Sunday 21 December 2014

Scratch-card game didn't make money in a decade

Cancer Society and Polio Trust lost €1.1m despite €8.8m in sales

Published 23/03/2014 | 02:30

Rehab boss Angela Kerins Photo: Collins
Rehab boss Angela Kerins. Photo: Collins

A SCRATCH card lottery run jointly by a Rehab Group company and the Irish Cancer Society has raised zero cash for charity in the past decade.

The revelation will come as a huge shock to the tens of thousands of people who played the game in the belief their money would be funding charitable services.

Company records reveal the zombie lottery, run by the Irish Cancer Society and the Polio Fellowship Trust, last made a profit in 2003.

Since then it has recorded accumulated losses totalling over €1.1m, despite selling over €8.8m worth of tickets.

However, the charities decided to keep it alive as they were entitled to draw down €6.5m in government grants from a charity lottery compensation fund in the same period – as long as the lottery remained in operation.

The two charities finally decided last November to shut down the lottery after it recorded a loss for the 10th year in a row.

The revelations look set to further damage the image of the charity sector, which has been rocked by a series of controversies in recent months.

They come as the Department of Justice released an audit it conducted into the performance of 20 charities involved in the running of lotteries. The release of the information followed a request from the Sunday Independent under Freedom of Information rules.

The audit found that most of the charities looked at were barely making a profit because the costs of running the lotteries, in terms of wages, administration and prize funds, was so high. The department conducted the probe in 2012, but its findings were not disclosed at the time.

The audit prompted the Minister for Justice Alan Shatter to announce the phasing out by 2016 of the compensation scheme, which was set up in the Nineties after charity lotteries complained about the dominant position of the National Lottery.

Since the fund's inception, the lotteries have been able to draw down annual grants, with the level of the funding directly linked to the value of the lottery tickets sold. The more tickets sold, the higher the proportion of the overall fund the charity gets. More than €50m has been claimed from the fund in this way by the 20 charities since 2007.

But the audit found: "In many cases, the overall net surplus is small and in one of the bodies audited, it was noted that a considerable deficit results. The costs as a proportion of sales are extremely high for most of the organisations."

It recommended changes to the operation of the fund to force charities "to introduce more efficient fundraising schemes".

But instead, Justice Minister Alan Shatter decided to scrap the fund altogether.

The audit was carried out separately from a probe by the Department of Justice into the operation of Rehab Lotteries scratch card games, which recorded a surplus of just €10,000 on sales of €4m in 2010.

The performance of the Rehab operation proved to be even worse in 2012, with a profit of just €468 from €3.4m in scratch card sales.

The Irish Cancer Society was also the subject of a separate audit by the department, but the findings of that probe have not been disclosed.

However, Companies Office records reveal the lottery it ran on a 50/50 basis with the Polio Fellowship Trust, a wholly owned subsidiary of Rehab, last made a profit in 2003.

That year the lottery recorded a surplus of €68,000 after ticket sales of €1.2m.

Accounts show that between 2004 and 2012, the lottery's losses amounted to €1.1m, despite €8.8m in sales. In the same period just over €3m in prizes were awarded, while it cost close to €6.9m to run the lottery.

In a statement, the Irish Cancer Society said it and its partner would be closing the lottery in the coming months as there was "no prospect of recovery".

It said the two charities had tried to arrest the decline in the performance of the lottery by looking for "innovative sales approaches".

Efforts were also made to "keep operational costs as low as possible".

The statement said the dominant position of the National Lottery and a cap on the prize money charity lotteries can award placed it at a competitive disadvantage.

"The losses arose because it, like all other lotteries, is precluded under lottery legislation from offering the same level of prizes as the National Lottery. Therefore it is not as attractive," the Irish Cancer Society statement said.

"It's possible in times of recession people are more drawn to the potential prizes in the National Lottery whereas in good times people are more likely to buy a charity lottery ticket to support the charity."

Rehab has challenged the minister's decision to wind down the compensation scheme in the High Court. A ruling has yet to be made.

The charity and commercial group says legislation which caps prize funds at €20,000 per week for each charity lottery is unfair and puts them at a competitive disadvantage.

 

Total payments to charities  under the Charitable Lottery Fund 2007-2013

 

Rehab Group €32,370,268

Gael Linn €3,522,746

Asthma Society €3,243,052

Irish Cancer Society €2,066,833

Polio Fellowship €2,066,833

The Hanly Centre €1,213,255

ISPCC €966,015

Irish Lung Foundation Ltd €946,165

Ataxia Ireland €779,902

West of Ireland Alzheimer Foundation €723,749

Drogheda Community Services Trust €626,848

Irish ME Trust €554,834

Longford Cathedral Circle €341,921

St Kieran’s/ATK Community Centre* €331,766

Associated Charities Trust €219,651

Lyreacrompane Community Development €153,911

Slieve-Ardagh Rural Development €115,691

Mulranny Day Centre Housing Co €114,473

Cappoquin Community Development Co €95,350

Irish Wheelchair Association** €18,694

 

TOTAL €50,471,957

 

* Did not claim funding in 2007

 ** Did not claim funding after 2009

Sunday Independent

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