During my researches into this matter I went to Milford Haven library to consult the back numbers of the Mercury in order to refresh my memory about what exactly I had written at the time.
Questions were raised at the meeting on 8 February 1995 about the involvement of members in this scam.
As Cllr Basil Woodruffe put it: "Any councillor who doesn't notice an unauthorised car park on his patch isn't doing his job. He probably doesn't notice because he asked for it to be put there in the first place."
Cllr Woodruffe went on to say that members themselves had been "guilty of malpractice" and concluded: "There are rogues among us", which removed the need for any heavy thinking about the wording of that week's front page headline.
He wanted to know whether those members who were implicated ought to declare an interest.
Nobody moved, though Old Grumpy knows for certain that, during the investigation, two members (possibly more) were interviewed about their part in the affair.
Perhaps the most bizarre contribution to the February 1995 meeting came from Cllr George Grey.
He told the meeting that "Officer A is one of the highest quality officers on the council's staff. He undertook these unauthorised works because of his social conscience. The Broadhaven car park was necessary to save lives. He has performed a service to the council for which he deserves a medal."
That was too much for the Chief Executive, who pointed out that the Broadhaven car park had been built on private land without the permission of either the owner or the National Park Planning Authority.
"The National Park is threatening enforcement action to have it removed" he said, "I can't see anything to applaud in that."
In my column that week, I wrote: "Can we be sure that Cllr Grey's judgment wasn't clouded by the fact that he and Officer A both belong to same lodge of the Freemasons, and how many other members should have declared an interest for the same reason?
The answer came at the meeting eight months later,on 21 November, when six members, including Cllr Grey, declared their masonic ties to Officer A and left the meeting.
But not before they had taken part in the vote to hold the meeting in secret.
Of course, one was still left to wonder why they hadn't declared the same interest at the earlier meeting on 8 February 1995 Surprisingly, during the February meeting, one of these six, Cllr Maurice Hughes, had been one of the fiercest critics of what had gone on
"I can't believe that the officer was driving up the Fishguard Road when he suddenly decided to paint the Food Hall. Which member was responsible", he asked
This was a reference to the painting of the Food Hall at Withybush Showground ahead of its use as the venue for Cllr Peter Stock's inauguration as Chairman.
But, whoever it was, it wasn't Peter.
He told the meeting: "I was unaware that it had been painted until I arrived that day."
Below are the full reports to the various meetings that took place.
My own comments are italicised in square brackets.
There is a good deal of repetition but, if you manage to wade through the whole thing, you will gain a valuable insight into how local government works here in Pembrokeshire.
And how, despite the auditors best efforts, nobody had any precise idea as to the extent of these illegal practices.
Report of the Monitoring Officer [Islwyn David] on contractual and disciplinary matters relating to the Central and Northern division of the Works Department.
In October, 1994, following the discovery by the audit section of the Treasurer's department of apparent irregularities in respect of a particular contract, the district auditor's advice was sought and the matter was reported to the police, whose investigation into this and other contracts is continuing. Concurrent with the police investigation, I initiated an internal investigation to establish whether there were grounds for disciplinary action against any council staff; in the meantime, three officers of the central and northern division of the works department were suspended on full pay while internal investigation was carried out.
The internal investigation led to the discovery of irregularities in respect of a number of other contracts, involving several contractors, and these have been examined in detail. As a result, the investigation has taken longer than had been originally envisaged. Indeed, although why have now received a report from the investigating team on the matters which have been examined to date, the investigation into certain matters is continuing. I should like to record my thanks to the following members of the internal investigation team for the thoroughness with which they have carried out the task:
Mr. T. Dobson, Assistant Treasurer
Mr. D. Harries, Quantity Surveyor
Mr. M. Phillips, Principle Auditor
Mr. N. Andrews, Audit Manager, District Audit Service
Thanks are also due to the treasurer and director of planning for releasing their officers to carry out his work at a time when their departments have been burdened with a particularly heavy workload relating inter alia to the formulation of the 1995 /96 estimates and preparations for local government reorganisation.
The present position with regard to the three officers who were suspended is as follows:
Officer A - resigned on grounds of ill-health with effect from 11th January, 1995. [and couldn't thereafter be interviewed by the investigation team]
Officer B - a disciplinary interview with the Director of Works [Fred Fisher] and Head of Personnel Services [Francis Maull] on 18th January, 1995 was adjourned by agreement with his union representative. [Resigned on ill-health grounds before the adjourned disciplinary proceedings took place and could not, therefore, be further interviewed. In fact this report is not entirely accurate because Officer B had actually resigned on 18 January]
Officer C - given a written warning and returned to work. It was felt that this Officer's role in the matters investigated was minor and it appeared that he had acted under duress [The Nuremburg defence, which also leaves open the question: duress by whom?].
The internal investigating team has provided me with a series of detailed reports which, taken together, constituted a substantial file. Much of the information therein must be regarded as confidential and is the subject of the ongoing police investigation. A summary document, however, is attached at Appendix 1, which provides members with the basic facts. As I feel that it is in the public interest to consider this report in public session, I have deleted the names of the contractors involved.
It must be emphasised that the irregularities which have been brought to light are all in respect of contracts in the Central and Northern division - there is no evidence of any irregularities in the way in which contracts have been handled in the Southern Division. The conclusion from reading the report of the investigating team is that the culture appears to have developed in the Central and Northern division in which unauthorised expenditure appears to have been regularly incurred and that contractors have been regularly encouraged to falsifying invoices in order to hide the cost under other approved budgetary headings. [This is a bit of a slippery statement because it stands to reason that, while the money may have been spent under approved budgetary headings, it was not spent for approved budgetary purposes. What actually happened was that money budgeted for mending holes in the road, repairing pavements, or whatever, was misappropriated (stolen) and used for other, wholly illegal, purposes.] Furthermore, because of lack of adequate records maintained by the Central and Northern Division of work ordered and carried out and the inability or reluctance of the contractors to provide information, it is not possible to reconcile the amounts paid to the contractors with the value of the work completed. Therefore, the full extent of the unauthorised expenditure or the amounts which may have been overpaid to contractors is not known (my emphasis).
While some of this work was carried out on land in which the council has no interest (e.g. the car parks at Broad Haven and St Dogmaels and the works at Withybush Showground) and was therefore totally irregular, other works to property owned by the council would have been perfectly legitimate if due provision had been made in the estimates - indeed, if they were considered urgent, approval could have been sought for virement or alternatively for supplementary estimates [Unfortunately, for those involved, that would have meant going through the democratic process. How much easier, if you wanted a new car park in your area, to collude with the Officers to steal the money required.] The actions taken however were in flagrant disregard of Financial Regulations and Standing Orders relating to contracts and present a prima facie of gross misconduct. [Interestingly, while all this was going on, the case of R v Bowden was making its way through the Court of Appeal. That case involved one Terence Bowden a maintenance manager with Stoke on Trent City Council who had been convicted of the old Common Law offence of misconduct in public office for dishonestly diverting council property to a friend. The issue before the Court of Appeal was whether the offence of misconduct in public office, long held to apply to civil servants, also covered those working for local authorities. The Court had no difficulty bringing local government officers within the law. Indeed, the report on the case in the Local Government Chronicle strongly supports the view that members could also be prosecuted under this law].
It is imperative that the sorts of practices which have been the subject of this investigation should not be allowed to occur again. To that end I strongly recommend:
(1) That the Divisional Works Consultative Panels should be redesignated as sub-Committees; their proceedings to be regulated accordingly under meetings open to the public and press; agendas to be controlled by my Committee office and proper minutes kept; and that any recommendations which they make with regard to expenditure for which there is no budgetary provision will be submitted to the Public Services Committee or the Housing and Environmental Health Committee as appropriate (my emphasis). (See Toothless watchdog)
(Note: if the recommendation with regard to agendas and minutes is adopted, it may be necessary to seek additional support in the Committees section of my department).
(2) That all expenditure, other than emergency work, responsive work, or that of an urgent nature, shall be approved by the Divisional Sub-committees and that the requirement that all work not covered by budgetary provision must be subject of virement or supplementary estimate be rigidly enforced. Elected members should not attempt to require officers to carry out works except through the machinery of the appropriate committee or sub-committee.[Or, put another way, elected members should not subvert the democratic process by pressurising officers to misappropriate council property] (see Toothless watchdog)
(3) That the scheme of delegation of functions approved by council on 19th May 1984, be amended so as to delegate the functions involving the incurring of expenditure listed in Appendix 2 to this report to the Divisional Sub-committees, rather than to the Director of Works.
(4) That any deliberate breach of financial regulations or standing orders relating to contracts by any employee shall be regarded as gross misconduct (That the council had to pass such a resolution only goes to show what a pretty pass had been reached).
(5) That there shall be a general presumption against the attendance of Officers of this Council at meetings of town and community councils, other than in exceptional circumstances where instructed by the Chief Officer of the department concerned and then only in respect of specific items which relate to the functions of the District Council and of which due notice is given in writing.
(6) That the Director of Works submit proposals with regard to the organisation of his department from the present time until 31st March 1996 with particular reference to the management of the Central and Northern division and the separation of the client and contractor function.
(7) That all departments be required to review a their lists of officers authorised to place orders and certified accounts.
(8) That the invoice submitted by Firm D [£1,267] for painting the Food Hall at Withybush Showground in connection with its use in connection with the chairman's Civic Service be paid.
(9) That a recharge of £700 be made to Haverfordwest Town council for painting at Picton House.
(10) That the council should seek to recover as much of the remaining cost as is legally possible.
(11) That provision be made in the current year's accounts in respect of unauthorised work for which no budget provision has been made.
There remains the question of the four firms who have been prepared to co-operate with officers in falsifying accounts. Members need to consider whether any (and, if so, what) sanction should be taken against them [In the event a decision on this matter was deferred pending the outcome of the ongoing police inquiry].
It is my opinion that it is likely that this latter question will need to be considered in private session by virtue of paragraphs 7 and 14 of Part 1 of Schedule 12 a to the Local Government Act 1972.
Audit report: internal investigation
On Friday 4th November 1994 the Chief Executive asked Mr T Dobson, the Assistant Treasurer, Mr D Harris, the Quantity Surveyor, and Mr Phillips, the Principle Auditor to form an investigation team with Mr Neville Andrews from the District Audit Office in attendance.
The terms of reference of the investigating team were as follows:
(a) To investigate and obtain information relevant to irregularities highlighted in internal audit creditor file report relating to Firm A dated 4th August 1994.
(b) To investigate any other suspected irregularities which may be brought to the attention of the investigating team as result of (a).
(c) To interview, where appropriate, any person who may be able to assist them with their investigation.
(d) To prepare a written report to the chief executive detailing the findings made. The report to be provided no later than Thursday 17th November, unless an extension is necessary and agreed.
The team was subsequently advised by the police that statements and transcripts of their interviews with individual employees would not be made available.
Furthermore, because their inquiries concerning possible fraud was continuing, the police requested the investigation team not to interview the Contractor and two of the employees concerned until they had conducted further interviews. These interviews were not completed until 22nd November.
While waiting for the police to conclude their interviews the team interviewed other employees of the works department in order to gather background information. During the course of these interviews information was volunteered on a number of suspected irregularities. As a result the chief executive was advised that the deadline of 17th November was unrealistic and indefinite extension was granted.
This report summarises the findings made by the internal investigation team following their appointment.
(2) Firm A
Officers of the Central Division entered into a contract with Firm A for the provision of services at public conveniences, and also for the supply of various items of equipment which was to be fitted into the public conveniences.
It would appear that as there was insufficient funds in the budget for the council to pay for the contract, it was agreed that the payment for the contract was to be made by a third party, Firm B, a local building Contractor, (note - an audit examination of the Central Division order books for the period 1st April 1993 to 30th October 1994 revealed that this contractor had received payments in excess of £270,000 during this period, on 97 separate orders. None of this work appears to have been ordered following the receipt of tenders). Firm E was to be reimbursed for the payment by the falsification of invoices on contracts for the renovation of council houses which they were undertaking on the council's behalf.
This peculiar [wholly irregular] payment arrangement was the subject of an initial internal audit report, and is still the subject of an ongoing police investigation
The investigation team interviewed all persons concerned with the affair and most of the information obtained was independently corroborated by more than one person with the exception of the statement given by Officer A whose interpretation of events differed from the other statements obtained.
(3) Other irregularities
As a result of information received from a variety of sources, the following additional schemes were the subject of further investigation. For the purpose of this summary report the schemes are being grouped into the various contractors involved.
(i) Firm C
(a) Falsification of invoices.
The assistant treasurer and the council's highways inspector identified various invoices amounting to over £20,000 submitted in March 1994 [and that was only one month in a scam that went on for 'several years'] for works in the Central and Northern Division which appeared to have been inflated when compared with actual measurements and specifications. The Contractor has informed investigation team that these invoices were falsified in order to hide the cost of various other schemes (mainly the construction of a car-park at the council housing estate at Wiston, and the purchase of a bus shelter which is still being stored by the Contractor). [the explanation for this is that that one of the old boys on the council wanted a bus shelter in his ward. There was no money in the budget for such a purchase. So, the councillor approached Officer A who quietly tells Firm C to order a bus shelter. Firm C are then "paid" for the bus shelter by way of inflated or ficticious invoices for other works for which there is a budget. The officer in the Works Dept gets a pat on the head from the councillor and the councillor gets a pat on the head (re-election) from his constituents] The value of these other schemes have has been estimated at nearly £19,000. However the assistant treasurer has noted discrepancies in the information supplied by the Contractor which has suggests that a further invoice for over £3,000 is entirely fictitious. This matter is the subject of ongoing police enquiries.
It would appear that no official orders were raised for the schemes that have had their cost hidden and that none of this work was ordered or paid for in accordance with Standing Orders of Financial Regulations.
(b) St Dogmaels Community Council car park
The contractor falsified an invoice to hide the cost of the works carried out in the car park at St Dogmaels Memorial Hall. An invoice was received for the value £2,209 excluding VAT stating that the works had been completed on highway works at Cilgerran, and the Contractor has admitted that no such works were ever carried out.
No official order was raised for the works and no arrangements was made to recharge the cost to the Community Council.
(c) Maes-y Cnwce, Newport
An invoice had been received from the Contractor in January 1993 [more than two years before this report was written] and paid in the sum of £6,624 excluding VAT for tarmacking the road at the above site. A subsequent report had suggested that no work had been completed on the site and this had been confirmed by the Contractor who has stated that the works were completed elsewhere, though he has been unable to tell investigation team where.[What no records at the quarry as to where all this tarmac was delivered?]
(d) Broad Haven car-park
A car park was built in Marine Road, Broad Haven, on land which is owned by a private developer.
Firm C and another Contractor were following instructions given by officers of the Central Division. The estimated cost of the scheme was £8,000, though no invoice has yet been received. No official order was raised in respect of the scheme
No authority was given by the council to carry out these works or incur this expenditure, and it is the investigation team's opinion that it was intended to hide the cost of the car park in invoices submitted for other works as both contractors have admitted they regularly did at the request of officers of the Central Division.
(e) Tamacking an area at the Withybush Showground.
At the request of officers of the Central Division the contractor tarmacked an area at the Withybush Showground outside the Food Hall at a cost of £8,446. No invoice has been received for the works, and it would appear that the cost of the job will be paid by the Pembrokeshire Agricultural Society. The letter from the Agricultural Society requesting and recharge was received after the commencement of the internal investigation.
No official order was raised in respect of the scheme
There would appear to be no apparent reason why such a peculiar [wholly irregular] arrangement was made to undertake and pay for the tarmacking works on the Agricultural Society's behalf and it is the investigation team's opinion that it was intended to hide the cost of the tarmac in invoices submitted for other works. There is however no evidence that the Agricultural Society was party to any intended deception.[If it is was the intention to "hide the cost of the tarmac in invoices submitted for other works", then, it was clearly not intended that the Agricultural Society should also pay. So, by what miraculous process did the Agricultural Society think that £8,000 worth of tarmac had appeared on their car park? And why did the Agricultural Society delay their offer of payment until after the commencement of the investigation, which was, incidentally, more than a year after the tarmac was laid?]
(ii) Firm D
(a) Picton House
This contractor had painted Picton House but at the request of officers of the Central Division had included the cost of the works in invoices submitted in respect of the painting of public conveniences.
An official order had originally been raised for the work, though subsequently cancelled. The effect of hiding the expenditure would have resulted in a direct loss to the council of £700, being the Haverforwest Town Council's contribution to the cost of the works.
(b) Food Hall, Withybush Showground
The contractor had painted, at a cost of £1,267, the Food Hall at the Withybush Showground in preparation for the Chairman [Cllr Peter Stock] of Council's inauguration [To add dignity to the occasion (see Llanfyrnach Church road below)].
No official order was raised and the contractor was told by officers of the Central Division not to submit an invoice for the work. He was told he would be reimbursed through other orders he would get from the council.[Who asked the officers to arrange for this work to be done?]
(iii) Firm E
(a) Broad Haven car park
See i. (d) above.
Although the invoice for £1,600 from this contractor has been received.
(b) Road leading to the Pembrokeshire Technical College.
The contractor carried out works to the grass verges and an open space at the entrance to the Pembrokeshire Technical College at a cost of £6,853.[My understanding is that this work was carried out on private land in the vicinity of the entrance to Pembrokeshire College - a rather different proposition] The Contractor has admitted that two invoices were falsified in order to hide the cost of this work. The Council's Highways Inspector has advised the investigation team that a third invoice submitted at the same time appears to been inflated by up to £3,000 to hide part of this or another job.
No official order was raised in respect of the works
(c) Scarrowscant sewer
An audit of the payments made in respect of the above scheme has identified a possible overpayment to the Contractor in excess of £8,500. The overpayment would appear to have been made by the submission of incorrect invoices from the contractor, and and an arithmetical error made by council officials. It would appear that the contractor has agreed to reimburse the Council for the overpayment, though the final sum due has not yet been agreed.
(4) Firm B
(a) Public convenience maintenance contract.
A contractor was employed on an hourly rate to drive continuously around the public conveniences in the Central and Northern Division inspecting them and carrying out minor repairs. He was also paid a further £60 per convenience for a survey. By the end of May £1,120 had been paid for the survey and £8,343 for hourly Labour. It was intended that this arrangement would continue throughout the summer period. It would appear that the arrangement was made due to adverse statistics regarding the speed at which repairs were carried out, and the fact that the Assistant Director (Central Services) had employed a workman to carry out the repairs.
In order to hide the true nature of the contract from the auditors an official order was falsified and a schedule of the works purported to have been completed was produced. A sample of this work was checked and in the auditor's opinion the work stated in the schedule had not been completed.
Furthermore, the building surveyor priced the schedule as originally submitted and has valued the work at approx £2,000 less than the amount claimed by the Contractor.
The Contractor is adamant that he is entitled to the full amount claimed because the agreement was for him to be paid for the number of hours worked, not the amount of work completed. However, because of a complete lack of valid documentation neither the council nor the Contractor can substantiate the value of the invoices submitted.
(5) Northern division of the Direct Labour Organisation (D L O)
(a) Cwm-Yr-Eglwys footpath
This contract was won in open competition by the council's own workforce, and was completed on behalf of the Pembrokeshire Coast National Parks.
The in-house contract resulted in a loss to the D L O of £18,000. Since the onset of the internal investigation, correspondence has been found which suggested that £10,000 of the loss had resulted due to the construction of a slipway at Cwm-Yr-Eglwys for the local boat owners. It would appear that the cost of the slipway had been hidden in this contract.
(4) Cost to the council
It is estimated that the cost of the above schemes is as follows:
(a) Firm A
Cost of unsuitable pedal operated bins £4,680
Cost of unsuitable paper towel cabinets £1,716
Cost of peculiar [illegal] payment arrangement £1,816
However, it is hoped that due to the involvement of the internal investigation team the loss will be reduced to the following amount:
Cost of unsuitable pedal operated bins £2,070
Cost of unsuitable paper towel cabinets £759
Cost of peculiar payment arrangements Nil
This has resulted in an estimated saving [?]of £5,383.
(b) Other irregularities
The following actual and potential losses have also been identified on the other matters outlined above:
Broad Haven car park £8,000 (unless cost rechargeable)
Tarmacking at the Withybush Showground £8,446 (costs now rechargeable so no loss)
St Dogmaels Community Council car-park £2,210
Falsification of F H Gilman Ltd invoices - current estimate in excess of £20,000
Picton House £700 (costs now rechargeable so no loss)
Food Hall, Withybush Showground £1,267
Road to Pembrokeshire Technical College £6,853
Scarrowscant sewer- current estimate £8,500
Public convenience maintenance (total not yet identified)
Cwm-Yr-Eglwys footpath - loss to the D L O £18,000
In addition, since the commencement of the internal investigation Firm C, Firm E and another contractor Firm F have submitted invoices for, and notified the Council of other jobs which they have carried out in this financial year on land which does not appear to be owned by the council. Further explanations of these works are currently being sought.
All the four contractors who have currently been interviewed by the Internal Investigation Team have agreed that they have falsified invoices to hide the cost of other works. They have all stated that the instructions for the falsification came from officers of the Central Division of the Works Department. One of the council officers concerned in the investigation has confirmed this to be the case.
Some other works completed but subject to irregular arrangements would appear to have been for legitimate council schemes [or, at least, they would have been legitimate if the irregular arrangements hadn't rendered them illegitimate]. However the investigation team have been unable to ascertain why others were completed.
A major part of the problem has been a total lack of compliance with the Council's Financial Regulations and Standing Orders relating to contracts.
Members of the Internal Audit Section have analysed the official orders raised by the Central Division between 1st April 1993 and October 1994. It was found that the value of the payments made during this period by Central Division on orders to the above four contractors were as follows:
Firm B £272,180
Firm E £186,482
Firm C £182,140
Firm D £61,989
It would appear that none of this work was awarded in accordance with the correct tender procedures although it was noted that quotations were obtained for a few of the schemes.[When it was eventually decided it would not be in the public interest to prosecute anyone over this business, the police gave as one of their reasons that nobody had benefited financially. Obtaining £700,000 worth of contracts without having to go through the competetive tendering process looks like a financial benefit to me. In fact, once this corrupt system was underway it became impossible for work to be awarded by a proper tendering process because the companies involved needed to jack up their prices in order to "create" the cash required to pay for the illegal works. Had there been a proper tendering process, these "extras" would have made them uncompetetive.]
As the investigation is not yet complete, the auditor feels that it is not appropriate to make recommendations at this stage.
T. Dobson Assistant Treasurer (Capital and Audit)
I.W.R. David Monitoring Officer 31st January 1995.
Preseli Pembrokeshire District Council
Tuesday 21 November 1995
Report of the Chief Executive on contractual matters relating to the central and northern division of the works department.
On the 8th February 1995, I reported to the Council in connection with irregularities in respect of a number of contracts in the Central and Northern Division.
That report (to which was appended an audit report by an investigating team established to examine these irregularities) dealt primarily with matters of internal discipline and recommended changes in procedures to try to prevent a recurrence. While the council would have been justified in considering that report in private session, given that individual members of staff were involved, I nevertheless felt that was in the public interest that it be considered in open session.
At the conclusion of that report, however, I did indicate that the council should, in my view, go into private session when it came to consider the question of the private firms involved in allegedly falsifying accounts.
In the event, that question was not discussed at the request of the police.
I similarly feel, therefore, that the council should go into private session on this occasion in order the give further consideration to various contracts [Members voted 22-12 to go into private session. Immediately following that vote, six members declared an interest because of their Masonic connections with one of the Officers involved. Fortunately, the following morning, a plain brown envelope containing a copy of the secret report appeared on the Mercury's doormat.]
So far as the police investigation is concerned, it is understood that that the files have been sent to the Crown Prosecution Service but at the time of preparing this report, nobody has been charged with any offence (Nor were they, ever).
A further report of the investigating team is attached as an appendix, and I have referred to the various firms and officers concerned by the same letters as were used in the previous report. It attempts to identify the cost to the authority arising from the falsification of accounts and draws attention to those instances where the council must decide whether or not to pay the accounts for unauthorised work. It reveals a complex picture and I sympathise with members in trying to work their way through it.
The cost of the irregularities which have been identified are summarised in paragraph 8 of the investigation team's report, pages 14-16. Leaving aside those works which have now been charged to third parties or which have since been charged to approved expenditure headings, a decision is now required with regard to those items listed under "unauthorised works are not yet paid for". These items can be dealt with in one of three ways of:
(1) This Council to settle these accounts on the basis that the work was performed on instruction of its officers.
(2) The loss to be borne by the contractors on the basis that they carried out works without official orders.
(3) The bills to be passed to third parties on the basis that Officers of this Council carried out the works on their behalf.
The management team has considered these options and has reluctantly come to the conclusion that it must recommend the council to settle the accounts concerned. While no orders were issued, it does appear that the contractors involved had been encouraged by certain officers to adopt this operational practice. Similarly, while they may be disagreement over the extent of pre-knowledge on the part of some third parties in respect of some of the items, there is no proof nor any documentary evidence that they were party to any instructions issued to contractors by council officers. On the other hand, there is no doubt that the works listed were carried out on the instruction of officers of this authority.
Also under paragraph 8 of the investigating team's report, there is a list of projects under the heading "amounts over-claimed by contractors". So far as the first of these (Scarrowscant sewer - £4,255) is concerned, the contractor has now agreed to issue a credit note to the council, to be deducted from future payments. So far as the other schemes are concerned, the management team recommends that no further payments be made under the heading "public convenience maintenance" as the Contractor has been unable to substantiate the value of the invoices submitted; and that in the case of 14 Glan Hafan Llangwm, and the six properties at Portfield Avenue Haverfordwest, only those sums to which the contractor is entitled under the terms of the respective contracts be paid.
The question then arises as to whether or not any sanction should be imposed on the firms involved. There is no doubt that they colluded with officers of the council in falsifying accounts in an attempt to hide the cost of certain works, although there is no evidence that any them enjoyed any improper financial gain from this - it seems to him more a question of co-operating in order to obtain further council work [So, as a reward for colluding with officers of the council in falsifying accounts they obtained council contracts, without having to tender, i.e they obtained an improper financial gain.] and have too cosy a relationship with certain officers.
Some of the firms are currently involved in other work for the council and, given the short period remaining to the end of March 1996 [when Pembrokeshire County Council was due to take over] it may be that no further sanctions should be taken, other than to express to the firms concerned the serious view that the council takes with regard to their actions [How convenient!!].
In February, the council accepted my suggestion that certain functions previously delegated to the Director of Works should in future be delegated to the three divisional sub-committees. One such function - to be responsible for street lighting works throughout the districts other than those dealt with directly by Dyfed County Council - had to be excluded at that time under the Council's standing orders, due to an earlier decision within the previous six months. For the sake of neatness, I now recommend that that function be delegated to the divisional sub-committees, rather than that to the Director of Works.
On Friday 4th November 1994 the Chief Executive asked Mr T Dobson, the assistant treasurer, Mr D Harris, the quantity surveyor and Mr M Phillips the principle auditor, to form an investigating team with Mr N Andrews from District Audit in attendance.
The terms of reference of the investigators are as follows:
(1) To investigate and obtain information relevant to irregularities highlighted in internal audit creditor file report relating to Firm A dated 4th August 1994.
(2) To investigate any other suspected irregularities which may be brought to the attention of the investigation team as a result of (1).
(3) To interview, where appropriate, any person who may be able to assist them with their investigation.
(4) To prepare a written report to the Chief Executive detailing the findings made. The report to be provided no later than Thursday 17th November, unless an extension is necessary and agreed.
On 24th January 1995 the internal investigation team submitted a report to the Chief Executive of their findings on the irregularities uncovered in the Central and Northern Division of the works department.
Subsequently the Chief Executive submitted his own report to full Council on 8th February 1995. A copy of the internal investigation's report was attached though was not considered in full due to the ongoing police investigation. However, various recommendations made by the Chief Executive were approved by the council.
This report follows up the irregularities discovered during the investigation and highlights the actions/decisions required to be taken to resolve the outstanding discrepancies.
(2) Firm A
A copy of the full report on Firm A affair is available for inspection, they can be briefly summarised as follows.
Officers of the Central Division entered into a contract with Firm A for the provision of services at public conveniences, and for the supply of various equipment which has also be fitted into the public conveniences.
It would appear that, as they were insufficient funds in the budget for the council to pay for the contract, it was agreed that the payment for the contract was to be made by a third party, Firm B a local building Contractor (note - an audit examination of the Central Division order books for the period 1st April 1993 to 30th October 1994 revealed that this contractor [Firm B] had received payments in excess of £270,000 during this period, on 97 separate orders. None of this work appears to have been awarded following the receipt of tenders). Firm B were to be reimbursed for the payment by the falsification of invoices on other contracts they were undertaking on the council's behalf.
This peculiar [dishonest] payment arrangement was the subject of an initial internal audit report, though upon the establishment of the investigation team, all persons concerned with the affair were interviewed. Most of the information obtained was verified by more than one person with the exception of officer A, whose interpretation of the events differed from the other facts obtained.
The equipment in question had initially been delivered to the City Road cemetery, and was later removed to a store owned by another local Contractor, Firm E, on the instructions of officers of the Central Division. It would appear that the equipment was unsuitable for use in public conveniences as the paper towels already supplied by the contractor to the council did not fit the Cabinet supplied by Firm A and the sack holders were easily removable.
Due to the investigation, 104 paper towel cabinets and 103 sack holders were recovered and returned to Firm A on 8th December 1994, in accordance with the agreement reached between representatives of the firm and officers of the internal investigation team in their meeting held on the 16th November, 1994. The goods were returned by TNT Express at a cost of £208 plus VAT.
On 9th January 1995, three credit notes were received from Firm A in the sum of £4,191 inclusive of VAT. These were offset against an unpaid invoice (No. 723244S) in the sum of £1,199, resulting in the net credit received by the council totalling £2,991.
The credit note received related to 87 interleaf paper towel cabinets and 87 sack holders. This was less than was expected, though the company advised the authority that 15 of the paper towel cabinets and 16 of the sack holders had been rejected. This still left a slight discrepancy of one item of each unit, though neither this, nor the rejections made have been pursued with the company. The net cost to the council has therefore been:
Added to this cost should be the cost of transporting the goods back to the company, giving a net overall loss to the council if £3,037.
The reimbursement to Firm B who paid for the original Firm A contract, is further detailed below.
(3) Firm C.
(a) Broad Haven car-park.
A car park was built in Marine Road, Broad Haven, on land which is owned by a private developer. This and another contractor were following instructions given by officers of the Central Division. The total cost of the scheme was £7,600.
No authority was given by the council to carry out these works or incur this expenditure, and it is the investigation team's opinion that it was intended to hide the cost of the car parking invoices submitted for other works as both contractors have admitted that they regularly did so at the request of officers of the Central Division.
No official order was raised in respect of the scheme.
Following the onset of the internal investigation the contractor submitted invoices for these works, which have not yet been paid. These invoices are currently held by the Director of Works [Mr Fred Fisher, who was ultimately responsible for what went on in his department. A point studiously ignored during the whole investigation process] and the investigation team are awaiting his advice on what action should be taken.
The decision concerning who was to pay for these works now needs to be made, bearing in mind that the work was not completed on council-owned land, nor has the contractor received an official order for the work [Old Grumpy was contacted by a nearby resident while this was going on. His complaint was that a car park being constructed outside his front window. Unfortunately, I didn't realise the significance of what he was telling me, particularly the presence, when the JCB turned up to cut the first sod, of several prominent members of the Community Council. What I now know is that the plot to build this illegal car park was hatched at a meeting of Broadhaven Community Council attended by Officer A, Preseli Pembrokeshire's Assistant Director of Works, Northern and Central Division.]
It had been originally suggested that the costs were to be recharged to the Havens Community Council, though there would appear to be no agreement to support this recharge. The Community Council have indicated that they do not feel obliged to pay.
(2) Tarmacking an area at Withybush Showground.
The contractor had tarmacked an area at the Withybush Showground outside the Food Hall at a cost of £8,446 on the instruction of an officer of the works department. No invoice was received for the works, though following the commencement of the internal investigation (my emphasis) a letter was received from Pembrokeshire Agricultural Society requesting that the cost of the job be recharged to them.
It is now understood that the Contractor has sent the invoice for these works [More than a year after the works were completed] direct to the Pembrokeshire Agricultural Society, who were to pay the bill.
It is the investigation team's opinion that it was intended to hide the cost of the tarmac in invoices submitted for other works [i.e. that the Agricultural Society were not expected to pay the bill] as the contractor had admitted that he had regularly done so in the past.
No further action is required on this work
(3) St Dogmaels Community Council car-park.
The contractor falsified an invoice to hide the cost of the works carried out that the St Dogmaels Community Council Memorial Hall car park. An invoice was received for the value of £2,209, excluding VAT, falsely stating that the works had been completed in respect of "Resurfacing and kerbing of footpaths in Cilgerran area, adjacent the toilet block" [where no such works were carried out].
The works were not completed on council land, nor had the contractor been issued an official order, nor were any arrangements made to recharge the cost to the Community Council. A decision now needs to be made as to who is to pay for these works
(4) Maes-Y-Cnwce, Newport
An initial internal investigation report concluded that the invoice in respect of this work, invoice number 1103320, dated 15th January 1993 in the sum of £6,624 excluding VAT, had been falsified to hide the cost of works completed at other unspecified sites. The Contractor [Firm A] had verbally confirmed this though was unable to state where the other works had been completed. The scheme forms part of the summary below. [ What we are expected to believe is that that more than £6 ,000-worth of tarmac disappeared though the gates of the quarry without anyone knowing where it had gone. What, no log books or tachograph records? Strangely Firm A had been very forthcoming about other illegal transactions. The reason for their reticence in this particular case was that, had they revealed the true destination of the tarmac, it would have blown a hole in the cover story that this was just a council officer bending the rules for some greater good.]
(5) Falsification of invoices
Following various meetings with Mr X of Firm A the internal investigation team have produced the following list of works which have been completed by the contractor and which he has stated had been paid for by the falsification of other invoices:
Wiston Council Houses £9022
Lower car park Haverfordwest Racecourse £621
Roch car park £1,608
Supply bus shelter £2,417
Market place Clarbeston Road £508
Carpet Llanrhian village hall £909
Maenchlochog play area £801
Llanhowel Church £1,100
Horeb chapel Letterston £1,937
Hoel-y-llan Llandissilio £1,598
It would appear that the intention was to hide the fact that these works are being carried out.
The list above does not include the following jobs which Mr X has informed investigation team were hidden, but following further examination of records, it would appear to the investigation team that invoices including these jobs had been paid by the council.
Jenkins Close, Merlin's Bridge £1,401. An invoice in the sum of £3,400 has been paid for work at this location, although the contractor has agreed that this as one of the invoices was falsified to hide other works (see below).
Little Newcastle trenches - it was originally suggested that the cost of this scheme, in the sum of £988 had been hidden by the falsification of other invoices. The value was later reduced to £513 when the contractor was advised that an invoice had already been processed for this scheme in the sum of £3,001, the contractor revisited the site and stated that the additional claim could not be justified.
Maes-Y-Frenni, Crymych - the contractor claimed that the cost of works to the value of £1,989 had been hidden, however the audit section had previously undertaken an audit upon an invoice which included work done by the contractor on the site through the jobbing repair system. This report has cast doubt upon the claim that the cost of any works on the site have been hidden.
The internal investigation team have also agreed with the contractor that the following invoices had been falsified to hide the cost of the above schemes.
Site Value of work Amount invoiced Maes-y-Cnwce 2,242 7,137 Maes-y-Cnwce 6,624 Lamposts 200 1,100 Jenkins Close 1,401 3,400 North St 2,673 3,673 Slade Lane 1,336 3,412 Ruther Park 1,853 4,913 Glenover Park 3258 6259 total 12,963 36,554
Total overclaimed £23,591
The internal investigation team had also suggested to it at an early meeting that the invoices on the following schemes also appeared to have been falsified
Kiln Road, Haverfordwest ( £1,000, possible discrepancy)
Hill Lane and Goat Street, Haverfordwest (£3,001, possible discrepancy)
Rickwell Terrace, Haverfordwest (£1,499, possible discrepancy)
Bishop's Palace and Goat Street, St David's (£1,065, possible discrepancy)
However Mr X has since stated that these schemes are being remeasured and that in his opinion may have been invoiced correctly. The council has insufficient records to either contest of confirm the figures provided by Mr X.
The following analysis summarises the above.
Cost of schemes hidden £23,054
Net cost of invoices falsified by contractor to hide the cost of schemes £23,590.
As mentioned above the investigation team have been unable to substantiate the figures provided by Mr X due to lack of documentation available. However, details were provided of the largest scheme hidden i.e. Wiston council houses, though an independent valuation by the internal investigations quantity surveyor suggested that the valuation had been overstated by £2647. At this moment in time this has not been pursued with the contractor because of the police investigation.
As a result the investigation team cannot be certain that the information provided by Mr X contains all hidden schemes nor all falsified invoices. Indeed during the course of the investigation it would appear that each time the internal investigation team became aware of a hidden scheme or falsified invoice, the contractor appeared to find a compensating error which he had not previously disclosed.
As a result it is the opinion of the internal investigation team that the full extent of the schemes hidden and the falsification of invoices will never be known (my emphasis), and that the full reconciliation between two will never be achieved.
(6) Other schemes.
The contractor has submitted claims for payment for a number of other schemes which he alleges Firm C carried out on the instruction of officers of the council without official orders. These are as follows:
Pen-Y-Bryn Lane St David's £365.
Lane off City Road Haverfordwest £3,060.
Entrance splay outside Lecha Farm Llanrhian £1283.
Entrance road and parking Llanfair Church £4,972.
Llanfyrnach Church entrance road and footpath £3,701.
These jobs were not on council-owned land or adopted highways and it is therefore unauthorised expenditure.
In addition the team has been advised by council officers and by the contractor of the following two jobs which have been completed but which no claims for payment have been yet made to the council:
Newport chapel (approximate cost £2,500)
Trem-Y-Mor Lane Fishguard (approximate cost £4,000)
A decision now needs to be made whether official orders should be issued for these jobs so that the contractor can submit final invoices to obtain payment from the council.
(4) Firm D.
The contractor had painted Picton House but at the request of officers of the Central Division and had recovered the cost of the works by inflating invoices submitted in respect of the painting of public conveniences.
An official order had originally been raised for the work, though subsequently cancelled. The scheme had cost £2,506 and the effect of hiding the expenditure would have resulted in a direct loss to the Council of £1150 i.e. the contribution of Haverfordwest Town council and Pembrokeshire community health council towards the cost of the works.
It is now understood that the relevant costs have been recharged the appropriate bodies.
Food Hall, Withybush Showground.
The contractor had painted, at a cost of £1267, the food hall at Withybush Showground in preparation for the chairman [Cllr Peter Stock] of council's inauguration
No official order was raised and the contractor was told by officers of the Central Division not to submit an invoice for this work. He was told he would be reimbursed through other orders he would get from the council.
Subsequently the Contractor submitted a bill to the council, which full Council and a meeting held on 8th February 1995, agreed to pay.
(5) Firm E
(a) Broad Haven car park.
See item 3 (a) above, where a similar decision needs to be made.
(b) Road leading to the Pembrokeshire Technical College.
The contractor carried out works to the grass verges and an open space at the entrance to the Pembrokeshire Technical College [my understanding is that these works were actually carried out on private land in the vicinity of Pembrokeshire College - a rather different proposition]. at a cost of £6,853. The cost of the works were hidden by the falsification of invoices in respect of two other schemes.
No official order was raised in respect of the works.
The true cost to the scheme has been coded to the Highways Agency account on the instruction of the Director of Works, and recovered from Dyfed County Council.
An original audit of the payments made in respect of the above scheme located a possible overpayment to the contractor in excess of £8,500. The overpayment would appear to be made by the submission of incorrect invoices from the contractor, and an arithmetical error made by council officials [more than one?]. Following the original report a revised final account was produced which recalculated the overpayment to be £4,255.
The reduction had resulted from the inclusion of additional extra works and the understatement of an item included in the original specification.
It is understood that the contractor has agreed that an overpayment has been made and is due to raise an appropriate credit note which will then be deducted from future payments.
(d) St Dogmaels landslide.
The investigation team highlighted a payment made to the contractor on invoice number 000304 which stated "St Dogmaels landslide, clean streams and gullies, cut down growth as directed by Officer A and Officer B, including carting away".
A subsequent discussion with the contractor revealed that the work actually completed was the reconstruction of gabions and a footbridge over a stream at St Dogmaels. No official order had been issued for the works, and upon its discovery the sum of £4,927 was transferred from the St Dogmaels landslide to the code set up to account for unauthorised expenditure.
(e) Private works for council employees.
During investigation into the overpayment on the Scarrowscant sewer scheme [see (c) above] it come to the attention of the internal investigation team that at around the same time the contractor had been undertaking private works at the home of Officer A [which was just round the corner from Scarrowscant Lane].
The contractor was interviewed regarding the works though he was unable to provide details of any invoice raised in respect of the works. Instead the Contractor advised the investigation team that the council official had paid £5,000 for the works completed, in cash, which had been accounted for and banked after the commencement of the internal investigation [More than a year after these "private" works had been carried out].
The former officer was not interviewed regard in the above as he was no longer employed by the authority [having taken early retirement on health grounds with an enhanced pension] when the investigation team became aware of these facts.
There is no evidence to suggest that these highly peculiar [irregular] arrangement between a senior council official on the contractors was fraudulent [Really?].
(6) Firm B.
Public convenience maintenance contract.
The above contractor was employed at an hourly rate to drive continuously around the public conveniences in the central and northern division inspecting them and carrying out minor repairs. He was also paid a further £60 per convenience for a survey. By the end of May £3,120 had been claimed for the survey and £8,343 on hourly labour. However the auditors have withheld from payment the final invoice in the sum of £4,316.
It was intended that this arrangement would continue throughout the summer period, and had been implemented due to adverse statistics regarding the speed at which repairs were carried out, and due to the fact that the assistant director of works (Central Services) had also employed a workman to carry out the repairs.
In order to hide the true nature of the contract from the auditors an official order was falsified and a schedule of the works completed was produced. A sample of this work was checked, and in the auditor's opinion had not been completed . However, the building surveyor priced the scheme as originally submitted and has valued the work at approx £2,000 less than the amount claimed by the Contractor.
However the contractor has now admitted that the schedule of "completed" works had been falsified, and he has also claimed that Officer A and Officer B had advised him what to state in the schedule.
The Contractor is adamant that he is entitled to the full amount claimed because the agreement was for him to be paid for the number of hours worked, not for the amount of work completed. However because of the complete lack of valid documentation, neither council nor the contractor can substantiate the value of the of the invoices submitted.
This contract will remain in dispute unless a decision is made to pay the contractor despite the lack of supporting documentation.
Firm B paid £13,115 to Firm A in respect of the contract entered into by the council with this latter named firm. It would appear that he was to be reimbursed this sum via the falsification of invoices on to other contracts at Glan Hafan, Llangwm and Portfield Avenue, Haverfordwest.
At the onset of the internal investigation neither the contractor nor the council officials appear to be sure how much money had been reimbursed the contractor to date, although the contractor had suggested that he had received £4,000. However he was unable to say which invoices had been falsified to recover this sum.
Bearing in mind the above of the investigation team requested final accounts to be produced on Glan Hafan and Portfield Avenue so that the overpayment to the contractor could be assessed. This revealed the following:
No official orders were issued for this work no price was agreed beforehand partly due to the nature of the work involved and also due to the fact that it had become the norm to issue work in this manner.
Following the payment to Firm A, Firm B was instructed to reclaim £4000 of the expenditure back on this scheme. Officer C was also instructed to produce a false final account to justify the payment. As a result the final account was produced which suggested that the contractor's element of the work on the scheme totalled £15,066. Invoices to the value of £14,792 had been submitted by the contractor, although the final invoice in the sum of £3872 was withheld from payment until the final account had been audited.
Before the audit of the final account could be completed the facts as reported above came to the attention of the Auditor. No further progress was made on the account until and the police had conducted their own investigation.
The revised final account produced suggested that the payment due to Firm B for this element of the work was £9,674. Invoices paid to date total £10,920, and thus it was suggested that the overpayment of £1,245 plus VAT had been made. In addition it was suggested that the final invoice in the sum of £3,872 should also be cancelled.
The contractor does not accept the revised final account calculations and maintains that the work carried out amounts to £10,792 but has been unable to substantiate this figure.
Although several official orders were issued for work on nine properties on the site, it would appear that no price was agreed per property beforehand. It would appear that it had become the norm to issue work in this manner.
The original intention was to recover £9000 of the payment to Firm A back through these properties and Officer C had also been instructed to produce a false final account to justify the payment.
Before Officers C's arrest a draft final account was partially produced which suggested that the payment due to the contract per property was to be £10,785. Properties were in various stages of completion, although it was noted that the final payment had been made on number 72 in the sum of £9,500, number 38 in the sum of £11,080, and on number 23 in the sum of £11,041. In addition interim payments amounting to £12,000 each had been paid on numbers 40 and 42.
No further progress was made on the account until the police had conducted their own investigation, and at this time the new Assistant Director of Works (Central and North) was requested to produce a revised final account based on the current agreement between the council and the contractor, where the latter agreed to work on the properties at the council's schedule of rates less 10 per cent.
As a result the revised final accounts suggested that the payment due to Firm B per property was £8,750. This would suggest that a substantial overpayment had been made on all properties.
However, no record exists of what was originally agreed with the contractor, who is disputing the revised final account produced. He has however been unable to substantiate the invoices submitted, but has claimed they were agreed by officers of the council.
Northern division of the D L O.
(a) Cwm-yr-Eglwys footpath .
This contract was won in open competition by the council's own workforce, and was completed on behalf of the Pembrokeshire Coast National Parks. The in-house contract resulted in a loss to the Direct Labour Organisation (DLO) of £18,000
Since the onset of the internal investigation, correspondence has been found which suggested that £5,000 of the loss had occurred as a result of the construction of a slipway at Cwm-Yr-Eglwys. It would appear that the cost of the slipway had been hidden in this contract.
(8) Cost to the council.
(a) Firm A
It would appear that if the audit section had not reported upon the peculiar [dishonest] payment arrangements that had been entered into with Firm A then the cost to the council would have been as follows:
Cost of unsuitable pedal operated bins £4,680.
Cost of unsuitable paper towel cabinets £1,716.
Cost of peculiar payment arrangement (loss of V A T) £1,816.
However due to the involvement of the internal investigation team the loss has been reduced as follows:
Cost of unsuitable pedal operated bins £2,070.
Cost of unsuitable paper towel cabinets £759.
Cost of peculiar payment arrangement
(on assumption VAT now reclaimable) Nil
Transportation of goods back to Supplier £208
This has resulted in a saving [reduction in the loss] of £5,175
(b) Other irregularities
The following losses/costs have also been identified:
Costs originally hidden now charged to third parties.
Tarmacking at the Withybush Showground (cost now rechargeable so no loss) £8,446
Picton House (costs now rechargeable so no loss) £1,150
Road leading to the Pembrokeshire Technical College (recharged to Dyfed Highways Agency account) £6,853
Costs originally hidden now charged to approved expenditure headings:
Food Hall, Withybush Showground £1,267.
St Dogmaels footbridge £4,927
Picton House (council contribution towards work) £1,356
Schemes hidden by Firm C £23,054
(c)Unauthorised works not yet paid for
Broad Haven car park £7,600
St Dogmaels Community Council car park £2,210
Pen-y-Bryn lane St David's £365
Lane off City Road, Haverfordwest £3,060
Entrance splay outside Lecha Farm, Llanrhian £1,283
Entrance road and parking Llanfair church £4,972
Llanfyrnach Church, entrance road and footpath £3,701
Trem-Y-Mor Lane, Fishguard (estimate) £4,000
Newport Chapel car-park (estimate) £2,500
Cwm-Yr-Eglwys slipway (estimate) £5,000
(d)Amounts over claimed by contractors
Scarrowscant sewer £4,255
Public convenience maintenance (total saving not yet identified) ??
14, Glan Hafan £5,118 (though not yet agreed by Contractor)
Six properties at Portfield Avenue £15,621 (though not yet agreed by Contractor)
All of the four contractors who have been interviewed by the internal investigation team have agreed that they have falsified invoices to hide the cost of other works. They have all stated that the instructions for the falsification came from either Officer A or Officer B.
No documentary evidence has been produced to support these allegations, although Officer B has verbally confirmed his involvement in the falsification of invoices from firms B, D and E.
However, he has denied any knowledge of the falsification of invoices from Firm C.
The conclusion of the investigation team is that the falsification of invoices with the collusion of officers in the central and northern divisions was systematic in order to hide the true nature of the works carried out and paid for on their instructions.
Some of these works would appear to have been for legitimate council schemes but hidden because there was insufficient money in the Budget. Other schemes were hidden because they were not authorised by the council. The investigation team have been unable to confirm precisely who requested or authorised these works.
A major part of the problem has been a total lack of compliance with the council's financial regulations and standing orders relating to contracts. It would appear that his lack of compliance was deliberate in order to facilitate the above mentioned deception.
[At this point there is a large gap in the text]
It is concluded that over a period of years the council has paid substantial amounts to contractors, often on hourly rates, for which it has no reliable records of the actual work carried out. Therefore the council cannot accurately account for the amounts paid to these contractors or assess whether value for money has been obtained. In the recent cases, where the investigation team has been able to evaluate the work done, significant overpayments have been found, and as a result the final cost of those contracts that were in progress at the commencement of the investigation have been significantly reduced.
T. Dobson Assistant Treasurer
D. H. Harris. Quantity Surveyor - Group Leader
N. Andrews. District Audit Manager
M. Phillips Principle Auditor.
Preseli Pembrokeshire District Council memorandum.
Treasurer's submission re: Chief Executive report on internal inquiry [This was the Treasurer's attempt to rebalance the books to take account of the illegal expenditure]
(1) A provisional sum of £65,000 was included in the council's revised estimates for 1995/1996 for the purpose of meeting expenditure identified as "unauthorised" by the council's internal inquiry team.
(2) The provisional sum was utilised in the final accounts for 1995/96 to meet payments in respect of the following:-
Painting Food Hall at Withybush Showground £1,267
New Moat Drainage works [new one on me] £9,518
St Dogmaels footbridge £4,927
Llanrhian Village Hall carpet £909
Invoice for Maes-y-Cnwcw, Newport £7,173
and to make provision for the following accounts
Broadhaven car park £8,000
St Dogmaels Community Centre car park £2,200
Llanhowell Church £1,700
Newport Chapel car park £2,500
Trem-y-Mor Lane, Fishguard £4,000
Cwm-yr-Eglwys slipway £5,000
Drainage works St Davids £1,600
St Anthony's Way - fencing £1,100
Llanyfyrnach Church entrance road £3,700
Llanfair Church car park £4,970
Entrance splay, Lecha farm, Llanrhian £1,280
Lane off City Road Haverfordwest £3,050
(3) The final accounts also included charges to services in respect of the following unauthorised works:
Car park, Wiston £9,023
Entrance Road, Pembrokeshire College £6,853
Picton House Haverfordwest £1,150
Public conveniences £3,037
(4) It has been established that the invoice relating to Maes-y-Cnwce (see para 2) was grossly overstated but the contractor has advised that he has carried out the following unauthorised work for which he has not raised bills:
Lower racecourse car park Haverfordwest £621
Purchase of bus shelter £2,417
Maenchlochog play area £801
Llanhowell Church £1,100
Horeb Chapel, Letterston £1,937
(5) In addition bills were not raised by the contractor for the following unauthorised works which were also covered by inflated invoices:
Roch car park £1,608
Market place, Clarbeston Road £ 508
Hoel-y-Llan, Hoel-y-Coed Llandissilio £1,307
Car park, Walton East £1,598
(6) Bills have now been received in respect of most of the schemes covered by provisional sums set aside in the final accounts (see para 2) with the exception of those schemes at
A scheme at Pen-y-Bryn, St Davids, has been added to the list relating to outstanding payments and that relating to Llanhowell Church deleted (see para 4).
Accounts relating to drainage works at St Davids and fencing at St Anthony's Way having been paid as authorised by the Director of Works have also been deleted from the list of outstanding payments.
(7) Accounts therefore remain unpaid in respect of the following:
Broadhaven car park £7,600
St Dogmaels Memorial Hall £2,210
Pen-y-Bryn St Davids £365
Lane off City Road, Haverfordwest £3,060
Entrance splay, Lecha Farm, Llanrhian £1,283
Llanfair Church - entrance and parking £4,972
Llanfyrnach Church - entrance and footpath £3,701
Trem-y-Mor Lane, Fishguard (estimate) £4,000
Newport Chapel, car park £2,500
Cwm-yr-Eglwys, slipway £5,000
(8) Decisions are required on the unpaid accounts which can be dealt with in a number of ways, viz:
(i) Payment where works considered intra vires;
(ii) Non-payment on basis that works not authorised by official order;
(iii) Non-payment - bills referred to third parties involved;
(iv) Part payment - bills offset by payments already made in respect of the unauthorised works identified at paras 4 and 5.
Council meeting 21st March 1996
[Ten days before Pembrokeshire County Council were due to take over. I have since been told that the legal department had been working overtime trying to find ways for the council to "legitimately" pay these bills. This was necessary because if any of the firms decided to sue for the money "owed" the full truth of what had gone on, , including the part played by councillors, might have come out in court]
Report of the Chief Executive.
With regards to a certain aspect of this report, Council will need to resolve whether to consider that matter in private session as containing likely "exempt information" under the terms of paragraphs 7 and 14 of Part 1 of Schedule 12 a of the Local Government Act 1972 - See note on report page R.1620.
The council has previously received reports concerning contractual matters at meetings held on 8th February 1995 and 21st November 1995. The main issues remaining for this Council to decide (regardless of any police action) are:
(a) Action with regard two outstanding accounts, and
(b) What to do about contractors who are alleged to have collaborated in the falsification of accounts.
When these matters were the subject of a report on 21st November 1995, the council adjourned consideration to enable further information to be provided concerning various accounts. That information related to the council's legal powers to make certain payments and to the question of ownership of land on which certain works had been executed. This has involved detailed consideration by the Treasurer, Director of Works and Head of Legal Services.
Detailed reports by the team which was initially established to investigate the allegations of unauthorised works and falsification of accounts were circulated with my reports to the meetings of council held on 8th February, 1995, and 21st November, 1995, respectively and I do not propose to repeat the detailed information contained therein. So far as the present financial position is concerned I can do no better than to attach as an appendix a memorandum from the Treasurer and to refer members in particular to paragraph 7 of that document, which lists the accounts which remain unpaid.
So far as the legal position is concerned, the Head of Legal Services has advised as follows on the principle of ultra vires:
"If (a local authority) attempts to do anything outside its powers, its actions and any contract it purports to enter into are null and void and not enforceable by either party, even if the other party has carried out works or incurred expenses in trying to perform the contract... An ultra vires contract is null and void and even if the council purchased, say, the land at Broad Haven later on, it would not make the past arrangement with the contractors legally enforceable and the council cannot legally resolve to do so".
On a question of the Council's Standing Orders relating to contracts, the Head of Legal Services advised:
"That the person entering into a contract with the local authority is not bound to inquire whether Standing Orders have been complied with and non-compliance does not invalidate a contract. So if the council has entered into a contract for works of any kind on its own land or within its own statutory functions, or say, within the terms of its powers as agent for Dyfed Highways, that contract is enforceable on the face of it; however this protection for contractors must be looked at in particular cases".
He then goes on to refer to particular circumstances in which it contractor may not have submitted a legitimate account for work actually carried out but, acting on instructions, may have put in inflated invoices for other work and he concludes that -
"Any reasonable contractor should have realised that this could not be legitimate procedure and in these circumstances the Contractor... Would not be able to successfully claim against the council in court". [That seems to me like an impeccable statement of the legal principle that: 'He who comes to a court of equity must come with clean hands'. However, when it came to deciding which accounts should be paid the council bent over backwards to make sure that the principle wouldn't be tested in court (see below)]
Against the background of that advice, the outstanding accounts listed in paragraph 7 of the Treasurer's memorandum may be categorised as follows:
(1) The following works are ultra vires and the council has no legal power to make payments:
Broad Haven car park - £7,600
St Dogmaels Memorial Hall car park £2,210
Trem-y-Mor Lane Fishguard and £4,000 (estimated)
Newport Chapel car park - £2,500 (estimate)
(2) Part of Pant-y-Bryn Lane, St David's, is an adopted highway. (I understand this is the correct name, although some reports have referred to it as Pen-y-Bryn Lane). Part of the adopted area was surfaced at a cost of £365 and, while it is not part of this authority's agency agreement with Dyfed County Council, the Director of Works feels that, as there are agency roads in the St David's area, a genuine error may have occurred. It is therefore recommended this account be paid.
(3) Lane off City Road, Haverfordwest - £3,060. This lane is in the ownership of this authority and expenditure is legitimate [or would have been if the work had been properly approved through the democratic process]. The account should therefore be paid.
(4) The following works have being carried on land which may be regarded as "highway waste":
Entrance splay, Lecha Farm, Llanrhian- £1,083
Llanfair church - entrance and parking - £4,972
That being so, there are powers to bear these costs under section 30 of the Highways Act, 1980, and section 89 of the National Parks and Access to the CountrysideAct, 1949 [how convenient].
(5) In the case of Cwm-yr-Eglwys slipway (estimated cost £5,000) it appears that, as a result of works carried out over many years, the council has a strong claim to possessory title, in addition to which section 11 of the National Parks and Access to the Countryside Act, 1949, gives local authorities power to carry out works to improve facilities for the use of waterways, including the sea. It seems clear that this expenditure is legitimate [?]and should be paid.
(6) Works were carried out at a cost of £3701 to surface the entrance and footpath at Llanfyrnach Church prior to the Chairman's [Cllr Lyn Davies] Civic Service. It has been the practice for many years to carry out minor enhancement works [see painting the Food Hall] to premises used for this purpose in order to add dignity [and puff up the Chairman's sense of self-importance] to the occasion. Quite apart from that however, it was stated that the council's meeting on 21st November, 1995, that the entrance roadway has been maintained at public expense for many years, although there is no documentary evidence of this. If such corroboration cannot be provided, it was still appear to be open to the council to meet this payment under section 137 of the Local Government Act, 1972 (power of local authorities to incur expenditure for certain purposes not otherwise authorised [That could have been lifted straight out of 'Animal Farm']).
The question also arises as to what, if anything, should be done to reclaim money paid on false accounts as listed in paras 4 and 5 of the treasurer's memorandum. The Treasurer, Director of Works and Head of Legal Services have looked at the sites involved and have established that there are legal powers available to make the payments concerned. Given the existence of such powers and the difficulty of establishing proof in each case, it is recommended that no attempt been made to recover these costs.
The council may also wish to consider the position of the four firms mentioned in previous reports as having been involved in the alleged falsification of accounts. If so, it is my opinion that is likely that the matter will need to be considered in private session by virtue of paragraphs 7 and 14 of Part 1 of Schedule 12 day of the Local Government Act 1972. [It was decided that the best place for this issue was under the carpet and that no action should be taken against any of the firms. The main driving force for this was that the council couldn't afford to take the risk, however remote, that the truth about member involvement might come out if one of the firms took action to recover money "owed". It is significant that at least some of the members taking this decision had been interviewed regarding their part in this scam during the course of the investigation, though no one ever declared an interest on these grounds]
I. W. R. David chief executive 14th March 1996.
Nobody was prosecuted, nobody was sacked and the contractors carried on working for the council exactly as before.
Interestingly, in exactly the same week that the Crown Prosecution Service decided that there was insufficient evidence to support a prosecution - a strange conclusion, you might think, after all you have read above - Old Grumpy reported that PPDC's licensing committee had imposed a six-month ban on a Milford Haven taxi driver.
And what manner of henious crime had he committed to warrant the loss of half-a-year's pay ?
Why, he had neglected to inform the council of a recent appearance in the Magistrates Court where he pleaded guilty and was given a conditional discharge for failing to produce the MoT test certificate for his own private car when requested to do so by the police.
Road safety was not an issue because he was acquitted on the more serious charge of driving without an MoT after he produced the certificate in court.
So much for equal justice for all!
And, as I noted at the time, the five-strong committee that handed down this draconian punishment was made up of a member who had, only a few months earlier, been savagely criticised by the Ombudsman for abusing his position to try to wangle a council house for his daughter; one who was still refusing to complete the register of members' social interests, almost a year after it was brought into being by a resolution of the council; another with two drink-driving convictions to his name; Peter Stock; and someone whose name I forget.