SENIOR Labour city councillor Hassan Ahmed took part in a decision to award a contract worth £500,000 of public money to a company where he was director and chairman, the District Auditor has concluded.

An investigation into Nottingham City Council's Future Jobs Fund by the auditor, Sue Sunderland, has concluded Hassan Ahmed, the councillor responsible for the scheme, should have told officers about his links with the company, the First Enterprise Business Agency (FEBA).

He should also not have participated in discussions about its funding.

Mr Ahmed has denied he was involved in any decision to give money to FEBA, but the auditor Sue Sunderland believes he "was actively involved in that decision".

She said his participation in discussions may have left him in breach of the council's code of conduct.

Members of the council's Standards Committee are now considering whether they should investigate.

Mr Ahmed has been a director of FEBA, a business support organisation, since it was first registered in 1993. He is also its chairman.

FEBA was awarded 50 job placements under the Future Jobs Fund scheme, each placement attracting funding of approximately £10,000 to cover wages, costs, as well as training and support.

In her report, which has been leaked to the Post, the District Auditor says that Mr Ahmed recorded an interest in FEBA in the city council's Register of Interests. He told her he had not received any payments from FEBA during his tenure as a city councillor.

But Ms Sunderland says she is of the view Mr Ahmed had a personal and prejudicial interest in the company since the firm stood to make a financial gain as a result of the contract. As a result, the auditor said: "The portfolio holder should have made his personal connections… clear on an ongoing basis to officers and should not have participated in discussions… so as not to leave the decision-making process open to challenge."

She added: "Officers should also have been more aware of all declared interests to enable them to flag up potential conflicts as they arose during discussions."

In addition, Ms Sunderland said the letting of contracts under the Future Jobs Fund scheme may have been open to legal challenge on the basis of apparent bias by officers.

And even though officers weren't directly or intentionally pressurised by Hassan Ahmed, officers "might be said to have been influenced by his links with certain organisations".

The report states that it would be impossible for the council to conclusively rebut allegations of bias, because the authority has failed to keep adequate records on any declarations of interests and of the discussions which led to decisions on contracts.

In interviews with the District Auditor's investigator, Hassan Ahmed denied he had any involvement in decision making about which organisations received Future Jobs Fund contracts.

According to the report, council officers supported his assertion "generally" that he was not involved in decision making.

However, the District Auditor contradicts his account. She says there is "convincing evidence" that Hassan Ahmed "was involved in discussing and agreeing the allocation of Future Jobs Fund contracts on September 9, 2009."

Ms Sunderland highlights evidence from an unnamed consultant responsible for implementing the Future Jobs Fund scheme as well as an email sent by the consultant on September 10, which summarised how many placements would go to different organisations.

In interview with the auditor, the consultant said: "The email of September 10, 2009, sets out what umbrella organisations will be offered what. This was based on a discussion between NJ, CC, and HA (Hassan Ahmed). Collectively made the decision. Not led by anyone."

Furthermore, the District Auditor highlights "somewhat confusing references" by council officers to financial decisions being "signed off" by the portfolio holder, even though in some cases large amounts of money were paid out with no evidence of a formal decision having been made.

In relation to the decision to award a £500,000 contract to FEBA, Ms Sunderland said: "I am of the view that the portfolio holder was actively involved in that decision."

Mr Ahmed also told the District Auditor he always made officers aware of his links to FEBA during discussions and he said "he reminded them that he was a director of FEBA and could not make any recommendations about them".

But Ms Sunderland stated in her report:"No formal record was made of when and how these particular allocation decisions were taken and whether the portfolio holder mentioned any interests in the discussions had."

She added: "There are no records or any clear recollection of officers of his having done so."

The auditor's report recommends Nottingham City Council should consider referring Mr Ahmed's involvement in decision making on letting of contracts to its own Standards Committee for further investigation.

She stated: "I accept the portfolio holder complied with the strict requirements of the Code of Conduct on registration of interests and declarations at formal council, committee, and executive meetings.

"The registration and disclosure requirements under the Code of Conduct do not however govern the full range of council business (in so far as they do not concern officer-led meetings and decision-making functions).

"The Code contains wider general obligations including that a member should not do anything that compromises, or is likely to compromise, the impartiality of officers.

"I am concerned that, whilst I do not consider that the portfolio holder deliberately set out to improperly influence officers, he may nevertheless, through failing to make appropriate disclosures and involving himself in discussions/a decision making meeting, have been in breach of the code."

In her report, the District Auditor said the issues she has raised about corporate governance "are likely to undermine the council's reputation for sound decision making and give rise, as has happened here, to allegations."

Nottingham City Council's response

NOTTINGHAM City Council chief executive Jane Todd said: "It is important to make clear that the district auditor has already found 'no evidence of inappropriate allocation of contracts' contrary to the law or the code of conduct.

"Indeed she commends the city council for bringing forward so quickly two large citywide programmes to support the creation of 1,360 paid placements in total – 1,000 through the future jobs fund, and 360 through the Nottingham Jobs Plan.

"We have previously accepted that there should be some sharper processes and record keeping put in place and these issues will be addressed through an action plan being prepared to ensure our actions are beyond reproach.

"Beyond that I do not intend responding to your questions given that, on the advice of the monitoring officer, the Jobs Plan Review report was considered by the city council's audit committee as an exempt item and the reasons for such an exemption remain.

"While I take the district auditor's concerns seriously, I am satisfied that the council is responding in an appropriate manner, and know that the district auditor is satisfied with our response to date."

• The damning report that council has kept secret
• What the council did wrong and what needs to be done about it
• Question marks over senior role
• Senior figures at council knew of concerns
• Connections which led to inquiry
• Nottingham Post comment: Public has the right to know how its money is being spent
• Nottingham City Council responds
• Who got what from the Future Jobs fund
• £10m jobs fund report: What the report said of key figures