Ynysawdre Community Council and Llangynwyd Middle Community Council have been heavily rebuked by Audit Wales for historic financial mismanagement after a former clerk to both councils – Natalie Morgan – paid significant sums of public money into her own bank account.
It comes days after Audit Wales raised serious questions about the quality of financial management in the town & community council sector as a whole.
Maesteg Town Council and Porthcawl Town Council are still subject to investigation for financial mismanagement reasons, while a former member of Laleston Community Council was recently ordered to pay back more than £1,800 which was unlawfully claimed.
Two public interest reports were published yesterday focusing on the period 2013-2017 and largely covering the same ground.
Ynysawdre (pdf); Llangynwyd Middle (pdf).
Background
Natalie Morgan was employed as clerk to Ynysawdre Community Council from July 2012 to September 2017 and Llangynwyd Middle Community Council from April 2013 to September 2017. Both councils raised “irregularities” in their accounts with Audit Wales in September 2017.
Neither council had significant records from the time to enable auditors to complete their work, as the former clerk had control over them and only made a limited number of them available (thought claimed they were a complete record).
Mrs Morgan also refused to answer the auditor’s questions. Most of her side of the story is a result of police questioning.
How much was lost?
In total, Ynysawdre Community Council is estimated to have lost £84,020 and Llangynwyd Middle Council £39,712.
Auditors say Mrs Morgan made unlawful payments to accounts controlled by herself and/or her husband from both councils totalling around £113,000.
This includes massive inflation of her salary (which was fixed at just £5,500 a year at Ynysawdre and set on a year-by-year basis at Llangynwyd Middle), various expenses, back pay and bonuses she wasn’t entitled to (including multiple laptops and office expenses), questionable payments to HMRC and payments to third parties and staff which made their way to her bank account.
Several third parties – which were listed in the few transaction records there were as having been paid – confirmed to auditors that they never received any money. These third parties include Bridgend Council and One Voice Wales (the community council representative body).
£6,000 was unlawfully transferred from Ynysawdre to Llangynwyd Middle across several payments, which were seemingly to keep the respective accounts in balance. At one point Ynysawdre only had 2p left in their bank account and eventually went overdrawn. Auditors believe these transfers were made so Mrs Morgan could make additional payments to herself and that’s supported by some of the transaction records.
Following the closure of the HSBC bank branch in Maesteg, Mrs Morgan set up new bank accounts on both councils’ behalf – where she was the sole signatory – without their approval or knowledge.
There are other unidentified payments – one of which appears to be a “loan” to Mrs Morgan of more than £3,200 from Ynysawdre. She told police this “loan” was paid off by doing routine maintenance work herself on behalf of the council – such as watering flower beds – instead of employing someone. None of these payments was approved by either council, though she claimed the former Chair of Ynysawdre – who has since died – authorised many of them.
The Council Failures
Auditors concluded that both councils failed to undertake even the most basic governance and financial checks.
Although the clerk is the responsible financial officer, it’s the responsibility of the councils to make sure the right decisions are being made and to keep control over their finances which is almost entirely made up of council tax precepts. Even the most basic common sense things – like requiring a second signature to authorise payments – weren’t being done.
There was no internal audit either. While a “Sarah Lewis” is mentioned as an internal auditor and signed off accounts, no councillors ever met “her” and it’s suspected Mrs Morgan filled in returns by herself.
The councils’ grip on things was so poor they let it happen under their noses without any challenge – a mix of laziness and stupidity. In early 2017, Natalie Morgan even called the police when a residents group tried to attend a meeting of Ynysawdre Community Council to question how money was being spent.
The Outcome & Recommendations
You’re probably going to struggle to believe this as much as I am, but despite the sums of money involved Mrs Morgan faces no criminal charges – possibly because the two councils were so bad at keeping tabs on things it almost comes across as they were OK with it.
Nonetheless, Audit Wales has recommended that both councils work to recover the money from Natalie Morgan (which I assume will be a very expensive civil claim). They also recommend significant improvements to record-keeping, a full review of their financial procedures and the appointment of internal auditors.
Both councils are now legally required to hold an extraordinary meeting within a month to discuss the report and take action where necessary.
All of the current councillors (edit: since this was posted it emerged that a sitting member was an Ynysawdre councillor but only for two months) and the clerk to Ynysawdre Community Council were not in office at the time and the situation at the council has improved significantly since Mrs Morgan’s departure. However, some sitting members of Llangynwyd Middle Community Council presumably were in office as there’s no disclaimer in their report.