Inspectors to investigate Tower Hamlets

The government has appointed inspectors to look into allegations of “governance failure, poor financial management and fraud” at the London Borough of Tower Hamlets.

Eric Pickles, the local government secretary, made the announcement after “serious concerns” were raised following the receipt of “certain documents”.

Using statutory powers under the Local Government Act 1999, amended today by the new Local Audit and Accountability Act 2014, which relate to a local authority’s functions in respect of governance, Pickles has appointed PricewaterhouseCoopers LLP to carry out the inspection of the council.

Earlier this week a BBC Panorama investigation found thatLutfur Rahman, Tower Hamlets’ directly elected mayor, had more than doubled funding recommended by officers for Bengali-run charities during his time in office.

Opposition councillors told the investigators they believe the grants were made in return for electoral support. It was also revealed that in 2010 Rahman, who stood as an independent, won the seat with only 13% of registered voters. However, almost two-thirds of those who voted were from his Bangladeshi community.

Rahman categorically denies the accusation of making payments for electoral support. And, in a statement, said:“Panorama has been active in Tower Hamlets for nearly eight months and has only recently contacted us. Councils are complex organisations and we found that the production team had made many incorrect assumptions. It is our belief that the Panorama team formed a view and then sought the evidence to fit their story.

"Governance in Tower Hamlets is strong and the residents of the borough are proud to live in a diverse and accepting community. The picture painted by John Ware is not reflected in any audit or inspection reports and he makes no mention of the many excellent services provided by the council from education to housing to street cleaning.”

But, despite these protestations, the PricewaterhouseCoopers inspection will look into evidence of the authority’s “payment of grants, the transfer of property, spending decisions in relation to publicity, and other contractual processes” from 25 October 2010 to the present day.

Pickles said: “It is a matter of public record that I have long been concerned about a worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration in Tower Hamlets.

“Following the receipt of a number of documents, I am now taking legal steps, in the public interest, to appoint inspectors to look into the allegations in respect of Tower Hamlets. This central action is not undertaken lightly, but localism requires local transparency, scrutiny and accountability, and these vital checks and balances must be upheld.”

He also stated that he hopes the action sendsout a strong signal that “robust processes” are in place to investigate allegations of failures in financial management and governance in local government, under the new regime introduced by the Local Audit and Accountability Act which replaces the Audit Commission.

A Tower Hamlets Council spokesman stated: “Under a newly introduced order, government auditors are today meeting with senior officers of the council.

“We welcome the opportunity to demonstrate that council processes have been run appropriately and to date we have seen no evidence to suggest otherwise. This inspection affords the borough the best opportunity to demonstrate that the borough has acted in the best interests of all residents. We will release further information in due course.”

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