Credit union recorded asset at 63 times value

Mallow Credit Union has refused to clarify how a property asset was recorded in its accounts at being worth 63 times its actual value to the institution.

The credit union’s 2012 financial statement shows a Youthreach building it rents at Ballyellis, Mallow as being worth €400,000.

This figure was said to be on the basis of a valuation by ERA O’Connell auctioneers in October 2012. However, it had already agreed to sell the site for €6,348 to Co Cork VEC.

The revised sale deal was struck in 2011 after CCVEC decided not to draw down a loan from the credit union against the property. CCVEC wanted to exercise its right to buy the property for a nominal sum, in line with a lease signed in 1996.

The earlier leases and financial support from the credit union had not been sanctioned by the Department of Education.

When the loan was not drawn down, CCVEC agreed to the credit union’s request to rearrange a third lease. This will run until 2018. But there will be no rent due until the final installment of €6,348.

The Department of Education asked CCVEC for answers as to why it agreed to continue to lease a property until 2018 when it should have been entitled to buy the property for a nominal sum in 2011.

The acting chief executive of CCVEC, Joan Russell, said the arrangement was made at the credit union’s request.

“It is my understanding that the credit union requested that the ‘buy option’ be deferred to 2018 to facilitate the ‘write-down’ of the asset from their accounts,” said Ms Russell.

The department asked the VEC why CCVEC had agreed to this arrangement.

Ms Russell said it was done after legal advice that was still the subject of departmental approval.

The explanation offered to the department by Ms Russell was put to the credit union but its board said it will not comment.

The €400,000 valuation had been based on a loan CCVEC applied for in 2007 to help it to fund a shortfall in the budget for a grant- funded childcare centre.

Documents sent to the childcare grant administrator, Pobal, show that CCVEC wanted to draw down €200,000 from the credit union and pay this back by way of an extended €21,000-per-year lease until 2031.

Neither the lease nor the loan were approved by the Department of Education.

CCVEC subsequently cancelled its request for funding and looked to revert to a situation where it could buy the Ballyellis site from the department for €6,348.

In her letter to the department, Ms Russell also suggested the organisation had not applied for a loan from the credit union.

The manager of Mallow Credit Union, Tomás O’Neill, is also on the board of the Youthreach Centre.

In April 2008, he wrote a letter to Youthreach, confirming that the board of the credit union agreed to a request to advance £200,000 to help fund the creche.

As part of the deal, CCVEC agreed to surrender its right to purchase the property for a nominal sum in 2011 and instead signed a new lease that was to run until 2031.

In response to a request for clarification from the Irish Examiner, Mallow Credit Union said it had answered questions earlier this year and would not make a further statement.

* www.mallowcu.ie