One Horton Heath: Auditors 'unable' to rule out fraud

External auditors examined the One Horton Heath (OHH) project and found "significant weaknesses" in fiscal controls at the increasingly debt-laden Eastleigh Borough Council.

Their 10,000-word report says they were "unable to determine" that no fraud or non-compliance with laws and regulations has taken place.

READ MORE: This is how much debt per resident each local council has

But the Liberal Democrat-controlled council says internal reviews have found "no instances" of fraud.

The auditors' report also cites value-for-money issues surrounding the purchase of Chalcroft Solar Farm in 2021. The authority is said to have paid £9.5m for the land, which was later valued at only £710k.

A report by external auditors has criticised significant weaknesses in spending controls at Eastleigh Borough Council (Image: Newsquest.)

The Ernst & Young (EY) study says: "There was insufficient information to allow the full cost of acquiring the solar park to be fully understood at the time."

Council bosses should ensure "comprehensive, complete and balanced information is presented to members to allow them to take fully informed decisions for major planned capital acquisitions.

"This should always include best and worst-case scenario modelling of the potential financial impacts arising from the acquisition."

Much of the report focuses on "wide-ranging" whistle-blower allegations made by a council employee in March last year. 

One of the accusations centred on payments made to contractors. Others involved an alleged failure to comply with procurement law and a lack of scrutiny surrounding the council’s financial and operational plans for OHH.

READ MORE: Extra £160m to be approved as spending on One Horton Heath nears half a billion

"We considered the allegations to be potentially indicative of material fraud and non-compliance with law and regulation," says the report.

"The initial IA (internal audit) investigative work and resulting reporting of findings was insufficient to address the risk of non-compliance with laws and regulations or fraud in procurement arrangements.

"The final IA report identified breaches of contract standing orders and wider weaknesses in governance arrangements for OHH."

One Horton Heath comprises up to 3,000 homes, a primary school and a new link road (Image: Eastleigh Borough Council)

More whistle-blower claims - subsequently withdrawn - were made in July last year.

The report said: "This second set of allegations were again centred around OHH, including similar allegations of significant weakness in internal control over payments made to contractors.

"Additional allegations around the funding of the scheme were also made.

"The allegations covered a suspected breach of legal obligations, conduct likely to damage the reputation or business of the council [and] other improper or unethical conduct.

The One Horton Heath scheme includes a new primary school (Image: Newsquest.)

"Neither we nor the council are able to determine there has been no material non-compliance with laws and regulation, or fraud."

The revelations have angered Eastleigh's Conservative MP, Paul Holmes, who is seeking a meeting with Simon Hoare, Parliamentary Under-Secretary of State for Local Government.

Mr Holmes told the Daily Echo: "My worst fears about this project have appeared to materialise.

Eastleigh MP Paul Holmes has criticised the borough council's reckless and irresponsible behavioure (Image: PA)

"The report is damning in its criticism of Eastleigh Borough Council’s inability to manage the One Horton Heath development.

"Concerns range from the spiralling costs and lack of expertise to carry out this project but also highlight EY’s inability to determine whether fraud and improper compliance with laws and regulations has occurred.

"This follows whistle-blowers raising concerns about the management of this project whose concerns have not been answered.

"I see no other option than a full and extensive investigation by the government into the One Horton Heath project.

"I will be meeting with the minister to ensure residents get the full facts on their council’s reckless and irresponsible behaviour."

Keith House is leader of the Liberal Democrat controlled Eastleigh Borough Council (Image: Newsquest.)

READ MORE: One Horton Heath costs Eastleigh Borough Council £300k a month in interest payments

The council bought the initial site in 2017/18 and subsequently acquired the 34-acre solar farm.

As reported in the Daily Echo, OHH comprises more than 2,800 homes, plus a new primary school, and is set to cost at least £476m.

The council originally intended to sell plots to developers but eventually decided to "self-deliver" at least the first phase of the development.

Last year it was revealed that the project was costing the authority more than £300,000 a month in interest payments.

The report says Eastleigh Borough Council bought Chalcroft Solar Farm for more than £9m (Image: Eastleigh Borough Council)

READ MORE: Eastleigh Borough Council likened to 'gambler' over One Horton Heath funding

Opposition councillor Stephen Broomfield has complained that the authority was not only the landowner but also the developer and the planning authority. "They mark their own homework," he said.

Much of the report deals with the council's debt levels, the impact of increased borrowing costs, and the action needed to tackle the issues.

It says the authority's "very high levels" of investment and borrowing have exposed it to greater financial uncertainty and risk than that faced by most other local authorities.

Council leader Keith House did not respond to a request for comment.

A report by the authority's deputy chief executive, Sarah King, is due to be discussed at a meeting of the audit and resources committee.

The report says the ruling cabinet was provided with "all the relevant information" it needed to make a decision on the purchase of the solar farm.

It adds: "The first whistleblower raised 35 individual concerns, which covered a wide variety of topics and did not relate solely to financial arrangements. Following extensive review and investigation, only two of the concerns raised were found to be valid.

"These relate to procurement arrangements and a breach in compliance with legislation and regulation.

"To ensure that this is an isolated historic incident, further audit reviews, to give Management and Stakeholders assurance, are being carried out."

Turning to the fraud allegations it adds: "The in-depth audit testing performed as part of the whistleblow review and other wider assurance reviews have identified no instances of fraud."