Shatter criticises Rehab citing low profits from lottery

Minister for Justice Alan Shatter has raised concerns over the low profit margins in Rehab Lotteries and questioned the "costly" legal action the charity has taken against the State .

An audit of Rehab Lotteries carried out by his department showed its gross lottery sales in 2010 of almost €7.2 million yielded a net profit of €558,000 or 8 per cent.

One Rehab Group scratch card product with sales of almost €4 million produced a profit of less than €9,500 in 2010, he told the Dáil last night.

Rehab rejected Mr Shatter’s remarks, saying he had abused his position, provided misleading information and seriously undermined the judicial process. The group said it could not respond in detail as the matters were before the courts.

“For a Minister who was or is a solicitor and thus an officer of the court to comment in this manner is simply outrageous. We expect the Minister to withdraw his remarks and apologise,” Rehab said late last night.

The Minister's intervention last night follows disquiet over the refusal of Rehab chief executive Angela Kerins to reveal her pay. It comes as political scrutiny of the charity sector deepens in the wake of disclosures about the Central Remedial Clinic.

Mr Shatter expressed particular concern about lotteries operated by Rehab, which provides education, training and employment for people with disabilities. “I noted that the profit ratio seemed disproportionate and expressed concern at the approach being taken to public fund raising.”

Mr Shatter linked the Rehab case and Government moves to phase out a State scheme which has provided a total of €120 million in public funding to lotteries operated by charities since 1997.

“I became very concerned that the fundraising activities of some of the organisations that benefit from the Charitable Lotteries Scheme operated at very low profit margins and that the operation of the scheme incentivised inefficient fundraising practices that could be used as a means to leverage government funding under the scheme,” the Minister said.

The scheme incentivises charities to maximise ticket sales with no regard to operating costs or how much money raised by ticket sales is used for charitable purposes.

Mr Shatter, who was speaking during a debate on a Sinn Féin private member’s motion, noted that Rehab received about two-thirds of the total available funding under the scheme.

“In the case of Rehab . . . the proportion of the face value of a Rehab Lotteries instant win scratch card that was retained for the benefit of the charitable organisation averaged around 1 per cent and around 15 per cent for draw lotteries over the period 2008-2010.”

Mr Shatter’s department carried out an audit in May 2012 of the funds Rehab received. “It was found that, in 2010, the amount of costs in generating the lottery sales in Rehab represented a significant percentage of overall sales revenue – leading to a low profit margin.

“For example, bingo sales of €3,190,000 in this period yielded profits of only €548,000. Scratch card sales of €3,969,000, yielded profits of only €9,452. In summary, 2010 figures supplied by Rehab Lotteries show their gross lottery sales of almost €7.2 million yielded a net profit of €558,000 or 8 per cent.”

Mr Shatter also noted that Rehab and its lottery have embarked on separate competition litigation against the State for €1.5 billion in connection with the National Lottery.