Part 1 of 2 Gardengate – A Solution to the Housing Puzzle?
Part 2 of 2 Gardengate – What Residents and Whitehall Needs to Know

Those residents who wander the streets of Tower Hamlets at night may have been scared by a howling carried on the wind from far away.

A hunting werewolf? The ghost of a pirate hanged on the foreshore of the Thames? Blind mutant zombie babies?

No, just the howls of frustration from Moley as he tried to find documents on the Tower Hamlets Council website.

At one point the Molester spent over two days fruitlessly searching for specific Cabinet reports relating to Gardengate.

He was only saved from further angst after asking the lovely people in the Tower Hamlets Freedom of Information office for help. Within 24 hours they came back with the specific links to the documents Mole needed and an explanation as to what the information meant.

Many thanks to the Tower Hamlets FoI team for doing the help and advice part of their job so well – it is much appreciated.

It would be good to report that the intense research of Mole and his colleagues has born fruit and the Enquirer can now reveal the secrets of Gardengate but um… we can’t.

We can explain why we think this is worth so much time and effort and, as ever, welcome your comments.

There are several different threads to this story and as yet we have not been able to create one coherent overview of what went on and, more importantly, why.

To make life even more interesting some of the main events took place five years ago in 2017 which makes us reliant on tracking down relevant documentation.

November 2017

Mayor’s Executive Decision Number 176

The two-page to spend £119 million on a social housing programme was approved by the Head of Place, the Chief Finance Officer, the Monitoring Officer on Thursday 9th November 2017 according to their signatures.

Despite the document stating that normal publication procedures had been sidelined as the decision was urgent, it was not published until the evening of the next day after it had been signed by the Mayor.

Mayor’s Executive Decision 176 Acquisition of Affordable Homes was finally emailed to Councillors at 7.31pm on Friday, 10th November, 2017.

This was 7 hours after the deadline to submit questions and motions for the full Council on the 22nd November.

It also meant there would be no opportunity at the Council meeting on 22nd November to ask questions of officers.

According to Cllr Andrew Wood (Independent, Canary Wharf) “While some individual components of the proposal had been discussed in the past, some as far back as 2015, many of the values had changed and this was the first time Councillors had seen the total figures.”

The manner in which this was done is a crude attempt to try and ensure that the announcement would attract as little attention as possible.

This raises the question of why Mayor Biggs would want to do this? Building more social housing is what Tower Hamlets administrations are supposed to do.

The only logical explanation is that there was, and still remains, a desire to keep this housing programme secret because there was something very wrong with it.

The Mayoral Decision was formally agreed by the full Council on 22 November 2017.

It was subject to a challenge (‘Call In’) by Opposition councillors on 23 November 2017 but issues with this did not surface until a long term later.

October 2020

The Audit Report

Fast forward a couple of years and this document ‘Appendix. 1 for Internal Audit and Anti-Fraud Progress Report‘ was written by the Tower Hamlets Council internal audit team in October 2020 some three years after the events it describes and we are writing in 2022, two years after the audit report and five years after the original events.

On page 12 the section ‘Management of Acquisition of Properties for Temporary Accommodation’ has some fascinating comments by its authors that give a valuable insight into the cack handed manner the current administration tries to get things done, in particular the Mayor’s Executive Decision 176 Acquisition of Affordable Homes.

Here is the first paragraph on page 12 that sets out the context of the audit report. [£] added by the Enquirer.

“This audit sought to provide assurance over the systems and controls for managing property purchases. The acquisition programme was agreed by the Individual Mayoral Executive Decision process (Decision log (No: 176)) on 23rd October 2017 and agreed by the full Council on 22nd November 2017. Capital estimates were adopted totalling [£]119M – Poplar Harca (19M), Purchases In and Out of Borough ([£]40M) and acquisition of S106 properties ([£]60M). Cabinet and the Full Council also agreed [£]30M and [£]20M respectively in February 2017 and January 2019.”

The second paragraph then starts to reveal the reason for the audit report.

“As at December 2018, the actual spend on Poplar Harca was some [£]53.6M. In December 2018, a Change Note approved the merging of three separate capital budgets into one and also approved the programme name change. The Change Note stated that verbal agreement was obtained from the Mayor so that [£]60M could be used for purchasing properties for temporary accommodation as well as for S.106 properties. At the time of this audit in January 2020, the Change Control was not reported to the Cabinet. Procedures require all Change Controls to be reported to Cabinet for approval as part of the Quarterly Revenue and Capital Budget Monitoring process.”

A Verbal Agreement? #WTF?

Dull stuff, huh? Yep, until you look again at the third sentence:

“The Change Note stated that verbal agreement was obtained from the Mayor so that [£]60M could be used for purchasing properties for temporary accommodation as well as for S.106 properties.”

Whatwherehowwhynow?

‘Verbal agreement’ from the Mayor to merge three separate capital budgets, call the housing programme something else AND use £60m to purchase properties for temporary accommodation and s106 properties?

You know what a verbal agreement is. We know what a verbal agreement is. What does a verbal agreement mean in local authority speak?

The report then states that when an internal audit was carried out over a year later in January 2020 the change had still not been reported to Cabinet.

This in spite of the requirement for all changes to be reported to Cabinet for approval.

Good job it was only £60m! Phew!

Worried yet? You soon will be.

The final paragraph on this page states that ‘The report for the adoption of capital estimates for the three capital projects did not clearly identify in detail the resources to fund these projects.’

In other words nobody knew where the money was coming from.

Not only did nobody know where the original £119m was coming from for the three original housing programmes the Mayor had then decided to merge into one so that he could do something else with £60m of it.

Oh and the spend on the £19m Poplar Harca budget had ballooned to £53.6m – so where was that extra £34.6m coming from?

The final sentence is a cracker!

“We have recommended that in future when capital budgets are adopted by the Mayor or the Cabinet, the associated funding streams and the amount of funding available is clearly identified for approval.”

What a good idea. You have to wonder if the Department for Levelling Up, Housing & Communities would describe this approach to finances as being in line with the Council’s ‘best value duty’?

The Authority’s obligations with regard to governance under the Local Government Act 1999 are defined as follows:

“3 (1) A best value authority must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

The Enquirer took that definition from the October 2014 report by PwC into the way Mayor Rahman ran the Council.

Whatever happened to him?

Another issue with the merging of three housing programmes into one housing programme is this. Normally a programme is described as either being s106 (funds or assets from developers), Temporary Accommodation (TA), Purchases In and Out of Borough, RTBBB (Right To Buy Buy Back) etc because the funding for each property type is, presumably, different in each case. Makes sense.

But it is rather unusual for different types of housing programme to be merged into one as happened here. According to a social housing expert the Enquirer talked to the reasons for this would need to be explained properly in a paper and the Council’s Legal Department would need to agree to the change.

It does not seem that this happened here.

A teeny weeny insurance problem

Page 13 of the audit report touches on a problem or two with the same properties that the housing programmes mentioned above actually bought.

As in whoever bought the properties did not, for some odd reason, tell the Council’s insurance service that they had been bought.

So they were not properly insured.

What is the very first thing any individual does when they get a mortgage on a property? Exactly. Get it insured.

Although each acquisition has to be financially assessed for value for money by the Council Finance team before they can actually be bought the reports states that

…audit testing of 20 purchases showed no evidence of a system in place for financial assessment and consultation with Finance to be undertaken before purchase approval.

Oops.

Audits do not test every purchase, they test a sample. In this case all of the 20 properties in the sample failed. Out of how many? 200? No idea. Have a feeling that however many that none of these were insured either.

Gardengate: A possible solution? Or just a bad guess?

At this point in reading this Moley paused (or pawsed if you are also a mole or other furry creature) as he had a thought. Was this the answer to the whole Weird Housing Purchase / Gardengate puzzle?

Where the properties that were not insured the same ones that Mayor Biggs bought using the AP1 system? And the reason the properties were not insured was because properties purchased using the AP1 system would be outside the usual property purchase procedure Tower Hamlets Council uses? And that this deception – if there was any deception of course – was the reason for the odd merging of three housing programmes into one that was ‘verbally agreed’ and not agreed by Cabinet until over a year later?

Just a guess. But Mole guesses can be very good at times. We should emphasise that there is absolutely no inference or allegation that any criminal activity has taken place here. But we are working without complete data and nobody in Tower Hamlets Council can explain any of this to us so to a certain extent we are reliant on guess work.

The irregularities with the properties did not stop at insurance.

Once properties are purchased by LBTH, repairs and associated works are managed by Tower Hamlets Homes. As with insurance a sample tests of 20 instances where repairs were needed ‘found that some control improvements were required, especially in the area of approval for variations orders by LBTH.’

These significant variations were in some cases over 100% of the original order values which should require approval by LBTH client [Tower Hamlets Homes?].

100% of the original order values? Does this mean 100% of the original repair costs or 100% of the purchase cost? There is a lot of difference between a £5k repair bill rising to £10k and a £210k property purchase having another £210k added to the price.

Which is also known as rendering the property completely worthless. Who would but a worthless property for £210k? Or £10k?

So that is that.

Apart from it is not.

Same document page 10 talks about Capital Programme Governance, the Capital Programme being all the money the Council spends in a year including the various housing programmes.

Page 10 points out that

The Council’s Financial Regulations require capital programming to be undertaken over a three-year rolling period. The Council’s Capital Strategy (7th February 2017), extended the Capital Programme planning from 3 years to 5 years and in January 2019, the capital programming was further extended to 10 years. Planning capital expenditure over such a long term period has the risk of having a “wish list “of capital projects – there being no assurance that the necessary capital funding was available in the first instance.

The Council extending the Capital Strategy from the three years rolling that regulations require to 10 years that regulations do not require sounds might unusual.

Sound familiar? Like the £119 housing programme mentioned earlier?

P11.

Audit testing of 10 Capital Growth Bids showed that there were issues regarding authorisation of the bids, identification of funding sources and completion and approval of the Project Initiation Documents (PIDs).

Ooh! PIDs! Anyone who has ever worked in any reasonable size organisation loves a good PID! For those who have never experienced the joys of project manage a Project Initiation Document (PID) is a document that has to be completed before a project can start. Little project, large project, doesn’t matter a PID has to be done which will include basic stuff such as target budget, schedule, personnel, project purpose etc.

In many organisations it is literally not possible start a project without a PID as it is tied into the IT system and without one nothing else can be done.

Even without this it beggars belief that the Council can start a project without a PID that says where the money for the budget is coming from.

Another scary sentence can be seen on page 11.

Audit was advised by officers that there was no alignment of the financial information held by the Capital Delivery team (reported through the Capital Programme tracker) and that reported by Finance to Cabinet through the quarterly Revenue and Capital Budget monitoring process to Cabinet.

To translate into English:

The Capital Programme tracker (probably an Excel spreadsheet) contained financial info that the Capital Delivery team relied on.

Somehow the reports by finance to the Cabinet were slightly different. Or maybe bigly different? Who knows?

Gardengate 25 February 2022 Update

INTRO