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 jobs

Project Engineer (Permanent)

Havant Borough Council
£37,100
We’re looking for an experienced and enthusiastic engineer to join our well-regarded design and implementation team. Havant, Hampshire
Recuriter: Havant Borough Council

Project Engineer (Fixed Term)

Havant Borough Council
£37,100
We’re looking for an experienced and enthusiastic engineer to join our well-regarded design and implementation team. Havant, Hampshire
Recuriter: Havant Borough Council

Contract Supervisor

London Borough of Richmond upon Thames and London Borough of Wandsworth
£31,013 - £36,486 depending on skills, knowledge and experience
The role of Contract Supervisor (Waste and Street Cleansing) will require you to support ambitious plans to provide services for residents Richmond upon Thames, London (Greater)
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

Flood Risk Manager

Birmingham City Council
£43,662 - £54,574
The role requires the post holder to be the lead professional for the Authority’s Flood Risk Management and drainage function Birmingham, West Midlands
Recuriter: Birmingham City Council

Head of Highways & Transport

Lewisham London Borough Council
up to £72,705
As our lead expert on highways and transport, you will set the direction and lead on all transport related matters Lewisham, London (Greater)
Recuriter: Lewisham London Borough Council

Ugobus Driver (multiple positions)

Essex County Council
Up to £18938.0 per annum
Please note that we have permanent, fixed term and relief contract opportunities on a part time, job share and flexible working basis. The salary is u England, Essex, Chelmsford
Recuriter: Essex County Council

Assistant Director

Hounslow London Borough Council
Up to £82k
Working across a wide range of high profile direct services, the emphasis for this role is on partnership working. Hounslow (City/Town), London (Greater)
Recuriter: Hounslow London Borough Council

Head of Parks and Environmental Services

Harrogate Borough Council
£58,778 - £61,882
You will have experience at a senior level in the management and delivery of front line services relevant to the functions Harrogate, North Yorkshire
Recuriter: Harrogate Borough Council

Programme Technician/Engineer

Norfolk County Council
£29,636 - £31,371 per annum
This is a challenging position which involves working across wide ranging activities. Norwich, Norfolk
Recuriter: Norfolk County Council

Principal Transport Planner – 2 posts (Warrington Waterfront Western Link)

Warrington Borough Council
£40,760 - £43,662 plus essential car user allowance
We are looking to form a new Warrington Waterfront Western Link Team and we are looking to fill a number of key posts Warrington, Cheshire
Recuriter: Warrington Borough Council

Director of Integrated Transport

Liverpool City Region
Salary up to £124,848
The Liverpool City Region Combined Authority is embarking on a search for an exceptional individual with the passion to deliver on our vision Liverpool, Merseyside
Recuriter: Liverpool City Region

Highways Manager

Oxford Direct Services
G11
Oxford Direct Services
Recuriter: Oxford Direct Services

Data Entry Administrator

Telford & Wrekin Council
£18,795 - £19,171
Telford & Wrekin’s Public Protection Service is looking for an enthusiastic and self-motivated Data Entry Administrator Telford, Shropshire
Recuriter: Telford & Wrekin Council

Transport Planner

Camden London Borough Council
£33,122 to £38,423
You’ll have previous experience of working in a transport/planning/accessible transport environment Camden, London (Greater)
Recuriter: Camden London Borough Council

Parking Business Administrator Level 3 Apprenticeship

Brent Council
£15,000 p.a. inc.
This role will support the Brent Parking Team work to provide administrative support for both the Notice Processing Team Brentford (City/Town), London (Greater)
Recuriter: Brent Council

Principal Engineer (Development)

Liverpool City Council
£37,849 - £42,683
Liverpool City Council wish to recruit a Principal Engineer (Development) to provide managerial and technical support. Liverpool, Merseyside
Recuriter: Liverpool City Council

Traffic Manager

Lincolnshire County Council
£55,503 - £60,578
We are looking to recruit a Traffic Manager to join our Highways team Lincoln, Lincolnshire
Recuriter: Lincolnshire County Council

Team Leader x2 - Passenger Transport

Redbridge London Borough Council
£27,228 - £28,215 per annum
You will be responsible for overseeing the duties of Passenger Transport drivers as well as providing support to the service and managers. Redbridge, London (Greater)
Recuriter: Redbridge London Borough Council

UTMC Engineer

Warrington Borough Council
£31,371 - £34,788
You will support the UTMC Principal Engineer and work as part of a team responsible for all aspects of Urban Traffic Management and Control Warrington, Cheshire
Recuriter: Warrington Borough Council

Programme Assurance Manager Public Realm

Westminster City Council
£46,293 - £49,203 per annum
A graduate, or have equivalent experience, and you can show evidence of continued professional, managerial and personal development... City of Westminster, London (Greater)
Recuriter: Westminster City Council

Highways on Fridays

Latest Issue

latest magazine issue

Zero carbon roads?

Modelling the future

A breath of fresh air

View the latest issue

Latest Video