy Mary Lou McDonald

Will the investigation have a remit beyond the immediate establishment of who sent which e-mails to whom at that technical and middle management level? Do the terms of reference capture any of Mr. Cardiff's responsibilities or any overview at the most senior level in respect of these failures?

Mr. Kevin Cardiff

An investigation will deal with all of the issues that arise. No reviewer will be precluded from going wherever the review takes him.

Deputy Mary Lou McDonald

Mr. Cardiff will probably tell me that this is a matter for the Minister, but at what stage will the terms of reference be in the public domain or available to this committee?

Mr. Kevin Cardiff

I hope that as soon as they are agreed, they will be put in the public domain. Since we hope to have a reviewer found within the next two weeks - that is how long these things usually take - I expect the terms of reference will be available in the same timeframe or quicker.

Deputy Mary Lou McDonald

I presume this committee will be kept abreast of all of these matters as they unfold. It is only reasonable to expect that.

I wish to make a final comment. This is my view, but I feel that in fairness I should make it at this committee. Mr. Cardiff will be the Government appointment to the European Court of Auditors. I asked the Tánaiste today if he still had confidence in that appointment. Frankly, I do not. It is not a good news day for Ireland if an appointee to a body such as that has been in charge at the time when an error of this nature has been found and, not alone that, if it transpires that the person in charge, who happens to be Mr. Cardiff himself, is not called to account for it. The Tánaiste took umbrage at that as he felt it was a personal criticism. I wish to emphasise that it is not.

Chairman

I remind the Deputy that she should not make remarks like that.

Deputy Mary Lou McDonald

People holding senior office - Accounting Officers for Departments - must take responsibility for errors where there is an ongoing error of this magnitude. It is the role of Deputies not to engage in a personalised campaign in respect of individuals, but Accounting Officers must be named and held to account.

Mr. Kevin Cardiff

Since the Deputy has, notwithstanding the Chair's instruction, made the comment, I would like the chance to respond.

Chairman

Very well. However, before he responds, would Mr. Cardiff inform the committee whether it is all right to publish the documents we have received? We have circulated them here in the committee.

Mr. Kevin Cardiff

In the normal course, if I had known in advance they were being circulated, I would probably have had a quick legal check done on that. However, since we have redacted the names, I do not see an issue. It is the Chair's choice, but I would not think there is an issue.

Chairman

It is up to members then whether they are circulated. They are in circulation here now. Is it all right to publish them?

Deputy Kieran O’Donnell

Agreed.

Deputy Eoghan Murphy

So long as there is no concern with regard to any future investigation. While I have the floor, on my last -----

Chairman

Sorry we must deal with this question. Is it agreed to publish the documents?

Deputy Kieran O’Donnell

One of the e-mails has the Christian name of an individual on it. That might be an issue.

Chairman

It is all right, once those officials cannot be identified in the documentation. Can we have the documentation checked to ensure no names remain in the documents.

Deputy Eoghan Murphy

There is a full name here and the name of the Department that have not been redacted.

Chairman

It is important we check those documents before publication. I ask the clerk to ensure that all names are properly redacted from all of the documents that have been circulated to members. We agree to publish from there.

I now invite Mr. Cardiff to respond to Deputy McDonald or generally, if he wishes.

Mr. Kevin Cardiff

I will if I might, in a general sense. I will try to keep my response from being personal, just as the Deputy did.

Like Ministers, if Accounting Officers were to resign every time there was an error, we would not have any Accounting Officers. If they were to resign every time there was a big error, we would only have lucky Accounting Officers, because big errors do happen. The Accounting Officer's job is to try to mitigate those errors, reduce their effect and to mitigate the possibility of them recurring and to ensure that over time the systems produce, as far as accounts of this kind are concerned, accurate, good information for the public and for the broader world.

In terms of the Deputy's question about whether an Accounting Officer should, in general, resign any time something like this arises, in general that would depend on the issue itself, the extent of personal involvement, the materiality of it and the whole range of the other duties of the Accounting Officer and how they are performed and so forth. I would suggest that an individual Deputy is not best placed to make that judgment. It is probably the employer who is best placed to make that judgment.

In my case, I have served the country as diligently as I can through both the best and worst times to be at the head of the Department of Finance. The best, because one will never get opportunities like those I have had to be supportive of the public good and the worst because there will never be such a need for that to happen. Since the Deputy mentioned my record, I think it is very solid and sound. Of course, I have been at the helm in the midst of many things that went wrong. However, one must ask the question: "Is the helmsman in the middle of a storm the guy creating the storm or the one keeping the ship going in the right direction?" As far as I am concerned, I have been keeping the ship going in the right direction as best I can. As for the European Court of Auditors, I think it will be a doddle compared to this job.

Deputy McDonald has had her say and I have had mine. The Chairman said I could have mine.

Deputy Mary Lou McDonald

Mr. Cardiff has made it clear he does not see this as of a magnitude that would raise that question for him.

Chairman

I do not want Deputy McDonald to continue with a personal exchange. Has the Deputy other questions?

Mr. Kevin Cardiff

I thank the Deputy for the opportunity to say what I said. I will have to say it again, no doubt.

Chairman

Members have received copies of the correspondence. Do they want to leave that issue now?

Deputy Kieran O’Donnell

Is it in order to follow up with some questions?

Chairman

Yes, absolutely. We are moving to a different element of the meeting in terms of the e-mails and the correspondence. I want to try and draw it together. What concerns me with regard to the exchange up to now is that communication between the NTMA and the Department - the Housing Finance Agency must be included in this - has been a shambles. It shows very poor management in terms of how the issue or the error was dealt with. Whether it was senior management within the NTMA or middle management in the Department of Finance, it was a shambles. There seems to be no procedure within both organisations to allow a complaint and error like this to be processed immediately to the highest level. Then when it was processed, we got to a point where people were not told of it, which should have happened whether it was a long weekend or not, and it drifted into another week. There was no urgency to it, although it was a matter of €3.6 billion.

In my book, the Accounting Officer, Mr. Cardiff, and Mr. Corrigan in the NTMA are the ones with questions to answer. While information has to be obtained from senior or middle management in the Department, it is the responsibility of the Accounting Officer to take full responsibility for what has happened. That is the way I view it. That is the way it would be viewed in the private sector. At some stage, in accepting responsibility, some penalty has to be applied.

As you worked to establish who actually was at fault, it is wrong that you would set down the terms of reference for this investigation. An outside Department should do it. The terms of reference should be set by some independent person or company, who should pursue the reports that you will compile from the staff and from those centrally involved in this, including the correspondences, e-mails, telephone calls and so on. Arising from that, some course of action should be taken. The systems in your Department have clearly shown that on your watch, and possibly before it, they have to be examined. They are not rigorous enough. All of this happened during the course of 2010. There is a role for the Comptroller and Auditor General in parts of this because it is clear that there is confusion about who is responsible for the audit.

It is high time that the recommendations made under different Administrations in respect of this committee should be extended to the Housing Finance Agency. The Comptroller and Auditor General should be responsible for that audit. I believe the Comptroller and Auditor General should be responsible for the audit on local government. There are 140 people employed in the Office of the Comptroller and Auditor General and 40 auditors in the local government audit section. This committee functions with its membership and three support staff. That balance needs to be tilted back in favour of the Members of Parliament who represent the citizens of this country.

You would be well advised to look outside your Department as to how the terms of reference are established and as to how the overall procedure for the report is to be conducted. The committee wants to be kept informed and we want to see some sound recommendations from this, not only for improvements, but identifying specifically where and why it happened and what action is being taken against you or the staff involved. That can only be done, restoring the credibility of the Department and the credibility of the accounts, if someone outside is involved from the outset. That view pulls together what committee members have expressed here this morning. It is essential that this process be conducted before you leave your post as Secretary General and take up your new job.

The e-mails and the correspondence have now been circulated and published. Do any committee members have questions arising from the emails?

Deputy Kieran O’Donnell

The first e-mail we have is dated 23 August 2010 and it is from the NTMA to the Department of Finance. It raises the question of the treatment of the Housing Finance Agency. It is effectively a request from the NTMA and it states, "I am not sure how to classify this figure or how it has been adjusted elsewhere in the GGD calculations, and I wish to discuss this with you before I finalise my figures". An e-mail came back on 1 September from the NTMA asking whether any progress was made on the HFA query, and states, "I am going on leave from this Friday and was hoping to finalise the return". Another e-mail on 4 September states, "Once again, can you liaise with on the treatment of the HFA placements?" On 7 September, a fourth e-mail was sent. I find it difficult to pick it up thereafter.

There are letters on 3 September, 2 December and 9 March from the NTMA to the budget and taxation division. One of the letters states, "Please note, the figure for liquid assets includes money placed with the Housing Finance Agency from the Exchequer account". It was clearly highlighted. An e-mail on 9 June 2011 deals with a parliamentary question on general government debt and net general government debt. Do we have an indication as to what happened after the third e-mail on 4 September 2010? It appears that the issue was the subject of discussion in an e-mail on 23 August 2010, 1 September 2010 and 4 September 2010, yet thereafter, I cannot see an audit trail and I am wondering where it went. There are letters on 3 September 2010, 2 December 2010 and 9 March 2011, dealing with the liquid assets.

The e-mail on 9 June came from the Department of Finance and was about a parliamentary question. It appears to deal with the Housing Finance Agency. What was the basis of that e-mail? There appears to have been an observation from the NTMA on 10 June regarding the same parliamentary question. This was clearly flagged by the NTMA in an e-mail on 23 August. For some reason, it does not appear to have been resurrected again, based on the e-mails on 10 June 2011. What is the background to that?

Mr. Michael J. McGrath

These are the e-mails that we have discovered so far, and they may be incomplete. They are coming off our electronic system, many of these e-mails would have been archived as well, so I must caution that there are gaps here.

Deputy Kieran O’Donnell

Would e-mails be archived if they were not responded to?

Mr. Michael J. McGrath

I am not an IT person, but I understand that after a particular period of time, the e-mails will be archived. The e-mails on 23 August, 1 September and 4 September effectively raise the question as to how we classify this. Up to now, we have no indication of email traffic going from the Department back to the NTMA.

Deputy Kieran O’Donnell

No response.

Mr. Michael J. McGrath

There is no response in an electronic sense.

Deputy Kieran O’Donnell

Is there evidence of a verbal or written response?

Mr. Michael J. McGrath

There is nothing on the file in terms of a written response. If there were a written response I expect it would have gone back by e-mail. I take it from our investigation so far that there is no written evidence of a communication responding to these three e-mails.

Chairman

In examining the e-mails we must understand that they were presented to us this morning and there may be other information. To be fair to Mr. Cardiff and his officials we should allow them the space to gather together the information.

Deputy Kieran O’Donnell

The Chairman will appreciate that from the public interest viewpoint the committee must raise queries on what we have to date.

Chairman

Yes. The committee should do so. However, some of the responses may not be as comprehensive as either I or the officials might like.

Deputy Kieran O’Donnell

Point taken.

Mr. Michael J. McGrath

I thank the Chairman. That is an important point because we are in an early position in terms of sifting through the records. As of right now we do not have any electronic document or file that tells me something went from the Department in respect of these three e-mails that raised the query about the classification. Having spoken to the individual in question and going on the memory of the individual there is no recollection of action. However, it is early in terms of our examination. The initial response is that there was no recollection of an action. This is why I am unsure whether there was a follow-on verbally dealing with the matter between the Department and the agency. I emphasise the fact that I am unsure because we have not done the exercise thoroughly given the time allowed.

Deputy Kieran O’Donnell

Is it not unusual that the Department of Finance advised the Housing Finance Agency and instructed it to change its method of funding because of the markets? The change involved moving from the NTMA raising funds for it. It was acting as an agent for the Housing Finance Agency which had the loans on its books. This changed to a point where that facility was not available and the agency was not in a position to raise the money through the NTMA. Then it had to go to the NTMA and, if my understanding is correct, get money that the NTMA would have had in its vault and which was then lent to the Housing Finance Agency.

Outside of the e-mails, is it not unusual that a direction given to the Housing Finance Agency by the Department would not have been an automatic change in policy? Would this not have taken place automatically? There should have been no need for the National Treasury Management Agency to e-mail the Department asking what should be done. There was a change in the way the Housing Finance Agency was being financed.

Mr. Michael J. McGrath

With regard to the e-mails and the point Deputy O'Donnell is making, there was a change in the treatment and in how the Housing Finance Agency was being financed.

Deputy Kieran O’Donnell

It was from the Department of Finance.

Mr. Michael J. McGrath

There was no question. I have no wish to prejudge any review but I assume that would be one of the points in terms of saying there was a systems problem and the dots were not joined up on that issue. The purpose of the initial communications between the agency and people within this area of the Department was to ask about the correct classification.

Deputy Kieran O’Donnell

Yes.

Mr. Michael J. McGrath

That was the purpose. The other thing points to a wider systems issue into which the various reviews that Mr. Cardiff has already referred to will delve.

Deputy Kieran O’Donnell

The e-mails of 9 June and 10 June this year were on foot of parliamentary questions tabled. The questions dealt with the treatment of Housing Finance Agency loans. It appears that the issue had arisen even at that point. An e-mail raised the matter on 23 August 2010. When were the figures prepared for the 2011 budget? Did this happen before or after the Department was compiling the figures or projections for the 2011 budget? Was this before or after the Department of Finance came up with the general Government debt balance for 2011?

Mr. Michael J. McGrath

Most certainly this would have been before the numbers were finalised for the 2011 budget which was in December 2010.

Deputy Kieran O’Donnell

Was it not unusual? If my understanding is correct, at that time in 2009 the Housing Finance Agency received some element of guaranteed notes from the NTMA. This involved guaranteed notes whereby the NTMA provided funding to the Housing Finance Agency as distinct from borrowing money as an agent for the HFA. Did the NTMA give the HFA some guaranteed notes in 2009 as well?

Mr. Oliver Whelan

At the time, happily, the HFA was able to borrow on the commercial private debt markets. However, as part of carrying out that process, there were occasions when, for reasons of our also borrowing on the same market, it suited us to borrow and to have the HFA not borrow on the same day. As a result we would provide short-term funding until the HFA would go back to the markets shortly thereafter. There were occasions in 2009 when we provided funding but at the end of 2009 there was nothing on our books in respect of that activity. In 2010 as the markets deteriorated from the end of the first quarter onwards and the tensions began, the amount we provided began to increase in a significant way.

Deputy Kieran O’Donnell

Would it not have come up on the NTMA radar while the agency was preparing the budget for 2011 that the accounting treatment of this funding in 2010 was unusual? When did the loans or money that the NTMA provided to the Housing Finance Agency materialise in 2010?

Mr. Oliver Whelan

It began from approximately the end of the first quarter and then as the markets deteriorated and the HFA could not get access to the private markets. As Mr. Cardiff explained earlier, as debt matured in the private markets it was replaced by funding which we-----

Deputy Kieran O’Donnell

Was the bulk of the €3.6 billion in 2010 provided prior to the e-mail in August?

Mr. Oliver Whelan

By the end of the second quarter of 2010 we had approximately €900 million in funding.

Deputy Kieran O’Donnell

How much did the NTMA have by the end of the third quarter?

Mr. Oliver Whelan

By the end of the third quarter we had €2.4 billion and then by the end of the year it was €3.6 billion.

Deputy Kieran O’Donnell

Will Mr. McGrath elaborate? Why did this not come up on the NTMA radar as a normal accounting treatment when it was preparing the budget for 2011? Clearly this e-mail would have been sent prior to the budgetary process. How did it feed in to the budgetary process this year when it did not do so last year?

Mr. Michael J. McGrath

I fear I must give the Deputy only a partial response at this stage given that we are only trying to delve through these matters. However, I wish to make a point of clarification. The €900 million or so that Mr. Whelan referred to related to the second quarter and there is a lag in reporting from the Central Statistics Office of approximately three months. This is probably the only amount that would have been signalled in the first instance. The third quarter figure should have been known later on but I am unsure about the exact detail of it.

The simple and short answer to Deputy O'Donnell's question is that the issue was raised as, "How do I treat this?" We do not have sufficient information today to say conclusively what was dealt with but certainly the evidence to date is that it was not actioned.

Deputy Kieran O’Donnell

How did it come to light this year when it did not come to light last year?

Mr. Michael J. McGrath

It came to light in the past ten days or so in terms of a further query raised in terms of the particular thing.

Deputy Kieran O’Donnell

Was that from the NTMA?

Mr. Michael J. McGrath

It was from the NTMA in dealing with the section in question. It was from that point of view that the individual within the section examined the matter and, as I understand it, discussed it further with the Central Statistics Office and between the three agencies during the course of last week confirmed that there was indeed a double count and then senior management was alerted as I indicated previously.

Deputy Kieran O’Donnell

I refer to the e-mail which would have caught the attention of the Department of Finance.

Mr. Michael J. McGrath

I am being told it is 21 October. On 21 October, there is an e-mail from the NTMA to the Department of Finance. It talks about the latest projections agreed with the EU-IMF and then the next-----

Deputy Kieran O’Donnell

Is that dated 21 October?

Mr. Michael J. McGrath

Yes, 21 October at 10 a.m.

Deputy Kieran O’Donnell

As I read it I note it refers to the latest projection agreed with the EU-IMF for the end of years. It asks "can you give me your projections for year end and also...I would like to have a quick word about the treatment of HFA." Is this the same NTMA official who wrote the e-mail of 23 August? It is a different official. How did it arise that it was a different official?

Mr. Michael Cunningham

In the different context. This was not in the context of the EDP returns but rather this was in the context of the budget projections.

Deputy Kieran O’Donnell

Was this e-mail sent to the same individual in the Department of Finance as had been sent the original e-mails?

Mr. Michael J. McGrath

It was sent to the same section but the individual had changed since earlier this year.

Deputy Kieran O’Donnell

The individual who received the e-mails of 23 August-----

Mr. Michael J. McGrath

The individual who received the e-mails of 2010 is not the same individual. It is the same section but the individual to whom the e-mails were directed in 2010 is not the individual who is in the section.

Deputy Kieran O’Donnell

When did his or her role change?

Mr. Michael J. McGrath

In the spring, in February-March of this year.

Deputy Kieran O’Donnell

Was there a reason for his or her moving?

Mr. Michael J. McGrath

He was on a three-year secondment with the Department from the Central Statistics Office.

Deputy Eoghan Murphy

I thank the witness for providing a copy of the e-mails as this is very helpful. I want to pick up where Deputy O'Donnell left off regarding these e-mails in 2011 on 21 October. It is quite interesting. I note there is a series of e-mails in 2010 - they are not all available to us here - going one way, from the NTMA to the Department of Finance and no e-mails in the other direction which in itself is very interesting if this remains to be the case that there was not even an acknowledgment of the e-mail. I note an exchange on the same day, 21 October, in which NTMA writes to the Department, "I would like to have a quick word about the treatment of the HFA in the GGD". Later that afternoon, the Department of Finance replies, "I will have a look at the HFA and call you in a few minutes." Then they have their phone calls. This is on 21 October which is a Friday.

I will move on a couple of pages to Tuesday, 25 October. The subject of the e-mail is actually the HFA and it is from the Department of Finance to the NTMA. This is where the Department actually admits that there is a double count of €3.5 billion in the debt:

In fact, it appears to be from figure seven and figure 12 of the annual report of the Comptroller and Auditor General that there is a double count. I have not spoken to anyone here about it. We publish the pre-budget outlook on 4 November. It will probably be reflected there. Thanks for alerting me to the issue.

That is the e-mail on 25 October from the Department of Finance back to the NTMA following the discussion those two people had on the Friday evening, or so we can only assume.

I have two questions. The Department has established on Tuesday, 25 October that there has been a double count yet the head of the Department is not notified until the Friday evening, as we have heard earlier. I also wonder what happened between this person saying, "I have not talked to anyone here about it. We publish the pre-budget outlook on 4 November. It will probably be reflected there." Did that person then decide that he should talk to someone about it and when did they decide to do that?

Mr. Michael J. McGrath

I should repeat that given that it is preliminary I do not want to suggest I am now giving an emphatic statement of exactly what happened. As I understand it, the individual in question, having engaged with both the NTMA and, I think, the CSO, on this matter, brought it to the line manager's attention on the Friday. That line manager reports directly to me. I was abroad on Friday but I took a phone call during the course of Friday afternoon from that individual, the line manager in question and from my conversation with him we agreed we needed to set out a note to signal the seriousness of this matter and to send the note to other senior managers, including the Secretary General and the Minister. As I said earlier, I then spoke with the Minister about it on Tuesday.

Deputy Eoghan Murphy

The note went to Mr. Cardiff that Friday evening?

Mr. Michael J. McGrath

It went by e-mail to a number of people and it was sent to the Minister's office.

Deputy Eoghan Murphy

To his private office? It was e-mailed to the Minister.

Mr. Michael J. McGrath

I apologise. I am a little hazy because I was not in the Department on Friday. As I understand, it was e-mailed to the office in the Department of Finance for them to bring it to the attention of the Minister.

Deputy Eoghan Murphy

Does Mr. McGrath know how it was e-mailed? For example, one can bounce off an e-mail or one can flag it, put an exclamation mark on it, mark it urgent, telephone the recipient to warn an e-mail has been sent which is urgent even though it is Friday evening. Did any of this happen?

Mr. Michael J. McGrath

I would have to come back to the Deputy on that point. As I say I was not actually in the Department on Friday because I was abroad.

Deputy Eoghan Murphy

Does Mr. McGrath know what happened between Tuesday when it was realised in the Department that the double count had occurred and Friday when the line manager who reported to you was informed? Why did that delay occur?

Mr. Michael J. McGrath

I do not know a blow-by-blow account of that situation, as of yet. However, I understand that further clarification and tick-tacking was going on between the relevant technical people in the various agencies. I think it will be part of our review to find that out. I am afraid I cannot give more clarification on that at this point.

Deputy Eoghan Murphy

It seems pretty clear in that e-mail that they knew exactly what had happened. They even cite the relevant figures in the Comptroller and Auditor General's report which we dealt with earlier. We already know that the NTMA knew there was an issue, as shown by the correspondence we have seen. Even though Mr. McGrath says it is a technical issue and he is not sure why it occurred or why there was a delay, it is amazing that there was a delay at all.

Mr. Michael J. McGrath

I cannot explain at this point why there was a delay. I know it was brought to management's attention on the Friday and actioned then.

Deputy Eoghan Murphy

I do not want to come back to the point about systems errors. I think what we are revealing is that these were not systems errors but that they are errors of a different kind.

The double count is noted on the Tuesday and then on the Friday the Secretary General is informed and a note is sent to the Minister but it is not until a Tuesday morning that the Minister is actually made aware - as far as Mr. McGrath is aware - that this has occurred.

Mr. Michael J. McGrath

Yes. I am subject again to correction but from memory I think the Minister in his statement yesterday in the Dáil indicated that he was briefed on the matter, those might be his exact words, on the Tuesday. I think he was then referring to both the note and to my discussions about the matter with him on Tuesday.

Deputy Eoghan Murphy

Were people working on this over the bank holiday weekend? I know Mr. McGrath was away and it was late Friday evening but this is a serious problem. It is a case of what to do about it, that the NTMA and the CSO needed to be spoken to, that EUROSTAT would need to be informed and also that contact should be made with the Office of the Comptroller and Auditor General. Was anyone working on these issues over those three days?

Mr. Michael J. McGrath

I cannot say specifically to the Deputy that on this specific issue and how to bring it forward people were dedicated to working on it over the weekend. I know that work was being done on the overall budgetary matters but I am unable to confirm whether there was work on this specific issue.

Deputy Eoghan Murphy

I acknowledge the records in front of us are not complete but there is nothing here from the CSO but the CSO was involved from Tuesday, 25 October when the double count was recognised.

Mr. Michael J. McGrath

That is my understanding.

Deputy Eoghan Murphy

How would the CSO have been communicated with?

Mr. Aidan Punch

Before answering that question, I had submitted a statement this morning to the clerk to the committee and I was willing to read it out. Clearly I have not been ducking and diving here at all. We are very accountable in the CSO. However, to answer the Deputy's specific question, I think there would have been an e-mail to one of our officials who has responsibility for the quarterly statement as quarterly statements are done by the CSO. I think probably some time elapsed because they would have contacted the Housing Finance Agency, I suspect, to get an answer. I think that would probably explain the gap between the Tuesday and the Friday.

Deputy Eoghan Murphy

Does Mr. Punch know when the CSO was first contacted about this?

Mr. Aidan Punch

We would have known first on 24 October as a result of a phone call.

Deputy Eoghan Murphy

Before the Tuesday of this e-mail, before 25 October, when the Department of Finance knew. The CSO knew before the Department of Finance knew.

Mr. Mick Lucey

No. We were contacted by the Department of Finance on 24 October.

Deputy Eoghan Murphy

Pardon?

Mr. Mick Lucey

We were contacted by the Department of Finance on 24 October, via a phone call.

Deputy Eoghan Murphy

Is that when the Department confirmed with the CSO that there had been a double count?

Mr. Mick Lucey

That is when they explained about what had happened with the HFA. They asked for our view on how that should be treated in the actual debt statement.

Deputy Eoghan Murphy

Okay. The Department of Finance and the NTMA had a discussion over the telephone on Friday evening. On the Monday of the following week the Department of Finance talked to the CSO and confirmed there had been a double count. On Tuesday afternoon the Department of Finance got back to the NTMA to say there was a double count, where it was and what they knew about it. At that stage the NTMA, the CSO and the Department of Finance were all aware that the double count had occurred and where it happened.

Mr. Mick Lucey

Yes. Then we tried to confirm with the Housing Finance Agency, HFA, what exactly was happening and what the figures were.

Deputy Eoghan Murphy

Who confirmed it with the HFA?

Mr. Mick Lucey

It was the CSO.

Deputy Eoghan Murphy

The CSO got on to the HFA.

Mr. Mick Lucey

We got on to the HFA.

Deputy Eoghan Murphy

Was that on the Monday?

Mr. Mick Lucey

No, it would have been on the Tuesday because the official was not in on Monday. He made contact with the HFA but it was not until Thursday that the HFA confirmed that it had guaranteed notes.

Deputy Eoghan Murphy

Does Mr. Lucey know why it took the HFA so long to confirm that?

Mr. Mick Lucey

I think there was some confusion about precisely what the source of the borrowing may have been.

Deputy Kieran O’Donnell

It was in its accounts in black and white.

Deputy Eoghan Murphy

Did Mr. Lucey say there was confusion about the source of inquiry?

Mr. Mick Lucey

The official we were dealing with was the one who makes the normal returns. Initially, there may have been confusion. Again, I will have to look at the trail on that couple of days. We had a couple of contacts with the HFA before it was confirmed that the guaranteed notes were in issue and we got information on the amounts involved at the end of each of the six quarters which were of concern to us.

Deputy Eoghan Murphy

The Department went back and forth to the CSO on Tuesday afternoon, on Wednesday and on Thursday it gave confirmation but it was not until Friday evening that senior people in the Department of Finance were notified that the situation was even going on and that questions were being asked.

Mr. Mick Lucey

Yes. From our point of view on Thursday, we were happy. We had the information from the two sources that there was a double count.

Deputy Eoghan Murphy

Could Mr. Cardiff explain what was happening in the Department of Finance in the meantime; when the CSO was trying to figure out what the HFA was doing and what it was about? The Department of Finance had known since Monday what was happening. Had an investigation begun yet? Had someone been appointed to look at the matter? Had the line manager said that the Department needed to find out what had happened because people needed to know or were they just waiting for the information?

Mr. Kevin Cardiff

As I understand it, the people concerned were trying to clarify the issue and ensure they were right. They produced a note for the Minister and they informed senior managers. The investigation, the process of digging through the information, did not start until Tuesday of this week.

Mr. Michael J. McGrath

Tuesday, that is right.

Deputy Eoghan Murphy

Was it on Tuesday of this week when Mr. Cardiff decided that he needed to start to look at the issue. Mr. Cardiff can correct me if I am wrong but the impression I gained is that when he was informed on Friday evening that the investigation was already happening, that the issue had been discovered and it was being examined in order to find out why and what went wrong, but he knew it was true.

Mr. Kevin Cardiff

The process of getting to the bottom of the fact that there had been an error, describing it and the implication of it, and creating a note, was all happening but the process of deciding to get to the bottom of how it had occurred began on Tuesday.

Deputy Eoghan Murphy

Understanding the error and saying a note had to be prepared only began on the Friday even though Department of Finance officials knew from the Monday that there was a double count. It was there in black and white and the officials concerned were clear about it but they decided not to tell anyone in senior management.

Mr. Kevin Cardiff

That is part of what we will try to get to the bottom of. The truth is somewhat different. There was a process whereby the people concerned were trying to find out, first, what the situation was and, second, cross-checking it with the CSO. Then it was brought to the attention of senior management on the Friday. Had there been an immediate statistical release or publication that would have had to be done more quickly but there was nothing on the horizon at the time. As Deputy Murphy said, the story was about to break but there was not a sense that we were working to a particular media timetable. At the time the people concerned were working to get it right. I am personally grateful to the people who spotted it, for dealing with it and for bringing it to our attention. One could argue that they should have brought it to our attention on Thursday instead of Friday but I am personally grateful to them for them doing the work, finding the mistake and bringing it to our attention.

Deputy Eoghan Murphy

Of course, but we are not talking about €50 in petty cash. Is Mr. McGrath concerned that on discovering an error of the magnitude of €3.6 billion on a Monday, the people working under him waited until Friday evening when he was not even in the country to tell him about it? Is he concerned that they did not even say that they had found a double count, that they know where it was, that they would look into it, double check with the HFA through the CSO but that it existed and they knew about it but that they would wait a whole week to tell him about an issue involving €3.6 billion? If one of my staff did not tell me about an e-mail I would be furious.

Mr. Michael J. McGrath

I would first of all echo the final comments of the Secretary General on the staff. It is an issue of surprise that my attention was not drawn to it earlier. I do not say that as a criticism; it is just an issue of surprise. I have to deal with the situation as it unfolded, which is that senior personnel outside of the section were notified on Friday. I was alerted by telephone during the course of Friday afternoon. We agreed that we would then go through the sequence of events I have already discussed so I will not repeat them. That is it. Yes, I would like to have known. I would like to have known as far back as August 2010 but we have to deal with the situation as we now find it. It is not satisfactory.

Deputy Eoghan Murphy

Does Mr. McGrath think it is satisfactory for him to wait three days to notify the Minister properly? Mr. McGrath's staff found out on Monday but they waited three days to tell him on Friday. He found out on Friday and he waited three days to tell the Minister on Tuesday.

Mr. Michael J. McGrath

No, it was a note. The normal communication for issues like this is that one would set it down in print to notify the Minister. A note was sent. Had I been in the Department - this is pure speculation - I may well have walked down to where the Minister was - but I was not in the Department. Given that I was out of the country and that I was not in work mode I thought that the best way to proceed was to get the information to the senior people and get a note sent to the Minister's office and then on Tuesday morning when I was back in the country and back at my desk after the bank holiday weekend I spoke to the Minister about it.

Deputy Eoghan Murphy

Who was responsible while Mr. McGrath was not in the country, because someone else was responsible for this as well, it was not just Mr. McGrath? Does he believe that just because he was not in the Department that a serious issue must wait until Tuesday? Someone else, either above or beside Mr. McGrath, should be briefed on the issue as €3.6 billion is not a small deal. I am sure everyone in the office knew what was happening and someone would have said that the Minister must be told.

Mr. Michael J. McGrath

My senior official who reported directly to me spoke with me. We discussed the matter of getting the note. As I understand it, he brought the note down to the Minister's office and he sent it around to the relevant senior officials within the Department on Friday evening.

Deputy Eoghan Murphy

Does Mr. McGrath consider the blame lies with the Minister's office in terms of him not finding out?

Mr. Michael J. McGrath

I am not even discussing where the blame lies. I can only say in terms of-----

Deputy Eoghan Murphy

Okay. Does the Secretary General think that it would have been up to someone in the Minister's office to bring it to his immediate attention, given the gravity of the situation?

Mr. Kevin Cardiff

No, I do not think the Deputy can say that. Let us follow the trail through and find out exactly what happened and what did not. It would not be a matter for a person in the Minister's office to bring the information to his immediate attention unless someone had in the words of the Deputy, flagged it.

Deputy Eoghan Murphy

Then it was not flagged to the Minister.

Mr. Kevin Cardiff

I do not know that it was. I assume not.

Deputy Simon Harris

I got a headache from all the references to "Mondays", "Fridays" and "Tuesdays" and trying to work out the trail so God knows what chance most people would have of trying to work it out.

The e-mail to which Deputy Murphy referred which was dated 25 October said that the person had not talked to anyone there about it. One cannot read too much into it but it nearly looks like a badge of honour that the person has not mentioned that there had been an error of €3.6 billion to anyone. We publish the pre-budget outlook on 4 November. I am making an assumption in asking for a response to my suggestion that there was an attempt to get away with it until 4 November when the pre-budget outlook would be published and the issue would not get into the public domain. At what point did the information come into the public domain? Will someone outline to the committee how the information became public, as I am missing that link? That is one point.

An e-mail dated 10 June contains the NTMA's response to the Department's query on parliamentary questions. As a new Deputy, the language used by officials in the NTMA gives me an insight into how parliamentary questions are viewed. Leaving that aside, the previous e-mail dated 9 June states: "perhaps you have a different view and will want to show the figures with the HFA included?" It clearly shows that on 9 June Department of Finance officials who were responding to parliamentary questions were themselves asking what they should do with the HFA figure. This is the first e-mail which was not a warning from the NTMA. It was from an official in the Department of Finance, whose grade I do not know, seeking clarification on the issue. Given that the issue arose in June in the process of answering parliamentary questions, would the Department have reverted to the NTMA on it?

Mr. Michael J. McGrath

As the review is ongoing, we have not yet had time to assess all of this. The e-mail was shown to me when I left the committee room to ascertain what went around. Given that it mentioned the HFA I thought it important that it be circulated to members. I need time to study it but I am not completely certain that it deals with the double count. It may deal with the HFA in another context. I do not want to mislead the committee.

The individual in the Department of Finance who was dealing with the matter is in an interlinked section but not in the statistical section that was dealing with the double count. That may not be relevant but I wanted to mention it.

Deputy Simon Harris

I fully appreciate Mr. McGrath's frankness. I ask him to consider the fact that an additional official in the Department of Finance, albeit from a different section, was also aware of the NTMA's concerns. Rather than confining the investigation to one or two individuals in one section, it now transpires that officials in another section were also aware of the NTMA's concerns and may or may not have acted on them.

Mr. Michael J. McGrath

To clarify, these sections are housed in the same room. I do not want to give the impression that they are in different areas. They work closely on related elements of the budgetary process but the main individual who would have dealt with the other matters is a statistical person as opposed to the individual who dealt with the issue Deputy Harris raised.

I will take on board the Deputy's comments in regard to the review. In terms of the public domain, all I can say at this stage is that the Department and the officials on my side of the Department were and still are focused on ensuring the documentation being published tomorrow evening, which was formerly known as the pre-budget outlook, is put into a proper format for presentation to Government. One would have to explain the numbers and how they might have changed over time. I am only interpreting this but I believe it was envisaged that an explanation would be required within that context. Given that the pre-budget outlook was only a matter of days away, the view was not taken that one needed to make a specific public issue of this figure. I understand this was put into the public domain by one of the television stations.

Deputy Simon Harris

The departmental official's response to the error was that it would be outlined and explained when the review was published but the information was leaked.

Mr. Michael J. McGrath

That would have been the first official documentation to offer the opportunity to deal with it. Obviously it was a matter one would discuss with the Minister on Tuesday.

Deputy Simon Harris

Mr. McGrath never got the opportunity to discuss with the Minister whether the information should be made public in advance of the report being published tomorrow, presumably because it was leaked to a television station.

Mr. Kevin Cardiff

To be clear, the Minister took the view that the information ought to be produced beforehand. The option of waiting until Friday would not have arisen because he already insisted on dealing with it earlier. In terms of the leak, these things happen.

Deputy Simon Harris

The information was not put into the public domain by the Department of Finance on the basis of a ministerial direction or Mr. Cardiff's request. It was leaked by somebody who should not have leaked it. Is that a fair summation? We all woke up and read our newspapers. Deputy Ferris showed Mr. Cardiff the clippings. We were told that the Department found €3.6 billion and one of the newspapers reported that it was found down the back of a couch. I just want to know how that information reached the public domain. Was it the case that the Minister, Mr. Cardiff or another official in the Department strategically decided to put it out or was it non-strategically passed on to our friends in the media?

Mr. Kevin Cardiff

I do not want to be facetious but we have a bunch of witnesses who will agree I never strategically leak anything, notwithstanding their attempts. I do not know how it got out but I do not think there is any reason to expect a conspiracy.

Deputy Simon Harris

My question was not conspiratorial. I genuinely want to know how the information was put into the public domain.

Mr. Kevin Cardiff

As to whether the Minister strategically leaked it, I am pretty sure he did not.

Deputy Simon Harris

The information was put into the public domain by somebody who was not authorised to do so.

Mr. Kevin Cardiff

As far as I am aware, nobody asked permission to put it into the public domain.

Deputy Simon Harris

That is good enough for me. Deputy O'Donnell touched on the change in the HFA that brought about this error. How was that decision arrived at? I appreciate the rationale behind it from Mr. Cardiff's opening statement but who signed off on the decision? In other words, who in the Department decided to instruct the HFA to carry out its borrowing in such a way? The Department also has a responsibility in this area to put the right systems in place. Much as I want to see accountability on the part of the individual who made the error, I also want to know who made the decision to change the HFA structure and what that individual did to ensure the systems were put in place.

Mr. Kevin Cardiff

I am not sure of the answer to that question because I do not have the necessary paperwork. The decision made itself in effect. In 2010 the Government was still borrowing in the market but the Irish housing market was in trouble and any agency with the word "housing" in its title was not going to be able to borrow.

Deputy Kieran O’Donnell

Would it not be fair to say that if Mr. Cardiff was instructing the HFA to change its policy to get moneys which the NTMA held on deposit rather than borrow on its own behalf, a note would have been drawn up within his Department stating that the accounting treatment of the agencies loans should be excluded from the general Government debt? Does such a note exist?

Mr. Kevin Cardiff

I do not know but I will check. In terms of the process, a person doing that might have assumed that the systems would bring it to his or her attention and that it would be dealt with properly. In a sense the systems did bring it to the Department's attention but it was not dealt with properly.

Deputy Kieran O’Donnell

Can we get an indication of the timeframe for the investigation so that the officials can return to the committee?

Chairman

I have set out what I believe the members of the committee would like to see. I ask Mr. Cardiff and his officials to take that on board and keep the committee informed of the actions being taken and the timeframe for concluding the report and submitting it to us. The members would like to see this as quickly as possible.

Deputy Eoghan Murphy

We are in possession of copies of the e-mail transcripts in which a couple of names have not been redacted.

Chairman

I ask members to respect this. The names have been removed from the copies being distributed to the press.

Deputy Eoghan Murphy

This is important as committee members who are not here may not be aware their copies do not have-----

Chairman

I will ask the clerk to ensure the message gets to them. I thank Mr. Cardiff and all of the officials for attending at such short notice and for providing us with the information they have. I ask them to understand we would like them to return as quickly as possible to conclude this business.

The witnesses withdrew.

The committee adjourned at 2 p.m. until 10 a.m. on Thursday, 10 November 2011.