Monday, 12 February 2018

Coincidence or conflict of interest?

Research reveals Borders council auditors' links to offshore trusts registered at same British Virgin Islands address as managing shareholder of council's failed waste management investment fund.


The global accountancy firm KPMG which checked the books of Scottish Borders Council for five successive financial years, and gave the local authority 'a clean bill of health' following the New Earth Solutions waste management scandal, audits the accounts of more than a dozen offshore trusts registered in the British Virgin Islands (BVI).

Thousands of files made public following the "leak" known as the Paradise Papers contain information showing those trusts - audited by KPMG Glasgow - are based in the offices of Panamanian lawyers Mossack Fonseca at  24 De Castro Street, Wickham’s Cay, Road Town, Tortola, British Virgin Islands.

Not Just Sheep & Rugby has previously revealed that Premier Group Distribution Inc (PGDI), the managing shareholder of New Earth Solutions and New Earth Recycling & Renewables [Infrastructure] Inc (NERR) is also registered at 24 De Castro Street, Wickham’s Cay, Road Town, Tortola, British Virgin Islands.

So was this "coincidence" or potential conflict of interest declared when KPMG signed off SBC's accounts for 2014/15, including the loss of £2.4 million of taxpayers' money after NERR could not come up with the £23 million needed to provide a waste management solution for SBC? And how deeply did KPMG delve into the conduct of NERR and its controllers and promoters Premier Group Isle of Man?

The NERR fund, as we reported last week, continues to be the subject of detailed investigations by liquidators Deloitte who have managed to assemble 200,000 documents linked to the failed investment fund. How many of those papers were inspected by SBC's external auditors?

Unfortunately not a single politician has been prepared to raise the issue despite compelling evidence of council incompetence throughout the four-year contract with New Earth Solutions Group (NESG). Instead they have been content to accept KPMG's assurances that everything was handled properly while the accountancy firm acted on behalf of Audit Scotland between 2011 and 2016.

The auditing of public authority accounts in Scotland provides highly lucrative contracts for KPMG and other accountancy businesses as a result of out-sourcing by Audit Scotland, the country's public expenditure "watchdog".

.On June 27th 2011 Audit Scotland published a contract award notice which revealed that 38% of the audit work for Scottish public bodies, including councils, government departments and further education colleges had been placed with various accountancy firms including KPMG, Ernst & Young, Deloitte’s and several others. The total value of these lucrative contracts came to £31.889 million, covering the financial years 2011/12 to 2015/16.

KPMG was successful in securing 28 separate accounting appointments across the three sectors after tenders were submitted by their Edinburgh office. The value of their share of the work was: Local authorities £4.204 million; Central government bodies £1.511 million; FE Colleges £500,000; a combined total of £6.215 million.

The tendering exercise was repeated in 2016. In March of that year Audit Scotland again published a contract award notice covering the financial years 2016/17 to 2020/21. This time the notice did not provide amounts won by individual firms from a pot worth £23.295 million representing 36% of Scotland’s public audit work. KPMG’s Glasgow office was among the successful bidders.

The external auditors’ report on the abandoned Borders/New Earth Solutions debacle dated September 2015 stated:
Termination of waste management contract In 2014-15, £2.2 million was written off as a result of the termination of a waste management contract. We have reviewed the Council’s decision making process in relation to the termination of the contract. Key points include:
These costs do not include any early termination fees or additional costs claimed by NES, as a “no fault” termination provision formed part of the contract;
The decision was considered and made by the Council in February 2015:
Information was provided by an internal project team, supported by appropriate external professional advisors; and
Appropriate options were considered and due diligence processes are evidenced as being followed. We are satisfied that the Council has followed appropriate procedures in relation to this decision. We have reviewed the business case relating to this decision, which was presented in February 2015 and set out the options available to the Council. 

The disclosure concerning PGDI's BVI connection came in April 2016 courtesy of another set of files known as the Panama Papers.

This aspect of the Scottish Borders project was not mentioned in any audit reports, and SBC has confirmed in a Freedom Of Information response they were unaware of these complex offshore “arrangements” even though the details were available in successive NERR annual reports from 2011.

In the Paradise Papers KPMG Glasgow,which houses the firm's "UK Tax Centre of Excellence", is identified as auditor for 15 offshore entities, most beginning with the name Windsor, and registered in Jersey and British Virgin Islands.

So KPMG Glasgow appears to work closely with Mossack Fonseca, registered intermediary for at least 14 of the offshore trusts, and who also happen to be the agent for PGDI, the managing shareholders of New Earth Solutions/NERR Fund.

 PGDI beneficiaries and shareholders included David Whitaker, a director of numerous NES Group companies, including (from April 2011 to November 2015) New Earth Solutions (Scottish Borders) Ltd, the special vehicle set up to deliver the £23 million waste management project at Easter Langlee, Galashiels.

 The so-called "Panama Papers”had come from Mossack Fonseca’s offices and revealed the law firm’s involvement in activities which brought allegations of corruption and money laundering. The contents of the leaked documents have been reported in media and newspapers around the world.

Mossack Fonseca’s BVI ‘branch’ where PGDI and those entities audited by KPMG are registered was hit with a $440,000 financial penalty in November 2016 by the British Virgin Islands Financial Services Commission for eight breaches of BVI’s anti-money laundering and terrorist financing codes. The penalty was the largest ever imposed by the BVI FSC. But anti-corruption activists claimed it was “too little, too late”.

It is perhaps somewhat surprising that none of the above factual information gleaned from detailed research requires neither an investigation nor a public explanation.

Wednesday, 7 February 2018

Liquidators locate 200,000 documents linked to failed council fund


Liquidators of the failed offshore investment fund which was selected by councillors in the Scottish Borders to bankroll a planned £23 million waste treatment facility believe it may still be possible to salvage something from the wreckage for the benefit of thousands of shareholders and creditors.

Three years after the Borders local authority was forced to abandon their worthless waste management contract with insolvent New Earth Solutions Group at a cost of £2.5 million to local taxpayers, the intensive efforts to discover what led to the collapse of the firm's partnership fund may soon reach a conclusion.

Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund (NERR) had 3,249 investors and a published value of $292 million when it collapsed in 2016. It was later discovered that £39 million of the NERR resources had been used to shore up the New Earth Solutions companies which were in serious financial trouble while their contract with Scottish Borders Council was 'live'.

NERR was managed and promoted by Premier Group (IOM) Ltd., another business which was liquidated shortly after the fund crashed, apparently leaving investors and creditors with little or no chance of seeing the return of their cash. Premier's bosses collected many millions of pounds in fees from NERR and a range of other 'high risk' funds.

And in the intervening period a number of disgruntled investors successfully took their grievances to the Financial Ombudsman Service who found they had been wrongly recommended to put money into the unregulated NERR fund by financial advisers.

The NERR fund's joint liquidators Alexander Adam and David Craine, of accountancy firm Deloitte's, have just published an update for the fund's shareholders...their first report since September last year.

In it they remind readers the Company’s [NERR] assets were principally investments by way of equity and unsecured loans in three companies which were located in the United Kingdom.

"The value of those investments at the date of winding up was close to nil. The role of the Joint Liquidators is therefore principally to: investigate the reasons for the failure of NERR; determine whether liability for the failure can be attributed to one or more parties; working alongside our legal advisers, establish whether there is any legal recourse against one or more of those parties; and to the extent that that those third parties are expected to have the resources to meet any successful claim, seek to recover value from them."

The report adds that investigations are focused on the matters which resulted in a direct loss to the Company (the value of investments made in the ultimately insolvent UK trading companies and the fees paid by the Company to the various service providers - many of which were based on the calculated NAV (Net Asset Value).

The sheer scale of the task facing the investigators can be gauged from the next section of the report which reveals: "We have secured in excess of 200,000 unique documents from the various advisers and service providers to the Company, many of which run to hundreds of pages.

"Our initial review of those documents identified a number of potential issues which we consider could lead to causes of action. These were passed to our legal advisers for further consideration. That review remains ongoing, as the review of such a volume of documentation is time consuming but essential to understanding the underlying business and transactions of the Fund and that process has inevitably identified areas where further investigation has been required to be undertaken."

"In the meantime we have also managed to secure access to the records of one service provider which had previously been unwilling to share their files with us and which have provided valuable insight into the Company’s affairs."

Mr Adam and Mr Craine say they are limited in what information they can share with shareholders and creditors on potential causes of action so that they do not prejudice any potential claims.

But they add: "However, we remain reasonably confident that our investigation will result in making claims for the benefit of creditors and shareholders in due course."

The joint liquidators expect to be in receipt of legal advice in respect of any possible causes of action by late April 2018. Following consideration of such advice they will write to update interested parties on how they intend to proceed.

Tuesday, 6 February 2018

Borders battle fails to make national inventory


A research project centred on a 16th Century Borders battle between Scots and English armies has concluded that the conflict should not be included in Scotland's national inventory of historic battlefields even though it resulted in a crushing defeat for Henry VIII's troops.

Historic Environment Scotland's assessment of the Battle of Haddon Rig, which took place near Kelso some 29 years after Flodden in August 1542, involved detailed studies of The Hamilton Papers, formerly in the possession of the Duke of Hamilton, and now held by the British Museum.

The collection of letters and papers illustrate the political relations of England and Scotland in the 16th Century.

An 11-page report covering the research findings tells how an English army led by Sir Robert Bowes was encamped near the town of Kelso, and had dispatched raiding parties to ransack nearby settlements. 

Meanwhile, a Scottish force under the Earl of Huntly, advancing to engage the English, encountered the raiding parties and pursued them back to the main English army, who in turn had advanced to meet them. Although the two parts of the English army did converge before the Scots reached them, the subsequent battle was still a heavy defeat for them. 

Many of the English army fled before the fighting, and Bowes himself was captured along with hundreds of his men. However, fears in England of an immediate Scottish invasion following the victory proved unfounded.

In a section setting out the reasons for excluding the battle from the inventory, the report points out that The Battle of Haddon Rig does not feature highly in the national consciousness but is of some interest on grounds of association with historical events or figures of national importance. 

No artefacts from the battle have been recorded but there is some potential that future investigations of the relatively undeveloped land south east of Kelso in the area around Haddon Rig may identify archaeological evidence for a chase and skirmish in August 1542. 

"Although the high ground known as Haddon Rig remains a likely site for the English camp, the primary sources considered by this assessment provide insufficient detail to enable secure identification of the camp’s location, or of other landscape features associated with the battle, with the exception of some named settlements raided by the English forces.

"The degree of interest on these grounds is unlikely to make a significant contribution to our understanding at a national level. Furthermore, while certain named places in the accounts of the battle can still be identified today, these are spread across a substantial area along the River Tweed and the River Teviot. There is also uncertainty about the precise location of the English camp, from which Bowes advanced with the main force, and it is unclear exactly where the raiding party rejoined the main English force and where it is likely the main fighting took place. 

"Without more certainty about the approximate locations of key elements of the battle, it is currently not possible to define an area of interest for the battlefield with a reasonable degree of certainty. As such the battlefield does not currently meet the criteria for inclusion in the Inventory as a battlefield of national importance."

Nevertheless, this particular encounter is said to be of considerable interest so far as Scottish Borders history is concerned.

The report describes how on the morning of St Bartholomew’s day (24 August) 1542, an English force under Bowes made a cross border raid into Scotland. Accompanying Bowes was Archibald Douglas, the Earl of Angus, who had been in exile in England since 1528, when James V had escaped from the Earl’s control and began ruling Scotland directly. Having entered Scotland in the vicinity of Kelso, two sorties of around 100 soldiers were despatched to raid in the area around the town, one led by the Redesdale and Tynedale families, the other by garrisons from Berwick and Norham. 

The Scots advanced from Kelso with Sir Walter Lindsay’s men at the vanguard, and with the Earl of Huntly and the main battle array at the rear. 

"Fearing the loss of the cattle and sheep they had seized in raiding, George Bowes and Brian Layton’s account states that the men of John Heron (all of Redesdale), Angus and Sir Cuthbert Radcliffe, scattered and fled. This appears to have left Sir Robert Bowes, his brother George Bowes, John Heron of Ford, Sir Cuthbert Radcliffe and around 40 other men (described in correspondence by George Bowes and Brian Layton as ‘household servants’) who dismounted from their horses around their standard.

"Of these, around only 20 stood their ground to face the Scots. The majority of the fighting appears to have taken place following this disintegration of Bowes’ forces, with the Scots easily overwhelming the small remaining English complement."

"The exact number of losses is not clear from the accounts. Angus claims that eight men (out of around only 20 who stood their ground to fight) died in the main engagement. A further 70 of their company are also described as either killed or taken prisoner, although their fate was clearly uncertain to Angus at the time of his correspondence with the Privy Council. Lindsay of Pitscottie estimates the English losses at 10 score (i.e. 200 men).

"In addition to the casualties from the small remaining force who engaged the Scots, further losses were suffered in the groups who fled the field, with at least 400-500 captured, although one source suggests almost a third of the English force was taken, meaning just under 1000 captives taken."

The research report says there is potential for survival of remains of Bowes’ short-lived encampment, potentially in the land around Haddon Rig, for example evidence for fortified banks and ditches, and also scattered artefacts including pottery, soldiers’ personal effects, and weaponry (e.g. musket balls). 

Among the archaeological evidence which might survive of the engagement is evidence of archers, cavalry and possibly even shot from matchlock guns, and grave pits for the dead. However, as Haddon Rig was not so much a pitched battle but perhaps more a chase and skirmish with relatively low loss of life, many of the raiding parties fled the battle and some were killed on retreat. 

This might suggest that the likely quantity of remains will be small, and potentially widely scattered. The potential areas within which physical remains may be identified are numerous and extensive, and also probably hard to locate beyond a general area between Heiton and Hadden, a distance of around 10km, extending even to the English border.

Monday, 8 January 2018

Threat of Hawick riots didn't even make the papers!


An influential committee of the Scottish Parliament was warned just before Christmas that any moves to "abolish" common good funds and transfer their assets to local authorities could spark a riot in Hawick.

The dramatic exchanges between a panel of witnesses called to give evidence to the Local Government & Communities Committee - currently investigating common good property and funds - have not been reported in press or media.

But the publication yesterday (Monday) of the official report of proceedings shows how lively the debate became while at the same time illustrating the clash of attitudes towards the issue of common good across Scotland.

The "riot warning" was flagged up by retired Selkirk general practitioner Dr Lindsay Neil, a dedicated campaigner for the protection of his town's centuries old common good assets. Not Just Sheep & Rugby believes the good doctor deserves a much wider audience!

Other witnesses included Paul Nevin, senior solicitor at Moray Council, lawyer Craig Veitch from Aberdeen City Council, and Andrew Ferguson, of the Society of Local Authority Lawyers..

Mr Nevin told the committee: "Common good should absolutely be abolished; parity should be created with ordinary council assets; and the normal democratic process that all of us in unitary authorities work within should be used to call councils to account in selling or not selling—or in leasing or not leasing—land. It is a hangover from the past, and it is archaic. It is historically interesting—I love working with it and indeed have enjoyed doing so for the past 10 years—but it is really not a modern form of government."

But Dr Neil retorted: "All I want to say is that, if you abolished common good, you would immediately face a riot in Hawick, and I do not think that that would be a very good thing."

Earlier, in an opening statement to the committee, Dr Neil said he hoped to be able to illuminate further the question of ownership of common good, and to suggest practical measures whereby that could be achieved easily. Secondly, He have always wanted to democratise the common good and restore to the community some control over its common good.

But Mr Nevin - clearly not a fan of the current arrangements - declared: " The current legal framework creates a special status for this small area of property and funds, which represents less than one per cent, loosely speaking, of council assets. The legal framework has led to a disproportionately complicated process of administration of common good assets, which means that the cost of administrating them generally far outweighs the value of the asset that is being dealt with." 

Dr Neil proposed having greater involvement of local people in the management of a local common good. That way, such questions could be argued over, discussed and decided at a much lower level without having to involve the entire council and all its staff in the expensive chasing of documents.

A proposal for a 'national' register of common good assets, to be compiled over, say, the next ten years, also seemed to pose potential administrative difficulties for Mr Veitch.

He told the committee: "What is difficult, especially for the larger local authorities such as Aberdeen City Council, is the number of titles to be examined—we have several thousand individual titles that would have to be examined.

"Some will be obviously common good but, with others, we will have to delve into not only the title deeds but council minutes from the 1800s and 1900s, and check with archivists. If we are to do that with a relatively slim legal team, in the face of the current budget restrictions and the resource and cost cutting that is going on in all the local authorities, setting an early target date [for the register] will make it extremely difficult for a number of authorities to achieve that target."

Witnesses were asked by Andy Wightman, MSP, a leading authority on common good and land ownership if there was a case for allowing local communities to regain ownership of the assets if they so wished.

In Dr Neil's opinion: " If the matter is devolved to a local area, people will volunteer to help the established councillors. Between them, they will be able to sort out what is common good property and what is not. 

"If they do not agree, I presume that it would fall back into the council’s hands. That way, with a cut-off date, we will get a register. If people do not make a case for an asset to be common good before that date, with the input of equal numbers of elected councillors and local people so that nobody can bulldoze anybody else, that will be it: the register will be done—end of story."

However, Mr Nevin and Mr Veitch appeared to take a different view.

Mr Nevin said:"I would point out that we have had common good registers before—the burgh councils had them. Just because something is on an old burgh council common good register does not mean that it is common good. This is the 21st century, and we are creating registers again. They were not definitive in the past, and they are not going to be definitive today."

And Mr Veitch: "We have to remember that the law protecting common good was put in place generally to stop the misappropriation of funds by councils, but time has moved on and we now have a lot of legislation and financial regulation controlling councils, which have to get the best value for all their assets. I might not be moving towards suggesting the abolition of common good, but we must look at the issue as soon as possible.

It was back to the issue of the "Hawick riots" near the end of the evidence session.

Paul Nevin -Short of abolishing common good, which I agree  might not get you votes—

The committee convener (Bob Doris MSP): Not in Hawick, apparently.

Paul Nevin: I fully agree that we must avoid riots at all costs, convener.

Dr Neil: Never mind abolition—I think that you should bring in... (the relevant sections of the Community Empowerment Act)... as soon as possible and, if possible, extend (the legislation) to include more people who could act locally in the management of local common good.

For those who value their common good funds here in the Borders - between them worth many millions of pounds - there may be concerns over the apparent desire in some quarters to abolish the system altogether. Time, perhaps, to man the barricades before the rioting begins!

Sunday, 7 January 2018

Skills shortage warning for Borders


The impact of Brexit coupled with an unwelcome fall in the working population of the Scottish Borders may mean the task of replacing 17,400 workers over the next ten years will be made more difficult, leading to possible skill shortages.

This is one of the key findings in a comprehensive report on future employment trends in the region from Skills Development Scotland (SDS) which warns the uncertainties surrounding Brexit have some particular implications for the Borders.

They include access to the Single Market for trading purposes which is of importance, given Borders exports in knitwear and high end cashmere; support for the agriculture and food production given its l emphasis here and, also, freedom of movement of EU nationals.

Meanwhile, in the period up to 2027, the report warns: "The Borders is expected to have a 15 per cent reduction in the size of the working age population (16-64), whilst nationally the working age population is anticipated to decline by 5 per cent.

"Growth will be greatest amongst those aged 75+, within the Borders this age group will grow faster than the equivalent rate across Scotland. This projected decrease in the working age population and increase in the older population may prove challenging for the Borders."

The document explains that in relation to the Scottish economy, the Borders is a low output and low productivity region. Based on 2015 statistics, it contributed £1,921 million in GVA (Gross Value Added generated in the production of goods and services) ; around two per cent of Scotland’s output and has the lowest output of all regions. 

A section in the report looks at numbers of business "births" and "deaths" in recent times.

It says: "The number of business births within a region can indicate dynamism in that region’s economy. By business births per 10,000 of the population, the Borders ranks 11th out of 14 regions within Scotland, whilst at the local authority level, the Borders ranks 22nd out of 32. Overall the picture before and after the recession for business births has been one of decline: currently at 32 businesses created per 10,000 population (2015); compared to 45 in 2005.

"Conversely, business deaths have increased over this period, from 25 per 10,000  in 2005 to 30 in 2015. Finally, if we look at the business survival rate, using 2010 as the baseline year, the business survival rate has decreased sharply on an annual basis from 89 in 2011 to 40 in 2015."

SDS estimate that over the next ten years jobs generated as a result of people who retire, change jobs or move away will require 17,400 people in total. However, this is driven by replacement demand, with expansion demand overall a negative figure.

The highest current employing industrial sectors in the Borders are human health and social work activities, with around 8,100 jobs, and wholesale and retail trade, with around 7,800 jobs. 

The same sectors are forecast to still be the highest employing sectors in 2027, although they will have switched places, with wholesale and retail becoming the largest with around 8,100 and human health and social work having 7,900. 

Next largest sectors for total employment in 2027 is forecast to be Manufacturing (4,800 jobs), although this will see the largest change of any sector, declining by 800 jobs. Agriculture, forestry and fishing will also decline slightly, but remain the fourth largest sector with 4,400 jobs, followed by Construction (4,000 jobs).

As the sector composition has been changing, so has the occupational profile of the region, where there has been a significant reduction in the proportion in skilled trades and operative roles, as the manufacturing and agriculture sectors have declined. These changes are largely expected to stabilise over the forecast period, although there are expected to be still fewer skilled trade and operative roles.

However, on a more optimistic note, the report says the introduction of the South of Scotland Enterprise Agency means providing dedicated support to the south of Scotland in the same way as exists for the Highlands and Islands, but tailored to the economic needs and local labour markets in the south of Scotland should help. 

"This focus should improve the level of investment in economic growth, enterprise, skills and innovation in the region as well as working in new ways with other partner agencies.

"There are proposals for a new Borderlands Growth Deal working with councils on both sides of the border to promote economic growth and competitiveness in the area including infrastructure projects and transport and connectivity, including improving the region’s digital connectivity and broadband speeds. The deal, working alongside the new South of Scotland enterprise agency, should boost productivity, innovation and growth."

In a reference to Fair Work, the document warns: "Given the lower levels of earnings in the Borders (below the national average), there is a need to ensure that inequality within the region does not mean those at the lower end of the labour market get ‘stuck’ in lower paid ‘non- standard’ jobs: part-time, temporary and self-employment. And also that there are adequate progression routes out of low skilled work for those who choose to move and decent pay and conditions for those who do not or cannot".

Saturday, 23 December 2017

Calls for LOCAL control of Common Good funds

EWAN LAMB continues our coverage of a burning Borders issue

A group of "campaigners" from the Scottish Borders have urged Scotland's Parliamentarians to place the administration and management of Common Good funds in the hands of the townsfolk who are supposed to benefit from the assets and end the current regime of 'remote control' by large local authorities.

The Scottish Parliament's Local Government and Communities Committee is looking at the current legislation surrounding the ancient funds to see whether it requires tightening up or strengthening. And an invitation calling for written submissions must have left the committee members in no doubt that changes are needed as a matter of urgency.

Not Just Sheep & Rugby has already reported on contributions from Hawick Callants Club, and from Derick Tait, a former chairman of Future Hawick.

That organisation has lodged its own submission which is as hard-hitting as the rest.

Future Hawick has told the committee:"The definition of what is and what is not common good is all too often open to misrepresentation and misinterpretation.  Greater clarity is required and the rules need to be obeyed as common good property needs to be properly administered for the community it serves.

"The recent compilation of assets lists has clearly demonstrated a desertion of duty in this respect by local authorities, many of whom tend to regard common goods as a nuisance to their administration.  While attempts to address this issue have been made as a result of Scottish Government initiatives, the delays which have occurred in compilation are a sign of lack of proper record keeping.  All too often, administration of common good funds has been treated by local authorities as a right rather than an obligation, and to suit the ends of the local authority rather than the community.

"The administration of common goods has become remote from the communities they are supposed to serve.Often, councillors who have no connection with a particular common good are responsible for its administration and have no knowledge of community requirements.  In the Scottish Borders, all councillors are de facto trustees of all common goods and in effect control their administration. 

"While local sub-committees are appointed for each common good, final decisions rest with the full council.  This is not a sustainable situation, and there is a need for greater devolution of management to the communities the common goods serve.  More effective and dedicated management would be attained through the establishment of local committees comprising members of community councils and representatives of local civic and cultural organisations, all with full voting rights.  At present the situation where community councillors can sit and speak, but not vote, on common good committees is anathema to the democratic process."

Former Hawick councillor Andrew Farquhar is equally forthright in his submission.

He writes:"It is unfortunate that the legislation at that time did not allow for some form of local democratic administration to be put in place within the Burghs that owned them. Recent consultation has confirmed that some authorities view Common Goods as an inefficient administrative burden and are seen as diverting resources from the work done by them in the expanding role of delivering local services in partnership with communities.

"Managing Common Good assets is understandably low in the list of council priorities and has not been without controversy. The importance can be measured in local terms however because in Hawick for 2013/14 the net assets are shown to be £3.061 million with a deficit for the year of £115,000. Common Good assets have not fared well under Council stewardship due to councils having to do more with less. Administering the Common Good is low down in their list of priorities. E.g. Progress made with registers of assets!"

Thursday, 21 December 2017

Committee hears Common Good mismanagement allegations

DOUG COLLIE reports on disturbing claims in Hawick submissions

A SET of written submissions to the Scottish Parliament's Local Government & Communities Committee contains evidence of alleged mismanagement of the country's network of Common Good funds including poor record keeping, and valuable assets having disappeared or been misappropriated by councils.

Members of the committee are currently investigating the status of scores of Common Good funds which have been in existence for centuries, and should now be worth hundreds of millions of pounds.

The MSPs will determine whether changes in ancient statutes are necessary to protect the funds from further decline and to ensure they achieve their full financial potential.

Not Just Sheep & Rugby has reported in the past on the poor investment returns being chalked up by funds in the Scottish Borders compared to a neighbouring common entity in Berwick-on-Tweed.

The Borders funds have been combined into a single organisation with investment managers appointed to look after each town's interests. But complaints persist that the funds continue to under perform.

As part of its investigation, the Holyrood committee issued a call for written submissions which have been published. And this week members started taking evidence from experienced Common Good witnesses, including Dr Lindsay Neil, of Selkirk, a regular critic of how his town's fund has been run by Scottish Borders Council.

A number of the most critical and hard-hitting submissions have come from Hawick which has a Common Good fund worth in excess of £3 million. The fund includes farmland, woods, buildings and movable assets which have recently been comprehensively listed for the first time in ages.

In their written contribution members of Hawick Callants Club have told the committee: "Many of the common goods have been merged by these larger councils and the loss of local knowledge has generally resulted in inadequate control over the goods. The Scottish Government’s instruction to Local Government to compile lists of common good assets has exposed the failure to maintain accurate records.

"Hawick Callants Club have recently been instrumental in raising the issues of omission of Moveable Assets in the Hawick Common Good Fund. This was directly as a result of the Hawick Councillors insisting that Scottish Borders Council inform Hawick civic groups, including this Club, of items they had recorded on the Moveable Assets list."

The Club says it immediately identified a significant number of assets missing from the list and after further investigation noted numerous further omissions although there were conflicting views of what was common good and what was not. Numerous townsfolk had donated to the ‘town’ thinking they were going to the common good, but the council had argued that they were donated to a museum and therefore were‘council’ property.

"These donations need to be assessed to ensure the correct recipient is identified", add the club. A club member who held a senior position in the previous organisation, Roxburgh District Council, maintained that a full list of all fixed and movable assets of Hawick Common Good Fund had been prepared at the end of the District Council in 1996, but SBC were unable to find this list and others that had been mentioned to them.

"This is a prime example of a remote organisation failing to keep accurate records of local assets. Very recently another club member identified an area in Hawick where potential movable common good assets are stored and these are now being checked. At the moment, unfortunately, due to the way SBC is structured, any actions taken by the sub-committee can be overturned by councillors from other wards. This arrangement totally defeats the whole purpose of common good being managed locally and leaves the funds at the mercy of someone who is not interested in the local community."

Local man Derick Tait - a former chairman of Future Hawick -  had some equally strong and sensible things to say in his submission.

Mr Tait writes: "Common Goods were once an important specific part of local community culture, managed by Town Councils and the like, which because of their dedicated specialist knowledge, were able to manage and disburse their obligations in that respect conscientiously, expediently, and appropriately.

"Sadly, as local government has become bigger (but not better), management of individual common goods has merged and passed into the trusteeship of those who neither appreciate their significance and importance to local communities, nor care particularly about their management. In recent years, I personally have been aware of instances of failure to manage common goods properly in three towns, principally because of lack of local knowledge.

"There is no doubt that the edict from the Scottish Government to Local Authorities to compile lists of common good assets opened several cans of worms, with delay upon delay in reporting entirely due to the failure to maintain proper records. In Hawick, that list has only now been completed, completion only being achieved thanks to the assistance of several civic groups in the town.

"Part of the problem with incomplete records is that the intentions of the original donors may not have been properly interpreted. Financial assets present their own problem in that these are very often swallowed up, often without trace, into Council coffers. Indeed, I suspect that if all common goods asked for their monies back simultaneously it would spell financial disaster for many local authorities. The merging and management of “joint” common good funds into single investment portfolios clouds the issues of management fees charged and apportionment of dividends (and losses).

"On one occasion I even heard local council talk of a proposal to allow borrowing in excess of investment from such joint portfolios. Fortunately, those with an interest and knowledge prevailed. Common goods are a diverse subject and have been the subject of diverse management over the years. Many have been frittered away or spent to suit council budgets with little reaction from the communities involved. 

"However in towns with a strong sense of community and appreciation of custom and tradition, common goods are a precious commodity to be jealously guarded not by sentiment, but by structure. Politicians ignorant of such structure are neither qualified, nor able, to analyse the present or shape the future. 

"As local government becomes less local, and the pen grows ever mightier than the sword, the intensity of the community fight to protect its rights and common should not diminish. Management should be devolved to appropriate civic bodies whose trustees are town dedicated councillors, community councillors, and representatives of appropriate local organisations."