Auditors call for further debate on effectiveness of standards regime in report on former council leader and contract award

The auditors behind a probe into the behaviour of a former council leader and the procurement of a contract with his physiotherapist’s firm have expressed the hope that their report will "encourage the ongoing debate around the effectiveness of the standards regime for local government and support mechanisms for both officers and members facing the same intractable difficulties".

Grant Thornton’s inquiry into Cheshire East Council when under the leadership of Conservative Michael Jones from 2014-15 - and a subsequent period of instability lasting to 2018 - found “a pattern of bullying and inappropriate behaviour on the part of the former leader, which whilst denied by him, led to distortions to good governance.

“This led moreover to increasing tensions between different officers, different members and the all-important relationship between the two groups.”

It found then chief executive Mike Suarez and chief operating officer Peter Bates did too little to rein in Mr Jones.

The latter at one point holidayed at Mr Jones’s Spanish villa, which the report said: “Indicates the closeness of the relationship between the former leader and the former chief operating officer and the extent to which the normal propriety had been distorted between the two.”

A large part of the report deals with how the council came to award a contract to a business run by Mr Jones’s friend - with whom he went into business after leaving the council - and how the friendship between the two was close enough to be a declarable interest, despite his assertions that she was only his physiotherapist.

Grant Thornton’s Report in the Public Interest on the impact of the Council’s culture and governance arrangements during 2014 -2018 describes how Mr Jones’s dominance over both councillors and officers through his behaviour was not checked by any local mechanism and that no national system had existed since the abolition of the Standards Board for England in 2012.

The report said: “Under current arrangements the only direct intervention available for a council with significant governance issues is for Government to commission a best value inspection and/or appoint independent commissioners to the body.

“It is unlikely that this would have been triggered at this stage of Cheshire East's history. A key learning from this report for the sector is therefore that the inherent weaknesses identified here could create governance difficulties elsewhere in the future.

“Sector leaders, including Government should, in our opinion, now give this further consideration.”

As far as local standards rules were concerned, Grant Thornton noted: “Given the nature of the former leader’s conduct, the matters reported here were relevant to the council’s then code of conduct for members and also the officer/member relations protocol.

“It is of major concern to us that these standards’ mechanisms played little part in addressing the issues. Certain officers and members perceived that the local standards framework would be ineffective against an individual in the former leader’s position of power.”

Grant Thornton said Mr Suarez and Mr Bates “enjoyed statutory protection against disciplinary action and dismissal that most other officers did not.

“They could and should, in our view, have done more but we acknowledge it would likely have come at a high personal cost.”

The report elaborated: “Officers did push back and try to find solutions that would ‘stay the right side of the line’. What is clear however, is that in the period leading up to when [Mr Jones] announced his resignation, there were two senior officers, the former chief executive and the former chief operating officer (and section 151 officer), who needed to take the greatest responsibility.”

It said Mr Suarez failed “to secure the necessary governance culture to address the former leader’s style of working” and Mr Bates also failed in this respect and was further criticised “for his inappropriately acting on the former leader’s wishes or apparent wishes” in relation to the contract award. Mr Suarez joined Cheshire East from Lambeth, where he had been executive director of finance and resources.

Grant Thornton said both were relatively inexperienced, but “these factors played a large part in creating the circumstances in which the former leader believed that he was able to act as he wished”.

Amid this “dysfunctional environment” came the council’s contract controversy, which involved “the piloting and then re-piloting after a failed procurement of physical exercise services for children which inappropriately favoured a company called Core Fit”.

Core Fit’s unnamed director provided physiotherapy services to Mr Jones who described her as a “trusted friend”. There is no suggestion of impropriety by Core Fit’s director.

Great Thornton found “numerous instances in the events investigated for this report, in which the former leader directly and indirectly set out to give an advantage to this company through his communications with the director of Core Fit, officers and others”.

Mr Jones denied to auditors that he inappropriately set out to advantage the director but “on the basis of the evidence considered for the purposes of this report we have concluded otherwise”.

When some physical education work with children was put out to tender in February 2015, Core Fit bid but the procurement was abandoned after the firm did not come highest in the evaluation/scoring.

An “unusual number of higher-grade officers” were involved in this small value procurement “in order to keep the former leader away from operational matters and to protect junior staff and the integrity of the process”,

Core Fit’s bid ranked fifth of five but rather than awarding to another bidder, Mr Bates and the then director of children’s services abandoned the procurement.

Despite this the council piloted the service with Core Fit, and Grant Thornton said: “The justification for the extended pilot was unsound and left the council vulnerable to the accusation that those officers were seeking to continue funding Core Fit’s  work, further to an actual or perceived view of the former leader’s wishes.

“The culture that had grown up around the former leader was such that his influence distorted due process and left the council vulnerable to the accusation of apparent bias.”

Core Fit later secured £188,000 worth of work a year under the pilot arrangements. The report said: the closeness of friendship between Mr Jones and Core Fit’s director “would not have been expected without some sort of disclosure in order to avoid public law difficulties and propriety”.

A further issue arose over the council having failed to check the relevant Disclosure and Barring Service checks were in place at Core Fit.

Grant Thornton established these were not obtained for most staff until the end of July 2015, and there had been a lack of parental consents.

“This represents a major safeguarding failing by the council”, the report noted.

In August 2015 there were anonymous whistleblowing disclosures made and Cheshire East’s then head of internal audit “demonstrated high standards of professional behaviour and personal bravery in bringing these matters to our attention, in spite of the challenging organisational culture in place at the time”, Grant Thornton said.

Auditors found: “We have concluded that the council’s former leader, appointed in May 2012 behaved in a manner that sought to influence certain senior officers into taking steps and decisions that would achieve his own objectives in relation to this company, even if this meant bypassing or overriding the council’s established controls.

“In our view, some of his wider behaviours were bullying, intimidatory and aimed at seeking to get his own way in matters without recourse to the normal procedures.”

Mr Jones's stint as Leader ended in 2015 after disputes within the then ruling Conservative group and left the council in 2017.

Cheshire East had six monitoring officers between its formation in January 2009 - from part of Cheshire County Council and the former boroughs of Macclesfield, Congleton and Crewe & Nantwich - and December 2017, a turnover rate that “will have weakened the council when it was at most need of robust legal advice and challenge", Grant Thornton said.

It added that the monitoring officer at the time of the contract dispute “had a difficult task in seeking to ensure legality around the leader’s dysfunctional behaviour” but was “to be commended for efforts in the face of real difficulties, which have been recognised by other officers”.

Lorraine O’Donnell, the current chief executive, said: “In the years since the events set out in this report, there have been many changes to governance, leadership, processes and culture at the council.

“The report acknowledges these improvements and makes no recommendations for the council for any further remedial action to address the historical failings. It provides assurance that the council has done a great deal to move on from the period in question.”

Mr Jones could not be contacted, but in a statement reported by the BBC he said the report was "not accepted by me as being fair or accurate, not least as it is based on disputed issues and events”.

He said he withdrew from the process after being shown a draft of Grant Thornton’s findings and noted a police investigation had not led to any action.

Caling the report's findings "regrettable", Mr Jones told the BBC: “I acted during my time as council leader in good faith to address underperformance of the council and the people of Cheshire may like to reflect on the performance as I drove up standards with the position before my tenure and since.

"If they do so, I'm sure they will recognise the forces massed against me by opponents to change and service improvements for the public."

Grant Thornton produced the report as it was the council's auditor during the relevant period. Cheshire East's current auditors are Mazars.

Mark Smulian