LBWF, the Local Authority
Business Growth Initiative programmes One and Two, and the Waltham Forest
Business Board, E11 Bid Co., and
North London Ltd.
Summary
·
Between 2007 and 2011, LBWF
received Local Authority Business Growth Initiative (LABGI) monies worth
£2,569,014.
·
LBWF used some of this money
for its own projects, and also allocated £540,000 to the Waltham Forest
Business Board’s operating arm, Waltham Forest Business CIC (WFB), contracting
the latter to stimulate two local BID Companies.
·
Exactly what was achieved by
the expenditure of the LABGI monies in terms of outputs and outcomes is
difficult to gauge, and this is particularly true of the sums passed to the WFB,
as when questioned under the FIA, LBWF is able to produce only a small fraction
of the monitoring data that was contractually required.
·
What is abundantly clear, however, is that one
of the beneficiaries, the E11 BID Co., was run chaotically and recklessly; and
that the sums it received from WFB – c. £180,000 - currently cannot be
accounted for.
·
Questions also arise about the
money that WFB kept for its own administration and running expenses, since
these seem to be well above the level that might be reasonably expected; and
also a payment of £50,000 it made to a third party, North London Ltd., which
again has an uncertain fate.
·
Research on these issues has
thrown up two further worrying dimensions.
·
One concern centers on North
London Ltd., since beyond LABGI, it is established that this company received
large amounts of additional public money, at least £1,108,000 (including
£455,279 from LBWF alone); spent it in ways that are not always easy to trace;
and recently was forced into administration, while under investigation by City
Hall.
·
In addition, it is a fact that
two of the key figures on the WFB board were also directors of delivery organisations
which received WFB funding, specifically the E11 BID Co. and NLL, and this
raises questions about their roles and potential conflicts of interest.
·
In conclusion, over recent
years, LBWF has been involved in a series of well-publicised scandals about its
use of public money, involving, amongst others things, the Neighbourhood
Renewal Fund, the collapsed local charity O-Regen, and its own Worknet
programme.
·
What is documented in the
following pages suggests that few lessons have been learnt, and underlines the need
for an independent inquiry into how the local authority operates.
LBWF, the Local Authority
Business Growth Initiative programmes One and Two, and the Waltham Forest
Business Board, E11 Bid Co., and
North London Ltd.
Introduction
1. Between 2007 and 2011, LBWF received Local
Authority Business Growth Initiative (LABGI) monies worth £2,569,014, £708,201 under
programme One in 2007-09, and £1,860,813 under programme Two in 2009-11.[1]
2. According to the Department of Communities and Local Government, the
LABGI initiative aimed to give ‘local authorities a financial incentive to
encourage local business growth by rewarding qualifying business growth with a
non-ringfenced grant’.
3. LBWF
appears to have spent the bulk of its LABGI allocation on its own schemes, for
example, the development of ‘Area Action Plans’ (cost £219,617) and a ‘Borough
Legacy Plan’ (cost £143,970); ‘Climate change business outreach’ (projected
cost ‘£105k’); ‘Construction skills centre contingency’ (projected cost
‘£418k’); and ‘Olympic projects’ (projected cost ‘£210k’).
4. But in
addition, LBWF allocated at least £540,000 of the LABGI monies to the Waltham
Forest Business Board (WFBB), £140,000 in 2007-09, and £400,000 in 2009-11, the
object being to support the latter’s operation ‘as a governing body of many
local businesses’, and specifically to allow it to help develop the borough’s
two recently created Business Improvement District (BID) companies, the Argall
BID Co., and the E11 BID Co. (each incorporated in 2007).[2]
5. Turning
to outputs and outcomes, what LBWF achieved through its own schemes remains
opaque. The construction skills centre was built, and though the majority of the
money involved came from the Learning and Skills
Council, LBWF
certainly contributed to its cost. Some of the other spending heads seem very
vague, perhaps deliberately so. It may be significant that LBWF has never
published a record of what its LABGI funds purchased, and recently ignored a
specific request under the Freedom of Information Act (FIA) to identify ‘which
organisations and/or persons received disbursements from this sum’.[3]
6. As to
the £540,000 given to the WFBB, what is known so far is hardly reassuring, as
will be explained in the following paragraphs, which first broadly follow the
chronology, and then turn to some recent revelations about the overall context.
The WFBB
7. The WFBB began operating in late 2005, and
was described by LBWF as ‘the strategic partnership body between the local
Council, regional government, central government and the business community in
Waltham Forest.’
8. In the LABGI period and beyond, the WFBB
chair was Michael Polledri, a prominent local property developer and
philanthropist, based at Heron House, Hale Wharf, London, N.17. However few other facts about
the organisation are known, as it does not appear to have published a
membership list, a constitution, or details of its finances.
9. In 2008,
the WFBB set up a community interest company, Waltham Forest Business CIC
(hereafter WFB), and subsequently used this as its operating arm. WFB was
guided by a small group of directors, which included Michael Polledri
throughout, together with the E11 BID Co. chair Fawaad Sheikh (to March 2012),
and the LBWF portfolio holder for ‘investment and enterprise’ Cllr. Terence Wheeler
(to August 2011).
WFB and LABGI One spending
10. As
regards WFB and LABGI One monies, LBWF records show that the entire sum was
paid to the two BID companies, £15,000 in 2007-08, and £125,000 in 2008-09,
though what this money purchased remains unrecorded.
WFB and LABGI Two spending (i) intentions
11. As
regards the WFB and LABGI Two monies, the picture seems at first sight a lot
clearer. On 24 December 2009, Michael Polledri and Fawaad Sheikh of WFB signed
a contract with LBWF to ‘administer’ the funding, on the basis of the following
detailed allocation, [4] which
was noted to be fixed and mandatory:
Activity
|
Funding
|
Dedicated Waltham Forest
Business Growth Officer
(‘Dedicated resource will
ensure
WFBB and its forums are
supported’)
|
£38,000
|
Business Champion (‘who will
manage day-to-day operations of the board’)
|
£12,000
|
On-going secretariat and
advice
(‘Salary costs to support
business
forums, board and BID companies’)
|
£46,700
|
Business directory
|
£5,000
|
Communications (‘Website,
Annual
Report and public affairs’)
|
£10,000
|
Board operating Budget
|
£18,000
|
‘Support BID Companies in
their
projects within the
community’
|
£220,000
|
‘Part funding for E11 One
Stop
business support centre’
|
£50,000
|
Total
|
£399,700
|
12. Subsequently, according to a letter written by
then Deputy Chief Executive Shifa Mustafa in January 2014, LBWF paid WFB
£400,000 in six installments, starting in February 2010, and ending in March
2011.[5]
13. However,
tracing what happened when WFB moved to the operational phase of this contract
reveals four sets of significant issues, concerning monitoring, the E11 BID
Co., North London Ltd., and monies allotted to project support.
WFB and LABGI Two spending (ii) monitoring
14. The contract of
24 December 2009 required that WFB submit specified
types of monitoring information, in particular formats, and at a series of
pre-determined times. Moreover, the satisfaction of such requirements was
clearly stated as mandatory, with non-compliance at any time constituting a
breach.
15. Yet when questioned under the FIA, LBWF
has struggled to produce this monitoring information, as the following examples
demonstrate:
(a) at Annexure G, the contract required that
WFB submit a De Minimis Aid Disclosure Form, to ensure that there was
compliance with EU regulations.
LBWF states it ‘does not hold the information
in recorded form’.[6]
(b) at Schedule 3, paragraph 2.3, the
contract required that WFB ‘provide periodic returns containing information in
relation to expenditure, Outputs, Milestones and risks in a format which
complies with the requirements of Annexure D’.
LBWF has supplied some quarterly monitoring
forms, but these are not in the form specified by Annexure D, indeed covering
only a few of the required headings; and are also incomplete, missing those for two of
the six quarters, July 2010 to September 2010 and January 2011 to March 2011.[7]
(c) at Schedule 3, paragraph 3, the contract
required that WFB submit ‘final reports in respect of all relevant Outputs
relating to the Project’, and specified six particular headings (‘Job
creation’, ‘Business support’, etc.).
LBWF states it ‘does not hold the information
requested’.[8]
(d) At Schedule 3, paragraph 2.4, the contract
required WFB to supply annual statements of grant expenditure, ‘audited by your
external auditor’, with special forms for both purposes provided at Annexure F.
LBWF has supplied two such forms, somewhat
confusingly dated 10 June 2010 and 22 October 2010, which relate to £145,676 and £105,021
respectively, meaning that 37 per cent of the grant, some £149,303, is entirely
unaccounted for. Moreover, in both cases the required forms signed off by an
external auditor are missing.[9]
16.
Other evidence, too, confirms the fact that contract monitoring was at best
patchy, at worst non-existent. For example, asked in 2013 the general question
‘In relation to the substantial monies that LBWF has paid over on a regular
basis to the Waltham Forest Business CIC since 2009-10, please will you forward
a list of the outputs that were produced?’, LBWF stated: ‘the Council does not
hold the information requested’.[10]
WFB
and LABGI Two spending (iii) the E11 BID Co.
17. As part of the LABGI Two contract
allocation, WFB paid the E11 BID Co. two sums of £110,000, satisfying a pair of
invoices for £55.000 dated 12 June and 20 September 2010 (see Appendices One
and Two, below).[11]
18. As is apparent, neither of these invoices
is supported by any information as to what they were to pay for, nor do they
have attached evidence of spend (e.g. receipts from third parties) – something markedly
different from equivalent invoices submitted by the Argall BID.
19. LBWF’s quarterly monitoring form for 1
April 2010 to 30 June 2010 suggests that the £110,000 was used to purchase CCTV
cameras, and was justified by a ‘Decision making audit trail’.
20. Questioned under the FIA, LBWF repeatedly
refused to release this ‘Decision making audit trail’, but on appeal was then
persuaded to do so by the Information Commissioner.
21. Significantly, when the documents
released are closely examined, they turn out to relate, not to a contract for
CCTV cameras, but to a contract for maintaining a CCTV network, worth only £18,000.
22. In addition, there are legitimate
question about the timing of these two payments. In the 12 months to June 2010,
the E11 BID Co. made an operating loss of £80,012, considerably more than the
total annual levy it received from traders.[12]
23. Moreover, evidence had emerged that the
E11 BID Co. was being chaotically run. Thus, at an E11 Bid Co. Board meeting of
16 September 2010, attended by, amongst others, Munawar Hussain (‘LBWF advisor
to the Board’), Cllr Afzal Akram (‘Cabinet Member for LB Waltham Forest
corporate’), and Michael Polledri (‘Waltham Forest Business Board Chair’), there
was extensive discussion of auditor Barnes Roffe’s recent annual management
letter, which advised the need for clarification about, amongst other things, a
host of elementary fundamentals, such as whether the E11 BID Co was:
·
maintaining proper books of
account;
·
ensuring its cheques were being
signed by two people in line with normal practice to avoid fraud;
·
respecting appropriate
restrictions on cash withdrawals;
·
operating a proper PAYE system;
·
clear about its VAT and
corporation tax status; and
·
certain that large cash withdrawals had been
correctly authorised.
24. Indeed, during this period the situation
had deteriorated to the extent that one ex-E11 BID Co. director was regularly
contacting senior figures such as E11 BID Co. director Cllr. Clyde Loakes and Michael
Polledri with detailed complaints about the company’s problems, on at least one
occasion also copying in the Leader of the Council, Chris Robbins. [13]
25. What brings these developments into
particularly sharp focus is the fact that the LBWF-WFB contract throughout
stressed the importance of propriety, and for example required at paragraph
34.2 ‘If there are grounds for suspecting financial irregularity in any
transaction…those grounds shall be notified to us immediately in writing’, and
added ‘For this purpose “financial irregularity” includes, but is not limited
to, fraud or other impropriety, mismanagement and the use of funding for
purposes other than provided’.
WFB
and LABGI Two spending (iv) North London Ltd.
26. The LBWF-WFB contract allocation, to
repeat, included the sum of £50,000 to be paid for ‘Part funding for E11 One Stop business
support centre’.
27. In March 2011, right at the end of the
LABGI contract, a private company called North London Ltd. (NLL) presented WFB
with an invoice dated 14 March 2011 for £50,000 (see Appendix Three, below).
28. According to LBWF, this invoice was paid
to NLL ‘for support of the E11 One Stop Shop Business Support Centre’.[14]
29. However, LBWF cannot say what this
support consisted of, nor when it began and ended.[15]
And neither, of course, is the invoice of much help, with the ‘Description’ box
reading only: ‘To provide project support as instructed by Waltham Forest
Council’.
30. Michael Polledri had become a director of
NLL in 2005, and the company was based at Heron House, Hale Wharf (as WFB).
31. The One Stop Shop was not controlled by
the E11 BID Co., but by a related company, The Leytonstone Business Forum CIC.
32. The directors of the Leytonstone Business
Forum CIC were Fawaad Sheikh (also a board member of both the E11 BID Co. and
WFB), and two others, one of whom subsequently denied knowing anything about
the company’s operation.
[1] LBWF Cabinet paper, 8 December 2009; FIA
deposition 20 March 2014.
[2] Ibid.
[3] FIA deposition, 20 March 2014.
[4] Contract, Annexure C.
[5] Letter Mustafa–Tiratsoo, 23 January 2014.
[6] FIA deposition, 14 October 2014.
[7] FIA deposition 24 March 2014.
[8] FIA deposition, 27 August 2014.
[9] FIA deposition, 27 August 2014.
[10] FIA deposition, 5 December 2013.
[11] FIA deposition 24 March 2014. However, it
should be noted that, in answer to an earlier FIA request, LBWF stated that the
dates of these two invoices were 15 January 2010 and 22 June 2010 (FIA
deposition, 11 December 2013).
[12]
http://www.e11bid.co.uk/docs/AGM%202011%20Report.pdf.
[13] See, for example, e-mails dated 23 June
2010, 26 August 2010, and 28 and 29 March 2011.
[14] FIA deposition, 6 January, 2014
[15] FIA deposition, 28 February 2014
34. And, most significantly, the Leytonstone
Business Forum CIC, was anyway first gazetted on 1 February 2011 and then
dissolved on 17 May 2011 – making any ‘support’ payment even more questionable.
35. Finally, it should be emphasised that NLL
was not cited in either the LBWF Cabinet paper originating LABGI Two, or the
LBWF-WFB contract, and so must have been especially commissioned, raising
questions about Michael Polledri’s role and whether there was any conflict of
interest involved.
WFB
and LABGI Two spending (v) project support
36. As the table at paragraph 11 (above)
indicates, LABGI Two included generous provision for project support. Indeed,
£127,700, a third of the total, was earmarked for this end.
37. Such a sum seems excessive, particularly
because (a) the WFB and WFBB only appear to have met monthly, at most; (b) the
WFBB website was fairy basic; (c) both BID Companies had their own sources of
income, principally of course their respective BID levies, but also funding
from LABGI One, and returns from various commercial schemes; and (d) both BID
Companies also benefited from separate LBWF support, with the E11 BID Co., for
example, receiving free office space, an array of one off payments (amounting
to c. £50,000 between 2010 and 2013), and extensive input from at least two LBWF
regeneration officers.
Recent
revelations (i) the E11 BID Co.
38. Since the events of 2009-2011, further
information has emerged which throws interesting light on what had ensued.
39. First, it is now absolutely clear that
the E11 BID Co. was throughout this period run not just chaotically but also
recklessly. In its management letter dated 2 August 2011, auditors Barnes Roffe
again drew attention to the company’s many failings, noting, amongst other
things that:
·
‘accounting records were not
kept in an orderly or logical manner’;
·
‘the company was not writing up
its accounting records’;
·
‘the company has employees but
does not have a payroll scheme registered with H.M. Revenue & Customs’;
·
‘income tax and national
insurance were being deducted from employee’s wages but were not being paid
over to HMRC’;
·
‘Mr. Fawaad Shaikh…is the sole
cheque signatory and is able to authorise electronic payments on his own’;
·
cash payments of at least
£18,000 had been made but could not be reconciled ‘due to the lack of a petty
cash book’; and
·
the company’s shareholder
register was out of date.[1]
40. One year later, Barnes Roffe repeated many
of the same criticisms, and also highlighted a further issue that perhaps had
even more serious implications:
‘During the course of our audit we noted that
Leytonstone Business Forum CIC was dissolved from the register of companies on
17 May 2011…We further noted that after this date the [E11 BID] company
continued to receive invoices from, and make payments to, Leytonstone Business
Forum CIC…The directors are responsible for ensuring that the company only
receives, and pays for, valid business services rendered by a legitimate entity…The
fact that services have been received from, and payments made to, a company
that no longer exists is a serious break down in controls and management of the
company’.[2]
41. More damningly still, an
independent report commissioned by LBWF and conducted by Wilkins Kennedy (the
auditor for two major central London BIDs, Better Bankside and Camden
Unlimited) has recently concluded amongst its ‘key findings’ that:
‘the Company and
its directors failed in their duty to maintain proper accounting records and
systems for the first three/four years of the first BID term and it was only
towards the end of 2011 and into 2012 that some level of control was imposed
and records brought partially up to date.
The first set of statutory accounts
filed on time was those for 30 June 2012, being the fifth accounting year since
incorporation…
The Company appears never to have
submitted a VAT return, which represents more than twenty VAT quarters since
registration at the start of ‘BID one’ in 2008…
For the period to the end of 2011 the
Company failed properly to operate its payroll and discharge its PAYE and NI
liabilities. Substantial liabilities have been allowed to accrue to HMRC for
outstanding PAYE/NI; Penalties and interest continue to accrue.’[3]
Recent
revelations (ii) North London Ltd.
42. Aside from the
LABGI programme, it turns out that LBWF made 62 other payments to NLL between
2004 and 2012, worth £455,279.[4]
43. LBWF
classified these payments under a number of headings including consultancy,
staff training, inward investment, and ‘the organisation, development and
management of WF Business Board and WFB CIC’.
44. A number of
the payments are simply described as match funded.
45. However, when
asked under the FIA about the finer details of these payments, LBWF once again
struggles, stating for example that:
· in relation to the multiple payments to NLL
that were made for ‘Regeneration Wood St project’, it holds no information
about either the contract involved or relevant monitoring material;
· in relation to the multiple payments that
were made to NLL for ‘inward investment. Match funding’ and ‘Match Funding
Contrib’, it holds no information about the contracts involved, nor in the
latter case about whether NLL raised equivalent funds to those paid to it by LBWF;
and
· in relation to NLL’s provision of a ‘free,
comprehensive, current and user friendly web based property portal to businesses
and individuals looking for premises, and who are already in the Borough or
looking to move to the Borough’, it holds no information about the address of
the portal, the date when the portal was launched, the estimated number of
visitors to the portal, or the sum that it paid to NLL for provision of the
service.[5]
47. Exactly what
these payments achieved in terms of outputs and outcomes remains to be
established, but some limited evidence currently at hand is hardly encouraging.
48. The ES programme was
part-funded by the European Regional Development Fund, and aimed to offer
‘advice, guidance and hands-on support to business owners considering exporting
or looking to explore new markets abroad’.
49.
Significantly, one of the partners charged with delivery of ES was the E11 BID
Co..
50.
Fawaad Shaikh’s initial public comments about the programme were very positive.
For example, at the E11 BID Co. AGM of March 2011, he boasted that it was ‘helping
businesses in Leytonstone trading in new markets’ and was ‘being successfully
delivered by the staff’.[8]
However, such optimism was fleeting, and subsequent E11 Bid Co. Board
references to ES were all in terms of what the E11 BID Co. was owed, with the
figure escalating from £10,000 in May 2011 to £20,000 a year later.[9]
The denouement came in November 2012, when Fawaad Shaikh told the Board that ‘it
is very unlikely that claims submitted will be paid’.[10]
51.
Many questions about this episode remain unanswered. It is by no means clear
what the E11 BID Co. could offer in terms of the ES goals, as seemingly it had
few relevant skills and limited experience of the issues. Nor is it obvious
that there were a substantial number of firms in Leytonstone that either
currently exported overseas or wished to do so. Furthermore, whether or not the
E11 BID Co. actually organised any provision of ‘advice, guidance, and hands on
support’ is unknown. What can be stated is that the E11
BID Co.’s current account ledger lists only two transactions of relevance, a
payment to NLL of £140 and a deposit from NLL of £287.49 – figures that seem to speak
eloquently for themselves.
52. Finally, it has just emerged that NLL is
now in liquidation, forced by its creditors; and that just before this
happened, City Hall officials were contemplating a ‘financial correction of
nearly £102,000’ in relation to payments made precisely in relation to ES.[11]
Recent
revelations (iii) WFB and governance of the LABGI Two contract
53. As already indicated, the LBWF-WFB LABGI
Two contract included several paragraphs concerning the latter’s strict obligation
to declare any financial irregularities and conflicts of interest that arose.
54. However, when asked whether it received
any correspondence from Michael Polledri about the E11 BID Co. or conflicts of
interest in the years 2009 to 2011, LBWF has replied that ‘it does not hold the
requested information in recorded form’.[12]
55. Questioned directly about these matters,
Michael Polledri has responded ‘At every meeting of the Waltham Forest Business
CIC…I always declared my interest and this was always minuted’, and added
‘there was no conflict of interest as on both North London Business [the
trading name sometimes used by NLL] and Waltham Forest Business CIC I was a
unpaid volunteer with no personal or financial interest whatsoever, neither did
I ever claim any expenses whatsoever during this period…[nor] charge for the
considerable time spent by my secretariat at Lee Valley Estates’.[13]
56. More puzzlingly, Michael Polledri has
also claimed that ‘North London Ltd. was not appointed by Waltham Forest
Business CIC, it was commissioned by the London Borough of Waltham Forest to
administer the LABGI 2 Programme’[14]
– though it is worth adding that this is not the first time that his
recollection of the facts contrasts with the documentary evidence emanating
from LBWF.
57. Finally, it is worth mentioning that a Council
scrutiny hearing to examine the E11 Bid. Co.’s recent history was closed at
short notice to the public and press; while the senior LBWF officer with
responsibility for LABGI and indeed all business relations, the aforementioned Deputy Chief Executive Shifa
Mustafa, left the Council’s employment in the autumn of
2014 with a pay-off of £140,000.[15]
Conclusion
58. As Table One, overleaf on p.12,
summarises, close examination of LABGI expenditure raises significant concerns,
as does associated scrutiny of monies paid to NLL.
59. It
is established that LBWF has a blemished record over the expenditure of public
money, and in recent years has been involved in a series of well-publicised
scandals involving, amongst others things, the mismanagement of Neighbourhood
Renewal Fund monies, the collapse of the local charity O-Regen despite copious
Council support and funding, and the failings of its own Worknet programme.
60. Against this background, there is surely
a strong case for a new independent inquiry to establish why, once again, LBWF
has become so enmeshed in controversy.
Nick Tiratsoo
13 January 2015
[1] Barnes Roffe LLP to ‘The Director’, 3
August 2011.
[2] Barnes Roffe LLP to ‘The Director’, 5
December 2012.
[3] FIA deposition, 12 November 2014.
[4] FIA deposition, 18 March 2014
[5] FIA depositions, 19 June 2014 and 20
November 2014.
[6] FIA deposition, 24 October 2014.
[8] E11
BID Co. AGM, 30 March 2011.
[9] E11 BID Co. Board minutes, 17 May 2011 and
31 May 2012.
[10] E11 BID Co. Board minutes, 22 November
2012.
[11] E-mail, 6 November 2014.
[12] FIA depositions, 27 October 2014 and 10
November 2014.
[13] E-mail, 5 November 2014.
[14] Ibid.
[15] Waltham
Forest Guardian, 10 April 2014 and 18 September 2014.
Paid by
|
Programme name
|
Paid to
|
Amount
|
Concerns
|
LBWF
|
LABGI One and Two
|
LBWF departments
|
£2,029,014
|
No information available about outputs and outcomes
|
LBWF
|
LABGI One
|
WFB, then E11 Bid Co. and Argall BID Co.
|
£140,000
|
No information available about outputs and outcomes
|
LBWF
|
LABGI Two
|
WFB
|
£400,000
|
Contract monitoring requirements not satisfied
|
E11 BID Co.
|
£110,000
|
E11 BID Co. run chaotically and recklessly; information about
outputs and outcomes is uncertain
|
||
NLL
|
£50,000
|
Unclear why money was paid; no information about outputs and
outcomes
|
||
WFB
|
£127,000
|
Amount seems out of scale with alleged ‘support’ provided
|
||
LBWF
|
Various
|
NLL
|
£455,279
|
Contract and monitoring data missing; unclear whether ‘match
funding’ occurred; uncertainty about outputs and outcomes
|
LDA
|
Exporting Success
|
NLL
|
£591,500
|
Subject to City Hall investigation prior to NLL going into
liquidation; uncertainty about delivery partner E11 BID Co.’s outputs and
outcomes
|
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