A COMPANY found to have used money intended to help vulnerable children to boost profits has reached a financial settlement with the council.

The authority launched a legal bid to recoup £240,000 it paid EduAction in 2004 from its Neighbourhood Renewal Fund to help schoolchildren at risk of exclusion.

A town hall investigation found the company, which used to run education in the borough, had committed fraud and deliberately misled the council on the number of children helped.

The report also concluded that the company had claimed for money it was not entitled to and put a whistleblower under sustained pressure to delete documents.

The council was also heavily criticised.

The Youth At Risk contract was not signed by anyone from EduAction, meaning the council’s regeneration department effectively signed a contract with itself.

Contract documents also included what was described as a “highly irregular clause”, which stipulated that EduAction could keep any operating surplus as long as the lead officer was satisfied with the programme’s overall level of performance.

This is described as “a green light to the provider to divert funds and make economies in services”.

A police investigation into allegations of fraud was later dropped due to a lack of evidence.

A legal settlement reached on March 31 will see EduAction pay the council an undisclosed sum.

The figure has been withheld on the grounds of commercial confidentiality.

Both parties will pay their own legal costs.

The agreement means that neither EduAction or the council accepts liability or wrongdoing.

They have also agreed to “co-operate, consult and work with each other” in a defence against a claim being made by an undisclosed person.

The scandal over the Youth At Risk programme led to the widespread mismanagement of regeneration funds by the council being uncovered.

This eventually led to an independent review concluding that officers across many town hall departments regularly ignored rules to prevent fraud.

It also found senior officers were protected from disciplinary action when concerns were raised.

The authority has refused to reveal whether anyone was sacked over the long-term failings.

The political leadership blamed officers for ignoring council rules.

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