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Sunday, 11 April 2004
What is MEA hidding

Statement of concern by a member of the MEA to other members of the MEA and to the ME community regarding the MEA
From Ciaran Farrell

The MEA have issued a statement that is a blanket denial of the charge that the MEA is insolvent. The previous Board of Trustees issued a series of blanket denials and then in March last year they issued an urgent appeal for funds so that the MEA would remain viable in the medium term. The target for this appeal was #150,000, which would secure the viability of the MEA in the short to medium term. Only approx #67, 000 was raised. The MEA promised that if the appeal was unsuccessful it would return the money to the individual donors on the basis that the MEA was not viable. All the individual donors
were asked to sign a release so that the MEA could spend the money that had hitherto been held in trust by the MEA.

This presupposed the MEA to be viable, but the issue of insolvency and the short to medium term viability of the MEA had not in fact been addressed, nor has it been. There have been denials of the seriousness of the financial and organisational problems faced by the MEA by the previous Board and by the current one who are carrying on with the self same polices of refusing to discuss these matters, and to all intents and purposes to act as if there were no problem worthy of discussion.

This was despite the fact that a large number of statements concerning the financial and organisational health and fitness of the MEA in general and the Research Fund in particular had been made by a select group of individuals one of whom became a candidate for the Board of Trustees.

Such views and attitudes fly in the face of the events of recent history and the continuing question mark placed over the viability of the MEA by the emergency appeal and the reason for it in the first place, and it's lack of success. Yet the MEA have not engaged in any other major fund raising venture to reach the target that they set themselves to secure the future of the MEA. Nor has any white knight or benefactor come forward to save the MEA from its fate, and there has been no lucrative government grant to help out either.

In a statement in ME essential magazine Ann Campbell put the financial and organisational problems faced by the MEA in a nutshell by saying that it cost #40 per member to provide the services that the MEA offers to it's membership, whilst the MEA only received #15 from each member by way of membership subscription. Clearly if this state of affairs is broadly correct there has to be a pretty severe problem, if not why had the MEA's auditors asked the MEA to launch the emergency appeal?

Another factor that was completely apparent from this at the time was that is was not simply a question of an extra few quid to bail out the MEA so it could have some kind of future, there needed to be a radical overhaul of the entire MEA, root and branch, and a complete reorganisation of what the MEA does, and how it does it.

At the MEA AGM on December the 6th the then chairperson Ann Campbell stated no less than 7 times that it would be up to the new Board to decide if they should decide to wind up the MEA as they would be provided with extra financial and other information at the Board meeting following immediately after the AGM. The members of the new Board contend that no such information was forthcoming, and that no such decisions were arrived at, because they were not even discussed. The contention is that the meeting was taken up with routine financial and administrative matters.

Ann Campbell did not want, and tried very hard to prevent any form of discussion of the MEA's financial position and did not address the matter of the solvency or the viability of the MEA, she would not be drawn on the matter, as she said that it was for the new Board to decide such matters.

Thus members legitimate questions concerning the solvency and viability of the MEA went unanswered.

This has cast a long shadow over the viability of the MEA, which has grown ever longer from that day to this is due to the following :-

The argument between the MEA's auditors concerning the qualification of the last set of accounts. The MEA considered that the auditors were not to exercise their professional judgement on the matter of the viability of the MEA and took advice from a specialist insolvency practitioner concerning the exact definition of insolvency. This led to the curiously worded disclaimer in the full set of accounts that the MEA did not want members of the MEA to obtain either at all, or in time for the AGM. It is part and parcel of the audit that the question of viability is considered by the auditors, and it is enshrined in company and charity law that this must be addressed in the audit report. The MEA were not acting within the framework of the law when they tried to prevail upon the auditors to withdraw their recommendation on non-viability. I was sent certain material about this issue by the Charity Commission last year in response to my enquiries.

The MEA have completely failed to comprehend the financial fact that the disposal of their large fixed asset, the freehold property would have, and has had a very significant impact on their ability to implement their Strategic Plan which was drawn up in 2000 and to which the previous Board and CEO were over committed to the detriment of the financial and organisational health of the MEA. They pushed on regardless with their plans without due care for financial and organisation planning in the implementation of their master plan their strategic plan. They forgot a golden rule about such matters that is that any given plan can only be implemented as far as resources will adequately permit.

One of the many consequences of this is that the MEA changed from being an asset rich and cash poor organisation into an asset impoverished and cash strapped one. This has a profound implication for the way in which the balance sheet test for solvency / insolvency works. In theory if one has money tied up in a large fixed asset one can trade on the basis that if the worst should happen and the organisation becomes insolvent on a day to day basis due to the lack of sufficient day to day revenue income to meet expenditure, then the company has to be wound up. The company can 'fail safe' that is, creditors can be paid the money they are owed from the sale of the fixed asset. This might also pay some of the winding up costs, or so it could be argued. Thus it would be possible to obtain a bridging loan from the company's bank on this basis, which could be repaid, later from the sale of the freehold property. This means that only a small mergency contingency fund need be held as a safeguard against insolvency and the costs associated with winding up and closing down the MEA.

Thus the mere presence of the freehold property was in effect by default a buffer against having to meet the entire costs of winding up the MEA from the MEA's day to day revenue resources which would be insufficient to meet day to day expenditure let alone the additional costs of winding up the MEA and staff redundancies etc.

Thus the implicit and unacknowledged costs of winding up and closing down the MEA become explicit as monies to the value of these costs have to be
held against the possibility of insolvency in a very, very much larger contingency fund, which in any event did not really exist in actuality, hence the problem. This situation was made a great deal worse because the cost of the office move, new office equipment and a larger more highly paid workforce recruited to professional posts and paid on professional salary scales soon ate up all the profit from the sale of the freehold premises, and more besides. Some of these costs were one offs, so although paying for them left a "hole" in the accounts, this hole could be filled in from day to day income providing that source of revenue did not continue to drop as it had been forecast it would, and it did. The MEA took on even more staff, and this time the expenditure is year on year, increasing the base budget of the MEA above levels that were sustainable. This led to staff being laid off, some of whom continued to work as volunteers.

In order to fill the staffing gap the staff from the Scottish Office who were being paid for by a grant from the Scottish Executive were in effect redeployed south to Buckingham and the Scottish Office was run as an outreach from Buckingham. This led to conflict between the MEA and the Scottish Executive and the grant was terminated, although the MEA tried to salvage matters through negotiations about some alternative form of provision.

The old Board met and decided to make the post of CEO redundant. More staff left or were made redundant due to concerns about the viability of the MEA, and another member of staff left just before Christmas. These redundancies, especially that of the CEO have been very costly, and yet again there is another hole in the accounts that has to be filled in from day to day revenue income which is again continuing to fall both for underlying reasons, and for another reason. The MEA relies very heavily on membership subscriptions and the donations members make when they pay their subscriptions, and the donations from the families and friends of members. Because requests for membership renewals are not being sent out and processed promptly the cash flow of the MEA has fallen. This relates to the problems with the various computer systems, and to the problems the very small staff have in operating the systems concerned. They have in addition many other tasks that had previously been done by their colleagues who are no longer working for the MEA.

This raises two fundamental questions, firstly can those staff that are left actually hold the line and keep the MEA afloat on a basic organisational level so that there may be an opportunity to rebuild the MEA from the ruins of what it was as an organisation?

The second question now arises, which is given the strategic plan lies in ruins and there are now only 2 staff when there had been eight, how can the MEA reorganise itself to meet the changed circumstances in which it finds itself?

A third question arises from these two, which is if this opportunity to rebuild and reorganise is to be taken up, then it must be taken up quickly before the MEA dwindles down to being non viable nothingness in financial, organisational and staffing terms.

If the MEA and it's Board of Trustees does not come up with a cogent and meaningful new strategic plan to serve as a rescue package for the MEA, then the MEA will dwindle down to nothing, and cease to exist.

This is why the new Board have to act quickly, decisively and comprehensively to draw up a rescue plan that members, staff and potential funders can sign up to and have confidence in.

It was clear to the MEA a year previously that they were sailing into financial trouble with the medium term viability of the MEA as is clearly shown in the previous year's accounts and Directors Report. In these documents the MEA Treasurer specifically made mention of this danger and warned against the MEA being too complacent about this matter. One has to
ask why the MEA did not heed it's own warning from it's own Treasurer?

Prominence was given in that report to a fundraising drive that would bridge the growing budget gap, and thus solve the anticipated future problems. There is no evidence that any significant or meaningful fundraising drive actually occurred in reality, why was this?

That 2 part time accountants left the MEA in March last year and this and other staffing issues meant that there were problems with the accounts being kept and with the computerised membership and accounting packages being updated. There were very severe problems reported in these areas in the Full Directors Report that the MEA tried not to make available to members either at all, or for the AGM. These issues themselves have histories and go back several years.

That a year previously another member of staff had walked out, and this person was gravely concerned about the general and financial management of the MEA was being conducted. This individual had introduced the various new computerised systems into the MEA following the mess left by the MEA when it divested itself of its local groups. The problem was that there was a single general purpose bank account which could be used by the local groups and the central MEA, so nobody knew what was what, as no proper or adequate records were kept of financial transactions.

The main issue was that if most of the money were ascribed to the central MEA which laid claim to it, then this would render the local braches non viable and bankrupt them. If on the other hand most of the money was ascribed to the local branches as they wanted, the central MEA would not be viable and would probably be rendered insolvent. In the end the local branches were able get the better end of the bargain struck between them and the central MEA.

The real casualty of the name change and the adoption of a completely new Mem and Arts back in 2001 was the central MEA. This was because it had decided that it did not want to have any branches, and would not be a resource for the local branch network it had been supporting, but it had not decided what it actually wanted to be, or do. The MEA drew up a new Strategic Plan that was not shared with the membership, and the membership were not consulted on it. This was because the relationships between the branches and the central MEA had become a conflict zone. The MEA decided that it was not going to be the servant of the membership again and began constructing a "Berlin Wall" between them and the local groups. The MEA decided that it wanted to get away from the culture of being a member run and led organisation and that it would become a professional organisation who would employ professional who would concentrate on a narrower range of services that the MEA would provide which would principally be turning the MEA into a research and educational charity. The things that the membership considered to be important like advocacy, benefits advice and other practicable help to ME sufferers were to be divested from the MEA portfolio just as the local groups had been. The MEA staff were to be made up from professionals who unlike volunteers would not be able to attend various internal meetings and engage in ME politics, such activities would now be off limits for staff.

A new Chief Executive was brought in, and she helped draw up a new Strategic Plan to enable this vision of things to be turned into reality. The Board decided that it would delegate a very considerable amount of power to the CEO who would have absolute control over all matters involving and relating to the implementation of the Strategic Plan. This was a mistake as the MEA Board had decided to take the "change or die" view of the implementation of their Strategic Plan as all of the MEA's activities and resources were bent into achieving the objects continued in the plan. This focussed more and more power in the hands of the CEO, and in the end Board members were forced to take a back seat.

For a period of time apparently the books of the MEA were not actually being kept, until a firm of accountants were brought in to perform this function. The MEA's auditors qualified the MEA's accounts on several occasions due to the local groups problem. Even after the split the MEA could not rely on being able to call upon the large balances that were being held in their bank account, as these were the subject of protracted negotiations with the local branches. Thus it was hard to obtain external funds from funders such as the lottery, or various government agencies etc. Another problem was that the MEA had decided what it was not, but not what it wanted to be, only that it wanted to be a professional outfit comprised of professionals.

There was not the in house expertise to conduct the required financial and organisational planning in order to rearrange and reorganise the current staff into an establishment that was fit for the rather ill defined new purpose in life. No such expertise was sought externally for this purpose. This resulted in the lack of a coherent organisational structure with properly defined posts of responsibility defined by a job specification and a person specification. It was not so much a question of square pegs in round holes it was a question of amorphous pegs in amorphous holes.

Thus the MEA lost it's way and forgot what it was here for, because it was determined to walk away from being a support organisation run by volunteers for it's members, and defined itself by what it was not, and not what it wanted to be.

This led to the problem that the MEA did not realise that it was not delivering the services it had chosen to provide either efficiently or effectively, and certainly not cost effectively. The very costly exercise of replacing volunteers with highly paid professional was a financial and organisational disaster. The MEA had made the mistake of thinking that just because volunteers are not paid and may not have the qualifications that might be expected of a professional in the role that their volunteer staff were of poor quality and low calibre. The skills and knowledge the volunteers had gained over many years proved to be invaluable in providing the service that members actually wanted from the MEA.

The other thing that was not appreciated by the MEA was that if one wants a highly trained and highly salaried professional staff, then they must be paid for, but one can only afford the staff one pay for. Had the MEA actually done the basic work around just how many people they really needed to run the core activities of the MEA plus some project work and development work, instead of simply building up as large a body of professional staff as possible, it would not have gone so badly wrong.

Financially speaking the MEA were way over establishment because the base budget of the MEA could not support the salaries of its workforce. Now most of those staff are gone, and some of them have been replaced by volunteers, we have the same problem but in the worse situation of those who are left having to become ever growing omnipotent amorphous pegs which must fit into many amorphous holes simultaneously in order to run the MEA in the short term.

Given the problems with the computer systems and the lack of financia expertise it is very doubtful that the computer with the accounts package has been regularly updated with all the relevant financial information, bills, involves, membership etc. Even if it were what is on that computer is only about half the story as the accounts package cannot produce a full set of management accounts, let alone the SORP accounts required by the Charity Commission.

That the MEA completely failed to understand the split of responsibility between either their own in house bookkeepers, and the firm of auditors engaged in the auditing of the MEA's accounts. That is, the same company cannot legally perform both tasks because of the contradictory roles and responsibilities. This continues to be the case, as far as I know or understand matters within the MEA.

There is the question of if the MEA actually has appointed any auditors and if so they will need to audit a set of accounts that the MEA will need to produce for this purpose. The audit process can take 2 1/2 to 3 months and can be quite costly. Has the MEA actually made proper preparation for these factors in terms of its proposed AGM date for this year?

That as many people will remember 3 Trustees including the Company Secretary resigned in protest at the general and financial mismanagement of the MEA which sparked an internet campaign for a new era of openness and transparency at the MEA. One of them was the Company Secretary. This position of responsibility was taken over by the then CEO against protocol, custom and practice and legal requirements that involve consulting the Charity Commission about the matter. The Directors report that was sent into the Charity Commission by the MEA, and forwarded to Companies house has to be signed by a director of the company who is a trustee. The report was signed by the then CEO who was not a Trustee or a director of the MEA, and is dated the 19th of September 2003. One has to ask how valid the contents are given that it was not signed by a person who possessed the relevant authority to do so. This matter is one of the reasons why the Company Secretaryship should not pass directly from the hands of a Trustee on the Board to the hands of an employee of the Board.

That the last set of accounts that are existence are the ones lodged with the Charity Commission and Companies House. These were prepared by the MEA's auditors for a period to December 2002 from December 2001, since they needed to be lodged with these bodies within a specified timescale the financial accounting information contained within the accounts was extrapolated to cover a period several months beyond the period of accounts actually examined by the auditors. This is in contravention of custom and legal practices.

A financial analysis of the MEA's solvency has been conducted by a professionally qualified member of the MEA community based on these figures, and that analysis shows that the MEA is not solvent.

It is extremely doubtful any other set of accounts have been produced since then, so then how can the MEA actually know if it be solvent or not?

What value should we place on the denials of the current Board that the MEA is not insolvent?

Given that it is the legal duty and responsibility of the Trustees of the Board and the Board as a whole to insure that they are not insolvent, it is unlikely given the current situation that they actually know, and can prove that their denials are indeed worthy of serious consideration?

That there is no evidence based on the information held by the Charities Commission that the MEA went through the correct and proper procedures within the MEA Mem & Arts to obtain the necessary consents and permissions required to dispose of the freehold property the MEA owned, and how the funds locked up in the property were then released for revenue spending. There may also be an issue surrounding the switching of restricted income streams connected with this. There is no evidence that the MEA followed the various procedures for this as set out in the Charity Commission booklet,"Disposing of Charity Land" CC 28, as a number of matters would have needed to be reported to the Charity Commission for their approval, and in any event should have quite rightly, and legally been reported in the Directors Report for that year. No such evidence exists as there is nothing on file with the Charity Commission to this effect, and there is no such entry in the Directors Report and the proper referenced entries are not made in the accounts.

That the MEA does not, and as far as I can tell has not properly or systematically made use of properly drawn up quarterly or monthly management accounts to provide financial monitoring information and routine financial controls as would be necessary and prudent in any form of business including a charity. This means that prior to the period when the move to new premises was being mooted and implemented that proper financial controls, management accounts and financial planning never really took place as the MEA were trying to pick up the financial and organisational pieces after the local groups debacle in which the MEA divested itself of it's local groups.
Producing these accounts and discussing them at Board meetings is recommended by the Charity Commission in their booklet, "Internal Financial Controls for Charities" CC 8.

This financial information not only can be used to monitor expenditure, it can be used as a tool to identify areas of the organisation's work that are not performing according to expectation because financial activity mirrors organisational activity. More important still, these accounts can provide the basis for sound financial planning for both organisational growth in terms of projects to be undertaken, and grants applied for, it can become a backstop to plan cuts if need be. One has to ask on what basis would grants from government or other funding bodies be sought when the ability to put together the sound financially costed proposals that funders require is absent?

Another question arising from this is, even if or where such grants wereapplied for and obtained how can the MEA provide a proper management and financial account for the money granted to the MEA for a given project or piece of work which these days is an absolute requirement of such grant / contract funding?

Yet another question follows on the heels of the last one, given the above, how can the MEA research prospective services for it's membership, consult on them with the membership and where approval is given obtain the necessary funding from the various funding bodies, and then implement the required decisions and turn them into services for MEA members?

The absence of this sort of financial and organisational skills and knowledge base, and the lack of the organisation culture that goes with it raises a number of deeply disturbing issues :-
A] The operation of the ME Connect support system that is financially supported by a grant, and how this is funded and how the grant is accounted for, and what the lines of accountability are for the service, and how the service meets or fails to meet it's operational policy, assuming there is one?

B] The lack of clarity and muddled thinking surrounding the MEA Research Fund's operation in financial, organisational planning an reporting terms. Who decided what research to fund, and on the basis of what kind of policy, and who draws up the brief for a research project? Who decided who is awarded funds and on what basis, and when the research is complete what kind of report do the MEA get in return for their money? Who decided if the research has been a success against the brief originally given? It is clear from reading the new ME Essential magazine and before it the Medical and Scientific Bulletin that there is no direct reporting of the results of MEA sponsored research specifically as such in contravention of the MEA's Mem & Arts.

There has been a culture of a number of prominent ME scientists or clinicians who have received funding from the research fund whilst they have some sort of involvement with the decision-making and advisory processes of the operation of the MEA research fund. There was also an involvement of the Melvin Ramsey Society, or a number of it's members or past prominent members in these matters which should be properly crystallised in organisational terms and regulated through proper procedures put in place by the MEA Board together with proper separation of the client and contactor functions to enable financial and organisational probity and clear and unambiguous reporting lines so as to avoid or minimise conflicts of interest, as set out in the Charity Commission booklet, "Charities and Contracts" CC 37 and "Charities and Trading" CC 35.

Full, proper and meaningful accounts of the Research Fund have still not been produced which tie the projects funded to the actual spending that occurred have yet to be produced.

C] There is the lack of clarity concerning the trading subsidiary of the MEA. It is quite right and proper that a charity company can engage in trading in order to generate funds for it's main charitable activities.
However, the way in which the stock and stock taking and stock levels are managed are causes for concern, together with the way in which staff time is ascribed to the activity of trading. There does not appear to be the sound practice in place as required by the Charity Commission as set out in their booklet "Charities and trading" CC 35. There is also an issue concerning what assets are the preserve of the Trading Subsidiary and what are the preserve of the MEA that owns the subsidiary.

The above are some of the issues that I can identify that the new Board should have been getting their teeth into. These are just a few of the reasons why I feel as I do about the MEA and the events of the last year or so, and the period from the AGM to the present in particular.

It is a lot to take in, and a lot to think about. I ask that the members of the Board of trustees consider this statement carefully at their next Board meeting and decide how they are going to address the issues I have outlined, before they decide to paste up any more dismissive cliches on their website.
I would also like them to consider the old saying that the first step in solving a problem is to acknowledge that there is a problem there to be solved.

Once this step has been taken, then as John Lennon said, "there are no problems only solutions".

Ciaran Farrell
ME International

Posted by peter200015 at 2:32 PM EADT
Updated: Sunday, 11 April 2004 2:33 PM EADT
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