State lost €31m by overpaying in five property deals

More than €31 million of taxpayers' money was overpaid by the Office of Public Works (OPW) in five property deals over a four-year period, an internal report has found.

Completed last year by two surveyors working for the OPW, the report has since been sent by OPW management to the Comptroller and Auditor General and has recently been sent to the Oireachtas Public Accounts Committee (PAC).

The unpublished report, seen by The Irish Times, concluded the Civil Service culture in the OPW was resulting in “poor value for money outcomes”. It claimed there was “considerable potential for corruption to arise in property transactions” conducted by the OPW, because waste of funds “is tolerated within the system”.

Thornton Hall site

The five transactions examined by the surveyors, one of whom has since retired, included the controversial Thornton Hall site in north Dublin, which had been earmarked for a prison but still lies vacant; a property in Galway which houses the Revenue Commissioners, a site bought for Department of Education offices in Mullingar, Co Westmeath, and land in Kildare.

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The report claimed the Thornton Hall site cost €20 million more than an alternative site, due to a subsequent need to purchase extra nearby land, and develop an access road. The Thornton Hall site itself was purchased in 2005 for €29.9 million, but the project never materialised.

The deal proceeded unchanged despite warnings, meaning best value for money was not obtained, the report said

The report concluded it was “hard to see” reasons for the eagerness to purchase the site, given the additional costs needed to address access problems.

An estimated €1.4 million was overpaid on a property in Fairgreen, Galway city, for the Revenue Commissioners, due to an error calculating the rent to be paid, costing an extra €141,000 a year, the report said.

“Overall rent payable by the OPW was increased by over 13 per cent simply by changing the code of measurement from net to gross internal area,” it said.

The discrepancy was raised by OPW valuers, but the deal proceeded unchanged despite warnings, meaning best value for money was not obtained, the report said.

In 2007, the OPW bought a site for Department of Education offices in Mullingar, Co Westmeath, for €8.2 million, the report said. The surveyors were critical the site was bought at a price “in excess of market value,” ahead of a nearby, but less central, option that was €2.9 million cheaper. Excess expenditure in the Mullingar and Fairgreen cases could have been “totally” avoided, the report said.

In each case acquisitions could have been made at substantially less cost

The report claims the OPW overpaid €6 million acquiring several apartments on Merrion Square, Dublin, purchased for demolition, “to enable a major redevelopment” of the neighbouring National Gallery.

Castletown estate

In November 2006 the OPW paid €2 million for 14 acres of land near the Castletown estate in Co Kildare. The review states that the previous year the land, purchased to be incorporated into the estate, had an estimated value of half the price paid.

Notes from an OPW valuer in 2005 said it could be possible to purchase the site “off market from the owner at around €1.25 million,” but this was not acted upon at the time, the report added.

In a letter on October 22nd last to the PAC, one of the report’s authors, who is now retired, said the €31.5 million had been lost on “unnecessary overspends” in the five cases.

The review did not find evidence of corruption in any of the cases, but said in the authors’ experience they represented “the tip of the iceberg of poor value for money outcomes for the taxpayer,” at the State body, the report said. “In each case acquisitions could have been made at substantially less cost,” the report found.

In a statement the OPW said it “completely rejects claims that there exists a culture of indifference to taxpayers’ money” in the organisation. “The OPW is committed to ensuring value for taxpayers’ money by providing effective, efficient and sustainable use of properties,” it said.

The overall recommendation of the report was that a commercial State agency should be set up to take over property management from the Civil Service, similar to the decision to form Coillte, the national forestry company.