The Department of Finance and the Central Bank are facing criticism from the State’s financial watchdog over an unauthorised release of €750 million in exchequer funds to the department.
There was no financial loss from the incident at the start of the October bank holiday weekend. But the Comptroller & Auditor General (C&AG) has expressed “serious concern” at the breach by both the department and the Central Bank.
In a report soon to be laid before the Dáil, the C&AG examines how the department drew down the money from the exchequer account in the Central Bank without seeking the comptroller’s approval as required by law.
The matter is seen as an embarrassment for the department, which is custodian of the public finances, and the Central Bank, which is the Government’s banker.
The affair stems from the requirement on the Minister for Finance to seek C&AG authorisation for the release of funds once the Government has spent a sum equivalent to 80 per cent of the money spent the previous year.
That point was reached on Friday, October 28th, but the department failed to seek consent for the transfer of several hundred million euro. The incident has been attributed to an oversight.
“It is a matter of serious concern that the Department of Finance issued a payment request to the Central Bank for which there was insufficient credit in place,” said the C&AG’s draft report.
The final text, circulated at about 4pm yesterday to the parties, expressed similar concern about the Central Bank’s role.
The department acknowledged a breach of process, saying it fully accepted responsibility for its role.
“The Department of Finance issued a payment instruction to the Central Bank of Ireland to transfer funds from the exchequer account where a sufficient ‘credit’ or sanction was not in place to cover the full payment amount,” it said in response to questions.
“The Central Bank subsequently processed this payment. The Central Bank identified the breach later that day, and informed the Department of Finance, who in turn informed the Comptroller and Auditor General on the next business day.”
After an internal review, it has taken steps to prevent any recurrence.
The Central Bank said it recognised the significance of its role in the exchequer control process. “Following this incident we have put additional controls in place and will work with the Department of Finance to ensure such a breach does not happen again.”
In a letter to Comptroller and Auditor General Seamus McCarthy, Central Bank governor Gabriel Makhlouf said he considered the incident “a serious one”.
The C&AG declined to comment. “The office does not comment on reports until such time as they are laid before the Oireachtas.”
