London council refers TMO to financial watchdog

The internal audit report, presented at the council’s corporate committee meeting at the end of November, identified several “critical” and “high priority” areas for improvement with respect to LEMB.

On financial management, the report said external auditors have “raised the going concern risk” for the second year in a row, with annual accounts showing an overall deficit in LEMB’s total capital and reserves. 

Other financial problems highlighted by the council included inadequate scrutiny of quarterly accounts, VAT returns remaining unpaid and bank accounts observed to be in overdraft.

The report also raised concerns around the “transparency and accountability” of LEMB’s decision-making processes.

It said: “Contract awards lacked demonstration of the supporting procurement processes and could not be evidenced as approved by the board.

“This lack of adequate documentation for the rationale behind the award decisions raises doubts about the fairness and competitiveness of the procurement processes.”

On LEMB’s foreign travel and gift spending, the audit report said: “The [resident management organisation’s] audited accounts highlighted that, despite a declining financial health position, an amount of £374k was spent on gifts for residents, and this amount was written off in the 2023-24 accounts, further contributing to the significant deficit position.

“A review of expenditure incurred during the last 12 months further raises concerns over the value for money being achieved, including travel to Turkey (£8,819 to meet with a supplier and inspect CCTV) and Las Palmas (£14,840 for a strategic planning trip by the board).”

Rebecca Spencer, chair of Lambeth Council’s corporate committee, said council officers have held multiple private briefings on this issue where many concerns have been raised.

“’I can’t really emphasise enough how much of a concerning report this was to us to read,” she said at the committee meeting on 27 November.

On the issues around TMO legislation, the council said: “Lambeth is also lobbying the government to give more powers to local residents and councils to be able to take action when concerns are raised about poorly performing TMOs, given the significant public funds that they control and the thousands of residents nationwide whose homes and estates are managed by them.”

Danny Adilypour, deputy leader of Lambeth Council and cabinet member for housing, investment and new homes, said the council is “absolutely committed” to ensuring resident voices are heard and that “their concerns are adequately addressed”.

He continued: “We are using every avenue we have available to act on this, including referrals to the FCA, lobbying the government and continuing to engage in legal discussions with the LEMB to ensure they adhere to their management agreement.

“Ultimately, councils have limited powers to help residents when difficulties arise with TMOs. This isn’t right and we need urgent reform so that communities are guaranteed good housing management and governance by TMOs, so they can be assured that their rents and service charges are being well spent.”

A spokesperson for the FCA said: “While we can’t comment on individual societies, we look into any concerns raised with us.”

LEMB declined to provide a comment.