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Gloucestershire Business News

Former city council leader to face the music over financial chaos at Marketing Gloucester

The former leader of Gloucester City Council will be asked to make a written apology for the "financial and organisational crisis" at Marketing Gloucester at what looks set to be a lively council meeting tonight.

Tonight's meeting  (North Warehouse, 6.30pm) comes just a day after Punchline revealed police were looking into financial irregularities at the council-owned firm.

While Gloucestershire Constabulary have confirmed that there is not yet "evidence of any criminality" there is a rising level of fury by councillors at the way MGL has been run in recent years.

Its CEO Jason Smith was sacked in December for gross misconduct with the current chairwoman of MGL confirming to Punchline that was due to "concerns - and evidence - mismanagement and financial irregularities."

The company's bookkeeper Richard Brooks has also had his contract with MGL terminated. He has also been relieved of his accountancy duties at the Gloucester Business Improvement District.

Tonight, councillors will quiz Councillor Paul James, a former chairman of Marketing Gloucester as well council leader, over the near collapse of the company that was set up to make Gloucester look good.

A motion laid down by Liberal Democrat councillor Declan Wilson will ask Cllr James to make a "written apology", claiming that he was responsible for the crisis.

Tonight's meeting is the first since the council's Overview and Scrutiny Committee reviewed a damning report by Grant Thornton into the shambolic way MGL was run.

The report declared that Marketing Gloucester was 'insolvent' and that a bailout would be needed from the council to keep it trading.

The council agreed to a £240,000 rolling credit facility to keep MGL afloat in response, but now councillors are demanding their pound of flesh as recompense.

The full motion states: "This council notes the report that was presented to the Overview and Scrutiny Committee in relation to the organisational and financial failings of Marketing Gloucester Ltd, a company 100 per cent owned by Gloucester City Council.

"This council welcomes the recommendations in the report and the resolutions agreed by the OSC.

"This council calls for a written apology from the former chair of the board and former leader of this council, who was responsible for the financial and organisational crisis that has hit MGL, which forced this council to bailout the company to the tune of £240,000 to help keep the company solvent."

Cllr James resigned from the board of Marketing Gloucester before news of the current problems broke. He stood down from his role as leader of the Council in November.

Salary spend went up, despite number of employees going down

Documents leaked to Punchline have showed just how chaotic the finances were at Marketing Gloucester in the lead up to the bailout being requested.

Despite having their direct council funding cut by £51,000 in 2018/19, there were marked increases in expenditure in wages, travelling, sundry expenses and accountancy and bookkeeping costs.

Salaries rose by 12.6 per cent, from £191,685 in the previous year to £215,858, despite the number of staff being employed by the company being reduced to seven from eight.

The amount spent on travelling rose by 72 per cent, increasing by £3,098 in the year from £4,293 to £7,391 while sundry expenses also increased by 53 per cent to £9,097 from £5,917.

The spending on the company's accountancy and bookkeeping more than doubled - going up by a whopping 131 per cent from £5,917 to £12,631.

Funding through the council was cut from £366,000 in 2017/18 to £315,000 in 2018/19. It was cut again to £269,000 for the current financial year.

The total expenditure on administrative expenses for the year was £325,260, up £11,087 from the previous 12 months.

The financial statements, which are due to be lodged at Companies House shortly, reveal that turnover was down by 28 per cent year-on-year - a reduction of £208,971.

Cost of sales was also significantly reduced from £496,338 in 2017/18 to £290,934 last year, a reduction of £205,404 or 41 per cent.

The loss for the financial year was £98,473, a similar figure to that achieved 12 months earlier.

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