tig march, 2010 final

8/9/2019 TIG March, 2010 Final

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Investigation

INTERNAL AUDIT REPORT

TOWN IMPROVEMENT GRANTS

March 20101639.09/10

FINAL


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Anglesey County CouncilMarch 2010

CONTENTS

SECTION PAG

1 Introduction 3

2 Executive Summary 3

Conclusions 5

3 Findings Town Improvement Grant Processes 6

4 Findings Site Visits & Interviews 12

5 Action Plan 16

Appendix A

ASSIGNMENT CONTROL:

Draft reportissued:

25 November2009

First Draft20 January

2010Second Draft

Auditors: Audit Manager

Internal Auditor

Responsesreceived:

03 March2010

Final reportissued:

09 March2010

Clientsponsor:

Section 151 Officer Corporate Director - Finance

Distribution:

Section 151 Officer Corporate Director - Finance;

Head of Service (Planning);

Audit Committee Chair

Printed: 5 May, 2010 File: 33367869.doc


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1. INTRODUCTION

1.1 This report relates to the administration of Town Improvement Grants bythe Anglesey County Council. Town improvement Grants are made for the

improvement of business premises to enhance the appearance of towncentres.

Welsh Assembly Government Agreement1.2 The Welsh Assembly Government (WAG) has the power to make Town

Improvement grants to fulfil its function of providing finance to assist in theurban regeneration of Wales including a designated TIG Area withinAnglesey. Further to this power the Welsh Assembly Government has thepower to appoint a Council to act as their agent to carry out, amongst otherthings, the function of the Welsh Assembly Government to provide financeto assist in the urban regeneration of the TIG area. The appointment of theAnglesey County Council as the agent to administer private sector TownImprovement Grants within the TIG area on Anglesey was subject to theterms and conditions set out in the schedule of the appointment letter whichwas dated 27th November 1996. (Appendix A copy of agreement andService Level Agreement)

1.3 The administration of the TIG area under the agency agreement with theWelsh Assembly Government is undertaken by the Councils PlanningServices.

Complaint Received1.4 The Council has received a complaint expressing concerns over theadministration of a particular Town Improvement Grant in Holyhead whichhas raised a number of issues surrounding the administration of thesegrants in general. This review will concentrate on the main areas of grantadministration and aims to enhance the controls in this area.

Scope of the Investigation1.5 The scope of the investigation will be the administration of the Town

Improvement Grants from approval of eligible works to the final claims forgrant monies to be released from the Welsh Assembly Government. The

review will consider the main requirements of the terms and conditions ofthe appointment of Anglesey County Council as agent for the WAG inconnection with the provision of new Town Improvement Grants as set outin the appointment letter of 27th November 1996.

New TIG Scheme1.6 Nota Bene The administration of Town Improvement Schemes has

changed considerably recently. The new arrangements will be the subject ofa separate review in the 2010/11 Internal Audit Operational Plan.

This means that the report will concentrate on determining the mainPage 4Page 4


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facts behind the processing of the TIG and recommendations will only bemade where they still apply to the general grant process.

2. EXECUTIVE SUMMARY

2.1 Compliance with Agency Agreement The Service Level Agreementwith the WAG is not specific about the level of financial checks orinspections of works to be carried out. However, in the case of thisproperty the requirements stated in the Agreement appear to have beencomplied with. The Council did obtain financial documentation in supportof the claim for TIG and passed this on to WAG for their assessment andthe Councils nominated officer did attend the property to carry outinspection of the works prior to processing the applicants claims forpayment to be made to him.

2.2 Segregation of Duties Although the Councils nominated Officer issolely responsible for the administration of the TIG work within theCouncil a segregation of duties over the determination of the eligibleworks, the inspection of works and the completion of requests for grantmonies to be paid by the WAG is provided by ensuring that the WAG iskept informed on the process of grant claims and is responsible for theapproval of the eligible works figure and approves the eventual claims forpayment received.

2.3 Supporting Documents No audit trail of work carried out has beenprovided by the contractor or the applicants agent to allow work

completed to be matched to invoices produced. Where documents havebeen provided showing cost analyses of eligible works etc. these havenot always been dated or date stamped as received by the Council. Thisagain has meant that an audit trail of documentation is made moredifficult. This lack of supporting documents relating to works completedis, we understand, a departure from normal with TIG grants.

2.4 Claims for Payment of Grant All three Claim Form for Payment ofGrant forms were completed by the Senior Planning Officer on behalf ofthe applicant and then signed by the applicant. The claims weresubmitted for the maximum amount of grant approved.

The third Claim Form completed by the Senior Planning Officer is notsupported by Interim Progress Payment documentation from BVUK. Wecan surmise however that the claimed total eligible expenditure figure onthis third Claim Form was 59 223 as the total grant figure claimed 47378 (incl VAT) is 80% of this total. It is not clear why the Senior PlanningOfficer submitted a claim form that was not supported by documentationfrom BVUK.

2.5 Inspections - Three inspections by the Senior Planning Officer in support

of the three Claim for Payment of Grant Forms signed by the applicant werePage 5Page 5


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made on 30-03-07, 04-07-07, and 25-10-07. The document used todetermine the work to be inspected was the list of eligible works categoriescontained in a letter dated 21st June 2005 which included a priced table ofthe main categories of works to be completed at that date. The SeniorPlanning Officer used the table in the letter as the basis of his inspections

and the Schedule of Works from WR Peters provided by BVUK as the basisfor the amounts to be claimed for grant purposes. Following the inspectioncarried out on 25-10-07 the Senior Planning Officer stated on the WorkInspection Sheet that all the eligible external work is complete and that thematerials and workmanship met with his approval. He subsequentlyrecommends the final payment of this claim to be certified and processed assoon as possible. The total eligible expenditure incurred to date figure onthe final Claim Form For Payment of Grant form was left blank, but on thetwo previous Claim Forms this figure has been stated as the same as thetotal eligible expenditure figure which on the final Claim Form is shown as59 923 (incl VAT) (in error as the actual Eligible Expenditure figure shouldhave been stated as 59 223.65).

2.6 On a subsequent inspection of the property it was determined by TheSenior Planning Officer and the WAG Regeneration Manager that the totalamount of works completed against the original priced Schedule of Workswas 45 023.65 (incl VAT)

2.7 Contingency A 10 000 contingency figure was included in the eligibleworks figure. No contingency work was requested, or approved, andtherefore the eligible works figure should have been reduced by the total of

the Contingency plus VAT, an amount of 11 750. Although both the SeniorPlanning Officer of the Council and the WAG Regeneration Manager wereaware of this, the full eligible works figure was included in the Claim Formfor Payment of Grant form and the full amount of approved grant wasclaimed for and paid by the WAG. We would have expected the grantawarded and paid by the WAG to have been the original approved grantfigure 47 378.92 (incl VAT) less 80% of the 11 750 = 9 400 (incl VAT)contingency element not used leaving a grant payment of .37 978.92 (inclVAT) based on the full eligible expenditure having been incurred.

2.8 Applicants Contributions The applicant has consistently stated that

he appointed BVUK as they had offered to reduce the amount of hiscontribution to the project. The applicant has also stated that he was awarethat he was required to make a 20% contribution to the cost of the eligibleworks. According to BVUK the applicant has made two payments to thecontractor of 29 375 and 17 265 in relation to the TIG in addition to anamount of 6 300 for associated fees included in the eligible expendituresum. Therefore the applicant has, as far as the paperwork is concerned, paid52 940.00 inc VAT and has received 47 378.92 incl VAT in grant moniesfrom the WAG. The applicants contribution at this point in relation to thetotal eligible expenditure figure of 59 223.65 would appear to be 5 562

incl VAT or 9.4%.Page 6Page 6


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The Council was misled about the amount of contribution paid by theapplicant in respect of the EHG undertaken at the same time at thisproperty and on the basis of this released EHG grant monies. As both theagent and the applicant were aware that a contribution for both grants

was required there is a prima facie case that the Council was deliberatelymisled.

CONCLUSIONS

o The Service Level Agreement between the Council and the WAG

does not clearly state the role of the Council in terms of theinspection process. There is no guidance as to the level of inspectionthat should take place and whether this includes the quantity, valueand quality of works carried out. In practice the inspections that didtake place were based on an estimate of the percentage completionof individual categories of main works and the final inspection sheetdoes refer to the material and workmanship meeting with theinspectors approval.

o There is evidence that BVUK has at the least allowed a perception to

exist that they can get TIG works completed for the grant moniesonly. This is obviously not the case and BVUK should be approachedto ensure that they make it clear to all applicants what theirresponsibilities are in terms of contributions to grant schemes. Thereis also evidence from the associated EHG that BVUK has misled the

Council in terms of the actually contributions made by the applicantand again this needs to be followed up.

o The paperwork provided by the contractor and agent in support of

invoices and Interim/Progress Payments certificates is inadequate toprovide an audit trail of actual works completed. The lack ofSchedules of Work completed relating back to the original Scheduleof Works upon which the eligible expenditure figure, and thus grantapproved figure, was based has made the determination of theamount of work done at the property difficult to determine. The factthat some key documents on file are undated and / or do not havedate received stamps on them has made determining an audit traileven more difficult.

o The contractor has stated that BVUK determined the amounts to beinvoiced. BVUK has stated that they do not annotate in detail theworks undertaken but ensure that the works claimed are in line withthe costs of the original schedule of works specifications andthereafter issued a certificate of Interim Progress Payment Form insupport of the contractors invoice. BVUK has also stated that theSenior Planning Officer determined the final eligible works figure.

There is therefore confusion over who was annotating in detail thePage 7Page 7


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by the Service Level Agreement with the WAG and to the extent that theCouncil complied with these requirements in the particular grant schemewhich is the basis of the complaint made.

3.1 Applicant Financial checks As required by the Service Level

Agreement a completed Application Form, Financial Questionnaire andBusiness Plan was received enclosed in a letter from RGR Partnership to theCouncil on 07-02-05. (see SLA Appendix A f)

3.2 Emails on the TIG file show that there was some concern at this time overthe applicants resources. There were also concerns that the applicantneeded additional support and that a Business Advisor was to be sourced forhim. In the end both the Business Advisor and support from Menter Monseem to have fallen through. (email 17-03-06)

3.3 A letter dated 08-04-05 from the applicant states that payment of the7.7k agency fees to RGR Partnership would cause him significantfinancial hardship. A letter from WAG to the applicant dated 09-11-06shows the applicants contribution to be 11.8k TIG and 31.1k EHG. Atotal of 42.9k.

3.4 A letter dated 27-11-06 from WAG confirms that a letter from theapplicants bank dated 22-11-06 shows that a loan of 45k over 10 yearshas been awarded.

3.5 During a telephone conversation on 28-10-09 with the applicant the Head

of Audit was informed by the applicant that he had written a letter to theWAG in June 2005 stating his concerns over the financial position and askingthat his application be cancelled. The Head of Audit requested confirmationof the receipt of this letter from the WAG on 02-11-09 but was informed thatno such expression of concern had been received and that if it been thenthere would have been no hesitation in cancelling the grant application.

The applicant at a meeting held in the Council Offices on 17-11-09 againstated that he had sent a letter in 2005 asking for the grant process to beended. The applicant offered to provide a copy of this letter which washand written. No copy of the applicants handwritten letter has been

received to date

3.6 The Senior Planning Officer has stated that the documentation for thefinancial checks was obtained by him but that such documents were thenpassed to the WAG for them to make a judgement as to the suitability of theapplicant to continue the grant process. (Witness Statement 11-11-09)Having received notification of the applicants obtaining of a loan of 45kthe grant process continued.

Segregation of Duties

3.7 Single Point of Contact - The Service Level Agreement requires thatPage 9Page 9


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the Council nominates one officer to act as a contact point at the Council.(Appendix A d) The Council is also responsible for instituting effectiveprocedures to carry out its obligations referred in paragraph 2 of the Termsand Conditions and to ensure compliance with the Town ImprovementExplanatory Manual, issued by the WAG, the Code of Practice on Financial

Procedures and the Welsh Office Urban Development Guidelines. (SLAAppendix A c)

3.8 The Council nominated officer was the Senior Planning Officer andprocedures were put in place for the operation of the TIG.

3.9 The procedures in place provide a segregation of duties between thedetermination of the eligible works, the inspection of works and thecompletion of requests for grant monies to be paid by the WAG by ensuringthat the WAG is kept informed on the process of grant claims and has toapprove the eligible works figure and the eventual claims for paymentreceived. However, there is no formal segregation of duties in relation to theinspection of TIG works on site.

3.10 There is evidence on the Work Inspection Sheets that at the time of thelast inspection undertaken on 25-10-07, according to the Signed WorksInspection Sheet, other officers from the Council were present at theproperty (see Table 1 below). We also understand that the WAGRegeneration Manager also attended the property and would havewitnessed the work in progress.

3.11 Although there is little formal segregation of duties in the Councilsprocedures such segregation is provided by the approval authority of theWAG over the key elements of the process. In addition a number of CouncilOfficers and WAG Officers attended the property to see the works anddecisions made on the amount of eligible works and the grant figureapproved were undertaken with the WAG.

Supporting Documents3.12 Dating of Documents - The Service Level Agreement requires that the

Council retain all original papers supporting each application or enquiryconcerning a new TIG for at least five years. Review of TIG files shows that

relevant paperwork is retained. However, it was sometimes difficult todetermine an audit trail of documents as they were not always dated and /orhave a date stamp of when received by the Council. Examples of undateddocuments are the BVUK WDA Town Improvement Grant Cost Analysis,summaries of additional or omitted works etc. (IA TIG file 6.4 & 6.7)

3.13 This lack of audit trail makes it difficult to determine the sequence ofevents with certainty, and has increased the risk of irregularity goingundetected, provides no protection to staff and limits the Councils ability toanswer allegations of irregularity.

Page 10Page 10


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3.14 Schedules of Work Completed We would have expected thesupporting documents held on file to include evidence provided by thebuilder / agent as to the works and the value of works undertaken for whicha relevant Certificate of Interim Payment was produced. However, review ofthe file and discussions with the builder and the Senior Planning Officer

found that no such schedules were produced to support the invoices raisedby the builder and the Certificates produced by the agent. (Please seeadditional information at section 4.9 to 4.12).

3.15 This has meant that it is not possible from the paperwork to determinethe works that have been undertaken at the property and the value of thiswork as set out in the original schedule of works priced document. This lackof audit trail has increased the risk of irregularity going undetected,provides no protection to staff and limits the Councils ability to answerallegations of irregularity.

Inspections of Properties3.16 Inspections - The Service Level Agreement states that the Council shall

during the five year period commencing on the Grant Date of a new TIGinspect each property that is the subject of a new TIG once annually todetermine whether or not the conditions of the relevant new TIG are beingcomplied with. (Appendix A k))

3.17 Review of the TIG file shows evidence of three inspections by the SeniorPlanning Officer in support of the three Claim for Payment of Grant Formscompleted by the applicant. These are dated 30-03-07, 04-07-07, and 25-

10-07.

3.18 Review of the Works Inspections Sheets shows the following:

Table 1

Page 11

WorksInspection

Signed&Dated

Recommendation Made By Senior PlanningOfficer

Sheet 1

AlsoPresent:contractor

SeniorPlanning

Officer30-03-07

All the main roofing was complete and 50% of therear roofing. 75% of the work to the chimney stackwas also complete. I am able to recommend an

interim claim for certification and approval inaccord with the information provided.

Sheet 2

AlsoPresent:BVUKagent

SeniorPlanningOfficer04-07-07

Approx 70% of the eligible work was complete andthe materials and workmanship met with myapproval. I am able to recommend a second interimclaim for payment in accord with the informationprovided.

Sheet 3

AlsoPresent:contractorapplicantand 2 otherCouncilstaff

SeniorPlanningOfficer25-10-07

All the eligible external work is complete. I can

also confirm that the materials and workmanshipmet with my approval. I can thus recommend thefinal payment of this claim to be certified andprocessed as soon as possible.

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Each Works Inspection Sheet also includes a more detailed description ofwork inspected and the percentage of completion of that work.

3.19 We were informed by the Senior Planning Officer that the document used

to determine the work to be inspected was the letter dated 21st June 2005which included a priced table of the main categories of works to becompleted at that date. This letter was from the WAG to the applicant. Thepriced table in this letter showed a total amount for External Works at 41500 incl VAT at that date in June 2005.

3.20 The Senior Planning Officer used the table in the letter as the basis of hisinspections and the priced Schedule of Works of WR Peters provided byBVUK as the basis for the amounts to be claimed for grant purposes.

3.21 The categories of works inspected therefore were:

Roof, items, timbers, fascias,gutter etc.ScaffoldRepair frontage windowsNew windows to rearChimneyRepair and paint elevationsShop front

Claim Form for Payment of Grant3.22 Three Claim Form for Payment of Grant forms were completed and each

was signed and datedby the applicant and submitted to the Senior PlanningOfficer for inspection and completion of the Certification of Claim part of theforms. Details of these Claim Form for Payment of Grant forms are providedbelow:

Table 2TIG Claim 1 Claim 2 Claim 3

Grant Offer 47,378.00 47,378.00 47,378.00

Total Eligible Expenditure 35,675.00 56,205.06 59,923.00

Total Eligible Expenditure to Date 35,675.00 56,205.06 left blank

Grant Received to Date 0.00 28,486.00 43,378.00

Grant Now Claimed 28,486.00 14,892.00 4,000.00

Balance of Grant Remaining 18,892.00 4,000.00 0.00

Claimed Signed by Applicant Applicant Applicant Applicant

Date of Signature of Applicant 23/03/2007 26/06/2007 08/12/2007

Related Works Inspection Sheet Date 30/03/2007 04/07/2007 25/10/2007

Covering Letter Date 30/03/2007 07/08/2007 12/12/2007

Signed by Senior Senior Senior

Page 12Page 12


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PlanningOfficer

PlanningOfficer

PlanningOfficer

3.23 Table 2 shows the total of eligible expenditure claimed as at 08-12-07 onclaim three a figure of 59 923 was stated. This should have been the

original eligible expenditure figure of 59 223. The total amount of grantwas claimed on the three claim forms submitted a total of 47 378.

3.24 All claim forms were signed by the applicant, although the figuresclaimed for appear to be in different hand writing which was confirmed bythe Senior Planning Officer as being his own hand writing. The SeniorPlanning Officer confirmed that he had completed all of the claim forms forthe applicant to sign. All certificates for payment were signed off andsubmitted for payment by the Senior Planning Officer.

3.25 The date of the Work Inspection Sheet relating to Claim 3 pre dates the

date of application by the applicant by over a month. We believe that thiswas to allow time for the builder to carry out some remedial works.

Certificates for Interim/Progress Payment3.26 Three Certificates for Interim / Progress Payments were submitted by

BVUK as detailed below:

Table 3TIG Submitted by BVUK

Certificate HeadingsCertificate No 1Dated 23-03-07

Certificate No 2Dated 11-04-07

Certificate No 3Dated 02-07-07

Original contract Value 54,213.00 53,149.00* 53,149.00*

Total value of works 26,315.79 42,105.26 47,834.10

Retention 1,315.79 2,105.26 2,391.70

Amount payable this certificate 25,000.00 40,000.00 45,442.40

Less previous payments 0.00 25,000.00 40,000.00

Net amount due 25,000.00 15,000.00 5,442.40

VAT 4,375.00 2,625.00 952.42

Total Payable 29,375.00 17,625.00 6,394.82

BVUK confirmed as paid by

applicant 16-04-0729,375.00

BVUK confirmed Paid by applicant09-05-07

17,625.00

BVUK confirmed Paid by applicant 0.00

* This figure in Certificates 2 & 3 should be 54213

3.27 The original contract value figure stated on the forms should be 54 213and not 53 149 which is the original contract value of the Empty HomesGrant works which was being undertaken at this property at the same time.

3.28 Under the terms of the grant the applicant was also required to make

payments of 5 292.32 agency fees and 1008.15 Building Regulations feePage 13Page 13


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both inclusive of VAT. We understand that these payments were made inpayments of 6300.47 paid in March 2007. This amount was included in theoriginal eligible expenditure figure stated on the BVUK WDA Coast Analysis.

Town Improvement Grant Eligible Works

3.29 Eligible Works Cost - The BVUK WDA Town Improvement Grant CostAnalysis sheet attached to covering letter dated 10th October 2006 showsthe original tender price as 63 700.28 inc VAT. Omissions and additionsshown on this Cost Analysis sheet show additions of 15 800 (including 10000 ex VAT for contingencies) and omissions of 24 972 (including 5 000contingency). Overall the additions and omissions amounted to a reductionof 10 777 inc VAT which brought the construction costs to 52 923.18.Agents fees of 5292.32 (incl VAT) and other fees amounting to 1008.15(inc VAT) were included in the eligible expenditure figure which brought thetotal eligible cost to 59 223.65 inclusive of VAT.

3.30 The Town Improvement Grant was approved on 09-11-06 on the basis of80% of the eligible expenditure figure being a total grant figure of 47378.92 inclusive of VAT.

3.31 Contingency - A letter dated 10 October 2006 from the applicantssecond appointed agent gives details of the tender process and a CostAnalysis Sheet for the WDA grant. Attached to these sheets is a Summary ofAdditional and Omitted Works which includes a figure of 10 000 ex VAT fora contingency sum. The explanation given by the applicants secondappointed agent for this contingency sum was that this figure has been

added (after the tender process) as:

the contractor is concerned that there is no allowancewhatsoever for any unforeseen works and is requesting thata contingency sum of 10k be included (but not to be usedunless discussed with the Councils Senior Planning Officer) ifthis situation arose.

3.32 However, a review of the schedule of works completed by WR Peters Ltdshows on page 17 a contingency sum of 5 000 which was already includedin their tender price of 54 213. This 5 000 was included in the 24 972

omissions shown on the Cost Analysis sheet.

3.33 We wrote to BVUK to comment on the above and in a written responsedated 21st September 2009 they stated that:

a meeting was held on 31 August 2006 where a contingencyfigure was discussed. Present at this meeting were arepresentative from the WDA, the Senior Planning Officer(IOACC), the applicant and the applicants agent from BVUK.Our representative proposed a figure of 10 000 in order to

assist our client and only to be utilised in the event ofPage 14Page 14


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unforeseen works. Furthermore in a telephone conversationwith the WAG on 15th September 2006 our agent againproposed this figure.(*officers were named in this communication but their nameshave been excluded for Data Protection purposes here.)

A decision as to the contingency figure was obviously madeby the local authority and as a consequence work wascommenced on the property.

There is no evidence that any approval to utilise the 10 000 contingencywas ever made or approved. Therefore, we would have expected theeligible expenditure figure to have been reduced by 10 000 plus VAT toa figure of 47 473 inc VAT (59 223 eligible expenditure figure less 11750 unused contingency). The amount of grant awarded and paid by theWAG was 80% of the original eligible expenditure figure including thecontingency at 47 378.92 inclusive of VAT.

3.34 In a letter dated 20-10-09 BVUK in response to a query concerning theamount of eligible expenditure on the TIG stated that the figure of 47834.10 (56 205.07 incl VAT) was arrived out by your Senior PlanningOfficer. This is consistent with the second claim form completed by theSenior Planning Officer which was signed by the applicant on 26-06-07which corresponds to the agents Interim Certificate Payment number 3dated 02-07-07. It is not clear on what basis the Senior Planning Officercompleted the Final claim form number three which includes the full eligible

expenditure figure of 59 223 incl VAT.

3.35 It would appear therefore that the claim form in this instance wascompleted by the Senior Planning Officer and signed by the applicant priorto receipt of the agents Interim /Progress Certificate number 3 and that thefinal Claim Form completed in December 2007 was not based on anInterim/Progress payment certificate from the agent.

3.36 As the Senior Planning Officer and the WAG Regeneration Manager wereboth apparently aware of the 10 000 contingency and have subsequentlyconfirmed that there was no request, or approval for any contingency sum

to be used, it is not clear why the Claim Forms certified by the SeniorPlanning Officer and sent for approval and payment to the WAGRegeneration Manager were not reduced by the contingency amount beforepayment was made.

4. FINDINGS - SITE VISITS & INTERVIEWS

4.1 Applicants Contributions The applicant has on several occasionsstated to members of the Internal Audit Team that he appointed BVUK as his

agents as they had informed him that they could get the work carried outPage 15Page 15


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for only the grant monies. In a letter dated 4th October 2007 from theapplicant to BVUK the applicant stated that;

You came into my shop with X (another named client ofBVUK) , introduced yourself and told me that if Id use you as

my agent I would get the job done for nothing. You thenproceeded to tell me that you could make a start in six weeks.That was in November 2005, was an offer no one could refuseand was the reason that I sacked RGR Partnership.

4.2 In an undated and unsigned letter to the Ombudsman with a date stampas received by the Ombudsman on 28th March 2008 the applicant statedthat:

It was at this time, late in 2005, I was approached by (a namedagent) of Best Value UK with a promise that if I sacked RGRPartnership and employed him, I would get the work done withno applicants contribution and that the work would commencein a matter of weeks.

4.3 In an interim independent report issued in October 2007 on the Standardof work carried out and associated matters at the property the independentsurveyor employed by the applicant stated that:

the applicant was approached by Messrs. Best Value UK, whosuggested that if he were to appoint them a his agent they would

be able to cover the whole cost of the works from grant aid, aprospect he felt unable to turn down, despite some doubts as tohow they could achieve this.

4.4 At a meeting held with the applicant on 17-11-09 the applicant confirmedthat he had been informed by BVUK that they would get the work carriedout for the grant monies with little cost to himself. The applicant explainedthat he understood that if the grant work on the internal work could bereduced to 37 500 then this would be paid by the Council as a grant awardof 37 500 was available for two private leasing flats as described in thescheme. The applicant confirmed at this meeting that he was aware that a

contribution of 20% of the TIG works was required to be made by himself.We understand that at the time that the EHG was awarded the applicantwas liable to contribute 25% of the total cost of eligible expenditure andthat 100% grant for this work was not available to him at this time.

4.5 As part of the requirement for the Empty Homes Grant the applicantscontribution was required to be paid prior to the Council considering thepayment of grant monies. A letter received from BVUK dated 02-07-07stated that I can confirm that the applicant has paid our fee in full and thebuilder the sum of 24 950.08. However, BVUK stated in a letter dated 03-

08-09 after a request for clarification was made by the Council that thePage 16Page 16


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applicant did pay our fee in full. Confirmation as to whether the contractorwas paid in full would have come from the contractor and/or the client toBest Value UK Ltd.

4.6 In a letter dated 20-10-09 again in response to a request for information

from the Council BVUK confirmed that the payments made by the applicantincluded only a payment of 10 299 in relation to the Empty Homes Grant. Aletter from the applicants accountant dated 15-09-08 states that nopayment had been made in respect of the first interim payment in the sumof 24 950.00.

4.7 It would appear therefore that the applicant changed his agent in orderto reduce or eliminate his liability to pay contribution and that the Councilwas mis lead by the letter dated 02-07-07 from BVUK that the applicant hadpaid his required initial contribution to the Empty Homes Grant of 24950.00. It was only on the basis of this, as it turns out incorrect,confirmation of contribution payment that grant monies were released bythe Council.

4.8 These facts could constitute a prima facie case that one or both of theapplicant and the agent has claimed / obtained money through misleadingthe Council as both parties were aware that a contribution from theapplicant was required before grant monies could be released as stated inthe grant conditions.

NB Further investigation with BVUK to verify how this perception

arose is necessary if any further action is to be considered.

4.9 Supervision of works by agent During a visit to the builders officeson 12-10-09 the builder was asked if he could verify for each of the invoicesproduced against which grant eligible works each was raised. The builderstated that he could not confirm this as BVUK had taken items of work offeach grant to add to the other at various times. The builder stated that onlyBVUK would be able to say what works were undertaken against each grantand that this would be in the agents head rather than on paper. The builderalso stated that BVUK were trying to reduce the costs of the work in theinterests of their client.

4.10 The builder also stated that he had been informed by BVUK as to thevalue of invoices to be raised.

4.11 During a site visit to the agents offices undertaken on 04-02-09 theagent was asked what procedures were in place for the checking ofcompleted work to ensure that the amounts invoiced were appropriate. Theagent stated that BVUK did not annotate in detail the works undertaken, butundertook a general sample check, ensuring that the claim was in line withthe costs of the original schedule of works specifications and thereafter

issued a certificate of Interim Progress Payment Form in support of thePage 17Page 17


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contractors invoice.

4.12 The Senior Planning Officer was asked about the supporting documentsthat would normally be expected to be produced in support of works carriedout by contractors and submitted as part of the grants process. The Senior

Planning Officer stated that it is usual for an interim request for payment tobe supported by a priced schedule of works completed by the contractor, inthe case of this property (named in original) such certificates werecompleted but no priced schedule of works undertaken were provided insupport of the certificates submitted. In the case of this property a moregeneral schedule of works under bullet point headings was provided by theWAG Regeneration Manager and this was used in lieu of such schedules.The main areas bullet pointed by the WAG were re roofing, repairs to frontelevation, and replacement of rear windows, and also rendering the rear.The Senior Planning Officer also stated that As far as I am aware and in myexperience with TIG works, this a unique exception to normal WAGpractices. (We understand that this relates to the letter from the WAG tothe applicant as detailed at 3.19 to 3.21 above).

However, the Senior Planning Officer has also stated that the inspectionsincluded reference to the original priced schedule of works provided byWR Peters.

4.13 As stated at 3.13 above this has meant that it is not possible from thepaperwork to determine the works that have been undertaken at theproperty and the value of this work as set out in the original schedule of

works priced document. This lack of audit trail has increased the risk ofirregularity going undetected, provides no protection to staff and limits theCouncils ability to answer allegations of irregularity.

4.14 It should also be noted that the contractor and the agent putresponsibility for the amounts to be invoiced on each other. Each statingthat the other provided the amounts to be invoiced.

4.15 Meeting with WAG A meeting was arranged with the WAGRegeneration Manager and WAG Auditors to discuss concerns expressed bythe IOACC Internal Audit Team over the amount of grant money awarded

which appeared to include a large element of contingency (10 000).

4.16 The IOACC Internal Audit team was also keen to ascertain the value ofworks actually carried out at the property in relation to this grant as theapplicant has consistently complained that less work than claimed for grantpurposes has been carried out.

4.17 At this meeting it was agreed that an inspector from the WAG and fromthe Council would produce a combined schedule of completed works andvisit the property to ascertain if this work had been carried out and todetermine a estimated final cost of works actually carried out..

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4.18 Joint Inspection October 2009 -The joint inspection visit took place inOctober 2009 based on an agreed initial cost value of 45 041 ex VAT (52923.18 incl VAT) as per BVUKs WDA Cost Analysis sheet. After deductingthe 10 000 unclaimed contingency and further works amounting to 2 151and adding 5 428 additional work an estimated figure for TIG work actually

completed of 38 318 ex VAT (45 023.65 incl VAT ) was determined.

4.19 The estimated figure for completed TIG works calculated above of 45023.65 can be compared to the actual amount included on the threeCertificate of Interim/Progress Payments issued by BVUK which total 53394.82 incl VAT. (see report at 3.26 above). A difference of 8 371.17.

4.20 It should also be noted that as at 3.35 above the final TIG Claim Formcompleted by the Senior Planning Officer on behalf of the applicant did notinclude a total eligible expenditure to date figure but was produced after thethird BVUK Interim Progress Payment certificate (number 3). Therefore thisthird Claim Form is not supported by supporting documentation from BVUK.We can surmise however that the claimed total eligible expenditure figurewas 59 223 as the total grant figure claimed at 80% was 47 378 (inclVAT).

4.21 Possible Overpayment of grant - If the actual completed eligibleexpenditure figure is 45 023.65 and not the amount of eligible expenditureclaimed which was the maximum amount of 52 923.18 (excludes eligiblefees of 6300.47) then the grant figure of 80% of actual eligible expenditurecan be calculated as 45 023.65 plus 6 300.47 eligible fees at 51 324.12

times 80% resulting in a grant figure of 41 059.30. A difference of 6319.62.

4.22 If the revised inspected figure is correct then this also means that theapplicant may have been over invoiced for this work. According to a letterreceived from BVUK dated 20-10-09 it would appear that the applicant haspaid two amounts towards the TIG amounting to 47 000 inc VAT (29 375and 17 625) and a figure of 6 300 in relation to eligible agents fees.

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5 ACTION PLAN

The priority of the findings and recommendations are as follows:

Fundamental - action is imperative to ensure thatSignificant- requires action to avoid exposure to significant Merits Attention -action advised to enhancethe objectives for the area under review are met. risks in achieving the objectives for the area under review.

control or improve operational efficiency.

Para Recommendation Categorisation

Accepted

Y/N

Management comment Implementationdate

Managerresponsible

1 The procedures for the new TIGadministration should be reviewed to ensurethat they provide clear guidance on the roleof the Council and the WAG in relation toeach stage of the grants administrationprocess.

Significant Yes TIG replaced by new Property &Environment Grant (PEG)

April, 2010 PrincipalPlanningOfficer

2 BVUK should be approached about the waythat they advertise their services in relationto public sector grants and in particular as toclaims they appear to have made that theycould get grant works done for no applicantcontribution.

Significant Yes Limited to new PEG grant which weare responsible for


SeniorPlanningOfficer

3 An agreed Code of Practice for agents

administering TIG grants should be drawn upincluding specific requirements for thedetailed annotating o f works completed tobe provided with each certificate forpayment and invoice issued by the agentscontractor.

Significant Yes To be included in application pack April, 2010 Principal

PlanningOfficer

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5 ACTION PLAN





Accepted

Y/N


Managerresponsible

4 The Council should ensure that alldocuments relating to grant administrationare clearly date stamped on receipt beforefiling in the appropriate file.

Agents should be asked to ensure that alldocuments produced by them and submittedto the Council are dated.

Significant Yes New procedures to be agreed withdate stamping documents for PEG


5 The Planning services should ensure that noClaim Forms for TIG release should becompleted without appropriate supportingdocumentation from the agent / contractor /applicant, whichever is responsible forsupervising the relevant scheme.

Significant Yes To be included within new proceduresfor PEG


6Unused contingency sums included ineligible works figures should be deductedfrom final eligible expenditure figures whendetermining the final amount of grant to bepaid.

Significant Yes As aboveApril, 2010

PrincipalPlanningOfficer

SeniorPlanningOfficer

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5 ACTION PLAN





Accepted

Y/N


Managerresponsible

7 Formal segregation of duties and / orsecond officer authorisation between staffinspecting properties and those producingdocumentation for release of grant moniesshould be introduced.

Significant Yes As above April, 2010 PrincipalPlanningOfficer

8 The WAG should decide what action, if any,should be taken to verify the amount ofgrant that should have been awarded in thiscase and to reclaim any grant moniesdeemed to have been overpaid and fromwhom.

Significant Yes Internal Audit has contacted the WAGto inform them of the outcome oftheir investigations into this TIG andthe possibility of an overpaymenthaving been made. WAG is stillconsidering what action, if any, totake at the time of this report.

April 2010 Head ofServi9ceAudit

9 The applicant should be informed of theoutcome of the investigation into theadministration of the TIG and provided witha copy of the finalised report along with anycomments that the WAG may have to add

to the report.

Significant Yes Internal Audit will liaise with the WAGover the response to be made to theapplicant.

April 2010 Head ofServi9ceAudit

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APPENDIX A

Extract of Main Terms and Conditions of the Agency AgreementThe main terms and conditions as set out in the Terms and Conditions

governing the appointment of the Council as agents are summarised as:

a) The Council to act as agent in regards of the marketing,investigation and monitoring of Town Improvement Grants. (Terms &Conditions para. 2)

b) All marketing to be carried out with material provided by the WDAand to be provided by the Council to applicants. (Terms & Conditionspara. 2)

c) The Council to institute effective procedures to carry out its

obligations referred in paragraph 2 of the Terms and Conditionsand to ensure compliance with the Town Improvement ExplanatoryManual, issued by the WDA, the Code of Practice on FinancialProcedures and the Welsh Office Urban Development Guidelines.(Terms & Conditions para. 3)

d) The Council will provide adequate and competent staff for theadministration of the TIG and will nominate one officer to act as acontact point at the Council. For applicants. (Terms & Conditions para. 4)

e) The Council shall provide the prospective applicant for a new TIG

with a copy of the Explanatory Manual and any other criteriaspecified by the WDA. (Terms & Conditions para. 5)

f) Council contact to meet applicants at relevant buildings to discussthe application in detail and the applicant should provide an outlineof the proposed scheme, including a budget estimate of the capitalcosts. (Terms & Conditions para. 6)

g) The applicant must complete an application form for a new TIG andthe Council must draw the applicants attention to the terms andconditions set out in the Explanatory Manual. A financialquestionnaire should also be completed by the applicant. TheCouncil shall ensure that the forms are completed properly andthat all relevant documents have been attached and forward themto the WDA. (Terms & Conditions para. 6 & 7)

h) If after the receipt of an Outline Grant Offer Letter from the WDAthe applicant wishes to proceed the Council shall obtain a DetailedApplication for Town Improvement Grant from the applicant. (Terms& Conditions para. 87)

i) Unless payment in instalments has been agreed by the WDAPage 23Page 23


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payment will only be made once works have been completed and aproperly completed Grant Claim Form and Certificate of LocalAuthority have been received by the WDA. (Terms & Conditions para. 11)

j) The Council shall submit to the WDA on at least a monthly basis

such information regarding enquiries, applications, investigations,sanctions and monitoring as is required by the WAG in respect ofthe TIG scheme. (Terms & Conditions para. 13)

k) The Council shall during the five year period commencing on theGrant Date of a new TIG inspect each property that is the subject ofa new TIG once annually to determine whether or not theconditions of the relevant new TIG are being complied with andreport the results to the WDA within seven days of the inspectiondate. (Terms & Conditions para 14)

l) The Council will accept responsibility for and indemnify and keepindemnified the WDA against all losses, actions, costs, claims,demands and expenses arising from any negligent act or omissionin the operation and administration of the TIG scheme. (Terms &Conditions para. 17)

m) The Council will retain all original papers supporting eachapplication or enquiry concerning a new TIG for at least five yearsfrom the Grant Date of the last new TIG monitored by the Councilunder this agreement. (Terms & Conditions para. 18)

n) The Council shall be entitled to receive an administration fee of theamount specified in the letter to which this Schedule is attached inrelation to each new TIG granted. (Terms & Conditions para. 24)

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