COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 6 Nov 2003

Vol. 1 No. 31

2002 Annual Report of Comptroller and Auditor General and Appropriation Accounts.

Vote 31-Department of Agriculture and Food-

Chapter 9.1.

Mr. J. Malone (Secretary General, Department of Agriculture and Food) called and examined.

Chairman

I must mention relevant correspondence of 6 September 2003 from Mr. Pat Geoghegan of the Cappagh Farmers Support Group concerning the Askeaton investigation in County Limerick.

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

Notwithstanding this provision in legislation, I remind Members of the long standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House either by name or in such a way as to make him or her identifiable. Members are also reminded of the provision within Standing Order 156 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 ask Mr. Malone, Secretary General of the Department of Agriculture and Food, to introduce his officials.

Mr. John Malone

Mr. John Fox, Mr. Aidan O'Driscoll, Mr. Jim Beecher and Mr. Seamus Healy are all assistant secretaries in the Department. The officials from the Department of Finance are Mr. Brendan Ellison, Mr. Robert Carey and Mr. David Hurley.

Chairman

I ask Mr. Purcell to introduce chapter 9.1.

Mr. John Purcell

Paragraph 9.1 of the report of the Comptroller and Auditor General reads:

Exhibition and Show Centre at Punchestown

The Initial Proposal

In November 1999 the Minister for Agriculture and Food (the Minister) received a proposal from the trustees and executives of Punchestown Racecourse (Punchestown) seeking funding for a development project. The project comprised an indoor exhibition facility, an entrance complex, a new stabling block, as well as additional car parking and landscaping. It was to be known as the National Agricultural and Eventing Exhibition and International Show Centre.

Punchestown indicated that on the basis of an exercise carried out by its Quantity Surveyors, costs would be €6.9m. The level of State support sought was not indicated.

On 19 January 2000 Departmental officials recommended to the Minister that funding of €6.9m should be given to Punchestown representing 100% of the anticipated construction costs. The Minister accepted the recommendation and on 20 January requested the Minister for Finance to provide additional funds of €6.9m in the Departments Estimates for 2000 to finance the proposal. The Minister for Finance acceded to the request on 27 January 2000.

The Revised Proposal

On 6 April 2000 Punchestown informed the Department of Agriculture and Food (the Department) of proposed changes to the project which would impact on costs, and on 2 June 2000 submitted a revised proposal costing €12.8m. The Minister accepted the revised proposal and on 23 June 2000 wrote to the Minister for Finance requesting additional funding of up to €6.4m for the project. The Minister for Finance agreed to the request for additional funding on 7 July 2000.

Table 9.1 compares the costs of the original and revised proposals.

Element	Nov 1999	June 2000
	€	€
Exhibition and Event Centre	3,174,000	6,488,000
New Stables Enclosure (147 stables + 7 rooms + toilets)	1,270,000	2,013,000
Entrance Complex-incorporating Entrance Canopy, Garda Rooms, communications/press room and Creche	1,143,000	1,130,000
Landscaping - incorporating grass arenas and all-weather cross country course	126,974	317,435
Allowance for Drainage and Site Services	63,487	126,974
General Hardstanding Parking	63,487	-
Roads, Access etc.	-	520,593
Sandstone to Parade Ring	-	188,556
Client Direct Items	-	126,974
Contingency Allowance and Inflation	317,435	507,895
Design Team Fees	761,843	1,363,937
Total (Excluding VAT)	6,920,226	12,783,364

The main changes to the first proposal were:

An increase in costs of the centre from €3.17m to €6.49m

A reduction in the area of the centre from 10,000 square metres to 7,535 square metres (due mainly to the removal of interior building supports)

An increase in cost of stabling by €743,000 due to the provision of additional parking

The addition of an access road costing €520,593.

Consulting the European Commission

On 26 April 2000 the Department wrote to the European Commission seeking its opinion on whether the Departments proposed financing of the centre constituted State Aid within the meaning of Article 87(1) of the Treaty of Rome. The Department said the proposed financing should not be considered a State Aid because:

The project promoter was a non-profit making trust which holds the lands at Punchestown for the benefit of the farming community as a whole and would be required to operate the proposed centre on the same basis.

The Centre would

Be available to all farm and farm related organisations on a non-discriminatory basis as part of the public infrastructure for the sector

Most likely operate in a breakeven situation and was unlikely to ever generate profits

Not operate in a competitive market situation either at national or international level

Funding would only be provided in respect of the establishment costs of the Centre.

The development could be viewed as a public good.

On 10 May 2000 the Commission said it was satisfied that State Aid was not involved.

Agreement and Conditions

An agreement was made with Punchestown on 9 August 2000 by way of an exchange of letters. The agreement provided that:

The money would be repayable if the Event Centre was sold, leased, or its uses altered significantly without the prior written approval of the Department.

The Centre would be used for:

Horse and Cattle Fairs/Shows

Eventing and other Competitions

Breed Congresses

General Agricultural and Machinery Exhibitions and Displays

Special Pedigree Cattle Sales

Other purposes agreed from time to time by the Department.

There would be no call on Exchequer funding for:

Construction costs in excess of €13.3m

The costs of running the centre.

Any profits made must be re-invested in the centre.

The centre must be:

held for the benefit of the farming community as a whole

available to all farm and farm related organisations on a non-discriminatory basis.

The Department could require repayment of the grant in whole or in part if the grant conditions were not met.

Further Contributions to Finalise the Project

In October 2001 Punchestown sought a further €1.5m mainly for works to satisfy the planning requirements of Kildare County Council. This was sanctioned by the Minister for finance on 31 January 2002 bringing total State funding for the project to €14.8m.

Audit Concerns

The audit established that proper tendering procedures were observed in connection with the placing of contracts, and that the Department had satisfactory controls in place in relation the processing of payment claims in terms of on-site inspections and detailed administrative checks. However, I did have concerns as to the adequacy of the evaluation carried out by the Department on the project, and some apparent weaknesses in the agreement from the point of view of adequately protecting the States interests.

Evaluation of Project

My concerns in relation to the evaluation of the project centred on whether the project had been comprehensively evaluated from a cost/benefit viewpoint prior to its approval ^ in particular if it met the criteria set down in the guidelines issued by the Department of Finance for the evaluation of major capital projects. The fact that the scale of the development changed soon after its initial approval lent weight to my concerns. Accordingly, I sought the views of the Accounting Officer in relation to these and other associated matters.

In response to my enquiries the Accounting Officer informed me that the project was considered worthy of support because for many years the Department had been aware of the need for a facility of international standard for the holding of agricultural shows and displays which could attract significant agricultural events to Ireland. Such a facility would be part of the infrastructure of the industry. The project put forward by Punchestown fully met the Departments objectives and in view of its benefits to the agricultural sector it was, in effect, a national facility and as such was considered worthy of 100% funding.

The 100% level of support given to the project (apart from the site) was agreed because the Department was aware that the Centre would require a considerable amount of finance to meet running costs such as maintenance, insurance, reinvestment etc. As Punchestown was obliged to operate the facility as an Event Centre indefinitely and were operating in an area where profits were difficult and as they were not allowed to dispose of the property, the running costs would be a constant liability on the organisation. In the circumstances the arrangement whereby the Department would fund the construction costs and Punchestown would use its own resources and considerable expertise to run the project was considered a good partnership arrangement, and one from which the agricultural industry as a whole would benefit. The Department was further satisfied that anything less than full funding for the construction of the facility would mean that the project would not proceed and the potential benefits to the agriculture sector and the country, in terms of attracting certain prestigious equine events in particular, would be lost.

In relation to the decision to accept the more expensive second proposal the Accounting Officer stated that the Department had for some time been aware of the need for a centre for agricultural events. The evaluation of the two Punchestown proposals had focused on the extent to which the proposals met the Departments needs. Under both proposals Punchestown would provide the site and would run the Centre thereafter. The initial proposal was the one which Punchestown were at the time prepared to apply their resources and expertise to running. Having given the project due consideration it was decided that as it met the Departments basic requirements financial support was justified.

Having obtained approval in principle, the promoters set about progressing their proposals. They subsequently indicated that following more detailed consideration of the needs of the proposed Centre which included inspection by the design team of similar facilities in the UK, Continental Europe and North America they proposed to make some structural and costly changes to the design of the main building in particular. The finalised proposal provided for the holding of a wider range of activities and made the centre more user friendly. Its clear span interior made it suitable for the holding of a wider range of machinery shows than could be accommodated in the first proposal and the general specification was also upgraded to cope with internal climate control. The finalised proposal was the Departments preferred option if funding could be made available.

The Department did not accept that the evaluation of the first proposal was not as thorough as it should have been. In the event that funding could not be made available for the revised more costly proposal the Department would have funded the original proposal as it met its basic need for a centre.

As to why the Department did not obtain independent technical advice on the proposals, the Accounting Officer stated that his Department was aware, and had sight of, the architectural and engineering advice obtained by Punchestown and all their plans. The Department had applied its own considerable experience and expertise to evaluating that advice and did not consider it necessary to acquire and pay for further independent advice. The Department had also ensured that proper procurement procedures were undertaken by Punchestown as the project progressed to ensure that the best value for money was obtained.

In relation to research carried out by the Department on the need for the facility the Accounting Officer stated that the Department was keenly aware, through its on-going interaction with societies such as the Pedigree Breed Societies and with the Irish Cattle Breeders Federation (ICBF), of the need for a facility such as the Event and Exhibition Centre for non-equestrian events. It was also aware that most of the Pedigree Cattle Breed Societies were linked to and participated in annual international and world congresses, fora, shows, competitions and sales, some of which it felt could be attracted to Ireland at reasonable intervals if the facilities were available at a suitable venue. It was further aware of the work being done through ICBF and other breed societies using Exchequer and EU co-financed Structural Funds to improve and market quality cattle breeding, and was anxious to complement that work by having the appropriate international status facilities in Ireland to promote the end products.

He stated that in the equine eventing area Ireland had been the lead stud book in the World Breeding Federation evaluations for many years, and in this context it was considered important to underpin this success with a suitable modern eventing facility in Ireland.

Formal research had not been carried out by the Department as it was considered that it already had sufficient information on these issues. The larger organisations had been informally consulted, they supported the venture and indicated that they would use the facility when it became available, and Punchestown had carried out research in relation to the Centres equestrian activities and undertook a feasibility study on the tourism aspect.

In relation to the non-submission by the promoters of projections of costs and revenues for the Centre, the Accounting Officer stated that the principal issue for the Department was the provision of a national agricultural eventing and exhibition centre for the farming sector. While the Department was naturally concerned about its long-term viability it was satisfied that this could best be achieved as part of the wider Punchestown complex.

As to whether any attempt was made to quantify the financial benefits of the project to the farming community and the economy generally, the Accounting Officer stated that the Centre was envisaged as a public utility for the use and benefit of the agricultural industry. It was seen therefore as a public good development, the benefits of which were long-term, reputational, and marketing through standards and presentation, and could not readily be measured in immediate and direct financial terms.

On the question of why no enquires had been made by the Department as to whether there may have been other promoters willing to provide such facilities at a possibly lower cost to the Exchequer, the Accounting Officer stated that the central and accessible location of Punchestown, its spacious setting, the synergies to be derived from the racecourse, its proven expertise in eventing shown through its successful hosting of a 3 day Eventing Competition since 1968 uniquely made Punchestown the ideal location for the Centre. Ireland had lost out in bringing the prestigious World Equestrian Games here in 1999 and an application had already been submitted to stage the 2003 European Eventing championships. As Punchestown was recognised as the premier location for a National Eventing Centre it would have been unthinkable to have located it anywhere else. No other promoter had made an approach to the Department to provide such facilities, which was understandable in the context of the scale of the facilities required, many of which were already available at Punchestown.

The Accounting Officer stated that the Department operates a number of capital grant schemes under the National Development Plan. Applications under these schemes were subject to a thorough assessment and evaluation process. Detailed procedures manuals were in place for each scheme, and he stated that he was satisfied that the processes and procedures within the Department for processing capital grant applications were thorough. The Punchestown project was very much a "once off" and not part of any particular scheme, and the project work and all grant payments relating to it had been subjected to particular and intense scrutiny.

He also stated that all of the capital works relating to the project had been completed and that the centre had commenced operating. While it was still early days, demand for the Centre had been reasonably good, and feedback received by Punchestown had been positive. In its first 10 months of operation to the end of September 2003 the centre would have hosted an average of one event per month, the majority of which were agricultural in nature. Demand for the centre was expected to increase as it became established, and in September the highly prestigious European Eventing Championships which came around every 3 years, and the Endurance Championships would be held there.

In view of the fact that the Department was required by Government Financial Control Procedures to obtain the approval of the Department of Finance for the funding it provided for the project, I asked the Accounting Officer of the Department of Finance whether his Department was satisfied that the project proposal had been adequately evaluated by the Department and that the guidelines laid down by his Department on the evaluation of capital projects had been followed, and whether the withdrawal by the Department of its first proposal for funding of €6.9m and its replacement by a proposal for funding of almost double the original amount, raised any concerns within his Department on this question.

The Accounting Officer of the Department of Finance stated that it was the responsibility of the Department of Agriculture and Food to formulate, evaluate and deliver on projects such as Punchestown, and to ensure that proper procedures were in place to do so in a transparent, responsible, and accountable manner. In doing this they were assisted by and must have regard to appropriate guidelines (including the 1994 Capital Appraisal Guidelines), the formulation and dissemination of which were the responsibility of his Department.

The Agreement

My concerns in relation to the agreement centred on the fact that the conditions governing the States financial support were covered only by an exchange of letters and had not been referred to the Departments legal advisers to ensure that they were properly constructed and legally sound. I also noted that the funding had not been made conditional on a certain minimum number of agricultural and equestrian related events being held there and that the agreement was silent as to a minimum length of time for which the Centre must operate. Moreover, the agreement did not cover the matter of payment by the racecourse company for use of the facilities of the centre including the stables and entrance complex. I also felt that the wording in the agreement left some doubt as to whether the Department had the power to prevent the holding of events of a non-agricultural and non-equestrian nature, as intended, if it so wished.

The Accounting Officer stated that any concerns which the Department had with the holding of non-agricultural and non-equestrian events were mainly to ensure that they did not prevent, from a timing or structural viewpoint, the holding of the type of events for which the Centre was funded. The Department was satisfied that should it wish to do so, it could prevent the holding of certain types of events.

He also stated that as the Department considered it had the power to veto non-core events it was not considered necessary to seek an agreement as to number and type of events in the Centre. With regard to the minimum period during which the facility must be operated, he cited the Food Industry where the Department has operated a capital grant system for many years, and where beneficiaries are required to have the grant-aided facilities operated for the purpose for which they were funded for a period of at least eight years. However in the case of the Centre at Punchestown it was decided to be more restrictive and by not imposing a limit the requirement was left open ended, which meant that the facilities must be made available indefinitely for the purpose for which funded, and that this reflected the 100% grant paid.

The Accounting Officer informed me that, although not incorporated in the agreement, arrangements had been put in place to cover payment for use of the centres facilities by companies in the Punchestown group.

However the Accounting Officer also informed me that in the light of my concerns on possible deficiencies in the agreement, he had referred it to the Legal Services Division of the Department for legal consideration. He understood that a new agreement may be considered which would where possible, address my concerns, and that Punchestown had indicated that they were willing to enter into a new agreement if the earlier one was found to be deficient and that the new agreement would be completed by one or all of the three companies within the Punchestown organisation, if required.

This is the sole reference in my report to the Department of Agriculture and Food this year, which is good news from the Department's viewpoint.

The initial proposal for this development project was made in November 1999. The proposal was to fund a project - an exhibition and show centre at Punchestown racecourse - costing €6.9 million. It was approved in January 2000 by the Minister for Finance, having been recommended by the Minister for Agriculture and Food. However, a revised proposal was submitted in June 2000, costing €12.8 million, and approval for this amount, plus another €0.5 million or so to allow for miscellaneous unforeseen expenses, was given a month later. That was not the end of it: in October 2001 Punchestown sought a further €1.5 million to finish the work. This was approved by the Minister for Finance in January 2002, bringing total State funding for the project to €14.8 million.

My main concern about this project was that the guidelines set down by the Department of Finance for the appraisal of proposed capital works were not applied, even though it was fully funded by the Exchequer. Normally if a revised proposal costing almost double the amount originally envisaged is received a few months after the initial approval alarm bells would ring in both Departments, but on this occasion it was more akin to pushing an open door. There was no evidence of critical cost-benefit evaluation being carried out at any stage of the project.

I put this to the Accounting Officer and, as we can see from the report, he stated that the centre was envisaged as a public utility for the use and benefit of the agriculture industry and was therefore seen as a public good development, the benefits of which were long-term, reputational and marketing, and could not be readily measured in immediate and direct financial terms. There is something in what he says but this does not obviate the need for thorough appraisal to avoid the risk of paying too much for what was seen as a desirable facility. I was glad to receive his assurance that under the capital grants scheme operated by the Department under the national development plan, projects and grants are subject to a thorough assessment and evaluation process and that the Punchestown project was a once-off in this regard.

I also had some slight reservations about the nature of the agreement drawn up to cover the State's interests. The Accounting Officer has referred this matter to the legal services division of the Department for any necessary action. To end on a positive note, the audit confirmed that proper tendering procedures were observed and that the Department exercised satisfactory control over the processing of payment claims by way of on-site inspections and detailed administrative checks.

Mr. John Malone

It had been generally accepted in the agriculture sector and also in the Department for a number of years that there was a need for a facility of international standard for the holding of agricultural shows and displays which could represent our industry both nationally and internationally and in addition attract significant international agricultural events here. The proposal submitted to the Department by Punchestown was timely in that it addressed this gap in the overall infrastructure required to promote the industry. The proposal was considered against that background.

The exhibition and show centre at Punchestown is now complete and the facility is in operation. This centre is a well serviced facility. This, together with its location, easy access, entrance facilities for receiving large crowds and extensive parking, makes it a flagship facility for the whole agriculture industry. It enables the sector to display the quality of the Irish product in an appropriate setting of international standard and has the ability to accommodate the bigger events in the international agricultural calendar, such as those connected with sport - horse event competitions and cattle breeding and livestock shows - as well as machinery displays, associated congresses and forums and other projects agreed from time to time by the Department. The Department is satisfied with the project and how it has operated to date.

Today the public expects high standards from public facilities. Any exhibition or show centre which does not deliver a sufficiently high standard of accommodation and ancillary services will simply fail to attract important events. This fact was very much to the fore in the Department's consideration of the Punchestown proposal. The Department was prepared to fund the first proposal submitted by Punchestown in November 1999. However, the Department is satisfied that it was the correct strategy to fund the revised proposal submitted in June 2000, subject to the availability of the funding required, as this resulted in the delivery of a superior facility which allowed for a wider range of uses, albeit at a higher cost than that originally envisaged. This was the choice we had to make at that time.

The facility constructed at Punchestown has proved to be a major success with exhibitors and patrons alike. Since it opened, the centre has successfully hosted a wide range of events, from the high profile European event championships and endurance championships to a pony club summer camp. A significant number of events have already been booked at the centre for 2004. The Department is satisfied that Punchestown has met and continues to meet the conditions of the grant agreement.

The Comptroller and Auditor General has commented on the fact that funding was not made conditional on a certain minimum number of agricultural and equestrian related events being held there. The Department has the facility to limit non-core activities should the need arise and this has not been contested by Punchestown. The Department's primary concern in this regard is to ensure that non-core events do not from a timing or structural viewpoint prevent the holding of the type of agricultural events for which the centre was funded. It must be realised that the holding of a wide range of events has been a part of the activity at Punchestown over the years. The venue has always been a site for popular music events, long before the construction of the centre. A limitation on non-core activities per se would serve no useful purpose but could prove to be an inhibitor to Punchestown in developing the role of the centre and indeed developing Punchestown in general.

The project in question constituted a once-off investment in this country's infrastructure for the promotion of agriculture and was considered to be a public good development. No alternative sites were put forward. The proposal was carefully examined and the Department consulted informally with the larger livestock and bloodstock organisations which indicated their support for the venture and their intention to use it when it became available. I draw the committee's attention to the Comptroller and Auditor General's comment: "The audit established that proper tendering procedures were observed in connection with the placing of contracts, and that the Department had satisfactory controls in place in relation the processing of payment claims in terms of on-site inspections and detailed administrative checks.".

With regard to the type of agreement entered into with Punchestown, the Department wrote to Punchestown on 1 August 2000 agreeing to fund the project subject to 17 detailed conditions. A number of these conditions were standard clauses used by the Department in other capital grant cases and had stood the test of time. On 9 August Punchestown formally wrote to the Department accepting the Department's offer of funding subject to the conditions set out. Given the standing of Punchestown, this formal exchange of letters was considered by the Department and, I believe, also by Punchestown, to be a legally binding agreement and the conditions enforceable. However, in view of the reservations expressed by Mr. Purcell this aspect is being further examined by the Department's legal services division. A new agreement is now being worked on which I hope will address Mr. Purcell's concerns.

This project did receive substantial funding from the Department of Agriculture, Food and Rural Development, €14.6 million. However, there is no doubt that this particular project would not have gone ahead without this degree of subvention. Punchestown has met all its obligations under this project: it provided a valuable site in a very suitable location, it managed the project and ensured its completion and it has taken responsibility for the day to day running of the enterprise. These are very important contributions in a project of this nature. The project is now in place and up and running. Feedback received to date has been positive and I am satisfied that it will prove to be a great success over time.

Chairman

The agreement was based on an exchange of letters. Was there an official agreement?

Mr. Malone

Yes. In our view the letter, which is a detailed one, was a legal agreement. Punchestown wrote back to us conveying its acceptance of those terms and conditions, but in light of the points raised by Mr. Purcell——

Chairman

Do you have a copy of the agreement?

Mr. Malone

Yes, we can give you a copy.

Chairman

It seems quite extraordinary that no evaluation was carried out by the Department of Finance on this project.

Mr. Malone

The project was examined in detail by the Department of Agriculture and Food. As I explained, we had felt for a number of years that there was a gap in the infrastructure, mainly related to the change in the RDS, with which members will be familiar - it used to be a well developed exhibition centre but its role has changed in recent years. This meant there was no centre where large events of this kind could be held. We had a view of the need for the project. We also had a good understanding of the need from the equestrian side. There is a predetermined set of events either every year or every few years. In addition, we consulted with the livestock sector, mainly the breeding societies. The Department had a clear view of the need for this facility.

The proposal was submitted in accordance with normal procedures to the Department of Finance. We sought a policy decision from that Department and we received it. That is as much as I can add.

Chairman

What was the cost per square foot?

Mr. Malone

I would have to calculate that. It is a fairly large events centre.

Chairman

I know the size, but what was the cost per square foot?

Mr. Malone

The facility is 7,500 sq m and there are also entrance facilities. We can calculate the cost - it would be €6.4 million divided by this figure.

Chairman

It is a lot more than €6.4 million, is it not? We are talking about the total cost.

Mr. Malone

We are talking about stables and entrance facilities.

Chairman

That is the whole development?

Mr. Malone

That is the whole development. I do not have the size of the full development here but I can get that figure.

Chairman

Are the ancillary services all part of the establishment? If one did a calculation one would be quite surprised.

Mr. Malone

It is quite high.

Deputy Ardagh

When I read chapter 9 of the Comptroller and Auditor General's report it read like a good cowboy story. The Punchestown boys ride into town, strut their stuff and say they are building a corral out on the ranch for some cattle and horses but it will be good for the town. There are a couple of John Waynes among them so they inveigle their way to the open safe and get almost €7 million. They ride out, have a look at things, scratch their heads and say that was easy why not try again? They do that and get another €7 million less than two months later, which is good going.

The chapter shows up the difference in emphasis between the Secretaries General of Departments who look at outputs versus the Comptroller and Auditor General who looks at the evaluation and the controls. In this instance the Secretary General has told us some of the outputs. It was a bit of a gamble and it paid off. It is a pity the committee did not have an opportunity to visit Punchestown prior to this. The RDS was caught for space but how much more advantageous was it to have a venue for horse shows in Punchestown rather than the RDS? The Dublin Horse Show is still held in the RDS so what other facilities are used in Punchestown?

Mr. Malone

The RDS has changed fairly dramatically in recent years. The amount of space available is limited and the concept of bringing animals, whether cattle or horses, into the middle of the city is no longer acceptable. As far as I know, the Dublin Horse Show is the only real livestock event held in the RDS. The difficulty we had was that the nature of the RDS has changed. There was clearly a gap in the infrastructure. Facilities such as this exist in other countries in various parts of Europe.

Deputy Ardagh

What events have been held in Punchestown that could not otherwise have been held in Ireland?

Mr. Malone

The three-day equestrian event was very successful. It is the biggest of its kind in Europe and it was held there last September.

Deputy Ardagh

How much money would that bring into the country?

Mr. Malone

It would have brought in several million euro.

Chairman

Is it an annual event?

Mr. Malone

It is held every three years. There is also an annual local event, the Farm Machinery Show. A large exhibit of farm machinery used to be held at the RDS.

Deputy Ardagh

The ploughing competitions were held in other locations.

Mr. Malone

The National Ploughing Championships moves from one location to another. It is a different event, not an exhibition and it has developed out of a ploughing competition.

Deputy Ardagh

Apart from the three-day event, what other events have been heldthere?

Mr. Malone

The Irish Charolais Cattle Breeds Society held an event there. There is an event held there almost every month, the Farm Trade Machinery Show, pony club summer camp, the European Eventing Championships and the European Endurance Championships - which as I said was a big event - and an Agri-Aware event is held in conjunction with Santa's Kingdom in December.

Deputy Rabbitte

Santa came early here.

Deputy Ardagh

Are any major events planned for next year?

Mr. Malone

Broadly the same range of events. In January there will be the Irish Farm Machinery Show which could not be held anywhere else; the eventing championships will be held there in June and towards the end of June there will be an event exhibiting tractors which is separate from the Farm Machinery Show. There is the National Hunt but that is not connected with the event centre.

Deputy Ardagh

Could any of these events have been held in other locations?

Mr. Malone

It would be very difficult to hold the Farm and Machinery Show anywhere else and the three-day event definitely could not have been held anywhere else. This centre has been up and running for roughly a year and it will have to be judged over a longer period. We looked at it in that context. One cannot judge it in terms of what happened in 2003 but what will happen over the next five or ten years.

Deputy Ardagh

So in the next Dáil when we come back, and if we are members of the Public Account Committee, we will be better able to judge it?

Mr. Malone

Yes I am confident of that.

Deputy Ardagh

Could Punchestown have funded this without having to be given 100% funding?

Mr. Malone

We would not have had a proposal without 100% funding. The difficulty is that there was a gap in the infrastructure. This is not a profitable enterprise by its nature. These event centres find it very difficult to make money. No commercial outfit was going to come to us, and it has not happened either before or since then that a group came to us, saying that if we gave it a 50% or 60% grant it would provide a facility. The advantage of Punchestown was that it was relatively near Dublin. It is a trust.

Deputy Ardagh

Can Mr. Malone repeat that?

Mr. Malone

Punchestown is in effect an agricultural trust.

Deputy Ardagh

We will come back to that. We would like to hear more about the trust.

Mr. Malone

In that way we know with whom we are dealing. The organisation provided the site and the facilities, ran the project and will manage the event centre. There were many advantages and the reality is that if Punchestown had not come forward no one else would have come forward. We have tried to think where else there might be a location or a sponsor for a project of this kind. It does not exist.

Deputy Ardagh

On 27 January 2000 the group received confirmation that it was going to get €6.9 million for the Punchestown Equestrian Exhibition and Show Centre and on 6 April, two months and ten days later, it came back looking for another €5 million or €6 million. Did the Department officials not hit the roof at that stage? Was it credible? How did they react to this?

Mr. Malone

Our reaction was that in effect these are two different projects. The project for €6.9 million was a smaller project. It was a bigger event centre but the way it would be constructed limited the range of activities that could take place there. For example, it could not be used as a machinery exhibition centre. What we were getting for €6.9 million was a centre that would deal with equestrian events. It would not be suitable for the wider range of events. This is not a case of costs getting out of control, in other words, it did not start with a project costing €6.9 million that ran up to €12.7 million. As Punchestown developed its thinking and looked at more facilities around Europe it felt it was a better idea and proposal to go for the more elaborate version.

Deputy Ardagh

Did Mr. Malone tell Punchestown he was glad it came back because this was much better and he had €5 million or €6 million handy?

Mr. Malone

We were getting a facility that had a much wider flexibility to hold events. Effectively, we had three choices in this project: we could have said no and refused to entertain any proposal and we would have had the same problem we had prior to it being constructed, we could have accepted the original proposal although the range of activities it could stage was limited, or we could go for the broader proposal with a better centre, a wider range of activities and more options for the future. Over time this is a public good facility. The €14 million development as it now is will prove to be good value.

Deputy Ardagh

The last paragraph of the Comptroller and Auditor General's chapter states the new agreement would be completed by one or all of the three companies within the Punchestown organisation. Mr. Malone mentioned a trust. Could he give us details of what these three companies are, who are the directors and shareholders, and whether any profits are made within those companies? I am sure the financial statements will be available from the Companies Office.

Mr. Malone

Punchestown is a trust owned by the Kildare Hunt which in turn is a trust that has existed for more than 100 years. Within that the Kildare Hunt has three different companies - Punchestown Development Company Limited which in effect owns the racing facilities at Punchestown; the Blackhall Racing Company which manages the events at Punchestown, and Punchestown Enterprise Limited which owns the event centre. There is a trust with 134 members. It is under a 250 year lease agreement and in summary it has three companies.

Deputy Ardagh

Does the trust own those companies?

Mr. Malone

The trust owns them. There is one other aspect that I should bring to the committee's attention. Horseracing Ireland, which has provided funding for the racing activities, a separate aspect of the Punchestown activities, is proposing because of the funding, that a new company structure be created of which in effect it would have 50%. When I indicated that we would re-examine the legal structure that was not to suggest that we have a legal problem. There has never been a disagreement or argument with Punchestown about the commitments, obligations or conditions but to be certain of this we need to have the agreement with the new company structure whenever that is set up. The advantage of that is that Horseracing Ireland is a State body and that will give an additional layer of protection.

Deputy Ardagh

The trust has 134 members. Could these members benefit in any way from any distributions possible or is there any asset that could be sold of which they could be beneficiaries?

Mr. Malone

We have examined the documentation. It is a trust. There are no fees paid to the directors. It is a non-profit making organisation in that sense. Punchestown does not make a profit. It is common knowledge that for racetracks around the country it is an achievement to break even.

Deputy Ardagh

One would expect that with such large facilities it would start making a few bob.

Mr. Malone

We hope that it will pay its way. We do not, and never did, envisage that it would make large profits or even modest profits. If that was the reality we would have a proposal from a commercial enterprise. We do not envisage this kind of difficulty arising but if it did arise we are legally protected. In essence, if somebody got a rush of blood to the head and decided to sell the event centre we would look for our money back.

Deputy Ardagh

Would the Department get interest on it?

Mr. Malone

Presumably we would. We have ourselves protected in that. If it makes any profits they have to be reinvested in the centre; they cannot be redistributed to directors.

Deputy Ardagh

How many acres are there in the Punchestown complex?

Mr. Malone

There are 500 acres.

Deputy Ardagh

If they were rezoned, given the way Dublin is growing, they could be worth €1 billion and the €14 million repaid to the State would be chickenfeed in that context.

Mr. Malone

As things are currently constructed that cannot be done. It is a trust.

Deputy Ardagh

Surely the members of the trust could benefit from it?

Mr. Malone

I am not sure. My understanding, and I am fairly clear on that, is that the deeds set out the purpose for which the land was given in the first instance. We have a condition in any event that if the property is sold, leased, or its use is altered, the money is repayable so we would get our money back. I am giving the committee my assessment that there is not the remotest possibility of the land being rezoned.

Deputy Ardagh

As I mentioned earlier, it could rightly be said that the emphasis should be on controls rather than outputs and there could be disagreement on that. On page 142 of the report, under the heading Evaluation of Project, the Comptroller and Auditor General stated his concerns about the evaluation of the project as follows:

. . . centred on whether the project had been comprehensively evaluated from a cost benefit viewpoint prior to its approval - in particular if it met the criteria set down in the guidelines issued by the Department of Finance for the evaluation of major capital projects.

Many questions arise there because first of all the guidelines have to be met. I do not know what they are but I am sure that we could find out.

The next paragraph states:

In response to my enquiries the Accounting Officer informed me that the project was considered worthy of support because for many years the Department had been aware of the need for a facility of international standards

Mr. Malone was looking at outputs immediately. The Department wanted this facility and they were looking at outputs immediately. From this, it appears the whole question of the valuation was not taken on board.

Mr. Malone

That is not fair comment.

Deputy Ardagh

I am just asking what the position is here.

Mr. Malone

There was a need for such a facility. That was a strongly held view in the Department; it was also a view held in the wider agricultural community and among the breed societies. It is important that no one has come to us since from the agriculture sector and claimed we should not have gone ahead with this particular project.

In terms of evaluation, this was not a normal proposal that would come from, say, a food processor looking for grant. In that sense, it was slightly more difficult to evaluate outcomes and outputs. It was clear that our objective was a facility of high standards. The issue was how much were we prepared to pay for that. Bearing in mind what I said earlier, there has been no sponsor either before or since. The sponsor who did come forward was prepared to do it if they received a 100% grant. We did have the option of hiring consultants which obviously would cost money.

Consultants would have looked at two aspects of the project - the equestrian aspect and what events could this facility attract. We had a fair idea ourselves from the calendar of equestrian events that happen on an annual basis. The second aspect was farm machinery. There is a farm machinery and trade association and we sounded them out to see if this facility would be used if it were provided. The final aspect was in breed societies using it for exhibitions. They responded yes. This was against the background of the changing role of the RDS grounds, which has been capitalised in property, and the ploughing championships, which is an event that changes location each year.

The choice then was to hire consultants or do the assessment ourselves, which we did. We have knowledge and expertise of this kind of area. We also have in-house expertise in architecture, engineering and people looking at projects. It has been accepted by the Comptroller and Auditor General that there were no questions of the actual management of the project.

Deputy Ardagh

It was exemplary according to the——

Mr. Malone

We had a choice then - no project, the first proposal or the second one.

Deputy Ardagh

In the Dublin south area we have many of these community resource centres. If they want to get a computer and a printer, they have to put together a 20 page proposal with cashflows and repayment schedules. How many pages were in the proposal from the Punchestown exhibition and show centre?

Mr. Malone

There was a covering document of four to five pages. Then, there were a whole series of plans, drawings and all that goes with that.

Deputy Ardagh

As for the financial implications and evaluations, were there manypages?

Mr. Malone

Yes, there was a detailed breakdown of the costings. We have that and we can give it to the committee. It contains the various headings of expenditure and all this was gone through in the finest detail. We also sent out our internal audit unit to check that everything was done properly.

Deputy Rabbitte

Where did the genesis of this idea come from?

Mr. Malone

It came from Punchestown Racecourse. We were approached by Punchestown Racecourse and received a letter from them on 16 November 1999 setting out the proposal.

Deputy Rabbitte

How extensive was that? There was a letter?

Mr. Malone

There was a letter and obviously discussions with Punchestown Racecourse.

Deputy Rabbitte

Was the proposal a letter?

Mr. Malone

Yes, the proposal was a letter from the Punchestown Racecourse. We also——

Deputy Rabbitte

Is the letter on file?

Mr. Malone

Yes, I have it on file.

Deputy Rabbitte

Roughly what does it say?

Mr. Malone

There was a letter to the Minister for Agriculture, Food and Rural Development on 16 November setting out drawings and layout plans for the Punchestown Racecourse development. The letter stated that the drawings had been prepared by Mr. James Twomey Architects. It also stated that the directors of Punchestown Racecourse believed that this was an outstanding opportunity to enhance the appeal and operational capabilities of the site. It continued that the principal element of this development would include the construction of one of the largest indoor complexes in Europe and cater for a wide variety of sporting, equestrian and agricultural events.

Deputy Rabbitte

Mr. Malone spoke of considerable in-house expertise and knowledge of this type of project. The proposal was, therefore, approved?

Mr. Malone

We examined that proposal. The exact date——

Deputy Rabbitte

It was 19 January.

Mr. Malone

On 27 January. However, a letter went from the Minister for Agriculture, Food and Rural Development on 20 January.

Deputy Rabbitte

It was the proposal and those drawings from Mr. James Twomey Architects that were approved?

Mr. Malone

Yes.

Deputy Rabbitte

Why did the Department write to the European Commission on the State aid issue?

Mr. Malone

We did so because it is now normal procedure. There is a concern within the European Commission about State aid generally, with rules and guidelines governing it. We deemed it prudent anyway to get clearance in advance from the Commission and not having a subsequent problem.

Deputy Rabbitte

What difference would it make?

Mr. Malone

If the European Commission said that it contravened the State aid rules, the consequence would be that the grant would not be provided.

Deputy Rabbitte

It was approved on 19 January?

Mr. Malone

Yes, we had given approval in principle. However, that would be the normal sequence of events.

Deputy Rabbitte

Can we go back over the timeline of these events? Mr. Malone might stop me if I am wrong. On 16 November 1999 a proposal was put to the Department - to the then Minister to be precise - by Punchestown Racecourse. A few weeks later on 19 January 2000, the Department recommended approval of the proposal as submitted for €6.9 million. On 20 January, the then Minister for Agriculture, Food and Rural Development contacted the then Minister for Finance. A week later on 27 January, the then Minister for Finance agreed to the proposals. On 6 April, they came back with changes that would have the effect of ratcheting the costs to €12.8 million. On 2 June, the proposal was costed at €12.8 million. On 23 June, it was approved by the then Minister for Agriculture, Food and Rural Development and on 7 July by the then Minister for Finance. Is that correct?

Mr. Malone

All those dates are correct. The only slight adjustment I would make is that the revised proposal in the letter from Punchestown Racecourse was 2 June. The Deputy mentioned 7 April. That was the date we sent a letter to the European Commission.

Deputy Rabbitte

On 6 April, the Department of Agriculture, Food and Rural Development was informed of the proposed changes. Is that correct?

Mr. Malone

Yes.

Deputy Rabbitte

In my experience there are not too many proposals that are moved through the system like that. Is that correct?

Mr. Malone

The proposal was processed quickly.

Deputy Rabbitte

It was processed remarkably quickly. What evaluation could have been carried out between 16 November and the Department's approval on 19 January to then Minister?

Mr. Malone

Much evaluation was done in-house and much can be done in two months.

Deputy Rabbitte

The period between 16 November to 19 January is a short time.

Mr. Malone

Yes, it is roughly two months. One can do much evaluation in that time.

Deputy Rabbitte

The then Minister turned it around the next day to the then Minister for Finance who came back within a week. Was the Department of Finance involved in this?

Mr. Robert Carey

Not in the details. When I went to the public expenditure division 33 years ago, we would have gone through this type of project with a fine toothcomb. We would also have gone through a proposal to purchase a box of pencils with a fine toothcomb. With regard to the policy now, I understand the Minister for Finance will be answering a question on it in the House this afternoon. The policy now is to give Departments far greater autonomy in projects like this. With that responsibility comes accountability. We do not give Departments a blank cheque. We have to be satisfied that there are appropriate and acceptable systems for project analysis, management, risk analysis and so on in place. The Comptroller and Auditor General mentioned that we assist the Departments with guidelines. I understand the Minister for Finance will advert to this this afternoon in the House.

As regards our involvement in a line-by-line assessment or examination of this project, we believe this is a matter for the Departments that have the necessary expertise in this regard. We do satisfy ourselves that they have these systems. I am a member of the Department of Agriculture and Food independent audit committee. In terms of systems such as risk assessment and internal audit, they are setting the standard in the Civil Service. I am sure the Comptroller and Auditor General will agree with this. In accordance with this policy under the strategic management initiative, managers are allowed to manage without the Department of Finance second guessing everything they do. It must also be remembered that the spend this year from the Department of Agriculture and Food will be €1.2 billion. We cannot look over their shoulders every time.

Deputy Rabbitte

Of course. However, I have some familiarity with the Department of Agriculture and Food.

Chairman

Deputy Rabbitte, the Comptroller and Auditor General wishes to speak.

Mr. Purcell

We should bring some clarification to this as it is important if one is trying to get at the facts. The origins of the project were mentioned. In the report, it accurately states that in November 1999, the then Minister for Agriculture, Food and Rural Development received a proposal from the trustees of Punchestown Racecourse and so on. In that letter it does suggest that there had been some activity beforehand on this matter. I can read two sentences that would help in this regard. The letter is from the chief executive of Punchestown Racecourse to the then Minister for Agriculture, Food and Rural Development and copied to the Minister for Finance. It states:

Dear Minister

Following my meeting with your colleague the Minister for Finance, I now have pleasure in providing you with the drawings and layout plans of the Punchestown development which we spoke about on that occasion and which I have been advised to forward for your consideration.

The last line in this letter suggests there were certainly discussions prior to this proposal being made and that it did not come out of the blue. It states:

We are most grateful for the support which the project to date has received from you and your colleagues. We hope that this request will receive your positive consideration.

Kindest regards,

Yours sincerely.

That suggests that this was not the first time the Department had heard of it nor the Department of Finance. We did not see any documents when we were carrying out this audit to show the nature of those prior discussions or the nature of any support which the project had received to date. That might clarify the genesis of the project.

Deputy Rabbitte

So was this agreed by Ministers at the races before Mr. Malone received it?

Mr. Malone

I cannot answer that question. I am not being evasive.

Deputy Rabbitte

Does Mr. Malone have any opinion on it?

Mr. Malone

It is clear that both the Ministers for Agriculture, Food and Rural Development and for Finance were aware of this project. I cannot comment beyond that.

Deputy Rabbitte

Accepting what Mr. Carey said, are there many projects of this size that would be turned around in a week in the Department of Finance?

Mr. Carey

That presupposes that they come to us for approval.

Deputy Rabbitte

This one went to the Department.

Mr. Carey

It did indeed. What we did not do was to second guess the Department of Agriculture, Food and Rural Development. We had given them delegated sanction to proceed with projects like this, as long as we were happy that there were appropriate controls, safeguards and procedures in place. Thirty years ago we would have taken six months to go through this line by line. Departmental policy has changed.

Deputy Rabbitte

It was turned around in a week. There is no evidence on file that anyone in the Department of Finance assessed it.

Mr. Carey

No, there is not. It really was not our business to assess it.

Deputy Rabbitte

So when it doubled——

Mr. Carey

We have transferred and allocated the responsibility for doing that to other Departments. We are allowing them to manage their own projects. When the then Minister for Agriculture, Food and Rural Development, Deputy Walsh, wrote to the then Minister for Finance, Deputy McCreevy, he was looking for a policy agreement that the State would get involved in this project. There was never a suggestion that the Department of Finance would do a root and branch examination of this. The Secretary General of the Department of Finance, Mr. Tom Considine, made this clear in his response to the Comptroller and Auditor General.

Deputy Rabbitte

When it went back to the Department of Finance with the price doubled, did anyone look at then?

Mr. Carey

It went directly to the Minister for Finance. This was Minister-to-Minister correspondence. The Secretary General of the Department of Agriculture and Food, Mr. John Malone, stated that this was a different project. The main considerations of autonomy responsibility and accountability for projects, whether they are replacing earlier projects or whatever, would still rest with the Department concerned. The Department of Finance will not get involved in the detailed assessment.

Deputy Rabbitte

When Mr. Carey says that it was a Minister-to-Minister project, is he saying that it did not come under assessment even on the second occasion from relevant officials within the Department of Finance?

Mr. Carey

No, it did not. There was no need for it because, as I repeat, the responsibility for assessing matters like this is with the line Department. Whether for good or evil, and I think for good, this autonomy, under the strategic management initiative, has been given to Departments. The Department of Finance will give guidelines, and I can let the committee know what those guidelines are, but we will not duplicate their work. We will make an appearance in cases where new schemes are being introduced, where terms of schemes are being changed or where there is going to be an ongoing effect on public finances. A project of this size however is something that the Department of Finance does not want to get involved in because we want to let line Departments manage their own affairs. The trend will continue in that direction.

The capital appraisal guidelines are currently being reviewed. We have asked the Comptroller if he has any thoughts on the matter to let us know, and I extend a similar invitation to the committee.

Deputy Rabbitte

It is perhaps a good thing that it is your responsibility in terms of making fast decisions and getting on with it. Am I to understand that you are saying that this is a great facility and therefore is worth the money, and that we should not be tracing the manner in which the process was handled from conception to delivery? Is that what you are saying?

Mr. Malone

I do not think I am saying that the committee——

Deputy Rabbitte

You are saying that you are satisfied. Your formal statement says that the Department is satisfied.

Mr. Malone

We considered, and I still consider, that there was a need for a facility like this, that it has to be judged in a wider context of the public good. The project was well managed. I accept that the facility is expensive. I do not argue or disagree with that. If the question is, with the benefit of hindsight, whether we made the right decision, I feel we did.

Deputy Rabbitte

The Department of Finance considers the Department of Agriculture and Food the lead Department in this area. I am sure the Department of Finance would permit some of us to differ, but that is neither here nor there. The proposal was put to you in November 1999. That was the year that the health centre in Millbrook Lawns in my constituency burnt down. Nine rooms were destroyed. The centre is still not refurbished. The refurbishment cost is €800,000. The area is hugely populous, with people requiring baby and maternal care, speech and language therapy, social workers and so on. The centre was burned down in November 1999 and we have still not got it rebuilt. What you say in your statement is that "Feedback received to date has been positive and I am satisfied that it will prove a great success over time." That is hardly the way to handle projects in any Department, is it?

You are now saying that we have two different projects, that the one you approved is not the one delivered. Is that right?

Mr. Malone

No. Maybe I could clarify that point. The original project had a cost of €6.9 million. The subsequent proposal went ahead. It was not simply a question of the cost of the project doubling, or costs getting out of control, but that in effect the second proposal was for a different project than the first project.

Deputy Rabbitte

Is that not what I said?

Mr. Malone

Maybe I misunderstood you.

Deputy Rabbitte

Logically, where does that leave us? A proposal is put to the Department. Drawings are submitted by presumably reputable architects, and so on. The project is approved at a cost of €6.9 million. Someone then decides to change the project and comes in with a different one costing twice as much and you say that is fine, you give it the go-ahead and say it will be a marvellous filling of the gap in the infrastructure.

Mr. Malone

We never formally wrote to Punchestown. We had a letter of approval on 27 January from the Minister for Finance, Deputy McCreevy. We never conveyed formal approval to Punchestown for the first proposal, though I am not putting that forward as an argument.

Deputy Rabbitte

It is an intriguing point nonetheless. What do you mean by it?

Mr. Malone

I mean that we had, as you know, got into the process of——

Deputy Rabbitte

Of deciding that the proposal was not suitable and that you would need a different one?

Mr. Malone

No. We had got into the process of liaising with the European Commission on State aids. There is a sequence of events there. Moreover, Punchestown began to re-evaluate the project. As we understand it, they looked at other facilities abroad. I do not see it as a being a matter for criticism that for additional expenditure one could get a wider range of facilities and in effect a better centre. It is fair to say that the Punchestown people changed their minds. There is no question about that.

Deputy Rabbitte

I am intrigued by the comment you made there, Mr. Malone.

Mr. Malone

In case there is any impression that this is a facility for the elite, it is not. The kind of people involved in agricultural events, livestock breeding and three-day eventing are ordinary people.

Deputy Rabbitte

Why do you think it is necessary to make that point?

Mr. Malone

Because the point you made, and I cannot comment on it, about the situation in relation to the health centre——

Deputy Rabbitte

No, no. Maybe the health centre should come within the remit of the Department of Agriculture, but I was not bringing it up from the point of view of the elite versus my constituents. That has nothing to do with it. I am interested in the point that you got approval for a project for €6.9 million but you never communicated that to the proposers of the project. Why?

Mr. Malone

Because we went to the European Commission.

Deputy Rabbitte

The European Commission did not want to change the proposal. You did not go to the European Commission until 26 April.

Mr. Malone

We went there to clarify the position on State aid. We had to do that.

Deputy Rabbitte

How would that affect the kind of centre to be built?

Mr. Malone

The Punchestown developers wrote to us on 6 April indicating that they were thinking of changing it.

Deputy Rabbitte

With respect, Mr. Malone, you may be defending something very difficult and I do not know the background. Please treat me with a little respect as well. How is it that a proposal could be put to you and processed with such speed to finality by the Minister to whom you report and the Minister for Finance, without you conveying that to the proposers? What has Europe to do with that? The State aid issue would have applied whether it was twice the size or half the size.

Mr. Malone

I do not think I am treating you with disrespect. I accept fully that the State aid issue is not about whether it was €6 million or €12 million or €14 million. We would have had to deal with that regardless, and early on in the sequence of events.

We did not formally write to Punchestown. There is no dispute about that. We would have been in contact with Punchestown. Punchestown would have had an idea of what was going on in the sense that there was not a total absence of communication between ourselves and Punchestown between 27 January and 6 or 7 April, when the subsequent letter came from Punchestown. They would have had an idea of what was happening. It is my assessment that the Punchestown developers, when they began to develop the project and make decisions on how to proceed, began to see that from their perspective there was a better way of doing it and that a better facility could be had. There is no great mystery surrounding the fact that we had not sent a formal letter to Punchestown, given that we were dealing with the EC Commission and were having phone discussions with Punchestown.

Deputy Rabbitte

This is important. On the one hand, I do not think that public servants even as eminent and senior as you ought to be subjected to every "i" being dotted and "t" crossed, because if that were so nothing would ever get done. I expressed that view in the Dáil yesterday and the Taoiseach expressed certain views which presumably you read today. Last Thursday your colleague, the Accounting Officer from the Department of Communications, Marine and Natural Resources, came before the committee, when we had an almost identical situation, with the cost of a project doubled, and so on. The previous Thursday we had the Accounting Officer from the Department of Education and Science talking about the Cork School of Music project which started out at an estimated cost of €13.8 million and is now projected at €200 million - not €100 million, as reported in a newspaper.

If it is unfair to expect senior civil servants who have the expertise of which you speak, and the knowledge of a project such as the Punchestown one, it seems fair that if a project is decided on, approved and evaluated, it ought to be delivered roughly as approved, conceived and validated, and roughly on cost. That is not happening and it did not happen in this event. There may be factors here which are entirely outside your control, because the only conclusion one can come to from listening to your answers is that there was tick-tacking going on between whomsoever. Presumably that led to a project entirely different to the one approved. Yet it is difficult to appreciate why you cannot say to Deputy Ardagh why, in terms of the evaluation, no cost benefit analysis was undertaken in the normal way.

There are many questions I would like to ask about this but I am absolutely flummoxed by the fact that on page 144 of the report, the Comptroller and Auditor General states:

My concern is in relation to the agreement centred on the fact that the conditions governing the State's financial support were covered only by an exchange of letters [That strikes me as unusual, Mr. Malone and the follow-up is extraordinary] and had not been referred to the Department's legal advisers.

I would have thought that if you wanted to make do with a simple exchange of letters, someone would have taken the precaution of going down the corridor to the legal adviser. That person might say to the adviser something like "This project is not being put through the Attorney General's office. It is a badly needed project to fill a gap in the infrastructure. There is a lot of money currently around and we need to replace the RDS. Would you look at this letter before it goes out?"

Is that an unreasonable issue for a member of the Public Accounts Committee to raise?

Mr. Malone

In the letter we sent to Punchestown there were 17 different conditions. It would be the format we use to assist projects in other areas. This would be the fairly standard approach that we would take. We feel that such a letter provides adequate protection for the Department and, more importantly, for the taxpayer. Generally we look for legal advice if we think we have a legal problem. We genuinely did not think we had a legal problem in this particular situation.

We have acknowledged the point raised by the Comptroller and Auditor General and submitted the issue to our legal unit. A new more formal legal agreement will be prepared. There is no problem with the Punchestown developers. They have not said they have any problem or that they contest any of the conditions.

Deputy Rabbitte

Why should they?

Mr. Malone

The issue relates to how far one goes.

Deputy Rabbitte

We know who Santa is. In this case, Santa is the taxpayer. We do not yet know who the cowboys are. There is no reason the Punchestown developers would raise the issue.

Mr. Malone

The point relates to them contesting any of the points or believing that they could not adhere to any of the conditions. That is where difficulties arise. We have not run into any problems of that kind. This project has gone smoothly. I accept the argument on costs, but there are no problems with the project itself or any arguments with the management in Punchestown. We will face up to the issue of producing a clearer and more exact legal agreement.

Deputy Rabbitte

In terms of projects initiated within or approved by the public sector or whatever, you told us about the knowledge reposed in the Department in respect of Punchestown and everything that surrounds that. You said that between 16 November, when you got the proposal which we now know was being discussed with and between whomsoever before that date, and the date on which it was approved by your Minister, on 20 January, you carried out your own assessment of the project, and so on, sufficient to satisfy you that it ought to be approved. Why were the deficiencies and unsuitability of the proposal not encountered during that period of assessment rather than subsequently?

Mr. Malone

It was not a question of deficiencies or unsuitability but a question of choice. The first proposal in effect offered an equestrian centre that could accommodate large and important equestrian events. However, because of the way the centre would be constructed, it would limit the range of options, such as machinery exhibits.

Deputy Rabbitte

Why did that not present in the assessment from November to January?

Mr. Malone

That was the choice we had. That was what one would get for €6.9 million. If one wanted to spend over €12 million, or whatever the figure is, one could go for the broader proposal.

Deputy Rabbitte

If one wanted, one could carry on and put a roof over it. That is not the point. The proposal was put to you. You say that drawings were presented and so on, that it was assessed and that you had the expertise and the knowledge sufficient to enable you to tell your Minister that you were recommending approval of the project. Why did it unravel after that? At whose instigation?

Mr. Malone

At Punchestown's instigation.

Deputy Rabbitte

They were the authors of the original proposal.

Mr. Malone

They were the authors of both proposals. Apparently they looked at facilities in different parts of Europe, saw that there were other options, and came back with a second proposal which was more expensive but which was different.

Deputy Rabbitte

Did they go to Europe only after they heard on the grapevine that the first proposal had been approved?

Mr. Malone

I cannot answer for Punchestown, but I understand that they began to look at similar facilities in different parts of Europe. They formed the view that there was a better and, I accept, a more expensive way.

Deputy Rabbitte

Were you involved in the exchange of letters with the Ministers?

Mr. Malone

In the sense of my name being on the Minister's letter?

Deputy Rabbitte

Did you draft it for the Minister?

Mr. Malone

The letter was drafted in the Department. The proposal was processed in the Department. It went through the various channels. I saw the letter, if that is what you are asking, before the Minister signed it.

Deputy Noonan

You said that in such projects the Department of Agriculture, Food and Rural Development was allowed to proceed with autonomy. Does that mean that there was really no evaluation of the merits or demerits of the proposal undertaken by the Department of Finance?

Mr. Carey

That is what I said, Deputy.

Deputy Noonan

Perhaps Mr. Malone might tell us, following from that, what similar projects his Department proceeded with autonomously and without consultation or evaluation by the Department of Finance.

Mr. Malone

Perhaps I might explain the background. Normally, in individual Departments, there are budget lines and specific schemes. The Department of Agriculture and Food does not fund very many capital projects, but it does so in the food industry, for example. We give grant assistance to individual projects. Normally we do not submit those projects to the Department of Finance at all.

Deputy Noonan

I understand all that. There is no need to say that.

Mr. Malone

The project in question was a one off. We do not get too many projects of that kind.

Deputy Noonan

That was my understanding. However, the Department of Finance's explanation for the lack of evaluation offered here was that you could act autonomously to proceed with such projects, which suggests that, because of your expertise in assessing them, there was no need for the Department of Finance to second guess you. Now you tell me that it was a one-off and that you never had any experience of assessing such projects previously. Is that right?

Mr. Malone

I said that we do not have too many projects of that kind. I will give an example related to the horse industry. We have funded several centres for wandering horses in inner Dublin.

Deputy Noonan

What was the capital cost of the most expensive wandering horse facility in inner Dublin?

Mr. Malone

It would be less. In total I believe that we have spent about £4 million. The highest capital cost was £3.3 million. Such situations arise, and one must deal with them as best one can. Individual one-off projects arrive and one forms an assessment. We sought a policy decision from the Department of Finance. Regarding the assessment and evaluation of the project, we must take responsibility. I do not deny that.

Deputy Noonan

When you replied to Deputy Rabbitte about the project's genesis, you rested that on the letter of 27 November. Then the Comptroller and Auditor General intervened to indicate that the genesis might have preceded that. You might go back over that ground.

Mr. Malone

I was asked from whom the project had come, which was Punchestown. I was asked when it had arrived at the Department, which was 16 November. It is clear from the letter that there had been discussions involving Ministers, but I did not take part. As far as we are concerned, we got a proposal on 16 November and had to deal with it.

Deputy Noonan

Is it not clear from the letter that there had been meetings between Ministers and the people at Punchestown previously?

Mr. Malone

Yes. There were contacts, though I cannot say if there were meetings.

Deputy Noonan

There was no departmental presence at any of those.

Mr. Malone

No.

Deputy Noonan

Would you be surprised if I said that I find the whole thing surreal and almost incredible?

Mr. Malone

Yes. We have a facility which is of high quality. It will stand the test of time. Initially we had a choice of not providing any funding. Essentially the alternative was to reject the proposal and say we were not getting involved. It was clear that one would have to provide 100% funding since no sponsor would come forward with his or her own money. That was the choice that we made. I accept that there is an element of risk, just as there is with any project. We are still in the early days, but we have no reason to believe that the facility will not work. Over time it will prove its value. I am anxious to emphasise that it must be seen in the context of a facility for the wider agricultural industry. It must be there to help the sport horse, livestock and wider agricultural industries. The RDS goes back a long time. Essentially it is in many ways a voluntary facility, and unfortunately those days are gone. I do not think anyone would have provided a facility as a charitable trust in a pro bono context.

Deputy Noonan

That is not why I am incredulous. My incredulity arises from my experience as a Deputy and former Minister. I have never seen a project proceeding in such a way through a Department. I have never seen one from which the officials in the Department of Finance stood back in such a manner. We are not discussing the policy here but the procedures, particularly the evaluation conducted by you in the Department of Agriculture and Food and the Department of Finance. There was none in the Department of Finance, and the speed at which the project moved in the Department of Agriculture and Food is, quite frankly, amazing.

Our experience as active politicians at ministerial and constituency level is not squaring up with what happened in this case. If the ceiling in a Mungret school falls down on top of children in the summer, it needs a national row in the media to make it safe before the children go back in September. That experience is replicated in extraordinarily bad conditions in primary schools all over the country. We cannot get a handful of extra gardaí on the streets to protect the citizens of my city. The first-time buyers grants has been abolished. There is chaos in accident and emergency departments in hospitals, yet the Department of Agriculture and Food can evaluate a project costing almost £6 million over Christmas and say is it grand and necessary for the national interest. Then, before it has even issued a letter of sanction, the proposers are back again, and the thing runs so rapidly that, within about a fortnight in the summer, sanction is given by the Department of Finance to double that expenditure. As a practising politician, I find that process so different from my experience that none of your explanations to date really satisfies me.

The question is whether there is another story. Was the decision taken at ministerial level? Did the Minister for Finance, being a Kildare man, have a strong personal interest? Did he think that it was a very good facility - which is probably true? You conducted only a cursory evaluation because you were following political instructions. Ministers are entitled to make policy decisions. That is why they are there. However, if that was the case, I would prefer you, and the Department of Finance, to say so. You got instruction from the Ministers, who had preliminary talks and thought it an excellent facility. They had second thoughts half way through and thought that a better facility could be provided, so they told you to give them the money, since they thought it was a good project that should be got through fast.

If that is the situation, we understand it, once again from our experience as politicians. In another forum, we can examine the policy and see if it was justified public expenditure and value for money. It is like watching one of the Monty Python sketches on the public service. With all due respect, I must say to both Departments that there is a different reality of which we are all aware. I do not know whether you wish to comment on that but it seems to me that, as Accounting Officer, if the decision was primarily political and you were instructed to do the normal thing - provide the money, issue the letters, ensure that everything was legally sound and attach the normal conditions - you went ahead and did it.

Mr. Malone

In fairness, I do not think I can get into the political aspect.

Chairman

I know that it affects you if you go into policy aspects.

Deputy Noonan

I am not asking him to do that.

Mr. Malone

I cannot get into the political realm.

Deputy Noonan

I am not asking you to do so.

Mr. Malone

It is clear that Ministers had an interest in the project. I accept responsibility for my role as Accounting Officer in the processing of the proposal, the procedures followed and its value for money. There was a view, which I hold personally, that there was a need for a facility of that kind. I have held that view for a long time and I make no secret of it. I am not alone in that in the Department and people in the wider agricultural world would also accept that. There was a predisposition in the Department towards that proposal in the sense that we felt, and still feel, it was something that the wider agricultural industry needed.

Second, regarding the consideration of the proposal, we had the option of sending for consultants, but, as I said, they would have cost money. In the main, the consultants would have been talking to people in the Department and the wider agricultural world to whom we were capable of talking ourselves. I do not deny that the proposal was processed quickly. On the argument about whether one can have proper consideration of a proposal in two months, I believe that one can if one goes about it properly and has sufficient background knowledge.

We were essentially left with the choice of accepting or rejecting the proposal. Someone else putting in funding or coming forward with an alternative proposal was not an option. It was simply not there. Our choice was between accepting or rejecting the proposal. I can understand the points made about difficulties in other areas and what €12 million or €14 million would do in education, health or security, but I am responsible for the Department of Agriculture and Food. We spend a great deal of money and take our responsibilities seriously regarding accountability and controls. I cannot add more than that. I cannot say whether Ministers were predisposed to the proposal. It was approved quickly and we proceeded. The facility is there, and in my view it is a good one and will stand the test of time. There would be a bigger problem if the project had gone wrong or if it were a white elephant, something we do not have.

Deputy Noonan

Did you investigate the financial state of Punchestown before your authorisation?

Mr. Malone

We were aware of its financial state since, at that time, we were responsible for horse racing. It was not an issue in the sense that it was a stand alone proposal. The nature of racecourses and the racing industry generally is that they do not generate huge profits. Broadly speaking, they break even. We were aware of the financial situation in Punchestown.

Deputy Noonan

How would you describe it?

Mr. Malone

It is difficult. For the past two years I believe it has made a modest profit. I repeat the point that both the racing facility for which we are no longer responsible and the events centre will probably break even.

Deputy Noonan

At the time of your evaluation and before, was it not true that the financial situation at Punchestown was very serious?

Mr. Malone

That was subsequent. There were internal difficulties in Punchestown. I cannot answer for the people there, but it is common knowledge.

Deputy Noonan

I was suggesting that the Punchestown decision to go for an international facility of that magnitude was partly motivated by a desire to make the whole enterprise solvent. There was an issue regarding putting such a facility in to invest, diversify and make the project solvent. Did that appear anywhere in the proposals?

Mr. Malone

No, I do not think so. It is clear that racecourses that operate as stand alone facilities find the going difficult. That is common knowledge, and there are many racecourses around the country that diversify into other facilities or get ancillary facilities going. The project was not put in place to resolve the financial difficulties of Punchestown. It was a stand alone project. As far as I know, the difficulties in Punchestown became evident some time later. New structures have been put in place and our information is that the racing end of the activity is now generating a modest profit.

Deputy Noonan

The notification to Europe was in the spring of 2000. Did that arise from the fact that you knew at that point that Punchestown would be involved in non-core activity, meaning that competitive issues would arise with the local hotel and catering industry?

Mr. Malone

No. That would be normal procedure where one is giving a 100% State grant. We would do that regardless to check with the State aids.

Deputy Noonan

What is the current breakdown between core activity and non-core activity in the centre?

Mr. Malone

Much of the non-core activity does not go near the events centre at all, for example, the music concerts. The events centre is not suitable for them. There are some exhibitions that are not related to agriculture. In terms of the number of events it is probably 50-50, but as regards their relative importance, the equestrian and endurance championship would be the biggest by far, other than the national hunt festival that takes place in Punchestown.

Deputy Noonan

In your introductory remarks you agreed a facility was needed to represent the industry, both nationally and internationally and in addition to attract both national and international agricultural events here. What events would correspond to that objective?

Mr. Malone

The European eventing championships is a huge event, with well over 100 competitors and all that goes with it. It is the biggest equestrian event in Europe. That was held here in September. The farm machinery sector could not operate without a facility such as this. It is debatable whether events such as those staged by the pony clubs could, but definitely the facility is of use and we would hope, over time the whole area of livestock breeding can be accommodated. These events move around every three or four years and we feel, down the line, some of these could come to Punchestown.

Deputy McGuinness

First, I am not going to address the political side of this and policy. The committee deals with everything other than policy and I respect the fact that politicians, Ministers and backbenchers, either push or change individual projects. That is a reality and can be dealt with in a different forum. As regards the Department of Finance and the confirmation that each Department is now allowed to make the assessment and empowered to go ahead, on new grounds, when was that introduced and is every Department now acting in that way? Has an assessment of each Department been carried out to ensure the structures, the personnel - and the professionalism in terms of qualifications and people - are in place to do the type of assessment allowed? I ask because every Thursday in this House that would not appear to be the case. Every week it is the same story from all the Departments that have been before us. There are millions in the difference, it is not nickels and dimes any more. It is a colossal figure. Individual Departments appear to lack the ability to deal with the policy the Department of Finance has passed on. As regards this specific issue, it refers here to discussions with the Minister in 1999. While we have been referring to €6.49 million up to now, and that figure moving upwards, the figure on page 141 is €3.17 million. We are actually dealing with €3.17 million upwards. It would appear that in the movement upwards there is a reduction in the area of the centre from 10,000 square metres to 7,500 square metres. It therefore became more costly for a smaller area in terms of that particular building and some increased costs elsewhere. To take the other end of the scale, a community making an application to any other Department has to append a raft of documents to it - legal documents, project plans, a business proposal and in some cases a marketing analysis in relation to the demand for money from the Department. That raft of documents would be different, I imagine, if it was for a €3.17 million proposal compared to one with an overall spend of €14.8 million. What documents were there, beyond a letter and the plan submitted to support a request for Punchestown to move from €3.17 million to €12.8 million and €14.8 million? What changes were in the documents to support that? Is there a business plan? Was there a marketing analysis? I do not want to hear that it is believed to be a viable project or that it is a fine building. I want to know what was examined and what led to the decision that this was a fine project - in the context of the procedures that would normally be followed by every other Department in respect of even the smallest amount of money. For example, I have seen documentation nearly one foot in depth that was sent to the Department of Finance for consideration in respect of a child care project for €80,000. It would seem from the answers Mr. Malone has given up to now that that is not how he has conducted his analysis in this case.

Mr. Malone

There are a number of questions. First, as regards the events centre and the change in the costs from €3.17 million to €6.48 million, the difference was that the new proposal is what is called a single span event centre. There are no supporting pillars and that substantially increased the cost. The advantage of that particular type of structure is that it gives the centre more mobility internally. That is probably the big change that took place. Second, as regards the stables, there were additional car parking and other facilities. As you know, 147 new stables were provided. That was a good decision. The stables are there for the benefit of the supporting staff, the people who work in these events minding the animals. Health and safety is now an important issue. It was decided that road access had to be improved and that a single entrance was better than a double entrance. The entrance would be used by the event centre and also by the racecourse. There is a whole series——

Deputy McGuinness

As regards the changes taking place, would Mr. Malone not think that anyone with a passion for delivering the centre, who understood this type of business, would clearly know what was required in respect of health and safety and other issues, the bedding of animals, the presentation of the exhibition centre, generally, and so on as well as the supporting businesses? They would understand that and have it in the application for funding from day one. That is what he would be looking for. It would be driven by Punchestown which would have supplied the information. The point I am making is that it moved from €3.17 million to the €14.8 million. Surely if a €14.8 million project was being planned in the beginning, the documentation and requirements would have been substantially different. Who was driving the change in this? Was it the Department, because Mr. Malone said earlier the expertise was there, or was it Punchestown? Which was it?

Mr. Malone

The short answer is Punchestown. First, to clarify one point, the figure went from €6.9 million to €12.7 million. There was an additional €1.5 million all right, but it is from not €3.1 million to €12.7 million. It is €6.9 million.

Deputy McGuinness

I have to disagree. The €3.17 million is where it started from.

Mr. Malone

No, the original proposal was €6.92 million. It went from €3.17 million to €6.4 million for the actual event centre.

Deputy McGuinness

The point I am making is that Punchestown was considering a project of around €3.17 million.

Mr. Malone

Initially yes.

Deputy McGuinness

Yes, that is a fact. The €3.17 million had to come from somewhere. Punchestown was considering a project of around €3.17 million. That is from where it started.

Chairman

Mr. Purcell may be able to clarify the position.

Mr. Purcell

That is not true. It was an element. Clearly the main element of the project was a new exhibition and events centre. That is very important and indeed the key element of the development was originally envisaged to cost €3.17 million. However, the new design for this particular key element of the development brought it to €6.48 million. The total project did not simply consist of sticking an event centre there. Roads and stables had to be put in to support the centre's activity, and also a new entrance complex.

Deputy McGuinness

I understand that but I am trying to explore how well thought out the project was at that time. It must not have been that well thought out. I will ask a direct question: is there a comprehensive business plan attached to this application which deals with how the project was going to be delivered, regardless of price, and how it would stand up, after delivery, leading to profitability? The people involved are not doing it for charity or just to break even. They have a proper corporate structure, so they would seek to cover themselves and move on. Is there a business plan on file from Punchestown outlining all they wanted to do?

Mr. Carey

I just want to respond to the question addressed by the Deputy to the Department of Finance about when this business of delegation came in. It came in with the strategic management initiative, SMI, in the late 1990s. I do not like to steal the Minister's thunder because he will be talking about this in response to PQs, but it is current policy to give the greatest degree possible of delegation, autonomy, responsibility and accountability to all the Departments. I do not know what other Departments who come before the committee, say in that regard. I am just saying that is Department of Finance policy.

Deputy McGuinness

The other part of that question, now that it is being dealt with, was whether each Department had been examined in the context of its structures and ability to deal with all of the issues now arising - and that continue to arise here every Thursday.

Mr. Carey

I can only speak about the Department of Agriculture and Food, the one with which I deal. I mentioned earlier that as a member of the audit committee of the Department, I am absolutely convinced that it has a state of the art system of project appraisal, management, risk analysis and internal audit. I am not saying every Department has a system up and running to the same degree as the Department of Agriculture and Food, but this is an ongoing process notably in response to the report Sean Cromien did in 1999. Departments are introducing all of these exigencies.

Deputy McGuinness

Was that state of the art analysis and so on applied in this case?

Mr. Carey

That was 1999. This is 2003. Yes I am satisfied. I am not saying what is state of the art.

Deputy McGuinness

Is this the type of procedure we can expect from here on?

Mr. Carey

That was in 1999. What I am saying is that the state of the art system existed in 2003. In 1999 I was not there and when this particular project arose was outside the country. I have no doubt but that it was comprehensively and satisfactorily analysed in the Department of Agriculture and Food. Probably the only reason they actually came to us with that particular project, given what I said about the system of delegation, was first, they wanted a policy a decision on whether the State should be 100% involved and second, more technically because it was a new service, they needed our approval for a new subhead. That is why they came to us.

Deputy McGuinness

Is Mr. Carey happy with the procedure and - I will ask again - is this what we can expect from now on - that there will be a fast tracking of projects like this with a turnaround time that was available to the parties here and that each Department now has the ability to do this? That is wonderful.

Mr. Carey

No. First, the question that relates specifically to this project is for the Accounting Officer to answer. His Department managed to turn this particular project around in what might be thought to be an excessively short time. I am not saying that the process of delegation and the transfer of autonomy, responsibility and accountability is per se going to result in a whole series of projects being turned around. I do not know. It will be up to the Departments given this delegation to apply it as they see fit.

Mr. Malone

Just to clarify, as regards the various headings of expenditure - and there are quite a number of them - we got detailed documentation from Punchestown as regards all of them. The project came in on budget. As I said earlier, the proposal changed, but it came in on budget. The November project and the June 2000 project were in essence two different projects.

Deputy McGuinness

Regarding the business plan and the necessary explanation and projections, can that be clarified? That is all I want to know.

Mr. Malone

I am sorry. I was coming to that point. As regards this particular project, it was not a normal undertaking. The Deputy said not to say it but I have to: this was not a normal capital project. This was a public good project. The Deputy said a proposal would have to be made that would generate profit. If this was a profit making enterprise, then some private entrepreneur would have come forward. No private entrepreneur——

Deputy McGuinness

I did not say that. I said one would have to seek to break even. Otherwise it will be a burden on the State forever. It says here that the level of State support sought is not indicated - the first paragraph of the initial proposal. When did it emerge or who asked whom for the 100% State support? I am not getting the explanation I should get as regards the question I am asking about the business proposal, regardless of whether it was a public good proposal. I have seen public good proposals come into different Departments and they have to be accompanied by the proper back-up documentation, which almost always in a case like this comprises a marketing strategy or analysis of what the market demands and a business plan that deals not only with the costs but the projections as to how it will be managed. Otherwise it is an inadequate proposal that requires further information. Mr. Malone should not address the building or how it is going to work in the future. I want to know from a procedural point of view about those two pieces of information. Are they there, did someone examine them and from where did the request for the 100% State funding come?

Mr. Malone

The request for 100% funding came from Punchestown. It was our understanding from day one that it required 100% funding. Had there not been 100% funding the proposal would not have gone ahead. As regards the second point, we did not have a business plan per se.

Chairman

You had no business plan?

Mr. Malone

No. To clarify, this is a project, as I said earlier, that at best will break even. The State was providing the facility. It is up to Punchestown to run it and manage it.

Deputy McGuinness

Who said it would break even? What figures were there to prove it would break even? The second part of that question was whether there was a marketing plan as distinct from the business plan available. Did someone just say it was going to break even? I am interested to know how it could be accepted by the Department that it would break even or might lose some money or that it was there or thereabouts. What figures were there to support that? What projections or marketing plan was there to support it? We now learn that there was no business plan for a project costing €14.8 million.

Mr. Malone

A sum of €14.8 million was in place to provide the facility. Punchestown provided the site and the management as well as running the facility. We had projections of the likely events.

Deputy McGuinness

I know other members of the committee wish to ask questions but I am baffled and amazed by what you have told me because the most lowly of projects that are beneficial to the community and are offering sites are required to provide the kind of documentation I am asking you about. You are telling me there is no marketing strategy or business plan. With that in mind, you answered earlier that you did not seek legal advice because there was not a problem, but if I was getting €14.8 million from you, John Wayne or no John Wayne, I would be quite happy. You would not have a problem with me. The legal advice should be sought on the basis of problems emerging, that is what people do. If I am leasing a building to a client who seems nice, that is fine, but that is not the way business is done. It is done on the basis of worst case scenario for putting the lease or anything else in place. The worst case scenario here is what legal advice did you seek that confirmed that you could proceed with just the conditions? What legal advice is there that indicates that, even when you go back to Punchestown perhaps with more rigorous conditions? This is a partnership with you supplying €14.8 million on behalf of the State. What protection can now be put in place and what difficulties might emerge from that?

Mr. Malone

We are revisiting the legal aspect. We do not think we have a problem with Punchestown. I am absolutely certain that we do not.

Deputy McGuinness

It depends on what conditions you attached to it.

Deputy Connaughton

After three hours it is difficult to bring in any new material. There are a few things that occurred to me as I sat listening to this, although it has nothing to do with the discussion here. The actual project is fundamentally good in that it will benefit the agricultural community to a certain degree.

I have major problems because of the committee I sit on and our constitutional role of achieving value for money. Like Deputy Noonan, I have also been looking at these things for a long time. The speed at which this happened was almost indecent in its haste. In the context of a few weeks ago, we were here arguing for two hours with Teagasc and the Department of Agriculture and Food because they were not able to keep open a small advisory farm in Ballinamore, County Leitrim, as a result of the cutbacks this Government has made in the poorest areas of the country, and remember that we are talking about €14 million. These were cutbacks inflicted by the Department of Finance on the Department of Agriculture and Food which worked their way down to Teagasc. The same thing happened at the Knockbeg sheep centre in Carlow. A large part of the farming community, looking at the priorities demonstrated here, will find it hard to understand why €14 million was so readily available at the drop of a hat for what will admittedly be a useful facility, but is it more or less useful than many of the other projects that had to be axed?

There seems to be a common denominator in the genesis of this, two Ministers and a racecourse, and Ministers who, rightly, have an interest in horse racing and even before it came to the Accounting Officer or the Department, it appears it was a done deal because this appeared to two Ministers to be a good thing. I do not know for whom it was a good thing but that is the way it appears to us after listening to the evidence for three or four hours.

In the circumstances, even though this centre will be useful on the equestrian side which is where it will make its name, most people understand that we have a national ploughing association which was so successful in the display and demonstration of machinery that it took machines out of the Spring Show in Dublin. The people who had machines to demonstrate wanted to do it in a practical way and in a practical forum where the buyers were likely to be able to test it in the middle of a big green field and not inside a building in the heart of Dublin. I cannot see any swing back in this regard in the future, even though Punchestown is ideally located, but as far as machinery is concerned, I cannot understand why most of the exhibitors at the national ploughing championships are prepared to pay very high rates to have their machines demonstrated there if they can get cheaper rates at Punchestown. It is only a technical question and I have no idea what the answer is, but perhaps the Punchestown complex is much cheaper for exhibitors and that is why some of them are using it.

One of the great success stories of the last five years has been the Tullamore show. That has really replaced the Spring Show in the sense that all the breeding societies go there. I was there myself and it is a sight to see compared with any show in Europe, all the more remarkable in that it has sprung up in the midst of County Offaly. The witness should bear in mind that unless the equestrian side of the business is going to expand, and I hope that it does as there is a huge future for it, the complex at Punchestown will hopefully not have to depend on machinery or livestock to a great degree in the future as it will not be able to compete, unless there is an alternative avenue that I cannot see. From this committee's point of view, we can only hope that there will be other projects that have good and genuine social and economic reasons which will allow them to be fast tracked to the same degree as this in all Departments. I have been on this committee for a year and there has not been a single Thursday we do not find great flaws in the budgetary controls and mechanisms with which we are presented. We know that we are not living in an ideal world and that these things will happen, but they are happening every Thursday. I hope that the next time there are projects that should be fast tracked, this will be seen as a precedent because, in our experience, this project has been progressed extraordinarily fast.

Mr. Malone

As regards Teagasc, its budget was not reduced, it was increased.

Deputy Connaughton

Ballinamore was axed.

Mr. Malone

Yes, decisions have to be made, but I am making the point and life moves on. In fact, Teagasc got fairly considerable grant assistance for capital expenditure over the past number of years.

Deputy Connaughton

Nothing compared to what it actually wanted to run its——

Mr. Malone

It got substantial capital expenditure and its educational facilities, for example, have been substantially geared up right across the country. I accept the point about the equestian side. The argument is about the machinery and the success of the ploughing championships has centred very much on the machinery exhibits. Also, at that time of the year, there is a big social dimension to it. There is an issue about the ploughing championships reaching the limit in terms of size and numbers. We consulted the machinery people who said they would use the Punchestown facility, which they have done and will continue to do. In respect of livestock, the Deputy is quite right about Tullamore and the change in the RDS and the old Spring Show, but if one is going to have a serious international event it has to be reasonably close to Dublin and reasonably near airports, which is the strength of Punchestown.

Deputy Curran

To start with the Department of Finance, effectively you are saying that with the exception of creating a subhead, the Department of Finance has no other role in this project. Am I right in summarising it like that?

Mr. Carey

In this particular project?

Deputy Curran

Yes.

Mr. Carey

No. What I said was that, on the one hand, there was a policy element, the Minister for Agriculture and Food was seeking agreement on the policy of State aid for this project and also on the public good of the 100% financing and, on the other hand, there was a technical requirement that this was a new service which required a new subhead that could not be paid for out of any existing subhead and if we had allowed that, the Comptroller and Auditor General would have been after us.

Deputy Curran

So the subhead was one aspect——

Mr. Carey

A technical aspect.

Deputy Curran

——and the other aspect was the policy issue.

Mr. Carey

Yes.

Deputy Curran

Just so I understand this, was the policy issue to be addressed? Could the Department either give a grant, or a grant for this specific project as opposed to——

Mr. Carey

As what?

Deputy Curran

That is what I am asking. What was the question of policy that was raised?

Mr. Carey

The question was whether the State should assist this project which had been submitted by the Minister and, in the light of the public good element, should the State assist to 100%. That was the basic policy element and the Accounting Officer also said that earlier.

Deputy Curran

Just for my own information, how did the Department of Finance make that policy decision? What were the criteria used to make that decision?

Mr. Carey

Sorry, I do not make policy decisions.

Deputy Curran

No, I am not asking you to.

Mr. Carey

The Minister makes policy decisions.

Deputy Curran

So the Minister decided? Fine.

Going back to agriculture for a moment Mr. Malone. In your opening statement you said that both you and the Department had identified, for a number of years, the need for a facility such as this. I suppose the purpose of this committee is to look at value for money in procedures and so forth, but it begs the question, looking back on it, did you do anything about trying to find a venue or advertise for a partnership? Punchestown made the advance and the opportunity was afforded to them but would other players who had venues have been aware of it and could they have made submissions, or was it restricted to Punchestown only?

Mr. Malone

No, it was not restricted to Punchestown. The reality is that no concrete proposal came forward.

Deputy Curran

Did you advertise?

Mr. Malone

We did not advertise. Over the years there had been one or two informal discussions with other centres but none of them came forward. The reality is that when one looks around the country where are the options? Where is there a facility with good access——

Chairman

Millstreet.

Mr. Malone

Millstreet is a different event, and actually Millstreet is a different type of facility. Millstreet actually got grant assistance, but Millstreet actually does not fit the bill here.

Deputy Curran

I do not want to look at individuals, I just want to know whether other venues were afforded an opportunity.

Mr. Malone

It did not arise. Punchestown came forward; nobody else came forward.

Deputy Curran

From one of the practical questions, just looking at the report, when did Punchestown get planning permission?

Mr. Malone

As far as I am aware, Punchestown got planning permission. Just to be clear, this was subject to planning permission.

Deputy Curran

Yes, I appreciate that.

Mr. Malone

We will get the date for you. I think it was towards the end of 2000 or early in 2001.

Deputy Curran

So they moved fairly quickly on it.

Mr. Malone

They moved fairly quickly and they had to get planning permission; there were requirements set by Kildare County Council.

Deputy Curran

The end of 2000?

Mr. Malone

It is possibly even 2001, I suspect.

Deputy Curran

The reason for my questioning this is that as a result of getting planning permission the cost to the Department went up by €1.5 million to comply with various conditions. What were those conditions specifically?

Mr. Malone

Two items were that Kildare County Council insisted on additional car parking facilties and also insisted on a sewage treatment plant. Those two had to be provided as a condition of the planning permission.

Deputy Curran

So that was the additional cost? Just one or two more quick questions. In respect of the agreement, I have never seen a grant like this from the Department, but I am aware of other grants. As I am a Dublin based Deputy the most common grant we see is the sports grants. One of the things I am aware of with the GAA and other clubs which get grants is that there is a fair degree of legal requirement, as in title to the land and so forth. Clubs engage solicitors and I am surprised in this instance that you were able to complete the whole agreement without involving any legal professionals, without even being involved in a complex contract. It is not the way I would have observed sports capital grants going to clubs and so forth. Would you like to comment on that?

Mr. Malone

Yes. As I said earlier, we are going to revisit that particular aspect. The points made by the Comptroller and Auditor General have been taken on board. We use the same process that we use in giving grants in the food industry and that is the normal way of proceeding. We did have sight of deeds of title and legal documents and the background to the process. We knew when we were dealing with it that we had all of that, but we take the point and we are going to address that.

Deputy Curran

Finally, I listened to Deputy Connaughton and Deputy McGuinness and I also find it extraordinary in many ways that while you saw the necessity for the project and provided the capital, there was no business plan, or if there was, we are certainly not seeing it. Without that business plan I would have felt that giving the grant was a high risk manoeuvre as it was in danger of becoming a white elephant or unusable, or Punchestown acquiring such a level of debt that they would not be able to continue in business. For the life of me I find it very hard to understand how the project advanced without that business plan. With any grant application this is a basic requirement. You have already said that there was no business plan so there is no question as such, but I find it surprising that the whole process was undertaken without that business plan.

Deputy Boyle

I know we have been here for a while and I will try to be brief. I too find it hard to come to terms with the concept of a lack of applications being received when they were not sought. I will have the pleasure of listening to the Minister for Finance in a few minutes when he tries to explain that concept to me. This concept of having new projects born in the middle of a process is disturbing. There is an idea that cost over-runs will disappear because the first project did not come into being. Then the second project emerges and costs twice as much as the original project. I do not wish that to become a legal principle, otherwise this committee will be out of business.

I question the changeover between the first and the second proposals. Was there any other external process? The first proposal came about because of the meeting with the Minister for Finance and the letter from the Minister to the Department. Was there a subsequent meeting with, or letter from, the Minister for Finance concerning the second proposal?

Mr. Malone

Not that I am aware of. I have never seen one. We engaged with Punchestown and they came forward with the second proposal. The second proposal came directly into the Department. It was not addressed to the Minister for Finance; it was addressed to an official.

Deputy Boyle

Subsequent to the first letter, was any other correspondence received from the Minister for Finance himself or from any other public representative about this project?

Mr. Malone

No.

Deputy Boyle

On the question of inclusivity and the fact this will be of benefit to the population in general, the fact that the Kildare Hunt is involved is something that would exclude a lot of people. I have qualms about public money being given to such an organisation, given its other activities. I assume that was not part of the analysis done about the potential usage of this facility.

My question on the strategic management initiative is probably better directed to the Department of Finance. I generally welcome this degree of autonomy within the Civil Service. If a project such as this comes into being, what limitations are placed on it? Is there a factor after which warning bells are set off and the Department of Finance feels the need to intervene? If a project was £2 million and ends up being £500 million is there a process where the Department of Finance feels the need to come in? Is there a cash limitation on any independent decision that can be made within each Department?

Mr. Carey

On the public expenditure division side we, that is, the Government, the Dáil, the Oireachtas, allocates a certain amount of money to each Minister and each Department under various subheads. A Department which engages under the delegated authority in a project may return to the Department of Finance because something has gone wrong, or they seek advice - the Department is always available to give them advice - and that is a matter for them. The guidelines which are issued by the Department of Finance to Departments exist for their benefit. If they need any assistance in the interpretation of these guidelines or any other advice on whether they are in accord with these guidelines, of course the Department of Finance is there to helpthem.

As to whether we look over their shoulders to see if they have over-run, Departments have to send in a monthly return of expenditures and we would see in the aggregate whether things are going to budget. We would not look over their shoulders on a regular basis to see whether they are on target with whatever project they are engaged in. That is a matter for the management of the Department.

Deputy Boyle

In no circumstances whatsoever? Even if it is glaringly obvious on a month to month basis that something is going off the rails badly?

Mr. Carey

We look at these things in the aggregate on a month to month basis. The Department of Finance is never happy when a doubling in the cost of a project occurs. However, as in this case, there may be a perfectly reasonable explanation for it. Two weeks ago, the Comptroller and Auditor General, said that if a project increases from €5 million to €10 million it would not be the end of the world because there could be very valid reasons for it.

Deputy Boyle

When it goes from €5 billion to €10 billion we should be worried.

Deputy McGuinness

It would be the end of the company.

Deputy Boyle

How far can the independence given to Departments exist? When it ceases to exist when and how does the Department intervene?

Mr. Carey

They are given an allocation for various services. Within that allocation, we have to be satisfied that there are appropriate systems in place, that they are aware of our guidelines about capital appraisal, that there are proper management skills and so on. It is geared to avail of this autonomy in the way that the Government wants it done. Thirty years ago when I started dealing with such matters, we would go through a proposal for a box of matches with a fine toothcomb. That has all changed. It is evolving daily. The guidelines for capital appraisal are being reviewed at the moment. We asked the Comptroller and Auditor General to give us the benefit of any suggestions he had. If this committee has any suggestions or views, we would be happy to take them on board.

Deputy Boyle

I have one final question for the Department of Agriculture and Food. Is there a condition about reporting from the company to the Department concerning its everyday activities as a commercial entity?

Mr. Malone

Yes. We have to get information from the company about what are called the non-core events.

Deputy Boyle

Is that done on a more regular basis than a company would be obliged to report to the Companies Office? Is there a direct communication system?

Mr. Malone

Yes. We have an on-going relationship with Punchestown. We will be monitoring very closely the progress of this event centre. We will obtain information on the number of events and the kind of events. In particular, if it was made available for an event that we felt was not suitable or clashed with an agricultural activity, we have a power of veto.

Deputy Boyle

There is a Punchestown complex which is used for other purposes, for example, racing and music events. Is the partial use of this facility for something of a more general commercial nature on the Punchestown complex allowed?

Mr. Malone

It is not suitable for music events.

Deputy Boyle

I meant as an ancillary facility.

Mr. Malone

We would not prevent that if it helped the viability of the centre.

Deputy Boyle

It would add to the commerciality of the general Punchestown facility——

Mr. Malone

Yes.

Deputy Boyle

——and the benefit would be given to the general Punchestown facility not to the company responsible for the centre.

Mr. Malone

No. If the centre is used then any profits made will have to be put back into the centre.

Deputy Boyle

There would have to be a commercial relationship between the racecourse and the event centre.

Mr. Malone

There is a commercial relationship.

Deputy McGuinness

There was a comment made about the Comptroller and Auditor saying that if there was an increase in the cost of a project it would not be the end of the world. It might be worthwhile discussing that. I would not buy into it. Perhaps at another meeting, in the context of the invitation issued from the Department official, we should put forward suggestions.

Chairman

We would be delighted to facilitate it.

Mr. Carey

My reference to the end of the world was a quote from the records of the last meeting of this committee.

Chairman

That was Mr. Purcell's comment. Perhaps Mr. Purcell could explain it.

Mr. Carey

I know what he meant and the context in which he said it.

Mr. Purcell

It is just as well to bear in mind the context of what I said. There is nothing wrong with that if there are justifiable reasons for it. It may well be that one gets a better system or a better facility as Mr. Malone suggested today. One cannot say when X does not equal 2X, that it is wrong. I am delighted to hear what Deputy McGuinness has said about the committee getting involved in capital appraisal guidelines and what should be done. It is very important especially in the context of the loosening of the arrangements for approval from the Department of Finance.

I am surprised to learn that they had been loosened to the extent suggested by Mr. Carey. Echoing what Deputy Boyle said, while one does not have to sanction the purchase of paper clips, I do not believe that there is no limit. For significant projects, the sanction of the Minister for Finance is needed. There are limits. We are entering dangerous territory if one simply says that it is looked at in aggregate every month and that a Department may seek advice from the Department of Finance if necessary. The Department of Finance has not shaken off its traditional mantle to that extent. I can put that on the record.

There are capital appraisal guidelines in this particular case which date back to 1994-95. They need to be up-dated and are being updated. However, it is no use up-dating them if they are not applied. Certainly they were not applied in this case. There may be justification in this particular case, as the Accounting Officer has said, and that is a matter for judgment on the part of the committee. If one has guidelines, one should apply them. Where responsibility for appraisal is being delegated, it behoves the Department of Finance in this brave new world to have some assurance that they were being applied. Accounting Officers will have to state this more or less specifically in their new statement on internal financial control which will have to accompany the Appropriation Accounts in the future as part of new corporate governance arrangements.

Chairman

Thank you, Mr. Purcell. It does not appear that we can dispose of this chapter today. I hope the committee can visit the centre and that we can get agreement at the next meeting in private session. I would like to see the centre as we have heard so much about it today. It would be very effective for our overall assessment if we could meet with the board of Punchestown and see the centre.

Deputy Boyle

Would we be supplied with horses?

Chairman

I am anxious to see the centre and the whole economy of scale.

Deputy McGuinness

The Chairman asked a very relevant question at the beginning. By visiting the centre and by meeting the board perhaps we can have the other questions that were not answered, answered more fully.

Chairman

I propose that. Would Deputy McGuinness second it?

Deputy McGuinness

Yes, Chairman.

Chairman

I call Deputy McGuinness for a last question.

Deputy McGuinness

Is the Chairman disposing of this Vote today?

Chairman

No.

Deputy McGuinness

When we are discussing the Vote, could we have a note on the beef tribunal? We paid out almost a million in 2002 and the running cost is €26.5 million. Can the Department give us some idea of the structure of those costs or the costs of legal fees?

In the current tribunals, it is said that some of the legal representatives get X amount per day. Can we have some notion of those costs so that we can have a fuller debate on the matter?

Chairman

Does Deputy McGuinness want any information on this today?

Deputy McGuinness

I am anxious to discuss it in more detail. I would be pleased if it could be provided in a note.

Mr. Malone

I can give it to the committee now. We have almost disposed of all of the claims under the beef tribunal.

Deputy McGuinness

Chairman, it will do in a note.

Mr. Malone

I can send you a note.

Deputy McGuinness

I am asking about the costs involved——

Mr. Malone

The futuristic costs.

Deputy McGuinness

——and the rate per day. I am anxious to obtain the details.

Mr. Malone

The Deputy wishes to know how much per day?

Deputy McGuinness

Yes and who got what.

Mr. Malone

You want the breakdown.

Deputy McGuinness

That is the general idea so that we can make a comparison with the other tribunals.

Mr. Malone

We can do that.

Deputy McGuinness

Benchmarking for tribunals.

Chairman

Perhaps Mr. Malone could give us the total cost, an overview of all the legal fees.

Mr. Malone

I can give them now, if the committee wishes. The total cost to date, up to 16 October, was €26.4 million. The main breakdown is for the legal fees. The legal fees for the State and tribunal legal teams were €4.6 million, administration costs were €3.4 million, various banking charges and withholding tax issues came to €1.8 million, and the actual cost, what is termed the cost orders, are €16.5 million. There are 77 cost orders in total. We have paid 62 to date and our assessment is that will be an additional €3.1 million.

Deputy McGuinness

We will have to debate it again, Chairman. Could we have a copy of that note?

Mr. Malone

Yes it will be given to the committee.

Chairman

Is there any refund coming from the temporary settlement with the Goodman group?

Mr. Malone

That has been resolved. Some €3.7 or €3.8 million has been paid.

Deputy McGuinness

That is money coming back in?

Mr. Malone

Yes.

Deputy McGuinness

Is that the only money coming back in?

Mr. Malone

Yes. That related to a specific issue.

Chairman

Can we agree the agenda for the next meeting on Thursday, 13 November? The Department of Enterprise, Trade and Employment, Vote 34, Chapter 11.1 next Thursday at 11 a.m. Is that agreed? Agreed.

The committee adjourned at 3 p.m. until 11 a.m. on Thursday, 13 November 2003.