Serious failings in financial management and governance discovered at city council

Serious failings in financial management and governance discovered at city council

The Council’s failure to carry out its own financial checks has created an environment which could be exploited for fraud, according to the public interest report released today by the Auditor General for Wales.

Under the Accounts and Auditing (Wales) Regulations 2014, the Board is responsible for putting in place appropriate financial management and internal controls. However, these devices are only effective if properly operated. When councils fail to implement appropriate financial arrangements, there is a risk of loss to the public purse, and this is seen in the case of Maesteg City Council. Our public interest report concluded that council failed to apply the minimum standards of financial management and governance expected of a city council.

Between March 2016 and December 2019, Maesteg Town Council’s former clerk defrauded the council of £238,000 – amounting to up to 27% of the council’s total non-salary expenditure in each financial year. Failure to follow proper financial procedures created an environment in which the former clerk could exploit to defraud. Council members serving during the former clerk’s tenure did not properly review the financial information presented by the former clerk.

As part of its financial and governance arrangements, the Council required that all checks be signed by members, who should also have verified all invoices. However, the check-signing members failed to follow proper procedure, including signing blank checks, which facilitated the fraud committed by the former clerk.

Our public interest report also revealed other significant failings on the part of Maesteg City Council. These included failing to have an adequate internal audit system in place before 2019 and failing to meet the legal deadline for submitting its accounts for audit. There are also significant inconsistencies and omissions in the Council’s accounting systems and records.

The report presents several recommendations for Maesteg City Council, including:

  • Ensure that its appropriate internal controls, including authorization of payments, are followed by all members.
  • Establish a scrutiny of the work of the clerk and deputy clerk.
  • Implement the recommendations issued by its internal auditor in 2020 and ensure the proper functioning of the processes put in place.

Auditor General Adrian Crompton said today:

“Failing to carry out financial and governance audits and controls can have serious consequences for municipal councils. The fraud against Maesteg Town Council highlights the importance of establishing effective systems of internal control and internal audit and Welsh town councils can learn from this report to minimize the risk of this happening. reproduce.

Geraldine L. Melton