THE secret findings of an anti-fraud investigation into an education company’s alleged mis-use of money intended to help at-risk children has finally been made public.

A probe into EduAction, which used to manage schools in the borough, found that it is likely company staff exploited a poorly drafted and monitored council contract to move money it was paid for the Youth At Risk programme into other areas of its business.

The cabinet member responsible for Youth At Risk at the time was current council leader Chris Robbins.

A council decision to block the release of the report was overturned following a complaint by Chingford MP Iain Duncan Smith to the Information Commissioner.

A subsequent report into the allegations surfaced as part of the independent panel review of council contracts, which uncovered widespread and long-term financial chaos at the Town Hall.

But the latest report, which is dated July 2008, provides further evidence that young people in poor areas of the borough at risk of exclusion did not receive support through a £240,000 Neighbourhood Renewal Fund grant between 2003 and 2006.

It calls on the then Director of Finance to “take appropriate action in view of the possibility of breach of contract by EduAction due to fraudulent action”, after the investigation found evidence that the council paid out as much as £130,000 more than was formally agreed by the Local Strategic Partnership (LSP), which was responsible for monitoring renewal funds.

The investigation also found that EduAction:

• deliberately misled the council over how many children had been helped

• ‘abused’ conditions relating to the use of NRF

• were reluctant to discuss how funds were used

• were ‘deliberately opaque’ in descriptions of funding sources and budgets

• claimed for, and was paid, management fees to which it was not entitled

• put a whistleblower under ‘sustained pressure’ during a dispute involving instructions to delete documents

• Initiated and shaped the programme of which it was the beneficiary

The council also comes in for sharp criticism.

It was found that the contract was not signed by anyone from EduAction, meaning the council’s regeneration department effectively signed a contract with itself.

The document also included a “highly irregular clause”, which stipulated that EduAction could keep any operating surplus as long as the lead officer was satisfied with the programme’s overall level of performance.

This is described as “a green light to the provider to divert funds and make economies in services”.

Despite the inclusion of the clause being referred to the council's legal department, no-one could explain its existence.

Monitoring officers also were found to have failed to do their job and payments to EduAction were approved despite persistent non-compliance with funding requirements.

EduAction previously argued that the criticisms of EduAction in the report were unjustified.

A police investigation into the allegations found there was insufficient evidence to bring criminal charges.

Iain Duncan Smith said: “I believe the report illustrates an appalling level of management, with individual officers and councillors completely failing in their duty of care.”

“The report also begs serious questions about the management of renewal funds as the letting of these contracts has been appallingly slack and open to abuse.

“Andrew Kilburn asked for an independent review of these contracts, but since he has now left, I have asked the new chief executive to publish these contracts urgently.”

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