City Council “cut corners” over £2m loan

There were “clear failings” by Derby City Council after it lent a local firm £2m according to an independent report from Grant Thornton.

The Report in the Public Interest compiled by the accountancy firm after it was appointed external auditor after the leadership at Derby City Council changed hands in 2014.

In 2011, the Council lent £2m in 2011 to a firm called Webhelp (originally HEROtsc) to enable it to occupy premises on Pride Park to safeguard jobs.

Cabinet agreed the support but had been informed that external legal advice would be sought to confirm that the arrangement was lawful and compliant with European state aid rules.

The former chief executive, Adam Wilkinson, who headed up the Regeneration Department, had overall responsibility for the project and for ensuring, with his team, that legal advice was secured, in consultation with the Council’s legal team.

Grant Thornton says it was unable to locate any such advice. The Report says the Council received an email giving general advice but it did not address the Council’s particular circumstances, meaning that a major project was embarked upon without the Council being satisfied that it was lawful.

WebHelp asked Derby City Council for further help on the same basis after winning a contract with EE. In March 2014 discussions took place between Webhelp and the Council’s officers, including Wilkinson, and an offer was made to the firm, without at any stage, having involving the Council’s legal officers.

The Council’s Monitoring Officer intervened, and the offer was withdrawn and an arrangement negotiated which was legally compliant.

Although the arrangement had “a positive outcome for the city”, Grant Thornton says the failures in governance outlined above, were indicative of a more general culture within the Council at that time, where on occasion, corners were cut, and decisions made outside the Council’s committee and legal structures.

Webhelp says it had no influence or involvement in the internal decision-making of the Council. However, Grant Thornton’s reports says there were clear failings in governance in the way that decisions were taken and insufficient attention was paid to ensuring that the basis for the project was lawful. The report adds: “We
accept that decisions sometimes have to be made at pace, but cutting corners in this
way exposed the Council to considerable risk.”

Councillor Ranjit Banwait, leader of the Council, said: “Firstly, I would like to thank Grant Thornton for their work concluding this report. I am confident that many of the issues reported by our External Auditors today are in the past; those issues that are more recent in nature are being reviewed and addressed – robust measures are already in place following an extensive overhaul of our governance framework.

“Grant Thornton recognises improvements by the current leadership and senior management teams and I would like to re-assure the people of Derby that we will discharge the Council’s duties with the utmost integrity.”