Examination of Witnesses (Questions 40
WEDNESDAY 10 MAY 2000
40. Do you think that every project should be
assessed before by some sort of a consultancy, and then every
project assessed after completion? It is all right sending in
inspectors and expecting them to send in receipts and things like
that, but do you think that every project should really be assessed
personally before, to see if it should go ahead, and afterwards
to see if it has done what it said it was going to do?
(Mr Hornsby) Every application to us, which exceeds
£200,000, goes to a second level detailed assessment. We
pay only £291,000 a year for qualified external assessors
to look at it. So in terms of the larger schemes we do have a
detailed second level assessment by accountants or professional
architects for a scheme of that size. We will then track through,
in terms of the check against the benefits, that what was promised
in the application is what was delivered. I absolutely take your
41. Basically, on the same theme, if we turn
to paragraph 3.26, here it tells us thatand I think you
mentioned thisin 91 per cent of the schemes looked at the
conditions had been complied with. That means that in 9 per cent
of the schemes the standard terms of conditions were not enforced.
So why did you fail to enforce those 9 per cent?
(Mr Hornsby) The shortfall of 9 per cent, to which
you correctly draw attention, covered a number of areas; areas
where accounts had not been submitted in time. That the quotes
had not been submitted in time. In the event, as I mentioned to
the Committee, if you take the second part of that bullet point,
in the eight cases where quotes had not been obtained, as they
should have beenand I entirely accept your point that it
was less than totally satisfactory controlin the event
they were secure and those projects fully delivered. So it is
not that 9 per cent never worked. It was that in 9 per cent of
cases the audit trail and the documentation that should have been
there at an earlier stage was not done.
42. Okay. The NAO found that 16 projects with
special conditions laid down were not complied with either. If
you look at the Pakistani Centre in Nottingham and the Bangladeshi
project in Charnwood, these are examples of where it seems quite
incredible that money has been paid out and, frankly, schemes
have not been delivered. It just makes you wonder where some of
the money goes to. In fact, some the money is lost in one of these
projects, is it not?
(Mr Hornsby) In the case of the Pakistani Centre,
as I say, this is now fully operational and it has fully produced
the benefits of the grant.
43. Bearing in mind that I have been very fair
with you this afternoon, I hope you do not go against any projects
(Mr Hornsby) I think you have 95 live projects in
Durham at £3.365 million. I can assure you that we will not
try to claw anything back!
44. Mr Young, 150 projects were examined. Do
you consider these to be representative of the total 4,789 cases?
(Mr Young) It is a fair sample. We discussed the methodology
with the Charities Board, with the NAO when they started their
report. In the time available we think it is a fair sample.
45. Therefore, if we were to look at any other
150 from the 4,789, we would expect similar sample funding results?
(Mr Young) Within that sample area, yes. When they
are extrapolated they put out quite a range because of that sampling
46. Right. I just want to focus not on the weak
cases but on the proven cases and they are on page 2 in the tablenot
the ones you have fully provided or mostly provided, nor the ones
that have not been provided but no grant paidbut the 25
cases representing 16 per cent of the projects and 20 per cent
of the catch. They are representative of the 4,789. That implies
that 766 were defective in some way or another: only partly provided
or not provided at all. Is that not the case?
(Mr Young) May I draw your attention to page 23, figure
6. That is where the report covers the calculation you have been
making. The report has quite an important health warning in paragraph
2.11, where it specifically says that we cannot use the analysis
to make firm conclusions about long-term success of the projects
covered because, just to be absolutely clear, what this is is
a series of snapshots at a particular time. So what this proves,
quite reasonably, (and I am accepting the sampling approach taken),
that at a particular time when the auditors went in the project
had not been delivered to time to the full objectives. But, in
fact, in the report, it has been there twice; so if we look at
figure 5 on page 19, that shows to you, if I may talk you through
that, the progress of these projects over time. You see that in
between the two assessmentsone was in November 1999 and
the updated one was by the end of 1999quite a significant
shift in the movement towards the left which is, in this sense,
the good direction. So are you with me now?
47. Mr Young, you have all my gratitude for
drawing my attention to page 19 and the excellent work done by
Theatre Workshop in Edinburgh, which I see as a very good case
by the National Audit Office and a tribute to the work of the
director and staff there. But let me, having tried to trump my
colleague here, just say that if this is a snapshot, then the
snapshot will admit that in any one time over 700 projects are
likely to flag up the sort of concerns that have been flagged
up: that is, only of those over £20,000 in value. Are they
more closely monitored than applications for smaller sites?
(Mr Young) Just to say what I think the table shows:
is that at two particular points snapshots were taken and the
progress of these 150 projects were monitored. Each time we go
back they look better and better. So what we are pointing up is
a delay in achieving the objectives promised at the start of the
projects when the awards were given. So the later you go back,
the more things will move to the left. That is what the report
48. If I can move on to them because I do not
believe, Mr Young, it is just a delay. There is a certain amount
of mismanagement, which may be gross mismanagement, in individual
cases that have been singled out. Those are concerns to everyone.
Which one causes you the most concern?
(Mr Young) There are a number of concerns here.
49. I think we have all taken your point but
what I am asking you is which one gives you most concern?
(Mr Young) I have no specific knowledge of these case
studies, no more than Members of the Committee have. It is Mr
Hornsby's job to look at particular cases.
50. What is your job?
(Mr Young) My job, as a senior accounting officer,
is to ensure that he has the systems in place to obey the financial
directions and policy directions which we set. We lay down systems
right from the start. We annually audit them to assure me that
the systems will deliver the goods. Case by case he has to do
that. Do you accept the difference?
51. I accept that as accounting officer you
will want to monitor those cases which cause the National Audit
Office concern and Members of Parliament, Parliament itself, concern.
You are telling me that that is Mr Hornsby's job.
(Mr Young) Yes, in the special responsibilities case,
in the particular case, but I am not ducking it, I am responsible
for him having systems to deliver the goods for you.
52. You have brought it slightly forward because
it is quite clear from Mr Hornsby's evidence that ever since he
became the first Chief Executive he has been saying he is under
staffed, or at least that is what you are telling the Committee
now. That under staffing, in some of the responses he made to
the Chairman, was responsible for some of these gross problems.
"Too many projects" were Mr Hornsby's words. What action
was the Department taking to try and make sure that Mr Hornsby
had adequate resources?
(Mr Young) The scale of his resources are a matter
for him. I do not control the number of resources he applies.
More positively what we have been doing is discussing with all
the Lottery distributing bodies the lessons emerging from their
own progress and, indeed, the two NAO Reports that the PAC are
into we have had on Lottery distributing matters already. The
Department sees a clear role in swopping best practice and as
it emerges that extra qualified staff are needed we will give
every encouragement to the distributing body to get them in.
53. Can I come back to my question about how
rigorously projects of value under £20,000 are monitored.
Are they monitored as rigorously as those over £20,000?
(Mr Young) Mr Hornsby will correct me if this is wrong
but my understanding is that all projects over it was £200,000,
and then it became £250,000, are monitored in a certain way
and then a sample of five per cent of all the other projects.
That is my understanding.
54. The answer is it is a sixth?
(Mr Young) Yes.
55. Right. Now that means extrapolating again
from this Report where we have 150 sampled out of 4,789, which
itself is a sub-total of 28,000 applications, there could be as
many as 5,900 which have got the defects which fall into the harsh
categories that I am focusing on of a value of £300 million,
some of which is never going to be recovered, is that right?
(Mr Young) I do not think it is because of the health
warning on page 23 in paragraph 2.11 where the Report saysand
I have to agreethat you cannot use this analysis to draw
conclusions about the long term effectiveness of these projects
because it is just a snapshot of what is happening at a particular
point. For all I know in three years' time all of these projects
will have achieved all of their objectives. I agree they will
be late but they will not have failed. I am not saying they will.
I may be wrong but these are snapshots. The Report says "...
for the majority of projects where there has been a delay the
planned level of service or activity has been delivered in the
end..." and that is in the Report on page 23.
56. Were you or your predecessors, your Department,
happy, as Mr Hornsby has told us, that it took three grant rounds
to finalise procedures so that they were stronger and that it
was on the fourth grant round they were robust enough?
(Mr Young) I think we would both agree we could always
improve our processes and our procedures. The role of the Department
is to ensure that each distributing body learns from each other
and improves its act all the time. I would say we are in the business
of continuous improvement and we have not claimed we have got
it right yet, either in this distributing body or any other. Each
time we have one of these Reports I start an immediate discussion
with all the distributing bodies for all the Lottery bodies to
see whether we can learn the lessons and improve their act. I
do not think either of us are saying we have got it right even
now but certainly I believe we have managed to improve procedures
as we have gone along in this body, as in others.
57. I am concerned that procedures simply were
not followed. If we take the case of the centre in Nottingham
with the £95,000 award, which has been the subject of previous
questioning here, why is it that any money was paid out when the
plans were not made available "for work"? The actual
criteria laid down were just not being applied. That was admitted
to, so it is not as if we are dealing with a case, as I understand
it, of that centre being perceived as being under staffed in any
way, all the staff had to say was "That is not being applied".
Why was money paid out, most of the money it appears to me?
(Mr Young) I am afraid on the particular case I am
going to have to ask Mr Hornsby to reply.
(Mr Young) I happen to know that Case study 13, the
Pakistan Centre in Nottingham, is now fully completed and is meeting
all its objectives for the same money it was originally offered.
59. What we have to satisfy ourselves, Mr Young,
is that if the NAO had not gone in and looked at that project,
whether that might have been lost as well because of staff pressures,
or whether the staff quite rightly were saying to the centre "For
goodness sake, the NAO is breathing down our neck, my boss has
to go before a Committee"it is not known as being
one of the most pleasant things "... for goodness sake get
us open by the time we meet in May next year", which happened
to be in January this year, five years, I think, after the application
and the award of the grant.
(Mr Young) I agree. My concern also is that all projects
should proceed on time and on budget. When it comes to handling
particular cases I will have to ask Mr Hornsby to answer.
3 Note by Witness: The threshold for an automatic
visit was £150,000 and has now increased to £200,000.
The figure is not £200,000 increasing to £250,000, as
previously stated. Back