Dáil Éireann Debate, Tuesday - 14 December 2004
43 Mr. Cuffe asked the Minister for Community, Rural and Gaeltacht Affairs the reason it was necessary for Údarás na Gaeltachta to make an exceptional provision for depreciation in 2002, ten times the normal annual provision; if the previous policy on depreciation was inadequate; and if he will make a statement on the matter. [33281/04]
Amharc ar fhreagraNote 11(b) of the financial statements of Údarás na Gaeltachta's published 2002 annual report states:
In previous years property and industrial facilities were depreciated on the basis of an estimated life of 50 years. As a result of a review carried out in 2002 it was decided that a more accurate estimate of useful lives was 25 years for property and 33 years for industrial facilities. In 2002 these assets have been depreciated accordingly and, in addition, the net book value of these assets at 1 January 2002, has been reduced by €37,952,810 on foot of the accumulated impairment in value of these assets up to 31 December 2001.
I have been informed by Údarás na Gaeltachta that the decision was made on the basis of prudent policy, having consulted with the Office of Comptroller and Auditor General. It takes into account policies in similar organisations and the changing nature of business and industrial property and facilities in recent years. This approach reflects a continuing development of best practice in accounting policies.
Does the Minister accept it is somewhat extraordinary, given conventional accounting standards, that this adjustment was made in one year? The re-adjustment was twice the normal level of depreciation on some buildings and two thirds on industrial buildings, but it took place for one financial year. Depreciation affects the bottom line of income and expenditure in any organisation. The picture is distorted as to whether Údarás na Gaeltachta is cash rich or needs cash injections from the Exchequer. Has the Department expressed any concern that this particular adjustment happened in the one year and was not made a contingency over a longer period?
No, we are not concerned. The note in the annual report explained the action in financial terms. For anyone examining the accounts, the given figure in the report had a note beside it, giving a full explanation of the exact procedure used. Many accounts and annual reports contain these. Unlike a normal trading company, Údarás na Gaeltachta has a large number of assets, exceeding €100 million. It does not borrow against those assets and, therefore, this accounting practice does not have any implications for bank borrowings. Údarás na Gaeltachta's borrowings are modest, usually relating to day-to-day operations. It is a book value adjustment to the assets that has no effect on the body's liquidity or its demand for State money.
Other development agencies, such as the IDA and Shannon Development, have been affected where leased properties have been leased back at high value, with losses to the agencies and bodies. Has Údarás na Gaeltachta leased properties that have remained unused and distorted the book and asset value of the body itself?
Traditionally, Údarás na Gaeltachta has a policy of constructing its own buildings and then leasing them. Reductions in rental income have occurred due to several factors, including EU rules and the closure of big factories in areas such as Gweedore, County Donegal. However, this has not had a serious effect on Údarás na Gaeltachta, as it owns most of the properties it leases to clients.
If properties are depreciated as such, can they then be sold off at a lower value?
No. We had a good debate earlier this year on procedures to be used in selling Údarás na Gaeltachta property. In selling any property, the full value, as far as is possible, must be attained. Even if a property had been written off at zero value, it does not take away from the obligation of Údarás na Gaeltachta to maximise its return from the sale of property.
Factory buildings were considered to be permanent structures. However, changing technologies mean that many Údarás na Gaeltachta's advance factories, built from the 1940s to the 1980s, must be refurbished from scratch if new industrialists are to locate in them. The nature of industrial buildings has changed dramatically and they are now more purpose built. I have discussed with Údarás na Gaeltachta the need to adjust its policy on buildings. The old idea of the advance factory and standard units is not the same as it was in the 1970s and 1980s when many of them were built by Údarás na Gaeltachta. Many industries locating in these areas want purpose-built facilities, not standard units.
