Select Committee on Public Accounts Minutes of Evidence


APPENDIX 1

Supplementary memorandum submitted by the National Lottery Charities Board (PAC 1999-2000/185)

Question 15:  Fraud Cases

  This note provides further details concerning the 10 grants, referred to at the Committee Hearing, where the Police have been involved and they have concluded their investigations.

1.  VOLUNTARY SECTOR SUPPORT GROUP

  This application, for £100,000, was for a project to establish support services and facilities for voluntary organisations and was identified during our assessment procedures as being suspicious. The matter was reported to the Police who, having investigated, did not consider the matter to have been substantiated. The NLCB did not make any grant award in this case, thus no loss was incurred.

2.  ACE PLACE KIDS CLUB

  This was a grant of £70,000, to assist with the provision of equipment, building refurbishment, vehicle purchase and staffing costs, for an organisation providing play and leisure within a safe, homely environment. Payments of £53,830 were made by the NLCB that were subsequently written off. The defendant admitted offences, however the CPS withdrew action.

3.  TENANTS AND RESIDENTS ASSOCIATION

  The grant for £28,000 was used to provide a specially adapted minibus for use by the elderly and disabled within the community. Allegations were later received that the organisation's community transport co-ordinator was using the bus for personal gain (private hire). Police found insufficient documentary evidence to proceed. The asset was subsequently transferred to another community group who planned to use it for the purposes of the original application ie community transport.

4.  COMMUNITY ASSOCIATION

  Grant of £41,400 awarded to group to create an information resource on services and HIV/AIDS therapies. Another funder advised the NLCB that it was investigating fraud and theft allegations in respect of the group, and that the police were also undertaking investigations. The Police case was subsequently dropped. The NLCB grant was not taken up within the timeframe specified so was withdrawn. No monies were paid out and thus no loss was incurred by the NLCB.

5.  HILLTOP PLAYGROUP

  The group received an award of £2,900 to purchase play equipment, toys and safety mats. The Group's Treasurer was found to have embezzled monies (some £1,700) and was subsequently charged. The group's bankers, who acknowledged responsibility for failing to observe the group's mandate, reimbursed monies. No loss was incurred by NLCB or grantee organisation.

6.  INGLEBY TRUST

  The application requested £199,573 to refurbish a property for HIV respite care/holiday accommodation purposes. The applicant was arrested by police, on unrelated fraud charges, and found to be in possession of a copy of an NLCB application form. The application received by the NLCB was found to contain forged signatures and accompanying documentation had also been falsified. Applicant subsequently sentenced for seven offences. No loss to NLCB as no monies were paid out, no award having been made.

7.  NEW NIMMO PLAYGROUP

  The grant for £3,024, was to provide play equipment, training, publicity and fund an outing. The group's former Treasurer was found to have withdrawn funds of £2,112 without authority. The group's bankers reimbursed the monies, and acknowledged their failure to adhere to all their systems checks with regards to mandates. There was no loss to the organisation or to the NLCB.

8.  DISTRICT DISABLED ASSOCIATION

  A grant of £166,000 was awarded to enable the organisation to undertake building works and refurbishment. Allegations were made that the tendering process had not been formally observed and that invoices for works were artificially inflated. Additional information was received from the Police, whose investigation did not substantiate the complaints. Grant monies were subsequently paid out in full.

9.  THE PUBLIC LAW CENTRE

  The application requested £10,185,522 to set up 39 branches of a free legal representation service. The Police, whilst searching the defendant's premises, found a copy of the NLCB application, and advised that they were investigating the applicant in connection with other fraud related matters. No loss to the NLCB as no award was made, being intercepted prior to assessment. The Defendant (Mr. Salakov) was found guilty and sentenced, but subsequently launched additional legal proceedings against the NLCB and police in connection with the case. The defendant was eventually declared as a vexatious litigant, resulting in subsequent claims being struck out, and he was prohibited from continuing proceedings against the NLCB.

10.  SUPPORT GROUP—SCOTLAND

  The grant of £3,045 was to be used to purchase computer equipment by a group offering support and education for people suffering from depression. The group's former Chairman took possession of the equipment on leaving the group, believing his successors to be inappropriate persons to run the group. The Police contacted the NLCB (the group having complained about the former chairman's possession of the PC equipment) to clarify if the items were personal or group property. Former Chairman eventually returned the equipment and matters were dropped. No loss to the organisation or the NLCB.

  The value of the grants awarded, as detailed above totals £314,369. The fraudulent element of these is £85,642, however in only one case (Item 2) has there been an unrecovered loss of grant amounting to £53,830. The remaining £31,812 represents an asset which was recovered by the Charities Board and subsequently transferred (Item 3) or ultimately reimbursed by third parties to the grantee organisations (Items 5 and 7) and there was therefore no loss of grant value.

  The Charities Board has updated these figures, which therefore vary slightly from those quoted in oral evidence.

Question 82:  Liaison with Local Authorities in Scotland

  In April 1998 the Charities Board in Scotland signed a Three Way Agreement with the Convention of Scottish Local Authorities (COSLA) and the Scottish Council for Voluntary Organisations (SCVO).

  The Charities Board in Scotland has worked closely with Local Authorities and in partnership with voluntary sector bodies to provide information about the Board's procedures and priorities, shared with them information on the needs in the area, and has encouraged local voluntary organisations to develop sound targeted applications.

  In the original version of the Three Way Agreement, the Charities Board Scotland agreed to consult local authorities on individual applications recommended for grant over £100k. In practice, however, the information which was provided did not lead to a change in recommendations or the decisions on the application. The process became a further bureaucratic burden on local authority officers. In addition, local authorities and applicants experienced a degree of confusion over the system. There was a general view that this consultation could be seen to undermine the objectivity of the assessment process.

  Accordingly, in the recent discussions over the Three Way Agreement, all parties agreed it would be beneficial to move away from consultation on individual applications over £100k, and concentrate instead on strategic and community planning considerations, and the dissemination of the priorities and approach in the Board's Scotland's Strategic Plan. The Board is in discussion with SCVO and COSLA, about the implementation of this Review. The Board will bring together local authorities, and Councils of Voluntary Service to discuss strategic approaches in the autumn.

Question 118:  Sale of Assets by Grant Holders

  The basis on which the Charities Board's position is protected is through the grant contract, in the form of the grant offer letter and in the standard terms and conditions of grant.

  Condition 4.1 of the standard terms and conditions makes it clear that a grantee may not dispose of assets without the prior written permission of the Board, nor use them as security for a loan for any other financial purpose for a period of 80 years.

  Under the standard term and condition 6.1, the Board has the legal powers to seek repayment of grant where there has been a breach of the grant contract—for example an attempt to sell assets without the Board's authority. Our legal advice is that once a right of action exists, it could be used both to make a claim for repayment, and also for an injunction prohibiting the sale of assets.

  Our financial directions from the Secretary of State for Culture, Media and Sport state we should consider each case on its merits when assets acquired or improved through lottery funding are sold within their useful economic life. The Board would normally seek an appropriate share of the market value from such disposals, related to the proportion of lottery funding that acquired or improved the asset in the first place. Cases would however be judged on the particular circumstances arising at the time, but our legal advice is that the firm requirement that the assets cannot be sold without the Board's written permission provides adequate protection for the Board.

  The Board is not required to take security in all cases, but to make a risk assessment looking at the circumstances of the case. In five cases we have in fact taken a legal charge on properties.

QUESTION 142:  NEW COMPUTER PROGRAMME FOR GRANT FUNDED ASSETS

  At the moment each individual grant file, in each grant making unit, contains full details of any assets which have been acquired with the aid of Charities Board grant. This information can be obtained by inspection of each file.

  With effect from the Autumn of 2000, in addition, all information concerning grant funded assets will be transferred to a central asset register on a computer system. This system will then automatically prompt grant staff to undertake inspection visits, or other investigations, to obtain about information on the status of grant funded assets, according to an overall policy we are discussing with the National Audit Office.

Question 163:  Mesh-In with Government Initiatives Designed to Tackle Social Inclusion

  In Scotland, the Charities Board has recently concluded an analysis of its main grants awarded in Social Inclusion Partnership (SIP) areas from March 1998 to March 2000. This data indicated that most SIP areas were doing relatively well in numbers of main grants awarded and overall funding via these grants. Overall, the percentage of grants made and funds given to SIP areas was over twice as high as their percentage of the population. Some areas, however, had done less well, and these were itemised in the analysis. The Charities Board ensures that its outreach effort takes place in SIP areas.

  The analysis was sent to the Social Inclusion Division in the Scottish Executive, and was shared with the other Lottery Distributors at a meeting to discuss how funding could be leveraged.

  More generally, the Board's Corporate Policy Directorate has had discussions with the Cabinet Office Social Exclusion Unit, to consider the range and focus of the policies on which the Board itself decides (subject to its own additionality rules), in the context of a better knowledge of wider developments on social exclusion.

Question 170:  Distribution of Grants Within Wales

  The Board has so far distributed some 2,527 grants in Wales amounting to £88 million. The attached table provides a break down by local authority area. Cardiff has received grants of £22.27 per head and Swansea grants of £28.86 per head, with total grants in those areas amounting overall to £7 million in each case. The success rate in Swansea has, however, been noticeably higher than the success rate in Cardiff. On the basis of the deprivation rankings, however, the amounts to each of these areas seem generally proportionate.

  In November 1999, NLCB Wales looked at the deprivation indicators and the amount of money distributed per head of population in each county, and decided to concentrate its outreach work on five counties—Flintshire, Newport, Bridgend, Caerphilly, and Blaenau Gwent.

  A publicity campaign was mounted through local newspapers, MPs were contacted as were Assembly Members, and our quarterly newsletter Resource also covered the topic. Meetings were held with officers of the relevant Local Voluntary Councils. The Board delivered a series of information seminars in these areas, providing advice on the distribution of Lottery Money, on the Board's funding policies, and on how to make an effective application. The feedback from these seminars was positive. They were also publicised in libraries, doctor's surgeries and local voluntary councils.

  The Board hopes that this effort put in will, over time, result in more good quality applications from these target areas. And the Charities Board in Wales will be continuing to keep the overall pattern of grants within Wales under review to see if any further action is justified.

GRANTS AWARDED BY LOCAL AUTHORITY


1995 hyd heddiw—1995 to date
Awdurdod Lleol—Local Authority
Ceisiadau
Applics
Grantiau
Grants
Llwyddiant
Success
Cyfanswm
Total
£/pen
£/head

Total
6629
2527
38%
£88,286,412
£30.22
Blaenau Gwent
121
42
35%
£1,433,639
£19.64
Penybont-Bridgend
136
50
37%
£1,418,779
£10.91
Caerffili-Caerphilly
216
97
45%
£2,616,585
£15.47
Caerdydd-Cardiff
630
143
23%
£7,015,996
£22.27
Sir Gaerfyrddin-Carmarthenshire
365
185
51%
£5,919,191
£35.00
Ceredigion
297
127
43%
£4,666,602
£67.15
Conwy
245
100
41%
£2,255,781
£20.40
Sir Ddinbych-Denbighshire
222
91
41%
£4,496,771
£48.77
Sir y Fflint-Flintshire
253
109
43%
£1,590,229
£10.97
Gwynedd
437
182
42%
£5,727,849
£48.62
Ynys Môn-Isle of Anglesey
178
72
40%
£2,054,463
£30.62
Merthyr Tudful-Merthyr Tydfil
138
53
38%
£1,991,246
£34.27
Sir Fynwy-Monmouthshire
165
67
41%
£912,472
£10.51
Castell Nedd Port Talbot-Neath Port Talbot
217
73
34%
£2,195,898
£15.74
Casnewydd-Newport
120
41
34%
£1,897,673
£13.87
Heb eu Dynodi-Not Specified*
227
0
0%
£0
£0
Sir Benfro-Pembrokeshire
266
111
42%
£2,168,334
£19.09
Powys
617
276
45%
£6,900,149
£55.47
Rhondda Cynon Taff
482
203
42%
£6,267,543
£26.10
Abertawe-Swansea
420
182
43%
£6,643,252
£28.86
Torfaen
180
60
33%
£1,342,573
£14.84
Bro Morganwg-Vale of Glamorgan
223
64
29%
£2,142,270
£18.40
Cymru Gyfan-Wales Wide
242
112
46%
£13,209,709
  
Wrecsam-Wrexham
232
87
38%
£3,419,408
£27.73


  *Not Specified—these are either grants where the applicant has not provided enough information to allow the data to be gathered, or has specified areas outside Wales.

National Lottery Charities Board

26 May 2000


 
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