A fraud investigation has launched at Guildford Borough Council following “an issue” within the housing maintenance department.

It is reported staff have been suspended, contracts terminated and possible fraud is being looked in to.

The borough council is already battling financial issues, with the threat of effective bankruptcy hanging over it and is also on the hunt for a new chief executive and a new finance chief after a succession of resignations.

Both these roles are shared with Waverley Borough Council, since a 2021 move which aimed to save both authorities money by sharing some senior staff.

Since the current year’s budget was set in February, the council has revisited the finances and found a £10 million accounting error as well as having to tackle an in-year deficit of £2.6m and bringing in spending restrictions.

Officers have warned a section 114 notice, effective bankruptcy, may have to be issued at a key meeting in October.

A Guildford Borough Council spokesperson said: “We’ve identified an issue within housing maintenance.

“Due to this, and in accordance with proper procedures, we are conducting an investigation.

“It’s essential to uphold the integrity of the investigation process.

“Therefore, at this time, we’re unable to provide any specific details or comments related to our ongoing enquiries.”

Guildford would not confirm when asked how many staff had been dismissed or suspended regarding allegations of fraud or other issues.

They added that more information may be released when “appropriate and permissible to do so”.

The spokesperson said: “We plan to operate as normal during this time and we’re working hard to continue providing our housing maintenance services with limited disruption.

“Our priority continues to be the safety and wellbeing of our tenants, and the compliance of our properties.

“We will continue to engage regularly with our Tenant Engagement Group.”

Councillor Paul Follows, leader at Waverley Borough Council, said in an email sent to staff at Waverley, that councillors had been given further context on the issue.

Conservative councillors at Waverley have spoken out against staff sharing measures at the authorities, claiming the arrangement was now “falling apart”.

The group said: “Guildford are in the midst of financial problems with allegations of fraud and staff dismissal, financial accounting errors and the strong possibility that the Council will need to issue a Section 114 notice – more or less declaring bankruptcy.

“Waverley Borough Council is now forced into the position of trying to find a new chief executive who is also willing to take on the job of managing a failing Guildford Borough Council, which will no doubt make recruitment more difficult.”

But Cllr Follows said of the investigation into staff, which he described as “such a serious matter”, that councillors were “collectively proud” Waverley teams could support the investigation at Guildford.

His email said: “We all recognise that a solid, stable Guildford Borough Council is a good thing for us all.

“We know more may come, and you have our full support.”

Cllr Follows confirmed that there were no connections between any of the accounts for either council and no Waverley staff had been suspended or were connected to the investigation.