Waverley and Guildford councils hit the crisis button this week after an internal investigation into an £18.5 million overspend found “a number of serious areas of concern”.

A housing maintenance contractor used by Guildford Borough Council is already under investigation by the police after irregularities in the authority’s housing revenue account were flagged last July.

Now, the borough councils, which have shared senior leaders and back-office staff since 2021, have jointly appointed a law firm to escalate their own probe into the issue.

Two council chiefs – including the interim CEO – have also been placed on gardening leave “to protect the integrity of the investigation”.

And incoming chief executive Pedro Wrobel has brought forward his arrival “in order to provide organisational leadership with immediate effect”.

The departing strategic directors are Annie Righton (community and wellbeing), who was only appointed as the interim joint-CEO of the two councils three weeks ago, and Ian Doyle (transformation and governance).

They were responsible for the relevant service area at the time the suspect contracts were let, a council spokesperson said.

It comes after Surrey Police previously confirmed it had escalated its fraud investigation to a regional organised crime unit, with the police probe running alongside the councils’ own housing maintenance review.

The leaders of Guildford and Waverley councils, Lib Dem councillors Julia McShane and Paul Follows, said a meeting of the Joint Senior Staff Committee will take place “as soon as possible” to authorise an investigation into whether correct governance processes were followed in the letting and management of housing maintenance contracts.

An external law firm will be retained to conduct this investigation.

The two leaders issued the following joint statement: “Public bodies need to be absolutely resolute in their commitment to openness, transparency and accountability for public money. 

“We are determined to identify exactly what has happened in order to safeguard both councils and continue to deliver on our commitment to best value and service delivery possible for all our residents and businesses.

“We’re extremely grateful that Pedro has agreed to join us early and to Westminster City Council for releasing him to us.”

Joint chief executive of Guildford and Waverley borough councils, Pedro Wrobel, said: “When it comes to public money, nothing is more important than propriety and value. All monies should be used to deliver the best possible services for our residents and businesses.

“I will be working with officers, councillors, external investigators and auditors to get to the bottom of these issues and account for every penny.

 “I will ensure the organisation has the right systems in place to safeguard the public’s money, and will take robust action where necessary.”

Surrey County Council corporate director, Michael Coughlin, has been seconded to provide additional support, capacity and resilience to the councils.

Guildford and Waverley councils have shared some staff since a back-office merger was agreed in 2021 to save the authorities money.

However, this move has been consistently criticised by each councils’ Conservative opposition groups as “extremely expensive” owing to the hefty redundancy payouts to many departing senior staff.

Responding to this week’s developments, South West Surrey MP Jeremy Hunt said: “In my constituency Lib Dem-run Waverley Borough Council still progresses the merger with Lib Dem-run Guildford council; now mired deep in these serious fraud allegations. Yesterday, Waverley residents lost an interim CEO and yet another joint executive head; both have been put on gardening leave. 

“Terrible news for Guildford residents and for Waverley residents.”