Scope of Responsibility

On behalf of the National Treasury Management Agency we acknowledge the Agency’s responsibility for ensuring that an effective system of internal control is maintained and operated. This responsibility takes account of the requirements of the Code of Practice for the Governance of State Bodies (2016).

Purpose of the System of Internal Control

The system of internal control is designed to manage risk to a tolerable level rather than to eliminate it. The system can therefore only provide reasonable and not absolute assurance that assets are safeguarded, transactions authorised and properly recorded and that material errors or irregularities are either prevented or detected in a timely way.

The system of internal control, which accords with guidance issued by the Department of Public Expenditure and Reform has been in place in the National Treasury Management Agency for the year ended 31 December 2017 and up to the date of approval of the financial statements.

Capacity to Handle Risk

The National Treasury Management Agency has an Audit and Risk Committee (ARC) comprising four Agency members, with financial and audit expertise, one of whom is the Chair. The ARC met six times in 2017.

The National Treasury Management Agency has also established an internal audit function which is adequately resourced and conducts a programme of work agreed with the ARC.

The Agency has developed a Risk Management Policy and Framework which sets out its risk appetite, the risk management processes in place and details the roles and responsibilities of staff in relation to risk. The policy has been issued to all staff who are expected to work within the National Treasury Management Agency’s risk management policies, to alert management on emerging risks and control weaknesses and assume responsibility for risks and controls within their own area of work.

Risk and Control Framework

The National Treasury Management Agency has implemented a risk management system which identifies and reports key risks and the management actions being taken to address and, to the extent possible, to mitigate those risks.

Risk registers are in place which identify the key risks facing the National Treasury Management Agency and these have been identified, evaluated and graded according to their significance. The Business Unit risk registers are reviewed by the ARC on an annual basis. The outcome of these assessments is used to plan and allocate resources to ensure risks are managed to an acceptable level.

The risk registers detail the controls and actions needed to mitigate risks and responsibility for operation of controls assigned to specific staff. We confirm that a control environment containing the following elements is in place:

• procedures for all key business processes have been documented,
• financial responsibilities have been assigned at management level with corresponding accountability,
• there is an appropriate budgeting system with an annual budget which is kept under review by senior management,
• there are systems aimed at ensuring the security of the information and communication technology systems, and
• there are systems in place to safeguard the assets.

Ongoing Monitoring and Review

Formal procedures have been established for monitoring control processes and control deficiencies are communicated to those responsible for taking corrective action and to management and the Agency, where relevant, in a timely way. We confirm that the following ongoing monitoring systems are in place:

• key risks and related controls have been identified and processes have been put in place to monitor the operation of those key controls and report any identified deficiencies,
• reporting arrangements have been established at all levels where responsibility for financial management has been assigned, and
• there are regular reviews by senior management of periodic and annual performance and financial reports which indicate performance against budgets/forecasts.

Procurement

The National Treasury Management Agency has an established Procurement Policy (published on its website) and a Procurement Procedure. The National Treasury Management Agency’s procurement practices are in accordance with the aforementioned documents.

The National Treasury Management Agency’s Procurement Procedure is consistent with the current Office of Government Procurement (OGP) guidelines. In certain instances it is deemed appropriate to obtain duly authorised exceptions from the Policy and Procedure (i.e. not run a competitive tender process) in respect of services, supplies or works valued above €5,000 (excl VAT) and below the EU thresholds e.g. for reasons of confidentiality, conflicts of interest, urgency, protection of intellectual property rights, sole source of supply etc.

The National Treasury Management Agency is subject to EU Directive 2014/24/EU as implemented in Ireland by the European Union (Award of Public Authority Contracts) Regulations 2016 (the ‘Regulations’), in respect of the procurement of services, supplies and works above certain value thresholds set by the EU. Where the Regulations do not apply – either because the value of the procurement is below the EU thresholds or falls outside of the Regulations – the National Treasury Management Agency adopts a process (in accordance with this Procurement Policy and Procedure as outlined above) that is designed to achieve the best value for money. Exceptions to the National Treasury Management Agency’s Procurement Policy and Procedure are approved by senior management.

The use of exceptions under the National Treasury Management Agency’s Procurement Policy and Procurement Procedure does not amount to non-compliant procurement. For contracts that are valued above the EU thresholds, EU legislation applies, and the Regulations permit exceptions from a competitive EU tender process in very restricted circumstances.

During 2017, payments with a total value of €6.2m were made in respect of goods/services that were the subject of procurement exceptions approved in accordance with the National Treasury Management Agency’s Procurement Policy and Procurement Procedure. A breakdown of these exceptions is provided in the table below.

Note 1: This amount includes €2.5m for payments made by the State Claims Agency (SCA) to expert witnesses for a large number of separate engagements, where the amount payable in the vast majority of cases in respect of each engagement was less than €5,000 (ex VAT) and therefore was not required to be the subject of a competitive process. In addition, a management decision was taken by the SCA that the selection of expert witnesses would not be competitively procured as it was considered that any form of procurement process would be likely to give rise to an added level of litigation risk in relation to the independence of such witnesses. Other payments within this category include €0.3m paid to a service provider that was appointed by the SCA where, for reasons of extreme urgency, the time limits specified for a competitive procedure could not have been complied with. The balance mainly relates to the procurement of other services by the SCA (including stenography, legal cost accountants and law agents) where the amount payable in the vast majority of cases in respect of each engagement was less than €5,000 (ex VAT) and therefore was not required to be the subject of a competitive process.

Note 2: This amount mainly relates to payments made to service providers for the support and maintenance of existing/proprietary software, including, by way of example, payments of €0.7m paid to an IT company as the sole provider of its proprietary service.

Note 3: This amount includes €0.4m in respect of payments made to a number of service providers for separate instances of repairs and maintenance, where the amount payable in respect of each instruction was less than €5,000 (ex VAT) and therefore was not required to be the subject of a competitive process. The balance mainly relates to canteen consumables where prices had been benchmarked against other suppliers. Arrangements are underway for the use of the OGP Framework Agreement for the provision of catering and hospitality services.

Note 4: This amount includes €0.5m in respect of payments to recruitment agencies. Vacancies were advertised on a variety of platforms and any recruitment agency in the market had the opportunity to submit applications. Therefore open competition was maintained by the HR Unit, and fees were only paid to the agencies that provided the successful candidates. The balance mainly relates to car rental, where an existing contract has continued in place pending the outcome of a strategic review by the National Development Finance Agency of its need for these services.

Note 5: This amount includes the purchase of stationery where the cost of the items being procured was benchmarked against the OGP framework.

The National Treasury Management Agency’s Procurement Policy and Procurement Procedure remain under regular review.

Review of Effectiveness

We confirm that the National Treasury Management Agency has procedures to monitor the effectiveness of its risk management and control procedures. The National Treasury Management Agency’s monitoring and review of the effectiveness of the system of internal control is informed by the work of the internal and external auditors, the Audit and Risk Committee which oversees their work, and the senior management within the National Treasury Management Agency responsible for the development and maintenance of the internal financial control framework.

We confirm that the Agency conducted an annual review of the effectiveness of the internal controls for 2017.

Internal Control Issues

No weaknesses in internal control were identified in relation to 2017 that require disclosure in the financial statements.

Treasury Management System Expenditure

In 2016 the National Treasury Management Agency commenced the implementation of a new treasury management system project and costs of €746k were capitalised as an intangible software asset. In line with the project governance framework, a review was undertaken during 2017 resulting in a management decision to terminate the implementation of this project. As a result, the National Treasury Management Agency has recognised an impairment charge of €746k. Another €107k was paid in 2016 for contractor expenses on the project. Arrangements to close out the project are ongoing.

29 May 2018