Unite and the "catalogue of deficiencies"

The Certification Officer (CO) has now published his 90-page report into alleged financial irregularities in Unite the Union.

The CO is a government appointee who "monitors" trade union activities, including their annual accounts and internal financial regimes. For technical reasons, the CO’s investigation focussed only on the calendar year 2021. But its findings cover Unite’s accountancy practices over a longer period of time.

The report paints a damning picture of financial mismanagement under its then General Secretary Len McCluskey, flanked by the multi-jobbing Howard Beckett.

The CO found “a large number of control failures during the relevant period. These were not isolated errors in the operation of a sound system. Basic controls were missing altogether.” The union had “failed to establish and maintain a satisfactory system of control of its accounting records, cash holdings, receipts and remittances.”

Many of the identified deficiencies “were in respect of controls that had never been in place at all; others had not been operated for years. The deficiencies were not new in 2021, and they were not subtle: no financial controls review, no procurement policy, no purchase order system, no impairment policy for the property portfolio among others.”

One of the more serious deficiencies was the absence of “a reliable mechanism for identifying conflicts of interest and related party transactions, i.e. one between the union and a person or organisation with a close connection to it, such as an officer, a senior employee or a company in which such a person has an interest.”

Although it fell outside of the remit of the CO’s report, it is worth noting that police investigations are continuing into how Unite allocated contracts for its member services (cheap insurance, shopping discounts, etc.) at the time when this fell within the remit of Howard Beckett.

Other significant failures were the absence of “a formal policy for reviewing Unite’s property portfolio for impairment” and “the absence of a formal procurement policy and policy enforcement controls.”

As a consequence, “contractual relationships (entered into by Unite) during 2021 did not follow normal procurement expectations, including in relation to certain associated service providers and the main contractor for the Birmingham Project.”

The Birmingham Project was the construction of a combined hotel and conference centre. The original estimated cost was £45 million. But total costs soon reached £112 million. On completion, “the hotel was valued at £29 million and the regional office at £8.6 million.”

Again, although it fell outside of the remit of the CO’s report, it is worth noting that police investigations are continuing into alleged financial irregularities in the construction of the Birmingham Project.

McCluskey does not come out of the report very well at all. His multiple failures included:

“The appointment of an unqualified person (Beckett) to lead the finance function for eighteen months during a period of major capital commitment on the Birmingham Project; the fourteen-month gap in reporting a major cost overrun (on the Birmingham Project) to the union’s governing body; and the materially incomplete presentation when reporting eventually came.”

Beckett comes out of the report even worse:

“I find serious management failures in respect of Howard Beckett: the near-absence of oversight of the finance function while he held the role; the ten-month gap between his knowledge of the cost position (of the Birmingham Project) and his report to the Unite Executive Committee; the incompleteness of that report; and his failure to respond to a member of the governing body seeking to scrutinise it.”

The report concluded that Unite had committed multiple breaches of section 28 of the Trade Union and Labour Relations (Consolidation) Act 1992: “The duty to keep accounting records.”

But, since 2021, Unite had been taking the steps needed to secure compliance with section 28: “The remedial trajectory is sound. Unite has moved from a state of institutional passivity regarding financial controls to one of active, if overdue, engagement.”

The report also considered whether McCluskey and Beckett had committed breaches of section 45 of the legislation: “a refusal or wilful neglect” to carry out their obligations under section 28, which could give rise to prosecution.

The report did not find that that there had not been the deliberate intent needed to constitute “refusal or wilful neglect.” But, in Beckett’s case, this had been a finally balanced judgement: Given “the catalogue of deficiencies that existed while he held the role of Finance Director, this is not a conclusion I reach comfortably and the question is a close one.”

The absence of any prosecution under section 45 is separate from the question of whether criminal prosecutions will arise from the ongoing police investigations into the Birmingham Project and the awarding of contracts for member services.

As the CO puts it in “a note of caution”: “Any separate issues of possible criminal liability regarding the Birmingham Project are firmly outside my remit and I make no comment on them.”