Consultants unravel cash crisis

The independent consultants appointed to review the financial management of the Abbey Theatre found five separate budgets with different projected outcomes for the Abbey Theatre in 2005.

Consultants said the different budgets reflected the "lack of clarity" surrounding the annual budget process and financial procedures at the theatre.

The comments are contained in a review conducted by consultants KPMG, which has been obtained by The Irish Times.

One of the budgets prepared in October 2004 projected that the theatre would reach break-even point in 2005; another undated budget projected significant losses; yet another budget, prepared in early May this year, projected an operating profit; the latest budget, prepared in late May 2005, projected an operating loss of €263,000.

Internal correspondence, also obtained by The Irish Times, shows the KPMG report that was presented to the Abbey board on Wednesday was the fourth draft and followed concerns among board members that "due process and natural justice" be observed.

The KPMG report shows in detail for the first time how losses mounted at the theatre during its centenary year, and how accounting errors and poor financial controls meant board and committee members failed to identify the full extent of the financial crisis facing the company.

The budget for the centenary programme, known as "Abbeyonehundred", was originally in the region of €3 million, however, it appears no final budget was ever agreed.

The consultants found a "version" of a budget with hand-written totals and costs for some projects which did not equal the breakdown of costs provided.

Some €650,000 was provided for a national tour of The Playboy of the Western World, however, the costs were never included in any of the income and expenditure statements during 2004.

The board and its finance and audit committee told consultants it was not aware that these costs were not included in these statements.

The consultants were also unable to find a formal budget for The Shaughran, although minutes of a meeting in August 2004 projected that it would cost in the region of €430,000. Figures suggest it had operating losses of €434,128. After the Arts Council grant factored in, this figure was €47,728.

Plans to raise sponsorship of €2 million for the centenary year also fell short of target by €500,000. The Book of Days, another centenary initiative, cost in the region of €164,000.

In December of 2004, the Arts Council provided the Abbey with a stabilisation grant of €2 million, including an early draw-down for the payment of overdue PAYE and PRSI.

The consultants concluded that accounting errors, poor corporate governance and "ad hoc" analysis of reporting of the finances contributed to the scale of the problem.

While these problems took place during 2004, the consultants say income and expenditure statements for the first four months of this year are "incomplete and unreliable".

The report did not uncover any indication of an act of theft or fraud, and there is no suggestion that any board member or member of the finance committee was guilty of misconduct.

The board is comprised of non-executive directors who contribute their time and commitment without any remuneration.

Latest estimates show the theatre recorded losses of €1.85 million in 2004 and now faces accumulated losses of at least €3.4 million.

While the the report spreads the blame, it says the board itself was responsible for the Abbey Theatre's financial affairs and it should have provided more effective oversight into the financial reporting and cost control activities, particularly in relation to the national theatre's centenary programme.