Review of City Building Glasgow uncovers ‘significant’ issues

A review into a building firm jointly owned by Glasgow City Council, prompted by whistleblower allegations, has uncovered “significant” issues within its business.

The council will be handed the review of City Building Glasgow (CBG) on Thursday (21 August) and will consider a number of recommendations.

It comes after the council ordered an audit report of the contractor’s 2022-23 accounts.

CBG is incorporated as a limited liability partnership – a joint venture between the council and social housing company Wheatley Group.

When multiple compliance matters were uncovered, the council appointed an external legal firm to undertake a forensic investigation.

The audit “identified a significant deficiency in respect of the overall control environment within the business”, according to a council report.

This prompted the council to establish a partnership steering group with Wheatley to review the firm and ensure it was “fit for purpose”.

The joint review, which will be submitted to the council’s administration committee on Thursday, has identified a number of areas for improvement relating to audit, board governance, HR and procurement.

It says: “One of the key issues of concern identified by the external legal firm’s investigation was in relation to City Building’s executive management and its culture towards the role of audit and governance, which was found to be undermining normal audit processes and relationships.”

The review adds that “significant compliance matters covering key governance, procurement and HR practices” have been discovered.

A new executive director has been appointed to instil “a culture of good governance and compliance within City Building, demonstrating improved operational effectiveness and improved financial efficiency”.

It has led to the establishment of an audit committee and a new code of conduct for CBG board members, an improved employee development programme and the formation of a new subcontractor framework to improve procurement practices.

“The establishment of the audit committee is an important milestone in enhancing the ethical culture within CBG and in demonstrating an improved approach to governance, transparency and compliance,” the report says.

The review also concludes that the current clause in the joint-venture agreement stopping CBG from carrying out housebuilding should be removed.

“This proposed change to the LLP agreement will provide greater flexibility for City Building to support Wheatley’s capital projects, helping to sustain and enhance the City Building workforce, specifically making available critical training opportunities for apprentices working on new-build construction,” the report to councillors says.

Since 2017, the joint venture has seen £1bn of projects go through City Building, including the building of five primary schools and four nurseries, as well as major upgrades to Mitchell Library, City Chambers, Kelvin Hall and Concert Hall.

Earlier this month, newly published accounts by the firm, which was ranked in the CN100 index of top contractors five years ago, showed an operating loss of £67,000 in the 12 months to 31 March 2024 – an improvement on the £14.5m decline it posted the year before.

However, turnover dropped from £162m to £154m.

Glasgow City Council and CBG have been contacted for comment.