Senior CRC executives avoided full impact of public service cuts by splitting salaries

Senior executives in the Central Remedial Clinic (CRC) avoided the full impact of public service pay cuts imposed on other staff because the organisation artificially split their salaries between amounts funded by the HSE and that generated from its fundraising arm, according to a report published yesterday.

The report by John Cregan, the interim administrator appointed by the HSE to run the CRC after the board and chief executive officer resigned late last year, reveals that in the past, the organisation operated a separate payroll for executives, in addition to the one in place for other personnel.

In 2009, the HSE had sought reductions in the pay of senior executives. The report states that in a deal reached with the HSE in November 2009, the CRC said it would fund the excess of salaries over and above the official rate from January 2010.

However, the report says that the CRC then proceeded to artificially divide senior management and administrative salaries into two categories identified as “ agreed HSE” and “private CRC”.

“The most egregious aspect of the new arrangement was the opportunistic use of the artificial split of the salaries to facilitate the avoidance by senior staff – who previously received the full benefit of public pay increases – of the full impact of public sector pay cuts. In addition, an unnecessary burden was maintained on charitable funds by not reducing the ‘private CRC’ component of executives’ pay.”

Mr Cregan says that in some years, funding for a portion of the remuneration of senior executives came from a donation provided by the CRC’s fundraising arm, the Friends and Supporters group.

The report says that the former CRC chief executive Paul Kiely received a pay increase of 2.5 per cent under the national agreement in September 2008, to bring his overall pay to €234,449.

If the pay cuts introduced across the public service under emergency legislation in January 2010 had been put in place in full, his salary should have fallen to €199,282. However, the report says no cut was applied to the €118,449 he received as part of the “private CRC” component of his pay. A cut of €10,600 was put in place in relation to his “agreed HSE” pay. This resulted in him receiving an overall salary of €223,849.

The report says the proper application of the financial emergency legislation/Croke Park agreement cuts on public service pay to Mr Kiely would have “reduced the burden on the CRC private funds by €24,567 per annum”. It says a further €22,000 would have been saved if the full cuts had been put in place in relation to the salaries of other executives at the CRC.

However, the report signals that there could be difficulties in recovering excess money paid to some executives. “There is no evidence of communication with the staff involved in relation to how their rates were determined in response to HSE concerns and the minutes of the board meetings were not made available to the executive team or other senior staff. In these circumstances, there may be a legal difficulty in recovering an amount resulting, in their eyes, from an error by the employer.”

It adds: “However the CEO, as the person charged with executive responsibility for the administration of the CRC, would have been familiar with a public pay policy diligently applied to other staff in the CRC and was the author of proposals to the remuneration committee (of the board) on the implementation of pay policy, and on that basis, monies paid in excess of properly calculated reduced rate for the period 01/01/2010 to date of termination should be recovered.”

An argument that public service pay cuts could not be applied to the remuneration of the chief executive and other senior staff “must be regarded as spurious”.