The report details unlawful expenditure amounting to over £2.7million in Members' Allowances between February 1996 and October 2001 and further unlawful expenditure amounting to £75,250 in increases to officers' remuneration in 1999. It is nevertheless the case that, save in so far as the Council made unreasonable increases of some £152,752 in Special Responsibility Allowances, it would have been open to the Council to set Members’ Allowances at the level that it did subject to following proper procedures including giving publicity to what was being done at the expense of local taxpayers.

The Appointed Auditor's main concerns regarding Members' Allowances are:

• The Council's use of an "automatic review mechanism" - which, as operated by the Council, did not review the appropriateness of any allowance but provided for automatic increases in allowances where there had been no increase in responsibilities; 
•  the backdating of increases in allowances (in some cases for a period of over 3 years);
•  increases in allowances made without delegated or other authority; and
• unlawful participation by individuals in the decision-making process.

The Appointed Auditor is critical of unreasonable increases in Members' Allowances, ranging from 44% to 74% over a 3 year period which gave rise to the inequitable treatment of some Members.

The report records that, the Council failed to comply with a statutory requirement to draw up a publicly available scheme of Members' Allowances, but it also failed, in breach of statutory duty, to publicise increases in Members' Allowances. Some increases in Members' Allowances and increases in officers' remuneration were made but not disclosed to Members generally; and officers authorised increases in remuneration for each other without reporting to the Council or to any committee or sub committee of the Council.

The Appointed Auditor is pleased that settlement with the Council in 2004 avoided the substantial costs of a two-week High Court hearing (see Notes to Editors). But she is critical that for some three years the Council mounted hostile opposition to her conclusions at significant cost to the public purse. This, she says, left her with no alternative but to commence legal proceedings.

The Appointed Auditor does not suggest that any Member or officer acted dishonestly or other than in good faith. But she considers that the conduct of some fell short of what it should have been and that the then Leader and Chief Executive can hardly be surprised that their conduct is the subject of public criticism.

Among the report's recommendations are calls for the Council to:

• consider the extent to which it may be able to recover unlawful payments made to Members and officers;
• ensure that decisions in relation to its scheme of Members' Allowances are made strictly in accordance with legal requirements, taken in public, recorded and given due publicity;
• keep proper records of all payments made to Members, in order to ensure a full audit trail is maintained; and
• ensure that no Member or officer participates in a decision making process in which he/she has a disqualifying interest (pecuniary or otherwise) in the outcome of that process.

The Council has responded positively to these recommendations and has improved procedures. It has also instigated a corporate governance review under the chairmanship of Sir Michael Lyons. However, Janet Jones warns that good systems and processes are not sufficient on their own and that their effectiveness depends on the manner in which they are operated.

The Appointed Auditor, Janet Jones, said today: