A police investigation into the Fenland Association for Community Transport (FACT) accepted that false information was created in funding applications but there was insufficient evidence to merit a prosecution.
The conclusions are revealed by Cambridgeshire County Council chief executive Gillian Beasley in a report to a special audit committee of the council on July 31.
Her assessment is attached to the 288 page report she commissioned by independent investigators PKF to look into FACT and its associated outlets HACT and ESACT.
Councillor Kit Owen, vice chairman of the FACT, ESACT and HACT boards, said tonight: “The majority of the issues are historic – which we have dealt with.
“On a number of the issues we have sought legal advice and acted upon the advice.”
He said: “However as with a number of issues such as state aid there is not a clear legal definition and different barristers and QCs have given conflicting advice.
“Nothing has been done for personal gain – there are as you will see from the attachment to the report, sound explanations.
“This is not to say mistakes were not made. But where mistakes were made we have accepted them and made changes to ensure they do not occur again.”
Cllr Owen said: “Operating the dial -a-ride service to the most isolated and disadvantaged of our community – which is why FACT/HACT & ESACT exist, make substantial losses each year, as was verified in the report.
“Let’s not forget we were asked to take over the original Nene & Ouse community transport organisation because of the serious financial position it found itself in; the same can be said of Ely & Soham Community Transport.
“FACT was able to do so because of the innovative way it operates. Grant money did not enable the organisation to put in unfair competitive rates to win contracts.”
Ms Beasley said: “While the police conclude there is insufficient evidence to merit prosecution, their conclusions do highlight actions by FACT, HACT, ESACT.
“And on the balance of probabilities these support a conclusion that false information was created and submitted with intent to support requests for public funding consistent with those findings highlighted by PKF.”
Referrals to police included an allegation of fraud over letters submitted in support of grant funding requests and allegations of fraud in respect of a customer survey undertaken by the council in respect of concessionary bus fares.
She said that police agreed that the funding letters “may technically have been “false instruments” but accepted “the author was a junior member of staff; there is no substantive offence of fraud”.
In respect of the survey “the police advise that actions do not highlight criminality and evidence is inconclusive that the community transport authority was told that it could not complete these forms on behalf of its members”.
Ms Beasley explains that other measures will include “repayment of loans including interest and return of vehicle”. The county council says the £204,000 cost of the PKF report could be recouped through re-imbursements from the FACT group as part of “external legal advice to remedy the breach of state aid funding”.
She said: “Recovery action has commenced and repayments started for those loans identified by PKF as due to the county council.” Up to £300,000 could potentially be winging its back to the county and other councils.
And until or unless the Department of Transport updates its guidance the county council will ensure that “neither public funds nor the assets they support subsidise commercial services/operators”.
Ms Beasley said the county council “fully accepts the findings of the PKF report” and as part of that admission she plans to meet with the complainants – i.e. the taxi industry- to “offer an apology for what has happened”. She will also set out how it will work in the future.
“There is no doubt that PKF findings have identified areas of council activity that did not operate to the standards expected and improvements have been agreed and implemented to address those issues,” she said.
The county council has also instituted what he says is an internal disciplinary investigation to look at officers connected with the case.
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