Select Committee on Public Accounts Minutes of Evidence

Examination of witnesses (40-59)



  40. The Iveagh Bequest that you were talking about, what are the terms under which Kenwood could be rented out for a wedding? To do it now it must be in the terms of the Iveagh Bequest.
  (Ms Alexander) We believe it is.

  41. At any time, even if it meant closing part of the house to the public?
  (Ms Alexander) No. The issue of closing the house to the public is one which we would do as rarely as we possibly could, and in doing so last July we did everything we could to make sure that the public had maximum access at all times. In that case we did feel that it was appropriate. It is something, as I said, we would do very rarely. We do not allow, under our corporate hospitality, the house to be shut.

  42. Is this within the terms of the bequest that the house can be shut to the public in that way?
  (Ms Alexander) We believed it was. We make it available very—

  43. You say you "believed" it was, do you believe now that it was?
  (Ms Alexander) Yes, I do believe it was.

  Mr Rendel: Thank you, Chairman.

Mr Gardiner

  44. Ms Alexander, how many people have visited grant aided properties?
  (Ms Alexander) We do not have a figure for that.

  45. I thought that was the case.
  (Ms Alexander) We are about to launch our July questionnaire on grant aided property owners and it will contain a question about how many visitors they have had.

  46. So basically over the past three years £23 million has been spent on providing access, but we have no idea how many people it has provided access to.
  (Ms Alexander) Of course, the primary purpose of that spending is to achieve the conservation of the building which it is funding. We do know that we have achieved that because I am delighted to say that the NAO has found that we make sure of that before we give the grant.

  47. Good. I appreciate that that is the binding purpose, although access is one of the major conditions attached. Let us look at some of the other conditions attached to the grant. Why were no financial appraisals carried out in 25 per cent of the cases before awarding the grant? It seems to me that if you are going to give somebody a grant the first thing you do is look and see if they need it, or that the building needs the work done to it, and how much is that going to cost, and then you should be looking at what the financial circumstances are of the people to whom you propose to award the grant. Is that not fair? It is public money.
  (Ms Alexander) What we look at when we do a financial assessment—and the NAO did confirm that we did a financial assessment in all of the 20 cases where it was required—we look at the market value of the building and the cost—

  48. Let us not talk at cross purposes, let us talk about the financial appraisals of the people who were receiving the grant.
  (Ms Alexander) I think you are talking about the five cases where although a financial assessment had been done there was no formal financial appraisal.

  49. I am talking about the financial appraisal of those people. There were cases in which the individual had not had their own financial situation assessed.
  (Ms Alexander) That is what I was trying to explain. We do not assess the means of the individual, we assess the market value of the property or the income from the estate, and a financial appraisal should result in a conclusion that a certain amount of grant is justified and a recommendation as to the percentage of grant which should be awarded. The assessment is not the final decision, it advises a decision. That is considered by a Needs Assessment Panel who then make the recommendation to the grant team who take the final decision. In all the 20 cases the Needs Assessment Panel met and discussed the case. It should have been supported in all cases by a formal financial appraisal written by the management accounts branch. The management accounts branch were at the Needs Assessment Panel in all 20 cases, but they did not present formal written appraisals in five of those cases, and those are the five that we are talking about. I am confident that the advice that the Needs Assessment Panel gave was informed by a full understanding of the market value of the property as against the cost of the repairs, which is what should have happened, in the form of the advice that they gave when the decision was taken. In the cases where formal appraisals were not presented, the reason for that was that the material which the management accountants had at their disposal led them to conclude that in one case, for example, the feasibility study had to be allowed to go ahead before a view could be taken on the final grant.

  50. Ms Alexander, we are time limited here. Let me refer you to page 33 and the key points of the agreed report. It states there: "English Heritage undertake financial appraisals of applicants' ability to contribute to repair costs for certain types of application, which accounted for about half the number of grants in our sample. They carried out financial appraisals in most cases where one was required, but for a quarter of those we examined there was no evidence of an appraisal prior to the grant being awarded." This is an agreed report and it seems to me that that is key a point, but that sounds at variance with what you have just told the Committee. Who is right and who is wrong?
  (Ms Alexander) Indeed. As you will see from another part of the report the NAO observe in paragraph 3.6 that in each the Needs Assessment Panel have considered and recommended what rate of grant would be appropriate. They go on to say that there was no evidence of appraisals. That is what would normally inform the Needs Assessment Panel. We certainly agree with the NAO that they should be formally recorded and we have already taken the lessons of this and given instructions that in all cases a formal appraisal should be recorded.

  51. Please stop there because now it seems to me that we have established the ground that those appraisals which should have been done were not done. Can we now go back to my original question which was why were no financial appraisals done? We have come a long way round here.
  (Ms Alexander) Three of the five cases to which you have referred were for what we call non-beneficial grants. They were properties which had no beneficial use and, therefore, no market value. In these cases management accounts had no basis for making a market value assessment of need, they could only inform the overall assessment of need by their view that this is a non-beneficial part of the building and the costs are justified or otherwise. They gave that advice at the Needs Assessment Panel when it met; they should have given it in writing before the Needs Assessment Panel met and we would then have understood the reasons why they had not carried out a financial appraisal in those three cases. In the other two cases they carried out an assessment of the market value of the property and the cost of the repairs and concluded that on that basis a grant was not justified. In one case, for example, a property worth £180,000 had repairs needed of £110,000, therefore if the owner of the 15th Century farmhouse which was unoccupied, for which this grant was sought, had been willing to sell it he might have got £70,000 for it and we might have found a purchaser willing to put £110,000 into it. The financial appraisal was given to the Needs Assessment Panel who then recommended that on financial grounds alone the grant could not be justified.

  52. Was it awarded?
  (Ms Alexander) It was, because it was justified on other grounds which were that there was absolutely no chance of the farmer who currently had that property unoccupied in his ownership either selling it or finding the funds to repair it and we were needing urgent repairs to keep a very important historic property together. There is no requirement to take the advice of the Needs Assessment Panel, it is proper that it should inform our decision.

  53. Why were the grant conditions about the competitive tendering not enforced in 20 per cent of these cases?
  (Ms Alexander) For very good reasons. In relation to the cases to which you are referring in relation to competitive tendering, in one case single tender action was justified by the urgency of emergency repairs needed and we do allow single tender action if it has to be done immediately. In one case the developer was the contractor. We were looking at someone who was going to be developing the building and instead of requiring competitive tendering we first of all assured ourselves that his costs were reasonable and would have been acceptable in terms of value for money, and, secondly, put in place a condition for profit recovery so that if in selling the property following repairs he made a profit we would share in that profit. That seemed a more effective and better value for money solution in that case. In four of the ten cases we needed continuity of very specialist expertise over a number of phases of the grant programme in each case and it made sense, as indeed I think is recognised in the Report, that where such specialist expertise was needed it was retained through the whole of the project. So we did not require competitive tendering at each stage. One example would be lead statues at Castle Howard as part of the multi-phased programme of grants at Castle Howard. We had someone working on the rest of the project capable of doing that. I think there were only two people in the country capable of doing it and it was sensible to let that go ahead.

  54. Would it not have been equally sensible to put it out to tender and then if the other one person in the country who might have been able to do it had put in a lesser bid, given that this is part of your grant condition that this should be CCT, you could have appointed that person?
  (Ms Alexander) The other person, in fact, was the consultant on the project. It was perfectly clear in that case that it was good value for money to retain the specialist who was already working on the earlier phases of the project. We believed, having looked at them, that in six of those ten cases[8] it was right not to press for competitive tenders. We do not require them in absolutely every circumstance because, as I have just described, there are circumstances where it is not good value for money to go through the process.

  55. Can I turn to the question of insurance that you mentioned earlier. As I understand it, English Heritage recommend that insurance cover is maintained after the works are completed, and indeed they enforce that insurance is in place whilst works are going on, is that correct?
  (Ms Alexander) Yes.

  56. So why is there no enforcement on insurance cover after the public, through you, has expended substantial sums on the repair of a particular building? Why is it not a condition of grant that the work which the public has just paid for goes on to be insured so that you do not have to find yourself in the position of paying for it again should it burn down the day after? Let us take a roof, for example, that you have spent three-quarters of a million pounds to repair. You have carefully maintained that it is insured during the period of repair but two days after the period of repair there is an unfortunate fire, it is not insured because you have not enforced that as a condition, and then of course the owners come to you and say "please can you help me repair the roof", presumably the same reasons that you engaged in the project in the first place would apply and the public would be spending money on that again?
  (Ms Alexander) In all of the grant work that we do there is a balance between the costs that we require of the owners if they wish to have anything to do with that grant and the value that we get out of those costs. We do believe it is important to insist on insurance while the work is going on. We do advise owners as to the insurance that we believe they should take out afterwards but we do not insist on it.

  57. I know that, I have asked you why not.
  (Ms Alexander) We do not believe that we should insist on it because the owners will be taking their own decisions about insurance for their whole properties. We do not perceive that it is an important element of our conditions for the future.

  58. So you would accept the scenario that I have painted could actually take place and you would accept no criticism if it did take place?
  (Ms Alexander) No. We think there are decisions that we have to leave to the owners to take. We give them advice and we must leave them to take those decisions.

  59. My question to you was would you accept no criticism of English Heritage if the scenario that I have painted took place and you ended up having to spend three-quarters of a million once and then twice?
  (Ms Alexander) We would certainly take it into account in taking the decision a second time.

8   Note: See Evidence, Appendix 1, page 14 (PAC 1999-2000/224). Back

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