NEARLY £15m of European aid not already allocated to managers of the under-spending venture capital programme will be handed back for use in more efficient projects, papers from a recent showdown with ERDF bosses reveal.
There is strong criticism of the level of management fees paid to Leach and the fund managers appointed by fund holding company North West Business finance.
The minutes of a special meeting of the Local Management Committee of the European Regional Development Fund North West, held on 15 June to tackle ongoing problems with the North West Fund, were published this week.
Andy Leach, who has since left his post as chief executive of NWF, presented to the monitoring committee, chaired by Philip Cox, director of the Department for Communities & Local Government, and deputy chairman Sir Howard Bernstein, chief executive of Manchester City Council.
In the committee's response, there is strong criticism of the level of management fees paid to Leach and the fund managers appointed by fund holding company North West Business finance.
Committee member Flo Clucas, of Liverpool City Council, 'queried the fact that the management fees are already paid, which is not acceptable given the level of investments by some fund managers'.
Bernstein agreed and criticised Leach's apparent defence that certain quarters of the year had a slower 'run-rate' than others.
Bernstein said: "It is imperative to avoid a situation where people are paid to do nothing."
Leach 'did not accept the comment on management fees'.
The North West Fund is a £185m debt and equity vehicle launched in December 2010 financed by ERDF and European Investment Bank. The fund is split into six sub-funds either by sector or size, some of which have performed well such as the sub-fund for the biomedical sector. But others, for instance the development capital fund which can invest between £100,000 and £2m in growing companies, failed to make a single investment in the first year.
At the time of Leach's departure in mid-July, the whole fund had made £29m of investments in 100 businesses. The fund had until the end of 2015 to allocate £185m, but that has now been trimmed to £170m.
Mike Emmerich, chief executive of New Economy, Manchester's policy think-tank, told the meeting 'the development capital figures seem very poor...a corporate finance level of expertise is needed in this situation. It is inexplicable how this fund is so under-invested.'
Clucas added if the North West Fund fails 'there will be a much more difficult scenario for financial engineering instruments in the next programme in the North West [from 2013-20]."
As well as spending rates, the venture fund was also pulled up over job creation outputs.
Andy Churchill, Merseyside voluntary sector representative, said the 'overall strategy for job creation...appears to be taken passively in the presentation'.
After the NWBF presentations and committee response the three-strong fund team left the meeting and the monitors discussed a remedy.
Cox said: "It may be necessary to use a firm hand, and presumably nobody wants to leave the £14.8m with the NWF. In addition NWBF be put 'on probation' with a further review in three months time [September] to see what progress has been made."
Bernstein called the situation 'untenable in the current climate'.
In concluding the meeting, NWBF was told to accept all the recommendations of a review by consultants Ekos aimed at speeding up delivery, return unallocated money to the ERDF programme, produce a revised business plan, and appoint three Local Enterprise Partnership representatives to the NWBF board.
The deadline for the actions to be implemented is the end of September
The meeting was attended by 29 people; 16 members of the committee, four ERDF programme delivery team members and nine observers and guests, including Leach and the other fund management representatives.
