Minister suggests that ‘match-funding’ condition was waived in award process, but says review of procedure ‘will not be the department marking its own homework’

Credit: Parliamentlive.tv/Open Parliament Licence

The government is to review the process by which a £100,000 grant was awarded to a cybersecurity firm run by Jennifer Arcuri, a friend of prime minister Boris Johnson.

In February, Hacker House – which runs ethical hacking courses for organisations and individuals – was awarded £100,000 via government’s Cyber Skills Immediate Impact Fund. The funding programme, which is run by the Department for Digital, Culture, Media and Sport, “aims to increase the diversity and numbers of those working in the UK’s booming cybersecurity sector”.

According to comments made in parliament by minister for digital and broadband Matt Warman this week (pictured above), DCMS worked with the Department for Education, the National Cyber Security Centre and industry body techUK in deciding to award the grant to the company.

Hacker House has thus far been paid £47,000 for work completed, Warman said. 

The Liberal Democrat MP Layla Moran responded to the digital minister to question whether Hacker House should have been considered for the grant on the grounds that funding is supposed to be limited to UK-based companies, and that the money awarded should not exceed 50% of the company in question’s “annual collective income”.

“We now know that Hacker House is not based in the UK,” she said. “The Sunday Times reports that its owner, Jennifer Arcuri, moved back to the USA in June 2018. The grants were not open for application until November. The registered address of the company is, in fact, a house in Cheshire that she used to rent, and the current occupant apparently sends any post addressed to Ms Arcuri back to the sender.”

“The review will not be the department marking its own homework.”
Digital minister Matt Warman

Moran added: “Where is the due diligence? What steps did the department take to ensure that Hacker House was indeed based in and operating in the UK? Why did officials waive the rule that the grants could not exceed 50% of the company’s collective income? How many of the other companies that we now find have had these grants have had this kind of preferential treatment? Did the prime minister, then a backbencher, make any representations, official or otherwise, to the department recommending Hacker House for the funding?”

Warman said that “the prime minister and his staff have had absolutely no role in the award of this grant”. 

Seemingly conflating the issue raised by Moran, of whether the grant exceeded half of the firm’s annual income, with another condition of the funding – that the money awarded by government should not exceed 50% of the proposed cost of the initiative, and should be matched by money from the company itself – Warman appeared to suggest that this rule had been waived.

“She raises the matter of the match funding of 50%,” Warman said. “The officials involved in awarding such grants scored the application very highly in all other aspects; as they routinely do in a number of other situations, they decided that the other aspects more than outweighed that particular criterion.”

Regarding the company’s location, Warman claimed that departmental “officials have done the usual due diligence”.

He added that, in addition to being registered at Companies House, Hacker House “has a British phone number”.

This number, which has an outer London area code, has since been discovered to put callers through to receptionist based in the US. The company’s UK-registered office – which, as Moran said, was a previously terraced house in Macclesfield – was on Wednesday changed to a central London building offering serviced and virtual offices from Regus.

I went through our email history, the DCMS grant awarded to us was initially applied for directly by me, just as the fund was closing. So, are the press suggesting I got freaky with the PM? because Jennifer only managed the application as CEO… 03/03/2018 – I emailed them.

— Hacker Fantastic (@hackerfantastic) September 26, 2019

On Twitter, Arcuri’s co-director and husband Matthew Hickey – who goes by @hackerfantastic – said that: “I’m globally based, cybersecurity is a global issue. I’m resident of both US and UK, as is my wife and our daughter. We go back and forth as we need because we have clients in San Francisco as well as London. Technology companies are global, our business is UK-based and held in UK.”

He added: “DCMS grant awarded to us was initially applied for directly by me, just as the fund was closing… Jennifer only managed the application as CEO.”

The results of a government review of the funding award “will report by the end of next month”, Warman said. The remaining £53,000 that has been awarded but not yet given to Hacker House will be “paused” until the process has concluded.

“This process, like all government grant-giving processes, is conducted in a transparent way,” Warman said. “The review will not be the department marking its own homework, and as I said, we will put any further updates to the House as they become available, which will be by the end of next month.”

A DCMS spokesperson added: “Funding for this scheme was awarded through open and fair competition. We regularly monitor grant initiatives and treat any allegations of impropriety with the utmost seriousness.”