Chapter 32 - Financial Control in the Irish Red Cross (Resumed) Thursday, 19 January 2012

Committee of Public Accounts Debate Page of 4

Mr. Michael Howard (Secretary General, Department of Defence) and Mr. David J. O'Callaghan (Chairman, Irish Red Cross) called and examined.

Vice Chairman:    I remind members and those in attendance to switch off mobile telephones as they interfere with the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable.

Members are reminded of the provision within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.

I welcome Mr. Michael Howard, Secretary General, Department of Defence, and I ask him to introduce his officials.

Mr. Michael Howard:  I thank the Chairman. I am joined by Mr. Brian Spain, director, and Mr. Cathal Duffy, principal officer, Department of Defence.

Vice Chairman:    I welcome Mr. David O’Callaghan, chairman of the Irish Red Cross.

Mr. David J. O’Callaghan:  I am accompanied by Mr. Donal Forde, who was appointed Secretary General of the Irish Red Cross in February 2011 and Mr. Ronan Ryan, head of fund-raising and communications since January 2011.

Vice Chairman:    Discussion on chapter 32, financial control in the Irish Red Cross, is resumed and I call the Comptroller and Auditor General.

Mr. John Buckley:  This is a resumed session. I already outlined the main elements of my report in the meeting of 13 October 2011. Briefly the background is that an internal review, which reported in 2010, raised concerns about the non-remitting of fund-raising proceeds to the society’s headquarters, delays in submitting returns by branches and returns not covering all funds held by branches. A trawl of all accounts held in one commercial bank uncovered 49 undisclosed accounts that held funds totalling €214,000.

A related issue was the fact that the incompleteness of the branch returns meant that comprehensive accounts could not be produced for the organisation as a whole. Based on my queries to the Department relating to the soundness of the society’s financial management the chapter outlines what the society is doing to improve its governance. The Department has reported that the society has codified its rules and procedures relating to how it manages its operations including, in particular, fund-raising and has set up an independent audit committee. From a regulatory perspective, the Department has stated that it intends to use its powers under existing legislation to amend the statutory instrument under which the society functions and subsequently to commence a review of the primary legislation.

Vice Chairman:    I call Mr. O’Callaghan to make his opening statement. May we publish it?

Mr. David J. O’Callaghan:  Yes, certainly. The Irish Red Cross is delighted to have been invited to this morning’s hearing. We are very pleased to have the opportunity to come before the committee and address areas of concern relating to corporate governance that have been raised by the committee.

The Irish Red Cross is an independent, charitable organisation, with almost 5,000 volunteers. It is very active in two different ways. We support the emergency relief work of the International Red Cross movement through financial contributions and through the assignment of delegates to international operations. At home our 5,000 volunteers provide ambulance, first-aid, emergency-aid and community-support services through almost 140 branches nationwide. The society forms an essential part of Ireland’s major emergency network and is an enormous volunteer effort that is part of community life across the length and breadth of the country. Volunteers at all levels give freely of their time and effort to the good works of the society and seek no remuneration or reward. We owe them a great debt of gratitude for the contribution they have made to our community for more than 70 years.

We have readily and publicly acknowledged that, for a time, the Irish Red Cross did not keep pace with standards of best practice in respect of governance and oversight. The society has recognised that weakness and has responded to it in a substantial and convincing manner. Members will see from my year-end report on developments through 2011 that huge strides have been made in developing the society’s governance and supervisory framework. For example, I would draw the committee’s attention to: the reform of the society’s constitution and important governance changes that come with it; new codes of conduct and the introduction of a suite of policy documents and standards; the establishment of an audit committee with external membership and expertise; and a framework for control and oversight of our branch finances. This progress has been formally acknowledged by our own international federation, by the Comptroller and Auditor General in his report and also by the Minister of Defence in correspondence to us.

Governance reform and development has been our central priority for the past 12 months. Great progress has also been made in developing the capacity of our secretariat and in addressing the financial challenges that face all charities in the current climate. We have been working closely with our colleagues in Geneva to develop our organisational strategy and to take many other steps that will ensure the Irish Red Cross is a vibrant and dynamic organisation that stands ready to respond effectively to people in crisis at home or abroad.

While all this work is under way, I will say that we have been disappointed to see some specific criticisms of the society that are simply untrue. In particular, allegations that moneys were diverted from the Haiti appeal of two years ago, that the society is misrepresenting its property assets or that there are irregularities in our accounts are all simply without foundation. We are happy to go into any of these in detail but let me repeat again that they are untrue and without foundation.

Once again we are pleased to have this opportunity to attend this committee meeting, to tell members about the great work that is done by Irish Red Cross volunteers and about the great strides that have been made to develop best practice standards in governance and oversight, and to reassure them that other specific criticisms of the society are simply make-believe.

Vice Chairman:    We are in somewhat uncharted waters today in that the Irish Red Cross is not a body that falls under the direct remit of the Committee of Public Accounts. However, our meeting in October with the Department of Defence left many unanswered questions. This meeting presents an opportunity for the Irish Red Cross to deal with these issues, many of which have given rise to very negative comments in the media and among the general public. The documentation the Irish Red Cross supplied to the committee outlines the changes that have been made, especially in the areas of governance, financial control and management of headquarters. It will be open to our members to question the progress on these changes and to deal with why a comprehensive transformation programme was necessary. As we said in October, the Irish Red Cross has considerable good will. It has many volunteers throughout the country and abroad doing a fantastic job. We owe it to the public and those volunteers to ensure that the issues, which gave rise to negative publicity, parliamentary questions, resignations of members of the council and labour relations problems with the staff, are addressed comprehensively. I hope this will come from today’s session.

Before calling members of the committee, I have a few questions of my own. How did the €160,000 in the Tipperary account go undetected for three years from 2005 to 2008? How was the money raised? When was the account opened? Who were the cheque signatories? Was there any movement on the accounts? This links into the 49 undisclosed accounts. Is the Irish Red Cross happy there are no other accounts?

I ask Mr. O’Callaghan to outline the recruitment procedure for the new general secretary, the former CEO of AIB in Ireland, Mr. Donal Forde. Mr. O’Callaghan made reference to property. The 2010 accounts contain a note that the Irish Red Cross is now working on the valuation of a number of properties. Why has it taken so long to deal with these properties which appear to have been off the balance sheet and have appeared from mid-air? Has this whole debacle reduced the revenue gathering potential of the Irish Red Cross?

When dealing with the Tipperary account I ask Mr. O’Callaghan to deal also with the Haiti fund, which he mentioned. Was the €600,000 redirected into general funds rather than being purely for that appeal?

Mr. David J. O’Callaghan:  They are reasonable questions and I thank the Chairman for giving us the opportunity to answer them. I would like the Secretary General to address the detail of the Tipperary account and I will deal with the recruitment, which was the second issue raised. The Chairman raised five issues and we will address the five.

Mr. Donal Forde:  To put this in context, the Tipperary account incident goes back to 2005. It was 2005, 2006, 2007 and came to light in 2008. It was then resolved at that point. It was subsequently the subject of an investigation that was commissioned by the chairman and conducted by a sub-group, essentially, of the board, chaired by a gentleman called Liam O’Dwyer, who was the chief executive at the time of the Irish League of Credit Unions. I am drawing on his report that was made available publicly at that time. I will go to that to deal with the Chairman’s question as to how this happened. I am drawing and quoting from that. It stated:

He elaborates on that and what he is saying essentially is that there was a small coterie of staff here managing the finances of the Irish Red Cross, previously gathering in the order of €5 million to €10 million per annum. Suddenly, essentially, the tsunami appeal was conducted and €32 million came flooding in over a period of time.

Vice Chairman:    Over what period of time?

Mr. Donal Forde:  Substantially in the course of 2005, but then it came through also in 2006 and even in 2007. This came through over a period of time. The point being made is that through that time financial resources were added to deal with the programme side, that is the setting up of programmes to disburse money to the victims essentially across the tsunami region, but no additional resources were added to a finance department that was now expected essentially to extend its scope and capability to deal with something of this volume. That was not done.

Vice Chairman:    In layman’s terms, when conducting an appeal would it not have been logical to bring all the treasurers of all the branches throughout the country into a room to advise them to open the account and remit the money to Dublin within a period of time?

Mr. Donal Forde:  I can only speak to what happened at the time. Very different processes apply today, let me be clear. Today if we conduct an appeal, moneys go into one account nationally. At the time the practice was that each branch, essentially, set up a restricted account essentially and specifically for these moneys and the moneys were then held, if one likes, locally. That was the context at the time. I am not suggesting that would be proper practice or secure practice, but that is what happened at the time.

There are a number of points to be made. In offering the committee these, I am drawing on the report. I am not looking to legitimise what was a mistake by any yardstick, but I am trying to create context for the committee. The moneys, it was decided, would be expended over a five-year period. It is not the case that all these moneys were going to be put in one spot, essentially, and then immediately transferred to the tsunami. That was not the way it was done and that would not be untypical for a programme of this size. It was decided that these would be expended over a five-year period. That is the first point to make.

At the time the practice in the Irish Red Cross - it was not all it should have been - was that these moneys, essentially, were gathered in local accounts. Some of the local treasurers, those in Tipperary specifically - and the report speaks to this - were not surprised that there was not immediate consolidation of these moneys in a central account. The evidence supports the assertion that their view was that the money would be consolidated over time as it was transferred to the programme in the tsunami region. They claim that they were not surprised they were not asked to centralise the money immediately and this is what the report speaks to. This is one point of context.

There were not the systems at the centre that one would expect there to be today. There were neither the resources nor the processes to make sure all branch accounts were reported on properly. There were not the reconciliation systems or information systems or the capacity to be able to oversee 150 branches and this scale of money throughout the country. I do not suggest this is legitimate and it has all changed dramatically but those were the circumstances which prevailed at the time.

Deputy Derek Nolan:    On a point of order-----

Vice Chairman:    To deal with the point on recruitment-----

Deputy Derek Nolan:    To be helpful, as I know the Vice Chairman has not chaired the committee previously, many of these questions will come out in what the lead speaker has prepared and the Vice Chairman will be perfectly entitled to ask questions at that point-----

Vice Chairman:    Point taken.

Deputy Derek Nolan:    Just to ensure that the meeting runs sensibly and efficiently.

Vice Chairman:    I have one final point to make before moving on to the lead questioners. Has a valuation been made of the fixed assets?

Mr. Donal Forde:  May I close on the point I was making because it is important?

Vice Chairman:    Yes, close on that and we will move on.

Mr. Donal Forde:  All of the conclusions I share with the committee were made available publicly. The report has been on our website since the end of 2010. I hope we have been appropriately open and transparent about all of this. Every recommendation made following the investigation has been implemented. Today, a national appeal goes to one account at the centre; the accounts from all of our branches are submitted half yearly and reviewed; we have systems at the centre; and we have an independent audit committee. All of the measures one would expect to be in place for an enterprise such as this are now in place. In trying to explain this I do not seek to legitimise what happened. It was a failing from an administrative point of view. I want to make this clear.

Vice Chairman:    We will move on to Deputy Eoghan Murphy who is the lead questioner.

Deputy Eoghan Murphy:    I thank the witnesses for coming before the committee. We asked representatives of the Red Cross to come before the committee because a number of questions were outstanding after we reviewed the Vote in the Comptroller and Auditor General’s report last October.

Mr. David J. O’Callaghan:  I am conscious that I have not answered any questions.

Deputy Eoghan Murphy:    Mr. O’Callaghan will have a chance to speak after several of us have asked questions.

Prior to asking my questions I wanted to state that a number of allegations have been made about the Red Cross in the media and in correspondence to the committee. They are quite serious and relate to loose financial controls and poor governance. The committee is not here to damage the good name of the Red Cross and all it does. We are here to protect it. I hope through the questions we ask and through these proceedings this will be the outcome of the meeting.

I thank the witnesses for the document they provided - which has been very helpful - on all they are trying to do with regard to good governance. In one way it is quite an indictment of what has gone on in the past and it substantiates some of the allegations made about poor governance in the society and the work that needs to be done. We touched briefly on the tsunami account from 2004 and what happened there. I would like to go into this in some detail and into how the Tipperary account was discovered in the first instance.

Mr. Donal Forde:  To be truthful, if I go to the formal records I cannot find a particular point at which it was discovered. It seems to have come to light in August 2008.

Deputy Eoghan Murphy:    Together with 48 other accounts.

Mr. Donal Forde:  The picture I have is that suddenly the central finance function woke up to the fact that there was €160,000 in the Tipperary account. It immediately initiated a trawl of accounts by going to the banks and asking for a list of all accounts in the name of the Irish Red Cross.

Deputy Eoghan Murphy:    I will go back to the first point made. It woke up to the fact that €160,000 was in the Tipperary account. What does this mean?

Mr. Donal Forde:  I can find no formal minutes of the time. Someone at headquarters in Dublin suddenly woke up to the fact there was €160,000 in the account in Tipperary.

Deputy Eoghan Murphy:    What do you mean by “woke up to the fact”?

Mr. Donal Forde:  The reason I say that is that there are no minutes from the time of any of the formal structures or meetings that at any point indicated that this was-----

Deputy Eoghan Murphy:    Somebody in the Red Cross headquarters became aware there was €160,000 in an undisclosed account at that time.

Mr. Donal Forde:  That is the picture I have. When I look to the investigative report made what is said in it is that Tipperary had kept the central function advised that this money was there informally, and this is not disputed but it is not on record. Let me just be clear about that.

Deputy Eoghan Murphy:    Just to clarify, Mr. Forde was not working with the Red Cross at the time.

Mr. Donal Forde:  I joined 11 months ago. I am a reporter of what happened.

Deputy Eoghan Murphy:    Someone in headquarters knew informally that there was an account in Tipperary with €162,000.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Off the back of that, they decided to do a search for any other undisclosed accounts.

Mr. Donal Forde:  They did not know of other undisclosed accounts.

Deputy Eoghan Murphy:    What did they go looking for?

Mr. Donal Forde:  They approached the banks and asked for lists of all the accounts in the name of the Irish Red Cross and then began to cross-check them with their records. At that point they found this account.

Deputy Eoghan Murphy:    They approached the bank formally.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Is that minuted or is there a document?

Mr. Donal Forde:  No, other than letters to the bank seeking the disclosures.

Deputy Eoghan Murphy:    So there is a letter to the bank stating that the Red Cross believed there were accounts it was not aware of.

Mr. Donal Forde:  No, it does not say that. It does not speculate. It simply asks for records of the accounts in the name of the Irish Red Cross.

Vice Chairman:    How many banks?

Mr. Donal Forde:  Bank of Ireland was done at the time and subsequently Irish Permanent and the credit unions, I understand.

Deputy Eoghan Murphy:    Accounts were found only in Bank of Ireland.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Who in the Red Cross headquarters asked for the search?

Mr. Donal Forde:  From what I have seen it was the head of finance at the time.

Deputy Eoghan Murphy:    The head of finance at the time asked for it to happen.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    So the head of finance was the person who informally was aware of the €162,000.

Mr. Donal Forde:  No, I did not say that. I cannot make that leap. What I see on record is the banks being requested for details. What I know from the investigation is that essentially it is accepted that there was some informal sharing of information between Tipperary and the head office. The rest is from adding one and one together. I have no basis to certify that.

Deputy Eoghan Murphy:    The official position is that headquarters was not aware of this account.

Mr. Donal Forde:  That is the official position.

Deputy Eoghan Murphy:    Someone knew informally.

Mr. Donal Forde:  It is accepted. It is a matter of record. The investigation is there. It is accepted there was certainly some discourse between the Tipperary branch and the centre which points to the fact that there was knowledge of this at the centre.

Deputy Eoghan Murphy:    Who was the chief signatory of the Tipperary account? Was it the chairman of the local branch?

Mr. Donal Forde:  There were four signatories at the time.

Deputy Eoghan Murphy:    Four signatories?

Mr. Donal Forde:  Forgive me, the particular account we are discussing had two signatories.

Deputy Eoghan Murphy:    Did either of them have other positions in the organisation?

Mr. Donal Forde:  One of the signatories was the PRO at the time in the Tipperary area and there was also the vice chairman at the time.

Deputy Eoghan Murphy:    The vice-chairman of the branch?

Mr. Donal Forde:  No, the vice chairman of the society nationally.

Deputy Eoghan Murphy:    So the signatory for the Tipperary account was the vice chairman of the national organisation.

Mr. Donal Forde:  One of the signatories was the vice chairman.

Deputy Eoghan Murphy:    So the vice chairman would have known of the account in Tipperary, being a signatory of it.

Mr. Donal Forde:  Yes, he would.

Deputy Eoghan Murphy:    Is that the person in headquarters who knew the account existed?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    It was someone else.

Mr. Donal Forde:  The previous discussion we had was about the finance function. Let us be clear this is a separate line altogether.

Deputy Eoghan Murphy:    What we have is the vice chairman of the national organisation being aware of an account in his branch and not disclosing that account officially in 2005, 2006 or 2007 and it not being recorded anywhere that the account existed.

Mr. Donal Forde:  That is fair.

Deputy Eoghan Murphy:    Is that person still the vice chairman of the organisation?

Mr. Donal Forde:  He is, yes.

Deputy Eoghan Murphy:    What happened upon the discovery of this account?

Mr. Donal Forde:  Forgive me Deputy, just for clarity I should make the point - and I have tried to create a context - that the view of the people in Tipperary was that they had told the finance function informally even though it was not submitted. The investigation accepts that the volunteers in the Tipperary region had given information to the centre to the degree that the central finance function knew about these moneys.

Deputy Eoghan Murphy:    I do not know what that means, sorry. You are telling me the members in the Tipperary branch were satisfied the €162,000 existed in a tsunami account and headquarters was fully aware the account existed.

Mr. Donal Forde:  Yes, that is what I am telling you.

Deputy Eoghan Murphy:    But that was not the case.

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    So-----

Mr. Donal Forde:  The investigation that was done accepted that it was the case.

Deputy Eoghan Murphy:    That headquarters knew about the money.

Mr. Donal Forde:  That headquarters was told informally.

Deputy Eoghan Murphy:    Sorry, but you told me the official position was that headquarters did not know that the account existed.

Mr. Donal Forde:  I am making a distinction here. Let me be very clear about this. I am making a distinction between formal returns that were made on accounts. There were no formal returns made which featured this account. That is a different thing from me saying the investigation concludes and accepts there were informal exchanges such that there was knowledge of the account at the centre. That is the distinction I am making.

Deputy Eoghan Murphy:    The Comptroller and Auditor General stated that headquarters was not aware of the existence of the bank account until a trawl of all Bank of Ireland accounts in the society’s name was undertaken in April 2008. I am not too concerned about the distinction that Mr. Forde is trying to make between formal and informal or about whether the Tipperary account’s members were satisfied that the account’s existence was known centrally. Is it correct to say that the money was sitting in an account, a signatory to which was also and continues to be the organisation’s vice chairman?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    What happened when the account was discovered?

Mr. Donal Forde:  The trawl was done in the space of a few weeks, the account was discovered, it was closed and the balance was transferred.

Deputy Eoghan Murphy:    Approximately 48 other accounts were found in the trawl.

Mr. Donal Forde:  Yes, but it would be wrong to interpret that as meaning other accounts contained tsunami money. Some of them were accounts with small, dormant balances. I cannot speak to the character of those balances, as I do not have the information with me.

Deputy Eoghan Murphy:    Some 49 accounts were unknown to headquarters formally and contained funds amounting to more than €200,000. The investigation was then launched.

Mr. Donal Forde:  No. The investigation was not conducted at that time. The account came to light in August 2008 and was closed in September 2008, at which time it seems our finance function took the view that the account was a financial administrative error. It was viewed in too casual a light.

Deputy Eoghan Murphy:    Who took the view that it was a simple error?

Mr. Donal Forde:  Let me be careful. All that is evident from the formal records is that the matter was closed.

Deputy Eoghan Murphy:    Would closing the matter have gone before the board?

Mr. Donal Forde:  Yes, but the point is that it did not.

Deputy Eoghan Murphy:    And the board would have said that there being 49 undisclosed accounts was okay.

Mr. Donal Forde:  I do not know what the board would have said, as the matter was not raised with it.

Vice Chairman:    Who was the general secretary at the time? Would he or she have been informally aware that €160,000 was sitting in the account?

Mr. Donal Forde:  I must be very careful about using the word “informally”, having just been challenged on it. All I can say is that it was not known formally.

Deputy Eoghan Murphy:    It was brought to the board.

Mr. Donal Forde:  No. To be clear, it was not brought to the board.

Deputy Eoghan Murphy:    A few people in headquarters decided that this matter was okay.

Mr. Donal Forde:  I cannot speak for who decided, but the matter was not brought to the attention of the board.

Deputy Eoghan Murphy:    To whose attention was it brought?

Mr. Donal Forde:  To my knowledge, nobody beyond the head of finance.

Deputy Eoghan Murphy:    In 2008, only the head of finance knew about the 49 undisclosed accounts and the moneys contained therein.

Mr. Donal Forde:  Formally. That is the picture I have.

Deputy Eoghan Murphy:    Is the head of finance still with the organisation?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    When was the investigation launched?

Mr. Donal Forde:  In 2009. No, forgive me. It was 2010.

Deputy Eoghan Murphy:    Why was there a delay?

Mr. Donal Forde:  According to the records and the investigation, the matter seems to have been closed within the finance department in September 2008. In 2010, there was commentary in the media about the fact that this incident had occurred. The media linked the incident with commentary about governance weaknesses more generally in the society, which presented the issue in a different light. It was at that point - November 2009 - that the first discussion on the matter featured in the minutes of the central committee.

Let me be clear about the timeline, and forgive me if I am causing confusion. The account came to light in August 2008 and was closed in September 2008. Subsequently, the matter was not raised again until the end of 2009, which is when it first featured for discussion at the central governance forum of the executive committee. It only featured on the back of media commentary.

Deputy Eoghan Murphy:    Media commentary made it public. Is the committee called the governance committee?

Mr. Donal Forde:  The executive committee of the central council.

Deputy Eoghan Murphy:    It decided that there should be an investigation.

Mr. Donal Forde:  Not immediately.

Deputy Eoghan Murphy:    It was made aware of the 49 undisclosed accounts, the fact that one account had contained a large amount of money and that one of the account’s signatories was the national organisation’s vice chairman, yet it still did not order an immediate investigation.

Mr. Donal Forde:  Not at that point.

Deputy Eoghan Murphy:    When did the Department of Defence become aware of these undisclosed accounts?

Mr. Donal Forde:  That was the first time the matter was mentioned at the forum on which the Department’s representative sits.

Deputy Eoghan Murphy:    My question might be better directed to Mr. Howard. When did the Department become aware of the 49 undisclosed accounts?

Mr. David J. O’Callaghan:  If we allow the secretary general of the Red Cross to continue, he might have that date.

Deputy Eoghan Murphy:    I beg Mr. Forde’s pardon.

Mr. Donal Forde:  The Department would have been aware of it for the first time in November 2009.

Deputy Eoghan Murphy:    What made the Department aware of it?

Mr. Donal Forde:  The events to which I referred, namely, media commentary and the discussion of the matter by the committee for the first time.

Deputy Eoghan Murphy:    In 2009.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    It is my understanding that a member of the board or the executive committee resigned in 2009 because nothing happened in respect of the undisclosed accounts, that the member wrote to the Minister for Defence to state the reasons for said resignation and that this was the first time the Department became aware of the matter.

Mr. Donal Forde:  I am confident that is not accurate.

Deputy Eoghan Murphy:    I will ask Mr. O’Callaghan, who was previously in a position in the Department.

Mr. David J. O’Callaghan:  I was its Secretary General.

Deputy Eoghan Murphy:    For which years?

Mr. David J. O’Callaghan:  Almost ten years from 1995 until I retired in 2003.

Deputy Eoghan Murphy:    Mr. O’Callaghan had a view of the Red Cross from the Department. Was he aware of the allegations being made?

Mr. David J. O’Callaghan:  I was Secretary General of the Department of Defence for nearly ten years and have been racking my brain as to how many times the Red Cross appeared on my radar of top ten issues, but I can remember no time when we had difficulties with it. It was at arm’s length from the Department and there did not appear to be any problem. A member of staff at principal officer level was on its board, but no problems surfaced at Secretary General level until that point.

If I might summarise, a picture is emerging. There was a mess. Hands up, it was bad governance and the matter was not spotted. When it was spotted, the moneys were diverted. They could not have been used anyway, as the account was restricted and there was no movement in it. Not one cent went missing or was misappropriated. There is no question of that, although I know that is not what the Deputy is suggesting.

Deputy Eoghan Murphy:    The money was just resting in the account.

Mr. David J. O’Callaghan:  It would appear that head office staff decided to address the matter administratively. This was a bad judgment call, as the money was significant enough to have been brought to the board’s attention immediately and an immediate investigation should have been conducted. The matter did not reach board level until quite late.

Mr. Donal Forde:  November 2009.

Mr. David J. O’Callaghan:  That would have been the first time the Department’s representative on the board became aware of it. What happened subsequently is a little unclear. The board agreed fairly quickly to launch an investigation, yet it was not conducted. The previous chairman resigned and, after a gap of eight or nine months, I was appointed as chairman.

Deputy Eoghan Murphy:    When was that?

Mr. David J. O’Callaghan:  September 2010. I was made aware of the matter. I wrote the investigation’s terms of reference and immediately put that investigation in train. It reported to me in December.

Mr. Donal Forde:  Of 2010.

Deputy Eoghan Murphy:    I might revert to that point. Turning to what the Department knew of the undisclosed accounts and whether an investigation was necessary, is Mr. Howard aware of when his Department found out that there was a question mark over the financial controls?

Mr. Michael Howard:  The Department’s representative on the committee would have found out when the rest of the committee was made aware of it, but I do not know in what terms the matter was presented to the board or how it appeared at the time. Given Mr. O’Callaghan’s comments, the matter was initially processed as an administrative error, as no money had left the accounts. No great significance was attached to the matter.

It may be relevant that, at the end of 2009, the previous chairman and the general secretary resigned. There were an acting chairman and an acting general secretary in 2010. I want to be careful in terms of what I say. I have no recollection of difficulties of a very serious nature being brought to my attention other than during the course of 2010. I could not put my hand on my heart and give a date in relation to when.

Deputy Eoghan Murphy:    Was Mr. Howard Secretary General in 2009?

Mr. Michael Howard:  I have been Secretary General since October 2004.

Deputy Eoghan Murphy:    So, if a Government representative on the executive committee resigned from the Red Cross, citing loose financial controls, impropriety or undisclosed bank accounts, that would come across Mr. Howard’s desk?

Mr. Michael Howard:  I am giving an honest answer when I say it does not spring to mind now. The Deputy will appreciate that the organisation of which I am the Secretary General and the account for which I am the Accounting Officer are fairly large in scope.

Deputy Eoghan Murphy:    Of course.

Mr. Michael Howard:  As such, a huge volume of stuff comes across my desk. I am being perfectly honest when I say that I do not recall it. I would have to check the records to give the Deputy a definitive answer.

Deputy Eoghan Murphy:    I am aware that the Secretary General has received correspondence making the point that the Department was made aware in 2009, through the resignation of one of the members of the board, that there was a serious problem in regard to undisclosed accounts and money that had not been put into the central account fund for the society. It is mentioned in correspondence to the committee that had happened.

Mr. Donal Forde:  May I interject?

Mr. David J. O’Callaghan:  We might be able to throw some light on that.

Mr. Donal Forde:  That is not an accurate representation of what happened. As the Deputy stated, there was a resignation but it was not linked to the Tipperary accounts. It is important to be clear in that respect.

Deputy Eoghan Murphy:    A resignation took place. My understanding is that - I have not seen the letter of resignation but it can be discovered - the person concerned resigned owing to deeply held concerns in regard to poor governance and loose financial controls in the organisation. I do not know if reference was made to a particular account.

Mr. Donal Forde:  The Deputy is correct but it did not-----

Deputy Eoghan Murphy:    That is when the Department of Defence first became aware of the fact-----

Mr. Donal Forde:  What the Deputy says is correct but it made no reference to Tipperary. Tipperary was not known about at the central forum at that point.

Deputy Eoghan Murphy:    I am asking what the Secretary General of the Department knew at that point and what might have been brought to his attention.

Mr. Donal Forde:  No one in the governance forum of the Red Cross knew at the point of that resignation about the Tipperary account.

Deputy Eoghan Murphy:    In 2009?

Mr. Donal Forde:  At that point in 2009.

Deputy Eoghan Murphy:    One year after it had actually been discovered by people working in headquarters.

Mr. Donal Forde:  As stated, they did not know.

Deputy Eoghan Murphy:    Perhaps Mr. O’Callaghan will elaborate a little on the investigation into this account and the undisclosed accounts. How many people took part in the investigation? Was a team of investigators involved or-----

Mr. David J. O’Callaghan:  A team of three competent people.

Deputy Eoghan Murphy:    Were they external to the organisation?

Mr. David J. O’Callaghan:  They were external to the executive committee.

Deputy Eoghan Murphy:    Not to the Red Cross.

Mr. David J. O’Callaghan:  No.

Deputy Eoghan Murphy:    It was initially intended to have an external investigation. It was announced that there would be an external investigation but then there was a change of mind.

Mr. David J. O’Callaghan:  Yes. That was my decision. I thought a sub-committee of the board would be an appropriate response to this type of thing. I did not see any justification for paying good money to an outside accountancy firm or consultants when we had competent people within the organisation who were willing to do this work, as in the case of most work done in Red Cross, on a pro bono basis.

Deputy Eoghan Murphy:    It did not bother Mr. O’Callaghan, given the fact that there seemed to be informal accounting procedures in the organisation, that one of the people directly involved held the position of vice chairman of the national organisation. It did not bother him that the organisation might not be able to investigate itself, in particular in light of what had gone on.

Mr. David J. O’Callaghan:  It is a large organisation. The people involved were totally divorced from the Tipperary account and the executive. They were totally independent. I know the Deputy is not questioning any member’s qualifications. The team was made up of accountants, consultants and included the CEO of the Catholic Institute for Deaf People, a former chief executive of the International League of Credit Unions and a the former head of the Society of St. Vincent de Paul, who chaired the group.

Deputy Eoghan Murphy:    The three people involved had no direct relationship with anyone being investigated.

Mr. David J. O’Callaghan:  None whatsoever. It was a thorough investigation. The report did not hold back on punches. It pointed to poor governance, in respect of which we put our hands up. The team reported the full picture, bad and all as it may seem.

Deputy Eoghan Murphy:    What reason was given for non-disclosure of the Tipperary account in 2005, 2006 and 2007?

Mr. Donal Forde:  The report acknowledges that informal discussion was taking place and that there was no formal recording of the accounts at the centre. It also states that given the timeframe in which the moneys were to be spent it was “understandable” that those in Tipperary felt it was not unsurprising that the money had not all been “consolidated” at that time. They are the terms used.

Deputy Eoghan Murphy:    Does Mr. Forde think it understandable the matter had not been reported? I acknowledge Mr. Forde was not there at the time but looking back now does he think it was understandable?

Mr. Donal Forde:  No. It is easy for me to speak of those events in the context of the rigour and disciplines we have introduced since. I do not believe it is appropriate for me to comment further.

Deputy Eoghan Murphy:    Mr. Forde did say it should not have happened and that he apologised for it.

Mr. Donal Forde:  Yes.

Mr. David J. O’Callaghan:  Yes, we do.

Mr. Donal Forde:  We have been open and transparent about the fact that it is, as the Deputy described, an unacceptable failing of our governance. That has been acknowledged. Since my arrival and the putting in place of the new leadership team, we have been putting that right.

Vice Chairman:    It seems extraordinary that the head of finance would not have communicated with the general secretary of the organisation at the time. What was the time lag between the head of finance being made aware of this €160,000 and it being brought to the attention of the board?

Mr. Donal Forde:  I see no evidence of such communication.

Vice Chairman:    The head of finance would not have been a member of the board?

Mr. Donal Forde:  No.

Vice Chairman:    Would the general secretary?

Mr. Donal Forde:  Would attend at the board.

Vice Chairman:    What was the timelag between the head of finance being made aware of the €160,000 and it being formally presented before the board?

Mr. Donal Forde:  From September 2008 to November 2009.

Vice Chairman:    Approximately 14 to 15 months. It would appear extraordinary to the ordinary person looking in that the head of finance would not communicate with the general secretary on this particular point. It was around the time of the resignation to which Deputy Murphy referred that this arose.

Mr. Donal Forde:  It was in July. The timeframe involved is from September 2008 to November 2009. I understand that the resignation took place in July 2009. The reasons cited for the resignation were poor governance, under-developed systems and control of supervision but there was no specific reference to Tipperary.

Vice Chairman:    There are questions to be answered in that regard. Mr. O’Callaghan referred to the investigation. It would be normal for an organisation of the size of the Red Cross, when it comes across large sums of undisclosed money, to bring in external investigators. This would be good corporate governance for any company. It is hard for people, regardless of whether or not they know other members, to investigate them.

Mr. David J. O’Callaghan:  I accept the Vice Chairman’s point. In all the organisations in which I have worked the internal auditors, often tasked with much bigger investigations than this, knew all the other employees in the organisation. I thought this was an appropriate response given the independence and calibre of people involved, who did not hold back from pulling their punches in the production of their report. It is a damning report of our governance at the time. With respect, I do not believe an external group of consultants - I must be careful about how I disburse the funds of a charitable organisation. After all, they are donor contributions. I thought we had the capacity. My judgment was borne out in-----

Vice Chairman:    I am not questioning the personal integrity of the people involved.

Mr. David J. O’Callaghan:  I know.

Vice Chairman:    However, in terms of good corporate governance, it might in hindsight have been wise to bring in external consultants to do that work.

Mr. Donal Forde:  It is important to make the point and to recall that there was no misappropriation of money involved. The report concludes there was no malevolence involved. It concludes that this was in the space of bad administration, governance and controls. I would draw a distinction between an organisation that found something of the order of misappropriation or malevolence, which is one context within which to conduct an investigation, and the conduct of an investigation where prima facie there was none, which the findings subsequently confirmed.

Deputy Eoghan Murphy:    What came of the investigation? Was any disciplinary action taken?

Mr. David J. O’Callaghan:  No, there was no disciplinary action as such.

Deputy Eoghan Murphy:    Are the two people who were signatories of the Tipperary account still signatories of any financial accounts within the Red Cross nationally or locally?

Mr. Donal Forde:  No, I do not believe they are.

Deputy Eoghan Murphy:    They are no longer able to sign off for any bank accounts in the Tipperary branch.

Mr. Donal Forde:  At the time, this was a specific account for the purpose of gathering funds after the tsunami disaster. These people were not signatories to the general accounts in Tipperary then, and not today, to my knowledge.

Deputy Eoghan Murphy:    The witness is saying neither of those people are able to sign off for funds donated or expenses.

Mr. Donal Forde:  I can speak for one, certainly. The vice chairman is not a signatory to those accounts. I cannot speak with the same confidence about the second person.

Deputy Eoghan Murphy:    Is it possible to get a copy of the letter sent to the bank asking for an investigation of the four undisclosed accounts?

Mr. Donal Forde:  It was not for an investigation. There was a request to provide, essentially, details of the accounts. I want to make clear there was no investigation.

Deputy Eoghan Murphy:    May we have a copy of that correspondence?

Mr. Donal Forde:  Yes, absolutely.

Deputy Eoghan Murphy:    I wish to move on to the auditing of the Red Cross, which is to stay on the theme of financial controls and management. How often is the Red Cross audited?

Mr. Donal Forde:  The published accounts of the Red Cross relate to its head office activities and are audited annually.

Deputy Eoghan Murphy:    It is just the head office.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    That happens every year.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Who are the auditors?

Mr. Donal Forde:  It is BDO.

Deputy Eoghan Murphy:    That does not include any of the branches or regions.

Mr. Donal Forde:  For the published accounts, the audit process undertaken by BDO relates to head office accounts.

Deputy Eoghan Murphy:    Who audits individual branches?

Mr. Donal Forde:  There is a process. For the past four years, the society, like many others, has been endeavouring to move to a consolidation of its branch accounts. It has been a painful four-year journey. One can imagine a scenario where 150 branches staffed by volunteers need a professional treatment of accounts; the process has taken some time but we are there. I can talk the Deputy through the journey. We are now at a point where, essentially, all the accounts of the branches of the Red Cross for 2011 will be audited, consolidated and published.

Deputy Eoghan Murphy:    Is that all the branches of the society for 2011?

Mr. Donal Forde:  They will be audited and published.

Deputy Eoghan Murphy:    I understand the difficulty as Fine Gael as a party has a similar operation, with hundreds of branches around the country and each year each branch would submit its own financial accounts to the constituency executive before going to headquarters. We have been doing that for some time. Is BDO satisfied with the accounts in the Red Cross?

Mr. Donal Forde:  Yes, unconditionally and absolutely.

Deputy Eoghan Murphy:    Concerns were raised previously.

Mr. Donal Forde:  To what is the Deputy referring?

Deputy Eoghan Murphy:    In 2005 and 2006, BDO raised concerns regarding the ability to prepare proper accounts and a lack of financial information regarding individual branches. These concerns were raised again in 2008.

Mr. Donal Forde:  I believe the Deputy is referring to the management letters at the time.

Deputy Eoghan Murphy:    I am trying to ascertain if the auditors were satisfied.

Mr. Donal Forde:  I should be clear. The auditors are satisfied with the accounts of the Red Cross today and at no point have the auditors ever introduced any qualification to the accounts of the Red Cross.

Deputy Eoghan Murphy:    In previous years the point has been made to the organisation that the auditors were not satisfied the organisation has the ability to prepare proper and complete accounts.

Mr. Donal Forde:  Yes, that was through their management letters.

Deputy Eoghan Murphy:    What happened then? The issue was raised in a management letter in 2005 and there was a concern about the ability to audit all the branches, which is in accordance with the rules of the society.

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    Is that incorrect? In 2005-----

Mr. Donal Forde:  Essentially, the rules of the society are that we produce audited accounts for our head office activities, which we have been doing.

Deputy Eoghan Murphy:    It is just for head office activities.

Mr. Donal Forde:  Yes, and it was decided that the organisation should recognise a need to move on and begin to address the upcoming requirements of the Charities Act.

Deputy Eoghan Murphy:    When did that happen?

Mr. Donal Forde:  That process goes back to approximately 2006.

Deputy Eoghan Murphy:    It has taken almost six years to get from BDO raising concerns in 2005 about the ability to prepare accounts and the lack of financial information regarding branches to where we are now. The concerns raised by BDO at that time have been addressed now.

Mr. Donal Forde:  I would not go that far. It is only now that we are in a position to produce fully consolidated accounts. Along the road there have been incremental steps each year that go to addressing the issues raised.

Deputy Eoghan Murphy:    Was there any reluctance in the organisation to adopt new financial controls or begin to audit branches?

Mr. Donal Forde:  There was none at a governance level, although there has been a long journey - alluded to by the Deputy - to try to get volunteer branch treasurers into the discipline of producing information in the required way.

Deputy Eoghan Murphy:    Did the external auditors state that the Red Cross is in breach of standard accounting practices for charities?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    It did not state as much in reference to the property portfolio, which was not recorded.

Mr. Donal Forde:  I believe the note referred to by the Deputy makes a statement that when the society adopts standard accounting practices, it may need to change its accounting treatment. We should be clear that the accounts of the society are prepared on general accounting principles

Deputy Eoghan Murphy:    They are not prepared on the basis of standard accountant practices.

Mr. Donal Forde:  No, it is general accounting principles.

Deputy Eoghan Murphy:    None of the property portfolio is recorded.

Mr. Donal Forde:  I am happy to speak about the property portfolio issue if the Deputy so wishes.

Deputy Eoghan Murphy:    Yes.

Mr. Donal Forde:  The confusion in this regard goes back to a note in the accounts for the past three years, which is essentially a disclosure note on the part of the board. There was an unease around the executive table for this reason. There was a burglary at the head office premises a number of years ago and some of the deeds of title and other ownership records were lost. They were not reconstituted as early as they should have been. There was some unease around the table that this had implications for the manner in which the properties were represented in accounts. As with other matters, that should have been addressed more quickly. We have worked on a project for the past four or five months, which is now complete. We now have full files on the 17 properties of which the society has ownership, although the ownership documents in three cases will only be fully in place within the next few weeks. The process is under way. In light of that full set of information, the property assets relating to the head office have been properly recorded in the accounts at all times. That is worth repeating.

Deputy Eoghan Murphy:    What does that mean?

Mr. Donal Forde:  At every point throughout the course of the period we are talking about, those properties have been properly recorded on the balance sheet.

Deputy Eoghan Murphy:    How are they recorded?

Mr. Donal Forde:  The accounting treatment requires them to be shown at their acquisition value, which has been done.

Deputy Eoghan Murphy:    Is there income from other properties?

Mr. Donal Forde:  We receive almost €5,000 in rent: €3,000 from a bridge club, €1,000 from girl guides and €1,000 from somebody else.

Deputy Eoghan Murphy:    How did the society come by these properties?

Mr. Donal Forde:  One property was donated in 2001. All the others have been acquired, in one form or another, over 70 years.

Deputy Eoghan Murphy:    There are 17 properties.

Mr. Donal Forde:  Yes. I have a list if the Deputy wishes to see it.

Deputy Eoghan Murphy:    Could it be made public?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    The properties are insured for €7 million.

Mr. Donal Forde:  They were at one point. They are now insured for €4 million.

Vice Chairman:    Were they acquired by local branches or head office?

Mr. Donal Forde:  It was both. No more than three or four, a small number, were acquired exclusively by head office. Typically, the arrangement was for the local branch to gather funds, perhaps for 30% to 70% of the price, and on occasion there may have been an approach to head office for the balance to buy the building.

Vice Chairman:    Could there have been cases where a local branch could have bought a building without the approval of head office?

Mr. Donal Forde:  Not to my knowledge.

Vice Chairman:    What is the highest value for the properties?

Mr. Donal Forde:  If there are 17 properties with a total of €4 million in value-----

Vice Chairman:    Are many of very high value that were purchased for significant sums?

Mr. Donal Forde:  The property of greatest value is approximately €500,000.

Vice Chairman:    Is that the headquarters?

Mr. Donal Forde:  No, it is the property donated in 2001. We use it as our national training centre and it is Kilbehenny.

Deputy Eoghan Murphy:    There are a large number of properties. What are they being used for?

Mr. Donal Forde:  They are used for training and therapeutic hand care sessions. They are used for many different activities.

Deputy Eoghan Murphy:    They are located throughout the country.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Do people receive benefit-in-kind for using the properties? Are any of them residential?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    Regarding control of the portfolio and managing it within the organisation, who does that fall to?

Mr. Donal Forde:  Today it is the head of finance, Ms Breda Hawkshaw, who is in attendance.

Deputy Eoghan Murphy:    Is Mr. Forde satisfied that the every item of property in the portfolio that exists under the control of the Irish Red Cross Society can be accounted for and that it can be recorded properly?

Mr. Donal Forde:  That has been done. It should have been done sooner and this disclosure note and the unease would not have arisen if it had been done sooner. This information is available and can be made public. We have complete files on all of this. The position in respect of representing those properties is absolutely accurate.

Vice Chairman:    How long have those properties been held by the Irish Red Cross?

Mr. Donal Forde:  Since 1953.

Vice Chairman:    The properties have been in situ for over 50 years.

Mr. Donal Forde:  Some of them have been.

Vice Chairman:    And they have never been reflected in the accounts.

Mr. Donal Forde:  They were always properly reflected in the accounts.

Vice Chairman:    They were not reflected in the financial statements.

Mr. Donal Forde:  Financial statements relate to our head office activities and include the property assets appropriate to the head office. Other properties are on the branch accounts and do not feature because these are not published. They will feature in the 2011 accounts.

Deputy Eoghan Murphy:    The properties that come under the branch accounts have not featured in the annual reports of the organisation.

Mr. Donal Forde:  No, because the organisation has not reported on a full branch basis.

Deputy Eoghan Murphy:    How many of the properties are owned by branches?

Mr. Donal Forde:  The picture is a little complicated because there is part-ownership where the branch has made a significant contribution. Perhaps half of them are owned by the branches and half of them are jointly owned.

Deputy Eoghan Murphy:    A branch will go to the head office and say that it wants to purchase premises and the organisation enters into some negotiation. The branches are not using the premises all the time because it is a voluntary organisation. While people give a lot of time to the organisation, they do not need premises all of the time. Do they lease premises?

Mr. Donal Forde:  No, we have 150 branches and 17 properties. Only the large centres have this set-up. Properties are made available to other volunteer organisations in some cases. We receive payment in only three cases, to a total of €5,000. In many other cases it is given for free and is volunteered to others.

Deputy Eoghan Murphy:    When it is given for free, is it given to voluntary organisations to use?

Mr. Donal Forde:  There are informal arrangements throughout the country and that is a matter for local volunteers.

Deputy Eoghan Murphy:    Are there any commercial arrangements?

Mr. Donal Forde:  There is a rental payment in only three cases that I know about.

Deputy Eoghan Murphy:    Is there an informal relationship with a commercial organisation that does not pay rent?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    Might there be a commercial organisation not paying rent because of an understanding between the organisation and the local branch?

Mr. Donal Forde:  I am not aware of any.

Deputy Eoghan Murphy:    Is Mr. Forde happy that he knows of the full activities happening in any of the buildings under the ownership of the Irish Red Cross?

Mr. Donal Forde:  I believe I do. As part of the work we have done, we asked every branch for a return about every property related item of information. We have collated this at the centre and I am speaking with a degree of confidence.

Deputy Eoghan Murphy:    We are touching upon financial management and governance issues. Mr. Forde stated that the organisation is in the process of making considerable reform in that area. An external report on governance was produced in 2005 and 2006 - is that correct?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Was that acted upon?

Mr. Donal Forde:  The Deputy is referring to the Finlay report, which was carried out by an external consultant who made several recommendations. The short answer is that it was not acted upon immediately. Most of the recommendations related to reform of the constitution of the Irish Red Cross. That process has been started and is a long and painful process that is not yet complete. Those particular recommendations were not implemented immediately.

Deputy Eoghan Murphy:    Where do the reforms being implemented now come from?

Mr. Donal Forde:  There was a subsequent report in 2008, with a growing emphasis in the society on governance and control. Professor Roger Downer of the University of Limerick conducted a report on governance and the recommendations on governance were almost completely in line with the previous report. I can make the detail of the report available to members.

Deputy Eoghan Murphy:    Was it in line with what Mr. Finlay had suggested?

Mr. Donal Forde:  Yes. In fact, it was a little stronger in some places.

Deputy Eoghan Murphy:    Perhaps this was necessary because Mr. Finlay’s recommendations were not implemented.

Mr. Donal Forde:  I do not think that is the case. Many of Mr. Finlay’s recommendations related to reform of the constitution, and that process has started. That is happening as one development. From the conversation we have had, the Deputy can see there was a growing emphasis on governance and administration in 2008 so the second report was commissioned with a slightly broader remit. Coincidentally, it makes many of the same recommendations.

Deputy Eoghan Murphy:    Did Mr. Downer draw up those recommendations and proposals on his own or was he assisted by a committee?

Mr. Donal Forde:  There was a committee of eight, with two advisers.

Deputy Eoghan Murphy:    Did the vice chairman of the organisation sit on the committee?

Mr. Donal Forde:  Yes he did.

Deputy Eoghan Murphy:    Is this the vice chairman who was also a signatory to the Tipperary bank account?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Did he sit on the committee to draw up the reform proposals for the organisation that are now being implemented?

Mr. Donal Forde:  That was the consultative group and any changes to the constitution must come to the central council.

Deputy Eoghan Murphy:    What is the vice chairman’s term of service to date with the Irish Red Cross?

Mr. Donal Forde:  It is 21 years.

Deputy Eoghan Murphy:    Was he vice chairman all that time?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Is it wise to have someone who sat in the Red Cross for 21 years through the difficulties it has had, particularly when these relate to the person concerned, to sit on a committee advising on reform proposals for the organisation?

Mr. Donal Forde:  When one puts together a committee, the best formula is to have all perspectives represented in the discussion. The vice chairman represented one of eight views and I do not think it is unreasonable.

Deputy Eoghan Murphy:    Does Mr. Forde not think it unreasonable that a person sitting on a board for 21 years, which is against all standards of good governance, and who was directly involved in an investigation because an account to which he was a signatory was not disclosed for three years, should be on a committee advising on good governance and financial controls for that organisation?

Mr. Donal Forde:  The question of what represented the best governance formula for the Irish Red Cross necessarily drew on a variety of opinions. Some argued for substantial and radical change and others made the argument for less radical change. The vice chairman represented one perspective and it is not unreasonable that this perspective was in the mix.

Deputy Eoghan Murphy:    Was this the perspective of less radical change? Was it a perspective of resistance to reform?

Mr. Donal Forde:  I have no evidence of that.

Deputy Eoghan Murphy:    We know good governance practices and we know the society is moving to initiate two consecutive three-year terms before one must stand down. I take it that this person will resign from the board as soon as possible.

Mr. Donal Forde:  That is a matter for that person.

Deputy Eoghan Murphy:    Will he be able to remain on the board?

Mr. Donal Forde:  Under that formula, he will be able to remain if he is elected.

Deputy Eoghan Murphy:    Under the reforms proposals, members of the board will be able to serve two consecutive three-year terms. What will happen then?

Mr. Donal Forde:  People will have to stand down for a period.

Deputy Eoghan Murphy:    What is that period? Will it be for a three-year period before returning?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    If the person was not challenged in an election for the position, would the person be able to remain in that position?

Mr. Donal Forde:  No.

Deputy Eoghan Murphy:    Do they automatically resign under the new proposal?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    When do the new proposals come into force?

Mr. Donal Forde:  They are ready and waiting and we are in discussion with the Department of Defence which is working with the Office of the Attorney General to draft the statutory order to enact it. Hopefully it is a matter of weeks away.

Deputy Eoghan Murphy:    Will this be retrospective?

Mr. Donal Forde:  I do not believe it will be.

Deputy Eoghan Murphy:    That flies in the face of good governance. Perhaps we could ask an organisation like Transparency International if it is good governance not to take into account retrospective service on a board so that a person can, quite incredibly, serve 27 years in the same position in the organisation through a period where there have been serious allegations against it. This person sat on the committee recommending the reform proposals that would keep him in place for a further six years.

Mr. David J. O’Callaghan:  We have heard that argument before. It may not be good governance in some people’s view but what has been lost sight of is that we are a democratic organisation. People are voted on to branches. They are nominated to the council. The council gets nominations and these people go for office every year. They must be nominated and voted on. To emphasise, the particular person about whom the Deputy is talking is a pro bono volunteer. He is dedicated to the society. He has not, in any way, hampered or been a stumbling block to the reforms we have been moving on over the past 12 months. Quite the contrary, he has been a source of very good and sound advice.

There are two elements to the governance. There is the constitution, on which the Deputy touched - the Downer report following on from the Hanly report. There is also the internal stuff, which I have listed in my report to the committee and which is the initiative of the head office, mainly the secretary general. These relate to the board, governance, management, oversight, financial governance and supervision, general governance, the way we are developing the society and a raft of other initiatives. I would like to read them all out and put them in the record but I do not want to waste the committee’s time.

Vice Chairman:    What is the rationale behind allowing people to go for two or three terms - six years uninterrupted - and that this would not be retrospective? Will someone explain the rationale behind that for the Irish Red Cross? How did the make-up of the consultative committee come about? Who determined that? For the ordinary person, it is six years uninterrupted, although I know it is a voluntary organisation.

Mr. Donal Forde:  We all understand what ideal structures might be from a governance point of view. Let me make that point, but this is a democratic organisation. There are different views within the organisation about what the right governance formula for it may be. There has been debate about retrospection. There has been debate not just here but with our colleagues in Geneva who have been intimately involved in this process. It is not recognised or necessarily accepted that moving some long-service volunteers off the board immediately represents the best interests of the society.

What I can tell the Vice Chairman is that there is no support to make this clause retrospective. Let me start by saying that. We have no right to impose. We cannot impose; this is a democratic process. We must accept the judgment and the verdict of the members. Let me be upfront about that.

I am drawing on feedback I get from members and from my interaction with them. They have different views on this. It is helpful to understand the situation. Some take the view that we are introducing very radical change and they want to make sure that is balanced by having some long-serving volunteers, who they regard very highly, in the centre of the process. That is the view in some quarters. Others believe that the right formula going forward is a mix of talent at the board table which will have long-serving volunteers as one aspect of it but appropriately balanced with new young blood from within the members and external expertise. That is another view. There are some who will say we do not need a clause for retrospection because, if they like, they can simply not return these people at the next election, which will be in April.

It is not that the organisation is setting its face against good governance. The members are exercising a judgment which is that in their view, the best mix for the society right now, given all that it is doing, is the balance that is-----

Vice Chairman:    The Minister for Defence wrote to the organisation and the chairman on 16 May and specifically referred to governance and the fact he would like to see these types of rules being changed and overhauled. What is the view on the fact the taxpayer will give €869,000 to the Irish Red Cross in 2012?

Mr. David J. O’Callaghan:  We are very grateful for that contribution from the taxpayer. The Minister for Defence wrote to us and following receipt of that letter - I referred that to task force on governance - the three-year gap was introduced. It was not as if we ignored the letter. Prior to that, the idea was a one-year-----

Mr. Donal Forde:  Prior to that, the talk was of a one-year step down. On foot of the Minister’s letter, that went back for consultation. The initiative of introducing a full term was introduced in response to it.

Mr. David J. O’Callaghan:  I cannot emphasise enough that we are talking about volunteers. I am sure everyone around the table knows how difficult it is to get people at branch level to take up the offices of chairman or treasurer. We are finding it very hard at branch level to get people to take on these jobs. People are happy enough to be members but they do not want to take on the responsibility of being treasurer. We have people who are dedicated and who give years of service. I know many associations, including the GAA and other voluntary groups in which I am involved, where it is the same people all the time. We are no different. Is it a bad thing to be a pro bono volunteer giving all one’s time to the Irish Red Cross for 21 years? Is it a crime? Is it a bad thing?

Vice Chairman:    Corporate governance was lacking in the organisation.

Mr. David J. O’Callaghan:  Right now, we are willing to take the honours paper in corporate governance. There is no question about it. If one looks again at the initiatives we have introduced, they are all there.

Deputy Eoghan Murphy:    With respect, the society is failing the honours paper on corporate governance.

Mr. David J. O’Callaghan:  We have in the past. We have failed the pass paper in the past. I agree with the Deputy.

Deputy Eoghan Murphy:    Right now, the society is failing it because this is not retrospective.

Mr. Donal Forde:  I need to challenge the Deputy.

Deputy Eoghan Murphy:    How can a person remain a member of the central committee if no longer on the executive committee?

Mr. Donal Forde:  The constitution, as it is outlined in the corporate governance code for Irish NGOs, meets best practice. Let me make that clear.

Deputy Eoghan Murphy:    That someone could sit on a board for 27 years in the same position as vice chairman-----

Mr. Donal Forde:  There are more aspects to corporate governance than that.

Deputy Eoghan Murphy:    There are, but if the society fails in one area, it is quite possible it could fail in others.

Mr. Donal Forde:  There is no standard in this respect or in terms of what is an appropriate membership. I understand that is one of the aspects of our constitution which people may question but let me be very clear in this respect. The code which is now in prospect meets best practice. It meets the expectations of our governance division in Geneva which has been intimately involved in this process.

Deputy Eoghan Murphy:    Is that the International Committee of the Red Cross in Geneva?

Mr. Donal Forde:  Yes. The ICRC and the International Federation of the Red Cross as well.

Deputy Eoghan Murphy:    The ICRC is fully aware that a person will remain in place for 27 years.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Did it say that was okay?

Mr. Donal Forde:  What it said was that it accepts that the members of the Irish Red Cross understand the specific issues it faces in Ireland and that if that is their democratic judgment, it does not see it as an issue of sufficient material importance to challenge it. It wanted to see rotation introduced, and it has been introduced. I want to be very clear in that respect. It does not see the issue of retrospection as a critical one. It accepts the general view among members of the Irish Red Cross that we are involved in a fairly dramatic change process and that a significant body of our volunteers want the comfort, through that period of change, of having somebody in whom they have significant confidence sitting on the board and who knows the organisation intimately.

Deputy Eoghan Murphy:    The Government, the Oireachtas and donors to the organisation must have confidence as well. I just do not have it. That is my problem. I have taken up enough time.

Mr. Donal Forde:  I accept I am being a little bit strident but I just want to make the point that this meets best practice standards. The Deputy is pointing to a specific aspect of it which I accept some may question. However, there is a context in which the members of the organisation have decided that this is their preferred formula for the moment. They may well change that.

Deputy Eoghan Murphy:    Did a general assembly meeting decide it?

Mr. Donal Forde:  No, the central council.

Deputy Eoghan Murphy:    How long has the central council been in place? Are these the people who have been in place for the past four or five years? Is the central council the executive committee of the board?

Mr Donal Forde:  No. The central council is essentially a group of almost 50 people, which includes the elected representatives from each area, that stands at 30 odd, and Government nominees, which constitutes about a third. They elect the executive committee.

Deputy Eoghan Murphy:    If a person comes off the executive committee do they remain on the central council?

Mr Donal Forde:  They must be re-elected to the central council. They could also be nominated to it.

Vice Chairman:    Does Deputy Murphy wish to continue with one final question or to come in later?

Deputy Eoghan Murphy:    I have more than one question.

Deputy Derek Nolan:    I welcome Mr. David J. O’Callaghan, Mr. Donal Forde and Mr. Ronan Ryan. I acknowledge and appreciate they accepted our invitation to appear before the committee but they are under no compulsion to be here.

The Irish Red Cross Society and its 5,000 volunteers in Ireland do positive work here and around the world and I commend the organisation for its good work. The society has an ambitious corporate governance reform programme but it seems there was severe failure of oversight, detrimental staff relations in some cases and at times scant regard for regulation, practices and procedures. As a result, the reputation of the organisation has taken a knocking in the media and in the mind of the public. There seems to be a view that some people in the organisation may not be capable of adapting to the change necessary for corporate governance. Mr. Donal Forde was appointed last year as Secretary General and Mr. Ronan Right is newly appointed so there is new blood at a senior level.

I raise the question of the Haiti fund, which was raised in the media, as I would like to get clarity on it. It has been said that at the time of that catastrophe there was an appeal for funds which the Irish Red Cross Society would send to the Haiti appeal. The money can come into the society in many ways - online, cheques and be paid directly into bank accounts. Some people would go to their bank and ask to lodge money to the Irish Red Cross, in anticipation that the money would be used for the Haiti appeal. What happened in fact is that if a customer does not specify that the money is for the Haiti appeal, it goes into a general fund, the head office fund. Approximately €600,000 of the money that went into the general fund could be identified as having been intended for the Haiti appeal and that money was then used for Haiti.

Mr. David J. O’Callaghan:  I am pleased the Deputy raised that issue. I will ask Mr. Ronan Ryan, head of fund-raising to deal with it.

Mr. Ronan Ryan:  Thank you Deputy. I am happy to answer this question. I was made aware of this allegation when I started in the Irish Red Cross Society about 12 months ago. I can categorically say that no money was diverted from Haiti. A sum of €3.1 million was raised for Haiti and every cent was allocated to the Haiti programme.

In regard to restricted and unrestricted donations that the Deputy alluded to, there are suggestions about the use of unrestricted funds. Will the Deputy allow for the fact that I may speak in fund-raising jargon? A restricted donation is very clear, the donor has said that the money is for a very particular purpose. An unrestricted donation is where the donor has not indicated a preference for where the money should go. With restricted donations, the Irish Red Cross Society, like all charities makes every effort to find out the donor’s preference, with reply slips, drop-down menus and if the donation is by telephone they are asked their preference. As a fund-raiser, one is keen to be true to the donor’s wishes and to ensure the money goes exactly where they want. With an unrestricted donation, where the donor does not mark clearly where the money is intended to go, one has no evidence of the donor’s preference and all one knows is that it is an unrestricted donation.

A large charity, such as the Irish Red Cross cannot assume that the donation has been inspired by one or other appeal because the Irish Red Cross has a number of appeals on the go at the same time. Let me give an example. During the Haiti appeal in early 2010, there was money coming in for the Irish people who suffered from the severe flooding in late 2009. At the same time we had long-term programme in Malawi, Niger, so that at a given moment, there are a number of on-going appeals. There are lesser known appeals, which may not be as well known as others. Our Irish Red Cross donors will know about them and people will donate to our therapeutic handcare programme, where we look after the elderly and the vulnerable.

Where a donation is made that is not clearly marked and one does not know the donor’s intention, the best practice in the sector for all charities in that situation is that the money forms part of the unrestricted funds to be used for the mission of the charity. This is the case in the Irish Red Cross Society, which responds to people in crisis and in emergency at home and overseas. This is best practice according to the statement of guiding principles for fund-raising. I have worked in a number of charities and it is common practice in all of them and complies with the charities legislation in 2009.

Deputy Derek Nolan:    There is no allegation that the law was breached. The argument is that the Irish Red Cross Society has its head office fund, with money coming into it every day. When an appeal is made, a great deal of money comes in. At the time of the Haiti appeal, the head office fund peaked. There was a major influx of money. I was told there was a rather large, noticeable spike in income to the general head office fund. It would be easily interpreted that the spike related to an appeal that was made by the Irish Red Cross Society for funds and that the money was meant for Haiti. Instead of being treated as Haiti funds, it was treated as general funds and could be used for domestic use and other programmes. It is also suggested that this is a trend over many years. People would give money to the Irish Red Cross, meaning it would go to the Haiti fund, but it would go to the Irish Red Cross Society. While the organisation has not done anything wrong, it may be morally questionable to say that this money is intended for general use, when clearly it came in at a time when an appeal has been made, giving rise to increased donations. Some people would say it is very easy to see that the money should have been used for Haiti.

Mr. Ronan Ryan:  I can understand why somebody might think that but it would not conform to best practice in the sector. If an unrestricted donation comes in at any time, for example, there is a problem as one can never say what the donation is meant for. One can get into trouble for trying to second guess people’s wishes. We cannot and would not do that.

There was a very generous public response to the Irish floods and this was at the same time as the Haiti appeal. There were long-term programmes that people respond to. The Haiti appeal was during the first few months of the year and a lot of donations from the Christmas appeal are coming in at that time as well, with the delays in the post and so on. There is no way one could say with confidence that money was a result of a particular appeal. There are any number of appeals that may have inspired the donations.

Deputy Derek Nolan:    Is there any attempt to link some of it to the Haiti appeal, for example, by giving 50% to the Haiti appeal?

Mr. Ronan Ryan:  There is no way that one could gauge the percentages, with any accuracy because there are so many appeals going on at the same time. It is important to see how the money is used. That money forms part of the unrestricted funds for the society and those unrestricted funds are used for the indirect support of the mission of the Irish Red Cross Society, and are used for indirectly supporting the emergency response at home and overseas. For example, unrestricted funds support the federation, which responds to emergencies all around the world at all times. They also are used to support our longer-term programmes. They are used to indirectly support some of our response to emergencies at home.

I can tell members from speaking to many donors over many years that many donors choose to leave a donation unrestricted, and not mark it for a specific purpose. Any fund-raiser will tell you that at a Christmas appeal, even though it is very clear that the Christmas appeal has a particular theme, that many donors will send an unrestricted donation. There is no way, with any transparency, that one could say that it was definitely meant for some particular category. That is the reason it is very clear in our income policy, which we publish on our website in conformity with best practice and the Charities Act 2009, we state clearly what we do. When I speak to our donors, they are happy to support the mission indirectly.

Deputy Derek Nolan:    I would imagine that most people at that time would not have contacted Mr. Ryan and would have assumed the money was simply going to Haiti.

Mr. Ronan Ryan:  I am not trying to contradict the Deputy but he has to bear in mind that so many people made donations for the Irish floods at the same time. If we were a single issue charity, the Deputy could say that with confidence. We are not a single issue charity. We have many programmes going on at the same time. At that time, we had a number of high-profile appeals going on for different things. I cannot contradict what the Deputy might think. As a fund-raiser, I have to protect all donors. My duty is to protect all donors. I have to follow clear guidelines. I have to apply all moneys that are not specified by the donor as being for a specific purpose to the mission of the Red Cross.

Deputy Derek Nolan:    I carried out a little research yesterday with the help of Deputy Eoghan Murphy. There is a disclaimer on the website of the Irish Red Cross, aimed at people who choose to make donations for specific purposes, which says, “In the unlikely event that we raise more money than can be reasonably and efficiently spent, any surplus funds will be used to help us prepare for and respond to other humanitarian disasters either overseas or in Ireland”. Is that clause regularly invoked?

Mr. Ronan Ryan:  I introduced this policy, which relates to shortfalls and access to moneys raised, last year. The Red Cross was one of the early adopters of the statement of guiding principles for fund-raising, which is a voluntary co-regulated code of practice for fund-raising. The income policy of the Red Cross is clear. I would like to backtrack for a second. I would like to mention my personal experience as a fund-raiser. I have been professionally fund-raising for 15 years. I have never been involved in an appeal in which more money was raised than was needed. The opposite is always the case, sadly. One always needs more money, which is why one is always appealing so loudly. The scale of the need is vast. I have never come across this situation. Good practice dictates that it should be part of our income policy to say that in the incredibly unlikely event that we raise more money than is needed, we will use the money that is raised in the spirit for which it was given. If we were to change it to a totally different use, we would contact the donor. Ultimately, the donor always gets to choose. It is a very hypothetical situation. Personally, I have never come across it.

Deputy Derek Nolan:    Has this ever happened in the Red Cross?

Mr. Ronan Ryan:  I have been informed that during a Red Cross appeal a number of years ago to raise funds for domestic flood victims, more was raised than was needed. That fund has since been used to respond to the needs of the victims of other floods, such as the floods in Ireland in late October and early November of last year.

Deputy Derek Nolan:    Does the unused money stay into the fund until a suitable and comparable-----

Mr. Ronan Ryan:  It had not been touched.

Mr. Donal Forde:  It was a small amount.

Mr. Ronan Ryan:  It was used in a manner that was exactly in line with the spirit of the donor’s intentions and as part of exactly the same kind of programme.

Mr. Donal Forde:  One of the frustrating things for us is the suggestion that some general funds should have been diverted to Haiti. Somebody else could just as easily advocate that general moneys should go to Irish flood victims or other Irish Red Cross programmes. That is the difficulty. We cannot make that choice. We have to abide by something that is clear and transparent. We do what the donor tells us. I want to make it clear that we are doing the same thing as every other Irish charity. Every other national Red Cross society, including the British Red Cross, which is one of the biggest raisers of general moneys across our movement, the French Red Cross and the Belgian Red Cross, approaches this question in the same way. What we do here is indisputable. Others may hold a different view but I do not think that anyone is suggesting that legitimises a different perspective.

Deputy Derek Nolan:    Would some of that money be extra money that came into the head office account? I assume some of it was transferred into the flood victims account and the Haiti account, etc., to try to compensate for that fact. Did that happen?

Mr. Donal Forde:  Mr. Ryan is far more proficient than me in this regard.

Mr. Ronan Ryan:  It would not be extra money. The society received €500,000 in unrestricted income in 2010, over the entire 12-month period. Unrestricted income consists of donations that were not clearly marked by the donor. As a fund-raiser, I can tell the committee that such moneys come from a wide variety of sources, including individual donations on the back of appeals and donations inspired by all the different things in which the Red Cross is involved. Such unrestricted funds become part of a larger unrestricted pot, into which money from many different places is fed. All of those unrestricted funds are used for the indirect support of emergency response at home and overseas, in line with the mission of the Red Cross. They are spent indirectly in support of our emergency response in Ireland and indirectly in support of our volunteers. Unrestricted funds are spent in support of our federation and in support of our longer-term programmes overseas. I am thinking of two particular missions in Malawi and Niger.

Mr. Donal Forde:  If one was looking-----

Deputy Derek Nolan:    Can I ask Mr. Ryan to explain how this money is used “indirectly”?

Mr. Ronan Ryan:  Unrestricted funds are spent on indirect supports such as the training of volunteers in Ireland to ensure they can respond and provide a first-class first aid and emergency service. When money is used by the federation for indirect support in the case of overseas emergencies, it is used to support the people who are co-ordinating and facilitating the overall programme response in a place like Haiti. It is not spent on the water coming out of the tap in Haiti - it is spent on the vast co-ordination of the relief effort that is needed with all the other agencies. That is what I mean by “indirect” support. I apologise for using technical jargon.

Mr. Donal Forde:  It might be helpful to explain what happened to the €500,000 in unrestricted moneys that was garnered in 2010. For example, some €130,000 of it was used by the federation in support of general worldwide emergencies and €60,000 of it was used to support our effort in Malawi. This money was channelled into other Red Cross missions.

Vice Chairman:    As the witnesses have said, the Red Cross decided at the time that €600,000 from the Haiti fund could be regarded as unrestricted funds. Can those moneys be used for administration and salary purposes? Can they be directed to non-front line relief work?

Mr. Ronan Ryan:  The only costs that come out of a large-scale emergency appeal are the fund-raising costs. Those costs tend to be very low. In the case of Japan, I think they came to 1.67%. The way we put it is that we take every euro and use it to get the next euro. All of the balance of that - the money that was raised for Haiti, for example - is used for programmatic purposes, including the monitoring, evaluation and control of programmes. It is a small proportion of the money. Some of the staff who monitor the programmes are based in Dublin. They are an essential part of the programme spend.

Vice Chairman:    It is clear that during the Haiti appeal, there was an increase in the level of funds coming in. Much of that money was donated directly for Haiti. Mr. Ryan is saying that some of the funds that were given at that time were unrestricted, on the basis that people did not designate what they wanted the money given as part of the appeal to be used for. At the same time, the advertising probably took place on the basis of the Haiti appeal.

Mr. Ronan Ryan:  I would not say that. I am clearly saying one cannot reach the conclusion that these moneys came in because of Haiti. I cannot say exactly what they were provided for because they were not marked by the donor. When the donor does not restrict the money, one cannot assume-----

Vice Chairman:    No, Mr. Ryan is missing my point.

Mr. Donal Forde:  It might be helpful to interject at this point. The general level of unrestricted money that was received in the previous year was approximately €300,000. In the year we are talking about - 2010 - the relevant amount was €500,000. The increment, if that is what one wants to focus on, was €200,000. We are talking about a year when there was a high-profile floods appeal, the Haiti appeal, the Pakistan appeal and a number of other things. The issue is whether one can attribute the incremental €200,000 to some of those factors. That is the point Mr. Ryan is making.

Vice Chairman:    I have a follow-on point. Was any of the €500,000 that came in, or the incremental €200,000, used for administrative purposes, as distinct from front line appeal purposes?

Mr. Ronan Ryan:  It was all unrestricted income. None of the unrestricted income is used for front line appeal purposes. The unrestricted income is available to indirectly support the mission of the Red Cross. It is not spent on the water that comes out of the tap in Pakistan or wherever. It is used in support of the federation’s longer-term programmes.

Mr. Donal Forde:  Perhaps I can interject at this point.

Mr. Ronan Ryan:  Yes.

Mr. Donal Forde:  I am familiar with the numbers, having looked at them. A small proportion of it would have gone to support the salaries of the people in our international team who were overseeing the programme in Haiti. I refer to those who were essentially charged with making sure the right agreements were drawn up with the international federation. A small proportion of it would relate to the reporting and accounting procedures. As I have said, €130,000 of it was used to support the work of the federation and €60,000 of it went to Malawi. I say that to give greater detail about what Mr. Ryan meant when he used the word “indirectly”.

Vice Chairman:    Okay.

Deputy Derek Nolan:    I would like to mention a few other issues. Deputy Eoghan Murphy was quite comprehensive. Mr. Forde mentioned the credit institutions that were checked for accounts - Bank of Ireland, Irish Nationwide and certain credit unions. Were any other banks checked? Were AIB or Ulster Bank checked?

Mr. Donal Forde:  I cannot say that AIB was checked at the time.

Deputy Derek Nolan:    Has it been checked since?

Mr. Donal Forde:  Yes, repeatedly.

Deputy Derek Nolan:    Is it the case that every possible bank has been checked?

Mr. Donal Forde:  I wish to be clear. This has been outlined. All of that was then.

Deputy Derek Nolan:    Yes.

Mr. Donal Forde:  We want to make that very clear. We are trying retrospectively to account as accurately as we can for what happened. I wish to make it clear that for the last year, every bank has had to send returns to us every six months for all accounts in the name of the Irish Red Cross. They have been cross-checked and reconciled with all of the accounts coming through from our branches. There will never be a Tipperary account again. Let me very explicit in that respect.

Deputy Derek Nolan:    A former member of the Irish Red Cross staff wrote a blog. It has been suggested that a substantial amount of money, upwards of €140,000, was spent on legal fees at the time to compel Google to reveal the identity of the blogger. Is that correct?

Mr. Donal Forde:  This is 2010. The legal fees of that year, €136,000, were close to the figure of €140,000. Not all of that would be attributable but yes, there were legal fees spent on seeking advice with respect to how to manage information that was appearing on a blog. That is correct.

Deputy Derek Nolan:    Did that involve trying to obtain the identity of the blogger from Google?

Mr. Donal Forde:  Yes.

Deputy Derek Nolan:    Why did you pursue that course of action?

Mr. Donal Forde:  We were not there but let me articulate-----

Deputy Derek Nolan:    I will rephrase the question. Why did the organisation pursue that course of action?

Mr. Donal Forde:  In hindsight that may look like an injudicious thing to do. However, I am careful at all times not to offer that verdict for this reason. If one was sitting there at the time as a member of the executive committee, one would have had responsibilities as a director or de facto director of the organisation. One is looking at a scenario where confidential information from the society is appearing externally. The question at that stage is what happens tomorrow morning if personal staff details or donor information start appearing on the blog. One is faced with a very difficult decision as to where one’s responsibilities are here. As I stated, while the amount spent looks injudicious, I am slow to criticise because if I had been sitting there at that point, I would have been in a very big dilemma and I certainly would have wanted to take legal advice, which does not come cheaply. That point needs to be made.

Deputy Derek Nolan:    Was an action taken against Google or did the organisation simply take legal advice? Were proceedings issued?

Mr. Donal Forde:  I think it was contemplated. I do not think it ever got to that point but it was certainly contemplated.

Deputy Derek Nolan:    I missed Mr. Forde’s reply.

Mr. Donal Forde:  When was that? That is through the course of 2010.

Deputy Derek Nolan:    Has the action ceased?

Mr. Donal Forde:  Yes, it is long past.

Deputy Derek Nolan:    It is finished. It seems like an awful lot of money.

Mr. David J. O’Callaghan:  I am not sure on this as it was slightly before my time but I think there was some action against UPC, the supplier.

Deputy Derek Nolan:    I think it was a combination of UPC and Google.

Mr. David J. O’Callaghan:  That may have incurred additional legal-----

Mr. Donal Forde:  I may stand corrected-----

Mr. David J. O’Callaghan:  The action against Google did not go forward as far as I am aware.

Mr. Donal Forde:  -----but that certainly was contemplated. The advice was in that respect and I do not know how far it went at the time.

Deputy Derek Nolan:    A sum of €130,000, at the maximum possible level, is an awful lot of money to spend. Mr. Forde mentioned that the increment over the past year was €200,000. This means, the legal fees spent in one year to try to catch a whistleblower amounted to 65% of the increment.

Mr. David J. O’Callaghan:  We have to be careful in talking about individuals as whistleblowers. This is a member of staff who has been dismissed. My information is that he is taking an unfair dismissal case against us. That will arise in the next number of months.

Vice Chairman:    It is reasonable to ask about the spending of €140,000-----

Mr. David J. O’Callaghan:  Of course, in the broad sense, yes.

Vice Chairman:    -----of money the organisation has either collected from members of the public or received from the State.

Mr. David J. O’Callaghan:  I agree with the Vice Chairman. As I stated earlier, I am loth to spend donors’ money on consultants.

Vice Chairman:    It is a reasonable question.

Mr. David J. O’Callaghan:  Yes, it is a reasonable point.

Mr. Donal Forde:  I need to correct a few points if I may. First, the total legal expenses of the year were close to €140,000, as the Vice Chairman says, but that was a year in which there were redundancies and other things on which advice was taken. It is not true to quantify the cost at that amount. That is the first point. The second point to make is that this is not donors’ money or taxpayers’ money. It was funded out of our commercial revenues. We have significant commercial operations and they were what funded that. We provide first aid training across the length and breadth of the country. We get fees for the use of our ambulances. There is a whole series of commercial activities which go on and it was funded out of that. That point needs to be on the record. The third point is that while it is easy to see it as an injudicious pursuit of UPC, I am just making the point that if one is sitting there and the issue was confidential information escaping from an organisation for which one has responsibility, one is placed in a very difficult position.

Deputy Derek Nolan:    A point was made on general assemblies. Is a general assembly of the Irish Red Cross supposed to be held every two years?

Mr. Donal Forde:  That is not in our rules.

Deputy Derek Nolan:    The organisation is not obliged to do that.

Mr. Donal Forde:  There was an initiative taken on two occasions - in 2002 and 2005 - when a general assembly was held. The second one was very poorly attended and it was not pursued after that. We want to reintroduce this. Our new constitution reintroduces the general assembly so we will go there. We are also embarking on a significant campaign of communication with our volunteers in the next few months. We are very keen to have processes where we reach out to and communicate with our volunteers.

Deputy Derek Nolan:    Having read the chairman’s report for 2011, I must give credit to the Irish Red Cross. An immense amount of work appears to have been done in putting in place new procedures and corporate guidelines. The independent audit committee with external membership is a very good initiative. Reading through the material on staff and the policies that have been put in place, undertaking such a drastic reboot of industrial relations procedures implies that staff relations were disastrous beforehand. We have a reorganisation of staff, regular meetings - obviously such meetings did not take place beforehand - a new external referee and a confidential telephone number. How are staff relations? Was there a catalyst for these measures?

Mr. Donal Forde:  I would not go that far. I can only speak about what we found, which was an organisation that had been through a very traumatic period. One must remember that there had been redundancies and dismissals and it had been in the news in a way it did not want to be. This was not an easy environment. These are not radical measures but all the steps one would expect to see in a well run organisation. That is simply what we are doing, namely, making sure that what represents best practice and people management is in place. I do not want to go so far as to say regular management meetings or meetings were not taking place but they may not have been taking place on quite as formal a basis as that which has been introduced.

Deputy Derek Nolan:    The Irish Red Cross is dependent on Mr. Howard and the Attorney General to get its new constitution in place. Is that correct?

Mr. Donal Forde:  We are enormously grateful to the officials in the Department of Defence who have had to put in an inordinate effort to help us to reach the right point with the Attorney General’s office. We feel we are nearly there.

Deputy Derek Nolan:    When is it expected that this point will be reached?

Mr. Michael Howard:  When we checked yesterday we were assured it will be finished within a couple of weeks. As the Secretary General of the Irish Red Cross said, an awful lot of work has gone into the drafting. All of the issues of policy are settled and it is now a question of formulating this in the form of a statutory instrument.

Deputy Derek Nolan:    I thank the witnesses.

Vice Chairman:    Before Deputy Harris contributes, I wish to return to one or two issues. I ask for more detail on the recruitment process for the new secretary general and his salary level. Mr. Forde spoke of getting volunteers to become more active in terms of the council which elects the executive. What has been done in terms of additional communications to encourage people to get involved?

Mr. David J. O’Callaghan:  When I was appointed chairman of the Red Cross in September 2010, an acting chairman had been in place for some time. He was there on a consultancy basis, which was costing the society about €160,000 per annum.

Vice Chairman:    My apologies, that was for the chairman.

Mr. David J. O’Callaghan:  That was for the Secretary General. I decided that we had better look for a permanent Secretary General and we advertised in the public press.

Vice Chairman:    Was that in September 2010?

Mr. David J. O’Callaghan:  It would have been in October or November 2010. We had the short-listing and interviews were then held in December 2010 I think. We followed the guidelines for the process laid down by the Public Appointments Service. It facilitated us by providing secretarial and accommodation facilities for interviews. The interview panel was made up of Professor Roger Downer, who was mentioned earlier, formerly of the University of Limerick, a member of the executive committee, Mr. Horwell, myself and an independent consultant who is an expert in human resources. Nearly 40 candidates applied for the job and we interviewed a short list of about 20. We appointed Mr. Forde who took up his appointment on 1 February 2011 on a salary of €95,000. That was the process.

Vice Chairman:    Are there any communications on getting volunteers to go on the council and new blood coming in?

Mr. David J. O’Callaghan:  Will Mr. Forde answer, please?

Mr. Donal Forde:  I will. The new constitution is only a matter of weeks away. That creates the opportunity not just to introduce external people in greater measure than was the case before, but to introduce new blood to the society. We have started that process. We brought a group of volunteers together in November. We brought over a specialist team from the society’s headquarters in Geneva and have had a discussion about how the organisation will develop, how we should go about development and how we should make sure we have their involvement. A set of recommendations has been prepared and is being brought to the board meeting next week. A deputation will come from Geneva to talk about it. In support of that there is a communications process in prospect. Essentially we will go out to have meetings with volunteers and to introduce surveys with the volunteers and give them the opportunity to give feedback. There will be a fairly intense process of engagement with them through the course of March and April with a view to forming a broader view about how the organisation can become more integrated and more in touch with the volunteers locally and put at the heart of how the society is functioning. This year will see a fairly radical change in the degree to which volunteers can identify with where the society is going and feel they have a say in it.

Deputy Simon Harris:    I thank the delegation for appearing before the committee. It has been a useful exchange and I hope it found it useful as well. It is reassuring to hear from the Secretary General that there will never again be a Tipperary account, to paraphrase. That emphatic reassurance will, no doubt, be a comfort to all the donors to the Irish Red Cross. It is important, even in these exchanges, to note that despite any errors or failings of corporate governance in the past, that does not undermine the excellent work done by the range of volunteers right across the spectrum in Ireland and abroad. That is to be commended. People throughout the country are grateful for that.

We are here for a specific purpose. This matter came to the attention of the Committee of Public Accounts given the reality that the taxpayer provides support to the tune of just under €1 million to the organisation. After all the excellent work done on reform and the reference in the chairman’s comprehensive report to moving on from the distractions and the failings, although the delegation may not agree, I still feel that making the changes retrospective is a failing and it will certainly be an ongoing distraction.

I refer to the letter of 16 May 2011 from the Minister for Defence. Considering we know that the Minister in writing this letter is leading the Department providing the finance and is speaking effectively on behalf of the taxpayer - we know the great level of co-operation between the Department and the organisation - while the organisation may have technically dealt with the Minister’s letter it certainly ignored the spirit of it. An extract from the Minister’s letter states that it is unhealthy for any organisation to have individuals serving in leadership level for in excess of 12 years and in any one position for longer than six years. Even with the reforms outlined today, while a welcome step forward, not only will somebody serve in any one position for six years, there is potential for the same individual to serve for an additional six years.

When the organisation receives correspondence from the Minister, how seriously is it treated? What is its response to his assertion, which is categoric and in black and white, that nobody should serve for in excess of 12 years and nobody should serve in any one position for more than six years?

Mr. David J. O’Callaghan:  First and foremost, we treat correspondence from any Minister seriously and it would have to be considered by our executive, as this was. I cannot get away from the fact that we are a democratic organisation. People are elected at branch level. Council elect people on to the executive. That is the nature of it. If the same people keep coming forward one cannot put down arbitrary rules about these things.

Deputy Simon Harris:    Sure.

Mr. David J. O’Callaghan:  We took the Minister’s letter seriously. At that stage it was to be two terms of three years each, giving a total of six years, and then a gap of a year. When we got the Minister’s letter I said let us see if we can do something about this. We referred it to our task force, a working group on governance, and it went along with the suggestion which was agreed then by council that it would be a gap of three years.

Deputy Simon Harris:    I am not familiar with the working of the organisation on the internal level although I am familiar with the working of many volunteer organisations. I take the point that these people are volunteers. I also take the point that in all organisations, of which we all have experience, often the same people put their hands up for the same positions on an ongoing basis. I am sure the Irish Red Cross is very grateful for the support of all its donors. When we have the Department of Defence, effectively a donor giving almost €1 million on an annual basis on behalf of the taxpayer, with respect, is there not a need for leadership within the Irish Red Cross so that the organisation would literally have a discussion on what is an ongoing distraction for the organisation? The Minister through the Department of Defence has made a recommendation. Surely, in the interests of the organisation moving on this would be to the organisation’s benefit?

Mr. David J. O’Callaghan:  I hope the Chairman’s report to which the Deputy kindly adverted in positive terms showed that we have leadership. On this item, I have to keep coming back to the defence that we are an independent organisation, as referred to by Deputy Noonan. We are grateful to the taxpayer for the money we get and are happy to be accountable for that money but we are an independent, voluntary, democratic organisation and we have in-built systems that have been voted on by the membership, its representatives, its council and its board. No one else is crying out for this change. Those on the federation, those on the international committee, are quite happy that we are following this practice.

Perhaps I can come back to the point I made earlier. I do not wish to speak about individuals but this person is a very positive force within the Irish Red Cross and has given his life to the organisation. It is all on a voluntary basis, all on a pro bono basis and he has been four square behind all the reforms that I and the Secretary General have introduced in the past 12 or 15 months. I accept the point, and I am glad the Deputy raised it, that one keeps coming across the same people. I am in another voluntary organisation. It is just a question of musical chairs. The chairperson is chairman for one term, then the vice chairman takes over and the chairman becomes treasurer. Given that only the same handful of people turn up at committee meetings, it is a question of musical chairs. It is very hard to get people to give their time and effort to voluntary organisations. It is one of the challenges that we and all charities face. If one has an individual who is willing to give so many years of his time and effort to a voluntary organisation, on a no reward basis, I do not think it is a national scandal or anything like it.

Deputy Simon Harris:    Let me put it clearly on the record. I do not know this individual’s name.

Mr. David J. O’Callaghan:  I know.

Deputy Simon Harris:    I do not want to know this individual’s name. This is not about an individual.

Mr. David J. O’Callaghan:  It is about governance.

Deputy Simon Harris:    I do not know anything about this person nor do I need to. In an effort to be helpful to moving on from the distraction and failings to which Mr. O’Callaghan referred in the chairman’s report, which is a constructive document, I appeal to the better nature of any individual involved in any walk of life or any voluntary capacity to give serious consideration to any suggestions coming from a Department that is closely linked to the organisation in the best interests of the organisation. No doubt anybody who has given two decades of service has played a huge part.

Mr. David J. O’Callaghan:  I do not wish to labour this point. I have met the Minister since. He has written to me and strongly supports and is positive about what we are doing in the Irish Red Cross. We are very grateful for that support.

Mr. Donal Forde:  To some extent, an organisational dialogue is going on about matters and the whole change programme under way. The questions of rotation and retrospection have featured in that dialogue. Drawing on all the feedback, the Irish Red Cross has not set its face against retrospection. What it says is that we will not include it in our constitution because we do not need to. We can all decide in the morning, if we want, to ensure these people are not returned. That is the point being made. The point I am making is that things may change. That is an important distinction. The organisation is not setting its face against anybody who says retrospection should apply. We are saying that we will be the judge of that. We have that power and do not need to introduce that clause in the constitution. We simply will not return people if we make that decision. There is a subtlety in that, but I hope the Deputy understands the point I am making.

Deputy Simon Harris:    I do, thank you.

Deputy Anne Ferris:    I welcome the delegation from the Irish Red Cross and the representatives of the Department of Defence to the meeting. It has been said already, but we completely agree with and understand the independence of the Irish Red Cross. The Department provides just under €1 million to the organisation.

Concerns have been brought to the Committee of Public Accounts and raised in the media over the years about the organisation and as money has been provided by the State, we the feel issues should be raised. The issue of how long some people have been on the board has been raised several times. Mr. O’Callaghan said that people volunteer at branch level and are then elected on to the general executive or general council. That reminds me a little of how political parties operate, because they have a similar structure and are all volunteers. However, if, within the party or organisation, questions or concerns were raised about certain individuals, it would be incumbent on the party leader, in the case of a political party, to make a judgment, for example on a person, such as a branch chairman, who was in a certain position for so long. To have somebody in a position for the length of time in question is too long, because it does not allow fresh thinking. I know there are many other people on the board and that there is fresh blood on the board and that there is a wealth of experience and that this works. At the same time, the organisation should look at the issue from the point of view of it being a powerful position and look at the length of time a person should be in the position.

With regard to the money provided by the State, can we have a breakdown on where that money goes? For example, what is the subscription to the International Red Cross. We know that the Irish Red Cross operates on a deficit, which has been reducing. I congratulate the organisation on that. I understand that in 2009 the deficit stood at €5.7 million and that this was reduced to €2.5 million in 2010.

Mr. David J. O’Callaghan:  Perhaps we could clarify those figures. Perhaps I should resign, if they are true.

Deputy Anne Ferris:    These are the figures I have been given here. It is a significant amount of money. Forgetting about the figures, the organisation has a deficit and is reducing that deficit. It is to be congratulated on that.

Mr. David J. O’Callaghan:  Thank you.

Deputy Anne Ferris:    The appointment of Mr. Forde and of Mr. O’Callaghan have helped boost the reputation of the organisation and the morale of volunteers and donors. However, it must be a huge challenge for the organisation to compete with other charities. The Irish Red Cross competes, almost on a business level, with groups like Concern, GOAL and others.

I do not have a particular question, but like my colleagues feel I should raise concerns that have been expressed. I was not aware until now that with regard to any donation I made in response to something such as the Haiti or tsunami appeal, I had to specifically say that I wanted my €20 or €100 to go to that appeal rather than just to the organisation. I would just have sent in a cheque and would have assumed that the money would go to the appeal . It was news to me and to many other people that it was necessary to specify. This message must be communicated to people. If I was hard pressed for money and donated €5 or so, and then became aware of statements in the media with regard to that money not going to the appeal, I would be very concerned. Therefore, the organisations should make this clearer through publicising the need to specify where a donation is to go.

Mr. Forde mentioned that when the Tipperary account came to light, he contacted the banks and credit unions about other accounts. How many other accounts were there?

Mr. Donal Forde:  I will check that, but the figure of 49 is in my head. There were a significant number.

Deputy Anne Ferris:    Would the board have been aware of those accounts?

Mr. Donal Forde:  No, they were unknown.

Deputy Anne Ferris:    Therefore, apart from the Tipperary account, there were 47 or 48 other accounts.

Mr. Donal Forde:  There were, but not to make too much of that, the balance in those accounts amounted to €50,000. The Tipperary account was the key issue.

Deputy Anne Ferris:    What happened to the money in the Tipperary account?

Mr. Donal Forde:  It was instantly directed to the tsunami appeal as intended and was spent. To be fair, it always would have been. The issue was the delay.

Deputy Anne Ferris:    There is a question of what would have happened if it had not come to light.

Mr. Donal Forde:  It is important to be specific on this. That money was in an account designated for the tsunami appeal and was never going to be spent on anything else. It was a restricted account. Therefore, there was no question that this money would not have been spent on the intended purpose. The issue was that it was lying there for a period before it was directed.

Deputy Anne Ferris:    How long was it lying there?

Mr. Donal Forde:  From early 2005, so for a period of three years.

Deputy Anne Ferris:    The tsunami appeal was well over then. The public appeal was well over. My concern is that it sat there for three years.

Mr. Donal Forde:  I am not trying to justify that. I simply wish to explain. I made the point earlier that it was well known that a decision had been made that the money would be spent over five years. That is not unusual for a large amount of money when there is a huge need. Therefore, if I was sitting in Tipperary, I could understand that the money would be spent over five years. I would know the money was sitting there and would be in no doubt about what would happen the money. Perhaps I might get to a point where I would say to myself that head office would come looking for the money when it was appropriate for it to direct the last of these moneys into the programme.

I can understand that train of thought, but I am not trying to justify it. It is important to have the context.

Deputy Anne Ferris:    I know that. I am not making accusations or allegations. Would that money have gained interest?

Mr. Donal Forde:  Yes, and the amount that was returned included interest.

Deputy Anne Ferris:    Did all that money go to where it was supposed to go?

Mr. Donal Forde:  It all went to where it was intended to go.

Deputy Anne Ferris:    Mr. Forde mentioned the Finlay report, an external report. What did that cost?

Mr. Donal Forde:  I do not have that information to hand. I will have to try to find it.

Deputy Anne Ferris:    Perhaps Mr. Forde can come back with that in the future.

Mr. Donal Forde:  If I find it, I will.

Deputy Anne Ferris:    I asked earlier for a breakdown on the money the organisation gets from the Department.

Mr. Donal Forde:  Bear with me, -----

Vice Chairman:    To be helpful, the organisation made an overall statement of expenditure over income for 2010 of €2.5 million. There was a surplus of €108,000 on unrestricted funds and a deficit on the restricted funds of €2.5 million. The designated funds spending was €45 million. That is in the 2010 accounts. It is in that context that Deputy Ferris is asking her question.

Deputy Anne Ferris:    That is right.

Mr. Donal Forde:  If I can take up three points, I will direct myself to the questions asked about the breakdown of the moneys. While I am doing that, I will ask Mr. Ronan Ryan to address the question of the need for us to make sure that donors understand where their money is being directed.

Mr. Ronan Ryan:  The Deputy made a point about when somebody sends in a cheque. I want to reassure her that we make every effort to ascertain exactly what people want their money to go towards. The reality these days is that a reply to an appeal will only be made when prompted, so if it is with us, there will be a clearly marked donation slip. A coupon cut out of the newspaper will have a specific code which will state what the money is for. The bulk of donations are now made online, and a very specific choice has to be made from a drop-down list. It is getting increasingly difficult to donate in an unrestricted way, and the trend is towards an ever greater restriction of gifts. It is quite unusual for people to send in a donation unprompted in an unrestricted form. It does happen and many donors who choose that, from my experience of talking to them, are happy for their donations to be used in a general way.

As the Deputy highlighted, the charities are competing. We all do quite a bit of marketing and all that effort is direct marketing, so it would come back with some form of response mechanism, which would let me know that the donor wanted the money to go to Haiti. I just would like to reassure the Deputy on that point.

Deputy Anne Ferris:    If somebody was kind enough to leave €50,000 in a will and it was not specific, it would go in. I do not think anybody would mind even if they had not specified whether it was Haiti or the tsunami or Pakistan, as long as it went somewhere. The concern is if the money was going towards the day-to-day running of the headquarters.

Mr. Ronan Ryan:  I totally agree, but that is not what the money is spent on.

Mr. Donal Forde:  I am not sure where the Deputy’s numbers came from in respect of the deficit, but I would like to reassure her that the society had a deficit in 2009 in its general funds management of €264,000. We had a surplus in 2010 of €108,000. This year’s accounts have not been published yet, and we expect they will largely break even.

Deputy Anne Ferris:    What was the deficit in 2010?

Mr. Donal Forde:  In 2008, there was a surplus of €485,000, in 2009 there was a deficit of €264,000 and in 2010 there was a surplus of €108,000.

Deputy Anne Ferris:    So the deficit has been cleared.

Mr. Donal Forde:  There is quite a bit of focus in our written material on making sure we do not have a surplus in the future, given the changing world in which we live. The Deputy’s attention on our financial well-being is right, but for the record, we have no deficit.

In 2011, we received €821,000 in a grant from the Department. Our core cost is essentially the cost of running the secretariat. That essentially is the cost of representation by me, the administrative function that supports the board, the finance department, which is staffed by four or five people, and other functions such as communications, IT and information support. There are also utility costs such as phones, lights, heating and so on. All of this came to €1.117 million last year. We set the grant of €821,000 against that, and this led to a deficit. That deficit is met out of our commercial activities.

Deputy Anne Ferris:    What would they be?

Mr. Donal Forde:  As I explained earlier, we have a very extensive network throughout the country where we provide professional training, first aid and other things. That helps to close the gap.

Deputy Anne Ferris:    I have one last question on the expenditure figure. Is remuneration given to the board or the council?

Mr. Donal Forde:  No.

Deputy Anne Ferris:    Even in travel and all that kind of thing?

Mr. Donal Forde:  I apologise. They are recompensed for any vouched expenses, but there is no remuneration.

Deputy Anne Ferris:    How many times a year would the central council and the executive meet?

Mr. Donal Forde:  The central council meets twice a year and the executive meets every month bar August.

Deputy Anne Ferris:    That is 11 months in the year. How many people are on the central council?

Mr. Donal Forde:  There are 47 people on the central council at the moment and there are 12 on the executive.

Deputy Anne Ferris:    Travel and subsistence would be paid.

Mr. Donal Forde:  Vouched expenses are for people-----

Deputy Anne Ferris:    Are they available?

Mr. Donal Forde:  Are they available in terms of records?

Deputy Anne Ferris:    Yes.

Mr. Donal Forde:  Yes, they are.

Vice Chairman:    The 2010 accounts are broken down into general unrestricted funds, and there is a surplus of €108,000. You expect that to break even in 2011?

Mr. Donal Forde:  It may be a small deficit, but it is in that order.

Vice Chairman:    The society overspent the restricted funds by €2.5 million, so it spent more than it took in. What are the designated funds? I presume they are the same form.

Mr. Donal Forde:  We have spoken about two categories this morning: unrestricted and appeal moneys. On occasions we are granted money that is explicitly for other purposes. We call that designated money.

Vice Chairman:    Like what?

Mr. Donal Forde:  For example, it can be given for the development of the national society. We have one such fund.

Vice Chairman:    What will be the outturn for the restricted funds in 2011?

Mr. Donal Forde:  I do not have it to hand.

Vice Chairman:    Mr. Forde can forward it. The amount of restricted funds remaining come to about €3.5 million, and the society had a deficit of €2.5 million last year. Has the negative media attention on the Irish Red Cross affected its capacity to raise funds? I would like to acknowledge the great work by volunteers on the ground, and Mr. O’Callaghan mentioned this at length. We know people of that regard as well, but has this attention affected fund-raising? The society’s funds appear to be depleting.

Mr. Donal Forde:  I will ask Mr. Ryan to come in on that, but there is no doubt that it has not helped us. Some of the publicity and some of the issues raised are not helpful to an organisation that depends on public trust. We have been engaged in very extensive communications over the past while, when compared with our donors. We are endeavouring to be open about the failings of the past and we are also endeavouring to be very specific about the measures that have been taken to put things right. We have no doubt that this is making an impact, but it is beyond question that all the publicity did not help the organisation in recent years.

Mr. Ronan Ryan:  We wrote to our donors last summer to acknowledge all the governance failings that had happened. I had a lot of contact with donors at the time, and many of them expressed disappointment at what had happened. The fact that we were communicating with them and were open with them about it meant that many of them said they would come back to us. They had natural concerns, but they were coming back to us. I have observed a turn in our fortunes in the sense that many of our donors have been won over as we were open and transparent and put our hands up where it was due.

Vice Chairman:    How does the society decide about monitoring the bank accounts in branches throughout the country? How long would it leave funds in those accounts? What type of controls have been brought in? There are volunteers throughout the country and many of them are now quite nervous about bank accounts in their branches, given the media attention on them. Like all forms of oversight, this went back to the lack of financial controls within the Irish Red Cross itself. Tipperary should never have happened. If the controls had been in place, it should never have happened. There should have been automatic reporting and the issue should not have arisen. There are many questions about that three-year period that remain unanswered. How is the organisation now dealing with that issue?

Mr. Donal Forde:  I will deal with that specifically. I said earlier on that, by contrast with the circumstances prevailing at the time of the Tipperary account, if there is a national appeal now, there is one account at the centre. No appeal moneys are held in branches.

Vice Chairman:    What about moneys collected locally?

Mr. Donal Forde:  It is lodged to a central account. One is given the details of the account and told to lodge it - end of story.

Vice Chairman:    That is fine.

Mr. Donal Forde:  A question was asked about local financial activity in the branches. They have ambulances and they get income from using those for duties. They have expenses associated with them and other such things. They have to submit their accounts to the centre at half-yearly points. It is mandatory to do this. Those accounts are reviewed at the centre by the finance team. They are now in the last year and they have been consolidated, so it is essentially the total accounts. A full reconciliation process goes on at the centre. At half-yearly or six-monthly intervals, all banks must give us reports setting out all the accounts they have there for the Red Cross, and they are cross-checked and reconciled against all the branch returns, so that there is full knowledge and full data and everything is dealt with. Then, in addition to that process, there is an extensive programme of education and training for all our branch treasurers.

The Vice Chairman’s point is well made; some of the members are fearful, not so much because of the Tipperary account, but because the requirements of a charitable organisation have intensified, leaving aside the issues that the Red Cross has had to deal with in the past. The requirements of a charitable organisation have increased substantially. These include requirements for openness, transparency, full records, appropriate receipts, information and all the rest of it. It is an intimidating burden for a volunteer who, in some cases, has no financial training. We have a considerable job, on an ongoing basis, to raise the level of competence and expertise to an acceptable level for all of our treasurers. They are mindful of this and, as people who are busy in other walks of life, they are conscious that this comes with being part of a cause. I do not want to hide the fact that some are fearful, but all are very mindful of the responsibilities they carry. I would not attribute it to the Tipperary account but to the fact that the accountability of a person who takes the role of treasurer for a charitable organisation has changed dramatically. That is acknowledged.

I do not deny that people may have unanswered questions about the period 2005 to 2007. The report conducted at the time is freely available and is reasonably thorough in going into most of the details. It does not hide the fact-----

Vice Chairman:    Corporate governance would appear to have been virtually non-existent at corporate level within the Red Cross.

Mr. Donal Forde:  It was not where it needed to be.

Vice Chairman:    That is the heart of the problem. The volunteers up and down the country who work with the Red Cross and other organisations must be applauded. That is why it is welcome that the representatives of the Red Cross came here today. However, there is obviously a further body of work to be done. I know they are looking for an honours result, but I think they should be looking for the A. That is what corporate governance is about.

Deputy Eoghan Murphy:    There are a couple of things I want to clear up in my head. I thank the witnesses for coming in. They are here in a voluntary capacity and, as I said previously, it is important that they are here and that we have this conversation in the interest of protecting the good name of the organisation and all those who volunteer for it and donate to it. Volunteers are incredibly important; there would be no society without them. However, it is also important, when so many criticisms are levelled against a particular organisation over such a long period, that change happens, and that it is real change and not just a change on paper. There may be long-serving volunteers, and it is important that those volunteers are there to act in the best interests of the organisation and not of themselves. Mr. O’Callaghan repeatedly referred to the organisation as a democracy, and it is a democracy in its operations, but democracy is imperfect; Mr. O’Callaghan knows that from his position in the Department of Defence. It is not perfect in Ireland, nor in the European Union or other countries. The role of leadership in these societies is to make sure that when there are problems, they can be addressed in a fair way, bearing in mind democratic principles and the fact that we have checks and balances and rules in society to ensure that all is fair.

With regard to Mr. Ryan’s comments, it is great to hear that people are coming back now, given the different reforms that are already under way, because it is important for us as a society. With regard to the money raised for funds such as the Haiti fund, if there is an excess of money left over that the organisation cannot deploy for the appeal in question, is that money then moved into the domestic fund?

Mr. Ronan Ryan:  I have never come across that situation. I would write to my donors and ask them if-----

Deputy Eoghan Murphy:    That has never occurred with the tsunami appeal or the Haiti appeal?

Mr. Ronan Ryan:  Not to my knowledge. I certainly have no experience of it. I stress that, as somebody who has worked in charities for a long time, I find it inconceivable that such would happen, although in theory it is always possible, and one must legislate for it, which is why we have it in our income policy. I have never come across it; the need is generally so vast.

Deputy Eoghan Murphy:    We hear news reports sometimes about an excess of money being raised that cannot be deployed effectively in a country.

Mr. Ronan Ryan:  I will give the Deputy an example. We received a donation yesterday for an appeal that has been closed, and we are going to write to the donor saying “Thank you so much, but we have to send this back to you because the appeal is closed.”

Deputy Eoghan Murphy:    It is good that people know that.

Mr. Ronan Ryan:  The spirit is always that the donor decides.

Deputy Eoghan Murphy:    Thank you. With regard to structures, which we talked about earlier, there is a head office in Dublin from which Mr. Forde, as secretary general, runs the organisation.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    That is a full-time position. How many full-time staff do you have working for you?

Mr. Donal Forde:  Full-time, 31. Thirty-one or 32, as there are some part-timers also.

Deputy Eoghan Murphy:    Have you engaged any consultants?

Mr. Donal Forde:  None. Somebody may be paying somebody €1,000 or €2,000 somewhere, but there are no significant consultancy contracts at the moment.

Deputy Eoghan Murphy:    Have there been previously?

Mr. Donal Forde:  Yes, before recent times.

Deputy Eoghan Murphy:    What kind of consultants were engaged?

Mr. Donal Forde:  Financial and legal consultants-----

Vice Chairman:    The CEO was a consultant; is that correct?

Mr. Donal Forde:  He was, for a time. So yes, there were some significant consultancy contracts.

Deputy Eoghan Murphy:    There are none for 2011, or for 2012?

Mr. Donal Forde:  There are certainly none under way at the moment - that is for sure - and there have been none recently.

Ms Breda Hawkshaw:  No.

Mr. Donal Forde:  We have somebody working on our property project who is being paid €4,000 or €5,000 for help. That is the extent of it.

Deputy Eoghan Murphy:    Do you have an idea of how much in total was spent on consultancy in 2010?

Mr. Donal Forde:  I would have to go to the accounts. I suspect a significant amount was spent, because at that time the previous secretary general was employed in a consultancy capacity.

Deputy Eoghan Murphy:    The previous secretary general was employed as-----

Mr. Donal Forde:  As a consultant for a period, yes.

Deputy Eoghan Murphy:    Consulting as secretary general, or consulting in a separate position?

Mr. Donal Forde:  He was acting secretary general for a time and was paid as a secretary general. Am I right in saying that?

Ms Breda Hawkshaw:  Yes.

Mr. Donal Forde:  Yes, he was paid on a consultancy basis.

Deputy Eoghan Murphy:    Acting secretary general of the Red Cross?

Mr. Donal Forde:  Acting head of finance for a period, and subsequently acting secretary general. I think it is fair to say that.

Vice Chairman:    I will just come in on one point. Mr. Forde said that a consultant was acting secretary general.

Mr. Donal Forde:  For a time, yes.

Vice Chairman:    Prior to that had been acting head of finance?

Mr. Donal Forde:  For a time, yes.

Vice Chairman:    In what period was he acting head of finance?

Mr. Donal Forde:  This was after the period in question. He was brought in, essentially, to try to bolster and reinforce the financial governance processes and that happened after the-----

Mr. David J. O’Callaghan:  Post-Tipperary.

Mr. Donal Forde:  Yes.

Vice Chairman:    Getting back to Deputy Murphy’s point, professional fees were €211,000 in 2010 and €288,000 in 2009. Is the public relations and communication department in-house?

Mr. David J. O’Callaghan:  Yes.

Vice Chairman:    The costs for this were €52,000 in 2010 and €91,000 in 2009. The professional fees in 2010 were quite significant.

Mr. Ronan Ryan:  A consultant was used on the communications side in 2010.

Mr. Donal Forde:  I am not denying that at all - in fact, I would say they were inappropriately significant. However, that has all been addressed.

Deputy Eoghan Murphy:    Sorry; I missed that.

Mr. Donal Forde:  The level of expenditure on consultants on aggregate, in 2010 and 2009, is not appropriate to the times we live in. That has changed.

Deputy Eoghan Murphy:    Fine. Was it appropriate at the time? Was the organisation running a deficit at the time when it was employing these consultants in 2009?

Mr. Donal Forde:  No. There was a deficit.

Vice Chairman:    There was a €12,000 deficit and a €64,000 deficit.

Mr. Donal Forde:  We did employ them but not consistently during that time. That is the point.

Deputy Eoghan Murphy:    Often, we have the conversation that what was being paid then would not be appropriate now given the circumstances. However, I am trying to make the point that these were never appropriate, especially if the organisation was running a deficit at the time and spending so much on consultancy fees. I return to the point. The acting secretary general was also acting head of finance for two separate periods. Is that correct?

Mr. Donal Forde:  Not at the same time.

Deputy Eoghan Murphy:    Was he being paid a salary or a consultancy fee?

Mr. Donal Forde:  A consultancy fee.

Deputy Eoghan Murphy:    One consultancy fee. Is that correct? This was when the acting secretary general was not working with finance in a direct capacity. Was he paid separately before that?

Mr. Donal Forde:  They were two separate periods.

Deputy Eoghan Murphy:    There are two separate periods and two separate salaries. I simply wish to be clear on that. What are the general salary scales in the organisation, without naming positions or individuals, from top to bottom among the 32 or so people who work in headquarters?

Mr. Donal Forde:  Today, they range from €12,000 to my own, that is, €95,000.

Deputy Eoghan Murphy:    Is that competitive for the field the organisation works in?

Mr. Donal Forde:  All these salaries have reduced significantly, typically by 40% across the board. Are they competitive? Yes, I believe they are appropriate at the moment. On occasion, we have difficulty attracting someone at the salaries we have but we are trying to be careful.

Deputy Eoghan Murphy:    Fine.

Mr. Donal Forde:  Generally, I would say “yes”.

Deputy Eoghan Murphy:    What are the total salary costs for the organisation, for the 32 people in headquarters?

Mr. Donal Forde:  I gave the figure earlier. I do not have the total. To be clear, they are broken up into teams and a small number of these work in support of the international operations. Some of them operate our commercial activities and I have them broken down in that way. Certainly, I can provide the committee with the number across the totality of it.

Deputy Eoghan Murphy:    Do they generate separate salaries as they are deployed? Let us suppose someone is employed by headquarters in Dublin and then they start to work in some capacity with an international team. Is there a separate top-up to the salary or a separate payment from the international organisation?

Mr. Donal Forde:  No. They are paid a salary. Like any office, they are organised into teams and I consider the costs on that basis. I do not think I can supply the committee with it.

Deputy Eoghan Murphy:    The central council is the main governing body. Is that correct?

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    Does Mr. Forde report to it?

Mr. Donal Forde:  Essentially, I report to the executive committee on a day-to-day basis. This is the group of 12 to which I referred. I report to the chairman on an operational basis.

Deputy Eoghan Murphy:    How are those on the central council, approximately 40 people, appointed?

Mr. Donal Forde:  Some 30 odd are elected by their areas to the council. The balance of 15 or 16 are Government nominees.

Deputy Eoghan Murphy:    The Government appointees are political appointments. Is that correct? Are the appointed by the Minister of the day?

Mr. Donal Forde:  Yes. They are appointed by the Minister of the day.

Deputy Eoghan Murphy:    The central council appoints the executive committee, a small grouping of 11 or 12 people.

Mr. Donal Forde:  Yes.

Deputy Eoghan Murphy:    How often do the central council and the executive committee interact?

Mr. Donal Forde:  Twice each year.

Deputy Eoghan Murphy:    The central council is the main governing body and the executive committee reports to it. Is that correct?

Mr. Donal Forde:  Constitutionally, we describe the central council as the highest deliberative body. It delegates the executive committee to manage the affairs of the society on a day-to-day basis. It oversees the affairs of the society.

Deputy Eoghan Murphy:    It meets twice per year. What of the executive committee?

Mr. Donal Forde:  It meets monthly, apart from August.

Deputy Eoghan Murphy:    Members of the central council and the executive committee are entitled to claim expenses. Is that correct?

Mr. Donal Forde:  Yes. That is right.

Deputy Eoghan Murphy:    How are they claimed.

Mr. Donal Forde:  They are vouched expenses.

Deputy Eoghan Murphy:    They submit receipts for everything. Is that correct?

Mr. Donal Forde:  They submit receipts to the secretariat, a professional team.

Deputy Eoghan Murphy:    If they must travel, does this include overnight accommodation?

Mr. Donal Forde:  Infrequently, but on occasion it might.

Deputy Eoghan Murphy:    Does it include a per diem?

Mr. Donal Forde:  Some do not claim. In fact, many do not.

Deputy Eoghan Murphy:    Does Mr. Forde have a figure? How much is it?

Mr. Donal Forde:  I do not have it to hand but Deputy Murphy is welcome to it if it is there.

Deputy Eoghan Murphy:    I am interested to know the details.

Mr. Donal Forde:  The head of finance is making the point that many do not claim expenses to which they are entitled. We will get a figure for expenses, if that is helpful.

Deputy Eoghan Murphy:    As I understand it, the executive committee operates like a board. I understand Mr. O’Callaghan is the chair. is that correct?

Mr. David J. O’Callaghan:  That is right. Yes.

Deputy Eoghan Murphy:    That position is an appointment by the Minister. It is not an elected position. The chairman is appointed by whom?

Mr. David J. O’Callaghan:  I am appointed by the Government on the nomination of the Minister on a pro bono basis. I am president.

Deputy Eoghan Murphy:    How long has Mr. O’Callaghan been in this position?

Mr. David J. O’Callaghan:  Since September 2010.

Deputy Eoghan Murphy:    Who was the chairman’s predecessor?

Mr. David J. O’Callaghan:  Mr. David Andrews.

Deputy Eoghan Murphy:    How long was he there for?

Mr. David J. O’Callaghan:  He was there for eight or nine years.

Deputy Eoghan Murphy:    When the members are elected to the central committee by their local branches, how long are they elected for? Is it a five-year or a one-year appointment?

Mr. Donal Forde:  It is a one-year appointment.

Deputy Eoghan Murphy:    Every year, the branches meet and re-elect a member to the central committee and they can go forward to the executive committee. Is that correct? We discussed the International Committee of the Red Cross and the International Federation of Red Cross and Red Crescent Societies and their involvement with the organisation. Is it true to say that the ICRC in Geneva did not always hold the most favourable opinion of the Irish Red Cross in terms of how it operated?

Mr. Donal Forde:  No. I know of no reason Deputy Murphy would say that.

Deputy Eoghan Murphy:    What about all the reasons we have been discussing all morning, including the poor financial controls and governance? Would they have been aware of it?

Mr. Donal Forde:  They would have been aware of it but I know of no reason. They would have seen the need for change at all times. They would have pointed to the need for change but I would not go so far as to say they took a dim view. It is for them to say as much.

Deputy Eoghan Murphy:    Naturally, it is for them to say that but what was one’s understanding of their impression? If they supported the need for change they cannot have been happy. We can deduce that much. They would not have been happy with the status quo.

Mr. Donal Forde:  I can only speak of the position since my arrival and they have been supportive. They have always been in a constructive mode, essentially pointing to the need for the organisation to raise its game. In my experience there has not been so much criticism as there has been pointing to what needs to be done.

Deputy Eoghan Murphy:    That is helpful.

Mr. Donal Forde:  It is helpful. Absolutely.

Deputy Eoghan Murphy:    How often does the Irish Red Cross Society interact with the ICRC or the international federation? Is it regularly?

Mr. Donal Forde:  I interact with the federation monthly. I visit formally for an extended period from time to time. It is appraised at all times of what is taking place.

Deputy Eoghan Murphy:    Would Mr. Forde agree that it has a good understanding of what has happened in the Irish Red Cross, the changes under way and what these changes will mean when they are implemented, for tangible things such as positions on the board and so on?

Mr. David J. O’Callaghan:  I am in correspondence with it. There has been encouraging and supportive correspondence from it.

Deputy Eoghan Murphy:    I read a letter from the federation to the effect that it is happy that the Irish society is engaging with the Government and supporting it in that way. Is the chairman satisfied that the ICRC and the international federation fully support all the proposals the Irish Red Cross has put down and that it understands what this will mean in practice?

Mr. David J. O’Callaghan:  Absolutely. That is without question.

Mr. Donal Forde:  I need to say this repeatedly to the committee. It has been constructive, supportive and helpful in trying to find the balance between what is right for the Irish Red Cross and what might be the view elsewhere.

Vice Chairman:    Deputy Murphy, have you many more questions?

Deputy Eoghan Murphy:    I wish to put one more question in respect of the commercial operations of the organisation. What are these worth to the society?

Mr. Donal Forde:  Something of the order of €300,000 in the past year. Like everything else, it was greater previously.

Deputy Eoghan Murphy:    That goes against topping up what the Government subsidy does not meet. Is that correct?

Mr. Donal Forde:  Yes.

Vice Chairman:    Before I call on Mr. Buckley to make his concluding remarks, on behalf of the committee I thank the delegation for coming in. It has been a worthwhile venture. I hope it will help to enhance the damaged image of the Irish Red Cross and the great work being done by volunteers throughout the country. We wish you well and we hope you continue to examine the corporate governance. There are further reviews to be carried out in respect of board membership and that area and to encourage new people to come on board. That will be taken on board. I call on Mr. Buckley to conclude.

Mr. David J. O’Callaghan:  I thank the committee for the fair and comprehensive questions and for the opportunity it has given to us today.

Mr. John Buckley:  The changes being implemented should have some structured process for feedback so that the Department of Defence can be assured that the change management and organisational development we have heard about today will be realised from now on. This would give a great deal of assurance in future. Clearly, the committee will also want to monitor what the Department is doing about the primary legislation and introducing the new constitution through a statutory instrument.

Vice Chairman:    Does the committee agree to dispose of Chapter 32 - Financial Control in the Irish Red Cross? Agreed.

I thank the witnesses for attending the meeting.

The witnesses withdrew.

The committee adjourned at 1.10 p.m. until 10 a.m. on Thursday, 26 January 2011.

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Last Updated: 29/02/2012 12:54:32

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