Council losses on a bungled roads maintenance contract are even greater than at first feared.
A forensic financial investigation by external accountants KPMG has revealed that the authority is facing a £4.2 million deficit on the deal.
And that’s almost £1m more than the £3.26m loss identified in a council probe into the ill-fated contract with Transerv which ran from 2013 to 2018.
The KPMG investigation found “no evidence of fraud or corruption” in the botched operation of the maintenance programme operated by DGFirst, an arms length company set up by the authority.
But their report states: “Based on the evidence which is available to us and adjusting only for items where we do have a high degree of certainty, the recalculated loss would be £4.2m.”
Council leader Elaine Murray told the Standard: “I suppose it’s a relief that it hasn’t found any fraudulent or criminal activity but it has shown gross incompetence unfortunately.
“It’s been down to basic mistakes like very poor accounting, failing to understand the contract and that sort of thing.
“What the council has to do, and to be fair what we have been doing since this all came to light, is to ensure we get structures in place so that this kind of thing doesn’t happen to us again.”
Members of the audit, risk and scrutiny committee will pour over the findings of a 53-page report next Tuesday.
Derek Crichton, communities director, will tell councillors: “The identification of a significant operational deficit on the former 4G contract was an unexpected and unwelcome occurrence for the council.
“The conclusion reached is that the DGFirst/Enterprising DG Service did not assess the risks of the 4G contract and did not plan, resource and implement effective financial and performance management arrangements.
“Furthermore, the council’s systems of internal control did not function adequately to highlight the issues arising from this contract on a contemporaneous basis.
“The various enquiries have found no evidence of fraud or corruption as defined by the council’s corporate anti-fraud and anti-corruption policy statement and strategy.
“The conclusion of the integrity group, following its review of the specific risks and encompassing all of the work streams undertaken to date, is that there is no legal or HR basis for triggering the policy in respect of any employee of the council.”
The 4th Generation Road Contract, which covered the maintenance of trunks routes including the A75 and A76, was expected to deliver a profit for the council.
But in 2019 – a year after the contract had ended – it emerged that it had in fact cost taxpayers millions of pounds in losses.
KPMG highlighted limitations in conducting their report due to a “lack of access” to information which hampered their efforts.
The report states: “This is primarily due to the lack of structured available documentation held by DG (the council) and contained within the Transerv folder of the DG SharePoint site.
“As well as in our inability to access those individuals who were involved in the financial management of the contract during its lifetime.
“It appears that certain documentation which we would have expected to have been provided by Transerv, was unable to be located within the DG SharePoint site relating to the contract and is now likely to be unavailable as Transerv is not currently in business as a trunk road operator.”
Councillors are asked to note the findings of the report and agree that follow up work is now completed.
