Claiming that the council had been slow to investigate “unusual” waste tonnages arising for the financial years 2002-03 and 2003-04, an Audit Commission report has found that the council and its waste contractor, Biffa, could not provide full explanations for the occurrence.
The four-year investigation came after a member of the public complained to the commission about the lack of reliable tonnage information and alleged that the council could have been charged to dispose of trade waste, which is paid for by the companies who generate it, in addition to its domestic waste, by as much as £10 million.
However, the report stated that if any loss of public money had occurred, it had been “considerably overstated”, and the additional disposal cost was calculated by the council’s Internal Audit service to have been more realistically between £183,000 and £298,000.
Nonetheless, the 24-page report criticised the council for its “weaknesses” in monitoring of tonnage information and data retained during this period – and also criticised former officers for having destroyed important historical documents.
Jon Roberts of Grant Thornton, the firm appointed by the Audit Commission to audit the council’s accounts, said: “It is disappointing that more definitive information was not available to explain fully the unusual trends in waste tonnage information for the years in question. Neither the Council nor the contractor has been able to explain, to our satisfaction, the reasons behind the variations.”
“While the council has now strengthened its contract control arrangements, the fact that a recent internal audit report was still highlighting control weaknesses is surprising, given the nature of the weaknesses and the relative importance of this issue to the council.”
Trade waste
In July 2004, North Somerset council identified a number of apparent irregularities in tonnages recorded for domestic and trade waste, most significantly an increase in annual trade waste and a corresponding reduction in domestic waste of around 3,500 tonnes between 2002/03 and 2003/04.
As this coincided with a change of contractor between the two years, the council was concerned that its contractor at the time, Biffa, may have been substituting trade waste for domestic waste tonnages and hence the council may have been inadvertently paying for the transportation and disposal of waste that had already been charged to the businesses responsible for generating it.
The council estimated that its potential loss if this practice had occurred could have amounted to between £183,000 and £298,000.
Around this time, a member of the public raised similar concerns with the Audit Commission and the council’s external auditor and made a number of allegations including that the tonnage information was indicative to the council being exposed to “systematic fraud from its contractors and employees.”
However, the waste contractor Biffa Waste Services claimed that the irregularities in domestic waste arising between the two years could have come from increased business in the region and a change of practice relating to trade waste, which saw waste previously sent elsewhere instead sent to a transfer station at Weston-Super-Mare.
Biffa – which became North Somerset’s domestic waste contractor after taking over from former contract holder Poplar in April 1999 and has now been replaced by Veolia – denied any wrongdoing but the report claimed that explanations offered by the waste management company had been “inconclusive”.
In addition, the introduction of commingled collections under the contract signed with Biffa and the lack of detailed council records had made it “particularly difficult” to prove any unlawful substitution, the Audit Commission claimed.
Responding to this, a spokesman for Biffa told letsrecycle.com: “Biffa denies that that there was any substitution between trade and domestic waste during its delivery of waste management services to North Somerset council between 2002 and 2004.”
“Biffa has been open with the council and has throughout maintained and continues to maintain that there was no wrongdoing on its part,” he added.
Ineffective
The Audit Commission report branded the council’s monitoring arrangements “ineffective” at having failed to spot the rise in trade waste being accounted and decline in domestic waste, and said there had been a lack of “good quality” evidence available to determine with certainty whether or not fraud or misstatement had occurred.
During the course of the investigation, the auditor found that there had been weaknesses in the monitoring arrangements of the council, which had led to it failing to detect the unusual tonnages.
The work to recover contemporary data was made harder by the destruction of operational files by the council’s area manager for streets and open spaces following the expiration of the Biffa contract in 2003.
The Audit Commission stated it was disappointed by the lack of computerised records available, however, it noted that it was of “considerable concern” that the council did not respond to tonnage variations until July 2004 and greater vigilance should have been enforced when the domestic waste collector changed in 2003.
Mr Roberts said: “While the council has now strengthened its contract control arrangements, the fact that a recent internal audit report was still highlighting control weaknesses is surprising, given the nature of the weaknesses and the relative importance of this issue to the Council.”
Legal
In attempting to recoup the loss, the council had been warned by its internal legal team that, due to the use of commingled collections, it would have sufficient evidence to warrant taking a civil action against Biffa.
However, the auditor claimed that the council could have negotiated “more robustly” for remittance and may now be unable to achieve a better commercial outcome having chosen not to use independent mediation to reach a settlement or seek any further information from Biffa relating to its explanation of increased business in the region.
Following the report, North Somerset dismissed some of the findings and claimed in a statement that it had taken “extensive” legal advice to explore the potential for a successful legal action against Biffa but the received advice of it having a low chance of success led to instead option to address the “pressing need to agree changes”.
The council welcomed the finding that the public complaint it had been defrauded was “massively overstated” but disagreed that it had been slow to introduce strengthened waste management and contract control arrangements, citing a recent internal audit review which found them to be ‘satisfactory’.
Councillor Carl Francis-Pester, North Somerset council’s executive member for environment, said: “I am very disappointed with the tone of this report. One of the implied criticisms is the time taken to complete the investigation. There are good reasons for this, not least investigating data and obtaining comprehensive legal advice.”
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