Concerns over the council’s vulnerability to fraud have been raised by a councillor at a meeting due to uncertainty over £2 million of transfers.

A Reading Borough Council (RBC) report found £2.2 million of accounting entries for transfers between the council and its children’s company Brighter Futures for Children (BFfC) needed further investigation and correction.

Green Party councillor David McElroy, a new member on the Audit & Governance committee, said the report made him “quite ill” at Monday’s meeting.

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He said: “That is quite a large number to not know what is paid and when. I understand we think a lot of these are just errors and not evidence of fraud.

“However, given the size of this £2 million and the size of the BFfC budget more broadly and how RBC is currently failing to meet some of its obligations regarding the Government’s transparency code, our apparent vulnerability to fraud makes me quite ill.”

The report said there is confusion over roles and responsibilities between the council and BFfC and it was difficult to confirm the completeness and accuracy of payments as there were delays in payment and poor controls.

This made it difficult to understand what had been paid and when.

Responding, chief auditor Paul Harrington said: “At the time of the audit, more than six months ago, we had concerns over the journal control in terms of evidence.

“We had real concerns over the governance and controls of the journals for the company billing between the two organisations. That was reported to the committee with a separate report.”

Updating on the progress on improving the situation, RBC finance director Darren Carter, said: “We are working on introducing much more robust processes for ensuring the quality of the evidence attached to journals processed by BFfC on behalf of RBC.

“We haven’t finalised the detail of that process yet.”

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The council’s internal audit also found purchase card policies and procedures were poor, with cards being shared or used by someone other than the card holder and purchase cards not being returned when the card holder had left employment.

The report states: “These are basic controls which protect the council and its employees against misuse and fraud.”

A report on strengthening processes will be brought to September committee meeting.