The finances of an Oxford tenants' association were a fiasco, watchdogs have discovered.

Auditors from Oxford City Council recommended this month that the Barton Estate Tenants' and Residents' Association - Betra - should be dissolved immediately. But city councillors have allowed the association to continue with new committee members.

The confidential report also recommended that all past executive members of Betra should be banned from holding posts in a new tenants' association.

Auditors found that the city council had been misled into giving grants to Betra.

They condemned Betra practices such as:

Signing blank cheques

Not making cashbook entries

Providing no explanation for receipts or payments.

Auditors said such practices were "totally unacceptable in the management of public funds".

The association's funds - mostly in grants from the city council - were managed by people with no knowledge of book-keeping or basic accounting.

"The custody of the association's funds and the operation of the accounts had been handled in a manner that made the funds susceptible to fraud and financial impropriety," auditors said. Among the findings made for the period 1989 to 1993 were that Bruce Ross-Smith, then treasurer of the association, submitted accounts to the council with a letter saying they had been independently audited by Sally Mercer. Sally Mercer is Mr Ross-Smith's wife.

The auditors said: "She cannot be considered . . . to provide a reliable, objective and independent opinion on the association's accounts."

They also found that Ms Mercer had signed a blank page in the cash book, certifying transactions that had not yet taken place as a true record.

Cheque counterfoils for 75 cheques issued between May 1989 and March 1992 were not available.

Auditors also found that between 1989 and 1992 Betra received grants worth £2,334 and a small amount of money from bank interest and the sale of raffle tickets.

Ticket sales only raised £22 but prizes worth £60 were paid out of the association's account. Mr Ross-Smith, the treasurer, won £30, committee member Joy Sellwood won £20, and chairman David Howells won £10.

There were many cases of unexplained payments and receipts. From 1995 to 1997 there were unexplained receipts worth £745 and unexplained payments worth £731. In 1996 Mr Ross-Smith received £480 and Gary Loveridge £150. In 1997 payments worth £48.50 were made to executive members Ena Trinder, Joy Sellwood and Fred Burden.

Mr Ross-Smith, who stepped down as treasurer in 1996, told the Oxford Mail he suffered from a long-term illness. He had been unable to cope with the treasurer's responsibilities but had not been able to find someone to take over.

"I do want to sort it out. There was no wrong-doing, we just got into a muddle," he said.

He said he had not been well enough to apply for grants for Betra from 1993 onwards and had been paying committee members' expenses out of his own pocket. He asked his wife to sign the accounts because she was the only person he could think of. It was the best I could do to find somebody to do it."

Richard Peacock, the city's director of housing, said the council encouraged tenants' associations to keep proper accounts and did not award grants to those which did not. "We haven't awarded a grant to Betra since 1993.

"There was a problem several years ago, we were alerted to that, carried out checks, and came to some conclusions," he said.

"The housing committee is continuing to recognise Betra."

Auditors recommended that in future, tenants' associations seeking a grant should have accounts signed by all members of the association's executive committee as having been independently audited. Spot-checks on finances on associations' cashbooks, cheque counterfoils and receipts should also be carried out. out by tenants' support workers and area client officers.

Mary-Jane Sareva, a member of the new Betra committee, said they welcomed the safeguards.

"The new committee are nothing to do with this and are the ones that have brought all this to light," she said.

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