Thursday, January 20, 2011

Irish Red Cross "at variance with Statement of Recommended Practice for Accounting by Charities" according to its external auditors

In 2008 and again in 2009 the external auditors of the Irish Red Cross, BDO, found that the organisation was in breach of standard accounting procedure in relation to its mysterious and secret property portfolio.

In 2008 the external auditor’s report stated:

Properties given for use by and now owned by the Society are not currently recognised in the Society’s financial statements. This is at variance with Statement of Recommended Practice ‘Accounting by Charities’ which requires that assets given for use by the charity should be included as income when received and an equivalent amount capitalised on the Balance Sheet.

The Society owns a number of properties whose cost is not reflected in the book value of fixed assets. It is believed that these properties were given for use by the Society over a period of years. The insured value of these properties is approximately €4.5 m. No professional valuation on an open market existing use basis has been undertaken. The Society is currently examining the best way to incorporate these assets in the Society’s financial statements in the future.

Twelve months later what progress had been made in ‘incorporating’ these assets in the Society’s financial statements? The answer is NONE! In 2009 the external auditor’s report carried the exact same statement as it had included in 2008. There is, however, one significant difference. In 2009 the external auditors reported that ‘The insured value of these properties is approximately €7 million’. This is a whopping €2.5 million increase in the value of the Irish Red Cross property portfolio in a twelve month period. This is all the more remarkable given that in 2009 property prices across Ireland were in near free fall but yet the value of Irish Red Cross’s property portfolio increased by 56%. Despite this extraordinary increase the Irish Red Cross failed in its duty to record even one property in its financial statements.

The fact that the Irish Red Cross property fiasco has occurred is another example of corporate governance failure at the Society. No-one has been held accountable. Spectacular corporate governance failure and a complete absence of accountability is a defining feature of the Irish Red Cross. Certain individuals are responsible for the property scandal and they are easily identifiable. It is incumbent on the Executive Committee and its master, the Central Council, to take decisive action on this matter. Failure to do so implicates everybody on these bodies. Abraham Lincoln, US President 1861-65, was correct when he said ‘To sin by silence when they should protest makes cowards of men’.

The Irish Red Cross has confirmed it has properties insured to the value of €7 million. It has, to-date, refused to release to its own board members on the Executive Committee and Central Council details of these properties. Who exactly is making the decision to breach Standard Accounting Practice and who is making the decision not to provide a detailed list of these properties to board members? And on what authority are they making such decisions?

It is to be remembered that these properties were donated by individuals and families to the Irish Red Cross for the benefit of the Society and the continued refusal to provide the details to members is a complete betrayal of the trust of these kind benefactors. More importantly it will surely discourage any future property donations to the Irish Red Cross.

If the €7 million value on Irish Red Cross property is accurate then this would imply that in the current depressed property market the Irish Red Cross could have upwards of twenty five individual properties around the country. This calculation is based on an average house price of circa €275,000. This Blog is aware of five properties owned by the Irish Red Cross, details of which are provided below. The value of these properties does not, however, come within a country mile of €7 million. It must also be remembered that the Irish Red Cross head office in Dublin is not a property owned by the Society. It is owned by the Irish Government (Office of Public Works) and as such cannot be included in the €7 million valuation.

Central Councils members, Executive Committee members and general members should be asking the following questions:

1. Why is the Irish Red Cross, over many years, in breach of Standard Accounting Practice and why, despite instructions from the external auditors, BDO, has the matter not been rectified? Will those responsible be held accountable?
2. Why has a full and detailed list of all Irish Red Cross properties never been provided to Central Council members and Executive Committee members? Such a list should immediately be compiled and issued by post or email to all Central Council members. This will allow members sufficient time to review the list and discuss in detail at the February Central Council meeting.
3. If the properties are insured for €7 million that implies the insurance company was provided with a detailed list of all the properties, their location, size, number of rooms, whether residential or business etc. It is not acceptable that a faceless insurance company would have this information while members of the Central Council and Executive Committee do not.
4. If the Irish Red Cross has an extensive property portfolio then why is it not generating a substantial income for the Irish Red Cross? No property or rental income appears in the accounts of the Irish Red Cross. If rent is being paid where is it going?
5. What are all these properties around the country being used for?
6. Are there individuals and/or families living in these properties? If so are they paying rent? If they are paying rent who are they paying rent to? Who signed the leases? Who decides on the rental charge? Who determines the tenants?
7. Are Irish Red Cross branches using these properties? Are the properties registered in the name of individual branches or the head office? Are any of these properties generating income for branches?
8. Are private businesses using these properties? If so what type of businesses? Are they paying rent to the Irish Red Cross? Who decides such matters? Where are all the lease agreements? If there is rental income where is it going as no rental income appears in Irish Red Cross accounts?
9. Where are all the deeds of ownership to these properties? In whose custody are the deeds? Are they all in the head office? In the safe of a designated bank? If not where are they, who has them?
10. With such a valuable portfolio why is there no Property Management Strategy in place? Are people with no property portfolio expertise making the decisions?
11. If members of Executive and Central Council do not have a list of the properties then who is making the decisions on the properties and where did they get the authority to make such decisions and why do they keep these decisions from the majority of board members?
12. Why were some of the properties not sold during the property boom and the money invested appropriately for the long term benefit f the Irish Red Cross?

As referred to above this Blog is aware of at least five properties in the name of the Irish Red Cross and they are as follows:
1. Brackbaun, Kilbeheny, Co. Limerick (This property is used by Irish Red Cross for occasional training and storing of stocks and supplies. It is hugely underutilized)
2. Rathdown Upper, Delgany, Rathdown, Co. Wicklow
3. Laragh East, Brockagh, Ballinacor North, Co. Wicklow
4. Gully, Bandon, Kinalmeaky, Co. Cork (this would appear to be in use by the Bandon Branch of the Irish Red Cross)
5. Town-Plots, Kinsale Urban, Kinsale, Co. Cork

Irish Red Cross branch members in the above areas may or may not be familiar with these properties especially if they are in use by the Irish Red Cross. It is obvious, however, that the value of the above five properties is nowhere in the region of €7 million and it is questionable if their combined value would reach the €1 million mark. That leaves a possible €6 million in properties unaccounted for.

Strength is Happiness. Strength is itself victory. In weakness and cowardice there is no happiness. When you wage a struggle you might win or you might lose. But regardless of the short term outcome, the very fact of your continuing struggle is proof of your victory as a human being-Daisaku Ikeda, Japanese Peace Activist

1 comment:

  1. We the members of the Irish Red Cross have for years, over 20 years in my case fought to have the Society open it's doors to the membership. The Irish Red Cross management have created an internal policy to protect their ownership of the Society by use all forms of tactics to divide the loyalties of both staff and members.

    They will use innuendo and malice to instil fear in individuals, they will create rumours and untruths, they will lie, and they will even go so far as to use threats and allegations of threat to sustain their reign of power. In my case they will try to use the judicial system to silence me. Ireland is a failed Country and there is no one to blame but those that let it happen. The Red Cross is in trouble because of fear.

    The Staff in Head Office can only be commended for their endurance at having to work under the rule of the members of the Executive, it is beyond my comprehension how they manage to go to work and withstand the pressures that they have been exposed to. Hurrah for them!