The bullish attack which the National Asset Management Agency has mounted on the Office of the Comptroller and Auditor General in the last 48 hours raises issues about Nama's transparency and parliamentary accountability well beyond those relating to Project Eagle. In order to defend itself Nama has destroyed the one shield it has against allegations that it answers to no one.
Nama is the biggest State entity ever created. The need for close parliamentary oversight was a key feature of what then finance minister Brian Lenihan described as the "fast and furious"' debate around Nama's establishment in the autumn of 2009. At the time Lenihan resisted efforts to put in place a tailor-made parliamentary oversight mechanism for Nama, fearing such arrangements would impede its work, undermine its commercial mandate or give rise to politically-motivated interference.
Instead the legislation provided that the principle mechanism through which Nama would be audited and politically held to account would be through the existing oversight mechanisms of the Comptroller and Auditor General (C&AG) and the Public Accounts Committee. An average of nine audit staff from that office have been assigned to Nama each year since.
The C&AG is a constitutionally-created office with responsibility to “control on behalf of the State all disbursements and to audit all accounts of moneys administered by or under the authority of the Oireachtas”.
In addition to acting as external auditor for government departments and other public bodies, the C&AG has a particularly potent power under section 9 of the Comptroller and Auditor General (Amendment) Act 1993 to investigate whether an asset owned by an entity it audits has been disposed of “economically and efficiently”, and “whether any such disposal has been effected upon the most favourable terms reasonably obtainable”. The office’s report into Project Eagle published this week was a section 9 report.
Transparency
The chairman and executives of Nama, and, indeed, the Minister for Finance
Michael Noonan
have repeatedly cited the extent and nature of the C&AG’s oversight function in response to calls for greater transparency.
When, for example, Nama appeared before the Oireachtas Finance Committee in March 2012, Frank Daly had the following to say: "The Deputy asked if Nama can assure the committee it is undertaking its role properly. Today is part of that role. However, more important is the role the Comptroller and Auditor General plays in Nama, with a permanent staff in the building who have full access to every paper, decision and email that Nama sends, and he reports back to the Committee of Public Accounts."
In the section of its website dealing specifically with accountability and governance, Nama emphasises that “Nama’s accounts are comprehensively audited by the Comptroller and Auditor General, who has a permanent team of officers based in the agency with unrestricted access to all its records and files”.
Such was the scale of the task involved in being external auditor to Nama that it threatened the ability of the C&AG to carry out its other duties.
The Irish Independent reported in October 2009 that in correspondence to the finance committee the C&AG pointedly warned: "Our appointment as auditor of the National Asset Management Agency. . . has placed pressure on resources, and in order to undertake this audit staff were relocated from support services, other financial audits and reporting work."
Loan sales
On Wednesday afternoon Nama put out a 1,200-word statement even before the C&AGs report into Project Eagle was published.
In this statement Daly and the Nama board not only “categorically” rejected the finding in the C&AG report, but also claimed that the office lacked the capacity to properly assess how Nama handled loan sales.
The key findings in the report were dismissed because they were made by “C&AG staff with no market experience of loan sales”, and because the C&AG did not proceed with plans to hire such expertise.
The assault on the C&AG in this statement and in follow-up media interviews was, of course, done with all necessary courtesy.
We were told how Nama has “the utmost professional respect” for the C&AG, and there was much use of phrases like “regrettably”.
There is no hiding, however, that what Nama is saying is that the C&AG is not fit for the purpose of assessing Nama’s work and is not capable of recognising its inadequacies in that regard.
If that is the case then surely the Government must propose and Nama must accept some other new and improved oversight mechanism to oversee Nama’s remaining work.
The stage is now set for an intense confrontation at the Public Accounts Committee this month between the C&AG and the biggest agency it audits.
The furious response by Nama to this C&AG’s report is already of a type rarely seen between two State bodies.Having previously relied on it for cover, Nama has now turned on the C&AG.
It may rue the day it did so.