Internal audit report into Arbed Scheme highlights multiple Council failings

THE findings of a report into a council’s involvement in an energy-saving scheme that left dozens of homes damaged has highlighted multiple failings.

Hundreds of homes in Caerau were left damaged after being poorly fitted with insulation under three separate schemes ten years ago.

The Welsh Government’s Arbed Scheme, under which Bridgend County Borough Council administered funding for work to be done on 25 properties, was one of these.

Of all the homes affected, many were left facing problems with severe dampness and mould, with some families even encountering health issues as a result

A Council internal audit report, which looked at the council’s involvement in the saga, identified a “number of significant concerns” relating to the “the governance, decision making, procurement, monitoring, and control aspects” of the Arbed Scheme.

Notably, the report concluded that

no due diligence checks were evidenced for the companies used to undertake these works

and that there were a “number of examples” indicating potential breaches of the council’s Members Code of Conduct.

Bridgend County Borough Council administered funding under the Arbed Scheme for work to be done on 25 properties – some of which were carried out by a company contracted by the council called Green Renewable Wales Ltd (GRW).

It was identified in the audit report that Companies House records showed that a former Bridgend councillor, the late Phil White, was the Director of GRW.

The company, which dissolved in 2017, was paid £309,201 by the council via two separate funding streams – the Arbed Scheme and ECO-BRI-001.

Analysis of the authority’s financial system identified that a total of £316,192 (excluding VAT) was paid to Green Renewable Wales Ltd between February and May 2013.

A number of companies were sub-contracted by GRW, including one called Sustainable Building Services Ltd (SBS) which Mr White was also the Director of.

The report concluded that although Mr White correctly “declared that he was a Director of Green Renewable Wales Ltd and SBS Ltd along with other companies”, he stated that SBS Limited “did not trade as a company when invoices indicate otherwise”.

Of the £316,192 paid to GRW,  £188,132.20 was “retained” by the company and SBS Ltd.

The detailed conclusion of the report also stated that it “cannot be confirmed” if BSS Bridgend – another company subcontracted by GRW – “actually existed”.

It continues:

“There was no company by this name registered with
Companies House and BSS Bridgend were not registered for VAT even though VAT was charged.

“It was noted that one of the BSS Bridgend invoices quoted an invalid
8-digit VAT registration number and the other invoice contained no VAT registration number.

“There was no company logo and no payment or bank account details
stated.

“The address on the invoice was Main Avenue, Brackla Industrial Estate but a google search could find no trace of a company of that name or at that address.

“The invoices from SBS state that the company’s address is Unit 4c Innovation
Centre, Science Park, Bridgend which is also the base for Green Renewable Wales Ltd.”

A review was requested to be carried out in 2018 to “ascertain the extent to which the Council’s policies and procedures had or had not been applied in respect of” the Arbed Scheme between 2012 and 2013 in Caerau.

Independent Bridgend Council member, Keith Edwards, said:

“Questions regarding procurement, involvement of the cabinet member, breach of the code of conduct were taken up with the relevant officers and senior cabinet members as far back as 2015-16. In 2014 forty cases of inferior workmanship regarding the properties concerned were sent to trading standards.

There has been a concerted effort at all levels both officer and cabinet to protect the authority and cabinet by repeatedly ignoring facts brought to their attention.

“While this attitude prevailed the house owners concerned have been forgotten about and left to live in the most appalling conditions.

Those involved in this cover-up need to look very closely at themselves as to whether they are fit for office.

Other failings highlighted by the report included a “breakdown in Governance at the Council” in relation to issues linked to Contract Procedure Rules; contract management and supervision processes; Financial Procedure Rules; Codes of Conduct for Members and Officers; protocol for member and officer relationships; decision making processes and documentation; and Management and Supervision.

The findings add that it was “unclear what inspections of work were taking place by council staff to monitor progress and to support payments made to Green Renewable Wales Ltd” and that there was “no clear evidence of how, when or who made decisions in relation to this scheme.”

In a statement, the Council said:

“While the council used the Arbed scheme in 2012-2013 to administrate funding and appoint a contractor to provide wall insulation for 25 properties in Caerau, it was not involved with a further 79 properties which had work carried out under the Community Energy Saving Programme.

“Commissioned after it became apparent that the wall insulation works were failing less than a decade after they had been installed, the report looked at several specific concerns. This included the apparent absence of an audit trail with regard to the procurement of work where the council was responsible for administrating the funding.

“The review was subsequently extended to focus on all of the financial and procurement aspects of the scheme, and the role of an elected politician who had links to the company contracted for carrying out the work.

“In addition to internal audit investigations, the council referred the matter to South Wales Police and liaised closely with Audit Wales so that it could be thoroughly and transparently investigated.

“While critical of both the management of the initiative at that time and the involvement of the elected member, the report recognised that key personnel from that era are no longer available, and examined and reviewed the management, procurement, and monitoring of other externally funded schemes, many of which were also energy efficiency initiatives.

“The report concluded that events surrounding the Arbed scheme in 2012-2013 were an isolated ‘one-off’ and made a number of recommendations for tightening procedures to avoid the situation from being able to reoccur.

“As all of these recommendations have already been implemented and actioned, Audit Wales confirmed to the council that the situation did not require their intervention, while South Wales Police confirmed that no further action was required.

“The issue of the elected member was reported to the Public Service Ombudsman for Wales as the body responsible for investigating and dealing with any elected member code of conduct issues.”

Chief Executive of Bridgend Council Mark Shephard, said:

“As I have previously highlighted while presenting public reports to Cabinet on 17 November 2020 and 9 March 2021, the internal audit report was very critical of the council’s poor management of the Arbed scheme during the period 2012-2013, and also raised concerns around an elected member’s conduct.

“I feel that it is therefore right that Bridgend County Borough Council apologises for this breakdown in governance, and offers reassurances that steps have already been taken to prevent these historical events from reoccurring.

“In addition to implementing actions to ensure such a situation cannot happen again, we promised to make the subsequent investigation as transparent as possible.

“As the external processes with the Public Service Ombudsman for Wales, Audit Wales, South Wales Police and Adjudication Panel for Wales have now concluded and no further action is to be taken, we have been able to deliver on that promise by publishing this internal audit report summary.

“The authority is now focusing its efforts upon submitting a full business case to Welsh Government by the end of February demonstrating how the £2.65m funding offer can be best used to address the failed wall insulation works and to ensure that householders will be able to benefit from the scheme as it was originally intended.

“While it remains hugely disappointing that the wall insulation works installed in Caerau in 2012-2013 quickly failed and did not produce the benefits for local residents that were primarily envisaged, it is encouraging to note that the planned remedial works to address the problem will include all 104 premises which received the work, and not just the 25 homes that the council facilitated the funding for.

“The business case outlining how this work will be delivered is currently under development, and I will be bringing a further report to Cabinet on this matter in due course.”

In response to the comments made by Councillor Keith Edwards, Council Leader Huw David said:

“It was the council itself which referred the matter to South Wales Police, Audit Wales, and the Public Services Ombudsman for Wales to ensure that it could be investigated as transparently as possible.

“These were hardly the actions of anyone trying to instigate a ‘cover up’ as is claimed, especially as those organisations have already confirmed that no further action is required.

“Despite only being involved with 25 of the 104 properties which received poor quality wall insulation works, this council has sought an all-inclusive solution which looks at all of the properties involved, and we welcome the £2.65m funding offer which has now been put forward by Welsh Government as a result.

“It remains bitterly disappointing that the wall insulation works failed, but it is also through this partnership with Welsh Government that a solution is now within sight.”

Earlier in the month, the Welsh Government awarded Bridgend Council with £2.65 million to carry out “essential remedial work” on properties in Caerau in the Llynfi Valley that were affected by poor insulation installation work a decade ago.

The funding is subject to the submission by Bridgend County Borough Council, and assessment by the Welsh Government, of a “satisfactory and detailed” business case and project proposal by the end of February 2022.