Police are investigating after a council sold a college building worth £4.6m (Sh793 million) for just £1 (Sh172), it has emerged.
Peterborough City Council officers are "concerned" its disposal of the John Mansfield Centre (JMC) – occupied by City College Peterborough – to a charity in 2020 and "associated financial transactions were unlawful".
After the sale, the council – which owns the college – paid rent of nearly £800,000 to the charity City College Peterborough Foundation (CCPF), but a cabinet report says there is "no evidence of any written lease or agreement for lease".
Cambridgeshire Police said three people had been arrested on suspicion of misconduct in a public office. CCPF has been contacted by the BBC.
The cabinet report says the decision to transfer the JMC to the foundation was approved in September 2019 and laid out in a "delegated authority form" which was "fundamentally flawed".
Councils can dispose of land "for less than the best consideration that can reasonably be obtained" without needing consent from the secretary of state if the value is £2m or below.
The book value of the JMC was £4.6m but there is no evidence consent was sought.
The report also states the "decision was taken by an officer not explicitly authorised" and the form incorrectly states the foundation – which started in 2013 – had been "set up specifically for the transfer and ongoing management of the JMC".
The college provides adult education, and after the transfer in February 2020 the council began paying rent of £17,010 a month to the foundation, rising to £29,010 by February 2021.
The cabinet report states: "The lack of written lease also creates a significant degree of uncertainty as to the terms of the council's occupation and as to any liability which may have accrued."
Other payments of nearly £300,000 linked to maintenance were made, which the council considers "unlawful".
The council cannot foresee being able to buy back the JMC, and now needs to negotiate with the foundation as there is uncertainty over the college's current occupation from a legal standpoint.
Mohammed Jamil, the council's Labour cabinet member for finance, said the report's publication was "proof that where unlawful acts are identified as having taken place, the council's statutory officers will not shy away from their duty to report that wrongdoing, and we fully support that approach".
He said. "As part of our improvement journey since 2022, we committed to rapid and far-reaching improvements in relation to governance and financial management.
"Many of the steps we have taken in recent years have led to more robust processes and policies in relation to decision making. However, the recommendations which will go before cabinet next week seek to bolster this further."
The report recommends the council's "monitoring officer continues to explore all feasible avenues of legal redress in relation to the unlawful disposal of the JMC".
Tasha Dalton, principal at City College Peterborough, said: "We are aware of the publication of the report which relates to a historical matter.
"Our priority is to ensure the college learners, supported people and staff are as least affected as possible."
