(Pic: © Copyright Jaggery and licensed for reuse under Creative Commons Licence BY-SA-2.0)
As you may be aware, Porthcawl Town Council is currently under investigation by Audit Wales and South Wales Police over possible financial mismanagement during 2019-20.
Earlier this week, an internal audit report into the council’s 2020-21 accounts was published (pdf) and it doesn’t make particularly good reading.
The headline findings and recommendations have already been reported on elsewhere, but it’s worth doing a more thorough summary.
As it’s an ongoing investigation, I’ll keep this summary to the content of the report itself.
There’s a wider issue of poor governance and infighting amongst some town and community councils in Bridgend and Wales more generally. At a time where many of them are seeking (or being forced) to take on more responsibilities, it’s a concerning development ahead of next year’s local elections.
The Key Findings
There’s a lot to get through, so I decided to split the findings into those focused on how the council is run and the financial issues. It’s also worth mentioning areas where the auditors believe the council did things the right way.
Governance & Administration Failings
- Governance and financial procedures haven’t been reviewed “for some time” and several recommendations from the 2019-20 internal audit weren’t implemented: “As such, the Council cannot be said to have operated throughout the 2020-21 financial year on a lawful basis.”
- A “Decisions Team” made key decisions behind closed doors without the approval of the council as a whole, which goes against the council’s own rules/standing orders.
- There’s a general lack of transparency concerning minutes and publication of accounts. There was little to no evidence that financial work was properly scrutinised by the council: “the lack of due diligence by Members (town councillors) is of extreme concern and represents an unacceptably low level of financial management and scrutiny throughout the 2020-21 financial year.”
- There is no formal scheme in place to inspect or manage playgrounds (the council is currently in the process of taking on responsibility for Griffin Park). Informal inspections are carried out but all inspections should be undertaken by someone trained to do so. This potentially puts the council at risk of being accused of neglect or mismanagement.
Financial Failings
- The council has no in-house accounting system/software and there was no appointed Responsible Financial Officer (at town and community council level this is usually the clerk) during 2020-21 (though this has since been resolved). Accounting was outsourced. Like-for-like budget comparisons from year to year were difficult due to this arrangement.
- The council failed to properly tender projects relating to the Griffin Park toilets and the appointment of Credu Charity (formerly the Porthcawl Harbourside Community Interest Company) to undertake work for the council. Credu had two sitting town & county borough councillors as officers – Cllr. Norah Clarke (Ind, Nottage) & Cllr. Mike Clarke (Ind, Rest Bay). Interests were declared but mainly in confidential minutes. Some of this outsourced work isn’t properly reflected in the council’s financial policies.
- Credu invoiced the council for more than £50,000 during 2020-21, but there was no evidence of a formal resolution to approve it (the council’s own threshold to require formal approval is £25,000).
- There’s a £35,000 shortfall in the running costs of the new Griffin Park toilets for 2021-22 because councillors only considered the cost of completing the project not running it afterwards. The council’s total budget deficit for 2021-22 is estimated to be around £80,000 (which for a community council is quite large).
- There are concerns with how income from the Porthcawl Hub – used by a local veterans group (amongst others) and run by an employee of Credu – has been reported. There are no records of bookings, transactions etc. (though it’s worth remembering the impact the Covid-19 pandemic will have had on use of the hub).
- There is no record of formal council approval of payroll for 2020-21, though detailed payroll figures were provided later with no issues arising.
- The Fixed Asset Register is incomplete but has been complicated by the liquidation process of Credu. The main point of contention is over the ownership of five media screens, which were paid for directly by the council for use by Credu. Only one of the screens has been installed.
- The council has more than £250,000 across two bank accounts, but they’re only protected to a maximum of £85,000 under the Financial Service Compensation Scheme. This means the council has (technically) put this money at risk by not spreading it across more investments.
What Porthcawl Town Council got right (or almost right)
- They took every measure necessary to comply with Covid-19 public health regulations and any changes to services were properly recorded and reviewed – though standing orders weren’t changed to factor in irregular working.
- The council properly reclaimed VAT (worth over £43,400 in 2020-21), but this was done annually when advice is for this to be done quarterly.
- The council is properly insured.
- The council’s general reserves of around £179,000 are “comfortably within” accounting guidelines.
- All of the council’s income (except for the Porthcawl Hub) has been properly accounted for.
The Recommendations
The auditors made 27 recommendations for improvements, summarised as:
- The council should, as a matter of urgency, get an appropriate accounting system/software in place.
- The council should ensure all major financial decisions go through the full council or the finance committee. They should also consult with One Voice Wales (the town and community council body) on the appropriateness of the “Decision Team” system.
- Councillors should be reminded that they have no authority to seek quotes for work or place orders on behalf of the council as individuals.
- “Confidential” items of business should be dealt with in accordance with normal procedures. Private meetings outside normal/formal council business which predetermine decisions should no longer take place.
- VAT should be reclaimed quarterly rather than annually.
- Management of playgrounds should be overhauled with appropriate training and record-keeping.
- Councillors should be presented with an income and expenditure report at every full council meeting. The budget-setting process should have a formal schedule and agenda that fully takes into account the ongoing cost of new projects.
- The council should take all reasonable measures to recover its property (as a result of the liquidation of Credu).
- Surplus funds in bank accounts above the FSCS threshold should be invested elsewhere to spread risk. The council should also have a formal investment strategy.
