The Black Hole

The London Development Agency (LDA) was given a well deserved drubbing in the London Assembly's Budget and Performance Committee Pre-Budget Report for its lamentable financial controls that caused a £159M financial black hole.

The shortfall has "not only damaged the Agency's reputation but has significantly reduced its resources".

"The financial prospects for the LDA in 2010/11 are bleak.

Together with clawbacks from central government of previously allocated grants, this shortfall will result in the LDA's available resources being over 20% less in 2010/11 than previously planned.

This comes in a period when the LDA will be trying to establish credibility with Londoners as the lead agency on economic development and regeneration in the capital in a challenging economic environment."

Committee chairman John Biggs said:

"The LDA must now demonstrate that lessons have been learned, controls improved and sufficient testing on budget areas carried out to ensure budgets going forward can be relied upon."

Quite!

Olympic Medals won during the Beijing 2008 Olympics

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Breaking The Rules

Baroness Ford, chairwoman of The Olympic Park Legacy Company (tasked with attracting developers to take on the Olympics site after 2012), is refusing to take on a £800M debt from the LDA (incurred in buying up the land for the 2012 Olympics).

The Evening Standard claims that she has been successful in convincing the Department for Communities and Local Government to take the loan on to its books.

However, if this is the case, this will breach Treasury rules on departmental borrowing.

The LDA, as you will recall, has a £160M black hole in its accounts as a result of lousy internal financial controls; it refuses to hold onto the debt, without mincing words, because it can't honour it without cutting back on other projects.

Ever get the feeling that there are simply too many agencies trying to "run" the 2012 games (ie stick their snouts into the Olympic trough)?

Ever get the feeling that the Olympics budget is out of control?

A mess by anyone's standards, courtesy of Nu Labour!

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

Cuts

As the old saying goes:

"Famine follows Feast"

Therefore we should not be surprised to learn that in the wake of the £160M blackhole, discovered in the accounts of those allegedly "in charge" (LDA) of the London 2012 Olympics, cuts have to be made.

Projects intended to deliver a legacy of the 2012 Olympics have been cut by the London Development Agency. There will be cuts of over £21M this year affecting 2012-related programmes run by the LDA.

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

The £160M Black Hole

In June I noted that:

"a £100M black hole has appeared, as if by magic, in the 2012 Olympics accounts of the London Development Agency (LDA) - the budget for which is not included in the £12BN Olympics budget".

Unfortunately, it seems that the size of this black hole has increased by over 50%.

The Times has obtained the unpublished report by KPMG into the black hole, which states that the black hole has expanded to £160M.

Unsurprisingly the report, according to The Times, "hints at a cover-up by officials who waited more than a year before alerting senior managers to cost overruns".

A £1.4BN compensation deal was agreed with businesses who were forcibly removed from the Olympics site. However, approximately 70 firms have yet to receive their money.

Seemingly the LDA has not set aside enough to settle the outstanding claims.

KPMG noted that staff in the Olympic Legacy Directorate, the department in charge of the scheme, should have been aware of spiralling costs as early as April 2008.

Neither the person overseeing the budget nor his finance manager were qualified accountants. A remarkably inept arrangement, even by the standards of the Labour government and the London Labour administration (under Ken Livingstone) at the time.

The report states:

"The basic requirements for managing and accounting for a budget were not met. None of the senior officers of the LDA to whom we spoke accepted responsibility for checking the accuracy of the accounting information."

It would seem that those "in charge" of the Olympic finances couldn't "run a piss up in brewery", and then did their best to try to hide their failings. Hardly surprising that the budget for this Labour "ego fest" has ballooned from £3BN to £12BN (including £2BN running costs).

BTW, isn't funny how those "in charge" conveniently forget to add on the £2BN running costs whenever they talk about the costs?

For why?

They are trying to keep the headline figure reported in the media below the psychological break point of £10BN.

Unfortunately for the politicians, they will learn that the trouble with black holes is that they just keep growing.

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

Cuts

Over £20M per annum, for the next 3 years, will be cut from the London budget to cover irregularities in the 2012 Olympics accounts.

The black hole (estimated at being between £60M-£100M) in the accounts means that the London Development Agency, the Mayor of London's economic and business unit, does not have sufficient reserves to cover compensatory commitments owed to businesses forcibly relocated from the Olympic Park.

KPMG are conducting a forensic investigation into the irregularities, and will issue a report at the end of July.

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

Lost!

Despite continuous assurances from those "in charge" of the London Olympics, and their political masters, that everything is under control (despite a rise in the budget from under £3BN to £12BN) it seems that £100M of taxpayers' money has been "lost".

A £100M black hole has appeared, as if by magic, in the 2012 Olympics accounts of the London Development Agency (LDA) - the budget for which is not included in the £12BN Olympics budget.

A routine audit of the accounts has uncovered large accounting irregularities, and a team of external accountants from KPMG has been called in to investigate the "lost" money.

Gareth Blacker, who oversaw the purchase of the huge Olympic site on the Lea Valley, and his accountant have been suspended. No evidence of wrongdoing is attached to either Mr Blacker or his accountant.

A source told The Times:

"This has gone beyond a routine audit, into the realms of a fraud investigation".

This gives me little faith in how our £12BN Olympics' budget is being "managed".

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

Another Raid on The Contingency Fund

True to form, the financial black hole that is the London Olympics 2012 continues to suck ever increasingly large amounts of cash out of the hard pressed British taxpayers.

The government are discussing a further raid, estimated to be around £400M, on the Olympic contingency fund in order to make up the shortfall in private sector funding for the Olympic village.

The Government raided the fund to the tune of £326M in January.

The "budget" currently stands at £12M (including £2M running costs).

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

Advertising Agencies Pull Out

In another blow to the so called London Olympics 2012 "budget", a number of advertising agencies have pulled out.

For why?

It seems that the Olympics organisers are so desperate for cash to throw into the ever growing budgetary black hole (£12BN - including £2BN running costs - and rising), that they tried to charge the agencies £10M each for the "honour" of being a "tier three" sponsor.

Whilst the £10M was not an "up front fee" as such, any agency signing up would have been required to agree to spend millions in exchange for being named an official 2012 sponsor.

Unsurprisingly those in the advertising industry don't think that the benefits, especially during the recession, justify the outlay.

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

London Olympics To Be Nationalised

It seems that the financial meltdown is taking its toll not just on the banks, but on the cash "black hole" of the London 2012 Olympics.

The Times reports that two of the main venues in the Olympic Park may have to be nationalised, with the taxpayer paying nearly £900M extra to bail them out.

Could someone remind why we need these games again?

As I have noted many times on this site, the cost of these games will most assuredly balloon from the already overinflated £12BN (including £2BN running costs) to £20BN by the time they're held.

Why is there no one of significance in the government with the courage to stand up and cancel them?

Olympic Medals won during the Beijing 2008 Olympics

Don't forget to visit www.theolympicswarehouse.com
www.olympicsdiary.com brought to you by www.kenfrost.com "The Living Brand"

The £1BN Black Hole II

The government has denied the existence of £1BN blackhole in the London 2012 Olympics budget.

Well they would wouldn't they?

Culture Secretary, James Purnell, promised yesterday that no more money would be transferred if MPs voted to take take almost £1.1BN from the National Lottery to pay for the 2012 London Olympics.

The MPs duly agreed like sheep.

Purnell claims that the £12BN budget (including £2BN running costs) was "robust", and dismissed claims of a £1.1BN "black hole".

Bullshit!

Where was dear old Tessa Jowell during this discussion?

The £1BN Black Hole

Well, well, well after months of warning on this site that the London Olympics budget was built of sand guess what?

It seems that I was right.

A £1BN black hole has been unearthed in the budget for the London 2012 Olympics. It appears that property projections, that were backed by ministers, have turned out to be ludicrous.

A report commissioned for the London Development Agency (LDA) notes that the Government's estimates for the amount it will recoup in land sales after the Games are unrealistic.

What a surprise!

Given that the budget has skyrocketed from under £3BN to £12BN (including running costs of £2BN), and is likely to rise ever further, why is anyone remotely surprised that ministers are incapable of presenting reliable figures.

Needless to say, someone will end up having to foot the bill for this shortfall. That will of course be the hapless taxpayers, and the projects that they think that some of their tax money is funding such as; heritage, sports and arts.

Ken Livingstone, the Mayor of London, and the soon to be expunged Tessa Jowell the Olympics Minister, signed a memorandum of understanding last year stating that at least £1.8BN would be raised in land sales after the Games. This figure was based on a staggering, and absurd, 16% per annum estimate in the rise of land values over the next 15 to 20 years.

The latest figure shows a more modest £800M figure expected to be raised, a mere £1BN short of Jowell's estimate.

Mark Dorman, the director of development consultancy for Savills, told the Times that any idea of raising 16 per cent per annum "is complete madness to me".

Jowell, who is living in the past, is sticking to her guns and is still relying on the fact that land rose in value by 20% per annum over the last 20 years:

"[That] gives me confidence that enough will be raised from the land sales both to build the new houses and parts of the community in the Lower Lea Valley, but also to repay the National Lottery."

Well Minister, as the old stock market warning says "past performance is no guide to future performance".

Politicians, least of all "Nu Labour" politicians, should not be left in charge of large scale projects and budgets such as the Olympics; they are simply not qualified, capable or competent enough to handle them.

The Olympics, a living memorial to the folly that is "New Labour".

The Olympics Black Hole

The London 2012 Olympics continues to cause controversy. It has been revealed that ministers covered up a £1BN black hole in the cost of the London Olympics, when they made the bid to host the Games.

Minutes of a meeting in November 2005 (that was the year in which London was awarded the games), attended by Treasury officials and accountants, show that ministerial aides had been warned of the additional £1BN a year earlier.

This revelation puts further pressure on embattled Culture Secretary, Tessa Jowell, who has been accused of massively under-estimating the burden on taxpayers.

The original bid showed a cost of £3.4BN, the latest budget for staging the Games is £9.3BN; the reality will in fact be at least £12BN.

Shadow Chancellor George Osborne said:

"It turns out that Gordon Brown knew all along that the published Olympic budget was wrong, and he's spent the last year trying to cover his tracks."

As I have noted many times before, never ever entrust politicians with organising and running a long term project such as the Olympics. They are not capable.