House of Commons - Public Accounts

Select Committee on Public Accounts Minutes of Evidence

APPENDIX 1

HOME ENERGY EFFICIENCY SCHEME (PAC 97-98/221)

Part of a letter as a Supplementary Memorandum to the Clerk of the Committee from the Chief Executive, EAGA

Question 31 A list of Trustees of the Eaga Charitable Trust

See Annex A attached.

Question 86 Cost variations amongst installers

— I offered to supply details of the highest priced claims in the Glasgow area detailed in the report. These are enclosed at Annex B.

— On general variation in prices amongst installers who had undergone market testing in 1997, I stated that this was now low. This is shown at Figure 1 attached.

Question 118
(Printed as a footnote).

Question 119 The proportion of NEA members that are HEES installers and the proportion of members of NEA which are Corporate Members

NEA advise that 51 per cent of their members are HEES installers.

I have also been advised by NEA that membership is available only to organisations and not individuals and that membership falls into two categories:

— Full Membership—available to voluntary and non-profit distributing companies.

— Associate Membership—available to other companies and statutory bodies.

Question 133 Assessment of installers costs

Eaga examine the "health" of installers finances periodically.

The situation is examined for each organisation prior to selection. The situation for installers compared to the industry as a whole was examined in 1995 and showed a positive financial position relative to the construction industry generally.

I have enclosed a copy of a presentation (Annex C)[12] I gave to the industry at their trade association conference in 1995 on this subject. The underlying message was that they should not expect any relaxation of pressure from Eaga to reduce their costs and that no increase in grant would be forthcoming.

A further review is scheduled for this calendar year.

Question 227 The Committee asked about the purpose of Eaga's reserves and their distribution on winding up or dissolution of the Company

In carrying out its business in an efficient and effective manner Eaga has generated surpluses at a rate (on average) of about half a million pounds per year. As a non-profit distributing company no dividends or incentives are payable either to individuals or organisations.

Over 80 per cent of Eaga's business is with a single customer—The Department of the Environment, Transport and The Regions. Therefore the directors pay particular attention to the business risks associated with having one dominant customer. These risks are reflected in the policy for utilisation of reserves.

The Board of Directors of Eaga Ltd consider the sustainability of the business and its employment sustaining objective to be a core value. It follows, therefore that the existing reserves of the organisation and ongoing surpluses will be utilised to deliver this objective.

Those funds which are "designated" are a prudent reserve to meet Eaga's liabilities as an employer and to our creditors in the event of a significant downturn in activity, and to fund a modest "restart" activity should the HEES contract be lost. Use of this reserve would be activated in these circumstances in order to ensure that Eaga does not impose any liability on the tax-payer.

Those reserves which remain undesignated in our accounts have accumulated at the rate of half of one penny for each pound of HEES funds managed by Eaga. These funds are utilised in a business sustaining sense as working capital and, in a business development sense, to deliver Eaga's objective of—providing meaningful and sustainable employment. A number of examples can be provided.

The Committee will also have noted that Eaga has no substantive assets, i.e., we have no land or buildings in our ownership and thus our undesignated reserves are the "full and only negotiable assets of the business."

There are many calls on the organisations reserves to sustain and develop the business but should any remain on dissolution or winding up of the organisation, the means of disbursement is considered in the Memorandum of Association (see Annex D,[13] section 8).

Question 230 Possible Beneficiaries

The decision regarding beneficiaries could only be taken by the Board at the time. However, when asked by the Committee to give examples I gave the following:

— Care and Repair Ltd; and

— Northumberland Distance Debt Unit (linked to the Citizens Advice Bureau).

I also confirmed to the Chairman that both NEA and the Eaga-Charitable Trust could meet the criteria required of beneficiaries:

— Energy Action Scotland;

— Forum for the Future; and

— Earth Balance Ltd;

and no doubt there are many others.

John Clough

Chief Executive

EAGA

24 March 1998

Question 30