I invite Mr. Purcell to introduce Vote 30 and chapters 11.2 and 11.3.
11.2 Fishery Harbour Centres
Failure to prepare Annual Accounts
There are five designated Fishery Harbour Centres in the State — Killybegs, Castletownbere, Rossaveal, Howth and Dunmore East.
Section 4(1) of the Fishery Harbour Centres Act 1968 (the Act) states that the Minister for Communications, Marine and Natural Resources (the Minister) shall manage, control, operate and develop each Fishery Harbour Centre.
Section 8(1) of the Act states that the Minister shall, as respects a Fishery Harbour Centre, cause to be kept, in an approved form, all proper and usual accounts of all moneys received or expended in relation to the Centre. The accounts of the Fishery Harbour Centres are audited by me in accordance with Section 8 of the Act.
The 1999 Income and Expenditure Accounts and Balance Sheets for the five centres were certified by me in January 2003.
My Office raised the question of the lack of accounts for the years 2000 to 2003 with the Department in November 2004 and a schedule was agreed for the production of the outstanding accounts for audit. The Accounting Officer informed me that the principal reason for the delay in the provision of accounts was exceptional pressure on the Department's accounts branch due to changes in the Department's functions during the period. External accountants had been engaged in January 2005 to bring the accounts up to date and draft accounts for the period 2000-2004 were eventually submitted for audit at the end of May 2005.
He was of the view that the installation and roll out of the new financial management package to the Fishery Harbour Centres was providing timely and accurate financial information on the payments side and when fully applied would underpin regular reporting as well as completion of the annual accounts to deadline in the future.
Previous Audit Concerns
Paragraph 28 of my 1999 Annual Report expressed concerns regarding the increase in the level of debtors in the Fishery Harbour Centres over the period 1996-1999 and the poor and varying performance of the different Centres in relation to debt collection.
In response to my concerns at the time the Accounting Officer stated that the then current standard procedures for collection were being reviewed with a view to effecting improvements in efficiency. He also stated that steps to improve collection would ensure that available income was maximised and would be accompanied by continued rigorous control of expenditure to ensure the viability of Centres going forward. The position in relation to debt collection was under review and any further action, identified to effect the necessary improvements in the position, would be taken.
Current Audit Concerns
Bearing in mind financial control and governance requirements I sought the views of the Accounting Officer regarding the Department's oversight of the Fishery Harbour Centres in the period 2000-2004 and the effectiveness of the collection of Harbour Centre debts.
Accounting Officer's Response
General
The Accounting Officer informed me that the fishing industry had, over the period in question, been going through a very difficult time economically due to declining stocks and, as a consequence, ever more stringent conservation measures. In recent times sharply increasing fuel prices are having a major impact on costs for fishermen. The effect of these factors has been to reduce the volume of landings, the number of active vessels, the volume of in-harbour processing activity and a reduced ability to pay with a consequent increase in bad debts.
He observed that harbours are funded through rents and charges and that charges had not been increased since 1990 and revenues in the early part of the period in question had not kept pace with costs. A significantly increased rate of charge, coupled with the introduction of new charges for services that were previously free, was introduced in 2003. There was strong resistance from the fishing industry to the new and increased charges and the real benefits of the new and increased charges were only really being felt towards the end of the period.
He stated that there was a substantial programme of change and modernisation taking place in relation to structures, roles and responsibilities and work practices and procedures in relation to the management of the harbours generally. It was intended to move at harbour level to a situation where the local Departmental engineer has a much greater and closely defined role in the local management of each individual Harbour Centre as part of his/her responsibility for a geographical area. It was also envisaged that further changes would be implemented as a new integrated fisheries information system and a new financial management package became fully operational.
Response to Specific Queries
· How did the Department perform its oversight duties for the period 2000 to 2004?
The Accounting Officer stated that during the period in question there had been considerable difficulties in relation to the filling of Harbour Master vacancies. This had resulted in a more direct hands on approach by the Fishery Harbours Division of the Department. There was day to day interaction relating to routine administration and a programme of regular visits was supplemented by additional specific issue visits. During 2004 the Fishery Harbours Division was restructured to enhance management and oversight of the Fishery Harbour Centres not least because of the continuing vacancies among Harbour Masters. As regards financial oversight the Department's accounts branch exercised some direct functions in relation to the financial processing of payments. On the receipts side the installation of a new accounting system in 2002 enabled receipts/debtors to be better monitored.
· Was the level of control during the period satisfactory and what specific controls were in place in each Fishery Harbour Centre to ensure the correctness of all payments and the prompt and efficient recovery of all due receipts?
Based on the information available to him the Accounting Officer said he was satisfied that payments were subject to satisfactory authorisation, control and oversight. He went on to say that Expenditure at the five harbours is broken down into three main categories: Labour, Current Operational Expenditure and Engineering Expenditure both Current and Capital. As regards Labour Expenditure timesheets for industrial workers are certified for payment by supervisors and processed weekly by the Department's Accounts Branch. All Current Expenditure payments arising from the operation of the Fishery Harbour Centres are handled and authorised centrally in Fishery Harbours Division. No major payments are authorised locally. Invoices received are certified at the Fishery Harbour Centre and forwarded to the division for scrutiny, authorisation and processing. Additional staff are being deployed to check invoices and streamline processes. Engineering expenditure, current and capital, is handled by Engineering Division which oversees the execution of necessary works both by the Department's own staff and by contractors. Invoices are approved within the Engineering Division. The Accounting Officer further stated that he was satisfied that controls were adequate to ensure the correctness of all payments but a process of continuous improvement needs to be sustained.
As regards receipts the Accounting Officer stated that Harbour Dues are now calculated locally at 3 Fishery Harbour Centres (Killybegs, Rossaveel and Castletownbere). Harbour dues are calculated in Fishery Harbours Division for 2 Fishery Harbour Centres (Howth and Dunmore East) pending the filling of Harbour Master vacancies. There had been a review of financial procedures and invoices were now being generated on a more timely basis and collection of dues was being more vigorously pursued. However the fully effective operation of these procedures was critically dependent on two factors. Firstly the appointment of Harbour Masters to existing vacancies -- offers of appointment have recently been made by the Public Appointments Service. Secondly the timely provision of fish landing statistics is critical to ensuring the calculation and invoicing of harbour dues. The recently installed Integrated Fisheries Information System is designed to underpin the generation of such data.
· What progress had been made as regards debt collection?
The Accounting Officer informed me that external services were engaged in 2001 to assist with collection of accumulated arrears and to design and operate effective debt management procedures. He also said that various campaigns of non-payment had impacted on collection rates over the years.
The Accounting Officer further stated that since 2001 there had been a number of initiatives to enhance recovery. In particular the automation of the systems for issuing invoices and statements in 2002 had been accompanied by telephone follow-up of all outstanding debts. In tandem with this the following debt control procedures had been put in place
·Charges to be paid within 30 days of the date of invoice
·Queries regarding charges to be directed in the first instance to the relevant Harbour Master with direct payment to the Department's Accounts Branch in Castlebar
·Pursuit of outstanding charges and referrals to the Chief State Solicitor for early recovery through the Courts
·The Department reserved the right to withhold services to Fishery Harbour users where there were dues outstanding.
Revised procedures were introduced to report outstanding harbour dues on a six monthly basis and to pursue collection of arrears. In September 2004 all arrears in excess of €10,000 were targeted. The incidence of such arrears had arisen due to a campaign of non-payment by users dissatisfied with the increased level of charges introduced in 2003. In excess of 90% of targeted arrears was collected in a two month period. The Accounting Officer added that a second exercise is currently underway in relation to arrears in excess of €1,000.
· What were the actual and relative levels of debt in each harbour centre over the period?
The Accounting Officer informed me that collection rates show progress on reducing debt levels. For the five centres the collection rate improved from 47% in 1998 to 65% in 2002. There was a dip in the collection rate in 2003 due to the reaction among harbour users to an increase in charges in 2003. However he was confident that the collection rate would improve as the once-off problem that occurred in 2003 passed through the system.
He also provided the detailed information set out in Table 1.
Table 1 Debt Outstanding at Year End in € and Collection as % of Amount Collectable
Year
|
Killybegs
|
C’bere
|
Rossaveal
|
Howth
|
Dunmore East
|
Total
|
|
€
|
%
|
€
|
%
|
€
|
%
|
€
|
%
|
€
|
%
|
€
|
%
|
1998
|
457,442
|
29
|
164,242
|
50
|
28,672
|
80
|
118,717
|
70
|
111,429
|
32
|
880,502
|
47
|
1999
|
227,131
|
73
|
175,978
|
54
|
32,675
|
68
|
106,119
|
82
|
117,137
|
36
|
659,040
|
68
|
2000
|
182,234
|
52
|
89,466
|
43
|
38,105
|
68
|
151,658
|
56
|
106,028
|
19
|
567,491
|
49
|
2001
|
207,716
|
68
|
89,288
|
62
|
68,533
|
52
|
276,450
|
54
|
95,427
|
48
|
737,414
|
59
|
2002
|
191,574
|
68
|
102,785
|
70
|
86,396
|
51
|
184,813
|
70
|
116,082
|
41
|
681,650
|
65
|
2003
|
435,708
|
53
|
152,312
|
58
|
111,132
|
46
|
324,469
|
51
|
134,070
|
42
|
1,157,691
|
51
|
2004
|
586,415
|
62
|
217,315
|
62
|
368,768
|
21
|
405,037
|
55
|
225,715
|
32
|
1,803,250
|
53
|
In relation to the foregoing, the Accounting Officer pointed out that
·In the case of 2003, the increased charges took effect in October. However, the amount of increased charges actually collected would be very small resulting in an apparent dip in collection efficiency. Current year collections always lag billings due to delays in assembling landings data.
·Rossaveal income is very dependent on ferry traffic. Increased charges are being resisted and legal action may be necessary to effect collection.
·The poor collection rate in Dunmore East reflects the absence of a Harbour Master.
11.3 Foreshore Leases/Licences
Background
Foreshore is currently regarded as the land and seabed between the line of high water of ordinary or medium tides and the twelve-mile territorial sea limit. It also includes tidal rivers and estuaries. The main governing legislation in this area is the Foreshore Act, 1933. The bulk of the foreshore is State property within the meaning of the State Property Act and ownership lies with the Minister for Finance although there are some parts of the foreshore in private ownership. The Minister for Communications, Marine and Natural Resources (the Minister) administers the State-owned foreshore and the legislative provisions through the foreshore section of the Coastal Zone Management Division.
The Minister may, if it is in the public interest, grant a lease or licence for the use of a section of foreshore. A lease, which is typically for 35 years, generally refers to the erection of a structure on, or the right to the virtually exclusive use of, a section of foreshore. While licences are granted for short term uses of the foreshore, such as horseracing, they are also granted for significant developments such as, for example, pipelines, interconnectors and waste water treatment plant outfalls. Restrictions are placed on the use of foreshore by way of conditions attaching to each lease/licence which address matters such as term, rent payable, reviews and environmental issues.
An internal audit report dated June 2004 prepared for the Department of Communications, Marine and Natural Resources (the Department) indicated that a total of 1,334 leases/licences had been issued as at the end of August 2003. This number had increased marginally by the end of 2004 to 1,384 although the Department states that this would also include a comparatively small number of matters other than leases and licences, such as agreements for the sale of foreshore, and exclude a number oflicences that were not assigned reference numbers in earlier years.
Annual receipts in respect of foreshore leases/licences can be substantial. While they amounted to €1.3 million in 2004, amounts in some previous years were higher — in 2002 almost €6 million was collected, primarily due to new major infrastructure projects.
Processing of Applications
Applications received by the Department are initially considered by the engineering, marine survey and sea fisheries control divisions of the Department prior to consultation with a broad range of external bodies including the Department of the Environment, Heritage and Local Government, the Marine Institute and the Central/Regional Fisheries Boards. Public consultation also takes place in virtually all cases. Most cases, including all complex applications are submitted for vetting to the Marine Licence Vetting Committee. A recommendation is made to the Minister in all cases. Under Department of Finance guidelines, issued in 1987, in fixing the rent payable the advice of the Valuation Office should be obtained. For certain developments, standard charges apply. Once the applicant notifies acceptance of the proposed terms, a lease/licence is issued. It is recorded in a database under a unique reference number. However full details of conditions attaching to the lease/licence are not entered. A sealed copy of the lease/licence is held by the Department. Lease/licence holders are obliged to comply with the conditions imposed by the Department. Upon the expiry or surrender of a lease/licence, restoration of the foreshore by the lessee/licensee is mandatory.
Department Records
Electronic foreshore lease/licence records maintained by the Department are not fully comprehensive, resulting in weaknesses that hamper effective management. Leases/licences are recorded on a database but this lacks data such as exact location, specific conditions, review dates etc. that would be contained in a Geographical Inventory System (GIS). However such a system is not currently maintained. The June 2004 internal audit report described the database as inadequate, noted that it did not lend itself to electronic interrogation and recommended that it be replaced. In the absence of a proper database, local office staff, who are best placed to assess compliance, have to request copies of the leases/licences from the Department's headquarters in Dublin where the originals are kept. This works against the systematic review of compliance.
This lack of a comprehensive electronic database, or related systems, is currently being addressed by the Department through a major project being undertaken by its Information Systems Division. Phase 1 of the project will be completed by October 2005 and it is envisaged that the entire system will be fully functional by early 2006. The intention is that the system resulting from this project will give a fully comprehensive database, replacing the existing electronic databases, such as the listing of leases and licences and rent records, that have been developed on an ad-hoc basis over the years. The new system will encompass functions including application processing and financial management and a GIS component.
Review of Cases
Leases issued since 1987 should, in accordance with Department of Finance guidelines, be for a maximum term of 35 years with provision for five yearly or seven yearly reviews unless the prior sanction of the Department of Finance has been obtained. Previously leases were generally issued for a 99 year term, some being subject to periodic review. Department records do not automatically trigger cases due for review. Instead, review dates have to be identified and collated manually.
A Departmental report of October 2004 concluded that
·Where cases had been reviewed by the Valuation Office for the period 2001 to 2003 the total value of rent collectable increased from €150,000 to €593,000 — an increase of almost 300%
·Current reviews were substantially in arrears
·The Valuation Office refused to handle review cases between May 2003 and November 2003 and ceased handling review cases between August 2004 and December 2004
·The legal implications of backdating rent reviews were unclear
·Review cases for 2001 were recalled unprocessed from the Valuation Office in March 2004 by the Department due to the passage of time.
Because of delays in the Valuation Office, the Department, in May 2004, sent only the 20 highest rent cases to that office for review. By April 2005 not all of these cases had been processed but of those returned the average increase was of the order of 400%. No cases were referred to the Valuation Office in the first half of 2005.
The Department furnished me with the following information on the extent of rent reviews in recent years.
Table 1
Year
|
Reviews Due
|
Reviews Finalised
|
1998
|
47
|
12
|
1999
|
66
|
2
|
2000
|
51
|
—
|
2001
|
53
|
5
|
2002
|
65
|
7
|
2003
|
68
|
6
|
2004
|
69
|
4
|
2005
|
38
|
—
|
As the failure to review rents in a timely way can lead to a loss of income to the Exchequer I asked the Accounting Officer what remedial action was being taken.
The Accounting Officer acknowledged that there have been delays in the carrying out of rent reviews provided for in foreshore leases. He cited a number of factors that have contributed to this situation, including, in particular, the pressures of other work in the Section and difficulties in obtaining advice on proposed revised rents from the Valuation Office. He stated that the Department recognised the need to address the position as a matter of priority and accordingly is making arrangements for a detailed examination of the situation to be undertaken. The aim will be to address any cases in which a due rent review has not been initiated, or finalised, to date, and to ensure that all reviews are carried out in a timely manner. He further stated that the Department is taking immediate steps to go to tender for an independent body to carry out valuations for all foreshore matters. All outstanding cases will be withdrawn from the Valuation Office and referred to the successful company for immediate appraisal.
Post-Review
If a client does not accept a revised valuation there is a provision for referral to arbitration. I have been informed that, in practice, no cases have been referred to arbitration in the period since 1998. Three requests for arbitration are on hands from lessees at present. Many clients simply continue to pay at the old rate or refuse to pay at all. It appears that the Department does not pursue an enforcement policy in the case of clients who do not accept revised valuations. According to the Department, no leases have ever been suspended or withdrawn as a result.
Valuation Office — Level of Service
The Department has been dissatisfied with the level of service provided by the Valuation Office for some time. Long delays in the provision of valuation advice are common. At a meeting in September 2004, the Valuation Office conceded to the Department that the service provided was not satisfactory, citing the need to concentrate resources on its core statutory function of rateable valuations. It also stated that it could not see any way in which the service could be improved in the foreseeable future.
In view of the comments made on the unsatisfactory nature of the service provided by the Valuation Office I sought the views of that Office's Accounting Officer. In reply he stated that the core business of his Office was the provision of accurate, up-to-date valuations of commercial and industrial properties to ratepayers and rating authorities as laid down by statute. Consequently resources had to be focussed as a priority on the rating valuation service and his Office could not guarantee a satisfactory consultancy service to Government Departments on market value work. For this reason it was agreed with the Department of Finance in September 2001 that the procurement guidelines should be revised to allow freedom of choice to Departments in sourcing market valuation services. All customers were advised by the Valuation Office of its priorities and resource constraints and of the proposed revision of the guidelines.
His Office met with the Department of the Communications, Marine and Natural Resources in September 2004 and again advised of the ongoing problems with service delivery. He concluded by stating that the situation had not changed and his Office will not be in a position to provide a satisfactory consultancy service in the short term.
Monitoring of Compliance with Lease/Licence Conditions
The audit found that the Department does not adopt a proactive role in the monitoring and enforcement of lease/licence conditions. Monitoring, where it does exist, seems to depend on the local knowledge of the Department's officials. In the Offices visited, the existence of copies of leases/licences issued by foreshore section was the exception rather than the rule. Together with the absence of a comprehensive database this makes effective monitoring virtually impossible. When I asked the Accounting Officer if he was satisfied that local offices of the Department were in possession of sufficient information to allow adequate monitoring of conditions attaching to leases/licences he informed me that the foreshore section can make any documentation in relation to a particular lease or licence not held by a local office available immediately to that office on request. The new information systems currently under development will allow local offices electronic access to all relevant records.
The Accounting Officer has informed me that the Department is not in a position at present to undertake comprehensive post-authorisation monitoring of compliance with the terms and conditions of foreshore leases and licences as it is constrained by the limited resources available for work of this nature. Specifically, the Department's Engineering Division, to which it would fall to carry out the inspections essential for monitoring compliance, is multi-tasked and is not, therefore, in a position to undertake systematic post-authorisation compliance inspections on foreshore developments. Consequently, inspections would normally be carried out where specific issues have come to attention, or if a complaint is received. If a report of an inspection by the Engineering Division were to indicate a failure by a lessee or licensee to comply with the terms or conditions of the authorisation, the matter would be referred to the foreshore section for appropriate follow-up action. This might involve correspondence with the lessee/licensee in the first instance, or legal action if there was a failure by the lessee/licensee to address the position. In this connection, the Department is currently engaged with the legal services with a view to instituting legal action for breach of the terms and conditions of a particular lease.
The Department will consider how it might be possible to move towards more structured monitoring of compliance with the terms and conditions of leases and licences, and will consider the role that the new information systems under development at present can play in that regard. However, the nature and extent of any developments in this regard will of necessity be determined by the resources available for the inspectorial work that provides the essential basis for compliance monitoring.
Pursuit for Non-Payment
While the payment of the first year's rent is made in advance, rent due in respect of later years is identified by staff, who then issue the relevant invoice. Reminders are issued approximately every 2 months. Up to four reminders may be issued. My audit indicated that the Department does not initiate legal proceedings or impose any sanctions in the event of non-payment. The Accounting Officer has informed me that a policy has now been adopted of referring cases to the legal services for appropriate action where rent is not paid. A number of cases have already been sent to the Chief State Solicitor's Office, and a similar approach will be adopted in any other case in which, despite reminders, amounts owed are not paid.
Unauthorised Developments
With very few exceptions, the creation/erection of any structure or the use of or reclamation of any part of the foreshore requires the consent of the Minister by way of a lease or licence issued by him. Audit evidence suggests, however, that unauthorised developments are quite common and an audit of certain local office files noted that 6 such cases had been identified and reported to foreshore section. An audit review, using the results of a coastline helicopter survey undertaken in September 2003, revealed a further 11 unauthorised developments in the same area for which no lease/licence exists. A further audit review of a section of the coastline surveyed indicated many more examples including a significant number of swing moorings.
Unauthorised developments represent a loss of revenue to the State. While the rate to be paid in each case is site specific, the large numbers involved, particularly of swing moorings, means that this loss is potentially significant. It is not clear to what extent the scale of unauthorised development, as identified in the course of the audit, is reflected nationally — it is however, suspected that the number of unauthorised swing moorings alone is in the thousands. The Department has no accurate information on the specific numbers involved. As the Department already has the September 2003 helicopter survey results available to it as well as certain satellite and aerial photographic records of the coastline that clearly show all foreshore developments, a geographical inventory system would enable it to easily identify those for which a lease/licence has and has not been issued.
The Accounting Officer, while accepting that there are many unauthorised swing moorings, pointed to the difficulty of distinguishing between permanent moorings which need a licence and temporary ones which don't. Close physical inspection would normally be required. However, he stated that the Department is currently considering the possibility of having electronic tagging and/or colour coding of authorised moorings to help identify those which are licensed, particularly from aerial surveys. He added that the harbour masters, who charge fees to those using moorings within harbours, were made aware that there was also a requirement to hold a foreshore licence. The feasibility of having both fees collected by harbour masters and the foreshore fees remitted to the Department by them is being examined.
I was informed that the Department is not, as matters stand, in a position to carry out systematic on the ground policing of the foreshore for unauthorised developments in pursuit of its clear policy that only properly authorised developments should take place. In these circumstances, inspections in respect of alleged unauthorised developments are normally carried out when matters come to attention in the context of other work, or in response to complaints and appropriate administrative action taken. If, however, what had been done were considered to be unacceptable, Court proceedings would be instituted seeking to have the development removed. I have been informed that 2 cases are before the Courts at present.
The Accounting Officer also stated that the Department recognises the need for a more structured approach to addressing unauthorised development on the foreshore and believes that the GIS component of the new information systems under development has the potential to offer considerable assistance in this regard if associated with aerial survey and on the ground inspections. It will in the meantime consider how it might be possible to advance an exercise to correlate the results of the aerial survey referred to with the details of leases and licences that have been granted, and to follow up in respect of any developments undertaken on State foreshore without appropriate authorisation.