£1m spend at heart of council finance probe

Two major software contracts have also been examined by the auditors, with questions being asked about the way they were awarded - which doe s not appear to have been done by the council's rules.

The council has said it cannot yet confirm a full figure for how much money is involved all told. Some suggestions put the eventual amount at more than £1 million if the overall value of the two contracts is included.

Findings from the special in-house audit investigation into ICTCS will be put to the council's cabinet today (Thursday) along with a set of recommendations for members to approve aimed at tightening up supervision of all departmental expenses and methods of dealing with outside contractors.

The council has already offered to bring in independent auditors to examine how two contracts were awarded and assess what went on in ICTCS, how much money is involved and why such spending was sanctioned - in some cases without the most basic documentation like VAT receipts.

Opposition members want resignations and a complete overhaul of how the council does business, especially with the private sector on which ICTCS - set up to drive the council's bid to be at the forefront of on-line local government - depended heavily.

No members of ICTCS have been suspended or disciplined over the findings. It is currently operating under an acting head: the previous head left the council in July.

Councillor Terry James, leader of the opposition, told the Hereford Times that neither senior officers nor cabinet members should be allowed to hide behind "interpretations of protocol" once the independent investigation was underway.

"Make no mistake, this is the most serious crisis the council has faced since its creation and, with the contracts included, more than £1m of council tax payers money may be involved. We want to know who sanctioned what and on whose advice - with this in mind, some of our senior officers and cabinet members should already be considering their positions," said Coun James.

The new investigation must, ideally, be done by auditors "with no links whatsover to local government" and take in the council's finances as a whole, said Coun James.

Council director of resources Sonia Rees said that the issues identified by the special investigation were "serious and significant" for the authority's overall reputation as it launched an ambitious IT-led programme to improve services and prepared the pioneering bid to be part of a Public Service Trust (PST).

In her report to cabinet she concedes that the findings of the investigation into ICTCS "raises the concern about compliance elsewhere" and makes the auditing of all claims a priority for the council.

A sample examination of travel and subsistence claims made by all council employees since April, 2006, is already close to being completed and will be used to assess the extent of any further problems.

The investigation into ICTCS began earlier this year when a review by the council's auditing team into expenses claimed by one senior officer was subsequently extended to include the whole of the division and two of the contracts it awarded.

Cabinet will be told that the apparent breaches identified in the investigation so far are, as referenced in the report: Two members of the division, one of them an agency worker, attending a three-day conference of "questionable value" in Paris - that was run by a council supplier - with travel, accommodation and and entertaining expenses reimbursed.

Claims paid and pending for overnight accommodation costs within Herefordshire without prior authorisation or clear business need.

Claims paid for mileage following business meetings at which "significant amounts of alcohol" were purchased.

Claims paid and pending for "entertaining" suppliers, council employees and council contractors Claims paid and pending for "alcoholic beverages" for meetings with suppliers, employees and contractors - during office hours.

Failure to supply VAT receipts for over half the claims made.

Failure to declare "hospitality received" in line with the council's policies.

Discrepancies between claims for overnight stays and subsequent declarations of hospitality.

Claims made for travel and subsistence expenses made by council contractors not itemised in detail in their invoices.

Failure to submit claims in a timely manner.

Claims authorised for payment although incomplete and in contravention of the council's policies.

A failure to follow, in full, the council's procurement controls on the awarding of two major in-house IT contracts to the private sector.

Council chief executive Neil Pringle said the findings were serious enough to recommend an independent audit to back up the work done by the authority's own auditors.

"The findings need that outside perspective. It is already clear to me that we have a serious situation, an independent look at how it happened is appropriate and will be put to cabinet," said Mr Pringle.

That independent look would, he said, also examine the extent of supervision and support for those involved in managing the ICTCS finances. Scrutiny will also be extended to the council's Herefordshire Connects programme, which aims at saving the authority millions of pounds by making all operations accessible online under a single software system.

At this stage, the investigation is not thought to have any direct implications for the Public Service Trust project that amalgamates the council with the Primary Care Trust, putting all of the county's public services under a single authority. The PST is expected to be up and running in shadow form soon.

Councillor Chris Chappell, who chairs the council's audit committee, which checks on the way the authority manages money, promised monthly meetings in open session to monitor the investigation into ICTCS and its implications.

"We have to openly ensure strong systems to maintain the integrity of the council's financial management are secure with ICTCS and enhanced across the authority as a whole," said Coun Chappell.