RTE had ‘alarming gaps’ in internal procedures and record-keeping – report
Accountancy firm Mazars was asked to look at how the broadcaster was run following the revelation of undeclared payments to Ryan Tubridy.
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Your support makes all the difference.A report by forensic accountants into RTE’s use of off-balance-sheet accounts has identified “alarming gaps” in internal policies, procedures and controls, Ireland’s Media Minister Catherine Martin has said.
Ms Martin has published the interim report by forensic accountant Mazars, which she appointed to examine RTE’s use of a UK-based barter account for certain commercial transactions.
RTE has been reeling since revelations earlier in the summer that it misreported the salary paid to star presenter Ryan Tubridy and failed to properly disclose 345,000 euro (£296,000) of payments to him between 2017 and 2022.
Last week, new director general Kevin Bakhurst announced that Tubridy would not be returning to his weekday radio show.
The furore around the payments to Tubridy has become a wider crisis for the national broadcaster amid further disclosures about RTE’s internal financial, accounting and governance practices and its expenditure on corporate hospitality for advertising clients.
The forensic accountancy report by Mazars is one a series of probes commissioned into RTE in the wake of the controversy.
Barter accounts are commonplace in the media industry. They allow organisations to exchange advertising airtime that would otherwise go unsold in return for goods and services from companies.
RTE’s use of barter spending has come in for intense scrutiny since it emerged that the broadcaster paid 150,000 euro (£128,000) to Tubridy through one such account, as part of an undisclosed commercial arrangement with a sponsor.
RTE had also faced criticism for using barter transactions to spend hundreds of thousands of euro entertaining commercial clients, including on a trip to the 2019 Rugby World Cup in Japan.
Further contentious transactions included almost 5,000 euro (£4,300) on 200 pairs of flip-flops for a summer party for clients.
Mazars’ interim report has identified significant gaps in controls and record keeping.
Ms Martin published it following a meeting with Mr Bakhurst and the RTE board chair, Siun Ni Raghallaigh, at her department in Dublin.
It also found there was a lack of signed contracts between RTE and the barter media agencies used and that there was an absence of budgetary reporting for barter account purchases.
Ms Martin said: “The report from the forensic accountants again sets out alarming gaps in internal policies, procedures and controls that existed in RTE.”
Issues highlighted in the interim RTE report from forensic accountant Mazars include:
– An apparent lack of signed contracts between RTE and the barter media agencies used;
– No properly documented policy and procedures for use of the barter account and inadequate record keeping;
– An absence of budgetary reporting for barter account purchases;
– Goods or services acquired through the barter account outside RTE standard purchasing and procurement processes;
– No formal list of staff limiting who could make purchases through the barter account;
– No formal list of approvers for purchases;
– No thresholds on the value of purchases.
Mazars did not identify any benefit to RTE in making purchases through the barter agencies rather than cashing out the trade credit balance.
Commenting on the findings, Ms Martin said: “This lack of properly documented policy and procedures for using the account, and an apparent lack of checks and controls over who used it, is not befitting a public service organisation, and cannot be repeated.”
Between 2017 and the end of 2022, RTE processed sales worth a total of 7,403,499 euro through three barter agencies.
In general, for each sales booking made with barter media agencies, RTE receives around 70% of the value of the gross booking amount (or 82.5% of the net booking amount after sales commission) through a combination of an initial cash payment and subsequent utilisation of available trade credit, the interim report from Mazars revealed.
RTE can cash out the trade credit to a value of approximately 70%, or purchase goods and services through the barter account, also at 70% of the value. The full figure for the trade credit is then deducted from the account.
The barter agencies have a 15% commission when a balance is added to the account.
Ms Martin told reporters: “It’s no longer in use for purchasing goods and services. It’s purely for generating cash.”
She said the report into RTE’s “points to” some staff at the national broadcaster avoiding the proper controls and procedures in order to “hide purchases”.
She added: “It looks that way, but I have to wait for the final report, which will be the first week in October, but that’s what its indicating.
Ms Martin said the forensic accounting work on the barter account, which will see a final report published in October, is expected to cost 300,000 euro.
The chairwoman of the RTE board Siun Ni Raghallaigh welcomed the publication of the report.
In a statement, she said: “Regrettably, it is further evidence of the deficiencies in the financial controls and procurement processes in place at RTE in the period under examination.”
Earlier, Mr Bakhurst said that RTE may have to consider compulsory redundancies “at some point” as the national broadcaster deals with massive reductions in TV licence purchases.
After the scandal rocked the broadcaster in June, there were 37,089 fewer licences purchased across eight weeks when compared directly with the numbers bought in the same period last year – representing a possible loss of 5.9 million euro (£5 million).
Speaking to reporters after a meeting with Minister Martin, Mr Bakhurst said RTE is “absolutely not considering compulsory redundancies at the moment” but added: “We may have to do that at some point.”
Asked about the remarks, Ms Martin said she “would absolutely have concern” for staff at RTE.
“These employees do an amazing job in a whole array from current affairs, to sports, to entertainment, to culture, and I absolutely would have concern for anyone, in any walk of life, in any job, that had that at risk – through no fault of their own.”