Examination of Witnesses (Questions 20-39)
14 NOVEMBER 2007
DEPARTMENT FOR
CULTURE, MEDIA
AND SPORT
AND OLYMPIC
DELIVERY AUTHORITY
Q20 Mr Dunne: Is that part of what
you have just described?
Mr Stephens: Yes, we monitor the
cashflow on a monthly basis.
Q21 Mr Dunne: That is not what I
asked. Do you have a monthly cashflow per project?
Mr Higgins: We have a monthly
cashflow per project and we monitor it also monthly and report
it to the Olympic Board.
Q22 Mr Dunne: Has that been made
available to the NAO?
Mr Higgins: Well, the NAO sit
at our Audit Committee and in fact there is one on Friday which
will go through the monthly reports on projects.
Q23 Mr Dunne: Sir John, could I ask
you whether it was available when you prepared this Report?
Mr Hawkswell: I think the position
is that, when we prepared the Report, there was a recognition
that there was still further work to do in terms of working through
some of that underpinning detail.
Mr Stephens: We have no problem
with providing it to the NAO.
Q24 Mr Dunne: Well, I am pleased
to hear you say that because The Daily Telegraph two weeks
ago had a member of the London Olympic Board, saying, "We
need a very clearly defined budget, a very clearly defined cashflow
analysis which is regularly updated and a very clear focus on
the contingency and how it is allocated to specific project lines
in the budget", and that is a member of your Board. Do you
not provide the regular financial information to your board members?
Mr Stephens: That is the Olympic
Board which approved the ODA's budget for 2007-08 in March and
that is publicly available. It sets out the planned spending by
categories, like the Olympic Park, master planning, enabling works,
structures, bridges, highways, power lines, undergrounding, utilities,
Olympic Stadium, Aquatic Centre, and—
Q25 Mr Dunne: But are you not providing
them with regular monthly information?
Mr Stephens: Indeed. We report
against that on a monthly basis to the Olympic Board.
Q26 Mr Dunne: So this board member
was asleep, was he, and he was not reading his papers?
Mr Stephens: Well, all I can say
is that we report against the 2007-08 ODA budget, as agreed by
the Olympic Board, on a monthly basis to the Olympic Board.
Q27 Mr Dunne: Does this go to the
level of detail of monthly cashflows per project? This is the
issue: reporting on a top-line basis does not allow either board
members or the NAO to have a proper test of whether you are on
track to achieve the budget. The reason why I am pressing you
on this is because, in order for this Committee to have a real
sense of how we are achieving the milestones in order to get the
projects delivered on time and within budget, unless you have
budgets which are broken down on a project basis by month for
cashflows and for contingency, we are not going to get the answers.
Mr Higgins: We report to the Olympic
Board on the cashflow every month, the overall cashflow, and to
the Funders Committee. The actual individual projects are reported
through a wide range of other reviews, including our own Board
and our own various committees.
Q28 Mr Dunne: Can you make those
available to the NAO for their next report?
Mr Higgins: Yes.
Q29 Mr Dunne: Sir John, perhaps you
will be able to take that up when you do your next report.
Sir John Bourn: Certainly.
Q30 Mr Dunne: Can we just look at
contingency for a moment, paragraph 66, and the Chairman has already
referred to the £360 million released to the ODA last June.
Has the contingency been allocated on a project basis, firstly,
and, secondly, on a time basis, on a monthly basis?
Mr Stephens: Each project has
an element of contingency and that has been budgeted in from the
start at the project contingency level. As the NAO Report explains,
of the initial £500 million allocated, the extra contingency
allocated to the ODA, £360 million of that has been approved
for allocation to individual projects over and above the contingency
built into individual project baselines. That leaves more than
£2 billion of programme contingency—
Q31 Mr Dunne: I am sorry, Mr Stephens,
but I have very limited time, so could you answer the question:
has each project got a contingency allocated to it and has that
been allocated on a time-phase basis?
Mr Higgins: No, we do not allocate
the contingency on a project basis on a monthly basis. We cashflow
the underlying project, but we do not anticipate spending—
Q32 Mr Dunne: So you do not know,
and we will not be able to track, how you are doing and spending
and, to get back to the Chairman's question, how you are doing
in using up the contingency because you have not got a plan for
that?
Mr Higgins: No. Absolutely we
do have a plan, of course, but we do not allocate contingency
to be spent in advance of it being required.
Q33 Mr Dunne: Can I turn to the back
end of the project. You have mentioned, Mr Stephens, that there
will be some profit to be taken from land sales at the end of
the project. On completion, at the end of the Olympics in 2012,
how much income has been assumed would be generated from the onward
sale of assets in this budget?
Mr Stephens: Nothing from the
sale of land, with the exception of a profit share from the Village
which is currently under negotiation in the contract that will
be signed shortly.
Q34 Mr Dunne: Is it anticipated that
any other assets would be sold, that any constructed assets would
be sold?
Mr Stephens: None of that is assumed
within the budget.
Q35 Mr Dunne: So any revenue generated
would be a gain back to the Exchequer on some basis?
Mr Stephens: Yes, and indeed that
is reflected in the Memorandum of Understanding, reflecting the
share of profits from the land between the Mayor and the Lottery.
Q36 Mr Dunne: Has there been any
assumption made for rectification work for the equivalent to dilapidations
in a residential property when that might revert either for sale
or to a previous owner?
Mr Higgins: Is this in the Village?
Q37 Mr Dunne: Any of the projects.
Mr Higgins: There is certainly
an allowance within the Village to repair the Village or to make
the Village good for sale after it has been used for the Games.
Q38 Mr Dunne: And the main stadium
itself is going to be taken down in part?
Mr Higgins: Yes, there is money
allowed in the main stadium budget to transform that to legacy.
Q39 Mr Dunne: What provisions are
there in any of the asset purchase contracts for reversionary
interests on the resale or subsequent sale of land?
Mr Higgins: The land in the Park
is owned by the LDA and, when the LDA sells that land, there is
clearly an agreement between the Government and the LDA to recover
surplus profits which are shared by the Lottery.
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