The Central Bank and Department of Finance have tightened checks and controls around the release of exchequer funds in the bank to the department after an unauthorised transfer of €738 million was made last October, the Oireachtas Public Accounts Committee (PAC) heard on Thursday.
The Comptroller & Auditor General (C&AG) said in a report in December that the breach was a matter of “serious concern”, even though the central exchequer fund account in the Central Bank was not overdrawn and the incident resulted in no financial loss.
“It is clear that the end-to-end process between the department and the Central Bank did not prevent a breach in the grants of credit limits in October 2022 and this is a matter of sincere regret,” Will Molloy, director of financial operations at the Central Bank told the committee. “Both the department and the Central Bank have worked individually and collectively to address the issue and introduce additional controls to prevent reoccurrence.”
The C&AG legally controls the release of money from the central fund by granting a credit for the maximum amount that the Minister for Finance can draw from the fund in a specific period of time.
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As of Thursday, October 27th, the Central Bank had released to the department all but €1.86 billion allowed under an existing C&AG authorisation for €53.2 billion of transfers between January and October 2022.
While the €1.86 billion was agreed by Department of Finance and Central Bank officials on the morning of Friday, October 28th as part of a standard reconciliation process, the department submitted two payment orders later that day totalling €2.59 billion, exceeding the allowable amount by €738 million. The funds were subsequently transferred.
The Central Bank identified the problem later that day and immediately notified the department. The C&AG, Seamus McCarthy, told the PAC that his office learned of the issue the following Tuesday, after the bank holiday.
The department identified two oversights on its side: that it did not seek a credit from the C&AG earlier in the year, after the Dáil had approved all of the revised estimates for 2022 and, at the time the payment orders were submitted to the Central Bank, no check was made to ensure that sufficient credit was available to cover the request.
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Mr Molloy said that the Central Bank also “recognised” that its payments process and reconciliation process surrounding authorised payments was “not sufficiently integrated to prevent this breach from occurring”.
“From the Central Bank’s perspective we are now updating the grants of credit balance intraday – in real time – and performing real time checks before payment orders are executed, reconciled against both the grants of credit balance figures provided from the Department of Finance and our own independently calculated figures – the ‘four eyes’ check,” he said.
Committee members also questioned Central Bank and Department of Finance officials on Thursday on the Central Bank-run Insurance Compensation Fund, but decided to adjourn the meeting until April 27th as they were not satisfied with the answers they were getting on the topic.
PAC chairman Brian Stanley said that it was “disappointing” that Central Bank governor Gabriel Makhlouf was unable to come to the meeting as he was in Finland and that none of the bank’s three deputy governors were in attendance in his absence.
