Financial Reporting Council to launch investigation into Woking Borough Council

First reported in The Guardian, the Financial Reporting Council looks set to investigate how the Surrey local authority went bust with debts of about £2 billion; second below only Birmingham as the most heavily indebted local authority in the United Kingdom.

Former chief executive Ray Morgan has confirmed he is one of those the watchdog will be investigating with The Guardian naming Woking’s former financial officer Leigh Clarke, who joined the council in 2014, as an other.

Both were previously named in the Grant Thornton report published on Tuesday, November 5, that found the scale of Woking’s borrowing, often lent to its 24 loss-making companies -as well as third parties – may have been so imprudent as to be unlawful.

Woking Borough Council’s “long and atypical history of borrowing from the Public Works Loan Board” ran between 1999 and 2020.

The levels of borrowing ramped up significantly between 2016 and 2019 – primarily to fund regeneration projects such as Victoria Place and Sheerwater but also to cover running costs at its companies as well as loans to private schools.

The impact of the bankruptcy has cost jobs, hit taxpayers in the pocket and seen the loss of valued facilities.

The Grant Thornton report read: “There was a strong message, over a period of many years, from the former CEO, Ray Morgan, that if debt could be serviced it was possible to borrow as much as the council wished, for whatever purposes it chose.”

However, it added: “The council’s governance arrangements and decision-making processes in relation to borrowing and investment decisions were wholly inadequate.”

It also said Mr Morgan had his own £3m “Opportunities Fund” with “decisions being made, for the most part, by him, in consultation with other senior officers, with the broad support of the administration at the time”.

Adding that there was “both documentary evidence and the information provided by stakeholders make it clear that the former CEO, Ray Morgan, was the principal architect of the council’s investment decisions.”

The Financial Reporting Council was contacted for this story but said it would not be commenting. It is expected to release a statement when the investigation is announced – which the LDRS understands from a number of sources, is likely to be at the end of this week.

Woking Borough Council has also said it would not be commenting at this stage.

Former CEO told The Guardian he was under “strict confidentiality rules” with the FRC and that he hadn’t been briefed on what questions he would be asked.

Others familiar with the situation are also under non-disclosure rules the LDRS understands.

Mr Morgan would however confirm what he said to the LDRS.

He told the paper. “Until I know what it is with the FRC – if they are going to proceed – I am not really in a position to comment to you.”

On the Grant Thornton report he added: “They did not take full account of the representations I and my colleagues made.”

Mr Morgan told the LDRS: “The Guardian statement is correct and you may also quote it.

“I do not wish to add anything at this stage.

“I understand the FRC is making a statement (this) week and is likely to name me.”