DÁIL ÉIREANN AN COISTE UM CHUNTAIS PHOIBLÍ COMMITTEE OF PUBLIC ACCOUNTS Dé Máirt, 23 Feabhra 2021 Tuesday, 23 February 2021 The Committee met at 10 a.m. MEMBERS PRESENT: Deputy Jennifer Carroll MacNeill, Deputy Paul McAuliffe, Deputy Matt Carthy, Deputy Imelda Munster, Deputy Cormac Devlin, Deputy Catherine Murphy, Deputy Alan Dillon, Deputy Verona Murphy, Deputy Neasa Hourigan, Deputy Sean Sherlock. DEPUTY BRIAN STANLEY IN THE CHAIR. 1 PAC Mr. Seamus McCarthy (An tArd Reachtaire Cuntas agus Ciste) called and examined. Horse Racing Ireland: Financial Statements 2019 Mr. Brian Kavanagh (Chief Executive Officer, Horse Racing Ireland) called and examined. Chairman: I welcome everyone to this online meeting. Due to the current situation regard- ing Covid-19, only the clerk, support staff and I are in the committee room. Members of the committee are attending remotely from within the precincts of Leinster House. This is due to the constitutional requirement that, in order to participate in public meetings, Members must be physically present within the confines of the place where the Parliament has chosen to sit, namely, Leinster House or the convention centre. I ask that committee members confirm their locations before contributing to ensure they are adhering to this requirement. The Comptroller and Auditor General, Mr. McCarthy, is a permanent witness to the committee and is attending remotely. Before we begin our public engagement, we considered the minutes of our meetings of 4 and 9 February at our private meeting last week. Standing Order 107(3) requires that the min- utes are agreed in public session. Are the minutes agreed? Agreed. Today we are engaging with officials from Horse Racing Ireland to examine matters relating to its 2019 financial statement. We are joined remotely from outside the precincts of Leinster House by the following officials: Mr. Brian Kavanagh, chief executive, and Ms Suzanne Eade, chief financial officer. I welcome them to the meeting and thank them and their staff for the briefing material they have prepared for us. When we begin to engage, I ask that members and witnesses mute themselves when not contributing in order that we do not pick up any background noise or feedback. I also ask that they use the button to raise their hands to indicate when they wish to contribute and, as usual, I remind all those in attendance to ensure that their mobile phones are on silent mode or switched off. When people have finished contributing, they should not forget to use the button to lower their hands. It can be confusing otherwise. I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to the Constitution and statute, by absolute privilege. However, today’s wit- nesses are giving their evidence remotely from a place outside the parliamentary precincts and, as such, may not benefit from the same level of immunity from legal proceedings as a witness who is physically present does. Our witnesses have already been advised of this and they may have viewed it as appropriate to take legal advice on this matter. Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction. Members are reminded of the provisions within Standing Order 218 that the committee shall 2 23 FEBRUARY 2021 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. Members are also reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. To assist our broadcasting and debates services, I ask that members direct their questions to a specific witness. If the question has not been directed to a specific witness, I ask the witnesses to state their names the first time they contribute. I invite the Comptroller and Auditor General, Mr. McCarthy, to make his opening statement. Mr. Seamus McCarthy: Horse Racing Ireland, HRI, was established to provide a statutory basis for the control, regulation and development of the horse racing industry in Ireland. It operates racing and betting activities through eight subsidiaries. In addition, it has a one third shareholding in an associated company called Curragh Racecourse Limited, CRL. HRI received State funding of €67.2 million in 2019, sourced from the Vote for the Depart- ment of Agriculture, Food and the Marine through the Horse and Greyhound Racing Fund. HRI’s other main sources of income in the year were contributions from horse owners and sponsors towards racing prize money, totalling €23.4 million; sales of media rights to the value of €6.8 million; registration fee income of €2.6 million; industry contributions to Irish Thor- oughbred Marketing of €443,000; and net income of €294,000 from racing activities arising from totaliser betting and HRI-owned racecourses. On the expenditure side in 2019, HRI paid out €67.6 million in prize money. Expenditure of €12.6 million was incurred on integrity and racecourse services, mainly comprising grants to the Irish Horse Racing Regulatory Board. Overall, the HRI group incurred a deficit of just over €1 million for 2019. The 2019 financial statements received a clear audit opinion. However, without qualifying that opinion, my report drew attention to two matters related to HRI’s activity in the year. First, I drew attention to the fact that the statement of income and expenditure disclosed a group loss of €2.064 million in 2019 relating to HRI’s investment in CRL. This is a company established to provide for the redevelopment and management of the Curragh racecourse. The redevelop- ment involved the construction of a new stand and other racing facilities, which opened in mid- 2019. Ownership of the company is split between HRI, the Turf Club and private investors. Notes Nos. 37 and 39 of the group financial statements explain that HRI had contributed fund- ing to CRL totalling €36 million up to the end of 2019. This comprised an investment of €23 million in return for an equity share, grant funding of €12.5 million for the construction project, and €500,000 paid for the right to use a hospitality suite at the racecourse for 30 years. In addi- tion, the group financial statements reflect a loan of €500,000 given by HRI to CRL during 2019 to fund additional works on the racecourse’s parade ring. As at 31 December 2019, HRI held a 35.29% economic share in CRL. The carrying value of HRI’s investment at 31 December 2019 was €18.5 million, indicating cumulative losses incurred by HRI amounting to €4.5 million. Second, I drew attention to the disclosure in the statement on internal control for 2019 of a financial loss by HRI of €389,000 in respect of cash-in-transit services. The service provider went into liquidation while holding cash relating to HRI’s racecourses and its Tote Ireland sub- sidiary. The chief executive will be able to update the committee on these matters. 3 PAC Chairman: I invite Mr. Kavanagh to make his opening statement. Mr. Brian Kavanagh: I am grateful for the opportunity to appear before the Committee of Public Accounts to assist with its examination of the 2019 financial statements of HRI. As members will be aware, HRI is a commercial semiState body responsible to the Minister for Agriculture, Food and the Marine and was established under the Horse and Greyhound Rac- ing Act 2001. HRI is responsible for the overall administration, governance, development and promotion of the Irish horse racing industry and operates a corporate structure that comprises the main body and nine subsidiary companies, one of which is dormant. Its functions are set out in legislation. As the Comptroller and Auditor General set out, HRI’s primary sources of funding are the Horse and Greyhound Racing Fund, race entry fees from owners, race sponsorship fees through racecourses, profits from commercial subsidiaries, a statutory foal levy on breeders, the sale of media rights, industry contributions to Irish Thoroughbred Marketing and a turnover levy on oncourse bookmakers. We are based in Ballymany, the Curragh, County Kildare, and including our subsidiary companies, we employ a total of 247 people. Since the establishment of the Racing Board in 1945, the horse racing and thoroughbred industry in Ireland has been overseen by a State body and has been the subject of legislation. The reason for this is the unique position which the sec- tor holds in Ireland. Horses are something which Ireland does well, and for a small country we hold leadership positions in many elements of the industry which makes a valuable contribution to the social, economic and cultural fabric of the country. This was well summed up recently by An tUachtarán, Michael D. Higgins, when he said the horse has a special place in Irish life and culture and, “A love of horses, their breeding and training, are an integral part of Ireland’s identity and of our reputation abroad.” Supportive Government policy over the years has enabled a significant rural industry to de- velop, and in 2017, Deloitte issued a comprehensive report on the value of the industry which made a number of important findings.