Oireachtas Joint and Select Committees
Thursday, 7 November 2013
Public Accounts Committee
Bord na gCon - Annual Accounts 2011
10:30 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Before we begin, I remind witnesses and those in the Visitors Gallery to turn off their mobile phones because they interfere with the sound quality of the transmission of the meeting. Witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 163 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies. I welcome Mr. Phil Meaney, chairman, and Mr. Adrian Neilan, chief executive officer, of Bord na gCon and invite them to introduce their officials.
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.
10:40 am
Mr. Phil Meaney:
The Irish Greyhound Board welcomes the opportunity to meet the committee, not just to deal with the 2011 accounts but also to outline its plans to optimise the opportunities that now present to monetise its racing product on a worldwide basis and which have been documented in the board's strategic plan 2013-17. Particularly for those members who may not be familiar with the greyhound industry, a few points may be helpful. It is a €500 million industry. According to the last economic review of the industry in 2011, it supports approximately 10,300 full-time and part-time jobs in the economy. The gross wage bill is of the order of €207 million, with the tax contribution being €21 million.
When I came into office, I made it an important part of my role to travel around the country to meet all stakeholders. The industry, traditionally, has been fragmented, but there is no doubt in my mind that the vast majority of greyhound people are on the same page; they know their industry; they realise its potential and understand that it will achieve its promise on the back of decisions clearly laid out in the strategic plan. Enormous work is being undertaken by people involved in the greyhound industry at all levels. This work is, however, being undermined by continuous attacks by a small, unrepresentative group within the industry. They paint a picture that is completely at odds with the reality and I hope this engagement with the committee will give members a better understanding of the scope, importance and ambition of our work. The industry has a high reputation internationally. This is reflected in the level of interest in the Irish greyhound racing product and operating model from the world's largest bookmaking organisations and countries where the industry is new and in its early stages.
The industry has an acknowledged pre-eminence for greyhound breeding and the quality and regulation of its racing. That reputation creates many opportunities which have significant economic benefit. These range from the internationalisation of the Irish racing product to increased dog exports and collaborative trading arrangements with greyhound industries in other countries. Greyhound racing has been particularly exposed to the consequences of the recession and the severe reduction in disposable income in recent years. It is clear that the current climate has impacted very negatively on racing attendances and, more importantly, customer spends levels at stadia. Since 2007 the board's turnover from racing activities has reduced by approximately 50%. That is a reflection of falling attendances, a decline in greyhound breeding and dog numbers, a consequent reduction in the number of races and, as a result, income, a reduction in the horse and greyhound fund of 28% between 2008 and 2013 and significantly lower disposable spend from its customer base.
The board has sought to address the impacts of these new realities and create more operational efficiencies which, by any objective yardstick, it has succeeded in doing. It has reduced its operating costs by 46% and generated operating surpluses, before depreciation, of €23.64 million in the period 2007 to 2012. Our overall staff costs have been reduced by 32% since 2007 and the board is operating within tight cost control parameters. We have shown ourselves to be resilient and flexible against the backdrop of a challenging economic climate and we will continue to strive for greater efficiencies and reduction of costs.
The five year strategic plan was drafted after comprehensive dialogue with and the participation of industry stakeholders. We had contributions from 1,200 owners, trainers and staff, making the scale of consultation noteworthy. Bord na gCon's plan outlines new potential growth areas which will further strengthen the industry's racing and breeding reputation internationally and aims to significantly improve its financial position, notwithstanding the current economic difficulties. In essence, our five year strategy is focused on the protection and maintenance of the Irish greyhound as a world leader and the development of new income streams from off-stadium betting nationally and the globalisation of the Irish racing product which has started to generate dividends.
A more aggressive commercial direction will include the generation of greater income from sponsorship of higher profile meetings and the development of the classic race meetings into major entertainment events. We also have to look at new ways to use our assets to achieve a greater financial return and capitalise on the opportunities that present. Delivering on this objective requires a new organisational structure, the implementation of which is well under way. We note the debate about the development and licensing of casinos in Ireland and given the quality of our stadia, Bord na gCon is an interested observer in how this debate will unfold. The ultimate aim of our strategic plan is to grow the industry. Ireland's greyhound industry is in a strong position to take advantage of a number of new opportunities as a result of successful sustained investment in the industry in recent years. We look forward to bringing these recommendations to reality over the term of the strategy.
Mr. Adrian Neilan:
The mandate of the Irish Greyhound Board is multi-faceted, encompassing as it does a commercial remit, with 17 individual stadia, a regulatory function and a greyhound welfare dimension. Historically, the greyhound industry has always been a challenging one to manage. There are many interests within it with priorities which have never been easily reconcilable. It is, perhaps, inevitable that a public narrative often emerges that reflects those sectional interests rather than the state of the industry as a whole. The board's duty is not just to manage the industry but to chart a course for it that secures the future for the 10,000 people employed in it.
My chairman has referred to the much more challenging economic environment for businesses like ours which depend on discretionary consumer choices for attendances and Tote income. We compete in a crowded entertainment space. It is important that the committee understand that if the industry is to survive, it must appeal to a younger demographic and a broader audience than is represented by greyhound followers. The sport needs to be further promoted and expanded as popular entertainment and requires the development of additional income streams.
The IGB strategy for the future recognises these commercial truths. Notwithstanding the changed economic landscape compared to the period when significant capital expenditure was undertaken, there is no doubt in the mind of the board that the investment in stadia was necessary and overdue. Greyhound racing must take place in facilities that are modern and comfortable, hence the investment in stadia that meets these criteria. It is also correct to suggest the new facilities created have averted what might have been a terminal decline in the industry. The investment has avoided the type and scale of difficulties apparent in other markets. I believe the organisation of which I am chief executive officer has created the conditions for strong recovery when consumer confidence returns.
It is also important to understand these new facilities unlock opportunities to sell the Irish greyhound racing product internationally. By the end of 2014, the Irish Greyhound Board will have benefited to the extent of €950,000 from sales, equating to approximately €825,000 in net profit from contracts bringing Irish greyhound racing to a new global online gambling audience. By the end of 2017 the board's strategic plan forecasts that this figure, conservatively drawn, will be €1.5 million in net profits per annum from international Tote sales. We will announce details of significant contracts, already signed, later this month. These contracts reflect a considerable focus on online wagering income through what is termed "co-mingling" arrangements which show live Irish greyhound racing in other jurisdictions, allow online access to the Tote and stream live races to betting companies. This new income stream has the potential to grow exponentially and can be transformational for the board.
This new income stream has the potential to grow exponentially and can be transformational for the board.
Our new stadia of which Limerick is a strong example, have become the standard by which international racing is judged. By way of example, industry representatives from five major new markets, namely, India, Dubai, China, Malta and Turkey, have been in discussions with the greyhound board about the Irish model for future racing developments in their respective countries. Two of these have specifically referenced Limerick as a way forward and all these markets present opportunities for Irish greyhound racing.
Some of the largest online and betting companies in the world, with which we are now contracted, are buying Irish greyhound racing, based on its strong regulation but also on the presentation of the product.
Limerick stadium and board headquarters which, contrary to reports, was built on time and under budget, and on which all contracts were procured properly, is a key fulcrum around which the internationalisation of Irish greyhound racing will take place. In fact, from next year onwards, Limerick is to host an extra night's racing. Even in changed economic circumstances, Limerick track has already made a positive cash flow contribution to Bord na gCon, unlike its predecessor, at the Markets Field, which was substantially loss making.
From 2007 to 2012, Bord na gCon has directed a major shift in operational structure and commercial orientation. We have prioritised and centralised certain functions. We have appointed a new director of commercial operations, a new procurement officer from outside the organisation and now an internationally recognised name as director of tote and wagering, to help us to realise the potential represented by online commercial activity.
The board is focused on the changing consumption patterns of customers. The potential for streaming on our app has led to a new commercial partnership with the Irish Independentwhich that newspaper described as transformational. This will widen the audience for greyhound racing in Ireland and will enable readers of independent.ieto watch racing and place bets via the Internet.
Online streaming can redefine the reach and commercial possibilities for Irish greyhound racing both internationally and nationally. Domestically, we operate under very restrictive conditions; an easing similar to the one in Australia would result in greater access to the sport and greater return to the industry and to the Exchequer. I note that my Australian counterpart in Victoria State who operates in a different legal landscape, was able to receive €45 million through a pro-racing funding structure that is set up to benefit greyhound racing in that state, from a population of 4 million people. That occurred through positive strategies on online streaming.
Our 2012 bank position of €22.2 million remained unchanged through 2011 and through to 2013. Forecasts indicate that this position will remain broadly similar in 2013. All bank covenants and conditions have been met in full.
Bord na gCon is concluding negotiations with AIB on a revised bank position that will see bank repayments commence from 2014. Our strategic plan forecasts net bank debt will reduce by 22% by 2017, a reduction of €5 million. This will be achieved by the following: sale of the IGB racing product to the international wagering market; improved return from domestic track operations; and a reduced capital expenditure programme.
Not unlike many organisations, there are issues with regard to the future operation of the board's defined benefit scheme which is in deficit. A range of options for the future management of the scheme has been prepared by the board and its consultants and has been forwarded to the Department for consideration. I refer members to the briefing note circulated.
The Comptroller and Auditor General raised issues in April 2013 about some procurement practices within Bord na gCon in the 2011 and 2012 accounts. We have given detailed explanation on the Comptroller and Auditor General's queries on procurement but would like to stress that even when procurement was not adhered to fully, the purchase of services did not represent bad value for the board. However, since the matter was raised earlier this year, the board has appointed a procurement officer from outside the organisation and new protocols relating to the purchase of goods and services have been introduced.
I wish to take this opportunity to advise the committee members present that Bord na gCon is in control of its business and the future of the greyhound racing. Bord na gCon has developed a costs conscious environment and a cost system that is flexible to the market within which it operates. Bord na gCon is positioned to reap the many rewards being presented by the international wagering market. With these opportunities, Bord na gCon will be in a position to continue to honour the commitments in respect of bank borrowing and other commitments.
There are great possibilities ahead for the Irish greyhound industry. It is exciting and challenging to have the role I have in leading this industry. There are many opportunities to be exploited in the years to come and Bord na gCon is very confident of the ability of the group to earn more from its assets. I have no doubt that a solid formation has been laid for the industry to realise its full potential I welcome any questions the members may have.
10:50 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. Neilan. May we publish both statements?
Derek Nolan (Galway West, Labour)
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I welcome Mr. Neilan, Mr. Meaney and the officials from the Irish Greyhound Board. When did Mr. Neilan become CEO of the Irish Greyhound Board?
Derek Nolan (Galway West, Labour)
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When did Mr. Meaney become chairman?
Derek Nolan (Galway West, Labour)
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Did either of them have roles with the Irish Greyhound Board previously?
Derek Nolan (Galway West, Labour)
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I am not an expert on the Irish greyhound industry. I have spent the past day and a half going through information and correspondence the committee has received. I was very surprised at the level of disharmony that seems to exist in the industry, particularly among greyhound owners and trainers. There is considerable concern over the activities of the board and the company it operates, particularly over the headquarters and the stadium in Limerick, and how that went through. Conor Ryan of the Irish Examiner has done considerable work documenting issue-by-issue what happened. On the basis of the reports, which I assume have not been contradicted by the Irish Greyhound Board, it seems that the entire project has gone from one mistake to another. It is therefore very interesting that based on the latest submission from the Department on the board's behalf, and as outlined by Mr. Neilan, the Limerick track came in under budget. It was a project that was anticipated to cost €10 million in 2000, which went to over €20 million and it has come in under budget. Of the €22.7 million the Irish Greyhound Board had in bank borrowings at the end of 2011, which Mr. Neilan indicated did not change in 2012, how much is related to the Limerick stadium?
Derek Nolan (Galway West, Labour)
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I have read all the briefs. I just want to clarify some figures and facts.
Mr. Michael Murnane:
Since 2007 the board has generated surpluses of €23.75 million. Some €3.7 million of these surpluses was invested as capital grants to private stadia. That would be grant assistance to non-IGB lands and stadia and €2.5 million was grant-assisted to the Dundalk project, which was a commitment made by the board in 2005-06. Some €29 million was invested in capital expenditure in those six years, of which €22.2 million related to Limerick. To answer the question, of the loans that were in place, the loans in 2007 stood at €11.1 million and at the end of 2012, the net bank loans stood at €22.2 million. If the Deputy wants to surmise, €11 million was spent on the development of Limerick greyhound stadium and the balance would have been funded from surpluses generated by the board within that period.
Derek Nolan (Galway West, Labour)
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I thank Mr. Murnane for that. Based on the board's financial statements, the borrowings have reached a level it can no longer manage and it is repaying interest only. A household repaying interest only on a mortgage is in financial trouble. The Irish Greyhound Board is paying interest only until 2016. Is its bank agreeable for that to continue or how is the board managing its debts?
Mr. Michael Murnane:
The interest-only portion of the loan, €12.5 million, is on interest only as per the agreement with the bank which, I believe, was entered into in 2009. So that is as per the contract with the bank. Currently we have a heads of terms of agreement with our bank, which we are hoping to finalise next week, whereby we are going to start a capital repayment programme commencing from 2014.
Derek Nolan (Galway West, Labour)
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The board is changing the structure to go from interest only to paying back.
Derek Nolan (Galway West, Labour)
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Of the €22.2 million of debt, how much will the board start to repay capital?
11:00 am
Derek Nolan (Galway West, Labour)
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Some of the €22.2 million is being switched to capital repayment while more is remaining on interest only-----
Mr. Michael Murnane:
It is part of the agreement; a total of €12.5 million of the loan is part of an agreement that expires on 9 December 2016. This must remain as changed. It is the board's stated objective that it wants to reduce debt so we will put the remaining portion on capital repayment starting from 2014.
Mr. Adrian Neilan:
I wish to emphasise the board has gone through a significant capital development programme since 2007. We have spent €29 million on capital development, putting in place an infrastructure which is future proof. We have now stopped our capital development programme. Given the level of surpluses we have been able to generate over recent years, we are very expectant we have put in place a cost culture environment. We have reduced our operating costs by 46%. We are very focused on reducing our costs. We will generate more returns and we will have a significant opportunity with regard to the sale of our product abroad, which will bring significant moneys into the business and help protect the industry.
Derek Nolan (Galway West, Labour)
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I understand this-----
Mr. Michael Murnane:
I will give a more concise version. In 2011 and 2012 the board generated positive operating cash flows of €5.6 million. Of this, €2.62 million was paid in capital grants as I explained with regard to Dundalk, and €5.37 million was spent on fixed asset additions. Borrowings were increased by €1 million to finish the capital programme in place and the remainder was financed out of the surpluses. The capital programme has now stopped and it will not be curtailed dramatically. There are no outstanding capital commitments.
Derek Nolan (Galway West, Labour)
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There is a serious question then about the financial management of Bord na gCon if it continued spending and drawing up debt to a point where it cannot be paid back and only the interest is being paid back. Debt has been accrued to a point where only the interest is being paid back and this surely implies some financial mismanagement.
Mr. Michael Murnane:
To clarify for the Deputy, 50% of the facility is on interest only. The remaining will go on capital repayments from 2014. The stated board objective was to develop Limerick with regard to the original strategic plan from 2007 to 2012. This capital programme has now been delivered and the focus is back on bank debt, reducing borrowings and getting as much value from the assets and infrastructure in place which are modern and fit for purpose. As stated in the strategic plan, we should be in a position to generate income whereby we can repay the loans over the period of time.
Mr. Adrian Neilan:
I ask the Deputy to please understand that in November 2006 we developed a strategic plan for the following five years. As part of this strategic plan we made a submission to the Department of Sports, Arts and Tourism and the Department of Finance to increase our level of borrowings to complete our capital development programme. At that point we had facilities which were significantly loss making. The Limerick project was losing €250,000 a year. There was a variety of reasons to develop the stadium and protect it. We had two operations there; we had a head office and a stadium which was significantly loss-making and not fit for purpose. For us to protect the second-largest dog pool ownership in the country, which is based in Limerick, we needed to develop it. This was all part of our strategic plan. We knew we would end up at this level, we knew we would complete our capital development programme, and now we are focusing on paying down debt and this is our plan. We are comfortable with our ability to pay down the debt while making sure vibrancy is brought back to the industry.
Derek Nolan (Galway West, Labour)
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What people say to us in correspondence is with regard to the manner in which the project was managed in their view and with regard to the figures. The costs exploded throughout the development of the project and serious errors were made with regard to who was responsible for site filling and compacting and car parks. Basic legal, construction and project management mistakes were made, which led to the debt being much higher than it ought to have been which has put Bord na gCon in this position.
Mr. Adrian Neilan:
I thank the Deputy for the question. Developing the stadium was part of the board's strategic plan, and we have developed it. Let me be very clear; a board-approved plan and budget were put in place and we delivered within the budget. I am happy to circulate information to the Deputy which shows the saving on the project was €1.2 million based on the planned spend. This was the budget put before the board and we came in within it.
I will deal with specific aspects-----
Derek Nolan (Galway West, Labour)
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I wish to ask a question before Mr. Neilan continues. The figure of €19.8 million was the limit for the project.
Derek Nolan (Galway West, Labour)
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When was this figure put on it?
Mr. Michael Murnane:
When I became chairman two years ago I did not spend much time looking back. I sat down with the executive and the board to see where the finances of the company were at, and even though we were committed to a capital programme at that stage, which we have completed, our borrowings have not changed. We have remained at €22.2 million through 2011, 2012 and projected to the end of 2013. As far as I and the board are concerned, I am happy that over the past two years we have managed our finances and have stayed within the plan we set ourselves. As Mr. Neilan, the chief financial officer, stated, the strategic plan is very clear that from the beginning of 2014 we will start paying back the capital.
Derek Nolan (Galway West, Labour)
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I understand. I am trying to figure out how we got to the figure of €22 million in the first place.
Mr. Adrian Neilan:
My colleague is handing out information to the committee members. The decision to purchase the site at Greenpark on Dock Road was made after an examination of 11 sites by the consultants retained by IGB. On balance the board decided the site was most suitable for the development of the new stadium because of its proximity to a new road network; it was within walking distance of Limerick city centre and served by public transport; it was also properly serviced by the ESB, gas, power and sewage; there was road access to the new stadium; and car parking would have been provided at an attractive cost. As I set out earlier, the decision to undertake a project of this scale stems from the fact the previous stadium was loss-making and not fit for purpose. Our head office is also in Limerick and this was not fit for purpose either. Based on our plan, Limerick stadium will become the centre of how we project greyhound racing abroad. It is also worth stating the Limerick project created 250 construction jobs over a 14 month period and its operation has resulted in 50 incremental part-time and full-time employees.
There is a narrative at work with regard to the Limerick project which is informed by untruths. All of these claims are utterly untrue and I will go through them in a little more detail.
Derek Nolan (Galway West, Labour)
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I have only 20 minutes so I do not have time for the list.
Derek Nolan (Galway West, Labour)
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I do not want to be rude but we have read briefing notes on this and have prepared for it.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Perhaps the questions Deputy Nolan will ask will bring forward these facts so I ask Deputy Nolan to continue with his questions.
Derek Nolan (Galway West, Labour)
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I wish to focus on April 2008 and the €19.6 million cost. When we receive the report from the Comptroller and Auditor General on his inquiries in 2012, much of this information will be put on a more formal structure and we will be able to tease it out. I get the impression the Comptroller and Auditor General will do a special report on it. In 2008, the Greenpark site was bought for €3.4 million.
Derek Nolan (Galway West, Labour)
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The commentary is there was a gentleman's agreement that Limerick racecourse, which sold the site, would look after the compacting and filling and Bord na gCon expected to pay €3.4 million. Was this Mr. Neilan's understanding at the time?
Mr. Adrian Neilan:
To be very clear, the site was bought for €3.4 million but the vendor, because it suited him and because the environment around it allowed it to happen as there were 15 construction sites in Limerick, stated as fill became available he would bring it to our site.
However, it was not an issue in the contract for sale. It was on a best efforts basis. It was never intended as a requirement for the overall sale. It was outside the sale. It made sense from his perspective, in that 15 sites were available and being developed in Limerick and we were in Greenpark, a site that needed to be filled. As an operation, having a place to dump rubble and fill would have been attractive for the people building on those other sites. It made perfect economic sense. Had the economy kept growing, the site would have been filled. However, it was never a contract agreement. Consider the maths. He was selling the site for €3.4 million. There is no way that he would turn around and fill the site at a cost to himself of €1 million. We bought a site that was 800 m from the centre of Limerick city. It was serviced by everything and was an attractive site. The maths do not stack up. The site was bought as it stood. On a best efforts basis only, not as a legal requirement, he would fill the site if fill became available. He endeavoured to do so. However, due to the slow-down in the construction industry in Limerick, the site never got filled. At that point, the board decided that it could not wait for nine or ten years to develop the site.
11:10 am
Derek Nolan (Galway West, Labour)
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The board suddenly found out that it had been caught and that the site's cost was much higher than €3.4 million.
Derek Nolan (Galway West, Labour)
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What was the provision?
Mr. Adrian Neilan:
It changed at every point in time, but even in the April figure we provided for approximately €200,000 or €300,000 to put a capping layer on top of the site. We did this on the basis that, if everything followed through, the fill would be available to us free of charge. It did not work out, but it was not a part of the legal contract. When construction activity stopped, other opportunities were created for us in terms of overall construction costs, but we needed to fund the fill from within the project.
Derek Nolan (Galway West, Labour)
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How much was that?
Derek Nolan (Galway West, Labour)
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The provision was between €200,000 and €300,000, but it cost €1.014 million.
Derek Nolan (Galway West, Labour)
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I accept Mr. Neilan's explanation of the reasons, but when one buys a site, one includes matters such as this in the contract. One does not take a chance or agree an understanding that something will happen.
Derek Nolan (Galway West, Labour)
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When one spends €3.4 million on a site, one wants to know that that is the cost.
Mr. Adrian Neilan:
It was never a part of the contract for sale. One could not include it in the contract. We checked with our legal people. It was never a contract for sale issue. Our legal people helped us to put together a method statement in respect of how the fill should be drawn in. They worked with our consultants in that regard. However, it was never a contract for sale issue.
Derek Nolan (Galway West, Labour)
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Was the board warned by its legal people? Was it advised that this could all fall through and it would have no legal recourse?
Derek Nolan (Galway West, Labour)
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But the board had not budgeted for it.
Mr. Adrian Neilan:
We had budgeted the overall limit at the outset. We selected the site for the reasons outlined. The vendor stated that he would fill the site on a best efforts basis. It was not a term in the contract. Like any approach to project management would, we reduced the overall budget's expectation of how much fill we would need, given our expectation that it would be provided. When we found out a year later that the fill would not be brought in due to the economic collapse, we procured the fill separately.
Derek Nolan (Galway West, Labour)
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The board took a chance and lost.
Derek Nolan (Galway West, Labour)
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I understand what Mr. Neilan is saying, but what he is really saying is that the board got hit with an extra cost and was lucky that building costs decreased as well, preventing it from being caught. That is not a saving. It means that the board lost out on the benefit that it should have received from cheaper prices in the construction industry, as it had not built this provision into its site price at the time.
Mr. Adrian Neilan:
No. I will help the Deputy to understand the figures. The collapse in the economy meant that no construction activity was under way. This led to cheaper construction costs for us. Had the economy continued growing, we would have received fill on a best efforts basis without needing to pay for it. When Sisk, the main contractor, came on site, its price reflected a buoyant economy. We would not have come in as much under budget as we did. The reduction in construction activity led to significant cost savings for the entire project. While we lost out on having free fill, we gained significantly from the decrease in construction costs.
Derek Nolan (Galway West, Labour)
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We disagree on the interpretation of what happened and the benefit. When the board bought the site, it should have set out legally or via an agreement who was responsible for filling it in. If that was the board, it should have included the cost in its budget. If that was someone else, it was his or her responsibility. Instead, people decided to do their best and see what happened and hoped to be able to do it. Had there been an agreement in place when the property market declined, the board would have benefited exclusively from that decline and the inevitably cheaper costs. Instead, the board was caught.
Derek Nolan (Galway West, Labour)
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The board included it in its project, as it only made provision for €200,000. Regardless of whether it was a legal factor, it was a financial factor in the deal.
Mr. Adrian Neilan:
The two issues are separate. From a legal perspective, the vendor did not commit to fill the site. He was filling it on a best efforts basis when fill became available, but it was never a contract for sale issue. He would never have signed a legal document agreeing to deliver on that commitment.
Derek Nolan (Galway West, Labour)
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We received correspondence from a former board member. I appreciate that the person did not put his or her name to it.
Derek Nolan (Galway West, Labour)
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According to it, when the board first considered purchasing the site in 2003, almost 14 acres were on offer for €2.2 million as opposed to the €3.4 million that was paid. However, the board's auctioneers and engineers had estimated a minimum of a further €1.5 million to be spent on fill. On this basis, the board decided not to proceed, as it was believed that the cost of filling the site was too high and that it was too risky to know whether the cost would stop there.
In 2003, the board had the foresight to realise that there could be significant filling costs and decided to step away from the project on that basis.
Mr. Adrian Neilan:
Compared with 2003, the site we bought in 2007 was completely different. It was properly serviced by the ESB, sewage and other necessary services. It also came with a road into it and the provision of a carpark at a fraction of normal cost. Due to the new road network being built around Limerick, the site could be easily connected to other counties. The report cited an expectation of €1.5 million for fill. The site was filled for €1 million. It was a completely different site. Planning was in our favour. Restrictive planning issues arose in 2003, but they did not exist when we went about building on the site in 2007. We had services and road access. Effectively, it provided everything for us.
We considered 11 other sites around Limerick. We considered every possibility. We engaged consultants, as members can see in the report, to get the best value possible. This was the best site for us. Please understand, the greyhound industry has been around for the past 50 years - we were formed in 1958 - and will be around for another 100 years. It is a vibrant industry. The stadium will stick around. Consider what is happening in Limerick now. It has the second highest level of Christmas bookings of all of our stadiums, second only to Shelbourne Park. Limerick will be fully booked out for Christmas. It is a fantastic site and will hold 20 benefit nights in the coming year. The people of Limerick have embraced it. When the site was built, a comment in one newspaper saluted Bord na gCon for adding another dimension to Limerick's stadiums.
Some 250 people were employed during the course of construction of this project. Is it making money?
11:20 am
Derek Nolan (Galway West, Labour)
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Is it making money?
Mr. Adrian Neilan:
Also, in 2008 one of our tracks in Youghal was losing €20,000 per annum. Owing to current economic conditions, this stadium is currently losing €80,000 per annum. I am comfortable saying that if Limerick had not been developed, the Deputy would be asking me today what we propose to do about the stadium in Limerick that is losing €450,000 to €500,000 per annum. In the worst economic climate for discretionary spending we have a stadium that is fit for purpose, attractive from a customer perspective, is showing a cash flow turnaround of €300,000 and will grow going forward, notwithstanding the international commingling opportunities that Limerick will present on a Monday night.
Derek Nolan (Galway West, Labour)
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On the €30,000 deficit per annum, does Limerick greyhound track bear any responsibility for the cost of its development? Are any of the loan or interest repayments included in that figure?
Derek Nolan (Galway West, Labour)
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Looking at it then from a return on investment point of view, which is what we are not doing, all of this debt on the group has been accumulated by a stadium that is now operating independent of the debt. Independent of the €12 million of debt in respect of its construction, it is still making a loss.
Mr. Michael Murnane:
It must be borne in mind that within the construction cost for Limerick there is also the cost of the development of Bord na gCon head office and the infrastructure associated with that. At least €5 million of the overall spend is allocated to the head office. We do service the industry. It is serviced countrywide from Limerick.
Derek Nolan (Galway West, Labour)
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I have a further question in relation to the Limerick site. The reports say that the Irish Greyhound Board paid €1.2 million for a new car park in respect of which it expects to obtain phenomenal rent. Perhaps the witnesses could explain this.
Derek Nolan (Galway West, Labour)
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It is stated in a communication the committee received.
Mr. Adrian Neilan:
I am delighted to have the opportunity to clarify the position for the Deputy because there is a great deal of misinformation going around. When we first looked at the site we were offered the car park on a licence only basis for 999 years at a cost of €1.1 million. That was the clearly communicated cost to us. This was put before the board in 2007 and accepted. There was a lot of value associated with that proposition. Greyhound racing, notwithstanding the opportunities currently presented - the Chairman referred earlier to casinos and other uses - takes place only two or three nights a week, during which time the car park is used. However, if we were to purchase the capital land for the car park, which would be 3 or 3.5 acres at a cost of €250,000 per acre, and to develop it the cost would be €2.5 million. We were offered a car park that should have cost us €2.5 million for €1.1 million. It made perfect economic sense for us to take it on a licence only basis. The board knew the cost would be €1.1 million and accepted it. It is a fallacy, and bordering on derisible, to suggest we were getting this for free.
Derek Nolan (Galway West, Labour)
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I accept that. I would like to raise one final issue. Does the €19.6 million include the money spent on the site in Clare in 2006?
Derek Nolan (Galway West, Labour)
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Even though that site was purchased as a site for Limerick greyhound stadium?
Derek Nolan (Galway West, Labour)
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It is debatable whether that could be part of the project costs.
Mr. Adrian Neilan:
When the Deputy asked earlier when I joined the organisation, I told him I became chief executive of the organisation at the end of January 2011. This issue of the site in Melleek has been the subject of a C&AG report already. It has been already communicated that that site, unfortunately, was bought despite it having no road access or services. Development of that site was also qualified by Clare County Council as being premature. We tried to progress the matter, in terms of whether we could develop there, but it could not be developed unless we got involved with local land owners, which would have resulted in a cost significantly higher than what we proposed to spend. We had no choice but to move from it. This has been already detailed in numerous reports. We have borne the legacy of that and have written that debt down and taken the charge on to us.
Derek Nolan (Galway West, Labour)
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It was stated earlier that a loss of €30,000 will be made in Limerick this year. What did the board anticipate in its business plan for 2008-2009 Limerick would be making now?
Mr. Adrian Neilan:
The capital appraisal process advised to me in March 2008 from Gerry Smith included a request that I ensure the board was fully informed of all decisions regarding capital projects, which it was. It also advised that I ensure a capital appraisal process was undertaken to facilitate the decision on investment. As the Deputy will be aware, a typical capital appraisal process is a MPV process, which is what we used. We had projected that Limerick stadium would come within 85% of the return of Cork stadium. That was our projection. Clearly, we made projections at a time that is much different from now. The economic reality has hit home and it is clearly not performing in line with those projections. However, we have a wider industry remit. We have owners from Limerick and Clare. From an overall perspective, the decline in ownership countrywide is approximately 34%. If I apply that to Limerick, it is 25%. We have a wider economic benefit and remit. We invest in greyhound welfare programmes and equipment to protect greyhounds when they come to the tracks. The point I am making is that an MPV is not a strictly accurate tool for measuring investments in the greyhound industry.
Derek Nolan (Galway West, Labour)
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I have one further question. It was reported in the media that a bill owing to Limerick City Council by the board of €553,000 remains outstanding and has been restructured.
Mr. Adrian Neilan:
The Deputy referred to media reports. Some sections of the media do not carry our responses to questions and have been forced to publish apologies to the organisation in respect of inaccuracies published.
On the Limerick City Council charge, in our budget, as part of the development in Limerick, the expectation was a charge from Limerick City Council would be €350,000. The council actually charged us a development levy of €515,000, which was a large and unexpected charge. As such, I sought to have the charge spread out. The restructuring is on a no interest basis and is being paid over an agreed term. It is prudent financial management.
Derek Nolan (Galway West, Labour)
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Was it restructured because the board could not afford to pay it?
Derek Nolan (Galway West, Labour)
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The board opted to seek an interest free option from the council rather than take the interest burden on board.
Derek Nolan (Galway West, Labour)
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So Limerick City Council is bearing the interest burden. If it is waiting for payment by the board, it as opposed to Bord na gCon is taking the hit in terms of interest.
Mr. Adrian Neilan:
I take the view that it has taken €500,000 from the board as opposed to the original sum of €300,000 and as such is getting quite a good chunk in terms of return.
They already have rates on the stadiums and I am just trying to get the best possible deal for the greyhound industry, as that is my job.
11:30 am
Derek Nolan (Galway West, Labour)
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There is something in the report of the Comptroller and Auditor General that may seem quite benign, but its inclusion is very worrying. It is the view that the body is a going concern, given its debt and income levels, as well as the overall position of the industry. It is entirely dependent on State funding in order to maintain operational surplus and profits each year. Without qualifying the Comptroller and Auditor General's opinion, he draws attention to this issue of whether the fact that it remains a going concern is appropriate based on the assumption of continued State funding and future increases in turnover. That implies that some factors must remain in place; if the €11 million from the State were to go in the morning, we all know the body would be in trouble. What will happen if the anticipated increase in activity does not occur? What will happen if the Henry Street headquarters is sold for less than the anticipated price when the market inflates? The body may not be a going concern.
Mr. Adrian Neilan:
Mr. Murnane will speak about the going concern issue. In general terms, we are very dependent on the horse and greyhound fund. We should put that fund in context. A piece of legislation has been established to ensure that the people who benefit from wagers on sport - the bookmakers - put something back into sport. My counterpart in Australia has 45 million Australian dollars every year with what is effectively the same structure. There is surely an opportunity for everybody to benefit from a better structure that puts more money back into the sport. As the chairman outlined, there are 10,000 jobs in the industry based in the rural areas. People have spoken about technology jobs but there are many people in the countryside who are dependent on the horse and greyhound industries. As a funding structure, it functions when people place a bet at a bookmaker shop and the money is put back into the industry. It ensures integrity measures are in place. We would like to see the levy extended to online and telephone channels, as planned, and we should look to increase its intake. Looking across the world at our counterparts in the UK and Australia, it is a fundamental model of how industries are funded. As a value-for-money proposition, this provides a phenomenal return for the Exchequer.
Mr. Michael Murnane:
The notion of a going concern was more of an issue in 2011 because of three principal factors. These were a slight increase in bank debt of €1 million up to €22 million, a decline in sales from 2010 to 2011 and the general economic conditions within which the Irish Greyhound Board operated. I took it as a great positive that the Comptroller and Auditor General did not believe the accounts needed to be qualified from a going concern. That is after extensive work. One must keep in mind that he supported the opinion that this company has viability for the future, and that viability has been underpinned with commingling arrangements and the new revenue streams as described under the business plan. There are contracts in place for this type of position, and some of the streaming income has generated €950,000. The figures relied on by the Comptroller and Auditor General have proven to be factual.
Mr. Adrian Neilan:
In the briefing sheet it is mentioned that we asked Deloitte to do an impairment review of assets and it concluded that no impairment was necessary. We believe that in the way we have set up our industry and based future-proofing on international commingling. In a climate in which many assets have been devalued, having no impairment charge speaks to the volume of our business and value of assets.
Derek Nolan (Galway West, Labour)
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I accept that, but the company is on an interest-only arrangement with loans and has had to renegotiate debt with the city council. That implies that we are not far away from not being a going concern.
Mr. Adrian Neilan:
Mr. Murnane can give a more detailed answer, but with regard to the city council issue, I am just seeking the best deal for Bord na gCon. It is getting €500,000 and we had planned to give them €300,000. Our bank position for the past number of years clearly indicates that we could have paid it.
Derek Nolan (Galway West, Labour)
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When I get my payslip I do not say to the Government that I had planned to give them €2,000 when it asked for €2,500, so they are lucky to get it. The tax bills must be paid and the same applies to development levies. There should not be an attitude that they are lucky to get it. The council is owed a debt and although it has agreed to restructure it, I would not be saying that it is lucky to get that money.
Mr. Michael Murnane:
All creditors are paid as debts fall due and we are not in arrears with any creditors. The going concern principle still applies. We have a strong asset base at €62.2 million, which is a net book value; there was no impairment charge required following extensive work during the 2012 audit. Our loans represent one third of the overall value. In future we will try to get maximum value from those assets from sales, revenues and the internationalisation of our product. We can say with confidence that the going concern will not be an issue because those revenues will generate the profits required to offer both a return to the industry and available cashflow to deal with bank loans. Careful cashflow management is the key to success for the Irish Greyhound Board for the next number of years.
Mr. Adrian Neilan:
I emphasise that in the UK bookmakers make a gross gambling yield from greyhound racing of £243 million, as reported by a February article in The Economist. Some 80% of dogs racing over there come from Ireland and our plan, as currently in execution, is to provide the greyhound racing product from here, with a resulting return going back to the industry. We are very confident about our ability to pay down the debt and introduce more vibrancy into the industry.
Derek Nolan (Galway West, Labour)
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I thank the witnesses.
Simon Harris (Wicklow, Fine Gael)
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I thank Mr. Neilan, Mr. Meaney and the team for being here today. At the outset I should make it clear that those who are asking questions and holding the board to account are not against rural jobs, a stadium in Limerick or positive developments in the greyhound industry. Everybody appreciates the importance of such industries to the Irish economy and communities. We are asking the question to protect the taxpayers' interests and the industry. We do not want a "don't hit me with the baby in my hands" sort of attitude.
I will begin with the Limerick track and stadium before moving to other issues. I accept that the witnesses are not responsible for the Meelick site and neither the chairman nor the chief executive were in office at that stage. I will take it as read that it was a disaster that should not have happened, and it has been dealt with at previous meetings. With regard to the Greenpark site, we know that as far back as 2003 there was a major issue of fill, although this relates to a different part of the site. We know the valuer indicated that should the extent and cost of the fill run to €1.5 million or more, warning bells would begin to sound. We will take that as read. We know that what with the messing around with Meelick and the ensuing disaster, in 2008 the board returned to the Greenpark site and bought a smaller portion of the land. This is where we get to the gentleman's agreement. I listened to the exchange with Deputy Nolan. These are questions rather than assertions, so the witnesses may correct me if I am wrong. I have been told that on 22 November 2007, the engineers, Atkins, indicated in writing with regard to the filling commitment that the purchase included both the existing site and what lies within and beneath the site. However, it also included works upon the site and through the site to be undertaken in advance of its taking position. It was noted that it was important that those works be properly specified in the contract, with a mechanism for certification and acceptance prior to handover. Is that correct?
Mr. Adrian Neilan:
Those discussions refer to a method of how the fill being proposed would be brought on-site on a best-effort basis. This regarded the type and size of the fill and how it was to be compacted, so that when Bord na gCon eventually took over the site, it could be worked with. We did not want to commit to buying the site and achieving planning permission only to have a site that would not be filled as our engineers stipulated. Any product brought on-site was to be dealt with properly.
11:40 am
Simon Harris (Wicklow, Fine Gael)
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The engineers advice was that those works upon the site and throughout the site that are to be undertaken in advance of taking possession should be specified in the contract. Were they specified in the contract?
Mr. Adrian Neilan:
They were not because clearly - we subsequently helped our engineers understanding of it - this was not an item for contract. This was not a contracted item; this was best efforts basis. The land was bought as it stood. The person endeavoured to say he would fill the site if fill became available but it was not a contracted term. That is where the confusion lies. I am happy to confirm once and for all that it was never part of the sale. It made no sense to be part of the sale. It was never going to be written into a legal contract. Would we have loved for it to have been written into a legal contract? Of course, but it was never part of it.
Simon Harris (Wicklow, Fine Gael)
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We know the engineers made that comment and I take Mr. Neilan's response on board. Five days later on 27 November, the solicitors wrote to say they noted the requirement for a condition to be inserted in the contract providing that the vendor will be obliged to apply for a fill licence and that under that licence will fill the site at the stadium and car parking area at the vendors cost to a specified standard as agreed by the respective engineers appointed by both the vendor and the purchasers. That was not done either, or was it?
Mr. Adrian Neilan:
Basically, what the legal people were talking about there was the methods statement for bringing in the fill. It was very clear and it was clearly outlined to the legal people. The Deputy will see that the subsequent contract signed with LRC never included it. It was not a legal term. There is a clear exchange of e-mails from LRC to our contractors clearly saying that this is not a legal requirement. That was our understanding. That is the basis on which we bought the site.
Simon Harris (Wicklow, Fine Gael)
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This is where I am confused. Mr. Neilan said there was no legal requirement. The only reason there was no legal requirement was that it was not in the contract. Before he signed the contract, he got to decide what he wished to put in the contract on his side. The vendor on its side then signed the contract.
Simon Harris (Wicklow, Fine Gael)
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The reason it was not a legal requirement was that it was not in the contract and yet his engineers suggested it should be in it and his solicitors clearly stated that they would draft a condition to insert into the contract. None of that happened.
Simon Harris (Wicklow, Fine Gael)
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That is crystal clear.
Mr. Adrian Neilan:
The job of our legal people and our engineers is to protect us as much possible and they were looking for ways to protect their client, as I would expect them to do. They were trying to be as helpful as possible in trying to get as much protection as possible. However, because it was not a contracted term and was never going to be a legal term, it could never be put into the contract.
Simon Harris (Wicklow, Fine Gael)
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I agree it is crystal clear that it was not a legal condition and that it was not in the contract but the reason we are having this conversation is that it was not in the contact. Mr. Neilan decided to have what is termed as "a gentleman's agreement". When the engineers said it should be specified and when the solicitors were drafting a condition to insert into the contract, why did it not happen?
Simon Harris (Wicklow, Fine Gael)
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Is Mr. Neilan saying - this could be very helpful in terms of clarification - that it was the wish of the greyhound board to have it included in the contract but from the vendor's point of view, it was not acceptable to include it in the contract?
Mr. Adrian Neilan:
No. Bord na gCon bought the site as it stood. Filling was never part of the contract. Our engineers and our solicitors asked if we could put it in there but clearly it could not go in because it was never part of the terms of the agreement. There is no point making a deal to buy something from somebody and then turning around and putting something into the deal which was not there. That was not part of the agreement.
Simon Harris (Wicklow, Fine Gael)
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I understand that but these discussions took place before the deal was done and before the contract was signed. Am I right?
Mr. Adrian Neilan:
From memory, it was April-June 2007. The contract was not signed until 2008. We knew from the heads of the agreement what the terms of the contract were. It was always clearly understood at that point in time that what was being provided was a carpark for €1.1 million and 11.25 acres. That was the contracted term. The provision of fill was on a best efforts basis because anybody who effectively had a construction site that could be filled was in a very enviable position back in 2007, so it made perfect sense. It was never part of the contract of sale and it was never going to be.
Simon Harris (Wicklow, Fine Gael)
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I am hearing Mr. Neilan loud and clear but I am still not getting my question answered. I understand it was not in the contract and that it was not a condition of sale but my question is, why was it not? Why did Mr. Neilan, as chief executive, make a decision to proceed with a contract when his engineers stated to him on 22 November 2007 that it should be in it and when his solicitors wrote to him five days later on 27 November 2007 suggesting a condition to add? Why did it not appear? When Mr. Neilan received this advice from his engineers and solicitors, what did he do?
Mr. Adrian Neilan:
The board was fully aware of all aspects of the Limerick project in terms of the various discussions. All the way through our meeting minutes, there would be a topic on the Limerick development. Our strategic plan was that we would develop a number of facilitates. Limerick was just one. We had Kilkenny, Clonmel and Enniscorthy. Capital development was front and centre of all board activities. When that issue was raised, my response to those people was that per what was agreed, it was not a condition of sale or a term to go into the contract.
Simon Harris (Wicklow, Fine Gael)
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I put it to Mr. Neilan that he ignored the advice of his engineers to include this in the contract.
Simon Harris (Wicklow, Fine Gael)
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I am not an engineer or a legal person but if I buy something, I rely on the advice of professionals. I bring in people who have engineering and legal professional skills and I ask them to advise me. The engineers clearly looked at the site and said the fill would be an issue and that Mr. Neilan had better include it in the contract. The legal people then went about trying to make sure it could be in the contract or putting a proposal forward of what one could insert in the contract. All of that took place in the year before the contract was signed and yet Mr. Neilan and the greyhound board chose to sign a contract and ignore those warnings. That is my assertion.
Simon Harris (Wicklow, Fine Gael)
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No. What I am trying to suggest is that if I go to buy a Mazda and there is water leaking onto the back seat and the mechanic says I should not buy it unless the leak is fixed, I would make sure the leak was fixed before I bought it. I put it to Mr. Neilan that his engineers said he would have to fill the site and in regard to those works upon the site and throughout the site that are to be undertaken in advance of taking possession, it is important those works are properly specified in the contract. That was the advice of the engineers' firm, Atkins, in regard to filling on the site. That was offered on 22 November 2007. What was the point in getting the advice because it was disregarded? Mr. Neilan cannot say to me and to the committee that it was not a condition of the deal or the sale. All these advices were offered to him before the deal was done.
Simon Harris (Wicklow, Fine Gael)
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Mr. Neilan had a mechanic saying not to buy it until the leak was fixed.
Simon Harris (Wicklow, Fine Gael)
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Mr. Neilan would accept that Atkins, his engineers, had advised him to include it in the contract.
Simon Harris (Wicklow, Fine Gael)
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In hindsight, does Mr. Neilan believe it should have been?
Mr. Adrian Neilan:
In hindsight, I need to go back and talk to my project management team to understand how our engineers could develop the view that this was going to be part of an item for sale. To be fair to our engineers, we evolved to a methods statement as to how the fill would be brought on site to make sure it was brought in the right truck loads, the right quantities and that it would be deposited in the right areas. It is not right to say we ignored them completely. We said there were elements which could be done and which we would take on board. We are not in the habit of ignoring our legal advice or our consultants' advice. That is what they are there to do.
Simon Harris (Wicklow, Fine Gael)
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We are going to have to disagree on this. I note with disappointment that there was advice available to the greyhound board before the signing of the contract to specify this in the contract.
However, Mr. Neilan signed that contract without that being done, with the consent of the board. I am simply noting that point.
On 29 April, 2008, the project manager prepared what has been described as a draft side letter to agree the filling terms, in addition to the contract. We now know that the filling did not make it into the contract, despite the engineers suggesting that it should. We now also know that the project manager prepared a draft side letter. I have been informed that the aforementioned letter was not signed either.
11:50 am
Mr. Adrian Neilan:
At the point by which the letter was developed, it became very clear that the fill was not coming in the quantities that were required. We are talking about 100,000 cubes of fill. It is a significant amount in the context of an 11 acre site, 4.5 metres high. There is an awful lot of fill involved. It became very clear towards the end of that period that the fill was not coming on board. We worked with our engineers to come up with a fill statement. The letter clearly was not signed - I accept that. However, events transpired in such a way as to make it almost immaterial in the context of having only 20 or 30 loads of earth fill being drawn in that period of time. In order for the project to be completed, the board made a decision to procure fill. We procured commercial-quality fill that allowed the site to be filled in a manner which allowed the construction to go ahead. We did not want to be faced with a situation where no construction took place. The Deputy made reference to country-wide employment. Since 2003, owners in Limerick and Clare had been looking for a new stadium in Limerick. The existing stadium was not fit for purpose. The project was to develop a stadium that they could base their livelihoods on and that was our charter.
Simon Harris (Wicklow, Fine Gael)
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That is all fine and admirable and no one has a difficulty with that. However, the two questions relating to this issue remain. Could the interests of the industry, the board's bank balance and ultimately the taxpayer been better protected if Mr Neilan had taken the advice of the engineer and the solicitor to include the fill in the contract? Second, when that failed to happen and was not done, had the draft side letter on the fill, which was separate to the contract, drawn up on 29 April been signed, the board would at least have had some protection. The fact that neither of these things was done resulted in the board having to procure, at a cost, commercial fill.
Mr. Adrian Neilan:
We have answered the first question already. The Deputy is asking me about a side letter that was to be signed regarding fill coming on board. However, at that point in time it was very evident to us that the fill was not coming in. On reflection, we should have signed that letter but we would still have incurred additional costs. We would still have had to go off and source fill ourselves. Signing a letter that allowed fill, in a haphazard way, to come into the site was never going to result in the development of the site. The fill was not coming on site in the volume needed. Once the construction slowdown happened and once there was no fill coming on site, the board was faced with the fact of having to buy it.
Simon Harris (Wicklow, Fine Gael)
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I have one final question on the Limerick project. In my experience, solicitors do not write letters and project managers do not prepare letters unless they believe those letters or their advice is sought. Therefore, Mr. Neilan's solicitors must have presumed or heard from him that he wanted to include or was considering including this condition in the contract. Equally, presumably the project manager, in his or her professional opinion thought it prudent to include it or thought that Mr. Neilan, as the boss, wanted this draft agreement to be drawn up. I find it hard to believe or fathom that Mr. Neilan did not view this as part of the deal while his solicitors were drawing up conditions to make it part of it.
Mr. Adrian Neilan:
To be clear here, there was a whole project management team involved in this. Our internal auditor was involved at every meeting and people were there to protect the board. The engineers and solicitors knew that fill was needed. We believed that if everything held up, construction activity continued and if the 15 sites in Limerick kept operating, fill would come on site. The issue was to make sure the fill arrived. Contractors were coming on site. Bord na gCon owned the site. We had to sort out insurance and access issues and keep all of that under control. That was a conundrum and we asked our solicitors and engineers to help us to figure it out. As a result of that, they came up with a method statement by which fill was going to be introduced on site. They looked for ways to give that method statement a bit of value. That was the direction.
Simon Harris (Wicklow, Fine Gael)
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Yes, but your solicitor provided you with advice. Presumably that advice was solicited. Presumably Mr. Neil sought their advice on the contract.
Mr. Adrian Neilan:
We sought their advice on how to deal with a vendor bringing fill onto a site which we owned to ensure that no insurance issues would arise. We also sought their advice on what to do if the fill being brought on site was not fit for purpose, was inadequate or did not comply with the fill licence, to ensure that the vendor had a duty to take it away and make good the site. Provisions were put in and that is why the fill method statement was put in place, to make sure we were protected.
Simon Harris (Wicklow, Fine Gael)
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Yes, but it did not appear in the contract.
Simon Harris (Wicklow, Fine Gael)
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Fine. I thank Mr. Neilan for his answers but I am still at sixes and sevens as to why, when his engineer told him to put in it and his solicitor drafted it up as a requirement of the contract, he signed a contract that did not include it. I will move on because I do not think we can advance this matter any further at present.
The next issue I wish to deal with is procurement, most particularly the Comptroller and Auditor General's comments in his audit certificate for 2011. The issue is also referred to by Mr. Neilan in his statement on financial control in the board's annual report. There seems to have been a number of instances where goods and services had not been tendered for and for which quotations had not been sought from a number of suppliers. I know, from reading the annual report, that there were cases where, in the board's view, due to the nature of the industry, some suppliers had a unique knowledge. A review was commenced and I ask Mr. Neilan to give the committee some statistics on the number of instances of non-compliance with normal procurement practice there were found in 2011.
Mr. Adrian Neilan:
I thank Deputy Harris for the question. I want to put this in context, if I may. Bord na gCon has evolved its whole procurement cycle significantly. In 2008, a report was completed about Bord na gCon's prior practices, on the back of a procurement cycle that fell through and cost the board over €2 million in legal fees. It documented significant issues around catering from 2001. Bord na gCon has moved on quite a bit from that. Furthermore, and more importantly, we have reduced our operating expenses by 46%, our administration costs have come down by 40% and our employee costs have come down by 32%. We are totally focused on cost management and giving the best value possible to the industry so that we can invest in that industry going forward.
We had two people in roles dealing with this specific issue. They were asked to take on a procurement role but unfortunately it has emerged that there were 11 instances with which the Comptroller and Auditor General was not happy, in terms of our procurement cycle. We have accepted that completely. That was flagged to us in April of this year. On foot of that, we went out and hired a procurement officer who is properly qualified in the area. That person is now charged with making sure that everything we do in Bord na gCon is done properly.
Simon Harris (Wicklow, Fine Gael)
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You now have a new procurement officer.
Simon Harris (Wicklow, Fine Gael)
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Is that officer here?
Simon Harris (Wicklow, Fine Gael)
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Does Mr. Neilan have a handle on the number of instances of non-compliance in 2011 and the value of those contracts?
Mr. Adrian Neilan:
The total value of those contracts was €600,000 and I can give Deputy Harris a brief breakdown of that. Holmes, O'Malley, Sexton, who were our solicitors at that point in time, were paid €64,0000. The people who look after our pension were paid €200,000, with two years worth of fees built into that. There was also a significant item regarding marketing spend. As Deputy Harris knows, marketing is a big portion of our business. We try to get people in to our events. At the start of the year there is a production element of marketing where we design our advertisement and then there is a media-buying element. We spent €20,000 with the people who designed our advertisement.
The media purchasing system that is used to buy media slots on a nationwide perspective costs €70,000. Bord na gCon's clear view is that we had a competitive process to select the production house and the media buying house we would use. We made sure we had the best value possible. We were happy to take the advice of the Comptroller and Auditor General, which was that a panel should be put together at the start of the year and selections should be made from that panel thereafter. That is what we have done.
12:00 pm
Simon Harris (Wicklow, Fine Gael)
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Mr. Neilan told me that the total amount was €600,000. He has mentioned contracts amounting to approximately €354,000. Does he want to provide a breakdown of the remaining contracts?
Mr. Adrian Neilan:
Fuel cards are provided to a significant number of people who travel around to provide stewarding services for the industry. That accounted for €65,000. We want to track fuel usage. A fuel card system is in place to facilitate that. We test 6,000 samples a year at our nationally accredited laboratory in Limerick. An outside company supplies specific testing of that equipment at a cost of €5,000. The company in question, Agilent, is a unique supplier. We accept the Comptroller and Auditor General's view that we need to see whether we can get somebody else to do it. However, it is very specific to the company. Another €18,000 was accounted for by IT costs. Just one IT company in Ireland, EPiServer, looks after this web server domain. Effectively, they were only available in Northern Ireland. We consulted other parties, including Barracuda in London, but we did not feel they were interested in our business. We recognised what went on. We put a new procurement officer in place.
I want to mention another thing that is important in the context of where this industry is going. We started a procurement cycle in 2011 for the streaming of our race pictures. As we worked through that tender, our overall strategy evolved. We wanted to see our pictures transmitted all over the world as cost-effectively as possible. We wanted to move from a satellite-based technology to an IP-based technology, which effectively involves putting pictures over pipes. That procurement cycle took longer than planned. We were advised by Achilles Procurement to make sure we went through it properly. In that year, there was €75,000 of activity. We were trying to get procurement in place and get people on a firm footing. While we were working through that process, some activities fell outside the cycle.
I want to emphasise that we are absolutely and completely focused on cost control. We have demonstrated that through our figures and the surplus we have generated. I would not want to come before the committee this morning if I had serious procurement issues, if I was making a serious loss, if I was demanding a subvention or if my costs were out of control. That is not the case. We are in control of our business. We accepted a direction from the Comptroller and Auditor General. We hired a procurement officer straight away. We will deliver on that.
Simon Harris (Wicklow, Fine Gael)
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I welcome those improvements. I am glad that action is being taken on foot of the Comptroller and Auditor General's recommendations. That is positive to hear. I would like to mention two more matters. I will be very brief. I know that there have been a number of attempted break-ins - they were unsuccessful, fortunately - and that crimes have been detected with regard to cash management procedures. I have seen comments suggesting that procedures were not followed correctly and that some of this was caused by staff being under pressure. I will group my questions because I am tight on time. I would also like to ask about the position looking forward. Obviously, an independent review of the greyhound industry has been launched. I think that is a very positive development. I am sure Mr. Neilan agrees. Along with Mr. Meaney, he outlined to the committee at the outset the importance of the greyhound industry. We all share that understanding. He might give us his take on the review, his involvement in it and where he sees it going.
Mr. Adrian Neilan:
We absolutely welcomed the review. It is consistent with what the Department and our sponsoring Ministers have done with other similar bodies. The report of the review of the horse racing industry contained many interesting findings. As Mr. Meaney has outlined, Bord na gCon has conducted its own strategic review. We are working on it. As the new review by the Minister comes in and presents findings, we will effectively work that into our strategy. There are 99 registered owners in the Deputy's constituency. Our strategy is to make sure that number increases. That is our approach going forward. We want a growing industry. We have noticed that-----
Simon Harris (Wicklow, Fine Gael)
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That is very impressive research. Bord na gCon must have a good research unit.
Mr. Adrian Neilan:
We do not. We have a very good system of tracking and looking after owners. We watch the growth of owners in every area. We want to grow this sector in Wicklow. I know that the Deputy's question about the plan did not relate specifically to Wicklow. We are definitely taking it on board. I will ask my colleague, Mr. Murnane, to speak about the activity that happened in Limerick.
Mr. Michael Murnane:
That safe and its contents were taken on the night of 30 January 2012. A number of other robberies took place after that, but all of them were unsuccessful, as the Deputy mentioned. That meant we had to spend some money on tightening security, for example by installing cameras and monitoring equipment. It also led to an element of unease among the staff in Limerick. We have put stronger cash management and monitoring procedures in place. We are not happy, but it is under control.
Mr. Adrian Neilan:
It is completely unfortunate that it happened. The Deputy will appreciate that as we are involved in a cash business, we need to be cautious and suspicious. We always have to protect ourselves. That is why we have good procedures in place. There is very good capacity in the stadium in Limerick. It has a strong room, etc. We have procedures in place. An employee did not follow those procedures. We have corrected that. The employee has undergone some training. A new supervisory structure is in place. We are happy that there will be complete adherence to our cash management procedures in the future.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I welcome Mr. Neilan and his colleagues. I would like to focus on a few specific issues. A note in Bord na gCon's accounts mentions that it incurred a loss of €934,000 on the sale of its property at Markets Field. The witnesses will appreciate that some of us do not know anything about Markets Field or Bord na gCon's other sites in Limerick. Given that the sale in question incurred a loss, was it necessary for the property to be sold at that time?
Mr. Adrian Neilan:
Mr. Murnane will cover the issue of the charge that was registered. We got a great deal of feedback from a number of people to the effect that when one leaves a site in Limerick, one should be concerned about it becoming derelict and attracting an element of hooliganism and anti-social behaviour. We were presented with an offer that we felt was very acceptable. At the end of the day, we were happy to accept that offer given where the site was located.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Even though it represented a loss of almost €1 million to Bord na gCon.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Page 25 of Bord na gCon's financial statements relates to the disposal of fixed assets in the order of €3.8 million in the year in question. There is no need for everyone to turn to that page. In light of the loss of almost €1 million that I have mentioned, I presume Bord na gCon got somewhere in the region of €2 million-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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Yes.
Seán Fleming (Laois-Offaly, Fianna Fail)
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My question relates to an element of Bord na gCon's property portfolio. According to its accounts, its fixed assets are worth €67 million. That is the net book value. Freehold land and buildings account for the biggest end of it, at €40 million. I query the decision not to allow for depreciation in that regard, given that there are buildings involved. I will ask the Comptroller and Auditor General about that in a moment. I accept that 2% depreciation is provided for in the case of leasehold buildings. The only time one of Bord na gCon's fixed assets has had its value tested by the market, it resulted in a loss of 70% - approximately two thirds - of its net book value. If Bord na gCon got €1.5 million for it, and lost €1 million on that transaction, it must have been in the books at €2.5 million. That means there was a loss of 40%. In that light, how can Bord na gCon be so confident that the assets in the rest of its balance sheet are worth what is being shown? One of the witnesses said here a little while ago that Bord na gCon has received a report suggesting that no impairment is required.
I heard that and accepted it in good faith, until I looked at the portion of its property Bord na gCon did sell, on which it incurred a 40% loss. How can the delegation explain this, given what it has not sold requires no impairment provision and everything it sold incurred a loss of 40%?
12:10 pm
Mr. Michael Murnane:
On the first question regarding the €1.5 million, the Deputy must be conscious the building in question was a derelict building. It was an old stadium gone beyond use that had not been maintained over a long period. Therefore, much of the asset disposed or the write-down related to old equipment that was not being used. If the Deputy wants further clarification on that, I will have to come back to him on it.
In regard to the impairment calculation, this is a detailed working taken over a period. I will explain what was involved. We look at the current cash flow, the operating profits and the projections for the next number of years. Then, because of the assets, which predominantly included fixed assets, we were entitled to take those over a 25-year period, discount them back to current day terms and if that discounted cash basis - under financial reporting section 11 - exceeded the current value of the assets, there was no impairment charge required.
Seán Fleming (Laois-Offaly, Fianna Fail)
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If Bord na gCon had done that test on the Markets Field, what would it have shown?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Therefore, what Mr. Murnane is really saying is that while the freehold value is in there at cost, it is being based on future income potential. That is what the accounts are showing.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I have no issue with that, so we will move on.
Seán Fleming (Laois-Offaly, Fianna Fail)
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What other assets are not generating income? Are the rest of the sites in the €40 million worth of freehold land in the income earning area?
Seán Fleming (Laois-Offaly, Fianna Fail)
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This means Bord na gCon is saying the Markets Field was an exceptional asset that was -----
Mr. Michael Murnane:
It was an asset that was beyond reasonable use. It was not being operated as a greyhound stadium and had got into a derelict state and although I was not in Bord na gCon at that stage, I was aware of it. Money was not put into that stadium. Therefore, €1.5 million represented a fair price, after significant competition. The sale went through the public process and that was the offer accepted.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Were there many offers?
Seán Fleming (Laois-Offaly, Fianna Fail)
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When was that site sold or when was the sale completed?
Seán Fleming (Laois-Offaly, Fianna Fail)
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That was a bad time to be selling property or finding buyers. I wanted to clarify that issue because there was a serious write-down that had not been mentioned so far.
A figure is shown in the accounts for capital grants to private stadia. We have received an information note from Bord na gCon and I am conscious of the serious difficulties it faces. I understand it has a bank facility of €25 million, but what is its legal borrowing requirement?
Seán Fleming (Laois-Offaly, Fianna Fail)
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How would Bord na gCon go about borrowing more or does it have the statutory authority to increase its borrowing? Would it require a change in legislation to increase its borrowing?
Mr. Adrian Neilan:
In 2007 our borrowing level was set at €12.5 million and the board put in place a strategy predicated on developing more facilities and bringing them to the standard expected. On the back of that, it looked for an extra increase in borrowing levels, to €25 million. That was approved by the Department of Arts, Sport and Tourism and the Department of Finance and we knew we would spend up to that level. As we said earlier, we have generated over €23 million in capital surpluses over the past six years and have paid out approximately €29 million on new buildings. We have stopped the capital expansion programme now and all surpluses in the future will be used to reduce our debt. We plan to pay down our debt by over €5 million to the end of our current strategic year.
The clear message is that we are in control of our future and of our debt. We are a business that is dependent on consumer spending in Ireland, and in that environment we must be careful. We are being careful and prudent. I will now hand over to Mr. Murnane to address specific issues.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Legally, Bord na gCon cannot increase its borrowing above the €25 million without going back to the Department of Finance.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Would it require a statutory instrument or a letter from a Minister to increase it? What would the procedure be to do that? I can understand why the going concern was an issue, given that Bord na gCon is at the limit of its borrowing. If income drops in subsequent years, I can understand how the board could have a difficulty, because it is at the limit of its legal facility to borrow. What arrangement would be necessary if the board required further moneys?
Seán Fleming (Laois-Offaly, Fianna Fail)
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Is the board confident it will get €10 million or €11 million every year for the next five years? We know about this year.
Seán Fleming (Laois-Offaly, Fianna Fail)
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The board is relying on the Minister therefore.
Mr. Adrian Neilan:
The Minister is very supportive of the industry overall and how it will move forward. More importantly, we recognise that we must generate more returns from our assets. We have a vibrant greyhound industry in Ireland. Across the world, the total for horseracing tote betting is approximately €100 billion. Governments all over the world are looking for new ways of raising taxes to balance their current accounts. One way of doing that is to regularise gaming. Many Irish-based companies are seeking licences in other jurisdictions and on the back of securing licences, they will require content. Looking at any of the high street bookmakers, greyhound racing accounts for approximately 16% of turnover. We are in the fantastic position of having the best breeding, stadiums, tote infrastructure and IT investment in the world in our product to allow those betting companies to earn a margin.
We have already demonstrated that we have delivered over €800,000 in net profits already, just from selling our product abroad. We will announce a big deal at the end of this month, which will bring our product in front of 4 million customers. If we assume that 10% of those - 400,000 - will place a bet of €10, that is €4 million. We will earn from 6% to 7% net on that margin. Therefore, we are talking about €320,000 on one €10 bet by 400,000 people. If that is repeated by seven or eight bets, the return to the greyhound industry will be significant.
To be fair, the badge that comes with being an Irish Government body is a significant badge. People are happy to deal with us because of our reputation and standing. We believe, based on the reaction we are getting at shows we participate in, that people want a partner such as the Irish greyhound industry in the future. This will develop product sales for us. It will also develop marketing sales, because as we beam our pictures on the Internet, our wall space and back space become more valuable. People will want to put up advertising on our wall. Therefore, as our pools become more liquid, this will allow people who are typically fixed odds betters bet directly with us on our tote book. We are confident that in these two areas alone, the industry is well worth supporting.
Seán Fleming (Laois-Offaly, Fianna Fail)
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To go back to the boards grant payments to the private stadia, I had a quick look at the figures given to us. In the four years, from 2007 to 2010, the board paid out grants of €1.5 million to these stadia. In 2011, it paid out €1.52 million and in 2012, it paid €1.12 million. The figure for these two years is €2.64 million in total. Why, when the board's cash is so tight is it paying so much in grants to private stadia in 2011 and 2012, more than it did in the four good years from 2007 to 2010. What is the projection for this year?
Why is there such a big increase in the last three years when compared with the previous four years?
12:20 pm
Mr. Adrian Neilan:
Our remit is industry wide. It covers all of the Republic of Ireland. We must safeguard the 10,000 jobs in the industry. Let us look at some of those private stadia, such as Clonmel. We invested in Clonmel. The stadium was not fit for purpose and it needed a new stand. There are very good greyhound owners and breeders in Clonmel. There is a lucrative local market. We felt that this stadium needed investment. We invested in it because we are confident about its future.
Seán Fleming (Laois-Offaly, Fianna Fail)
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What stadium would have received grants?
Seán Fleming (Laois-Offaly, Fianna Fail)
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What was the local investment by the owners?
Seán Fleming (Laois-Offaly, Fianna Fail)
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What grant commitments does the board have for private stadia this year?
Seán Fleming (Laois-Offaly, Fianna Fail)
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That was the question I was trying to ask. There seemed to be a big increase in those two years. That is fine.
Seán Fleming (Laois-Offaly, Fianna Fail)
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That figure of around €1 million is not in the cash flow.
Seán Fleming (Laois-Offaly, Fianna Fail)
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That is a help.
Seán Fleming (Laois-Offaly, Fianna Fail)
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None of the background was in the-----
Seán Fleming (Laois-Offaly, Fianna Fail)
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I am just trying to understand the figure. That is fine.
The last issue I wish to raise is about the board's net pension liability. According to the board's accounts, the pension fund is based on a number of assumptions, of which I will list three. There is a defined benefit scheme and a defined contribution scheme, but the accounts assume on page 30 that the rate of increase in salary is 3% per annum. I do not think that has been justified in the last couple of years, nor in the next couple of years. I do not know where that assumption has come from at this stage. There has also been a rate of increase in pension payment of 2%, as built into the figures. I do not think that is real. It is not happening out there. Then there is an assumed rate of increase in the State retirement pensions of 2%, which affects the balance the board has to pay to its pensioners. There has not been a 2% increase in the State pension for a number of years. I know some of those figures balance out each other, but they are all weird assumptions. None of those assumptions is valid in this day and age.
I see in the note we received that the board's pension liability at the end of 2010, based on those weird assumptions, was €3.1 million. At the end of 2011, it was €3.79 million, which is an increase of €690,000. I see that has gone up to €7.22 million by the end of 2012 - I know those figures have not been audited yet - which is an increase of €3.43 million. That is a massive increase in pension liability. Why is that happening and what has the board done to make the assumptions underlying its scheme more real?
Mr. Michael Murnane:
The increases are in respect of some of the assumptions that were taken by the actuary that prepares this report under FRS 17. It is his report that projects the rate of salary increases and the discount rate.
The changes in assumptions about market growth and risk have increased the pension by €3.3 million between 2011 and 2012, which is the big jump.
Seán Fleming (Laois-Offaly, Fianna Fail)
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Was there an assumption of growth of 5%?
Seán Fleming (Laois-Offaly, Fianna Fail)
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What was it?
Seán Fleming (Laois-Offaly, Fianna Fail)
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The Comptroller and Auditor General should not have been comfortable with those figures at that stage. I presume he will have said something about it in the 2012 accounts.
Mr. Seamus McCarthy:
The pattern of large increases which the Deputy noticed is not exclusive to Bord na gCon. It has happened in many financial statements in 2012. I mentioned earlier that I am looking at the assumptions on this and I expect to report on them. It is problematic that there are different assumptions being used by different organisations for what are ostensibly the same things, but also the swing in values that comes as a result of changes such as the change in discount rates. That has had very substantial impacts. Basically, this reflects the yield on long-term government bonds, which has dropped in 2012. I do not wish to give a definitive view on it, but I certainly share the Deputy's concerns about the variability from year to year, and also about the inconsistency in the different sets of financial statements.
Seán Fleming (Laois-Offaly, Fianna Fail)
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I will address my final question to the Comptroller and Auditor General. Somebody made the comment that when he went to prepare the audit, some adjustments had to be made to the draft accounts as presented. Perhaps I did not pick that comment up correctly. The report provided here states that the unaudited accounts for 2011 were presented to the Department in February 2012, and the audit began on 5 March, but was not completed until 12 months later on 15 March 2013. The report goes on to state that the financial results in the 2011 annual report did not change from the unaudited accounts as submitted in 2012. If that is the case, why did it take over a full year to carry out the audit? That is the implication of what I am getting here, given that the accounts the Comptroller and Auditor General was presented with were the final accounts, according to this document.
Mr. Seamus McCarthy:
The values in the financial statements did not change, but the disclosures would have changed. There were changes in the statement in internal financial controls in respect of prize money and procurement issues as well. The very significant delay was in getting explanations around Limerick stadium and trying to understand what was the relevance of the issues being raised in the media, in correspondence and so on. There was also the question of impairment and going concern was obviously an issue.
All of those things coming together right when we were reviewing it threw up a lot of questions that needed to be answered. I take responsibility for a part of the delay because it was on my table for a couple of months while I found the days I needed to work through the whole process. It took me about three days personally to work through that. I would have cleared it in December. There were changes that needed to be made and that took until the following March.
Seán Fleming (Laois-Offaly, Fianna Fail)
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That is the remark the Comptroller and Auditor General made earlier on. When I heard a later remark that there were no changes, I just needed a clarification.
Seán Fleming (Laois-Offaly, Fianna Fail)
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When will we see the audited accounts for 2012?
Seán Fleming (Laois-Offaly, Fianna Fail)
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We will discuss them on other day.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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As was previously stated by Deputy Harris, I also am not against the greyhound industry. I support the industry. I support the greyhound breeders and the associated activity. This is not about jobs or the dogs industry. We understand the work that has been done.
If the board is getting between €11 million and €15 million per year, then it must be spending it on something. There is activity taking place, there are stadiums and investments taking place. I acknowledge all of that. The job here is to examine the spend, to get value for the taxpayer and to ensure that the money is spent in accordance with the procedures and so on laid down.
A couple of things have come across in your exchange with the other members. You were here before, Mr. Neilan, in 2008. You were discussing procurement and other matters and the loss of taxpayers' money. You said at that time that you had learned valuable lessons from that period. You had only come into the organisation at that stage. Is that correct?
12:30 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is quite shocking to read the various reports of the activities of the Irish Greyhound Board, the boards, the losses on the sites and the deals that were done in respect of the filling and so on, because it shows a complete ignoring by you of the processes you said you would correct and put in place after your appearance here in 2008.
Mr. Meaney, you said in your opening remarks that traditionally the industry has been fragmented but that there was no doubt in your mind that the vast majority of greyhound people were on the same page because they knew their industry. However, everyone on the Committee of Public Accounts has received correspondence from a greyhound owners and breeders association criticising the board and stating a vote of no-confidence was passed unanimously with regard to the Irish Greyhound Board chairman, Phil Meaney, and the chief executive, Adrian Neilan. I am simply giving the comment, I am not saying whether it was right or wrong.
Then, there were further submissions to the committee. If I am not mistaken, there is a North East Greyhound Owners and Breeders Association and there seems to be another greyhound breeders association in Limerick. They have expressed criticism and concern around the industry. They are concerned about their own industry. They are concerned about whether the Irish Greyhound Board has a handle on what exactly is happening. They have expressed concern about individuals on the board but also about the debt and indebtedness of the greyhound industry.
It would seem the predictions the board made in 2007 to the Minister have not been fulfilled and that the board has fallen short. Perhaps that is an economic issue generally but it does not give rise to confidence. What have you to say to those people raising all of these questions? Substantial questions are being raised. Have you taken any action against the media outlets that have printed a good deal of stuff about the Irish Greyhound Board? Have you attempted to correct it?
Mr. Phil Meaney:
First and foremost, when I was appointed to the position of chairman, I visited all 17 stadia and made myself very available to anyone from the industry at any level who wanted to discuss the industry. I absolutely stand by the statement that the vast majority of greyhound people north, south, east and west know their industry and are happy, in the circumstances, with the progress that is being made.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How do you account for these comments from what would seem to be two organised groups?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that what these two groups are?
Mr. Phil Meaney:
I wish to make a third point. You asked me what action we have taken against certain media. I have taken action personally. I have been accused in the public media. Certain accusations have been levelled against me personally and I am in the process of dealing with that. For the record, I am not someone who believes in litigation and so on but when I am wronged I have no choice but to defend myself and that is what I have done. I did not intend going down this road today because I took the view it was inappropriate to do so in the committee, but I am happy to answer the question.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The only reason I am asking the question is because so much has been written and so many documents have come before the members. They have been referred to by Mr. Neilan and you are aware of everything that is happening. It is important that the people who are looking at the industry and the taxpayers who are looking at how the money is spent understand that there is some response from the industry. I am not asking you to go into detail but it is now understood that in some cases, perhaps on a personal basis, you are going down a legal route to deal with some of the accusations made.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is the board doing anything legally in respect of this? I am simply asking the question.
Mr. Adrian Neilan:
I appreciate that. A media outlet has already published a letter of apology or clarification to me on stuff that has already presented. On the back of some coverage we have already sent a letter to that entity. However, that entity does not exist any more in its current shape or form. We are going to challenge much of this because it is not in congruence with the facts. I wish to return to the Deputy's earlier point. I appreciate the reflection back to 2008 but I am not being sensitive about it. We have reduced our operating cost base by 46%, we have reduced our cost of doing business significantly and we have also put a focus on how we do business. We have recognised-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Neilan, I am not making that point. I am saying to you that you were before us in 2008 and you are here again this year. By all accounts, given the 2012 accounts you will be here again next year. Lessons have to be taken from this Public Accounts Committee hearing and from the Comptroller and Auditor General's report to ensure that you understand clearly the need for absolute transparency and accountability in respect of taxpayers' money. If that lesson is learned from today, then it is a valuable lesson. My point is that you said you learned that lesson in 2007 but we are still here.
Mr. Adrian Neilan:
As my chairman has indicated, a great deal of good work has been undertaken relating to how we do our business. We have identified 11 issues that we need to fix on but there are numerous others issues that we work well on. We are confident about that and the financial figures have been borne out in terms of how we reduced costs and they reflect that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will see that in 2012 and in the other report. Let us consider everything that went on through the media. You are aware of the letters that everyone in the House has received from interested parties. Why did you leave it until the earlier part of this meeting to produce that report? Why did you not make that report available to each of us prior to this meeting? Is this a public document? Can it be published? What status does it have? Why did you not put your side of the story before the committee prior to today in this document? Why leave it until the middle of the meeting?
Mr. Adrian Neilan:
We were given clear instructions that we had to prepare a briefing sheet to reflect the 2011 accounts and that it was to be no longer than four or five pages. Both of us were asked to prepare an opening statement. We really look forward to this meeting and to embracing with this committee-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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You must be the only one who looks forward to meeting the Committee of Public Accounts.
Mr. Adrian Neilan:
Honestly, I do and I would be very keen to come back before the committee next year and the year after to account for our spend and our stewardship of this industry. Rather than coming back due to the volume of letters coming in I am happy to come back every year or every two years to suit the committee's time - I realise the demands on the time of the committee. We will happily stand before the committee and explain how we spend money. We put together a document full of facts. They are public statements. We are happy for you to take it away. We printed 14 copies.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why did you leave it until the meeting today? Why not give us this before the meeting? It is a substantial document which requires reading.
12:40 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I want to ask about the board meetings. How many are on the board?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many would normally attend those meetings?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What about prior to that date, for example, 28 June 2007 and 23 April 2009? I am reading extracts from the minutes of these meetings and it seems that it is down to one or two members who led the board in proposing the purchase of the site, the expenditure of money on the development and so on. How many members of the board attended when these serious issues were being dealt with and decisions about huge sums of money were made? Can Mr. Neilan tell us that today?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many is that?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Four people made the decision on the purchase of the sites and the expenditure of money in these sites.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Are all of the board members within this jurisdiction, the Twenty-six Counties?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am speaking about earlier, from 2007, when Mr. Neilan took over.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Can the witnesses give us a list of costs, what board members are paid and their travelling expenses?
Mr. Phil Meaney:
I would like to come in on that point. I stated earlier that I had spent very little time in going back over what had happened before I joined the board. There were several new members and I felt it was a waste of time. The new board, the executive and I put new protocols in place. We have considerably reduced the expenses of the board. In my first year as chairman the total expenses of all board members came to €56,000. In 2012 they came to €58,000 and the projected figure for this year is between €55,000 and €56,000. I am more than happy that we have very strict protocols in place, not alone for board members but also for subsidiary board members. I personally sign off on all board members’ expenses and, in turn, the CEO signs off on mine. While I have no comment to make on what went on before then, I am more than happy that all current board members do not even claim what, in my opinion, they are entitled to.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Was that not the case before Mr. Meaney took over?
Mr. Phil Meaney:
I do not know. Prior to that I had been CEO of a company that was much larger than Bord na gCon and I was satisfied that I knew what was fair and reasonable. I had discussions with the then Minister of State, the late Deputy Shane McEntee. I was happy that what we had put in place, taking into account the economic conditions in which we lived, was fair and reasonable. I have to say the commitment of the board members, for the remuneration and expenses they receive, is very good value.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am not questioning that; rather I am questioning the accounting for the expenses paid. Is Mr. Meaney telling me that he has a full process in place according to which he signs off on everything?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Was that not the case before Mr. Meaney took over?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Can Mr. Neilan comment on it?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What was the cost in 2007?
Mr. Adrian Neilan:
As far as I remember, the cost in 2007 was €135,000. Everybody appreciates that mileage and subsistence rates and all reimbursements associated with travel have changed quite significantly to reflect the economic climate and that they have reduced in line with this. To emphasise the point made by my chairman, Mr. Meaney - the Chairman of the committee alluded to this - there is an element of oversight expected of board members. Board members are invaluable to me as chief executive officer. We have 17 sites around the country. It is very important for the people concerned to see what is happening in the business and reflect any concern. For the level of governance that is needed and public expectation around transparency and visibility the board represents fantastic value for the industry.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Do staff receive bonuses or have they during the years?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many staff members are there?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why did they receive that money?
Mr. Adrian Neilan:
To be clear, a large number of people work in our sales base on an over target earnings, OTE, commission basis and are entitled as per their contracts of employment to get an award. We may find that if somebody works above and beyond normal hours and duties, he or she is entitled to some compensation for the extra effort put in. Our overall staff costs have reduced quite a bit. We have managed our costs very carefully, but the expectation is that in the future there will be more performance management.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is in the contracts of these five staff.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Where else?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Who were the people in head office? I do not want names but the positions they were in.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What is the profitability position of the 17 sites? Do they all lose or make money? What is the break-down?
Mr. Michael Murnane:
The current structure is that each stadium is a limited company. The results for these companies relate only to track operations. The Tote operations are not included in their financial statements. They are included in the Bord na gCon financial statements as a group, but there is no list of individuals.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many of the 17 sites make money and how many lose money?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How much would they have lost?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That was in 2011. Are they carrying forward losses from previous years?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Was there any other stadium making a loss?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What did the picture in 2012 look like?
Mr. Michael Murnane:
The position got slightly worse in 2012. Four stadia lost money in 2012.
The Cork stadium lost money in 2012; Youghal lost €81,000; Waterford lost €33,759; Galway lost €30,221; and Limerick reported a loss of €70,000 but that was affected by the robbery and subsequent security measures.
12:50 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Those are quite substantial losses each year.
Mr. Michael Murnane:
Yes. We operate our stadia as a group. The Chairman mentioned 17 stadia. We only operate the tote in the private stadia so we do not report what those tracks make in their day-to-day business because we have no control over their track activities. We only control the tote activities. I agree the losses in Limerick were disappointing, as were the losses in Galway.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that an improvement?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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When did Bord na gCon last make a presentation to the Minister to convince him? He reads all this information in the newspapers and in representations to us from both named and anonymous sources. What presentation has Bord na gCon made to the Minister to convince him that €11 million was being well spent and that Bord na gCon is a viable concern?
Mr. Phil Meaney:
We have regular communications with both Ministers, particularly with the junior Minister in the Department of Agriculture, Food and the Marine and to a lesser extent with the senior Minister. We keep the Minister of State up to date and there is a good working relationship between the executive, the board and the Department of Agriculture, Food and the Marine. We have quarterly meetings-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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When was the last time Bord na gCon provided the Minister and the Department with projections and analysis of the industry?
Mr. Phil Meaney:
The Minister has noted our five-year strategic plan. In my view that is a real living and breathing document. We are close to the first year of that plan now. The Minister has asked for an annual review of the plan. We look to be on target for the first year and we intend to keep in contact at least annually and to keep the Minister apprised by presentations and by our accounts and figures and whatever he requires.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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While we are waiting for the 2012 accounts, I would welcome it if the witnesses have anything to submit relative to those projections to show how the board has proceeded from 2012. All the members of the committee would welcome those figures.
Mr. Phil Meaney:
Limerick has been one of the main talking points since I have become involved. I came from the construction industry. One of the first things I was anxious to do was to get an independent report. We brought in Bruce Shaw and that happened. I understand the sequence of events but I would welcome the opportunity to have the Comptroller and Auditor General help us at this point to get what I call the "myth of Limerick" to see if there are any problems in Limerick or any misunderstandings or misrepresentations. I know the committee is waiting for some information from us which we will provide as soon as possible. I think we need to kill Limerick once and for all. There has been a very great amount of reporting about the matter and much of it is erroneous, in my opinion. However, my opinion is not what matters in this case. We need to have the Comptroller and Auditor General sign off on Limerick so that we can move on. We have to provide some information to the Comptroller and Auditor General but I would like to see Limerick going off the radar by the end of this year or very early next year and that the Chairman and the committee are satisfied with the facts and figures to do with Limerick. I hope that we can clear up what the media and the people believe are the problems.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I would like to discuss a lot more questions but the witnesses have been answering questions all morning. I suggest the way to deal with those questions would be for the committee to forward to Mr. Meaney the questions that have been raised with us and which have not been answered today and that Bord na gCon would then submit to the committee a comprehensive response to each of the questions.
Some questions have been raised in the media and have been left unanswered and questions have been asked by the people who were critical of both witnesses. I suggest the witnesses should reply to those criticisms. It would help us to understand the situation and would provide us with a greater understanding of Limerick and the other tracks and other issues of concern with regard to Bord na gCon. It would allow the witnesses to clarify matters and put them before the Committee of Public Accounts.
I propose to arrange for that and I would appreciate if the witnesses would address the questions as comprehensively and in as timely a manner as possible. I ask that they forward a copy to the Comptroller and Auditor General because we are anxious to get to the end of it. There is much more we could talk about at this meeting today with regard to those reports. Perhaps the best way to conclude is to give the witnesses that opportunity.
I have a question for Mr. Ryan from the Department of Agriculture, Food and the Marine. What was the oversight role of the Department with regard to the affairs of Bord na gCon? I note in one reply from the Secretary General he refers everything back to the board which is a bit annoying for members of this committee. He refers to matters being management issues on which the Department cannot comment. If the Department is giving Bord na gCon between €11 million and €15 million as it was doing over the years, it should have its finger on the pulse so as to know what is going on in Bord na gCon. What is Mr. Ryan's view on what he has heard today?
Mr. Dermot A. Ryan:
Bord na gCon came back within the remit of the Department of Agriculture, Food and the Marine in May 2010. As a matter of procedure, we meet our three State bodies - Horse Racing Ireland, the National Stud and Bord na gCon - twice a year routinely, in order to discuss a set number of items. We deal with anything controversial which is raised in a wide-ranging discussion. We go through the code of governance for State bodies. We have quite an elaborate check list to ensure that everything is followed through correctly. Other special meetings are also convened, as required from time to time, outside those two regular meetings.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In the reply issued to the North-East Greyhound Owners and Breeders Association by the private secretary to the Secretary General, it is stated that the issues raised were financial and IR operational matters and are the responsibility of Bord na gCon.
The chief financial officer is in place for some time past and, prior to the appointment of the incumbent, had engaged the service of a professional accountant. I understand the latter was dealing with the question of the four-year gap but also with other issues.
The point I am making here is that the issues that were raised, both in this correspondence and prior to that in the media, would have been common knowledge to everybody before 2010 and after 2010, when Mr. Ryan took over. However, given the amount of money involved, the Department simply said it was an operational matter for Bord na gCon. In fact, it is not an operational matter; in the long run, it is a matter of accountability and transparency. The Comptroller and Auditor General audits the accounts and we investigate them, and it is my view that the Department should be having much greater contact with the board to ensure taxpayers' money is being spent properly and to investigate fully any of the issues that have been raised publicly by the two bodies in question. Mr. Meaney said the latter represent a minority group, but there is a need to protect the name of Bord na gCon if it is the case that the delegates are right and the two bodies referred to are wrong. My concern is that there does not seem to be any reaction from the Department on this matter.
1:00 pm
Mr. Dermot A. Ryan:
The first point to make is that we receive monthly financial statements from Bord na gCon, which means we are on top of its financial position and, in particular, its level of borrowings. In regard to specific complaints that would come in to us concerning Bord na gCon, we make a judgment call and there are certain issues that are matters for the board and executive of the organisation itself to deal with. We raise any issues that come to us with the executive of Bord na gCon and, if necessary, we meet with the board. We take the view that if they are procedural matters for the board or executive to deal with, then that is where they should be dealt with. It should not be our role to get involved in doing the work the board and executive are supposed to do. Some of the issues that come in relate to human relations, for example, and clearly those are matters in which we cannot get involved. Having said that, we discuss such matters with Bord na gCon in order to be satisfied that they are, in fact, for the board and executive to deal with rather than the Department.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Ryan assumed his position in 2010. On 8 May 2012 and again on 21 June 2013, the Irish Examiner published extensive articles detailing all sorts of issues. Did Mr. Ryan discuss those articles with Bord na gCon? The article on 8 May 2012, in particular, gives extensive details on certain matters. I will not comment on the accuracy or otherwise of the reports, because Mr. Meaney and Mr. Neilan have made their comments in that regard.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It deals with waste at the site, site filling, construction of the carpark, ground compacting, planning fees and so on.
Mr. Dermot A. Ryan:
We discussed the issues regarding Limerick in detail with the chief executive officer and his team. We sat down with them and, during the course of the meeting, got information in regard to the purchase of the site, the cost of filling it, the cost of the carpark and the various items raised.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Was Mr. Ryan satisfied with the answers he received?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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My question is whether Mr. Ryan and his colleagues, as representatives of the Department funding the board, were satisfied with the answers they were given.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How did the Department verify what it was told? Did Mr. Ryan and his colleagues simply accept the information or did they test it in any way?
Mr. Dermot A. Ryan:
We did not get into the area of testing the validity of the facts by undertaking a special investigation or anything like that. We were working on the basis that the board's accounts are presented in the normal manner and are audited by the Comptroller and Auditor General, after which they come to us.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is Mr. Ryan satisfied with the Limerick site? Would he like to make any comment on it?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is there a departmental official on the board?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Did Mr. Ryan ever consider making such an appointment?
Mr. Adrian Neilan:
From my perspective, we would welcome working with the Comptroller and Auditor General in terms of concluding all the facts regarding the Limerick site. I have consulted internally about getting in somebody entirely external because, unfortunately, it is the only way this issue can be completely resolved. At the same time, we are happy to stand over the figures we have communicated. Everything was properly procured, everything was properly done and we are very happy with the facility. We are happy with the facts.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I see the name Mark McMahon recorded in the minutes. Will Mr. Neilan identify this individual?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The minute of 28 June 2007 states that Mr. McMahon advised that he did not have a licence to fill but had submitted an application for same and, if he received the licence, he would fill the site.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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However, it does not say that in the minute; it says Mr. McMahon would fill the site. We as a committee are not happy with some of the details we have been given this morning - I will not say we are unhappy with the accuracy, but the detail of statements given - and are unconvinced by certain answers we have received. As such, we will have to go back into this matter again. I am simply pointing out to Mr. Neilan that on 28 June 2007, the board minute states very clearly that Mr. McMahon would fill the site. It does not say this would be done if it was possible, if he had the fill or if something else happened; it says very clearly that he would fill the site. Mr. McMahon also indicated his wish to project manage a stadium development up to planning stage. Here we have a situation where, as part of that deal, this person would fill the site.
Based on that information - the proposition of one individual seconded by another - the board unanimously agreed to proceed with the purchase of the site. In other words, it agreed to purchase the site based on the information given by the individual in question. If I was told that this individual would fill the site and I was proposing that the site be purchased on that basis, I would expect the site to be filled. Mr. Neilan had an exchange with Deputies Simon Harris and Derek Nolan in regard to the contract, but here we have the minute suggesting something rather different. I have not had time to go through Mr. Neilan's document this morning, but there certainly are issues that need to be addressed. If the members of the board were told that Mr. McMahon would fill the site, I presume the Minister would have signed off on something on 28 June to the effect that this would happen. Immediately following that sentence in the minute is the proposition by Mr. McKenna and Mr. Reilly, unanimously supported, to purchase the site. I would have to question the board members as to what they thought was being said to them here. What is conveyed in the minutes seems to answer the question that was posed to Mr. Neilan by the two Deputies completely differently from what Mr. Neilan said in response.
The legalities, etc., can be discussed and the committee can be informed with regard to whether it was a gentleman's agreement and, if it was, whether it stands up to scrutiny. On one occasion it appeared to be a gentleman's agreement and then it was stated that this was not the case. However, the press release from 2008 indicated that it was a gentleman's agreement. This matter must also be examined. We will certainly examine the documents further before coming back to our guests on them.
1:10 pm
Kieran O'Donnell (Limerick City, Fine Gael)
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I welcome our guests and I apologise for my late arrival. Will they indicate how the tracks are performing in 2013? Mr. Murnane provided figures for 2012 in this regard.
Kieran O'Donnell (Limerick City, Fine Gael)
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How are they doing in general?
Mr. Michael Murnane:
Limerick is still disappointing. It is beginning to recover and the bookings for November are way ahead of last year and the Christmas meeting is going to sell out. The end-of-year position is encouraging, while that at the beginning of the year was disappointing. Galway has shown positive signs of recovery in respect of the tote, so I do not expect another loss to arise for this year. Cork had a difficult start to the year but has been performing well since May or June. Dublin tracks are holding their own and Mullingar is fine. On an overall basis, the tracks are on a par. Limerick remains disappointing but we are expecting a strong finish to the year in respect of it.
Kieran O'Donnell (Limerick City, Fine Gael)
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Approximately 10,000 people are employed in the industry. How many of the 17 tracks within the industry are privately owned?
Kieran O'Donnell (Limerick City, Fine Gael)
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So the other ten are operated by Bord na gCon.
Kieran O'Donnell (Limerick City, Fine Gael)
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Youghal continually appears to be operating at a loss. The Comptroller and Auditor General referred to the issue of maintaining a going concern and the level of debt involved. How does Youghal fit into Bord na gCon's plans for the future. I may be going over old ground here.
Kieran O'Donnell (Limerick City, Fine Gael)
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What about Limerick?
Mr. Michael Murnane:
They also start their careers in Limerick. However, Youghal is one of the strong tracks of encouraging young dogs. For whatever reason, Youghal seems to be a very strong feeder track for those in the industry. As such, we will probably need it to be supported. That support is critical from the point of view of making positive returns in Shelbourne Park, Harold's Cross, Cork and elsewhere. This is why the industry must be seen as a group as opposed to a team of individuals.
Kieran O'Donnell (Limerick City, Fine Gael)
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I read Mr. Neilan's presentation, particularly that part of which relates to addressing the level of debt. In the context of moving forward, when will the industry reach the point where it will be repaying capital and where its level of debt will be sustainable? Again, I may be going over old ground but-----
Mr. Andrew Neilan:
As I stated at the outset in the context of the future, we contend that we have the best greyhounds in the world. There is a fantastic opportunity for Irish greyhound racing abroad. International companies want to partner with us to supply greyhound racing to a foreign audience. With our tote and our stadia, we have the ability to transport the greyhound racing product abroad. We have signed contracts with a significant number of people and we will be announcing details of these at the end of the month. On the basis of that, the figures - which we have laid down in our strategic plan - will comfortably allow us to pay down our debt and introduce more vitality to the industry.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the current level of debt? It was €22.2 million at the end of December 2011.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the term of that loan?
Kieran O'Donnell (Limerick City, Fine Gael)
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In the context of the term of the loan, have our guests come up with-----
Kieran O'Donnell (Limerick City, Fine Gael)
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In the context of the negotiations with the banks, what is the typical lifespan of a track? Am I correct in stating that a portion of the €22.2 million relates to a short-term overdraft?
Kieran O'Donnell (Limerick City, Fine Gael)
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So what is the position in terms of arriving at a sustainable model? Bord na gCon's current level of debt has caused the Comptroller and Auditor General to make reference to it. In that context, he made reference to Bord na gCon in the context of note 24 in the accounts. Is there a typical lifespan for a track? Limerick is a modern track.
Mr. Michael Murnane:
Correct. The lifespan of a track is 25 years. The plan is that the financial model we are developing will put those loans on a 15-year normal commercial term model. The latter is normally the case with a business loan. This is a matter of discussion at present and will be subject to circumstances in the future.
Kieran O'Donnell (Limerick City, Fine Gael)
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What view are the banks taking on the matter? Bord na gCon is seeking to restructure the debt over a 15-year term and make it a long-term loan. Is it currently involved in discussions with the banks?
Kieran O'Donnell (Limerick City, Fine Gael)
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Okay. How are attendances at the tracks and how is business in general? How do our guests see the greyhound industry developing in Ireland during the next five to ten years?
Mr. Andrew Neilan:
The industry is driven by the level of consumer available in Ireland. In the past number of years, this has declined quite dramatically. We have resized our business to cater for that decline. Revenue has dropped by almost 50% and we have cut our costs by an appropriate amount in order to generate a level of surplus. What we find is that once some element of vibrancy returns and because we have very large stadia that are very well set up, we can offer people fantastic value in terms of meals. Last year alone, some 202,000 people partook of meals at our venues. This year, 26,000 people will have their Christmas parties at our venues. I have already alluded to the fact that Limerick has the second highest level of Christmas party bookings to date after Shelbourne Park. We are putting on an extra night's racing at Limerick in order to cater for this. We know people are very attracted to the product of greyhound racing and we are confident that the industry in Ireland will be sustainable into the future. However, a huge opportunity to generate real returns that can be reinvested in the industry here will come through the sale of coverage of our meetings to international broadcasters. UK bookmakers made €243 million in gross gambling yield from greyhound racing. Some 80% of the dogs involved in racing in the UK come from Ireland. Obviously, we would like to attract this income to Ireland and we want to sell our pictures abroad. There is a huge opportunity for us in this regard and we are meeting people from all over the world who want to broadcast those pictures. This is the case as a result of our good name and our international reputation.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the current position in respect of this matter?
Mr. Andrew Neilan:
The current status is that in the region of 30 contracts are ready to be pursued. We have already signed six or seven of these and we will be announcing a significant contract at the end of the month which will put our product in front of 4 million betting customers. It is a case of having adequate staff to get these contracts rolled out and delivered. We are very excited by the future here. We recently concluded a deal with Independent Newspapers which the business editor of the Irish Independent labelled as transformational. We are very excited by the possibilities to which this deal will give rise.
Kieran O'Donnell (Limerick City, Fine Gael)
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Are our guests prepared to place a value on what this will bring to the greyhound industry?
1:20 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I call Deputy Murphy.
Eoghan Murphy (Dublin South East, Fine Gael)
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I thank the representatives for appearing before the committee. I apologise for not being here earlier as I was in the Chamber. I want to pick up where Deputy O'Donnell left off. In respect of the new product the board is offering to the markets in the gaming and gambling space, I take it the €1.5 million figure that was mentioned will be net profit-----
Eoghan Murphy (Dublin South East, Fine Gael)
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-----and that will earned every year from 2017 onwards.
Eoghan Murphy (Dublin South East, Fine Gael)
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Is the board predicting a net profit of €825,000 for 2014?
Eoghan Murphy (Dublin South East, Fine Gael)
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Is there a prediction for net profit up to the end of this year?
Eoghan Murphy (Dublin South East, Fine Gael)
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Those 30 or so contracts to which Mr. Neilan referred are all brand new contracts. There are no existing ones in place.
Mr. Adrian Neilan:
This is a result of business development trips we took. We travelled to the United States, London, Austria and Spain. A lot of people were very interested in this product. I repeat, it is predicated on the international brand of Irish greyhound racing status. It is also predicated on our ability, based on the technology investments we made over recent years, of being able to send the pictures worldwide at a very significant discount. We have not had to take on expensive satellite costs. We own the Tote system and that allows one to bet into those Tote pools but also, more important, it allows us to deliver the data. Every end customer has different needs, different bet types and different languages in which they want to read to it. We have the ability to customise the experience to any audience that receives it. People have been very impressed with our flexibility and adaptability to provide a product to them, in respect of which they can enter a wager and from which the Irish Greyhound Board can benefit.
Eoghan Murphy (Dublin South East, Fine Gael)
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Is it a view that the 30 contracts that will amount to sales of €950,000 will bring in €825,000 in profit and the €1.5 million is based on new contracts in relation to those 30 contracts?
Eoghan Murphy (Dublin South East, Fine Gael)
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Those 30 contracts will not deliver the €1.5 million in profit. It is a question of getting the 30 contracts in place to get a profit figure in 2014 of €825,000.
Eoghan Murphy (Dublin South East, Fine Gael)
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They will deliver to the €1.5 million mark in 2017.
Eoghan Murphy (Dublin South East, Fine Gael)
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Okay. In terms of the period after 2017, is that were it stops for this?
Mr. Adrian Neilan:
No. The strategic plan covers five years and we expect that will just start the process. I believe we will deliver a lot higher than that but, from the context of a strategic plan that has been tested by a number of people to ensure it is valid, I am pleased to state that is the figure we will deliver, but we will be driving the organisation to deliver a lot more. We will also ensure it can be delivered over the long term. We are in a great position.
Eoghan Murphy (Dublin South East, Fine Gael)
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Can Mr. Neilan explain the term com-in-link? Is this in terms of the revenue streams?
Mr. Adrian Neilan:
No. When a person goes along to a track, he or she bets into Tote. One might be located in a different shop or in a pub in Spain and one can go up to the counter and, using a mobile device, one can bet directly into our Tote pools. People would be betting into liquid Tote pools so that they can get a return on their money. It is using the existing betting platform which is the Tote, our races, our data and putting on a bet.
Eoghan Murphy (Dublin South East, Fine Gael)
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Mr. Neilan spoke about the performance of the industry in the UK and some opportunities there for us. Is that opportunities in terms of us selling images to the UK or bringing UK events to Ireland?
Mr. Adrian Neilan:
No. Some 80% of the dogs that run in the UK come from Ireland and they allow the UK bookmakers to make £243 million from gross gambling yield wagering in that product. Our intent, in terms of the decline in dog figures in the UK, is to ask the bookmakers in the UK to bet on our product here. We believe we have great racing. It is about customising our product to make it work. We are in discussions with a large television entity which is interested in taking Irish racing content from us on a Tuesday night by which, in effect, a bookmaking audience will bet into our greyhound racing. Our racing is slightly different from that in the UK . They use a closed kennel system which means the dogs are specific to their stadia. In Ireland we have an open kennel system and the dogs travel around. We believe we can make this work and make it happen. That is an opportunity for us.
Eoghan Murphy (Dublin South East, Fine Gael)
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In terms of that example, the board is not simply making a profit from selling the races on a Tuesday night to the UK market-----
Eoghan Murphy (Dublin South East, Fine Gael)
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-----it is also making profit based on what people are pooling into the Tote if they are betting from the UK.
Eoghan Murphy (Dublin South East, Fine Gael)
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When Mr. Neilan spoke about exporting the Irish model to other countries to which he travelled, is that the model he is talking about exporting?
Eoghan Murphy (Dublin South East, Fine Gael)
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Who in the greyhound industry is heading that on our side?
Mr. Adrian Neilan:
It is something at which I have worked for the past year or year and a half. I indicated the onset of it. It has a lot of spring in it, about €825,000 in net profit, which has been very positive. Given the opportunity, we have hired a director of tote and wagering with international status to lead up this division to get these contracts completed.
Eoghan Murphy (Dublin South East, Fine Gael)
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That person is working for the board full-time at present to get that done.
Eoghan Murphy (Dublin South East, Fine Gael)
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For what length of time is that contact. Is it part of this five-year plan?
Eoghan Murphy (Dublin South East, Fine Gael)
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Is this the person who is leading up areas such as Expinet and other such companies?
Mr. Adrian Neilan:
Yes. It is integrating working with those types of companies throughout the world in terms of demonstrating how the product will be transferred, how it will work and listening to local customers, because if someone is betting in South America, one may not have the jackpots one would like. We have to ensure the jackpots we can deliver work for that local audience. It is to understand those local needs, customising it here and transferring it. We are very confident about that.
Eoghan Murphy (Dublin South East, Fine Gael)
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Are the 30 contracts this person will be helping to deliver contracts with 30 different countries or are they-----
Eoghan Murphy (Dublin South East, Fine Gael)
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Each is operating in different markets.
Mr. Adrian Neilan:
Different markets. Competition is good. It depends on how much they push it. For example, some of the deals we will announce at the end of November will be with regard to competing bookmaker sites. That is fine. It is good for our product. We are the ones who will earn money from it.
Eoghan Murphy (Dublin South East, Fine Gael)
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The other area I wanted to touch on briefly was the pension issue. Has that been discussed?
Eoghan Murphy (Dublin South East, Fine Gael)
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Can we request a copy of the report to the Department on how the board managed the pension liability? The witnesses' statement indicated that the board submitted an independent report to the Department of Agriculture, Food and the Marine outlining a number of options to resolve the deficit in the pension scheme. Would it be possible to get a copy of that report?
Eoghan Murphy (Dublin South East, Fine Gael)
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The witnesses' statement indicates that €3.337 million of the increased contingent liability is as a result of changes in actuarial assumptions on risks associated with the scheme. Was that discussed?
Eoghan Murphy (Dublin South East, Fine Gael)
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What were those risks or what was the change?
Eoghan Murphy (Dublin South East, Fine Gael)
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Okay. I apologise for going into this now when it has been discussed.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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You might let us have those details on the previous question whenever they are available.
Eoghan Murphy (Dublin South East, Fine Gael)
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Thank you, Chairman.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will agree to dispose of the 2011 accounts. We are doing that on the basis that the 2012 accounts are in and we will have a look at those again and on the basis of the questions which have been put to us, which will be sent to the witnesses and to which they will give a comprehensive response. That is the basis on which our decision is being made. The committee is adjourned until 14 November 2012.