September 15 - An unqualified accountant was put in charge by the London Development Agency (LDA) of its £1.1 billion Olympic budget, it emerged today as investigations continued into a £160 million black hole in the expenses.
Harvey McGrath, the chairman of the LDA, and Sir Peter Rogers, the chief executive of the LDA, made the extraordinary admission when they appeared before London Assembly members who demanded answers on how £159.8 million could have been spent on remediation costs and professional fees without anyone noticing.
Members from the London Assembly Economic Development, Culture, Sport and Tourism (EDCST) Committee were trying to find out how the LDA's accountants had failed to spot the overspend.
The LDA, which is the Mayor's economic and business funding arm and its remit includes regeneration, promoting business and employment and charity-led schemes to boost the capital's economy and well-being, admitted of the two accountants employed to check the accounts, only one was formally qualified.
This one looked after “day-to-day” accounts, the LDA said, while the £1.1 billion Olympic budget was ultimately administered by an unqualified accountant.
A report on the budget of the Olympic Legacy Directorate (OLD), which is part of the LDA, produced by accountancy firm KPMG on behalf of the LDA and published last week, discovered the agency failed to spot a budget overrun as far back as April 2008, the month before Boris Johnson took over as London Mayor, despite information available at the time showing that payments and land cost claims were running "significantly above" the costs estimated when the budget was originally set.
The budget relates to the complex task of clearing land and purchasing it for the 500-acre Olympic site in the Lea Valley in East London, which involved 3,000 separate land interests in total.
The budget was set at £1.1 billion in 2006 by the then LDA board following input from a number of experts, including KPMG.
This figure is separate from the £9.3 billion set aside for staging the 2012 Olympics.
The LDA admitted a series of programmes it had been hoping to fund, would now face severe cuts as a result of the error.
This included funding for the Visit London tourist programme, which the LDA said would be cut by £4 million this year.
Conservative Olympic spokesman Andrew Boff admitted last week that £45 million will have to be taken from projects this year to fill the gap "which would mean cuts for skills programmes, funding for affordable housing and job brokerage schemes."
Dee Doocey, the chair of the EDCST Committee, said: “Once again this undermines confidence in and raises questions about internal processes at the LDA.
“This shortfall will have to be met by taking funding away from key programmes helping Londoners during the recession.
“What we heard today amounts to nothing less than breathtaking incompetence.”
Four staff from the OLD are facing disciplinary action over the scandal, although no criminal activity is suspected.
September 2009: Auditors discover £160 million blackhole in LDA Olympic account