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Drama at the Abbey as Arts Council investigates finance and governance

Payments to former directors have prompted independent audit by Mazars

Very soon, the Arts Council should receive a report from independent auditors Mazars on finance and governance at the Abbey Theatre, arising from payments to its former co-directors, Graham McLaren and Neil Murray.

It’s no secret the council is seeking to establish whether public money was used for financial settlements by the Abbey, the largest recipient of Arts Council funding (€7.5 million for 2022). Responding to a query from The Irish Times on the purpose of the review, Arts Council director Maureen Kennelly stated public money invested by the Arts Council was to be “used in pursuit of the creation of work and the development of the arts”.

News emerged before Christmas that the Abbey’s handling of the departures of McLaren and Murray, and its management of another matter relating to McLaren only, had led to a number of settlements, totalling about €700,000 including legal fees.

Neither the Abbey nor the Arts Council has confirmed or denied this figure, but it is clear the ex-chief executives received termination settlements, even though their fixed five-year terms had run their course. The 2020 Abbey accounts filed late last year show €165,256 as “termination amounts payable” for McLaren and Murray, plus €11,000 “legal costs for concluding the termination agreements”, after “the board approved restructuring of the leadership positions”, which “resulted in the existing roles filled by the joint CEOs being abolished and the creation of two distinct leadership roles”. In addition to termination payments, salaries for the pair in 2021 totalled €206,432, plus pension payments of €16,514.

The Irish Times has seen Arts Council documentation under Freedom of Information legislation, covering board, HR and financial matters at the Abbey between June 2020 and November 2021.

Much detail is redacted, but there are flurries of frequent correspondence over the period between senior figures in the council and the Abbey, including Kennelly, Arts Council chair Kevin Rafter and Abbey chair Frances Ruane.

Structural change

A year before the end of Murray and McLaren’s term, on July 29th 2020, Ruane wrote to Rafter about the Abbey’s future leadership, saying the board planned to advertise for an artistic director and executive director (chief executive), both reporting to the board. This represented a slight structural change, formally separating artistic and executive leaders rather than having joint co-directors.

Ruane referred to a “very helpful conversation we had in June – it has already informed and assisted our process”. She said staff would be informed at 5pm that day, and “we do not plan to make a public announcement until the advertisements are posted”. The day this letter was sent, the Abbey responded to an Irish Times inquiry, followed by publication that morning of the fact the co-directors’ contract was not being renewed.

Correspondence about a new memorandum and articles of association for the Abbey reflected ongoing council concern about the Abbey’s governance structures, as well as the new leadership structure. On September 10th, 2020, council chair Rafter wrote to Ruane for “further clarification regarding the Abbey board’s approach to the appointment of the new leadership team”, citing specific concerns about individual role profiles and their reporting relationship to the board, seeking “specific clarity on the role of the artistic director in the proposed structure”. This mirrored unease among theatre practitioners about the apparent subordination of the artistic director role to the executive director.

In recent years, Abbey board membership has at times been seriously depleted, with several appointments overdue

The director jobs were advertised with a closing date of November 9th, 2020.

It’s unknown whether the outgoing co-directors applied or were interviewed for the slightly restructured jobs.

The quarterly Working Group Abbey-Arts Council meeting on February 19th, 2021, appears to have been controversial. Among attendees were Murray (but not McLaren) and Abbey finance director Gus McNamara, and the council’s director and deputy director. In the seemingly standard agenda, one item is redacted, under “Financial Update”.

Redacted minutes

On March 2nd, Murray looked for draft minutes. On April 27th, the council sent these and, on May 11th, the Abbey requested changes to the minutes, “on behalf of the Executive and chair”. Those lengthy minutes are fully redacted. Four days later, on February 23rd, the Abbey announced its new directors, Caitriona McLaughlin and Mark O’Brien,would be joining in May and taking over in July 2021.

On February 25th, Rafter emailed Murray and McLaren, in appreciation of their “collaborative and constructive” approach and to “wish you both well with your future endeavours”.

Just as the Abbey prepared to reopen to live audiences on June 25th, a tornado appears to have hit, as witnessed by a blizzard of communication at the top levels of the Abbey and the Arts Council, continuing through summer 2021 and into autumn. It started on June 4th with an email from Rafter to his Abbey counterpart Ruane, followed by a video meeting and three consecutive letters from Kennelly to Ruane.

The regular quarterly Working Group meeting scheduled for June 18th, with the Abbey’s outgoing and incoming directors and finance director attending, was abruptly cancelled by the council the evening beforehand, without giving a reason. When asked whether there have been any quarterly Working Group meetings since February 2021, the council declined to comment.

Just before that cancelled June 2021 meeting, The Irish Times understands, the Arts Council learned – from a third party rather than directly from the Abbey – about a number of financial settlements paid to Murray and McLaren, and sought information about them.

The series of letters between Kennelly and Ruane continued, under the subject “Engagement with the Abbey Theatre”, sometimes marked “private and confidential” or “common interest privilege”: an unprecedented 36 top-level communications between June 4th and November (when FoIs end).

On August 23rd, Kennelly was “expecting a response from you last week and have yet to receive one. I am very concerned that a significant period of time has passed since we first raised these issues. Can you please indicate when I may expect a comprehensive response?” Ruane replied the following day, “in relation to the requests in your letter of 13 July. We are also conscious that dealing with this matter is taking more time than we would wish.”

Ceased meetings

On October 6th, Ruane told Kennelly “our solicitors have advised me this morning that they hope to have the material required by the Arts Council later today”, followed by further letters.

Quarterly meetings in September and November didn’t take place, and the council then appointed Mazars to carry out the review on its behalf.

In parallel with this, Arts Council concern about Abbey governance continued. Barrister Michael Wall was reappointed to the Abbey board in July 2020, without following proper procedures, prompting furious Arts Council reaction when it came to light over a year later, in August 2021, it appears from the documentation.

The reappointment excluded the required involvement of Arts Council chair Rafter, though Ruane on August 30th wrote to him that “Regrettably I cannot agree with your interpretation of our exchanges in January 2020”.

On September 7th, the Abbey board backed down, updating the Registrar at the Companies Office that Wall ceased as board member in July 2020, and acknowledging that using a draft, rather than the existing M&AA, for Wall’s renewal “amounts to an inadvertent corporate governance lapse, notwithstanding that the board considers that the draft M&AA is a further improvement in governance standards”. The board also notified the Minister and the Charities Regulator of the lapse.

In recent years, Abbey board membership has at times been seriously depleted, with several appointments overdue. In November 2021, there were only four board members plus chair. The following month, four new appointments were announced (including the valid reappointment of Wall); remaining board appointments are expected. Chair Frances Ruane’s term runs until this June.

The Arts Council documents also refer to accounting delays last autumn. On September 10th, the council wrote about an audit of financial statements “at this point, it is very overdue”, adding that submitting audited accounts is mandatory for funding, and setting a deadline the following week. The Abbey replied the file was with the Comptroller and Auditor General and then would take two or three weeks for final sign-off, including board meeting and agm.

Grant aid

The new executive director, Mark O’Brien, intervened, looking for advice on how to proceed “in light of application deadline this Thursday and the fact that we are still awaiting our audit”.

Fast forward to November 4th, when the council requested the Abbey’s most recent management accounts (they sent accounts up to September 2021, which are redacted). The next morning the council informed O’Brien by phone that it was appointing Mazars, and requesting they “provide all the necessary documentation and assistance” to the external auditors. O’Brien acknowledged the auditors’ appointment: “we look forward to engaging”.

Confirming Mazars’ governance and financial review to The Irish Times, the Arts Council said its “post award evaluations and reporting processes are structured to provide assurances that public funding is used for the purposes intended. The Arts Council may also exercise its right to separate independent assurance with regard to the expenditure of grant aid.”

In attempting to track down what happened, why payments were made and where they came from, the Mazars review should be illuminating

Asked about the settlements, the Abbey responded: “As you know, the Abbey Theatre does not provide details on contractual terms in relation to current or former employees.”

Two questions arise. First, if the co-directors’ five-year term ran its course, why were there redundancy payments? Second, why was the other payment, which amounts to a much larger share of the overall sum, made?

Termination payments

Two sources say the figure reported appears correct, and that the €700,000 includes legal fees. If this is correct, a substantial portion remains unaccounted for. The termination payments of €165,256 (plus €11,000 legal costs) are reported in the 2020 accounts. The previous year’s accounts include “legal and professional fees” of €316,040 (including “charges for operational, compliance and HR matters”); by comparison, in 2018, legal fees were €90,351, some €225,689 less than in 2019. The Abbey’s 2021 accounts are not yet due to be filed.

In attempting to track down what happened, why payments were made and where they came from, the Mazars review should be illuminating. The council declined to say if any of the report would be made public.

While the Arts Council can’t comment on internal matters of individual organisations, its additional comments make clear its concerns, pointing out “all funded organisations adhere to the highest standards when it comes to corporate governance”, and that “public money invested by the Arts Council is used in pursuit of the creation of work and the development of the arts for the ultimate benefit of the public. Funded organisations must demonstrate their compliance with this requirement.”

But if the Abbey were to argue public money was not used for any such settlements, it’s a moot point. The State, via the Arts Council, is by far its largest source of funding. And it ultimately all goes into the same pot as box office revenue or fundraising income.

The alleged €700,000 is nearly one-tenth of the Abbey’s annual public funding. If that money was used to pay off former employees, it is not available to make theatre.

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