TDC Funding Blunders

In a report by Thanet Councils Auditors, originally secret, but made public on the insistance of Labour Councilors, it has been revealed that Thanet District Council has been forced to repay hundreds of thousands to European Regional Development Fund
The Thanet Gazette published an excellent report in to TDC's Governance & Audit Committee's report on the ERDF expenditure between 2000 and 2006. It is now available to read and download here:
http://tdc-mg-dmz.thanet.gov.uk/published/c00000114/m00002364/ai00010354/$europeanregionaldevelopmentfund.doc.pdf
The council received £5,575,715 in government grants, but has since been forced to repay £603,340.
The low point in the Councils performance concerns the Thanet Innovation Centre.
The report says: "This was the council's single biggest reclaim and the partial repayment related to the authority not fulfilling all of the grant conditions and failing to notify the Government of the South East (GOSE) of changes in the management approach following the original grant letter, that were considered substantial changes by GOSE".
The reports says that instead of filling the business centre with innovative companies, it used space for companies that "are not innovative start-up businesses" and its own staff. The report also said the council had not maintained records of jobs created by the grant.
A business owner inside the centre said: "The council could have spent that money on improving the centre which would attract new businesses in."

On the 29th, when the Report comes before committee, I will want to be assured that lessons have been learned across the organisation, but also have detailed questions concerning how some grants came to be made and precisely what has been done to recoup the money.

Points in the report:

1.1 The Council had grants approved of £5,575,715 through the 2000-2006 ERDF programme, for which, The Government Office for the South East (GOSE) was the accountable body.

2.2 The table above demonstrates that of the total funding received (£5,035,463), 12% of funding had to be repaid to GOSE (£603,341), the details of these reclaims are set out below.

3.0 ERDF Reclaims

3.1 Project 002/036 – Encouraging Social Inclusion – Main/Trans - £1,806 + £1,093

3.2 Following an Article 10 audit of both projects by GOSE, some expenditure claimed through the project for salaries could not be evidenced and as such the grant in relation to this expenditure had to be repaid to GOSE.

3.3 Project 006/028 – Business Networks and Cross Working – Main/Trans £17,443 + £20,159

3.4 These projects related to grant payments, however the sums made ineligible by the audit related to match funding that was originally added to the claim by the claim preparer, so the authority was able to claim back 100% of the grants paid out. There was no evidence on file of where the match was meant to come from and so could not be subsequently evidenced.

3.5 Project 011 – Thanet Museum Strategy - £63,702

3.6 The authority had claimed £63,702.48 in grants paid out to 2 museums, however the authority could not evidence what the museums had spent the funds on, despite attempts to contact the museums in question.

3.7 The authority sought to reclaim the grants from the museums, but between the time of the grant being paid out and the time of the audit, both museums had closed and the owner of one had passed away, meaning the authority was unable to reclaim the grants.

3.8 Project 015/158 – Thanet Tourism Grant Scheme Phase 3 & 4- £52,960 + £81,890

3.9 Both phases of the scheme faced issues when audited and there were three main reasons for grant repayment, these were:
• The hotel had been converted into apartments within 5 years of the grant being paid;
• The hotel was never eligible for a grant, as the grant was approved retrospectively or was for work to restaurants or other facilities that were not allowed under the scheme;• The hotel closed within 5 years of the grant being awarded. 3.10 The Council managed to reclaim £10,000 of the total repayment of £134,850 on
the scheme.

3.11 Where the hotels were never eligible for the grant, payment was made to the hotels in error and so a reclaim could not be undertaken.

3.12 Despite the Council pursuing other grant recipients, many of the owners were no longer traceable, because the hotels had been demolished / closed or the companies that the grant had been paid to, had ceased trading.

3.13 Project 016 – Margate Harbour & Turner Centre - £22,635

3.14 Some expenditure, which attracted grant of £22,635 was identified as ineligible by an audit and was subsequently repaid to GOSE.

3.15 Projects 031/033 – Organisational Development Grants Main/Trans - £16,237 & £42,363

3.16 Both projects had an Article 10 audit by GOSE and as a result it was identified that most organisations that had been paid grant, did not provide the authority with any evidence to support what the grant had been used for.

3.17 The authority subsequently wrote to all grant recipients and obtained a large amount of information which helped secure some of the grant. However, as the audit was not until 5 years after the grants had been paid out, a few of the organisations had ceased trading, some were un-contactable, some had passed away and some did not respond, leaving the authority with an incomplete audit trail.

3.18 The grant offer letter with each grant recipient stated that they were only required to maintain records for 5 years from grant award, though the authority is still required by GOSE to have access to records until 2014.

3.19 The External Funding Officer identified £12,935 of grants that were still within the 5 years and should be sought for reclaim, however the legal department have confirmed that as the second payment was made to these grant recipients confirming that the authority was satisfied with the project progress and evidence at the time, that it is not possible to progress a reclaim against these recipients.

3.20 Project 034 – Marketing and Communications - £9,924

3.21 The reclaim on this project related to expenditure that the authority had tried to claim twice, which was identified through an audit at a later date.

3.22 Project 037 – Thanet Innovation Centre - £250,000

3.23 This was the Council’s single biggest reclaim and the partial repayment related to the authority not fulfilling all of the grant conditions and failing to notify GOSE of changes in the management approach following the original grant offer letter, that were considered substantial changes by GOSE. The authority has since agreed with GOSE some key changes in the management of the centre in order to overcome further reclaim.

3.24 The partial grant repayment specifically related to the authority running the facility (for VAT reasons) instead of the management being vested in a specialist Board - which resulted in a lower level of business networking than had been envisaged in the grant offer, that TDC had too large a percentage of tenants in the centre that were not innovative start up businesses and that the authority had not maintained fully detailed records of the jobs created and their longevity (including after tenants had moved out of the centre).

3.25 Project 085 – Stimulating Innovation and Entrepreneurship - £1,797

3.26 The reclaim related to ineligible accommodation costs that were claimed through the project, that were subsequently identified by audit.

3.27 Project 451 – Delivering Margate’s Creative Quarter - £21,331

3.28 This was the last project running through the 2000-2006 programme and finished on 31st December 2008. Unfortunately some of the expenditure claimed related to an invoice that covered a period after the project end date and the rest related to a grant offered at a rate of 45% of total spend, to a grant recipient, however the authority could not reclaim any grant, due to an error on the grant offer letter to the individual company, which stated 31st March 2009 as the end date for the project.

3.29 The authority did manage to attract additional grant from KCC due to invoices provided to them to assist in match funding their own ERDF project. The funds from this meant that TDC could repay the grant without any adverse impact on its own budgets.

3.30 Under this scheme, a grant of £68,750 was paid towards refurbishment works of 16 Marine Drive and 42 High Street. Works started in 2008 but the scheme has not been completed due to the withdrawal of the developer’s private sector funding. Action has commenced to recover the grant monies and GOSE has agreed that should any funds be recovered, that these could be recycled to support works that meet the original objectives of the programme.