Financial Statements
REPORT OF THE COMPTROLLER AND AUDITOR GENERAL FOR PRESENTATION TO THE HOUSES OF THE OIREACHTAS
I have audited the financial statements of the Industrial Development Agency for the year ended 31 December 2006 under the Industrial Development Act, 1993.
The financial statements, which have been prepared under the accounting policies set out therein, comprise the Accounting Policies, the Operating Account, the Balance Sheet, the Cash Flow Statement and the related notes.
Respective Responsibilities of the Board of the Agency and the Comptroller and Auditor General
The Agency is responsible for preparing the financial statements in accordance with the Industrial Development Act, 1993, and for ensuring the regularity of transactions. The Agency prepares the financial statements in accordance with Generally Accepted Accounting Practice in Ireland. The accounting responsibilities of the Members of the Agency are set out in the Statement of Board Members' Responsibilities.
My responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
I report my opinion as to whether the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland. I also report whether in my opinion proper books of account have been kept. In addition, I state whether the financial statements are in agreement with the books of account.
I report any material instance where moneys have not been applied for the purposes intended or where the transactions do not conform to the authorities governing them.
I also report if I have not obtained all the information and explanations necessary for the purposes of my audit.
I review whether the Statement on Internal Financial Control reflects the Agency's compliance with the Code of Practice for the Governance of State Bodies and report any material instance where it does not do so, or if the statement is misleading or inconsistent with other information of which I am aware from my audit of the financial statements. I am not required to consider whether the Statement on internal Financial Control covers all financial risks and controls, or to form an opinion on the effectiveness of he risk and control procedures.
I read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the financial statements.
Basis of Audit Opinion
In the exercise of my function as Comptroller and Auditor General, I conducted my audit of the financial statements in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board and by reference to the special considerations which attach to State bodies in relation to their management and operation. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures and regularity of the financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgments made in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Agency's circumstances, consistently applied and adequately disclosed.
I planned and performed my audit so as to obtain all the information and explanations that I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In my opinion, the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of the Agency's affairs at 31 December 2006 and of its income and expenditure for the year then ended.
In my opinion, proper books of account have been kept by the Industrial Development Agency. The financial statements are in agreement with the books of account.
John Purcell
Comptroller and Auditor General
22 May 2007
STATEMENT OF BOARD MEMBERS' RESPONSIBILITIES
The Industrial Development Agency Ireland (IDA) was established on 1 January 1994 as an agency of Forfás (the policy and advisory board for industrial development in Ireland) under the provisions of the Industrial Development Act, 1993.
Paragraph 7(2) of the First Schedule to the Industrial Development Act, 1993 requires the Agency to keep, in such form as may be approved of by the Minister for Enterprise, Trade and Employment with the consent of the Minister for Finance, all proper and usual accounts of money received and expended by it. In preparing those accounts, the Board is required to:
- select suitable accounting policies and apply them consistently
- make judgments and estimates that are reasonable and prudent
- prepare the Financial Statements on a going concern basis unless it is inappropriate to presume that the Agency will continue in operation
- disclose and explain any material departures from applicable accounting standards.
The Board is responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Agency and which enables it to ensure that the Financial Statements comply with Paragraph 7(2) of the First Schedule to the Industrial Development Act, 1993. The Board is also responsible for safeguarding all the assets of the Agency and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
On behalf of the Board:
John Dunne Chairman
Sean Dorgan Chief Executive
Kieran Corrigan Chairman, Audit and Finance Committee
STATEMENT ON THE SYSTEM OF INTERNAL FINANCIAL CONTROL
On behalf of the Board of IDA I acknowledge our responsibility for ensuring that an effective system of internal financial control is maintained and operated by the Agency.
The system can only provide reasonable and not absolute assurance that assets are safeguarded, transactions authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected in a timely period.
The Board has taken steps to ensure an appropriate control environment is in place by:
- establishing formal procedures through various committee functions to monitor the activities and safeguard the assets of the organisation;
- clearly defining and documenting management responsibilities and powers;
- developing a strong culture of accountability across all levels of the organisation.
The Board has also established processes to identify and evaluate business risks. This is achieved in a number of ways including:
- working closely with Government and various agencies and institutions to ensure that there is a clear understanding of IDA's goals and support for the Agency's strategies to achieve those goals;
- carrying out regular reviews of strategic plans both short and long term and evaluating the risks to bringing those plans to fruition;
- setting annual and longer term targets for each area of our business followed by regular reporting on the results achieved;
- carrying out regular reviews of developments and strategies in our business sectors;
- establishing and enforcing extensive standard procedures and provisions under which financial assistance may be made available to projects, including provisions requiring repayment if the project does not fulfil commitments made by the promoter.
The system of internal financial control is based on a framework of regular management information, administrative procedures including segregation of duties, and a system of delegation and accountability.
In particular it includes:
- a comprehensive budgeting system with an annual budget which is reviewed and agreed by the Board;
- regular reviews by the Board of periodic and annual financial reports which indicate financial performance against forecasts;
- setting targets to measure financial and other performances;
- clearly defined capital investment control guidelines;
- formal project management disciplines.
The IDA has an internal audit department, which reports directly to the Audit and Finance Committee of the Board. This Committee meets on at least a quarterly basis to review reports prepared by Internal Audit and other departments. The Audit and Finance Committee in turn keeps the Board informed of the matters that it has considered.
The internal audit function operates in accordance with the Framework Code of Best Practice set out in the Code of Practice for the Governance of State Bodies. A rolling three-year Internal Audit work plan is determined by the Audit and Finance Committee and revised annually where required. The current work plan takes account of areas of potential risk identified in a risk assessment exercise carried out by management and reviewed by the Audit and Finance Committee and the Board. The Internal Auditor provides the Committee with quarterly reports on assignments carried out. These reports highlight deficiencies or weaknesses, if any, in the system of internal financial control and the recommended corrective measures to be taken where necessary.
The Board's monitoring and review of the effectiveness of the system of internal financial control is informed by the work of the Internal Auditor, the Audit and Finance Committee, which oversees the work of the Internal Auditor and the executive managers within IDA Ireland who have responsibility for the development and maintenance of the financial control framework.
I confirm that, in respect of the year ended 31 December 2006, the Board conducted a review of the system of internal financial controls.
Signed on behalf of the Board
John Dunne
Chairman
9 May 2007
ACCOUNTING POLICIES
(1) Basis of Accounting
(a) The Financial Statements have been prepared in accordance with the historical cost convention in the form approved by the Minister for Enterprise, Trade and Employment with the consent of the Minister for Finance and are denominated in euro.
The Financial Statements are prepared on an accrual basis, except where stated in the Accounting Policies. The financial year is 1 January to 31 December.
Financial Reporting Standards recommended by recognised accountancy bodies are adopted as they become applicable.
(b) Tangible Fixed Assets comprise:
- Land which is held for the purposes of industrial development.
- Site development works.
- Industrial buildings leased to tenants including buildings in the course of sale where title had not passed at the year end.
- Vacant property available for industrial promotion or in the course of sale where title had not passed at the year end.
- Other Fixed Assets including motor vehicles, computer and office equipment and fixtures and fittings.
(c) Telecommunication Assets comprise:
Telecommunication Assets constitute an indefeasible right of use of a designated portion of a global telecommunications network for a period of 25 years from 2000.
(d) Investments consist entirely of equity investments.
(e) Accounts Receivable comprise amounts due in respect of:
- Properties sold on a deferred basis. Interest is charged on these amounts at the Exchequer Lending Rates advised by the Department of Finance or the EU Discount Reference Rate as applicable.
- Rents due under the terms of lease agreements, for periods of up to 35 years, entered into between the Agency and tenants, charges for the use of undeveloped lands and estate maintenance charges billed to tenants.
- Fees from purchase options given on IDA property, deposits paid by IDA for the purchase of property where title had not passed to the Agency at 31 December, and the provision of other services.
- Amounts due in respect of the disposal or leasing of telecommunication assets.
- Amounts due in respect of joint arrangements.
- Amounts due in respect of loans advanced and interest thereon.
(f) Accounts Payable comprise amounts payable in respect of:
- Creditors.
- Grants that have matured for payment.
- Deposits received in respect of disposals of property in progress.
(g) By way of memorandum Income and Expenditure in respect of Industrial Property transactions are set out in note 22 to the Financial Statements.
(2) Income recognition
Income from Oireachtas grants, grant refunds, the National Training Fund, the European Social Fund, the European Regional Development Fund and investments, represent actual cash received.
(3) Industrial Property
Industrial Property included in tangible fixed assets has been acquired, developed or constructed for the purposes of assisting in the promotion and development of industry and is not considered to be investment property but normal fixed assets.
(4) Carrying Amounts, Depreciation and Provisions for Impairment
(a) The carrying amounts for tangible fixed assets, other than land, and for telecommunication assets comprise:
Historic cost less accumulated depreciation and less a provision for impairment of the assets, where applicable, to endeavour to ensure that the value of the assets carried in the Financial Statements do not exceed their estimated recoverable amounts.
(b) The carrying amounts for Land and Investments comprise:
Historic cost less a provision for impairment of the assets, where applicable, to endeavour to ensure that the value of the assets carried in the Financial Statements do not exceed their estimated recoverable amounts.
(c) Depreciation is calculated in order to write off the cost of assets less, where applicable, any impairment provision over their estimated remaining useful lives. No provision for depreciation is made in respect of land or investments.
(d) Provisions for impairment may be made following reviews of fixed assets, telecommunication assets and investments carried out by officers of IDA or independent valuers, as appropriate, if events or changes in circumstances or economic conditions indicate that the carrying amount of the assets or investments may not be fully recoverable. Any such provisions will be recognised in the Operating Account in the year in which they are made.
Where a subsequent review indicates that the circumstances which gave rise to a provision for impairment no longer exist or have changed materially the accumulated provision for impairment will be reduced accordingly.
(e) The cost of land, site development and industrial property includes an apportionment of administration costs associated with the acquisition or development of the assets.
(5) Deferred Income
EU grants received in respect of the purchase or development of fixed assets are treated as a deferred credit and are amortised to the operating account annually over the useful economic life of the assets to which they relate.
(6) Accounting for Bad and Doubtful Debts
Known bad debts are written off and specific provision is made for any amount the collection of which is considered doubtful.
(7) Accounting for Investments
The IDA Financial Statements do not reflect a consolidation of the results of the investee companies because IDA activities are so different from those of the investee companies that such consolidation would be incompatible with the obligation to give a true and fair view.
(8) Grants Payable
Grants are accrued in the Financial Statements when the grantee complies with stipulated conditions.
(9) Foreign Currencies
Assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the Balance Sheet date. Revenues and costs are translated at the exchange rates ruling at the dates of the underlying transactions.
Profits and losses arising from foreign currency translations and on settlement of amounts receivable and payable in foreign currency are dealt with in the Operating Account.
(10) Operating Leases
The rentals under operating leases are dealt with in the Financial Statements as they fall due.
(11) Capital
Capital represents funds utilised for the acquisition and development of industrial property, the acquisition of other fixed assets, telecommunication assets and investments taking account of disposals, depreciation charges and, where applicable, provisions for impairment in the carrying amounts.
(12) Superannuation
All IDA staff are employees of Forfàs and are seconded to the Agency by Forfàs. Legislation requires Forfàs to prepare and administer pension schemes for the granting of pension entitlements to its staff including staff seconded to IDA. Forfàs is also responsible for pension reporting requirements, including those set out under FRS 17. Voluntary early retirement costs paid directly by IDA and all pension contributions deducted from staff are accounted for in the Operating Account in the period in which they arise.
| Notes | 2006 € '000 | 2005 € '000 | |
|---|---|---|---|
| Income | |||
| Oireachtas Grants | 1 | 131,218 | 126,573 |
| National Training Fund | 2 | 1,269 | 900 |
| EU - INTERREG 111A Programme | 3 | 132 | 1,264 |
| EU & Exchequer Co-Funded Research Technology and Innovation (RTI) for Industry Programme | 4 (a) | 4,296 | 4,310 |
| ESF Receipts | 4 (b) | 3,961 | - |
| Grant Refunds | 10,776 | 11,350 | |
| Rental Income | 3,220 | 2,947 | |
| Less Rental Income Received from Enterprise Ireland Client Companies | 5 (a) | (72) | (165) |
| Other Income | 6 | 1,497 | 1,247 |
| Profit on Disposal of Assets | 7 | 61,089 | 46,023 |
| 217,386 | 194,449 | ||
| Expenditure | |||
| Grants Payable | 8 | 96,687 | 87,259 |
| Promotion,Administration and General Expenses | 9 (a) | 40,121 | 36,179 |
| Industrial Building Charges | 10 | 11,833 | 9,428 |
| Depreciation Charges and Provisions | 11 | 16,970 | 16,950 |
| 165,611 | 149,816 | ||
| Surplus | |||
| Net Operating Surplus for Year | 51,775 | 44,633 | |
| Contribution to the Exchequer | 12 | (6,731) | (2,426) |
| Balance at 1 January | 35,990 | 44,652 | |
| Transfer to Capital | 13 | (54,510) | (50,869) |
| Balance at end of Year | 26,524 | 35,990 | |
| Notes | 2006 € 000 | 2005 € 000 | |
|---|---|---|---|
| Tangible Fixed Assets | |||
| Industrial Property | 14 | 307,768 | 252,883 |
| Other Fixed Assets | 15 | 1,193 | 877 |
| 308,961 | 253,760 | ||
| Intangible Assets and Investments | |||
| Telecommunication Assets | 16 | 693 | 1,384 |
| Investments | 17 | - | - |
| Total Tangible and Intangible Assets and Investments | 309,654 | 255,144 | |
| Current Assets | |||
| Accounts Receivable | 18 | 9,437 | 40,201 |
| Cash at Bank and on hand | 93,758 | 13,672 | |
| 103,195 | 53,873 | ||
| Current Liabilities | |||
| Accounts Payable | 19 | 75,743 | 16,936 |
| Net Current Assets | 27,452 | 36,937 | |
| Long Term Receivables | |||
| Accounts Receivable: amounts falling due after more than one year | 18 | 1,676 | 1,78 |
| Deferred Income | |||
| EU INTERREG 111A Programme | 3 | 2,604 | 2,736 |
| Net Assets | 336,178 | 291,134 | |
| Representing: Capital | 13 | 309,654 | 255,144 |
| Representing: Operating Account | 26,524 | 35,990 | |
| 336,178 | 291,134 | ||
| The Basis of Accounting, Accounting Policies, Cash Flow Statement and Notes 1 to 25 form part of these Financial Statements. On behalf of the Board: | |||
| John Dunne Chairman |
Sean Dorgan Chief Executive |
Kieran Corrigan Chairman, Audit and Finance Committee |
|
| Notes | 2006 € 000 | 2005 € 000 | |
|---|---|---|---|
| Reconciliation of Net Operating Surplus to Net Cash Inflow from Operating Activities | |||
| Net Operating Surplus for Year | 51,775 | 44,633 | |
| Depreciation Charges: Industrial Property | 11 | 15,583 | 15,376 |
| Depreciation Charges: Other Fixed Assets & Telecommunication Assets | 11 | 1,387 | 1,572 |
| EU-INTERREG 111A Programme Grant Amortised | 3 | (132) | (1,264) |
| Expenditure Capitalised | 9 (a) | (235) | (865) |
| Provision for Impairment of Investments | 11 | - | 2 |
| Profit on Disposal of Assets | 7 | (61,089) | (46,023) |
| Bank Interest | 6 | (967) | (357) |
| EU-INTERREG 111A Programme Grant Received | 3 | - | 4,000 |
| Decrease in Accounts Receivable amounts falling due within one year | 30,764 | 4,946 | |
| Increase/(Decrease) in Accounts Payable | 58,807 | (2,829) | |
| Decrease/(Increase) in Accounts Receivable amounts falling due after more than one year | 113 | (117) | |
| Net Cash Inflow from Operating Activities | 96,006 | 19,074 | |
| CASH FLOW STATEMENT | |||
| Net Cash Inflow from Operating Activities | 96,006 | 19,074 | |
| Contribution to the Exchequer | 12 | (6,731) | (2,426) |
| Returns on Investment and Servicing of Finance | 23 (a) | 967 | 357 |
| Capital Expenditure and Financial Investment: Acquisitions | 23 (b) | (86,782) | (74,535) |
| Capital Expenditure and Financial Investment: Disposals | 23 (c) | 76,626 | 53,604 |
| Management of Liquid Resources | |||
| (Increase)/DecreaseinShortTermDeposits | 23 (d) | (20,474) | 7,000 |
| Increase in cash for the period | 59,612 | 3,074 | |
| Reconciliation of net cash flow to movement in net funds | |||
| Increase in cash for the period | 59,612 | 3,074 | |
| Increase/(Decrease) in liquid resources | 23 (d) | 20,474 | (7,000) |
| Movement in net funds in the period | 80,086 | (3,926) | |
| Net funds at 1 January | 23 (d) | 13,672 | 17,598 |
| Net funds at 31 December | 93,758 | 13,672 | |