Development Agency wrongly awarded over £150,000 grant to rural centre

What happened

In 2009 Equestrian Centre F applied to its Regional Development Authority for Rural Development Programme for England (RDPE) funding to build a second indoor arena. The Department for Environment, Food and Rural Affairs (Defra) had overall responsibility for RDPE funding. When it looked at the funding application, the Authority relied on an informal process and the integrity of the application. Guidance to applicants asked them to identify their competitors and say why their publicly-funded proposal would not affect or 'displace' their competitor's business.

Equestrian Centre F did not do this because it said its business was unique, so it did not have competitors. This, together with other assertions it made, was false. But the Authority approved the application because it did not check any of the assertions.

After Equestrian Centre B complained, an independent expert instructed by the Authority said many assertions in Equestrian Centre F's application were false. Defra referred the matter to its internal police who, after an investigation, sent a file to the Crown Prosecution Service (CPS). The CPS ultimately did not prosecute as it was not in the public interest because Defra had the right to claw back the money.

Meanwhile, Defra's response in summer 2011 to Equestrian Centre B's complaint found that the Authority had not handled the complaint well. Defra asked one of its senior officials, in autumn 2011, to examine how the Authority considered displacement in Equestrian Centre F's application. The senior Defra official found several weaknesses in the Authority's consideration of displacement but found that overall it followed the available guidance and did not poorly assess displacement.

What we found

The Authority's appraisal process was not written and so was unclear and could lead to inconsistent decisions. Its process had not followed general HM Treasury guidance and we found that its appraisal consisted only of reading a sample of testimonials. The process was flawed and that was maladministration. The Authority did not check anything in the application and so missed the false assertions. It therefore approved an application it should not have. That was also maladministration.

Defra's handling of Equestrian Centre B's complaint was poor. This was because, although the complaint resulted in three separate reports and a criminal investigation, Defra did not link the conclusions of these reports and relate them to the Authority's consideration of displacement. That meant it did not answer Equestrian Centre B's complaint. This was further maladministration.

The Authority's maladministration would have had some small impact on Equestrian Centre B.

However, Equestrian Centre B had not given us clear evidence of financial impact such that we could make a recommendation for a specific financial loss. But it left Equestrian

Centre B with uncertainty about the impact on its business. Defra's denial for over three years that it poorly assessed displacement when appraising Equestrian Centre F's application was also frustrating and stressful for Equestrian Centre B.

Putting it right

Defra apologised to Equestrian Centre B for its maladministration and the impact it had had. It paid the complainants £2,000 compensation. Defra said it had made significant changes to the schemes it offered, including a range of controls over the assessment of applications. This included lessons learnt from this case.

Defra undertook to emphasise to appraisal staff that they must check facts and assertions. Defra agreed to include this in guidance to be published in January 2015.