Damning report reveals UL overpaid for properties by millions of euro
Were Linehan Valued General The Failings Identified Said The Properties Ptroller Auditor File Were Dan And Picture: How In
A damning new report detailing significant failings in the purchase of properties by the University of Limerick (UL), that resulted in them overpaying by millions of euro, has been published by the State’s spending watchdog.
The Comptroller and Auditor General said that significant losses were incurred by the University’s acquisition of the former Dunnes Stores on Honan’s Quay (€3m) and homes purchased in Rhebogue for student accommodation (€5.2m).
In the case of Rhebogue, where 80 bed spaces in 20 houses were purchased for a total of €12.2m including Vat, a litany of concerns around this purchase were detailed by the C&AG.
The report said: “Objective appraisal of investment proposals and the avoidance of premature commitments are the central objectives of the Public Spending Code.
“In the case of the Rhebogue acquisition, this examination found no evidence of proper, objective appraisal of the options of the kind that should have been available to decision-makers, including the Governing Authority members, when they were asked to approve the acquisition.”
It found that due diligence in terms of the planning aspects of this development was absent, and the university's governing authority was not informed that planning permission was due to expire in March 2023.
A subsequent warning from the Limerick City and County Council about it being a potentially unauthorised development was a direct result of this lack of due diligence, which the C&AG called an “undesirable and unnecessary outcome”.
Failings were also identified in how the properties were valued. UL based its valuation on the rental yield of Rhebogue. This resulted in a much higher valuation than it would have gotten if it had just done a standard sales comparison.
The report said that the financial analysis then presented to the Governing Authority represented a “justification for the maximum price that the University could reasonably pay”.
“As a negotiating stance, this was detrimental to the University’s and taxpayers’ financial interests,” it said. “The default position for a public body should be to seek to acquire all goods and services, including real property, at the minimum achievable price, not the maximum.”
The C&AG said that the Governing Authority had a right to be briefed on the risks identified in the project ahead of being asked to authorise such a major purchase.
The proposal document submitted to them “failed significantly in that regard” and said legitimate concerns raised by officials were “simply omitted”.
When the range of issues were identified with this purchase, an independent investigation found there was “credible evidence of dismissal and override of legitimate counterarguments”.
“This raises a serious doubt about the objectivity of the University’s evaluation of the Rhebogue acquisition,” the report said.
It all resulted in UL losing out on €5.2m which was recorded as a loss for its overpayment on the 20 homes.
“On this basis, it appears that the manner in which the University acquired the Rhebogue assets resulted in a significant loss in value for money,” the C&AG said. “Further significant improvements are therefore urgently required in the University’s property acquisition policies, procedures and controls.”
In the case of Honan’s Quay, the report said that the university obtained some valuation advice but got no formal valuation report on the property. In September 2018, it considered offering €3m. In March 2019, it offered €6.5m and eventually agreed a price of €8m in April 2019.
The C&AG said an economic assessment was not undertaken on the relative merits of the old Dunnes Stores property and suitable alternatives. It said a suitable site nearby was available at an estimated €3m.
“Because there is no evidence of any additional real benefits to be gained from the University’s development and use of the Honan’s Quay property, as compared to a similar facility at the Opera Quarter, it is difficult to see how the excess cost incurred — of the order of €5m — was warranted, or that it represents value for money,” it said.
Independent valuers put the value of Honan’s Quay as of September 2023 at €5.4m.
Coupled with renovation costs, this resulted in a loss to the university of €3.044m.
Protected disclosures were also made to the University in 2019 and 2020 alleging there had been significant shortcomings around the acquisition of this property.
The report said the university took a “narrow approach” in responding to these protected disclosures.
“Once the second disclosure had been received, the implications of alleged wrongdoing for the operation of controls over the property acquisition should have been considered as a whole, taking account of all of the circumstances of the acquisition, and the non-standard approval procedure followed,” it said.
“This might have warranted the kind of investigation that was later commissioned from external consultants following freedom of information requests.”
In a letter to staff on Friday, Provost Shane Kilcommins said that UL fully accepts the findings of the C&AG report and that the recommendations will implemented without delay.
“These events should never have occurred, and the University has paid a considerable price both in financial terms, due to the impairments carried on our accounts from both transactions, and in reputational terms.”
Mr Kilcommins said the issues surrounding the City Centre campus purchase “cast a long shadow” over the university’s reputation. This was “compounded further” through the Rhebogue purchase.
He said he recognised the damage that has been caused, which he “deeply regrets”. But, he added that many corrective actions have been taken with more to follow.
“Though the future of UL is bright as it is an essential public good, the institution must face the issues of the past and be committed to learning from these mistakes and rebuilding trust through tangible actions,” he added.