audit services manager memo - whatdotheyknow
TRANSCRIPT
John Benbow Principal Auditor Business Services
telephone 01782 236058 fax 01782 232312 email [email protected]
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for the attention of John van de Laarschot, Chief Executive cc Hardial Bhogal, Director City Renewal Peter Bates, Assistant Director Financial Services (Section 151 Officer)
our ref AS\CON\DRC 070\112446
from Sue Woodall, Audit Services Manager
date 16/08/11
Business Services Swann House Boothen Road Stoke-on-Trent ST4 4UJ Steve Sankey Acting Director
Audit Services Sue Woodall Audit Services Manager
memo
PRIVATE AND CONFIDENTIAL
Funding of the Demolition of Boothen Methodist Church
1. Summary of Findings
Boothen Methodist Church
1.1. Boothen Methodist Church, Portland Street, Hanley (the Church) was acquired by Great
Places Housing Association (Great Places) in 2007. Structural reports commissioned by
Great Places, issued in February 2008 and October 2009 documented problems with the
fabric of the building. However as no such report was undertaken at the time of acquisition
the remedial works were not covered by Great Places’s insurance. (7.1, 7.3, 7.4, 8.6)
1.2. In June 2010 Great Places made a request of the Authority to fund the demolition of the
chapel section of the Church, making reference to the Voluntary Acquisition Funding
Agreement they had with the Authority as the leading Registered Social Landlord for the
area. (9.2)
1.3. Justification to demolish the chapel section of the Church was put forward by Great Places
and was accepted by the Authority without recourse to third party verification e.g.
commissioned structural reports. (9.3)
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1.4. From the documents seen it is concluded that the Programme Manager (PB) agreed to the
Authority funding the demolition of the chapel section of the Church by Great Places, at an
estimated cost of £37,569 (including VAT), using funds allocated to the Voluntary
Acquisition Funding Agreement for the City Centre North West Area of Major Intervention.
This programme formed part of the Housing Market Renewal Pathfinder. (9.7, 9.9)
1.5. The basis for the decision to fund the demolition of the chapel section of the Church appears to have been the overriding presumption within RENEW that the City Centre North West Area of Major Intervention was to be declared a clearance area and therefore subject to future demolition. (9.10)
1.6. The Assistant Director City Regeneration commented that the decision to fund the
demolition in advance of the anticipated declaration of the area was an act of “goodwill” on
the part of the Authority.
1.7. The opinion was expressed by the Authority’s Principal Solicitor that this informal decision,
whilst committing the Authority to fund the demolition, was not within the scope of the
Voluntary Acquisition Funding Agreement. He has advised that it is possible to formalise
the arrangement retrospectively. (9.11)
1.8. Consultation with residents of the area in respect of the demolition of the chapel seemed to
be fragmented. (10.5)
1.9. It is understood that whilst the chapel section of the Church has been demolished, it
appears that the Authority has yet to receive complete documentation to verify the actual
expenditure incurred to do this. (10.6)
1.10. The above decision/agreement was neither formally recorded nor approved by the Authority.
1.11. The North Staffordshire Housing Market Renewal Pathfinder Market Restructuring
(Implementation) Agreement, dated 2004 stated eligible expenditure to include that “…in
relation to land, its acquisition, reclamation, improvement, or refurbishment for the purpose
of redevelopment for residential or mixed use” (11.1)
1.12. In June 2010 the Housing Market Renewal Budget 2010/2011 was un-ring fenced. (11.4).
Voluntary Acquisition Funding Agreement (City Centre North West Area of Major
Intervention)
1.13. Officers from RENEW explained that the rationale for this agreement was the expectation that the area would be declared a clearance area, following completion of a Neighbourhood Renewal Assessment. The pre-emptive voluntary acquisition of properties was undertaken to reduce the opportunity of speculators acquiring these properties and making a financial gain, at a cost to the Authority, when compulsory purchase orders were enacted to clear the area. (11.8)
1.14. On the 24th December 2009 the Authority signed an agreement to provide Great Places with
funding of up to £4,000,000, to acquire up to 400 properties as agent of the Authority within
the above area. (11.9, 11.10)
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1.15. Under the Voluntary Acquisition Funding Agreement the Authority has paid to date a total of
£2,536,000 to fund the acquisition and management costs of 35 properties by Great Places,
and also the abortive costs in relation to a number of other potential acquisitions from which
either the Authority or the owner withdrew their agreement. The Assistant Director City
Renewal (JT) commented that had Great Places completed all the acquisitions the Authority
had given agreement to proceed with by August 2010, the total spend would by now have
exceeded £3 million. However, the voluntary acquisition programme was suddenly ended
following a change in Central Government in 2010 and the termination of the Housing
Market Renewal Pathfinder. (11.20, 11.22)
1.16. The existing procedures within RENEW seemed unclear as to which officers were
responsible for authorising funding payments. This ambiguity was compounded by
procedures which had been primarily set up to process payments in arrears and not
advances as in the case of this Voluntary Acquisition Funding Agreement. At the time of
this review it is understood that these issues are being reviewed and addressed. (11.23 –
11.26, 11.29)
1.17. The Authority has yet to receive full and robust evidence to support the actual expenditure
incurred by Great Places. To date, following requests made by the Monitoring and
Performance Assistant (HM), documentary evidence has been received to the value of
£1,049,815 in support of defrayment. The Authority has received recent correspondence
from Great Places saying documentation to the value of a further £775,742 is to be
submitted for verification. The Authority continues to pursue outstanding documentation to
support actual expenditure. (11.28)
1.18. A Progress Report received from Great Places on the 10th August 2011 analysed the
amount incurred and committed to acquire properties and forecast a total spend including
management costs in the region of £2.3 million. At the time of this review, officers within
RENEW expressed the opinion that they expected, once the programme was concluded,
approximately £100,000 would be repaid to the Authority, by Great Places. (11.30, 11.31)
1.19. The latest forecast expenditure referred to above includes a figure of £28,311 in respect of
the Church. The figure was described “Agreed that demolition costs would come out of this
budget”. (12.1)
1.20. The Authority has submitted a bid for Transitional Funding of approximately £8,000,000,
which is to be match funded, to fund proposals which include both refurbishment and
demolition of properties in the Portland Street area. (13.2)
2. Conclusions
2.1. The management of the Voluntary Acquisition Funding Agreement was undertaken without
expected rigour and recourse to adequate documentary evidence to support the expenditure
incurred, to date, prior to the continued advancement of funding for the voluntary
acquisitions. The agreement to fund the demolition of the chapel section of the Church
reflected the informality applied to this Funding Agreement.
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2.2. The following questions (a – d) have been raised by a member of the Portland and Century
Residents’ Association (PACRA). From the review, the following has been concluded:
a. On what basis were public funds paid to fund the demolition?
2.3. Great Places, as the lead registered social landlord in respect of this locality, entered a
Voluntary Acquisition Funding Agreement with the Authority in 2009, as part of the Housing
Market Renewal Pathfinder. With reference to this Agreement, Great Places requested
funding to demolish the chapel section of the Church.
2.4. The Authority agreed to fund this demolition in anticipation that the area was to be declared for clearance, following the conclusion of a Neighbourhood Renewal Assessment. However, with the demise of the Housing Market Renewal Pathfinder following a change in Central Government in 2010, funding to continue the Voluntary Acquisition Funding Agreement provided by Central Government ceased.
2.5. No formal report setting out the request or decision was drawn up. Following a thorough investigation into this matter recommendations and actions have been agreed and implemented to improve the Authority’s procedures in respect of this.
b. What was the amount of funding provided by the Authority?
2.6. The Authority agreed to fund forecast costs of £37,569 (including VAT) using grant money
received under the Housing Market Renewal Pathfinder. The Authority is in the process of
confirming the actual cost of the demolition.
c. What was the reason for the Authority to fund the demolition?
2.7. See Question a. above (2.3 – 2.5)
d. Was the funding provided from the Portland Street Area Acquisition Fund?
2.8. The demolition is to be funded by money originally allocated to the Voluntary Acquisition
Funding Agreement, which was part of the Housing Market Renewal Pathfinder.
3. Risks of Note
3.1. From the work undertaken it is the opinion of Audit Services that the following risks to the
Authority, in respect of the findings of this review, are to be noted:
3.2. As it is understood that the management costs charged by Great Places for the properties
acquired are time dependent and the date when this voluntary acquisition programme is to
be finalised has yet to be determined, the Authority does not yet know the total final cost of
this programme. However this risk is reduced by the Authority having received invoices for
expenditure incurred totalling £1,049,815, and notice that additional invoices are to be
submitted to the value of a further £775,742. The Authority has also received in August
2011 a forecast of expected total costs of £2.3 million although this forecast has not been
verified by the Authority. Additionally, the spread-sheet upon which it is based is not
arithmetically correct and therefore cannot be relied upon.
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3.3. With respect to the costs of the demolition of the chapel the current financial risk is limited to
£37,569 (including VAT), which is the total value agreed to be funded.
4. Recommendations
4.1. (R1) It is recommended that clear procedures are agreed and followed in respect of
assessing, agreeing and providing grant funding to outside bodies. All relevant staff to be
notified of these procedures and are to implement them accordingly.
4.2. It is suggested that the lead officer to action this recommendation be the Assistant Director
City Renewal (JT). The aim is to ensure relevant decisions are taken by the duly authorised
officers of the Authority, and therefore the Authority has appropriate control over the
liabilities to which it is committed. These controls to be enacted by the end of August 2011.
4.3. (R2) Given that the funding of the demolition of the chapel section of the Church has been
agreed, it is recommended that a formal retrospective agreement is drawn up in respect of
this, ensuring appropriate recognition of the Authority’s interest in this transaction and the
Church.
4.4. It is suggested that the lead officers to action this recommendation be the Programme
Manager (PB) and Principal Solicitor (GC). The aim is to have an appropriate formal
agreement in place as soon as possible, (no later than September 2011), regarding the
funds provided to demolish the Church.
4.5. It is also suggested that the Programme Manager (PB) seeks clarification from the
Authority’s Monitoring Officer as to whether the decision to fund the demolition of the
Church requires any further formal retrospective approval/confirmation.
4.6. (R3) It is recommended that the Authority receives full and robust evidence of the costs
incurred by Great Places to demolish the Church, which was funded by the Authority.
4.7. It is suggested that the lead officer to pursue Great Places to provide clear documentary
evidence of the cost to demolish the Church be the Programme Manager (PB). This
documentation may then be verified by the Monitoring and Performance Assistant (HM).
This is to be done immediately with the aim for the Authority to have the requisite
documentation by the end of August 2011.
4.8. (R4) It is recommended that the Authority requests, receives and reviews up to date monthly
reports on the latest forecasts for the completion of the voluntary acquisition programme,
including forecast management and maintenance costs.
4.9. Since the commencement of this review it is understood that the Programme Manager (PB)
has requested Great Places to provide an up to date progress report of forecasted costs to
completion. On 10th August 2011 Great Places provided an up to date forecast, which
included a number of estimated costs. It is suggested that the Programmer Manager (PB)
actively pursues the regular (monthly) submission of progress reports from Great Places
until the final cost of the voluntary acquisition programme is agreed.
4.10. If Great Places do not provide regular progress reports it is recommended that the
Programme Manager (PB) escalate this action to the Assistant Director City Renewal (JT).
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4.11. (R5) It is recommended that a timetable is agreed for the winding up of this voluntary
acquisition programme, including planned timescales for the completion of acquisitions, the
drawing up of final accounts, and the agreement of costs and the verification of expenditure.
4.12. It is suggested that the lead officers to action this recommendation be the Assistant Director
City Renewal (JT) and the Programme Manager (PB). The aim is to have in place a clear
agreed timetable to wind up this voluntary acquisition programme by the end of August
2011.
4.13. (R6) It is recommended that all outstanding acquisitions under this voluntary acquisition
programme are completed at the earliest opportunity. Whilst it is recognised that this is not
in the direct control of the Authority, officers where appropriate are to take all requisite
action to successfully effect the prompt completion of outstanding acquisitions. It is
understood that the current expected time for completion is September 2011.
4.14. It is suggested that this recommendation is incorporated in the timetable referred to in 4.12
above.
4.15. (R7) It is recommended that the Authority receives full and robust evidence for all
expenditure incurred by Great Places in respect of this voluntary acquisition programme.
4.16. It is suggested that the lead officer to pursue Great Places to provide clear documentary
evidence in support of their expenditure regarding this voluntary acquisition programme be
the Programme Manager (PB). This documentation may then be verified by the Monitoring
and Performance Assistant (HM). At the time of writing it is expected, in the absence of an
agreed timetable for completion (4.12), that the Authority will have received all requisite
supporting documentation by the end of October 2011.
4.17. (R8) It is recommended that the Authority reconciles the advances made to Great Places
with the actual expenditure incurred, ensuring all outstanding balances are agreed and
where necessary repaid.
4.18. It is suggested that the lead officers to action this recommendation be the Programme Manager (PB) and the Monitoring and Performance Assistant (HM). The aim is to ensure that all funds expended by the Authority on this voluntary acquisition programme are accounted for and have been effectively utilised.
4.19. It is recommended that the lead officers to resolve queries in respect of the eligibility of expenditure be the Programme Manager (PB) and Assistant Director City Renewal (JT). It is noted that if the Authority cannot agree “reasonable” costs for the transfer of properties to the Authority, these lead officers may recommend that the Authority consider the decision for Great Places to retain the properties in their ownership for longer than they would wish to do so. Housing Market Renewal Grant 2010/2011 Audit Report
4.20. In addition to the above recommendations, reference is also to be made to the two
recommendations (both medium risk) made in the audit report of the Housing Market
Renewal Grant 2010/2011, issued on the 30th June 2011. These recommendations were:
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4.21. Recommendation 1: It is recommended that RENEW ensure all programmes and projects
undertaken under the auspices of the Housing Market Renewal Programme have been
carried out in accordance with the funding agreements and that appropriate evidence is
provided to verify that the requisite progress has been made in order to authorise the
release of payments.
4.22. The recommendation is agreed. The system for the management and monitoring of the
Housing Market Renewal Programme in respect of 2011/2012 is currently under review.
The Team Manager City Regeneration and Enterprise (AB) gave assurance that once the
revised procedures have been agreed and instigated this recommendation (report) is to be
passed onto the relevant officers responsible for the monitoring and management of
projects. At the time of the report it was anticipated this would be completed by the end of
August 2011.
4.23. Recommendation 2: It is recommended that grant claims are signed and submitted by the
relevant officers responsible for the respective projects, who are independent of the
Monitoring and Performance Team.
4.24. The recommendation is agreed. The system for the management and monitoring of the Housing Market Renewal Programme in respect of 2011/2012 is currently under review. The Team Manager City Regeneration and Enterprise (AB) gave assurance that once the revised procedures have been agreed and instigated this recommendation (report) is to be passed onto the relevant officers responsible for the monitoring and management of projects. At the time of the report it was anticipated this would be completed by the end of August 2011.
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5. Introduction
5.1. In May 2011 Internal Audit received correspondence from PACRA regarding the demolition
of the Church. A number of concerns were expressed about the actions of the Authority in
respect of this demolition, which are summarised as follows:
a. On what basis were public funds paid to fund the demolition?
b. What was the amount of funding provided by the Authority?
c. What was the reason for the Authority to fund the demolition?
d. Was the funding provided from the Portland Street Area Acquisition Fund?
5.2. Additionally Freedom of Information requests had also been received in relation to this
matter. Since the commencement of this review it is understood that the Authority has
received further Freedom of Information requests regarding this, which are currently being
assessed and processed.
5.3. In response to the above concerns members of Audit Services met with two representatives
from PACRA. Audit Services have subsequently carried out a review and examination of
the Authority’s actions and the extent of its funding of the demolition of the chapel section of
the Church.
6. Work Done
6.1 Internal Audit conducted discussions with the following relevant officers in the Authority:
• City Renewal:
• Jo Tyzzer; Assistant Director City Renewal (JT)
• Phil Brundrett, Programme Manager (PB)
• Helen Millington, Monitoring and Performance Assistant (HM)
• Alison Bennett, Team Manager City Regeneration and Enterprise (AB)
• Housing Services:
• Carmen Muir, Strategic Manager – Housing Standards (CM)
• Neil Macleod, Policy and Strategy Officer (NM)
• Legal Services:
• Gerry Clarke, Principal Solicitor (GC)
6.2 Examinations were conducted of correspondence between members of staff at Great
Places and officers of the Authority, as well as internal correspondence within Great Places
and the Authority.
6.3 Relevant files and other documentation and records in respect of the Portland Street Area of
Major Intervention (AMI) were also analysed.
6.4 During the course of the review although various documents were requested, not all such
documents were provided/seen.
6.5 From work undertaken to examine the concerns raised by PACRA, further queries arose in
respect of the Voluntary Acquisition Funding Agreement (City Centre North West Area of
Major Intervention) between Great Places and the Authority. Consequently the scope of the
review increased to incorporate examination of certain aspects of this Agreement.
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6.6 A summary time line of events is appended to this report.
6.7 During the course of this review an audit of the Housing Market Renewal Grant 2010/2011
was undertaken to provide the s.151 Officer with assurance that HMR funding for 2010/2011
had been properly expended; prior to the completion and submission of the requisite Grant
Determination Letter.
6.8 The audit report in respect of the above review was issued on the 30th June 2011 and
expressed a satisfactory audit opinion although 2 medium risk recommendations were made
regarding the management of projects and the authorisation of funding payments.
7. Background
7.1. It is understood that Great Places acquired the Church in September 2007, using its own
funds. The Church was made up of 2 separate sections; a chapel and a church hall.
The Chapel
7.2. It is understood that the chapel had been closed to the public for a number of years, prior to
the acquisition by Great Places.
7.3. From records seen of internal communications within Great Places, reference was made
that in February 2008 a structural report of the Church, commissioned by Great Places, was
completed. It is understood that the report identified internal tension cracking in the chapel
ceiling although the external structure was deemed reasonably sound. Auditors have
requested but not received this document.
7.4. From the same records a further structural report commissioned by Great Places was
completed in October 2009. This highlighted more recent movements in the chapel and the
need to reinforce the external structure.
7.5. There is no record that the structural reports referred to above (February 2008 and October
2009) were provided to the Authority at the time it received the request from Great Places to
fund the demolition of the chapel. However, during the course of this review Great Places
provided the Authority with a copy of the second structural report referred to above.
7.6. It is understood that a committee member of PACRA had requested copies of these reports
but had not received them.
The Church Hall
7.7. In the latter part of 2008/early 2009 the church hall was refurbished to create the Portland
Area Resource Centre (P@RC). It is understood that this was done with funding of £30,000
from a unilateral agreement (deed of undertaking) pursuant to a planning application for the
proposed development of a casino, and hotel with ancillary food and drink and drinking
establishments, on land at Waterloo Road.
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7.8. The deed of undertaking, which was originally signed on the 27th February 2003 and
subsequently renewed on the 22nd February 2007, was between Lear Management Limited
and Bromley Investments Ltd. It provided that:
7.9. “’…the Contribution’ means the sum of Thirty thousand pounds (£30,000) or such other
amount as is required which amount shall be applied to fund the purchase and
refurbishment of the property known as No 1 and No 3 Lowther Street or such alternative
property as shall be approved by the Association (acting reasonably) which (in either case)
is to be used for the establishment of a community project house for use by the Hanley
Project Team…”
7.10. It is understood that due to the passing of time, the Hanley Project Team ceased to exist
and the properties at No 1 and No 3 Lowther Street were no longer available to be used.
Consequently it was agreed with Lear Management Limited to use the £30,000 from the
above deed of undertaking to fund the conversion of the church hall, which had been
recently acquired by Great Places, into a community facility. This was done.
8. Decision to Demolish the Chapel
8.1. From a review of the structural report commissioned by Great Places and prepared by ABA
Consulting, dated October 2009:
8.2. “ABA Consulting was appointed to carry out a visual appraisal of the Boothen Methodist
Chapel…” Their report stated:
8.3. “There are significant cracks above and below the main window, and a gap by the side of
the window frame where horizontal movements have occurred. If such horizontal tensions
continue they have the potential to destabilise the two arches in the pulpit area…”
8.4. “…in order to ensure long term stability the arches need to be protected from the effects of
differential settlement and horizontal strains…The extent of measure will depend on the
extent of further investigation…and some superstructure repairs may be required in the
short term, even if the building life is limited.”
8.5. It is not known if Great Places commissioned any further investigation into the extent of
cracks and strains. The auditors undertaking this review do not have the technical expertise
to assess the implications of the findings of this structural report, which provides no
recommendation as to a preferred course of action regarding the future of the building.
8.6. From an internal communication at Great Places dated 7th May 2010, following the second
structural report referred to above, it was said that Great Places had established the
necessary work required to make the chapel structurally sound and this work was not
covered by insurance as no structural report had been carried out at the time of purchase
(September 2007). Therefore the liability for the repair/making good the structure of the
Church rested with Great Places.
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8.7. Around the time of the second structural report; the end of 2009, Great Places obtained
quotes for remedial work on the chapel, which was stated to be £8,600 plus VAT. Great
Places also sought quotes for the demolition of the chapel only, the lowest of which was
£12,600 plus VAT. Great Places noted that whilst the estimated cost of the remedial work
was less than that of demolition, no account had been taken of the on-going maintenance
costs of the chapel if it was to be made structurally sound.
8.8. Whilst auditors have not spoken to any members of staff at Great Places to verify the
rationale behind their decision to seek to demolish the chapel section of the Church, on the
10th June 2010 the Authority’s Programme Manager (PB) in respect of the Portland Street
AMI received an e-mail from Great Places, which said:
8.9. “As you will be aware we are currently experiencing quite serious structural problems [at the
Church] and have no choice but to demolish the main church area.”
9. Decision to Fund the Demolition
9.1. The above e-mail (10th June 2010) went on to say:
9.2. “We currently have no funds to do this as our original idea for the church was conversion
into flats. Could you confirm if it would be possible to fund the demolition out of the Portland
Street acquisition pot as I presume in time the church would be subject to demolition as part
of the wider regeneration of the area [It is assumed this refers to the Voluntary Acquisition
Funding Agreement]
Could you let me know asap as the church is becoming quite dangerous?”
9.3. The Programme Manager (PB) responded on the 14th June 2010 “Do you have a cost
before we agree?”
9.4. Following this Great Places commissioned Wilkinson Cowan Partnership (Chartered
Quantity Surveyors) to produce a “Report on the Tender for Demolition Works at Boothen
Church, Cobridge, Stoke-on-Trent for Great Places Housing Association”.
9.5. This report was dated October 2010 and noted:
• Quotations for demolition were obtained from 2 local established contractors (from
discussion with the Programme Manager (PB) it was understood that Great Places
had invited quotes from 3 contractors). It was commented by the Programme
Manager (PB) that as a lead registered social landlord their internal procedures had
previously been assessed and viewed to be adequate. (No documentation regarding
the internal procedures of Great Places was viewed during the course of this
review).
• The prices quoted were £12,500 and £20,876.
• The report stated that a meeting was held with the contractor of the lowest quote to
confirm their proposal ensured appropriate health and safety during the demolition.
Following this the quote was revised to £14,375. At the same meeting the following
additional works were also identified (arising from the location of the Church)
increasing the revised quote to £21,380; an increase of 49%.
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• Work to maintain the community hall (£1,630).
• Security Fencing (£1,775).
• Car park to furnish community hall during demolition (£3,600).
• The above excluded work to be undertaken by other organisations e.g. the required
closure of highways by the Authority, as well as provisional and contingency
amounts. The latter items were not quantified by the report.
• The report finally recommended:
“We are of the opinion the quotations by Dawsons Builders for the proposed
demolition works referred at Boothen Church, Cobridge, to represent a reasonable
cost for the project and good value for money and recommend it should be
considered for acceptance in the sum of £21,380.00 on the basis of an 8 weeks
contract period plus additional lead-in time to be agreed.”
9.6. This report was sent to the Programme Manager (PB) on the 25th October 2010.
9.7. Following further correspondence, Great Places presented the Programme Manager (PB)
on the 9th November 2010 with the following schedule of costs totalling £37,569, including
VAT:
• Cost of Demolition £25,656 (revised quote)
• Consultant £1,800 (additional items)
• Contingency £6,000 (additional items)
• CDM £1,763 (additional items)
• Provisional Sum £2,350 (additional items)
• Total £37,569
9.8. Great Places asked “Please can you confirm asap if you are happy so we can proceed.”
9.9. On the 10th November 2010 the Programme Manager (PB) replied to this schedule “Cost
ok.”
9.10. It appears that the expectation by both Great Places and the Programme Manager (PB) was
for the Portland Street area to be declared a clearance area, based on the outcome of a
Neighbourhood Renewal Assessment (11.8). This expectation seemed to be the basis for
both the request for funds to demolish the chapel and the subsequent decision that the
Authority would fund the demolition through the Voluntary Acquisition Funding Agreement
given that if the area was declared for clearance the prospect was that the Church would
then be acquired by the Authority and demolished.
9.11. From discussion with the Authority’s Principal Solicitor (GC), he expressed the opinion that
the above (9.9) constituted an agreement for the Authority to fund the demolition. He
explained the Programme Manager (PB), as the main contact for Great Places at the
Council, had ostensible authority to make such an agreement. However, in his opinion the
demolition of properties was not within the scope of the Voluntary Acquisition Funding
Agreement.
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10. Consultation
General
10.1. Following Audit Services discussion with the Programme Manager (PB), the opinion was
expressed that RENEW had “extensive” consultation with residents regarding what was
happening in the community, using the P@RC community centre for a lot of this. He
commented that weekly drop-in sessions were held at the P@RC. The Authority also
funded community roles such as:
• A Residents Friend, who operated through the Citizens Advice Bureau
• A Community Development Worker
Demolition
10.2. It is understood that a leaflet dated the 14th January 2011 was sent out by Great Places to
the residents of the area, informing them of the demolition of the church, which was to
commence on the 18th January 2011. From discussion with committee members of PACRA,
this leaflet was not received by residents until the 17th January 2011. The leaflet noted:
10.3. “The chapel and community building at the rear have been in our ownership for nearly three
years now and over this time we have noticed some structural movement within the main
chapel building. Due to this issue it has now become apparent that the building will need to
be demolished. Initial stripping out work has started and demolition work will commence
from the 18th January once the scaffold has been erected.”
10.4. “It is our intention to retain the rear of the building for community use although the whole
building will have to be closed for a number of weeks to allow safe deconstruction of the
chapel and to make good the walls of the retained building. It is estimated that the
demolition and building works will be completed in approximately six weeks and that the
community hall will reopen in early March.”
10.5. From other documentation provided by Great Places to the Programme Manager (PB),
which was not dated, they noted that the demolition of the Church had been raised at the
P@RC steering group meeting held in November 2010. However, they also acknowledged
that letters issued to residents “could have been sent earlier…”
10.6. It is understood that the chapel section of the Church has now been demolished. Whilst the
Authority has received, on the 15th August 2010, some documentary evidence to support
and confirm this expenditure; an interim valuation of £24,570 (including VAT), this is not
expected to be the final cost funded by the Authority to demolish the Church given the quote
obtained for this work (9.5, 9.7).
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11. Source of Funding
Housing Market Renewal Pathfinder
11.1 The funding utilised was sourced from the North Staffordshire Housing Market Renewal
Pathfinder, with reference to the Market Restructuring (Implementation) Agreement, dated
2004. This specified eligible expenditure to include:
• “…in relation to land, its acquisition, reclamation, improvement, or refurbishment for
the purpose of redevelopment for residential or mixed use”;
• “…in relation to buildings intended for predominantly residential use…their
acquisition, demolition, conversion or improvement”
• “…in relation to land or buildings intended for predominantly residential use,
environmental improvements”
11.2. The Assistant Director Renewal Services (JT) explained that under the terms of the above
Agreement, the demolition costs of the Church was eligible expenditure for funding, given
that it was expected to be replaced by residential buildings.
11.3. In respect of 2010/2011 the Homes and Communities Agency informed the Authority, noted
in a letter dated the 5th August 2010, that:
11.4. “In its Local Government Funding announcement on the 10th June, the Government
included the removal of the ring fencing from the 2010/2011 HMR budget.”
11.5. The implications of this amendment to the original Implementation Agreement were further
clarified and were understood to necessitate only that the capital element of the HMR
budget be used to fund capital expenditure and for the accountable body to confirm this by
the submission of an appropriate statement at the end. The Authority has since prepared
and issued such a statement (6.7).
Housing Market Renewal Programme (City Centre North West Area of Major
Intervention)
11.5. As part of the above Programme, on the 26th August 2009, following a report of the Director
of Regeneration to Cabinet regarding ‘A stabilisation Policy through Voluntary Acquisitions
within the Housing Market Renewal Programme’:
11.6. The minutes record “…to agree that the Registered Social Landlord (RSL) partner be
supported to implement a stabilisation programme to acquire properties voluntarily in this
area [Portland Street area] ahead of the outcome of the assessment [neighbourhood
renewal assessment] and that owners be compensated as if the area has been supported
for clearance through the Housing Market Renewal Programme.”
11.7. The Registered Social Landlord (RSL) partner referred to above was Great Places.
Page 15 of 20
Neighbourhood Renewal Assessment
11.8. From discussion with the Strategic Manager – Housing Standards (CM), the neighbourhood
renewal assessment of the Portland Street area commenced in September 2009 and was
completed in September 2010. From discussion with the Programme Manager (PB) it
appeared that the expected result of this assessment was to be the declaration of a
clearance area. However during the time the assessment was carried out the funding
agreement (11.9) allowed the Authority to provide a housing market for those people in the
area who wished to sell. It also provided the Authority with options to secure properties
prior to the expected declaration for clearance thus negating the opportunity for speculators
to acquire properties in the area for which the Authority would then have to buy at a later
date.
Voluntary Acquisition Funding Agreement
11.9. On the 24th December 2009 Great Places and the Authority signed a funding agreement
“relating to the acquisition [of] properties at City Centre North West AMI”. The terms of the
agreement included:
• (“(2)”) The City Council…agrees to make funding available to the Housing
Association in the total sum not exceeding the “Maximum Sum” [£4,000,000] for the
purpose of financially assisting the “Acquisition” on the following terms and
conditions…”
• (1.1) “Acquisition” means the acquisition by the Housing Association of all estates
and interests of the Properties.
• “(3.1.2) The City Council may in its absolute discretion and on such terms as it may
specify agree to pay funding to the Housing Association before the conditions [as
defined in the contract] have been met, but if the City Council does so, this will not
prejudice its rights to refuse to pay any further funding until these conditions are
met.”
• The City Council shall not be obliged to pay any funding unless:
• (3.2.2) It has received a valuation confirming the purchase price payable.
• Funding shall be paid as follows:
• (3.3.2) Each claim for funding shall include to the satisfaction of the City
Council evidence that the expenditure to which the claim relates has been
reasonably and properly incurred or spent and that payment has been made
by the Housing Association;”
• (Schedule 2) It is understood that the properties acquired by Great Places using the
above funding are to be subject to an option agreement, which the Authority may
exercise for the price of £1 per property.
The Supporting Acquisition and Management Strategy to this agreement noted:
11.10. “Great Places have been requested to propose an acquisition strategy for up to 400
properties within the Portland Street area…”
11.11. “Great Places will be responsible for acting as the Council/Renew’s agent in all aspects of
acquiring the properties…”
Page 16 of 20
11.12. Acquisitions are to be given the following priority:
• Empty properties
• Owner occupiers
• Empty RSL properties
• Private landlords
11.13. “It is envisaged that £500,000 grant funding will be drawn down to begin front funding the
acquisition programme. When £100,000 remains, a further tranche of £500,000 shall be
requested…”
11.14. “The following costs are to be recouped from the City Council/Renew upon confirmation of
expenditure;
• Valuation fees
• Legal fees
• Homeloss payments…”
11.15. “Upon acquisition of a property, Great Places will arrange for the following works to be
undertaken …”
•••• Drain down of heating system
•••• Empty the property if required
•••• Etc.
11.16. “All costs will be recoverable from the City Council/Renew upon confirmation that
expenditure has been defrayed.”
11.17. “Great Places will keep records and details of all properties acquired and will present to the
Council/Renew a progress report on a monthly basis detailing properties acquired,
properties in negotiation etc.”
Funding Payments Made
11.18 It was explained that due to their provision of home improvement assistance, Great Places
was covered by the requirements of Financial Services Act. This required Great Places to
hold funds to cover any offers it made to acquire properties, hence the need for advance
payments.
11.19 The Assistant Director City Renewal (JT) explained that the Authority had previously
undertaken a similar arrangement in 2004 with English Partnership whereby advance funds
were provided to acquire properties.
11.20 At the time of this review; (June 2011), the Authority had paid Great Places £2,536,000 in
respect of the Voluntary Acquisition Funding Agreement, representing 4 instalments of
£500,000 and 1 instalment of £536,000.
Page 17 of 20
11.21 It was understood that payments had been made to Great Places on the basis of their
progress to acquire properties. Great Places were said to provide periodic progress reports,
which detailed their forecast costs in respect of the proposed acquisitions it was pursuing. It
is unclear how often these progress reports were supplied; auditors have requested of the
Programme Manager (PB) copies of the progress reports received over the last 6 months.
Apart from the two referred to below (11.30) no other progress reports were provided or
seen during this review.
11.22 The Assistant Director City Renewal (JT) explained that a change in Central Government
during 2010 promptly terminated the Housing Market Renewal Pathfinder programme.
Following this, payments to Great Places were suspended pending the controlled winding
up of this voluntary acquisition programme.
Authorisation of Funding Payments
11.23 The Financial Regulations of the Authority stated that when an officer certifies a payment
they acknowledge amongst other things that:
“The goods, works, services, or other proper purpose, for which the invoice and payment
refers have been received or completed, conform to the specification set out in the order
and are ‘fit for purpose’.”
11.24 From the checklists and creditor requisition forms seen, the funding payments made to
Great Places (11.20) were authorised and certified by members of the Monitoring and
Performance Team.
11.25 From discussion the above practice was a long standing procedure, which had been
introduced when RENEW was first established to enable the Monitoring and Performance
Team to closely monitor payments made by the then new body. It was further explained
that at that time funding payments were made in arrears and the procedure ensured that all
expenditure had been verified by the Monitoring and Performance Team prior to releasing
payments.
11.26 The nature of the advances required to fund the above voluntary acquisition programme
meant that evidence in support of the amount claimed by Great Places was not readily
supplied. Consequently [from verbal explanations received and the review of e-mails] the
Monitoring and Performance Assistant (HM) contacted the Assistant Director City Renewal
(JT) and the Programme Manager (PB) to seek confirmation that the advances were to be
paid given the absence of evidence to support defrayment of the amount being claimed.
11.27 From verbal assurances received, the advances were only made when one or other of the
above officers confirmed a claim was to be paid. However this authorisation may have been
verbal or informal, there being no formal record of this.
11.28 Following discussion with the Monitoring and Performance Assistant (HM), in the meantime
she issued correspondence to Great Places requesting them to provide supporting
documentation of defrayment. The outcome of this to date is that the Authority has received
documentation from Great Places to support expenditure to the value of £1,049,815 and has
recently been notified (9th August 2011) that additional invoices are to be submitted, for
verification, to the value of £775,742. These invoices were received on the 15th August
2011.
Page 18 of 20
11.29 The Team Manager City Regeneration and Enterprise (AB) commented that there had been
ambiguity over the roles and responsibilities between members of the Programme Team
and members of the Monitoring and Performance Team. She further explained that the
structures and procedures within and between these Teams were currently being reviewed
and clarified, which has been noted in the audit of the Housing Market Renewal Grant
2010/2011, issued on the 30th June 2011 (6.7, 6.8)
Progress Reports on Expenditure to Complete
11.30 Progress reports seen during this review were dated 17th February 2011 and 10th August
2011, the latter was received following requests made by the Programme Manager (PB).
The progress report dated 10th August 2011 disclosed total forecast expenditure for this
voluntary acquisition programme of £2,298,169. This forecast included estimated fee costs
and elements of expenditure which the Assistant Director City Renewal (JT) said were still to
be agreed with Great Places.
11.31 With the cessation of the Housing Market Renewal Programme the above programme is to
come to an end. It is anticipated that Great Places will have acquired 35 properties as agent
of the Authority by the conclusion of this programme; it currently has one acquisition
outstanding which is expected to be completed by September 2011. The Programme
Manager (PB) expressed the expectation that at the conclusion of the programme all
outstanding documentation regarding expenditure will be provided to the Authority and
Great Places may be required to repay approximately £100,000.
Applicability of the Voluntary Acquisition Funding Agreement
11.32 Notwithstanding the above, the Authority’s Principal Solicitor when asked expressed the
opinion that the agreement for the Authority to fund the demolition of the Church (9.11), did
not fall within the scope of the above Voluntary Acquisition Funding Agreement.
11.33 He advised that the agreement to fund the demolition may be formalised retrospectively
either with a variation to the above Voluntary Acquisition Funding Agreement or by the
creation of a separate agreement. At the time of discussion he favoured the latter.
11.34 The funds to which the Voluntary Acquisition Funding Agreement referred i.e. Housing
Market Renewal Pathfinder were still eligible to be used to fund the demolition.
12. Payment of the Demolition of the Chapel
12.1. On the 15th August 2011 the Authority received an interim valuation of £24,570 (including
VAT) in respect of the demolition of the chapel section of the Church. This however is not
expected to be the final cost of the demolition funded by the Authority and documentary
evidence in support of further costs e.g. security, highway closures, etc. are expected to be
submitted for verification in due course. Moreover, a review of the progress report received
by the Authority on the 10th August 2011, from Great Places, included within its total forecast
costs of £2,298,169 a figure of £28,311 in respect of “Boothen Church” with the narrative
“Agreed that demolition costs would come out of this budget”.
Page 19 of 20
12.2. From discussion, the above arrangement was described as a variation to the Voluntary
Acquisition Funding Agreement, which had been enacted and authorised without the back-
up of the requisite formal approval procedure and supporting documentation.
13. The Future for Portland Street Area
13.1. The Neighbourhood Renewal Assessment for the Portland Street area has been completed.
It is understood that the initial conclusion of its findings was for the area to be declared a
clearance area however the cessation of the Housing Market Renewal Pathfinder withdrew
the funding required to clear the area.
13.2. The report on the Neighbourhood Renewal Assessment is currently in draft pending the
assessment of the funding options available to the Authority in respect of the area. In
particular it is understood that the Authority has submitted a bid for Transitional Funding of
approximately £8,000,000, which is to be match funded, to fund proposals which include
both refurbishment and demolition of properties in the Portland Street area.
13.3. Subject to the above, this review has not examined how the Authority is to manage the
properties acquired under this voluntary acquisition programme following its conclusion.
Page 20 of 20
Appendix: Summary Time-Line
Date Officer Date Offcier
24/12/2009
Voluntary Acquisition Funding
Agreement signed on behalf of
the Authority by Gerry Clarke
and Paul Hackney: Upper limit
of funding agreement.
4,000,000
08/01/2010
HMR/RENEW Grant Claim
Form received from Great
Places
500,000Not located
by review
Not located
by review
Not located
by review
Not located
by review
08/04/2010HMR/RENEW Grant Claim
Form signed by Great Places536,000 17/05/2010 R. Hill
Not located
by review
Not located
by review
10/06/2010
Request from Great Places
asking if the demolition of
Boothen Methodist Church
could be funded from the
"Portland Street Acquisition
Pot"
11/06/2010HMR/RENEW Grant Claim
Form signed by Great Places500,000 17/06/2010 R. Hill 17/06/2010
K. Round
& R. Hill
14/06/2010Authority responds "Do you
have a cost before we agree?"
28/07/2010
HMR/RENEW Grant Claim
Form signed by Great Places.
Claim accompanied by a batch
of invoices in support of
expenditure.
500,000 16/08/2010 R. Hill 08/09/2010K. Round
& R. Hill
Claim accompanied by a batch
of invoices in support of
expenditure.
14/09/2010HMR/RENEW Grant Claim
Form signed by Great Places500,000 25/10/2010 R. Hill 25/10/2010
K. Round
& A.
Bennett
25/10/2010
Authority receives from Great
Places "Report on Tender for
Demolition Works at Boothen
Church…"
09/11/2010
Amended proposed costs for
demolition received by the
Authority.
37,569
10/11/2010Authority responds to amended
proposed costs "Cost ok"
14/01/2011
Letter from Great Places to
residents explaining that the
demolition of Boothen
Methodist Church was to
commence.
18/01/2011
Demolition of Boothen
Methodist Church
commenced, per letter issued
by Great Places.
17/02/2011
Portland Street Spread-sheet
received from Great Places:
forecast total cost of
Programme (expected
acquisition of 35 properties)
2,312,487
10/03/2011HMR/RENEW Grant Claim
Form signed by Great Places
Outputs and
previous
defrayment
only.
17/03/2011 R. Hill
11/03/2011
Batch of invoices received
from Great Places re Voluntary
Acquisition Agreement
expenditure actually incurred
1,049,815
2,536,000
Key:
Officers: G. Clarke Principal Solicitor
P. Hackney
R. Hill Accountant
K. Round Accountant
A. Bennett
Demolition of Boothen
Methodist Church
Voluntary Acquisition
Funding AgreementDate
Relates to Boothen Methodist Church
Team Manager – City Regeneration and Enterprise
Head of Legal Services (Monitoring Officer)
Value (£) Authorised
Funding
paid to
Great Places
Agreed
Sums
RENEW Checklist Creditor Requisition