THE DISTRIBUTION OF LOTTERY FUNDS BY THE
ENGLISH SPORTS COUNCIL
INTRODUCTION
AND
SUMMARY
OF
CONCLUSIONS
AND
RECOMMENDATIONS
1. The National Lottery was launched in the United
Kingdom in November 1994. The English Sports Council (the Sports
Council) are one of eleven bodies responsible for distributing
the proceeds to the 'good causes'. From the launch to 31 October
1997, the National Lottery generated £756 million for distribution
by the Sports Council. The National Lottery introduced a significant
change in the scale of the Sports Council's operations - in a
very short period, their business expanded from handling an annual
grant-in-aid of nearly £50 million to include the distribution
of lottery funds of some £250 million a year.
2. On the basis of a report by the Comptroller and
Auditor General,[1] the
Committee of Public Accounts examined the Sports Council's arrangements
for handling applications and assessing which projects to support,
for making grant payments, for monitoring the progress of projects,
and for ensuring a fair distribution of grants.
3. In distributing lottery funds to capital projects,
the Sports Council need to ensure that all applications for grants
are rigorously assessed and that the projects supported achieve
their objectives and deliver the benefits set out in the application.
The main general points to emerge from our examination are:
- Under their lottery capital programme, the Sports
Council make grants for the capital aspects of projects and do
not contribute to on-going running costs. The Sports Council should
make it clear to applicants in the application form and accompanying
guidance that they will not bail out projects that run into financial
difficulties. Any attempt by the Sports Council to prop up failing
projects will simply reduce the funds available for others.
- The Sports Council need also to carry out rigorous
appraisals of the viability of all projects put forward for grant
assistance, and they need to ensure that all claims for payment
of grant are thoroughly checked. We are not convinced that the
Sports Council have the financial expertise to do this, given
that they have only four qualified accountants in the whole organisation.
- The Sports Council should ensure that projects
are used for the purposes intended and that they deliver the benefits
set out at the application stage. They have not always done this.
There have been cases, for example, where the promised level of
disabled access has not been provided and where the general public
have been admitted only at inconvenient times. When monitoring
the outcome of projects, the Sports Council should take a strong
line in such cases and if the problems cannot be easily resolved,
they should take action to recover their grant.
4. In more detail, our conclusions and recommendations
are as follows:
on handling applications and assessing which projects
to support
(i) The Sports Council normally require
applicants to contribute a minimum of 35 per cent of the total
project cost in partnership funding. We recognise the merit of
requiring partnership funding, as an indication of community support
for the project, but are concerned that projects may collapse
because of an inability to raise the required amount. We welcome
the Department's change in their policy directions to the Sports
Council which now require the Sports Council to have regard to
the ability of applicants to obtain partnership funding. We look
to the Sports Council to use this extra flexibility to support
worthwhile schemes that are struggling to raise the required amount
of partnership funding (paragraph 18).
(ii) The National Lottery introduced a substantial
new stream of money for the Sports Council and with it the risk
of fraud and corruption. It is essential that adequate features
are built into the Sports Council's distribution arrangements
to ensure, as far as possible, that fraud and conflicts of interest
do not arise. Although the Sports Council built anti-fraud measures
into each stage of the distribution process, we are concerned
that the necessary guidance and training to complement this was
introduced in piecemeal fashion over some two years. We recommend
that guidance and training on fraud prevention and detection be
updated regularly to take account of lessons learned from assessing
applications and making grant payments (paragraph 19).
(iii) Making applicants aware of the Sports
Council's concerns over fraud would help deter fraudulent activity.
We stress the importance of ensuring that the guidelines for applicants
and terms and conditions attached to grant offers state categorically
that the Sports Council will follow up any cases of suspected
fraud (paragraph 20).
(iv) We are concerned that the National
Audit Office found that in five of the forty one cases they examined,
the Sports Council had not demonstrated sufficient financial expertise.
We are deeply concerned that the Sports Council do not possess
the expertise required to carry out a rigorous financial appraisal
of applications, particularly in connection with the future financial
viability of projects. This is fundamental to ensuring that the
projects supported by the Sports Council survive to achieve their
objectives. We agree with the Department that it is absolutely
critical that the Sports Council take full account of running
costs and income forecasts before they even consider approving
an application for a capital project (paragraph 21).
(v) We note that the Sports Council have
acted to overcome this weakness by providing training for all
staff in key financial skills, establishing a compliance team
and using consultants to provide financial advice on larger projects.
However, we are surprised that the Sports Council employ only
four fully qualified accountants within the whole organisation.
We look to the Sports Council, and the other bodies responsible
for distributing lottery funds, to ensure they have sufficient
financial expertise to carry out a rigorous financial appraisal
of applications (paragraph 22).
(vi) We note that several of the projects
supported by the Sports Council look set to incur deficits as
far as running costs are concerned. In such cases, there is a
risk that the applicant may seek revenue funding to finance the
running or maintenance of the project. We are concerned that lottery
funds might in the future be used to bail out projects that are
experiencing serious financial difficulties. We welcome the Department's
assurance that there is nothing in the policy or financial directions
that would allow lottery funds to be used as an open-ended subsidy.
We recommend that the Sports Council make this message absolutely
clear to organisations applying for a lottery grant (paragraph
23).
(vii) We note that the Sports Council removed
reference to the right of appeal from their standard rejection
letter and have been slow in dealing with appeals, allowing one
case to drag on for almost a year. We recommend that in future
the Sports Council closely monitor their performance against their
target of eight weeks for dealing with appeals (paragraph 24).
on making grant payments
(viii) Robust controls over the payment
of lottery monies are essential in order to safeguard lottery
funds. We are thus deeply concerned that the Sports Council have
undertaken little detailed checking of invoices before making
payments. In five of twenty cases examined by the National Audit
Office, the Sports Council approved claims for payment in respect
of invoices which merited further investigation. We note the Sports
Council's view that invoices are checked and that this is just
not evidenced, but consider that the cases reported by the National
Audit Office indicate that the weaknesses in control are more
fundamental than this (paragraph 30).
(ix) We recognise that the Sports Council
have since acted to strengthen their controls over the checking
of invoices. We recommend that all claims for payment of grant
be thoroughly checked against supporting documents and against
the project specifications and approved cost and that in future
this is properly evidenced on the documentation (paragraph 30).
(x) We are concerned about the Sports Council's
approach towards projects that underspend and therefore need less
grant than originally envisaged. The Sports Council have not been
consistent in the way they handled such cases and, in one case
examined by the National Audit Office, the Sports Council had
not identified an underspend of seven per cent of the approved
project cost. We note that the Sports Council only pursue significant
underspends and, even then, first consider whether the underspent
grant can be used by the applicant to enhance the project. We
note the Sports Council's view that there is a presumption of
recovery, but that every case should be looked at individually.
We look to the Sports Council to take a more robust and consistent
line on the recovery of underspends (paragraph 31).
on monitoring the progress of projects
(xi) It is important that the Sports Council
monitor closely the progress of projects during construction to
address the risks to value for money that exist at this stage,
such as changes to the project specification or improper use of
the award. We note that the Sports Council have now decided not
to request quarterly progress reports for the majority of projects,
but to rely on information provided by applicants when claiming
payment of lottery funds. Formal quarterly reports are now only
required for larger projects. We consider that this approach fails
to provide the Sports Council with sufficient information as to
the progress of projects. We look to the Sports Council, and the
other bodies responsible for distributing lottery funds, to review
their arrangements for monitoring projects prior to completion
to ensure that these are adequate in meeting their obligations
as set out in the financial directions in relation to the proper
use of the funds provided (paragraph 38).
(xii) The visits to completed projects carried
out by the National Audit Office and the Sports Council's own
independent project monitors found that some applicants have not
fully complied with the terms and conditions of the Sports Council's
grant offers. We are deeply concerned that several projects are
not being used fully for the purposes intended and that some applicants
are not providing the promised level of disabled access. For example,
a sports facility was built without a lift for the disabled and
a college that was awarded £300,000 to develop a sports hall
has only been allowing the general public in at inconvenient times.
We note that the Sports Council share the Committee's concerns
and have been working with applicants in each case to resolve
these problems. We recommend that the Sports Council take a strong
line in cases where the project is not used for the purposes intended
and where key issues, such as disabled access, are neglected (paragraph
39).
(xiii) We note that the Sports Council are
meeting with other lottery distributing bodies to share information
and experience on project monitoring and evaluation and that this
is resulting in the identification of good practice. We recommend
that the Sports Council and the other distributors should review,
and where necessary revise, their project monitoring and evaluation
arrangements to reflect this good practice (paragraph 40).
on ensuring a fair distribution of grants
(xiv) The Committee noted disparities in
the relative value of lottery awards across the country, which
ranged from £15.70 per head of population in the South down
to £8.21 in the East Midlands. We are concerned about these
disparities and welcome the initiatives introduced by the Sports
Council to encourage more applications from geographical areas
that are under-represented. In particular, we note that two initiatives—the
Priority Areas Initiative and the School Community Sport Initiative—have
succeeded in channelling a substantial amount of lottery funds
to such areas (paragraph 48).
(xv) We recognise that, until recently,
the Sports Council have had to be careful not to solicit applications,
but that the new policy directions issued to them in June 1998
require them to have regard to the spread of awards and to the
scope for reducing economic and social deprivation. We note that
the Sports Council will now be required to demonstrate how their
proposals for using lottery money will meet the needs of the sporting
sector and to take account of the Department's policy directions.
We look to the Sports Council to take this opportunity to ensure
a more equal distribution of lottery funds (paragraph 49).
(xvi) We look to the Sports Council to grasp
the opportunities provided by the new National Lottery Act and
the revised policy directions issued by the Department for Culture,
Media and Sport to ensure that they achieve a more equal distribution
of lottery grants around England and that they target more effectively
those geographical areas that are currently under-represented
(paragraph 50).
1 HC 617 of Session 1997-98: The Distribution of Lottery
Funds by the English Sports Council Back
| 
