INVESTIGATORS have raised concerns about the dealings of a local learning and skills council whose executive director recently resigned in protest at the handling of public funds.
A team of national LSC auditors was sent to the London South office after complaints from the executive director Vic Seddon, who has since quit his post.
The concerns surround the use of the local initiative fund (LIF), worth millions of pounds to local LSCs - money which can be spent on projects that meet specific local objectives.
The draft auditor's report, seen by FE Focus, said: "There has been an ongoing difference between the council and the executive as to who is responsible for the day-to-day management of the local LSC's discretionary budgets."
Auditors added that, before their visit, "a stand-off between the executive director and the chairman existed, with both wanting the delegated authority to approve projects that were to be expected through the LIF budget".
The auditors also found a number of contradictions between budget allocations and the way money was actually spent.
The report says: "These differences do not appear to be wilful manipulations but highlight a period where the LIF budget and associated management information was not well controlled."
The report also made reference to "a number of control weaknesses and issues that need to be resolved".
Auditors said there was "little or no evidence" of officers pushing through pet projects, as had been alleged by whistleblowers, although there were three projects which had gone through without the local council's approval.
The report said London South should make more of its LIF funding available to open bidding so that there is greater objectivity in awarding contracts.
Howard Grieves, who led the audit team, wrote: "The relationship between nurturing projects and objectively assessing projects seems somewhat blurred."
Auditors also examined the relationship between London South and an organisation which was hired to carry out research funded by LIF. The provider had allegedly been told to do preliminary work under a verbal agreement. This was denied by Steve Moore, at the time a director of London South and now based at LSC headquarters in Coventry.
A contract was drawn up retrospectively to pay pound;30,000 for work already carried out. A further pound;112,000 was authorised, under a separate contract, to undertake the remainder of the work which had been agreed.
The report said: "Whether London South LSC should have contracted with (the organisation) is a moot point. What is clear is the LSC should not allow any work to start without a signed contract or, under exceptional circumstances, a letter of intent."
A statement from LSC headquarters said: "The internal audit identified no deliberate impropriety. The full report of the investigation will be discussed by the London South LSC audit committee and the full council as soon as possible and an agreed set of actions will be put in place to ensure this kind of issue will not recur."
Mr Seddon refused to comment on the report.
Local LSC chairman Roy Charles said: "The LSC unanimously agreed to retain authority over LIF funding. The executive director is a full member of the council and has ample opportunity to raise concerns in that forum."