Investigation

INTERNAL AUDIT REPORT

TOWN IMPROVEMENT GRANTS

March 2010
1639.09/10

FINAL
Anglesey County Council
March 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 report 25 November Auditors: Audit Manager
issued: 2009
First Draft Internal Auditor
20 January
2010
Second Draft
Responses 03 March
received: 2010
Final report 09 March
issued: 2010
Client Section 151 Officer –
sponsor: Corporate Director - Finance
Distributio Section 151 Officer –
n: Corporate Director - Finance;
Head of Service (Planning);
Audit Committee Chair
Printed: 5 May, 2010 File: 33367869.doc
Anglesey County Council
March 2010
 Anglesey County Council
March 2010

1. INTRODUCTION

1.1 This report relates to the administration of Town Improvement Grants by

the Anglesey County Council. Town improvement Grants are made for the
improvement of business premises to enhance the appearance of town
centres.

Welsh Assembly Government Agreement

1.2 The Welsh Assembly Government (WAG) has the power to make Town
Improvement grants to fulfil its function of providing finance to assist in the
urban regeneration of Wales including a designated ‘TIG Area’ within
Anglesey. Further to this power the Welsh Assembly Government has the
power to appoint a Council to act as their agent to carry out, amongst other
things, the function of the Welsh Assembly Government to provide finance
to assist in the urban regeneration of the TIG area. The appointment of the
Anglesey County Council as the agent to administer private sector Town
Improvement Grants within the TIG area on Anglesey was subject to the
terms and conditions set out in the schedule of the appointment letter which
was dated 27th November 1996. (Appendix A – copy of agreement and
Service Level Agreement)

1.3 The administration of the TIG area under the agency agreement with the
Welsh Assembly Government is undertaken by the Council’s Planning
Services.

Complaint Received
1.4 The Council has received a complaint expressing concerns over the
administration of a particular Town Improvement Grant in Holyhead which
has raised a number of issues surrounding the administration of these
grants in general. This review will concentrate on the main areas of grant
administration and aims to enhance the controls in this area.

Scope of the Investigation

1.5 The scope of the investigation will be the administration of the Town
Improvement Grants from approval of eligible works to the final claims for
grant monies to be released from the Welsh Assembly Government. The
review will consider the main requirements of the terms and conditions of
the appointment of Anglesey County Council as agent for the WAG in
connection with the provision of new Town Improvement Grants as set out
in the appointment letter of 27th November 1996.

New TIG Scheme

1.6 Nota Bene – The administration of Town Improvement Schemes has
changed considerably recently. The new arrangements will be the subject of
a separate review in the 2010/11 Internal Audit Operational Plan.

This means that the report will concentrate on determining the main

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

2. EXECUTIVE SUMMARY

2.1 Compliance with Agency Agreement – The Service Level Agreement

with the WAG is not specific about the level of financial checks or
inspections of works to be carried out. However, in the case of this
property the requirements stated in the Agreement appear to have been
complied with. The Council did obtain financial documentation in support
of the claim for TIG and passed this on to WAG for their assessment and
the Council’s nominated officer did attend the property to carry out
inspection of the works prior to processing the applicant’s claims for
payment to be made to him.

2.2 Segregation of Duties – Although the Council’s nominated Officer is

solely responsible for the administration of the TIG work within the
Council a segregation of duties over the determination of the eligible
works, the inspection of works and the completion of requests for grant
monies to be paid by the WAG is provided by ensuring that the WAG is
kept informed on the process of grant claims and is responsible for the
approval of the eligible works figure and approves the eventual claims for
payment received.

2.3 Supporting Documents – No audit trail of work carried out has been
provided by the contractor or the applicant’s agent to allow work
completed to be matched to invoices produced. Where documents have
been provided showing cost analyses of eligible works etc. these have
not always been dated or date stamped as received by the Council. This
again has meant that an audit trail of documentation is made more
difficult. This lack of supporting documents relating to works completed
is, we understand, a departure from normal with TIG grants.

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

The third Claim Form completed by the Senior Planning Officer is not
supported by Interim Progress Payment documentation from BVUK. We
can surmise however that the claimed total eligible expenditure figure on
this third Claim Form was £59 223 as the total grant figure claimed £47
378 (incl VAT) is 80% of this total. It is not clear why the Senior Planning
Officer submitted a claim form that was not supported by documentation
from 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 were

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made on 30-03-07, 04-07-07, and 25-10-07. The document used to

determine the work to be inspected was the list of eligible works categories
contained in a letter dated 21st June 2005 which included a priced table of
the main categories of works to be completed at that date. The Senior
Planning 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 basis
for the amounts to be claimed for grant purposes. Following the inspection
carried out on 25-10-07 the Senior Planning Officer stated on the Work
Inspection Sheet that all the eligible external work is complete and that the
materials and workmanship met with his approval. He subsequently
recommends the final payment of this claim to be certified and processed as
soon as possible. The total eligible expenditure incurred to date figure on
the final Claim Form For Payment of Grant form was left blank, but on the
two previous Claim Forms this figure has been stated as the same as the
total eligible expenditure figure which on the final Claim Form is shown as
£59 923 (incl VAT) (in error as the actual Eligible Expenditure figure should
have been stated as £59 223.65).

2.6 On a subsequent inspection of the property it was determined by The

Senior Planning Officer and the WAG Regeneration Manager that the total
amount of works completed against the original priced Schedule of Works
was £45 023.65 (incl VAT)

2.7 Contingency – A £10 000 contingency figure was included in the eligible
works figure. No contingency work was requested, or approved, and
therefore the eligible works figure should have been reduced by the total of
the Contingency plus VAT, an amount of £11 750. Although both the Senior
Planning Officer of the Council and the WAG Regeneration Manager were
aware of this, the full eligible works figure was included in the Claim Form
for Payment of Grant form and the full amount of approved grant was
claimed for and paid by the WAG. We would have expected the grant
awarded and paid by the WAG to have been the original approved grant
figure £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 (incl
VAT) based on the full eligible expenditure having been incurred.

2.8 Applicant’s Contributions – The applicant has consistently stated that

he appointed BVUK as they had offered to reduce the amount of his
contribution to the project. The applicant has also stated that he was aware
that he was required to make a 20% contribution to the cost of the eligible
works. According to BVUK the applicant has made two payments to the
contractor of £29 375 and £17 265 in relation to the TIG in addition to an
amount of £6 300 for associated fees included in the eligible expenditure
sum. Therefore the applicant has, as far as the paperwork is concerned, paid
£52 940.00 inc VAT and has received £47 378.92 incl VAT in grant monies
from the WAG. The applicant’s contribution at this point in relation to the
total eligible expenditure figure of £59 223.65 would appear to be £5 562
incl VAT or 9.4%.

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The Council was misled about the amount of contribution paid by the
applicant in respect of the EHG undertaken at the same time at this
property and on the basis of this released EHG grant monies. As both the
agent and the applicant were aware that a contribution for both grants
was required there is a prima facie case that the Council was deliberately
misled.

CONCLUSIONS

o The Service Level Agreement between the Council and the WAG
does not clearly state the role of the Council in terms of the
inspection process. There is no guidance as to the level of inspection
that should take place and whether this includes the quantity, value
and quality of works carried out. In practice the inspections that did
take place were based on an estimate of the percentage completion
of individual categories of main works and the final inspection sheet
does refer to the material and workmanship meeting with the
inspector’s 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 monies
only. This is obviously not the case and BVUK should be approached
to ensure that they make it clear to all applicant’s what their
responsibilities are in terms of contributions to grant schemes. There
is also evidence from the associated EHG that BVUK has misled the
Council in terms of the actually contributions made by the applicant
and 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 to
provide an audit trail of actual works completed. The lack of
Schedules of Work completed relating back to the original Schedule
of Works upon which the eligible expenditure figure, and thus grant
approved figure, was based has made the determination of the
amount of work done at the property difficult to determine. The fact
that some key documents on file are undated and / or do not have
date received stamps on them has made determining an audit trail
even more difficult.

o The contractor has stated that BVUK determined the amounts to be

invoiced. BVUK has stated that they do not annotate in detail the
works undertaken but ensure that the works claimed are in line with
the costs of the original schedule of works specifications and
thereafter issued a certificate of Interim Progress Payment Form in
support of the contractors invoice. BVUK has also stated that the
Senior Planning Officer determined the final eligible works figure.
There is therefore confusion over who was annotating in detail the
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works undertaken and who was then responsible for determining the
value of certificates and invoices to be produced and upon what
basis.

o The third Claim Form completed by the Senior Planning Officer is not
supported by Interim/ Progress Payment documentation from BVUK.
However, the Claim Form shows the maximum amount of grant to
have been claimed. However, the subsequent inspection of works
completed by the Council’s Senior Planning Officer and the WAG
Regeneration Officer determined the value of work completed to be
less than the original eligible expenditure figure.

o Although both the Senior Planning Officer of the Council and the
WAG Regeneration Manager were aware that a £10 000 unused
contingency fee was included in the original eligible expenditure
figure this amount was not deducted from the final eligible
expenditure figure or pro rata from the grant monies paid to the
applicant. In the third Claim Form for Payment of Grant form the full
amount of approved grant was certified by the Council and paid by
the WAG.

o The determined value of work undertaken on the TIG appears from

the recent joint inspection of the property to be £45 023.65
(excluding the contingency figure of £10k) compared to the amount
of eligible expenditure claimed which was the maximum amount of
£52 223.18 (excludes eligible fees of £6 300.47). If this is the case
then the grant figure of 80% of actual eligible expenditure can be
recalculated 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 £6 319.62 to the actual amount of grant paid to the
applicant.

o The applicant has paid £53 300.47 in respect of the TIG. The
applicant paid £6 300.47 to BVUK as agents fees and £47 000 to the
contractor for eligible works. The eligible expenditure sum now
determined after the re inspection of works would be £51 324.12.
This represents an overpayment by the applicant of £1 976.35
assuming that no additional non eligible works were included in the
amounts paid.

It is a decision for the WAG to decide what action to take, if any,

in light of the apparent over claiming and over payment of grant
monies.

3. FINDINGS - TOWN IMPROVEMENT GRANT PROCESS

Compliance with Agency Agreement

This section of the report concentrates on the main processes required
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by the Service Level Agreement with the WAG and to the extent that the
Council complied with these requirements in the particular grant scheme
which 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 and
Business Plan was received enclosed in a letter from RGR Partnership to the
Council 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 over
the applicant’s resources. There were also concerns that the applicant
needed additional support and that a Business Advisor was to be sourced for
him. In the end both the Business Advisor and support from Menter Mon
seem to have fallen through. (email 17-03-06)

3.3 A letter dated 08-04-05 from the applicant states that payment of the
£7.7k agency fees to RGR Partnership would cause him significant
financial hardship. A letter from WAG to the applicant dated 09-11-06
shows the applicant’s contribution to be £11.8k TIG and £31.1k EHG. A
total of £42.9k.

3.4 A letter dated 27-11-06 from WAG confirms that a letter from the
applicant’s bank dated 22-11-06 shows that a loan of £45k over 10 years
has 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 the
WAG in June 2005 stating his concerns over the financial position and asking
that his application be cancelled. The Head of Audit requested confirmation
of the receipt of this letter from the WAG on 02-11-09 but was informed that
no such expression of concern had been received and that if it been then
there would have been ‘no hesitation in cancelling the grant application.’

The applicant at a meeting held in the Council Offices on 17-11-09 again

stated that he had sent a letter in 2005 asking for the grant process to be
ended. The applicant offered to provide a copy of this letter which was
hand written. No copy of the applicant’s handwritten letter has been
received to date

3.6 The Senior Planning Officer has stated that the documentation for the
financial checks was obtained by him but that such documents were then
passed to the WAG for them to make a judgement as to the suitability of the
applicant to continue the grant process. (Witness Statement 11-11-09)
Having received notification of the applicant’s obtaining of a loan of £45k
the grant process continued.

Segregation of Duties
3.7 Single Point of Contact - The Service Level Agreement requires that

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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 effective
procedures to carry out its obligations referred in paragraph 2 of the Terms
and Conditions and to ensure compliance with the Town Improvement
Explanatory Manual, issued by the WAG, the Code of Practice on Financial
Procedures and the Welsh Office Urban Development Guidelines. (SLA
Appendix A c)

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

3.9 The procedures in place provide a segregation of duties between the

determination of the eligible works, the inspection of works and the
completion of requests for grant monies to be paid by the WAG by ensuring
that the WAG is kept informed on the process of grant claims and has to
approve the eligible works figure and the eventual claims for payment
received. However, there is no formal segregation of duties in relation to the
inspection of TIG works on site.

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

3.11 Although there is little formal segregation of duties in the Council’s

procedures such segregation is provided by the approval authority of the
WAG over the key elements of the process. In addition a number of Council
Officers and WAG Officers attended the property to see the works and
decisions made on the amount of eligible works and the grant figure
approved were undertaken with the WAG.

Supporting Documents
3.12 Dating of Documents - The Service Level Agreement requires that the
Council retain all original papers supporting each application or enquiry
concerning a new TIG for at least five years. Review of TIG files shows that
relevant paperwork is retained. However, it was sometimes difficult to
determine an audit trail of documents as they were not always dated and /or
have a date stamp of when received by the Council. Examples of undated
documents 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 of
events with certainty, and has increased the risk of irregularity going
undetected, provides no protection to staff and limits the Council’s ability to
answer allegations of irregularity.

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3.14 Schedules of Work Completed – We would have expected the

supporting documents held on file to include evidence provided by the
builder / agent as to the works and the value of works undertaken for which
a relevant Certificate of Interim Payment was produced. However, review of
the file and discussions with the builder and the Senior Planning Officer
found that no such schedules were produced to support the invoices raised
by the builder and the Certificates produced by the agent. (Please see
additional information at section 4.9 to 4.12).

3.15 This has meant that it is not possible from the paperwork to determine
the works that have been undertaken at the property 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 of irregularity going undetected,
provides no protection to staff and limits the Council’s ability to answer
allegations of irregularity.

Inspections of Properties
3.16 Inspections - The Service Level Agreement states that the Council shall
during the five year period commencing on the Grant Date of a new TIG
inspect each property that is the subject of a new TIG once annually to
determine whether or not the conditions of the relevant new TIG are being
complied with. (Appendix A k))

3.17 Review of the TIG file shows evidence of three inspections by the Senior
Planning Officer in support of the three Claim for Payment of Grant Forms
completed 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
Works Signed
Recommendation Made By Senior Planning
Inspect &
Officer
ion Dated
“All the main roofing was complete and 50% of the
Senior
Sheet 1 rear roofing. 75% of the work to the chimney stack
Planning
was also complete. I am able to recommend an
Also Officer
Present: interim claim for certification and approval in
30-03-
contractor accord with the information provided.”
07
“Approx 70% of the eligible work was complete and
Sheet 2 Senior
the materials and workmanship met with my
Planning
Also approval. I am able to recommend a second interim
Officer
Present: claim for payment in accord with the information
BVUK 04-07-
provided.”
agent 07
Sheet 3 “All the eligible external work is complete. I can
Senior also confirm that the materials and workmanship
Also
Present: Planning met with my approval. I can thus recommend the
Officer final payment of this claim to be certified and Page
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contractor
applicant 25-10- processed as soon as possible.”
and 2 other
Council 07
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March 2010

Each Works Inspection Sheet also includes a more detailed description of

work 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 21 st June 2005
which included a priced table of the main categories of works to be
completed at that date. This letter was from the WAG to the applicant. The
priced table in this letter showed a total amount for External Works at £41
500 incl VAT at that date in June 2005.

3.20 The Senior Planning Officer used the table in the letter as the basis of his
inspections and the priced Schedule of Works of WR Peters provided by
BVUK 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.
Scaffold
Repair frontage windows
New windows to rear
Chimney
Repair and paint elevations
Shop front

Claim Form for Payment of Grant

3.22 Three ‘Claim Form for Payment of Grant’ forms were completed and each
was signed and dated by the applicant and submitted to the Senior Planning
Officer for inspection and completion of the Certification of Claim part of the
forms. Details of these Claim Form for Payment of Grant forms are provided
below:

Table 2
TIG 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
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Planning Planning Planning

Officer Officer Officer

3.23 Table 2 shows the total of eligible expenditure claimed as at 08-12-07 on

claim three a figure of £59 923 was stated. This should have been the
original eligible expenditure figure of £59 223. The total amount of grant
was claimed on the three claim forms submitted a total of £47 378.

3.24 All claim forms were signed by the applicant, although the figures
claimed for appear to be in different hand writing which was confirmed by
the Senior Planning Officer as being his own hand writing. The Senior
Planning Officer confirmed that he had completed all of the claim forms for
the applicant to sign. All certificates for payment were signed off and
submitted 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 this
was to allow time for the builder to carry out some remedial works.

Certificates for Interim/Progress Payment

3.26 Three Certificates for Interim / Progress Payments were submitted by
BVUK as detailed below:

Table 3
TIG Submitted by BVUK
Certificate No 1 Certificate No 2 Certificate No 3
Certificate Headings Dated 23-03-07 Dated 11-04-07 Dated 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

£29,375.00
applicant 16-04-07
BVUK confirmed Paid by applicant
£17,625.00
09-05-07
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 £54 213
and not £53 149 which is the original contract value of the Empty Homes
Grant 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 fee
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both inclusive of VAT. We understand that these payments were made in

payments of £6300.47 paid in March 2007. This amount was included in the
original 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 Cost
Analysis sheet attached to covering letter dated 10th October 2006 shows
the original tender price as £63 700.28 inc VAT. Omissions and additions
shown on this Cost Analysis sheet show additions of £15 800 (including £10
000 ex VAT for contingencies) and omissions of £24 972 (including £5 000
contingency). Overall the additions and omissions amounted to a reduction
of £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 the
total eligible cost to £59 223.65 inclusive of VAT.

3.30 The Town Improvement Grant was approved on 09-11-06 on the basis of
80% of the eligible expenditure figure being a total grant figure of £47
378.92 inclusive of VAT.

3.31 Contingency - A letter dated 10 October 2006 from the applicant’s

second appointed agent gives details of the tender process and a Cost
Analysis Sheet for the WDA grant. Attached to these sheets is a Summary of
Additional and Omitted Works which includes a figure of £10 000 ex VAT for
a contingency sum. The explanation given by the applicant’s second
appointed 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 allowance

whatsoever for any unforeseen works and is requesting that
a contingency sum of £10k be included (but not to be used
unless discussed with the Council’s Senior Planning Officer) if
this situation arose.’

3.32 However, a review of the schedule of works completed by WR Peter’s Ltd

shows on page 17 a contingency sum of £5 000 which was already included
in 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 response

dated 21st September 2009 they stated that:

‘a meeting was held on 31 August 2006 where a contingency

figure was discussed. Present at this meeting were a
representative from the WDA, the Senior Planning Officer
(IOACC), the applicant and the applicant’s 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 of

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unforeseen works. Furthermore in a telephone conversation

with the WAG on 15th September 2006 our agent again
proposed this figure.
(*officers were named in this communication but their names
have been excluded for Data Protection purposes here.)

A decision as to the contingency figure was obviously made

by the local authority and as a consequence work was
commenced on the property.’

There is no evidence that any approval to utilise the £10 000 contingency
was ever made or approved. Therefore, we would have expected the
eligible expenditure figure to have been reduced by £10 000 plus VAT to
a figure of £47 473 inc VAT (£59 223 eligible expenditure figure less £11
750 unused contingency). The amount of grant awarded and paid by the
WAG was 80% of the original eligible expenditure figure including the
contingency at £47 378.92 inclusive of VAT.

3.34 In a letter dated 20-10-09 BVUK in response to a query concerning the

amount of eligible expenditure on the TIG stated that ‘the figure of £47
834.10 (£56 205.07 incl VAT) was arrived out by your Senior Planning
Officer.’ This is consistent with the second claim form completed by the
Senior Planning Officer which was signed by the applicant on 26-06-07
which corresponds to the agents’ Interim Certificate Payment number 3
dated 02-07-07. It is not clear on what basis the Senior Planning Officer
completed 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 was
completed by the Senior Planning Officer and signed by the applicant prior
to receipt of the agents Interim /Progress Certificate number 3 and that the
final Claim Form completed in December 2007 was not based on an
Interim/Progress payment certificate from the agent.

3.36 As the Senior Planning Officer and the WAG Regeneration Manager were
both apparently aware of the £10 000 contingency and have subsequently
confirmed 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 Senior
Planning Officer and sent for approval and payment to the WAG
Regeneration Manager were not reduced by the contingency amount before
payment was made.

4. FINDINGS - SITE VISITS & INTERVIEWS

4.1 Applicant’s Contributions – The applicant has on several occasions

stated 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 out

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

‘You came into my shop with X (another named client of

BVUK) , introduced yourself and told me that if I’d use you as
my agent I would get the job done for nothing. You then
proceeded to tell me that you could make a start in six weeks.
That was in November 2005, was an offer no one could refuse
and was the reason that I sacked RGR Partnership.’

4.2 In an undated and unsigned letter to the Ombudsman with a date stamp
as received by the Ombudsman on 28th March 2008 the applicant stated
that:

‘It was at this time, late in 2005, I was approached by (a named

agent) of Best Value UK with a promise that if I sacked RGR
Partnership and employed him, I would get the work done with
no applicant’s contribution and that the work would commence
in a matter of weeks.’

4.3 In an interim independent report issued in October 2007 on the Standard

of work carried out and associated matters at the property the independent
surveyor employed by the applicant stated that:

‘the applicant was approached by Messrs. Best Value UK, who

suggested 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, a
prospect he felt unable to turn down, despite some doubts as to
how they could achieve this.’

4.4 At a meeting held with the applicant on 17-11-09 the applicant confirmed
that he had been informed by BVUK that they would get the work carried
out for the grant monies with little cost to himself. The applicant explained
that he understood that if the grant work on the internal work could be
reduced to £37 500 then this would be paid by the Council as a grant award
of £37 500 was available for two private leasing flats as described in the
scheme. 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 applicant
was liable to contribute 25% of the total cost of eligible expenditure and
that 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 applicant’s
contribution was required to be paid prior to the Council considering the
payment of grant monies. A letter received from BVUK dated 02-07-07
stated that ‘ I can confirm that the applicant has paid our fee in full and the
builder 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 ‘’the

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applicant did pay our fee in full. Confirmation as to whether the contractor
was paid in full would have come from the contractor and/or the client to
Best 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 applicant
included only a payment of £10 299 in relation to the Empty Homes Grant. A
letter from the applicant’s accountant dated 15-09-08 states that ‘no
payment had been made in respect of the first interim payment in the sum
of £24 950.00.’

4.7 It would appear therefore that the applicant changed his agent in order
to reduce or eliminate his liability to pay contribution and that the Council
was mis lead by the letter dated 02-07-07 from BVUK that the applicant had
paid his required initial contribution to the Empty Homes Grant of £24
950.00. It was only on the basis of this, as it turns out incorrect,
confirmation of contribution payment that grant monies were released by
the Council.

4.8 These facts could constitute a prima facie case that one or both of the
applicant and the agent has claimed / obtained money through misleading
the Council as both parties were aware that a contribution from the
applicant was required before grant monies could be released as stated in
the 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 builder’s offices

on 12-10-09 the builder was asked if he could verify for each of the invoices
produced against which grant eligible works each was raised. The builder
stated that he could not confirm this as BVUK had taken items of work off
each grant to add to the other at various times. The builder stated that only
BVUK would be able to say what works were undertaken against each grant
and that this would be in the agent’s head rather than on paper. The builder
also stated that BVUK were trying to reduce the costs of the work in the
interests of their client.

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

4.11 During a site visit to the agent’s offices undertaken on 04-02-09 the
agent was asked what procedures were in place for the checking of
completed work to ensure that the amounts invoiced were appropriate. The
agent stated that BVUK did not annotate in detail the works undertaken, but
undertook a general sample check, ensuring that the claim was in line with
the costs of the original schedule of works specifications and thereafter
issued a certificate of Interim Progress Payment Form in support of the

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contractors invoice.

4.12 The Senior Planning Officer was asked about the supporting documents
that would normally be expected to be produced in support of works carried
out 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 to
be supported by a priced schedule of works completed by the contractor, in
the case of this property (named in original) such certificates were
completed but no priced schedule of works undertaken were provided in
support of the certificates submitted. In the case of this property a more
general schedule of works under bullet point headings was provided by the
WAG Regeneration Manager and this was used in lieu of such schedules.
The main areas bullet pointed by the WAG were re roofing, repairs to front
elevation, 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 my
experience with TIG works, this a unique exception to normal WAG
practices. ‘(We understand that this relates to the letter from the WAG to
the applicant as detailed at 3.19 to 3.21 above).

However, the Senior Planning Officer has also stated that the inspections
included reference to the original priced schedule of works provided by
WR Peters.

4.13 As stated at 3.13 above this has meant that it is not possible from the
paperwork to determine the works that have been undertaken at the
property 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 of
irregularity going undetected, provides no protection to staff and limits the
Council’s ability to answer allegations of irregularity.

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

4.15 Meeting with WAG – A meeting was arranged with the WAG
Regeneration Manager and WAG Auditors to discuss concerns expressed by
the 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 of
works actually carried out at the property in relation to this grant as the
applicant has consistently complained that less work than claimed for grant
purposes has been carried out.

4.17 At this meeting it was agreed that an inspector from the WAG and from
the Council would produce a combined schedule of completed works and
visit the property to ascertain if this work had been carried out and to
determine 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 in
October 2009 based on an agreed initial cost value of £45 041 ex VAT (£52
923.18 incl VAT) as per BVUK’s WDA Cost Analysis sheet. After deducting
the £10 000 unclaimed contingency and further works amounting to £2 151
and 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 £45
023.65 can be compared to the actual amount included on the three
Certificate of Interim/Progress Payments issued by BVUK which total £53
394.82 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 Form
completed by the Senior Planning Officer on behalf of the applicant did not
include a total eligible expenditure to date figure but was produced after the
third BVUK Interim Progress Payment certificate (number 3). Therefore this
third Claim Form is not supported by supporting documentation from BVUK.
We can surmise however that the claimed total eligible expenditure figure
was £59 223 as the total grant figure claimed at 80% was £47 378 (incl
VAT).

4.21 Possible Overpayment of grant - If the actual completed eligible

expenditure figure is £45 023.65 and not the amount of eligible expenditure
claimed which was the maximum amount of £52 923.18 (excludes eligible
fees of £6300.47) then the grant figure of 80% of actual eligible expenditure
can 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 £ 6
319.62.

4.22 If the revised inspected figure is correct then this also means that the
applicant may have been over invoiced for this work. According to a letter
received from BVUK dated 20-10-09 it would appear that the applicant has
paid two amounts towards the TIG amounting to £47 000 inc VAT (£29 375
and £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 enhance
the 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 Categoris Accept Management comment Implementa Manager

ation ed tion responsible
date
Y/N
1 The procedures for the new TIG Significant Yes TIG replaced by new Property & April, 2010 Principal
administration should be reviewed to ensure Environment Grant (PEG) Planning
that they provide clear guidance on the role Officer
of the Council and the WAG in relation to
each stage of the grants administration
process.

2 BVUK should be approached about the way Significant Yes Limited to new PEG grant which we April, 2010 Principal
that they advertise their services in relation are responsible for Planning
to public sector grants and in particular as to Officer
claims they appear to have made that they
Senior
could get grant works done for no applicant
Planning
contribution.
Officer

3 An agreed Code of Practice for agents Significant Yes To be included in application pack April, 2010 Principal
administering TIG grants should be drawn up Planning
including specific requirements for the Officer
detailed annotating o f works completed to
be provided with each certificate for
payment and invoice issued by the agent’s
contractor.

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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 enhance
the 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 Categoris Accept Management comment Implementa Manager

ation ed tion responsible
date
Y/N
4 The Council should ensure that all Significant Yes New procedures to be agreed with April, 2010 Principal
documents relating to grant administration date stamping documents for PEG Planning
are clearly date stamped on receipt before Officer
filing in the appropriate file.
Agents should be asked to ensure that all
documents produced by them and submitted
to the Council are dated.

5 The Planning services should ensure that no Significant Yes To be included within new procedures April, 2010 Principal
Claim Forms for TIG release should be for PEG Planning
completed without appropriate supporting Officer
documentation from the agent / contractor /
applicant, whichever is responsible for
supervising the relevant scheme.

6 Unused contingency sums included in Significant Yes As above April, 2010 Principal
eligible works figures should be deducted Planning
from final eligible expenditure figures when Officer
determining the final amount of grant to be
paid. Senior
Planning
Officer

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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 enhance
the 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 Categoris Accept Management comment Implementa Manager

ation ed tion responsible
date
Y/N
7 Formal segregation of duties and / or Significant Yes As above April, 2010 Principal
second officer authorisation between staff Planning
inspecting properties and those producing Officer
documentation for release of grant monies
should be introduced.
8 The WAG should decide what action, if any, Significant Yes Internal Audit has contacted the WAG April 2010 Head of
should be taken to verify the amount of to inform them of the outcome of Servi9ce
grant that should have been awarded in this their investigations into this TIG and Audit
case and to reclaim any grant monies the possibility of an overpayment
deemed to have been overpaid and from having been made. WAG is still
whom. considering what action, if any, to
take at the time of this report.
9 The applicant should be informed of the Significant Yes Internal Audit will liaise with the WAG April 2010 Head of
outcome of the investigation into the over the response to be made to the Servi9ce
administration of the TIG and provided with applicant. Audit
a copy of the finalised report along with any
comments that the WAG may have to add
to the report.

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APPENDIX A

Extract of Main Terms and Conditions of the Agency Agreement

The 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 WDA

and to be provided by the Council to applicants. (Terms & Conditions
para. 2)

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

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

d) The Council will provide adequate and competent staff for the
administration of the TIG and will nominate one officer to act as a
contact 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 criteria
specified by the WDA. (Terms & Conditions para. 5)

f) Council contact to meet applicants at relevant buildings to discuss

the application in detail and the applicant should provide an outline
of the proposed scheme, including a budget estimate of the capital
costs. (Terms & Conditions para. 6)

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

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

i) Unless payment in instalments has been agreed by the WDA

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payment will only be made once works have been completed and a
properly completed Grant Claim Form and Certificate of Local
Authority 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 of
the TIG scheme. (Terms & Conditions para. 13)

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

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

m) The Council will retain all original papers supporting each

application or enquiry concerning a new TIG for at least five years
from the Grant Date of the last new TIG monitored by the Council
under this agreement. (Terms & Conditions para. 18)

n) The Council shall be entitled to receive an administration fee of the

amount specified in the letter to which this Schedule is attached in
relation to each new TIG granted. (Terms & Conditions para. 24)

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