Serious failings in financial management and governance found at town council

Serious failings in financial management and governance found at town council
16 August 2022
magnifying glass hovering over an orange piece of paper

Prolonged poor governance and financial management found at Maesteg Town Council.

The Council’s failure to carry out their own financial controls created an environment which could be exploited to defraud, according to the report in the public interest issued today by the Auditor General for Wales.

Under the Accounts and Audit (Wales) Regulations 2014, the Council is responsible for putting in place proper financial management and internal controls. However, these arrangements are only effective if they are operated properly. When Councils fail to implement proper financial arrangements, there’s a risk of loss to the public purse, and this is seen in the case of Maesteg Town Council. Our report in the public interest found that the Council failed to exercise the minimum standards of financial management and governance expected of a town council.

Between March 2016 and December 2019, the former Clerk of Maesteg Town Council defrauded the Council of £238,000 – representing up to 27% of the Council’s total non-pay expenditure in each financial year. Failing to follow proper financial procedures created an environment in which the former Clerk was able to exploit to defraud. Council members serving during the former Clerk’s tenure failed to properly scrutinise the financial information presented by the former Clerk.

As part of their financial and governance arrangements, the Council required all cheques to be signed by members, who should also have checked all invoices. However, members who were cheque signatories failed to follow proper process, including signing blank’ cheques, therefore facilitating the fraud committed by the former Clerk.

Our report in the public interest also found other significant failings by Maesteg Town Council. These included failing to establish an adequate internal audit system prior to 2019 and failing to comply with the statutory timescale for submitting its accounts for audit. There are also significant inconsistencies and omissions in the Council’s accounting systems and records.

The report outlines several recommendations for Maesteg Town Council, including:

  • Ensuring that its proper internal controls including authorisation of payments, are followed by all members.
  • Putting in place proper scrutiny for the work of the Clerk and Deputy Clerk.
  • Implementing the recommendations made by its internal auditor in 2020 and ensure that the processes put in place are operating effectively.

Failing to carry out financial and governance checks and controls can have serious consequences for town councils. The fraud committed against Maesteg Town Council highlights just how important it is to establish effective internal control and internal audit systems and town councils across Wales can learn from this report to minimise the risk of this happening again.

Adrian Crompton, Auditor General
Failure in financial management and fraud – Maesteg Town Council