Council’s failings led to local businesses losing thousands of pounds on housing project – report

Elgan Hearn, local democracy reporter

Management failings led to local businesses losing thousands of pounds after the developer of a flagship council affordable housing project went into administration last year, according to a new report.

In September 2023, Powys County Council revealed that their £3.5 million housing development of 17 houses and a bungalow on the former Red Dragon public house and Maesyrhandir Youth Centre site in Newtown had been opened.

But the project has been dogged by problems as Old Colwyn-based firm R L Davies and Son who were building the homes, went into administration in February 2023 causing a delay in finishing the project.

A report by council internal auditors SWAP will be discussed by members of the Governance and Audit committee meeting on Thursday, April 18.

The probe was prompted following an intervention by Cllr Peter Lewington at a meeting at the end of last September, where he said that a number of firms had been in touch with him about the issues.

The SWAP report has focussed on the use of a project bank accounts for the Red Dragon contract.

Lack of clarity

In their report SWAP said: “The internal contract distribution process lacked clarity, hindering the understanding of responsibilities.

“There was limited accessibility of the final signed contract and any related contract addendums, with no central electronic copy, which prevented visibility to all relevant parties.”

On the project bank account, SWAP said that the RL Davies should have signed an agreement to set up the project bank account inside seven days of finalising the contract.

SWAP said: “From discussions it was evident that nobody could confirm whether the document had been provided to the contractor for signing, nor were they aware if a signed copy had been received in return.

“This uncertainty raised concerns about whether all parties involved knew their responsibilities with the contract process.”

The report adds that staff in the finance department had advised as far back as 2020 that a financial system called “Efinancial” should be used to provide evidence that payments to subcontractors have been made. But this requirement had not been put into the contract.

Controls

SWAP said: “The council failed to implement sufficient controls to verify payments to subcontractors throughout the contract.”

The report goes on to say that there was a lack of “oversight of risks and warning signs throughout the project.”

SWAP explained that this is because: “The council primarily focused on asset delivery and house completion, neglecting the broader picture, and resulting in fragmented project ownership.

“Improved communication between service areas is necessary to ensure unified project ownership.

“There is no centralised data management system across service areas with services retaining information independently.

“The lack of a centralised documentation repository would have hindered transparency, direction, and awareness of project issues for decision-makers.”

Project management

While introducing a new system would improve contract and project management council staff also need to know what to do to flag up issues.

SWAP said: “The council should ensure officers are aware of what needs to be reported and to whom.”

In response to the report chief officer of place, Matt Perry said that the concerns raised by the probe had been “considered” by staff from the council’s Housing, Finance, Commercial services, and Legal departments.

Mr Perry said: “An action plan has been prepared to address and resolve the issues raised in the audit.”

Some of the agreed actions include:

Installing a centralised electronic contract management system for all contracts and any related changes to the contract.

Setting a financial threshold be a project be before insisting on a project bank account.

Contract management training for staff in the council’s housing and commercial services departments.

More checks on the commercial viability of developers.

Improved communication across council departments.