Exclusive: Folk Festival Fiasco – Second financial calamity hits Council

Cambridge City Council has not been paid for online ticket sales for last year’s Folk Festival. The funds were due to be received last August from the company responsible for the website that sold the tickets, but after months of trying to obtain payment, the Council has or will shortly be publishing a notice in the London Gazette to take the supplier to court – a hearing will be held later in the month to determine the fate of the company, that is likely to see it put into administration. It is believed that the company has serious financial problems, and around £620,000 of Council tax payers money is now at grave risk of being lost. This amount is around 10% of total City Council Tax collected last year.

An independent investigation into how the Council got itself into this mess is currently being conducted by accountants PricewaterhouseCoopers.

This latest blow follows on from £9m invested in now-failed Icelandic banks, for which there is also no certainty that it will all be recovered. Although the issue doesn’t affect the Folk Festival going forwards, it could have a serious impact on budgets across the Council.

Commenting on the news, Conservative Councillor Chris Howell said:

“This is terrible news for Cambridge Council tax payers – this year’s budget was already looking very stretched, and I have already contacted the Director of Finance to ask why this issue, that has been known about for some time, does not appear to have even been considered in the pre-budget reports recently put on public record.

In the short term, I am urging the Council to take all steps it can to try and recover these funds, but I fear the financial impact could be bigger and more immediate than the Icelandic investments, as there is a strong possibility of the companies concerned having no assets at all available to unsecured creditors.

Whilst there is an independent investigation going on into how the Council managed to get itself into a contract that allowed a supplier to keep approx £620,000 of Council tax payers money, one thing is very clear, in both this case and those of the Icelandic investments there have been catastrophic failures of financial risk management. I am today repeating the calls I made in the Council Chamber in December for a comprehensive review of the Council’s risk management procedures, to help safeguard Council Tax payers assets going forwards.

But the ultimate responsibility clearly lies with the weak political leadership and inadequate scrutiny of key decisions shown by the Liberal Democrats running Cambridge. I understand both the flawed Treasury management strategy and this contract were decisions made personally by Executive Councillors – if not, they should have been. There is wholly inadequate scrutiny of key decisions by Executive Councillors and backbench members of the ruling group who see their role as nodding through decisions of the Executive whilst speaking only to criticise opposition Councillors. It's no wonder the Council finds itself in such a mess – the Liberal Democrats are proving to be a disastrous custodian of Council Tax payers funds.”

One final less than amusing irony is that the 2007 Annual report of parent company notes that “the second area of research that the company has been active in is the Electronic Biometrics Identification Cards system” – leading to the sickening possibility that Cambridge Council tax payers money has ultimately been used to finance research into ID cards.