| OVERSIGHT AND GOVERNANCE OF THE SCHEME
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| (a) Oversight by the Department of Social Security
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| C&AG's Report, paras 5.8 and 5.9
| 41. The Comptroller and Auditor General reported that a memorandum of understanding setting out the conditions of the Department's grant-in-aid funding for Motability's administration was agreed between the Department and Motability in 1995. This provided a framework for the Department to monitor Motability's expenditure of grant-in-aid and their performance. The Department intended to agree with Motability high level performance indicators related to the Department's objectives to assist this review process.
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| Qs 1-2
| 42. Our predecessors asked the Department how they had monitored Motability before 1995. The Department said that they had always had a clear overall objective in supporting the Scheme. Before the formal agreement and indicators were in place, they had systems to make sure that Motability knew about the conditions of the grant-in-aid. They would have reviewed the Charity's operations through regular audits and staff inspections, and they had always had somebody who sat on Motability's executive committee meetings. The Department added that as the Scheme grew enormously during the early 1990s, it became more difficult for the Department to manage Motability in this way. This had led them to put in place a more formal management arrangement with the Charity and developing some formal indicators of performance.
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C&AG's Report, para 5.4
Qs 82-83
Qs 180-191
Qs 44, 213-215
| 43. The rapid and sustained growth of the Scheme had stretched Motability's administrative capacity. Our predecessors asked Motability's Director (Mr Muddiman) what he found when he took over as Director in June 1995. He said that he had found an organisation that had faced enormous growth and was coming apart at the seams in certain areas. Motability had not had time to put in place staff training or introduce an IT system, and their premises were no longer large enough for the business. He added that with additional money made available by the Department, Motability had been able to enhance their management team by employing an operations director, who knew about the motor industry and car dealerships, a finance director, who had experience of both the public and private sectors, a grants and technical director, who understood the annuality of budgets, and a fund- raising director. Motability had also taken action to improve their computer systems and had brought extra staff into the information technology area.
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| Q 27
| 44. Our predecessors asked the Department whether they were happy that Motability now had the appropriate financial and management controls. The Department confirmed that they were very happy with the arrangements that Motability had now put in place. They added the Motability had for a number of years been coping with huge growth in the Scheme, which doubled between 1990 and 1993 and was doubling again. This growth had put some of Motability's systems under strain. During the last few years Motability had remodelled themselves so as to make the Charity entirely suitable to cope with the size of the business they now had.
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| Qs 178-179
| 45. Our predecessors asked the Department how often they intended to review the Charity. The Department said that they had monitoring in place to see what was happening on a day-to- day basis. They were currently reviewing the Mobility Equipment Fund which accounted for £3 million of the total grant-in-aid of £7.6 million in 1995-96, but as far as the administration grant-in-aid was concerned, they intended to wait a few more years to see how the various initiatives, which the Governors had in train, actually changed the organisation.
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| (b) Governance of Motability
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| C&AG's Report, para 5.13
| 46. Motability have a board of ten voluntary Governors drawn from the Membership of the Charity. The Board meet quarterly to oversee the operation of the Scheme, and had a sub- committee to oversee the award of grants from funds provided by the Department and charitable sources.
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| Qs 243-249
| 47. Our predecessors asked how Governors were chosen. Motability said that the Governors were drawn from the other members of the Charity. New Governors had to be elected at an annual general meeting, and existing Governors had to stand for re-election every three years.
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| Qs 243, 254-256 and 283
| 48. Our predecessors asked about the composition of the Governors, in particular the absence of women and young disabled people. Motability said that it was a case of finding people with the necessary skills, and that the Chairman had been looking to strengthen the board of Governors with the business skills the Charity required. Motability assured our predecessors that gender did not come into the selection process but admitted that they were not aware of any active encouragement to get women on the board.
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| C&AG's Report, paras 5.28 and 5.29
| 49. The Comptroller and Auditor General noted in his report that allegations had been made that the Vice Chairman of Motability had a conflict of interest in relation to consultancy work undertaken for Motability by the firm of accountants, in which he was a senior partner. The firm's income from their consultancy work for Motability and for staff seconded to the Charity totalled £111,138 in the four years 1991-92 to 1994-95.
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| Qs 96-103, 159-168, Evidence, Appendix 1, page 24, para 100
| 50. Our predecessors asked Motability whether the Board had formally reviewed this possible conflict of interest. Motability stated that the potential conflict of interest was considered by a sub-committee of the Governors, excluding the Governors in question, and that the sub-committee could find no evidence of any conflict of interest which worked to the detriment of Motability's activities. In addition Motability pointed out that the issue had been thoroughly investigated by the Charity Commissioners who had found no evidence of any conflict adversely affecting the Charity.
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| Qs 162-163
| 51. Motability added that they were still making use of the firm, but before doing so they went to the Charity Commission. Also, the decision to employ the firm was made by the Honorary Treasurer and other Governors of Motability when the Vice Chairman was not present. Motability assured our predecessors that the trustees took this issue very seriously, and that decisions were properly debated and taken in the proper and correct manner under the trusteeship laws and the charity laws.
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| Qs 163 and 169
| 52. Our predecessors asked Motability whether there were any other Governors on the Board who might have a conflict of interest in the work that Motability undertook and, in particular, whether the Board included representatives of any companies which were suppliers, directly or indirectly, of components for wheelchairs or cars. Motability stated that none of their Governors had a directorship in any of the other companies which the Charity employed.
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| (c) Motability's oversight of Motability Finance Limited
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| C&AG's Report, para 44
| 53. In 1980 Motability and Motability Finance Limited signed an agreement setting out their respective responsibilities. Both parties subsequently recognised that the agreement needed revision in the light of the Scheme's size and projected growth, and in June 1996 signed a new agreement.
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Qs 51, 78-79 and Evidence, Appendix 3, Annex A, page 32, paras 28-33
Evidence, Appendix 3, Annex A, page 29, para 2
| 54. Our predecessors asked Motability about the closeness of their relationship with Motability Finance Limited, and how closely they scrutinised Motability Finance Limited's operations, including their administration costs. Motability said that they saw Motability Finance Limited's full accounts, and had undertaken a number of periodic reviews of the running of the Motability scheme since its inception. In a note Motability recorded ten reviews which the Governors of Motability had undertaken between January 1992 and December 1996.
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| Qs 87-90
| 55. Motability added that Motability Finance Limited had not been subject to a value for money audit, but in September 1995 a firm of accountants had undertaken a benchmarking exercise, of Motability Finance Limited's administration costs, for the Charity. This exercise concluded that at that time the costs were in line with the market, but the review had not been sufficiently detailed. Motability were undertaking another benchmarking exercise to make sure that Motability Finance Limited's accommodation costs, overheads, wage rates and other costs were in keeping with the market.
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| (d) The Bircham Report
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| Qs 72-76, 59, 216-229 and Evidence, Appendix 3, Annex A, page 31, paras 14-27
| 56. During their enquiry our predecessors became aware of a report by Bircham and Co, a firm of solicitors, about Motability's oversight of Motability Finance Limited and governance. They asked Motability about the status of this report and the issues raised in it. Motability stated that the report was inaccurate and incomplete and had been withdrawn by the authors.
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| Evidence, Appendix 3, Annex A, page 31, paras 23 and 24
| 57. Motability added that the report had sought to address four areas: Motability's relationship with Motability Finance Limited; financial aspects of the Scheme; the governance of Motability, and the potential for conflicts of interest on the part of some Governors. They pointed out that although the report had been withdrawn, a sub-committee of Motability's Governors, excluding those with potential conflicts of interest, had considered each of the issues; Motability had made the Report available to the Charity Commission; the Chairman of Motability had sent a copy of the report to the then Permanent Secretary of the Department of Social Security in early 1995; and each of the issues and the actions taken had been dealt with in the National Audit Office's report.
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| Conclusions |
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| 58. We note the views of Motability and the Department that, in some respects, the scheme has suffered from its own success, and that enormous growth since 1990 put some of its systems under strain. We are pleased to note the Department's view that Motability has now remodelled itself and that it is now entirely able to cope with current levels of business. We also note the steps taken by the Department to improve their oversight of Motability including the development of high level performance indicators.
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| 59. We note that Motability are in the process of strengthening their Board of Governors to ensure they have the necessary business skills to oversee the Motability Scheme. We consider that in doing so Motability should seek to ensure that the membership of the Board reflects as broad a cross-section of society and of Motability users as possible.
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| 60. We are concerned that it has taken so long to put in place formal letters of understanding setting out the respective responsibilities of Motability and Motability Finance Limited. We expect Motability to hold Motability Finance Limited accountable under the terms of their agreement, to subject all aspects of the running of the Scheme to regular reviews, and to publish the results.
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| 61. We note Motability's evidence that the "Bircham report" about Motability's oversight of Motability Finance Limited had been inaccurate and had been withdrawn by its authors. We note that Motability have taken action to address the four main issues it covered.
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