An investigation is underway into ‘financial irregularities’ at Marketing Gloucester
By Andy Merrell, James Young and Mark Owen | 29th January 2020
An investigation is underway into the financial irregularities of Marketing Gloucester, its former chief executive and its book keeper.
It is the latest development in the messy saga of just what and who is to blame for the near collapse of the company set up to make the city of Gloucester look good.
Gloucestershire Constabulary have confirmed that there is "no evidence of criminality at this stage" but will continue to review information from Marketing Gloucester.
Before Christmas a report by Grant Thornton into the city council-owned, privately-run business was made public, declaring it 'insolvent.'
At the same time, it was reported that a £240,000 rolling credit facility had been agreed with the local authority to keep the company afloat.
Just days later, the high-profile chief executive officer, Jason Smith, was sacked from his post - and Punchline can now reveal that he was dismissed by the board for "gross misconduct."
Punchline can also confirm this was because of concerns and evidence of financial irregularities, according to the current chairwoman Jennie Watkins.
Book keeper Richard Brooks has also been dismissed.
Former chairman to face questions at council meeting
Mr Smith's departure from the role follows on the heels of Paul James, who left his role as leader of the city council in November.
Councillor James also resigned from the board of Marketing Gloucester before news of what we now know is an administrative debacle broke.
Cllr James is due to face more questions about what happened under his chairmanship when he steps before a full meeting of the council tomorrow night.
The positive impact of Marketing Gloucester drawing attention to the city through the likes of the Tall Ships Festival and SoMAC is not in dispute.
However, paperwork outlining what happened to hundreds of thousands of pounds of public money is.
An anonymous source close to the investigation into MGL said that records of savings, debtors, significant expenses and finances generally were not apparent.
The source also confirmed that there was no business plan, something that was also outlined by Grant Thornton in its report.
'Concerns regarding amounts of payments CEO has sent himself'
The report said Mr Smith had set up a company called UK:DRIC at Companies House (twice in fact) and received £400,000 from Gloucestershire Local Enterprise Partnership (GFirst LEP) to establish the centre in Eastgate Shopping Centre, Gloucester.
That money and a further £76,000 was spent before the centre opened.
According to the report, the city council was unaware of the new business and funds.
The source close to MGL also confirmed that the Marketing Gloucester board was also unaware of UK:DRIC being established.
Minutes seen by Punchline from December's meeting of the board of Marketing Gloucester outline some of the major concerns beginning to be brought before the board.
Councillor Jennie Watkins joined the board of MGL in May as chairwoman, succeeding Mr James.
The minutes state that "audits were conducted and there were significant concerns around the financial with UK:DRIC".
These included: "concerns regarding amounts of payments CEO has sent himself direct... it was also mentioned that CEO's son had done some web work."
The minutes state that GFirst LEP "still wanted to work with us".
They also state: "Visit Britain haven't heard from MGL in approximately two years. Also, there isn't any relationship with the Forest of Dean and Wye Valley. Our Cotswold relationship is also broken.
"Our current CEO was not good at working with other partners - how do we rebuild those relationships?"
Other revelations included that the salary of at least one individual was still being paid into the accounts of MGL even though they were no longer employed by the company.
In fact, that person was employed by the city council.
When approached by Punchline Cllr Watkins, who is driving the attempt to review the situation at MGL, confirmed the police had become involved.
As she did so, she reminded everyone that the financial concerns run far beyond MGL - and also bring into the picture the city's BID (Business Improvement District) - which paid Marketing Gloucester a consultancy fee rising to several thousand pounds a month.
Marketing Gloucester was providing management services to the city business group Gloucester BID, for which it charges £3,900 a month - a fee it increased in August 2018 from £2,500.
Cllr Watkins said: "I can confirm that the board of MGL have been sharing concerns about financial irregularities with Gloucestershire Constabulary since November 2019.
"We are now working in conjunction with the board of the Business Improvement District to continue to share information as it becomes available.
"Investigations to the issues and concerns are ongoing."
Marketing Gloucester book keeper Mr Brooks was also the book keeper for the BID. It is understood he was sacked from his post with the BID this week.
Cllr Watkins added: "It's fair to say that the narrative that is being played out regarding the state of the company, about it being down to the reduction of council funding, is not accurate.
"We know from the Grant Thornton report that there was a complete absence of governance and transparency.
"I have been told there will be report blaming the council cabinet for reducing funding. In part, it had an impact but not to the extent we are looking at."
Financial agreement in place - but no formal partnership with city council
This morning Gloucestershirelive.co.uk published a report on Mr Smith and the funding situation at MGL in which the point was made that the city council had continually reduced the organisation's funding.
Punchline can confirm that the council contributions to Marketing Gloucester in 2019/20 was £269,000.
In 2018/19 it was £315,000, in 2017/18 £366,000, in 2016/17 £475,000 and in £2015/16 £486,000.
It is understood the council has said it does not hold data for the period prior to the financial year 2015/16.
Punchline has seen documents which show that on December 19, 2008, the council and Marketing Gloucester signed an FMA (financial management agreement) and Punchline understand that remains in place.
The criteria for funding Marketing Gloucester was to "pump prime funding in order to establish itself as an independent private company and the council has agreed to provide this limited assistance on the terms hereafter.
It adds: "Nothing herein contained (within the FMA) shall be construed as creating a partnership between the council and the company."
The FMA said the council would fund the company through non-repayment contributions by way of seconded staff and an annual grant.
The FMA confirmed the 2008/09 part-year contribution as £89,000 and the 2009/10 full-year contribution budget as £268,000 - including a grant of £186,000 and £82,000 seconded staff value.
The council budgeted spend for MGL for 2015/16 within the Culture and Leisure Cabinet portfolio was £464,000.
This is a 73 per cent increase (£196,000) on the council budgeted funding and expenditure from 2009/10 to 2015/16.
Review of the council budget for MGL expenditure and 2015/16 transactions identified that not all council spend was covered though a legally binding agreement.
The FMA also stated: "Loans issued to Marketing Gloucester (historic or current) should be reviewed and formal agreements documented to confirm the purpose of the loan and the terms for repayment."
In a statement, Gloucestershire Constabulary confirmed it was aware an investigation was underway and ongoing by Marketing Gloucester.
The statement said: "We have received information which has been reviewed and there is no evidence of criminality at this stage.
"We're aware that an internal investigation is ongoing and we will review any criminal allegations once this has concluded."
Punchline has contacted Mr Smith for comment.
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