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‘Major deficiencies’ in the council costs Walsall £2.5million
An independent inquiry has blasted Walsall Council as lacking the “capacity and competence” to manage European funding intended to regenerate communities in Walsall. The mismanagement of European Regional Development Fund and European Social Fund grants has resulted in council tax payers in the borough footing a £2.5million bill.
A report by independent auditors Grant Thornton highlights the fact that under normal circumstances, the council should have acted as an intermediary between third sector organisations providing community projects and the Government Office of the West Midlands and would not normally be exposed to financial risk. However, a lack of adequate accounting, audit trails and risk management has led to the cash-strapped council paying back £2.5million out of a total of £3.2million in European Union funding.
The report, due to go before the council Audit Committee on Wednesday describes “major deficiencies” in the way that Walsall Council administered the funding scheme between 2003 and 2009 and quotes the Government Office of the West Midlands who, following an inspection last August, found that the council management and control systems were “inadequate” and that the overall position was “wholly unsatisfactory”.
A lack of transparency, ineffectual communication and a reluctance to undergo meaningful scrutiny resulted in the Government Office of the West Midlands threatening to fine the council in addition to claiming back the full £3.2million grant. In light of its findings, the report recommends that the council should now “undertake a review of all other major grant funding streams”.
The inquiry team from Grant Thornton interviewed a number of councillors and current and former council employees involved in the debacle, including current Chief Executive Paul Sheehan, Council Leader Mike Bird and former head of programme management Peter Francis. Annie Shepherd, the Chief Executive of Walsall Council at the time of the scandal, did not appear before the inquiry.
Peter Francis alerted council bosses of his concerns regarding the management of the Neighbourhood Renewal Fund action plan within two weeks of being appointed. He was subsequently suspended and then sacked by the council. He later successfully claimed against unfair dismissal and was awarded £650,000 in compensation. In July last year, Council Leader Mike Bird implied that it was Mr Francis who was responsible for the funding crisis over a number of years even though the officer was only in post for nine months before his removal. The Thornton inquiry glosses over the affair, stating: “This report does not address these historical issues as the matter is outside of our scope.”
Annie Shepherd left Walsall Council in 2006 as an investigation by the Crown Prosecution Service and the City of London Police into financial irregularities was beginning. The investigation resulted in the finding that there was no evidence of criminal activity within the council. Ms Shepherd is now Chief Executive of Southwark Council.
Current Chief executive Paul Sheehan said: “We have just received what is a very comprehensive report into a number of important issues going back to 2000.
“We will now consider the full implications of the report before taking appropriate action. It is essential that we respond to any weaknesses in the Council’s processes in order to avoid any repetition in the future.”
The Audit Committee, which meets on Wednesday, will have to consider the findings of the inquiry and pass on its recommendations to full council. However, as the Grant Thornton report points out, the Audit Committee “has the overall responsibility for ensuring the Council risk management arrangements are sound and effective” and so, as the overseer and vital watchdog of financial dealings with both Westminster and European funding, the committee has failed and, in reality, be in a position to judge itself.
No disciplinary action against officers who remain in service with the Local Authority has been announced and, as yet, no councillors responsible for the mess have offered their resignations.