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Council may have breached its statutory obligations over projects, say auditors

A borough council’s arrangements for managing significant capital regeneration projects were flawed and the authority may have breached its statutory obligations, its auditors have concluded.

Issuing a public interest report, KPMG also found that Corby Borough Council might have made decisions against its own internal policies and procedures.

The auditors examined four projects worth £67m over six years: the Cube civic offices, Kingswood estate developments, improvements to the Rockingham Triangle sports complex and the sale of land in the St James area of the town.

Over the period Corby has had limited usable revenue reserves over its designated minimum balance of £0.8m. Its external borrowing also rose from nil to a peak of £47m in 2011/12.

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KPMG accepted that the regeneration projects had brought “very real benefits” to residents and that external borrowing had since fallen to £36m. The council was also praised for taking action to tackle reported weaknesses.

However, the auditors found that:

  • “Corby’s arrangements for managing the projects were ambiguous and ill defined leading to uncertainty as to who should have made key decisions;
  • There was insufficient member oversight at critical periods of the schemes;
  • Where established governance arrangements and internal controls did exist they often did not operate as they should have done;
  • Financial and project management of the schemes was poor;
  • On the face of it the land at St James was sold for considerably less than best consideration without getting the requisite statutory approval to do so;
  • This was compounded because the checks and balances, including the statutory responsibilities of key officers, which should have alerted the council to the failings, did not operate.”

KPMG said that Corby, in addition to potentially breaching its statutory obligations, had exposed itself to greater financial risk than it needed to have done.

The auditors also said the borough would have been in a better position to respond to the significant financial challenges it was facing if the failings had not existed.

The report’s 18 recommendations include:

  1. Strengthening member contribution to and clarifying arrangements for making decisions for major regeneration projects, particularly those carried out in partnership;
  2. Strengthening arrangements for member scrutiny, including holding officers to account;
  3. Assessing the legal implications of the potential breach of section 123 of the Local Government Act 1972;
  4. Reviewing the operation of whistle-blowing arrangements;
  5. Taking steps to strengthen compliance with its own governance procedures by raising awareness of governance arrangements in both members and officers;
  6. Reviewing arrangements for assessing financial risks, including the early involvement of finance staff;
  7. Subjecting major projects to systematic review to ensure that they remained realistic, affordable and command informed member support;
  8. Strengthening arrangements for managing contractual relationships and contractors’ performance;
  9. Ensuring professional advice is evaluated and either followed in the council’s interests or, if not, that reasons for departing from it are recorded; and
  10. Reviewing the arrangements for the effective discharge by the Section 151 Officer and the Monitoring Officer of their statutory duties.

The council will consider the report’s findings and recommendations at a meeting next month. A copy of the report can be viewed here.

Neil Bellamy, KPMG’s audit director, said: “There is no doubting the very real benefits to Corby residents from the regeneration projects considered in this report. However, these were at the expense of good corporate and financial governance.”

He added that it was “disappointing that the ‘failsafe’ statutory responsibilities of key senior officers did not operate as they should have”, which would have brought the failings to light sooner.

Bellamy said: “It is imperative that the council learns from the above and that officers and members work together to strengthen governance arrangements and establish and embed a culture and environment where the arrangements operate as they were intended.”

Responding to the report, Corby’s Leader Cllr Tom Beattie, said: “The failures that have been identified in this report are unacceptable. The people of Corby have been let down but they can be assured that these failings are a thing of the past.

“The report confirms the outcomes of our own investigations and endorses many of the steps we have already taken to improve accountability and oversight. It indicates that the steps the council has taken over the last 18 months have been the right ones.”

Cllr Beattie added: “At the time when these projects were undertaken there was clearly a lack of oversight by elected members, weak project management procedures and a culture in which officers were fearful of questioning or drawing attention to practices which fall well short of the standards our residents expect of Corby Council. These issues are all being addressed.”

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