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Investigation

INTERNAL
AUDITREPORT

ALLEGATIONS
OFIRREGULARITIES
RELATTNG
TOA HOUSTNG
GRANT& TOWN
IMPROVEMENT
GRANT

March2009

FINAL
Anglesey
GountyGouncil 1454
March2009
r1108

CONTENTS

sEc?t0N FAGE
lntroduction 1

Findings ,t

Executive
Summary 4

Conclusion T

AS$IGNMENT
CONTROL:
Draftreportissued: 11February2009 (HeadofAudi0
J.Fidoe
Responsesreceived: 2 March
2009
issued: 2 March
Finalreport 2009
Clientsponsor: N/A
Distribution: Section
1S1Offieer:Corporate
Director
- Finance
ce Frenerr:r/t.IntedmReDDraft
Printed:18Manh,2009 File:BlankAssuran

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GountyGouncil
March2009
r454.08t09

1. INTRODUCTION

1'1 In 2005anapplicant
applied forgnant monies to imprcve
hisbusinesspremise$,andalsoto convert
theupstairs
section
into2 flatsforfuture
letting.
Heapplied
forthefollowing
eligible
wo*si
Townlmprovement
Grant(ExternalWorks)
(WAGGrant) - [gg,22g
Commercial Grant(YMCC
lmprovement Grant- Planning)- t19,000
Landlords
Housing (YMCC
Gnant grant- Housing) -[67,0gg
Thefolloringgrantswereagreedi

Ttc - 847,378 (80%ofcost)-;

CIG - Nil* schemehadfinisheddueto lackofavailable
funds
LHG - e37,500

Inlinewiththerequirement
ofthesegrants theapplicant
wasrequired g4gK(TlGtlAK
to raiseapprox
I LHG €30K) by other
meansor fromhis own resource$.
Theproiect
wassanctionedin November
2006withRGRPartnenhip astheinitialagentsandtheworksawarded to W.R.Peterrs
Ltd(following
theusualtenderingprocedures
undertaken byRGRPartnership).

Theapplicant
decided to change
agentsto BestValueU.K.Ltd
andtheyadvisedtheapplicant
that
theywouldappointa contractor
to canyouttheworksin accodanewiintneprevious"dchedule
of
Worksspecifications.

Wewereinfonned by BVUKthatnewtendem had'been

obtained
for theTIGworksandtheirtetter
dated10 October2006statesthat5 tendershadbeenattained wifr theworksawarded tof
fwho we understand
h haveagred to carryouttheseworksat theoriginalpriceof ffi
|tisnotdearwhyfwasapproachedtoundertaketheTlGwofuatiheorigina|price
thetenderprCIcess
despite orrrvhy
thereis noevidenceof competitive
tenderfortheLHG. ihere are
nocopies ofhe tenderdmuments heldonthefilesmaintained
byPlanningandHousing Departments
due presumably becauseBVUKdealtwith ttreseprocedures. We understand thit in oder to
undertaketheworkswithinthegrantfigures,thatthenewagenthadomittedseveralitemsfromthe
original
specifications.

Conespondence
on file indicates
thatthe contract
workswerenot goingto planresulting
in the
withtheservices
of boththeagent{BestvalueuK ttd) andthe builder
onthe4 october
2007.
Thebuilder
wassubsequenfly
reinstated
onzshoctober2007
a consequence it hasbeendifficult
to obtaintherelative
paperworkin orderto calcrlate
thefinal
overallpojectactountfigute,although BVUKdidprovide contract
variations
andan unsigned final
account fortheLocalHousingGrant.

Theapplicant contactedtheAuditSection stating

thathehada longlistof complaints regarding
the
waythegrantsctemehadbeenadministered. Hewasparticularly concemed thequalily
regarding of
the norkmanship and allegedthat the Council'slnspectors had sanetioneO sunstanOard
workas
acceptable, thepayment
thusauthorising ofgrantsmonies forbothTownlmprovement Grantandthe
LocalHousing Grant.Although we understand thatit is the responsibility
of theappointed
agentto
undertake qualityinspection
of wotrs.lt wasexplained at the outsetthattheAuditTeamwls not
qualified
to comment onthestandards of fre actualworkcarriedout,butmerelyontheallegations of

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AngteseycoungCouncil {454.0g109
March
2.009

financialinegularig
in respect
ofhe contmct.

Furtherallegations
weremadeby theapplicant implyingthathe stagepayments madeby boththe
CouncilandWAGcouldhavebeenduplicated, withfundspaidto a thirdpartywhowerenoteligible
to
suchpayments.
r-eceive Conespondence heldonfileindicates
thatSrisconhacthasbeena subjeet
of
formal
complainh to boththePlanning
andHousing section's'Corporate
Complaint
Qfficerc'.
Thematterwasrefenedin March2008totheOmbudsman bytfreapplicant,
whodeclined
to intervene
untilfte casehadbeentullyinvestigated
bytheAuthorig.

Scopeof theInvestigation
Theinvestigation
waslimitedto theallegations
conceming inegularities andpayments,
in invoicing
Theinvestigation
did notcoversuchissuesas fte qualityof workmanship or fre decision
as to the
ofanyfuturegrantsmonies
recipient paidbytheCouncil.

2. FINDINGS

Payments madeby WAGandYffiCC

In orderto asertainwhichpayments hadbeenpaidby theWAGin respectof theTIGgrantwe
csntactedthemandtheyconfirmed thatthebllowingclaimssubmitted
by thegnants
inspector
had
beenpaiddirectto fte applicant
asperthegrantconditionsi

1.27M147 - €28,486
2.04/09t07
-€14,892
3. 18/0?08
- e4,000
(Total -e47,378)

Weestablished
thattheHousing hadalsopaiddirectto thebuilder
GrantSection payments
inrespeet
oftheLocalHousingGrantofi

1. AW07t}l
-810,299.92
2. 06n?,07
- e9,450.07
(Total - €18,749.99)

hadbeenpaid,twoof theauditors
ln orderto clarifywhichinvoices visitedthebuilder,I
onthe'14January 2009andreceivedthefollowing
conftrmation
of payments received
toGG:-
Table1
Payment Date Inv.No. Amount Source
No.1 01.04.07 070401 e2$75.00
No,2 05.05.07 070504 t17625.00
No.3 42.47.47 070703 810299.90
No.4 02.07.07 070701 910299.92 PerYMOC
No.5 26.09.07 070939 t8450.07 PeTYMCC
TOTAL t?6049.Ss
A letterdated15September
2008issuedbyapplicanfs
accountant paynents
statesthatthefollowing
weremadetothecontractor
byhisclient.

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Anglesey
CountyCouncil 1454.08t09
March2009

Table2
16April2007 t29375.00
09Mav2007 tl7625.00
05Julv2007 r10299.00
TotalPayments t57299.00

It wasnoteddudngtheinvestigation
thatan invoice for817625 by theagentforpayment
submitted
wasonlypartpaidbytheCounciltotheamount of t10299.92.
Thebalanceof theinvoice
totalhaving
beenpaidbytheapplicant to a letterfromBVUKdated02{7-07whichweunderstand
according is
normalpractice
forsucfipayments,

Enoneous Invoices
It seemsthat3 furtherinvoieswereissuedby theContnactor,
butthereis no recordof payment
in
evidenceeitherbytheWAGor theCouncil's grantssection.Theseareallegedbythegrantapplicant
to be enoneous invoicesissuedby theBuilderfor thesameworksas above.Thedehilsof the
inquestion
invoices arcasfollowsi

Table3
Date lnv.No. Amount
243n7 070326 129375.00
nnn7 070327 917625.00
07!6t07 070612 e17625.00
Whenquestioned abouttheselaterinvoices,
thecontractor andhissecrehrystatedtrat theyseemed
likeduplicates.
Theye;plained thatduringthepedodwhentheseinvoices wereraisedtheyemployed
a clerkwhowasresponsible for raisingtheinltialinvoices. payment
On receiving for theinvoices
shownin table1 she raisedthreenewinvoicenumbers fur reasons
unknown. Thebuilderand
seoetarydidnotknowwhyshedidthisandshenolongerworksfurthebuilder.

Audit'sinvestigation
conftnned thattheamounts shownintable1 onlyhavebeenpaid.A furtrercheck
of theCouncil'sCreditots System established
thatonlytwoHousing grantpayments
in relationto he
worksat Holyheadhad beenmade.We alsoconfinned tom lhe Gouneil'sreeordsthat invoice
numbers 070326, W0327and070701 werenotpaidbytre Council. WealsolookedattheCouncil's
payment recordsrelatingto thebuilder,BVUKandthegnantapplicantbutfoundnoamounts overand
abovethetwopreviously mentioned LocalHousingGrantpayments havebeenmade.
(However.anyVATimplica$qns
thatarisefom theissueof theseapparentlv
enoneous
inygices
will
haveto beaddressed
bytheBuilder).

Duringa visitto the formeragentBWK we wereinfonned by theagentthatas regards to the

eroneous invoices,hedidnotkeeptrackofinvolces assuch.Inrelationtothe!'ltAGgnant
hesentthe
originals
to theapplicantwithcopiesto theAuthori$'sPlanning$ectionfortheattention
oftheGrants
Manager in oder thathe couldprepare his reportto WAG.Theoriginalinvoices relating
to the
LandlordsHousing Grantweresentdirectto fte Authoritt'sHousing
Section.Audithasverifiedthat
invoice
numbers 070612and070939, whichareonthebuilder's headed paperandnotcopies, are
heldontheHousing Grantfile.

Verificationof ltlforkslnvolced
Wechecked the Council's filesfor thegrantsheldby theHousing
andPlanning
Departments
for
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Anglesey
CountyCouncil 1454.08'09
March2009

supporting
documents including
detailsof workclaimedfor on invoicas.
Copiesof interim/ plogress
payment issuedbytheagent(BVUKIwere
certificates onfilewithnelated
inspection
sheets.
Wewereinformedby bott departments that it was normalpracticeon inspection fur suchgmnt
for payrnent
invoiceshat authorisation is basedon a visualassessment of the progressof works
ratherthana detailedbreakdown of workdownfr,omthe builderor agenl.Weundentand thatit is
usualfura moredetailed inspection
to becaniedoutat thefinalaccount stagewhichhasnotbeen
reached fortheLHGatthetimeof theinvestigation (February
2009).

Wealsocontacted tte builderandvisitedtheagentto obtainrelevant

detaited
supprtingdocuments
refeningto the wod<caniedout relatingto eachpaymentWe wereinformedby boththatsuch
detailed
records ofworkwere notmadebefore invoicingforstagepaynents.

FinalAccountFlgure
we thenattempted
toverifywhatthefinalaccount
figureforthecontnctshould
be.
Anothervisitwasundertaken bytwoof theauditors.on 19January2009to thefqrmeragent,namely
BestValueUKLtd,to endeavour to gatherfurtherinformation
wtrichmightbe of benefiiin clarifying
thesituation.
Wewereinformed thatdueto thefactthattheagent'sservicesweredispensed withby
theapplicant whilstthewo*s werein progrcss, theycouldnotproduce an accurate ovenall pnoject
finalaccountfigureforthecontract(TlG& LHG). Theydid,however,estimateffrefiguras
asbllowsi
Townlmprovement work- t54213(plusVAT)
Grantrelated
Landlords
Housing work- t53149(plusVAT)-
Grantrelated
TotalCost - t107362(plusVAT)=t126150.35.
. Although
theHousing a finalactountfigureftomBVUKfor the LHGof E5S02lwhich
ftlecontains
figurewehaveusedinthecalculations
below.

Records showftat a sumof t76049hasbeenpaidto date,leavinga balance figureof 952308

outstanding/ dueuponcompletion
of alltheworks.Witha grantaidedfigureof t18750to befurther
paid,thiswouldleavea sumoft33558owingbytheapplicant.

TheHousing hasalsoprovided
Department an estimated
finalaccount
figure(estimated
fortheTIG
andbasedon BVUKfinalaccount figurefortheLHG)whichinmrponates he relevant
omitsladdsin
connection
withtheworks.Thisfigureish elg7z7-(Tlct10195andLHGt9532)afterthepayment of
theoutstanding
LocalHousingGnntf18750. Thesefigures
wenowundenhndto havebeenverbally
agreedbythebuilder.

Thebuilderadvisedthatthereis onlyaboutoneto twodaysworkstillouFtanding in orderto complete

whichwouldprobably
thiscontract, costin he regionof t1k. Hefurtherinformed theauditorsthathe
estimatedthe applicantowedhim in the regionof t30ldt35k(excluding the outstanding HRGof
forworkwhidrhehasnotyetinvoiced.
€18.7k)

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Anglesey
CoungGouncil r454.08t09
Mareh20119

3. EXECUTIVE
SUMMARY

Investigations
haveshownthatonlyfiveinvoices
havebeenpaidto date.Twoin relation
to theLHG
grantby theCouncilandthreeby theWAG,Thereis noevidence
trat thepayments werenotbeen
pmperlyprocessed
bytheCouncil's Planning
andHousing
department.

lnvestigations
revealthatwhist&erearesofiteconc€ms rcgardingSrewayenoneous
invoices
have
beenraisedonthreeoccasions, thereis noevideneto mnfinntrat payments
havebeeneffected
by
duplication
orthatanyinegulartransactionshavebeenundertaken.

It wasobservedonsitevisitsto thecontnacto/s
officethathisbookkeeping rccordswerein anuntidy
stateand this and inexpedenedstafi couldhaveresultedin invoicingemrs. Furthermqre, the
dispensing
of theservicesof BestValueUKLtdastheagenthasaddedto fre problems of obtaining
paperworkfortheTIGthatpruvides anappropriate
audittrailof wod<
andinvoices.
Thereis onlya minimumamountof workrequited
in orderto complete
theLandlords
GrantWorks
thusallowing
therelease gransmonies
ofhe remaining oft18780.
4. CONCLUSION

Ourinvestigations
havenotfoundeviderree
of anyinegularity
in thefivepayments
madeto dateon
thisgnant.

Havingconsideredtheresultsof theinvestigalion
to dateI do notbelierre
thatfurtherinvestigation
is
warantedby the-lntemafAudit'sectionunlessfurtherfirm and rclewnt-e|legations-eoneeming
paymenlsonfiis grantaremade.

lf anyfurtherinvestigation doesprcvenecessary
by tre IntemalSection it wouldbe beneficial
to
explore qualifled
fte useof suitably forensic
accountant
investigators.
I understand
however, thatthe
Policehavenowbeenaskedto lookatthismatter andobviously
thelnternalTeamwillhelpthepolice
withanyenquirieshat theywhichto make.

AuditManager
2 March2009

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