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Sir John Bourn, Head of the National Audit Office, reported to Parliament today that an examination of 15 major capital projects funded by Arts Council England shows that most are delivering the intended benefits in terms of, for example, the number of performances and productions, the level of visitors, and the quality of the new facilities. Nine of the projects are achieving or exceeding all of the benefits envisaged when they originally applied for lottery funding, with four delivering in part. Eleven projects have won awards for architectural design or disability access.

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However, the Arts Council has concerns about five projects that, while operational, are experiencing financial difficulties, although it expects the position of three on these projects to improve shortly and is working with the other two to help them address their longer term financial stability. Two other projects (the National Centre for Popular Music in Sheffield and the Dovecot Arts Centre in Stockton-on-Tees) have closed due to financial problems. The Arts Council is working with regional stakeholders on a recovery strategy for the Dovecot Arts Centre. In the case of the National Centre for Popular Music, the Arts Council expects to recover from the sale of the building only around £500,000 of the £11 million that it invested in the project.

In terms of time and cost, the majority of the projects did not go entirely to plan and, since the Committee of Public Accounts reported in 1999, there were further delays on four projects and further cost increases on ten. Of the 13 projects now completed, four were finished on time and nine were delayed (three by a month, two by four months, and four by 12 months or longer). Thirteen of the 15 projects were over budget, with the cost increases ranging from two per cent to 58 per cent. The total cost overrun was £94 million, 17 per cent of the original budgets. In some cases the increases in cost resulted in part from enhancements in the scope or specification of the project, and the two projects completed within budget were reduced in their scope.

Ten projects received supplementary grants from the Arts Council, totalling £33 million, in addition to their original lottery funding. The extra funding covered 35 per cent of the cost overrun, with the remaining 65 per cent funded by the projects themselves from other sources. Overall 12 of the 15 projects raised or exceeded the required level of ‘partnership funding’ from other sources (usually 25 per cent or more of project costs). The remaining three failed to raise the required partnership funding and as a result the Arts Council funded a higher proportion of the costs than it originally intended. The Arts Council provided £337 million (52 per cent) of the £650 million that the projects cost in total.

In designing its new capital programme, that it launched in 2000, the Arts Council has drawn on its experience of the first programme and reflected the concerns expressed by the Committee of Public Accounts in 1999 in taking steps designed to reduce the risk of delays and cost overruns and of having to award extra lottery funding to ensure that projects are successfully completed. These include measures to improve its own project monitoring and to build the capacity of the arts organisations concerned to manage their capital projects.

The Arts Council has also taken steps to improve its arrangements for handling supplementary grants and partnership funding, to evaluate more systematically whether projects are delivering the intended benefits, and to protect the lottery funds it has invested. The National Audit Office’s report includes suggestions for further improvements which go with the grain of these measures.

"It is pleasing that most of the 15 projects are now delivering the intended benefits to the public. But it is disappointing that two have had to close and that on most the construction work did not go to plan, with delays and cost overruns which resulted in 10 projects needing additional lottery funding. It is important that, in taking forward its new capital programme, the Arts Council monitors the effectiveness of the measures it has introduced to reduce the likelihood of similar problems in the future. Where things do go wrong the Arts Council should be prepared to stop funding and at all times it must ensure that lottery funds are protected so that it is in a position to recover its money in the event of projects failing."

Sir John Bourn

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