Irish Red Cross criticised by auditors over management of donated funds

The Irish Red Cross deducted more than €123,000 from donated funds for humanitarian appeals, as a "retrospective" administration charge during a period of financial pressure, a confidential audit has found.

The audit raised several issues with how the charity manages restricted funds, donated to be spent on specific appeals and causes.

The report, seen by The Irish Times, was conducted by auditors Mazars and completed in January, and found the charity's policy for managing restricted funds was "not in line with best practice".

Restricted funding includes public donations given to humanitarian appeals, bequests left to the charity, or types of State grant funding, and it cannot be spent on general costs.

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The audit found over €123,000 was “retrospectively” deducted from four humanitarian appeal funds, as an administration charge. However, the basis for the retrospective charge “was not explicit” in any documents reviewed, the audit said.

Financial turmoil

The organisation has been going through a period of financial turmoil, following a drop in donations and budget shortfall on expected income last year.

The administration charge of 7 per cent was taken from appeal funds set up for Syria, Nepal, the migration crisis and flood-relief. The charge had not been applied between 2015 and 2017, but was later taken from the four funds retrospectively last year.

The basis for the fee was agreed at a board meeting in 2010, and the audit said minutes from the time noted it would need to be assessed on an annual basis, after an initial review.

The Mazars audit said “there was an absence of additional evidence of the performance of the initial review, or any subsequent review prior to July 2018”.

The audit recommended the administration fee be reviewed each year, to ensure it “remains valid and appropriate”, and the charity’s management accepted this recommendation.

The charity has been embroiled in a controversy over restricted funding, following a dispute at board level over past practices. Previously restricted funds had been drawn down for day-to-day spending, then later topped back up by the charity.

Documenting costs

The practice ceased last year, after the board directed all restricted funding be placed in a separate bank account to ordinary income. Following the board dispute, the charity brought auditors Mazars in to review the management of restricted funds.

The Mazars audit found the charity’s policy for managing restricted funds did not adequately record decisions taken impacting on funds, or procedures for documenting costs charged to funds.

The audit had examined the spending and management of restricted funding between January 2017 and last August.

There was no purchase order system for spending drawn down from overseas project funds, the audit found. It was also critical that not all travel and subsistence claims were backed up by receipts.

In a statement, the organisation said it was satisfied with the outcome of the Mazars review. The charity’s board said the review had addressed concerns around restricted funds, and found “no funds are either missing or misspent”.

Charity senior management and its board are already working to implement the audit’s recommendations for improvements, the statement said.