Major reports criticise ‘fictitious’ accounting at RTE

Irish national broadcaster RTE recorded “fictitious” accounting transactions and operated with a “lack of trust” between its board and senior management, according to long-awaited expert reports.

It comes as more than 100 recommendations from two reports ordered by the Irish Government were published on Tuesday, alongside an examination on the organisation’s use of off-balance sheet transactions.

Minister for Media Catherine Martin published the Government-commissioned reviews and examinations of practices at RTE.

She also committed to making a decision on reforming the funding model for public service broadcasting before the Irish parliament enters into summer recess in early July.

However, Ms Martin acknowledged that legislative changes may not happen in the lifetime of the current Government as a general election must be called by March at the latest.

“I would hope that any government that is in place after the next election will take very seriously the key recommendations from expert groups that are putting RTE and public service broadcasting on sure footing.”

Ms Martin said the decision on the funding model has not been made but added that she believed there are two main options.

While appearing to rule out a hybrid model, she said there could either be a reformed broadcasting charge to be collected by the Revenue Commissioners or direct funding from the Exchequer.

The reports published on Tuesday identified “several instances of inadequate record keeping” and “fictitious” accounting transactions.

It also noted that four senior RTE executives that were “centrally involved” in the events which prompted the reports have since retired or resigned.

The authors also said that because the financial arrangements for two of these exits have not been disclosed, it is not possible to say whether there had been a “pay-for-failure” arrangement.

It said RTE was characterised by a siloed culture with a “lack of speaking up and good faith reporting” as well as a lack of accountability.

It said there was a lack of trust between the RTE board and its former executive, as well as an informality within board processes and a “limited appetite to learn”.

The first review of RTE’s governance and culture was prepared by Professor Niamh Brennan – and a separate review of contractor fees, human resources and other matters was chaired by Brendan McGinty.

Both reviews have led to a total of 116 recommendations.

These include assigning the Comptroller and Auditor General as auditor of RTE; modernise the legislation governing the role of the RTE Board; improve and resource the risk and compliance functions within RTE.

It also recommended requiring RTE to include a financial or formula cap in any future exit scheme; introduce and publish pay bands for its on-air presenters; improve the functioning of the RTE Board and its committees; and ensure greater transparency for higher executive pay.

It further recommended to improve the accountability of the director general to the RTE Board; strengthen the implementation of gender, equality, diversity and inclusion policies in the broadcaster; and ensure the review of roles and grades and forthcoming review of allowances in RTE are effective, transparent and include consultation with employees.

The cost of three reports has amounted to around 570,000 euro to date, however the cost is expected to reach as much as one million euro as the department awaits confirmation of further invoices.

The review of governance and culture includes 90 recommendations to reform RTE’s corporate governance framework, its organisational culture and its way of doing business.

The review of its HR practices made 26 detailed recommendations, including improving the oversight and mechanisms by which it engages contractors and presenters and the use of short-term employment contracts and employment terms and conditions in RTE.

The Government said it has accepted in principle all 116 recommendations made by the expert advisory committees.

RTE will now be required to prepare an implementation plan within six weeks, setting out the actions and associated timelines that it will take to implement the recommendations.

The implementation plan will be overseen by a monitoring group, composed of the minister’s department and senior representatives and NewERA (New Economy and Recovery Authority).

RTE was plunged into crisis in June last year after it admitted understating the fees for its star presenter and previous top earner Ryan Tubridy.

A series of probing parliamentary committee hearings also uncovered other concerns about culture, governance and financial management at RTE and there have been several high-profile resignations from the board and executive of the station.

Disclosures during the scandal revealed the use of barter accounts by the broadcaster’s commercial wing.

Barter accounts are commonplace in the media industry to allow organisations to exchange advertising airtime that would otherwise go unsold in return for goods and services from companies.

However, RTE’s use of the accounts came under intense scrutiny and a previous report found that there were significant gaps in controls and record keeping.

The examination into the matter published on Tuesday shows that a barter account was used for hundreds of thousands of euro worth of client hospitality, including concerts, restaurants and gifts.

It also found that some barter purchases amounting to 654,000 euro were incorrectly omitted from reports to the minister.

The review, conducted by Mazars, also states that a hard copy of barter transactions for the period of 2017-2019 was lost during an office move.

It also found payments through the barter account with “no valid basis” including payments to Tubridy and 2,510 euro for a cancelled executive board meeting.

However, Ms Martin has said the two independent expert reports which were ordered by her Department will form the main basis for the Government’s decision on reforming the funding of public service broadcasting in Ireland, including RTE.

A pre-existing steady decline in licence fee revenue was accelerated by the expanding controversy.

RTE operates on a dual-funding model that sees around 55% of its income brought in through the obligatory licence fee, which costs 160 euro a year for Irish households with a television.

Approximately 85% of revenue from TV licence fees goes to RTE to carry out its public service broadcasting commitments, while it also earns money through commercial operations.

RTE’s director general Kevin Bakhurst, who assumed the role in the early weeks of the crisis, has also announced a strategic plan for reforming the institution by 2028.

It includes cutting headcount by 400 – a reduction of up to 20% – and a significant increase in investment in the independent production sector.

RTE said it has welcomed the publication of the reports.

In a statement, RTE said that it accepts “in principle” the recommendations made in the two expert advisory committee reports.

Mr Bakhurst said in a statement: “The events of last year are a source of deep frustration and disappointment to all of us in RTE and those connected to this organisation.

“We have already undertaken major reform of RTE and addressed many of the recommendations included in the reports and we are committed to continuing on this process of reform, now with the benefit of recommendations set out in the reports today.”

The broadcaster said its board and the RTE’s interim leadership team will take time to fully review all three reports, including the recommendations.

RTE has begun a programme of works to deliver on the recommendations, it said.

RTE chairman Terence O’Rourke said: “RTE has supported both Expert Advisory Committees and Mazars in their work and we welcome the publication of their reports by Government today.

“Their analyses and their recommendations, all of which we accept in principle, will make a significant contribution to the task of rebuilding trust in RTE. RTE is tasked with providing a vital public service.

“The organisation’s corporate governance, transparency and operations must be of a standard commensurate with that mandate. The board is focused on returning RTE to levels of corporate governance and transparency that should define it. We look forward to working with Government, staff in RTE and all our stakeholders, in delivering the process of transformation that commenced last year.”