COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 3 Apr 2008

Special Report No. 60 of the Comptroller and Auditor General of November 2007 — Valuation Office.

Mr. A. Murray (Chief Executive Officer and Commissioner, Valuation Office) called and examined.

Chairman

Witnesses should be aware that they do not enjoy absolute privilege. As and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These rights include: the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited to appear before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of them and provided with the transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies.

Mr. Aidan Murray

I am accompanied by Ms Mary Smyth, head of finance; Mr. Patrick Cooney, head of revaluation, and Mr. Gilbert Storrs, head of strategic planning and information technology.

Chairman

Mr. Jimmy Doyle from the Department of Finance is also attending. Mr. John Buckley from the Office of the Comptroller and Auditor General is here in place for Mr. John Purcell. I invite him to introduce Vote 15 and the special report.

Mr. John Buckley

The Valuation Office carries out valuations of properties which are used by local authorities to determine the rates bills for occupiers of commercial and industrial properties. It spent €10.5 million in 2006 and made a gross saving of €1.2 million by comparison with its budget.

As well as the appropriation accounts, a special report on the operation of the office from 2001 to 2006 is before the committee. It examines the main valuation activities of the office, which are to provide valuations for existing properties and, as a separate exercise, to revalue over time all relevant property in the State.

The reason for the countrywide revaluation was that there was a risk that the basis on which existing valuations had been carried out had, due to the variety of calculation methods used over time, begun to diverge to different degrees from the net annual value of the properties. The Accounting Officer will be in a position, based on the results of the first revaluation exercise, to indicate the extent of that divergence.

The report found restructuring, following the enactment of new legislation in 2001, had improved the productivity of the office, relative to what had pertained previously. The main driver of that change was an improvement in valuation quality which reduced the amount of resources which had to be devoted to processing appeals against determinations.

When the number of appeals was at its highest in 2001, partly due to an appeals backlog, it was estimated that for every three people devoted to basic valuation work, it could take two more to dispose of appeals. By improving the quality of the initial valuations, the number of appeals has decreased. The appeals process has been streamlined since 2004, so as to focus the reviews and provide for specialisation in the appeals area. Consequently, the office can now divert staff previously engaged on appeals to core valuation work.

The special report highlights several areas where ongoing management attention is called for. The primary area of audit concern was the revaluation programme. At the point we reported in 2007, work was nearing completion in only one local authority, South Dublin County Council. The programme had been extended in March 2007 to another local authority, Fingal County Council. The programme will take longer than envisaged and cost more than estimated when the initial plan was laid out by consultants in 2001. When we calculated the costs, it did not include any allowance for the cost of appeals. The cost could be five times the original estimate by the consultants. The report recommends that when the first cycle of revaluation is completed in South Dublin County Council, there will be an urgent need for a revised strategy for the roll-out of the programme which deals with resourcing, budgeting and the timescale, based on the experience of the office to date.

Traditionally, Government agencies have relied on the Valuation Office for market value assessments of properties, although they are free to go to the market for them. There have been considerable delays in processing these requests with the result that underlying transactions are being delayed. Like other Departments, the Valuation Office has been investing in its management information systems. However, it has still some way to go to evolve a comprehensive performance measurement system. We found that the office was not benefiting from its new accounting systems in that it had not directly captured its costs by activity headings or over 80% of its expenditure. However, it was doing this on an apportionment basis. While it has gone some way to refine its output measurement, it now needs to devise a more robust measure of its organisational output and provide for reconciliation of income to reported output.

We have produced a baseline or status report on the position an early stage in the revaluation programmes. Based on this report, progress will be kept under review in future audits.

Chairman

Thank you, Mr. Buckley. I call on Mr. Murray to make his opening statement.

Mr. Aidan Murray

I thank the committee for the opportunity to discuss the operations of the Valuation Office in recent years, to look at where it is now and to consider some of the challenges which lie ahead. I will keep my opening statement brief and reasonably general in nature, as I am conscious that there is much to consider and discuss in the course of this hearing. I have no doubt many of the specifics will be addressed in the course of our discussions. The period covering 2001 to 2006, which is the subject of the Comptroller and Auditor General's special report No. 60 and within which the appropriation account being considered today also falls, has been a period of marked change and great challenge for the Valuation Office. Within that period the office assumed a greatly expanded statutory mandate, pursuant to enactment of the Valuation Act 2001, consolidated its rateable valuation service to local authorities, embarked on new, far-reaching initiatives in valuation, most notably in relation to global-special project valuations and revaluation, and developed and embraced new work practices with a concentration on quality, efficiency and transparency. The Comptroller and Auditor General's comprehensive and thorough report ranges over these developments and points up many of the achievements and challenges of recent years, both internal and external.

The principal statutory functions of the office are the provision of a rateable valuation service to all local authorities, which encompasses what are termed "revision requests" and requests for the valuation of newly constructed buildings, the conduct of a national revaluation, the first since the 1850s, the better alignment of rateable valuations of industrial and commercial properties throughout the State with their current open market commercial rental values, and the carrying out of global and special projects valuations involving commercial undertakings and public utilities which typically have real estate assets in the rating areas of two or more local authorities. These are the core statutory functions of the office and it is on these activities that we must necessarily focus our available resources. It is appropriate in my opening statement to comment briefly on two of these areas.

On the provision of a rateable valuation service to local authorities, the Comptroller and Auditor General's report records the marked increase of 35% in productivity which we have achieved over the period in question, a period of unprecedented buoyancy in the property sector in Ireland. The activity of the office in this regard underpins in excess of €1.2 billion in rates income to local authorities and year on year has helped capture for local authorities the buoyancy in rates income generated principally by new buildings. Within the past two years the office has accommodated the impact of the Local Government (Business Improvement Districts) Act 2006 which provides local authorities with the means of generating rates income from new buildings once they have been valued rather than, as heretofore, having to wait until the following year.

The office places great emphasis on the quality of its services and maintains a close liaison with local authorities in terms of managing the processing of their requests. We pay particular regard to the feedback from local authorities, not least in terms of our customer satisfaction surveys. That feedback in recent years has indicated a high level of satisfaction with our services but we are committed to identifying and securing, wherever possible, further improvements in the quality of our service and in our customer satisfaction levels.

The revaluation of the rating area of South Dublin County Council, SDCC, has been an achievement of great historic and operational importance for the office. It was achieved on time in the face of the most severe challenges. It is the first step in the first national revaluation in more than 150 years which, by bringing rateable values into line with current open market property values, will ensure a more equitable distribution of rates contributions across the industrial and commercial sectors. We have rolled out the process in the rating area of Fingal County Council and I envisage, subject to the necessary clearances, that we will be in a position to begin roll-out in a further local authority area within the coming months. There is no substitute for practical experience when it comes to preparing for and planning the way ahead and the practical experience which we have gained to date from the SDCC revaluation will play a major part in informing our approach to revaluation in the future.

Expectations regarding revaluation have heretofore been based exclusively on a consultancy report produced some seven years ago, on the transposition of experiences elsewhere which are not directly analogous to our current operation, and the application of untested assumptions. The real practical experience which the office has gained and continues to gain in conducting an actual revaluation, when reviewed and analysed, will enable us to bring forward projections for a national revaluation, including the dimensions of timescale, cost, resources, etc., which will be grounded in reality and therefore will be more valid and authoritative than the projections which have prevailed to date. We are committed to a process of ongoing review, to learning the lessons generated by practical experience and to applying appropriate best practice. Our ambition in this area is to conduct the initial national revaluation within the shortest possible timescale at the lowest possible cost and, in so doing, lay down the base on which subsequent periodic revaluations, as required by the Act, can be carried through quickly, with relative ease and at a modest cost, as is the case in other jurisdictions which have reached this stage.

The Comptroller and Auditor General's report covers the foregoing and many other areas of our operations, both internal and external, statutory and otherwise. It points up notable successes, such as the impact of our streamlined appeals system, and areas which require review, which are problematic or which require particular attention, such as the provision on a non-statutory basis of market value services to Departments and Government agencies, as already mentioned. My colleagues and I consider the value for money audit on which the report is based to have been a timely and worthwhile exercise and the report itself to be a most worthwhile document. We are committed to a process of ongoing development and improvement across our entire spectrum of operations and we view the report as assisting us in that regard. We can readily accept its recommendations, some of which are already in the process of implementation, and look forward to recording and reporting further measurable achievement and progress under the various headings in the years ahead.

Chairman

I thank Mr. Murray. May the committee publish the report?

Mr. Aidan Murray

It may.

Deputy Niall Collins

Has the Valuation Office an estimate of the quantity of unvalued industrial and commercial space with which it still has to deal, by region, city or whatever? Has it got access to that data?

Mr. Aidan Murray

I do not have a figure for that today. As for the way we do our work, we are reliant on the two main pillars I described earlier. These include the revision process whereby local authorities will become aware, inter alia, of new building taking place in their functional areas, in which case they will notify us to request we do a valuation on them. That will pick up new builds. We will then have a situation whereby the revaluation project, which is a sequential progressive exercise running from SDCC right through the country and ultimately covering every local authority area, will pick up properties not on the records at this time. In terms of putting a figure on this, however, I do not have information to hand at the moment.

Deputy Niall Collins

Who dictates a direction? Does the Valuation Office take its lead from the local authority or does it follow its own agenda?

Mr. Aidan Murray

The revision work essentially is a response to a request from a local authority. We have a very close liaison with the local authorities. We have four teams, broken down by regions, to deal with a basket of local authorities in each of their areas. There is very close liaison and personal familiarity between officials on our teams and those of the particular councils in those areas. At the beginning of each year a service level agreement is signed between the office and each local authority. In that service level agreement the local authority sets down its requirements for the year ahead in terms of the volume of properties with which it wants us to deal and we will indicate the level of service we will give.

Deputy Niall Collins

Is there a forum wherein a member of the public can address the local authority and the Valuation Office to indicate that he or she may have an issue with the revision?

Mr. Aidan Murray

We can do that, yes. We can have requests from ratepayers or occupiers who may feel, for example, there has been a material change in their premises. They may feel their current rateable value is unfair or inappropriate. In those circumstances the office will respond. Such cases, however, are in the minority.

Deputy Niall Collins

I pick up the view as a public representative that the public believe that the Valuation Office in the first place works for the local authorities because it picks up new properties and new valuations for them whereas these people believe that quite often they are being put to the back of the queue.

That leads on to the next issue I have about vacant properties to let. It puts a big strain on business people and members of the public to have a vacant property that is valued and rateable. The process in Limerick — I assume it is the same elsewhere — is that the proprietor has to pay rates and then claim them back through a different avenue. Are there any proposals on this? It puts huge cash flow pressure on ordinary business people and members of the public. Is the Valuation Office looking at any mechanism to provide for a waiver on rates while a property is vacant?

Mr. Aidan Murray

We are not. On the Deputy's first question about members of the public, we are sensitive to the perception that we are working for local authorities. We work with local authorities in the sense that they make requests to us which we then process, but we are conscious that each of the properties that we value is owned, rented or occupied by a person or business. There is a right of appeal against the rateable value we produce.

There are a few stages to the appeal. The representation stage occurs when a person receives the proposed rateable value; he or she can directly engage with the valuer who has done the job and an amendment can be made by agreement. If that does not happen, the person concerned is issued with a draft certificate, against which he or she can appeal formally to the Commissioner of Valuation. If he or she is not satisfied with this, he or she can take it to a third stage, an independent valuation tribunal. Therefore, there are many checks and balances built into the system. The individuals concerned do not have to wait for the local authority to activate something they may see as necessary to address a grievance. They can make a direct approach, in which case we will look at the property to determine if it warrants a revision in its market value.

There is a clear distinction between our role and that of a local authority. The role of a local authority is to collect rates, while our job is to act strictly within the parameters of the 2001 Act and calculate the value of properties which are rateable under the definition included in the Act. In the legal sense, once a property is finished, it becomes rateable. That does not necessarily correlate to what happens in the real world. For example, a restaurant may be finished and the lessee has taken occupancy of it but it is not opening for business to the public for one month; nonetheless, the building is finished and has been occupied and, under ratings law, is rateable. It is a matter for the local authority to decide whether it wants to enter into some local arrangement, whereby it will waive payment of the rates payable or give a rebate. Our job ends when we give the rateable value of the property to the local authority. That is where the distinction lies. It is not within our gift to enter into arrangements for a waiver on rates or to exempt people. The only exemptions with which we can deal are those provided for in the Schedules to the 2001 Act, which define what is and what is not rateable. We cannot deviate one whit from them.

Deputy Niall Collins

Is there scope within the enabling legislation to outsource some of the office's work, if it is falling behind, as has been the case?

Mr. Aidan Murray

We can look at that issue. It is not specifically provided for in the Act, although across the broad sweep of the public service——

Deputy Niall Collins

It is not prohibited either, or is it?

Mr. Aidan Murray

It is not specifically prohibited, but I would like to make a point about falling behind in our statutory work. There are three main areas which always take precedence because they have a direct bearing on the financing of local authorities. We typically receive about 8,000 requests every year for ratings work on properties. That does not mean we do 8,000 valuations; in fact, it could mean 14,000 valuations on foot of the 8,000 requests. We have kept pace with this work. The Comptroller and Auditor General has recorded that our productivity level in this area has gone up by 35% in five years, at a time was when the Celtic tiger was at its height and buildings were going up everywhere. We do not see any need to outsource this work, nor could we do so.

The second area is revaluation, a process we have started in south County Dublin and in which we are now engaged in Fingal. We will be moving into another local authority area in the coming months. Notwithstanding the difficulties we have had to face, I would not see any particular benefit in outsourcing that work.

The third area is global or special project valuations. This occurs when we value properties for entire businesses such as Vodafone, Meteor or the large utility companies such as the ESB. We have a very small, very specialised team which has proved to be more than a match for the best the multinationals can throw at it in terms of financial expertise. It has captured more than €130 million per year for the State and local authorities in what essentially are tax payments.

The fourth area is market value services. It is in this area that we have fallen behind. It is non-statutory work and we have fallen behind because we have had to devote all our available resources to the statutory work mentioned. It has been a problematic area for four to five years. I was last before the committee in June 2006 when I also spoke about this issue which the Comptroller and Auditor General has detailed in his reports as far back as 2004. There is a backlog and we have recently obtained sanction from the Department of Finance to seek additional resources. It is our intention to devote those additional resources to rebuilding a capability in market value services.

A few years ago the Department of Finance gave permission to other Departments and agencies to go to the private sector for valuation services. It is our belief that a number of Departments are not doing this to the extent that they could. They are continuing to send cases to us in the knowledge that we will not be able to get to them in a timely fashion. There are agencies such as the Revenue Commissioners and the Criminal Assets Bureau which, for obvious reasons, cannot go the private sector for valuation services. In rebuilding the capability to provide such a service, which will take up to one year, our focus will be on satisfying the requirements of these specialised agencies. The kernel of the Deputy's question is whether it is possible to outsource other work. As matters stand, the Department of Finance has for a number of years allowed other Departments to go the private sector for valuation services, but some of them have not found it possible to do so. We are less than convinced that others have made a real effort to do so.

Deputy Niall Collins

It was noted in the report that there were industrial relations issues. Have they all been settled?

Mr. Aidan Murray

The industrial relations problems immediately followed the passage of the 2001 Act. Essentially, they revolved around the perceived imposition on staff in the office of entirely new work without the provision of additional resources. That is now water under the bridge. Agreements were made in the early part of this decade that have resolved those issues and we have moved on.

Chairman

What worries me is that Mr. Murray is saying the office cannot outsource, but at the current rate, it will take the office about 38 years to complete its revaluation work across the 34 councils. Surely, that issue needs to be addressed. Values are usually revised upwards. Can the Department of Finance estimate what revenue is being lost to the State due to progress being made at a snail's pace?

Mr. Jimmy Doyle

As recommended in the report, we intend that when the revaluation process in South Dublin County Council is completed, we will have a further review which should be completed next September. At that stage we will sit down with the commissioner and his staff to ascertain what timeframe will be needed to complete the revaluation process nationwide.

Chairman

Why wait until then? Why not do it now?

Mr. Jimmy Doyle

It is only then that all of the appeals will have gone through the Valuation Appeals Tribunal and the process will be complete. At that stage we will know how long it took to carry out the revaluation, how many appeals were made to and dealt with by the commissioner and referred to the Valuation Appeals Tribunal. It is only then that we will know the full scope of a realistic revaluation, and that we will be able to make a realistic estimate of the timeframe and costs involved. As we proceed, we will undertake not an overall review but occasional reviews with the commissioner and South Dublin County Council. We have been keeping in touch to ascertain how matters are progressing. We are waiting until we finish the revaluation process in South Dublin County Council before we come up with what we would consider to be realistic views on the cost and timeframe involved.

Chairman

The figures in paragraphs 3.38 and 3.40 of the Comptroller and Auditor General's report suggest the average valuation cost is €41 in Britain, €100 in Northern Ireland and an unbelievable €600 here.

Mr. Aidan Murray

I shall try to put those figures in context. A real life revaluation has not taken place in this country for 150 years. The areas mentioned in the report for the United Kingdom, including Northern Ireland, have been the subject of repeat revaluations. The valuers in the United Kingdom have reached the stage where revaluations can be carried out from a desk. In other words, there is a database of properties, all of which have been measured and assessed by valuers. In some cases there have two or three previous valuations. They are able to engage in a desktop exercise without the cost and inconvenience of having to send out valuers to do the initial inspections. The costs they put forward are the costs of that exercise. We will get there.

The exercise we are undertaking and which we undertook in South Dublin County Council and Fingal, because it is the first such exercise in such a long time, requires that we go out and do the hard slog. That is time consuming and costly but once-off. When it is complete, we will have a database of the approximately 6,500 properties in south County Dublin. We now have detailed knowledge of those properties — their shape, size, location, nature and so on. If we were to revalue properties in south County Dublin in the future, as we will be required to do in five to ten years from now, we would not be trudging the roads of south County Dublin. We would carry out much of that exercise on the basis of a computer database, which we could then update. The cost involved would be a fraction of the cost of an initial revaluation.

Chairman

The consultants' target programme cost was €18.5 million. Mr. Murray agrees this is correct and states his target is €18.5 million. However, the Comptroller and Auditor General suggests a figure of €100 million.

Mr. Aidan Murray

Yes. The problem is that, to date, we have all been working from assumptions. As I said in my opening statement, all of the expectations up to now, including on the initial cost of revaluation, were based on a consultants' report obtained some seven years ago from a consultancy firm. Because the consultants had a blank page and there was no experience here of a revaluation since the 1850s, they went across the water and picked up as much evidence as they could of exercises undertaken in Britain. They were repeat valuations and did not involve the heavyweight components of on-the-ground inspections of individual properties and the creation of updated databases. They are the most costly elements.

The consultants pushed the issue further and suggested it should be possible for a valuer involved in a revaluation process to generate valuations for 1,200 units per annum, or approximately 27 properties per week. They stated that if one were to operate on that basis, the cost would be X and the duration would be five years. There is no way under Heaven that anyone undertaking a revaluation exercise in Ireland could generate 1,200 cases a year, in the context of the initial revaluation stage we are at.

Chairman

Who are the consultants?

Mr. Aidan Murray

The consultants at the time were Deloitte & Touche.

Chairman

It was not worth the paper it was written on if they just made those——

Mr. Aidan Murray

They made assumptions which were are out of line with reality. It has been problematic for us that it has been suggested one can carry out an initial revaluation process throughout the country in five years when we know we cannot do this. On the other hand, there is no way we could accept the proposition, as the Chairman put it, that it should take 30 or 35 years. What we need to know is what it takes to carry out a typical, real-life valuation here, how long it takes, how many valuers are needed and what is the cost. The first one——

Chairman

Based on Mr. Murray's evidence, it will take 38 years.

Mr. Aidan Murray

Based on that evidence. However, south County Dublin was not necessarily typical because the model we were given by the consultants to run the revaluation project referred to a unit devoted solely to revaluation work and fully staffed with 30 contract valuers working on nothing but revaluation, with a management tier overlying it. In undertaking the south County Dublin project we were able to recruit no more than half the team needed to do the work. We were competing with private sector property companies which could offer a lot more money and much better career opportunities than we could, as was thought at the time. At one stage during the south County Dublin project we had just one third of the resources needed. It was only by moving resources from other areas of the office, which must be done with great caution in case it impacts on the local authority revision process, that we managed to deal with the south County Dublin project within time. I caution in the strongest terms against a direct extrapolation from what was involved in the project.

I would always say to anyone, including committee members, that the revaluation process is an investment in consolidating the base on which local authorities depend. This year alone they will take in approximately €1.2 billion or €1.3 billion for local services but there will be difficulties if that rates base is not robust or is suspect, or if it contains anomalies. There are some anomalies in that there are areas in which economic activity has increased and others in which it has decreased, whereas the rateable valuations have been left high and dry. Some have rateable valuations well above or below the correct figure. If these anomalies are not addressed, a question mark is cast over the rates base of local authorities.

Our spending in south County Dublin was €3.25 million spread over a period from the tail end of 2005 to 2007. We are now dealing with appeals from south Dublin County and have begun the process in Fingal. The rates income of South Dublin County Council is approximately €120 million a year. Therefore, for an outlay of €3.25 million, we have effectively carried out an exercise which will protect the rates base which generated in excess of €300 million in the period of the revaluation.

To refer to my colleague from the Department of Finance, it is our intention this year to undertake a review to find what we have learned in south County Dublin, where we can cut corners and how we can get our staff numbers up to the full level. For the first time ever, there is a fully staffed unit, which we should have had a few years back. In such circumstances we will be able to come up with an authoritative estimate for the committee and others of what it will cost and what it will take to carry out the national revaluation process.

I caution that the consultants' report is completely at variance with reality — I must speak in very blunt terms at this stage. The Chairman validly asks what should apply if that does not and whether we should simply multiply following the experience in south County Dublin. We should not do so because there are aspects which would lead the committee in the wrong direction and yield the wrong result. We will carry out a review later this year, arising from which we will have an authoritative estimate of what it will cost and what it will take to carry out the process.

Chairman

In the absence of any study or estimate, that is all we can go with.

Mr. Aidan Murray

If one were to take the case of South Dublin County Council and simply do the multiplication, it would lead one in that direction. However, none of us within the Valuation Office is thinking in terms of such timescales.

Deputy Pádraic McCormack

I wish to tease out the question of the timescale. In 2001 the legislation providing for the revaluation of all commercial and industrial properties was enacted. I understand, however, that that process did not begin until 2005 and I am not sure what caused this delay. I understand from what Mr. Murray has said that the South Dublin County Council revaluation is the only commercial and industrial revaluation that has been completed. There are 34 local authorities in the State, some of them smaller than South Dublin County Council but others have a larger rate base. Galway County Council would probably be included in the latter category. Will Mr. Murray confirm that the South Dublin County Council revaluation is the only one that has been completed? On that basis, one could conclude that it might take at least 40 years for the commercial and industrial rates of all 34 local authorities to be revalued. What is the timescale envisaged for completing this work?

Mr. Aidan Murray

The only timescale on paper is the five-year timescale thrown up by the consultants some years ago. As I said, this was predicated on figures the validity of which we do not accept. They are not directly comparable to the circumstances of the exercise in which we are engaged. I will not be able to give the committee a timescale until we have undertaken the review to which Mr. Doyle referred. That review will be based on the exercise of carrying out a revaluation in Irish circumstances.

Deputy Pádraic McCormack

How long did it take to complete the South Dublin County Council revaluation from start to finish?

Mr. Aidan Murray

The revaluation began on 7 November 2005 and the certificates were issued at the end of December 2007. It took two years.

Deputy Pádraic McCormack

If the other revaluations each take two years, it will take 64 years to complete all of them. It seems extraordinary that there is no definitive timeframe for the completion of this exercise, despite the provision in the 2001 legislation for the revaluation of all commercial and industrial properties.

Mr. Aidan Murray

I repeat the point I made to the Chairman. The South Dublin County Council exercise was extremely problematic. We were unable to recruit or retain the staff we needed. For example,15 valuers were engaged on contract by the Valuation Office at the beginning of the South Dublin County Council revaluation process. By the end of it, every one of these contractors had gone.

Deputy Pádraic McCormack

I can only go by the facts and it is a fact that it took three years to complete the South Dublin County Council revaluation. I do not know how long it will take to complete the rest of the revaluations. Even if one assumes the others will each be done in one year rather than two, one is still looking at a timeframe of up to 40 years to complete the entire exercise. That seems entirely ridiculous.

Mr. Murray was critical of the consultants. I understand they estimated the cost of the revaluation exercise at €18 million. What is the current projected cost? How much were the consultants paid for this ridiculous advice, based as it apparently was on an incorrect starting position?

Mr. Aidan Murray

I am afraid I do not know the figure paid to the consultants but I can discover and convey that information to the committee. The new, more definitive timescale will only be generated when we have completed the review to which I referred.

To give some background information, going further back in time, an interdepartmental committee was established in 1995 to review the ratings system. This committee recommended that legislation was needed and that there should be a fundamental review or overhaul of the system. It took from 1995 to 2001 to enact the legislation. It took from 2001 to 2005, for various reasons, to start the revaluation process. Up to 2005, we had absolutely nothing other than a consultants' report on which to base any estimation of what might be involved in a revaluation process.

Deputy Pádraic McCormack

I am basing my calculations on the commencement of the exercise in 2005. I am ignoring the period from 2001 to 2005.

Mr. Aidan Murray

With respect, my point is that there were delays and complications in the South Dublin County Council project which I do not expect to recur in other areas.

Deputy Pádraic McCormack

I admire Mr. Murray's optimism.

Mr. Aidan Murray

I believe that expectation is realistic. At one stage of the South Dublin County Council project, for example, we had ten contract valuers. This represented one third of the complement of 30 which the consultants told us would be required to do the job. We now have a virtually fully staffed unit of 27. The Fingal County Council project commenced in the latter part of last year and we already have in excess of 50% of the properties inspected in that period of seven or eight months.

Deputy Pádraic McCormack

When did the Fingal County Council exercise begin?

Mr. Aidan Murray

The order was signed in March 2007 and the exercise commenced last autumn.

Deputy Pádraic McCormack

When is it expected to finish?

Mr. Aidan Murray

The publication date is December 2009.

Deputy Pádraic McCormack

Again, that is a period of two and a half to three years.

Mr. Aidan Murray

That is the period that has been allowed for the project but it is conceivable that we could finish before then. The process in Fingal is an acceleration of what took place in South Dublin County Council. We have more resources; we know what we are about because we have done it once before, and we have developed methodologies. We committed in our business plan to undertake a review of the overall cost and duration of a national revaluation.

Deputy Pádraic McCormack

When did the Fingal project commence?

Mr. Aidan Murray

The order authorising the commencement of the exercise was signed in March 2007 and the work began last autumn. Already, at the end of March, we have inspected some 55% of the properties in Fingal.

Deputy Pádraic McCormack

The project has been ongoing for eight or nine months. When will it be finished?

Mr. Aidan Murray

It will be finished in 2009.

Deputy Pádraic McCormack

In other words, this project, too, will take more than two years to complete. By allocating only one year for the completion of each of the remaining projects, we are looking at a timeframe of 35 years. It seems there is no reasonable end in sight for this exercise. Mr. Murray is unable to give me any figures for the actual cost compared to the €18 million estimate brought forward by the consultants who did not do their job properly in the first instance.

Mr. Aidan Murray

I am in some difficulty in that I have already identified the means of answering the Deputy's questions, which is the review we have committed to undertake of the experience to date. That will point to timescales and costs based on reality. Until that review is undertaken, I am not in a position to provide the answers.

Deputy Pádraic McCormack

How many valuers are employed in the Valuation Office?

Mr. Aidan Murray

We have 47 people working on revisions and some 35 engaged in revaluation work. In addition, we have a number of other valuers working on appeals and globals. In total, therefore, there are more than 80 valuers in the Valuation Office.

Deputy Pádraic McCormack

Those figures suggest there must be approximately 100 valuers.

Mr. Aidan Murray

The total is in excess of 80.

Deputy Pádraic McCormack

Mr. Murray referred to 47 and 35 valuers, as well as an additional number engaged in other work.

Mr. Aidan Murray

I am sorry; there are 82 in total.

Deputy Pádraic McCormack

That is fine. Mr. Murray mentioned customer satisfaction surveys and ratings more than once in his presentation. Is other work in the Valuation Office being neglected because of the concentration on the revaluation of commercial and industrial properties? I am aware of cases in Galway city where local authority tenants who wish to purchase their homes are obliged to pay for their own valuer because they are dissatisfied with the city council valuer. There is always a conflict between the valuation of the city council and that of the private valuer. Disputed cases such as these are sent to the Valuation Office. I am aware of at least three cases in Galway city where almost one year has elapsed since the Valuation Office was asked to provide an independent valuation but no reply has yet been forthcoming. Is work for local authorities now being neglected entirely because of the concentration on commercial and industrial revaluation?

Mr. Aidan Murray

The concentration must necessarily be on the statutory work that we do. The work to which the Deputy referred falls under the heading of what we call market value work. There is a backlog of market value work because it is non-statutory. Hardship cases — tenant purchase schemes or cases referred to us by the Department of Social and Family Affairs, which may involve means testing of a person for a payment like an old age pension——

Deputy Pádraic McCormack

This is not means testing.

Mr. Aidan Murray

It would be part of the same basket of work. We try to give that attention even though it is not statutory work in many cases. Those cases are being dealt with.

Deputy Pádraic McCormack

The office is not giving it attention. I am dealing with cases in Galway city and have rung the office several times but my calls have not been returned. I cannot get any information on behalf of the clients who tell me they wanted to purchase their houses from Galway City Council more than a year ago and were unhappy with the council's valuer. They were told to employ their own valuer which they did. After that, it goes back to the Valuation Office for adjudication. Galway City Council tells me that it cannot get any reply from the Valuation Office.

When the Valuation Office eventually gets around to dealing with that type of valuation, will there be value on the property at the time of the application to buy it, at the time when it was appealed to the Valuation Office or currently, which is a completely different valuation to that which would have been produced a year ago? This is very important for the person who trying to purchase their house.

Mr. Aidan Murray

We dealt with 27 tenant purchase cases last year, notwithstanding the fact that market value work must be prioritised at a lower level. We will always try to attend to cases that involve a hardship element or where persons——

Deputy Pádraic McCormack

What is a hardship element?

Mr. Aidan Murray

What I refer to as hardship cases are cases involving tenant purchase schemes or cases referred to us by the Department of Social and Family Affairs. We dealt with 27 tenant purchase scheme cases last year and 19 cases referred to us by the Department of Social and Family Affairs which it regarded as hardship cases. If the Deputy wishes to give me details of a particular case, I will certainly have it looked into.

Deputy Pádraic McCormack

I will do that.

Mr. Aidan Murray

I assure the committee that in so far as the hierarchy of work is concerned, we have no choice but to give priority to the work which, by law, we are required to do. Members of the Oireachtas will understand this. The highest priority in respect of other work will always relate to cases that involve hardship or duress.

Deputy Pádraic McCormack

It is quite simple. If there is a professional valuer for the local authority and one for the tenant, somebody in the local authority could decide what the value of that house was compared to a house sold on the same road at the same time if it was in the same state of repair. Why must a file remain with the Valuation Office? That type of work should not be held up by the fact that the Valuation Office is so busy doing other work. Somebody else should handle that type of work to allow ordinary tenants applying to purchase their houses to go ahead with the purchase on an agreed valuation which could be easily reached locally.

Mr. Aidan Murray

If the Deputy passes on the details of a particular case he has in mind to me, I will have it looked into. As I explained earlier, market value work has necessarily been given a lower priority than statutory work. I must be very forthright about this. However, within the market value work, the highest priority will continue to be given to tenant purchase scheme work and cases referred to us by the Department of Social and Family Affairs.

Deputy Pádraic McCormack

That is not the reality I find.

Mr. Aidan Murray

All of this area is under extreme strain because of the demands of the statutory work. It is not neglected. We try to deal with these cases as best we can. I accept that our response times would probably be better if we were better resourced and there is now a prospect of that. I said to Deputy Collins earlier that we recently received sanction from the Department of Finance for additional staff. This staff will be used to rebuild capability in the market value service area. That capability will be focused on work that needs to be done and that is sensitive in varying ways. I certainly see the tenant purchase scheme and hardship cases as featuring in that.

Deputy Pádraic McCormack

I have a few questions about the value for money report. Report No. 60 states the budget for the revaluation is based on the estimated cost computed by consultants, which was €18.5 million but the actual outcome is unknown. When will the actual outcome be known?

Mr. Aidan Murray

Is the Deputy referring to the cost of the revaluation project?

Deputy Pádraic McCormack

It says that the cost estimated by consultants is €18.5 million but that the actual outcomes are unknown.

Mr. Aidan Murray

What we refer to here is the overall cost of the national revaluation programme. The consultants came up with that estimate. I do not want to labour the point but I urge the committee and anyone else to whom I am speaking to treat the consultants' estimates here with the greatest of caution. I do not want to denigrate Deloitte & Touche or any other firm of consultants but when they are given a blank page to come up with estimates of how one does an exercise in a country in which the same exercise has not been done for a century and a half, there is an element of a shot in the dark involved in it. The cost estimates they have generated are based on productivity levels that have to do with repeat revaluations. We are not doing a repeat revaluation. The answer to the Deputy's question will be available when we have done the review mentioned earlier.

Deputy Pádraic McCormack

I am not a consultant but I would say it would cost at least €120 million, if not €200 million, judging by the information Mr. Murray was able to give me here this morning. I look forward to his answer when he is able to give it to me.

In respect of Vote 15, the surplus surrendered for 2005 was €2.6 billion and the surplus surrendered for 2004 was €3 billion. In other words, the Valuation Office surrendered 23% of its money in 2005 and 33% in 2004. Yet Mr. Murray tells me the office cannot do the work. Why is the money surrendered each year?

Mr. Aidan Murray

The Deputy is quite right in saying that we have surrendered money for several years. I have explained to the committee in the past that the main reason for the surrender of money and our under spending against the Vote is the fact that all of our operations are not geared up to the maximum extent. I refer to the revaluation project. As the Deputy said, the Act was passed in 2001. It was envisaged that revaluation should start more or less straight away. It did not start until 2005. When it started, the gearing up of the revaluation unit has proceeded at a pace far slower than envisaged. Funds provided for a project that had not got off the ground and which when it got off the ground did not absorb all of those resources were handed back. That is the reason for the savings.

Deputy Pádraic McCormack

It seems to get worse by the year. In 2004, €3.59 billion was surrendered, while €2.99 billion was surrendered in 2005 and €2.93 billion was surrendered in 2006. In other words, a total of 44% was surrendered.

Mr. Aidan Murray

I have pointed out in the past that we are now at a stage where the staffing levels are higher than they have ever been within our permitted overall complement of staff. The Deputy will see those savings diminished, if not eliminated, in future years. We are now at a stage where the revaluation unit is almost fully staffed. We have 27 contract valuers out of 30 at this stage. At one stage, we were down to ten. In other words, in respect of two-thirds of what would have been spent on those people in terms of salaries, travel, and so on, the staff were just not there to spend it.

Deputy Pádraic McCormack

On fees to counsel and other legal expenses, the estimate was €65,000 but the outturn was more than double that at €125,000. What was the cause of that?

Mr. Aidan Murray

That is a difficult area for many Departments and Government agencies and in respect of which we are involved in litigation — or not necessarily litigation — from time to time. When cases go to the valuation tribunal, an independent entity, there is legal representation involved. We have also been involved in High Court cases. When we lose cases and must pay our and the other side's costs, the invoicing of the costs and their turning up for payment do not always occur in the years in which they are incurred, which seems to be a feature of the legal system. We and other agencies have a problem with this, as one may only receive a call for payment two years after an expense has been incurred. One can make an estimate.

Deputy Pádraic McCormack

The estimate in this case was €65,000.

Mr. Aidan Murray

That is right.

Deputy Pádraic McCormack

The outturn was €125,000. Were I running my business that way, I would not still be in business. There seems to be no control of the outcome compared to the estimate in a number of aspects of the expenditure. This is just one example.

Mr. Aidan Murray

I agree with the Deputy, but the aspect in question is a direct result of the way in which lawyers bill their clients for work done. Bills are received in a way that is regarded in many areas of activity as haphazard, involving long intervals between the costs being incurred and the bills. One can make an estimate on the basis of the cost incurred, but one may not see the bill until next year.

Deputy Pádraic McCormack

Who earned the €125,000 and what was it for?

Mr. Aidan Murray

I have a list of seven payments to solicitors' firms ranging from €5,900 to €35,000.

Deputy Pádraic McCormack

What would the payments be for?

Mr. Aidan Murray

They would be made where we lost cases and had costs awarded against us. We would pay our own costs and those of the other side.

Deputy Pádraic McCormack

What type of case would have been taken?

Mr. Aidan Murray

Where valuations would have been challenged. I explained the system, namely, if people are unhappy with the representations they make concerning their valuations, they can make a first appeal to the office for which we charge a small fee. If they are unhappy with the appeal, they can go to the Valuation Tribunal, which has quasi-judicial power. People will use legal representation there. At times, we go to the High Court when challenges are made to the tribunal's determinations. In those circumstances, we and the other side must have legal representation.

As would occur in respect of any Department or agency from time to time, if we lose a case — we are duty bound in certain instances to defend our legislation and to protect the rates base with which we work — we incur costs. Unfortunately, the legal profession's billing system results in bills for some cases being received many years after the litigation has been determined. This is not particular to the Valuation Office.

Deputy Pádraic McCormack

Taking another example, A3 on incidental expenses contains an estimate for €463,000 and an outcome of €609,000. What are incidental expenses?

Mr. Aidan Murray

They cover a range of expenses within the office. Many of our valuers are members of professional bodies that charge repeat membership fees, etc. and are entitled to have their fees paid out of office funds. A large component of incidental expenses relates to our contract with Ordnance Survey Ireland for the provision of maps, which are indispensable to our valuers' work. The former Ordnance Survey Office, or Ordnance Survey Ireland as it calls itself now, operates on a strictly commercial basis. Notwithstanding the fact that we are first cousins within the public service, it charges us the full amount for the service it gives us.

Deputy Pádraic McCormack

How are incidental expenses higher by 50% than the provisional estimate?

Mr. Aidan Murray

When we were moving into that year, a contract was being negotiated with Ordnance Survey Ireland, an element of the cost of which was paid in that year. The contract negotiations terminated and the first payment was made to Ordnance Survey Ireland that year. This cost is the largest single component.

Chairman

Deputy McCormack's questions raised a number of important issues. The consultants conducted a dummy or useless report. If I got a painter to paint my house and he or she made a mess of the job, I would look for my money back. Have there been discussions with the consultancy company concerning the fees paid and their refunding? The report seems to have been seriously defective. Has there been an examination of State contracts with the company, which I am sure is involved in a broad spectrum of Departments? Has the Department of Finance examined the consultants' performance in other areas? If I employed them, I would not do so a second time if they came up with a report described as seriously defective.

Arising from Deputy McCormack's questions on the valuation of properties, particularly for individuals — I could go on about cases for hours — what is the situation in terms of decentralisation? In Northern Ireland, a small province, there are seven decentralised offices. In the Republic, one must ring an office in Dublin to get answers. What is being done to bring the service to the people?

Mr. Aidan Murray

If I may, I will answer both questions. I am not aware of any discussions with Deloitte & Touche. I was appointed in November 2005 and, in my time in the job, there have been no discussions with the consultants in respect of that report or their payment. I do not want to put words in their mouths or to appear to be their advocate, but the report was based on many assumptions and experiences in Scotland, England and Wales at that approximate time.

Chairman

Which were not relevant.

Mr. Aidan Murray

Deloitte & Touche would have seen them as relevant to particular circumstances, but the job it envisaged in 2001 and the job we find ourselves doing in 2008 are markedly different. I suspect that one could have——

Deputy Thomas P. Broughan

On that point and through the Chair, Griffith's Valuation took 13 years in the middle of the 19th century. It is a famous document, particularly in terms of the history of surnames and so on. Did the rest of the British state have other valuations after 1922?

Mr. Aidan Murray

It did.

Deputy Thomas P. Broughan

We did not get around to it.

Mr. Aidan Murray

No, we are miles behind the game in this regard. Over the years, we have maintained a complicated valuation base. Efforts have been made. From the Deputy's knowledge of local authority rating, he will know of the use of all sorts of algorithms, formulae, reducing factors and so on. The original idea behind valuation, to which revaluation will return us, is a direct connection between the rateable value of a building and what the building will command in commercial rents per year. This is the simplest and best way of doing it. If a building is down on its luck or a business is not running well, it is only fair that the person in question should have a rateable valuation reflective of a status that is markedly lower than, for example, Grafton Street. If there are increases and decreases in areas of a city or town and no one makes an adjustment in that regard unless there is a material change in circumstances — if one owns a shop, the only time one would see us approaching would be after a material change had been made to it, thereby triggering a revision, whereas one would be stuck were the shop to remain the same notwithstanding the fact that traffic patterns in the area may have changed or a bypass may have been built — the situation is iniquitous.

The UK and Northern Ireland have experienced repeat revaluations. The latter is on its third in recent years. On the Chairman's point, the North has a regional structure of seven offices. It does much of its work on a desk-based exercise, which is economical and easy to do, but it incurred significant costs in getting to that point, which we know from our close liaison with it. The North has developed work practices that we would aspire to develop in the years to come whereby there are non-valuers doing certain work that valuers in our jurisdiction do. There are industrial relations issues involved and it is a subject for another day.

The essence of the Deputy's question is whether people in Northern Ireland or Britain are engaged in the exercises in which we are engaged of measuring and individually inspecting properties. The answer is that they are not, they have gone far beyond that for a long time. When the legislation was first passed which gave rise to Griffith's Valuation it was envisaged that there would be repeat valuations but they were not done. We must now catch up. Regarding the initial revaluation, we are laying a base for repeat valuations that can essentially be desk-based. The Act obliges us to do this within every five and ten years. We must return to South Dublin County Council within five and ten years of having done the first valuation. These exercises will become more modest in cost and much quicker.

Chairman

I have a question for the Department of Finance regarding the tracking of consultants and their performances across Departments. Is there any exercise being done on this?

Mr. Jimmy Doyle

I will have to check and revert to the committee. I am not familiar with that area of the Department.

Chairman

Representatives of the HSE appeared before the committee recently and were asked a question about consultants. Two weeks later we received an answer, with a 38 page list of consultants. Is there any analysis or quality control of reports? This is an example of one that represents poor value for money.

Mr. Jimmy Doyle

I am sure there is; I do not have the facts with me today but will come back to the Chairman on the issue.

Chairman

Specifically, I know of a case where a man retired and was then employed as a consultant at €150 per hour. If he had been left in his original job he would have been employed at the going rate. Has an exercise been undertaken by the Department of Finance?

Mr. Jimmy Doyle

I will come back to the Chairman on that issue.

Mr. Aidan Murray

I will not attempt to range over the public service. Our philosophy is to be sparing in the use of consultants. I will provide one example that is relevant to the committee and some questions asked so far. We referred to an overall review, a review of the national revaluation and how long it would take. That was a global exercise. As the Comptroller and Auditor General has acknowledged in his report, we have undertaken a number of mini reviews of operations and the way our valuers do their work. Within the next week or two we will start another, in which we will examine the practical experience in South Dublin County Council, and whether we can accelerate further or do better. I have received confirmation from the retiring Commissioner of Valuation for Northern Ireland that he will be part of the review. As much as we can, we are not in the habit of pushing matters out to consultants. Very often the knowledge lies within the public service, or the public service of Northern Ireland and Britain. We have a small group and our target is one month. It will examine working methods rather than overall cost, etc., to see where we can cut corners, accelerate and increase momentum when we move further into Fingal. The Commissioner of Valuations for Northern Ireland is retiring this week and as soon as he does he will join us immediately to help. It is not a formal consultancy arrangement and I believe we will achieve a better outcome than if the matter disappeared into the mists and reappeared in 12 months' time.

Deputy Thomas P. Broughan

Regarding the revision that is proceeding, the Comptroller and Auditor General informs us that Dublin and Cork alone account for 40% of the total number of properties for valuation in the State. What is the position on the five local authorities in those regions? Is there a plan to deal with Dublin and Cork first? Is there a timeframe for the national revision?

Mr. Aidan Murray

The timeframe will be thrown up by the review I mentioned. I do not want to refer to it again and again and suggest the review will solve everything. In the immediate future we cannot stop the present process while conducting a review. If we do, we will lose the contract valuers. Nobody will remain with a project that is not running. We started in South Dublin County Council and have moved into Fingal. The likelihood is that the next one will be Dún Laoghaire-Rathdown.

Deputy Thomas P. Broughan

What is the position on Dublin City Council?

Mr. Aidan Murray

Dublin City Council has 26,000 properties within the city area. We will undertake the work sooner rather than later. I would like to see the revaluation process extend outside Dublin to other counties. The process in some counties could be completed within months.

Deputy Thomas P. Broughan

Does Mr. Murray have a timeframe whereby properties in the entire country could be revalued, using the staff of the office and contract staff? From then on we would have the database.

Mr. Aidan Murray

I have ambitions but do not want to express them yet. I want to have them tested by the review we will carry out.

Deputy Thomas P. Broughan

Does Mr. Murray think it will take five years or a decade?

Mr. Aidan Murray

Although I am not basing this on anything scientific, I would like to break the back of it within a decade.

Deputy Pádraic McCormack

It would be double or triple that period. We must go by the facts and progress made so far. There is no use saying it will be completed in a decade when the fact is it took three years to complete the process in a major local authority and will take two years to complete it in the second one.

Deputy Thomas P. Broughan

On the basis of the report's conclusions, it seems corporate governance must be greatly strengthened. That is what the Comptroller and Auditor General states. Major resources are needed for this important national task because the funding of local authorities is so vital. Does Mr. Murray believe we need a strong reorganisation of the Valuation Office?

A number of points are striking. The Valuation Office has a system of electronic transfer of information with only two county councils so far. There is no cost management centre and the internal audit function seems to be weak. I accept that staff are working very hard and trying their best to carry out this important national task. Given the record of the report, is it necessary to provide major resources for the office to enable the work to be undertaken in coming years?

Mr. Aidan Murray

I do not think so. I tend to be analytical about this. If we break it down, the revision work we do——

Deputy Thomas P. Broughan

There is an 18 month backlog.

Mr. Aidan Murray

No, that concerns market value but if one takes revision work — the bread and butter of local authorities, ensuring they capture the rates income to which they are entitled every year — we have kept pace, even with the booming economy in Dublin and other areas. We have a satisfaction rating of 83% from local authorities in terms of the service we provide, a rating that is very high.

Deputy Thomas P. Broughan

The County and City Managers Association had some criticisms to make of the service.

Mr. Aidan Murray

It expressed a number of concerns, one of which was related to a reduction in staff numbers and delays. This was consequent on a letter I wrote to city and county managers in January last year. I pointed out that the difficulties occurring with the South Dublin County Council revaluation meant I would have to take some staff from revision work — the bread and butter of local authorities — to work on the revaluation for a short number of months to ensure we got it finished within the timescale laid down. The city and county managers interpreted this, not unreasonably, to mean that rates income would be hit. Where they had acute levels of anxiety, I met them. At the end of the year we exceeded the worst case scenario by a factor of two. That is from where the city and county managers' point comes.

There are good measures of the level of satisfaction which local authorities have with regard to this revision work which, as I stated, is the work which underpins the more than €1.2 billion of rates income each year. Each year, we do a survey on how satisfied they are under various headings and the average is 83%. Provision is made for local authorities to appeal valuations. If we became benevolent in how we value buildings and local authorities saw valuations as coming in too low, which would cause a rates loss, they would appeal the valuations in large numbers.

Deputy Thomas P. Broughan

On that point, I note 10% of appeals were made by charitable and voluntary bodies. What percentage of those were upheld?

Mr. Aidan Murray

Charitable organisations are not rateable. An issue might arise if an organisation shares a premises with commercial organisations as it may feel aggrieved and may appeal the stance we take. If the Deputy bears with me I will try to locate the figures on the rate of appeals. Generally speaking, in terms of outputs — the actual valuations we generated — in 2007 for all the various categories of people who are rateable, we had slightly fewer than 11,000 outputs on the revision side of the organisation. Of this, 3.77% were appealed. This means the occupiers of more than 95% of the buildings we valued felt the valuation we gave was reasonable and acceptable.

We do not merely send out a letter. We allow the occupier to receive the valuation report which shows what we came up with, why we came up with it and how the valuation relates to comparable properties in the area. They can see whether they are being fairly treated. Of the 3.77% who appealed, 43% had the valuation reduced but the extent of the reduction on appeal was 5.2%. Very small numbers appeal and any reductions made are modest.

In terms of the quality of the service we try to deliver to our clients, an overwhelming number of people accept their valuations. Where they feel uncomfortable with the valuation they can go through three stages. The can engage in what is termed in the Act as a "representation stage" where they speak with the valuer and see whether——

Deputy Thomas P. Broughan

Admittedly, the charitable and voluntaries bodies is a small proportion. Last year, did they account for 10% of appeals?

Mr. Aidan Murray

I do not have this figure with me but I would be surprised if it even reached this figure.

Deputy Thomas P. Broughan

What about the previous year?

Mr. Aidan Murray

Again, I will have to communicate with the committee because I do not have the figures with me.

Deputy Thomas P. Broughan

To quote the Comptroller and Auditor General from paragraph 2.15 of the special report, "despite an increase in the level of industrial and commercial development in the past decade, the level of valuation requests made by rating authorities to the Office has not increased substantially over the period 2001 — 2006". Why was this the case? This was during the Celtic tiger period.

Mr. Aidan Murray

What we are seeing here is a strange phenomenon in the Valuation Office. I will not bore people with the detail of it. We have two measures of performance and one is requests, which are what we receive from local authorities. A local authority will ask us to value a particular lot number. This is one request and in a typical year we receive 8,000 requests. Our valuer might find three buildings on this lot number and he or she must value each of them. This generates three outcomes.

We found that in the years covered by the Comptroller and Auditor General's report what is called "additionality" has kicked in. This means an increasing number of individual requests generate an increasingly higher number of outputs. Going back to the beginning of the period, in 2001 because of additionality, every 100 requests we received generated 140 outcomes. This has increased to almost 170 as we now have 67% additionality. This means the number of requests remains broadly static but we have a greater intensity of building with multiple uses on the same footprint of land.

If one examines our requests one might state we are treading water as we seem to be doing the same number year in year out. However, if one examines the outputs, which is the work we do as opposed to what we take in, it has increased. This directly correlates with the trend in development in Ireland during recent years.

Deputy Thomas P. Broughan

The last time I was on the committee, a major issue for it and the Comptroller and Auditor General was the development of an accrual accounting system whereby valuation of assets would be kept updated. Does the office use balance sheet information to any extent in the process? I know people often downplay assets.

Mr. Aidan Murray

To the best of my knowledge we do not do so at present. Our asset base is very limited. We operate from a rented premises and our largest capital is human.

Deputy Thomas P. Broughan

I mean with regard to commerce generally. Does the office cross-check or use financial reporting to check on values?

Mr. Aidan Murray

With regard to what values?

Deputy Thomas P. Broughan

With regard to possible rental values.

Mr. Aidan Murray

In terms of our clients?

Deputy Thomas P. Broughan

Yes.

Mr. Aidan Murray

Yes, and there are various ways in which valuation is done. Depending on the type of property being examined, for particular types of businesses such as pubs and hotels we examine the operation of the business in terms of its profitability and turnover. We also have global valuations and special project valuations such as the West Link toll bridge. It would be pointless, irrelevant and an extraordinary proposition to measure its width, length and height and state this was the basis for valuation. The basis in this case is receipts and expenditure and the financial expression of the operation is taken into account in its valuation. In other cases it is based more on the area and type of a physical building.

Deputy Thomas P. Broughan

I thank the delegation, and I wish to make a final point before I must leave to attend a meeting of the Joint Committee on Transport. It should not be as long again before the Valuation Office comes to the committee in view of the conclusions of the report of the Comptroller and Auditor General that we keep the issues raised under review.

Chairman

We will discuss it. Earlier I asked how the Valuation Office figures in the Government's decentralisation programme. Independently of this, does the office have any plans to do what was done in Northern Ireland and go to the regions?

Mr. Aidan Murray

In answer to the second question we have no plans to physically regionalise the structure at present. Our teams are built on a regional structure. We have four teams dealing with the revisions area, each of which has responsibility for particular counties. They operate out of Dublin. This does not mean they are up and down to Dublin every day. They can be gone for a week or two. They operate on a regional basis but we do not have regional offices.

Chairman

Why not?

Mr. Aidan Murray

I am not aware whether it was proposed prior to my time but since I have come into the job we have not pushed it. I am not sure whether if we did our colleagues in the Office of Public Works or in the Department of Finance would see it as cost-effective. With regard to our operational activities, I am not sure whether it would add anything to the numbers we get through. The team working structures we have in place are good. I return to the point that it has enabled us to keep pace with a phenomenal increase in building activity in recent years. In regard to decentralisation, we are destined to go to Youghal. We will move 100 staff from our complement of 180, which is due to increase to 191 with the approval by the Department of Finance of supernumerary additions. The indicative time for our move is 2009. We will share our building with the Public Appointments Service, which is also due to move 100 staff. Discussions are ongoing between the OPW and Youghal Town Council, which owns the land for the building, but to the best of my knowledge construction on the building has not yet commenced and the legal formalities between the OPW and the council have not been concluded. Our problems are similar to other organisations in regard to decentralising specialist staff.

Chairman

Does Mr. Murray fear for the office's institutional memory?

Mr. Aidan Murray

I certainly do. Furthermore, valuers are very hard to recruit. When we send valuers out, they are professionally qualified and competent. They have to be able to put a valuation on a building under legislation and defend it all the way to the High Court. A solid basis is needed in terms of qualification and expertise and they are not interchangeable. Other organisations within the public service employ only a handful of valuers, so if our cadre of valuers decided not to relocate we would not be able to employ a body of valuers who were working elsewhere in the public service. I certainly have concerns about corporate memory but I am more worried about being able to recruit staff who are competent and capable of withstanding challenges. Some of the tasks and valuations we take on concern serious players who are prepared to raise challenges as far as the tribunal and the High Court because of the sums of money involved. We need people who have the professional basis to withstand that type of challenge.

Deputy Róisín Shortall

I welcome the delegation. Can Mr. Murray set out the breakdown of staff according to their deployment across various areas of activity within the office?

Mr. Aidan Murray

I do not have the precise figures but I can provide an indication for the Deputy. I hope the committee will be able to follow me as I set out the structures. Our areas of work are liaising with local authorities on revisions for rates, which is our bread and butter work, revaluations, global and special project valuations and market value work, which is a subset of the former.

We employ 45 valuers divided into four teams on a geographical basis to work on revisions. One of those teams deals exclusively with the Dublin area. Currently 35 staff work on the revaluation projects in South Dublin County Council and Fingal County Council. That figure will be boosted by an intake of staff over the next couple of months. A small team of three people work on market value, global and special projects.

We have set up an appeals system which employs three people. These act as the final determiners of appeals within our system, after which appellants may go to the Valuation Tribunal. Three staff are adequate for the volume of appeals we receive at present.

We also employ approximately ten technical staff, such as cartographers, in the areas of revision and revaluation. Revision is supported by eight administrative staff and revaluation has two support staff, alongside 47 general support staff for personnel, accounts and other areas. We operate a public office in which people can consult records dating back several hundred years, which is unique in terms of its historic importance. Finally, four staff who work for the Valuation Tribunal come from our Vote, even though the tribunal is independent of us. The secretary to the tribunal is paid by the Department of Finance, which also pays the fees of tribunal members.

Deputy Róisín Shortall

It strikes me that the Valuation Office is engaged in a juggling exercise with staff in order to cope with the various demands placed on it, particularly in respect of the implementation of the Act. From the point of view of an important public service, that is an intolerable way to proceed. If all these obligations fall on the office because of the Act, it should have a business plan for dealing with them. In respect of delivering the national revaluation within a reasonable space of time, has a business plan been devised to set out the timescale, staff requirements and costs?

Mr. Aidan Murray

There is not one at this juncture. We have annual business plans and we are required to set out a statement of strategy that covers a three year period. As the Comptroller and Auditor General's report acknowledged, we will not have a plan for the national revaluation until we have completed the review. We could have made a stab at a plan based on another range of assumptions but we could not start to build an authoritative plan yet until we finished with South Dublin County Council and came up with hard information on what was involved in terms of inspections, building a database, the numbers of representations and appeals, the resources needed and the length of the process. We already discussed the consultancy report, which had a number of assumptions built into it. We found that the hard facts of life do not stack up to those assumptions. A plan will be devised for the national revaluation based on the outcome of the review I spoke about earlier.

Deputy Róisín Shortall

When does Mr. Murray expect to have the plan completed?

Mr. Aidan Murray

We are starting the review later this year, so I expect to have a plan within six to seven months. We have a structure in place at present which is the product of the consultancy report, the legislation and various industrial relations agreements reached subsequent to the industrial action to which Deputy Collins referred.

The latter has injected a certain amount of inflexibility into the organisation in respect of demarcation lines between areas of activity. Without renegotiating that agreement, we have made considerable headway in having people from one area assist efforts in other areas which are under strain. Deputy Shortall summed up the situation very well when she remarked that a certain amount of juggling was being done. I do not necessarily see that as a bad thing in the sense that I would like greater flexibility within the organisation. I generally feel that where areas within the public service come under strain, it should be possible to redeploy resources.

In terms of a plan, we will conduct the review in the latter part of this year, at which stage we will have information that we can feed into a review. We did not have that information before because a revaluation has not been done since 1852. The review will indicate outcomes on cost, duration and resources.

Deputy Róisín Shortall

Mr. Murray is speaking as if the revaluation will be done in five years time. I do not get the sense that a clear plan is in place to carry out the national revaluation. If the office continues its activities according to the manner in which it dealt with south Dublin, God knows when it will be completed. As a modern and important public service, the Valuation Office should be in a position shortly to outline for us its business plan for carrying out the national revaluation. We should be very clear on the targets, dates, timescale and cost involved. However, that should not be at the expense of the revision or market value work. It seems to be on a knife edge. It is intolerable if in the market value work there is an 18-month backlog. It is not good enough for Mr. Murray to tell members that if they have individual cases, he will be happy to take them up. The public service should not operate on the basis of Deputies having to make representations on individual cases. There should be a public service which can cope with the demands placed on it. If there are IR, staffing or funding issues, they must be dealt with head on. It strikes me that the lid is being kept on this issue and that the Valuation Office is just about keeping its head above water. As a modern service we should be very clear on the demands and funding requirements. Let us put in place a modern public service which can deal with the demands placed on it.

Mr. Aidan Murray

With respect to Deputy Shortall, I have to take issue with one or two of her comments. I do not accept the characterisation that we are on a knife edge or just keeping a lid on matters. I have to return to the hard, cold reality of what we do and how we measure it. In the 2001 Act we were given a clear statutory remit and do not have discretion to vary, neglect or put it to one side. That remit is to run a rateable valuation service which supports local authority financing, conduct revaluations and make global valuations. Those are the three priorities the Oireachtas has given us. The market value service is not to be found anywhere in the legislation. It is a non-statutory service and has to be subsidiary to the statutory service we provide. Historically, it was easy to provide it because in years gone by there was no revaluation. The only work of the office was revision work. When the revision valuers had time on their hands, they could deal with the market value service. Departments were able to refer cases, which were returned to them in more leisurely times than we have now.

Staff in other Departments understandably look to us to provide the market value service. I acknowledged this, as did my predecessor as far back as 2004; we have been saying it for years. The Department of Finance, in the sanction it gave Departments some years back to go elsewhere, acknowledged that we were not in a position to dispense with statutory work to provide valuation services. Some of the cases referred to us for market value services would be easily dealt with by private sector companies. They are not sensitive, confidential or major. However, for whatever reason, certain agencies continue to send cases to us that they know we will not be able to get to. The cases we try to get to over and above our statutory work are those which are indicated to be extremely urgent or, where we can manage it, the type of cases I referred to in response to Deputy McCormack.

The revaluation project had a very difficult birth. It began in 1995 with an interdepartmental committee which came up with certain findings. It took six years to get from that point to enactment in 2001. The implications of that enactment triggered an industrial action involving the office, the Department of Finance and at least one other trade union. It preceded my time but I think it took almost two years to resolve. During those two years there was a significant impact on local authorities and their financing. The matter was resolved by an agreement made by the parties involved and endorsed by the Department of Finance which has yielded a structure with which we work.

I saw it as virtually worthless to produce a business plan for a national revaluation in circumstances where we had not fully staffed the unit which was to carry out the project and we did not know how long it took to get through cases or how many representations a revaluation would typically turn up. In our planning last year for south County Dublin we predicted a worst case scenario that 50% of 6,500 occupiers in south County Dublin could appeal or make representations when they received their draft certificates. When an initial revaluation was made in Britain in 2000, appeal levels were 80%. In our business planning for last year we factored in appeal rates of up to 50% in the south County Dublin revaluation. As it transpired we had appeal rates of approximately 13% or 14%. All these realities will feed into a review, from which we will generate a picture of what a national revaluation will involve, what will be needed — a different structure from the current one may be required — and what it will cost.

Had I come before the committee or anybody else today or last year with a business plan for the national revaluation in circumstances where we had not even got through the first revaluation of a functional area in this country in 150 years, I would have had serious difficulty standing over anything in it and it would have been of little or dubious use to the committee. I would like to return to the committee and other stakeholders in due course with a plan over which we can stand and about which, when we are questioned on it, we can say the figures are true. I know, for example, how many cases per year a valuer in south County Dublin can generate and it is not 1,200, the figure the consultancy report threw up. I want to be careful with that report. They mixed apples and oranges and based the figure of 1,200 cases a year on a different exercise from the one in which we are now engaged. The structures in 2008 are different from the ones it foresaw.

The revaluation unit comprises a layer of managers who are permanent civil servants, under which works a unit of 30 contract valuers, graduates who are contracted in. Many of those involved are young and highly mobile, which is why we were unable to keep them when attractive emoluments were being offered from outside. Those outside circumstances have changed a little and we are retaining staff. However, our most senior contract valuer has been with us for 15 months. The longer we hold onto staff the greater the expertise they will have, the faster they will work and the more cases they will get through. In those circumstances I see the project accelerating. I need to come to a committee and be able to say the plan, duration and cost we predict are based on solid evidence. When the members ask me how many cases a contract valuer will be able to get through, how many appeals will arise and why I am giving that number, I will be able to say that is the number that occurred in a particular area, not what some consultant told me seven years ago.

Deputy Róisín Shortall

We should ensure we invite representatives of the Valuation Office to return this time next year because I look forward to seeing the business plan. I accept what Mr. Murray is saying about the need to base it on experience.

Mr. Aidan Murray

I would appreciate that opportunity.

Deputy Róisín Shortall

We are conscious of the experience we have had where legislation is introduced in the Dáil to establish new organisations or place responsibility on existing organisations and the resources are not provided for this. It needs to be quantified and there must be a business plan.

Let me ask Mr. Murray about the appeals process, about which he spoke to Deputy Broughan. On the other side, is there an opportunity for local authorities to appeal the Valuations Office's decisions in respect of revisions being too low? During part of my time on the Dublin City Council, then Dublin Corporation, in the late 1990s there was much concern about revisions which resulted in significant reductions in the council's rates income. How does it happen that there are huge revisions and what is the experience with local authorities appealing such decisions?

Mr. Aidan Murray

We have a very low number of quite isolated cases of appeal by local authorities and, in general, they do not appeal the valuations. There is a facility which allows this but, in general, appeals we receive are from occupiers rather than the local authority. If the local authority felt valuations were wrong in the first place, that is, they were too low, the rate of successful appeals by occupiers was too high and the rate of reduction on appeal was exorbitant, we would have a serious issue with local authorities coming to us.

As I have indicated, in recent years over 90% of revisions are accepted by all and sundry. Another 7% or 8% would go to representations and people would want to speak to the valuer. A subset of those would go on to the first appeal, an appeal to the commissioner within the system. Last year, 0.8% of all the cases we did went on to the Valuation Tribunal.

Off the top of my head, I am not aware of any recent case appealed by a local authority. I will try to get figures if the Deputy so wishes. I am aware of cases where local authorities would have signalled concerns about particular properties or concern that we would get to properties early.

A good example would be the legislation passed by the Oireachtas at the end of 2006, which is called the "BIDs" legislation colloquially. That allowed a local authority for the first time to bypass a wait of a year to bring a property onto its books for rates income. Local authorities throughout the country which use that device are very anxious that when a building is completed, we are out there quickly to capture it and it is brought onto the books straight away. They will indicate such concerns to us. Generally speaking, with regard to the quantum valuation, the levels of appeal and the reduction on appeal, there is no issue between us and local authorities.

Deputy Róisín Shortall

I wish to ask about the market value work. Given Mr. Murray's opinion that much of this could be done in the private sector, who are the typical clients?

Mr. Aidan Murray

I can give the clients as I have a list with me. I will give the Deputy a flavour as they are typical and tend to be the same clients generally. Heading the list is the Department of Communications, Energy and Natural Resources. There is also the Health Service Executive, the local authority tenant purchase scheme which I mentioned to Deputy McCormack before, the Revenue Commissioners, the Department of Social and Family Affairs and small numbers of others. The old Department of Communications, Energy and Natural Resources alone would account for in excess of 50% to 60% of the work.

Deputy Róisín Shortall

What type of work is involved?

Mr. Aidan Murray

It would consist of many aspects, bearing in mind land would be owned in the margins of harbours around various marine facilities in the country up to and including foreshore leases. There are properties located on piers, with a good example being Howth pier in Dublin. The Deputy may be familiar with that as there are shops and restaurants along the pier. Those types of properties are leased as they are sitting on land leased by the Department with responsibility for the marine. It would require, for example, a review of leases from time to time.

There are many cases where such a Department would dispose of property. This generally would be smaller properties rather than major examples and they may be small plots of land. Such a Department typically would be the repeat clients.

Deputy Róisín Shortall

Has there been a discussion with any of those bodies?

Mr. Aidan Murray

Yes, all of them.

Deputy Róisín Shortall

What kind of results have emerged?

Mr. Aidan Murray

This is not a new phenomenon and it goes back several years. We have pointed out that we are not in a position to give a timely service. If there is a serious case or a very present case comes up, we can do our best and we have urged such bodies to go elsewhere. They understand that and in many instances the number coming in has decreased.

Taking the Health Service Executive as an example, we know that body has been in discussion with private sector service providers with regard to properties it owns. To the best of my knowledge, it may be getting a service from that quarter, which would be perfectly permissible under the rules of the Department of Finance as well. What it is looking for is to ensure a good market valuation so the taxpayer is protected in disposing of a property.

Deputy Róisín Shortall

Does the Valuation Office charge for that service?

Mr. Aidan Murray

Yes, we have a fee for market valuation services.

Deputy Róisín Shortall

It charges the commercial rate.

Mr. Aidan Murray

We have fees for all our services.

Deputy Róisín Shortall

There is no advantage in a State body going to the Valuation Office for a valuation.

Mr. Aidan Murray

No, although in going to the private sector, one invariably finds that in many instances the fees would be substantially more than what we charge. This comes back to a number of factors. Some Departments may indicate that when they tried to go to the private sector, there was no interest. That certainly would have been an experience two or three years ago when the economy was booming and the last thing these companies wanted to do was sell small plots of land behind fisheries harbours when they could sell a housing estate at the end of town. The changing economic circumstances means there should be more of an interest in taking on State property cases.

If there is a pressing case or a transaction must be completed that would allow a development to go ahead, there is nothing in the Department of Finance rules preventing bodies going to the private sector. Previous rules obliged such bodies to come to the Valuation Office but they now can get a service from the private sector. Although we cannot deal with cases, we will always provide advice on firms which can be approached, etc.

I mentioned the Revenue Commissioners and there are some bodies like this which, for very obvious reasons, are not prepared to do this. In some areas there are high net value individuals, etc. involved and such bodies do not want to go out to the private sector. The work interests us and it is a matter of regret to us all that we have not been able to continue with the service in recent years. Apart from other factors, there is a variety of work involved and it is good for our staff because we deal with many different types of property. The statutory work must take precedent.

None of us aspires to a return to what could be termed "the good old days" where every blade of grass, if it must be valued, gets turfed in the direction of the Valuation Office. We know the private sector can and should be doing some of the valuations for Departments at modest cost. It will be the case that some clients within the public service require our service and we intend to focus our rebuilt resources on those.

The Deputy may appreciate that a new valuer cannot be brought in and put doing market value work. That type of work is necessarily based on detailed knowledge of conditions in particular markets throughout the country. The market for selling a property in Donegal would be very different from selling it on the edge of Kilkenny city, for example. The valuer would have to be familiar with the local markets and it takes time to send out a worker with experience. We take in new people, move some of the experienced valuers over from the revision side and we replace them in a phased programme with the new intake. We rebuild the staff over time.

Deputy Róisín Shortall

I thank Mr. Murray.

Chairman

A vote is due in the House at approximately 12.35 p.m. so we will try to wrap up before then. I have a question on section 4.39 of the report. It concerns a survey of staff attitudes and indicates only 50% of staff were satisfied with management and, with regard to management, a factor which affects performance is the time taken to assign a case to a valuer. In other words, that is the time from getting a request for a valuation to the time of the case being assigned. Is there a problem with morale in the organisation?

Mr. Aidan Murray

I do not think there is an overall problem with morale. What we have had in recent years is an organisation which in a relatively short space of time has gone through a huge amount of change. It has gone through everything from industrial relations problems to a move in its location to taking on work it would not have done in the past. It is also fair to say individuals and groups of people in the office have had to contend with being moved around or asked to do work which in some cases would not traditionally have been their work. That would from time to time have affected their mood. However, I do not think there is a general morale problem in the office. We do climate surveys each year which cover everybody in the office. We would like to think, in terms of the personnel philosophy within the office, that we operate an open regime and that if we identify a problem, we try to address it. In answer to the Chairman's question of whether there is a prevailing morale problem, I would not accept that there is.

Chairman

That is great. I thank Mr. Murray.

Mr. John Buckley

Our report, as I said, was a status report and obviously many of the issues such as progress on the revaluation programme, the management information framework and the market value casework are at intermediate stages of development. We will be reflecting on the discussion and keeping under review progress in those areas in our audits and, where appropriate, feeding the results back to the committee in the form of reports.

Chairman

I thank Mr. Buckley. An opinion has been expressed by a number of members that we would like to have the representatives back some time in 2009 to consider what will have been done by the Valuation Office in the meantime in terms of producing a business report. We look forward to talking to the representatives again about the progress made in that regard.

Mr. Aidan Murray

I thank the Chairman.

Chairman

There were some unanswered questions about consultants, including Deloitte & Touche, the cost of the consultants' report and a number of other issues. Perhaps the representatives might provide us with the answers as soon as possible.

Mr. Aidan Murray

We have taken note of these questions and will get back to the committee with the answers.

Chairman

If Mr. Murray would like us to write to him to confirm what we are looking for, we will do so.

Mr. Aidan Murray

That might be helpful.

Chairman

Is it agreed that the committee should note Vote 15 and dispose of Special Report No. 60 of the Comptroller and Auditor General of November 2007 but review it again next year? Agreed.

Our business next Thursday will be to consider the 2006 Annual Report of the Comptroller and Auditor General and Appropriation Accounts: Vote 28 — Foreign Affairs, and Vote 29 — International Co-operation.

I thank Mr. Murray and his staff, the officials from the Department of Finance and the Office of the Comptroller and Auditor General for coming.

The witnesses withdrew.

The committee adjourned at 12.15 p.m. until 10 a.m. on Thursday, 10 April 2008.