Debt discrepency in the National Accounts – Public Accounts Committee, Thursday 3rd November 2011.

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 being 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.