The 193-page report, ordered by the communities secretary, Eric Pickles, says the east London council, run by directly elected independent mayor Lutfur Rahman, awarded more than £400,000 in grants to “ineligible organisations” in one case after an intervention by a council member.
It was criticised for failing in its duty to acquire best value for local taxpayers.
PWC reports that the council’s response to the identification of issues raised in the report “suggests a tendency towards denial or obfuscation rather than an inclination to investigate concerns raised”.
“Despite its public assertions of support for the inspection, at various stages [the council] raised a number of obstacles to our progress which have significantly delayed the provision of information or documentation and which in large part led to our request for an extension of the timetable for the inspection.
“The authority tended to pronounce allegations to be baseless and/or politically motivated without having conducted what we would consider to be an adequate investigation into the issues raised.”
The Evening Standard summarises this:
Among key findings:
- Poplar Town Hall, a Grade II listed building, was sold for £875,000 to a political supporter of Mr Lutfah even though the bid arrived late, and after rival bids had been opened, which created a “risk of bid manipulation”. A higher offer was rejected, contrary to independent advice, and the winner was later allowed to change his contract.
- Grants were handed out to organisations that were “ruled ineligible”, with some £407,700 given to groups that failed to meet the council’s own minimum criteria. Council officers were over-ruled in many cases.
- The appeared to show “a tendency towards denial or obfuscation rather than an inclination to investigate concerns raised”. It did not properly investigate issues raised in a BBC Panorama programme that alleged Mr Rahman intervened to increase grants paid to some local Bangladeshi organisations.
- Public money was spent “inappropriately” on political advertising for the Mayor.
The Telegraph is more explicit,
Tower Hamlets, the east London council, sold off public buildings to associates of the Mayor and handed out grants to ineligible bodies, a damning Government report has found.
The winning bidder to buy Poplar Town Hall offered a lower price than other bidders and “had an association” with the controversial Mayor Lutfur Rahman, according to an audit by PricewaterhouseCoopers (PwC).
The Mayor personally intervened in the awarding of council contracts, which lacked signed paperwork or audit trails, the report found.
Hundreds of thousands of pounds in public money were awarded to local bodies that were not eligible for the money after the intervention of elected councillors, the report found.
The audit was commissioned by Eric Pickles, the Communities Secretary, following allegations of cronyism, fraud and waste at Mr Rahman’s council.
Mr Rahman, who has courted the support of the borough’s Bangladeshi community, was re-elected in May. That victory is being challenged in the High Court by people who alleged the vote was riddled with fraud.
Addressing the Commons, Mr Pickles said Mr Rahman had handed money out “like a medieval monarch”. He said the report had been submitted to the police for examination of potential criminal wrongdoing.
The “rotten borough” is “at best dysfunctional, at worst riddled with cronyism and corruption,” he said.
“Executive power is unchecked and executive power has been misused.
He announced that three commissioners, answering directly to central Government, would take responsibility for all financial decisions. They would see the appointment of new permanent council officers.
Mr Pickles said there were “widespread allegations of extremism, homophobia and anti-Semitism being allowed to fester without proper challenge.”
“The abuse of taxpayers’ money and culture of cronyism reflects a partisan community politics that seeks to trade favours and spread division on the rates,” he said.
This comment is revealing,
Meg Hillier, the Labour MP for Hackney, called for Mr Rahman to resign. Mr Pickles replied: “He would not be missed.”
The Local Government Chronicle states,
The report, written by accountancy firm PwC and published today, found the council had “failed to comply with its best value duty” in relation to the way grants were awarded and property sold.
It said the authority’s governance arrangements “do not appear to be capable of preventing or responding appropriately to failures of the best value duty of the kind we have identified”.
It said: “This calls into question the adequacy of these governance arrangements.”
Tower Hamlets mayor Lutfur Rahman said the report revealed “regrettable” flaws in process but had not found evidence to substantiate “wild claims about fraud” (see full statement in update below).
The report said the council had had no chief executive since July 2012, adding: “One of the authority’s corporate directors has since that time (with a short hiatus) fulfilled the role of head of paid service, as required by statute, however the head of paid service has not had the full powers of a chief executive delegated to him under clause 3.5.5 of the authority’s constitution.
“These powers have remained with the mayor. This means that, for most purposes, the head of paid service, other statutory officers (being the section 151 officer and the monitoring officer), as well as other corporate directors are all directly accountable to the mayor.”
The accountancy firm was sent in by communities secretary Eric Pickles just before last May’s mayoral and council elections after he received a dossier of allegations about abuses including governance failure, poor financial management and fraud.
Regarding the transfer of council property to third parties, the report said: “In relation to three of the four property transactions we looked at in detail, namely Poplar Town Hall, Sutton Street Depot and Mellish Street, we conclude that in those instances, the authority failed to comply with its best value duty.”
In relation to the Poplar Town Hall sale, PwC said Tower Hamlets had “accepted a late bid from the winning bidder after other bids had been opened, creating a risk of bid manipulation”.
The report said: “The winning bidder was, as a matter of fact, connected to a person with other business interests that had an association with the mayor [Lutfur Rahman].”
The report said although the difference in price was “small”, the council “did not in fact select the highest bidder, in spite of the external adviser’s recommendation to do so”.
The report added: “The winning bidder also asked for and was granted changes to the contract it had signed, which further undermined the purpose and credibility of the contract race process.”
Regarding the way grants had been awarded, PwC’s report said: “In relation to the matter of grant making, we conclude that the authority is failing to comply with its best value duty.”
It said grants had been awarded to organisations “which were ruled ineligible or which did not meet the required evaluation score”.
The report added: “Applicants [who had not met the minimum criteria for an award after evaluation] were recommended to receive, in total, awards of £407,700.”
PwC also looked at whether spending on media advisers to the mayor were “genuinely for the benefit of the authority” or “of a party political nature pertaining to the mayor” and concluded “that there is a failure to comply with the best value duty”.
The same was said of the Ofcom finding that five television channels had broadcast an advert from the council that was deemed to breach the Communications Act. PwC’s report said “the clear implication is that authority monies were spent inappropriately on what amounted to political advertising for the benefit of the mayor”.
PwC said both it and Tower Hamlets’ internal audit team had “found instances of procurement policies and procedures have not been adhered to”.
The report noted problems associated with evidence gathering when it said: “Despite its public assertions of support for the inspection, the authority has at various stages raised a number of obstacles to our progress which have significantly delayed the provision of information or documentation and which in large part led to our request for an extension of the timetable for the inspection.
As a result the Guardian now reports,
The communities secretary, Eric Pickles, has taken over the administration of Tower Hamlets council in east London for two years after an inquiry commissioned by his department found wholesale mismanagement, questionable grant-giving and a failure to secure best value for local taxpayers.
Pickles plans to dispatch three commissioners to administrate grant-giving, property transactions and the administration of future elections in the borough.
The commissioners, who will be answerable to Pickles, will be in place until March 2017 and are tasked with drawing up an action plan to improve governance in the council, including the permanent appointment of three senior council officers including a chief executive.
The BBC adds,
The report also found that a proposal to award money to lunch clubs for Jewish, Sikh and Hindu communities resulted in £99,212 being awarded to Bangladeshi or Somali groups, none of which had applied for the money.
The report found that in response to the BBC Panorama programmeThe Mayor and Our Money, the authority spent £101,479 getting advice from law firm Taylor Wessing and PR consultants Champollion.
We have covered this story (and there have been many previous posts on Tendance Coatesy), principally because of charges of ‘communalism’ against Rahman, and his declared policy of directly funding religious organisations out of public money.
It is very probable that such groups are amongst those cited by the damming report.
Having Pickles run the borough through his commissioners is no solution.
Pickles is a one-man anti-democratic foul abusive swine.
But before protesting at this those on the left should avoid saying that Rahman’s administration and satellites innocent because they say so.