Oireachtas Joint and Select Committees
Thursday, 27 November 2014
Public Accounts Committee
Special Report No. 86 of the Comptroller and Auditor General: Bord na gCon
Before we begin, I remind members, visitors and those in the Visitors Gallery to turn off their mobile phones as they affect the sound quality and the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the House 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 should also 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 policies.
I welcome Mr. Phil Meaney, chairman of Bord na gCon and Ms Geraldine Larkin, CEO of Bord na gCon. I ask Ms Larkin to introduce her officials.
Mr. Seamus McCarthy:
Bord na gCon was established to provide a statutory basis for the control, regulation and development of the greyhound industry in Ireland. It operates its own racing activities through 11 subsidiary companies, and licenses greyhound racing at other privately owned tracks. In recent years, it has received annual State funding of around €11 million from the Horse and Greyhound Racing Fund. The level of State funding is anticipated to increase in 2015.
The main project undertaken by Bord na gCon under its 2007-10 capital programme was the development of a new racing stadium and administration headquarters building in Limerick. The project was completed in October 2010. Subsequently, concerns were raised publicly about certain aspects of the project, resulting in media reports and correspondence to this committee. In the course of the audit of the 2011 financial statements, we sought to examine the evolution of the project, and its impact on Bord na gCon’s financial position. Because the issues were complex, we were unable to conclude that the project had been delivered in a satisfactory way, and continued the examination in parallel with the audit of the 2012 financial statements. Members will recall the discussion about the stadium last November with the representatives of Bord na gCon in the context of examination of those financial statements. I felt it was necessary to present a report to allow finalisation of the matter by the committee and to address the public's concerns.
Redevelopment or replacement of the existing Markets Field stadium in Limerick had been contemplated since around 2000. Although public bodies are required to assess the business case for capital projects, we did not find evidence of any formal appraisal underpinning the decision to construct a new stadium on a greenfield site rather than to redevelop the existing stadium. At a public auction in April 2005, Bord na gCon bought a 16-acre site in Meelick, on the outskirts of the city. The purchase price was just over €1 million, and further expenditure totalling €935,000 was incurred on stamp duty, site investigations and development, and project planning and design fees. Prior to the auction, a firm of consultants hired by Bord na gCon identified a potential problem in relation to site access, and the fact that the Meelick site fronted a national road. There is no evidence that the consultants’ report was presented to or discussed by the board in advance of the site purchase. Subsequently, Bord na gCon dropped its planning application to develop the new stadium at Meelick, due to anticipated planning difficulties over access. The site at Meelick is still held by the board, and was valued at end 2012 at €150,000. A total of €1.6 million spent on site purchase and subsequent development and planning costs has been written off.
In June 2008, the board purchased an alternative site of 11.5 acres at Greenpark at a cost of €3.4 million or €304,900 per acre. Bord na gCon had commissioned a valuation of those lands in 2003. This indicated a value of €160,000 per acre would be reasonable at that time. Despite a 91% increase in price per acre and a number of major changes in the site characteristics between 2003 and 2008, a fresh valuation was not sought at the time of the purchase.
When the board approved the purchase of the Greenpark lands, it was informed that the vendor would construct the car park for use by members of the public attending racing or other events, on the basis that it would also be available for use as an overflow car park for a nearby commercial development. The board was also told that the developer would provide necessary fill for the site at no cost to the board, subject to a landfill licence being granted. These features of the deal on offer could have reduced the overall cost of the development. In the event, these aspects of the deal did not work out as planned and Bord na gCon incurred additional costs and risks.
Department of Public Expenditure and Reform rules for capital projects require the preparation of a formal appraisal in advance of substantial commitments being made to a capital project. An initial capital project evaluation was presented to the board in June 2008. An updated evaluation was presented to the board in April 2009. This projected an excess of net project revenues of €1.4 million, in net present value terms, based on a capital investment of €19.8 million. My examination found that there was a lack of thoroughness in the manner in which this appraisal was undertaken by Bord na gCon. In particular, despite available evidence that revenues from greyhound racing activity were falling in 2008-09, high racing revenue was forecast for Limerick. As a result the projected net revenues from the operation of the Limerick track appear to have been overstated by an estimated €2.9 million in net present value terms. This was in contrast to the expenditure side of the analysis, which took account of the fall in construction prices being experienced in 2008-2009. In addition, cash from property disposals accounted for over one third of the total projected project revenues, and these were not backed up by current valuations, despite falling property prices. Finally, sensitivity analysis of the results did not appear to have been carried out. This would have allowed the board to identify that the commercial viability of the project was heavily dependent on the assumptions around increases in tote betting contribution and track profit at Limerick.
The outturn on the project has been that profits from the track operation and the Tote at Limerick have been well below the levels projected and are forecast to remain so in the period to 2015. For example, the evaluation projected profits in Limerick of €800,000 in 2011, increasing to €1 million by 2015. In fact, Limerick generated a surplus of €208,000 in 2011, and recorded a loss of €107,000 in 2012. The stadium was at break-even in 2013.
My main conclusion is that had better analysis been done and more soundly-based assumptions used, it is likely that the analysis would have indicated that the Limerick stadium development was marginal in commercial terms. There might nevertheless have been strategic arguments in the interests of the greyhound industry in favour of proceeding with the project, or a scaled-back development, but in pursuing such a course, the board should have recognised that the project might adversely affect its financial position. In the end, Bord na gCon spent a total of €21 million on the development at Greenpark, including the site purchase at Greenpark, stamp duty and irrecoverable VAT. As indicated in the figure displayed on the screen to the committee, its borrowings increased from under €10 million in 2007 to around €22 million in 2012. Over the same period, its operating profits have declined from about €6 million a year to about €3 million a year. The chief executive officer will be able to brief the committee on the steps being taken to reduce the borrowing level and address the longer-term sustainability of Bord na gCon’s operations.
Mr. Phil Meaney:
It is a year since the Irish Greyhound Board appeared before the committee. Since then, we have had a number of significant reviews of matters of concern to the committee and to the board. The Comptroller and Auditor General report into the Limerick project, the construction of the new greyhound stadium and Irish Greyhound Board, IGB, headquarters, was published last October. It is clear from the report that over the timeframe of the entire project, from its conception in 2000 to its delivery in 2010, there were issues of concern to the Comptroller and Auditor General.
The Comptroller and Auditor General found that the project, notwithstanding that there may have been a case for undertaking it, was not subject to appropriate capital appraisal, particularly at a time in 2008 when IGB profits from its activities were declining, the year before the decision to proceed with the project was taken. This is, rightly, of concern to the Committee of Public Accounts and also very much to the IGB, which has inherited the consequences of the decision to proceed. There is a double impact here. Apart from the management of the finances arising from the Limerick project, its profile has meant that it has absorbed massive amounts of staff time. It has damaged staff and organisational morale, affected our relationships with some stakeholders and to this day has badly affected the IGB's capacity to focus on the future. There is a major opportunity cost.
The IGB accepts the findings of the Comptroller and Auditor General report and has implemented its recommendations. Since we last met, the independent review of the greyhound industry and IGB commissioned by the Minister of State at the Department of Agriculture, Food and the Marine, Deputy Tom Hayes, has been carried out by economic consultancy Indecon. The IGB welcomed the commissioning of the report on an industry that was, and is, under pressure and on which commentary was generating a lot more heat than light. Indecon pointed out that the IGB faces many challenges in its efforts to restore financial stability and sustainability to the organisation. It was also prescriptive in its recommendations, to which the board has responded in great detail and in a time-lined fashion.
The board believes the Indecon report can make a very significant contribution to a re-energising and restructuring of the greyhound industry. The board hopes the publication of the report will be a defining moment and will facilitate closer working relationships with all stakeholders. Notwithstanding our current difficulties, the board shares the confidence of the consultants that with the implementation of the report's recommendations and the continued support of the Minister and Government, there is a positive future for the industry ahead. However, it will be hard-won, and the board and executive are under no illusions about that.
Ms Geraldine Larkin:
The Comptroller and Auditor General's review of the Limerick project raises serious concerns about the adequacy of the analysis informing the decision to proceed with the project. It accepts that there may have been strategic arguments in favour of proceeding with the project or with a less expensive development and concludes that the board should have recognised the project might adversely affect its financial position, if proceeded with at that time. That has come to pass. Our financial position has been seriously affected and that is the reality we now find ourselves in.
It would be remiss of me, as chief executive, not to point out to members that no one representing the organisation here today was involved with the Limerick project, whose genesis goes back to 2000. That is not intended to be a special pleading on my part. It is simply a fact that we were not privy to the discussions that took place at the time. Nor were we part of the contract negotiations, the sanction of borrowings or the supervision of the construction phase. While we have, as best we can, familiarised ourselves with detail from the files, ours is, at the very best, a remote and inadequate view and is limited as a result.
The current board and executive have the responsibility to deal with the legacy of the Limerick decisions. The implications of those have been compounded by the economic environment which coincided with the project. We are, in a sense, dealing with a perfect storm. We are servicing the additional borrowings arising from the Limerick project and endeavouring to manage an industry that faces many other challenges, some of the most acute of which have arisen from the impacts of the recession. Disposable income has come crashing down, affecting all our income streams, namely, gate receipts, food and beverage income, tote and sponsorship. While IGB has always carried borrowings, these have been doubled as a result of the Limerick project. While IGB has never breached any bank covenants, repayment of debt is our biggest challenge. The Indecon report states that this issue, not operational day-to-day cash flow, represents the biggest problem for IGB.
The issues we face are complex and even if we did not have significant legacy issues to manage, there are many other challenges. In the first instance, we need to stimulate, energise and restore confidence of the core elements of the industry, the foundations on which the industry is based. We need to increase the number of owners, breeders and trainers. We need larger dog pools to sustain the industry and ensure the quality of racing is such that it attracts not just an indigenous audience, but an international one. All of this must take place within a robust and clearly understood regulatory and welfare framework. We are in the entertainment industry, competing for discretionary income with other sports and hospitality venues. New technology, changes in consumer tastes and new demographics are all part of the challenge. To meet it, new product development, the exploitation of the global opportunities from streaming, getting more value from our assets, new forms of track ownership and operation and the rationalisation of tracks all have to be considered.
As the IGB chairman said, we have submitted a detailed, time-lined response to the Indecon report. My obligation as chief executive is to restore the financial stability of the organisation and to oversee a transformation across IGB governance, regulation and welfare. It is a daunting task. If this industry is to survive and prosper, it will require tough decisions, ongoing assessment of the business model, the development of new income streams, and openness to new approaches across the sector. Together with the board and all industry stakeholders, the decisions will be made so as to ensure the long-term sustainability of the industry. The issues facing the industry are so pressing that leaving matters as they are is no longer an option for anyone involved. I hope we can demonstrate to committee members that the strategy now at work in IGB can deliver significant change and improvement and thereby best protect the State's interests.
I welcome everybody here, both from Bord na gCon and the Department. Tomorrow, I will be going to Harold's Cross for races sponsored by the local football club, St. Finbar's in Cabra. I am sponsoring the politicians' race and I hope there is no conflict of interest between my asking the witnesses a few questions and turning up at one of their racetracks.
No, I am afraid I have never indulged in training a greyhound. Harold's Cross and Shelbourne Park are very much part of the Dublin landscape and it is a very serious matter. I have carefully examined the briefing the IGB provided, the Comptroller and Auditor General's statement, which was a very strong and robust analysis of what has happened over recent years, the current situation and how we are moving forward, and what the chairman and CEO said today. I see some mixed messages in the report and what the chairman and CEO said today. The statements recognise the harsh, cold, dire realities of the situation. The Comptroller and Auditor General has indicated that at least €4 million in costs could have been avoided in the projects to which we refer. The average attendance was the same in 2012 and 2013, 392 per race, and is clearly unsustainable.
There was a 32% reduction in greyhound ownership in Ireland between 2007 and 2013. Between 2008 and 2013 the debt doubled from €10.4 million to €21.8 million. There was a pensions deficit in 2012 of €8.6 million. These are serious matters. Bord na gCon is only paying interest on the debt and there is no indication of when the principal will be repaid. The witnesses tell us that next year they hope to restructure the debt. It is stated on page 3 of the briefing that the Irish Greyhound Board has reached agreement with its bank on the restructuring of loan facilities and that the agreement will come into effect once the security held by the bank has been legally perfected, whatever that means. There is no indication of how much of the principal will be repaid. Will the witnesses clarify whether repayment will continue on an interest-only basis?
I am concerned that following the reference in the briefing document to the restructuring of loan facilities there is a paragraph with wishful thinking:
As outlined the financial statements for 2013 continue to be prepared on the going concern basis. While the forecasted profits projected from new income streams did not materialise in 2014 due in principle to reconciliation of information technology platforms, IGB remain confident that significant returns will be generated for the industry over future years from secured contracts with co-mingling partners and supply of live racing pictures to the wagering market. IGB are currently finalising contracts with an established tv provider within the wagering industry and have contracts with some of the largest wagering partners that are due to commence during quarter 1 2015. IGB are encouraged by the support and financial commitment made by these wagering outlets for their future use of the IGB racing product. The demand for the Irish greyhound racing product is greatly enhanced with the badge of a semi-State organisation.What does "due in principle" mean? This paragraph is nothing but waffle, making tentative references to "confidence" about "future years". This is all wishful thinking. The reality is the level of greyhound ownership is down, track attendances are down and the Tote take is down. We received clear and realistic statements from the CEO and the chairman stating the situation was bleak. The chairman says staff morale and relations with stakeholders have been damaged and that this has badly affected the capacity of the Irish Greyhound Board to focus on the future. We are receiving mixed messages. It is suggested everything will be hunky-dory in the future, but the reality today looks serious. Will the witnesses address this issue?
I do not like being told that there is a new board that cannot take responsibility for things that happened under the old one. The suggestion is that we must accept the legacy of the old board, while acknowledging that the new one is not at fault. Representatives of the National Paediatric Hospital Development Board were before the committee three weeks ago and the board had impaired debts of around €40 million. To a large extent, it blamed the old board, but this is not good enough in the case of a commercial semi-State body that must operate on an ongoing basis. The witnesses cannot simply say these are legacy debts - I do not like that message. They must clarify the mixed messages.
Ms Geraldine Larkin:
I will address the Deputy's point on the new board first. Not only has the board changed but the executive has also changed. That was my main point. The executive that was in place at the time of these decision-making processes has changed and for a significant portion of the period in question the organisation operated without a chief financial officer.
Mr. Phil Meaney:
Three years ago, when I was appointed chairman of Bord na gCon, deficits in the executive structure were the first things I recognised. I am not sure for how long the organisation operated without a chief financial officer, but I moved immediately with the board to appoint one. After this, we put a different operating structure in place, although I concede this has taken longer than we initially hoped. The point is that there is a new chief financial officer and that there is a very different structure in place for running the greyhound business than three years ago. This is apparent in the strengths exhibited by those members of the executive present.
Mr. Phil Meaney:
I am not sure if there was a chief financial officer in place at the time the decision was made. I think there was, but some time after that we were without a chief financial officer. I accept that every organisation should have a chief financial officer and, as I said, the current board moved quickly to fill the gap.
Following on from what Ms Larkin said about the previous board, this board was not involved in the decision, but we recognise our responsibility to deal with the consequences, both as a board and as an executive.
We are moving forward, but we must look back because that is what the auditor's report compels us to do. It seems decisions were made on the purchase of the original site, the Meelick site, when it should have been obvious to anyone that it was not satisfactory. As a result, it was purchased for €1.75 million, of which €1.6 million has been written off. What was the relationship between the executive and the board in this matter? How was a decision made to purchase an unusable site owing to its unsuitability and lack of access? Nothing was ever built on it. How was such a big decision made? How did Bord na gCon only discover subsequently that it could not be used for the intended purpose, for a new track and headquarters?
It was not a good decision; it was an atrocious one. Any right-thinking person would not decide to buy a site where problems relating to access had been identified prior to purchase. The site was bought and, of course, the issue of lack of access prevented development.
If the problem was identified in advance and if it was obvious that there was no access, is it not perverse that a decision to purchase the site for €1.75 million was proceeded with? What does the paper trail tell us?
Has anyone been held responsible for it? Has the finger been pointed in a particular direction? Has anyone been asked to explain how taxpayers’ money was wilfully thrown around like confetti, particularly when it was obvious before the purchase took place that the property was unsustainable and could not be used for the purpose for which it was bought? The intention was – this was also the case with the next site – to spend a further €90.4 million on building new headquarters and a new racetrack. In the aftermath of the original decision which was incredibly negligible in nature, a great deal of good money could have been thrown after bad.
I presume no person has been identified as being culpable in this matter. It appears that people can make the most perverse decisions and get away scot free for doing so. The new board is stating this is the legacy of the previous board or executive and washing its hands of the matter. It is riding off into the sunset in the aftermath of taxpayers’ money being wasted.
In view of the fact that there was no reasonable basis for the action taken, it seems the current board and executive had a duty to do so. There was blatant negligence on the part of the previous board and executive in using taxpayers’ money for a purpose which they knew beforehand to be invalid and contrary to what was originally envisaged. Mr. Meaney has stated he is going to seek to determine how such a perverse decision was made and who was responsible for it. Will he revert to the committee with his findings?
Mr. Phil Meaney:
It is currently valued at €160,000. As the Deputy is aware, that is its agricultural land value. It is a non-core asset and our intention to dispose of it. We are somewhat concerned not to dispose of it by means of a fire sale. As a result, we are seeking to identify a way to sell it for more than its current value.
I note that the track I am going to visit tomorrow night has been identified as being expected to be disposed of. I think an overall figure of €8 million has been placed on the old head office building, the land at Meelick and Market’s Field. It is also stated the Harold’s Cross site is included in the list. Why does Bord na gCon propose to dispose of the site at Harold’s Cross? Is it not a successful racetrack?
Mr. Phil Meaney:
In its report Indecon recommended that, with a view to writing down debt, we should sell the site at Harold's Cross. The Minister and the Government appear to be of the view that this is the best way forward. Leaving that aside, as a board and an executive, we are of the view that it makes more commercial sense to accommodate the people who attend race meetings at Shelbourne Park and Harold's Cross, at which, as the Deputy indicated, a lot of good people attend meetings, at one venue.
The profile of those who attend both tracks is different. Shelbourne Park is a more up-market venue, whereas Harold's Cross is the ordinary working man's track. Ordinary people are the mainstay of greyhound racing.
Mr. Phil Meaney:
I have enjoyed rugby matches at Croke Park. If we work through this very carefully, in conjunction with the people who operate the tracks at Shelbourne Park and Harold's Cross and the Department, I am sure we can put in place an absolutely great set-up at Shelbourne Park. Parallel with this, we can release a great deal of capital. Regardless of how we came to find ourselves in difficulty with our borrowings, it is the reality we have inherited. We can dispose of the site at Harold's Cross and accommodate both groups of racing people in one stadium.
Mr. Michael Murnane:
The track in Limerick broke even last year. A profit of €907,000, including track and Tote operations, was recorded. The accounts filed with the CRO account for track operations only and do not include any Tote operations. As I explained this time last year, we only have one licence which is accommodated within Bord na gCon. Including its incidental income, the profit at Shelbourne Park was just north of €1 million. This include the SIS arrangement in place at the venue. The profit at Harold's Cross last year was €203,000.
I do not wish to pursue this matter to any great degree, but is it not the case that too many race meetings are being held, that less prize money is on offer as a result and that the average number attending meetings is 392, which is an extremely small level of attendance?
But they are both profitable. I do not want to take up too much time on this. If they are both profitable and the one that Mr. Murnane was just talking about down in Limerick has not been profitable for a period of time, we need to see Bord na gCon's business plan for the disposal of assets-----
-----and how that will deal with the overhang of debt and why Bord na gCon proposes to close down a profitable stadium. Presumably, if Bord na gCon were to sell the stadium at Harold's Cross, it would be a bit like Limerick. Unless Bord na gCon gets planning permission for a change of use, it will not go far with it. I presume that is a further projection. We need the business plan on the disposal of assets to see whether Bord na gCon is proceeding on a sustainable basis. Is it agreed that Bord na gCon will provide that to the committee?
Excuse me; I do not think that is what Deputy Costello is asking. He is asking for a business plan, and Mr. Murnane's answer would seem to indicate that he will agree with the business plan on some sort of timeline down along the road. Deputy Costello and the other members would like to understand what exactly is Mr. Murnane's approach to this plan and what it will involve. Would that be correct?
We are talking about action now. That is what the Indecon report is about. Bord na gCon was supposed to have a strategic plan by September 2014, and I do not know whether that has been drawn up. Mr. Murnane might tell us about that. There were 27 recommendations in the Indecon report. What is Bord na gCon doing with those? Bord na gCon states it has taken on board the five recommendations from the Comptroller and Auditor General. We would like to see those as well, but what has Mr. Murnane done with the 27 Indecon recommendations and the plan that Bord na gCon was to have drawn up by September 2014. I am not talking about something occurring in the future. If Bord na gCon is to deal with its overhang of debt, then it needs a business plan for how it will dispose of the assets, if that is the main way it will deal with the matter, plus any other proposals it has.
Ms Geraldine Larkin:
If I can respond briefly, in terms of our response to the Indecon, that has been submitted to the Department and published on our website. A link to the document was included in the briefing.
To briefly give the committee an overview of our response to Indecon's - Deputy Costello is right - 27 recommendations, it indicates what we are going to do about each of the 27 recommendations and the timeframe in which we are going to do it. It is very clear, both within the document and then in a summary appendix at the back of the document, how exactly we are going to hit each of the recommendations.
Specifically, Deputy Costello talked about asset disposal and the consideration around Harold's Cross. I have two things to put forward in reply to that. First of all, when the board and the executive were formulating the response to the Indecon report, obviously we looked at what other proposals might be considered rather than an asset disposal of Harold's Cross. The proposals put forward by the executive included a review of all the stadiums that are currently under the control of Irish Greyhound Board, looking at them from the perspective of operational performance, operational surpluses, the freehold or leasehold arrangements on particular sites or stadiums, and, indeed, the particular zoning attached to each one. After that analysis, and, indeed, looking at the surplus that is generated on an annual basis by Harold's Cross and doing a projection on those figures, it was on that basis that the board decided to proceed with the sale of Harold's Cross. While Harold's Cross is in profit - to the tune of €200,000 in 2013 - the reality of the situation the IGB is in is that its debts are far greater than any continued operation of Harold's Cross would realise, assuming we can dispose of the asset with full zoning.
It also has to be considered that, while I accept what Deputy Costello is saying in-----
Mr. Brendan Gleeson:
We have a plan with a set of timelines, with projections for improvement in the financial situation over 2015, 2016 and 2017. There are proposals for disposal of assets.
Deputy Costello mentioned earlier the risk of relying on increased revenue streams for reducing debt. Indecon came to the same conclusion and felt that really it was not possible to reduce the debt without some programme of asset disposal. Harold's Cross, I suppose, was the most valuable of the potential assets for sale.
In terms of the detailed management of the sale of Harold's Cross, those details remain to be worked out; we do not have a detailed plan. What we have is a programme of actions which follow on from the Indecon recommendations, and we would expect that an amendment to the strategic plan of the board would be required, but we do not have the details of the proposals for the sale of Harold's Cross at this point.
So there will be a period of time from now into the future within which some of this may or may not be achieved, because zoning is not an immediate matter. It could take Bord na gCon a considerable length of time. Is that correct?
Or it may not happen at all. It will depend on a large number of circumstances. Rezoning is quite a delicate business and applications for rezoning are often rejected for a wide variety of reasons, particularly in an area that is already built up. There is no guarantee. If Bord na gCon does not get it rezoned, of course, the value it expects from the site is hugely diminished, because it is of no value unless it is rezoned for the purpose it seeks. It is those matters that need to be teased out carefully, and then we can consider whether it is desirable that a profitable race track should be disposed of, whether the new unit in Dublin is the way forward, whether the same racegoers who went to Harold's Cross will now go to Shelbourne Park - as it is a different clientele that goes to the two race courses - and whether what has been successful to date might be best to build on.
These aspects are very relevant to the sustainability of Bord na gCon and its future activities. We need to see the business plan that Bord na gCon is considering to reduce the significant overhang of debt, which has more than doubled in the past five or six years, and for the disposal of assets, which includes, I presume, the Market Field in Limerick, which was the original track. I ask for a commitment that the business plan will be forwarded to the committee once it has been finalised.
I welcome the delegation. Deputy Costello has mentioned much of what I intended to raise, including the debt problems and the pension plan. The Indecon report sets out how assets are to be sold. I know the delegation will not divulge what Bord na gCon would like to receive for these places, but I ask what is the plan B if sales are not realised.
Ms Geraldine Larkin:
In addition to asset disposal, the Indecon response is grounded in a very stringent overview of the performance of stadiums and a change in the mindset when considering the performance of stadiums and the awarding of prize money, as compared with the contribution of each individual stadium back into the industry. One of the key issues for the IGB and for the industry is that we will need to target money where it is giving the best return for the industry. In that vein, we have proposed in our response to Indecon to start measuring the performance of each individual track. That measurement will not be solely financial. In addition to financial measurements, we will also be considering from an industry perspective the relative size of the dog pool within each area, the relative attendance at each stadium, the level of sponsorship attracted to each stadium, growth and development and the local involvement at each stadium. We will also consider the level and state of development of a stadium so that we are not comparing an undeveloped stadium with one that has received significant capital investment. Over time, these figures will give us a much better overview as to where we are getting best value for the taxpayers’ money. In the short term we will work with stadiums in order to explain and evaluate these metrics. However, the reality is that we have to focus prize money and our subvention on those tracks that are contributing the most back to the industry. If we do not realise the asset sale, or if the expected value is not realised, as indicated in our briefing, then the emphasis on the performance of those tracks will become even more severe. The bottom line is that it is down to the individual stadiums having to improve performance on a wide variety of measures.
On that point, Bord na gCon is in a financial hole at the moment as a result of previous years. The new board’s job is to try to fix the situation. Has the Department imposed a deadline? I note that Bord na gCon did not have a chief financial officer before this new board was established. Who is the financial expert telling the board that this plan is credible?
Mr. Michael Murnane:
The cost to date has not been substantial because much of the research contained in the Indecon report originated in our own resources. We looked at the tracks from 2008 to date to check the performance of tracks based on attendance and on the number of dog pools and to work out the averages. We have put together a set of KPI metrics which are built on the facts of the industry.
There is a massive financial problem here, and to be very honest, for the past hour, the witnesses have been a bit woolly on the detail of when deadlines and guidelines were going to be hit and the details of the rescue plan. Does Bord na gCon see itself as needing more State funding? Will the Government need to put in more money because of the financial hole?
Ms Geraldine Larkin:
Our response to Indecon details our financial proposals. The additional funding we have received in the recent budget will enable us to drive forward that process further and faster and will ensure that we can deliver.
In response to the 27 recommendations in the Indecon report, we have set out key actions under each of the 27 recommendations, with associated timeframes indicating where we are going to be and when the action will be done. A significant portion of that work will be completed by the end of 2015. We have also committed to reporting back to the Minister regarding our progress on those responses.
Our analysis of performance includes details such as examining the subvention per attendee at various tracks in order to see where we are spending our money, to understand where the best value can be obtained and to examine how we will provide financing into the future. Our structure is the same as when Bord na gCon was established in 1958. We must now decide whether that structure is still the best fit for us in the future. This is apart from any asset disposal we might consider. We will be looking at the core underlying structures in order to assess whether they are a best fit for the future. We have taken soundings of the views of industry stakeholders as to how racing might be best structured.
There are inherently too many races. There has been an assessment of the cost of running races relative to the contribution being made. We have identified unprofitable races which we would be better advised not to run on a particular night. As part of our calibration exercise in response to Indecon, we have identified at least 86 race nights that will not go ahead in 2015. This decision will be subject to ongoing review.
In some cases the shoulder nights actually arise during the summer. Therefore, it is a question of being as specific as looking on a night-by-night, stadium-by-stadium and track-by-track basis at what it is costing both to deliver the racing, the impact on the industry itself, the stakeholders, the dog pool and the prize money we are issuing. It is a very tight analysis going forward.
Ms Geraldine Larkin:
No, it is not a case of changing them if we see fit. We obviously have to evaluate the Indecon recommendations and put an implementation plan in place. Our executive has been recognised by Indecon as being under-resourced, due to the numbers that were removed from the organisation in recent years because of cost-cutting measures. Consequently, we do not have the facility to appoint a single individual with responsibility for risk and nor do we currently have the capacity to incur that additional resource. Therefore, the risk officer role is deployed through a risk management committee. That committee comprises the entire executive. The risk management committee has completed a risk register with three different gradings of risk. That risk register is then considered by the audit committee of the board and all high risks are considered at every single board meeting until they come down to an acceptable level.
The solution we have proposed is robust. It recognises the limitations of the resources we have available to us, but at the same time delivers a strong risk management policy. From the recommendations in the Indecon report, the key was that we manage the risk and ensure that key personnel have responsibility for addressing the risk as it arises under those areas. Ultimately, it is governed and controlled both by the audit committee in the first instance and by the board in total which has responsibility for it. There are layers of risk governance within that.
I accept all that, but the line in the Indecon report is that at all times the board should ensure that an experienced risk officer and an effective internal audit function are in place. Ms Larkin has mentioned the internal audit function.
Ms Geraldine Larkin:
There are a number of proposals stemming from the strengthening of the board and directors. One of the key recommendations under that broad general category was that board members would no longer act as directors on the local boards of all our stadiums. That proposal is in place so that over the next quarter board members will step back from local boards. That is the first part of that. The Deputy will appreciate that this plan only went in on 10 October. Within the first quarter, the other strengthenings that will happen within the whole governance area include the further training of board members and the executive in board governance. That will also be accompanied by a review of the governance, operation and effectiveness of the board. That is all scheduled to take place. Obviously that work will be tendered to bring in an external person to evaluate it and work with the board. That work is scheduled to be done in quarter 4 or January 2015.
I am not trying to be flippant but I find it unusual that a previous Dáil committee raised questions over this, yet when this committee deals with it we still cannot get the answers about the cost or what was taken from the sale of that part of Shelbourne Park.
I imagine that Mr. Murnane's priorities should also be, as he said, to move on from the previous board and show a level of competence and confidence going forward so that people can say this is the board that will fix it. When I cannot get a figure for a sale in 2001 that was already raised at a previous committee meeting, it is hard to understand.
I know that Mr. Murnane was not there at the time of the Limerick situation as part of the report, but the Department would be aware of what happened at the time when the Limerick situation was going on. Were any red flags being raised?
Mr. Brendan Gleeson:
The answer is "No".
I am reluctant to say this, but it is factually correct that we only took over Bord na gCon in March 2010. The Limerick project would have been well under construction at that point. We would have been briefed on the construction and met a number of times with Bord na gCon, but we would not have been aware of the deficiencies in the process around construction and the purchase of the Meelick site until we had sight of the Comptroller and Auditor General's report.
Mr. Brendan Gleeson:
The reality is - again, I am reluctant to say this, but it is a matter of fact - that what we are speaking about is a commercial State agency, the legislation around which is designed to allow it a certain amount of latitude and flexibility that does not apply to Departments. We have an accountability system that involves certain burdens on the board, the chairman and the chief executive, but it is audited independently by the Comptroller and Auditor General. We have a monitoring system which is very much based on reporting. We hold regular governance meetings, at least biannually, with Bord na gCon and also meet it to discuss specific issues. I am being asked to interpret events before the Department of Agriculture, Food and the Marine took over this body. I am not sure I can do that. I do not believe information was being wilfully withheld from us.
Mr. Seamus McCarthy:
It is important to remember that a previous report by my predecessor as Comptroller and Auditor General in March 2008 which was published in June 2008 was considered at a meeting of the Committee of Public Accounts. I do not have the exact date when it was considered, but that report followed on from an examination conducted by Mr. Tim Dalton, former Secretary General of the then Department of Justice and Equality, of governance matters arising, I think, from the development of Shelbourne Park. The report pointed out that there were difficulties with governance. Some of the key findings included considerable day-to-day involvement by directors in the business of the organisation, including the provision of services; a failure to clearly outline the functions reserved to the board and those delegated to the executive until September 2002 when Bord na gCon formally adopted a code of corporate governance; a division of duties which served to limit the CEO's involvement in a key part of the organisation - Shelbourne Park and Harold's Cross - in the period from 1997 to 2003; a tendency for the chairman to adopt a hands-on approach and, at a later stage, ineffective communication between the board and the CEO and a failure to adequately involve the board in the planning and development of Shelbourne Park in 2005. There is a history of difficulties in Bord na gCon around these developments and their governance and oversight. What is disappointing is that in the period on which we have now reported these problems continued. It could be that they were not adequately dealt with at the time and that adequate structures were not put in place. There are resonances of these findings in the report now presented on the situation in Limerick. That is part of the legacy with which the current board and executive are dealing.
Arising from that contributrion and previous questions, what Department, prior to the Department of Agriculture, Food and the Marine, was responsible for oversight of the operations of Bord na gCon?
There were one-to-one meetings with officials. Did they indicate there was a problem? I was a member of the Committee of Public Accounts which examined not this issue but other issues prior to 2007. Did officials of the then Department of Arts, Sports and Tourism flag to the Department of Agriculture, Food and the Marine that it was taking on a problem case?
Arising from the governance issues which led to the Dalton report and Comptroller and Auditor General's report of 2008, at the time when approval was sought to double the borrowing capacity of the group what examination took place? What in-depth analysis led the Department of Agriculture, Food and the Marine to agree to this?
Mr. Brendan Gleeson:
We have a copy of the correspondence received. Sanction was granted in the context of approval of a strategic plan from Bord na gCon. In the context of that strategic plan, sanction was sought to increase the borrowing limit. The development of Limerick stadium would have formed part of the plan. At that stage it was a very high level document. Sanction was granted on the basis that if borrowing was increased, there would have been no State guarantee for the money which would have had to be met from Bord na gCon's own resources.
Did the Department believe at the time that there was an onus on it to ensure the strategic plan was tested to the point where issues arising from that examination would be highlighted for Bord na gCon? What happened? Was the plan tested in any way? Mr. Ryan may respond, if he so wishes.
Mr. Dermot A. Ryan:
The plan was presented to the then Department of Arts, Sport and Tourism in 2006 or 2007. It envisaged significant capital development at Limerick and a few other tracks. On the basis of the plan, Bord na gCon sought to have the borrowing limit increased to €25 million. It submitted an application to the then Department of Arts, Sport and Tourism in 2009. Arising from it, Bord na gCon received approval to increase its borrowing limit to €25 million.
I understand that, but the Department was. The administration of the State was involved.
I am not being personal because Mr. Ryan was not there but would somebody tell me if the administration of the State, whoever it was, tested that strategic plan or was it just impressed by the story it was told?
Would Mr. Ryan find out what official dealt with that strategic plan in 2006 and 2007? Who signed off on that plan? Was it tested in any way, given the background, from Mr. Dalton’s report right through to the Comptroller and Auditor General’s report? Who tested it and who signed off on the plan? He might be able to tell us, and he should feel free to do so, whether it was just a political decision.
No endeavour. I am asking for the information. If Mr. Ryan or the Revenue Commissioners asked me for my accounts from 2007, I would have to produce them. I am asking Mr. Ryan, on behalf of the taxpayer, to produce his analysis of that strategic plan, which allowed an organisation double its borrowings. That is all I want. The Department has a responsibility to answer that question. It is not Mr. Ryan’s Department in this case but the previous Department. There has to be some link to it. I will ask the clerk to write on behalf of the committee to the Accounting Officer in that Department as well as asking Mr. Ryan to try to get this information. It is critical to how this has unfolded.
During the time of Mr. Nealon’s tenure of office there was no financial officer. Is that right?
The board either had an internal audit committee that has a function or, as Ms Larkin has said, it could outsource it. What was the structure at that time within the internal audit? Was there an audit committee or not?
I hope there are no taxpayers watching this committee meeting this morning. Bord na gCon gets almost €11 million a year of taxpayers’ money and while this is historical stuff it has to be based on something in the past in order to move into the future but from the Department right down questions are not being answered in any way that would give confidence to those taxpayers that this case is in hand. The other issue that arises-----
Mr. Phil Meaney:
On that point, while I accept what the Chairman is saying about the historical issue, it is only fair to the current board to say we recognised the importance of an audit committee and of its being outsourced. While we may not have all the historic answers, we are putting our house in order on functions such as the internal audit.
Deputy Connaughton just asked about the risk officer. Indecon understands that during its review Bord na gCon indicated that it was proposing to appoint a risk officer and said it should take place with immediate effect. It added that at all times a board should ensure that an experienced risk officer and an effective internal audit function are in place.
Mr. Meaney is giving his version of a risk officer which is fine, but this was a recommendation to appoint the risk officer that seemed to have been agreed. I am trying to establish detail here as to what we have learned from the past because the board gets €11 million a year. I am anxious to hear about Mr. Nealon’s time in office which we covered the last time the witnesses were here.
The Department of Agriculture, Food and the Marine was asked at some stage for permission to extend Mr. Nealon’s time as chief executive officer, CEO. What was the response to that?
Mr. Brendan Gleeson:
We agreed to a limited extension under diminished contractual conditions. It was for two years on the basis, as we understood from the board and the chairman, that Mr. Nealon had experience and certain skills critical to the delivery of the strategic plan for Bord na gCon so we supported the request.
Mr. Phil Meaney:
I wrote to the Department on behalf of the board seeking an extension of the CEO’s contract. With the help of an external facilitator we had put a strategic plan in place. Any strategic plan in any organisation is very much based on the CEO. We felt it was prudent to maintain the CEO to deliver that strategic plan. Parallel to that, he was the project manager on commingling and certain other things that we felt would lose momentum if we did not maintain the CEO for a period. As it happened, his extension was granted but he did not accept it and we have moved on.
The point I am making is that he was there during the course of the historical stuff we are talking about. The board then decided in October 2013 that it wanted to extend his time. He is referred to in the correspondence as being a transformational character. I am trying to marry up all of that presentation of his qualities to the Department and whether they shone through in the previous years when he or the board was doing this deal. It is lost on me.
Mr. Phil Meaney:
I have given the Chairman the reasons for putting a new strategic plan in place. The CEO and the CFO were central to that. We felt as a board it was the best decision for the organisation for a bedding-in period and because parallel to that he was the project manager on commingling and the sale of television rights.
Mr. Michael Murnane:
How does the Tote operate? A person places a wager on the Tote, and fully 80% of the Tote goes into the Tote pool. Depending on the margin, the winnings that accrue in the Tote are paid out accordingly in a dividend to the winner. A total of 20% is retained by Bord na gCon and the 20% is used to pay whatever operating costs, etc., relate to the Tote.
Mr. Phil Meaney:
It was a recognition of the employment in the greyhound industry, especially in rural parts of Ireland where there may not be much alternative employment. I think it came after we submitted our replies to Indecon. My view is that it is a supported industry that is good and positive.
Mr. Brendan Gleeson:
It has traditionally been the case that the amount of money given to the Horse and Greyhound Fund has been associated with the receipts from the betting tax. There is an adjustment to the betting tax and next year receipts will go up to €25 million. A decision was made to increase the subvention to HRI and Bord na gCon.
I welcome Mr. Meaney and his colleagues. I am a Deputy for Limerick city. The greyhound track at the Greenpark site is a fantastic amenity for the city. I have fond memories of Markets Field when it operated as a greyhound track as well. I welcome that it is now being developed for Limerick Football Club. It is a fantastic amenity. Nevertheless, let us go back. Much of this is historical. Bord na gCon was before the committee a little over one year ago. Is that correct? We have a special report from the Comptroller and Auditor General. Mr. Meaney will appreciate that as members of the Committee of Public Accounts we are duty-bound to go through what is presented to us. What is the annual budget of Bord na gCon?
I am not looking at detail. I am trying to make a point. It seems extraordinary that for a critical period between April 2008 and February 2012 there was no chief financial officer in place, despite a budget at that level. Let us consider it from a governance viewpoint. This is critical in terms of strategic dates. Bord na gCon purchased the site at Greenpark in June 2008. Does Mr. Meaney not think it extraordinary that during that period no chief financial officer was in place?
I am reading notes provided by the Comptroller and Auditor General. They state there was no chief financial officer in place for the period from April 2008 to February 2012. That is from the Indecon report.
Mr. Phil Meaney:
Yes, I agree with Deputy O’Donnell. Within weeks of being appointed I took the view it was one of the first things that was absolutely necessary. It is important to point out that although there was no chief financial officer, obviously a financial team existed within the IGB. There was a financial team but no chief financial officer.
Who was the boss over the finance team? Who looked after things? In any situation someone must be responsible for the overall financial function. Who was responsible for the overall financial function at that time?
Hindsight is great. I realise the organisation now has a separate set-up. Anyway, the situation that existed, regardless of the personalities, should not have been allowed to continue. Is that a fair comment?
We are working off the Comptroller and Auditor General’s report at the moment. It has not come up before, but it appears that the first site Bord na gCon looked at was the Greenpark site. That was in 2001. At that stage the organisation got the site valued. In 2003, it was valued at approximately €2.2 million.
Then, in 2005 the organisation decided to proceed to put a cap on the amount of money that it would use. The cap was €1.4 million on the purchase of a site. Greenpark was valued at €2.2 million. Of the face of it, it appeared to be a better site given its strategic location. It was on the site of the old racecourse and within in the bounds of the city. It is a good location. Why was that site not pursued at the time?
Let us follow on. Let us consider it in the context of the Comptroller and Auditor General’s report. It strikes me that the Greenpark site was identified in 2000. Bord na gCon was looking at it at that stage. It was valued at €2.2 million. That was not pursued because the organisation was looking into getting the Markets Field site rezoned. Subsequently, nothing happened. The organisation was looking at the Coonagh site as one of various sites. It put a value of €1.4 million on that site.
Then, it appears, a report was completed for the organisation which examined the Coonagh site. It appears the organisation bid on the Coonagh site without any preplanning with Clare County Council and without the specific project having been approved by the board.
Yes, the Meelick site. I know it as the Coonagh site. Locally, it is known as the Coonagh site. I am unsure whether it is in Coonagh or Meelick. I think it is in Coonagh but I am open to correction. Am I right?
Let us call it the Meelick site. It seems extraordinary that the organisation bid at public auction without getting any preplanning from Clare County Council and without getting formal approval of the board. The organisation got a report produced which does not appear to have gone to the board. It stated that there were severe risks in terms of access to the site. Am I correct in what I say?
That should not have happened. Side-by-side with that, there was a site at Greenpark that the organisation had identified some years before. It was valued at approximately €2.2 million. The site was available at that price. The organisation ended up paying €3.4 million for that site. That occurred in June 2006.
The organisation did not nail things down. Clearly, proper preplanning was not done in respect of the purchase of that site, because once the organisation got on that site it did not nail down with the vendor that it should carry out the fill-in of the site in terms of parking. Then the organisation put in for planning for parking on the site that it did not own, only to be told by Limerick County Council that it would only allow for greyhound parking and that the vendor would be unable to use it for other activities. The vendor wanted to appeal the case to An Bord Pleanála but Bord na gCon was against the idea because it would delay the project. The vendor had Bord na gCon over a barrel.
Then Bord na gCon had an issue or problem with the type of filling being carried out. It appears that due to the absence of any proper form of planning Bord na gCon ended up spending €4 million more than it should have spent, at a minimum. A total of €1.6 million was spent on the site being written off in Meelick, €1.4 million went on costs incurred in respect of the site fill at Greenpark, something the vendor was supposed to do originally, and €1 million was spent on a call option held by the vendor with Bord na gCon whereby the vendor could call upon Bord na gCon to purchase the freehold. If proper preplanning had been carried out with Limerick County Council then, at a minimum, the organisation would have gone to the vendor and made the case that it would only buy the site if the vendor extended the site to include an area where Bord na gCon could get parking as well.
It appears the board has a reserve function in terms of capital acquisitions. Was the chief executive bypassing the board? Was there proper reference back to the board? Was it simply too loose?
For me, it is simple. Bord na gCon does great work in the dog and greyhound industry, which is of major importance. The Greenpark racecourse is a fantastic amenity in the city. I come from a county and I represent a portion of Clare where dogs are a major activity, but it is fair comment to say that fences were rushed and improper attention was paid in terms of due diligence prior to the purchase of the sites. Was Mr. Meaney on the board at the time?
Is there anyone before the committee today who was on the board at the time? In hindsight, was the board consulted properly at the time on the purchase? I am not in any way saying that people were doing things that were in any way underhand. I am not questioning the motives. If I was buying something and I had a report with a question over right of access at the Meelick site, I would have gone to the public auction. However, if the site did not make the bid price, I would have contacted the vendor and agreed to buy it, but only subject to planning. There is no way any State body could buy land in those circumstances in future. It had agricultural zoning not commercial zoning. The site had problems with access. Clearly, it was an unsuitable site.
The organisation put in €1.4 million. The site was bought for €1 million. Was the organisation being penny wise and pound foolish at the time? The board, for whatever reason, decided on a cap of €1.4 million when in fact there was a site further up the road at Greenpark for €2.2 million, that is €1.2 million less than the organisation eventually ended up paying. Is that fair comment?
Mr. Phil Meaney:
As I said at the beginning and as the Comptroller and Auditor General is aware, there was a good deal of frustration at the last meeting. The Chairman asked the Comptroller and Auditor General to do a report on the Limerick development. We have that report. There are five recommendations. We have implemented or we are in the process of implementing all five recommendations.
Has Bord na gCon put procedures in place? I am mindful of the people on the board and of the work people do on boards. At the same time we are challenged with putting the questions. This applies whether I am a Deputy for Limerick city or otherwise. I acknowledge the fantastic facility that is there, the employment Bord na gCon provides and the fantastic work it does. Nevertheless we must ensure things are different in future. In hindsight, there should have been a procedure.
Let us consider Markets Field. Either Limerick City Council was going to provide rezoning or it was not. Then we should consider where the best site was strategically. Greenpark was clearly identified initially as the best site. A racecourse had been there previously in the heart of the city. The site was associated with sport and people recognised it. The racetrack had gone to a big facility at Greenpark but that represented a loss to the amenities in the city. Therefore, it would have made more sense to pursue the Greenpark site. Did the board go to the Department at the time? Did the Department indicate it would not sanction such a site? Can the Department comment on the matter? Does that ring a bell? Were impediments put in the way to pursue the Greenpark site at the time?
Mr. Seamus McCarthy:
I think the analysis of Deputy O’Donnell is spot on. There was a problem with the quality of record-keeping in Bord na gCon at the time. We pointed this out to Bord na gCon in the 2008 report and in management letters and so on.
From the records that exist I have seen no evidence of any external involvement in those decisions.
We did not see any correspondence with the Department of Arts, Heritage and the Gaeltacht or with the Department of Agriculture, Food and the Marine in relation to 2003, 2004 and into 2005 when a decision was initially being made on the purchase of Meelick.
It appears that if the consultants' report commissioned on the Meelick site had gone to the board, there is a fair chance that the bid on the site would not have been pursued. It might have been a timing thing at the time as the timescale was very short in terms of completing a report before the public auction. Once one goes to public auction, one is on a hiding to nothing on a risk basis as, ultimately, the site is locked in. I am asking if it was a case of penny wise and pound foolish in getting a site for €1 million which appeared to be good value at the time, but ending up at Greenpark at the road which cost €1.2 million more at the time. In terms of moving forward, those issues must be acknowledged. Is that fair comment?
Bord na gCon identified in the business plan that was formulated at the time that it would sell Markets Field, which has been sold and which is providing a fantastic amenity that Limerick FC will shortly use. It is a civic amenity that is very good. Where does Bord na gCon stand in terms of the sale of other assets? It was indicated that €8 million would be identified. Of that €12.5 million, what would be a sustainable debt level in terms of the Greenpark racetrack?
Mr. Michael Murnane:
AIB. The only issue currently with AIB that is subject to the conclusion of the contract is that it is perfecting the titles held in relation to the three stadiums securing that part of the loan. They are at Harold's Cross, Clonmel and Cork. We are just going through the legal paperwork at this point.
The model that was pursued at the time to go after and develop Greenpark was based on the forecast realisation of €8 million through the sale of assets. The numbers do not change. What happened in the past should not have. Will the racetrack break even in 2014?
It is at a level at which in terms of just being interest only it is washing its face. It is not a burden on the organisation bar the fact that there is a massive debt hanging over in terms of capital repayments. Can the witnesses go back to the €8 million figure and set out the plan for reducing the debt burden in respect of Greenpark?
When one looks at it, that was the turn Bord na gCon took off the road and got lost for a while. The organisation should have gone straight to Greenpark. The head office was deemed to be worth €3.5 million. What is it currently valued at?
I ask Mr. Murnane to tell me about the balance of €6.5 million. Can he give me a level at which Bord na gCon as an organisation will be in a position to be sustainable and to make capital repayments in respect of the Limerick greyhound track at Greenpark?
Mr. Michael Murnane:
The principal task in relation to the bank loans is to deal with the €12.5 million development loan associated with Limerick. That is the principal challenge facing Bord na gCon between now and December 2016. The sale of the assets originally envisaged will generate approximately €1 million or €1.1 million, depending on Meelick. That will leave a deficit of €11 million. The realisation of the asset disposal strategy as laid out in Indecon is being forecast to try to deal with that debt in some portion or another.
I ask Mr. Meaney about the lessons that have been learned from what has happened. Ultimately, we are charged with asking about the public purse and taxpayers' money. What has Bord na gCon learned from what has happened and what measures has it taken to ensure it never happens again?
What is the body's timescale for dealing with the €12.5 million overhang by way of disposals? When will Bord na gCon be in a position whereby the debt levels in Greenpark are at a sustainable level or, ideally, wiped out.
Mr. Michael Murnane:
There is a call on the carpark. There is a condition in the planning permission associated with Greenpark that the carpark adjacent to Limerick greyhound stadium cannot be used for any other purpose other than greyhound racing. There are 100 acres around the Greenpark estate, if I can call it that. If other commercial entities wanted to use it as an overflow carpark, the condition in the planning permission refuses that. If that continues for the next 30 years, Bord na gCon is on call for that €1 million.
Mr. Michael Murnane:
If the owner of Limerick Racecourse Company goes for planning permission for whatever purpose on the adjacent lands and, within the planning, uses our carpark for the overflow and is turned down, it is entitled to call on that €1 million. He has 30 years to make that planning application. That is the period of the risk.
I assume that is a contingent liability because, ultimately, the risk is that if there is any development on the site and he applies for planning and gets refused for the overflow carpark, he can call on that €1 million.
Mr. Michael Murnane:
My understanding of the decision was that there were four acres in that carpark, so four acres at €300,000 an acre would have cost around €1.2 million. The cost of filling that carpark could have cost another €1 million, so that was the €2.2 million. That was roughly the justification beyond the licence.
With due respect, if proper pre-planning had been done on the Meelick site and the Greenpark site, many of these issues would have been avoided. There were clearly complications with both sides. Unfortunately, if one goes into an agreement with a vendor and does not check out pre-planning, the vendor is playing with the ace of hearts or with the trump card. The vendor was playing with all the aces and played his hand. Looking back, not enough due diligence was done at pre-planning stage. Having said that, the site at the greyhound track is a fantastic amenity.
Mr. Michael Murnane:
I have to take the comment made by the Comptroller and Auditor General into account in regard to 2008. There are summaries of decisions but the background to the conversation is sometimes missing and sometimes it is left up to one to decide what was said, what was the assumption and what information was provided.
That covers the records. Looking back on those records, did the auditors, the internal auditors or the others employed - Grant Thornton and Deloitte & Touche - discover any conflict of interest or anything-----
I asked Mr. Murnane about the Tote, a matter in which I am interested. He might correct me if I am wrong in my understanding, as I obviously am. The income from the Tote at the 17 stadia is approximately €20 million.
I wish to ask about correspondence that most members have received. Sent to Mr. Murnane in August 2013, it queried expenditure of €541,231 under the heading of travel, promotion and entertainment. What was the reply? Did Mr. Murnane reply to the query?
It was €10,000 per week, an increase over previous years. I am asking for two reasons - what did it pay for and how does Bord na gCon deal with such queries? Does it openly respond to them or does it simply acknowledge the queries without answering them?
Mr. Michael Murnane:
If we can respond in an open manner, we will. We try to respond as openly as possible. The Chairman will have to forgive me, as I do not have the detail of the €541,231. It normally involves the travelling expenses of the entire organisation, including all 17 tracks. I can reply to the committee with the figure.
Mr. Brendan Gleeson:
From the chairman, we get an annual report as well as a statement of assurance that the codes of corporate governance are in place. We have biannual meetings with Bord na gCon where we go through all of these issues in detail. Where specific issues arise, we meet more frequently.
Given the nature of what is happening and the fact that Bord na gCon has increased funding of €13.6 million, is it not time to have a clear line of oversight on a more regular basis? Consider the Indecon report, the timelines that are to be met and the new board and executive that are in place.
Mr. Brendan Gleeson:
Yes. It is our intention to meet frequently on the Indecon report so as to monitor progress and ensure that it is being implemented. We have also introduced a provision in the Horse Racing Ireland, HRI, Bill allowing us to give a direction to the organisation where necessary and to have more control over the grants it receives. Where we are not satisfied that the strategic plan is being delivered upon or a direction has been complied with, we will have the explicit power to retain grant moneys from the organisation.
I will be brief. Most of this discussion has been about how Bord na gCon will handle its debt, but what is the plan for getting more people through the turnstiles and boosting income? Are there deadlines?
Mr. Colm Walsh:
We have considered the matter in great detail. Ownership and dog pools are at the core of what drives business and income in stadiums. The largest challenge - not just for the IGB, but all stakeholders and participants in the industry - is to increase the level of ownership and restore the dog pools. Working with the stakeholders to achieve these aims is the challenge that we as an executive and the board face. We have plans in place and in development to promote and develop ownership. We will engage with stakeholders in the near future on how to progress the situation. The level of ownership has decreased from approximately 17,000 in 2009 to approximately 8,000 currently. One can see the impact of this on income lines in the stadia, for example, admission fees, food and beverage sales and expenditure on the Tote. We must work through this critical issue with the people in the industry as well as with the organisation. There is no magic road to recovery. There is no quick six-month fix.
We have been examining how to use our food and beverage model as a driver of attendance in the domestic market, for example, special offers and tailored packages on off nights. We would use it as a means of encouraging people into stadia. It would also be a driver in the corporate, incentive and tour operator markets.
We have had some success in recent years in growing the tour operator business and the volumes through the stadiums from tour operators. We are examining engaging with the tourism industry and international trade fairs to drive those numbers in the early part of 2015. Food and beverage is a critical part of that plan and how it looks and what we offer will help to drive attendances in the stadium network.
We are also examining having an increased sales resource and how we can do that effectively. The sales resource we have currently is very limited and stretched in that the people who are in the sales function cover a multitude of other tasks on a day-to-day basis in the stadiums. During the cost reduction phase staffing levels were reduced, therefore, the time available for selling and dealing with customers has been reduced. We are currently concluding a test whereby we are using third party call centres to provide support for the local stadium managers in terms of their sales. They do lead-generation work, business development and cold calling for us. That is very cost effective rather than trying to put a team of sales people on the road. We get an immediate response. We get database building and profiling of potential customers, be they corporate or individual parties. We will be running through an evaluation of that test programme in the coming weeks. If that is proved successful in terms of the revenue generated from it, we will then seek to run a number of those campaigns by stadium during 2015. It is a far more cost effective way rather than having sales people on the ground.
From a marketing strategy point of view, we are promoting the venues on the basis of a brand, a venue brand or entertainment brand within their local market. Previously the main plank of the marketing strategy would have been promoting the Irish Greyhound Board, IGB, but people do not travel to see the IGB. They go to Curraheen Park, Shelbourne Park or Harold’s Cross stadium. We have individual websites and webpages and our digital strategy for 2015 will see the individual local brands in those areas. Their websites will act as a hub for all social media activity and all digital activity and we will be able to engage with people, understand the profile of people coming through the gates, have better segmentation and be able to tailor and customise our activity and our offers towards people based on databases that have been and will be built during 2015.
Mr. Colm Walsh:
The way we work is that each track has its own business plan and its own P&L. We have monthly commercial meetings with stadium managers and we operate on a rolling quarterly basis. On that basis, the quarter forward is planned and reviewed and the figures are reviewed on a monthly basis. If the figures are not achieved for whatever reason, we review them, try to understand why they cannot been achieved and see how we deal with those issues as we move through the year.
I have two brief points. The representatives told me previously that they were the new board and they would examine the manner in which the site was purchased at Meelick despite the fact that there was prior information that it was unusable for the purpose for which it was purchased, how that type of perverse decision could have been made which seems to have been a negligent squandering of taxpayers’ money and that they would come back to us with a report on that. Can they also come back to us with some level of continuity between the boards in the sense that in the introductory remarks it was stated that these were legacy issues from the old board? Therefore, it is trying to deal with them but there is the sense that this is the legacy of the old board and that they can wash their hands of it to a degree. There should be some continuity in that we would not have a totally new board that would say these were legacy issues.
That is a commitment.
Moving on to my second point, I see the wonderful expression in the presentation that the IGB will provide support to the rehoming of greyhounds. What is meant by the rehoming of greyhounds? Various reports are published from time to time indicating that greyhounds when they have passed their sell by date are sold off to various countries - some of them travel to Spain and other countries - are not properly treated and so on.
Ms Hilary Forde:
In terms of our welfare updates, the Retired Greyhound Trust is providing financial assistance to Clare Greyhound Project and Orchard Greyhound Sanctuary in Clare who rescue retired greyhounds from the Ennis Dog Pound. The Ennis Dog Pound accounted for almost 40% of all registered greyhounds that were put to sleep at the ISPCA-run pounds in 2013 and the Retired Greyhound Trust provides rehoming opportunities for these organisations through its network of rehoming agencies. We are conscious of new areas and working hard on them.
Ms Hilary Forde:
A total of 404 retired greyhounds were rehomed from January to November 2014, which represents an increase of 30% from 2013. Such rehoming agencies exist throughout Italy, the Czech Republic and, most recently, Canada. We are exploring every avenue that is possible to find suitable homes for racing greyhounds.
The board meets every month. Obviously, it is vital to get the debt level of Limerick stadium under control. I wish the representatives well on that and hope that happens sooner rather than later and that it does not go to the wire. We have to comment on what happened in the past but the stadium where it is now located is a terrific amenity for the city. It is vital that debt level is dealt with in terms of its sustainability and getting it on a proper footing. I wish the representatives well.
Mr. Phil Meaney:
Yes, but to what level is a debatable point. Up to now we have just had six board members. They would have all come from different aspects of the industry traditionally but there is a move away from that. The most recent board appoint would have been a former vet with the Department.
Very occasionally. Every board must be challenged in some way, in the same way as we challenge the system every week here to one degree or another. I would certainly like to see a contrary or contrarian voice, preferably a contrary voice, on it which would reflect the view of the other side. There is always another side.
Mr. Phil Meaney:
Credit where credit is due, when I say we have contrary voices we have strong people willing to express their opinion. I have been involved in the greyhound industry for three years and I have tried very hard to bring all threads of the industry together. We will not have a good industry until this happens. Sometimes there are difficulties in getting the strands to agree among themselves but we are getting there. Since Ms Larkin was appointed as CEO she has put much work into trying to get all aspects of the industry to go in the same direction.
Will Mr. Meaney take the risk and invite someone onto the board who may have been critical of it in the past or present, and who is recognised within the area of greyhounds, racing and breeding as being knowledgeable, but on the outside?
The Department of Agriculture, Food and the Marine is in charge. Deputy Costello spoke about the transfer of knowledge from the past to the present and the overlap. The Department has been asked questions on this overlap, and the board and chairmen have been asked similar questions, but we have not received an answer. They will be recorded in the transcript. I propose to leave the vote open until such time as we get these answers. Our experience is that getting the answers after the event is extremely slow. I am not referring to the board or the Department, but generally speaking this is what happens. I would like to see the answers in a timely fashion, and the risk is that the witnesses will be invited in again to give the answers directly.
I thank the witnesses for coming before the committee. I wish Mr. Meaney well and I compliment him on his work to date. As a constituent I know how hard he works on the board.