Mr. Seamus McCarthy:

Bord na gCon is a commercial semi-State body which is responsible for the control and development of the greyhound industry in Ireland. It licenses and regulates greyhound racing. Its primary sources of income are income generated from its Tote operations and the greyhound racing tracks it owns and State funding received from the horse and greyhound fund. The board's racing track activities are operated through 11 subsidiary companies, nine of which are wholly owned. The financial statements are group accounts consolidating the results of the subsidiaries.

The economic downturn has significantly impacted on Bord na gCon, with net Tote betting income down from €8.9 million in 2008 to €5.2 million in 2011. Its annual allocation from the horse and greyhound fund fell from €15.3 million to €11.4 million in the same period. While the board has also reduced expenditure, its annual surplus has fallen from €4.7 million in 2008 to €500,000 in 2011. Bord na gCon's gross borrowings increased from €11.6 million at the end of 2008 to €23 million at the end of 2011. This is just below its sanctioned borrowing limit of €25 million. The increase in borrowing related mainly to the cost of construction of a new stadium and headquarters offices in Limerick which were completed in 2010. The bank borrowings are on an interest-only basis until December 2016.

In the light of the reduced profitability and the level of outstanding debt, I drew attention in my audit report to note 24 of Bord na gCon's financial statements which explained why the board was satisfied that it was appropriate to prepare the financial statements on the going concern basis. This included the assumption of continued State funding and, significantly, that there would be future increases in turnover from greyhound racing, including Tote-related activities. The costs associated with the capital development in Limerick and its impact on Bord na gCon's trading position were examined during the audit. Media reports on the project raised a number of concerns. As the issues raised did not materially affect the 2011 financial statements, I was able to conclude the audit. However, I requested a further examination during the 2012 audit of the project and its impact on the board's activities. We await Bord na gCon's responses to a number of queries in that regard. When we have a final response, I will consider whether a special report should be prepared on that matter.

My audit report for 2011 included references to two areas where control weaknesses were identified. The audit tested a sample of high value procurements by Bord na gCon in 2011 and found that competitive procurement processes had not been used for a substantial proportion of the spend examined.

Bord na gCon agreed to disclose this in its statement on internal financial control and to outline what changes it proposed to make to improve its procurement practice. We will keep the board’s procurement practice under review.

I also drew attention in the audit report to a significant lapse in control in the payment of prize money in January 2011. A duplicate payment run resulted in overpayment of almost €300,000 to dog owners. By the end of 2011 the bulk of the overpayment had been recovered, but approximately €49,000 remained outstanding. The statement on internal financial control disclosed this control lapse and the action taken by the board to recover the overpayment and prevent a recurrence.

The audit of Bord na gCon’s 2012 financial statements has been completed. I cleared the financial statements on 21 October, subject to a number of amendments being put through. These are being processed and checked. Subject to satisfactory finalisation of all outstanding points, I expect the audit report to issue next week.