Tuesday, December 20, 2011

Transparency International calls for independent investigation into Irish Red Cross

On the 9th December 2011 Transparency International (Ireland), the highly reputable global organisation that fights corruption and abuse of power, wrote an open letter to the Minister for Justice, Defence and Equality, Mr. Alan Shatter, calling on the Irish Red Cross to commission an independent investigation into reports of weak financial management and governance at the Society.

Previously Transparency International wrote to the Irish Red Cross but their request for an independent investigation fell on deaf ears. It is of course a damning indictment on the Irish Red Cross that an organisation as credible and highly respected as Transparency International deems it appropriate to call for an independent investigation into the Society’s affairs.

It remains to be seen if Minister Shatter responds in any meaningful way to the call by Transparency International. Certain individuals (past and present) at the Irish Red Cross have much to hide and much to fear from an independent investigation. At a minimum it is likely its board members would come in for severe criticism. It is also a possibility that any independent investigation would result in the Garda Fraud Bureau of Investigation being asked to assist although any such call would be a matter for the independent investigation.

The question is whether the Minister has the stomach for an investigation as it would undoubtedly involve scrutiny of his own Department. It can be assumed with near certainty, given their record of indifference and inaction and therefore complicity, that senior civil servants in the Department of Defence would not be keen to see any independent investigation take place.

The full transcript of the Transparency International letter is transcribed below and can also be seen on the Transparency International Ireland website on the link:


Mr Alan Shatter T.D.
Minister for Justice, Equality and Defence
Department of Justice and Equality
94 St Stephen’s Green
Dublin 2

9 December 2011

Dear Minister Shatter,

I write on the occasion of UN Anti-Corruption Day to firstly congratulate the Irish Government on the ratification of the UN Convention against Corruption this year. We are convinced that this important legal instrument will help Ireland meet its commitments to reaching and maintaining international standards of good governance and are happy to offer whatever help your department should require in reviewing its implementation.

As you are aware, Article 33 of the Convention recognises the important role of good faith reporting in protecting the public interest.

I should therefore also use this opportunity to draw your attention to the continued concerns of Transparency International Ireland (TI Ireland) over the failure of the Irish Red Cross Society (IRC) to commission an independent investigation into reports of weak financial management and governance at the Society made by Mr Noel Wardick, former Head of the IRC’s International Department.

Mr Wardick was dismissed on the grounds of gross misconduct on 10 November 2010 for having publicly commented on the governance of the IRC. He is still unemployed and unable to gain employment pending his appeal for unfair dismissal to the Employment Appeals Tribunal.

On 9 December 2010, TI Ireland wrote to the Central Council of the IRC encouraging them to commission an independent investigation into Mr Wardick’s claims. In spite of the Comptroller and Auditor General’s critical report into poor financial management of state funding at the IRC, no independent investigation has taken place into Mr Wardick’s public statements on the management of public donations and governance at the charity.

We believe that the IRC’s refusal to commission an independent investigation into his claims will serve as a great disincentive to anyone wishing to report financial irregularities or the risk of wrongdoing in the charity sector. We would therefore ask you to press upon the IRC the importance of an independent investigation into Mr Wardick’s reports. Such a measure would not only help seek a fair resolution to all the parties in this case, but also serve the public interest.

Yours sincerely,

John Devitt
Chief Executive

On a Separate Matter:

1. It appears the issue of the very poor 2011 Floods Appeal was not properly discussed at the recent Central Council meeting on 10th December 2011. For those not familiar with the situation an unwise decision was taken after the highly localised but severe flooding that took place primarily in Dublin in November to launch a nationwide appeal. The appeal involved radio and newspaper advertisements and as such significant costs would likely have been incurred. The appeal raised a gross amount of circa €30,000, extremely small for a national appeal. When the costs of the appeal advertisements are deducted the net amount would have been very much less. To put €30,000 in context in 2009 when vast areas of the country were flooded over €1 million was raised. It is highly unusual for the Irish Red Cross to launch a costly national appeal for a localised emergency that received no more than a day or two of national media coverage. Those experienced in such matters, had they been available, would have advised against a national appeal as the response permitted from raising smalls sums of money leaves many affected families disappointed and frustrated. Unfortunately for the Society many saw the appeal for what it was, namely a public relations exercise that had little real substance to it. Hopefully some valuable lessons have been learned by senior Irish Red Cross management who made the questionable call to launch a national appeal.

2. The decision, if confirmed, to suspend the purchases of all ambulances in 2012 and to ask branches to cover costs directly related to their branches that were previously covered by head office is welcome and long overdue. In recent years the Irish Red Cross head office has incurred some sizeable and costly annual operating deficits and these have severely impacted the Society’s ability to grow and develop. Much of this was due to head office being forced to incur massive costs covering branch expenses and outlays related to purchasing new ambulances. Millions of Euros reside in bank accounts across the country which belongs to local branches yet head office is obliged to pay many branch direct costs, a clearly unsustainable policy and one that has cost the organisation many hundreds of thousands of Euros in recent years. It could easily be argued that the pressure to close the worsening head office operating deficits led to the decision in 2010 to allocate over €600,000 donated by the public and intended for Haiti into the domestic fund. By doing so the 2010 annual accounts showed a near breakeven point for the Society. The reality, however, was that a huge deficit had been incurred. Earthquake victims in Haiti paid the price on this occasion.

3. In relation to ambulances no new purchases should take place until such time as a full scale assessment and performance audit is carried out on the 140 or so vehicles that operate under the name of the Irish Red Cross. Such a performance audit with recommendations should be carried out by independent fleet management specialists and not by internal Red Cross staff, volunteers or board members. A comprehensive fleet management and accountability system needs to be implemented. All future ambulance purchases post the suspension should only be made after a comprehensive cost/benefit analysis and should be based on a real need and an ability to efficiently and effectively address that need. Ambulances as status symbols and a means to influence, reward and control must have no future in the Irish Red Cross.

4. It is hoped that the suspension of ambulance purchases will ensure the Irish Red Cross no longer drains valuable resources and energy away from other critically important humanitarian programs carried out domestically by the Irish Red Cross such as the ever growing and expanding Youth Program, the highly impressive Restoring Family Links Program, the HIV/AIDS Program, the Community Services Program including therapeutic hand care etc and the highly innovative and pioneering Prisons Health Care Program. It is essential these programs are properly resourced and invested in. While they are no more important than first aid and ambulances equally they are no less important.

Wednesday, December 7, 2011

Will Irish Red Cross issue formal apology to families who donated properties?

For over twenty years the national media in Ireland has reported on the financial irregularities, misuse of resources and poor governance at the Irish Red Cross. During this time, and particularly in recent years, there has been a number of shocking revelations. One of the more significant of these has been the discovery that the Irish Red Cross has an extensive property portfolio that it has failed to declare in its financial statements, in breach of Standard Accounting Practice for Charities. The Irish Red Cross estimated in 2010 that the value of these properties was in the region of €7 million. While presumably the value has declined substantially over the last year or two due to the recession the omission of assets worth millions of Euro from the Society accounts is a matter of utmost public concern.

What is important to note re the undeclared properties is that the Irish Red Cross has been fully aware for nearly twenty years that it was in blatant breach of accounting and financial protocol by purposefully and consciously omitting valuable assets from its financial statements. The current external auditors of the Irish Red Cross, BDO, have highlighted the matter every year since 2000. As a result of its actions the Irish Red Cross has wilfully misrepresented its financial accounts to the Irish Government, its members and volunteers, its staff and to the Irish public every year for nearly two decades.

The location of these properties, the use to which they are put (if any), their state of repair, who is responsible for them, their rental income if any and who donated them has been kept a closely guarded secret by a tight inner circle of individuals. The information has been kept from the highest governing authority of the Society, the governing Central Council. Many on the closed and secretive Executive Committee have little knowledge or detail on the property portfolio. The question must therefore be asked, and answered by way of an independent investigation, why this is so.

If any such independent investigation deems it appropriate, the Garda Bureau of Fraud Investigation could be asked to assist.

The failure of governance, senior financial management and fiduciary oversight at the Irish Red Cross has allowed this situation arise and continue for years. As with the litany of other scandals at the Society no-one has been held accountable. Because the charity sector in Ireland is so poorly regulated the Irish Red Cross has been permitted to breach proper accounting procedure year on year without any person ever being prosecuted or held to account for doing so.

For those not familiar with the correct accounting procedure for the treatment of donated assets such as properties to the Society the property must be professionally valued and the amount recorded as INCOME in the financial statements. The value of the donation must also be recorded as an ASSET on the balance sheet. For every property donated to the Irish Red Cross the Society failed to do this. As such the annual accounts massively misreported the income of the Society and under reported the value of its assets by millions and millions of Euros.

In understanding the nature of this scandal it is very important to realise that these unrecorded and unaccounted for properties were, in the main and possibly in entirety, donated to the Irish Red Cross by members of the public following the death of the property’s owner. As Irish people will know only too well one’s home is usually by far the most valuable asset a person accrues in their lifetime. For any Irish person or family to donate a property to a charity is a hugely generous and selfless act.

These properties were donated by the families for use by the Irish Red Cross in its pursuit, as per its mandate, of humanitarian activities and to be used in the best interests of the Society and its intended beneficiaries. The fact that the Irish Red Cross repeatedly failed to keep track of these properties, has mislaid title deeds and ownership documents, failed to record the properties in the Society’s accounts, has left a number of properties idle and vacant and has been unable to explain how or what the properties are used for is a shocking betrayal of public trust. It represents a scandalous misuse of assets worth millions of Euros.

If even one family donated cash of say €100,000 to the Irish Red Cross and the money was not recorded in the accounts and the money was difficult to locate or track down or its use not readily identifiable it is likely the Gardai would be immediately be called in. Or at least that is what would happen in a well functioning organisation. Failure to record and keep track of extremely valuable property donations is no different than failing to record and keep track of cash donations.

As a direct result of the Dail’s (Ireland’s Parliament) Public Accounts Committee Hearing on the 13th October 2011 into allegations of financial irregularities at the Irish Red Cross and following the inclusion of the Society (Chapter 32) in the Comptroller and Auditor General’s Annual Report the Department of Defence was forced to admit for the first time that the Irish Red Cross has at least 18 properties around Ireland that it has failed to record or properly account for. The Department did not state whether 18 was the totality of the missing properties. The Department did state that for ten of these properties it would take at least another 6-12 months “to re-construct documents of title for 10 of these”. This is a shocking indictment of incompetence and negligence at the Society.

Readers may be interested to know that the Society was instructed to deal with the property problem as far back as 1992. To-date not one person has been held to account for this spectacular failure of governance and management. It can only be hoped that the Dail’s Public Accounts Committee follow-on Hearing into the Irish Red Cross scheduled for 2012 will shed some further light on this distasteful affair.

In the meantime nothing short of a full scale public apology to the families of bereaved loved ones and kind benefactors who donated properties is immediately required of the Irish Red Cross.

In addition to the public apology the Irish Red Cross needs to be seen to hold those responsible to account and it needs to state on public record that such misuse of resources and financial irregularity will never occur again. It will also be critically important that the Irish Red Cross state categorically (assuming it can do so with conviction) that no criminal offence or activities took place in relation to the properties. This apology, given the scale of the betrayal of trust, should be issued by way of large public advertisements in the main national newspapers (Irish Times, Irish Independent and Sunday Independent) as well as on TV and radio. It is also an absolute necessity that all families who donated properties are individually contacted and the situation and future plans explained in detail to them.

On the 10th December 2011 the Central Council of the Irish Red Cross will meet. It can only be assumed that the Central Council report issued to members in advance of the meeting has an extensive and detailed report on the Dail Public Accounts Committee’s ongoing investigation into the Irish Red Cross. One also assumes that the upcoming Public Accounts Committee hearing into the Irish Red Cross in 2012 will be discussed and debated at length. It is a matter for the Central Council to decide how this matter should be handled and as such they need to direct the Secretary General and Executive Committee accordingly.

The inclusion of a full chapter on financial mismanagement at the Irish Red Cross in the Government’s Comptroller and Auditor General’s Annual Report will also presumably be high on the agenda.

In the event that the Central Council report omits the fact that the Irish Red Cross is under investigation by the Dail’s most powerful and influential cross party Committee it will prove beyond doubt that nothing has changed and that the Irish Red Cross remains as closed, secretive and misgoverned as ever. It will also demonstrate once again that information is purposely held from the highest deliberative authority of the Society.

Given the staggering incompetence and deceit shown over PropertyGate this Blog calls on Central Council members to instruct the Secretary General to initiate an independent investigation into the affair. In the meantime the Central Council should reassert its ultimate authority and demand a full list of all Irish Red Cross properties, their location, their current use, their current physical state and who has day to day responsibility for each one. These assets are worth millions of Euro and the supreme governing authority of the Society (the Central Council) needs to demand and insist on full disclosure.

Consideration should be given to the establishment of a special Property Sub-Committee of the Central Council to interact with any independent investigation. Members of this sub-committee would, as part of their terms of reference, visit and physically inspect every single Irish Red Cross property. It would be much more preferable if such a sub-committee was made up of non-Executive Committee members in order to avoid any conflict of interest. Any independent investigation would then liaise with this sub-committee, the Department of Defence and if necessary the Garda Fraud Bureau. Perhaps a representative from the International Committee of the Red Cross (ICRC) could also sit on either the CC Property Sub-Committee or the Independent Committee.

Time will tell whether the Irish Red Cross has the moral courage to apologise to all those donor families it has failed so badly. The history and culture at the top of the Irish Red Cross tells us no such apology will ever be forthcoming. There are those who tell us things are changing at the Society and changing for the better. Perhaps these individuals would be better advised to desist from their empty propaganda and spin. Instead proof via actions and substance that the Irish Red Cross has changed would be far more desirable. Hold people to account, demand resignations, enforce them if not forthcoming and issue a public apology. Then perhaps we might believe.

True remorse is never just a regret over consequence, it is a regret over motive-Mignon McLaughlin