Investigation into FACT reveals how councillors and council officials repeatedly ignored claims by taxi drivers that rules were being brokenhttp://www.wisbechstandard.co.uk/news/f ... -1-5619978Cambridgeshire County Council paid out hundreds of thousands of pounds to community transport provider FACT without in some instances proper authorisation, funding agreements or with no detailed follow up of how the money was spent.It has led to questions being asked about whether the cash was legal or even necessary or whether, instead of its intended purpose, the funding was used to finance almost a million pounds of vehicle additions from 2012 and 2016.
That money helped to transform what was once essentially an organisation set up to provide support for elderly and isolated people into a potential multi million pound commercial organisation.
Eighty per cent of FACT’s work now comprises commercial contracts with the county council or with private schools such as Wisbech Grammar School where five of its mini buses are used daily for home to school transport.
Over the past six years county councillors, former county council chief executive Mark Lloyd, county council leaders and Fenland District Council have refused to act on claims that the expansion of FACT was destroying the livelihoods of local taxi and coach firm operators.
“All we ask for is a level playing field, and if they wish to enter the commercial business of coach hire then they should come out of their subsidised, charitable status,” one coach operator wrote to MP Steve Barclay five years ago.
March taxi driver Dave Humphreys has been the lead campaigner to unravel the errors, false statements and misleading information provided by FACT over the years – claims taken up and tested by the Cambs Times over the past six years.
But despite repeated pressure the county council refused to act – until last year when chief executive Gillian Beasley, who replaced Mr Lloyd, authorised an investigation.
Those conclusions, released tonight in a 288 page report with 400 appendices of evidence, provide a damning indictment of a county council handing out large sums of cash to support FACT’s commercial growth.
That was money was often allocated without being properly authorised and the evidence revealed by the inquiry shows that legal agreements covering on going monitoring were not complied with; tens of thousands of pounds of loans were allocated and never recovered.
The result was that FACT was able to take over what were described as ‘failing’ community transports in other parts of the county that led to the Huntingdon based HACT and the Ely and Soham based ESACT to then also possibly lose their original identity and become part of their expanding commercial empire.
The report was prepared by PKF – a leading firm of forensic accountants – and lifts the lid on the scale and propensity of misleading statements and falsifications made in funding bids.
It also details the cavalier attitude of county council officials – and senior county councillors – as they authorised huge sums to allow FACT to expand.
Specific grants – such as £200,000 handed to HACT to begin its Huntingdon operation and £80,000 to expand into Ely through ESACT – were not properly accounted for and no meaningful follow up was carried out to show how the cash was spent.
PKF concede that one problem faced by any scrutiny of FACT’s accounts was that trading activity of both the main company and its Huntingdon and Ely subsidiaries were bound together in one single bank account.
“As the annual grants are deposited into a single mixed-use bank account (in which community transport service and contract income and expenditure is mixed) it is not possible to trace the funds into specific expenditure,” says PKF.
Had they done so it might have made scrutiny easier and could have ensured “the grants have been used for specified purpose”? Not doing so “makes it difficult for the donors to monitor”.
One of the agreements signed with the county council mandated FACT manager Jo Philpott to attend an annual review but she informed investigators “that she has not attended any annual reviews”.
The county council agreements also insisted that quarterly FACT should provided a comprehensive evaluation of miles travelled by their fleet, revenue received from each service, a breakdown of group member, hire bookings, passengers carried, mileage and the total of unmet journeys and journeys not operated. None of these were ever provided to the county council.
From 2013 to 2017 and excluding ESACT the county council handed over annual grants of £210,325 to FACT and £60,475 to HACT to provide dial-a-ride services: start up costs and other income is not included. HACT was awarded a total of £139,000 to buy seven vehicles at launch plus a further £27,000 for VAT. And a small loan to buy radio equipment.
“CCC did not enter into grant agreements with FACT and HACT in respect of radio equipment or the start up funding,” says PKF.
“CCC has not set procedure to ensure grant funding is utilised for the specified purpose.
“HACT did not include milestones in its application for the start up grant and therefore CCC would be unable to review grant funding against targets. CCC did not follow up with HACT on this omission in the application form”.
A section of the application form for funding to start up HACT included the requirement to list milestones under which progress could be monitored and achievements checked for delivery.
“This was left blank by HACT,” says PKF’s report.
PKF noted that the county council community transport officer attends the annual general meeting of FACT “but was unaware of the monitoring conditions” contained in the original agreement.
FACT manager blames ‘temporary’ or ‘work experience’ staff for funding applications that misled local councils in March, Wisbech and Maneahttp://www.wisbechstandard.co.uk/news/e ... -1-5620055FACT manager Jo Philpott blamed a temporary member of staff and in another instance a work experience student for false statements made in funding bids to local councils.A temporary member of staff was blamed by Ms Philpott for falsely describing the organisation as a charity in a funding application.
When quizzed by investigators, Ms Philpott “indicated that it was prepared by a temporary member of staff and signed on her behalf per procurationem (PP)” says the report.
PKF says Ms Philpott “concedes” that it was her responsibility to check for accuracy before the application was sent but she failed to do so.
Investigators looked at documents and accounts from FACT from over several years and found other examples of where they referred to itself as “a registered charity” and evidence that the community transport over stated membership claims and the level of service it offered.
For instance it told March Town Council it operated “seven days a week with 20 drivers catering for the needs of nearly 5,000 members”. FACT wanted more money to expand its service.
When challenged, Ms Philpott said that document, too, had been signed ‘PP’ on her behalf “by the temporary member of staff”.
The report says: “She believes that the figure could be a combination of membership and ridership figures but concedes that in any event membership has never reached the 5,000 figure. “
She told investigators that whilst dial-a-ride does not operate seven days a week “the group service is available seven days a week as long as sufficient notice is given of the requirement”.
She said she did not check the letter prior to it being sent to March Town Council.
In another letter to March Town Council in 2013, FACT had by now changed its status to what it is – an industrial and provident society – and asked for £1,000 to support their work for “a member base of 2,000 which includes many local March groups and organisations that rely on us for transport”. The reality was that FACT’s membership at the time was 1,142 with 389 group members.
“There is no indication of who completed the application form”, says PKF; the town council gave them £500.
In the months that followed FACT again went back to the town council for funding – and investigators show that it described itself as an “industrial and provident society (charitable organisation) 26756R” so not heeding advice from the Charity Commissioners to ensure total clarity in its status.
In Manea investigators looked at an email trail from early 2013 in which FACT applied for funding claiming that “we desperately need an extra bus and driver on this route to help meet the increasing demand for your residents”. The application said that “Manea passenger journeys are significantly higher year on year” and there was “a high ratio of elderly residents in Manea”.
The parish council gave FACT £300 but the picture they had painted was not borne out by the transport group’s own quarterly returns.
Dial-a-ride was shown to be static for much of 2012 with a slight increase in the final quarter but dropped in 2013 “and fell sharply during quarter two of 2013”. PKF noted that “there were no major increases in demand and there was a decreasing demand from 2014 onwards”.
FACT however had told the parish council in January 2013 of their intention “to put another bus and driver for the Manea dial-a-ride” to cope with increased demand.
The parish council said budgets for the year had been set so they could not offer the £3,000 requested.
PKF concluded: “We are informed by FACT that the additional bus was primarily to support a case of special need, which is not reflected in the bare statistics. In the event an additional bus was not purchased for this route”.
In respect of Wisbech Town Council the inquiry has also pinpointed a series of misleading emails and information, the first in 2010 missing the charity number but also claiming to operate seven days a week and catering for the needs of “2,835 members spread around the Fenland area”.
Despite the grant application showing a signature purporting to be that of the FACT manager, Ms Philpott told investigators that it was “signed on her behalf by the work experience member of staff. There is no PP to indicate to the reader that it has been signed by someone else other than the manager.”
The letter also claimed that “FACT is a registered charity” as it set out its bid to obtain from Wisbech Town Council £17,419 out of a total project cost of £35,419.
PKF say they looked at 23 archived versions of the FACT website to test claims by the organisation over a period of time although in most instances it showed them purporting to operate a six day service for dial-a-ride.
PKF said the evidence “tends to corroborate” the claims of the taxi drivers’ association that the statements of a seven day a week service was misleading.
Freedom of Information requests to the county council later revealed that in 2012 FACT’s membership was 971 that was 1,864 members less than the number quoted by FACT itself four years earlier.
PKF concluded there was clear evidence of FACT wrongly telling councils it was a registered charity and that the claim of having 5,000 members was false.
“The FHE manager (Ms Philpott) has confirmed the approximate 5,000 membership figures are incorrect,” says PKF.
Here’s how Cambridgeshire County Council was persuaded to allow lucrative commercial contracts to be awarded to FACT - even though procurement rules were brokenhttp://www.wisbechstandard.co.uk/news/c ... -1-5620084A 288 page report by forensic accountants PKF Littlejohn for Cambridgeshire County Council into the March based Community Transport triumvirate FACT, HACT and ESACT (hereafter FHE) lifts the lid on the lack of scrutiny and disregard to procurement regulations that went on for many years.The first striking thing about the report is the chronicling of the breadth and scale of FHE manager Joe Philpott’s negotiations that secured hundreds of thousands of pounds worth of grants, on the grounds that they would support the transport needs of the elderly and disadvantaged in remote rural areas.
In reality – while domestic services for the needy were carried out – Ms Philpott secured a vast and growing number of lucrative commercial transport contracts from Cambridgeshire County Council.
When FACT took over the running of the struggling Huntingdonshire based Nene and Ouse community bus group in 2013 she threatened to withdraw key community transport services. The new organisation was called HACT (Huntingdonshire Association for Community Council) and straightway it was awarded nine commercial contracts from the county council worth £250,000 per year without having to go to tender and without any advertising to other potential bidders.
Over the last few years the Cambridgeshire Bus, Coach and Taxi Association (CBCTA) has repeatedly pointed out that the generous (and largely unapproved) grants and commercial contracts have mostly funded not community transport but the rapid growth of a fleet of minibuses used to service commercial contracts.
At the same time demand for community transport services (FHE’s raison d’être), has remained more or less static.
FACT and HACT had 33 more vehicles at the end of 2016 than three years earlier. These are net increases, so taking disposals into account actual purchases will be correspondingly higher.
A cursory look at the modest surpluses of income over expenditure make it unclear where HACT and FACT found the funds to make that sort of net increases to their fleet (£241,000 additions in 2016 for FACT alone).
The second striking theme in the report is how funding and commercial contracts were effortlessly secured by FHE, with little or no evidence of going through a formal or transparent procurement process. Where the authorities do not deny the procurement rules were overridden, documents are unavailable and records have gone missing.
The PKF report shows there is no formal audit trail for the set-up funding for HACT or Ely based ESACT (£202,000 and £86,000 respectively). The county council was responsible for drawing up the grant application documents but one is missing and the other unsigned.
The £202,000 set up payment to HACT in 2013 was paid on March 26, 2013, two days before it was registered with the Charity Commission.
The £85,923 set up payment for ESACT appears nowhere in Cambridgeshire County Council’s supplier spend data, nor is any evidence held of authorisation for ESACT’s start-up funding by the Cambridge Future Transport Governance Group or the council leadership.
There is also no grant agreement or a loan agreement for the £20,000 working capital loan within the seed funding that was supposed to be paid back. Quentin Baker, the county council’s former director of law (he quit suddenly in May) is shown in the report to have warned county council officers about the likelihood of funding being in breach of state aid regulations. His warnings were apparently ignored.
PKF prints a copy of an email in which Mr Baker set out the risks facing the county council in short cutting procurements and also threw into the mix the possibility of a legal challenge and judicial review.
In one part he warns of a “risk of loss of reputation” if word got out that commercial contracts for HACT had been automatically extended without going out to tender.
And he also questioned whether the county council was going against the principles of “competition, transparency and clarity” which were part of an EU directive on procurement.
PKF’s report suggests that LGSS lawyers overseeing the county council’s contracts with the FHE had little or no idea of the state aid rules applicable.
The county council’s community transport officer is also shown to have been unaware of the auditing requirements for FHE.
He told investigators he read the FHE annual accounts but admits to not being experienced in interpreting them.
He also told PKF he did not know how to check for cross subsidisation (grant money for community transport services being diverted to support commercial activity).
PKF also reveal that the county council, in contravention of the annual grant agreements, failed to receive budgets or action plans from FACT or HACT, did not undertake an annual review nor have sight of the statistics required by the agreements are provided.
Many of the issues raised in the PKF report have been highlighted repeatedly in Cambs Times articles going back to 2012 – each time councillors and officials and crucially FHE itself has denied any wrong doing.
There will be much now for the county council to inspect – not least the awarding of contracts to that were labelled ‘emergency’ and so therefore outside normal procurement rules whereas in fact PKF has shown they weren’t.
Senior county council officials from the top down (former chief executive Mark Lloyd declined to even respond to a comprehensive report handed to him by this newspaper four years ago) failed to take any action for years on serious abuses of the contract procedure rules.
Councillors have been aware of CBCTA’s campaign for several years and have received stark evidence of the alleged irregularities on numerous occasions.
It raises uncomfortable questions about scrutiny and accountability under the government’s localism policy.
The FHE business model has clearly been extremely successful.
But as PKF has confirmed the community transport empire created by Ms Philpott and her board of management – many of them ironically local councillors -will face inevitable challenge.
Cambs police rule out prosecution but accept ‘false information was created’ as FACT says majority of issues ‘historic’ and have been dealt withhttp://www.wisbechstandard.co.uk/news/f ... -1-5620154A police investigation into the Fenland Association for Community Transport (FACT) accepted that false information was created in funding applications but there was insufficient evidence to merit a prosecution.The conclusions are revealed by Cambridgeshire County Council chief executive Gillian Beasley in a report to a special audit committee of the council on July 31.
“On a number of the issues we have sought legal advice and acted upon the advice.”
He said: “However as with a number of issues such as state aid there is not a clear legal definition and different barristers and QCs have given conflicting advice.
“Nothing has been done for personal gain – there are as you will see from the attachment to the report, sound explanations.
“This is not to say mistakes were not made. But where mistakes were made we have accepted them and made changes to ensure they do not occur again.”
Cllr Owen said: “Operating the dial -a-ride service to the most isolated and disadvantaged of our community – which is why FACT/HACT & ESACT exist, make substantial losses each year, as was verified in the report.
“Let’s not forget we were asked to take over the original Nene & Ouse community transport organisation because of the serious financial position it found itself in; the same can be said of Ely & Soham Community Transport.
“FACT was able to do so because of the innovative way it operates. Grant money did not enable the organisation to put in unfair competitive rates to win contracts.”
Ms Beasley said: “While the police conclude there is insufficient evidence to merit prosecution, their conclusions do highlight actions by FACT, HACT, ESACT.
“And on the balance of probabilities these support a conclusion that false information was created and submitted with intent to support requests for public funding consistent with those findings highlighted by PKF.”
Referrals to police included an allegation of fraud over letters submitted in support of grant funding requests and allegations of fraud in respect of a customer survey undertaken by the council in respect of concessionary bus fares.
She said that police agreed that the funding letters “may technically have been “false instruments” but accepted “the author was a junior member of staff; there is no substantive offence of fraud”.
In respect of the survey “the police advise that actions do not highlight criminality and evidence is inconclusive that the community transport authority was told that it could not complete these forms on behalf of its members”.
Ms Beasley explains that other measures will include “repayment of loans including interest and return of vehicle”. The county council says the £204,000 cost of the PKF report could be recouped through re-imbursements from the FACT group as part of “external legal advice to remedy the breach of state aid funding”.
She said: “Recovery action has commenced and repayments started for those loans identified by PKF as due to the county council.” Up to £300,000 could potentially be winging its back to the county and other councils.
And until or unless the Department of Transport updates its guidance the county council will ensure that “neither public funds nor the assets they support subsidise commercial services/operators”.
Ms Beasley said the county council “fully accepts the findings of the PKF report” and as part of that admission she plans to meet with the complainants – i.e. the taxi industry- to “offer an apology for what has happened”. She will also set out how it will work in the future.
“There is no doubt that PKF findings have identified areas of council activity that did not operate to the standards expected and improvements have been agreed and implemented to address those issues,” she said.
The county council has also instituted what he says is an internal disciplinary investigation to look at officers connected with the case.
Her assessment is attached to the 288 page report she commissioned by independent investigators PKF to look into FACT and its associated outlets HACT and ESACT.
Councillor Kit Owen, vice chairman of the FACT, ESACT and HACT boards, said tonight: “The majority of the issues are historic – which we have dealt with.
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