Westway Development
Trust: a developer's claims were "taken at
face value" - 1/3
This
auditor's report will make little sense if you
haven't read Brian Deer's Notting
Hell from The Sunday Times of June 17
2001. In July 2002 the trust renamed itself
Westway Development Trust. A Westway Development Trust
index of
materials is also available
Inquiry
into matters between the Royal Borough of
Kensington & Chelsea and North Kensington
Amenity Trust (NKAT)
PricewaterhouseCoopers
12
October 2001
Background
and Terms of Reference
1. At a
Council Meeting on 25 July, the Council resolved
to invite PricewaterhouseCoopers (as the
Council's auditors appointed by the Audit
Commission) to investigate its National
Non-Domestic Rates and Licensing arrangements
with NKAT [Now Westway Development
Trust].
2.
Subsequent to the Council's resolution, the Town
Clerk and Chief Executive provided the following
Terms of Reference for the inquiry.
Terms of
Reference for the inquiry
1. To
inquire into the applications submitted by
NKAT for
(a) fee
waivers for the fee normally charged for a
public entertainment licence.
(b)
relief from non-domestic rates
2. To
review the decision-making processes used by
the Council to determine these matters.
3. To
consider whether any improvements are
necessary to decision-making systems; to
advise on whether any relief should be
reclaimed and recommend any other action as
necessary.
4. To
comment on any other matters arising from
these inquiries.
To report
findings to the Council's Cabinet Overview and
Scrutiny Committee.
3. We
conducted the inquiry in accordance with the
Terms of Reference. During the inquiry we have
studied relevant Committee reports and supporting
papers; interviewed officers responsible for
handling applications for discretionary fee
waivers and discretionary rate relief reviews and
obtained additional information, which we
considered relevant to the review. We also met
and discussed the issues with the Director of
NKAT. However, we would point out that our review
has been primarily concerned with the Council's
procedures for dealing with the applications
submitted by NKAT and we have not reviewed the
procedures, systems or controls within NKAT for
which we have no responsibility.
4. We
summarise the results of our review, together
with our conclusions and recommendations in the
following sections of this report;
* Overall
financial relationship between the Royal Borough
and NKAT
* Fee
waivers for public entertainment licences
* Rate
Relief Applications
Overall
financial relationship between Royal Borough and
NKAT
Findings
5. It is
necessary to consider the applications for
discretionary relief in respect of the property
at 12 Acklam Road (known as Subterania) within
the overall context of the financial transactions
between the Council and NKAT. The Council has
been closely involved with the establishment and
development of NKAT over a 30 year period and has
provided financial support to NKAT throughout
this period. The following table summarises the
main ongoing commitments as at July 2001, based
on information supplied by the Director of
Finance & Information Systems.
Details
of financial support
Amounts
paid in 2000/01
- Annual
payment made under a Management Agreement
in respect of the Westway Sports Centre
based on a fixed percentage of agreed
operating costs
- £161,000
- Deficit
grant paid in connection with the
repayment of a loan in respect of
Portobello Green Fitness Club
- £34,500
- Annual
grant to NKAT in respect of the costs of
cleaning the pedestrian areas of the
Trust's land including the mowing of the
grassed areas
- £38,200
- Interest
free loan in respect of Portobello Green
Phase 2 (Notional interest at calculated
at 10% of outstanding balance)
- £14,500
- Sundry
grants
- £3,500
- Discretionary
rate relief on Sports Centre, Fitness
Club, Bay 66 and NKAT offices (the
Council's 75% contribution element)
- £15,730
-
- Total
financial support in 2000/01
- £267,430
Westway
Sports Centre Management Agreement
6. The
largest item is the annual payment in respect of
the Management Agreement for Westway Sports
Centre under an agreement originally negotiated
in 1980 with the former Inner London Education
Authority, which continues through until 2011 and
then is subject to an annual review. The
agreement commits the Council to make annual
payments towards the running costs and
administrative overhead costs incurred by the
Trust. The payment is calculated in relation to
specified proportions of specific cost headings.
7. Under the
agreement schools are entitled to free use of the
facilities during the day (9am to 5pm) and at
weekends a reduced charge. Schools, FE
establishments and Youth Services are also
entitled to free use of certain pitch facilities
on weekday evenings. The Trust's annual report
for 1999/2000 records 845 hours of free usage by
schools and local youth groups in the year to 31
March 2000. This would equate to £190 per hour
based on the annual payment. The Council does not
have its own record to confirm the usage.
8. In view
of the continuing commitment to make a
significant contribution to the costs, there
would appear to be scope for the Council to make
greater use of the facility under the terms of
the agreement. This would require an assessment
of the current usage and an options analysis of
the potential ways to increase the usage.
Portobello
Green Fitness Club deficit grant
9. The
deficit grant is tied to the repayment of a loan
in respect of Portobello Green Fitness Club and
is subject to review each year, by the Council.
To date, it has been paid each year throughout
the term of the loan on the basis that NKAT
accounts have recorded an operating deficit on
the facility in each year. The loan period runs
until 2009. The accounts of the Trust indicate
that the aim in the medium term is to operate the
Centre as a financially self-sufficient facility
for the benefit of the Community. The Council's
grant is not tied to the provision of specific
community activities.
Annual
Grant to NKAT for the costs of cleaning
pedestrian areas
10. The
annual grant to NKAT in respect of the costs of
cleaning the pedestrian areas of the Trust's land
including the mowing of the grassed areas appears
to have been paid since 1975. The Council's
Policy and Resources Committee agreed on 15 July
1975 that the Council should accept
responsibility for meeting these costs by way of
an annual grant. It is largely an internal
transaction as the Council provides these
services and the recharge and the grant are
internal accounting entries. The nature and
extent of the services provided has been
described in correspondence and file notes
but is not captured in any definitive agreement.
Similarly the costs of providing these services
are based on a costing exercise carried out in
1991 and this amount was increased on an indexed
basis up to 1996, since which it has been held at
the 1996 cost level.
11. The
nature and extent of financial support to NKAT
provided by the Council reflects the Council's
long-standing commitment to the community
activities of the Trust. However there is limited
documentation or evaluation by the Council to
quantify the specific benefits to the community
in respect of the financial support.
12. In our
view, the overall level of financial support
provided by the Council, which amounted to
£267,000 in 2000/01, is relevant to the way in
which the specific discretionary reliefs in
respect of Subterania, which amounted to less
than £7,000 in any year, were handled. Given the
scale of the overall level of support and the
lack of specific targets and monitoring
arrangements attached to much of this funding,
there was the potential that the discretionary
reliefs in respect of Subterania could have been
viewed as part of an overall level of support and
therefore not subject to the level of detailed
scrutiny that might otherwise have been the case.
Recommendations
The Council
should nominate an officer to manage the
relationship between the Council and NKAT and to
maintain an overview of the support provided by
the Council and the expected benefits to result
from that support.
The Council
should review the amount of free usage that it
receives under the Management Agreement for the
Westway Sports Centre and consider whether there
is scope to increase the usage under the terms of
the agreement.
The Council
should review the basis and need for the deficit
grant in respect of Portobello Green Fitness Club
and, as part of this review, should require NKAT
to submit some form of business plan to indicate
when the Centre will achieve break-even and
remove the need for the grant.
The Council
should review the basis of grant-aiding the cost
of cleaning the pedestrian areas of the Trust's
land including the mowing of the grassed areas,
including the basis for defining and costing the
level of services provided.
The
auditor's report continues >>>>
|