Post Office Savings Bank Fund

Comptroller and Auditor General Report for presentation to the Houses of the Oireachtas

Post Office Savings Bank Fund

I have audited the financial statements of the Post Office Savings Bank Fund (the Fund) for the year ended 31 December 2014 under the National Treasury Management Agency Act 1990.  The financial statements, which have been prepared under the accounting policies set out therein, comprise the accounting policies, the income and expenditure account, the balance sheet and the related notes.  The financial statements have been prepared in the form prescribed under section 12 of the Act, and in accordance with generally accepted accounting practice in Ireland.

Responsibilities of the National Treasury Management Agency

The National Treasury Management Agency (the Agency) is responsible for the preparation of the financial statements, for ensuring that they give a true and fair view of the state of the Fund’s affairs and of its income and expenditure, and for ensuring the regularity of transactions.

Responsibilities of the Comptroller and Auditor General

My responsibility is to audit the financial statements and report on them in accordance with applicable law. My audit is conducted by reference to the special considerations which attach to State bodies in relation to their management and operation. My audit is carried out in accordance with the International Standards on Auditing (UK and Ireland) and in compliance with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements, sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of

• whether the accounting policies are appropriate to the Fund’s circumstances, and have been consistently applied and adequately disclosed
• the reasonableness of significant accounting estimates made in the preparation of the financial statements, and the overall presentation of the financial statements, and
• the overall presentation of the financial statements.

I also seek to obtain evidence about the regularity of financial transactions in the course of audit.

In addition, I read the information about the Fund in the Agency’s annual report to identify any material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report.

Opinion on the financial statements

In my opinion, the financial statements, which have been properly prepared in accordance with generally accepted accounting practice in Ireland, give a true and fair view of the state of the Fund’s affairs at 31 December 2014 and of its income and expenditure for 2014.

In my opinion, proper books of account have been kept by the Agency. The financial statements are in agreement with the books of account.

Matters on which I report by exception

I report by exception if

• I have not received all the information and explanations I required for my audit, or
• my audit noted any material instance where public money has not been applied for the purposes intended or where the transactions did not conform to the authorities governing them, or
• the information about the Fund in the Agency’s annual report is not consistent with the related financial statements, or
• I find there are other material matters relating to the manner in which public business has been conducted.

I have nothing to report in regard to those matters upon which reporting is by exception.

 

Seamus McCarthy
Comptroller and Auditor General

16 June 2015

Accounting Policies

(a) Background

The Minister for Finance guarantees the repayment and servicing of moneys invested by depositors in the Post Office Savings Bank. An Post remits the net proceeds of this investment to the National Treasury Management Agency (“the Agency”). The Post Office Savings Bank Fund (“Fund”) does not form part of the Exchequer.

The Minister for Finance may appropriate for the Exchequer any accumulated surplus in the Fund after making appropriate provision for depreciation in the value of the Fund’s assets available to meet the liabilities to the depositors (Finance Act 1930, Sect 19(1)).

The Fund has the following main purposes:

• to invest the moneys made available by depositors, and
• to act as an intermediary through which the tranching, cancellation, sale and repurchase (repo) transactions and secondary market trading can be transacted by the Agency, and
• to provide moneys under Central Treasury Services to designated state bodies.

(b) Reporting Currency

The reporting currency is the euro, which is denoted by the symbol €.

(c) Basis of Accounting

The financial statements are prepared on an accruals basis under the historical cost convention.

(d) Investments

Investments are stated at cost.

Income and Expenditure Account

Year Ended 31 December

		2014	2013
	Note	€000	€000
Investment Income	1	129,625	65,905
Interest Paid and Payable	2	8,121	9,988
Other Expenses	3	27,312	26,303
		35,433	36,291
Surplus for the Year		94,192	29,614
Balance at Beginning of Year		96,218	66,604
Balance at End of Year		190,410	96,218

Notes 1 to 8 form part of these financial statements.

Conor O’Kelly, Chief Executive
National Treasury Management Agency

Willie Walsh, Chairperson
National Treasury Management Agency
15 June 2015

Balance Sheet

31 December

		2014	2013
	Note	€000	€000
Assets
Advances	4	459,727	484,932
Investments	5	1,791,925	1,319,896
Debtors	6	57,812	44,902
Central Treasury Loans		31,918	37,384
Cash with Central Bank of Ireland		521,965	864,379
		2,863,347	2,751,493
Liabilities
Post Office Savings Bank Deposits	7	2,670,290	2,650,450
Creditors	8	2,647	4,825
Accumulated Reserves		190,410	96,218
		2,863,347	2,751,493

Notes 1 to 8 form part of these financial statements.

Conor O’Kelly, Chief Executive
National Treasury Management Agency

Willie Walsh, Chairperson
National Treasury Management Agency
15 June 2015

Notes to the Financial Statements

1. Investment Income

	2014	2013
	€000	€000
Net Interest Received and Receivable	66,255	64,017
Profit on Sale of Investments	63,370	1,888
	129,625	65,905

Sale and Repurchase agreements are transacted between the Fund and primary dealers in the bond market. The related income or interest cost arising from these transactions is reflected in Investment Income.

2. Interest

	2014	2013
	€000	€000
Interest Payable to Depositors of Post Office Savings Bank	8,121	9,988

3. Other Expenses

	2014	2013
	€000	€000
Management Expenses	27,312	26,303

4. Advances

	2014	2012
	€000	€000
Advances to Exchequer	455,927	470,632
Advances to the State Claims Agency	3,800	14,300
	459,727	484,932

Advances to the Exchequer represent Ways and Means funds, which have been loaned to the Exchequer.
No financing costs were charged by the Fund to the State Claims Agency.

5. Investments

	2014	2013
	€000	€000
Bonds
At Cost	1,791,925	1,319,896
Valuation as at 31 December	1,825,383	1,366,997

 

Schedule of Investment Holdings:

Nominal	Stock	2014 Cost
€000		€000
83	8.25% Treasury Bond 2015	98
453,787	4.5% Treasury Bond 2015	465,929
422,252	4.6% Treasury Bond 2016	452,262
328,331	5.5% Treasury Bond 2017	380,348
107,589	4.5% Treasury Bond 2018	124,694
225	5.9% Treasury Bond 2019	283
59,837	4.4% Treasury Bond 2019	70,272
33,400	5.0% Treasury Bond 2020	41,043
83,136	4.5% Treasury Bond 2020	99,608
277	3.9% Treasury Bond 2023	331
45,949	3.4% Treasury Bond 2024	53,101
55,725	5.4% Treasury Bond 2025	74,175
29,840	2.4% Treasury Bond 2030	29,781
1,620,431		1,791,925

 

6. Debtors

	2014	2013
	€000	€000
Dividends and Interest Receivable	44,181	40,549
Cash Balances held by An Post	1,499	4,353
Outstanding Bond Trade Settlements	12,132	–
	57,812	44,902

 

7. Post Office Savings Bank Deposits

	2014	2013
	€000	€000
Post Office Savings Bank Deposits	2,670,290	2,650,450

 

In April 2014 €2,226,367 (2013: €2,282,998) was transferred from the Fund to the Dormant Accounts Fund under the Dormant Accounts Act, 2001. At 31 December 2014, a liability of €38,933,835 (2013: €37,378,265) remained following account reactivations of €730,147 (2013: €1,190,604) and the capitalisation of interest (net of DIRT) of €59,350 (2013: €65,188). If reclaimed by POSB depositors this is payable from the Dormant Accounts Fund. The POSB deposits of €2,670,289,962 (2013: €2,650,449,890) do not include this liability.

 

8. Creditors

	2014	2013
	€000	€000
Net Funds due under Sale and Repurchase Agreements	1,824	4,164
DIRT due to An Post	823	661
	2,647	4,825