Regulars will know that we have taken issue with Creative Scotland (CS) over its funding of private company Sandstone Press.
Sandstone has been funded for 14 years by CS and predecessor SAC. Of the £0.41m it has received, it has lost £0.34m. It is, by a huge margin, CS’s most-funded publisher.
When CS gave Sandstone £30k on 3 April 2019, its rating of its application was fantasy. 50%+ of the application’s components were ineligible.
(For the avoidance of doubt, we are only criticising the quality of Sandstone’s application and Creative Scotland’s assessment thereof. We will readily correct /update information and do in any way not question either the propriety of the authors or the quality of their work. Indeed, we would love to publish some of them!)
Sandstone committed to notifying CS of changes to the facts or context of its application. Instead, it covered up the resignation of its only non-executive director.
Sandstone’s former non-exec claims to be its current non-exec, mirroring the company’s claim on its website. She resigned as a director on 31 January 2019 – over 2 months before CS approved Sandstone’s application – and has not been reappointed. She is a member of the Creative Industries Advisory Group, chaired by Scotland’s Culture Secretary Fiona Hyslop*.
Not that that stopped CS citing her as mitigation for Sandstone’s huge losses. She would, CS claimed, ensure accountability and governance. Of course, she could not, as she was not a director and not entitled to see management accounts.
(* Fiona Hyslop’s department is aware of the deceit by Sandstone and the CIAG member she chairs, but has not acted. Ms Hyslop is responsible for Creative Scotland (observer on the CIAG) and Highlands & Islands Enterprise (HIE). CS and HIE are, respectively, Sandstone’s funder and lender. HIE approved a £0.175m lending facility for Sandstone while the company falsely claimed to have its non-exec. HIE actually part-funded the non-exec role until weeks before agreeing its facility.)
Sandstone’s FD had already resigned (30 Oct 2018), apparently selling his shares to Publishing Director Moira Forsyth. ‘Apparently’ because Sandstone told Companies House that no updates were required for its 2019 Confirmation Statement. There were: there had been significant changes to its shareholders and their shareholdings.
CS knew that Sandstone was in another cash flow crisis. Publishing Scotland warned CS that failure to fund Sandstone’s original application would mean board changes at the company. Those board changes ensued. CS should have been aware of them. It was extremely close to the company – it had contributed to Sandstone’s strategy day prior to assessing the application resulting from the strategy it had helped shape.
CS considered 40% of application unfundable
CS assessed Sandstone’s reapplication 9/12. That score was a fantasy. The application as submitted merits 2/12. It might scrape 3-4. It needed 7 to be recommended for funding. CS had invested too much in Sandstone for it to be allowed to fail, so it scored the application to ensure it was funded, regardless of its poor quality.
Of the application’s 10 components, CS rejected 4 as ineligible and excluded them. They included an ask for cash to promote the profile of Sandstone owner-director Moira Forsyth.
2 of the 6 remaining components were eligible. CS funded all 6.
One sought £3k to promote author Daniel Shand. As no new title was being published and no marketing plan was submitted, CS had nothing to assess, but handed Sandstone £3k anyway.
So, despite only 2/10 components being eligible, CS rated Sandstone’s application Strong (3/4) for Quality. It merited 1/4 (Limited).
In addition to most components being ineligible, CS did not believe the maths that underpinned Sandstone’s ‘Readership’ numbers. The application also made no mention of author appearances despite much of the ask being for cash for promotion of authors not titles.
Once again, CS ignored the quality of the application and rated it 3/4 for Public Engagement. It merited 1/4 (Limited) at best.
Sandstone’s two directors have overseen the loss of over £0.34m of public money.
Its FD had resigned. No replacement had been appointed. (CS told its Funding Panel a replacement would be appointed. Its FD subsequently claimed, in response to a formal complaint, that the assessment made no mention of a successor. The assessment states: ‘A replacement Financial Director will be appointed in Spring 2019.’ Categorical!)
Sandstone had covered up the resignation of its non-exec director.
Its Companies House filings were inaccurate and misleading regarding its ownership.
There were no marketing plans for the promotional elements of the application.
CS knew that the company was in a cash flow crisis.
Despite all that, CS rated the application 100% for Management: 2/2 on a scale of 0-2.
In addition to all of the above, Sandstone’s net assets had reduced by £0.92m (pre CS funding) in its last accounts. It had made substantial losses in the previous two years even with funding, as CS recognised.
The only mitigation provided was Sandstone’s non-exec, whose resignation the company had covered up (and continued to cover up until June 2020). Even had CS not been aware of her resignation, Companies House records showed it to be the case.
Miscategorising the project as Medium Risk by giving it 1/2 on a scale of 0-2 (effectively 67%) put public funds at risk. This was clearly a High Risk project that CS’s Staff Handbook required rating as 0/2, but that would have made it extremely difficult to fund.
Whereas there might be room for argument between 9/12 and 10/12, there is a gulf between 4/12 and 9/12.
CS ignored the application’s myriad failings and the company’s deceit. It funded the company despite the application, not because of it.
Failure to disclose key evidence to the Competition Appeal Tribunal
We challenged CS at the CAT. When CS provided the CAT with its assessment of this application, it redacted the details of Sandstone’s ineligible components, e.g. cash to promote its owner-director. It then published the information unredacted when it gave its delayed reply to our FOI request after the preliminary hearing. The unredacted version tells and entirely different story. it reveals the ineligibility of the Sandstone’s application.
In failing to disclose the full document, CS hid its funding of ineligible components in contravention and materially misled the Tribunal.
Scottish Public Services Ombudsman
We have passed the above information to the SPSO. Public bodies cannot be allowed to act in this way.