As the Lib Dems seek to distract the public from their own serious financial failings by making false claims about Surrey County Council, here are the facts.
Since the Liberal Democrats took control of Guildford Borough Council, first in coalition with R4GV in 2019, and full control since 2023, the council’s finances have suffered due to serious failings of financial management and governance.
The previous Conservative administration left the council with healthy reserves. Those reserves have now disappeared. Not because of any extra spending for the benefit of residents, but purely due to waste and lack of financial control. The latest independent auditor’s report is so damning that the council cannot be confident how much money it has. They may as well have been pouring money down the drain. The council is only avoiding bankruptcy by selling off income generating council assets.
The investigation into the Council's housing maintenance practices revealed significant overspending and potential misconduct involving a contractor. Concerns included unnecessary work orders, incomplete tasks, duplicate invoicing, and unauthorised expenditures totalling £18.9 million against a contract valued at £2.4 million. This happened under the current Leader’s watch when she was the Housing portfolio holder, yet she refuses to take any responsibility for a complete lack of oversight.
Since 2023, independent consultants’ reports detailing the council’s failings have been published, including a recent auditor's report. You can read the full reports by clicking the links. Here are some extracts and summaries from the reports:
2022/23 and 2023/24 Auditors Annual Report – Grant Thornton UK LLP
In terms of the 2022/23 and 2023/24 financial years we identified the five following significant weaknesses:
Financial Sustainability
Unidentified savings/funding gaps in financial planning that substantially threaten delivery of the medium-term financial plan which needs to be extended further than 2026/27;
Governance
Serious and pervasive weaknesses in final accounts processes leading to material errors in draft accounts, failure to meet statutory reporting deadlines and/or a modified opinion;
Pervasive weaknesses in internal controls which had a significant financial and service-delivery impact on the housing service which enabled a material fraud to occur.
Improving the economy, efficiency and effectiveness
Failure to secure improvement in the housing service where the Council had identified, and the Regulator of Social Housing (RHS) subsequently, identified weaknesses in terms of service performance;
Significant financial loss and failure to deliver efficiency/performance improvements as expected when managing significant outsourced contracts/services.
The Audit Findings for Guildford Borough Council YE 31.3.2024 – Grant Thornton UK LLP:
- We have not been able to satisfy ourselves that the Council has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.
- We noted several discrepancies that were posted in the General Ledger but not in the initial draft accounts. New [interim] officers struggled to locate supporting working papers and were unable to provide us with General Ledger download as required by our audit procedures to ensure completeness and accuracy of the ledger.
- We note there is a lack of proper authorisation process. i.e. anyone who has rights to approve can approve.
- We are unable to conclude whether there has been any management override of control and therefore a risk of misstatement in the accounts potentially exists.
- The Council had a fraud within its Housing Revenue Account spanning 2021/22 to 2023/24 financial years. This expenditure was material in 23/24. We were provided with a listing of transactions from the HRA system for completed works from the supplier in 2023/24 which totalled £10.2m. However, the listing from the General Ledger from the same supplier had £6.9m being included in additions. We were unable to obtain explanations for the differences during the audit and we were unable to substantively test all HRA spend in relation to this fraud.
- The Council struggled to produce a complete transaction listing of revenue recognised in the year.
- We are not able to provide any assurance on the Council’s revenues and debtors balances.
- We are not able to provide any assurance on the Council’s other service expenditures and creditors balances.
- We have no assurance over the accounting of grants and contributions for 23/24.
- We have been made aware of the fraud incident in relation to HRA maintenance costs that impacts the 2023/24 balances that has led us to scope these as a significant risk. However, as the testing was not completed on HRA additions, where these costs have been capitalised we are not able to provide assurance that the current year balance is fairly stated.
Investigation Report relating to overspend and fraud in the Housing Revenue Account – Heminsley Law January 2025.
Summary Findings
- Senior management was largely unaware of the overspending until 2023.
- Red flags included concerns about procurement processes, conflicts of interest, and urgent contract needs, which were ignored.
- By February 2023, management should have recognised significant risks related to the contractor.
- Failures in governance and oversight allowed significant overspending without proper controls.
Housing Governance Review – Solace In Business Ltd, April 2024
The investigation into the Council's housing maintenance practices revealed significant overspending and potential misconduct involving a contractor. Concerns included unnecessary work orders, incomplete tasks, duplicate invoicing, and unauthorised expenditures totalling £18.9 million against a contract valued at £2.4 million.
- The Deputy S151 Officer raised concerns on June 27, 2023, about excessive spending with Seville Developments Ltd.
- An investigation began in August 2023, leading to the suspension of two employees and termination of five agency workers.
- The total expenditure with Seville Developments Ltd reached £18.9 million in less than three years, far exceeding the original contract value.
- Whistleblowing reports in September 2022 and July 2023 highlighted risks and overspending, but actions were not taken until June 2023.
- The Deputy S151 Officer raised concerns on June 27, 2023, about excessive spending with Seville Developments Ltd.
- An investigation began in August 2023, leading to the suspension of two employees and termination of five agency workers.
- The total expenditure with Seville Developments Ltd reached £18.9 million in less than three years, far exceeding the original contract value.
- Whistleblowing reports in September 2022 and July 2023 highlighted risks and overspending, but actions were not taken until June 2023.
Financial Oversight and Budget Management
The review revealed significant financial mismanagement, including unauthorized expenditures and inadequate budget monitoring. The Council's Housing Revenue Account (HRA) requires urgent attention to ensure compliance and effective management.
- A £24.5 million investment was approved in February 2022 for housing maintenance, but budget monitoring was insufficient.
- The Corporate Procurement Team was staffed solely by temporary officers, leading to lapses in financial oversight.
- The Council must enhance budget monitoring and establish robust mechanisms for expenditure approval.
- The Housing software system needs to be upgraded to improve financial tracking and reporting.
Independent Governance Review – Solace in Business Ltd, March 2024
The SOLACE Review Team’s main finding is that Guildford Borough Council is at serious risk of failing in its statutory duty to delivery Best Value.
Some efforts by Members and officers to improve governance are underway and it is understood that this is a priority for the Council. However, the approach to improvement is inconsistent and far from comprehensive. There is no coherent improvement plan with suitable strategic and operational elements. There is no clear direction of travel and there is a debilitating and serious absence of a range of important strategies, plans and systems.
Leading Members and officers focus to a large extent on immediate or short-term issues in a reactive manner. This amount to a significant risk for the authority.
The review found that the Council does not have a set of values which are modelled, promoted or understood across the authority. Few people interviewed were able to say what the Council’s values are.
All senior managers are working to deliver the priorities of the two Councils (Guildford and Waverley), which have different policies, procedures, staff teams and systems of every kind. The severity of the issues is exacerbated by the lack of clarity about the Council’s priorities and the poor quality of service and financial planning systems. Consequently, senior managers are very stretched and cannot operate efficiently.
The Council’s ambition for the partnership with Waverley is too narrow, focussing almost exclusively on savings to the exclusion of improvement in services and outcomes for the public.