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Olympics Ministry being economical with the truth again

Conclusions and Recommendations of the House of Commons Public Accounts Select Committee Report 22 April 2008

  1. Foreseeable requirements for public sector funding were excluded from the estimates at the time of the bid to host the Games, giving an unrealistic picture of the expected costs. Contrary to good practice, the Department [of Culture Media and Sport] did not include programme contingency, now £2.7 billion, because the scale and complexity of the undertaking were not appreciated at the time of the bid. The costs of tax and security, now estimated at over £1.4 billion, were also excluded from the estimates as they were uncertain. Yet £738 million of funding from the private sector was included, despite not being supported by robust analysis. All costs and revenues should have been included from the outset, with the uncertainties explained and a contingency provided.
  2. The revised public sector funding package of £9.325 billion does not include all of the activities on which delivery of the Games and its legacy depends. The acquisition of land for the Olympic Park, the costs of government departments working on Games preparations and legacy planning, as well as the costs of improving wider transport links are all outside the budget. Any assessment of the costs and benefits of the Games should reflect all of the additional costs incurred.
  3. The Department has confirmed that the public sector funding of £9.325 billion will not be exceeded and the Committee will hold the Department to account against this figure. Following our hearing, in January 2008 the Department published its first annual report summarising progress with the Olympic programme. In future, the annual reports and the six monthly updates should explain any changes to the cost forecasts and provide a breakdown of the costs incurred.

  4. There are over four years to go until the start of the Games but £500 million (18%) of the programme contingency has already been used. Contrary to the Department’s suggestion, there should be no assumption that all of the remaining £2.2 billion contingency will be used. It is for unforeseen costs and the Department should satisfy itself that options to contain costs have been fully explored before further contingency is used.
  5. Despite the £5.9 billion increase in the public funding for the Games, the Department has not specified what will be delivered in return for this expenditure and the current budget cannot be reconciled to the commitments in the original bid. To provide a clear basis for accountability, the Department should:

    • publish a statement of what will be delivered, including the legacy plans and benefits for the programme as a whole;
    • provide an assessment of progress against that baseline in its annual reports to Parliament; and
    • show how any subsequent changes to the plans reconcile to the baseline and support them with a clear audit trail.

  6. The preparations for the Games depend on the Department’s ability to coordinate funding from a number of sources. The Department should maintain up to date forecasts of the cash needs for the Olympic programme and the timing of individual funders’ contributions. Given that the date of the Games is fixed, the Department needs to identify any funding shortfall well in advance, and put in place contingency plans for dealing with it.
  7. Revised expectations for private sector contributions have increased the estimated cost to the public sector by £748 million. The March 2007 budget for the Games included a £175 million public sector contribution to the cost of the Olympic Village, which was previously going to be fully funded by the private sector. In addition, the absence of legacy plans has made it harder to attract private investment, and the estimated private sector contribution has fallen by £573 million. In finalising legacy plans, the Department and the Olympic Delivery Authority should seek to reduce public sector costs by attracting private investors, who could also promote use of the facilities after the Games.
  8. The National Lottery is providing £2.175 billion (23%) of the funding for the Games, but its share of any financial benefits is uncertain. The estimated £675 million reimbursement to the Lottery is inherently uncertain as it is based on estimated proceeds from future land and property sales, and on an agreement with the Mayor of London which is not legally binding. The long term cost to the public sector may also be offset by profits from the future sale of the Village flowing back to the Olympic Delivery Authority. The Department and the Delivery Authority should identify all potential revenue generating opportunities and establish principles for how any benefits might be shared amongst the funders, including the Exchequer and the National Lottery.
  9. The Olympic Delivery Authority is having difficulty generating supplier competition for some venues. Ideally, contracts should be awarded after effective competition between suppliers. If this is not achieved, it is all the more important that the Olympic Delivery Authority builds cost and performance safeguards into contracts. The Olympic Delivery Authority should have rights of access to contractors’ books to check costs and financial viability, and should establish clear contractual incentives for delivering to time and cost targets. The Authority should also have early warning arrangements and contingency plans in place to identify and resolve any problems with contractors, and, if necessary, replace them.
  10. The Department is aiming for wide ranging legacy benefits from the Games, but there is no basis on which to measure achievements. The legacy planning should now be completed and for the full range of expected benefits, extending beyond East London to the United Kingdom as a whole, the Department should make sure that the plans set out:
    • quantified objectives and how they will be achieved,
    • how and by whom success will be evaluated,
    • and who will be accountable.

Download PDF from Public Accounts Committee

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