Police are investigating potential fraud in property sales by one of Scotland's biggest councils after prime sites were handed to developers at less than half their market value and with other bidders excluded.
Audit Scotland found local taxpayers had lost out on as much as £5.5m after Aberdeen City Council sold on £9.3m worth of property at only 40% of market value. Its report levels stinging criticism at management for "serious and wide-ranging deficiencies" and "serious weaknesses in governance and accountability".
The public spending watchdog, working with internal council auditors and chartered surveyors, looked at 26 transactions over recent years and found only seven were adequately handled. Six caused "serious concerns", according to Caroline Gardner, the Controller of Audit, and 11 did not have evidence for valuations.
The city's College Street car park was sold off at half its actual £3.6m value, with independent valuers saying the deal struck was "extremely poor and almost bordering on negligent".
Reporting some former staff had been reticent in helping auditors, Ms Gardner said it was "appropriate" that the police were looking at "unexplained concerns" about five of the 26 transactions; in Seafield, Carnie, Eday Road, the former Buchan railway line, and College Street car park.
A Grampian Police spokeswoman last night confirmed the force had been called in by the council to investigate the property sales. She said officers were liaising with Grampian area procurator-fiscal, indicating the inquiry may be close to a conclusion.
The Audit Scotland report, obtained by The Herald, notes "ineffective management, inadequate processes and inadequate compliance with procedures".
It did not find evidence of fraud by council staff, leaving those questions to police, but the evidence of mismanagement piles pressure on the council's chief executive, Douglas Paterson.
He already faces the worst Audit Scotland report ever compiled into a council, public protests at the impact of £27m in budget cuts, and a rare public grilling by the Accounts Commission next month.
In that previous report, the council's financial health was described as "precarious", with widespread and significant weaknesses in most services.
The new report into asset sales does not put Aberdeen councillors in the line of fire, finding instead that they were kept in the dark about officials' actions and their instructions to officials were not followed.
In the case of Carden House in Skene Street, councillors were told the land was being sold to the local NHS primary care trust when it was a property developer, and they were still not told when the health trust later raised the issue.
The investigation was sparked by a member of the public two years ago, raising concerns with Audit Scotland over the Carden House sale. That had been agreed in 2003, and the investigation by the council's internal and external auditors covered a range of deals between 2001 and 2007.
They found that, on Carden House, there was interest noted beyond the one offer being considered, including a written bid of £400,000 more. The final price of £590,000 was less than half the £1.25m maximum possible.
Auditors found property sales in which no valuation report was prepared or not properly signed off.
The council's chief executive issued a statement last night, saying that the report draws attention to "serious deficiencies in the former City Development Service" and that the failure to pass on information to councillors is "a very serious matter".
Mr Paterson said the council responded quickly when concerns arose in 2006 and "a series of actions have already been put in place to address all the shortcomings identified in that review."
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