Bonanza for fat cat lottery consultants

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Large City firms are cashing-in on the National Lottery by charging consultancy fees for organisations wanting lottery grants and by working for the grant-making bodies themselves.

A whole new profit-stream has opened up for City accountancy, public relations and management consultancy firms since the start of the lottery. It has now become big business, with well-known companies falling over themselves to advise bodies seeking lottery cash for their projects and the boards of the cash-rich grant-making organisations.

"There is a great deal of resentment about these consultancies," said Luke Fitzherbert, the editor of the National Lottery Yearbook for the Directory of Social Change, an independent charity. "They're getting a lot of money out of it, and there is little evidence that all this expenditure is necessary."

The Alexandra Palace Committee - which runs the London landmark on behalf of Haringey Council - employed the consultants, Shandwick, in a fruitless bid for a lottery grant from the Millennium Fund last year. Shandwick's fee is believed to have been pounds 100,000.

At the same time, City firms are being retained by the grant-making bodies themselves to assess projects and applications.

Last year, three grant-making bodies - the Heritage Lottery Fund, the Arts Council of England and the Millennium Commission - spent more than pounds 9m on professional fees, most of it on payments to external advisors to study lottery projects.

In the case of the Heritage Fund, the pounds 5.2m it paid for professional services amounted to almost half its total operating costs of pounds 10.7m. A Heritage Fund spokeswoman said the fees were necessitated by "eligibility requirements laid down by the Government" for lottery funding. The Arts Council of England has employed Coopers & Lybrand to help in setting up its "stabilisation" scheme - a plan to use lottery money to plug the holes in the balance sheets of ailing arts organisations. The giant City consultancy received nearly pounds 600,000 for its work in designing, managing and advising on the scheme.

According to the Directory of Social Change lottery grants database, 319 feasibility studies have been funded by the various distributing bodies at a cost of over pounds 17m.

Millions of pounds in lottery cash that could otherwise be handed to charities and used wisely has been siphoned off in fees for consultants in this way.

Among specialist advisers employed by lottery funding applicants are some whose expertise is filling out the grant applications in the first place. For smaller arts organisations, said Christopher Lord, marketing manager for the Centre for Contemporary Arts in Glasgow, "the real question is how to learn which holes to jump through".

Critics also say the distributing bodies are disposed toward applicants with reams of supplementary documentation and data such as feasibility studies and profit projections. "There is a large percentage of lottery money that is spent on peoplewho are now deemed necessary to validate an application," said a former chairman of a Scottish arts organisation.

The Globe Trust's chief executive, Michael Holden, said the "quality and quantity of information required" in an application for lottery funding is increasing. The 65-page application the Globe theatre submitted to support its first successful funding request would, he says, "probably not be considered a sufficient quantity of information now". The Globe's most recent application for pounds 10.4m in lottery funding was refused. One of the criticisms was "that the applic-ation wasn't thick enough".