MPs have launched a scathing attack on the UK national lottery distribution fund that supports charities and community groups after an inquiry into a grant made to an anti-deportation campaign.
The £340,000 grant awarded to the National Coalition of Anti-Deportation Campaigns by the Community Fund in 2002 sparked a furious onslaught on the lottery cash distributor by the Daily Mail. An earlier £191,000 grant made to the NCADC in 1998 had passed unnoticed.
The second grant also prompted interventions by the home secretary, David Blunkett, and the culture secretary, Tessa Jowell, who raised concerns with the Community Fund. The grant was upheld, but conditions were imposed to prdvent the NCADC pursuing "doctrinaire" activity.
But Edward Leigh, chairman of the powerful Commons public accounts committee, said today there were "weaknesses in every stage" of the Community Fund's work. He called on the fund to "use the ultimate sanction" of withholding cash if grant recipients breach its terms.
Mr Leigh was speaking as the committee published its review of the grants made to the NCADC. He said the Community Fund had failed to act on earlier recommendations by the committee on grant assessment and monitoring procedures.
"It is disappointing that the Community Fund had not acted more fully on my committee's earlier recommendations," he said. "We found weaknesses in every stage of the fund's work, from grant application, assessment and approval through to the end of grant review.
"The fund's monitoring has been poor, and even when problems have become evident, the fund has been extremely reluctant to withdraw grants."
Mr Leigh added: "The fund must act robustly if grant recipients breach its terms and be prepared to use the ultimate sanction of withholding funds or requiring them to be repaid."
The committee found that if the fund had acted on its 2001 recommendations, the issues surrounding the grant to the NCADC might not have arisen. More could have been done to implement the recommendations, particularly in relation to visiting projects and assessing the achievements of grant recipients after the funding of their work.
The Community Fund had subsequently introduced improvements to procedures and had accepted the recommendations made by the National Audit Office, the committee found.
The lottery distributor now needed a clear action plan and timetable for implementation and a robust system of performance monitoring to ensure procedures are enforced.
The Community Fund should also make greater use of the expertise of its independent committee members and should widen its definition of risk, taking into account the context within which grant applicants operate, to avoid funding activities that could be considered political and doctrinaire.
The MPs found that the Community Fund's risk profiling of the NCADC as a grant applicant was inadequate and focussed too narrowly on financial risk. They said the fund should have known how far grant funding would be used to assist the settlement and integration support of asylum seekers, and how far it would be used to challenge deportation orders.
The report also recommends that the Community Fund should be more consistent with grant recipients that are not registered charities monitored by the Charity Commission. Non-charitable bodies are often small, unsophisticated and unregulated, and as such are potentially more susceptible to the misuse of funds, the report says.
A Community Fund spokeswoman said: "We welcome this report and will take on the findings and the learning into the new lottery distributor, [to be formed from a merger of the Community Fund with the New Opportunities Fund]. We will respond in due course to the PAC findings."