GRANT PROBLEM

Question

Our PC has for a long time provided a substantial annual grant to a local charity under S137 which provides community services .  The Chairman of that Charity is  a Councillor and declares an interest.   The charity in turn uses the grant to fund an SLA with  a  CIC to deploy its tasks .  That CIC has two directors viz the Councillor's wife and her sister. The accounts of the CIC shows details of  the employment of staff and expenses incurred but over half is shown as directors remuneration .  A  motion to pause the grant payments (made quarterly) for enquiries to be made has been rejected (on NALCs advice) on the basis that “its none of our business” i.e, how they (the charity) spend their money .   That I understand but does capacity exist to rescind the original resolution  or is it best to wait until next year

The report required to be completed under s137a ( must require the body or charity to provide a written statement of how the money has been spent, within 12 months after the assistance has been given) has apparently historically never been made

Another tricky “money through charities” problem. How would you proceed.

Answer 1

I would propose  that the council's obligation of fiscal prudence would over ride the NALC advice. It is a matter of due diligence on the council to ensure that tax payers money is accounted for and supports the community and NOT the pay packet of directors of the charity. If the council feel that the proportion of the costs of the charity paid for overheads is disproportionate they have a duty to amend or withdraw the grant offered. As the grant already made cannot be "clawed back" then  a council meeting can decide at any time to refuse further grants to the charity. It is for the charity to meet the stipulations of the grant, Any councillors who are involved in the charity are of course unable to vote on the grant issue

Answer 2

S137 states:

(1)A local authority may, subject to the provisions of this section, incur expenditure which in their opinion is in the interests of, and will bring direct benefit to, their area or any part of it or all or some of its inhabitants, but a local authority shall not, by virtue of this subsection, incur any expenditure—

(a)for a purpose for which they are, either unconditionally or subject to any limitation or to the satisfaction of any condition, authorised or required to make any payment by or by virtue of any other enactment; nor

(b)unless the direct benefit accruing to their area or any part of it or to all or some of the inhabitants of their area will be commensurate with the expenditure to be incurred.

So you have no power to incur this expenditure unless council feels that the benefits gained are commensurate with the money spent. From what you are saying it seems clear that you do not feel this is the case.

Nalcs advice that it is not of your business how they spend their money seems strange as it's baked into S137 that you must be satisfied as to how they are spending the money.

Answer 3

Is there a role for the charity in this transaction? Why doesn't the council commission the services of the CIC, thereby giving it more control? If there is concern that value for money is not being demonstrated in the current arrangement, re-tender it.

For what it's worth, I agree with the NALC advice that your current arrangement gives you no influence over the use of funds by the CIC.

Comments

This is simple.  The parish council decides where it spends its money.  If the parish council is not satisfied with how that money is used then it should put an end the grant it has been making.

On the comment from NALC that how the charity spends its money is not of your business.  That may be the case but it is absolutely YOUR business how YOUR money is spent.

---

Now here is an interesting question of legal interpretation/drafting..  If a S137 grant is made and to be paid quarterly can the PC apply the legal tests prior to each payment i.e., do they have to be separately authorised? .  There is nothing about this in our grants policy

---

I’m sorry but I do not understand the question

---

John 1706 Resolution made to say pay  grant for £20K (under S137)  to be paid in 4 quarterly payments ,  After  first quarter  payment concerns arise re VFM.   Can quarter 2 payment be paused so as to re-evaluate or must whole resolution be rescinded

---

I don’t want to get too far into the detail.  All I will say is that it is the parish council which is the custodian of this public money and it is therefore the parish council who can decide how to proceed in the future.  How that is achieved is up to the pc.