Damning report into Arch concerns made public

A damning report on issues at the Northumberland County Council-owned company Arch, including two matters with ‘potential for criminality’, has been made public.

Friday, 15th March 2019, 2:03 pm
Updated Saturday, 16th March 2019, 8:32 am
Northumberland County Council

A special meeting of the authority’s audit committee is taking place next Friday (March 22) to discuss the report reviewing arrangements at Arch, whose reputational issues led to it being replaced last year by a new regeneration vehicle – Advance Northumberland.

Two audit committee meetings last year heard concerns about lavish spending while at real-estate conferences in London and the south of France, hospitality and spending on company credit cards.

However, the full 98-page report by the council’s internal auditors, which was commissioned after the Conservatives took over at County Hall in May 2017 and completed in October that year, has not been released until now.

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This is because it had been embargoed from publication at the request of Northumbria Police, which formally advised last month that this embargo was lifted. The force has since confirmed to the council that it would not object to the report’s disclosure and said 'no criminal offences have been identified'.

The review covered five main governance areas within the Arch Group: Consultants and contractors; employees; property portfolio; hospitality and gifts; awards of major contracts.

In each case, there were some concerning findings, for example, the circumstances of one consultant/contractor’s appointment and duties ‘were unclear, but it appeared that the consultant had commenced work on the contract before the closing date on the advert for the contract had been reached.

‘The remuneration for this consultancy was not well documented but appeared to include a disproportionately generous package of benefits including provision of a house and car by Arch to the contractor in addition to a high daily rate.’

In terms of employees, ‘certain ad-hoc payments had been made to staff without a suitable decision-making or authorisation trail. A number of pay enhancements were unusual.’

‘Substantial’ property acquisitions had been made by Arch, but ‘inaccuracies were found in a number of conveyancing transactions associated with property purchases’ and ‘errors were identified in land registration details’.

Meanwhile, ‘a specific surveying firm had received payments under what appeared an exclusive contract with an extremely generous fee structure which did not assure value for money for the Arch Group’.

Alarmingly, review of the award of major contracts found that ‘correspondence between senior officers within Arch and some major contractors appeared to show a level of relationship which went beyond a normal business contract. No declarations of interest were however located on file’.

The internal audit opinion, which opens the full review, states: ‘There are two immediate primary areas of concern regarding propriety/probity.

‘These relate firstly to the purchase of the former Arch chief executive’s home, by Arch, at a price which appears to have been unrealistically high to deliver expected rental income yields; and secondly, to what appears to be an unduly generous benefits and remuneration package afforded to a specific contractor.

‘There is potential for criminality to be indicated in respect of each of these two matters, which were correctly referred by the county council’s then interim chief executive to Northumbria Police for further examination.

‘Northumbria Police requested that absolute confidentiality should be maintained by the county council/Arch, in order that any potential criminal proceedings would not be compromised.

‘Lifting of this reporting restriction was notified to Northumberland County Council by Northumbria Police in February 2019 (confirmed in March 2019).’

It adds: ‘In the remaining areas audited, findings indicate areas in which procedures need to be strengthened to protect the Arch Group of companies and its primary shareholder Northumberland County Council.’

Coun Georgina Hill, chairman of the audit committee, said: “This report, regarding matters relating to Arch and the former council administration, has been subject to external embargo.

“There still continues to be desperate attempts from certain quarters to prevent its publication. However, the public interest is clearly served by releasing these findings.

“I am sure that the audit committee members and the wider public will have many more concerns and questions. Above all else, there must be full accountability.”

A Northumbria Police spokesman said: "We can confirm that Northumberland County Council contacted police with concerns relating to finance and governance at Arch. Police have been working with the council and reviewed documentation they provided. We can confirm no criminal offences have been identified."

Ben O'Connell, Local Democracy Reporting Service