Committee Reports > List of Committees > Dáil > 1990 > Committee of Public Accounts > Final Report - Appropriation Accounts 1988

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of Public Accounts)

Déardaoin, 22 Samhain, 1990

Thursday, 22 November, 1990

The Committee met at 11 a.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 2 — HOUSES OF THE OIREACHTAS AND THE EUROPEAN ASSEMBLY.

Mr. E. Rayel called and examined.

Chairman.—The Committee of Public Accounts of Dáil Éireann is this morning examining the Clerk of the Dáil, who is the Accounting Officer for the Houses of the Oireachtas and the European Assembly, on Vote 2 and the audited accounts for the year ended 31 December 1988. You are very welcome, Mr. Rayel.

Mr. Rayel.—Thank you very much, Mr. Chairman.

Chairman.—There are no paragraphs on this so we will go straight into the Vote itself. May I ask you, Mr. Rayel, in your time or in the recent past has there been an efficiency study of the way the Houses of the Oireachtas are managed?

Mr. Rayel.—You wrote to us, Chairman, in February 1990, asking us to look into this matter. The position at the moment is that the technology manager is engaged full-time on the provision of personal computers for Members. The current position in this matter is that a contract is about to be placed with a view to the equipment being delivered before Christmas. The systems manager has been assigned full-time to the project. As a consequence, he has had to suspend work on the development of information technology for the office, but he will return to this task on which some work has been completed once the equipment for Members is acquired. The purchase of the necessary equipment to implement the IT plan will aim to improve the administrative systems in use in the office and thus contribute to the efficient operation of the Houses.

We are also looking at the possibility of having the management services unit of the Department of Finance examine our administrative systems and procedures with a view to ensuring, as far as possible, that we provide the best service to the Houses within the resources made available. It is not possible for a small office such as this to develop the necessary level of expertise to undertake this kind of exercise ourselves. Such an examination would run in parallel with and be complementary to the development of the IT plan.

Chairman.—I think that is certainly progress, Mr. Rayel, but would you consider asking the Irish Productivity Centre, or someone like that, to look at the whole way the Houses of the Oireachtas operate? It seems to me that from the point of view of both the Members and the civil servants using the House that it is probably the worst equipped head office in town. It has more or less developed over a period rather than in a planned way. It is run somewhat on a shoe-string.

Mr. Rayel.—Yes.

Chairman.—It is not to criticise the civil servants or the Members; we have both been doing the best we can with the facilities. It is time, from the point of view of efficiency and effectiveness, that the whole manner in which the Houses are run and managed should be looked at. With the equipment which is available, and the modern technology — we are now nine years off the 21st Century — it is time decent standards were achieved.

Mr. Rayel.—I will see to it that that proposal is examined.

Chairman.—Thank you. Any other questions? On the Vote itself, what sort of appropriations-in-aid would the Houses of the Oireachtas have?

Mr. Rayel.—They are divided into two. One is Members’ contributions under the European Assembly Irish Representatives’ Pension Scheme, 1979. That is a contribution by MEPs towards their pension rights. They are accounted for as an appropriation-in-aid. The second is a smallish sum which relates to the sale of postcards of Leinster House and the booklet, Tithe an Oireachtas.

Chairman.—The reason I raise this issue is that we all bring in school children, groups of old folks, or women’s clubs, men’s clubs, or whatever it happens to be, to do a tour of the Houses of the Oireachtas. Most people have set foot in the Houses of the Oireachtas only once in their lifetime. Some people will never set foot here. There is very little to give them when they are leaving in the way of literature that they could read about the Houses and which would improve their knowledge of how democracy functions. I am just wondering if, as in the House of Commons, or in other parliaments, it might be considered providing a shop in the Houses of the Oireachtas where we could actually charge for the facility and in which we would have available information booklets and leaflets on the way the Oireachtas operates so that schools, groups and individuals would be able to benefit.

Mr. Rayel.—My understanding is that the Joint Services Committee is looking into the proposals to have a shop here.

Chairman.—Is it under examination?

Mr. Rayel.—Yes.

Chairman.—Any other questions? Mr. Rayel, I understand this is your last appearance after a life-long service in the public service.

Mr. Rayel.—Yes

Chairman.—I am sure your career is not going to end at this stage and that you will go on to do other things. I would like to say that the work you have done in the public service is greatly appreciated and certainly in your attendances before this Committee you have made every effort to help and assist the Committee in reaching its conclusions. Whatever it is you go on to do from here, we wish you every happiness and success and we would like to express our appreciation and thanks for your dedication and service down through the years.

Mr. Rayel.—Thank you very much, Chairman.

Deputy M. Ahern.—I would like to second you wish for a long and happy retirement to Mr. Rayel. Over the last eight years his attendances before this Committee have been exemplary and I join with the Chairman in wishing you every happiness for the future.

Deputy McGahon.—I, too, would like to be associated with those wishes, and to say that I borrowed a pound from him last week and I hope to return it to him before he retires.

Deputy Connor.—May I also wish Mr. Rayel many happy years of retirement? He has had a long and distinguished career in the public service. We thank him for his hard work in the Houses of the Oireachtas. I have always found him to be most conscientious and helpful.

Deputy Cullimore.—I, also, wish to be associated with those good wishes and remarks and to thank Mr. Rayel for the courtesy he always extended to me.

Mr. Rayel.—Thank you very much, gentlemen.

The witness withdrew.

VOTE 34 — INDUSTRY AND COMMERCE (RESUMED).

Mr. John Donlon called and examined.

Chairman.—The Committee is now resuming its examination of Mr. John Donlon, the Accounting Officer for the Department of Industry and Commerce. On the previous occasion we informed Mr. Donlon we would send a list of questions to him. It would not be an exhaustive list but would be one to which we would require replies in advance of his attendance. You are all in possession of the questions and replies received so far. You are welcome, Mr. Donlon.

Mr. Donlon.—Thank you.

Chairman.—Having examined the responses to the queries raised following your appearance before the Committee in September, would you agree that the IDA, as a big player in the property market, are not answerable in a commercial sense for decisions on transactions they made?

Mr. Donlon.—I would have to point out that the IDA’s involvement in the acquisition of property could not be described solely as a commercial activity. It is dictated by what are seen as real needs in an industrial development sense. There are many matters that we have sought to justify to you previously, the reason for the existence of this policy, the benefits that it has brought. In judging the performance of the IDA, one has to take a broader view rather than the straightforward profit and loss occurrences in the disposal of lands. Having said that, on examining the response to the questions which have been raised, we have found some concern with them.

Chairman.—May I ask you specifically about the site at Ballyfermot, which was purchased and developed at a cost in excess of £2 million but sold for £250,000 and which is now, I understand, on the market for £4.2 million? In an interview on “Today Tonight” shown recently, an executive director of the IDA, Mr. P. J. Daly, said that the IDA could have done a conventional rescue package but instead took the land from Semperit for £2 million to keep the company going. This raises several questions. Is this, in reality, some form of dressing up of the IDA accounts where a grant-in-aid is given to troubled companies without it actually being shown? Does this procedure circumvent normal procedures and is this common practice? Would it be common practice to give a grant through the backdoor in this way? How would that, in turn, appear in the accounts of Semperit? Does it mean that Semperit would not show in the accounts grants that they received but rather would show the sale of, or a reduction in, assets? What is the full implication of giving a grant in this way?

Mr. Donlon.—While I heard the interview to which you referred, obviously I cannot answer for whatever might have been in the executive’s mind at the time. In so far as the specific points which you have raised are concerned, we could not accept that this could be described in any way as a grant-in-aid. We believe the IDA believed that the land in question would be of use to them particularly if certain developments were undertaken. It was seen to have an intrinsic value in its own right. They purchased the land from the owners. The owners happened to be Semperit. If it transpired, as was suggested in that particular programme, that there was an element of rescue involved in it, it is something that would cause us great concern and something which has caused us concern to the extent that we have since raised it with the Authority. As to whether or not it is common practice, I am assured that land is purchased for the purpose we have already indicated to you, which is its intrinsic value for use in industrial development purposes. Again, we would be very surprised if it was common practice and certainly if there wa an element of rescue involved in it. Finally, as to how it might be represented in Semperit accounts, I would imagine that it would have been regarded or treated as a sale of an asset by Semperit and the proceeds would have been recorded accordingly.

Chairman.—In the case of your concern expressed here this morning which you have pursued with the IDA, would you let the Committee know of the outcome of your deliberations when you have had a reply from the IDA in this matter?

Mr. Donlon.—I will certainly but, as I said, I would be very surprised if a rescue element was put forward as being the basis for the purchase.

Chairman.—If you want to view a copy of the “Today Tonight” tape there is one outside. It has been gone through and that is what was said on it.

Mr. Donlon.—I have seen it.

Chairman.—There are a couple of other questions. On examination of the land transactions, four of them were found to have been repurchased by the original vendors but only in one case was a profit shown, even allowing for re-valuation and depreciation. Would you agree that these purchasers can realistically look on the IDA as a soft touch?

Mr. Donlon.—The method of acquisition used by the Industrial Development Authority is set out in some detail in the report which has been submitted to you. We are quite satisfied that the different mechanisms which were in place were adequate for the purposes. First, on the manner in which the lands are acquired, it may be that in certain instances local people would be aware of who was buying and for what purposes. It has been mentioned in the report that there have been instances where a number of landowners would actually have to negotiate with the Authority on the purchase or assembly of a particular site. Secondly, the land which the IDA seek or sought to acquire had special attributes such as would render the property to be described as quality property. It would need to be suitable for industrial purposes. It was either zoned or capable of being zoned for industrial purposes. This would confer a premium on the property. In those circumstances, it is to be expected that a price above an agricultural price level would arise in the purchase of land. As to whether the IDA are seen as a soft touch. I am not too sure that the attitude towards the IDA or any other Government agency or, indeed, local authorities would differ very much in the eyes of possible vendors of land.

Chairman.—Let me just take the four sites which were found to have been repurchased by the original vendors. In Letterkenny the IDA purchased a site from a person for £440,000 and sold it back to that person for £112,000. In Ballisodare they purchased a site for £72,000 and sold it back for £65,000. In Sinnottstown they purchased a site for £77,000 and sold it for £13,000 and in Carrick-on-Suir they purchased a site for £56,000 and sold it for £15,000. All of those sales were back to the original vendors. It seems to me quite extraordinary that that should happen — from almost £80,000 down to £13,000. Surely there was somebody else locally who would have been interested in buying the site for something more than £13,000. It raises the question of whether these sales were pursued vigorously and if the IDA really tried to get the best purchasers for these sites. The efforts to answer these questions and the performance by the IDA in a recent defence of their situation do not stand up. I have a certain sympathy for you, Mr. Donlon, as Accounting Officer being in here accounting for the IDA. Unfortunately, as statutory Accounting Officer that is your duty. I hope the concerns expressed by the Committee will result in you and your Department sorting out the IDA and whoever in the IDA are responsible for conducting their affairs in this manner.

Mr. Donlon.—Let me start at the end. First, the concerns which we have recognised have already been discussed and are the subject of contact between ourselves and the IDA. Second. I mentioned to you on previous occasions that we had decided to undertake a full review of this particular policy area. This review will be broad in scope and conclusions will be reflected presumably in changes in direction. To the extent that there have been criticisms of the IDA and their performance, again, I will have to return, first of all, to the point that this particular area of activity should not be viewed simply as a commercial acquisition of property and disposal of property activity. There is a much more important element involved, which is the provision of lands for industrial purposes. The benefit which has accrued from this policy over the years is one which I am not in a position to quantify at the moment, but given that we have many industries established on lands which were previously owned by the IDA, employing people, making an economic return to the economy, there has to be a benefit which would be brought into the balance sheet there.

Additionally, in disposing of the lands, it will be seen that in these disposals we are talking about here today, the IDA departed from their normal practice of dealing directly with a prospective industrialist and engaged auctioneers’ valuers for the purposes of the disposal of land. Such disposals were widely advertised both in the national and local press. All lands were sold either as a result of auction, public or private tender. Some of the cases to which you refer relate to where the original owner repurchased the land. The Letterkenny case, the first case you mentioned, was widely advertised. It was a lot in excess of 50 acres and it was decided to break it down into four lots. One could tender either for one lot, four lots or something in between. It went to tender and as far as I am aware there were three bids. The highest bid was accepted. Going into such a situation, if one is selling, one sets a reserve price. If the reserve price is reached, one normally sells.

The question that such a loss was incurred in this particular transaction is obviously one about which I am concerned. The loss in itself — perhaps not the loss, but the gain to the repurchaser — was quite substantial. In circumstances where you are embarking upon sales of this kind you go through the proper procedures, you put it up for public auction or deal with it by way of tender and there cannot be a guarantee that you are going to get not alone your book value cost, not to mention your historic value cost——

Chairman.—But in the case of Letterkenny, because this man was smart enough to deal with the IDA he actually gave his land away, got his land back and ended up with £328,000 in his pocket, on top of getting his land back.

Mr. Donlon.—He ended up with £300,000 in his pocket at the end of the transaction, but the reality is that there were two other bids in the process and his was the highest.

Chairman.—In 1988, when this disposal took place, the cost of the land had been £11.815 million and it was sold for £4.1 million, a loss of £7.715 million. Of course, when it was purchased a number of years would have passed by, but just taking the actual figures themselves, who provided the advice which underscored the Government decision to dispose of surplus IDA property?

Mr. Donlon.—My recollection is that the Government decision was taken in the context of Estimates decisions of that particular year.

Chairman.—Who advised them? Who said to them the IDA have a lot of land, they could sell it off and you could get money from there? Was it your Department or did the IDA make the suggestion themselves?

Mr. Donlon.—The IDA did not make the suggestion themselves. The decision would have been based upon papers the Government would have had before them at that time in considering the Estimates for the Department.

Chairman.—Were there outside advisers, who sit on advisory committees, who suggested that this would be a good idea?

Mr. Donlon.—I am not aware of the existence of any formal committee at that time. Obviously there was the widely publicised advisory body in the Department of Finance.

Chairman.—Did you advise it? Did you give the advice that they should be sold? You are the Secretary of the Department and the Accounting Officer. Was it your advice?

Mr. Donlon.—I do not know if I am supposed to talk about the kind of advice that one gives to Government. It is, in fact, the Minister’s advice to Government, if it is advice at all, and I am not sure if I am free to disclose the nature of advice that goes to Government. What I can say is that in the normal Estimates process, you will have an input by the particular Department whose Estimate is being considered. You will have an input by the Department of Finance and you will obviously be aware of the existence, over the past couple of years, of another body which has participated in an expenditure review process.

Chairman.—This is the Colm McCarthy committee and people of that kind?

Mr. Donlon.—That is an advisory committee. Otherwise I am not aware of the existence of any committee which might have advised on this particular aspect.

Chairman.—Once the decision was made, was that it? Was it to be implemented regardless of cost or loss? Was there not a presumption that if these sites were to be sold, there would be some control on the way they would be sold? Was it monitored from there?

Mr. Donlon.—The Government took the decision in the context of the Estimates exercise. It would have been conveyed by us, in the normal course, to the IDA. There was a recognition that, given depressed market conditions, given the fact that properties had to be disposed of within a finite period, some loss could arise. There was no indication as to the size of losses that might be incurred. In the course of the disposal by the IDA of the lands — and I think this was the subject of a separate question in the report itself — there was contact between the IDA and the Department. This was centred mainly on the question of the non-disposal of Ballylongford which was a significant element in the mix and these discussions led to a reduction in the amount of money that was subsequently required from the IDA by way of contribution from the disposal of assets.

Chairman.—But can we take it from what you say that the Government were not aware that there were likely to be substantial losses on these sales when they were advised to make them?

Mr. Donlon.—As I said, there was a recognition that, given the depressed market conditions, given the need to sell pretty quickly, there was a possibility of losses being incurred. These were not quantified and, obviously, could not have been quantified until such time as one saw what the market value for the particular tracts of land were. Obviously the market value can only be determined when there is someone there willing to buy the land.

Chairman.—But we can take it, I presume, that the Government were not aware that £11.7 million sales would be sold for £4.1 million, that there would be such substantial losses?

Mr. Donlon.—It could not have been known at the time that the Government took their decision.

Chairman.—When it did become clear, were the Government kept informed so that they could attach conditions to the sale, or did the sale just go ahead regardless?

Mr. Donlon.—We did not actually become aware of the level of losses that were incurred until after the expiry of the 1988 year of account. We were satisfied that the appropriate procedures had been put in place for the disposal of the land, that everything possible was done to ensure that the best price possible was obtained. We are still satisfied to that effect, that the procedures were there, but we are talking about a set of circumstances where we had depressed market conditions, we had a need to sell within a particular length of time.

Chairman.—Finally, presumably, if the Government took a similar decision tomorrow, as Accounting Officer you would ensure that this sort of thing did not happen again, that the IDA would be more selective in their disposal of sites? If the Government take a decision, an agency of the Government must be presumed to do the best it can, based on that Government decision. I presume that if a Government took a siimilar decision tomorrow or next year, you would monitor the situation and ensure there was no repetition of this level of losses on disposals?

Mr. Donlon.—Well, obviously we would not wish to set any parameters within which Government might decide what sources they might use for raising of funds. On the basis of our experience in what I would describe as this forced disposal of lands, it would certainly be my position that we would urge very strongly against embarking on any such course in the future.

Chairman.—Deputy McGahon offered and then we will have Deputy Rabbitte.

Deputy McGahon.—I, too, feel a certain sympathy for Mr. Donlon because he is trying to defend an impossible situation and I am sure he does not relish it. This story is a tragic one and is like something from Hans Christian Andersen because it is an absolute fairytale. I cannot understand why there was a blind decision to proceed regardless of what was realised. At a previous Committee meeting I suggested it would be helpful to this committee if a representative of the IDA, a senior executive was here to explain to the Committee how this sorry story came about. The scope of the Committee should be widened to enable all State bodies being examined to have a representative here. It would help the Committee in their deliberations.

The problem in this case arose initially at the purchase. I fail to see, given the previous record of success by the IDA in selling land, how this fiasco could suddenly have been arrived at because the record of the IDA over the years has been quite successful in selling off land. Why this sudden unbelievable loss? I would like gently to pick up a point made by the Chairman. Was there not a reserve price, were the implications not apparent in almost every case that there was going to be tremendous loss in individual sales and were the Government not informed of that likelihood? Was the need to obtain £5 million — a rather small sum in these days in any context such that land should have sold at a dreadful loss? Could that land not have, been kept as a land bank for better times ahead? What hole did £5 million fill? It would not pay the social welfare in one county for one week. It was a blind decision to sell off assets that had been acquired at inflated prices. No private company could work or function in that capacity and no bank manager would entertain further deliberations from any man who sold off the family silver at such give-away prices.

There is one other point that I would like to address. I believe that the problem arose initially because inflated prices were paid by the IDA for land in the respective areas. There is no doubt about that. Perhaps it was the knowledge locally that the IDA were interested in purchasing the lands that resulted in inflated prices being paid. That should be addressed by the IDA and it is hoped that they will learn that from this story. IDA involvement automatically inflates the price and I hope some other method will be used in years to come when purchasing land without local knowledge that the IDA are interested. There must be some mole within that organisation that alerts local people that they are interested in that land.

On page 24 of the report, at paragraph No. 16 it is stated that auctioneers were instructed to ensure that the sales were conducted at arms’ length, whatever that means. In the case of a site in Edenderry an architect who was formely a member of the IDA staff acted for a company in purchasing a site. Is it possible that there were other people within the organisation who were not uncovered, who assisted other companies in acquiring land, who alerted them, tipped them off or told them that it was likely that the land could be obtained at a very realistic price?

Mr. Donlon.—We have had quite a range of questions there. Let me start by referring to the present position and the IDA learning from this. The reality is that the IDA are not in the business in any significant way at this time and, in fact, have not been over the past number of years. The report which you have sets out the level of recent acquisitions and over a period from 1985 to 1989 we are talking about 200 acres having been acquired over that five year period. Notwithstanding that, obviously such lessons as can be learned from this have been learned by us and will, of course, be learned by the IDA.

On the question of IDA staff, my recollection from the report is that the person in question actually left the IDA a good many years ago. I have no reason to believe that there is any other person, given the search that obviously was involved in extracting that piece of information. Given that, I would be happy that they made a thorough search and that there would be no-one else in the wood-work or behind the wallpaper. As to IDA staff possibly alerting people about sales, I am not too sure what the merit of all that could be in that the actual sales were widely advertised both locally and nationally. Auctioneers were there and the actual sales were by way of auction or tender.

Apart altogether from that, I would be absolutely shocked if the IDA, or any staff member in the IDA, did seek to benefit in any way from this disposal. One could ask, if they were going to do that in this instance would they not be doing it in the normal course? In the normal course the track results have been such that one would certainly not believe that anyone might have benefited in that the IDA for the greater part received an economic cost or the historic cost for the particular properties. I would certainly be concerned, and I have no doubt that the IDA themselves would be very concerned, at the possibility of any such occurrence. I am satisfied that it has not happened.

The Deputy referred to the fact that the IDA had been successful in this activity. One should point out that when it is viewed in the context of their involvement in this activity, not being a commercial activity but rather as part of an industrial development programme, their performance has been remarkably successful. In those cases they were actually disposing of the land for the purpose for which they were in the business, which was to industrialists and it was being disposed to them at the economic cost. You will have seen in a number of the replied here that the objective is to seek a full pay-back at least in so far as the State is concerned and that it is still the considered view within the authority that the return will be achieved even in such areas as Ringaskiddy which have been the subject of questions and Dungarvan and other areas. The objective still is to show no loss in so far as the State is concerned while at the same time creating the facilities for the attraction of industry to particular areas. They have been successful when they have been disposing of the land for the purpose for which it was acquired in the first instance.

On the question of the reserve prices, a reserve price was established in each case. I am not aware of any case where the reserve price was not achieved. The reserve price was one which was struck on the advice of the professional expertise which the IDA engaged. It had to be. If you were disposing of a particular piece of land, you had to talk in terms of what would be available, given the known interest and possible uses and so on for the land. Reserve prices were, as I said, established on foot of auctioneers’ or professional advice.

On the question of whether or not the Government were informed of the likely losses, I did reply to the Chairman earlier to the effect that there was a recognition that certain losses would have been incurred but there was not recognition that losses would have been so high as they actually transpired to be.

Finally, with regard to the question of the IDA purchasing land at inflated prices, the report that members have in front of them sets out quite detailed criteria which the IDA consider must be in place before they acquire land in the first instance. Satisfying those criteria means that you have got quality land for the greater part, although there may be some small parts in it which, for some reason or other, perhaps are not. You are talking about the acquisition of quality land at a price which is obviously going to be higher than that which would be available for agricultural purposes. Beyond that, obviously, locals will know of an interest and, as I mentioned earlier, there have been occasions when the IDA, in order to accumulate a particular site, did actually have to deal — and whether they dealt personally or through their auctioneers I cannot say — with, perhaps, two or three property holders. However, notwithstanding that, every effort would have been taken to ensure that the land was obtained at the best possible prices.

A suggestion was made earlier that the tract in Ballyfermot was acquired at an inflated price. In checking out that suggestion, I am assured that the prices at which the land was actually acquired was that which prevailed in certain other areas, within Dublin, for land of this particular type, having all of these attractions that were seen to be necessary before the IDA would purchase in the first instance.

Deputy McGahon.—In respect of what Mr. Donlon has said, I believe the problem really initiated at the purchasing. While I accept the criteria which are required, suitable land and so on, I feel that the involvement of the State agency does lead to an inflated price. Farmers are known to use “sweeteners” in a case like that. I believe there should have been a recognition at some level, whether by the IDA or the Government — I say that gently in deference to my colleagues here — that the price obtainable, or the price available, was way below a realistic level and in that case the land should have been held in reserve for a better time.

Deputy Rabbitte.—Would it be fair, Mr. Donlon, to summarise this by saying the Government made a decision to raise £5 million from the disposal of lands not considered suitable for industrial use any more by the IDA, on which process we lost almost £8 million? Would that be a fair summary? Did we establish, without going into the privileged nature of the relationship between a Secretary of a Department or civil servants and the Minister and the Government, whether that decision was prompted by outside advice or from within the Civil Service? Did I understand you to say to the Chairman that it was prompted by outside advice?

Mr. Donlon.—No. I am sorry. I was very reluctant to say to the Chairman what the nature of advice, either from my Department or anyone else, would have been, but what I did say was that the Government in reaching their decisions on the Estimates would, as in the ordinary course, have inputs from the relevant Department, the Department of Finance. For the past couple of years, there was an additional input and this was at the Department of Finance level where you had this body sitting. I acknowledge they were there and, in so far as I am aware, in response to the Chairman, I said that there was no other body in place. They would have had the range of documents before them in reaching their decisions that they would normally have. I am not aware that there was any particular individual or agency or anything like that which would have made a specific suggestion. The Government decided to raise £5 million in this way and that was it. That decision would have been made on the basis of all information available to them.

Deputy Rabbitte.—You do not feel you are in a position to tell the Committee the genesis of this particular idea? Selling off resources and losing £8 million was not a great contribution to the £25 billion national debt.

Mr. Donlon.—I suppose many little things make a larger unit, but it would be reasonable to comment that at that time there was a series of decisions taken in order to realise certain properties. Whether one was aware of that policy as a general rule, or how influential that would have been on the Government’s decision on this issue, I cannot say. I will say — I mentioned this previously — that in the course of the industrial policy review in 1984, certain guidelines were established for the holding of land, etc., by the IDA. It was recognised at that time that while the policy was the correct one, there may have been a situation where too much was being held. Because of that, we have seen the cutbacks in expenditure in this area.

Deputy Rabbitte.—Yes. Just to short-circuit that, Mr. Donlon, I do not think any member of this Committee disputes the necessity to have taken drastic remedial action to rectify the public finances. I believe that is only a distraction, if I may say so. What I am trying to establish is if, within the terms of reference of this Committee, we could make any progress in particularising the authors of this decision. Whose bright idea was it that selling off IDA land could make a contribution towards solving that overall problem?

Mr. Donlon.—Beyond indicating, as I have done, the types of documents the Government would have in front of them when they are reaching decisions on this, and I do not know what other inputs there might have been at the Cabinet table, I do not think I can go beyond that.

Deputy Rabbitte.—I understand that. My view is that, thank God, advice to Ministers is generally left to civil servants, if this is the kind of decision we get from outside experts. It would appear to me that it is a question of outside experts because it is extraordinary that you did say to the Chairman you did not know that the land was being sold off in this manner until after it was being sold. You knew about the decision, you knew about the Government decision in macro-terms, but as to the actual selling off of the parcels of land and the losses that were made and so on, you did not know about them until after it was done?

Mr. Donlon.—I am sorry, I hope I did not mislead earlier. We conveyed the Government decision to the IDA. The IDA decided how they would implement the Government decision. They informed us of their proposals for the disposal of land. They were noted and the IDA went ahead with their programme. I think that is what I said to the Chairman earlier. I also said there was a recognition that given the depressed market conditions at the time, given the need for sales within a finite period, there could be some losses. We were not aware of and could not anticipate the kind of losses that would have been incurred in this activity.

Chairman.—May I just interject one question at this stage because we did not get a clear reply to it earlier? When the implications of this drastic decision were evident, did the IDA at that stage advise you or the Government?

Deputy Rabbitte.—That was my next question, so you can answer the Chairman.

Mr. Donlon.—I did mention that we did not become aware of the level of losses until after the year of account which would have been last year. What we did seek to establish with the IDA in the currency of this period was the progress that they were making towards achieving the £5 million or £3.8 million to which it was subsequently reduced. At that stage we were informed of progress. We were not aware of the losses that were being incurred in the lands which had been actually disposed of at that time.

Deputy Rabbitte.—That stretches credulity a bit far. Taking the more startling examples, some of which were touched on this morning, it is a little difficult to understand how, for example, the IDA could have paid £2 million for a site, put it up for tender, found that there were no tenders, according to the report, and sold it subsequently, the report says for £250,000. If I were handling that matter as chief executive of the IDA, and were faced with such figures, purchased at £2 million and selling at £250,000 — we now have a professional auctioneer telling us that it is worth £4.2 million — I would make sure that the Department of Industry and Commerce knew that this was likely to be the implication of implementing the Government decision in respect of that transaction. I find it extraordinary that that was not done.

Mr. Donlon.—The level of loss, as I have already acknowledged in this case is a matter of at least some concern. I do not know if the land will eventually be sold for an amount in excess of £4 million. I believe it is on offer. I do not know if any interest has been expressed in it at those levels and what it might eventually be sold for — it could be substantially less than that — but I accept the point that it might be in excess of the price which the IDA obtained for the disposal of that property. The price at which it was acquired, as I have indicated, was at the level per acre which was the going rate for land of this particular kind within the Dublin area at the time.

The Deputy referred to a professional auctioneer’s view that £4 million plus might be obtained from it. As can be seen from the report there is also a figure provided by a professional firm of auctioneers and estate agents and that figure transpired to be the figure at which the IDA disposed of the land. As to whether the chief executive of the IDA at the time, on seeing that this was the price it was going to go for, should or should not have contacted the Department with a view to bringing this disposal to an end, I cannot comment on his thinking at that time, but, yes, we are concerned about it. A number of concerns have arisen, and we dealt at some length earlier with the question of rescue.

Deputy Rabbitte.—Let me just put it in a general way. It seems a little extraordinary in respect of a Government mandate to the IDA to cough up £5 million towards our national problems at the time, that when the IDA tried to implement that decision and found that they were going to do so at the cost of making the kind of loss that was suggesting itself at that time, the chief executive, or somebody on his behalf, did not say to the Department of Industry and Commerce that this decision of the Government was all very well but that if the IDA were to proceed with it this was the order of the loss they would have to take and to account for subsequently. I find it extraordinary that your Department was not apprised as this developed.

Mr. Donlon.—As I mentioned, we were apprised by the IDA in the initial stages of the possibility of loss in the circumstances. The likely loss was not quantified and there was no communication through that period of losses which were being incurred in the disposal of the lands. I cannot answer for the chief executive of the IDA as to what he should or should not have done.

Deputy Rabbitte.—The documents that we have before us and your own answers have leant heavily on the question of the acquisition procedures being impeccable, being set out, being observed scrupulously and the nature of the professional expertise secured in order to implement this Government decision and so on. It does not automatically follow that because one has professional expertise, whatever this is, that makes the situation right in all circumstances. We spent all day yesterday in the Dáil dealing with insider trading and the Stock Exchange in the Companies Bill. It seems that insider trading goes on in more areas than just the Stock Exchange.

Mr. Donlon.—Again — and this touches on a point which has been raised previously by Deputy McGahon — I cannot accept any suggestion of anything untoward being undertaken on the part of those who were involved in the actual disposal of the land. I have absolutely no reason to believe that that would have happened. I presume that is what the Deputy means by insider trading. I have no reason to believe it and on the basis of the performance of the IDA I would be very, very surprised and concerned if such were to be the case. As I said to Deputy McGahon, the IDA themselves would be very concerned if such were to be the case.

Deputy Rabbitte.—I find it difficult to believe. There are a number of examples. The Chairman abstracted one of them which showed that in selling a parcel of land in year X and purchasing it back a few years later one has made £300,000 in the process and that it is entirely an accident of the marketplace.

Mr. Donlon.—You did comment on the question of engaging expertise. All that we can do is seek to engage the best expertise available on the market and that was done in this instance. I agree that we can engage expertise in many areas and we will have differing views put forward. I hope one is not addressing one’s remarks to any particular person, but we have seen the legal profession thriving on offering views on differing issues and so on. An effort is made to engage the best possible advice. One would be wrong if one did not do that and one can only proceed on the basis of what one has.

Deputy Rabbitte.—I fully accept that. It is the lack of monitoring and of control that concerns me and that appears to be an internal matter for the IDA in the first instance and for the relations between the IDA and you in the second instance. I tabled a question to the Minister for Industry and Commerce on this last Thursday. He made a remark that he was in favour of selling off unproductive assets and so on. Nobody can argue with that, although there are some questions to be raised about the situation we find ourselves in now. However, his overall point was that he was waiting for the report of this Committee. That concerns me in so much as the Minister seems to be putting a lot of faith in the findings of this Committee, and looking at the documentation that we have received and at the difficult task Mr. Donlon has, given the brief that he is handed in this situation, we ourselves do not have the professional back-up to prepare a report that is worthy of the dimensions of the problem that we have got here. I am very concerned about that. Some of these cases need particular examination, because it is impossible to put general questions to the Accounting Officer on a matter such as this. I am sure he is answering from his certain knowledge, in so far as he has knowledge, that in each case it is purely an accident of the marketplace, but that stretches credulity and I would not be happy from the documents that have been supplied to us and on the information that we can elicit here, that it would be a thorough investigation of this situation.

Mr. Donlon.—Obviously I cannot comment on the type of report you will prepare. I also am aware of what the Minister said in the Dáil last week. I have already said to the Committee that from our viewpoint we have had some concerns. We have been in discussion with the Authority about those and I have indicated I will come back to the Chairman in due course.

I also mentioned that there has been a change in policy, that the IDA are only marginally involved in this area of activity but that notwithstanding that, we have decided to initiate a full, comprehensive review of this arm of industrial policy. That review will be as comprehensive as possible and will obviously deal with out experiences in this area. To the extent that lessons can be learned from that we will obviously be taking such measures as are required in order to put those into place. It is not a question of sitting back and leaving everything lie at this stage. We are in contact with the IDA about our experiences in this particular case.

Deputy M. Ahern.—First of all, it appears to me that the procedures for the sales were done as per rules and regulations. What resulted does not mean that it was right or wrong to do what was done. I would like to pose a few questions and make one comment. I would like to know whether there was any purchase of sites in those areas where the sites were sold off since by the IDA? Secondly, was industrial development restricted in any of the areas where the sites were sold off by the IDA because of the lack of available sites? I would also like you to comment on this. If we had sites throughout the country which were not being used and were unlikely to be used, expenditure on them had already been made by the State, and if one could use the word that there was a certain “loss,” how much of it was to the State, even though you had an asset and there was expenditure already on it? Some people might say that that was a loss to the State so would not the sale of those unusable assets be reducing a loss that was already there?

Finally, I believe it was a policy decision years ago to purchase sites throughout the country. People got carried away and unecessarily bought up a great deal of land. That led to the instigation of this problem.

Mr. Donlon.—On the question of any purchases in the area since, on the basis of the figures I mentioned a few moments ago, I can only express the view that I doubt it very much, given the very small purchases that have been made in the last five years. We are talking here about the last year. On the other point, was development restricted? The IDA were very careful in identifying the lands for disposal to ensure that particular areas would not be deprived of facilities, be they advance factories or lands. In compiling the list of properties — it would be no harm to go back to page ten to look at the criteria that were used — the properties were deemed to be surplus to immediate needs thereby minimising any negative effect on the IDA’s job creation programme; buildings which were generally empty; sites which had incurred least development costs, and so on. I do not think one could accept that an area was restricted or impeded in any way in its industrial development by virtue of these disposals.

On the question of a loss to the State and the possibility that at least with these disposals we were getting something back, that is on the basis that you are writing off the original figure, and I do not think that one could accept at all the question of loss to the State. What we are talking about is an investment in industrial policy, in the provision of a certain infrastructure which would make the attraction of industry easier. It has proved to be successful; the question of holding land banks is one which is regarded as being a successful policy and I would not accept the thesis that there has been a loss. We have seen a number of benefits accrue as a result of the holding of such sites and lands.

As to the point whether people got carried away in acquiring sites, the reality is that it was at a particular period of growth when our industrial promotion agencies did not have available to them what was regarded as being an important element of industrial promotion, i.e. lands and factories. There was a need to build up a land bank and this was done in a way where it was evenly spread throughout the country.

Deputy Cullimore.—Just a brief reference to the Sinnottstown Lane site in Wexford. My recollection of that site is that it was purchased when the market was very high and there was a great air of expectancy around. It was purchased for quite a considerable amount of money, but in 1987 when they disposed of it there was certainly an air of gloom around Wexford that that site would never be developed. I would like to put on record that Raymond Corish & Co. Ltd., who are auctioneers, and are a very reputable company, one of the most reputable companies in Wexford, would certainly be very aggressive in the marketing of any site. The Committee will be glad to know that that site, having been in the wilderness for years, is now being developed. I must say that I am very grateful to the IDA that development is taking place.

Deputy Taylor.—When this instruction about raising the £5 million came through, was a timescale set?

Mr. Donlon.—They had to return the funds to the Exchequer within the year of account.

Deputy Taylor.—What length of time did that, in practice, give the IDA to raise the money?

Mr. Donlon.—I suppose it would have been the year as a whole, as long as adequate proceeds were in at the end of that period. They would have had practically the 12 months within which to put arrangements in place for disposal and actually dispose and return funds to the Exchequer.

Deputy Taylor.—Was it simply a bald instruction, raise £5 million at any price irrespective, were there no qualifications? Was it a bald instruction to raise £5 million no matter what?

Mr. Donlon.—It was not a question of disposing come what may. The request basically required them to do so on an evenly spread basis and phased over a period so as not to result in a glut in the market.

Deputy Taylor.—Would it not have been reasonable to interpret the instruction as being to raise £5 million provided it is reasonably prudent to do so and provided reasonable prices can be obtained, rather than just raise it at any price, throw caution to the winds and have a give-away operation? Would that not have been a reasonable implication?

Mr. Donlon.—The actual directive was to provide £5 million to the Exchequer on foot of disposals of land and factory space.

Deputy Taylor.—When it comes to the interpretation of that instruction, to take an extreme case, nobody would advocate selling £100 million worth of materials for £5 million. Would there not be an implication there that one would have to apply a caution to the position, an implicit directive even if it was not explicitly spelt out?

Mr. Donlon.—We would certainly be concerned if the attitude of the Authority was that they could just dispose of what they liked. My understanding is that the Authority identified the areas for disposal having regard to certain criteria and that having done so they would seek to achieve the best possible price for the disposal of those lands.

Deputy Taylor.—Is it correct to say, then, that reliance was placed on the reserve prices set by the auctioneers who were given the job of organising the sales? Did they make recommendations on reserve prices?

Mr. Donlon.—That is my understanding, that the reserve price was that which was advised by the auctioneer on the basis of his professional expertise.

Deputy Taylor.—And those recommendations were accepted?

Mr. Donlon.—As far as I am aware, the recommendations would have been accepted. I am not aware of any instance where the property was sold at a price below that which was identified by the professional advisers.

Deputy Taylor.—Did it occur to anybody at all, either in the Department or in the IDA, that it is a well known, time-honoured practice in the auctioneering profession when a potential vendor asks them to set a reserve, or to give a valuation with a view to sale, the figure they give is the lowest possible figure that they can get away with, for the obvious reason that that facilitates them in making their sale?

Mr. Donlon.—I cannot say whether it occurred to anybody. The reality is that the sales were by way of public auction or tender. The price that was achieved was the highest price available and at no stage was it below the reserve price that was indicated by the auctioneers.

Deputy Taylor.— Would you not agree that when auctioneers know that there is a sale coming up for them, human nature being what it is, they will recommend as the reserve a very, very low figure because the lower the figure they give, you will agree, the better the chance they have of having a sale struck and of their obtaining their commission? It is notorious in the auctioneering profession that they will tell an intending vendor that the reserve is to be the lowest possible figure so that they can increase their chances thereby of ensuring that a sale takes place and that they obtain their commission.

Mr. Donlon.—I can accept as a general principle that perhaps a safe bottom line might be struck, but the reality is that the prices that were available for these parcels of land were those that the market was willing to pay at the time. In many instances, as far as I am aware, the actual selling price was in excess of the price advised and in no instance was it below.

Deputy Taylor.—The fact that it was above the reserve price, would you not agree, substantiates my point that the reserve figure struck is always a very, very low figure?

Mr. Donlon.—I could not accept that it was the case throughout this that they had set a very, very low figure. I would expect that the prices which were advised to the Authority were those advised on the basis of the best information and knowledge available to the auctioneering firm at that time.

Deputy Taylor.—How would you know, or how would the IDA know whether it was a very low figure or not, because all you were going on, as I understand it, was the reserve figure that was put to you by the very auctioneer who was being given the job of selling the land, not by an independent auctioneer? How could you know whether it was a reasonable reserve or a low reserve?

Mr. Donlon.—Personally, I would not know but the property division within the Authority have certain expertise available to them and I am sure, on the basis of their consideration of the facts of the case and of the case presented by the auctioneers, that they were in a position to accept that the price which was indicated was a reasonable price.

Deputy Taylor.—Have they got valuers in the division? Are these valuers that you are talking about people who know property values? Is that what you mean?

Mr. Donlon.—As I understand it, the property division is staffed by professional people with expertise relevant to this area of activity. As to whether there is actually a valuer within that division, I cannot say at the moment.

Deputy Taylor.—Very well. If they are people with valuation expertise, that is good enough in my book. Did those experts prepare valuations, their own valuations of what these parcels of land were reasonably worth?

Mr. Donlon.—I presume that they had their own idea as to what the pieces of land were worth.

Deputy Taylor.—I am not talking about their own idea. Did they prepare a document setting out what, in their opinion, was the value of the various parcels of land?

Mr. Donlon.—As I understand it, the decisions actually to sell at particular prices would have been one which was taken by an executive committee within the Authority and, in some instances, by the executive board within the Authority. On the basis of my understanding of the operation of those two bodies, I would be very surprised if there was not a thorough professional analysis of the professional advice that was given to the Authority by those relevant experts within the Authority.

Deputy Taylor.—So there would have been a document prepared then by the experts, that would have gone before the board?

Mr. Donlon.—I would expect that there would have been.

Deputy Taylor.—Can we see that document? Is it available?

Mr. Donlon.—I do not think that such a document would be made available to me as an internal document within the Authority.

Deputy Taylor.—Can it be made available to us in this Committee?

Mr. Donlon.—I do not know.

Chairman.—The position is that the Committee have the power to send for persons, papers and records. In the event, of course, that persons do not comply with such a decision if the Committee so decide, it would be up to the Committee only to report that to the House. Under our terms of reference we have the power to send for persons, papers and records.

Deputy Taylor.—I am asking that the Committee send for that report. Such a document would be crucial to this issue because it would show what valuation was put on these lands and we could relate that to the valuations given, to the reserve figure quoted and to the price actually obtained and see what that might throw up. I am asking the committee to agree that we would ask for those valuations and reports that were put up on those figures in respect of those parcels of land. It would be a key factor in the equation.

Chairman.—Are there any objections to that? Do you have any objections to that?

Deputy Dennehy.—No.

Chairman.—Since there is no objection, we should ask for that report. Perhaps, Mr. Donlon will communicate that to the IDA.

Mr. Donlon.—You are asking me to communicate the request to the IDA?

Chairman.—Yes.

Mr. Donlon.—I will do that.

Deputy Taylor.—There is one final question. On page 10 you set out at paragraph 6.3 a list of criteria that were given for the disposal of particular parcels of land. I find it a little strange that one further criterion was not included there which would have said something like, “sites on which a reasonable offer might be forthcoming”. In other words, that it was not taken as an important criterion that those sites which would be chosen would be those on which a fair and good price would be obtainable. The criteria set there are thrown up on a kind of open-ended basis on the selection of which particular properties would be let go. I find it somewhat surprising that one of the conditions did not say, have another look through the portfolio and in the times that are in it and the conditions that are there, select those in which we can get a fair, good price, rather than pick out anything which would go at a low price.

Mr. Donlon.—One of the objectives, obviously, of the Authority was to ensure that they were not demuding themselves of what are regarded as being necessary facilities. In order to do that, you will see one of the criteria was “the least attractive sites or portions of sites were selected”. Obviously, sites on which you were going to get a very high return are sites which, perhaps, the IDA would wish to retain for the purpose for which they were originally required, which was the promotion of industrial development.

Deputy Taylor.—When the lands were being put up for auction, or whatever, would it not have been widely known in the area that this was a pressure sale of IDA land, where there was a pressure on sale, where people living around would know that this land had to be sold and was going to go at a low price and that there would be a response to that accordingly?

Mr. Donlon.—First of all, it would have been known that the IDA were engaged in a specific programme of disposals of land. Certainly in a local area I am sure there would have been knowledge as to which lands were owned by the IDA and if these came on the marketplace, and they were widely advertised, certainly there would have been knowledge of the fact. They could have put two and two together and perhaps decided that this was a forced sale.

Deputy Taylor.—That cannot have helped to keep reasonable prices up.

Mr. Donlon.—I have already accepted that there would have been an influence operating at local level which would have impacted.

Deputy Dennehy.—In relation to the sales Deputy Ahern made a very valid point — which I mentioned at our last meeting — that it was a question of getting rid of loss-makers. I am sorry Deputy Taylor has just left because I think the perfect criteria were set and one of the key ones was in regard to buildings generally empty for over five years. I made the point that we had taken a lot of abuse, even as local public representatives, prior to my coming to the Dáil, on allowing a situation to exist where buildings were empty. In fact, there was a policy of not giving them for commercial-type purposes but only for strictly industrial purposes. I had argued that over the years. I think the criteria set were perfect.

I would like to compliment Mr. Donlon for his very detailed responses and answering the 20 or more questions put on the last occasion. Many people may have found the steam gone out of their argument today because they were failing to come up with any new points having had their questions answered so comprehensively. A factor that has to be considered having looked at the criteria laid down on page 10, which are very important, is that we needed to get rid of some of what we had, particularly boglands and marshlands.

That leads me to my next point. We had a discussion with the Comptroller and Auditor General the last day on accounting practice. There are two factors involved. The changes in accounting practice are mentioned on page 9. At the end of the day I got a long answer about what are real facts and real figures. I would still like to know how they affected the two figures which make up the total loss. We have heard before that an accountant can do almost anything with figures, but I would be worried about the actual changing of the format of accounting. On page 12, we see that there are two basic costs on the land which are involved in accounting and in the sale price. One is the purchase and the sale price — subtract one from the other and there is a given figure — but we are talking about the development costs and we see that these are spread over the entire land, even though the portion sold, which we are now referring to, often did not benefit from the development works being at the rere of the land holdings. etc.

It was also put that the acquisition cost was apportioned equally over the entire site, irrespective of the quality of the lands being sold. Moving on from there, we come to deal extensively with one specific sale, that is the Ringaskiddy sale. I will try to narrow it down. Ringaskiddy is in my own constituency and I am totally au fait with the area, and have been for the past 20 years, and what we have been doing there. We purchased 1,024 acres at a cost of £4.2 million at that stage, but in fact the development costs were £14.2 million, more than three times the purchase price. Obviously they have a ratio of three to one in changing what we would call the cost factor per acre. In this, we took in marshland, boundary and so on, they are all mentioned here. When the directive came, and this is why I said the criteria set were important, we sold a bog that could not be developed for anything. I know the actual land involved. On page 20 we deal with breaking down the specific price, the cost of acquiring and the sale price and we see that the loss would be £440,000 but, in fact, the development costs were £1.8 million for that particular bit of land. If we move on from that I want to say that I am worried, as a non-accounting person, about the practice which we use and which is presented to me as a public representative. On page 21 it is stated:

When account is taken of (a) sales to date, (b) sales under negotiation, (c) land on option and (d) present selling price per acre in Ringaskiddy, a surplus, over and above the cost of site acquisition and site development, in the region of £2.5m. will be generated when the site is disposed of in its entirety.

I have had this pitched in my local paper— which I am sure I will be forgiven for naming, as the only person left in the press gallery is a representative from the Cork Examiner — but we have told the people of Cork about what a scandal this is in Ringaskiddy and how much has been lost there because we sold off portion of our 1,024 acres: 152 acres have been agreed for sale, even though that sale is not completed; there are 149 acres under option and 348 acres are still available for promotion.

That sale has been described — and has gone out from this committee — as being a financial disaster. If this is typical — and this has been dealt with at length — we are not presenting a true and fair picture. In a book-keeping exercise we are showing a loss of £8 million in a year or two years because of certain things that were done. Taking it overall from the changes in 1982 onward, the picture is not nearly as bad and I agree totally with the sale of what was described as the unsaleable element of a holding which is not normally disposed of. In this case 30 acres of bog were involved, which obtained full acquisition value at a figure which I have already stated and we are still presenting factual figures as being a loss. There is a credibility gap here.

People can talk about Ballyfermot or any other place with which I am not au fait, but for Ringaskiddy we are presented with an inaccurate picture. We may have been presented with an accountant’s picture, a bookkeeper’s picture or comptroller’s picture, but from the point of view of industrial development and progress over the past ten or 12 years it is not accurate. Some of this land we would have had for 20 years. Certainly if the IDA can sell bogland at no matter what price, I say “Well done”. I know there are other areas over which there can be argument, but for Ringaskiddy, the bottom line is not as bad as it is pictured. I do not have questions on that because we have got comprehensive anwers. What we should look at as good news is another change in policy by the IDA; that is where there is private financing for developments.

I put down a question concerning the technology park in Model Farm Road, where out of seven buildings only two were financed out of the IDA property budget. Since then all of the high tech buildings, which are of the highest standard in the country, have been privately financed. There is a chart showing plans into the eighties for this kind of development. Private developers have agreed to provide 25 new private sector buildings, seven of which are completed, seven under construction and nine to commence in the 1991 programme. This is the good news side of the IDA and reflects the change that was made in 1982-83. At that time there was public fear that we were pumping money into the IDA to build factories willynilly, to buy thousands of acres and put up factories all over the country which in many cases were not going to be occupied. This changed policy where we have private financing is most welcome and I hope that it balances in some way the gloomy side that we have been discussing.

I do not have any questions on this, but I would like to put my views on record because I would like to give a fair picture, as far as possible, of the way I read the accounts. It is not a cover up for anyone, it is not an argument over policy, it is just putting down the facts as I see them.

Chairman.—Mr. McDonnell might wish to respond to that.

Mr. McDonnell.—Some of it anyway. I think that Deputy Dennehy was concerned on the last day about the impact on the figures of the revaluation exercise which was carried out in 1985 by the IDA — that was done in the context of the industrial policy review at the time. At that time it was recognised in regard to the properties which the IDA had acquired — I am not going to go into the question of whether they had acquired them at a market price or an inflated price — that the value at which they had acquired them was not the realisable value in the context of their industrial promotional policy and that they would not recover those costs from the industrialists to whom they would be seeking to dispose of the sites. At that time, and as is said in one of the appendices to the later document, the accounting policy of the IDA was changed. In 1985 they did write down their total portfolio of properties — and it is clear in their published accounts — by £47 million. I think what Deputy Dennehy is concerned about is whether, when one starts talking about a loss one is talking about a loss as against the written down value of the property or about a loss as against the original purchase price.

Lands are acquired by the IDA over a certain number of years. Lands which were acquired years ago were being disposed of in 1988 at a price less than they were bought for. It is immaterial from the taxpayer’s point of view whether the IDA reflect that difference partly by way of a revaluation of their property in 1985 and partly by reporting a loss in 1988. The fact of the matter is that the difference is the cost to the taxpayer. That is what I said the last day. From the point of view of the IDA reporting it — and that is what comes out here in the document — there is a figure calculated by reference to the price at which the IDA had revalued it, but there is also the price referred to as the original purchase price. I emphasise again that the difference and the cost to the taxpayer is the figure that I had been talking about.

The other point raised by Deputy Dennehy was the question of development costs and the apportioning of the development costs over the whole site. He gives the example of the Ringaskiddy case on pages 19 and 20. The document explains in paragraph IV on the Ringaskiddy sales, what this means. Basically it means what Deputy Dennehy said it means, that the development costs are apportioned over the whole site. Therefore, if they are disposing of a particular part of the site it bears its proportion of the development costs which might not necessarily be recoverable or usable in the context of that particular part of the site. In the case of Ringaskiddy what the document is saying is that in regard to the portion of the site which they have already disposed of and taking into account the proportion of the development costs involved on that part, they have incurred a loss of £2¼ million. What they are saying is that when and if they dispose of the remainder which comprises 348 acres, which is available, 149 acres on which there are options and 152 acres agreed at the prices which they are receiving to date, they will convert that loss into a profit of £2.5 million. Therefore, they would be visualising making a gain of £5 million on the remaining disposal of those properties. Whether that will materialise or not I do not know and I would not speculate on that. If what is said there happens, then the Ringaskiddy site total package will have come out in the way in which it is projected there. That depends on the realisation of the aspirations stated in paragraphs 8 and 9 on page 21.

Deputy Dennehy.—May I ask Mr. McDonnell, from the accounting angle, if it might be a very neat formula to spread the site development cost over the whole area? Main roads have been built through this site and yet, at the outset, we can give for example, a percentage of 20 per cent, that cannot be developed for industrial purposes. Is it good practice then to put down site development costs in this case as £1.8 million? It is a very easy formula to divide the total costs of an area, but is it good from our point of view to do that?

Mr. McDonnell.—That is the practice followed by the IDA and followed also by, for instance, other agencies like the National Building Agency. I suppose you are going to have to put the roads through the whole site. I do not suppose you can come to a full stop, so to speak. If you were to apportion only the development costs over the portion of the site which you expect to sell, you might be in the same situation, because you have to look at it in relation to what you can recover from the industrialists. If there is an over-weighting of development costs in relation to a particular part that you are expecting to dispose of, then you may have a loss on that in any event. So it may be as broad as it is long. It would be a difficult exercise to apportion it only over what you are going to sell, because you do not know at that stage what you are going to sell when you are starting out on the developing of a site.

Deputy Dennehy.—That particular case is unique because it is over 1,000 acres, but certainly the picture is not anywhere near as dismal as this decision to change the practice and to attribute acquisition and development cost to the whole of the site which, apparently was not done previously.

Mr. McDonnell.—The attributing of the development costs of the whole of the site is not a change in accounting policy. The change in accounting policy in 1985 was to revalue the properties downwards.

Deputy Dennehy.—Mr. McDonnell beat me to the punch there. What they did in this case was attribute a land cost to the whole of the site, based on the full cost. Previously, apparently, lands which could not be developed were not costed at all. This is what I am told. They did not put in a cost for areas that could not be normally disposed of or normally used but in this particular case at top of page 22, section 3——

Mr. McDonnell.—Yes, that was one particular instance.

Deputy Dennehy.—The reason for saying this is that we will be meeting major developers, foreign developers, in Cork over the weekend in relation to Ringaskiddy and that whole project. I certainly would not want anything to go out from any Committee, particularly from this Committee, in relation to Ringaskiddy. It is a major issue in Cork city and county. We are talking about the best part of £100 million spent between deep water berths and so on. I would not like any lack of confidence to develop from the discussion here. That is why I would like to get the record as accurate as possible as I see it, as a layman and a representative of the area.

Mr. McDonnell.—The particular case on page 22 was an unusual case. Fifty per cent of it was undevelopable. By and large, one would hope that the IDA when buying sites would be looking at it in terms of the smallest possible proportion of it being undevelopable.

Chairman.—I want to bring this discussion to a conclusion at this stage. First of all, notwithstanding the Committee’s decision to send for the IDA document, which we can consider in due course, perhaps on the next occasion when the Accounting Officer is in, or whatever the Committee should decide, we should try to bring this section of our discussions to a close. In order to ensure that the deliberations of the Committee are fully reflected, the two reports and the written questions sent to the Accounting Officer will be included in the report of the Committee. That is number one. Number two, Mr. Donlon, you will inform the Committee of the outcome of your deliberations with the IDA as soon as possible?

It seems that there is prima facie evidence that no matter how the thing is dressed up, the IDA paid over the odds for the land in the first place. There is an indication that there is prima facie evidence to support that. It is also clear that the IDA were holding too much land. This might have arisen because of over-enthusiasm in the 1970s and running too far ahead of projected job deliveries, but it should also go out to the IDA, and every other agency, that those who implement policy cannot do so with blinkers on, working on the basis that Government are solely responsible for the consequences, for example, the head-in-sand approach, or the abdication of their responsibility. When the Government take a decision to sell off an asset, the agents of the Government should make every effort to ensure that the State gets value for money in the disposal of those assets.

Lastly, it seems there is a serious failure in the completeness of the information the Government are entitled to get and, indeed, that Parliament is entitled to get from the agencies in a timely manner, which might have prevented some of these sales taking place. The Government might have decided, or the Minister might have decided, that had they been so informed that some of the sales might not have gone ahead. Therefore, we should have to mark ourselves dissatisfied with this whole matter. As things stand I do not see much point in bringing a special report into the House just to have it left on the Order Paper. I recommend that the Committee ask the Comptroller and Auditor General to undertake a special review of how Government Departments and agencies implement Government or departmental or agency decisions to sell off assets, and to lay down guidelines to be followed in such transactions. If the Committee agree with that, we can ask the Comptroller and Auditor General to undertake such a report.

Deputy Dennehy.—We so agree, Chairman.

Chairman.—We may return to the matter when the IDA document is before the Committee at some stage in the future Mr. McDonnell.

Mr. McDonnell.—May I respond to that, Chairman, just very briefly, because I want to be clear as to what I can do and what I may do. I have often emphasised here and in other places that I do not have any function vis-à-vis policy. The Government take policy decisions and I have no function vis-à-vis those decisions. The implementing of policy is what I am concerned with and what you, I think, Chairman, are concerned about. That is an area where I do get involved. I have to agree with what Deputy Taylor said earlier. It is implicit in any Government decision that it be implemented in a prudent and practical manner. Relevant to the Government taking any decision is the question you just mentioned, Chairman, of the completeness and the quality of the information and the keeping of the information up-to-date so that the Government are fully informed and so that they can make fully informed decisions. Indeed, I might say, Chairman——

Chairman.—And, I say, Mr. McDonnell, and Parliament, in reviewing those matters.

Mr. McDonnell.—I thought you were talking in terms of implementing the Government decisions as such. Let me say that this question of the quality and the completeness of information on which decisions are based is, in fact, recognised in other administrations where the question of value for money auditing has been developed as an aspect of value for money auditing. It is clear that the audit authority has no function vis-à-vis the decision made. In some administrations it is recognised that it has a function to review that procedures are such that the information on which the Government base their decisions is complete, full and up-to-date. In that context, what you have asked me to do, I suppose, impacts on the whole question of the review of my mandate.

If I could suggest to you, since it does impact on that area and since the Committee had a special report on this and since it discussed it on a number of occasions with the Secretary of the Department of Finance who was very supportive of the Committee’s approach on this, that in regard to what you have said, which would be a wide-ranging exercise, I would look at it with yourself and with the Secretary of the Department of Finance to see how we could set the parameters of this exercise.

Chairman.—Very well. I think we can agree with that. Finally, we can agree also that the sooner the report on the powers of the Comptroller and Auditor General are implemented the better.

Mr. Donlon.—Just one small point of clarification, you referred to when the IDA document is available——

Chairman.—The IDA document that we have asked you to communicate to them that we are seeking.

The witness withdrew.

The Committee adjourned.