WAVERLEY Borough Council has been accused of covering up a £200,000 fraud in the build up to this year’s election, prompting calls for the council’s Tory leadership to resign.

A police investigation has been launched after allegations emerged that the borough council paid more than £200,000 taxpayer’s money into a fraudulent account intended for repairs contractor Mears in spring 2014.

Waverley staff were reportedly duped into updating the council’s records after new bank details claiming to be those of Mears were received in April 2014.

It is alleged three invoices were paid to the fake account later that year and the council was only made aware of the scam by its bank in late-summer 2014, mid-way through the last electoral year.

The incident was reported to the authorities and with the help of its bank Waverley was able to recover “a significant proportion” of the lost funds. An unspecified amount is the subject of an ongoing insurance claim.

But Waverley has been accused of “sweeping the embarrassing incident under the carpet” after opposition councillors and the public were this week made aware of the scam.

UKIP MEP for the South East Diane James, who was also leader of Waverley’s opposition during the last administration, has called for the council’s leadership to “consider their positions”.

She told The Herald: “This story blows an absolute hole in any claim Waverley’s Tory administration had for finance management and excellence.

“This matter was never revealed to the opposition – it should have been since, just like the changes to the chief executive role [when Mary Pett, left her post in 2013] it was of sufficient importance to warrant all councillor knowledge.

“It should have involved either an all councillor briefing by the executive director Paul Wenham or an exempt report to the corporate overview and scrutiny committee with notification to all councillors - neither happened.”

The only public reference to any incident of fraud in the past two years by Waverley is limited to a vague report to the council’s audit committee in September 2014, commenting that the auditor had “been made aware of an external fraud affecting the council in April 2014”.

Of the six members on the audit committee at the time all were Conservative, and its then-chairman, the former Mayor of Waverley Richard Gates included no mention of the fraud in his reports to the full council.

Ms James added: “The current mayor Mike Band, then deputy mayor, would have definitely known [about the fraud investigation] as would deputy leader Julia Potts, the leader Robert Knowles and the then-portfolio holders for housing Keith Webster and Carole King.

“All four should consider their positions, and certainly stand down from their cabinet roles.

“The leader should resign immediately for keeping this secret for so long.”

The UKIP MEP, who lost her Waverley seat in May’s election, added the failure to inform councillors of the investigation was symptomatic of the Tory’s “desperation to keep control” of the council in the year leading up to the elections.

She added the quality of Waverley’s overview and scrutiny committees – on which, unlike the audit committee, opposition members were permitted to serve – was “shambolic”, and also called for Tory policy on representation on the audit committee to be revised “immediately” to allow non-Tory membership.

John Williamson, leader of Waverley’s new opposition group, Farnham Residents, said: “The loss of public funds is serious by any measure. However, the culture of hiding the truth from the residents is in my opinion far more serious.

“If the facts of this case are as reported, then this pernicious culture needs to be addressed and removed from the council, root and branch, and replaced by a genuine culture of public service, transparency and faithful representation.

“If we do not want this to go the way of Watergate then those responsible for ‘Waverley-gate’ should consider their positions in order to protect the council’s reputation.”

In response, Waverley’s deputy leader Julia Potts said she was unable to comment on the on-going police investigation, but she did seek to address several “inaccuracies” by Ms James.

Miss Potts said: “To be clear on committee representation in the year 2014/15 to which Ms James refers, the UKIP opposition were allocated positions in proportion to their elected representation on Waverley.

“In addition, Ms James, as leader of the opposition, was offered an ex-officio place by the leader of the council Robert Knowles on the standards committee.

“There is also non-Conservative membership in this current administration of committees.”

A council spokesman said: “Waverley Borough Council can confirm it was a victim of fraud in April 2014.

“An investigation was immediately conducted which resulted in the recovery of a significant proportion of the funds.

“The council also conducted a full review and strengthened its processes and procedures following the incident.

“The council is continuing to work with the police, the banks and our insurance company to recover the outstanding amount.

“The relevant councillors were informed at the time of the incident as were the council’s external auditors.

“The fraud was also reported in the external audit findings report, to the audit committee. This was a public document.”

A West Midlands Police spokesman said: “West Midlands Police can confirm it is investigating an alleged fraud offence, which was reported in April 2014, where the victim received a fraudulent letter reporting to be from one of their suppliers claiming bank details had changed.

“The victim then paid money into this account.

“Enquiries are on-going to locate the suspect.

“The crime was reported to Action Fraud who gave the information to the National Fraud Intelligence Bureau which was subsequently passed to West Midlands Police to investigate.”