NATIONAL lottery funding bodies should consider the dangers of a public backlash when giving money to controversial groups, the Government’s spending watchdog says in a new report.

Today’s National Audit Office report into a highly-contentious £340,000 lottery grant from the Community Fund to an asylum group finds that the fund failed to read the applicant’s website or newsletters and turned down repeated invitations to visit its offices before agreeing to give it money.

As a result, the fund failed to notice that the applicant, the National Coalition of Anti-Deportation Campaigns, had published “offensive and politically doctrinaire” material on the internet, including an accusation that David Blunkett, the Home Secretary, was “colluding with fascism”. The fund also appeared to be unaware that two members of the group’s management board had been subject to deportation orders themselves.

The grant led to an intensely critical campaign against the fund, led by the Daily Mail, which ran a front-page headline saying “Is this the barmiest lottery handout of them all?” and encouraged readers to “vent your justified anger” by writing to Lady Brittan at the fund. More than 3,000 letters, a number of which were threatening, were sent. The row developed into a large-scale debate over the use of lottery money and how far the Government should go to dictate the fund’s activities. Ministers intervened, asking the fund to review the grant.

The grant was later confirmed but only on condition that the group ensured that its policies, activities and publications were not doctrinaire and that no lottery money was used to prevent the deportation of people convicted of terrorism.

The report criticises the Community Fund for giving only “cursory consideration” to the group’s long-term financial viability and for failing to produce any evidence that an earlier lottery grant of £191,000 had been properly spent and accounted for.

Sir John Bourne, the Comptroller and Auditor-General, concludes that although the Community Fund did not break any of its own rules, its policies and procedures were “not sufficiently robust” and did not alert it to risks it was undertaking in awarding a grant to a body working in a highly sensitive area.

His report calls on the fund to improve its risk assessment procedures. It suggests that fund staff be given training on how to deal with hate mail.

“A grant award may risk both the awardee and the fund in terms of reputation . . . and the lottery more generally. High-level risk awareness across the spectrum of the fund’s work now needs to be cascaded to all the activities of the fund including grant assessment,” the report says.

Sir Edward Leigh, chairman of the Commons Public Accounts Committee, said the whole furore could have been avoided if the fund had done its job properly and taken simple precautionary measures.

“If lottery spending bodies lose the public’s trust, then they will vote with their feet and stop buying lottery tickets. It is vital that action is taken quickly to reassure the public that lottery money really does go to good causes. Otherwise, many worthy causes will lose out,” he said.

Richard Buxton, chief executive of the Community Fund, said that the fund had already tightened up its procedures and had checked all 1,500 websites for all groups holding a grant in excess of £60,000. However, he insisted that the fund would not stop giving grants to asylum-seekers.

Should this group have been given a grant?
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