A whistleblower's accusations of serious mismanagement in a lifelong learning project have been upheld by an internal Edinburgh City Council inquiry but it found "no evidence that council funds were misappropriated".
The internal auditor's report, submitted last week to the full council, omitted any criticism of senior officials in the education department, or leading councillors, who disciplined the whistleblower rather than probe the substance of the allegations made by John Travers, a community education worker.
An employment tribunal in January upheld Mr Travers's view that he was acting in the public interest in October 2002 by sending a series of anonymous emails about the running of the Cityconnect organisation, an offshoot of the Edinburgh Lifelong Learning Partnership (ELLP).
The tribunal awarded him pound;5,000 in compensation but he has yet to receive payment despite his considerable legal bill.
In 2002, Mr Travers alerted Donald Anderson, council leader, to alleged malpractice at Cityconnect, which was effectively run by the council. He claimed that project workers employed family members, and that project staff set up their own ICT business to win contracts from Cityconnect, which they ran, and failed to account for hardware.
External auditors for ELLP queried some pound;378,000 of unaccounted spending over two years. Cityconnect was subsequently disbanded last year.
After making his allegations, Mr Travers was tracked down and disciplined, a move he successfully challenged in court. He has launched a further claim of victimisation following his now long-running wrangle with his employer.
Last week's report focused narrowly on the council's involvement with ELLP and how it governed the partnership. It confirms many of Mr Travers's allegations, including the setting up of a company, WabsterIP, by two members of the ELLP staff working for Cityconnect. There was a conflict of interest and WabsterIP has not lodged any accounts at Companies House, in breach of the Companies Act, the report states.
"One ELLP employee transferred to the council in October 2004 but continues to be a director and shareholder of Wabster. Wabster appears to continue to deliver ICT services to a variety of community groups. Again, education department management has not investigated the apparent conflict of interest."
The auditor calls for proper training of officers involved in companies or on secondment and more transparency in council-run projects. No one officer should have formal authority to conduct business unchecked, the report says, in a reference to the relationship between Cityconnect and WabsterIP.
The Cityconnect workers who set up WabsterIP were Peter McDougall, Alistair Frater and David Hillson, the senior manager seconded from the education department. In 2004, Mr Hillson won a national award of pound;2,500 for his work on ICT in the community.