Author: Gavin Sheridan

FAS Ashfield audit report

More from our FAS file. This is the audit report that was carried out in relation to Ashfield Computer Training (ACT). The company received € 30,264.00 via the FAS CDP scheme in 2006, €464,044.00 in 2007 and €443,361.57 in 2008, a total of €937,669.57. We don’t yet have figures for 2009. FAS director general Paul O’Toole has said that money could not be recovered from Ashfield Computer Training, because the company was liquidated earlier this year.

Critically, the report states, among other things:

no explanation was provided by ACT as to why the date created for the NEWSLETTER document in the Word Processing 2 module was 28 August 2007; two months after the course finished.

In the case of the NEWSLETTER document produced in the Word assessment there were 6 candidates whose documents were identical and contained a series of errors that suggest the document was copied. In the Integrated Applications the consistent use of the same incorrect pie-chart also suggested that the assessment material had been manipulated.

There was material missing from both the printed assessment material and from disk. In the view of Internal Audit, ACT were unable to provide a reasonable explanation as to how learner’s had passed these assessments in the absence of such essential material.

…it is the view of internal Audit that efforts were made on the part of the tutor to ensure that learners, who had not achieved a sufficient level in some assessments, were assisted in achieving a pass level after the assessment was completed.


Banks QE themselves

It seems we have something of an answer as to how Irish banks expect to get through the €30bn funding cliff this month. In the Irish Times today:

IRISH NATIONWIDE has issued €4 billion of Government-guaranteed bonds effectively to itself. It can use the bonds to draw €4 billion in funding from the European Central to help tide it over a key refinancing period later this month.

The building society has €4 billion of debt covered under the original blanket Government guarantee maturing at the end of this month. The bonds will allow the building society to draw fresh funding from the ECB if necessary to repay this debt against a backdrop of heightened funding pressures across the guaranteed institutions.

So what does that mean? Irish Nationwide is issuing bonds (these ones) and then using the bonds as collateral to borrow from the ECB marginal lending facility (MLF), also known as the discount window.

This is not dissimilar from the practice we learned of last week where nationalised bank, Anglo Irish, is using promissory notes issued by the Government as part of recapitalisation (ostensibly long term), as collateral with our own Central Bank in order to fund itself (they dare not go to the ECB?), at a rate of 1:1. This appears to have gone relatively unnoticed, and is buried in Anglo’s interim report, referred to as the Special Master Repurchase Agreement, which comes on top of the Master Loan Repurchase Agreement.

Expect to see other Irish bank create fictitious money in order to fund themselves via the discount window.

It also seems that this type of transaction is nothing new. Back before the September 2008 crisis, it seems that Lehman Brothers were doing something similar. Per the FT back in April 2008:

It was rather elliptically suggested by Bloomberg (from a Morgan Stanley analysis) that Freedom’s notes had been used as collateral by Lehman in the Fed’s primary dealer credit facility. And that that was – in the main – the reason the CLO had been created and successfully closed.

But there’s some confusion. In this article, Bloomberg say Lehman sold the $2.2bn of senior notes in Freedom “in a private placement”, which can’t be true if they’re being used in repos with the Fed by Lehman. As for the equity tranche, it’s unrated, so the NY Fed won’t accept it as collateral.

The WSJ reports that only some of the senior notes may actually have been pledged to the Fed. The small amount was supposed to “test” what the Fed would accept.

Since the test seems to have gone well, can other banks be expected to jump on the CLO bandwagon? JP Morgan is understood to be doing just that – with rumours of senior notes of a recently closed CLO being pledged in the PCDF.
But even if Freedom, and other CLOs, were created with the express intent of pledging notes to get liquid collateral through the PCDF, so what?

And it wasn’t only in the US this was happening. In the UK these are referred to as ‘phantom securities’:

In the depths of the financial crisis, the Old Lady began expanding the bank collateral eligible for use at its various liquidity operations, and starting new ones up. Unsurprisingly, given market conditions at the time, banks flocked to make use of the facilities. In fact, they began creating things specifically for use at the BoE, which the Bank gave the attention-grabbing title of ‘phantom securities.’

Some day, we will eventually we will have to confront reality, and stop this merry-go-round of fiction.

FAS funds and SIPTU/ICTU

On the subject of:

THE TÁNAISTE Mary Coughlan yesterday sought to play down a controversy with the European Commission that has brought a halt to the claiming of tens of millions of euro in European Social Fund payments.

Her department confirmed that a claim for €57 million spent by Fás on training and which was to be repaid by Europe, was withdrawn because of issues raised by European audits.

A prominent trade unionist has criticised a call for FAS to be shut down:

The Labour Party’s spokesman on education, the former minister for labour Ruairí Quinn, has called for Fás to be “shut down” as a result of this latest blow to its credibility. He said some of its budget should be transferred to educational institutions such as institutes of technology.

This sparked an angry trade union reaction from Siptu and Ictu president Jack O’Connor who is also a long-time member of the Labour Party’s national executive.“Ruairí Quinn was undoubtedly the best minister for finance in my lifetime but he is totally and completely wrong in his call for closing down Fás,” Mr O’Connor said.

Total amount SIPTU College received via the FAS Competency Development Programme (CDP) (2003 to 2008 inclusive): €2,068,571.6

Total amount ICTU received via the FAS Competency Development Programme (CDP) (2003 to 2008 inclusive): €2,460,274.73

Total for SIPTU and ICTU: €4,528,846.33

SIPTU and ICTU were two of the top 10 recipients of FAS CDP money from 2003 to 2008.

I think maybe Mr O’Connor should have mentioned these figures.

HSE briefing papers Sep 09 to Jun 10

Some time ago I sought all briefing papers used by HSE staff for appearances before Oireachtas committees between September 1, 2009 and June 14, 2010, inclusive.

Here are seven sets of them:



Search and retrieval: €29,141.45

Four weeks ago I sought what I believed to be reasonably standard information from the Department of Enterprise, Trade and Innovation (DETI). Among the things I sought were:

The appointments diary of the Minister for 2008 and 2009.

All speaking/talking points prepared for the Minister from January 2009 to July 2010, inclusive.

The FOI requests log for the Department from January 2007 to July 2010 inclusive. This should include the requestor, what was requested, the date of the request, and any other information recorded.

An export of the expenses database of the Department. I understand the Department uses Oracle iExpense to record expenses data.

I often ask many Departments for similar information, so I have some understanding of how these records are held, and the amount of work involved in releasing them. I have sent almost identical requests to other Departments, and been charged little or no search and retrieval fees (under the Act, a public body can charge €20.95 an hour to find and retrieve stuff). But never before have I received a fee request as big as this one from DETI:

€29,141.45

A record for thestory.ie.

This was broken down as follows, for each part in turn:

1) 1 Staff, 10 Hours, €209.50
2) 45 Staff, 1,310 Hours, €27,444.50
3) 1 Staff, 7 Hours, €146.65
4) 4 Staff, 64 Hours, €1,340.80

So to be clear, let’s take each of these in turn.

1) The Department believes it would take one staff member 10 hours to print out or photocopy the appointments diary of the minister over two years. We believe this diary is held electronically, so they are saying it would take one staff member 10 hours to click “print”. Even if it was held in hard copy, it does not take 10 hours to photocopy (most Ministerial diaries are well under 150 pages per year). The Department cannot charge for the time it takes to redact information. As readers are aware, we have ministerial diaries from other departments covering many years, we have never been charged for these.

2) The Department claims that: “These records are maintained by individual Business Units in the Department who are responsible for preparing the notes in question for the Minister. As you can appreciate, the remit of this Department is so wide and covers so many areas, that the retrieval of speaking/talking points for the Minister for the 19-month period covered by your request would involve the examination of over 900 files, containing several thousand records.”

However we have previously been issued with speaking notes for one media appearance that was collated into one document, and given a heading. We will explore this further. But we do have in mind that most if not all documents are stored electronically.

3) Most Departments hold their FOI requests log in the form of a spreadsheet. So again, I’m being charged €146.65 for clicking “print”. If it’s not a spreadsheet then it’s a hard copy containing the name of the requestor, the date of the request, what was requested and sometimes other information. At most, such a log would contain a few dozen pages. Again, charging €146.65 for this information is nothing short of ludicrous. How it would take one staff member nearly a fully working day to perform this task is beyond me.

4) I’ve been down this road with other public bodies. Exporting a database actually requires no search and retrieval time whatever. It is simply a matter of exporting the data to a spreadsheet. Any other requests seeking Oracle data has not incurred a charge from any other Department. How it would take four staff 64 hours to export from a database is again beyond me, especially given the fact that such processes are automated.

A reader I met recently didn’t realise just how much time and resources it takes to get information out of public bodies. This is only one example. I will be contacting the Department to either clarify my position, or appeal for internal review on the fee alone. And even if my €75 appeal is successful, I don’t get the €75 back. That’s fair, isn’t it?

Front Line funding

We note that Denis O’Brien’s charity Front Line did not receive European Commission funding last year. In figures recently released by the Commission, Front Line does not feature for 2009, despite appearing as a recipient in 2008. That year, Front Line received €1,801,679 from the European Commission.

But he will no doubt be cheered with the €450,000 the charity received in 2009 from the Department of Foreign Affairs, and the €450,000 also received in 2008. There is no sign yet of Foreign Affairs giving money to the charity for 2010.

Anglo and Lehman

A common refrain heard from representatives of the Government is that Anglo Irish Bank had to be saved in September 2008, else it would have brought the entire banking system down with it. Government ministers consistently and still come on air to tell us that Anglo was systemically important and that we had to save it. Just look at Lehman Brothers, they say, look at the disaster Lehman caused.

Yes Lehman collapsed. Is the US better or worse off as a result, two years laters?

Ben Bernanke, the Fed chairman, has said something rather interesting in the context of Lehman:

“I regret not being more straightforward there because clearly that has supported the mistaken impression that, in fact, we could have done something. We could not have done anything.”

Bernanke told the Financial Crisis Inquiry Commission that any loan the Fed could have provided Lehman would not have stopped a run on the bank by customers.

“If we lent the money to Lehman,” Bernanke said, “we would have saddled the taxpayers with tens of billions of dollars in losses.”

So if the US government had saved Lehman, it would have saddled taxpayers with tens of billions of dollars in losses.

Except in Ireland, we did save our Lehman, leading to tens of billions of euros in losses for the taxpayer.

And what have we got to show for it?