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specified so was withdrawn.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
|
