This meeting has no confidence in the current Honorary Treasurer in discharging his senior roles and responsibilities as a Trustee.
Palpable failure as Treasurer charged with the primary responsibility to ensure that members have available to them fair and transparent accounts that allow them a proper understanding of the true financial position of the Institution.
As Chairman of the Audit and Risk Committee he has responsibility to assess investments and point out risk. Events demonstrate that in this he has also failed.
At the last AGM he made claims regarding the rate of return on the trading company investments which have not been substantiated.
The Institution’s document “Trustee Role Profile” spells out the statutory duties of a trustee and is the standard against which the behaviour and performance of our current Honorary Treasurer should be compared. The statutory duties for a trustee include:
“To ensure that the Institution uses its resources exclusively in pursuance of its objects: the charity must not spend money on activities which are not included in its objects”
“To safeguard the good name and values of the Institution”
“To ensure the financial stability of the Institution”
Why do we have no confidence in the current Honorary Treasurer?
The current Honorary Treasurer has been a member of the Trustee Board for several years rising to the senior position of Honorary Treasurer after holding positions of influence as a Vice President and Chairman of the Institution’s Boards. Currently, he also holds the position of Chairman of the Audit and Risk Committee. Our Honorary Treasurer has been intimately involved in supporting the direction of travel of the Institution over recent years, for the use of the Institution’s resources in following that path and for the damaging consequences that have ensued, both financial and reputational.
Use of the Institution’s resources
The sale of the Institution’s publishing business in 2010 converted an asset of the Institution into cash, received in the form of an up-front payment of approx. £11m followed by staged receipts over the following 5 years amounting to a further £10m, around £21m in total. The cash from this asset sale was a substantial Institution resource which the Trustees were required to ensure was used “exclusively in pursuance of its objects: the charity must not spend money on activities which are not included in its objects”
This is specifically referred to in the Royal Charter:
The income and property of the Institution shall be applied solely towards the promotion of the objects of the Institution and the exercise of its powers as defined in Article 7.
The objects and purposes for which the Institution is hereby constituted are to promote the development of Mechanical Engineering and to facilitate the exchange of information and ideas thereon and for that purpose:
•(a) To encourage invention and research in matters connected with Mechanical Engineering and with this object to make grants of money or books or otherwise to assist such invention and research.
•(b) To hold meetings of the Institution for reading and discussing communications bearing upon Mechanical Engineering or the application thereof or upon subjects relating thereto.
•(c) To print publish and distribute the proceedings or reports of the Institution or any papers communications works or treatises on Mechanical Engineering or its application or subjects connected therewith.
•(d) To co-operate with Universities, other Educational Institutions and public Educational Authorities for the furtherance of Education in Engineering Science or Practice.
•(e) To provide indemnity insurance to cover the liability of the members of the Trustee Board ….
•(f) To do all other things incidental or conducive to the attainment of the above objects or any of them
As a senior Trustee with knowledge and experience of the rules of governance of the Institution, as determined by our Charter and By-laws, the Honorary Treasurer, as Chairman of the Audit and Risk Committee, has a duty to ensure that any investments made by the Institution are assessed against the requirements of the Charter and are monitored for risk. The serious failure within the portfolio of PEP companies demonstrates that the Audit and Risk Committee failed to see and assess the risks associated with that portfolio, for which the Honorary Treasurer must carry responsibility.
Safeguard the good name and values of the Institution
The financial losses associated with the acquisition and subsequent closure (liquidation) of the recently acquired training company, Amber Train, are covered elsewhere in this document but the damage to the reputation of our Institution is even more concerning. The Times Educational Supplement of Dec 2017 published a damning article in which they highlight the plight of a number of apprentices left stranded with incomplete certified training by the liquidation of Amber Train. Subsequent to the liquidation of Amber Train in July 2017, no provision has been made by the Institution to arrange for completion of their courses and both the Institution and the Chief Executive are strongly condemned in this article for this behavior.
The role and responsibility of the Honorary Treasurer, as one of the senior Trustees and Chairman of the Audit and Risk Committee, is to guard against the possibility of such an occurrence with its attendant damage to our reputation and standing as a professional body. In this he has clearly failed.
Financial stability of the Institution
The financial journey and current financial state of the Institution is well covered in the earlier sections of this document. Needless to say, the substantial annual operational losses recently incurred make for very unhappy reading. With the financial fallout from Amber Train still not finalized, by any measure, the current financial position of the Institution cannot be described as “stable”, as has been claimed by those responsible.
The annual financial reports make it difficult for members to gain a clear
understanding of the true financial situation of the Institution, including its trading subsidiaries. In particular, to allow the funds from the sale of the Institution’s publishing business to be treated as revenue of the trading arm of the Institution – PEP Ltd – (see Annual Accounts) is contrary to all good accounting practice and was clearly designed to obscure the true financial performance of the trading businesses.
The audited accounts for the 2016 financial year were not available for presentation at the Institution’s AGM in May 2017 and were finally presented to a further General Meeting in November 2017, but only after the auditors had issued a qualification - a most serious matter for any organisation and particularly a charity. This is clearly a matter that falls directly under the influence of the Honorary Treasurer. At this meeting the Honorary Treasurer presented a slide purporting to show the rate of return on the trading investments that was palpably incorrect. Repeated requests for a copy of this slide have been ignored.
Moreover, for the Honorary Treasurer to choose to sign off the 2016 accounts himself when the President declined from doing so is highly irregular and certainly not acceptable practice.
None of the above is commensurate with the responsibility and position of the Honorary Treasurer as a senior Trustee and custodian of the Institution’s resources.