A former Envirolink Chairman, Peter Jones OBE, has blamed the Department for Communities and Local Government’s (DCLG) implementation of ‘unethical’ changes to auditing procedures for ‘directly [leading] to the NGO entering liquidation’.

It was announced on 11 January that the regional arm of the not-for-profit organisation set up to ‘support the growth of the low-carbon and environmental goods and services’, Envirolink Northwest, had entered voluntary liquidation, with debts owed to numerous unsecured creditors totalling £550,000.

The decision to make all 19 of its staff redundant and appoint Bev Budsworth of The Business Debt Advisor as liquidator was taken following a board meeting in December 2012.

According to the liquidator, Envirolink hit ‘cash flow difficulties’ as a result of ‘successive funding cuts’, exacerbated by the transfer of the European Regional Development Fund (ERDF) from the former North West Development Agency (NWDA) to the DCLG in April 2011.

Much of the debt, £398,460, is owed to the Merseyside Waste and Recycling Authority (MWRA) for its part in co-ordinating the Orchid Environmental Ltd mechanical heat treatment (MHT) demonstrator plant in Huyton, Knowlsey, the cost of which was estimated at £13 million when it closed in 2011 after only three years of operation.

Liquidator and Managing Director of The Business Debt Advisor, Bev Budsworth, said of Envirolink’s downfall: “It’s a really unfortunate situation that Envirolink Northwest found itself in. For a limited company that helped support so many businesses and created jobs in the region, it ultimately failed because it became increasingly difficult to get sign-off and payment on European funded projects. Severe funding cuts also drastically reduced turnover causing cash flow issues.

“What’s worse is that 19 extremely experienced and loyal staff will lose their jobs. Saving the business just wasn’t possible as there were very few remaining projects and no sustainable business to sell.”

DCLG Criticism

However, in a letter to his local MP, former Envirolink Chairman Peter Jones OBE heavily criticised ‘a change in the same auditors approach to audit rules’ following the transferral of ERDF contracts.

According to Jones, the way in which the implementation of changes to auditing procedures undertaken by the DCLG ‘was at best dubious and at worst unethical’ and directly led to the NGO entering liquidation.

He wrote: ‘Whilst I have no argument with the need for detailed audit procedures the process by which this was undertaken…was at best dubious and at worst unethical on the part of DCLG.

‘In my professional life I have never had to place a company into liquidation and to do so on such spurious grounds for services legitimately delivered demands closer scrutiny in my opinion.’

Jones went on to say that the liquidation will also hurt the DCLG, as it was a ‘major creditor’ and will now lose its money.

‘I believe this episode is the tip of a bigger iceberg… my contact base in the environmental sector involved in the delivery of RDF programmes across the UK have hinted that they are also the victims of arbitrary retrospective changes in the audit rules implemented by DCLG. Those bodies are both NGOs and universities and fear that to speak out on these matters will jeopardise their ability to access future funding streams from EU or UK Government sources’, he concluded.