FRAUD occurred in the handling of money intended for Waltham Forest’s poorest areas, the council has admitted for the first time.

A report published in November last year into the authority’s response to the scandal over Better Neighbourhood Initiative spending found no evidence that lessons had been learned after the mismanagement of millions of pounds was uncovered.

Speaking at a recent meeting of councillors where the report was considered, the Town Hall’s chief auditor said: “It was recognised that fraud and waste of monies had occurred in this case.”

Previous enquiries into the fiasco have said that, while there was widespread evidence of waste and failure to follow rules, there was no evidence of fraud.

But the latest statement raises the possibility of further, possible criminal, investigations.

The council is yet to reveal when the evidence emerged and what action was taken.

The November report reviewed two previous investigations into BNI spending and concluded that the widespread financial chaos could happen again because concerns had not been "communicated throughout the council".

This is despite at least ten previous investigations into the problems, with a cost to the taxpayer of up to £200,000.

PriceWaterhousCoopers (PwC) investigators in 2008 found the BNI in complete disarray, despite warnings about council spending in poor areas being made as early as 2004.

It found half of project files did not contain a signed contract and all projects in 2007/08 had not been approved by council lawyers.

There was no evidence that a tendering process had been carried out in several cases.

Missing file data meant PwC was unable to check money paid against the council’s own logging system. Only eight per cent of files were found to have complete budget details.

The findings resulted in 14 council officers being interviewed to establish what went wrong.

The probe found the team responsible for managing the project did not understand council contract rules.

It also emerged that there was also no formal procedure for allocating BNI grants and ensuring those involved declared a potential conflict of interest.

Butlers Management Consultancy (BMC) was drafted in October 2009 to try to trace BNI spending.

Although the investigation found widespread weaknesses, the report has never been formally approved.

BMC found £125,000 was spent on projects relating to the 2012 Olympics, but it remains unclear whether this came from a separate budget or BNI funds in error.

On a small number of occasions negative amounts were entered into the council’s log. No reason for this was established.

The report did not recommend any disciplinary action or further investigation.

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