Rehab criticises department over lottery fund audit

The Rehab organisation has strongly criticised the Department of Justice over concerns raised last summer in an audit of funding received under the charitable lotteries fund.

Its chief executive Angela Kerins said it was not appropriate for the department to seek to influence the operations of a private body by insisting on setting out how its earned income was spent.

She also maintained the department could be perceived to be seeking to act as a “shadow director”.

The charitable lotteries fund was established in 1997 by the Government to provide additional finance to private charitable lotteries whose products were in direct competition with the National Lottery.

The audit said Rehab had received €25.86 million between 2007 and 2011 under the scheme.

Last month, Minister for Justice Alan Shatter highlighted the audit findings when he pointed to the low profit margins in Rehab lotteries.

Ms Kerins told the Department of Justice in a letter sent on foot of the audit findings last August that its report “demonstrates serious and material misunderstanding of the Charity Lottery Compensation Fund”.

“This fund is a commercial agreement between the Government, as owners of the National Lottery, and owners of private charity lotteries. This commercial agreement was the result of the National Lottery operating under vastly more enabling legislation, thereby creating a very uneven commercial playing field.”

She said the agreement acknowledged the unequal legislative provisions pertaining to the charity lotteries.

Ms Kerins said it was generally accepted the agreement “constitutes a very favourable arrangement for the Government’s lottery”.

The letter said the funding of the charity lotteries represented a first charge on the profits of the National Lottery.

“It is not an exchequer grant to organisations to provide services. It is therefore clearly not appropriate for the Department of Justice to seek to influence the operations of a private body by insisting that its earned income be applied to certain areas,” she wrote.

“Indeed, with respect, it might not be in the interest of the department to do so, as it might be perceived in certain circumstances to be operating in a shadow director role, particularly in a situation where it is not funding services.”

Ms Kerins said if a level playing field had been set up when the National Lottery began in 1987, “it would not have been unreasonable for the charity lottery sector to have had a 10 - 20 per cent market share in the intervening years”.

“If the Irish charity lottery sector had a 15 per cent market share today, that would mean an annual sales value of around €110 million and a profit contribution of around €30 million. Instead, because of inequalities of legislation, the charity lotteries have less than two per cent market share and diminished income.”

Ms Kerins said while Rehab had co-operated completely with the audit “to ensure our business was fully understood, we in no way agreed, or expected, to find that any of our private commercially sensitive information would be made public in a Government report. That is unacceptable to us.”

The letter was provided by the Department of Justice to the Oireachtas Committee of Public Accounts.