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NAO publishes damning report on Libor funding

08 Sep 2017 News

HM Treasury and the Ministry of Defence do not know if the recipients of Libor funding spent the money as intended, a National Audit Office investigation has found.

The NAO has today published its findings about the Libor Fund, stating that of £592m distributed through grants, two-thirds came about through direct requests for money, while millions of pounds have still not been dispersed, .

The report Investigation into the management of the Libor Fund revealed that the government cannot yet demonstrate the impact the Libor grant fund has had as “it has not been evaluating the impact of the grant schemes on the charity sector”.

It also said that the Treasury “did not have a formal comparative assessment process for awarding the majority of the grants” from the HMT Libor fund.

The NAO report came about due to questions were raised in the media and in Parliament over the transparency of how the money from the fines is being distributed.

£181m yet to be spent

It found that there is as much as £181m of Libor funded yet to be spent. Civil Society Media and Charity Finance have repeatedly questioned the Treasury on how funding decisions have been made.

Of this, £40m has yet to be committed through any scheme, with the other £140m committed through the Covenant Fund but not distributed to any specific charity or cause.

A total of £973m worth of fines were collected by the Financial Conduct Authority and committed to the Libor Fund. This money came from banking fines after an investigation revealed that several banks had been manipulating Libor (the London Interbank Offered Rate) for profit. Other banking fines went on to be added to the Libor Fund.

Of this, £773m was assigned to be granted to charities and good causes by HM Treasury and the Ministry of Defence.

A further £200m was given to the Department for Education to spend on 500,000 apprenticeships however the Department for Education “is unable to demonstrate that these have been delivered”.

Applications prior to Autumn Statement 2016

The report even states that before the Autumn Statement 2016, grant applications were made by letter to the Chancellor.  

It said: “The Chancellor made decisions throughout the year and announced them either at fiscal events such as during a Budget speech, or during visits related to the Armed Forces.”

However PACAC recommendations regarding allocations of funding to charities following the breakdown of Kids Company made it clear that “there must be no suggestion that individual ministers have funds under their personal control or are exercising personal patronage”.

Following this the Treasury announced that its grant scheme was open to public subscription on the government website as of the Autumn Statement 2016. The NAO report says that the Treasury now believes the scheme is in accordance with grant funding principles that came into effect following the closure of Kids Company.

Two-thirds from direct asks

It also reveals that two-thirds of £592m disrupted through grants were awarded following requests for funding directly to the Chancellor of the Exchequer, from charities, MPs and government departments. Although the report does say that HM Treasury officials provided advice on which causes to fund.

The remaining third (£207m) was spent through “competitive application processes managed through HM Treasury and MoD”.

Treasury and MoD cannot confirm money spent as intended

The Treasury commissioned the MoD to carry out a retrospective review of all grants awarded since 2012 to seek assurance on how the grants were spent and to provide information for further monitoring. It found that the two departments were holding differing level of information on grants, depending on when they were paid and from what scheme.

The MoD is still gathering evidence on 236 of the 729 grants, with the departments believing that the monitoring requirements built into the schemes from which the grants were given under being sufficient to complete the review. The two departments expect to complete the review by December 2017.

No terms and conditions

The report also revealed that not all grants from the Libor Fund had terms and conditions attached to them as standard, until the Autumn Statement 2015.

The NAO said that the investigation explains how the government has distributed the money, but does not seek to evaluate the value for money of these decisions.

Grants awarded

HM Treasury and MoD awarded £591m through 729 different grants to 639 different charities and causes. Grants ranged from £1,000 to £50m, with the average grant being £800,000.


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