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Fraud probe after £9m overspend discovered in council department

PUBLISHED: 17:19 06 December 2018

Newham Council has launched a fraud investigation. Pic: Newham Council

Newham Council has launched a fraud investigation. Pic: Newham Council

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Newham Council is investigating allegations of fraud in the department that deals with social housing and road repairs after it was found to be £9million over budget.

A whistleblower exposed “major” financial issues in the town hall’s repairs and maintenance services, according to a summery report by the Chartered Institute of Public Finance and Accountancy (CIPFA).

Staff have already been “suspended or dismissed” and highway repair work has stopped while an investigation is carried out.

The department is responsible for building repairs, the council’s gas servicing, highways maintenance and planned roadworks and started building council homes in 2015.

But investigators uncovered “a number of undocumented deals” in the service and found staff had allegedly “cut work prices arbitrarily by around 20 per cent and then used sub-contractors at higher rates”, according to the report.

The report, published last week, notes that “work was billed at higher than quoted rates to hide the effects of price cuts”.

It is alleged that the department “manipulated” its list of work in progress in 2017 and invoices were not raised until month 12 so commissioners were left “unsighted”.

“There have been allegations of fraud and staff have been suspended or dismissed”, the report adds.

The department was overspent by some £9m when auditors were brought in earlier this year.

In March 2017 Newham ouncil boasted that the service won the “most innovative service delivery accolade” at the Local Government Chronicle Awards – the “Oscars of the local government world”.

It said the judges were impressed with the way it “had modernised into larger scale repairs and refurbishment to provide better value for money and customer satisfaction”.

Then mayor, Sir Robin Wales, said the new approach had “saved the council more than £10m since 2007”.

Newham Council refused to say how many members of staff had been sacked or suspended over the allegations because the investigation was “still ongoing”.

The borough’s new mayor Rokhsana Fiaz said: “My election pledge was to clean up the council’s budget so that it is open and transparent, and that we had a clear idea of what the financial picture is.

“The CIPFA review expresses real concerns about a lack of financial controls and sets out clearly how we need to improve our financial management systems across the board, including proper scrutiny from council members.

“I have asked that officers come back with a report on how the CIPFA recommendations will be implemented fully, and I will take all measures necessary to fulfil my election pledge.”

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