Bournemouth council ran the risk of making illegal payments

And the authority has been criticised for not telling councillors when the new contractor also ran into trouble and the authority agreed to pay the firm’s bills to suppliers.

The criticisms come in a letter from the District Auditor which clears the council over other complaints.

The episode centres on what happened when Quadron Property Services Ltd (QPSL) – which maintained the borough’s 5,100 council homes – went into administration in 2009.

Bournemouth council handed the work to another company, the Kinetics Group, without putting the contract out to tender.

And when Kinetics also ran into trouble in late 2010 and suppliers were reluctant to provide it with goods, the council agreed to settle Kinetics’ accounts.

A total of £697,487 was eventually paid to Kinetics’ suppliers and contractors before the firm also went into administration.

Adrian Fudge, a former deputy leader of the council, complained to the District Auditor over the episode.

District Auditor Simon Garlick said the arrangement with Kinetics “continued for over 18 months, well beyond what in my view could reasonably be described as a temporary measure and inconsistent with the advice given by legal officers of the council”.

He said the arrangement amounted to a new contract which should have been put out to tender. Failure to do so “could give rise to potentially unlawful expenditure”.

The change should have been reported to the council’s cabinet and not just to the member for housing, who was also the council leader at the time, Peter Charon.

The auditor said it was “not unreasonable” in principle that the council decided to pay suppliers when Kinetics ran into trouble. But it was “essential” that all councillors should be aware of such significant changes to contracts.

But the auditor decided the deficiencies in the process did not make payments unlawful. He did not accept there was a lack of a “due diligence” process or that payments to suppliers had actually been illegal.

Mr Fudge said the episode showed there was a “lack of control” over council contracts.

“There’s virtually no scrutiny, no reporting to members and therefore the potential for things to go wrong in major contracts must just be enormous,” he said.

He added: “What’s the point in having 54 members of Bournemouth council if nobody’s going to be aware of what’s going on and make sure everything’s properly monitored on behalf of the council taxpayer?”

But council leader Cllr John Beesley said the council had been vindicated.

“Sometimes in business you have got to make decisions very quickly for the greater overall good,” he said.

“That overall good was about safeguarding jobs, it was about continuing a service and it was about ensuring that all creditors got paid. In doing that sometimes you’ve got to act extra quickly and you’ve got to do what’s right in the greater interest of the council tax payer.”