A €3.6 billion accounting error, which reduces the State's outstanding debt by some 2.3 per cent of gross domestic product, will have no impact on the Budget, Minister for Finance Michael Noonan confirmed today.
The Department of Finance and the National Treasury Management Agency yesterday clashed over responsibility for the mistake.
The error arose due to the inaccurate accounting of the NTMA’s borrowings to the Housing Finance Agency, which provides loan finance to local authorities and voluntary housing bodies.
In a statement, a spokesman for the NTMA said it was the responsibility of the Department of Finance to calculate the general government debt, and that the NTMA raised the issue of potential double-counting “on a number of occasions from as far back as autumn 2010”.
The department refused to comment yesterday when asked whether it had been alerted to the issue last year, but in a statement said that it had only happened lately. “The NTMA has recently drawn to our attention the fact that there was a change in their relationship with the [Housing Finance Agency] that has an impact on the accounts of the two entities,” it said.
The Public Accounts Committee (PAC) said it will hold a special meeting tomorrow morning to discuss the issue.
Kevin Cardiff accounting officer of the Department of Finance, and senior officials from the CSO and the NTMA are expected to be questioned by the PAC during the meeting.
PAC chairman John Mc Guinness said the meeting was necessary to give “some level of assurance that there is not a systems failure” in the way the national accounts are compiled.
“We will have to see whether systems need to change as at the moment it appears that no one is checking the Department’s work,” he added.
Earlier today, Mr Noonan said the issue was not whether an individual civil servant had made a mistake, but whether there was a "systems error" in a particular area of his Department.
He said there was nothing on record to show that the NTMA had received a response to its original email to the Department of Finance in August 2010. Nor was there anything on record to show the NTMA had followed up on the matter subsequently, he added.
Mr Noonan said the issue arose during preparations for the Budget last year. He was "very confident" that former minister for finance, the late Brian Lenihan, had not known about it.
The Minister said he first learned of the issue yesterday and had decided it was something that should be made public. “It says that certainly a mistake took place, that to err is human," Mr Noonan said.
Speaking on RTÉ's Morning Ireland, Mr Noonan said he needed to make sure there was not a systems failure in his Department and that there were "checks and balances" in place.
He said the 2010 accounts had already been examined by the Comptroller and Auditor General, and that the PAC had not spotted the error either.
He said the discovery of the error, which reduces the State's outstanding debt, would have no effect on the Budget. "We are now more sustainable because the debt is lower, but it makes no difference to money in or money out, or budgetary matters."
The €3.6 billion error was discussed at Cabinet yesterday. Another Cabinet meeting today will focus exclusively on the Budget.
Minister for Jobs, Enterprise and Innovation Richard Bruton is cutting short a five-day trip to the US to attend this Cabinet meeting. A spokesman for Mr Bruton last night insisted he was not being recalled: “The Minister decided that since there’s a Cabinet meeting to discuss the budget, in order to attend that meeting, it would be necessary to depart from his investment mission to the US.”
Meanwhile the Central Statistics Office has taken partial responsibility for the error, which will see Ireland’s gross outstanding debt for 2010 revised to € 144.4 billion rather than the published € 148.0 billion.
The Government had intended to announce the error along with the medium-term fiscal statement, due to be published on Friday, setting out the planned fiscal adjustment path for the period 2012-2015.