Paul Lorber was refused permission to present this paper on the Barham Park Trust accounts at today's meeting. The meeting lasted less than 10 minutes. Officers said that representations had been dealt with in previous correspondence and the accounts were fine. Cabinet members in the guise of trustees asked no questions and then rubber stamped them.
PAUL LORBER'S PRESENTATION
The revised accounts for the year 2022/23 are fundamentally
wrong and should not be approved. They are inconsistent with previous years, do
not reflect the correct income due to the Charity, overstate the Charity
expenses and do not provide information in an understandable and clear way that
makes review and scrutiny of those accounts easy.
I deal with some of the key issue in detail below and
summarise the other issues in need of investigation.
Rental Income
presentation problem (the income is not confidential and can be easily
ascertained from past public reports)
Excluding the £11,300 rental income from the Children centre,
£6,500 from Virgin Media, casual rentals and income from the funfair the Rental
Income due from the four tenants occupying the Barham Park buildings is as
follows:
ACAVA £43,000
Friends of Barham Library £7,000
Barham Veterans Club
£3,000
Tamu Samaj £1,500
TOTAL £54,500
This income has remained unchanged for some years. According
the Officers the Accounts are presented on a Cash “received” basis rather than
on the more usual” arrears” basis.
This income is shown in the accounts on the line described
as “Rental Income – other”
The amounts shown are:
17/18 £50,373
18/19 £52,500
19/20 £51,500
20/21 £51,500
21/22 £50,009
22/23 £1,625
None of the years 17/18 to 21/22 agree with the expected
income suggesting that some rents were not collected. The officers may want to
explain which tenant did not pay and why or what the discrepancy with the
expected £54,500 p.a. is for each of the years.
The amount for the year 2022/23 looks very odd compared to
all the previous years.
The officers claim that the Accounts for the Trust are prepared on a cash basis
(i.e. they show income in terms of cash received and payments in terms of cash
paid rather than on the traditional accruals basis of showing the income
expected to be received in the year with any amount not received shown in
debtors.)
This explanation does not stand up to scrutiny when you look
at the extracts from the minutes dealing with the 2020/21 accounts. Minute 3.5
clearly states “the majority of the rental income for 2020/21 is still
outstanding”. If this is so why is the supposedly “cash received” figure for
the year showing £51,500 when most of the rental income “has not yet been
paid”.
The rental income for 2019/20 of £51,500 too is clearly also
NOT the “cash received” as note 3.6 below states that at 31 March 2021 …..£76k
of the rental income has not yet been received. As ACAVA’s annual rent is
£43,000 this means that £33,000 (£76,000 less £43,000) of the amount
outstanding as unpaid must relate to 2019/20 – which in turn means that the
£51,500 clearly cannot possibly represent the “cash received” in respect of
rent in that year.
Extract from 2020/21 Accounts
3.4 During 2020/21 the Trust
incurred expenditure of £96,283 on maintenance of the building complex and the
park. This is made up of £60,383 of unrestricted funds expenditure and £35,900
of restricted funds. The Trust generated £81,300 receipts from rental income
and interest earned.
3.5 This includes rental income
that is due but has not yet been paid. The majority of rental income for
2020/21 is still outstanding. The cumulative rental income due but not paid as
at 31 March 2021 was £76,291.
3.6 This means that as at 31
March 2021, the Trust had assets of: (i) £58k unrestricted funds cash (ii)
£353k restricted funds cash (iii) £76k rental income due but not yet received
(unrestricted funds) (iv) £939k valuation of Barham Park Building Complex
3.7 This means that if the
rental income arrears are not received, the Trust would have only £58k of
unrestricted cash. If the arrears continue building up, the £58k would be
enough to cover around 12 months of maintenance and wardens costs.
CONCLUSION
The Accounts for all years to 2021/22 have been produced on
an accruals basis (they show the rent due and not the cash income received).
The revised 2022/23 Accounts presented to you on Tuesday 25
September 2023 are wrong as they are being presented on an inconsistent and a
totally incomprehensible basis.
The 2022/23 figures are attempting to show some form of
‘cash basis’ whereas the comparative figures for 2021/22 are clearly on the
correct accruals basis.
Even if officers were correct to present the 2022/23 on a
cash received basis to make the accounts consistent and for them to make sense
they would have to revise the 2021/22 comparatives to a cash basis too.
IT MAKES NO SENSE
In terms of the size of its transactions the Barham Park
Charity should prepare its accounts on an accruals basis as in relation to
rental income the accounts would show the rents due in the year and any amounts
uncollected/owing would be shown as a debtor and any rents paid in
advance/prepaid would be shown as a creditor.
This makes it straight forward to make comparisons between
the years in respect of both income and expenditure figures making it easy for
Trustees and 3rd party observer to see the trends between years and
ask questions if unusual variations arise.
OTHER ISSUES
Various reports claim that the Council provides the Barham
Park Charity with a subsidy. This cannot be substantiated because none of this
is reflected in the Barham Park Trust Accounts.
Charity Commission Guidance covers this issue:
CHARITIES SORP (FRS 102)
Accounting and Reporting by
Charities: Statement of Recommended Practice applicable to charities preparing
their accounts in accordance with the Financial Reporting Standard applicable
in the UK
Accounting for
donated facilities and services, including volunteers
6.13. If a charity is given
facilities and services for its own use which it would otherwise have
purchased, these must be included in the charity’s accounts when received,
provided the value of the gift can be measured reliably.
6.14. Measuring donated services
using fair value would not be practical as such services cannot be resold and
the use of fair value may result in an overstatement of the value of the
donation to the charity. Donated facilities and services are therefore measured
and included in accounts on the basis of the value of the gift to the charity.
6.15. Value to the charity is the amount that
the charity would pay in the open market for an alternative item that would
provide a benefit to the charity equivalent to the donated item. Value to the
charity may be lower than, but cannot exceed, the price the charity would pay
in the open market for the item. Accounting and Reporting by Charities Page 62
6.16. Donated facilities and
services that are consumed immediately must be recognised as income, with an
equivalent amount recognised as an expense under the appropriate heading in the
statement of financial activities (SoFA).
6.17. Facilities such as office
accommodation or services supplied by an individual or an entity as part of
their trade or profession can usually be reasonably quantified and must be
included in a charity’s accounts.
6.18. Charities often rely on
the contribution of unpaid general volunteers in carrying out their activities.
However, placing a monetary value on their contribution presents significant
difficulties. For example, charities might not employ additional staff were
volunteers not available, or volunteers might complement the work of paid staff
rather than replace them. These factors, together with the lack of a market
comparator price for general volunteers, make it impractical for their
contribution to be measured reliably for accounting purposes. Given the absence
of a reliable measurement basis, the contribution of general volunteers must
not be included as income in charity accounts.
6.19. However, it is important
that the user of the accounts understands the nature and scale of the role
played by general volunteers. Charities must include a description of the role
played by general volunteers and provide an indication of the nature of their
contribution in a note to the accounts
WHAT DOES THIS MEAN?
If substantial – and the Council implies this by always
refering to providing the Barham Park Charity with a subsidy – the services
provided by the Council to the Charity must be valued and shown both as Donated
Income on one side and ‘deemed’ expense on the other.
While the net impact is £0 any reader of the accounts become
aware of the true cost of managing the Charity.
NETTING OFF OF INCOME
AND EXPENDITURE?
Do the trustees know or understand what the figure described
as cash advance” of £27,092 represents?
According to the report the £27,092 is actually a net figure
made up of the remaining balance of rent owed by one of the tenants of £39k
offset by an unpaid consultancy fees of £12k due to the Architects for their
recent work on the ‘hypothetical’ project.
It is described this way in the Report:
3.11 As at 31 March 2023, the
Trust had a rental debtor of £39,625 and a £12,533 payment that was due but not
yet paid. These have been recognised as debtors and creditors on the Council’s
side and the Council gave a net £27,092 cash advance to the Trust in order to
aid the Trust’s cashflow position and avoid a detrimental effect of outstanding
debt on the Trust’s financial position. In 2022/23 the cash advance has been
reported on a separate line in the income section to aid transparency. The
Council has also paid interest to the Trust on the cash advance. The Trust
continues liaising with tenants and expects all arrears to be cleared by March
2024.
In my view the netting off of these two figures and their
presentation is wrong. Income should be shown in the Income section and the
Expense in the Expense section. More importantly it hides the fact that £12,533
of consultancy costs on top of the £8,711 already shown in the accounts (Total
£21,244) – and there may be more paid and charged in 2023/24 to the Barham Park
Charity when they should NOT be.
The treatment of the estimated costs of £25,000 for the
architects working on the recent Barham Park vision study was agreed and
confirmed at the Trust Meeting of 27 January 2022. This is what the minutes
say:
Having authorised officers (in September 21) to prepare a financial
strategy in respect of the Trust, approval was now being sought to the
appointment of an architect in order to lead development of a more holistic
options appraisal relating to the feasibility of improvements to the buildings
comprising the Estate and impact on current occupation uses and tenancies. The cost identified for the architectural
services required had been £25,000 which it was proposed to fund from the
Council’s Capital Programme rather than directly by the Trust, given the
existing commitments on its available restricted and unrestricted funds.
CLEARLY AN ERROR IN
THE 2022/23 ACCOUNTS
If it was agreed to charge the Architects cost to the
“Council’s Capital Programme” why are £21,244 of the costs charged to the
Barham Park Charity in its 2022/23 accounts.
The Charity’s surplus for the year and its unrestricted
funds are clearly being reduced by this substantial amount.
The 2022/23 Accounts are therefore materially wrong on this
point alone and need to be corrected.
OTHER CUMULATIVE
ERRORS IN THESE ACCOUNTS
I will just list a few issues here that need investigation,
should concern the Trustees and should lead to more questions.
1. The Barham Park Charity has been deprived of
correct Interest Income. The amount paid to it by Brent Council for the use of
over £500,000 of cash balances does not represent a fair arms length price. I
estimate that in the current year The Charity has been deprived of at least
£5,000 of extra income and the amount will be at least double that if this is
allowed to continue.
2. The so called ‘arms length’ rent paid by the
Council to the Charity for the use of the former Children Centre has not
changed for years. As the sub lease has expired a true market rent should be
charged each year. The Council has failed to follow correct procedures in
ensuring that an ‘arms length rent’ is paid.
3. It is also not clear why the Children Centre is
not paying service charges for services such as refuse collection, water etc
that it receives. There is no reason why the Charity should be paying for this.
4. There has been a failure to implement rent
reviews due some years ago. The cumulative cost of this failure runs into tens
of thousands of pounds in lost rental income to the Charity.
5. The Charity has had a benefit of NCIL Grants to
upgrade the QE II Silver Jubilee Gardens and the Pond in the Park. The value of
these Grant is well in excess of £100,000. The accounts for the current and
previous years for failing to reflect both the Grant Income received and the
expenditure on which the Grant was spent on.
6.
The Accounts fail to show enough detail in
relation to the expenditure line of “maintenance and wardens”. This heading
includes some expenditures which have nothing to do with maintenance and
include items which should be included in the lines – including utilities,
waste disposal etc. Without this information the Trustees and others cannot be
certain if some of these costs should not have been recharged.
7.
Why is the Charity incurring an insurance charge
of £2,500 – should not some or all of this have been recharged?
Conclusion:
I have tried to engage with Council officers to highlight
these issues. My views and concerns have been ignored. As a result the revised
Accounts as presented are fundamentally wrong.
1.
They are prepared on the wrong and inconsistent basis.
2.
They do not comply with acceptable accounting
policies as advised by the Charity commission.
3.
The figures are wrong.
4.
They understate the Charity’s Income
5.
They overstate the Charity’s expenses
6.
As a result of 4 & 5 above they understate
the net worth of the charity (its net assets).
These accounts should NOT be approved or submitted to the
Charity Commission in their current state.
Councillor Paul Lorber
25 September 2023
