Barnet Council failed to follow correct procedures when depositing £27.4 million in collapsed Icelandic banks, a report has revealed.
Treasury manager Patrick Towey has resigned following revelations that he ignored approved credit rating criteria when making the deposits, leading to millions of pounds being frozen in unstable Icelandic accounts.
Council leader Mike Freer was informed of his decision late last night, after the scrutiny working group report detailing the maladministration was presented to councillors.
Mr Freer said: “Despite previous assurances from council officers that correct controls were applied to Icelandic deposits, it has now come to light that in fact this was not the case.
“Yesterday, I was presented with a scrutiny working group report that makes it clear that officers did not in fact follow the correct procedures, despite having repeatedly told me both verbally and in writing that they had done so.”
Mr Freer said he had written to council acting chief executive Brian Reynolds to request a full external investigation into all aspects of the treasury management policy and how it is implemented.
He also vowed to commission an independent investigation to identity why the council’s external auditors, Robson Rhodes – now Grant Thornton – did not pick up on the issue.
A council spokeswoman confirmed Mr Towey failed to cross-check the deposits against credit criteria approved by the council’s financial advisors, Sector Treasury Services Ltd and Butlers Ltd, as outlined in Barnet's treasury management strategy.
She was unable to say how much of the £27.4m currently frozen in Iceland could have been saved, had the correct procedures been followed.
The spokeswoman said: “It appears that the controls for placing deposits were not robust enough and monitoring by officers was not sufficient.
“All the assurances verbal and written given to the council leader in relation to the Icelandic banks stated they were in compliance with the treasury management strategy.
“At no point was the leader advised that in fact this was not the case.”
But Lib Dem group leader, Councillor Jack Cohen, said it “beggared belief” that Mr Freer, who is cabinet member for resources and once worked for Barclays Bank plc, was not taking responsibility for the mistakes, and called on him to step down.
Mr Cohen said: “It’s all beginning to unravel. The leader has blamed everything on the officers, but he should really be examining his own position. I feel strongly he should resign.
“There is clearly no proper oversight of officers by this administration, and the leader is meant to be the cabinet member responsible for resources. All this has happened on his watch.
“He should have had a better grasp of how his council was functioning. He seems to have adopted a very laidback approach.
“We need real assurances that this sort of thing can never happen again.”
Andrew Dismore, Labour MP for Hendon, echoed Mr Cohen’s concerns. He said: “It is typical Barnet Council leadership to pass the buck to officers, but the buck stops with the leader, especially when he used to be a banker.
“I think he has to consider his position.”
Barnet Labour group leader Alison Moore said: "The leader has to take responsibility for his own portfolio.
"There has been much emphasis on the treasury management strategy, and this is absolutely and explicitly his responsibility.
"As cabinet members, we cannot hide behind officers. It is inappropriate for him to blame everything on them."
Mr Freer called the criticism “pure political posturing”.
He added: “The constitution is quite clear. Councillors set the policy and are entitled to expect officers to implement that policy. If I am misled I am misled. Other people may be mind readers, I am not.”
The leader also stressed the fixed-term deposits, placed in Glitnir and Landsbanki banks between November 2006 and September 2007, had not been lost.
“I would like to reassure residents that at this point, the Icelandic deposits remain frozen by the administrators of the two banks involved and discussions around the return of this money remain positive and ongoing,” he said.