Salford council is investigating its own housing company after ‘concerns’ were raised during financial checks.
Dérive, a development firm wholly owned by the council, was set up in 2017 and has handled more than £10m of public money since then.
The Manchester Evening News understands Salford council’s investigation is looking into whether any financial mismanagement or misconduct has taken place.
Click here to get the biggest stories straight to your inbox in our Daily Newsletter
The probe comes after council officers reportedly spotted irregularities in the accounts after requesting information from the firm. This included concerns about accuracy and completeness of record keeping.
Multiple senior figures have resigned from leadership roles at Dérive since February, with five directors and one secretary stepping down according to public records on Companies House. Dérive is a month overdue in submitting its annual accounts.
A row has broken out at the town hall over the situation, with one senior councillor calling it ‘disgraceful’ that elected members in the city ‘haven’t been updated’ on the matter.
“What is being hidden? Dérive is a very important arm of the council delivering much-needed affordable housing, if something untoward has happened councillors should know.”
Other councillors contacted by the MEN also confirmed they had not been informed about what was happening at Dérive.
Salford mayor Paul Dennett sent an email to councillors in Salford about the situation today (April 29), claiming ‘nothing is being hidden’ and telling them not to speak to the Manchester Evening News.
In the email, which has been seen by the MEN, Mr Dennett said: “Currently formal investigations are underway involving third party professional support, pertaining to matters of governance, regulatory compliance, finance & accountancy, audit.
“Once these initial formal investigations are concluded further next-steps will be considered, which could potentially have implications for industrial relations and people’s employment within Derive RP and Derive Group.”
Mr Dennett’s email has been shared in full below.
Among those who have recently stepped down from leadership roles at Dérive include several elected councillors serving in the Labour-led council’s cabinet team.
The changes are all listed in public records on Companies House, the government’s business portal.
The three councillors who were former directors are not under investigation and are not suspected of wrongdoing.
Coun Tracy Kelly and Salford city mayor Paul Dennett on Longshaw Drive, Salford.(Image: Salford council)
Councillor Tracy Kelly, who holds the housing portfolio in the council’s cabinet team and serves as deputy mayor, resigned as director at Dérive in February.
It is understood councillor Kelly’s resignation was unrelated to the ongoing investigation.
Former council leader John Merry also stepped down as director at Dérive in March along with Phil Cusack, who is chair of Salford council’s planning committee.
The three have been approached for comment, Councillor Merry declined to give a statement and there was no comment from either of the other representatives.
A Salford council spokesperson commented in March on Councillor Kelly’s resignation at the firm saying: “Members come on and off outside bodies frequently for various reasons.”
When probed on the situation at Dérive, a Salford council spokesperson said: “We can confirm that we are looking into concerns surrounding Dérive RP – a registered provider of social housing. Dérive RP is independently regulated to provide and manage affordable housing.
“It is inappropriate to discuss more fully the nature of the concerns at this stage while we review what has happened, other than to confirm that concerns came to light during routine audit and financial checks by the council.”
The council said it has taken ‘immediate steps’ in response to the situation, including ‘reviewing the governance and operational arrangements’ of the company.
It has also notified the Regulator of Social Housing, a government body.
The Salford council spokesperson added: “A number of changes have already taken place to strengthen and improve governance arrangements.
“It is important that the review continues and conclusions are allowed to be reached on this matter. We are committed to ensuring the review is conducted both thoroughly and quickly.
“We want to reassure residents that the Dérive Group, Dérive RP and the council remain focused on supporting tenants and providing high quality affordable housing in the city.
“Services to residents are not affected and continue to remain unchanged. We are committed to continuing to do all we can to help to tackle the acute need for genuinely affordable housing in Salford.”
A spokesperson for the Regulator of Social Housing said: “We confirm that we have been notified by Derive RP and Salford City Council and are engaging with Derive on this matter. We cannot comment further on our ongoing engagement with individual landlords.
“We set standards that all social landlords need to meet, including governance requirements. If we find material failures to meet our standards, we publish a regulatory judgement that sets out our conclusions.”
Greater Manchester Police confirmed they are not involved in the investigation.
Dérive, an ‘arms-length company’, was established in 2017 with £2m of Section 106 money – cash contributions made to the council by developers – with the aim of tackling the city’s more than 5,000-long housing waiting list.
It delivered 119 social rent homes last year, with a further 177 planned on the site of the former Harrop Fold High School off Longshaw Drive in Little Hulton.
Projects by Dérive include more than 100 social rent homes on Clifton Green, Ryall Avenue and Brassington Avenue, 43 new-build family homes on Jane Street, in Ordsall, and 25 homes transferred into their ownership on Kara Street, Langworthy.
Paul Dennett’s email sent to councillors in Salford
‘Dear Colleagues / Elected Members,
‘I’ve been made aware yesterday that the Manchester Evening News (M.E.N) has received the following comment from a Councillor / Elected Member who unfortunately hasn’t afforded myself or the Lead Member of coming to speak with us directly about any concerns they may have with Derive Group or Derive RP and have seemingly preferred to provide anonymous comment on the record to the M.E.N stating:
‘“It’s disgraceful that elected members haven’t been updated on this. There must be something seriously wrong with the Lead Member for Housing, Deputy Mayor Tracy Kelly stepping down. What is being hidden? Derive is a very important arm of the council delivering much-needed affordable housing, if something untoward has happened councillors should know.”
‘I can categorically confirm that nothing is being hidden from Councillors / Elected Members and as soon as I can, I will updating you all on all matters pertaining to Derive RP and Derive Group. Currently formal investigations are underway involving third party professional support, pertaining to matters of governance, regulatory compliance, finance & accountancy, audit. Once these initial formal investigations are concluded further next-steps will be considered, which could potentially have implications for industrial relations and people’s employment within Derive RP and Derive Group.
‘Can I therefore ask that all Councillors / Elected Members to refrain from commenting publicly about matters pertaining to Derive Group and Derive RP, to do so could put the City ‘Council at significant risk and to do so without knowing the facts or having any understanding of the situation is hugely irresponsible.
‘I have asked the Chief Executive and City Solicitor / Monitoring Officer for the City Council to share with all Councillors / Elected Members what we’re able to currently (at this point in time) in connection with this matter, without predetermining or prejudicing the outcomes of the investigations underway involving third party professional support, pertaining to matters of governance, regulatory compliance, finance & accountancy, audit.
‘Your co-operation as Councillors / Elected Members would be much appreciated. Moreover, the Elected Member Code of Conduct expects this of us all!’
