District Auditor's Report IOACC September 1998

District Auditor's Report under Section 8 of the Audit Commission Act 1998
DISTRICT AUDIT

Isle of Anglesey County Council

Audit 1997/98

delivering public audit for the Audit Commission

Ceri Stradling District Auditor

489B8.DOC

JO [11 September 1998

Detailed Report Sep 98

District Auditor's Report under Section R of the Audit Commission Act 199R


Contents

Section 1

03

I ntrod uction

Section 2

06

Contracts awarded by the Housing and Property Department

• Rhosgoch

• Other contracts

• Cefni Glass

• J N Owen

• Ponsonby Joinery

• Purchase of goods for private use

• Conclusions

Section 3

16

The disposal of assets from the Council's Depot at Holyhead

• Background

• Allegation of corruption

• Audit findings

• Jones & Whitehead

• Breach of whistle-blowing policy

• Conclusions

Section 4

24

Council plots for sale, Nant y Pandy, Llangefni

• Allegation of Impropriety

• Audit findings

• Conclusions

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District Auditor's Report under Section 8 a/the Audit Commission Act /998



Section 5

27

Grants awarded to businesses under economic development powers

• Background

• Cefnt Glass

• Ponsonby JOinery

• Other grants and relationships

• DRIVE grant

• I nternet project

• Mona Airfield feasibility study

• Other transactions and related issues

• Conclusions

Section 6

36

Overall conclusions and recommendations for the future

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Section 1

District Auditor's Report under Section H of the Audit Commission Act 199H


Introduction

On the 1 April 1998 I exercised my power under Section 15(3) of the

Local Government Finance Act 1982 to issue a Report in the Public Interest to the Isle of Anglesey County Council The report highlighted a number of serious matters arising from the 1996/97 audit of the Council's accounts. These matters primarily related to the conduct of certain officers and members, the awarding of contracts and the management of assets.

2 The report made twelve recommendations for improving management arrangements. The Council has since taken prompt action to address these recommendations, firstly by establishing a Preliminary Investigation Committee (PIC) to consider recommendation I regarding possible disciplinary action, and secondly, under the Chairmanship of

Mr Michael Farmer QC, establishing a Special Review Committee (SRC) to consider the other recommendations.

3 Following extensive public consultation the SRC published a report on the 17 July 1998 which set out the Committee's views on how the Council should implement the auditor's recommendations including the establishment of a Standards Committee. The deliberations of the PIC are still ongoing at the time of writing this report. This audit report does not concern itself with either of the above proceedings but concludes on the audit issues that were unresolved at the time of issue of the Report in the Public Interest.

4 Paragraph 74 of the Report in the Public Interest stated

"I am also currently reviewing a number of other contracts let by the Council's Housing and Property Department and! am concerned that the Council's Financial Regulations may have again been breached and the Council may not be obtaining value for money. This work is currently ongoing and once our enquiries have been completed! shall consider what action, if any, ! need to take ...

5 These enquiries are now sufficiently complete to enable me to summarise our findings. Again I have decided that it would be in the public interest for me to issue a report under Section 8 of the Audit Commission Act 1998 (previously Section 15(3) of the Local Government Finance Act 1982) This report is set against the context of the following matters relevant to the Housing and Property Department:

• The Director of Housing and Property is currently suspended from duty whilst criminal proceedings are being taken against him He has been charged with misconduct whilst in public office, witness intimidation and attempting to pervert the course of justice

I Introduction

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• The conduct of the Director of Housing and Property is also being considered by the PIC in respect of conduct matters arising in the earlier Public Interest Report.

• The County Council's Chief Executive who was also acting Director of Housing and Property has recently applied for early retirement and is currently on sick leave

6 As a consequence of the publication of the first Report in the Public Interest we have received further information from officers and members of the public concerning certain activities involving the Council. Some of this information has resulted in the investigation, discovery and prosecution of frauds perpetrated by third parties, It has also provided further evidence that the conduct of some of the Council's own officials has again failed to meet the standards demanded of those serving the public, primarily those who are currently employed within the Property Section of the Housing and

Property Department This report provides the facts as I see them together with my conclusions and a recurring theme running throughout the report is the questionable actions and relationships of certain officers with third parties,

7 All of the issues raised in this report are serious in their own right but taken as a whole, a picture emerges from which I can only conclude that the culture of the Property Section of the Housing and Property Department is not one which promotes openness and probity, This culture I believe has existed for a number of years and prompt and far-reaching action is now needed to address the shortcomings and to regain confidence in this Section, However it should not be inferred that the failings identified in this report can be directed at the Council's activities in general. In my view the vast majority of Council officials are endeavouring to make correct and positive contributions to service delivery during a particularly difficult period,

8 I have made six recommendations, designed to achieve further improvements within the Council and they are contained in Section 6 of this report It is very pleasing to note that the Acting Chief Executive, with the full support of the Monitoring Officer and the Leader of the Council, has already implemented a number of these recommendations as our audit was being concluded, This has included the suspension, without prejudice, of two officers In addition the Council is determined to demonstrate openness and has again welcomed the fact that the contents of this report will be made available to the public.

I Introduction

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District Auditor's Report under Section R of the Audit Commission Act 1998



9 With the exception of one matter, all the issues raised in this report occurred before the publication of the Council's new Codes of Conduct, the earlier Report in the Public Interest and the SRC report. The recommendations contained in this report should enable the Council to strengthen further its financial and general controls and build on the strong foundations outlined in its new Protocols and the SRC report My intention is to refer to the progress made by the Council in dealing with all these matters when I issue my Management Letter later this year.

lOA number of the matters contained in this report are still being investigated by the Police. To avoid prejudicing Police enquiries some of the companies and individuals have been referred to anonymously.

II The investigations referred to in this report were undertaken in partnership with the Council's own Internal Audit Section. I would like to express my thanks to the officers of the Internal Audit Section, in particular the

Chief Internal Auditor, for their co-operation and assistance during the course of our investigations.

I Introduction

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Section 2

I

District Auditor's Report under Section 8 of the Audit Commission Act /998


Contracts awarded by the Housing and Property Department

• Rhosgoch

• Other contracts

• Cefru Glass

• J N Owen - general contractor


• Purchase of goods for private use

• Conclusions

Rhosgoch

12 The earlier Report in the Public Interest referred to failings in the Council's arrangements to safeguard assets at the Rhosgoch site which formed part of a charitable trust. Since then we have continued to assist the Police and the Council with their enquiries. It has become apparent that assets in addition to the hardcore and transformers may have been stolen. These include copper cabling, oil and a crane. Evidence obtained as part of these enquiries is currently being investigated by the Police. We have also interviewed members of the public who claim to have inspected equipment with the intention of purchase to find that, in their view, it may have been tampered with to make it unattractive to potential purchasers. Although we have no evidence to support these claims we have received similar witness comments in relation to other Council assets and this is discussed in

Section 3.

13 Paragraph 128 of the earlier Report in the Public Interest outlined my concerns that officers of the Council had been lax in their dealings with the contractor employed by the Council to carry out certain work at Rhosgoch, particularly as this contractor was also engaged by these same officers for private work. This matter is now the subject of ongoing Police enquiries and an investigation is also being carried out by the Charity Commission.

Other contracts

14 As a result of our earlier concerns and information received, we have reviewed in more detail the work awarded by the Housing and Property Department to a number of contractors. We have identified a distinct pattern whereby work has been awarded to favoured contractors without regard to the Council's Contract Standing Orders. In my view insufficient steps have been taken to demonstrate probity in the appointment process and that value for money has been obtained.

2 Contracts awarded bv the Housing and Property Department

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District Auditor's Report under Section 8o/the Audit Commission Act 1998



15 Furthermore, we have become aware of close friendships between one particular officer who was responsible for appointing and supervising contracts and the contractors involved This is even more concerning as we later discovered fraud perpetrated against the Council by two of these contractors. Details of these frauds are summarised in Section 5 of the report. Further details of the contract matters are summarised below with a section on each contractor.

Cefni Glass

16 During the four financial years 1994/95 to 1997/98 Cefni Glass received payments totalling £ 171,493 from Y nys Mon Borough Council and the Isle of Anglesey County Council.

Year Amount paid (£) Number of payments
1994/95 9,143 111
1995/96 42,337 258
1996/97 91,256 303
1997/98 28,757 369
Total 171,493 1,041 17 These payments relate to general repairs and maintenance work but a significant proportion, over £43,000, relate to office alterations made at the time oflocal government re-organisation (mainly the period December 1995 to August 1996) to accommodate the additional staff transferring to the Council's headquarters at L1angefni. This is reflected in the table above where the greatest expenditure is incurred in the 1996/97 financial year.

18 We have examined the documentation in support of these payments. An official order was raised on the 4 March 1996 requesting Cefni Glass to "carry out alterations at the Council offices Llangefni" Six payments were made in respect of this official order totalling £36,424 33 The award of this work was not in accordance with either the Borough Council's or the County Council's Contract Standing Orders which are as follows

Borough Council

"wherever practicable competitive quotations should he obtainedfor all good,' and services supplied to the Council" "( 'ompetiu, 't! lenders should also he soughtfor contracts that are estimated to exceed {fO,aoo. "

2 Contracts awarded by the

I lousing and Property Department

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County Council

"In the case of contracts estimated not to exceed U5, 000, the

Chief Officer may at his discretion dispense wah public advertisement and subject to his having satisfied himself that arrangements do not exist for the goods, materials, or work to he readily obtained through a purchasing consortium of which the Council is a member, may enter into a contract with such persons as he considers competent for the purposes, hut in such cases he shall endeavour to seek and obtain at least three formal and competitive quotations. "

19 An earlier official order was issued on 17 February 1996 requesting

Cefni Glass to "carry out joinery work at Borough Council Offices (Highways Dept) as instructed". Six payments were made in respect of this official order totalling £ 15,299.39. Again in awarding this work the Borough Council's Contract Standing Orders were not complied with

20 To obtain a view of the circumstances prevailing at the time of local government reorganisation, we have discussed the work undertaken with the Principal Management Advisory Officer (PMAO) of the Council's Central Services Department. During the period of local government re-organisation officers were charged with the difficult task of ensuring adequate suitable accommodation for all the staff to be employed by the new unitary authority. Challenges included needing to react to last minute changes including when the Council was notified that some staff could not be accommodated by Gwynedd Council in Caernarfon. There was therefore a need for flexibility in the manner in which the work of adaptations and alterations was undertaken.

21 The PMAO informed us that he was' seconded' to the Housing and Property Department during this period. In that way he was better able to relate existing accommodation with the needs of the new Council and to promptly identify the adaptations that would be necessary. He was not involved in any of the arrangements leading to the placing of the work with appropriate contractors, as this was the responsibility of officers within the Property Section. He also stressed that the availability of contractors that could carry out the work as and when required was essential if it was to be completed in time

22 Whilst I accept the view expressed above regarding the extremely challenging time of local government re-organisation, I believe the approach adopted, particularly the selection of contractors, should have been reported to members or a request made for the suspension of Standing Orders when it became apparent that the limits would be exceeded The Standing Orders state that:

2 Contracts awarded by the Housing and Property Department

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"a tender (or quotation) other than the lowest shall not be accepted until the Council has considered a report from the appropriate Chief Officer unless in the professional opinion of the Chief Officer concerned it will give better value for money, in which case a report shall be submitted to the next available meeting of the responsible committee or sub committee. "

The Borough Council's Standing Orders were similar to this.

23 We raised the selection of contractors with the former Director of Contract Services, Mr Gareth Roberts. He openly admitted that most officers had 'favoured' contractors who were usually given the majority of certain types of work. The application of Standing Orders appears to have been of secondary importance to that of getting the job done. One such contractor 'favoured' by Mr Gareth Roberts and some of his officers in the Property Section was Cefni Glass.

24 The transparency of the process leading to the appointment of Cefni Glass for the above work can be further questioned when the following matters are taken into account:

• Although the company was willing and able to assist the Council, and some of its employees were joiners, the company's main trading activity is the supply and installation ofuPVC windows, doors and conservatories.

• The Company is based in a Council owned industrial unit at Penyrorsedd, Llangefni and has consistently been in arrears with its rent on the unit. At the time that this work was being awarded the company had arrears in excess of £4,000. The company is still in arrears with rent on this unit.

• The proprietor of the company Mr Ken Jones is a close friend of the Technical Assistant, Mr Paul Roberts about whom we expressed concerns in our last report. Mr Roberts has confirmed this friendship.

• Our review of official orders and paid invoices shows that

Mr Paul Roberts was the officer who usually completed the official orders, and checked the goods or services received from Cefni Glass. Mr Roberts was also the main person responsible for supervising the work of the contractor. This is demonstrated by the fact that his timesheets and overtime returns show he was in work during the peak times invoiced as worked by Cefni Glass. (ie during the period December 1995 to August 1996, Mr Roberts worked a total of

770 hours overtime at a cost of £ I 0,764)


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• Mr Paul Roberts' brother is employed by the Council's Planning Department. He currently has a joint interest with

Mr Ken Jones in a pine furniture outlet, which trades from the same premises as Cefni Glass at Penyrorsedd We have been informed that this officer has declared his business relationship but no declaration of any kind has been made by Mr Paul Roberts

• Mr Ken Jones and his employees carried out work on

Mr Paul Roberts' own house when it was being constructed.

Mr Roberts has admitted to us that this was done without monetary payment. Mr Roberts does not accept that in accepting this favour he has placed himself in a compromising position.

• We have received allegations that the persons engaged by

Mr Ken Jones on Council contracts were unemployed and in receipt of housing benefit. We have evidence to support this allegation and are currently pursuing our enquiries on this matter.

J N Owen - general contractor

25 During the financial years 1994/95 to 1997/98 payments totalling £69,613 representing 196 separate transactions were made to jobbing contractor

J N Owen, of Gwalchmai.

1994/95 13,143 62
1995/96 11,762 56
1996/97 31,515 19
1997/98 13,194 59
Total 69,613 196 26 Mr Owen had previously been employed as a sub-contractor for the Council's Building Maintenance OLO. The payments summarised above are in respect of a variety of jobs but a substantial proportion of the expenditure relates to furniture removals and security work undertaken during the period of local government re-organisation We make the following observations about these payments

• Mr Paul Roberts was also responsible for completing documentation for this work. For example, payments made on official order HP3971 requesting the contractor to "carry out general work as instructed at Borough Council Offices, Llangefni ", totalled £7,928 excluding

V AT. Quotations should have been sought for this work in accordance with the Borough Council's Contract Standing Orders.


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• Details on the invoices are inadequate to demonstrate the hours spent per day, names of the persons employed and the location of the work. We would consider this to be essential information, particularly in respect of the overnight security work undertaken.

• The invoices submitted for payment were raised by Mr Owen's wife who was up until 17 March 1998 employed by the Council at its Depot in Gaerwen.

• The invoices we have examined were addressed to Mr Paul Roberts and show that he certified receipt of the goods. Mr Roberts was also responsible for the supervision of the contractor as the relevant times are again reflected in his overtime returns.

• It was Mr Paul Roberts' view that J N Owen had been appointed because he was a 'favoured' supplier of the Director of Housing who knew him in both a professional and personal capacity.

27 This report does not imply any criticism in respect of the quality of work performed by J N Owen. Officers have commented on the contractor's ready availability and willingness to help during the difficult period of local government re-organisation. However I would question the experience of this contractor to undertake security work and whether appropriate steps were taken to vet the contractor's employees who were placed in a position of trust. We have subsequently attempted to confirm details of the employees he used, but to date Mr Owen has not provided us with all the information we require. In summary, I am concerned about the poor internal controls that operated over the ordering of the work, the supporting documentation and the approval of invoices for payment. I n the context of this latter point Mr Paul Roberts has confirmed to us that he certified

receipt of some services e.g. security work, on the basis of trust.

Ponsonby JOinery

28 Another company that has received a significant amount of work from the Property Section is Ponsonby Joinery We were aware of close business links between this company and Cefni Glass.

29 During the financial years 1994/95 to 1997/98 payments totalling £32,674 representing 18 separate transactions were made to Ponsonby Joinery


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District Auditor 's Report under Section 8 of the Audit Commission Act 1998



1994/95 1,689 2
1995/96 6,729 5
1996/97 21,322 8
1997/98 2,933 3
Total 32,674 18 30 An examination of official orders showed that Mr Paul Roberts had again initiated much of this work and signed the goods received boxes on the invoices.

3 1 During our enquiries we were informed that all the hardwood windows and the staircase ofMr Paul Roberts home at 5 Nant Y Pandy, L1angefni, had been supplied by Ponsonby Joinery in the Autumn of 1994 to the value of several thousand pounds. Our investigations revealed that Mr Roberts has paid a partial instalment of £ 1,700 for these goods, which he has subsequently confirmed. He did however say that he always intended to settle the remainder of the debt. In my view it is unusual that any supplier in normal circumstances would wait nearly four years for an account to be settled.

Purchase of goods for private use

32 As part of our audit we obtained information that Mr Paul Roberts was ordering wallpaper on behalf of Council officials for private use. This matter was put to Mr Roberts who said that he had ordered wallpaper on behalf of Council officials at a discount, but the officials themselves were responsible for collecting goods on delivery and paying the supplier. He did not widely publicise this 'scheme', as he did not want to create further work for himself

33 We contacted the wallpaper supplier who provided us with the information that they did not operate such a scheme and that discounts (of up to 60%) were only available to the Council and not its employees Furthermore they did not deliver in Wales and deliveries would have been made by an appointed independent courier. They also added that couriers would not accept payment on behalf of the supplier.

34 Further audit enquiries identified two officers and a Councillor who had purchased wallpaper through Mr Paul Roberts in transactions totalling £796.33. The purchases were made using official controlled stationery and using Council funds. A summary of the transactions is shown overleaf


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Purchaser Cost £ Discount £ Date of Order
Secretary to Director of Housing 182.63 153.69 26 July 1995
Secretary and Principal Housing 414.38 367.20 18 September 1995
Officer (joint purchase order)
Former Leader of Council 199.32 25643 28 March 1996 35 The Councillor reimbursed the Council within three months of the wallpaper being ordered. He has subsequently informed us that because he was busy he asked Mr Paul Roberts, as a favour, to obtain wallpaper that he had previously seen and liked. He did not realise that it would be ordered and paid for by the Councilor that financial regulations would be breached. In the case of the two officers referred to above, reimbursement to the Council was not made until some two years after the wallpaper had been purchased. The two officers reminded Mr Paul Roberts to send them an invoice on numerous occasions.

36 The official invoices were drawn up by Mr Paul Roberts on the 30 June 1997. The invoices were processed in the same batch used to recover the income due in respect of the sale of hardcore from the Rhosgoch site from the Director of Housing and Property and two private contractors. This matter was referred to in our previous Report in the Public Interest (paragraph 125) as follows:

"The invoices in relation to the 'random rubble' contract were not sent to the three contractors until two and a half years after the tenders were accepted and during the period when the Director of Housing and Property was being investigated by the Police ".

37 We are concerned with the transactions outlined above for two reasons.

Firstly that officers and a senior member of the Council have benefited personally from the arrangement by means of trade discounts and secondly that the Council's Financial Regulations have been broken. Ynys Mon Borough Council's Financial regulations stated:

"No order shall be signed for goods and services the cost of which is not covered by the approved annual estimates or by specialfinancial provision. "

38 We are aware that similar orders for other goods and services have taken place amongst various officers within the Housing and Property Department including the then Director of Contract Services, Mr Gareth Roberts, who purchased a chair at substantial discount in this way He did however settle his account promptly with the Council


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DIstrict Auditor's Report under Section 8 of the Audit Commission Act 1998



Conclusions

39 The Local Government Management Board sets out in its National Code the minimum standards that should apply to the conduct of local government officers. The Code sets out clearly expected standards of conduct with respect to relationships with contractors. These are summarised below:

• All relationships of a business or private nature should be made known to the appropriate manager.

• Orders and contracts must be awarded on merit, by fair competition, in accordance with the Council's Standing Orders and Financial Regulations.

• No special favour should be shown to businesses run by, for example, friends, partners or relatives. No part of the local community should be discriminated against.

• Employees involved in the tendering process and dealing with contractors should be clear on the separation of client and contractor roles within the authority. Senior employees who have both a client and contractor responsibility must be aware of the need for accountability or openness.

• Employees in client or contractor units must exercise fairness and impartiality when dealing with all customers, suppliers, other contractors and sub-contractors.

• Employees who are privy to confidential information on tenders or costs for either internal or external contractors should not disclose that information to any unauthorised party or organisation.

• Employees should ensure that no special favour is shown to current or recent former employees or their partners, close relatives or associates in awarding contracts to businesses run by them or employing them in a senior or relevant managerial capacity.

40 The National Code of Conduct also clearly states that "it is not enough to avoid actual impropriety. You should at all times avoid any occasion for suspicion and appearance of improper conduct". It is clear from the matters outlined above that a certain officer named in this report has significantly failed to meet the above standard of conduct and did not declare his personal dealings or close relationships Also given that many of the official orders and invoices reviewed were certified by more senior officers within the Housing and Property Department it is difficult to understand why these conflicts of interest were not identified and acted upon Ly the Department itself


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District A uditor 's Report under Section ~ of the Audit Commission Act 199R



41 The Council's Democratic Services Sub-Committee on 5 February 1998 resolved to amend Contract Standing Order 8( dd) to require officers to seek formal quotations for all work unless the estimated expenditure was less than £500 The Director of Finance has told us that the Council's Housing and Property Department resisted this amendment.

42 During the course of our audit work we identified that fraud had been perpetrated against the Council by Cefni Glass and Ponsonby Joinery by means of business grant applications (summarised in Section 5) Although Mr Roberts had no involvement in any of these transactions there are potential links with another officer of that Section who was then working as an Economic Development officer The actions of these companies combined with the breaches in Council procedures highlighted above are likely to have a significant impact on the confidence members will have in officers of the Property Section It is for these reasons that we have made a number of recommendations for the Council to act upon and these are contained in Section 6

2 Contracts awarded bv the Housing and Property Department

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Section 3

The disposal of assets from the Council's Depot at Holyhead

• Background

• Allegation of corruption

• Audit findings

• Jones & Whitehead Ltd

• Breach of whistle-blowing policy

• Conclusions

Background

43 Between the late 1980s and early 1990s the former Ynys Mon Borough Council operated a uPYC window-making factory at its depot in Holyhead. The financial viability of the factory was, however, declining and the Council resolved to cease its operations in 1991. The assets employed by the window-making operation and their value in 1986 was as follows:

Item Value (£)
Double mitre saw 3,32400
Single head copy router 2,480.00
Striffier 2791 (3 head) 2,37930
Welder WMS 711 LTV 13,40535
Corner cleaner Wegoma MPAl2 5,401.00
Transom end miller AF2 20 1,176 00
Steel saw MBI 200 486.15
Mitre saw 476.70
Aluminium saw 451 00
Compressor SK 18 2,910.00
Glass cutting table 7,005.00
Total (excluding VAT) 39,494.50 44 After the factory had ceased trading in 1991, the above assets, excluding the glass-cutting table, were valued independently at an expectedly lower value of£11,450.

45 Following the cessation of operations the Holyhead Depot was subsequently let in November 1993, to a company called Aluform Ltd that was engaged in the manufacture of aluminium roof trusses.

3 The disposal of assets from the Council's Depot at Holyhead

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46 In September 1994, Mr Gareth Roberts the then Director of Contract Services (who has since retired and is now employed as a consultant on the construction of the new Council Offices) reported to the DLO Board and made recommendations regarding the disposal of the assets relating to the window-making factory. The report stated:

"On 31 January 1994 the Board resolved to sell the plant and equipment formerly used for the manufacture of PVCU windows and doors to

A luform Ltd for the sum of £6,000.

In late June 1994, I hecame aware that Aluform Ltd had vacated the former Holyhead Depot without notice and that some of the machines had he en removed The company had not paid for any of the machines, nor had they paid the Council rent for the unit. Some damage had heen caused to the building and there were signs of forced entry. The Police and the Council '.'I insurers were informed of the situation and I understand that the Police and Inland Revenue Inspectors are now trying to locate the former directors jor questioning in connection with these and other matters. However, I must stress that there is no evidence that the missing items were removed hy the company.

Two weeks later the unit was again forcihly entered and further minor damage was caused hoth to the huilding and some of the remaining plastic window equipment. I also received a report from the owner of an adjacent unit on the estate that he had foiled an attempt hy persons unknown to gain entry into the building through the roof shortly after the successful hreak-in.

In August 1994, I received an offer from Cefni Glass for the three of the machines in the unit, two of which had heen damaged hut were repairahle. In order to avoid further risk of theft or damage and to secure at least some income, I accepted the offer and the equipment was sold to

Cefni Glass for £2,000. The items were a glass-cutting tahle, welding machine and douhle mitre saw. "

47 Enquiries made during the course of the audit identified the following matters:

• the North Wales Police have no record of any report being made of a break in to the Depot at Holyhead in the summer of 1994

• no insurance claim was ever made in respect of the assets stolen from the Holyhead Depot

• no income has ever been banked in respect of the assets disposed of by the Director of Contract Services

• no rent was received from Aluform Ltd since it was never invoiced by the Housing and Property Department for any of the period it occupied the depot.


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Allegation of corruption

48 During the course of our audit we received information from another uPYC window manufacturer that the proprietor of Cefni Glass, Mr Ken Jones, whilst boarding up the Holyhead Depot for the Council, had paid cash directly to Mr Paul Roberts for machinery which was then removed from the site. They claimed the money was never deposited in the Council's accounts.

Audit findings

49 In response to all the above matters we carried out a fuller examination of events at the Holyhead Depot. We again identified a situation where Council assets have not been adequately safeguarded, favoured contractors have been employed and officer conduct has fallen below the standards that should be expected.

50 A review ofMr Paul Roberts' travel claims show that he was at the Holyhead Depot on July 11 1994 when the official order he had completed was forwarded to Cefni Glass requesting them to "board up all window openings at the old Council Depot Holyhead".

51 Mr Ken Jones records in a letter dated 3 August 1994 to Mr Gareth Roberts that he saw the window-making equipment when he was boarding up the depot in July 1994. In June 1998 he informed the Council that a cheque had been provided for the cost of the equipment by Mr Norman Ponsonby of Ponsonby Joinery. Mr Ponsonby had accompanied Mr Ken Jones to collect the equipment from the Holyhead depot. Mr Jones also produced a Housing and Property Department compliment slip which acknowledged the receipt of £2,000 from Mr Norman Ponsonby. The acknowledgement is in typeface and is not signed by any Council officer. Mr Jones could not recall the officer who raised it. Mr Ponsonby who paid the £2,000 on behalf of

Mr Jones states that the Council never presented his cheque. Mr Ponsonby however never informed the Council of this fact and the sum outstanding should now be collected from Mr Jones

52 When interviewed by us Mr Paul Roberts denied any involvement in the receipting of money in respect of the sale of equipment from the depot and could not provide us with any further information on who may have prepared the compliment slip.

53 We subsequently met with the former Director of Contract Services,

Mr Gareth Roberts to discuss his report of September 1994 to the DLO Board and to determine which officer(s) would have dealt with the sale of equipment.


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54 During the meeting Mr G Roberts initially explained that he had dealt exclusively with Mr Ken Jones of Cefni .Glass and had been personally responsible for dealing with the income from the sale, the report to the Police and the insurance claim. We explained to Mr Roberts that no income had been received, no insurance claim had been submitted and the Police had no record of a report of a break-in. Mr G Roberts then stated that he had probably compiled his report on the basis of information provided to him by one his officers at the time. When pressed Mr Roberts stated he could not recall which officer had provided him with that information, he also said he had no knowledge of the unofficial use of a Housing compliment slip in this instance.

55 Mr Roberts was also unaware that Aluform Ltd had never been billed for rent at the Depot. During our investigations we attempted to refer to correspondence pertaining to Aluform and the Holyhead Depot kept in a Housing and Property file. The file could not be located although all other files in the sequence were present in the storage room above the

National Westminster Bank, Llangefni.

56 The Council's accounting records show that the empty Depot at Holyhead has been boarded up on no less than five separate occasions, at a cost of £1,53! as follows:

Date Contractor Cost (£) Ordered by:
27 June 1994 A general contractor 347 Mr P Roberts
11 July 1994 Cefni Glass 560 Mr P Roberts
11 November 1994 Cefni Glass 60 Mr P Roberts
15 March 1995 Cefni Glass 176 Mr P Roberts
15 January 1996 Cefni Glass 388 Mr P Roberts 57 We visited the general contractor referred to above to discuss the work undertaken at the Holyhead Depot in June 1994. He said that two of his men had boarded up the majority of the windows and doors of the premises from the outside. The cost of the materials had been £71 36. He was therefore surprised when we put it to him that some two weeks later another contractor had visited the site and boarded up the doors and windows at a cost in materials of £396.78. We are also concerned with the materials costs particularly because in his report to the DLO Board the Director of Contract Services stated" Two weeks later the unit was again forcibly entered and further minor damage was caused both to the building and some of the remaining plastic window equipment ".

-' The disposal of assets from the Council's Depot at Holyhead

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58 Mr Paul Roberts has been unable to provide us with a satisfactory explanation why the depot had been boarded up on five separate occasions and whether or not he had queried the amounts billed before certifying that the goods had been received.

59 During our meeting with the general contractor referred to in paragraph 57, he said that a colleague of his had visited the depot in 1994 with a view to purchasing some of the window-making equipment. He inspected the equipment in the presence ofMr Paul Roberts from the Council. He did not submit a bid for any of the equipment since he believed that the machinery had been tampered with and a number of key components removed making them unattractive to potential purchasers. It was also his opinion that the machinery had not been subject to mindless vandalism. Although we have not been able to prove this, the circumstances are very similar to the witness information we received in relation to assets at the Rhosgoch site.

60 This view however contradicts the view expressed by Mr Ken Jones' offer letter to Mr Gareth Roberts of August 3 1994 which stated:

"I hereby wish to make a formal bid of £2,000 for the machinery at the above premises. The items include the glass cutting table, twin headed mitre saw and the welder.

The offer is based on the present vandalised nature of the machinery as seen on my last visit to the premises".

61 The Director of Contract Services' formal opinion in his September 1994 report was that two out of the three machines were "damaged but were repairable ". We have asked Mr G Roberts how he reached this conclusion but he was unable to recall.

62 The general contractor referred to above also said that he knew

Mr Paul Roberts well. He said that he had done some plastering work on Mr Roberts' house at Nant Y Pandy, Llangefni, in the late autumn of 1994 at an approximate cost of some £2,000. He said that Mr Roberts made no effort to pay him for the work. At that time he relied upon the Council for a substantial proportion of his income and was given the impression that if he pursued Mr Roberts to settle his debt he would receive fewer orders for work.


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63 The general contractor then made a point of explaining that Mr Roberts turned up unannounced in May 1997 and paid him £ 1,000 in cash. He said the event had stuck in his mind since at the time the press was reporting the Police investigation of the Director of Housing and Property. He said that Mr Roberts had brought a further £600 in cash on the day following the publication of our Report in the Public Interest on 1 April 1998. He substantiated these comments by reference to his paying in records.

64 We questioned Mr Roberts about these events and he admitted that the general contractor had carried out work to the value of £ 1 ,600 on his house. When pressed he also admitted that the payment details provided by the general contractor were probably correct.

Jones & Whitehead Ltd

65 As part of our enquiries it also came to our attention that

Jones & Whitehead from Bethesda was a 'favoured' contractor for electrical work. Most of the official orders we have seen for the work done by Jones & Whitehead have been completed by Mr Paul Roberts. In

April 1996 an order for electrical repairs and maintenance for the Holyhead depot costing £703 (net) was raised by Mr Dylan Edwards and

Mr Paul Roberts certified that the goods had been received. The contractor used was Jones & Whitehead. We visited the site which revealed that some recent electrical work had been undertaken but in our view the work was not finished. We questioned Mr Roberts why this work had been ordered when the depot had been empty for some time and was surplus to requirements. He could not provide us with any explanations. When questioned, he also admitted that Jones & Whitehead had carried out work on his own home but, unlike the other suppliers, he had paid in full for this work.

Breach of whistle-blowing policy

66 On Wednesday 13 May 1998 we met with Mr Stuart Kirkham (Senior Technical Officer) of the Council's Housing and Property Department. He had received a serious allegation from a member of the public and was concerned not only as to the substance of the allegation but that it had not been properly investigated when he brought it to the attention of his manager.

67 Mr Kirkham stated that on Monday 11 May 1998 he had received an allegation that Mr Paul Roberts had received a cash payment from Mr Ken Jones for Council owned assets at the Holyhead Depot.


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68 Mr Kirkham reported this conversation to Mr Berwyn Owen, the

Assistant Director of Housing and Property, later that afternoon. Mr Owen said he would pursue the matter directly with Mr Paul Roberts. Towards the end of that day, Mr Kikham received a telephone call from Mr Roberts who was calling from Mr Owen's office. Mr Roberts asked to meet him later that evening when he would provide an explanation. At that meeting Mr Roberts said that there was no substance to the allegations being made. During the course of the next two days Mr Kirkham received a telephone call from

Mr Ken Jones denying any impropriety and a call from the person who had brought it to his attention professing that he had made the allegations in error. Mr Kirkham was particularly concerned that Mr Jones, who he had only heard of in passing, had contacted him at home regarding this matter.

69 Mr Kirkham brought this matter to our attention since he believed that his approach to the Assistant Director of Housing and Property had not been dealt with properly and the response fell short of what he had expected under the Council's newly approved and publicised protocols and whistle-blowing policy. We asked Mr Kirkham to raise the matter with the Council's Monitoring Officer which he subsequently did.

70 We subsequently raised Mr Kirkham's concern directly with Mr Berwyn Owen. He said that he believed the allegation to be malicious and of no substance. He suspected that the source of the allegations was the person's employers of whom he had previous knowledge and considered them to be untrustworthy. He did however concede that in the light of the matters we had raised in our earlier public report and the new whistle blowing procedures he should have taken an alternative course of action. He also agreed that he was in breach of the Council's Financial Regulations which state:

"5.3.6 Any matter which involves, or which might involve, irregularities concerning money, stores or any property of the Councilor entrusted to it shall he reportedforthwith to the Director of Finance, who shall take such steps as he or she considers necessary. "

71 Following our meeting with Mr Owen we also wrote to the Council's Monitoring Officer expressing our concerns. The matter is now being taken forward as part of the Council's new procedures.


Page 22




Conclusions

72 On the basis of our investigations I conclude that Council owned assets

have been removed under suspicious circumstances from the Holyhead depot and that expenditure has been incurred that has not been satisfactorily explained. I also conclude that there is sufficient evidence to cast doubt on the actions, motives and integrity of the officers involved with these

matters. I also believe that members have not been provided with an accurate record of events and may have been misled about the depot and the window making equipment.

73 It is particularly regrettable to report on a breach of Financial Regulations and of the whistle-blowing policy by a senior Council official at this point in time given the strenuous efforts of officers and members over recent months to regain public confidence in the Authority by the introduction of new procedures and protocols to demonstrate openness and accountability The breach of procedures is particularly sensitive since:

• we have independently found that there were financial irregularities resulting from the allegations made

• these irregularities would not have come to light without subsequent audit involvement although they should have been identified if the new procedures had been properly applied

• the allegations should have raised concern with the Assistant Director of Housing and Property given the reservations we had raised on the conduct ofMr Paul Roberts in our earlier report in the Public Interest

• the confidence of junior staff in coming forward and expressing their concerns may have been undermined as a result of the actions of the senior officer in this instance.

3 The disposal of assets from the COunCIl'S Depot at Holyhead

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Section 4



Council plots for sale, Nant y Pandy, Llangefni

• Allegation of irnproprtety

• Audit findings

• Conclusions

74 This section provides evidence that officers of the Housing and Property Department have not acted solely in terms of the public interest but have used their position to obtain personal benefit.

Allegation of impropriety

75 In July 1998 we received a complaint from a local elector who had decided to come forward after seeing the press coverage of our Report in the Public Interest. He provided the following information.

76 In 1993 he had applied to purchase one of the Borough Council's plots for sale at Nant y Pandy, Llangefni. He explained that at a meeting of prospective purchasers, the Director of Housing and Property and the Director of Contract Services he was allocated plot number 5 following a random draw of names from a hat. He was very pleased with this allocation since plot 5 was some 15% bigger than the others in that row and was one of the furthest away from an adjacent Council estate. He expressed frustration at the subsequent delays on behalf of the Council in allowing him to complete the purchase of his plot.

77 His main contact was Mr Gareth Roberts of the Housing Department who informed him on a number of occasions that there were delays on behalf of the Council's Legal Department. He was particularly concerned that, in his view, with the exception of plot 1, building work had commenced on most other plots. In the end he withdrew his application and formally notified the Council in a letter to Mr Gareth Roberts dated 25 April 1994:

"Further to my conversation with one of your staff all Friday afternoon, I would like to confirm my withdrawal from the purchase of plot number 5.

I feel that it has taken far too long for the purchase to be completed.

On a recent inspection of the plot I was dismayed tofind that plot .J had made use of my plot for storage, and lCB ruts have been made on an area of the plot. "

78 He was particularly aggrieved to discover that a short time after withdrawing his interest a Council official, Mr Paul Roberts had commenced building on plot 5 He was aware that Mr Roberts had been intending to purchase plot I but claimed he was not at the buyers' meeting when the plots were allocated from the draw.

4 Council plots for sale, Nant y Pandy, Llangefni

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Audit findings

79 We have reviewed the files maintained by the Council's Legal and Housing Departments in relation to the development at Nant Y Pandy. We have not, based on the documentation seen, observed any reasons for significant delays on behalf of the Council in allowing the sale to be completed on

plot 5. However, we are concerned about the following matters.

80 On file we noted a letter written by Mr Paul Roberts to Mr Gareth Roberts on 26 April 1994 stating:

"As you are aware / was allocated plot 1 of the above scheme at the original meeting some twelve months ago. Following recent developments / now respectfully wish to transfer my application from plot No 1 to

plot No 5".

81 On 28 April 1994 Mr Gareth Roberts replied to Mr Paul Roberts as follows:

"I refer to your letter dated 26 April, 1994. I confirm that I have transferred your allocation of plot No 1 to plot No 5 Nant Y Pandy, Llangefni, and hope that you can now proceed with the purchase of plot 5 as soon as possible. "

82 When interviewed neither Mr Gareth Roberts or Paul Roberts could explain how the availability of plot 5 became known to Mr Paul Roberts or why there had been delays with the purchase of the two relevant plots. Both are of the opinion that they have not acted improperly but acknowledge that personal benefit may have arisen from being an employee of the Housing and Property Department. Both Mr Paul Roberts and Mr Gareth Roberts were unsympathetic to the concerns expressed by the person who brought the matter to our attention.

Conclusions

83 The internal correspondence referred to above was all written in the same typeface and format. The original purchaser of Plot 5 wrote a letter withdrawing his interest on 25 April and Mr Paul Roberts applied to

transfer his application from plot I to plot 5 on 26 April. Based on this sequence of events I believe Mr Paul Roberts benefited personally from information obtained from his position within the Department, by obtaining a larger and more sought-after plot that ultimately may have a higher market value on re-sale. In my view the correct procedure would have been to seek further interested parties for the plot to avoid claims of favouritism or insider knowledge


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84 Lord Nolan in his publication listing the seven principles of public life comments

"Holders of public office should act solely in terms of the public interest. They should not do so in order to gain financial or other material benefits for themselves, their family or their friends ".

85 This p.inciple was introduced by Nolan to prevent the type of incident we have highlighted above from occurring and tarnishing the reputation of local government.


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Section 5



Grants awarded to businesses under economic development powers

• Background

• Cefni Glass


• Other grants and relationships

• DRIVE grant

• Internet project

• Mona Airfield feasibility study

• Other transactions and related issues

• Conclusions

Background

86 Given the concerns we had about the way in which work had been awarded to the contractors as highlighted in Section 2 of this report we extended our audit to review all other payments made by the Council to these contractors over the last few years. It was observed that two of the contractors had received small business improvement grants from the former Borough Council and the County Council. These transactions were reviewed in more detail.

87 Under economic development powers, local authorities are able to promote the growth of local businesses by awarding grants. The contractors,

Cefni Glass and Ponsonby Joinery have received Small Business Investment Grants (SBIGs) from the Borough Council and/or the new County Council. These schemes are described as follows:

"Grant of 30% available to new and expanding businesses (in terms of property/employment) employing up to 10 persons. Assistance for capital investment of over £500 in either equipment (including office automation facilities) or minor adaptation to property and maximum payment of £2,000. An application must he submitted hefore the project work/purchases commences. Available to manufacturing and service sectors excluding ... retail, wholesale, motor trade, construction and transport. Agriculture and tourism are also excluded due to availability of assistance from other sources ".

5 Grants awarded (0 businesses under economic development powers

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Cefni Glass

88 This company has received two small business improvement grants from Ynys Mon Borough Council and one from the Isle of Anglesey County Council, all three payments total £5,900:

Year

Amount (£)

Certified for Payment by: Date Paid

1994/95

1,900.00

Mr Berwyn Owen 29 March 1995

1995/96

2,000.00

Mr Dewi Lloyd 15 March 1996

1996/97

2,000.00

Mr Alwyn Cadwalader 27 March 1997

89 Our audit involved independent verification with third parties of the validity of invoices submitted in support of the grant applications. In nearly all instances we found that the invoices provided by the company were false. We also note that every grant application was submitted within the last three weeks of the Council's financial year-end. It is likely that if officers had been more diligent these frauds would have been detected sooner.

90 Of further concern was the fact that a false invoice was submitted in respect of a Berline Bailey semi-automatic glass cutting table which is the same machine removed under suspicious circumstances from the Holyhead depot some two years earlier by Mr K Jones. Mr Jones had therefore received a grant to buy an asset, which technically was still owned by the Council.

91 The grant payments were referred to the North Wales Police who subsequently brought charges against the proprietor of Cefni Glass,

Mr Ken Jones. He has since pleaded guilty and has recently been sentenced. Although Mr Jones repaid the grants in the week of a court appearance, the Council has stopped further contractual arrangements with Cefni Glass following written advice from the Director of Finance. However Cefni Glass still owe approximately £4,000 rent arrears in respect of their continued occupation of the Council's industrial unit at 8 Penyrorsedd, L1angefni which should be recovered by the Council.

5 Grants awarded to businesses under economic development powers

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Ponsonby JOinery

92 On 21 March 1996 the Borough Council awarded a small business development grant of £2,000 to Ponsonby Joinery for the purchase of machinery. The grant was based on an invoice for £4,200 in respect of this machi.iery supplied by Mr K W Jones of Cefni Glass. This transaction was also found to be fraudulent. Mr and Mrs Ponsonby, the proprietors of Ponsonby Joinery were recently convicted of theft at the L1angefni Magistrates Court in respect of the above grant application. Both were conditionally discharged for a year. Mr Ken Jones has also been charged for his involvement in this offence. The Council has now terminated further contractual arrangements with the Ponsonby Joinery following written advice from the Director of Finance.

Other grants and relationships

93· During the course of our audit we met with the Assistant Director of Planning and Economic Development, Dr Caroline Turner, because she wanted to discuss a number of matters which were troubling her. At the meeting she raised issues relating to her predecessor Mr Berwyn Owen, in particular his relationship with certain companies and individuals. Following this we reviewed the financial transactions the Council had made with these companies. In the case of one company in receipt of a DRIVE grant, we have now passed the files over to the Police, and so the identity of the company and its directors has not been disclosed. Set out below are further examples of what I consider to be improper conduct by an officer employed by the Council in his dealings with these companies.

DRIVE grant

94 DRIVE grants were made available by the Borough Council to larger private sector projects of benefit to the local economy. The Borough Council awarded a grant of £ 18,584 to a company in March 1996. This grant was to assist the company to purchase computer equipment costing £61,948 to expand its operation and create local employment. A review of the grant file showed that the company had purchased this equipment from another company trading from the same business premises Further

enquiries revealed that the company supplying the hardware had a 50% ownership in the claimant company and both companies had common directors. We therefore paid an unannounced visit to the business address of the company to discover that the company in receipt of grant had re-located to new premises in the south of England. The directors had not notified the Council of their relocation which is against the terms and conditions of the grant. The Council should therefore seek to recover the grant.


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95 The computer equipment claimed to have been bought, to qualify for a grant, was not on the premises An examination of the supplier's accounts showed that transactions amounting to no more than £8,000 had taken place between the two companies. However, the grant application file included a letter from the supplying company stating:

"This is to confirm our receipt with thanks of [61,948 plus VA Tfor the following equipment. "

96 This was accompanied by a full inventory of the computer equipment that was claimed to have been supplied. Of particular concern is the fact that this inventory had been ticked as checked by the Assistant Economic Development Officer, Mr Dewi Lloyd who claims to have inspected the equipment during a site visit on the IS March 1996, the same day the grant was approved for payment. We have some concern about the ability of this officer to validate the existence of all items of equipment, firstly in the light of our findings above and secondly, by the admission of the directors' solicitors who in a letter to us state:

"It would not have been possible for all the equipment necessary for the project to have been purchased within the time-scale imposed by the Council of 7 days. "

The Company "accept that the information contained in the letter of 15 March did not accurately reflect the position at that time and this is very much regretted"

"All our clients would wish to say here is that it must have heen obvious to the officers of the Council at the time that the project would not have heen completed and that the full costs and expenses would not have heen incurred"

97 It is, however, plausible that the officer may have inspected equipment owned by the supplier company rather than the company making the grant application. We anticipate that this matter will be resolved during the course of ongoing Police enquiries. Mr Lloyd said that with hindsight he would have been better placed to give an opinion on the equipment inspected had he been accompanied by one of the Council's IT officers

98 We would also make the observation that the supplier company acknowledged receipt of payment, the Assistant Economic Development Officer inspected the equipment, the Council approved the grant for payment and the company wrote expressing their thanks to the Council all on the same day, the 15 March 1996.

99 Discussions with two of the directors revealed that most of the negotiations for the grant had been conducted with Mr Berwyn Owen, who at the time was the Borough Council's Economic Development Officer Indeed the company wrote to Mr Berwyn Owen on IS March 1996 stating:


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-------------------------------------------------------------------------------




.. Thank you I'ery much for your letter of 12 March confirming that our application for the above grant has been approved. Please find enclosed a letter from X confirming receipt of payment for the equipment.

I would also like to express our thanksfor the very efficient and helpful manner in which this matter has been dealt with by your departmental staff and yourself "

100 We were made aware that Mr Owen is a friend of two of the directors of the company, attended college with one of them, and this has been confirmed verbally by these persons. At interview Mr Owen accepted these relationships and admitted to the fact that one of the directors had been the best-man at his wedding. He also confirmed that he had not formally declared these interests. Mr Lloyd provided us with information showing that the company in receipt of the DRIVE grant had originally applied for a small business improvement grant but withdrew its application in November 1995. An application was then submitted for a DRIVE grant, which can be awarded up to £20,000 on eligible expenditure compared to the £2,000 ceiling on small business grants. Mr Lloyd recalled that Mr Owen had taken a personal interest in the DRIVE grant application and his personal involvement with the application was greater than Mr Lloyd would have normally expected.

Internet project

101 In September 1995 the Director of Planning and Economic Development of the Borough Council, submitted an application for an ERDF grant for the purpose of setting up an Internet web site. The application was prepared on the Director's behalf by Mr Owen, the then Economic Development Officer. The Internet site would, in addition to presenting Council information, also be used as a directory of the Island's local business organisations and services. The objective was to promote the Island and provide information to those who live and work locally, and those who intend to visit the Island for business or pleasure.

102 The business plan states that some of the work would be carried out by a local company, in fact the one that we have referred to above which received the DRIVE grant. The plan claims that the company had specialist expertise and knowledge in developing web pages on the Internet and Mr Owen has since drawn our attention to information about the company's current standing in this area. However, it should be noted that the company was not incorporated until 27 July 1995 and did not have the appropriate equipment at the time as we have commented upon in paragraph 96 above. would therefore question how it was decided that it had the experience to carry out the work and whether it was prudent to consider awarding the


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work to a company untested within the marketplace. Furthermore, there is no evidence to show that the appointment of the company was presented to any of the Borough Council's Committees or that the application for grant funding was notified to the Finance Department.

103 The following table summarises the total payments of £3,525 made to this company for preparing and hosting the Council's web site

Invoice Description Date of Amount Authorised
Invoice £ for payment
by:
Setting up costs for Internet connection 25.07.95 881.25 Dewi Lloyd
Completion of Internet site 29.11 95 881.25 Berwyn Owen
Internet site annual maintenance and 29.11.95 1,762.50 Berwyn Owen
admin 104 In August 1997 the Assistant Director of Planning and Economic Development, Dr Caroline Turner, wrote to the company informing it that the decision had been taken to establish a new Internet site for the Council. Dr Turner, who took over the responsibilities of Mr Owen at re-organisation, explained to us that she had concerns over the way the above agreement had been entered into, the high cost and, in her view, the inadequate service provided by the company. The Council's Assistant Director of Finance (IT), Mr Dave Gardner, who we also interviewed as part of our audit, has echoed her views. In particular he has expressed concern regarding the high cost of providing a relatively small amount of web space (2 megabytes). To counter this Mr Owen has referred us to a report made to the Economic Development Committee on 14 October 1996 which commends the Internet development and subsequent benefits

105 In April 1998, the company submitted a further invoice for £ 1,762.50 to cover the cost of the monthly hosting charges, the maintenance of the site and the cost of transferring the domain name to Angleseygov.uk. The Assistant Director of Leisure, Mr John Rees Thomas, has now taken over the responsibility for the project and has asked the company for more information to support the invoice so the account can be settled. At a recent meeting with Mr Thomas, one of the directors stated that he could not produce an official order or background papers to support the invoice and that the work undertaken had not been logged and had been conducted without any real procedure.

106 Mr Thomas is currently trying to retrieve the relevant documentation from storage before making a settlement offer to the company for the service provided


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107 When questioned, Mr Owen said that there were no improper motives behind the selection of the Internet provider and that the company had been selected because of its locality and perceived expertise in the field. In my view there is sufficient evidence to cast serious doubts over Mr Owen's motives.

Mona Airfield feasibility study

108 A further concern expressed to us by Dr Caroline Turner was the commissioning of a feasibility study for Mona Airfield. On 30 September 1992 the Economic and Tourism Development Committee of the Borough Council resolved in respect of Mona Airfield:

"to authorise the Economic and Tourism Development Officer

(Mr Berwyn Owen) to proceed as a matter of urgency with his investigations and that a further report be submitted to the next meeting on the findings. "

109 This resolution was made following a brief report presented by the Economic Development Officer which stated:

"At this point it was decided to appoint consultants, following agreement with the Chairman, in order to prepare a short study into the feasibility of commercial flights. The urgency was necessitated because it was known that Caernarfon Airport was about to submit a bid for more funds to the WDA. "

110 A report was prepared by the 'Business Development Group', Llanfaelog at a cost of £2,835. The payment was made in March 1993 and was authorised by Mr Owen. This work was done by a personal friend ofMr Owen who is also one of the directors of the computer company to which we refer above. Mr Owen has informed us that the Committee Chairman was well aware of his relationship and that in addition to his own assessment of the person's suitability to carry out the work the WDA was also satisfied Despite this I am concerned that this work was again awarded to a close friend of

Mr Owen. Furthermore, although the individual may have had business experience I would question the relevant experience this person had to undertake such a specialist study on the Council's behalf

Other transactions and related issues

III In 1995/96 Mr Owen purchased computer goods for his Department from one of the computer companies referred to in paragraph 94 above. The value of the purchases was some £5,000. He informed us that he had only purchased the goods after ensuring with the Head of the IT Section that the prices were cheaper than alternative suppliers The ex-Borough Council's Computer Manager has been unable to confirm or deny that this took place.


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------------------------------------~~~~ .. --.- .. --~------




112 We have also reviewed grant payments to the uPYC window company referred to in paragraph 48 above and are sufficiently concerned to have passed these files over to the Police for their consideration. We have observed that the grant awarded to the proprietors was certified for payment by Mr Berwyn Owen. We are aware ofMr Owen's view in paragraph 70 above that he considered these individuals to be untrustworthy.

113 In June 1994 Mr Owen certified for payment a small business investment grant of £ 1,828 to a firm of Chartered Architects. He has confirmed that the proprietor of the firm is a near neighbour and acquaintance He also confirmed that prior to his appointment by the Borough Council they had business connections but that he did not try to conceal the fact that the applicant was well known to him. However in my view the prudent approach would have been to declare an interest and have no involvement with the claim.

I 14 Mr Owen was also influential in granting a marketing grant of £200 to one of the companies involved in the DRIVE grant claim. As far as we are

aware this is the only company to have received this form of grant. We have also seen correspondence between Mr Owen and another organisation in which he takes a personal interest in trying to persuade them to purchase a computer system from the same computer company. In my view this level of involvement in the business activities of a company is inappropriate for an officer of the Council.

Conclusions

l l S This section has outlined frauds perpetrated against the Council by the same companies referred to in Section 2 who had received substantial amounts of work from Council officers without competition and were also close acquaintances of those officials.

116 We have also referred further grant files to the Police for their

consideration. Without prejudicing any Police investigation into one of these grant applications, we have expressed concern that the senior official,

Mr Berwyn Owen, who was involved with the award of this grant was a friend or close acquaintance of some of the directors. Companies owned by acquaintances of Mr Owen have also benefited from other business grants and contracts to provide an Internet site, consultancy services and computer goods. One of these companies would have further benefited financially from an ERDF grant application prepared by Mr Owen if the scheme had not been changed by his successor. Mr Owen has not formally disclosed his relationship with these individuals although he has told us that the Chairman of Economic Development and the Chief Executive at the time were aware of most of them


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I 17 I also conclude that another senior Council Official, Mr Dewi Lloyd, did not satisfactorily inspect equipment for the purposes of approving a substantial grant, that the company itself claims had not all been in existence at the time.


Page 3S

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Section 6

I

Overall conclusions and recommendations for the future.

1 18 This report has concluded most of the audit enquiries that were ongoing at the time the earlier Report in the Public Interest was issued. We have also investigated new related matters brought to our attention by members of the public following recent press coverage of the Council.

119 Whilst the individual issues I have commented on in this report are serious in their own right, taking an overall view I can only conclude that the culture of the Property Section is not one which promotes openness and probity. I have identified in this and the previous report serious shortcomings in the standard of conduct of a number of both senior and junior officers of that Department which I believe that the existing Director, who is currently suspended, has allowed to prevail.

120 In this report I am critical of the conduct of the former Director of Contract Services, the Assistant Director of Housing (Property Services) (formerly Economic Development Officer), and a Technical Assistant. I also express concern about the role played by the Assistant Economic Development Officer in checking entitlement to a DRIVE grant.

121 It is also difficult to believe that the actions of these individuals were allowed to occur without being questioned by other members of staff in their Departments. I have already commented that official orders and invoices were authorised without any apparent questioning by senior officers within the Housing and Property Department. This culture I believe has existed for a number of years and it is clear that prompt and far-reaching action is needed to address the shortcomings and regain confidence.

122 This report therefore makes a small number of recommendations, which I believe, need to be implemented as a matter of urgency

Recommendations

RI The Council should consider initiating appropriate disciplinary action in respect of Mr Berwyn Owen and Mr Paul Roberts. I1IIS should he done swiftly and investigations concluded promptly.

R2 (liven the seriousness (~f the matters identified in this report and that Police investigations are ongoing, the Council should consider suspending the above named officers, without prejudice until all Police and disciplinary enquiries have been completed.

6 Overall conclusions and recommendations for the future

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DISTRICT AUDIT

District Auditor's Report under Section 8 a/the Audit Commission Act 1998



Recommendations (continued)

R3 the Council should review its current contractual relationship with the former Director of Contract Services (as Consultant for the new office building).

fU the Council should review the organisation and managementfor the delivery of Housing &Property Services. This should be a radical review and include the option qf transferring services to other departments.

R5 the Council should recover slims due to itfrom Cefni Glass for outstanding rent arrears and the outstanding payment of £2,000 in respect of the glass cutting-table in the company's ownership. If this fails further legal action and eviction should be considered. In addition we do not believe that the director of this company should receive any further orders for work.

R6 The Council should seek to recover the DRIVE grants from the company highlighted in this report.

123 The Council has already acted on the first two recommendations and we understand that the former Director of Contract Services has recently resigned as consultant for the office building.

--=tt--~l<,

ceri~ District Auditor

30111 September 1998

h Overall conclusions and rccommendauons for the future

Page 1,7

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