Long-awaited report into financial matter of 'grave concern' reveals IHRB breached Charities Act with €350,000 transfer

The long-awaited Mazars investigation into the financial governance of the Irish Horseracing Regulatory Board (IHRB) has revealed the transfer of €350,000 from the Jockeys Emergency Fund (Jef) to the IHRB bank account in January 2022 was cashflow related and constituted a breach of the Charities Act – and the inflated exit payment to former chief executive Denis Egan in 2021 did not fall within the rules of the early retirement scheme in place at the time.

On June 29 of last year, IHRB chief executive Darragh O'Loughlin appeared in front of a hearing of the Public Accounts Committee (Pac) and digressed from his opening statement to reveal he had uncovered concern a financial issue of "grave concern" in his preparation for the hearing.

The matter was contained within the IHRB's 2022 accounts and the regulator's chief financial officer Donal O'Shea was revealed to be on "voluntary leave" with immediate effect, thus unable to make his scheduled appearance in front of the Pac that day. He subsequently resigned in July of this year.

Auditing and accounting firm Mazars was commissioned with the investigation at a cost of €80,000.

The report was initiated in August 2023 and was finally completed 14 months later on October 23, with the IHRB publishing the findings on Tuesday afternoon. The report reveals O'Shea and the IHRB's finance manager carried out the transfer from Jef to the IHRB bank account after the former CFO gave the instruction due to "urgent cashflow pressures in order to pay monthly salaries in the context where monthly HRI funding had not yet been received, and having to pay significant voluntary and compulsory redundancy payments at that month end".

Mazars noted it received no evidence of this cashflow urgency being reported at the January 2022 month end to the CEO, executive or board of the IHRB and specific approval for the transfer was not sought from or given by Jef trustees or the board of the IHRB. The funding was returned to Jef three months later

The report states the transfer of funds "was not in line with the governing rules, operational procedures and constitution of the Jef, and was not in compliance with the Charities Act, 2009 requirement to use the Jef funds for charitable purposes only", and that the "cashflow difficulties should have been foreseen by the former CFO, broader executive and IHRB board". 

It goes on to question whether the IHRB should continue to administer the charitable funds due to a "lack of adequate segregation between the statutory function of the IHRB and that of the charities and benevolent funds", before recommending various governance safeguards should it continue to do so, along with eight other recommendations in relation to financial governance. 

The other primary objective of the report was to investigate the severance payments made by the IHRB to staff members who departed under an early retirement or voluntary redundancy scheme in 2021, including Egan.

Denis Egan: received payment of €384,870 after he took early retirement in 2021Credit: Patrick McCann

It was revealed in March 2023 that Egan received an exit payment of €384,870, a figure that was 58 per cent above what he was entitled to under the terms of the redundancy scheme, after he took early retirement in the autumn of 2021.

The report confirmed this figure was made up of €242,990 from funding received from HRI, and €141,880 from funding received from the Irish National Hunt Steeplechase Committee and the Turf Club. 

Five current and former IHRB board members were interviewed and they provided a joint statement, asserting their belief that HRI supported the payment proposal and indicated the payment could be funded through the scheme, which was published by HRI.

However, based on interviews with HRI chairman Nicky Hartery, chief executive Suzanne Eade and former CEO Brian Kavanagh, Mazars did not obtain confirmation the payment was supported or formally approved by HRI, or envisaged to be funded by the scheme.

The IHRB board members stated they believed that HRI gave implied approval of the retirement package by making a payment to the IHRB in support of phase one of its "organisational transformation programme". This funding was provided in November 2022 and included an amount of €242,990 requested by and paid to the IHRB, relating to the former CEO's retirement.

However, the funding contained no approval from HRI which sanctioned the use of the money for the purposes of a retirement package for Egan. As a result, Mazars concluded the payment did not fall within the rules of the scheme.

It also noted that the amount paid was incorrectly reported as being part of the voluntary redundancy and early retirement scheme in the 2021 financial statements, given it was not formally approved in accordance with the criteria of the scheme in place.

Of the changes being implemented following the scandal, O'Loughlin said: “The IHRB is clear that the incident that gave rise to the Forvis Mazars review absolutely should not have happened. Since we commissioned this review, we have taken significant actions to improve our financial governance procedures and internal controls and we have publicly reported on this work to the Oireachtas Public Accounts Committee. We will continue to address the issues highlighted in the review and further strengthen the organisation, and are on target to have fully implemented the recommendations by the end of the year.  

"Importantly, we have tightened our financial oversight and transaction approval controls to ensure such an incident will not happen again.”

Read more:

IHRB chief financial officer resigns after a year of voluntary leave following revelation of financial issue of 'grave concern' 

Top Irish officials to face parliamentary hearing over €350,000 transfer from jockeys' fund and RTE Investigates programme 

IHRB's 'bombshell' financial governance issue relates to transfer of €350,000 from charity jockeys' fund 

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