From Europe we learn of two stories with similar characteristics that tick all the boxes for classic Information Quality Trainwrecks.

From Germany we hear that due to errors in internal accounting in the recently nationalised Hypo Real Estate, the German National debt was overstated by €55 Billion (US$76 bn approx). This was doubly embarrassing for Germany as they had spent the last while criticising the accuracy of accounting by the Greek Government.

According to the Financial Post website:

In an era of austerity where their government has squabbled tirelessly for two years over a mooted €6-billion tax cut, Germans found it hard to fathom that their government was so suddenly and unexpectedly 55-billion euros better off.

The net effect of the error being found and fixed is that Germany’s Debt to GDP ratio will be 2.6% lower than previously thought.

The root cause appears to be a failure to standardise accounting practices between two banks who were being merged as part of a restructuring of the German banking system. This resulted in the missing billions being accounted for incorrectly on the balance sheet of the German government who owns the banks in question.

From Ireland we have a similar story of missing Billions. In this case a very simple accounting error resulted in monies that were loaned from one State agency (the National Treasury Management Agency) to another State Agency (the Housing Finance Agency) being accounted for by the Department of Finance in a way which resulted in €3.6billion being added to the Irish National Debt figures.

This (almost co-incidentally) resulted in a 2% misstatement of the Irish National debt. Also co-incidentally it is exactly the same figure as the Irish Government is seeking to reduce net expenditure by in its forthcoming budget.

The problem was first spotted by the NTMA in August of last year (2010) but, despite a number of emails and phone calls from the NTMA to the Department of Finance the error was not fixed until October 2011. For some reason there was a failure in the Department to recognise the error, understand the significance, or take action on it.

The Secretary General of the Department of Finance blames middle-management:

Secretary general of the department Kevin Cardiff said the error was made at “middle management” level and was never communicated up to a more senior level. He said the department was initiating an internal inquiry to examine the issue and would establish an external review to look at the systems and to put safeguards in place to ensure such mistakes were not repeated in the future.

Information Quality Professionals of course would consider looking at the SYSTEM, and part of that is the organisation culture which is in place in the Department which prevented a significant error in information from being acted upon.

Lessons to Learn:

There are a lot of lessons to learn from these stories. Among them:

1. When bringing data together from different organisations, particularly when those organisations are being merged, it is important to ensure y0u review and standardise the “Information Product Specification” so that everyone knows what the standard terms, business rules, and meaning of data are in the NEW organisation and ACROSS organisational boundaries. Something as simple as knowing who has to put a value in the DEBIT column and where the corresponding CREDIT needs to be put should be clearly defined. Operational Definitions of critical concepts are essential.
2. When errors are found, there needs to be clear and open channels of communication that allow the errors to be logged, assessed, and acted on where they have a material or significant effect. Organisational cultures where internal politics or historic arrogance lead managers to assume that the issue isn’t there or isn’t their problem ultimately result in the issue becoming bigger and more difficult to deal with.
3. Don’t shoot the messenger. Don’t blame the knowledge worker. But ensure that there are mechanisms by which people can take accountability and responsibility. And that starts at the the top.