Grants report: States need to take more care of public money

Thursday 07 December 2017

The States have been accused of encouraging the operators of Aquasplash to waste public money because their £100,000 annual grant is not being properly monitored.

The Comptroller and Auditor General, Karen McConnell, has published a critical report on how various States Departments have looked after the £5million worth of grants given to projects and organisations.

Those grants, which Ms McConnell concluded were being inadequately managed, were just a small sample sum of the total of £43.5m in grants handed out by the States each year. Most of these related to the Department of Education and the Department of Economic Development, Tourism, Sport and Culture, as well as Social Security.

Ms McConnell’s assessment also revealed that the no attempts had been made to quantify the Air Display’s value to the island after it received a grant for £90,000 in 2016 – responsibility for that grant has now passed to Ports of Jersey, however. 

Pictured: The Comptroller revealed that the government hadn't assessed the benefits of giving away £90,000 to the Air Display.

Reasons as to why grants were handed out from the Tourism Development Fund were also not documented, and no accounts or grant assurance statements were obtained. 

The ways in which grants were handed out and monitored were largely inconsistent, Ms McConnell found. She also noted confusion at times between contractual payments and grants.

Such was the case for the operator of Aquasplash, Serco. The former Waterfront Enterprise Board agreed to a 21-year deal with Serco to control the pool facility, which is actually owned by the States. The public purse, meanwhile, would be used to meet the costs of capital spending and fixed payments towards the operating deficit. 

Ms McConnell noted that the grant was “fundamentally different” to other grants because it related to a commercial agreement to operate the pool. She said the deal they eventually struck, however, led to “perverse incentives” because Serco wouldn’t be allowed to hold onto any unspent budget. She argued that they’d therefore be tempted to spend as much as they can in order to use up the budget so that it cannot be taken away.

“This arrangement incentivises the inefficient expenditure in order to utilise the annual budget; and hinders effective planning of capital expenditure as it forces ‘smoothing’ of expenditure over time,” she wrote. 

Pictured: Karen McConnell, the Comptroller and Auditor General.

Ms McConnell is now calling for tighter financial controls. She wants to develop a new Financial Direction to do this.

In a statement following the report, she said:

“I am concerned that there are weaknesses in the management of grants and that:

• taken together, the weaknesses are significant and mean that the States are not able to demonstrate that value for money is secured from expenditure on grants; and
• in some parts of the States a culture was tolerated that allowed such weaknesses to persist, even after Internal Audit made recommendations for improvement. Although these issues have been highlighted within Economic Development, Tourism, Sport and Culture, there is room for improvement in other departments.

“Too often weaknesses in arrangements have been identified but prompt and effective action has not been taken. However, I n October 2017, the recently appointed Accounting Officer for Economic Development, Tourism, Sport and Culture wrote to the Treasurer of the States highlighting not only significant issues relating to grant expenditure but also a lack of capacity within the Department to address them. He also outlined the work in place to ad dress the weaknesses in control. I welcome this positive commitment to change.

“I also welcome both the decision to develop a new Financial Direction covering grants, which I understand will be issued shortly, and the focus of Internal Audit on this area. But development of the Financial Direction and reporting by Internal Audit will not be sufficient to enable the States to demonstrate that value for money is consistently being secured from grant expenditure. That will require effective roll - out of new arrangements and implementation of recommendations. Crucially it will also require a consistent understanding of the elements of good practice in the management of grants and a culture of learning so that good practice is shared and consistently applied a cross the States.”