Does
Alexandra Palace earn its keep?
Analysis by an accountant of
the accounts of Alexandra Palace and Park to be read in conjunction
with the 10
year financial analysis.
Introduction
The accounts for Alexandra
Palace and Park (AP) are of fundamental
importance as the proposed sale of a 125
year lease of The Palace was based on
the statements that the Palace “has
cost the Haringey tax payer money”
and “has never made a profit
in living memory.” In
order to assess their truthfulness, recent
accounts for Alexandra Palace and Park
have been analysed. The accounts
are the audited accounts prepared for
and approved by the Trustees and the information
provided has been obtained from them.
The Trustees of AP and Haringey Council
(HC) have been trying to prepare the Palace
for a sale in its entirety for the past
17 years. The effect of this strategy
on any trading activities and long term
planning for the organisation will of
course be profound in that it will de-motivate
management from long term planning and
prevent customers from making long term
bookings. The management of the
Palace has not been in professional hands
and the internal control and audit functions
appear to have been missing for many years.
Despite the foregoing the following analysis
shows that the Palace has not
cost HC any money for the past 10 years.
The analysis also shows that
the business, if properly run, will be
able to sustain long term investment in
the fabric of the building so as to bring
it all back to public use.
Financial Analysis
The
financial analysis (pdf 60kb) shows
the total incoming resources generated from charitable and trading
activates less the cost of generating those funds. This shows
a net deficit over the past 10 years of approximately £16m. However,
this figure needs to be adjusted for the following items:
Interest
Payable to HC Cost overruns of
many millions on the rebuilding of the
Palace as a result of the 1980 fire
were charged to the Trust. However
the Treasury solicitor refused to accept
that the Trust was liable for these
costs as they were due to the mismanagement
of the project by HC. Accordingly
in their letter to the head of council
of 1 May 1996 they confirmed that the
cost overrun charge and the associated
interest charged to AP should be reversed.
This was only finally done in
the accounts for year ending 2006. The
total amount of interest charged unlawfully
amounts to approximately £15m
over the 10 years.
Park and Road Maintenance
and Security It
is very important to separate the costs of the park and the road
from the overall running costs of Alexander Palace itself. The
park extends to over 100 acres and requires extensive maintenance
and security. This will be a continuing liability for HC
and accordingly the cost for the Trustees providing this service
should be excluded from the financial analysis for the cost of
AP itself. These costs are not separated out in the Trusts
accounts but have been disclosed separately and the most conservative
estimate of them has been included in the analysis. These costs
over a 10 year period have amounted to approximately £2.5m.
Development
Costs HC & AP
have incurred significant costs in relation to the policy of
trying to dispose of a long leasehold interest of the Palace. These
costs should be excluded from the normal running costs of AP
as they have only been incurred as a result of the flawed decision
to sell the Palace. In the year 2006 they have amounted
to approximately £1.2m and no doubt there will be a significant
cost in the current year.
Unauthorized
Expenditure In
the year 2000 HC had unauthorised and unbudgeted expenditure
of £95,000 on a “millennium bid”. The
Treasury Solicitor and the auditors were very concerned on this
point and confirmed that this cost should not be the responsibility
of AP and accordingly been excluded.
Conclusion
The effect of these adjustments show that the Palace has had an operating surplus
over the past 10 years of approximately £3.6m and has
shown a surplus in the past 6 years out of the last 10.
An important factor is whether AP has actually cost HC any money. In cash
flow terms over the past 10 years The Trust has repaid a lump sum of £4.2m
to HC in 1998 and generated approximately £5.5m in cash surpluses. There
is absolutely no evidence of AP requiring any funding from HC over the past 10
years.
It is evident that the mismanagement of the rebuilding contract and the lack
of attention to maintenance have resulted in the Palace becoming dilapidated. The
contention of HC is that AP could not raise the necessary funds for the long
term restoration of the Palace and its maintenance without a disposal. The
reality is that over the past 10 years the Charity has
spent more than £10m in repairs and maintenance on the property. It
is evident that if properly managed with a long term plan for the proper use
of the Palace within its charitable objectives, the Palace could generate sufficient
surpluses and cash flow to sustain a long term refurbishment and maintenance
program for the whole property.
Wood Green Observer June 12th 1953
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