Mr. Seamus McCarthy:

I confirm that I had a discussion yesterday with Deputy McDonald about this matter. The origination of the internal audit work probably goes back to an issue we raised in a 2013 management letter to the Central Bank. There was an ongoing issue with holding the Central Bank to account in relation to things like procurement so we made a recommendation that they carry out a comprehensive review of the extent to which they were compliant with the code of practice. This is possibly the first instalment of a programmed review relating to four main areas: the operation and construction of the board of directors; code of conduct and ethics; remuneration; risk management accountability; and internal control and internal audit. There were specific procedures to be followed by State bodies on procurement, travel, disposal of State assets and access to assets by third parties, as well as tax compliance. We suggested that to the Central Bank and it undertook this work in 2014. We received a copy of the results of the internal audit in March 2015, around the time we were completing the audit of the 2014 financial statements. It was an exercise the Central Bank needed to do and actions arising from the audit needed to be followed up fairly promptly. When we audit the 2015 financial statements we will revisit the matter to see what action has been taken on the recommendations of the internal audit and what progress has been made in investigating other aspects of the code of practice.

The statement on internal financial control is at the front of the financial statements.

It includes a reference to the applicability or otherwise of the code of practice. It states:

The European treaties ... provide that the Central Bank of Ireland is independent of the Government and so Government decisions, codes of practice and circulars do not apply directly to the bank. However, the Code of Practice for the Governance of State Bodies is largely applied by the Bank. In accordance with the Central Bank Acts 1942 to 2014, remuneration of Bank staff is set by the Commission. The Bank is guided by Government policy on staff remuneration.

In the statement on internal financial control, the bank also disclosed that:

During 2014, expenditure of €4 million ... approximately 4% ... of the Bank’s committed spend, was incurred across 42 contracts without recourse to a public procurement tender process. Of the 42 contracts ... 28 have been regularised during the year, and there is an action plan in place to address the remaining 14 contracts.

Where significant weaknesses in control are disclosed, there is a requirement for the Central Bank to include them in the statement on internal financial control. We will come back to it. The audit was informed that there was a whistleblower event in 2014 and we will investigate the matter further in the audit of the 2015 financial statements.