CRC fundraising arm founded as separate company to hide funds from HSE - report

Friday 20 June 2014 11.53
A report of the Interim Administratior to the Central Remedial Clinic has found a number of outstanding issues
A report of the Interim Administratior to the Central Remedial Clinic has found a number of outstanding issues

A report of the Interim Administrator to the Central Remedial Clinic has found the Friends and Supporters of the CRC was established as a separate company to hide its level of funding from the HSE.

The administrator said the inference was that "if the HSE had been aware of the level of funds available, it may have reduced its annual allocation to the CRC".

He said the F&S was founded as a separate company to the CRC only to maximise funding from the HSE.

The administrator called for all the functions of the F&S to be transferred to the CRC as soon as possible and said the company should be would up.

A report found a number of outstanding issues need to be brought to a conclusion.

This includes the executive team structure, pay in 2015 and the full application of public sector pay cuts to former CEO Paul Kiely.

Mr Kiely was given a €740,000 retirement package and the administrator says that overpaid monies should be repaid or recovered.

Oireachtas Health Committee chairman Jerry Buttimer said there is a moral obligation on Mr Kiely to reflect on the report of the Interim Administrator to the Clinic and to do the right thing.

Mr Buttimer said the governance of the CRC had now been proven to have been completely shambolic and the interim report published today shows there was no proper competent governance by the former board of directors.

He said the report reflects a need to put a structure in place where there is a new CEO, a new board and a new service level agreement with the HSE.

The 164-page report said that the CRC made incorrect calculations in the retirement package negotiated with Mr Kiely, which had been aimed at saving over €367,000.

The administrator, John Cregan said that time was on the side of the CRC, given that the Haddington Road salary cut was imminent and it could have explored a range of options to secure the fairest deal for the CRC and the CEO.

Despite the CEO's pay being the most serious governance issue to be faced by the CRC Board, it chose not to inform the HSE of the proposed package.

The administrator also says that 'to add fuel to the fire' the CRC proceeded to offer the new CEO post to Brian Conlon, a former Board member, without the approval of the HSE, which further soured the CRC's relationship with its main funder.

The administrator found a number of 'Big Ticket' items dealt with by the former Friends and Supporters (F&S) of the CRC board, the charity arm, for which there was little or no narrative in the minutes.

Among the items was a donation by the F&S of €700,000 to the CRC in 2013, to enable the clinic fund the termination agreement entered into with its former CEO, Paul Kiely.

The report says that in the past the CRC operated an executive payroll, in addition to a general payroll, but from January this year all employees have been paid through the general pay roll.

The administrator says that the CRC Board appeared to be more concerned about the clinic's independence and the attention that revealing the level of the former CEO Mr Kiely's pay would attract, rather than the level of remuneration itself.

But the administrator says that at no stage did he find it necessary to refer any matter to any third party or authority and the overall standard of record-keeping and the normal financial transactions were properly supported and vouched.

He says there is no basis for the Office of the Director of Corporate Enforcement to be involved in the affairs of the CRC or its related areas.

Findings on CRC 'Friends and Supporters'

The administrator says that the Friends and Supporters of the CRC:

- Forgave loans made to The Care Trust, the operator of pools and lotteries for charitable purposes, of which the Friends and Supporters own half of the shares

- Made an unsecured, interest free, long-term loan of €3m to the CRC to help it fund its pension liabilities

- Repaid €550,000, on behalf of CRC Medical Devices, to the CRC in 2013. CRC Medical Devices distributed mobility products in Ireland, had accumulated losses and ceased trading last year.

- Mr Cregan says that as yet, the losses at CRC Medical Devices can not be quantified however those losses will be a drain in the F&S resources and on the funds raised for the benefit of the CRC.

- The use of a CRC Medical Devices credit card by a CRC employee, even if the transactions related to expenses incurred on behalf of CRC Medical Devices and were vouched, was not considered to be appropriate by the interim administrator.

- At the end of 2013, the Friends and Supporters had funds of €12.8m.

The report says that the CRC experienced a sharp reduction in the funds being raised from its fundraising activities and staff previously assigned to fundraising were redeployed to other roles within the CRC.

In 2012, the CRC secured €404,000 in fundraising but this fell to €190,934 last year in the wake of controversies faced by the clinic.

The administrator says that the CRC needs to deal with the immediate priority of a future fundraising strategy to deal with the sharp fall in fundraising income.

The administrator says that a number of undesirable governance practices have been identified which are to be dealt with by the boards of the CRC and the Friends and Supporters arm.

It notes that the Friends and Supporters of the CRC is a limited company with charitable status but it is not a Section 38 or Section 39 agency.

The lottery income to the F&S may only be used for the benefit of the CRC.

Last year, F&S recorded lottery proceeds of €1.7m from The Care Trust.

The administrator says that irrespective of who owns the shares in The Care Trust, the beneficiary which is the CRC, should get the funds generated from the lotteries directly from The Care Trust.

The report finds that The Care Trust has built a successful lottery and has generated significant funds for the benefit of the CRC.

The other income for The Care Trust is for the benefit of the CRC, Rehab and the Mater Hospital.

The report says that through a combination of new appointments being made to consolidated scales, the expiry of fixed term contracts in 2015, a retirement in 2015 and a review of duties, it is  necessary at this stage to 'red circle' salaries and arrangements in a small number of cases.

The report says that CRC service arrangement obligations have been met and there are no apparent obstacles to the HSE and the CRC entering into similar arrangements this year.

It says a new Board and CEO are in place and the CRC has sound systems of financial control in place and no issues of concern have been identified in the audit of the 2013 accounts.

The report says the level of cooperation provided by the current staff and others was exemplary but there was no engagement with the former Governors of the CRC or the Directors of the Friends and Supporters of the CRC Limited.

The administrator said that his role was to ensure continuity in the delivery of services to clients of the CRC, overseeing the restoration of good governance and identifying any legacy issues.

Available relevant records for the period 2009-2013 were examined.

The administrator says that the relocation of some files was part of normal organisation of files and no sinister motive was ascribed to this.