Irish Red Cross government funding under review amidst Ministerial concerns over board members length of service

The debate in Ireland’s parliament (Dail Eireann) on 29th June 2011 concerning the Irish Red Cross has revealed the extent of the Irish Government’s frustration with Irish Red Cross intransigence, obstinacy and inflexibility with regard to reform of its antiquated and outdated governance structures.

The damage being done to the Society by the refusal of long serving board members to step down and resign is at this stage incalculable. Their continued display of disdain towards the government’s wishes and their egotistical refusal to accept that excessive service on a board is reflective of very poor practice is jeopardising not only the reputation of the Irish Red Cross but also its annual €1 million grant from the Department of Defence. Should the Government decide to cut the grant then everyone should be in no doubt where the blame lies.

The Minister has specifically stated in written correspondence on 16th May 2011 to the Irish Red Cross that he views it as “unhealthy for any organisation to have individuals serving at leadership level in excess of 12 years in total and in any one position for longer than six years”. In response to this correspondence the Irish Red Cross re-appointed Tony Lawlor as Vice Chairman for the 21st year in a row. Readers will judge for themselves how a senior minister can be expected to react to such an affront to his advice.

For the first time in the Dail the issue of allocating €600,000 of public money donated to the IRC intended for the Haiti Earthquake appeal to IRC’s domestic account has been highlighted. This is a very significant development. An immediate independent investigation is required in order to ensure the money is returned to the Haiti fund.

It is also noteworthy that Fianna Fail TD (MP), Dara Calleary, raised a parliamentary question on the Irish Red Cross on the 28th June 2011. It would now appear that both government and opposition TDs have serious concerns about the Society.

Below are highlights from the debate as well as the full detailed transcript. Involved were Labour TD (MP) Aoidáin O’ Riordáin and Minister for Justice, Defence and Equality, Alan Shatter.

Before outlining the detailed transcript the Blog has highlighted some key remarks made by both Deputies, as follows:

Deputy O’Riordáin:

“Concerns about misuse of power and financial irregularities in the IRC have been raised by staff, board members, media and politicians for over 20 years”

“Transparency International Ireland has called for whistleblowing legislation to include provisions allowing for criminal prosecutions to be taken against employers who take retaliatory action against whistleblowers who report the truth in good faith”

“The signatory on the aforementioned account (Tipperary), the society’s vice chairman, Tony Lawlor, was re-appointed as vice chairman in May 2011 for the 21st year in a row”

“The treasurer, Ted Noonan, who failed to investigate the matter at the time, was re-appointed in May this year to the board for the tenth year running”

“It (the IRC) broke even in 2010 only because more than €600,000 intended for Haiti was recorded as domestic income. This is a practice that has apparently gone on for years within the IRC and is morally reprehensible”

“Based on the evidence to date, all the information now in the public domain and the real concerns that exist inside and outside this House, the Minister must seriously consider withholding the annual grant of €1 million and review its donation of free property to the IRC for use as its headquarters until such time as a comprehensive independent investigation into the society takes place and is concluded”

Minister Shatter:

“The grant to be paid (to IRC) in 2012 is being considered as part of the review of departmental spending currently being undertaken”

“However, in light of the claims of maladministration within the society, I asked for assurances from the chairman of the society regarding the use to which funds that are granted annually from the Vote of the Department of Defence are put”

“I am of the view that organisations in receipt of funding from the Exchequer should publish detailed accounts that provide transparency on how such funds are used”. Note: IRC does not produce any details on how the government grant is spent.

“Such organisations should also publish their annual reports on time. It is not satisfactory that the annual reports (of the IRC) for 2009 and 2010 remain yet to be published”. Note: This Blog understands that the 2008 Annual Report has also not been published yet.

“While some progress has been made by the society in this regard, it is critical it makes further substantial progress to ensure its corporate governance structures comply with the highest standards. For instance, it is not conducive to good corporate governance that any individual should serve indefinitely on the central council, the executive committee or in the same appointment. I made a case on this through correspondence with the society”

“In correspondence with the society on 16th May 2011, I expressed the view that as a matter of principle I regarded it as unhealthy for any organisation to have individuals serving at leadership level in excess of 12 years in total and in any one position for longer than six years. With this in mind, I asked the Society whether a more comprehensive reform of the corporate governance arrangements than previously proposed might be considered”.

Serious questions must be asked of the IRC leadership as to why the Minister’s 16th May 2011 letter to the Society was not shared with Central Council members in advance of the May 28th Central Council meeting, at which at least two long serving members were re-appointed, contrary to the Minister’s wishes.

Readers of this Blog should be aware that members of the public can obtain access to the Minister’s letters to IRC and IRC’s responses by submitting a Freedom of Information (FOI) request to the Department.

The full transcript of the Dail debate is below or available at:

http://debates.oireachtas.ie/dail/2011/06/29/00026.asp

Deputy Aodhán Ó Ríordáin:

I appreciate the opportunity to raise this matter.

I first refer to the commitment given in the programme for Government, which states: “We will initiate a detailed legal review of the basis, structures and governance of the Red Cross in Ireland to improve its functioning in the light of changing circumstances.” Serious concerns and questions have been raised about alleged abuses of power, misgovernance and misuse of financial resources in the Irish Red Cross Society for over 20 years, yet the State unquestioningly gives it an annual grant of nearly €1 million. The OPW also provides the IRC with its head office at 16 Merrion Square effectively free of charge. In comparison, the budget of Irish Aid has been cut by 8% since late 2008, while the IRC has suffered no cut whatsoever.

Concerns about misuse of power and financial irregularities in the IRC have been raised by staff, board members, media and politicians for over 20 years. There was a surge in revelations in 2009 and 2010 following an intensive media campaign and the decision by Noel Wardick, former head of the international department at the IRC, to go public with his concerns. Mr. Wardick spent four years trying to have the matters addressed internally - all, unfortunately, to no avail. Mr. Wardick was fired for gross misconduct in November 2010 under the charge of breaking his confidentiality agreement. This is yet another example of an employee reporting serious concerns in good faith and in the public interest and suffering serious employer reprisal. Seven months later, Mr. Wardick remains unemployed. Transparency International Ireland has called for whistleblowing legislation to include provisions allowing for criminal prosecutions to be taken against employers who take retaliatory action against whistleblowers who report the truth in good faith. It would have been easier for Mr. Wardick to remain silent.

In the past, the Government has always taken a hands-off approach to questions raised about the integrity of IRC actions, despite appointing its chairman and 16 members of its central council and despite the presence of a Department of Defence official on the IRC governing executive committee. It appears that Governments have been happy to involve themselves in absolutely every aspect of IRC operations except those relating to governance reform, financial irregularities and abuse of power.

The Minster will be aware of the scandal regarding the undeclared Tipperary bank account which was found to have €162,000 intended for the victims of the 2004 Asian tsunami lying in it for over three years. The organisation’s vice chairman was a signatory on the account. The matter was swept under the carpet despite the resignation of the then honorary secretary in protest over the society’s failure to investigate the matter. She formally wrote to the then Minister for Defence, Deputy Willie O’Dea, and was effectively ignored. An internal investigation was carried out in late 2010 but despite the identification of major breaches of financial policy and certain actions deemed as “a threat to IRC governance”, no one was held to account or blamed. Nothing has changed. The signatory on the aforementioned account, the society’s vice chairman, Tony Lawlor, was re-appointed as vice chairman in May 2011 for the 21st year in a row. The treasurer, Ted Noonan, who failed to investigate the matter at the time, was re-appointed in May this year to the board for the tenth year running.

The IRC made substantial operating losses in 2008 and 2009. It broke even in 2010 only because more than €600,000 intended for Haiti was recorded as domestic income. This is a practice that has apparently gone on for years within the IRC and is morally reprehensible. In reality, the society made a large operational loss in 2010, yet it still managed to pay its secretary general €165,000 and spend €140,000 on legal fees in trying to silence Mr. Wardick, including legal suits against Google and UPC.

Any independent examination of media reports, industrial relations hearings and parliamentary questions over the past 20 years will bear out the fact that the IRC is a highly dysfunctional organisation with real and serious questions to answer about its financial affairs. Since 2007, the IRC has had four secretaries general, which is a clear sign of the problems that remain unresolved in the society.

The so-called new IRC constitution is also deeply flawed and is designed to ensure those in power remain in power for many years to come. I believe there was minimal organisation-wide consultation on its drafting and it must not be approved by the Government or enshrined in legislation without significant amendment. The Minister has said he is in consultation with the Office of the Attorney General with regard to the legal review, as outlined in the programme for Government. There is a real worry that the Minister will use the new legislation to enshrine the new IRC constitution into law, which will in effect secure the power bases of the long-serving, discredited incumbents, which is exactly what they are hoping for.

The IRC is not obliged to report separately, in financial or narrative form, on its €1 million Government grant. It appears as a one-line income and expenditure item in its audited accounts. The Government basically gives the grant annually to the IRC and thereafter washes its hands of its responsibilities. Based on the evidence to date, all the information now in the public domain and the real concerns that exist inside and outside this House, the Minister must seriously consider withholding the annual grant of €1 million and review its donation of free property to the IRC for use as its headquarters until such time as a comprehensive independent investigation into the society takes place and is concluded.

Minister for Defence (Deputy Alan Shatter):

I thank the Deputy for raising this important matter.

As the Deputy mentioned, the Irish Red Cross Society is the recipient of an annual grant-in-aid allocated from the Department of Defence Vote. The following are details of the grants paid to the society from the Defence Vote over the past ten years. In 2002 the grant was €809,000; in 2003 it was €821,000; in 2004 it was €866,000; in 2005 it was €880,000; in 2006 it increased to €951,000, and up to and including this year it has remained at that level. The grant to be paid in 2012 is being considered as part of the review of departmental spending currently being undertaken.

The grant from the Defence Vote is paid to the society each year in quarterly amounts and includes a sum of €130,000 which represents the Government’s annual contribution to the International Committee of the Red Cross. The balance of the grant goes towards the salary and administration costs of running the headquarters of the Irish society. In addition, the society also pays, from its own resources, an affiliation fee to the International Federation of Red Cross and Red Crescent Societies, which this year is expected to amount to approximately €160,000. Each year, the society publishes its independently audited annual accounts and nothing has come to light to indicate that the grant-in-aid has not been properly expended.

As the society is a body corporate which, in accordance with the legislation, is responsible for the handling of its own internal affairs, it is not a matter for my Department to be involved in the day-to-day running of the society. However, in light of the claims of maladministration within the society, I asked for assurances from the chairman of the society regarding the use to which the funds that are granted annually from the Vote of the Department of Defence are put. Comprehensive and satisfactory answers have been provided by the chairman, which showed that the total cost of running the head office of the society in 2010 amounted to just under €1.3 million.

I am of the view that organisations in receipt of funding from the Exchequer should publish detailed accounts that provide transparency on how such funds are used.

Such organisations should also publish their annual reports on time. It is not satisfactory that the annual reports for 2009 and 2010 remain yet to be published.

The programme for Government provides for the initiation of a detailed legal review of the basis, structures and governance of the Red Cross in Ireland to improve its functioning in light of changing circumstances. Proposals for reform of the governance of the Irish Red Cross Society initially arose from a resolution that was passed in November 2007 by the council of delegates of the International Federation of Red Cross and Red Crescent Societies. It urged all national societies to examine and update their statutes, rules and related legal texts by 2010.
A working group to propose changes in the governance of the Irish society was established by the Irish Red Cross in 2008. Its chairman presented the findings, which included changes recommended by the international federation, to the central council of the Irish Red Cross Society at a meeting held in November 2009. The working group’s report was then submitted to the Department of Defence early last year.

Following the Department’s review of these proposals and the related legislation, a draft order that would amend the Irish Red Cross ministerial order 1939 was submitted to the Office of the Attorney General. The 1939 order sets out the basis upon which the society is governed and was made pursuant to the Red Cross Act 1938. Discussions with the Office of the Attorney General on the extent of changes that can be made to the 1939 order are continuing. Whatever changes are made to it, a comprehensive review of all Red Cross legislation, and in particular the primary legislation, will then be commenced by my Department.

In this regard, while I am conscious of the importance attaching to the independence of the society, I have been in contact with the chairman of the Irish Red Cross recently about the society’s corporate governance arrangements. On 8 June 2011, he advised me that work is well under way with regard to corporate governance changes. Initiatives introduced have included statement of directors’ roles, responsibilities and accountabilities; a signed code of conduct for directors and management; a strategic planning framework; a register of organisational risks; an induction process for new directors; the establishment of an independent audit committee with external participation; performance evaluation for senior management and plans for board evaluation; a statement of fund-raising principles and behavioural code; and analysis and reporting of non-compliant branch financial returns. Work is well advanced in drafting financial policies relating to reserves management, borrowing capital expenditure, procurement and investment.

While some progress has been made by the society in this regard, it is crucial it makes further substantial progress to ensure its corporate governance structures comply with the highest standards. For instance, it is not conducive to good corporate governance that any individual should serve indefinitely on the central council, the executive committee or in the same appointment. I made a case on this through correspondence to the society. As a beneficiary of State funding, both directly and indirectly, I have urged the society to make further substantial progress in this area to ensure its corporate governance standards meet what would be regarded as acceptable for an organisation of its calibre.

In correspondence with the society on 16 May 2011, I expressed the view that as a matter of principle I regarded it as unhealthy for any organisation to have individuals serving at leadership level in excess of 12 years in total and in any one position for longer than six years. With this in mind, I asked the society whether a more comprehensive reform of the corporate governance arrangements than previously proposed might be considered. The chairman, in response, explained the society is making progress in developing a much more robust corporate governance system.

The issue of turnover and rotation at leadership levels was raised at the recent central council meeting. The chairman informed me agreement was reached on a mandatory three-year break or one full-term break for executive committee members in circumstances where a member may have previously served for two full terms. This agreement occurred subsequent to correspondence with the society in which I engaged.

I have arranged to meet with the chairman of the society presently. An overriding principle must be to ensure that any legislative changes made have the full support of the international federation and that the society’s management framework requires the full and required standards acceptable in the 21st century.
ENDS