State Gains from “Error”

Fairly amazing story

The general Government debt is to be written down by 2.3 per cent, or €3.6 billion, following the detection of an accounting error.

The Department of Finance said the National Treasury Management Agency (NTMA) had notified it of a double count brought about a change in its relationship with the Housing Finance Authority.

Does this mean we can cancel the €3.6 billion budgetary adjustment? (Just kidding).  Now if only we could correct the “error” of supplying the IBRC with €31 billion in promissory notes, we’d be saved.

65 replies on “State Gains from “Error””

This means that there’s now another €3.6 billion available for distribution to bondholders that won’t have come from taxpayers! The government talking points were more right than they knew.

So it would appear that the Paddys are unable to perform even the most basic of accountancy calculations. Either that or the Paddys have a very, very cunning plan involving financial shenanigans while eyes are elsewhere this week.

In either event, this is yet more mad Accountamancy. Is it too much to ask that the country at least get its books in order at this stage?

There should be some room for this to have an impact on the budgetary adjustment necessary, all joking aside. With a 2012 target of an overall debt-to-GDP ratio of 8.6%, we now need to reduce by a lesser amount to hit that target, no?
Anyone know by how much?

There was an Apres Match sketch a couple of years back with the late Minister for Finance hinting that he had a grand plan – when pressed by the Vincent Browne character, it turned out to be his fervent hope that our creditors would forget a few zeros from the amount owed.

That day has not yet arrived alas.

An accounting error is being used to hide a CASH payment of US$1 billion tomorrow. It will dominate the media and distract from the payment to bondholders. Just watch the RTE news this evening.

Obviously, the accountancy fees involved will also be rebated, people will resign, saving on the wage / pension bill….

It’s not just the Paddys

http://www.bloomberg.com/news/2011-10-31/german-ministry-says-will-host-meeting-on-fms-accounting-error.html

Heh. Looks like people are trying to sneak out a few fresh notes from the ECB right under Merkel’s nose. I’m getting visions of Trichet et al passing out big brown envelopes filled with €500 notes to deserving government departments across the continent.

It’s time for officials to get creative with the books.

Just spotted my error above re: Debt to GDP as opposed to Deficit to GDP. Ignore the question…

….and in a day for spotting and fixing errors, how long have I been mis-spelling that bloody username? Also corrected…

Suddenly finding €3.6bn is as serious as suddenly losing it.

I’ve pointed out before that government “regulatory” accounting practices are archaic, and government “management/performance” accounting almost non existent (across CS,wider PS and some semi states)

The Irish state sector needs proper financial controllers urgently

@ Frank Galton

Thanks. My main worry would be if it were the C&AG’s fault, then how confident could we be letting them audit NAMA. Internal audit could cover a wide range of things, I wonder what the chances of the DoF giving us information on who to blame are…

@ All

The German version of this accounting error may have more serious consequences than the Irish. The German media are reporting that Schaeuble knew of the error in mid-September and the issue of a possible misleading of parliament has raised its head. Believe it or not, there is also more than a possibility of a parliamentary investigation!

At this stage, the departure of Schaeuble – although unlikely – would not be greatly regretted as he and Merkel have competed with one another for the soul of the CDU-CSU with what can only be described as a mixture of capriciousness and obstinacy in the pursuit of disruptive initiatives. Perhaps the most obvious, apart from PSI, is the proposal that has emerged from the Commission on a financial transactions tax which has no hope of being adopted at the level of the 27 or internationally, a fact which Schaeuble has conceded but insists can be proceeded with under a so-called enhanced cooperation, omitting to mention that all possibilities under the treaties for adoption at the level of the 27 must first be exhausted.

By coincidence, 2.3% is almost the identical figure by which the population was under-estimated pre-census. As I say, coincidence and the two are not connected. But, it means that government debt per capita in Ireland is now almost 5% less than was estimated a few months ago. Following the census revelations, I think it quite likely that GDP will be revised up by a similar amount (although it may take some time), so it is quite likely that that government debt as a percentage of GDP will also turn out to be almost 5% less than was estimated a few months ago. Those who bet on Ireland defaulting are in deep doodah.

… surreal … finding 3.6 allows the 8.6 to be addressed with another 3.6 … kum bak Flann O’Brien – all is forgiven – take your rightful place among the great civil servants of the nation. At Swim – two birds – one stone.

I also hear that a certain minister is adding soma to the water …

what a day! and it ain’t over yet …

Am I correct in thinking this will have minimal impact on the upcoming budget? A few million in interest saved, is that it?

Nice to see incompetence working to our advantage for a change. Why wasn’t this caught by EU/IMF/ECB/CB/Academics/Bloggers etc?

Why can’t we just cancel this budgetary adjustment and give it to the workers to save goverment money ?
We can reduce imports through tax policey , not by reducing the money supply & starving people.
Why was massive personnel credit debt good during the boom and saving money bad during the bust ?
Its obvious the official policey is for the official banks to own us as they are the only ones who get to keep the company tokens as we are forced to shop in the company store.
Despicable but predictable as Daffy Duck might say.

Does this mean that the capital expenditure budget allocation will be reduced by this amount? Cripes, I can see this state investment bank thingy being capitalised overnight.

Does NTMA really stand for No Technically-competent Managers Available?

@ Patrick

i dont even think affects the interest servicing cost, i think its literally a restatement of the ‘balance sheet’ position of the Irish state. Its more important in terms of hitting various market/EU/IMF benchmarks in terms of ‘sustainability” of Irish debt.

@Paul
Maybe there are a few Patriots in the NTMA ( I doubt it but maybe)

They have just illustrated how stupid fiscal rules are in this monetory system.
Bravo.
This crisis is a illusion to bail out the credit banks.

@Paul H

Shall we start a popular uprising in support of a referendum to approve a competition thread?

Never Too Many Accountants

Numerical Talents Mainly Academic

National Tendency for Muppet Approximations

Actually its worse then the company store example – its as if the company managers are reducing their monopoly supply of company tokens hoping that some workers die off real quick like.
A complete abdication of soverginity to a dark priesthood of shadowy men with very different goals from your average bear.
http://www.youtube.com/watch?v=rxiOO_DoA7Y

@Grumpy,

I see you’re taking this seriously – I was more ‘tongue-in-cheekish’. I’m sure there are a few red faces – paticularly as they are paid a bit over the odds (but nobody knows by how much).

I’m more interested in how this will impact on the figures – and in how it will be exploited.

A DoF statement is promised, but that will be likely to conceal more than it reveals.

My understanding of the Dept of Finance statement is that the unused borrowing of €16.2 billion (at 31 Dec 2010) should have read €12.6 billion. The borrowing figure (at 31 Dec 2010), before this correction, was €148.3 billion; it’s now €144.7 billion. But, alas, the unused borrowing figure of €16.2 billion is now stated at €12.6 billion. When netted off the true borrowing figure is exactly the same, €132.1 billion. The real cock-up is that the General Government Debt, per the EU formula, includes without note the unused borrowing – when it should be netted off within the calculation.

There are few more stirring sights than the DoF mandarins blaming others for their errors and oversights. Were they to apply the same acumen to doing their job properly in the first place it is, of course, a sight we, as taxpayers, might be denied.

From Bloomberg – “Irish NTMA Says Told Ministry of Debt Double-Counting Late 2010
2011-11-01 16:22:52.37 GMT

By Joe Brennan
Nov. 1 (Bloomberg) — Ireland’s National Treasury Management Agency said it raised the issue of potential double- counting of some government debt with the country’s finance ministry as early as a year ago.
“The Department of Finance is responsible for the calculation of general government debt,” said a spokesman for the NTMA, which manages the state’s debt, in an e-mailed response to questions. “The NTMA raised the issue with the Department of Finance on a number of occasions as far back as Autumn 2010.”
The Dublin-based ministry said today that removing the impact of a double count in its accounting reduces the estimate of 2010 general government debt by 3.6 billion euros or 2.3 percent of gross domestic product.”

@Paul H

Karl will be exploiting it for his stand up routine at Kilenomics, it will be marbleously funny.

What would make this truly great news would be a €1 billion reduction in the austerity required under the EU/IMF programme. The programme must be based on certain assumptions of growth rates, deficits, debt levels etc. so surely when the figures underlying those assumptions change so too should the requirements. With a lower debt level comes a lower urgency to cut spending and raise taxes. An announcement that the austerity programme would be eased by €1 billion would boost consumer confidence and contribute towards getting the domestic economy back to growth and facilitating the goal of getting back to a budgetary balance.

Schaeuble=55.5bn, now Noonan, does any of them resign?

I know, stupid questions.

(shaking head in disbelief)

@John (who isn’t a TCD professor) O’Hagan

Ta for link. I like the last line i.e. it makes no ‘real’ difference.

So our liabilities were reduced by €3.6b… but our assets were also reduced… leaving a net change of…. zero….

“On the General Government balance sheet, end-2010 financial assets were also overstated by the €3.6 billion, as the loan from the NTMA to the HFA was incorrectly recorded as an open market bank deposit.”

This is a smokescreen to distract from FG/Labour rowing back on their cynical pre-election lies. Looks like it will be a successful smokescreen.

side note, almost 100,000 emails against the Anglo payouts here:

Amazing to contrast their impact against just one letter from 8 formers Attorneys General isn’t it.

It’s not how many letters you write; it’s the names you get to sign them that counts in Ireland.

@Brian
Sov debt is a asset to a commercial bank & a indivdual saver although its a pure financial asset in the eurosystem , not money – only Euros is money in the euro system.

They are gutting the physical economy and depreciating physical assets so you can get no wealth surplus.
These banks do not want to create wealth , they cannot create wealth – they feed off of wealth – they think wealth creation is a zero sum game –

All those bank credit deposits should have been turned into goverment money and all private debt contracts should have been written off along with the commercial banks that hold them.

The CSO speaks .. all is made clear… nothing has changed – we are still in the..

Outrageous isn’t it that these Greeks are been given a chance to vote on austerity. Next thing you know they will behaving like Libyans and demanding democracy. We wouldn’t put up with this sort of thing in Ireland . The Greeks should do as we do and let the Germans make the big decisions and tell us what to do

@Karl
Can it be correct to say as CSO have:

“The General Government Deficit (GGDeficit) figure for 2010 reported for Ireland is not affected by the revision, and neither is Ireland’s net debt position (GGDebt less liquid assets).
Overall, the State is no better or worse off as a result of the correction.”

I understand “why we are “no worse off” but why “no better off” I would have thought that this could be treated as if we got a 3.6bn lottery win? Would we also be “no better off” if we had found another 144bn or at what financial error does it start to make a difference? Will they still crucify us with the same budget?

Does this mean that the HFA is now entirely funded by the NTMA and not through short-term debt issuance? (Commercial paper I believe it was). So another magical short/long story has a bitter twist in the end.

Of course, people who have HFA mortgages are now not subject to market variations in interest rates… oh wait… they’re being soaked by the NTMA instead, aren’t they?

@ A-Mac

I think (note!) it’s a case of gross debt vs net debt. Gross debt is lower but net debt is unchanged. Technically net debt is more important than gross debt, but markets at the moment often overlook that and focus on the gross figure.

@EB
thanks – still as clear as mud but I’ll put that down to my own lack of creative accountancy skills.
I think I kinda like that A-Mac handle though so I’ll take it before someone else does 🙂

@Eoin
“Technically net debt is more important than gross debt, but markets at the moment often overlook that and focus on the gross figure.”
Er, if I have a tenner in my pocket on the way into the pub and I owe you twenty quid, how much do I really owe you?

Cash on hand can get eaten very quickly…

So this, in my view, is good news.

I love it when I put on a jacket I haven’t worn for ages and find billions I forgot I left in the pocket.

If I were thinking with a PR hat on at the moment, I might think this was a jolly good wheeze to distract attention from that Anglo bond payout though.

In related news it appears someone has leaked the list of Anglo bondholders for tomorrows 718 Quarterly Gift for Poor Investment from the Irish people. Is this for real?

Look on Twitter for #bonaid, a grainy image was available here: http://twitpic.com/79hhkh , largest singkle beneficiary is Arca Sgr, who look like nobody of strategic importance to anyone.

Why precisely are we doing this?

@DOCM
“Believe it or not, there is also more than a possibility of a parliamentary investigation!”

For future reference (as it is off this topic), this is what the German constitution (not a common law jurisdiction) says about such investigations

Article 44 [Investigative committees]
(1) The Bundestag shall have the right, and on the motion of one quarter of its Members the duty, to establish an investigative committee, which shall take the requisite evidence at public hearings. The public may be excluded.
(2) The rules of criminal procedure shall apply mutatis mutandis to the taking of evidence. The privacy of correspondence, posts and telecommunications shall not be affected.
(3) Courts and administrative authorities shall be required to provide legal and administrative assistance.
(4) The decisions of investigative committees shall not be subject to judicial review. The courts shall be free to evaluate and rule upon the facts that were the subject of the investigation.

http://www.iuscomp.org/gla/statutes/GG.htm#44

Karl

Remember your row with Garret FitzGerald (or more precisely his row with you) over what debt figures to use. Was it your use of the General Government Debt he objected to?
I’m just trying to figure out how we can find 3.6bn and yet it doesn’t matter.
What are the different types of debt figures?

@ Sarah

I think we’ll let my tiff with Garret, god bless him, stay in deserved obscurity.

The difference between the gross government debt and other versions of the “national debt” that NTMA subtracts off cash resources and other liquid funds to arrive the its national debt, so it’s a net versus gross concept.

http://www.ntma.ie/GovernmentDebt/CompositionOfDebt.php

Now in this case, the particular transaction involved is one where one arm of government owed €3.6 billion to another arm. And even though the GGD is a gross debt concept, apparently this particular transaction should have been netted out in the calculation of the GGD but it wasn’t.

@ Cathal

It kind of destroys the illusion that there is deep thought and analysis put into the austerity measures.

Figures are obviously plucked out of the air. All that is really important is that a political agenda is imposed in a TINA situation. Otherwise the finding of the 3.6b would have had a knock-on effect on the correction.

(Remember Paulson’s expalnation of the $700B Tarp- it sounded like an impressive figure)

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