The State paid a developer €33m in compensation for a site worth less than €3m, a damning new report has found.

The Public Accounts Committee (PAC) has concluded its investigation into a botched land-swap deal involving the former garda station at Harcourt Terrace in Dublin.

The report - seen by the Sunday Independent - found a series of significant failures by several State agencies led to the large compensation pay out to developer Durkan New Homes.

In 2012, the Commercial Court awarded the damages to Durkan New Homes, after the State failed to honour an agreement to hand over Harcourt Terrace Garda Station in Dublin as part of a land-swap deal.

As part of a government scheme to address the housing shortage, Durkan built 215 affordable homes for first-time buyers during the height of the boom.

It did so in return for getting possession of the garda station and the adjoining film censor's office.

The government plan identified State-owned buildings and sites deemed "surplus to requirement," with a view to developing them in conjunction with private developers.

The Harcourt Terrace development cost Durkan more than €31m. Failures to identify a suitable alternative location for gardai based in Harcourt Terrace meant it remained occupied by the force until 2012. It now houses a national school.

The site at Harcourt Terrace was valued at €17.7m in 2006, but was valued at just €2.8m at the time of the judgement.

As a result, Durkan took the Minister for the Environment to court and the company's case was upheld. The court ruled that Durkan New Homes paid its share of the contract in full.

The new PAC report concluded that too many State agencies were involved and they got in the way of each other. As a result, the deal ultimately failed.

The PAC report also found that Harcourt Terrace was "clearly not" surplus to requirement.

It found that the risks associated with this venture, which initially lay with the developer, had transferred in full onto the State.

"It would have been better in hindsight if the initial contract had placed a value on the Harcourt Terrace site which would then have provided a ceiling on any potential claim in the event that the contract was not fulfilled," the report said.

After the process had commenced, the Office of Public Works (OPW), which had legal control over the site, became concerned about the time frame involved. In 2008 it commenced negotiations with the developer with a view to leasing back the site for a period of five years.

When negotiations broke down in 2010, Durkan, having seen the value of the Harcourt Terrace site collapse, forced the hand of the State by seeking payment of the full €31m.

The PAC report was based on its investigations into the accountability issues relating to the failure of the State to deliver on its commitment and the costs arising from the non-delivery of the site.

Despite the debacle, the report said the taxpayer was rescued somewhat by the fact that Durkan had gone into Nama. As a result, Nama then became the beneficiary of the High Court judgement, and therefore the net cost to the taxpayer was somewhat less.

"The fact that Nama was the ultimate beneficiary of the High Court decision to compensate the developer has lessened the overall impact on the public finances," the report states.

But it adds: "A cash flow issue arises as the Department and the OPW have to pay over this money over a five-year period and this has an opportunity cost."

During its investigations, PAC vice-chairman Kieran O'Donnell asked if the agendas of different state agencies had got in the way of each other.

OPW chairwoman Clare McGrath denied this, and said everybody had been working towards the same goal. She conceeded, however, that "lessons need to be learnt".

Former Department of Environment secretary general Geraldine Tallon told the committee: "Hindsight is 20/20, but I do very deeply regret how this has turned out. Ultimately you need a single authority who is calling the shots."

Sunday Independent