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Dublin: 18 °C Friday 31 October, 2014

7 things we learned from the CRC’s grilling by the PAC

Contractual obligations, a failing business and a pension fund that doesn’t actually exist – it was an interesting day in Committee Room 3.

Updated at 11.19pm

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OFFICIALS FROM THE Central Remedial Clinic (CRC) appeared before the Public Accounts Committee today to answer questions from TDs about the established practice of topping up the salaries of high level staff with money from its fundraising arm, Friends and Supporters.

Directors David Martin and Jim Nugent, as well as former CEO Paul Kiely, appeared before the committee as well as representatives from the HSE and the Department of Public Expenditure and Reform. Brian Conlan, who up until last week was CEO of the clinic, was not present today but there is talk of his being compelled to appear before the committee.

There were a number of revelations coming out of today’s five hours of hearings as TDs launched an assault on the board, the former CEO, the HSE and anyone else who had knowledge of the situation.

Here’s what we know now:

1. The CRC was ‘contractually bound’ to top up the salaries of some staff

From the very beginning of the session today, CRC’s Jim Nugent told TDs that the company was and still is ‘contractually bound’ to pay certain levels of pay to some staff.

He said a meeting with the HSE in 2009 did establish pay caps but there were ‘legacy’ contracts that the company was obliged to honour with specific pay levels set out in them and funds from donations were used for this.

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If a person has an employment contract, the employer is obliged to pay it,” he said.

It was also agreed with the HSE that the clinic would review salary levels of replacement staff and consult with the HSE on this. However it emerged during the course of the committee hearing that the HSE had not been consulted about the appointment of now resigned Brian Conlan or about his level of pay, which also involved a top-up, until after it had already been done.


(Video: Hugh O’Connell/YouTube)

2. This whole controversy centres around five people receiving top-ups

CRC was supplementing salaries to the tune of €280,000 a year which applied to five members of staff – the CEO, clients service manager, the administrator, the manager of HR and the manager of IT.

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As Sinn Féin’s Mary-Lou McDonald pointed out, “the vast, vast, vast majority of the staff were fully in line, full compliant with public sector pay policy”.

3. The former CEO got a €200k lump sum when he left and will get a €90,000 a year pension

Former CEO Paul Kiely was commended for making an appearance today but that didn’t stop TDs from roughing him up a bit.

Shane Ross challenged Kiely on his pension, which will be based on his full salary of €242,000, though just €106,000 of that came from the HSE. His yearly pension, when it kicks in, will be roughly €90,000 a year.

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On top of that, Kiely received a tax-free lump sum of €200,000 when he left CRC – which came from the charity fund. Director of Human Resources at the HSE, Barry O’Brien said they were not aware of this.

It emerged in recent weeks that some €3 million was loaned to the clinic by Friends and Supporters, to plug its private pension deficit. In CRC accounts, the loan is described as “unsecured, interest free and not repayable in the short term” and Ross said this was “a gift by any other name”.

4. The HSE knew salaries were being topped up

It was not just the CRC representatives who suffered a beating from the committee today.

Fine Gael’s John Deasy said it seemed to him that the HSE “knew what was going on”.

You were responsible for policing this – when is enough enough?

If people are going to ask for board resignations, they should look at the HSE.

As previously stated, there was a meeting between the CRC and the HSE about salaries in 2009. From that time there was correspondence between the two on the issue.

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Chief Operating Officer of the HSE, Laverne McGuinness, said the HSE understood the position that the clinic had historical arrangements and that they had ask for it to review how they could bring salaries back down to public pay limits.

She acknowledged that the HSE received a letter in 2009 outlining how the CRC was using private fund to part-fund salaries but said the HSE did not respond and so did not agree to any amount of extra funding or where it was to come from.

She also said that the HSE “could not compel the organisation” to implement pay cuts as they had advised the HSE they had legal arrangements in place.

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Chairman John McGuinness told HSE representatives in relation to the €16 million the CRC received from the HSE each year: “You did not flex your muscles as a provider of that fund”.

“You’re as guilty as the CRC in terms of what’s going on here and the management of the fund,” he said.

When pushed on the issue, Barry O’Brien conceded that “the HSE made an error”.

5. Over €500k from the charity funds was used to set up a company that failed

The clinic decided, about five years ago, to set up a subsidiary company to manufacture specialised wheelchairs in the hope of making a profit and create an income stream.

Kiely said it was “tantalisingly close to making a profit” when the recession hit and it has just recently been sold.

What emerged today is that €550,000 was taken from the charity fund to set up this company which had to scale down over the years as businesses died out.

Nugent said the sale will likely result recoup €500,000 of that which will be put back into the fund.

6. The Mater Hospital has been charging the CRC for a pension fund that may or may not exist

A line of questioning from Shane Ross led to that former CEO Kiely revealing that the CRC pays the Mater Hospital around €660,000 to administer a pension fund that does not exist, something now ‘refuted’ by the hospital.

He explained to the committee that the clinic pays the hospital a premium of between 10 and 13 per cent of employees’ gross salaries every year for the public hospital to administer a Voluntary Hospitals Superannuated Scheme or VHSS pension scheme.

However he said “there is no fund that I know of”.

In a statement this evening, the Mater Hospital explained that the fund does exist, and is “in line with Public Sector pension policy, whereby all pensions are funded from current revenues, as is the case with all Public Hospitals”.

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Shane Ross described this as “outrageous”, and “absolute madness”.

Kiely said it was a legal agreement that went back about 30 years and he had tried to break it on numerous occasions but “no one wanted to know”.

He also revealed that he was told the CRC was not the only organisation the Mater Hospital does this for.

The HSE’s Barry O’Brien said he was not aware of this and would request a report from the hospital to present to the committee next week.

7. Everyone thinks the board should resign

A number of TDs, including Simon Harris, Kieran O’Donnell, Shane Ross and Gerald Nash, told the directors that their positions is now “untenable” because of the decisions it had made. The committee was told that Kiely has, in fact, already resigned from the board “since the news of this broke”.

Nugent told the committee that the board has been in the process of moving the way it functions “into a new era”.

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“I will bring your views back to the board members and we will communicate a response in depth,” he said.

However Nash hit out at Nugent, telling him it was obvious that no lessons had been learned, with the temporary appointment of Joan Hurley to fulfil the position of Operations Director in the day-to day-management of CRC since the resignation of Conlan as CEO. The committee heard that Hurley is one of the staff who has been in receipt of a top-up to her salary.


(Video: Hugh O’Connell/YouTube)

Originally posted at 8.30pm

Related: ‘Absolute madness’: CRC pays Mater Hospital €660k to administer ‘phantom pension fund’>

Read: Mater Hospital ‘refutes’ suggestions that the fund does not exist >

Video: Former CRC chief got €200k lump-sum payment from charity fund

More: CRC ‘contractually bound’ to top up salaries

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