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 assessment of the accounts for Alexandra Palace and Park (AP) are of fundamental importance as the proposed sale of a 125 year lease of The Palace is predicated on the assumption that the Palace “has cost the Haringey tax payer money” and “has never made a profit in living memory.”  In order to assess the truthfulness of these statements which have been made to support the sale, the accounts for Alexandra Palace and Park for the past 10 years 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 15 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 finally done in the accounts for year ending 2006.  The total amount of interest charged unlawfully amounts to approximately £15m over the past 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 12th1953

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