COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 9 Oct 2014

2013 Annual Accounts of Údarás na Gaeltachta

Mr. Stiofán Ó Cúláin (Chief Executive Officer, Údarás na Gaeltachta) called and examined.

Chairman

I remind members to turn off their mobile phones, as they interfere with sound quality in the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that where possible they should not criticise nor make charges against a Member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provision within Standing Order 163 that the committee should also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies.

I welcome Mr. Stiofán Ó Cúláin, CEO of Údarás na Gaeltachta, and I ask him to introduce his officials.

Mr. Stiofán Ó Cúláin

Liom inniu tá Gearóid Breathnach, ceannasaí airgeadais, agus Séamus Mac Eochaidh, bainisteoir fostaíocht agus fiontair.

Chairman

I welcome Ms Máire Killoran and Mr. Beirtí Ó hAinmhire from the Department of Arts, Heritage and the Gaeltacht. I ask the Comptroller and Auditor General to introduce the relevant appropriation accounts.

Mr. Seamus McCarthy

Údarás na Gaeltachta was established under the Údarás na Gaeltachta Act 1979. Its main function is to preserve and extend the use of the Irish language as the principal medium of communication in the Gaeltacht. In pursuit of that objective, Údarás na Gaeltachta is involved in the funding and fostering of a wide range of enterprise development and job creation initiatives and in supporting strategic language, cultural and community-based activities.

In 2013, Údarás na Gaeltachta recorded a deficit of expenditure over income of €540,000 after a net transfer from the capital account. Údarás na Gaeltachta received Oireachtas grants and other income from State and EU sources totalling €21 million in 2013. It also administered grant funding amounting to €15.67 million on behalf of the Department of Social Protection in relation to employment and social schemes. Its other main source of income was rental income from the renting of properties in its commercial property portfolio.

In 2013, Údarás na Gaeltachta incurred expenditure of €15.6 million on employment and social schemes, including community employment, the rural social scheme and the Tús programme; €4.9 million in grants to enterprise and community bodies; €3.8 million on language, cultural and community development; €7 million in depreciation on its fixed assets; €3.6 million on the maintenance and management of Údarás na Gaeltachta's commercial property portfolio; €6.2 million on administration costs; and €4.8 million on pension costs.

Údarás na Gaeltachta holds a significant investment portfolio. At the end of 2013, three of its investments were wholly owned subsidiaries of Údarás na Gaeltachta and eight were associate companies. It revalues investments based on the value of the company and the share held by Údarás na Gaeltachta. At the end of 2013, Údarás na Gaeltachta had investments with a net book value of €15.8 million.

Since the balance sheet date, Údarás na Gaeltachta has concluded an agreement for the disposal of one of its subsidiaries, Arramara Teoranta, which is a seaweed processor. I expect to examine that disposal in the context of audit of the 2014 financial statements. The financial statements for 2013 received an unqualified opinion.

Chairman

I invite Mr. Ó Cúláin to make his opening statement.

Mr. Stiofán Ó Cúláin

Táimid buíoch as ucht an cuireadh teacht os bhur gcomhair inniu chun plé a dhéanamh ar chuntais iniúchta an údaráis don tréimhse dár críoch 31 Nollaig 2013. Tá beirt ball den bhainistíocht, Gearóid Breathnach agus Séamus Mac Eochaidh, liom anseo inniu. Ba mhaith liom an deis a ghlacadh chun cúlra a thabhairt don choiste ar obair na heagraíochta chomh maith le tagairt a dhéanamh do na féidearthachtaí agus na dúshláin a bheidh le sárú sa tréimhse atá amach romhainn.

Aithnítear gurb é cobhsú an bhoinn eacnamaíochta trí ghiniúint fostaíochta an bealach is fearr leis an daonra a chaomhnú agus gurb é seo an bunsraith chun caomhnú agus leathnú na teanga a bhaint amach, rud atá lárnach don Straitéis 20 Bliain don Ghaeilge. Cruthaíodh 611 post nua i gcliantchomhlachtaí Údarás na Gaeltachta sa bhliain 2013. Bhí beagnach 7,650 post i gcliantchomhlachtaí an údaráis ag deireadh na bliana, comhdhéanta de 6,969 post lánaimseartha agus 680 post páirtaimseartha. Is údar mór dóchais é go raibh an líon ba lú caillteanais post le 30 bliain i gcliantchomhlachtaí Gaeltachta le linn 2013.

Tá ráitis airgeadais Údarás na Gaeltachta don bhliain dar críoch 31 Nollaig 2013 iniúchta ag Oifig an Ard-Reachtais Cuntas agus Ciste faoi Alt 18 de Acht um Údarás na Gaeltachta, 1979. Is é a thuairim go raibh leabhair chuntais chuí coinnithe ag Údarás na Gaeltachta agus go raibh na ráitis airgeadais ag teacht leis na leabhair chuntais. Ní raibh aon rud le tuairisciú maidir leis na cúrsaí sin faoina ndéantar tuairisc le heisceacht.

Maidir leis an bhfócas i mbliana agus don bhliain seo chugainn, leanfaidh an tÚdarás air ag maoiniú réimse de thionscadail a bhaineann le forbairt fiontraíochta agus cruthú fostaíochta, tacú le fiontair láidre nuálacha, a chruthóidh agus a chothóidh rachmas agus fostaíocht sa Ghaeltacht trí thacú le comhlachtaí nua agus comhlachtaí atá bunaithe cheana féin a gcuid fostaíochta a chaomhnú agus a mhéadú.

Maidir le forbairtí agus cinneadh straitéiseacha, tá béim faoi leith á chur againn ar fhorbairt acmhainní nádúrtha atá flúirseach thart ar chóstaí na Gaeltachta. Facathas deis dúinn i bhforbairt tionscal na feamainne. Cé go mbeadh infheistíocht nua suntasach agus saineolas eolaíochta, taighde agus margaíochta riachtanach, bheartaíomar an deis a thapú agus scaireanna inar bhfochomhlacht, Arramara Teoranta, a dhíol trí phróiseas trédhearcach le saineolaí idirnáisiúnta san earnáil seo.

Tá ábaltacht agus fonn ar bhord agus ar fhoireann an údaráis breis fostaíochta a chruthú agus próiseas pleanála teanga a thionscnú sa Ghaeltacht ach na hacmhainní cuí a bheith ar fáil dúinn chuige seo. Go sonrach, is féidir suas le 1,000 post breise thar tréimhse cúig bliana a chruthú agus úsáid na Gaeilge mar ghnáthurlabhra phobal a mhéadú 25% thar tréimhse 20 bliain ach na buiséid chuí agus an t-infreastruchtúr riachtanach a bheith ar fáil, go háirithe córas leathanbhanda ardluais ar chostas réasúnta a sholáthar, aonad fiontraíochta d’ardchaighdeán a chur ar fáil agus struchtúr oiriúnach foirne a bheith in áit ón bhliain 2015 ar aghaidh.

Ba mhaith liom aitheantas a thabhairt don tacaíocht atá tugtha dúinn ag an Roinn Ealaíon, Oidhreachta agus Gaeltachta, Fiontraíocht Éireann, Bord Bia, Bord Iascaigh Mhara, an Ghníomhaireacht Forbartha Tionscail, Solas agus an Roinn Coimirce Sóisialaí i gcur i bhfeidhm ár gcláir fostaíochta sa Ghaeltacht sa bhliain 2013. Ar mhian leis an gcoiste go ndéanfainn aistriú go Béarla?

Chairman

Yes.

Mr. Stiofán Ó Cúláin

We thank the committee for this opportunity to appear before it to discuss Údarás na Gaeltachta’s audited financial statements for the year ended 31 December 2013. Accompanying me are two members of our management team, Gearóid Breathnach, the financial controller, and Séamus Mac Eochaidh, the enterprise and employment manager. I will give the committee an overview of the work of Údarás na Gaeltachta as well as a brief synopsis of the possibilities and the challenges facing us in the future.

It has been recognised for some time that stabilisation of the economic base through the creation of employment is the best way to preserve the population in the Gaeltacht and that this, in turn, is the foundation for achieving the preservation and extension of the language, which is central to the 20-year strategy for the Irish language. Údarás na Gaeltachta client companies created 611 new full-time jobs last year. At year end, total employment in Údarás client companies stood at 7,650, of which 6,969 were full-time jobs and 680 were part-time jobs. Significantly, 2013 saw the lowest rate of job losses in 30 years in Gaeltacht client companies.

The Office of the Comptroller and Auditor General has audited the financial statements of Údarás na Gaeltachta for the year ended 31 December 2013 under paragraph 18 of the Údarás na Gaeltachta Act 1979. The Comptroller and Auditor General has expressed the opinion that the financial statements have been properly prepared in accordance with applicable law. There was nothing to report in regard to those matters upon which reporting is required by exception.

Údarás continued in 2014, and will continue in 2015, to fund a range of enterprise development and employment creation initiatives, with particular focus on aquaculture, fish processing, life sciences, food, tourism and creative enterprises, including media, arts, and language and culture-based sectors. The language planning process will continue, and a range of community and local development programmes will be supported, which have the objective of upskilling and building capacity at community level in a range of enterprise and language planning initiatives.

Particular emphasis has been placed on the development of our natural resources, which are found in abundance along the Gaeltacht coastline. To develop the seaweed industry, for example, significant new investment and the acquisition of new scientific expertise and marketing ability is required. This was the primary driver of the decision to sell our seaweed processing subsidiary company, Arramara Teoranta, to an investing company which has the resources and the expertise to develop the sector properly and create value added products and new employment in the Gaeltacht.

The Údarás board and staff have the capability and motivation to create more employment and to initiate a language planning process in the Gaeltacht if the appropriate resources are available to us for this purpose. Specifically, it is possible to create up to 1,000 additional jobs over a period of five years and to increase the use of Irish as a vernacular language by 25% over a period of 20 years with the appropriate budget and the necessary infrastructure being provided, especially high-speed broadband at affordable cost and ready-to-occupy enterprise accommodation, and having an appropriate staff structure in place from 2015 onwards.

I acknowledge the continuing support of the Department of Arts, Heritage and the Gaeltacht, Enterprise Ireland, Bord Bia, Bord Iascaigh Mhara, IDA Ireland, SOLAS and the Department of Social Protection in implementing our enterprise development programme in the Gaeltacht during 2013.

Chairman

May we publish the statement?

Mr. Stiofán Ó Cúláin

Is féidir.

Deputy Paul J. Connaughton

I welcome the witnesses. I will continue in English as otherwise this will be a very short session. Perhaps Deputies O'Donnell and Ross will speak as Gaeilge but I will speak in English.

I acknowledge the work done by Údarás in creating and sustaining jobs in more rurally isolated parts of the country where traditionally it has been difficult to create jobs. Where will the 1,000 additional jobs come on stream? How will we have to work on them?

I imagine Mr. Ó Cúláin is expecting questions on the sale of Arramara Teoranta. For the sake of the committee, will he give me a very brief outline of the history of the sale, when it began and why the company is being sold?

Mr. Stiofán Ó Cúláin

I will reply in English. We acquired Arramara Teoranta from the State in 2006. The company had been in operation since 1947 processing, milling and drying a particular type of seaweed, ascophyllum nodosum, which is found in abundance along the west coast in Donegal, Mayo and Galway in particular, and in County Clare, and supplying the dry weed to processors who added value and, perhaps, many jobs elsewhere. When we got the company, its infrastructure was deficient and needed much investment and expertise to develop added value products in the locality, which is Kilkieran in west Galway, which is a very strong Gaeltacht but a disadvantaged area with high unemployment. We thought we would take the raw material and try to develop it, add value to the products and get the company up to speed with regard to the investment required and create jobs locally. Many jobs depend on the company, in particular the harvesters, who number between 250 and 300 people. There are also those who transport the weed to the factory. These were the primary drivers for our decision to add value to this local renewable resource to create employment for all the partners in the business.

Deputy Paul J. Connaughton

Údarás decided to sell it to add value to it.

Mr. Stiofán Ó Cúláin

I will ask my colleague, Mr. Séamus Mac Eochaidh, who is manager of the enterprise and employment division, to provide more detail on this.

Mr. Séamus Mac Eochaidh

We do not use the words "sale" or "sell". We never wanted to sell it. It was not something we wanted to get rid of because it was too important to the area. We always wanted a strategic partner to develop it to its full potential. It was not a sale in this sense and we never set out with this purpose. As Mr. Ó Cúláin stated, we were given this company in 2006. The State invested initially in 1947 and the company had moved between various Departments and ended up in the Department of Community, Rural and Gaeltacht Affairs in 2006. By 2006 the company was not liquid and in a bad financial state. It had lost €1.5 million between 2000 and 2006. It had gone from having reserves of €700,000 in 2000 to a deficit of €400,000 or €500,000 in 2006. The company had no money. It had spent a lot of money on a capital investment programme at the site.

It was in serious trouble and the banks were looking for their money back. We were given the shares, with 81% of the shares owned by the Government and 18% of the shares owned by a company called ISP Global Technologies, which had been the sole customer of the company. ISP Global Technologies had decided in the 2000s that it was no longer interested in Arramara Teoranta. Local people would collect seaweed and sell it to Arramara, which dried the seaweed before it was shipped to Scotland for the extraction of alginate. In the 2000s, synthetic alginate came on the market, so it was no longer viable to produce alginate from natural seaweed. What was probably unknown at the time was that ascophyllum nodosum is not the best source of alginate, and if one is seeking to extract alginate from seaweed, there are many other variations, such as laminaria, that are far better. The people at Arramara did not know that as it had no science or technology expertise. It was being used by ISP Global Technologies as a source of dried seaweed, with valued added in Scotland. With the advent of synthetic alginates, it withdrew from the business.

We were left with a kind of basket case as a company, if I can use that phrase. We have much experience in Údaras na Gaeltachta of running companies from a board and strategic level but we did not know anything about seaweed. As ill-luck would have it, the existing general manager tendered his resignation when we took over the shares and he left in January 2007. At that time we had a company that was broke and we had to invest money immediately to keep it afloat. We began to consider how we needed a strategic partner to develop the company. We started the process in 2007 by putting in a manager to keep the company going. He did great work in three years, building up a customer base. One should remember that ISP Global Technologies was the customer, so the company had lost its customer. The manager did as much as he could from a technology perspective. We began the process in 2007 that culminated in the sale of the Údaras na Gaeltachta shares in May 2014. It was not a sale but rather we sought a strategic partner.

Deputy Paul J. Connaughton

Údaras na Gaeltachta has decided to seek a strategic partner.

Mr. Séamus Mac Eochaidh

Correct.

Deputy Paul J. Connaughton

Should this not have been put out to public tender?

Mr. Séamus Mac Eochaidh

No, not at that point. We did not know enough about the industry to settle on what we would do. In 2010, when the issue came under my remit, we had done much work and commissioned some reports about the industry to get to know what it looked like. There were some parties interested in the company. Admittedly, there were parties which were willing to take the company off our hands for €1. We decided in 2010 to formalise the process and we appointed consultants to seek that strategic partner. We did not publicly advertise the process because we were trying to keep the company as a going concern. We did not want to hang a "for sale" sign over the door. We had employees, harvesters and customers, and we did not feel it would be the proper mechanism in this case. This was not a fire sale and we wanted to keep the process under our control, so we engaged consultants, who put together nine potential partners. At this stage, the company had built up a big customer in France and there were various other parties active in the industry. The consultants sought expressions of interest from those people. We did not want any tyre kickers. Many people indicated a wish to visit Arramara and see what the company does. One must protect what one has. It was not a sale to be publicly advertised on the back of The Irish Times.

Deputy Paul J. Connaughton

Had the Department indicated that this could be done?

Mr. Séamus Mac Eochaidh

The Department was not involved. The process was managed by Údaras na Gaeltachta. With regard to the guidelines to State bodies on the disposal of assets, there is no requirement to publicly advertise the sale of an asset. The requirement for a sale in excess of €150,000 is there must be board approval.

Deputy Paul J. Connaughton

The Department did not know about the process being undertaken. Am I right in saying the Minister has to sign off on the sale?

Mr. Séamus Mac Eochaidh

Yes.

Deputy Paul J. Connaughton

Should he not have been involved earlier in the process?

Mr. Séamus Mac Eochaidh

Not necessarily. The asset is entrusted to Údaras na Gaeltachta and as the Comptroller and Auditor General has indicated, we have a large portfolio of assets, including buildings and shares in companies. We do this all the time; it is our business. We sell buildings, companies and shareholdings and we also buy them. It is our day-to-day work.

Deputy Paul J. Connaughton

Why is the Minister required to sign off on it then?

Mr. Séamus Mac Eochaidh

That is what is laid down. The sale of shares by Údaras na Gaeltachta requires the consent of the Minister of State at the Department dealing with Gaeltacht affairs, having consulted the Minister for Public Expenditure and Reform. I do not know who laid down those rules but we abide by them. We do not query them.

Deputy Paul J. Connaughton

The consultants examined relevant parties which may have had an interest.

Mr. Séamus Mac Eochaidh

Correct.

Deputy Paul J. Connaughton

This is where Acadian Seaplants Limited comes into the process.

Mr. Séamus Mac Eochaidh

It was one of the nine parties consulted.

Deputy Paul J. Connaughton

It was whittled down from nine to how many interested parties?

Mr. Séamus Mac Eochaidh

Six parties responded.

Deputy Paul J. Connaughton

Were there six bids or did six parties demonstrate an interest?

Mr. Séamus Mac Eochaidh

Six parties demonstrated an interest and three parties had no interest.

Deputy Paul J. Connaughton

How were those six parties whittled down again?

Mr. Séamus Mac Eochaidh

The consultants-----

Deputy Paul J. Connaughton

Who were the consultants?

Mr. Séamus Mac Eochaidh

They were RSM Farrell Grant Sparks, or RSM FGS.

Deputy Paul J. Connaughton

How did they whittle down the numbers?

Mr. Séamus Mac Eochaidh

They had criteria and the process is in the public domain. It was mentioned in Dáil questions and so on. They came to us with two companies to fit the bill for a strategic partner.

Deputy Paul J. Connaughton

At this stage, the Údaras na Gaeltachta board was to make a decision.

Mr. Séamus Mac Eochaidh

The consultants were appointed and our board approved the process in June or July 2010. We indicated the wish to engage the consultants, whose job was to seek partners. This was approved and the consultants reported to us almost 12 months later, indicating the two companies deemed to meet criteria. As an executive, we began due diligence with the companies. We had to meet representatives and see what the companies were doing. Acadian was one of the companies and Setalg, a French company, was the other. We got to know these people and wanted them to understand our vision. This process concerned a State asset and it was not a sale which the company could do with as it wished. Stakeholders other than the State were involved, although it was the principal shareholder. They included employees, harvesters and Irish customers. There were also environmental issues involved. This was a complicated process and we had a recommendation from FGS.

In October that year, an Irish company became involved and questioned why it was not part of the process. When the consultants were asked to take on the job and assembled the list, it asked companies for a list of customers. The company had only been formed in 2008 and it is a fine high-performance start-up, HPSU, company backed by Enterprise Ireland. Nevertheless, it had not really come on the radar by 2010. It was purchasing a relatively small amount of material - approximately 170 tonnes - from Arramara. Arramara would sell approximately 5,000 tonnes of product, as every four tonnes of wet seaweed weighs approximately one tonne when dry. The customer in question bought approximately 3% of Arramara's product, so it was not really on the radar. When it indicated it should have been involved, the company had improved quite a lot and Enterprise Ireland had invested in the company as a HPSU. Kernel Capital had also made an investment, the company was making good strides and it had some patents. It had a licence from the Department to harvest laminaria. We met its representatives and decided it should be admitted to the process in the interest of fairness and transparency.

When this company entered the process, RSM FGS treated it the same way as it had the previous companies, although it had to fast-track the process. The company made a complaint afterwards that it did not have enough time at this stage. We were under pressure and the company had 21 working days to submit its proposals.

By November that year RSM FGS had reported to us and it ranked the company third after the other two companies. It was a good company, but at that point in time RSM FGS did not think it met the criteria we wanted.

Deputy Paul J. Connaughton

Had Údaras set the criteria?

Mr. Séamus Mac Eochaidh

Yes, we set them in consultation with the consultants.

Deputy Paul J. Connaughton

At what point in the process did Acadian Seaplants Limited pull out of wishing to buy Arramara Teoranta?

Mr. Séamus Mac Eochaidh

Never.

Deputy Paul J. Connaughton

It never stated at any stage that it wished to pull back from the sale?

Mr. Séamus Mac Eochaidh

That was Setalg.

Deputy Paul J. Connaughton

Acadian Seaplants Limited had an interest all the time.

Mr. Séamus Mac Eochaidh

Yes. In January 2012 we approached the board of Údarás. The project went before the board of Údarás 12 times in a two year period. This was not an isolated process that was being conducted by the executive. Owing to the sensitivity of the project, it officially went before the board 12 times. There would have been verbal presentations also. In January 2012 we recommended to the board of Údarás that Setalg be given preferred bidder status. This was approved by the board and Setalg embarked on preferred bidder status. It was to take three months, but Setalg asked for an extension. Finally, in approximately five months it completed its due diligence of Arramara Teoranta and we decided to conduct formal due diligence of Setalg as a purchaser because this was a State asset. About two weeks later Setalg which is owned by the Roullier Group, a big group in France, stated it had ceased all mergers and acquisitions and pulled out at that point.

Deputy Paul J. Connaughton

Therefore, its issue was not with the process or the company but that it had other company problems.

Mr. Séamus Mac Eochaidh

It had other issues in France. I do not know. We took it at face value that it had ceased all merger and acquisitions activity. It is still a customer of Arramara Teoranta and the relationship is good. There is no problem.

Deputy Paul J. Connaughton

Acadian Seaplants is now number one.

Mr. Séamus Mac Eochaidh

Yes.

Deputy Paul J. Connaughton

At the point when the Roullier Group pulled out, did Údarás go back to the other bidders to tell them things had changed and invite them back into the process?

Mr. Séamus Mac Eochaidh

No, we went back to the board in September. We were faced with a situation where other companies not in the original nine had come along. One very large multinational company had come along and stated, "We can do a great job here. We will take this off your hands." We had certain discussions with it and outlined what the process would be. We explained that it would be a formal process and that the company would have to go through it. It stated it was not interested in the process and that it did not do things that way. It stated we would have to sell the company for what it was prepared to pay and promised great things. I have no doubt that it could deliver great things as it is a very well known company, but we said we could not do it that way and that it had to be done in a transparent manner. That company and other similar companies had approached us and made certain statements on what they could and could not do. At that stage we were faced with a decision, because of the other interests involved, as to whether we would collapse the process and start again or continue with it and go to the next ranked company. We discussed this with the board in September 2012. It decided that we would ask Arramara Teoranta to prepare a corporate plan and if that plan showed that it could achieve what we wanted it to achieve from its own resources and ability, we could consider abandoning the sale. Arramara Teoranta embarked on that process and by January 2013 wrote to me to state it did not have the resources, be they financial, scientific or technological, to do what we wanted to be done. Therefore, we engaged with Acadian Seaplants Limited and in March 2013 the board approved the sale of the Údarás shares to that company.

Deputy Paul J. Connaughton

With regard to that deal, what was the issue with harvesting rights?

Mr. Séamus Mac Eochaidh

Harvesting rights are not an issue. Arramara Teoranta has no harvesting rights. No one has harvesting rights. As the Minister for the Environment, Community and Local Government controls the foreshore, he has the rights. According to the advice of the Attorney General, 98% of all seaweed belongs to the Minister. There are traditional rights, but legally the position since 1947 has been that individuals harvest seaweed and sell it to Arramara Teoranta. That is how it works. Locally, people will say they have rights and there are some situations where we believe there are rights on their deeds, particularly where the Land Commission divided land and there might have been certain seaweed rights attached to that land, but that is a legal issue. Some 95% of all seaweed harvested off the coast of Ireland is harvested without a foreshore licence.

Mr. Stiofán Ó Cúláin

We are strongly of the opinion that the company now in place will respect traditional rights. When it comes to licensing issues, I believe the Minister will make a clear distinction between what people collect for small-scale use of their crops, the traditional collection of seaweed and commercial harvesting. The traditional taking of small lots of seaweed is aimed at home use, not for profit. We would certainly support this if we were asked at the time.

Deputy Paul J. Connaughton

The question many people ask me is whether there was an agreement with Acadian Seaplants Limited on harvesting rights.

Mr. Séamus Mac Eochaidh

I can categorically say "No." In fact, when we acquired the company, the first thing we noticed was that Údarás was the landlord and owned the buildings, but all the company had was outdated manufacturing equipment which had been in place for 30 or 40 years and a network of suppliers. That network of suppliers to Arramara Teoranta extends to 250 to 300 local people. Some people cut actively, while some cut for the Christmas period. The manager we had put in place pro tempore came back to us after approximately two years and said, "Really Arramara Teoranta is like a bank. When people need money, they cut seaweed, bring it to Arramara Teoranta and get money for it." That is a weakness also because how does one develop an industry when one is depending on suppliers who only supply when it suits them?

There are two issues I should bring to the Deputy's attention in that regard. During the economic boom, when people could go to building sites in Galway and earn €700 to €900 per week for assisting a bricklayer or whoever else, it was very hard to get seaweed. We had this manufacturing plant but no supply. Now - the new owners have said this - the existing generation of harvesters are all people of my age. The big challenge is to make the industry attractive for a new generation of harvesters who can see that they can make a living from it and live in their communities. Supply is the issue. The weed is on the rocks and there is plenty of it, but it is no good unless it is being harvested.

No harvesting rights were sold because we did not have harvesting rights to sell. Arramara Teoranta still does not have harvesting rights. The Minister for the Environment, Community and Local Government controls the harvesting rights.

Deputy Paul J. Connaughton

Mr. Mac Eochaidh said he was seeking a partnership, not a sale. What does Údarás own now?

Mr. Séamus Mac Eochaidh

We do not own any of it now.

Deputy Paul J. Connaughton

Acadian Seaplants Limited owns all of it.

Mr. Séamus Mac Eochaidh

The board approved the sale of 60% of the shares and decided that we would convert 40% of the shares into convertible preferred shares. As part of the deal and following legal and accounting advice, we put a mechanism in place, whereby we transferred 100% of the shares, but we have a put and call option with the purchaser that if it does not deliver on certain commitments it has made, largely surrounding investment which the company needs and the purchaser-----

Deputy Paul J. Connaughton

Has any of these commitments been made to local harvesters?

Mr. Séamus Mac Eochaidh

They are not relevant to the local harvesters. We are selling the company and part of the deal is that the purchaser will invest money in it to bring it to a point where it will be an efficient producer; therefore, the harvesters will have a place to sell their weed. If the purchaser does not do what it states it will, we can potentially claw back 40% of the company.

Deputy Paul J. Connaughton

In what timeframe?

Mr. Séamus Mac Eochaidh

A five-year timeframe.

Deputy Paul J. Connaughton

Does that mean that if Acadian does not uphold its side then Údarás na Gaeltachta can claw back 40%?

Mr. Séamus Mac Eochaidh

Potentially. It has to make a range of investments which have been agreed and are necessary but which we did not have the money for as part of the State. We did not have the money for it and Arramara did not have it. If this had not happened, the business would have gone down the tubes.

Deputy Paul J. Connaughton

Has it ever been made public how much Údarás got for the company?

Mr. Séamus Mac Eochaidh

As with all deals that involve a private company, it is a commercial situation and the price paid is covered by a confidentiality agreement.

Deputy Paul J. Connaughton

Can Mr. Mac Eochaidh tell me whether the sum agreed was the best offer over any other offer received?

Mr. Séamus Mac Eochaidh

I can tell the Deputy two things. From the period when we commenced the process in 2010 until we completed it and got permission from the board in 2013, the enterprise's value increased by 250%. Had we completed the deal in 2010, we would have had two and half times less than we got eventually.

There are two ways to value any company: one can use either a multiple of earnings - or a multiple of EBITDA, net earnings, or whatever, but a multiple of what the company is capable of making - or net asset value. As I pointed out to the committee, the net asset value was minimal because all the company had was antiquated manufacturing equipment. We own it - we are the landlord - so the best value is a multiple of earnings. Fortunately, through some very hard work, earnings improved under our ownership, despite a very bad period up to 2006. They improved to the point that we had a very good year one year, in 2012, and that is the base year we used for the calculation of the enterprise value. I am very happy that was maximised.

Deputy Paul J. Connaughton

What I am trying to get at, though, is this. Due to the confidentiality agreement, no one knows what the final sale price was because it was a private company doing a deal with Údarás na Gaeltachta. What if I was a competitor and felt I had a better offer on the table? Why was I not given a chance? We do not know the figure - I do not know the figure - and I doubt the delegation will tell me what it is this morning.

Mr. Séamus Mac Eochaidh

Unfortunately not. I do not understand - if the Deputy were a competitor-----

Deputy Paul J. Connaughton

If a competitor was also looking to buy the company, how would Údarás na Gaeltachta have known?

Mr. Séamus Mac Eochaidh

We engaged in a process in 2010 to find all the people who were interested. I am not aware of somebody coming along and saying "I would have given you three times that."

Deputy Paul J. Connaughton

I am not aware of it either. I want to know whether the process is open and transparent enough that rival bidders can say to themselves that they lost out due to not offering enough money.

Mr. Séamus Mac Eochaidh

As I said, the board of Údarás na Gaeltachta approved the deal on 1 March 2013, and then we had to submit it to our parent Department for approval. The Attorney General engaged as part of the approval process. Those in the Department can speak for themselves but my understanding is that they found it to be fair and transparent.

Deputy Paul J. Connaughton

I mean in the sense of an open and transparent system.

Mr. Séamus Mac Eochaidh

And, ultimately, the Department of the Public Expenditure and Reform.

Deputy Paul J. Connaughton

Yes.

Mr. Séamus Mac Eochaidh

All I can do is assure the Deputy that the process was fair and transparent.

Deputy Paul J. Connaughton

Throughout this process, were concerns raised with Údarás na Gaeltachta by people from outside the seaweed harvesting industry that this was not a good sale? Were there a lot of concerns over it? Did other State bodies or anybody else express concerns about the deal?

Mr. Stiofán Ó Cúláin

We are happy that the present owners will develop this company. They have developed a similar type of company in Canada employing nearly 300 people, and back in Kilkieran there are 20 people. They have the same resource base. They have a lot of expertise and knowledge, and they are sensitive to local cultural issues such as bilingualism. Acadian is located in a French-speaking area in Canada, which means the region is bilingual as well. They understand small fishing and farming communities. My last visit was two weeks ago, but one of the first things they did was to increase the price paid to harvesters by 10%. That gives us an indication of what they will do going forward. We feel this is a good deal for the area and the community. We will get much better bang for our buck from the resource.

Deputy Paul J. Connaughton

Were concerns raised with Údarás na Gaeltachta throughout the process by anyone apart from the seaweed harvesters and outside bidders?

Mr. Stiofán Ó Cúláin

There was a lot of media speculation at the time and there were a lot of meetings. In our opinion, there was a lot of misinformation. We responded to all of that and the company responded to all of that. People mixed up commercial harvesting with traditional rights. They thought we had harvesting rights and Arramara had harvesting rights, which we do not have.

Deputy Paul J. Connaughton

When did the board sign off on the deal in 2013?

Mr. Stiofán Ó Cúláin

On 1 March 2013.

Deputy Paul J. Connaughton

When did the Minister sign off on the deal?

Mr. Séamus Mac Eochaidh

On 29 July 2013.

Deputy Paul J. Connaughton

I refer to Muintearas Teoranta and issues that arose regarding Pobal. Can the delegation give me a brief outline on what, from its perspective, the problem was?

Mr. Stiofán Ó Cúláin

Yes. This is something that happened back in 2010-2011. Muintearas Teoranta is a company based in Lettermore that provides services all along the coast and up in Donegal.

Deputy Paul J. Connaughton

Does Údarás na Gaeltachta own it?

Mr. Stiofán Ó Cúláin

It is a subsidiary company of Údarás and we own it. Muintearas Teoranta provides a whole range of training, education and early childhood services in disadvantaged areas and has done so for the past 20 years or so. It has a very good record and a good operation, but it came to light at the end of that period that an overpayment had been made to them for the crèche part of their services. We looked at the matter and asked for an independent audit, which was carried out. The sum involved was €124,000, which had to be repaid. Through negotiation - Pobal allowed some other services that were not included - the sum came down to €100,000, which is still a very large sum. Our primary concern was that the service be allowed to continue, because the company has existed for the past 20 years. It is in a building that cost a couple of million to put in place, towards which we got a grant from Pobal at the time. The service had been running very well and there had been no issue up to then.

Through a series of negotiations and meetings between Pobal, ourselves and the Department of Children and Youth Affairs, we came to an agreement that €100,000 was to be repaid, and also that it would not be done immediately, because that would probably sink the company. It was agreed that the sum would be repaid over a period of five years. To date, we are down to €28,000 outstanding on that account. It will be cleared and fully paid back to the State by 2016.

Deputy Paul J. Connaughton

What were the discrepancies that led to an overpayment of €124,000?

Mr. Stiofán Ó Cúláin

A subvention given to parents who are disadvantaged is channelled through Muintearas. At the beginning of the accounting period people register their children for the oncoming year, and towards the end of the year the scheme is audited. If there is a difference between the number Muintearas said were going to be attending and the number who actually do attend in any particular week during that period, there is a balancing figure, and it is balanced down. In this case, people did not attend who had registered to attend.

Deputy Paul J. Connaughton

Okay.

Mr. Stiofán Ó Cúláin

The money was paid up front. When we looked at it and when the independent audit was carried out, we realised there had been an overpayment and that it was an error. We said it would be rectified and that the money would paid back, and it will be.

Deputy Paul J. Connaughton

It is a hell of an overpayment.

Mr. Stiofán Ó Cúláin

Yes, it is.

Deputy Paul J. Connaughton

These families had registered-----

Mr. Stiofán Ó Cúláin

Yes.

Deputy Paul J. Connaughton

-----but never showed up. Why did someone in the company not put up his or her hand straight away and say, "By the way, so-and-so is not here"?

Mr. Stiofán Ó Cúláin

The only answer we have for that, and the reason they did not show up that particular year, was that this was a time when there was huge unemployment in the area and a lot of families left the area.

Deputy Paul J. Connaughton

I want to know why a person in Muintearas Teoranta did not say "Our numbers are far lower than what we said they were."

Mr. Gearóid Breathnach

That is a fair question, and we do not really have a good answer. That had not been the process or the procedure up to then. Muintearas has established a procedure since to ensure that if children who are registered do not attend, it makes a supplementary return to Pobal and Pobal then adjusts the subvention. Up to that point and during that period, that was not done. That was not the procedure.

Deputy Paul J. Connaughton

Muintearas Teo. was caught out on this figure of €124,598. It never put up its hands and admitted that these children were never there, that these families never turned up. Technically, it could have continued.

Mr. Gearóid Breathnach

That is a fair point, but one must look at the figures received in subventions and the numbers attending in the years leading up to that period. In 2010 a subvention of €145,000 was received from Pobal. It was €135,000 the year before and €100,000 the year before that. The figure eventually certified as being due to Muintearas Teo. for the year 2010-2011 was, therefore, far lower than that for the previous five years. It is difficult to understand why the subvention for that year should be so low compared to that in previous years.

Deputy Paul J. Connaughton

However, it should have been much lower.

Mr. Gearóid Breathnach

The final figure was €25,000, which Pobal certified as being the correct subvention payable for that year.

Deputy Paul J. Connaughton

Yes. What has happened in Muintearas Teo. since?

Mr. Gearóid Breathnach

What has happened-----

Deputy Paul J. Connaughton

Does the person who signed off on this payment still have their job?

Mr. Gearóid Breathnach

No, the manager of the crèche has been changed. There is a new manager of the facility. The crèche's operating costs have been reduced. Two facilities were run that year, but it was later rationalised back to one. Two people were made redundant, while others had their hours reduced. The real problem that year was that it was incurring a loss because the cost of the structure was too high for the number attending it. These corrective actions were taken.

On the main issue raised by the Deputy about the actual attendance versus those registered, if it were to happen now, it would be communicated to Pobal through supplementary returns as they were identified.

Deputy Paul J. Connaughton

On a weekly basis.

Mr. Gearóid Breathnach

No, not on a weekly basis. It is fairly complicated. The pattern of attendance is key; a child may not appear for one week because they are sick, but that does not mean that they will not be there for the rest of the term. One could not establish such a pattern over the period of one week.

Deputy Paul J. Connaughton

What is the period?

Mr. Gearóid Breathnach

I do not have that information, but we are talking about a pattern. Once the manager of the crèche is satisfied that a child is not going to attend for the period for which they have been registered, a return is made to Pobal.

Deputy Paul J. Connaughton

What is the payment from the family at the start of the year? What is their contribution to it?

Mr. Gearóid Breathnach

There is a range of contributions, but it depends on how many days a week and how many hours a day they are registered for.

Deputy Paul J. Connaughton

It is not that I am interested in the figure, but I imagine that at the start of the year the family make a commitment. Yes, the child may become sick and not attend, but I do not think families will make a commitment at the start of the year and then pull out three weeks later and that we do not have checks and balances to identify this quickly.

Mr. Gearóid Breathnach

That is not what happens. The family do not make a contribution in this case because, based on their economic circumstances, Pobal makes a subvention to the crèche for the child attending it. The family, therefore, do not have to pay the fees. Pobal may pay them on their behalf. The problem arises if a child is registered and does not attend.

Deputy Paul J. Connaughton

If a child is registered and does not attend, does over-staffing become an issue?

Mr. Gearóid Breathnach

That is a risk the crèche must manage because it cannot force a parent to send their child to the crèche.

Deputy Paul J. Connaughton

Absolutely not, but after a mistake involving a sum of €124,000, are there checks and balances to ensure this cannot happen again?

Mr. Gearóid Breathnach

There are checks and balances, but there is always a risk that a parent may register a child at the beginning of the year and be due a subvention for that child which is paid to the crèche. If the child does not attend, the crèche is down that amount for the year.

Deputy Paul J. Connaughton

I imagine that after one month someone is going to say to the family that they have not seen the child for the last month, that the child is not attending.

Mr. Gearóid Breathnach

Yes, that is now being done. I can guarantee that it is being done.

Deputy Paul J. Connaughton

But it was not done before.

Mr. Gearóid Breathnach

It was not done in that year or before it. That procedure was not in place.

Mr. Seamus McCarthy

Previously we produced a report on child care expenditure and that scheme. We reported in September 2011 and one of the findings was that the capital expenditure to fund crèches had resulted in excess places being provided. The estimate was that about 15,000 places in excess of the number needed had been provided, at a cost of at least €75 million. In the course of that exercise we looked at the testing done by Pobal on behalf of the Department of Children and Youth Affairs to ensure children were turning up because, as Mr. Breathnach pointed out, the payment was made to the crèche service, not the parents. At that stage, Pobal looked at the attendance patter in a particular week. We suggested it was probably necessary to look at a longer period to establish the pattern of attendance underpinning the payments. It is something that could be taken up-----

Deputy Paul J. Connaughton

How many extra places did Mr. McCarthy say had been provided?

Mr. Seamus McCarthy

It is in terms of the capacity of the crèches involved. There was excess capacity of about 15,000 places at that stage.

Deputy Paul J. Connaughton

How much did it cost?

Mr. Seamus McCarthy

The estimated cost was €75 million.

Deputy Paul J. Connaughton

Over what period?

Mr. Seamus McCarthy

The national child care investment programme 2006 to 2010.

Deputy Paul J. Connaughton

A total of €75 million was spent-----

Mr. Seamus McCarthy

In providing places in excess of need. In addition, if children are being registered but in reality are not turning up on a consistent basis, there is an overpayment in respect of these places also.

Deputy Paul J. Connaughton

The total figure is €75 million?

Mr. Seamus McCarthy

That is the capital spend.

Deputy Paul J. Connaughton

Therefore, the figure of €124,598 is just a drop in the ocean.

Mr. Seamus McCarthy

Yes.

Deputy Paul J. Connaughton

This was widespread-----

Mr. Seamus McCarthy

As Muintearas Teo. is just one of the companies that provide crèche services, it may be better to take up the issue with Pobal.

Chairman

To clarify the point, €75 million was provided for the construction of facilities in the period 2006 to 2010.

Mr. Seamus McCarthy

It was a much bigger programme than that, but the cost of the estimated over-capacity was €75 million.

Chairman

I understand that, but when Mr. McCarthy says there was over-capacity, does he mean that there were buildings or facilities provided for child care services that were empty?

Mr. Seamus McCarthy

Empty or under-utilised. If it had capacity for 20 children and there was only a demand locally for ten places, there was a 50% over-capacity rate.

Chairman

The figure of €75 million is spread across the country.

Mr. Seamus McCarthy

Yes.

Chairman

It was €75 million in the period 2006 to 2010. What happened after 2010?

Mr. Seamus McCarthy

I do not think the programme has continued, certainly not on the same scale.

Chairman

However, the facilities are still in place. Are they still under-used?

Mr. Seamus McCarthy

Some of them are. I think there was correspondence with the committee in the past about facilities that were no longer being used.

Chairman

We must ask representatives of Pobal to come before us to discuss the matter. A sum of €75 million, as Deputy Paul J. Connaughton said, is sizeable in comparison to the figure of €124,598 and it is one about which we should at least know or investigate

Deputy Paul J. Connaughton

Were applications made for the 15,000 places?

Mr. Seamus McCarthy

Yes, applications were made for grants which were paid.

Deputy Paul J. Connaughton

For children who never turned up.

Mr. Seamus McCarthy

It is not that they never turned up. There are two issues involved. One must build a crèche and then decide whether it will cater for 15 or for 30 children. Grant assistance was provided in these circumstances-----

Deputy Paul J. Connaughton

For what was it used?

Mr. Seamus McCarthy

-----or at least there was over-capacity; therefore, a crèche could have been catering for 20 children when it could have been catering for 30 and when the expectation when it was built was that it would cater for 30. The second payment is ongoing and is made where a parent says their child will attend a crèche.

This is where a parent says my child will attend this crèche and there are staffing, food, cleaning and heating costs. This is what the recurrent payments are underpinning.

Deputy Paul J. Connaughton

Does Mr. McCarthy have any idea what that payment is?

Mr. Seamus McCarthy

I do not have the figures in total.

Chairman

It is a matter we can discuss with Pobal. Of the €75 million invested in these various facilities, most are underused. It will be interesting to see how the figures compare today to reflect on the figure of €75 million and on the process. Once the application is made to the Department, we must consider who carried out analysis to determine whether a facility for 30 children was needed.

Mr. Seamus McCarthy

Our finding at that stage was that the programme had not been supported by detailed demand analysis. It is already reported.

Chairman

Perhaps we can have a copy of it. Perhaps the clerk can make arrangements for Pobal to come before the committee to provide an update.

I will return to the sale of Arramara Teoranta. It was a State business owned by the taxpayer. There was a process with the consultants to determine the purchaser at the end. How much money was spent on consultants? What are the costs of the process?

Mr. Gearóid Breathnach

I do not have the costs but I think it is of the order of €20,000.

Chairman

That is a figure Mr. Breathnach should have. Presumably Údarás na Gaeltachta tendered for it and there was a tender process. The outcome was that one single company, RSM FGS, and Mr. Breathnach thinks the cost was €20,000. Perhaps he can revert to us with the details of the tendering process and the final cost. Mr. Breathnach says it was not a sale but the transaction means that the company has gone to a private company, granted with a put and call option as a condition.

Mr. Séamus Mac Eochaidh

Yes.

Chairman

It is a 100% transaction of an Irish State asset to a private company. The only way Údarás na Gaeltachta would come back into the game is if the company does not invest to the extent set out in the sale of the company.

Mr. Séamus Mac Eochaidh

Correct.

Chairman

And the State would get back 40%.

Mr. Séamus Mac Eochaidh

Yes.

Chairman

Theoretically, the State could get 40% of nothing in five years' time.

Mr. Séamus Mac Eochaidh

If the company ran into the ground, yes.

Chairman

It is a possibility.

Mr. Séamus Mac Eochaidh

We have received what we consider a good return for the principal stakeholder, the taxpayer, and there is a cash consideration. There is cash in the bank, which Údarás na Gaeltachta uses.

Chairman

As someone representing the taxpayer, can Mr. Mac Eochaidh tell me how much Údarás na Gaeltachta received for the company? It will show in the accounts anyway.

Mr. Séamus Mac Eochaidh

I do not know if it will. Of course we want to share the information with the committee but the problem is that we have a legal issue. I am not saying that I will not tell the committee but I am concerned that if I put it on record now I could be open to-----

Chairman

When Mr. Mac Eochaidh has to account for the period, will the amount received for the transaction not appear in the accounts?

Mr. Séamus Mac Eochaidh

I do not know if it will be itemised.

Mr. Gearóid Breathnach

It will appear in the accounts in 2014. The consideration will be included but the practice until now has not been to identify each particular sale. The total figure will appear.

Chairman

That is our job because we want to know what Údarás na Gaeltachta got for that company so that we can determine, on behalf of the taxpayer, whether we believe it is value for money. How can I, another member or the Comptroller and Auditor General do our jobs unless we get this figure? Is there a confidentiality agreement in place that covers the matter?

Mr. Séamus Mac Eochaidh

There is certainly a confidentiality agreement in the deed of sale. As to whether we can find a way around that-----

Chairman

Who is Mr. Mac Eochaidh accountable to?

Mr. Séamus Mac Eochaidh

I am personally accountable to the board of Údarás na Gaeltachta.

Chairman

Who is the board accountable to?

Mr. Séamus Mac Eochaidh

The board is accountable to the Minister.

Chairman

And who is the Minister accountable to?

Mr. Séamus Mac Eochaidh

The Oireachtas.

Chairman

This is the Oireachtas Committee of Public Accounts. Mr. Mac Eochaidh did this deal on behalf of the taxpayer, on behalf of his company and on behalf of the Minister. He says it is not a sale but it is a sale and we should be told about it. Mr. Mac Eochaidh makes the point that there is a legal difficulty so I am not putting him on the spot. If the figure will appear in the 2014 accounts, how will Mr. Mac Eochaidh deal with the clause relating to confidentiality?

Mr. Séamus Mac Eochaidh

We sell many assets so I do not know whether it is detailed. I take the point of the Chairman. It is not that we do not want to be co-operative but we have a precise difficulty we would like to find a way around.

Chairman

Údarás na Gaeltachta has a list of other assets it sold. It is only fair that we know what it sold the assets for. There is a list of assets, so many of them were disposed of and this is how much was received for each. It is reasonable that we request that. It is transparency in respect of the taxpayer having some comfort that the deal was done with a transparent process involving consultants, what was received for the company and how the Department was paid. Mr. Mac Eochaidh is telling me that, because of the confidentiality clause, a lump cash sum was received in one payment and it is in the bank.

Mr. Séamus Mac Eochaidh

It is not one single payment. That the sale is structured is part of the deal. The difficulty we have is that we are doing a commercial transaction in a sensitive commercial area and others operate in the area. The purchaser wishes that the information is not in the public domain from a commercially sensitive point of view. The difficulty we have is that the taxpayer owns the asset and, quite rightly, the Chairman says it should be in the public domain. The payment is phased over a period.

Mr. Gearóid Breathnach

The process that authorised the transaction involved all figures being made available to the Minister and the Department of Public Expenditure and Reform so that when approval from the highest level was received, all of those authorities had that information. In respect of the 2014 accounts, the sale will appear in the accounts and if the Committee of Public Accounts wants to receive information about all of the other sales, it may well be able to establish to its satisfaction what is left.

Chairman

When will the 2014 accounts be signed off?

Mr. Gearóid Breathnach

Our draft accounts will be available for audit in February 2015.

Chairman

I will ask the Department about its role in the sale, its oversight of the appointment of consultants, the agreement at the end for sale with put and call conditions and payment over five years.

Mr. Séamus Mac Eochaidh

I said it was a phased payment.

I am not trying to be evasive.

Chairman

It is phased payment.

Mr. Séamus Mac Eochaidh

It is guaranteed payment. The money is fully guaranteed.

Ms Máire Killoran

I preface my comments at the outset by saying that Údarás is an independent statutory agency with its own independent board, which takes its own decisions. The role of the Department is in terms of oversight and ensuring that Údarás is in compliance with corporate governance procedures and makes investments in accordance with its statutory functions under the Gaeltacht Act 2012. In terms of the procedure undertaken specifically in regard to Arramara, the history to it briefly was that a decision was taken by the board on 1 March 2013, subject to ministerial approval being obtained and legal details being agreed. The Department assessed the proposal, legal advice was received and, ultimately, approval for the sale was granted by the Minister of State in the Department and by the Minister for Public Expenditure and Reform in July 2013. The Department is advised that the sale was ultimately completed in May 2014 and that Údarás is satisfied the conditions laid down have been fully complied with.

Chairman

Ms Killoran is saying Údarás is happy.

Ms Máire Killoran

In terms of the Department, our role in the primary instance is an oversight one. Based on the information we received, we understood from the outset that the whole purpose of the process was to identify a strategic partner to develop the industry sustainably in the west of Ireland. The Department considers that, based on the process undertaken, best value was achieved for Arramara in terms of securing a strategic partner with the expertise to develop Arramara for the benefit of its stakeholders.

Chairman

It is not really a partner. Is there a partnership deal now?

Mr. Séamus Mac Eochaidh

There is an 80-page deed of sale agreement, which includes the put and call option.

Chairman

Údarás has no function in that company.

Mr. Séamus Mac Eochaidh

It has no day-to-day function-----

Chairman

None whatsoever.

Mr. Séamus Mac Eochaidh

-----which Údarás does not want.

Chairman

That is fair enough until five years' time when it may or may not have to take up its 40% put and call.

Mr. Gearóid Breathnach

Just to make that clear, there is a put and call option. Even though Údarás has the option if the circumstances-----

Chairman

It does not have to exercise it.

Mr. Gearóid Breathnach

Údarás does not have to exercise it. If it is 40% of nothing, it does not have to-----

Chairman

I am glad Mr. Breathnach made that point. Therefore, it is a sale and we do not have the amount Údarás received for it, except to say that it received a certain amount, that it will get it over a period of time and that it may not exercise the put and call option. It is a lot of smoke and mirrors over just the sale of a property. That is essentially what it is. I am not saying that is good or bad but I am just saying that is how I see it from the outside.

Mr. Séamus Mac Eochaidh

I take the Chairman's point.

Chairman

It can dress up all these put and call options all it likes but whether they are even worth the paper on which they are written is another thing. I do not expect Údarás to comment on that because it entered into the agreement on it. I suppose it all remains to be seen.

Mr. Séamus Mac Eochaidh

By its nature, it is a complicated process to achieve what we wish to achieve, which is the growth of the sector and the industry and to attract-----

Chairman

It is Údarás's best bet.

Mr. Séamus Mac Eochaidh

It is the best bet we could find.

Chairman

Let us call it what it is. We have covered Pobal and schools and we will come back to that at another time. I am concerned that the consultants in the case - this was covered - narrowed it down. There would seem to be some disquiet about the fact that some companies might have felt they were excluded. That was made known to some Members of the Oireachtas by interested parties. How the process was conducted was dealt with and it is over and done with now.

In terms of the other activities, I want to clarify two points, one of which relates to rental property where the income from the property was €3.6 million. Maintenance of the property was something similar. There was very little turnover on it.

Mr. Seamus McCarthy

I think the rents from these properties in 2013 were €3.9 million and expenditure on the maintenance and management of the property portfolio was €3.6 million.

Chairman

How does Údarás account for that? Were substantial works carried out on these properties?

Mr. Gearóid Breathnach

The €3.6 million refers to maintenance of industrial estates and all of the industrial portfolio, which includes more than just rented property.

Chairman

The rental income is €3.9 million - a separate figure - and the maintenance and management of the property is €3.6 million, so whether it is maintenance or management, Údarás still only comes out with €300,000. Is that every year?

Mr. Gearóid Breathnach

More or less.

Chairman

Would Údarás consider that to be a good return?

Mr. Gearóid Breathnach

It is not a good return but the only reason Údarás na Gaeltachta has a property portfolio is that without suitable property available for letting to clients, it would be very difficult to get investment and employment generation in the areas in which we operate. There is no doubt that it is a costly undertaking to maintain a large portfolio of property and industrial estates. Unlike other areas of industrial development, in the Gaeltacht, Údarás owns the industrial estates and is responsible for the effluent treatment plants on most of those estates. It is a costly exercise to maintain those estates properly and to maintain the other properties.

Chairman

Are all of the properties rented?

Mr. Gearóid Breathnach

No.

Chairman

How many commercial properties does Údarás have?

Mr. Gearóid Breathnach

It has approximately 500 units.

Chairman

How many of those are rented? What percentage of those units is rented over a period of time?

Mr. Gearóid Breathnach

Seventy percent of the industrial property is rented.

Chairman

Is the remaining 30% empty?

Mr. Gearóid Breathnach

Thirty percent is empty and approximately 20% of that 30% could be better-----

Mr. Stiofán Ó Cúláin

Údarás has 227,000 sq. m of property. Approximately 70% of that is rented. Of the remaining 30%, only about 10% of it is ready to be rented out. The rest of it is old-----

Chairman

Is it the same per square metre for each property?

Mr. Stiofán Ó Cúláin

No, it varies. Údarás has four different areas - areas close to the centres, areas in between, areas which are disadvantaged and the islands. Údarás also has four different types of properties. It has very old industry-type properties and office-type accommodation and they attract different rents. Údarás reviews that regularly.

Chairman

Are the board members of Údarás paid? Do they get an annual fee?

Mr. Gearóid Breathnach

The members of the board who are not in public employment and who do not receive a salary from public employment are paid a fee of €11,970 per annum.

Chairman

Is that for each board member?

Mr. Gearóid Breathnach

It is for each board member who is not in receipt of a public salary. There are four members of the board who do not receive a fee because of that.

Chairman

In terms of travel and motor expenses, it was €93,000 in 2012 and €96,000 in 2013.

Mr. Gearóid Breathnach

That is travel and motor expenses and subsistence involved in the maintenance and management of the property portfolio section.

Chairman

The other figure in the accounts - note 8 - for domestic travel is €265,000 for 2012 and €254,000 for 2013.

Mr. Gearóid Breathnach

Yes.

Chairman

Who gets it?

Mr. Gearóid Breathnach

It is for staff - employees of Údaras - not the board.

Chairman

I understand that, but is it not an excessive amount of money? What travelling are they doing to warrant that expenditure - €254,000 in 2013?

Mr. Gearóid Breathnach

That was to meet expenses necessarily incurred in the performance of their duties, including travelling to meet clients, visit properties and attend meetings.

Chairman

How many employees would have shared in that €254,000?

Mr. Gearóid Breathnach

There are 82 employees in Údaras na Gaeltachta.

Chairman

Would all of them be in receipt of travelling expenses?

Mr. Stiofán Ó Cúláin

About 50 of them would be.

Chairman

Therefore, 50 people shared €254,000 in travel expenses. Are the witnesses happy with this?

Mr. Gearóid Breathnach

Staff are only reimbursed for travel expenses necessarily incurred in the performance of their duties.

Chairman

Is there a lot of travel?

Mr. Gearóid Breathnach

There is, yes.

Mr. Séamus Mac Eochaidh

One of the difficulties is that our headquarters are located in Galway, but there are Gaeltacht areas stretching from Fanad Head all the way down to west Kerry and over to Dungarvan. As there are no train or bus services to these areas, if a member of the property division needs to meet a tenant in Fanad, he or she must drive there. It is peculiar in that sense in that staff are not travelling from Galway to Dublin all the time. They are travelling from Galway to-----

Chairman

Is it the case that 50 employees service the general Gaeltacht areas and incur travel costs of €254,000?

Mr. Séamus Mac Eochaidh

Yes.

Chairman

The figures for 2012 and 2013 in travel and motoring expenses of €93,000 and €96,000 relate to property maintenance. Is that correct?

Mr. Séamus Mac Eochaidh

Yes.

Chairman

Is that extra, on top of the figure of €3.6 million?

Mr. Gearóid Breathnach

No; it is included in it.

Chairman

Is there any way of tightening up on it to give a greater return or are the witnesses happy with the checks and balances in place?

Mr. Gearóid Breathnach

A lot of the expenditure on property is fixed. It includes environmental costs, compliance costs, rates, the cost of street lighting, effluent plant maintenance, sludge disposal and so forth. There are a lot of fixed costs associated with our property portfolio. It is expensive, of which there is no doubt.

Chairman

Looking at the accounts for 2013, board member expenses amounted to €48,818, with the figure for mileage amounting to €33,961, subsistence, €14,131 and other expenses, €728. Board members receive approximately €11,700 each but they also receive expenses.

Mr. Gearóid Breathnach

The expenses are to cover the cost of attending board meetings. It is detailed elsewhere in the report that there were approximately 12 board meetings that year.

Chairman

Therefore, for the 12 meetings they shared expenses of €48,818, which is broken down into two lots, with the figure for mileage amounting to €33,961 and subsistence, €14,130.

Mr. Gearóid Breathnach

It is paid on the basis of the Civil Service scheme.

Chairman

Where are board meetings held?

Mr. Gearóid Breathnach

Mostly in our head office, but some are held in other Gaeltachtaí from time to time.

Chairman

Where?

Mr. Gearóid Breathnach

In other areas of the Gaeltacht.

Chairman

Board members travel to these areas and incur expenses; is that it?

Mr. Gearóid Breathnach

Yes, but board members come from different areas of the Gaeltacht. There is one member from outside the Gaeltacht. Therefore, no matter where board meetings take place, they necessarily involve travel.

Chairman

Does Údaras have much use for consultants or public relations firms?

Mr. Gearóid Breathnach

We use some consultants to undertake assignments such as the one referred to with Arramara Teoranta or to make economic appraisals of the performance of our client companies and so forth.

Chairman

How many consultants would Údaras have used? What are the figures?

Mr. Gearóid Breathnach

In 2013 the amount paid was €145,000.

Chairman

Was that paid to various consultants?

Mr. Gearóid Breathnach

Yes. It would include internal audits, some legal advice and-----

Chairman

Who looks after internal audits?

Mr. Gearóid Breathnach

A company by the name of DHKN Chartered Accountants.

Chairman

I will now hand over to members for further questions.

Deputy John Deasy

I welcome everyone to the meeting. I would make some attempt to speak as Gaeilge but my Irish is worse than the Minister of State, Deputy Joe McHugh's was in July.

Chairman

We will not go into that.

Deputy John Deasy

The Ring and Old Parish Gaeltacht is well represented here. The Comptroller and Auditor General has cousins in Ring, while I have cousins from Old Parish. My only question relates to a decision by the then Minister a number of years ago to end the permanent board relationship for smaller Gaeltachts. As I understand it, there is now a rotating system in place, with one permanent position rotating between the three smaller Gaeltachts, namely, the Ring and Old Parish, Ballyvourney and Meath Gaeltachts. At the time, the decision was very contentious and it still is within Fine Gael. I have asked the Minister of State, Deputy Joe McHugh, to review it. It is obviously a policy issue and something that was determined by the Minister at the time. I have always made the argument that the smaller Gaeltachts are the ones that needed representation more than the larger ones. It never made sense to me that the right to a permanent member on the board of Údaras would end the right of these three Gaeltachts. What do the witnesses think of that decision? Obviously, they do their jobs and probably compensate in many ways. Do they believe there is a lack of representation for the smaller Gaeltachts because of that decision? Has the board benefited in any way from it? Did the decision make sense? Should it be reviewed? I regularly receive representations from the Ring and Old Parish Gaeltacht, the most recent of which were related to access to high speed broadband for businesses in the area. I am concerned that the lack of a permanent board member for the smaller Gaeltachts which are already finding it difficult to keep the Irish language alive among the population will mean that it will go downhill. Do the witnesses have a view on this?

Mr. Stiofán Ó Cúláin

We have a very small but thriving Gaeltacht in Ring and Old Parish, as the Deputy said. I am very familiar with the area. As I worked out of our office in Dingle for seven years and also covered Waterford, I am familiar with the companies operating in it. That Gaeltacht area is very strong. The Irish language is very strong among the young people there, which is very encouraging. We have 130 people employed in our client companies there. The companies in question are very small. I am sure the Deputy is aware that the major employer is NemetonTV, originally a one person start-up company which is now doing very well. There have been four or five other start-up companies in the past few years and they hold their own when it comes to board meetings. They are well represented by the one full-time board member, Fiachra Ó Céilleachair. The Ring and Old Parish Gaeltacht is well looked after. At least once a month an officer from our Dingle office visits the Ring area. Our office in Cork also covers An tSean Phobail and An Rinn.

Deputy John Deasy

I understand the role Fiachra Ó Céilleachair plays. I also understand the point made by Mr. Ó Cúláin that Ring is a vibrant Gaeltacht. My concern is that the smaller Gaeltachts do not have a permanent board member each. That is not such a good idea. I could never understand the logic of why their membership of the board had been discontinued. The smaller Gaeltachts, in many respects, need permanent representation.

Mr. Stiofán Ó Cúláin

I will give a general answer. As the Deputy said initially, it is not really a question for Údarás na Gaeltachta but a policy decision for the Minister and the Department.

Deputy John Deasy

It is a policy issue for the Minister. Would there be a benefit in having a board member for the smaller Gaeltachts outside Ring? Mr. Fiachra Ó Céilleachair is there, which is fine

Mr. Stiofán Ó Cúláin

Personally, I think there is.

Deputy John Deasy

Thank you, Mr. Ó Cúláin. That is all I needed to know.

Chairman

Is it agreed that we dispose of the Údarás na Gaeltachta accounts for 2013? Agreed. I thank the witnesses for appearing before the committee.

The witnesses withdrew.

Sitting suspended at 11.05 a.m. and resumed at 12.30 p.m.