< About in the News

The Hereford Times | Posted 30th March 2015

Parish council slammed for “potentially unlawful” five figure spend on pub project

A PARISH council has been cited for “serious failings” in its governance and procedures over the purchase of a village pub as a community hub.

The Audit Commission (AC) says £34,689 spent on the refurbishment of the pub by Dilwyn parish council was “potentially unlawful” with it not being possible to trace proper payment approval.

An investigation report out this week also finds the council failed to comply with its own standing orders and financial regulations and took action without proper authorisation.

Councillors were also found to not to have made “proper” declarations of interest at meetings in which payments were made to them.

In one specific example, £6,566 excluding VAT was found to have been paid to a councillor’s heating and plumbing business for work undertaken at the pub, with “insufficient or no” declarations of interest made at meetings at which orders for required work were authorised or payments made to the councillor approved.

The investigation, carried out by Grant Thornton UK LLP on behalf of the AC, revolved around the council’s purchase of The Crown, Dilwyn, to be retained – ahead of an auction – as a community asset.

That purchase went ahead in early 2012 with the pub bought from Punch Taverns for about £250,000 for renovation and reopening.

The council used grants and a public works loan to raise the money.

In the AC report, the council concedes that proper procedures were not always followed, but offered a justification of circumstances in which “speed was of the essence” to make the project viable.

Grant Thornton, however, found this argument to be “put forward after the event” and in response to enquiries having not been recorded in council minutes as such.

Time pressure, the report says, could have been avoided with better planning and allowing for “sufficient” time for proper governance procedures to be adhered to.

In a response to the Hereford Times, the council said it was “likely” to formally accept the findings of the report in full at a meeting next Tuesday (April 7) and “guarantee” to implement all of the related recommendations – with a number already in place.

At a meeting in March 2012, the council set up a committee called The Crown Community Hub (hub committee) to deal with the purchase, renovation and leasing of The Crown.

During the meeting, guidelines for the hub committee were set out and adopted.

Concerns about the committee not keeping to the guidelines, acting outside of its delegated powers, and unlawful expenditure, were raised with the AC later that year.

In 2013, the Herefordshire Association of Local Councils (HALC) was commissioned to undertake a “detailed investigation” and prepare a report.

HALC wanted all business relating to The Crown to be conducted through the full council and the council agreed.

Between July 2013 and February 2014, the hub committee did not meet, with all business relating to The Crown being conducted by the full council.

The HALC report in February 2014 noted “serious failures” in governance and procedures and recommended all business relating to The Crown continued to be conducted through the full council.

Meeting that month, the council accepted all the HALC recommendations, except that business relating to the crown be conducted through the full council.

At that meeting, the council resolved that the hub committee be re-instated with immediate effect.

A subsequent AC investigation found a number of serious failings in governance and procedures at the council.

In failing to comply properly with its own standing orders and financial regulations, the AC found:

  • The council failed to obtain quotes for work in accordance with financial regulations.
  • The council failed to pass a resolution authorising the signing of the lease agreement between the council and the landlord of the Crown.
  • Failure by councillors to make proper declarations of interest at meetings in which payments were made to them.
  • Failure by the council to ensure that a responsible financial officer took responsibility for all cash income received by the crown to be properly counted and banked.
  • The investigation also found that action was taken by councillors between council and committee meetings without proper authorisation from either the council or the hub committee.

    Nor did the council undertake adequate risk assessment in relation to the operation of The Crown and, as a consequence, the  pub was under insured and compensation subsequently reduced when a claim was made as a result of a chimney fire.

    The report says the additional costs would normally have been borne by the council and local taxpayers, but were, instead, paid voluntary by customers of The Crown.

    Also identified were “inappropriate procedures” in place for the payment of VAT with VAT due paid out of the clerk’s own personal bank account and re-claimed from the council.

    Other payments were made without proper approval by the council or hub committee.

    In the report, the AC identifies that in the year ended March 31 2013 the council spent £34,689 excluding VAT that was “potential unlawful”.

    It had not been possible to trace approval of all of these payments to either hub committee meetings or full council meetings, the AC said.

    In the AC’s view, however, there was no benefit from seeking a court declaration that the expenditure was unlawful, as the cost to the taxpayer of doing so would outweigh any potential benefits.

    The council has already changed its procedures relating to VAT with all claims and payments now made through the council’s own bank account.

    A number of councillors have since received training on the local government code of conduct and, following the upcoming election, it is planned that all councillors will be provided with formal induction and code of conduct training.

    The council also re-adopted its exiting standing orders, financial regulations and internal controls in May last year, pending review.

    But this review has not yet taken place and must do so “as soon as practicably possible” the AC says.
    Also recommended are:

  • Periodic reviews by the council of guidelines for the hub committee.
  • All expenditure must be properly authorised and approved at a properly convened  council or committee meeting.
  • Declarations of interest must be properly made at all appropriate stages, that is in discussions regarding the award of contracts, authorisation of expenditure and authorisation of payments.
  • Risk assessments must be undertaken annually and should consider all aspects of the council’s business, including The Crown.
  • Specific risk assessments of any other “high profile” projects to ensure “properly informed” decision making.
  • The council should document all its day to day internal controls and review them periodically.
  • The council should retrospectively authorise the signing of the lease and record this in minutes.


    Declarations of interest were a specific example the AC made in identifying failures in the governance of Dilwyn Parish Council.

    The investigation found £6,566 excluding VAT was been paid to a councillor’s heating and plumbing business for work undertaken at the pub with “insufficient or no” declarations of interest made at meetings at which orders for required work were authorised, or payments made to the councillor were approved by the hub committee.

    Overall, the report reveals that where declarations of interest were made, the nature of the interest was not recorded and insufficient detail given as to which councillor was making the declaration.

    Councillors did not leave the room, nor were they excluded from discussions relating to the authorisation of work or approval of payments in which they had a prejudicial interest.
    The council told the AC that the reason for giving work to the councillor was because this gave “best value for money” with work done by the councillors’ business charged to the council at a rate lower than cost.

    However, the AC found the council was unable to demonstrate that amounts paid were reasonable and gave value for money.