Mr. Seamus McCarthy:

As members are aware, the National Treasury Management Agency is a complex organisation with multiple functions that extend beyond its original and core role of managing Ireland’s national debt. The set of financial statements before the committee this morning reflects the various statutory obligations of the agency in respect of its financial reporting. The NTMA’s primary function is to manage borrowing on behalf of the State. The results of that borrowing activity are reported in the national debt account. At the end of 2018, the gross national debt stood at slightly more than €205 billion. This was an increase of more than €6.5 billion on the gross national debt at the end of 2017. Total debt servicing costs in 2018 amounted to €6 billion. This was 4% less than in the previous year, reflecting the impact of refinancing of debt at prevailing low interest rates.

Other key functions and services of the NTMA that are accounted for separately include management of compensation claims on behalf of certain State authorities in its capacity as the State Claims Agency, management of the Ireland Strategic Investment Fund and provision of procurement and financial advice in respect of certain public private partnerships and other large capital projects in its capacity as the National Development Finance Agency.

The financial statements of the State Claims Agency indicate claims settlements on behalf of State agencies in 2018 amounting to slightly more than €250 million, with associated expenses of €104 million. This expenditure, totalling €354 million, was recovered from the State agencies involved and represented an increase of almost 12% on the 2017 level. The agency’s estimate of the value of claims liabilities outstanding at end 2018 was €3.15 billion, up 18% from the estimate of €2.66 billion at the end of 2017. As members are aware, almost three quarters of the estimated claims value outstanding relates to clinical claims.

The financial statements of the ISIF show a reduction of €3.6 billion in the value of the fund assets between the end of 2017 and the end of 2018. The loss in value that occurred in 2018 is related to a significant fall in the value of the fund’s shareholdings in AIB and Bank of Ireland, which comprise a portfolio invested in by the fund at the direction of the Minister for Finance. The audit report on the ISIF financial statements draws attention to the NTMA statement on internal control, which discloses a weakness in controls relating to foreign currency hedging that resulted in a loss of €721,000 in the year. The agency has since introduced enhanced controls in that area.

The NTMA assigns staff and provides certain other support services, on a reimbursement basis, to certain independent bodies, including the National Asset Management Agency, NAMA, the Strategic Banking Corporation of Ireland and, since 2018, Home Building Finance Ireland. These are governed by separate boards and the NTMA is not accountable for their activities. The NTMA also provides staff on secondment for the Department of Finance’s banking unit, with the costs in that case being carried by the NTMA.

The NTMA’s administration account shows gross expenditure on administration costs totalled €127.2 million in 2018. Of this total, €46.7 million or 37% was recovered from NAMA and the SBCI. Overall, staff costs accounted for around 79% of the expenditure in the year. All staff are employees of the NTMA, including those assigned to work for the supported agencies. As explained in note 7.3 of the administration account, the agency operated a voluntary redundancy scheme during 2018 at a cost of €2.6 million. This is separate from the voluntary redundancy and retention scheme operated for NAMA staff, which cost a further €1.8 million.

The audit report on the NTMA administration account draws attention to expenditure of €5.9 million in 2018 relating to contracts that were not publicly advertised. The NTMA’s statement on internal control provides explanations for the procurement approach adopted in relation to those contracts.

Pursuant to section 28 of the National Treasury Management Agency (Amendment) Act 2000, the Minister for Finance delegated to the NTMA a range of functions in respect of the Ireland Apple escrow fund, including the production of annual financial statements, which are subject to audit by me. The first set of financial statements for the fund were prepared for the period 17 May 2018 to 31 December 2018. These are published separately from the other NTMA accounts. Between May and September 2018, Apple paid amounts totalling €14.285 billion into the escrow fund. The net assets of the fund at year end were €14.269 billion, representing a decline in value of €16 million. Operating expenses of €2 million were incurred during 2018 in respect of investment management and other fees and expenses. The remainder of the loss in value in the period of account is attributed to the current negative interest rate environment.