CHAOS uncovered by investigations into council spending in the borough’s poorest areas could happen again, a report has warned.

Auditors found no evidence lessons had been learned after a series of probes found a systemic failure to monitor cash allocated via the Better Neighbourhoods Initiative (BNI).

The report into spending between 2006 and 2008 has only just been published, following previous assurances it would be completed in March 2009.

A copy of the report, seen by the Guardian, says the council must do more to prevent a repeat of the widespread mismanagement of taxpayers’ money intended for poor areas.

This is despite promises that decisive action would be taken when an independent panel found earlier this year that contract rules to prevent fraud were regularly ignored across and council spending was not properly monitored.

The report reviews two previous investigations into BNI spending.

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 latest report does not recommend any disciplinary action or further investigation, but makes a series of other recommendations. These include detailed training of officers and changes to the council contract payment system.

Nick Tiratsoo, whose research uncovered widespread council failings, said: "This report shows that the BNI was a shambles from start to finish, with projects procured improperly, little or no monitoring and auditing, baleful paperwork, money used for purposes other than those intended (including the Olympics), and financial data inserted retrospectively.

"More regrettably still, Deloitte concludes that previous Council reports into the BNI have gone largely unheeded, which means that hundreds of thousands of pounds paid for these reports has been wilfully wasted, and there remains a danger today that 'similar errors could happen in future projects'.

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