Council banking scheme in Essex criticised
A report has highlighted faults in a council scheme providing loans to struggling businesses in Essex.
Essex County Council spent more than £372,000 on consultants to set up the scheme, overspending its budget by £84,000, an internal audit report says.
It says the inspection found loan files were "disorganised", adding that he scheme failed to give "best advice" to all companies.
The Tory-controlled council said it still had confidence in the scheme.
"Banking on Essex" was started more than a year ago in partnership with Santander.
The county council's internal audit report, seen by BBC Essex, says that by the end of May 2010, only 13 local companies had been lent money.
More loans and overdrafts have been approved since then.
Liberal Democrat county councillor David Kendall said: "I have a concern just how much was spent on consultants. Where's the accountability in that?"
Mr Kendall said it raised more questions, adding: "Who has been monitoring that process? Why was it so far over-budget? The whole process needs to be managed much more tightly."
Businesses that were turned down for loans were meant to be referred to Business Link for advice, but the report found that was not always the case.
Another paragraph stated: "Loan files managed by Santander were, in the main, disorganised."
A spokesman for Santander told the BBC: "Like all innovative schemes, the Banking on Essex partnership had a small number of teething issues when it was first established."
The scheme was set up in June 2009 when businesses were finding it hard to get loans and credit from high street banks, even if they had a good track record.
Essex County Council teamed up with Santander to offer loans to local businesses if they passed a credit test and met certain conditions.
The council set aside £50m to go towards the loans with each loan half-funded by the council and half-funded by Santander.
Conservative councillor Kevin Bentley and deputy to the leader defended the project saying: "Santander is an excellent partner for us.
"Like any new scheme there will be a few glitches in the system. A lot of those have now been completely ironed out."