Concerns over UL’s €12.5m deal for 20 student houses undermined and ignored

A protected disclosure was made last year about a deal that saw the university pay €5.2m above market value, reveals Wayne O’Connor

Legitimate concerns were undermined and ignored before the University of Limerick (UL) controversially paid €12.56m for 20 homes, according to a review of the deal. A former senior civil servant found problems highlighted in advance of the deal were not brought to the attention of key decision-makers.

The review raised concerns about valuations and financial information used when the purchase was approved.

UL also failed to act on advice around planning permission and did not apply good governance to the purchase.

This means those responsible for approving the plans were not aware of the full facts before signing off on them. A value-for-money exercise showed UL overpaid for the homes by about €5.2m.

It comes as the Sunday Independent can reveal a protected disclosure was made at the university last year in relation to the acquisition.

A whistleblower claimed plans to buy the homes did not adhere to university policies and procedures, including the public spending code. Their complaint was examined by an independent senior counsel, former Communications Minister Alex White, but no action was taken afterwards.

The Higher Education Authority (HEA) has ordered its own in-depth review.

Potential conflicts of interest, governance, oversight and the cultures at UL will be examined as part of its assessment.

It is expected that UL’s capital expenditure over the past 15 years will also be analysed. The university underwent significant development and expansion during that period.

A separate fact-finding review was completed last month by Niamh O’Donoghue, a former secretary general at the Department of Social Protection.

She found legitimate questions were raised about the deal but conflicting views were not brought to the attention of key decision-makers on time.

Consequently, decisions were made without a full awareness of risks associated with the plans, her report said.

The O’Donoghue report did not examine the protected disclosure, but it is categoric in how it addressed other matters around the deal. It said due diligence and approval processes, policies and procedures were not followed properly.

Financial information on the cost of the scheme was not presented clearly to UL’s governing authority, a board responsible for crucial planning and policy decisions.

This board approved spending €10.88m on the homes in August 2022, but the contract was later amended to €11.9m without the governing authority’s (GA) knowledge.

However, even the approved spend inflated the value of the homes by about €4.6m.

The contract was later negotiated down to €11.44m when UL agreed to pay the builder, Silvergrove Developments, upfront and end a rent share agreement. This sum was €560,000 more than the university had approved for the scheme.

In a letter to UL chancellor Professor Brigid Laffan last month, the HEA said it appeared university president Professor Kerstin Mey made the contract amendment without bringing it to the attention of relevant sections of the institution for approval.

O’Donoghue’s report also found external advice was sought too late on planning issues and tax matters around the purchase.

The homes are in use as student accommodation, despite not having planning permission.

A higher-than-anticipated €1.12m stamp duty bill contributed to the inflating costs.

Silvergrove Developments first contacted UL about the scheme in Rhebogue, about 3km from UL, late in 2021.

The builder had been granted planning permission in 2018 for 20 social homes on the site but the project had stalled. The company made an informal approach to UL asking if the university was interested in using the proposed estate to house students.

Companies Registration Office files link Silvergrove to an accountancy firm based in Limerick city centre.

Planning files show Mark Fenton, a developer from Cratloe, Co Clare, who is well-known in the mid-west, is involved in Silvergrove’s daily operations.

His name appears on correspondence between Silvergrove and Limerick City and County Council (LCCC) about a planning application for works at the Rhebogue site.

In early 2022, a quantity surveyor, Ger Dunworth & Associates, contacted UL chief commercial officer (CCO) Andrew Flaherty on behalf of Silvergrove with a formal proposal to house 80 students at Rhebogue.

Ger Dunworth and Flaherty appear to have known each other prior to this. The two men were photographed playing golf together in 2015 as part of a team competing at an event in Shannon Golf Club.

Ger Dunworth & Associates did not respond to a request for comment this weekend. Efforts to contact Silvergrove were unsuccessful.

Flaherty and UL’s chief financial and performance officer, Gary Butler, were listed as the two main sponsors of the deal through university processes for approval during 2022 at a time when UL was under financial pressure.

The HEA had withheld €1.7m in funding, almost 70pc of UL’s capital budget, over concerns about financial governance because of issues around a separate property deal when the university spent €8.3m on a vacant Dunnes Stores unit — €3m more than it was worth.

Former UL chancellor Mary Harney led a delegation at the Oireachtas Public Accounts Committee (PAC) in May 2022 and assured TDs the university had a better handle on its affairs.

New procedures and governance processes had been introduced to prevent a recurrence of the issues which blighted the Dunnes Stores deal.

By the end of July, the HEA reinstated the €1.7m. A week later, UL’s governing authority approved a decision to buy the 20 homes in Rhebogue.

A governance and due diligence process would normally see such a deal examined by a number of internal committees and sections of the university.

UL’s buildings and estates office manages new works projects and land acquisitions but raised objections about the agreement. It was not centrally involved in progressing the student accommodation plans afterwards.

The homes were eventually built by another contractor, Din-Form. It won a tender competition against three other firms to carry out the work. Din-Form said it was hired by Silvergrove and had no direct dealings with UL or anyone outside the main design team.

During construction it emerged that UL faced a significant planning issue in relation to the development.

Plans for the homes were adapted so communal areas could be repurposed into extra student bedrooms.

UL was advised this could be considered a material change of use and require separate planning permission.

University risks fine of €12.7m for breach of planning laws

Shortly after students moved in last year, LCCC told the university it was acting in breach of planning laws. It risks a fine of up to €12.7m.

The university was scheduled to reappear at the PAC last week over the deal but sought a postponement as Mey is on sick leave.

She is expected to be out of work for at least another four weeks, but Laffan said she has “no intention of frustrating the committee with delays”.

A spokesman for UL said it could not comment on Mey’s individual situation.

“The HEA has requested that UL’s governing authority undertake a review of specific issues in relation to the acquisition of the Rhebogue properties and in relation to general governance and culture of the university,” he added.

“Terms of reference for this review are expected to be finalised shortly and as such UL cannot comment further on these matters at this time.

“UL takes these issues very seriously and is working with all stakeholders, internal and external, to chart the best way forward and to ensure the university continues to function as normal,” he said.