The Financial Reporting Council (FRC) is set to investigate two former senior officials of Woking Council after the local authority declared itself effectively bankrupt in 2023, accumulating over £2 billion in debt due to unsuccessful commercial investments.

The council, located in Surrey, experienced one of the most significant financial failures in UK local government history after investing heavily in skyscrapers, a luxury hotel, and other risky projects.

The FRC, which regulates the UK accountancy profession, is preparing to launch its investigation into the former Conservative-led council's investment decisions.

Sources indicate that the inquiry will focus on two individuals, widely identified as former chief executive Ray Morgan and former finance director Leigh Clarke.

The FRC is anticipated not to disclose the names of the individuals involved publicly.

This investigation comes in the wake of escalating financial challenges faced by local councils across the UK, with more councils declaring effective bankruptcy in recent years than in the previous three decades.

Significant contributors to this trend include budget cuts due to austerity measures and local mismanagement, with Woking joining councils in Birmingham, Nottingham, Thurrock, and Slough in their financial distress.

In 2022, the FRC launched an investigation into a former accountant with Thurrock Council following a government review that identified reckless investment practices involving hundreds of millions of pounds.

A report from Grant Thornton, commissioned by Woking’s new Liberal Democrat administration, indicated that Morgan played a pivotal role in driving the council's investment strategies.

During his tenure from 2006 to 2021, he drew comparisons between Woking and Singapore, despite the significant losses incurred from investments that ultimately devalued substantially.

The report also indicated that a £3 million "opportunity acquisition fund" was set up under Morgan's authority, which enabled him to pursue regeneration projects with little oversight from the council's executive or elected officials.

Clarke, who served as finance director from 2014 to 2023, was noted in the Grant Thornton report for failing to ensure effective financial management during her term.

Morgan has refrained from commenting on the FRC’s investigation due to confidentiality rules but has expressed concerns regarding the Grant Thornton report's failure to consider his and his colleagues' explanations fully.

Clarke has not responded to inquiries for her comment on the matter.

The FRC has also declined to provide any comments regarding the investigation.

In a related development, local leaders in Surrey have approached the government, requesting the cancellation of approximately £1 billion in Woking's debt to facilitate a merger among the county's twelve local authorities.

This effort aligns with broader plans announced by Deputy Prime Minister Angela Rayner for local government reorganization in England, which forms part of a significant devolution initiative for the region.

However, alleviating Woking's debt could shift the fiscal burden onto taxpayers nationwide, particularly following years of austerity experienced by councils in less affluent areas.