East Kent Councils fail to recoup £1.5 million from P & R

Fear, shame, embarrassment: these brakes no longer apply. Senior officers of Canterbury, Dover, Folkestone & Hythe and Thanet councils have discovered they can bluster through any scandal. No Chief Exec, or their subordinates, need resign. No one need apologise. No one need explain.

The alleged £1.5 million pound fraud perpetrated by P & R, who began their contract with East Kent Housing to undertake Gas Servicing and Heating Installations on 1st April 2017; and terminated the contract on the 3rd July 2019, has never been explained to ratepayer or elected Cllrs of all four councils of East Kent – Canterbury, Dover, Folkestone & Hythe and Thanet.

No council is explaining why they have not recouped the £1.5 million. No one is apologising and here’s why.

According to Bilby PLC accounts for 2019 (Bilby were the parent company of P & R), at page 70, they state:

• On 28 June 2019, P&R issued notice of adjudication to Canterbury City Council, the District of Folkestone & Hythe and Dover District Council (collectively “three East Kent Councils”) in relation to unpaid monies amounting to £661,000 relating to the period December 2018 to May 2019. On 2 August 2019 the adjudicator found in favour of P&R and awarded the company £661,000. At the date of these consolidated financial statements the amounts awarded remain unpaid.

The adjudication fees for Folkestone & Hythe District Council (FHDC) were £2,925 (inclusive of VAT), as shown in the document above.

Bilby’s 2019 accounts go onto say:

• On 16 August 2019 P&R was issued notice of adjudication by three East Kent Councils in relation to disputes over amounts of monies amounting to £1,511,000 relating to the valuation of the contracts for the period April 2017 to May 2019. A preliminary review of the documentation has been undertaken and continues to be assessed based on professional advice received.

So it’s clear P & R (Bilby’s subsidary) won the first adjudication in Aug 2019, but the Council’s counter claimed just two weeks later.

Bilby’s 2020 accounts recently released state at page 62:

• £4,031,000 relates to the exit from the contracts with four East Kent Councils (collectively “East Kent Housing”) and other gas contracts in P&R (of which £1,971,000 relates to the impairment of financial assets and inventory, £1,265,000 relates to provision for claims against P&R, £507,000 relates to provision for post-contract termination trading losses and £288,000 relates to legal and professional fees). All relevant provisions have been unwound in 2020, and no further costs have been incurred. These are considered to be one-off in nature.

What “provisions have been unwound” means in this instance, is the counter claim made by the councils was unsuccessful. So P & R did not get it’s £661,000 from the Councils; and the Councils did not recover  £1,511,000 of public money from P & R.

The second adjudication costs for FHDC were £5,990.

Now of course, the Councils have NOT informed Cllrs or the ratepayers they failed to recover any monies from P & R, public money.

On the 2nd Sept 2019, Mike Davis, who is Dover District Council’s Section 151 Officer, (the Senior Officer in charge of the Council’s financial arrangements) stated in a report to the DDC Cabinet:

• These problems have included a failure to detect and challenge poor performance by contractors, a failure to challenge overcharging by contractors, and a failure to detect and challenge a pattern of charging that appears to be a systemic-fraud.

However, the councils are NOT taking P & R, or Bilby PLC to court for the alleged fraud. This means there was insufficient evidence to get them across the fraud threshold. It doesn’t mean fraud didn’t happen, just that there is not enough evidence to prove their case beyond all reasonable doubt.

So where does this leave the Council’s auditors, Grant Thornton, who are looking into objections to FHDCs and Thanets accounts for 2018/19 regarding the alleged fraud?

It is important to realise, a set of accounts are subject to two types of materiality.

The first is a financial threshold for FHDC. In 2018/19 the financial level of materiality was £1.7 million.

The second type of materiality is value, nature or context.

All Councils are responsible for obtaining value for money; which means they have to secure economy, efficiency and effectiveness in its use of resources.

Failure to recoup £1,511,000 means they could not have obtained economy, efficiency and effectiveness, or Value for Money, because as Mike Davis said their has been:

• a failure to challenge overcharging by contractors, and a failure to detect and challenge a pattern of charging that appears to be a systemic-fraud.

The very nature and context that none of the four councils recouped there monies, means the councils did NOT received Value for Money from the P & R contract which is material by nature and context.

The auditors of all four councils is Grant Thornton (GT), who’s job according to their Chief Exec is not to uncover fraud.

GTs auditors must approach the Councils accounts with scepticism. It is a key element of every audit. Scepticism is central to what an audit is all about. 

In the past the Financial Reporting Council (FRC) have been heavily critical of GTs audits. In July 2019 the FRC reported just over a quarter of GT audits it reviewed needed significant improvements.

In July 2020 the FRC reported, “the overall inspection results remain unacceptable”  meaning poor audits by GT continue to be a real concern to the FRC.

The accounts for all councils in 2018/19, should NOT have been signed off by GTs auditors.  In fact, we know both Folkestone & Hythe and Thanet Councils accounts for 2018/19, have not be signed off yet. However, we believe GT will find a set off words to allow them sign the accounts off eventually, rather than issuing a Public Interest report.

In the recently published Redmond_Review into the Oversightof Local Audit and the Transparency of Local Authority Financial Reporting it states:

• Governance in respect of the consideration and management of audit reports by authorities has also been examined in considerable detail. Based on evidence presented, there is merit in authorities examining the composition of Audit Committees in order to ensure that the required knowledge and expertise are always present when considering reports, together with the requirement that at least an annual audit report to be submitted to Full Council. This demonstrates transparency and accountability from a public perspective which is currently lacking in many authorities.

The fact the Councils have not divulged to their Audit & Governance Committee members, their ratepayers, or their elected Cllrs, their failure to recoup the £1,511,000,  demonstrates a lack of transparency and accountability in their councils.

There is no fear, shame or embarrassment of the Chief Execs of Canterbury, Dover, Folkestone & Hythe and Thanet Councils, who between them earn £587,392 (Incl. pension contribs), regarding their failure to recoup  £1,511,000 from P & R, or its parent company Bilby PLC, for their ratepayers.

None of them will lose their jobs for failing to be transparent and accountable.

None of them have explained or apologised to the residents of their district for the loss of public money on their watch.

Will that change anytime soon? We’ll leave you to mull that over.

The Shepway Vox Team

The Velvet Voices of Dissent