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:
Friends of Barham Library £7,000
Barham Veterans Club £3,000
Tamu Samaj £1,500
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:
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.
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.
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.
Why is the Charity incurring an insurance charge of £2,500 – should not some or all of this have been recharged?
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