York's ill-fated multi-million-pound care home plan "lacked a reality check", says independent review

Investigators from audit firm Mazars were called in by council chief executive Kersten England earlier this year, after the ambitious plan to create two new super care homes was cancelled in March.

Their final report, due to go to a key audit and governance committee next week, shows that while parts of the project development went well, important areas like financial planning fell short.

Auditors said that at several points crucial financial information was not properly scrutinised, while the underlying issue running through the scheme was a "lack of a structured, best practice approach to business case development."

In February, The Press revealed a secret memo that showed the council considered creating a "fudged" financial plan as the project unraveled.

On several occasions though the three-year project updates went to the council cabinet, but the auditors say that more than once problems were not properly debated by cabinet members, and problematic assumptions over the millions of pounds of investment needed were not challenged.

Ian Floyd, the council's deputy chief executive and finance chief, said they welcomed the auditors' report, which would help them use "best practice" on future projects.

He added: "The review highlights many areas of good project management throughout the ambitious and complex programme, praising the commitment and diligence of the project team, and makes it clear that key risks were considered throughout the process.

“We recognise that there are areas of the project that could have been improved and have already implemented a number of recommendations put forward in the report, notably around risk and project management, governance and increased communication with stakeholders."

The auditors praised parts of the project management, including the "comprehensive and well managed" public consultation, and said the tricky transfer of elderly residents out of the closing care homes went well.

But problems grew out of the "limited experience" the council had of the competitive dialogue procurement system they chose to find an operator for the new care homes, they added.

Mr Floyd added: “The council remains committed to working with partners to ensure that York’s older people are able to choose from a range of local, affordable, high quality housing options which meet their care and support needs, while enabling them to remain independent as long as possible.”

Labour councillors were in charge at City of York Council throughout the project, and a spokesman for the group said they would be carefully considering the report and its findings.

He added: "The previous administration were right to take action when the increasing risk to the council in terms of affordability became clear.

"Following this we asked for our external auditors to review the project and make recommendations to address how we manage the inevitable element of risk in large projects such as this - all councillors should welcome this professional approach to improve the process in the future."

The multi-million pound plans to build two new "super care homes" - to replace seven ageing council owned care homes - were first embarked upon in 2011 but were abandoned in February this year, after negotiations costing £350,000. It emerged there would be £1.5 million budget shortfall each year, and the plans were deemed unaffordable by all parties.

Next week the new council executive will be asked to approve plans to create more "extra care" beds in the city. Officers have come up with a plan which involves funding round-the-clock care at two existing sites, extending Glen Lodge, building a new extra care scheme on the site of an existing older persons' home, and pushing for one new care home on the Burnholme School site.

They also want to start on consultation on closing two more council owned care homes, following Oliver House and Fordlands which closed in 2013.