The Indecon report is highly critical of how B
ord na gCon gave a green light to the €23 million development of a new greyhound stadium in Limerick in April 2009 at a time when Ireland's boom was turning to bust.
The economic consultants devote five pages of yesterday’s report to “deficiencies” in the 2009 decision by its board to go ahead with construction of a new stadium in Limerick without sufficient assessment of the risks involved.
Indecon says from 2008 there were “concerns” raised by the comptroller and auditor general about the project, starting with the “lack of formal appraisal” of the purchase of the site in Limerick and with its board not being “privy” to all key information.
Later, Indecon noted the C&AG raised more concerns in relation to its procedures for planning, tendering and managing capital projects that “did not operate effectively”. “We believe that of core significance is how Bord na gCon appraised capital projects,” it said.
Indecon added that, along with the fall-off in commercial revenues, the decision to go ahead with Limerick has “impacted on the debt levels now faced by the organisation”.
Cost benefit appraisal
Indecon said it examined the cost benefit appraisal on Limerick which was presented to its board on June 16th. 2008, as part of its report.
This assumed revenue from Tote would shoot up from €150,000 in year one to €300,000 in year two, before hitting €636,000 per annum from year three until year 20.
“There was no documentary evidence presented to the board in June 2008 to underpin the validity of this critical assumption and no sensitivity analysis for changes in revenue assumptions.”
It said assumptions on revenue from Tote were “very optimistic” and it noted that plans to raise €11.8 million from selling properties did not happen.
In April 2009, Indecon said Bord na gCon considered an “updated” cost benefit proposal. By then it was clear the economy was in trouble.
Property sales
The economic assumptions used by Bord na gCon, however, remained optimistic.
Contribution from Tote was still €150,000 in year one, but now it was €550,000 in year two (more than previously estimated) before hitting €629,000 a year after that, only modestly down on earlier projections. Property sales were adjusted downwards to €8 million, but earnings from other sources moved up.
“Indecon’s analysis suggests deficiencies in the capital appraisal process.”
In particular, it was not based on any documentary evidence concerning the realism of the revenue projections.
“Despite the evidence on declining revenues the final decision to proceed (in April 2009) was based on more optimistic assumptions for revenue than were presented in June 2008.”It said valuations it placed on properties were “optimistic”.
“There was also no sensitivity analysis done.”
In 2013, revenues from Tote in Limerick were in reality only €246,000, Indecon notes.
It said it accepted there was a “legitimate desire” by Bord na gCon for economic and greyhound development reasons to invest in Limerick “but the implications were not adequately evaluated”.
Indecon stated that no capital expenditure was currently planned by Bord na gCon but from now on any spend above €25,000 required a “detailed project approval and a post-project evaluation report”.
