In January 2014, JET (Jobs, Education and Training) in Normanton was awarded, by Derby City Council, an 11 month contract worth £118,000. This was to help East European migrants into work, “with a particular emphasis on Roma and women” although there was scope to include a wider population. At the time it was met with some criticism, because of the size of the award and the nationalities and status of the main targeted beneficiaries.
The funding was linked to a much larger arrangement with the European Social fund (ESF), and it either, had to be spent locally, or paid back to the ESF. Derby City Council decided to use the money for the benefit of the City and to put a contract out to tender for the value of £118,000 ( at a fixed price) for an employment programme.
So was £118,000 spent on getting jobs for East Europeans (Roma), and was it value for money?
It became evident in early January 2014 that, due to a technicality in the wording of the ESF conditions, that it was unlikely that any Roma people would actually qualify for the funding. Arguably, this made the task much easier to deliver, as JET had limited experience of working with Roma ( who don’t like going to JET) . Those Roma that do visit, do so primarily, to get their Job Seekers Allowance agreement routinely stamped to avoid being sanctioned by Job Centre Plus.
Of the 200 people who participated in the programme, none were recorded as Roma, and 1 person was “White-Other”. 29 people were found a job, over 80% were of Asian ethnicity. No East Europeans, or Roma, were declared as finding a job under the contract.
Background on JET
JET is a charity that operates out of the offices at 284-286 Normanton Road. It is a charity and a company limited by guarantee with a Board of Trustees overseeing the formal running of the organisation. Mohammed Sharief is both the Chief Executive and Company Secretary. He, together with his close family own the freehold of 284-286 Normanton Road; originally the buildings were a fairly modest shop, similar to other properties in the area. Since the formation of JET in 2002, £398,000 worth of improvements have been made to the building, approx. £250,000 (60%) of which were funded by the Derby City Council. The rest was provided by other public funders. Sharief and his family charge the charity £60,000 per year for rent under a non-cancellable lease. This is declared in the annual financial statement as a “market” rent.
A review of similar properties in the area would suggest a more reasonable “market” rent in the range of £20-30,000 pa.
Questions to be asked:
1. Why does the Chief Exec , Sharief, have a non-cancellable lease with JET on a property he owns. This poses conflict of interest issues and is considered by some professionals to be “unusual” for a charity?
2. Why, when the building improvements have been funded by public money, is Sharief charging the charity an inflated “market” rent?
• NB: The rent charge is approx 20% of JET’s average income.
The salary cost for 13 employees in the year to 31 March 2014 was £236,000. In 2013 this increased by £82,000 when JET employed 4 additional people. I have been told by Sharief, directly, that the office staff, of which there are 10, are on minimum wage ~£11,000 pa average ( not all are on full time hours). The remaining £126,000 is split between the 3 senior staff members, including Sharief. Sharief’s personal salary is not declared in the accounts, nor that of his son, who is the Finance Officer.
It is clear that Sharief has a substantial personal financial interest in this charity.
The high salary bill and rent means that the charity has run at a deficit for the last few years. This is borne out by the fact that in 2 years it has lost approx. £48k (94% of its net current worth at 31 March 2012) and at 31 March 2014 it hit a record low point of only £4k net current worth. This position was only made respectable by £54k paid by Derby City Council ( stage payment of the £118,000 contract mentioned earlier). Had JET not won that contract then it would have been, technically, illiquid with its net current worth being negative £49k.
The average annual income for JET for the last 5 years (exc. Capital grants) has been £270k pa – this one contract represents 42% of that.
In winning this contract, JET bid, and declared to the Council a schedule of direct costs, solely attributable to this contract amounting to £118,000. This represents a 40% increase in JET’s total cost base for an 11 month period. An examination of the accounts for the year to 31 March 2014, shows no discernible increase in costs, even after 3 months (27% of the contract period) of the contract, despite being paid £54k (45% of the contract amount) of the £118k.
Note: At 31 March 2014, there were only 74 of the required 200 participants engaged in the programme. JET claims to have 30,000 visitors a year – this represents 1 visit every 3 minutes, 7 hours a day, 5 days a week, 50 weeks a year ( Although any regular inspection of JET’s reception will highlight that this is a gross exaggeration). These 74 participants would have made a very small impact on JET’s total throughput – less than 1%!
3. Why were no questions asked as to why the contract would cost £118,000 (40% increase in costs) when the the 200 people would represent significantly less than a 10% increase in total visits for the period of the contract?
4. Why were no questions asked as to how JET could sensibly increase their spending by 40% in such a short period of time, and for such a short period, when the scope of spend was so limited?
• NB:The expectation in the contract was that people would be accessing support that was already available.
5. Why were no questions raised as to how the costs of this programme were coincidentally £118,000 when there was no reason that the 2 should be the same?
• NB: The value of £118,000 was the unspent portion of an unrelated fund and bore no relation to the costs necessary to deliver this contract. In effect it was a spending target.
6. Why is there no evidence in the 31 March 2014 audited financial statements of additional costs even after 3 months of the programme?
The other constraint of the funding was that the participants should not be “ currently participating in any programmes”. Limited attempt was made to assess whether the participants were new visitors to JET or were already known to JET and were already participating in their weekly job search activities, or the concurrent £122k UK Border Agency programme. In the Freedom of Information (FOI) Request it was confirmed that “no independent check was done”.
7. How has the Council assessed, beyond any reasonable doubt, that all 200 participants have not been covered by other funding sources, and/or are new visitors to JET?
The contractual requirement was for 25% of the participants to be in work to qualify for a portion of the £118,000. The FOI request confirmed only 29 people (14.5%) were found jobs, principally from the Asian community.
8. Why was no money withheld given that the target for securing jobs was not achieved?
It is not clear how JET justified the need for £118,000 to discharge this contract. It is also not evident that any meaningful incremental impact has been made on the employment prospects of 200 people beyond what could have been achieved without £118,000 of public money. Given the rapid decline of JET’s net worth, it looks like the Council is supporting JET’s illiquid position – a position that has arisen because of the substantial payments made by JET to Sharief, and his immediate family.
There are too many questions that need to be answered to reassure the public that this large sum of money has genuinely provided £118,000 of value to the unemployed people in the area.
The Council should re-audit the claims made by JET under this contract and critically assess whether:
• All costs claimed were directly, and solely, incurred in support of this project, and that
• the participants were in fact unique to this programme, and that
• Real value for money was delivered
All of the detailed findings should be made available under Freedom of Information.
If any of this is found wanting, then money should be clawed back from JET, and, if necessary, paid back to the ESF.
I look forward to a response from the Council.