Payments made without checks at Middlesbrough Council

It comes after a damning internal audit into purchase card activity within children’s services cited evidence of non-compliance with policy and thousands of unreviewed transactions at Middlesbrough Council.

There was no regular challenge against excessive spending limits, the report found, and approximately £629,000 of transactions were made with no VAT recorded, resulting in around £125,000 lost in unclaimed VAT.

An audit committee meeting of the council was told on Thursday how all cardholders are undergoing mandatory training. If they fail to engage, they will have their cards removed until they do.

Committee member Cllr Ian Blades asked: “If staff require a card to do their job and then you remove that card, surely that means the staff are no longer capable of doing the job they are employed to do? My opinion is there should be a different process, a disciplinary process, rather than just threatening to take their card off them.”

Disciplinary processes would be put into place if staff did not follow policy or were using the card “inappropriately”, said Louisa Grabham, the council’s head of commissioning and procurement. “Vat receipts and description of spend are also now mandatory.

“Reports go to directors monthly and I will flag any issues or discrepancies.” It was also raised at the meeting that, in a report to the committee, it had been stated that staff who failed to follow due process on three occasions or more will have their cards removed. Cllr Brian Hubbard suggested said that needed to be tightened further to only one occasion.

“We can amend that if need be,” said Ms Grabham. The report revealed £8m was spent on corporate purchase cards across council services in the last financial year.

Ms Grabham said analysis of the report showed that 71 pc of the £8m spent across council departments – about £5.6m – was directly related to contract spending when purchase cards are used as “a tool for payment”. The remaining £2.2m was classed as off-contract spending provisions.

She said this was spent on urgent transactions for children in care, for example. “Not withstanding all of that we are absolutely aware that we need to tighten controls,” she said.

“We have done a review and reissue of purchase cards so we have asked directors to look at purchase cards in their circulation and produce to is reasons why individuals would need a purchase card. We also asked for financial limits to be reviewed.”

Auditors also found, a “small number” of officers were even reviewing and approving their own spend. Ms Grabham said the internal report identified just two officers approving their own spend.

She added: “In actual fact when it was fully investigated it was just one and that was an error with the system and corrected straight away.” Spending limits on cards, previously set at £1,000, are also being revised by directors in line with roles and requirements, she said.

“So we now have a variety of limits in place ranging from £100 to £1,000 plus,” she added. Committee member, Cllr Sharon Platt, asked: “Are managers of cardholders held accountable for the errors?”

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In response, Ms Graham said: “Previously managers would only approve spend of over £1,000. That has now been changed so managers will approve all transactions and will absolutely be held accountable.”

In a statement on purchase cards, Cllr Nicky Walker, Executive member for finance and governance, said management had taken “prompt action” to address the identified control and compliance issues within the area of children’s services before the audit report was published. These were incorporated into revised procedure rules that were agreed by the council in September, she said.

“The range of revised controls will ensure stronger oversight and compliance in this area, and further assurance will be achieved through audit work across all areas of the council that will be completed by March 2024. This audit has been conducted in accordance with the council’s planned audit work to ensure robust management and control arrangements are operating and appropriate actions are taken when it is not.”