To receive any questions relating to items on the Agenda from members of the public and replies thereto.
Mr Paul Elstone asked the following questions in respect of items 6 and 7 on the agenda:
The Grant Thornton Audit Plan, as provided to the Audit Committee in June of this year, assessed that there was “Significant risk of Material Misstatement of the GROUP Financial Statements”.
MDDC Cabinet have just agreed to lend 3 Rivers an additional £2.3 million to cover overspends on two projects.
Given the fact that Cabinet threw out a Scrutiny Committee recommendation this in the form of a resolution to have a risk review carried out by the Audit Committee and that these loans are, I believe, are well below market rates, where an impairment is in place, which may leave MDDC open to accusations of anti-competitive Government Support.
Will this have any impact on Grant Thorntons Audit Plans?
I ask this question based on the principle of continuous improvement, and in the context of the exactness of MDDC Internal and External Audits.
For necessary background, The MDDC Grant Thornton Audit Risk Assessment 2021/2022 asks the following questions:
“Are you aware of any instances of actual, suspected or alleged fraud, errors or other irregularities either within Mid Devon District Council as a whole or within specific departments since 1 April 2021?”
“Housing received one fraud case for 2021. This is currently being investigated by the Neighbourhood Team Leader”.
“Are there any areas where there is a potential for misreporting?”
“It is our assessment that it is extremely unlikely that misreporting would take place”.
With these statements in mind
I ask that, given these MDDC Management Responses, will this Audit Committee supported by both Grant Thornton and the Devon Audit Partnership, please investigate why MDDC Executive Officers failed to declare that a serious and formal fraud allegation had been made during the audit period?
The allegation in question was that an MDDC Senior Officer purposely misrepresented facts to a Property Developer in relation to a land purchase deal that MDDC required to progress promptly, for MDDC’s financial gain and ultimate benefit.
This alleged misrepresentation of fact by the MDDC Officer caused the Property Developer to incur substantial financial loss.
This alleged misrepresentations amounted to fraud, as defined in Section 2 of the Fraud Act 2006, and has the ongoing potential to form the basis of a civil compensation claim against MDDC for SUBSTANTIAL loss.
It is known, beyond all doubt, that every one of MDDC Executive Management Team, the MDDC Council Leader, and the MDDC Cabinet Members for Finance and Planning knew of the fraud allegation.
Furthermore, documents obtained following a Freedom of Information request appear to show that some of these individuals may be implicated in the fraud.
For the avoidance of any doubt, I refer the Auditors to the Minutes of the Scrutiny Meeting of 17th January 2022 at which Scrutiny Committee Members expressed concerns that allegations of fraud did not appear to be investigated internally, asking for clarification on the internal investigation process – See minutes of meeting.
The MDDC Executive Officer for Business Improvement stated there was an MDDC internal escalation process and for referral to the Devon Audit Partnership.
HOWEVER just 4 days later, in a letter dated 21 January 2022, the MDDC Monitoring Officer tells the person making the allegation that:
“As the key Senior Officer has left the Council, It is clear that there would now be little, if any benefit, in conducting an investigation”.
It is true that senior officer left MDDC not long after the allegation was made in what would seem to be highly questionable circumstances given the timing, however it is clear that the facts at the centre of the allegation are still very much of concern to MDDC in terms of exposure both internal and external.
The Chairman stated that Mr Elstone was making a statement rather than asking questions but if he submitted the questions in writing he would receive a written reply.
Having submitted the question in writing above, the following replies have been provided to Mr Elstone’s questions by the Deputy Chief Executive (S151):
The answer is ‘No’.
We were informed of an unsubstantiated fraud allegation by a resident – who has been asked on numerous occasions to provide evidence to us or the relevant authorities and no information has been forthcoming – therefore there was no need/requirement to update the Committee.
Note: Cllr R L Stanley declared a Disclosable Pecuniary Interest in that he was a Director of the 3 Rivers Development Company Ltd. and from this it was inferred that should any discussion ensue he would need to leave the meeting.