The Department of Communities and Local Government (DCLG) has been criticised for its role in the failure of an environmental not-for-profit company.
Envirolink Northwest, which offered services and expertise within the low carbon sector, went into voluntary liquidation last week and made 19 staff redundant.
Envirolink had been funded by the former Northwest Regional Development Agency (NWDA), the European Regional Development Fund (ERDF), and local authorities and industry. DCLG took over audit responsibility from NWDA when it was wound up in 2011 and now the department has been accused of changing the basis of the qualifying data without consultation.
According to Peter Jones (left), the former director of Biffa who was pro bono chairman of Envirolink: “This was in spite of the otherwise unchallenged integrity of Envirolink in delivering a £4.5m package of ERDF contracts for the first three years.
“In consequence staff were diverted onto useless backtracking tickbox exercises at the end of which (after one year of complete inaction) DCLG still withheld over £205,000.”
Jones, speaking to MRW in a personal capacity, added: “Any possibility of continuing business development was destroyed and, as ever, cashflow suffered. The upshot is that an otherwise successful enterprise fulfilling a real need employing around 20 full time equivalents and contributing taxes to the Treasury on a portfolio of other work has had to be liquidated.
“Ironically another DCLG body was a major creditor that will now lose their money.”
The creditor’s report, which MRW has seen, supports Jones’ claims about the DCLG, citing one of the reasons for the failure of the business as “protracted EDRF audits and paper-chasing, diverting staff resources”.
Other factors the liquidators blamed were: successive funding cuts; the early closure of projects; and the inability of the company to secure enough new work.
The report states “The company’s cash flow challenges continued throughout this period, exacerbated by the ERDF team moving from NWDA control in April/May 2011 to the control of the Department of Communities and Local Goverment. There then ensued a hiatus in payments from ERDF.”
It goes on to say that in January 2012, as the company was ready to enter ‘full commercialisation’, it was “caught up in protracted ERDF audits and paper chasing that distracted a large proportion of the remaining staff for nearly the first half of the year, eating into financial reserves built up over the last 12 years.”
This was after the ERDF team transferred to the DCLG.
After the audit was completed in June 2012, the ERDF witheld around £200,000 from Envirolink as they concluded that the company had “not achieved its contracted outputs”. But the company said it could never have managed them 100%, partly because some client companies had been closed or taken over.
After this, the company struggled to regain footing, and the report says, “Recovery from the ‘lost’ first half of the year has proven difficult and, despite growing revenues, the company was still not hitting budget.”
The liquidator, Bev Budsworth, managing director of The Business Debt Advisor said: “It’s a really unfortunate situation that Envirolink Northwest found itself in. For a limited company that helped support so many businesses and created jobs in the region, it ultimately failed because it became increasingly difficult to get sign-off and payment on European-funded projects. Severe funding cuts also drastically reduced turnover causing cash flow issues.
“Envirolink has suffered like many others in the ‘not for profit’ sector with government cutbacks affecting many worthy projects.”
The DCLG has not yet responded to a request from MRW for a comment.
Envirolink was set up in 1999, and at its peak in 2010, employed 90 and had a £6m turnover. Its projects in the waste industry included providing support for a waste fats and oils scheme, a composting initiative, funding research into recycling polypropylene carpets, and helping to get the first trade recycling centre in the region up and running.
- The former chief executive of Envirolink, Nick Storer, and three senior employees have now formed a low-carbon consultancy called Gyron, the Manchester Evening News has reported.