S106 Funds and EDDC Audit & Governance Committee – report from an attendee:
On Thursday November 17th the Audit & Governance Committee of EDDC voted to make several changes to the Council’s finance systems which will now ensure that s106 payments will go to the local community amenities for which they are intended.
S106 payments are agreements under the Town and Country Planning Act 1990, often referred to as ‘developer contributions’ whereby developers agree to make financial contribution to the community infrastructure when they build property. These contributions are usually used to provide amenities such as playground equipment or other local projects, and usually decided with local councillors in the town or parish councils.
The recommendations to make changes in the way EDDC manages and monitors the s106 monies comes from auditors KPMG who received an objection from a local elector. KPMG mounted a financial investigation into the elector’s complaint and concluded that the council’s control systems had the following weaknesses:
1. An absence of summarised financial information to facilitate the monitoring of s106 contributions
2. Lack of challenge or enforcement of the developers’ legal obligation to provide information
3. Lack of understanding of financial and accounting implications of triggers being met and the communication between Planning and Finance over this.
EDDC Chief Executive Officer Mark Williams, at one point in the discussion, disclosed that he watches some s106 debts grow (because interest at 4%+ base rate is applied) rather than collect them when due so that the council can gain more money.
No one challenged or questioned the ethics of this as a strategy for dealing with the funds that could have gone sooner to the communities for which it is intended (or whether developers could be benefitting by delaying payments). Neither was it established whether that interest earned is applied to the s106 amenities for the community or left in the council’s general reserves.
EDDC Monitoring Officer Henry Gordon Lennox, referring to the £730,000 he had previously disclosed (through a Freedom of Information query) was owed in 2014/15 and 2015/16 for s 106 payments, interjected that the £730,000 owing had included a mistaken overstatement of £409,000. The current status of the other £321,000 was not established during the committee discussion however.
The auditors, in upholding the objection to the accounts, made Priority One recommendations to address each area of weakness because these are fundamental and material to EDDC’s systems of financial controls. The committee resolved that these should be implemented by set dates and KPMG will follow up in their next audit.
Councillors of various political parties during the discussion on this item thanked the elector for having raised the lid on this issue. Now that the previously weak system has had “a light shone on it” and addressed, the Audit & Governance Committee will be able to require regular reports on s106 monies owed and collected. They will be able to ensure that the funds are being directed to and spent on the amenities in towns and parish council communities projects for which they are intended.