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COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 6 Feb 2014

Annual Report and Financial Statements 2012

Ms Eileen Quinlivan(Acting Chief Executive Officer, Dublin Docklands Development Authority) called and examined.

I welcome the witnesses. We will now move on to item No.7, the Dublin Docklands Development Authority annual accounts for 2012. Before we begin, I remind members and witnesses to turn off their mobile phones because interference from them affects the transmission of the meeting. We have received complaints from the public in this regard and the constant interference is sending out a negative image of our proceedings.

I advise the witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter but continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the provision within Standing Order 163 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Ms Eileen Quinlivan, acting CEO of the Dublin Docklands Development Authority, and Mr. John Crawley, financial advisor. I also welcome Mr. Paul Dunne, principal officer, Department of the Environment, Community and Local Government. I will now ask the Comptroller and Auditor General to make his opening statement.

Mr. Seamus McCarthy

I thank the Chairman. As the committee is aware, the Dublin Docklands Development Authority was established in 1997 to secure the physical, social and economic regeneration of the docklands area on a sustainable basis. It is a non-commercial State body with a commercial mandate and has operated generally without Exchequer funding. In May 2012 the Government announced its decision to dissolve the authority and transfer its planning and development functions to Dublin City Council. The actual dissolution date has not yet been determined. In the meantime, the authority has a transition business plan in place to resolve the liabilities of the authority through the liquidation of assets, including the transfer of the relevant infrastructure, and to deal with any remaining litigation.

The authority's gross surplus for 2012 was €2.3 million as compared with €7.6 million in 2011. After taking account of operating and other expenses and impairment costs charged in the year, the authority reported an operating deficit of €5.5 million. In addition, the 2012 financial statements recognise an exceptional gain of €8.4 million as a result of a commitment given in July 2013 by the Department of Public Expenditure and Reform that it will assume the authority's future pension liabilities on dissolution. At the end of 2012, the authority had net assets of just over €5 million. It held investment properties valued at €23 million and had creditors that were owed €24 million. A significant proportion of the liabilities was made up of a bank loan and amounts due to other State agencies in respect of levies collected on their behalf. The authority recognised that its capacity to meets its liabilities depended on its ability to liquidate its property assets and to collect its debts. I understand that the authority disposed of significant amounts of property during 2013 and in the early part of this year and the authority has provided the committee with an update in that regard.

I would like to take this opportunity to comment on a matter raised by Mr. Paul Maloney when he appeared before the committee in connection with the Irish Glass Bottle site acquisition and in subsequent correspondence. This concerns the executive board's decisions about the authority's financial exposure to the Becbay joint venture. My understanding is that Mr. Maloney takes the view that the executive board was fully aware at the meeting of 2 November 2006 that it was agreeing to a financial exposure for the authority in excess of €61 million, comprising a guarantee to Anglo Irish Bank of €26 million, 26% of the interest that would accrue on Becbay's loans for two years and up to €35 million in other shareholder funding.

As explained in Mr. Crawley's note to the committee of 21 January 2014, these are the terms given effect in the shareholders agreement signed on 9 November 2006. We estimated that the authority's exposure increased to around €82 million by the end of 2010. Further liabilities had accrued by the time the authority concluded its agreement with NAMA in July 2011. The point raised by Mr. Maloney relates to the executive board's decisions about the financial commitment, as documented in the board minutes and papers.

I have reviewed those records again and note a number of key points, which follow. The board minutes of Friday, 20 October 2006 record, at paragraph 7, that the authority's equity contribution to the joint venture would be €9 million, to be provided from existing resources. The board also noted that the remainder of the required funding would be raised through bank borrowing, secured solely on the Irish Glass Bottle site. The board minutes of Tuesday, 24 October 2006 state that the director of finance outlined to the board that the maximum liability to which the authority would be exposed if the proposed site acquisition agreement went ahead was €36 million, comprising shareholders loans and equity amounting to approximately €29 million and an additional €7 million in recourse finance which would have to be available to the joint venture company. It was on this basis that the decision to commit to the bid for the site was made.

The board minutes of Thursday, 2 November 2006 deal with a number of issues that had arisen in the course of progressing the agreement terms with the joint venture partners and the joint venture funders. The minutes include references to guarantees to be provided by the authority in relation to Becbay's proposed borrowing, subject to upper limits being set in relation to the potential liability arising from the guarantee. A related board paper refers to the proposed guarantee provisions increasing the liability of the authority. Estimates of the additional exposure related to the guarantee are not given but a limit of €35 million is mentioned.

The draft heads of the shareholders agreement presented to the board on the same day state that all the costs incurred or losses in the joint venture shall be shared pro rata between the shareholders, provided always that the total recourse to the Dublin Docklands Development Authority under any loans to the joint venture company, guarantees or in any account whatsoever in respect of the acquisition of the Glass Bottle site or otherwise "shall not in aggregate exceed €35 million".

In my view, taking account of Mr. Maloney's evidence, the records kept by the authority in relation to the executive board's decisions on this matter are ambiguous at best. Evidence from members of the board may ultimately be required to clarify the matter. In effect, Mr. Maloney's evidence appears to be that the executive board decided in less than two weeks to increase the authority's financial exposure to the joint venture from €9 million to over €61 million. In my view, decisions of that nature should be very clearly stated in the relevant records. The justification for the increases in financial exposure and the implications for the expected returns from the investment should also be clearly recorded.

I thank Mr. McCarthy. Have we permission to publish his opening statement?

Mr. Seamus McCarthy

Yes.

I now invite Ms Quinlivan to make her opening statement.

Ms Eileen Quinlivan

I thank the Chairman and the committee for inviting us to this meeting. My name is Eileen Quinlivan and I am the acting CEO of the Dublin Docklands Development Authority. I am joined today by my colleague, Mr. John Crawley, the authority's financial advisor. We are here today to discuss the 2012 annual report and financial statements and to bring the committee up to date on developments in the authority since the Comptroller and Auditor General issued his special report No. 77 on the authority.

Last week we submitted a briefing document to the committee which we will be referring to this morning. On 31 May 2012 the Minister for the Environment, Community and Local Government announced the Government's intention to dissolve the authority. A new council and executive board were appointed to the authority in June 2012 to oversee the transition. The Minister envisaged that the authority would remain in place for a transitional period during which it is required to wind up existing operations, prepare the transition to new arrangements and make recommendations to him on appropriate structures for the future.

These structures should ensure the docklands brand and international marketability as an attractive and prime location for investment and high-value development is maintained and enhanced, an appropriate fast-track planning regime remains in place, the local community and the business sector continue to be involved in the regeneration project and job creation is facilitated. In addition, the board has also considered and made recommendations to the Government on how best to achieve the Minister's key objectives for the future regeneration of the docklands in a way that the board considers will build on the positive elements of the authority's legacy in terms of social, physical and economic regeneration. A series of key objectives and associated risks were identified to implement the Government decision, as reported on in the 2012 annual financial statements.

In July 2013, the Cabinet approved Dublin City Council as the successor to the authority and instructed the Department of the Environment, Community and Local Government to put the final transition arrangements, including enabling legislation, in place. A dedicated unit within the city council is being established to carry forward the docklands regeneration project upon the coming into effect of the strategic development zone planning scheme and the dissolution of the authority. The city council is providing services to the authority to resource day-to-day operational activities. The transition of responsibilities to the city council has commenced through this process. The key wind-up issues being addressed by the authority include: the completion of the remaining asset sales and the discharge the authority's remaining liabilities; the management and resolution, where possible, of all litigation against the authority; the implementation of the transition of the authority’s functions, obligations and responsibilities to transfer infrastructure to Dublin City Council; and the transfer and disposal of any authority interests in joint ventures and subsidiaries. This work will be substantially completed in the first half of 2014 with residual issues being transferred to appropriate State bodies.

The transition objectives set by the board of the authority fall broadly into three categories. The first objective - the stabilisation of the authority - is substantially complete. Key deliverables in this regard include the repayment in full of the authority's bank borrowings, which at their highest rose to €35 million; the successful conclusion in the authority's favour of the high-profile €100 million claim by Bernard McNamara and Donatex against the authority; and the resolution of €20 million in other claims against the authority without any cost. In one case, the authority received a €500,000 benefit. The authority continues to dispose of its investment assets at good market prices in the current environment in order to settle its remaining liabilities. The remaining litigation continues to be managed out.

The second objective relates to planning for the future. Two new structures have been designed and are in the process of being implemented. An strategic development zone planning scheme has been prepared by the city council for the area covered by the authority's North Lotts and Grand Canal Dock planning schemes. This is currently on appeal to An Bord Pleanála. The authority has also recommended to the Department of the Environment, Community and Local Government that a docklands forum be established to ensure the continued involvement of the local community and businesses in the regeneration of the area. The third objective relates to the transfer of responsibilities from the authority to the city council, which has commenced. In this regard, the city council is providing ongoing resources to facilitate the continuation of the section 25 fast-track planning function and is mobilising resources to take responsibility for the authority's infrastructure, for example roads and lighting.

The detailed briefing paper submitted by the authority to the committee last week is intended to provide Deputies with a full update on four key areas. It contains an update on the findings and conclusions reached in the Comptroller and Auditor General's special report. It sets out the progress of the authority's finances from 2010 through to the audited financial statements for 2012. As the authority is being wound up, we have prepared a summary of the moneys received by the authority since its inception and how those funds were spent. The briefing paper also outlines a proposed delivery mechanism for the continuation of docklands regeneration into the future.

In summary, the authority's finances have been stabilised. In conjunction with the city council, the authority has put in train a process to develop alternative fast-track procedures. We have put forward a framework for the continued involvement of local communities in the future regeneration of the docklands area. In addition, the transition into the city council, as directed by the Minister, is at an advanced stage. My colleague and I will be happy to deal with the committee's queries to the best of our knowledge and ability.

I thank Ms Quinlivan. Can we take it that it is in order for her statement to be published?

Ms Eileen Quinlivan

Yes.

I thank Ms Quinlivan. Deputy Eoghan Murphy is the lead questioner today.

I thank the Chair. With his agreement, we might park the second part of the Comptroller and Auditor General's statement, regarding the document given to us by Mr. Crawley, and return to it at the end of the meeting. It relates particularly to the Irish Glass Bottle site.

I thank Ms Quinlivan and her officials for coming in today. I would like to go through the 2012 accounts and try to get up to speed with where we are today. My colleague, Deputy Nash, will ask about the exceptional items in the Comptroller and Auditor General's report on the accounts for 2012. I would like to ask a quick question before I begin. We dealt today with some correspondence regarding the Dublin Docklands Development Authority's expense accounts between 2005 and 2010. Does the authority have any credit cards or expense accounts at present?

Ms Eileen Quinlivan

I believe there is one credit card, but it is not used. I think the only time it was used since 2010 was to pay for an information technology licence.

Mr. John Crawley

We have one expense that goes through it - online software renewal, which costs approximately $100 a year.

Does Mr. Crawley sign off on that card?

Mr. John Crawley

Ms Quinlivan signs off on it.

Ms Eileen Quinlivan

I sign off on it.

So it has not been used for any foreign travel.

Ms Eileen Quinlivan

No, there has been no travel since 2009.

Is it still possible for entertainment or food expenses to be charged to the authority?

Mr. John Crawley

No.

Ms Eileen Quinlivan

There have been no such charges since 2010.

When the current board was put in place in June 2012, it was estimated that it would take 18 months to wind down the authority. Has there been a delay? If so, why?

Ms Eileen Quinlivan

We have continued to work to wind down in an orderly fashion. A number of items that are outside the control of the authority need to be put in place in order to effect the dissolution. First, legislation is required. It is currently with the Government and will obviously have to go through the Oireachtas process. Second, in order to have an alternative fast-track planning system in place, the Government designated the North Lotts and the Grand Canal as a strategic development zone in December 2012. The city council was designated as the development agency in that case. A statutory procedure has to be followed to develop a planning scheme for this strategic development zone. That was approved by Dublin City Council on 5 November 2013. It is currently with An Bord Pleanála. Those two things need to be in place before the authority can be wound up.

Is the legislation to which Ms Quinlivan refers that which will move the authority permanently into Dublin City Council?

Ms Eileen Quinlivan

I refer to the legislation to dissolve the authority.

Ms Quinlivan said in her opening statement that "this work will be substantially completed in the first half of 2014". Is it the case that there is not yet a fixed date because it depends on the legislation and on An Bord Pleanála's ruling on a planning decision?

Ms Eileen Quinlivan

Yes.

Ms Quinlivan spoke about "residual issues being transferred to appropriate State bodies". What are those residual issues? Was Ms Quinlivan referring to things like lighting?

Ms Eileen Quinlivan

If any issues are outstanding, they will go to the relevant body.

Is it anticipated at this stage that there will be any outstanding issues?

Ms Eileen Quinlivan

No.

At the moment, there is a board and a community council.

Ms Eileen Quinlivan

The docklands council, yes.

Yes. What will happen to that board upon the dissolution of the authority? Will it cease to exist?

Ms Eileen Quinlivan

I assume so, yes, but that would be matter for the legislation.

It will be determined by the legislation. I understand that the authority currently has 15 staff.

Ms Eileen Quinlivan

We currently have two staff.

Sorry. It was 15 in 2012. Ms Quinlivan is currently working in the head offices of the authority.

Ms Eileen Quinlivan

Yes. I am seconded part time from Dublin City Council. I am also working in Dublin City Council.

When the authority ceases to exist - when the legislation is passed and An Bord Pleanála has made its ruling - what will happen to the premises? It says in note 27 of the accounts that the authority owns the freehold. Is it anticipated that the site will be sold or leased?

Ms Eileen Quinlivan

At the moment, the intention is to retain that asset in State ownership.

Would it transfer to Dublin City Council?

Ms Eileen Quinlivan

The question of which assets get transferred to which agency will depend on the legislation.

Has the authority provided advice to the Department on what the legislation should or should not contain?

Ms Eileen Quinlivan

Yes. We provided information when the Department requested it.

When did that happen?

Ms Eileen Quinlivan

That would have happened over the last couple of months.

Looking at the figures, we are almost at the point where the authority will no longer exist. What is the current position in terms of its net value?

Ms Eileen Quinlivan

I will hand over to Mr. Crawley to speak about the financial details.

Mr. John Crawley

The accounts the Deputy has before him show the authority has a net asset value of approximately €5 million. This means that if we disposed of everything on the balance sheet, on that date there would be €5 million in surplus assets over liabilities, as at 2012. We are currently in the process of preparing the 2013 accounts, which are in draft form, but have not been audited yet. On the face of it, it looks like the net asset value is holding at around that level. In accounting terms, I suspect the value will be in the order of €5 million, but this does not include a number of other assets we do not record on our balance sheet, approximately €3 million.

Does the €5 million figure already take into account the fact that the pension liability is transferred away?

Mr. John Crawley

Correct. That is net of the pension liability.

If the pension liability had not been transferred, would the authority have been in deficit?

Mr. John Crawley

Yes, it would be in deficit.

Does that include the assets that are not counted on the books?

Mr. John Crawley

We record approximately €5 million on the balance sheet and approximately €3 million off the balance sheet, amounting to €8 million. Then, we have transferred an €8 million pension liability back to the State, of which approximately €1.1 million will fall due in the next five years and approximately 50% will fall due from about 20 years out.

When we count the balance sheet assets that will remain when the authority dissolves and the assets that are not on the balance sheets, does it look more like a break even point of view for the authority, taking into account the pension liability transfer?

Mr. John Crawley

Yes, if one was to take the pension liability into account and in terms of looking at the State costs - it would be approximately break even point.

Was the pension liability moved too early then?

Mr. John Crawley

No, as part of the dissolution of the authority, we needed to address all of the issues on the balance sheet and we quickly entered into discussions with the Department in regard to what would happen with staffing. It was a priority for the board that staffing be dealt with. Therefore, how the future pension arrangements for deferred pensions would be dealt with was taken as a priority. Once the Department, in conjunction with the Department of Public Expenditure and Reform agreed the liability would transfer to the State, the correct accounting treatment was to discontinue accounting for it in the accounts of the authority. We disclose it separately so the liability is clearly set out on the balance sheet, but it has an opposite offset and equal offset which effectively shows the State will underwrite it, and that has been audited.

Thank you. To return to Ms Quinlivan, has it been decided yet where the balance, if it is the €5 million surplus we mentioned, will transfer to? Will that be a matter for the legislation?

Ms Eileen Quinlivan

Yes, and I presume it will be a matter for the Department, as the Department with oversight.

At the time of the 2012 accounts, investment assets were valued at €20.95 million, but there has been progress made since then. Will the authority representatives talk me through the assets that have been sold since that date?

Mr. John Crawley

Approximately €20 million in value of assets has been disposed of since the balance sheet date.

Does that include the Custom House Quay building, CHQ?

Mr. John Crawley

It includes CHQ, which accounted for €10 million of that.

I have the breakdown for the others, retail units €2.96 million, office units €3.4 million and a car park €4.8 million. At end 2012, the liabilities were €24.4 million. That figure has come down now.

Mr. John Crawley

The bank loan, approximately €12 million, has been repaid. The remaining liabilities on the balance sheet are now, substantially, intra-State liabilities.

Will Mr. Crawley explain that?

Mr. John Crawley

They are moneys that are owed to other State agencies. There are moneys owed to Dublin City Council, to NAMA and to the Railway Procurement Agency.

Does that amount, in total, to approximately €12 million?

Mr. John Crawley

Yes.

Therefore, the asset position is approximately €2.95 million and liability is approximately €12 million.

Mr. John Crawley

Correct.

I am somewhat confused. In the notes to the accounts, mention is made of the authority's capacity to deal with the liabilities based on disposable assets. How is that going to work out then? How can those two sets of figures be squared?

Mr. John Crawley

Some of the proceeds we have received are now in cash, so we have substantial cash balances.

Mr. John Crawley

I will try to reconcile the figures for the Deputy. We currently have approximately €8.5 million of assets. We had approximately €23 million at the end of 2012. We have had sale proceeds of assets of approximately €18 million. This included approximately €5 million in value higher than we originally anticipated in 2012. In other words, we recorded an accounting profit. Therefore, we now have approximately €9 million worth of assets on our balance sheet today which we can sell. We have approximately €4 million in cash on our balance and approximately €3 million of debt receivables on the balance sheet, all in all amounting to €17 million. Then, we have €12 million of liabilities. When we balance one figure against the other, we are left with €5 million.

Thank you, that is clear. In regard to the remaining €9 million assets, what are they?

Mr. John Crawley

They are some commercial units in the Grand Canal Square area, some retail units on The Camshires and a couple of small properties on the north side of the city.

When was a valuation last carried out for them?

Mr. John Crawley

The valuation process we have involves a couple of valuations. A formal valuation takes place every three years, so we had one in 2010 and another one is due as at 2013. Each year, when the directors sign off on the accounts, they assess the value of the assets and sometimes we take informal soundings in the market to see what is going on. The value of €9 million for assets still on the balance sheet, is a combination of market value since 2012, as updated in the market over the past couple of months. It also includes our own assessment as to what guide price we are putting on those properties, as we are in the process of selling them currently. We have agents engaged on the sale of those assets. I expect that €9 million is a solid figure. The assets are out to formal valuation at the moment.

Is that being done because of the move to sell them or because of the process of revaluation done every three years?

Mr. John Crawley

Both. We have the process of revaluation every three years, so we must do it because it is the third year. Also, as we put each asset on the market for sale, we ask the agent who wins the tender for the sale to give us a valuation and that influences our guide price.

Mr. Crawley said earlier that the authority had achieved €5 million more than it expected from the disposal of the assets it has disposed of since 2012. Is there an argument for transferring assets to some other State entity rather than disposing of them in the market if the prices are rising?

Mr. John Crawley

There is that argument and we have looked at that. The direction the board has given us is to dispose of the assets and pay down the liabilities, against the background that we are getting reasonably good value on the properties we are selling at the moment. It is difficult to predict what way the market will go, but at this point in time we believe we can get fair values that will allow us to dispose of the liabilities we have.

I would now like to look at some of the notes on the accounts. Note 1b on page 34 of the 2012 accounts mentions an impairment in 2012 of €2.08 million.

Mr. John Crawley

Correct.

Mr. John Crawley

That related to the CHQ building.

Was that the final impairment figure on the CHQ building?

Mr. John Crawley

Correct. In 2011, we had the CHQ building valued at approximately €12 million.

In the 2012 accounts, we took it down to €10 million, which was our estimate of what we would-----

Which is what it was finally sold for.

Mr. John Crawley

-----sell it at, and actually did.

The impairment in 2012 was for the CHQ building before it was sold. There is a valuation surplus of €651,000.

Mr. John Crawley

That relates to upward valuation of some of the investment properties we had in the Grand Canal dock area.

A separate impairment in 2012 of €230,000 is detailed in note No. 13 on a site transfer to the Department of Education and Skills at nil consideration.

Mr. John Crawley

Correct. That is an intra-State transfer of a site that we had acquired under our area and social regeneration programme. It was to be developed as a special school. With the wind-up order on the authority, that was not something with which the authority could continue. We entered into discussions with the Department of Education and Skills, which was a better fit from the State's point of view to continue developing that site.

Why was it transferred for free? Was there a commitment to put the site into the Department's ownership?

Mr. John Crawley

It was an intra-State transfer. As such, we felt that there was no point in looking for value for it and that it was better for the Department to take on the project. The authority had always planned to invest in the project. As it sat on our books as a quasi-investment asset, we ascribed a value to it, but it was never the authority's intention to sell it for a profit. It was acquired to-----

It was never on the books as something that would make money for the authority.

Mr. John Crawley

No. It was designed to be an investment by us to develop the school. Significantly larger sums would probably have been contemplated for selling and developing it at the time. It is effectively a derelict site.

In this document it is counted as a cost to the authority.

Mr. John Crawley

Correct.

Have there been discussions with other State agencies about taking properties off the authority's books at nil consideration?

Ms Eileen Quinlivan

At nil consideration, no.

I understand that the authority might not have intended to make a profit from it, but the authority has submitted a loss from it for transferring it for free to the Department. Was there ever a request to the Department to pay?

Mr. John Crawley

I do not recall. I was not involved directly in the negotiations. I would need to check the files to see if there was a request to pay. As an accountant, I would always request a payment, but this was a social regeneration initiative and the decision to transfer for nil value probably rested on that factor.

It would have been a decision of the board ultimately to-----

Mr. John Crawley

It was a decision of the board.

Could we have the minutes of that meeting, if Mr. Crawley would not mind? They would be interesting.

Mr. John Crawley

That would be no problem.

We briefly mentioned the properties not recognised on the balance sheet. They are included in the breakdown that Mr. Crawley supplied to me of the €9 million in assets.

Mr. John Crawley

Correct.

Why were they not recognised on the balance sheet?

Mr. John Crawley

Those assets are broken up into two categories. We acquired some for public area development and infrastructure purposes. These are sites that we acquired, typically along the Campshires and the River Liffey. From time to time, the authority acquired properties that it effectively expensed, in that it was buying them to knock them. However, this will not now happen to one asset that is on our books. The circumstances have changed.

Which asset is that?

Mr. John Crawley

It is in the Grand Canal dock area. As it is currently subject to sale and if the Deputy does not mind, I will not go into detail, as the matter is slightly commercially sensitive. We will report it to the committee in the fullness of time. The rationale changed over a period. Previously, we had expensed the asset's purchase as a cost, but we now recognise that we may achieve some value for it commercially and have recorded it off the balance sheet.

A number of other assets fall into the infrastructure-type space. For example, we have a comprehensive ducting network in the IFSC and the Grand Canal dock area. We expensed its development. However, it has a commercial value because we rent it and we value it as a multiple of the rent that we achieve on it on an annual basis.

These are the two principal categories, although there are a number of smaller items.

Moving on to note No. 5 on page 36, operating expenses. In 2012, legal fees amounted to €1.2 million. Just under €1 million was spent on defending the Irish Glass Bottle, IGB, site case.

Mr. John Crawley

Yes.

For what was the remainder? Was there other litigation?

Mr. John Crawley

The Deputy wants an analysis of the €1.2 million.

Mr. John Crawley

Approximately €1 million was spent on the Donatex case, approximately €135,000 is a provision against another case in which we are involved, approximately €70,000 was spent on debt collection and approximately €500,000 represents the cost of our in-house legal team. There was also some HR advice for €30,000 and miscellaneous advices, small €2,000 or €3,000 bills, amounting to approximately €30,000.

There is an in-house legal team.

Mr. John Crawley

Yes.

I believed that the DDDA used consultants, in that it acquired its legal services externally.

Mr. John Crawley

It is consultancy. To distinguish it from the external solicitors involved in cases, we call it in-sourcing a legal team. It is an external service.

The DDDA bought it in.

Mr. John Crawley

Correct.

From which firm?

Ms Eileen Quinlivan

McInerney Solicitors, which was engaged through an open tender process.

Was it engaged for all of the authority's litigation or just the IGB case?

Ms Eileen Quinlivan

It currently provides all legal advice and services to the authority.

The authority was not awarded costs in its defence of the IGB site case.

Ms Eileen Quinlivan

We were, but they are unrecoverable.

How does that get treated?

Mr. John Crawley

We treat them as an expense and have written them off as such.

Note No. 25 refers to contingent liabilities in respect of certain legal matters. Mr. Crawley mentioned that the authority had dealt with a number of legal matters since 2012. Does the authority still have contingent liabilities in that regard?

Mr. John Crawley

We do. Approximately 16 cases are in the legal or quasi-legal sphere. They are not necessarily all in court. We are working hard to ensure that some do not get into court. These cases range from title issues and disputes to contract enforcement issues. To the extent that we consider costs or potential settlements to be associated with these cases, we have already reflected those in the accounts. Anything that we are working on now has been reflected in the 2012 accounts. There was little or nothing new in 2013.

The authority made provision in 2012 to account for potential costs.

Mr. John Crawley

Correct. Some could have been accounted for in earlier years. They may have been running for a number of years.

Can the authority wind up while these issues are outstanding?

Ms Eileen Quinlivan

Yes. They would transfer over to the city council, which would deal with the continuation of any outstanding case.

That will form part of the legislation to come, but it will have to take on its-----

Ms Eileen Quinlivan

Yes. That is part of what we are working on with the city council so that it can get up to speed with the various issues.

The city council will become the body to defend these issues.

Ms Eileen Quinlivan

As the successor to the authority, although we will be expected to turn out.

I will briefly examine the other expenses detailed in note No. 7 on page 38. In 2012, administrative expenses amounted to €354,000 and the depreciation and impairment of tangible fixed assets amounted to €483,000. What are the current figures?

Mr. John Crawley

The majority of the administrative expenses - over 50% of it - relates to bank fees, which is a negotiation fee that we have to pay to the banks. I refer to the draft numbers for 2013 in terms of operating expenses. I wish to make sure I am comparing like with like. Bank fees are expected to be little or nothing and general administrative expenses are about €122,000, which is significantly lower. It is about a third of the cost in 2012.

Are facility expenses at €260,000 still the same?

Mr. John Crawley

The facility expenses will continue to be in or around the same because a significant part of it is insurance. It sounds like an awful lot of money for lighting but it includes lighting up the Campshires and it includes lighting some of the public utilities which are run off our account.

The total figure for other expenses was €1.1 million in 2012. What will it be at the end of 2013?

Mr. John Crawley

It will be, including depreciation, just short of €1 million. The depreciation charge will be a good bit higher. It will be approximately €100,000 higher because some of the fixed assets have been prudently written down to zero in our 2013 accounts because we are just not clear at this stage as to what will happen to those. It depends on what happens with the authority’s premises in Custom House Quay. We may need to revisit the number but we have just taken a conservative view at this stage that they may have reached the end of their useful life.

What kind of assets is Mr. Crawley talking about?

Mr. John Crawley

The authority moved back into those premises about two years ago and had to refurbish the property at a cost of about €300,000 or €400,000. We were depreciating the refurbishment cost over about five years. We have speeded that up to completely write it off on the assumption that we are not sure as to what will happen the building post the wind-up of the authority. That is a fluid number. It is about €100,000 or €150,000.

Mr. Crawley is being conservative in the estimate.

Mr. John Crawley

Correct.

It might come back-----

Mr. John Crawley

If one were to suppose it would continue as an operating building we probably would not write it off. Our successor would then probably just take over the depreciation charge and then write it off over what it would consider to be the remaining useful life.

Okay. To return to note 5A - bad and doubtful debts - there was a write-off in 2012 of €865,000 in bad debt. Does that pertain to legal fees?

Mr. John Crawley

No, it does not actually. It relates substantially to a loan that the authority had issued. It is broadly in the space of the CHQ property. I will not go into the exact details because I do not wish to mention a particular tenant but it relates to loans that had been provided for refurbishment of properties which are not now recoverable. They were effectively reflected in the sale price of the property that we achieved. We passed the debt on to the new owner.

Did the authority issue a loan to someone who owned a property in the authority’s area?

Mr. John Crawley

The property was leased.

It was leased. What was the purpose of the loan?

Mr. John Crawley

It was to assist in the refurbishment of the premises.

It was done with a view to continuing the lease but then the business could not continue the lease and-----

Mr. John Crawley

No, it is a continuing operation and the loan was being repaid but we effectively sold the loan with the property. It was treated as a loan on our book so from an accounting point of view we recorded the CHQ transaction in its simplest terms as a €10 million sale proceeds and approximately €800,000 loan write-off. Our net gain out of the transaction was about €9.2 million.

I see what was done there. In effect, when we talk about the asset value of the CHQ when it was sold, the Dublin Docklands Development Authority sold it for €9 million rather than €10 million in terms of its valuation.

Mr. John Crawley

In terms of its-----

Was the CHQ valued at €10 million or €9 million when it was sold?

Mr. John Crawley

It was very difficult to get a valuation on the CHQ. We had valuations that ranged from much lower numbers, potentially half what we anticipated it to be. We anticipated that we would achieve approximately €9 million net for it. We recorded it as a €10 million asset on the balance sheet and then we had made a provision against the loan for the €800,000.

The authority anticipated selling it for €9 million but it was sold for €10 million and the extra money was used to write off the loan as a bad debt. When the authority entered into negotiation with the purchaser, did it do so on those terms?

Mr. John Crawley

Yes. It was a tender type of process. We had provided information to the short-listed people who were making bids on the property and one of the details that was provided to them was that we were asking them to take over the loan so they had to price that into the transaction.

I thank Mr. Crawley. In terms of the banking facilities the authority now has, the proceeds of the CHQ sale were used to settle the liability. Does the authority have a loan outstanding?

Deputy Gerald Nash took the Chair.

Mr. John Crawley

It does not. As a matter of fact, it is in cash surplus at this stage.

I am sorry, Mr. Crawley mentioned that earlier.

Mr. John Crawley

We do not need banking facilities at this stage.

The interest payable on bank loans was €473,000 in 2012. Will that figure not exist for 2013?

Mr. John Crawley

That is correct. There will be no bank fees other than processing charges. There is no fee for maintaining a loan and there will be no bank interest. There will be surplus bank interest but it will be reasonably modest.

I will jump ahead to note 14 on page 41. It relates to debtors. The total is €3.8 million. Could Mr. Crawley explain who is covered under the €3.2 million?

Mr. John Crawley

The €3.2 million of debtors refers to moneys that are due in from developers for development levy contributions which are in turn payable to the Railway Procurement Agency, RPA. They are included both in debtors and creditors. They are on both sides of our balance sheet. The reason for that is that we are the legal authority that is obliged to collect the levies for both the authority and the RPA. We record them as receivables and then we also record them as payables. Deputy Murphy will see from the note that the debtor number is net of some provisions we have made. A substantial part of the sum of €5.9 million also relates to development levies that are due, but they are due to the authority for the authority’s account.

What is the difference? What is the figure for what is owed to the authority separate from what the authority is collecting for any other body?

Mr. John Crawley

It is about €4 million.

It is €4 million. The authority is responsible for collecting levies for other authorities and the responsibility will transfer to Dublin City Council.

Mr. John Crawley

To the extent that they are uncollected at the date of transfer. We are working hard to make sure that will not be the case.

What about the €4 million that is owed directly to the authority?

Mr. John Crawley

It is the same number of people that we are dealing with so, in other words, the debtors we are pursuing owe levies both to the authority and the RPA. It is effectively the same case. To the extent that we can recover on those liabilities, some of those funds will be for our own account and some will be for the RPA’s account.

How are those debts being pursued?

Mr. John Crawley

Through a combination of the legal process and enforcement. We are working with a number of receivers at the moment.

Who is covering the cost for that? Is it a shared cost with the RPA?

Mr. John Crawley

In some cases it is a shared cost with the RPA. The RPA is underwriting its portion of the legal fees.

As a final point, note 22 refers to joint ventures and subsidiary undertakings. What are they?

Mr. John Crawley

There is only one substantial operation here and it relates to the management company we operate in the Grand Canal Dock area. When we acquired the gasometer site and created the Grand Canal Dock area, we created a management company in that area, as we had previously done in the original International Financial Services Centre, IFSC, and subsequently in the North Lotts area. The process is that we set it up, build it out, and then transfer the management company to the owners of the property in the area. We still have not completed that project for the Grand Canal Dock area. When the economic tsunami hit, that process slowed and development stopped. We are now in the process of winding up our interest in that company, which will necessitate disposing of our shares in that company. That is the substantial entity that is referred to in note 22. For legal reasons, the authority has one or two other small entities that it uses for title purposes.

When the authority disposes of the shareholdings, is it disposing them to another State agency or-----

Mr. John Crawley

No, to the owners of the property in the area as envisaged by the planning scheme for that area, which is exactly the same as what has happened on the north side.

The final area I want to examine is in regard to NAMA. When the authority was settling with NAMA in terms of the Irish Glass Bottle Company site, it transferred €7.85 million worth of assets to settle its liabilities. Does Mr. Crawley know what the asset value is for the properties the authority transferred at the time? Does he know what it is now?

Mr. John Crawley

Do I know what the asset value is now for those properties we have transferred over?

Mr. John Crawley

I am sorry, Deputy. I would not know that. NAMA would be-----

Is the authority no longer involved with those properties?

Mr. John Crawley

We are not involved with those properties. They are under the control of NAMA. As I understand it, they are all substantially still in the control and ownership of NAMA. I believe only one of them has been disposed of.

Deputy Nash wants to deal with the important issues relating to the exceptions in the auditor's report, but to be clear, once An Bord Pleanála reports on the strategic development zone, STZ, the only outstanding issue then is the legislation.

Ms Eileen Quinlivan

Yes, that is correct.

Given her interaction with the Department in recent months on what the legislation might include, does Ms Quinlivan have any understanding as to when that legislation will be in train?

Ms Eileen Quinlivan

No. The Deputy would have to ask the Department that, but in terms of the STZ, the target date An Bord Pleanála has published is 10 April.

Mr. Paul Dunne

We are currently preparing draft heads to go to Government and we would hope to have that done within the month. Given Government approval, Oireachtas time and some drafting issues, we would hope to have it enacted before the summer recess.

That is the intention at the moment.

Mr. Paul Dunne

Yes.

And at that point the authority ceases to exist.

Mr. Paul Dunne

Yes, or depending on where we are, the Minister could appoint a date-----

In the legislation, at which point it would cease to exist.

Mr. Paul Dunne

-----or by order, at which point it would cease to exist.

Deputy Kieran O'Donnell resumed the Chair.

I thank the witnesses for the comprehensive notes they have provided on the accounts, which are very helpful and allow us to come to a much quicker understanding of the financial position of the authority. I want to raise a number of points, the first of which relates to the pension liabilities. How many individuals are involved in terms of the organisation's pension liabilities into the future? The note in terms of the realisation of those liabilities over a period of years is very helpful. How many pensioners are in the scheme?

Ms Eileen Quinlivan

I will let Mr. Crawley deal with the details of the pension scheme.

Mr. John Crawley

I do not have the exact number but I can give the Deputy an approximation, and we can provide him with the exact details. There are probably somewhere in the region of 100 people who will have entitlements to deferred pensions. Some of those will be for very short periods, perhaps somebody who just worked for the authority for five years. The authority's staff numbers rose to the mid-60s at the height-----

(Interruptions).

Mr. John Crawley

It is now down to two, but there would have been people who would have come and gone from 1997 through to today. There is probably somewhere in the order of 100 people who would be entitled to deferred benefits.

In terms of the previous chief executive, what would be the value of Mr. Moloney's pension pot in the context of his work with the Dublin Docklands Development Authority, DDDA? Is Mr. Crawley in a position to-----

Mr. John Crawley

I would need to check with our actuaries to work that out. I will have tables that will support - this is done on an individual basis-----

If it were possible to forward that information to the committee, it would be very helpful.

Mr. John Crawley

Yes.

Given that it was always the case, and had been the stated position of the authority over the years, that pension obligations would be met from accumulated reserves from its development work, it is clear that was not possible given the economic tsunami that hit the organisation, a phrase Mr. Crawley used, although probably in a different context. Obviously, discussions opened with the Department of Public Expenditure and Reform in terms of who would pick up the tab for the €8.4 million. Is it not the case now that the taxpayer will have to pick up the tab? Were any discussions opened with Dublin City Council, for example, given that Dublin City Council would be the successor authority to take over the responsibilities of the organisation? Would it not have been more appropriate if Dublin City Council had taken on that liability as opposed to the Department of Public Expenditure and Reform? Does Mr. Crawley have a view on that?

Mr. John Crawley

I understand from the legislation that our reporting line is through the Department because we are a State agency under the Department of the Environment, Community and Local Government. Therefore, that was the logical port of call for us to continue with. There are two different issues here. One is how we account for the liability, and we have clearly not accounted for it now as a result of the accounting treatment we have taken. In terms of who pays for that, as Ms Quinlivan said, ultimately, it is the decision of the Department as to how any surplus or deficit for the authority is to be dealt with.

The Department of Public Expenditure and Reform sanctioned that arrangement but it is actually the Department of the Environment, Community and Local Government that will be responsible for the pension provisions. Is that not the case?

Mr. John Crawley

It has not decided where it will be rested and administered from at this point.

The Comptroller and Auditor General would like to comment.

Mr. Seamus McCarthy

Local authority pensions are paid on a pay-as-you-go basis with funding that emanates from central government. Who will sign the cheque may not yet have been determined but, ultimately, it will come back to the Exchequer one way or the other.

I accept that clarification from the Comptroller and Auditor General, which is useful. Regarding matters to do with public procurement, I note from the associated documentation provided to the committee - I refer to point No. 2 on page 21 - that in regard to procurement the witnesses want to draw our attention to the fact that the authority delayed procurement of some services in 2011 and that the bottom line was that because of the nature of the issues the authority had to deal with, and that it appeared the authority, even at that stage, would no longer exist in its current structure, the Department of Public Expenditure and Reform agreed to roll over two particular contracts. Those contracts were in regard to financial services advice and IT.

Ms Eileen Quinlivan

Correct.

What was the value of those two contracts?

Ms Eileen Quinlivan

The total value in 2012 is €429,000.

And they were not tendered for through the normal procedures.

Ms Eileen Quinlivan

The financial services contract initially was tendered through direct invitation of five people in 2010.

It was through direct invitation.

Ms Eileen Quinlivan

Yes. That was re-tendered again in late 2012 and Crawley Business Consulting was appointed in January 2013. Again, that was through a direct invitation. The other contract relates to an IT contract that was of long standing and on a roll-over basis and that was re-tendered.

Notwithstanding the fact that in 2010, the Comptroller and Auditor General pointed out some deficiencies from the authority's point of view in respect of its tendering processes, as far as I can recall, the authority then decided simply to proceed to roll over these contracts. However, I suppose the key point is the authority had the sanction of the Department of Public Expenditure and Reform to roll over those contracts because of the uncertainty regarding the previous board.

Ms Eileen Quinlivan

We had sought advice from the Department and were advised to roll it over, given the uncertainty over wind-up and how long the authority would exist. Consequently, the new board then decided to re-tender.

To clarify, Ms Quinlivan referred to the financial service contract. With whom is it?

Ms Eileen Quinlivan

That is with Crawley Business Consulting.

That contract originally was tendered for in 2010.

Ms Eileen Quinlivan

Yes.

For how many years was the contract? I ask because it does not appear to have gone back out to tender until-----

Ms Eileen Quinlivan

Late 2012.

For how many years was it? Is it unusual to have a contract for two or three years without it being re-tendered?

Ms Eileen Quinlivan

Not necessarily, no.

Ms Quinlivan knows the context. When Crawley Business Consulting got the contract, for how long was it?

Ms Eileen Quinlivan

I will have to check to see what was the original one, unless the-----

Does the Comptroller and Auditor General know?

Mr. Seamus McCarthy

My understanding is that originally, it was a contract for six months.

On an annual basis, how much was that contract worth in 2012?

Ms Eileen Quinlivan

In 2012, it was €316,000.

It was €316,000. Can the Comptroller and Auditor General indicate how much that contract was worth when it originally was granted?

Mr. Seamus McCarthy

I will try to find the figure for the Vice Chairman.

I apologise to Deputy Nash.

Ms Eileen Quinlivan

It was €152,000.

It was €152,000 in 2010 and it more than doubled in less than two years.

Ms Eileen Quinlivan

The figure for 2010 was for half a year.

It was for half a year. So it is a contract for €316,000, which was for a six-month contract initially-----

Mr. Seamus McCarthy

Sorry Chairman, no specific amount was set in 2010. It was €750 per day, plus VAT, for six months.

The contract was for €750 per day, plus VAT.

Mr. Seamus McCarthy

For a six-month period.

To do what?

Mr. Seamus McCarthy

It would be required to provide, as necessary, the following: to assist the authority with the restructuring of its investments; to assist with the implementation of the highest standards of corporate governance for the authority complying with latest Government regulations and combined code; to support the acting chief executive officer on the development of an updated financial planning model for the authority; to monitor and provide advice on the authority's property assets; to monitor the control and review of risk for the authority in line with the current risk review register; and to provide, if and as required, accurate and timely financial information to the chief executive officer and the executive board.

Before I let Deputy Nash back in, does it not seem extraordinary that in the case of a body that had cost the taxpayer astronomical amounts in the millions, that the authority had a contract for €316,000, which was based on €750 per day in 2010 but which appears not to have been the subject of annual tender? Does Ms Quinlivan not find that to be unusual? Is that not a reasonable view to take?

Ms Eileen Quinlivan

In 2010, the board found itself in a position in which it was not able to recruit a finance director on the departure of the previous finance director. The board needed comprehensive and skilled experience to be brought in for the board to be able to deal with the financial issues it faced. Consequently, the board thought this was the only option it had.

To confirm, this was Mr. Crawley's own company.

Mr. John Crawley

Correct.

Can Mr. Crawley remember the circumstances of the appointment of his company and the reason it did not go out to re-tender? I am not in any way casting a negative view but simply am considering this in respect of corporate governance for a body of this size. Can Mr. Crawley recall the circumstances?

Mr. John Crawley

I was not involved in the initial appointment, I was simply an applicant to the tender process. From memory, there was a significant piece of work with the negotiation of what we now call the NAMA settlement, which ran on longer than six months. My firm was asked to continue with that work. There were changes of chief executives along the way and as I read the file in preparation for this meeting, it appears that under the previous board, mindful of the fact that under the Fine Gael manifesto, there was to be a wind-up of quangos, it was decided the board would continue to roll forward contracts. I think there is some reference to this, which may be in one of the reports provided. Discussion was had with what we now know as the Department of Public Expenditure and Reform but which was the Department of Finance at the time, on whether it was okay to roll those contracts over. As part of its hand-over to the current board, the previous board identified this as an issue. When the current board took over and asked for a transition business plan, which was prepared at the Minister's request, at that stage it was clear that this would take more than a couple of months to continue and therefore, it was put back out to tender at that stage.

In early 2013.

Mr. John Crawley

No, it was in 2012. From memory, it was approximately a three-month process and so it concluded in early 2013.

I invite Deputy Nash to continue.

Mr. Crawley reapplied for the tender. Is that correct?

Mr. John Crawley

I reapplied for the tender, yes.

Okay, and obviously successfully secured it, as Mr. Crawley would not be sitting in front of the committee otherwise.

Mr. John Crawley

I would not have the pleasure of sitting here today.

This is an unusual situation to arise, whereby-----

Mr. John Crawley

The Deputy has a consultant in front of him.

That is right. It is most unusual. It might be useful, were the committee to obtain the minutes of board meetings that considered this issue in the interest of completeness, as well as correspondence between the authority and the Department of Public Expenditure and Reform. There are a couple of issues on which I seek clarification. It would be useful, were those items to be secured.

Ms Eileen Quinlivan

We can get that for the committee.

Mr. John Crawley

That is not a problem. It is readily available.

I will get the clerk to follow up in this regard.

I will move on to issues concerning staffing and recruitment.

Did that contract with Crawley Business Consulting relate to just one individual? Is the €750 per day for one individual?

Mr. John Crawley

My contract covers a number of people. At any point in time, there could be approximately four people working in my firm. However, they are not all working full-time in the authority. We dip into resources, as are required.

I wish to put a number of questions to the witnesses on the issue of staff recruitment. Clearly, a moratorium was introduced on staff recruitment in 2009 by the previous Government. I believe there was a reduction of six staff between that period and 2011 and that at the end of 2011, the headcount was 15. That number now has fallen to just two, a very small number indeed. However, it appears as though the moratorium was breached and Mr. Crawley made reference to this in the documentation he provided to the committee. Four members of staff were provided with contracts of indefinite duration. I assume this arose under a usual set of circumstances whereby an individual who is engaged by an organisation has two or more fixed-term contracts, after which he or she essentially derives additional benefit from that and under law, contracts of indefinite duration are provided. Consequently, in Mr. Crawley's own words, the moratorium was breached. I will read the observation back to him and put it on the record------

Mr. John Crawley

Can the Deputy indicate the page to which he refers?

Sorry, it is on page 21, where it states, "I bring to your attention that a second contract was entered into with an existing staff member in October 2009 after the announcement of the Government moratorium".

This was done by the former CEO. Was that Mr. Maloney?

Mr. John Crawley

No. I do not think that was in Mr. Maloney's time, I think that was subsequent.

This was done by the former CEO without the knowledge of the board and contrary to clear instructions from the board to the executive that under no circumstances was the moratorium to be breached. That matter only came to the attention of the board for the first time at its March 2012 board meeting. In regard to this staff member, the Department has confirmed that the person now has a contract of indefinite duration. Who was the chief executive at that time?

Mr. John Crawley

I think it would have been Mr. Kelly who was the chief executive at that time. Mr. Maloney had departed the authority in 2009. This issue was-----

It was October 2009 that the existing staff member was provided with the contract of indefinite duration.

Mr. John Crawley

I do not think Mr. Maloney was with the authority at that stage.

So it was Mr. Kelly.

Mr. John Crawley

That would have been Mr. Kelly at that stage.

What of the staff member who was provided with that contract of indefinite duration?

Mr. John Crawley

That person is no longer with the authority. That person is working elsewhere in the public system.

Was that person redeployed?

Mr. John Crawley

We have a national redeployment system in place and that person availed of an opportunity under the redeployment scheme to transfer elsewhere.

At what level was that person working in the authority?

Mr. John Crawley

It would have been a direct report of the chief executive.

Who was the person?

Mr. John Crawley

Am I supposed to mention names?

I do not expect that there is a difficulty in doing so.

Mr. John Crawley

It was the previous company secretary, a Mr. O'Sullivan.

It would be a matter of public record anyway.

It is, as I understand it. What was the salary?

Mr. John Crawley

I do not know that salary. Just based on the grades, it would have been somewhere in the region of €60,000 or €70,000, probably. It would have been that sort of level, but I would need to check the exact salary level.

I have a couple of final points. Vice Chairman, am I in order to discuss some areas around the previous use of credit cards?

It is in reference to something mentioned earlier that is, Mr. Maloney's use of the company credit cards. Mr. Maloney is on record as stating that he would be happy to assist the committee in regard to expenditure on those credit cards. I am open to correction, if my memory does not serve me well on this. I seem to recall Mr. Maloney said that if the committee had information in regard to credit card statements, he would be happy to respond to those if they could be sent to him. On foot of that, I ask the authority representatives before us today whether Mr. Maloney has made contact with the organisation to gain access to credit card statements and those records. If not, could they forward them to him because he appears to be interested in receiving them to help jog his memory?

Mr. John Crawley

He has not been in contact. We have no difficulty in supplying them.

I would imagine if Mr. Maloney is interested in addressing the concerns expressed here around the use of a company credit card that his first port of call would be to his previous employer, not to the committee. He has not been in touch.

Ms Eileen Quinlivan

He has not been in touch.

Can Ms Quinlivan state categorically he has not been in touch since he appeared before this committee on 12 December last?

According to the clerk to the committee, Mr. Maloney has them currently and he is looking at them. The clerk to the committee will seek an indication from Mr. Maloney as to when he expects to come back with the information. Has Deputy Nash concluded?

I would make a couple of points in the interest of completeness. When the financial services contract went out to tender in 2013, did many apply under the tender process?

Ms Eileen Quinlivan

It was a direct invitation for five tenderers to bid.

Did five bid?

Ms Eileen Quinlivan

Yes.

Did it go through a process?

Ms Eileen Quinlivan

Yes.

Obviously, Deputy Nash is looking for the information.

The €113,000 for IT was the balance. According to the accounts for 2012, as audited by the Comptroller and Auditor General, €429,000 was paid. Was the €113,000 for IT consultancy?

Ms Eileen Quinlivan

IT support.

Who were the consultants in that area?

Ms Eileen Quinlivan

Ergo.

What were the circumstances around that as to the tender process there?

Mr. John Crawley

I can take that one. As I understand it, Ergo changed hands a couple of times and so it would have had different names. As I understand it, Ergo had been the IT service provider to the authority for a good number of years, possibly ten or 15 years. Indeed, this was one of the contracts that was identified by the Comptroller and Auditor General during the 2010 audit.

We were, and are still today, unable to dig out the original tender documents for that but it is unlikely that it was given a tender for ten or 15 years.

Why would Mr. Crawley think that?

Mr. John Crawley

It is more likely than not that is not the case.

It is highly improbable.

Mr. John Crawley

Therefore, it will be out of contract. By the way, this service is now terminated.

The view of the authority over the years, in particular, 2010 and 2011, was that notwithstanding the fact that the numbers of staff were going down, there are, unfortunately, complicated IT systems in the authority. Extracting records from those systems was important to us. There was not a clear path in terms of the design or the architecture of that system and we needed the corporate memory of the company to assist us in fully understanding what records were held on the system. The committee will recall that we had a major litigation where we had a discovery order served on us that we had to comply with so it was not going to be to our advantage to change the supplier, unfortunately, and therefore we did not re-tender that contract. We scaled it down over 2013. Now we have the systems documented, we have the systems audited and the IT function in the city council is now in a position to take over the custody of those records and the remaining operation.

This was highlighted by the Comptroller and Auditor General in 2010. He still felt it necessary in the accounts to make reference to it in 2012. It seems incredible that there was a ten-year contract. How many staff were working in the organisation at peak?

Mr. John Crawley

I think 63 to 65.

I assume this Ergo contract was a maintenance contract.

Mr. John Crawley

No. It is the provision of labour on site. In other words, it had provided an IT person on site.

Was it one person?

Mr. John Crawley

Yes, one person.

At a cost of €113,000?

Mr. John Crawley

Correct.

I would not be hugely knowledgeable on computer maintenance but that figure seems very high. If that is the case, why did the DDDA not look to employ someone?

Mr. John Crawley

Unfortunately, we were not in a position to because of the moratorium.

Point taken. In terms of corporate governance, an area with which Mr. Crawley would be familiar, why was it not put out to tender over the years?

Mr. John Crawley

I can only answer from 2010 onwards. To restate, the position in which we found ourselves was that we were at a sensitive stage with a discovery order on a case with shrinking numbers of staff and little or no corporate memory left in the organisation. We found ourselves having to interrogate the systems ourselves to understand, with the assistance of the IT personnel, as to who did what to whom and when. It was necessary. It would have been our preference, naturally, to put it out to tender.

It went out to tender for the financial services in early 2013. This contract is now concluded.

Mr. John Crawley

That contract is now concluded.

On page 31 of Mr. Crawley's briefing, there is a map that shows the North Lotts, the IFSC and Grand Canal Dock. How much of that holding is now under the control of NAMA? I refer to the undeveloped parts.

Ms Eileen Quinlivan

We would not have that information on land ownership.

The delegates might provide that to the committee.

Mr. John Crawley

I am not sure we can actually provide that information. It is probably a question the Deputy would need to direct to NAMA.

Would it not be based on the sale to NAMA itself? Could details be provided on what assets ended up in NAMA?

Ms Eileen Quinlivan

Is the Deputy referring to assets that were formerly in the ownership of the authority that it can identify as having been transferred to NAMA?

Ms Eileen Quinlivan

They would not comprise the substantial part of the land-holding there. There is 22 ha of development land.

I am talking only about the land that would be owned by the DDDA. That is all I am interested in.

Ms Eileen Quinlivan

We can provide that.

Let me refer to the buildings the authority sold, including the CHQ. Is it called CHQ or is it the Customs House Quay building?

Mr. John Crawley

CHQ.

Was it in the possession of the DDDA? What is its history?

Ms Eileen Quinlivan

I am not entirely sure how it came into the possession of the authority. That would have happened many years ago.

The renovation cost was €45 million. How much was the building sold for?

Ms Eileen Quinlivan

It was €10 million.

Ms Eileen Quinlivan

In 2013.

When was the cost of €45 million for renovation incurred?

Mr. John Crawley

In the early 2000s.

The early 2000s. Was that building occupied?

Ms Eileen Quinlivan

It was in a derelict condition when the authority received it so the money the authority invested was to restore it for use-----

When the €45 million was spent, was it occupied or let? What were the circumstances surrounding it?

Ms Eileen Quinlivan

It was intended to be a shopping centre or mall. I do not believe it ever achieved full occupancy.

There is a €35 million loss to the taxpayer associated with that building alone. In total, 11 rental units were occupied and 22 were vacant. Of the vaults, one was occupied and four were vacant. Therefore, the majority, or two thirds, of the units were unoccupied. Does the authority know what type of due diligence procedure applied when putting €35 million in taxpayers' money at risk? Has it had a chance to examine that?

Ms Eileen Quinlivan

No. It would have been long before our time, but we can check the files if the Deputy wishes us to.

In North Lotts, €50 million was spent acquiring the development lands. Page 28 of Mr. Crawley's briefing states the authority spent approximately €50 million acquiring development land sites that were subsequently transferred to NAMA at a value of €7.85 million. This represents another loss, of €42 million. The sum of €35 million and €42 million is €77 million, which represents a loss of nearly €80 million in respect of the CHQ building in the IFSC, North Lotts and the development sites. Do we know much about the circumstances of the development sites and of the due diligence procedures that were applied? Has the authority examined this? Nearly €80 million in taxpayers' money is probably down the drain if one includes legal fees, etc.

Mr. John Crawley

There were three substantial sites that we transferred to NAMA. According to the records, two of them were acquired under compulsory purchase orders.

Which ones?

Mr. John Crawley

What we know as the Jones Oil site and another site known on our files as the Artbrook site, which is down near the Point village. The third site was the old Readymix concrete site.

What losses were made on those on the transfer to NAMA by the DDDA?

Mr. John Crawley

On the Jones Oil site, it looks as if we paid about €19 million. It had a book value of €2 million when we transferred to NAMA. We revalued it down by €17 million a year after we bought it.

What about the next site?

Mr. John Crawley

The Artbrook site, which was also subject to a compulsory purchase order, was acquired for €8 million in 2006. We revalued it down by €7 million in 2008. Therefore, it had a value of €1 million on transferring to NAMA.

That is a loss of €7 million.

Mr. John Crawley

The Readymix site cost €23 million. We revalued it down by €20 million. It had a value of €3 million.

Some €3 million.

Mr. John Crawley

On the south side, there is a site at Britain Quay, which is at the bottom of Sir John Rogerson's Quay. That was acquired as part of the general Campshires. I understand the cost attributed to that was €9 million and it was revalued down by €7 million to €2 million.

A loss of €7 million.

Mr. John Crawley

The tot of those losses is approximately €8 million.

I came up with €34 million. On the Jones Oil site-----

Mr. John Crawley

My apologies. Bearing in mind the tot of the transfer value to NAMA, the tot of the cost of them was €59 million.

It was €59 million. They were transferred with a value of €7 million. Is that correct?

Mr. John Crawley

Approximately €8 million, give or take.

That is a loss of €50 million.

Mr. John Crawley

We revalued them down by €51 million in 2008.

There was a loss of €35 million on the CHQ building in North Lotts. Development sites resulted in a loss of €42 million. If one adds another €50 million, the total is €127 million, or nearly €130 million in taxpayers' money down the drain. Are there more sites on which there were losses? I will speak about the Irish Glass Bottle Company site later. Speaking on behalf of the taxpayer, I must question whether I am missing anything.

Mr. John Crawley

They are the sites that we transferred to NAMA. All the other properties the authority had in its accounts at the time of the transfer to NAMA are commercial assets that we subsequently sold or are in the process of selling. There are no other development sites. The major development site that the authority had acquired was the gasometer site, which is now the Grand Canal Dock area. That was all completed.

What is left to sell of the assets that were valued at approximately €24 million?

Mr. John Crawley

About €9 million worth.

What does Mr. Crawley expect the assets to realise?

Mr. John Crawley

Approximately €9 million is my current estimated value.

Does the authority anticipate that it will break even when winding down? How will the balance sheet look?

Mr. John Crawley

At this point in time I would say there is about €5 million in accounting profit – assets over liabilities – and approximately €3 million in off-balance-sheet items, which we talked about earlier.

Mr. John Crawley

They are assets.

Some €8 million.

Mr. John Crawley

About €8 million. Separately, we have now written back the €8 million pension liability. Had we continued with the pension liability on our books, it would-----

Mr. John Crawley

How much will the authority be handing back to the State in cash terms on the wind-down of the DDDA? Will it be €8 million?

Mr. John Crawley

It is €5 million plus about €3 million in assets.

Can I refer to the granddaddy of them all, the Irish Glass Bottle Company site? What was the total legal fee in the Donatex case?

Mr. John Crawley

It was approximately €2.5 million.

Does the authority have other legal fees?

Mr. John Crawley

Is the Vice Chairman referring to that case?

I ask about overall legal fees on cases.

Mr. John Crawley

As I noted earlier, we are managing approximately 16 active legal files where lawyers could be involved.

What is the authority's exposure?

Mr. John Crawley

I cannot quantify an exposure in terms of costs against the State. It is my judgment from an accounting point of view that there will not be a settlement cost to the State on those files.

In respect of six developments, CHQ represented a loss of €35 million, the sites in the North Lotts represented €42 million and the sites in Jones Oil, Artbrook, Readymix and the southside together represented a loss of €50 million. How much of a loss does Mr. Crawley expect the DDDA and, ultimately, the Irish taxpayer to realise on the Glass Bottle site?

Mr. John Crawley

The figure for the Glass Bottle site is €52 million.

That is cash.

Mr. John Crawley

No. From the authority's point of view, it exited the transaction with the transfer of €8 million in assets to NAMA. If one considers it from the State's point of view, the figure will not be known until NAMA reaches a settlement on those sites. At this point in time the figure is €52 million.

The former CEO, Mr. Maloney, appeared before this committee on a previous occasion. The board minutes of 20 October 2006 stated that the Glass Bottle site represented an exposure of €9 million to the DDDA. Four days later, on 24 October, the figure had increased to €36 million, comprising shareholders' loans and equity amounting to €29 million and an additional €7 million in recourse finance. By 2 November, the figure had increased again to €61 million. In the space of 12 days, the figure increased by €52 million. There was no independent valuation or proper cost-benefit analysis. Due diligence was not properly followed. The matter has all the characteristics of a vanity project for management and directors of the DDDA.

The aforementioned seven projects cost a total of €130 million, and a further €52 million were put in. The total loss to the taxpayer between these seven projects is, therefore, approximately €185 million. That is a disgrace. When people deal with the taxpayer's money they should treat it as if it was their own. Have Mr. Crawley and Ms Quinlivan taken the opportunity to investigate what happened in respect of the Glass Bottle site that made costs run amok in the space of 12 days? Was the tail wagging the dog? I do not accept the argument that the assets will end up in NAMA because the decision should not have been made in the first place.

Ms Eileen Quinlivan

Our focus has been on winding up the authority and achieving the Minister's objectives for the future of the docklands. That is the remit of the transition board. The Comptroller and Auditor General has undertaken an extensive investigation into these matters, as has this committee, and we consider that the best use of our time is to focus on the transition and the future of the docklands rather than rehearse the history of this site.

I ask Mr. McCarthy to comment on the issue.

Mr. Seamus McCarthy

I would have expected the records of the authority to be clearer about decisions of that nature. The record is ambiguous. The authority's record keeping was not of the highest standards in the years preceding the period in which Ms Quinlivan and Mr. Crawley have been involved. I understand that it was an enormous task to compile material for the defence in the Donatex case and to comply with disclosure requirements. Ultimately, the evidence is available to the extent that it has been presented and it is up to the committee to reach its conclusions and, perhaps, make recommendations more generally. Such recommendations will not apply to the DDDA because it will no longer exist but the committee may use its report to outline what lessons should be learned and what pitfalls avoided.

In Mr. Crawley's view, were there weaknesses in corporate governance in the DDDA? Did it fall under his remit to examine that issue?

Mr. John Crawley

My remit was to put in place a corporate governance regime for the authority from 2010 onwards. The processes we put in place are available to be examined on our website. We did not conduct an examination of what had happened previously. The Office of the Comptroller and Auditor General carried out a comprehensive review of the process and we agree with its findings.

If Donatex had won its case, how much would it have exposed the DDDA and the Irish taxpayer?

Mr. John Crawley

The short answer is quite a bit of money.

Mr. John Crawley

At the end of 2011 or 2012, we had accrued a further €5 million or €6 million in annual incremental interest costs. That figure would have increased over time because nobody was paying the interest.

How much was Donatex claiming in the legal case?

Mr. John Crawley

There are two different figures. Donatex was claiming €100 million. Separately, it was our understanding that we had provided guarantees of approximately €29 million to Becbay, the joint venture in which we owned a 26% shareholding. Annual interest was also accruing on these figures. In a theoretical situation, had the case been successful, one could add €100 million to the figures.

Are we speaking about €100 million or €200 million?

Mr. John Crawley

The authority's liability under the guarantee for Becbay was approximately €20 million. We had also invested equity of approximately €32 million in Becbay.

I am more interested in the perspective of the ordinary person looking on.

Had the DDDA lost the court case, how much would it have had to pay to Donatex?

Mr. John Crawley

Had we lost the case we would have lost €100 million.

So the DDDA would have lost €152 million on the Irish Glass Bottle site and the total loss on developments would be up around €280 million, close to €300 million. The DDDA was playing with fire. On 20 October 2006 the DDDA had a potential exposure of €9 million. We suddenly find that had the DDDA lost the court case, that exposure would have increased to €152 million. It is astounding. It makes no sense. It is an abuse of taxpayers' money. In Mr. Crawley's final remit in the wind-down, I ask that he examine that area to see what could be learned and make that known to the Comptroller and Auditor General, who could deal with it. Like everything, one needs a beginning, middle and end. With the rate of exposure of €152 million, which could have been a pension for the Irish Glass Bottle site, and €180 million with other assets, we are talking of the order of €300 million. It is €150 million with the other six development sites and another €150 million for the Glass Bottle site, a total of €300 million. It is an astronomical figure.

Ms Eileen Quinlivan

The €100 million claim does not arise so it is inaccurate to try to portray it that the €100 million is legitimately considered in there.

With due respect, the board put the DDDA and the taxpayer in a position where they had to fight a legal case based on making an investment over a 12-day period when the investment went from an exposure of €9 million to €61 million with no independent valuations provided. Major questions have to be answered here. Looking at it now it is clear that it was invested at the peak of the market. Had proper due diligence been done on it at the time and an independent valuation sought, that investment might never have gone ahead and the DDDA might still be functioning and playing the role it was meant to play, the redevelopment of business, social, educational and recreational aspects of the docklands.

Ms Eileen Quinlivan

I accept those points, and the findings of the Comptroller and Auditor General, but on the €100 million, we successfully defended the case and it was dismissed so it would be inaccurate to factor it in.

I refer to pages 21 and 22 of the updated briefing document regarding payouts that were made to staff members as the authority was winding down. The total amount is €103,000 and change, and was divided between a settlement payment of €14,750 gross made to a staff member in lieu of time off for working unsocial hours over a five-year period. A staff member was awarded a payment of €88,379 gross in respect of increments for the period 2001 to 2011, which should have previously been paid. When were those two decisions on those two payments made?

Mr. John Crawley

It was reported in the 2012 accounts, so some time in 2012.

A decision was made to make those two payments?

Mr. John Crawley

Correct.

Was it the case that the individual in the first instance, who was recompensed in lieu of time off for working unsocial hours over a five year period, requested that money in each of those five years and it was not paid, and eventually in 2012 it was decided that it was a liability that had to be covered? How was that determination reached?

Mr. John Crawley

Both of these were mistakes by the authority. They are payments that should have been made. As part of the wind up of the authority I specifically examined the human resources issues regarding the various people in the authority. We audited the files of the various people who were still with the authority and identified these two errors. My memory fails me in one case, but in the case of the €88,000 the person had previously requested that those payments be made. That person was on a scale and the authority had not been paying the staff member the increments. The person had formally raised it under a previous regime, maybe a couple of chief executives back, and then the gentleman brought it to my attention in early 2012. We took legal advice on it, reviewed the situation, discussed it with the board-----

Who took the legal advice?

Mr. John Crawley

We did, and our conclusion was that the authority had made an error.

Okay, but he had been protesting about this lack of pay over a number of years and it had not been listened to.

Mr. John Crawley

Correct.

The second point I want to raise is on the issue Deputy Nash raised. In October 2009, when the moratorium was in place, the former CEO signed the contract without notifying the board although the board had clearly instructed him not to do it. Is that it?

Mr. John Crawley

Correct.

Was that Mr. Kelly?

Ms Eileen Quinlivan

We can check the records.

Mr. John Crawley

We believe it was Mr. Kelly. Looking at the dates, logically it could not have been Mr. Maloney.

Ms Eileen Quinlivan

We can confirm that for the Deputy.

If Ms Quinlivan could. What happened to that CEO as a result of such a clear breach of his responsibilities? I do not know if it is a breach of the law or not; that is a separate matter.

Mr. John Crawley

I do not know.

How long was Mr. Kelly with the authority?

Mr. John Crawley

In his capacity as chief executive, maybe two years.

Who replaced him?

Mr. John Crawley

Ms Loretta Lambkin, who has been before this committee.

Would it be fair to say Professor Niamh Brennan might have some information on that situation regarding Mr. Kelly?

Mr. John Crawley

Professor Brennan was the chairperson at the time.

Was she chairperson at the time it was discovered or at the time it occurred?

Mr. John Crawley

Both. Professor Brennan took up the chair of the authority around late 2009.

Was she in place until Mr. John Tierney was appointed?

Mr. John Crawley

Yes, in mid-2012.

That might be something to bring up with her at a later stage. My final point relates to something the Comptroller and Auditor General said in his opening statement. We had back and forth on this with Mr. Maloney in a previous meeting and in meetings before that. There was a difference of opinion between Mr. Crawley and Mr. Maloney as to what the board believed it was entering into. We received a note from Mr. Crawley on that matter, document 3A1C. I want clarity on this because it will be important later on. Does the Comptroller and Auditor General believe Mr. Crawley's note backs up what Mr. Maloney was claiming?

Mr. Seamus McCarthy

The note Mr. Crawley provided deals with what was in the shareholders' agreement. The "back and forth" between Mr. Maloney and me was regarding what the board authorised, directed or decided should be in the shareholders' agreement and regarding the investment. I have no difficulty with what is in Mr. Crawley's note. Those are the facts and I am satisfied with that. The difficulty arises around what the board thought it was doing or agreeing to at the time. In practice we were restricted to relying on the board minutes which Mr. Maloney and I agreed should be a comprehensive record of what was decided.

I have tried to outline this morning that this was the sequence of decisions, and the Chair has referred to the speed at which the decisions appeared to be changing. I was also trying to draw attention to the lack of clarity about what those decisions were, even in respect of this limit of €35 million. It appears, when we look at the executive board minutes, that what they were talking about was a limit on the exposure through the guarantee. In fact, the limit of €35 million was on everything else except the guarantee. The guarantee had a separate scope of limitation. Effectively, the guarantee was 26% of €100 million, or €26 million, plus 26% of the interest on the Becbay borrowing for a period of two years. In the event, that is not the way it panned out, and by the time the authority came to do the deal with NAMA at the end of 2010, it had racked up a total exposure of about €82 million. Further liability would have accrued up to July 2011. Had a deal not been done with NAMA, that liability would have continued to increase.

There are two points involved. The first is that the attempt to limit the exposure did not work, and the second is the fact that the amount that they were agreeing to commit was changing within the space of days. That is something that should be very clearly documented in minutes and very clearly understood by boards when they make decisions like these.

It was said that the board minutes for the authority were the most detailed for any State authority or semi-State body, but Mr. McCarthy thinks that the records are ambiguous when it comes to this matter.

Mr. Seamus McCarthy

I think so, in particular the minutes of 2 November.

If we go back to the exchange that Mr. McCarthy had in December, Mr. Maloney said the following:

On the figure of €35 million, we all agree now that it was a funding guarantee liability to do with recourse and interest. At the time of the shareholders' agreement, the €32 million for equity was also in the shareholders' agreement. The authority knew it had a €35 million liability, plus the €32 million equity. Does the Comptroller and Auditor General accept that?

Mr. McCarthy replied, "No, I do not".

Mr. Seamus McCarthy

The first point read out by the Deputy was that the €35 million applied to the guarantee. It does not apply to the guarantee, and that is not what is in the shareholders' agreement. It is everything other than the guarantee.

The position on that has not changed.

Mr. Seamus McCarthy

I think it is ambiguous as to what the records actually say. There appears to be contradictions between the various documents.

If I take the Acting Chairman's point, perhaps he was inferring that the speed at which this changed, if we go by Mr. Maloney's interpretation, means that it might lack credibility if that is what the board would move to agree on in such a short period of time. That is a matter for the PAC.

Mr. Seamus McCarthy

The recorded value of the site was changing between the various minutes.

It went from €350 million on 20 October to €412 million on 24 October. That was only in the space of four days.

Mr. Seamus McCarthy

At the beginning of October, there were references to site values of €240 million and €300 million. There is a difficulty with all of this in that the record, in my view, is not sufficiently accurate and comprehensive for an investment of this scale. That is the point we were trying to make in the report.

Does Ms Quinlivan wish to make any final comment?

Ms Eileen Quinlivan

No, but we would like to thank the committee for the opportunity to come in today. Since the report of the Comptroller and Auditor General and the difficulties that have been discussed at length by this committee, I hope that we have conveyed that the authority has made sincere and successful efforts to rectify its financial position and to bring about its orderly wind-up, and secure the successful continued regeneration of the docklands for the future.

I thank Ms Quinlivan, Mr. Crawley and Mr. Dunne for appearing before us. Is it agreed that the committee dispose of the annual accounts of the Dublin Docklands Development Authority for 2012? Agreed.

The witnesses withdrew.
The committee adjourned at 12.45 p.m. until 10 a.m. on Thursday, 13 February 2014.
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