€3.6bn extra found on books after 'accounting error'

The Government has been forced to admit an embarrassing accounting blunder which has found an extra €3.6bn on State books.

Loans from the organisation which manages the nation’s debt to a housing agency were counted twice, doubling the debt, the Department of Finance has revealed.

The accounting mistake – involving the National Treasury Management Agency (NTMA) and the Housing Finance Agency (HFA), which finances house buying for councils – was due to be detailed in an economic review out this Friday.

The Department said the €3.6bn was lent by the NTMA, which recorded it as money owed, while the HFA also recorded it as a debt on its books - doubling the cost.

Mary Lou McDonald, Sinn Féin’s spokeswoman on public expenditure and reform, called on Taoiseach Enda Kenny to clarify how the embarrassing windfall will impact on the budget.

“News that the Government debt is €3.6bn lower than originally expected is deeply embarrassing for the Government and the officials involved,” she said. “The idea that an ’accounting error’ of this size went unnoticed for so long is truly amazing.”

Discovery of the error will be a huge boost to the Government, as well as an embarrassment, just weeks before the December budget to secure anything from €3.6bn-€4bn in savings.

Mrs McDonald said: “On the basis of this information, the Government no longer needs to cut €3.6bn in the budget to meet the EU/IMF deficit target.

“I am calling on the Taoiseach Enda Kenny to make a statement on the matter outlining how, if at all, today’s news changes his Government’s approach to the budget.”

The accounting error means general Government debt – the total debt of the State including the bank bailout costs – has fallen by 2.3% of the value of Gross Domestic Product.

The error was uncovered after the Department of Finance alerted the NTMA to a change in the way it deals with the HFA.

From the end of last year the NTMA began to lend directly to the HFA rather than acting purely as an agent for the Government body to provide finance to local authorities and voluntary bodies for housing.

The Department said loans direct from the NTMA to the HFA should appear on the agencies’ respective accounts as assets, or liabilities.

It is understood the accounting error was due to have been clarified in the Medium Term Fiscal Statement to have been published on Friday. The report contains the latest macroeconomic and fiscal forecasts of the Department of Finance to inform the Government in its ongoing budgetary projections.

Fianna Fáil said a comprehensive explanation is required from Finance Minister Michael Noonan setting out the details and precise chronology of how the error was made and when it was identified.

Finance spokesman Michael McGrath said: “This is a very serious error on the part of the Department of Finance which raises a number of questions that need to be answered.

“General government debt is the measure of the State’s total debt and is used for comparative purposes across the European Union.

“Therefore, potential investors examining Ireland’s public finances in recent months were basing any investment decisions on official figures which were significantly inaccurate.”

Mr McGrath revealed he has asked the Oireachtas Finance Committee to invite Mr Noonan to appear before it to explain what happened.