County council to take action after governance failures at development subsidiary

Northumberland County Council is to make radical changes to the governance of its wholly-owned development company Arch after auditors found a host of irregularities and “significantly lax” employment and payroll practices.

The council said stronger management procedures and new leadership arrangements were being put in place following the highly critical report to its audit committee.

A council spokesperson said: “An independent and strategic review of Arch highlighted a number of serious failings in terms of governance and financial impropriety.

“This work has highlighted a significant number of financial irregularities in terms of attendance at overseas events, corporate hospitality and gifts, sponsorship, as well as lack of HR and management processes and procedures.

“We are appalled at this inappropriate use of public funds.”

The audit committee report noted that Arch spent £73,000 on staff attending the Mipim property industry exhibitions both in Cannes and the UK “with no evidence of an evaluation of the benefits [achieved].”

Auditors said a significant part of the £73,000 had been spent on “the purchase of high cost meals and alcoholic beverages for Arch delegates”. Other significant sums went on unauthorised first class travel.

They also discovered that an employee of a Northumberland taxi firm was flown to Nice at Arch’s expense and provided with accommodation and a vehicle in which to ferry Arch delegates around at Mipim.

Arch spent £1,000 on a party that never took place, £6,000 on a staff Christmas party and £3,500 on travel, hospitality and accommodation for four people to attend a sporting event at Wembley, among other improper hospitality spending.

The lax human resources procedures allowed unexplained salary increases of up to 50% for some staff, Arch to be charged for driving lessons for a staff member whose role did not require them to drive and abuses of car allowances.

Northumberland’s spokesperson said: “Any identified impropriety will be handled in accordance with standard policies and procedures.

“A new development company is being created, which will have a greater focus on regeneration, place shaping and delivering for the communities of Northumberland.”

Mark Smulian