Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)



  60. I am happy to have Mr Hornsby's views on this.
  (Mr Young) Okay. It is for them to judge at each stage—

  61. I think you are biding time to think.
  (Mr Hornsby) I am there. I will carry on.

  62. Excellent, Mr Hornsby. Fire away.
  (Mr Hornsby) The concern you have, and I can understand this, is did we only get energised when the NAO picked up some naughtiness and that triggered us into action? If you look at the sequence of events, I entirely accept that we had—to use Mr Steinberg's word—rather shoddily paid money out without the rigorous enforcement of the initial special conditions over the detailed plans. That said, we issued a number of reminders and visited the project in February 1998 before the NAO were on the scene. So this was not a case in the Pakistan Centre of the NAO having picked something up and us then saying we redoubled our efforts. We were on the case after the initial error. We did a number of bits of chasing, we visited them, and, as Mr Young said, it came right at the end. Could I just refer to your earlier comment about staffing? When we were set up we did not know, nor was there any model which could predict, what volume of applications we would get. On the Charity Commission register there are between 300,000 and 700,000—

  63. I have a question directly on that. When did you realise and what did you do about it?
  (Mr Hornsby) We staffed up with, as I say, 43 permanent staff and we deliberately used outside assessors. Once it became clear, which was after the closing date for the first grant round, that the likely volume of applications would be between 10 and 15,000, we then looked again at our support systems, at the balance between the number of outside assessors and inside assessors, at the way we had largely decentralised the work, and we staffed up further. So that by the time we had the volume of applications in for the second and third round, we were better staffed. My comments about under staffing were it would not have been practicable to put in place a comprehensive set of staff against an unknown volume of demand. We reacted as quickly as I think we could.

  64. What you are saying is you had adequate staff before you strengthened the procedures. The final two questions relate to how can it be that a number of organisations received over half a million pounds—and that is on page 38—without providing either audited accounts or quotes for capital purchases?
  (Mr Hornsby) Which particular paragraph?

  65. Paragraph 3.26.
  (Mr Hornsby) The situation there, as I have said, was that there was not comprehensive 100 per cent compliance with the terms and conditions at the time that these schemes were being managed. In the event, as I have said, we did get the information, albeit late, and, as I have said, the schemes did prove satisfactory but there was a processing error linked with the sheer volume of work which the grant officers had.

Mr Love

  66. Mr Hornsby, can you tell me what the Charities Board's view is of the relationship that it should have with local government?
  (Mr Hornsby) We, from the outset, consulted the various local government associations about the scope and focus of our programmes in the way that we consulted the voluntary sector. We provide the best information that we can to the lottery officers and local authorities, who act as a conduit of information, and my regional managers have regular discussions with the chief executives of the local authorities about the volume of bids in an area or about the particular needs and pressures. I would see local authorities as being a valuable source of information and statutory authorities where we would want to know what their programmes were.

  67. When inquiring about something entirely different, I had it verified for me that the Lottery Charities Board is the only one of the lottery organisations that does not inform local authorities of applications for grants from organisations within its area, is that correct, and if so, why?
  (Mr Hornsby) It is correct, and the reason is this: in the case of colleagues in the Sports Council, they can grant local authorities and there is a duty on local authorities to produce comprehensive strategies in their area. In our case, we grant non-statutory authorities, voluntary, philanthropic and benevolent. When we consulted the sector, they were extremely keen to say to us, "We want our bids looked at on merit and completely independently. We may have had a run-in with the local authority, we may be a voluntary body, but that experience was a good experience. We want the judgments you take on our scheme to be on the basis of the application and your professional assessment." The sheer volume of our schemes, which is three or four times that of any other lottery distributor, would cause a logistical difficulty in consulting the local authority if we were going to turn them round, but my board felt there was the policy point that if we started consulting local authorities on independent voluntary sector activity, we might be in a position where we would be told, "Why don't you consult health authorities or others?", and the voluntary sector itself was very clear that it wanted an independent view, but the premise of your question is right.

  68. Turning part of your question the other way round; if you are getting such a large volume of applications, which I understand you are, could a local authority not help you to weed them out?
  (Mr Hornsby) I do take your point in terms of a sift.

  69. We talked earlier on about the difficulties some organisations have had with planning permission and other difficulties that other organisations have had with premises. Is that not an opportunity for the local authority to help out in both of those cases?
  (Mr Hornsby) I think that most of the groups who approach us would, as a result of advice from their CVS or others, in any case, be approaching the local authority and, as was made clear, they would need to for development control reasons. I do not think we need to tell these sorts of groups, "You should consult your local authority", they would be doing so anyhow.

  70. As I understand it, the policy has now changed in relation to grants, in that you are now allowed to be proactive rather than await applications from organisations. Is that not a perfect case where a local authority who knows local circumstances could assist both with finding the organisational talent and, indeed, focusing on the need within the local authority area? Are they not perfectly placed to be able to help with that proactive work?
  (Mr Hornsby) I entirely accept that. As I said earlier, our regional managers discuss with chief executives in those areas where we are particularly targeting to drum up a richer mix of applications. We have arranged joint seminars with local authorities, open days, helper sessions, so what you are saying is true and we are doing it.

  71. I would go on to mention about the help that they could provide in preparing applications, and that they could assist in deciding whether the people concerned can provide applications. Can I refer you to the end of the report on page 47, where it talks about key factors? This is paragraph 3.46. It says, "Key factors which influence how each organisation—". If I go through all of them, on almost every one of them a local authority could provide an independent view to assist your organisation in making those judgments, yet you do not seem to be able to use them. Are you really telling me that the sensitivities of the local organisations—I understand those sensitivities and I do know of a number of voluntary organisations and charities that have had run-ins and policy differences with local authorities, so I do not underestimate the need for sensitivity in this area, but are there so many strong reasons why local authorities could and should be involved in this, not least that they would know where additional finances coming in from organisations like the Lottery Charities Board could be used?
  (Mr Hornsby) We did run, in Scotland, after discussions with COSLA and SCVO, an experimental scheme under which we consulted the local authorities in Scotland above a particular threshold. I have to report that although the general reasons you give for the advantage of that are strong, our practical case work experience of how it worked was not particularly positive and in the tripartite negotiations we had, we decided we would not continue to do that. We did have a pilot to see whether it would be as helpful as we thought it might be, and, frankly, in the event, it was not.

  72. I noticed earlier in response to a question from Mr Steinberg, you told him how many grants and the total amount of money that was provided to Durham. I am hoping you are now going to tell me the situation for Edmonton.

  (Mr Hornsby) I am going to have find the right crib sheet. £1,286,270.

   73. I am rather pleased with that. I have been trying to find out that figure and had some difficulty in the past, so it is very nice to have an accurate figure. That presumably is up until the end of last year?
  (Mr Hornsby) Yes. I should say, because it is a very relevant question, any MP who wants to know the scope, or the number, or the details of grants in their constituencies, if they write to me, write to the regional office or write to the Director of England, our information retrieval system proudly boasts that we can provide a constituency sort at the push of a button, and that is a service we would be very anxious to provide for Members of Parliament. We do, when we send Members of Parliament our annual report -a thrilling read—automatically include a constituency printout. But if, in between those statements, MPs are interested, we would certainly see it as our duty to provide them with it.

  74. Mr Young, in an earlier answer you indicated that the overall policy framework for the lottery distributing body was set by your department. I wonder if that policy framework included—and this is in terms of the distribution of grant funds—either that they should be focused on more deprived communities, or whether there was any attention made to focusing on communities from which the bulk of lottery funds are raised? Do either of those appear within your remit of policy directions?
  (Mr Young) The first but not the second I think is the answer. Under the 1998 Act this Government made important changes to the Lottery legislation. That 1998 legislation for the first time required distributors to produce strategies for addressing the needs of their sector. It allowed them, as has been mentioned, to solicit applications for the first time to address those needs. It encouraged them to go ahead with joint schemes with other distributors. Under policy directions laid down under the Act we require them now to ensure that all parts of the country have access to funding. It produces a new focus on people from all sections of society in order to tackle social inclusion and we have focused on young people in particular. We have helped them produce strategies which address just those needs. Under the policy directions, which we have issued under the 1998 Act, for the first time distributors have been obliged to focus on social exclusion issues including young people in particular and equal and fair shares to all parts of the country. I think that is yes to the first part of the question but that implies, I think, a no to the second part of your question. It is not Government policy that where more people buy Lottery tickets they get more money out of it. In the case of the Charities Board they distribute between regions according to a population and needs assessment basis formula which is in line with our strategy and the Lottery legislation does direct resources to where the need is and if that is not where people buy tickets then it is definitely a no to the second part of your question.

  75. Can I just say for Mr Hornsby's ears that a quick calculation shows that you are not doing too bad in relation to the amount of money that is put in from my local area into the National Lottery.
  (Mr Hornsby) I am very grateful.

  76. To the second question you seem to be doing quite well. Can I pursue you on the first part. What changes you have made since 1998 to respond to the new policy guidance that has been given from the Department?
  (Mr Hornsby) From the beginning we were the good boys. The distribution of resources since its inception by the Charities Board has been, as Mr Young has said, on a population weighted by deprivation basis for each country and for each region within England. What we have done post the 1998 Act is to try and take this down to a smaller level. If I may give an example in Scotland. In the early days Edinburgh was undoubtedly punching above its weight, partly because of the coverage by some very effective highly organised voluntary groups. Glasgow, which had areas of very significant deprivation, particularly in the east, was producing fewer applications. When we tracked this through, post the 1998 Act, what we did was we set up a separate office in Glasgow. I think physically in terms of providing a presence and a help desk it looks better than running it from the foot of Edinburgh Castle. We provided a series of helper sessions. My Scotland Committee asked for a calibration of the comparative amount and as a result we are now making a greater proportion of grants in that area. So within countries and within regions post the 1998 Act we are looking at the possibility of a degree of spatial targeting where there is a mismatch, where there are very significant needs but we are just not getting the applications or we are not able to make the grants. So that is the rebalancing act at a more local level that the Charities Board is seeking to do.

  77. Can I pursue you on this, and I am thinking now about the proactive element. Recognising that deprived communities have greater difficulties in being able to assemble the expertise and the organisation to be able to apply for grants, what resource in terms of assistance, education, support, can your organisation put in as well to help engender that expertise and that commitment from a local community that needs those resources?
  (Mr Hornsby) I take the point. Under our community involvement programme we are prepared to fund capacity building for voluntary sector infrastructure to enable the small groups to get the training or the learning or the skills or sometimes the equipment which will make them more effective. We have run a pilot scheme in Barnsley—Brass for Barnsley—where we have specifically said we will earmark £3 million for potential grant and we invited—and my Chair was present on the occasion—a large mix of some of the more challenged voluntary groups to come to a meeting and say "What can we do to help you put in decent bids". We have tried to do exactly what you suggest.

  78. One of the restraints on being able to do that must be the level of finance you can commit to the administrative side of your function?
  (Mr Hornsby) Yes.

  79. If we assume you do need to put a greater resource into getting organisations up and running, but I suspect there will be a continuing role also in terms of monitoring and ensuring that things do not begin to go wrong, as has been indicated they have in some cases in this Report, are you going to have to come back to the Department and say "If you want us to implement a policy direction for giving you need to give us more resources in order to achieve that"?
  (Mr Hornsby) We are fortunate in that our source of income is 4.7p from every Lottery ticket so we do not actually go back to the Department cap in hand, in terms of a non departmental public body that is grant in aid. Currently we are spending about £24 million on overheads and administration, that is about eight per cent of our total income, which compares well with the percentage spent by other grant makers. I think if we work efficiently and if we run a tight ship we should be able to release sufficient resources for the sort of help and support work you suggest and still keep within a ten per cent ceiling. My Board is extremely keen on cost effectiveness. They have suggested as a discipline that the amount we spend on overheads should be less than ten per cent of income on the grounds each pound we spend on that is one pound less to be spent on grants. Also, we do submit to the Department our management accounts and our overall budgets but I should say the Department have been both relaxed and supportive about the switch we do where we are paying rather more now on administration than we were in the early days, precisely because of the developmental needs you mentioned.

  Mr Love: That brings me back to my original point about having a relationship with local government to assist you in that very difficult task that you are now being set. I will not ask you for an answer because we need to move on.

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