'Fraud probable' at Stoke-on-Trent City Council, report finds
It is probable "fraudulent activity" took place at Stoke city council, a report has found.
It said there were "serious systemic failings" in the management of a project started to increase business growth in North Staffordshire.
The investigation by the government came after an allegation made to Staffordshire Police in 2010 over the tendering processes at the council.
It said the authority must repay a £1m grant used to pay for the projects.
The report by the Department for Communities and Local Government auditors last October has been released to the BBC under the Freedom of Information Act.
It criticised three building projects run by Stoke-on Trent City Council which were funded by more than £16m of taxpayers money.
Two of the projects - Excelsior Works and Just Mugs - aimed to provide new accommodation for businesses that needed to be relocated. The third project was to renovate part of Bridgewater Pottery.
The report said: "As a result of the police investigation there is evidence to suggest, that on the balance of probabilities, fraudulent activity has occurred in relation to the Excelsior Works procurement and [some of] the Just Mugs works."
The report found "procurement documents were falsified" to increase the cost for work and an invoice for finished work requested three months before the Excelsior Works - a business park - had been completed.
A false invoice was also produced for demolition work not part of the procured contract for Just Mugs, a former pottery works on College Road in the city. The report also found an artificial increase in professional fees being charged.
The report also criticised work carried out on the Victorian buildings at Bridgewater Pottery, where it said there was some evidence to suggest a building certificate was produced before work had finished, but did not go so far as to allege probable fraud.
The firm has been unavailable for comment.
The report, which cost £20,000, concluded "there have been serious systematic failings in the management of this project by the city council."
The council said the report criticises "financial controls and procurement practices at the now defunct North Staffordshire Regeneration Partnership" and focuses on the use of European funding for a range of regeneration projects between 2000 and 2006.
Stoke-on-Trent City Council's chief executive, John Van De Laarschot, who was not in charge at the time, said changes have been made but also accepts the implications are serious.
"It's absolutely horrendous and totally smacks of systemic failings, not only within the local authority but with all the partner agencies that are working together," said Mr Van De Laarschot.
"These are dark days within Stoke on Trent's recent past.
"This is not something that we would condone or indeed something we would like to ever replicate on a go forward basis."
Stoke-on-Trent Labour MP Rob Flello now wants those case files reopened.
Mr Flello said: "I think the CPS needs to be reopening their files and looking at a prosecution in the public interest, that's the first thing I'll be calling for.
"The second is that I shall be asking for the chief executive to write to me assuring me that every possible method has been taken to minimise any possible chance of this happening again."