Two members of staff suspended by Salford Council believe they have been 'scapegoated' for years of 'rampant governance failures', sources have told the Manchester Evening News.
Investigation into Derive Housing Company
Earlier this year, the authority launched an investigation into its own housing company, Derive. Set up in 2017, the development firm is wholly owned by the council and has handled more than £10m of public money. Its aim is to provide 3,000 homes in ten years - a target set in 2023. So far, about 600 have been built or acquired from private builders.
The M.E.N. understands the internal probe began after concerns were raised during financial checks carried out by the council. The town hall says an independent investigation is currently underway, although its exact nature and the people involved have not been disclosed.
Suspensions and Blame Game
The authority has not given any reason publicly for the suspensions, but sources have told the M.E.N. they followed a total breakdown of relations between the local authority and the company. According to a source, the blame game is already underway, with the council claiming internally it had lost confidence in Derive's senior management. Derive, on the other hand, regard the council as 'incompetent' and 'interfering' in its governance, the M.E.N. has been told.
It is understood the two staff, suspended from Derive RP (Registered Provider) on March 6, strongly deny any mismanagement and have yet to be told exactly why they have been sent home. The RP is owned by the Derive Group which is in turn owned by the authority. Salford Council's probe reportedly includes concerns about accuracy and completeness of record keeping.
Historic Rent Overcharge
The M.E.N. can also reveal that Derive was the subject of a 2023 investigation, after some tenants were overcharged for their rent due to an administrative error. They were subsequently reimbursed around £20,000 after the blunder. A spokesperson for the council said: “We can confirm that the matter of rent payments is historic and resolved.”
One source said: "Basically, for three years the senior staff believe they have been blocked from running an RP as it should be run. The council has persistently blocked their efforts to implement the structures necessary for the RP to function as it should."
Whistleblower and Resignations
The M.E.N. understands a whistleblower had previously alerted the regulator to issues at Derive. The source added: "The social housing regulator expects responsibility and acceptance of blame when things go wrong - a culture the two suspended staff have always tried to follow."
The firm is more than a month overdue in submitting its accounts. Several senior figures have also resigned leadership roles at Derive since February, with five directors and one secretary stepping down, according to public records on Companies House. They include three councillors who were former directors who are not under investigation and are not suspected of wrongdoing.
Councillor Tracy Kelly, who held the housing portfolio in the council's cabinet team while working with Derive, resigned as a director of Derive in February. A council spokesperson said this was in preparation for her takeover of the role of cabinet member for adult social care, as the local authority grapples with an 'inadequate' rating from government watchdog CQC. Former council leader, John Merry, also stepped down as director at Derive in March along with Phil Cusack, who was chair of Salford council's planning committee while also registered as a director.
All councillors were advised by the council’s legal department to step down to 'ensure the independence of the investigation', the M.E.N. understands. All three councillors have been approached for comment.
Council and Mayor Statements
Salford Council insists the firm is an 'independent entity'. City mayor Paul Dennett recently addressed the town hall, stating: "I stress the word 'independent' because that's what the social housing regulator demands. There has been an issue within the registered provider. That is very much in the hands of the organisation itself, the board. And the advice we received from the borough solicitor was that it would be prudent for our elected members to step down at this time to allow those investigations to conclude and for us to have confidence in that piece of work."
But people close to Derive dispute that it was left to run independently of the council. The source claimed tension existed between senior staff at Derive RP and council officers. "During board meetings, Salford council officers would challenge them. The two that were suspended were scapegoats for rampant governance failures", claimed a source.
A council spokesperson claimed 'Derive RP Limited staff are not employed by the city council, nor does the council have control over the running of the company' and that 'it would be wholly inappropriate for the council to comment further on this matter'.
Understaffing Concerns
The M.E.N. has also been told there had been "chronic" understaffing for some time at Derive. A source said: "RPs of a similar size - and Derive visited one to share best practices—had 25. This time last year there were just three staff. Yet there were two years of internal council audit reports stating that staffing was an issue."
In a comment sent by the council press office, a spokesperson for Derive RP said: “A new chair and board was appointed in March, and we have been able to review practices. It is important to clarify a number of points. There has been no restriction on staff recruitment and we are working towards ensuring staff are supported and have the right skills and experience in their roles. It is Derive RP that referred issues to the regulator and Derive RP who is meeting with the regulator, not the council. We are committed to carrying out due diligence into historic practices and understanding what has gone on, so that we can improve matters where required."
A source close to the City Mayor added: “There are issues alleged here that are simply untrue, not by a 'whistleblower', but by someone with a grievance that a proper and full investigation is taking place. This investigation is required because of genuine and serious concerns about the historic management of Derive RP. These are issues for Derive RP, independent of the council."
A Salford City Council spokesperson said: "As has been previously reported, the ongoing investigation into concerns which were raised during financial checks is continuing. This is a live issue, and we have been providing support to the process where relevant. We understand that residents and stakeholders may have questions, and further updates will be provided in conjunction with Derive RP Limited at the right time and without compromising the integrity of the process. The council has been assured that the services provided by Derive RP Limited to residents remains the priority. In the meantime, we ask that the investigation is allowed to proceed without speculation."
Last month, after the M.E.N. revealed Derive was under investigation, Salford Mayor Paul Dennett sent an email to councillors in Salford saying "nothing was being hidden" and telling them not to speak to the M.E.N.
