Newham reeling from £9m overspend and allegations of fraud

17/01/2019 | CHRIS AMES

Newham Council plans to set up an Internal Control Commission to improve its financial management after an arms-length highways maintenance service racked up a £9m overspend in one year.

Investigations into the allegations of fraud are ongoing, however the council's internal investigations have been completed and it has referred the matter the police. The authority has called for anyone with information to come forward.

The council stated that it has ‘investigated allegations of fraud but as yet insufficient evidence of criminal activity has been found’.

A report to the full council sets out ‘weaknesses in controls and lessons to be learned’ following an £8.78m overspend in 2017-2018 by the council’s arms-length Repairs and Maintenance Service (RMS).

The overspend was specifically in relation to the £100m ‘Keep Newham Moving’ highways programme - covering February 2016 -2026 and including work on all the boroughs pavements, roads and lights.

The council said mayor Rokhsana Fiaz and her cabinet plan to set up the commission to advise it on how to become ‘a beacon of good practice in terms of financial management and internal control’.

Ms Fiaz said: ‘This proposal aligns with my administration’s commitment to transparency, and improving the governance of the council in the interests of all Newham residents. We are putting things right. We have been proactive in resolving the financial mismanagement in RMS and taking clear action.’

The council said that Ms Fiaz discussed RMS with the police, including ‘whether there are grounds to take the matter further’.

The report sets out how RMS secured almost all of its work through the council’s internal commissioning framework, whereby commissioning officers would specify to RMS the work that was required, with RMS providing its price for the work based on an agreed annual schedule of rates.

RMS would then be paid on the basis of that ‘price’ although, as the report point out, this was a purely internal arrangement.

In June 2017 a whistleblower made allegations to the council of financial mismanagement and fraud in RMS.

According to the report, a senior council officer carried out an investigation into issues such as ‘non-compliance with finance and procurement rules allocating work to external contractors’, accounting irregularities that presented an end-of-year loss as a profit, false overtime claims and work being carried out on a senior manager’s home using council resources and equipment.

Some of the allegations, including that ‘procurement guidelines and standing orders are not being followed’, were upheld, resulting in the dismissal of the operations director and other members of staff.

However, the report states: ‘None of the investigations found sufficient evidence of criminal activity to bring proceedings but the council remains willing to consider any further evidence brought to its attention.’

According to the report, the overspend was mainly a result of RMS under-pricing its Keep Newham Moving Highways activity and then failing to manage contractor costs resulting in increased capital costs compared to what was originally budgeted for.

As one of a number of ‘clear failings of internal control’, the report states: ‘RMS managed its own procurement of external contractors, outside of the council’s procurement standing orders which were then hired at rates significantly higher than the schedule of rates put forward by RMS to the Council to cover the cost of the work. This was identified by officers in 2016 but it appears no corrective action was then taken by RMS.’

In November, the council published a Powerpoint presentation given by the Chartered Institute of Public Finance and Accountancy (CIPFA), which it had asked to carry out a wide-ranging financial review.

The presentation cites some of the specific issues with RMS: ‘RMS cut prices arbitrarily by around 20% and then used subcontractors at higher rates. A number of undocumented deals have been uncovered…Work was billed at higher than quoted rates to hide the effect of the price cuts [and] There have been allegations of fraud.'

council spokesperson told HIghways that these points represented CIPFA’s interpretation of the issues following interviews with council officers and councillors.

Update: On request from the council, this article was amended to include the line: 

The council stated that it has ‘investigated allegations of fraud but as yet insufficient evidence of criminal activity has been found’.

A Metropolitan Police Service spokesperson said: 'The MPS are aware of a matter relating to a financial discrepancy in Newham. The matter was brought to the attention of police in December 2018 by Newham council.

'There have been no arrests and an assessment is currently at the preliminary stages; all information is still being reviewed. Officers are working in close cooperation with London borough of Newham.'

Highways InProfile

latest magazine issue
Highways jobs

Senior Highways Engineer

£50,754 – £53,607 per annum
Our people are deeply committed to providing excellent services to our residents, doing all we can to make lives as good as they can be. Hounslow (City/Town), London (Greater)
Recruiter: Hounslow London Borough Council

Senior Engineer x 2

£47,532 –£55,620 per annum
Our people are deeply committed to providing excellent services to our residents, doing all we can to make lives as good as they can be. Hounslow (City/Town), London (Greater)
Recruiter: Hounslow London Borough Council

Rights of Way Assistant

£28,797 - £30,708
Within the Highways Directorate we are looking to appoint enthusiastic, customer focused and experienced person to join the Service. Darley Dale, Matlock
Recruiter: Derbyshire County Council

Project Design Engineer

Up to £0.0000 per annum
Project Design EngineerFixed Term, Full Time£37,559 to £44,186 per annum Location
Recruiter: Essex County Council

Project Design Engineer

Up to £0.0000 per annum
Project Design EngineerFixed Term, Full Time£37,559 to £44,186 per annumLocation
Recruiter: Essex County Council

Principal Transport Planner (Strategy)

£46,731-£49,764
We are looking for an experienced professional to join North Northamptonshire Council as a Principal Transport Planner (Strategy). Sheerness House, 41 Meadow Road, Kettering moving to Haylock House, Kettering Parkway, Kettering NN15 6EY, United Kingdom
Recruiter: North Northamptonshire Council

Highways Capital Delivery Manager

£50,788 - £52,805
To be responsible for the implementation of Welsh Government’s Renewal and Upgrade programme. Baglan, Port Talbot
Recruiter: South Wales Trunk Road Agent

Electrical Design Engineer

Grade 9 £34,314 to £37,938 - Grade 10 £37,035 to £40,476 - Grade 11 £39,513 to £43,693 - Grade 12 £42,708 to £46,731 p.a.
The Construction Consultancy Services (CCS) team provide client-side construction consultancy services across a range of professional disciplines to d Durham
Recruiter: Durham County Council

Park Operations Assistant - Thorndon Country Park

Up to £12540.50 per annum
This is a permanent, part time position on an annualised hours contract. This means you will be contracted to work a minimum of 964.59 hours per yea England, Essex, Brentwood
Recruiter: Essex County Council

Highways Capital Lead

£47,754 - £50,788
To be responsible for management of the Regional Highway Capital Delivery Teams South Wales
Recruiter: South Wales Trunk Road Agent

Senior Development Management Engineer

£37,938 - £44,711
In line with our One Coventry Values, we want to ensure that our communities are represented across our workforce Coventry, West Midlands
Recruiter: Coventry City Council

Head of Highways

£66,366 - £85,284 pa
Highway Operations is a large division within the Planning, Growth & Infrastructure. Enfield (City/Town), London (Greater)
Recruiter: Enfield London Borough Council

Director Highways, Transport & Waste Management

up to £120k
There for Nottinghamshire. There for each other. There for you. Nottinghamshire
Recruiter: Nottinghamshire County Council

Director of Highways and Transportation

£126,909
We’re seeking a dynamic and innovative leader to spearhead our Highways and Transportation services. Essex
Recruiter: Essex County Council

Senior Structures Technician

£32,654 - £36,124 plus circa £2000 - £4000 OT (variable
To lead on the planning, delivery and reporting of the highway structures General Inspection programme. Baglan, Port Talbot
Recruiter: South Wales Trunk Road Agent

Assistant Director of Place Operations

£85,962 to £93,267
Bury is a proud and prosperous borough Bury, Greater Manchester
Recruiter: Bury Council

Career Grade Transport Planner (Carer Grade 6-8)

Grade 06 (£29,093 - £32,654) TO Grade 08 (£37,938 - £41,511)
This is a fantastic opportunity to work for a forward thinking and dynamic transport authority located in the heart of the North West Warrington, Cheshire
Recruiter: Warrington Borough Council

Principal Performance and Assurance Manager

£Competitive
We have an exciting opportunity for a highly motivated Principal Performance and Assurance Manager to join our Senior Management Team SBIM Avonmouth, Bristol
Recruiter: Amey

Principal Construction Manager

£Competitive
We are excited to offer a fantastic opportunity for a Permanent Principal Construction Manager to join our dynamic Area 12 West Yorkshire
Recruiter: Amey

Electrician

£Competitive
We are excited to offer a fantastic opportunity for two Permanent Electricians Tingley, Wakefield
Recruiter: Amey
SUBSCRIBE NOW

Latest Video

Subscribe to Highways today to ensure you keep your finger on the pulse of everything happening in the UK road network throughout the year.

SUBSCRIBE NOW