Government has taken control of the Corporation of Hamilton’s purse strings after the municipality was charged with a raft of good governance violations.

And the move could put City Hall in line for yet another costly court battle after Deputy Mayor Donal Smith last night suggested Government was acting illegally.

At a press conference yesterday afternoon, Home Affairs Minister Michael Fahy said the decision — which will give Government oversight of all the Corporation’s financial dealings — was “regrettable”, but that it was made “in the best interests of Bermuda”.

Government’s decision to step in came one week after Ombudsman Arlene Brock filed an in-depth, highly critical report citing numerous examples of maladministration at City Hall, including questionable expenditures, potential conflicts of interest, City business being held in secret caucus meetings, the advice of technical experts being ignored and an increase in retroactive and unsigned resolutions.

“These actions were all called into question,” Mr Fahy said yesterday.

He went on to say that, in his capacity as Minister for Home Affairs, and with the support of Cabinet, he had “served notice on the Corporation of Hamilton advising that the Government, via the Minister of Home Affairs, will temporarily assume stewardship of the Corporation’s financial administration and treasury functions, with immediate effect”.

“Essentially this action means that all financial matters are to be overseen and carried out only upon the authorisation of the Minister of Home Affairs,” Mr Fahy said.

“This includes tendering, accounts receivable, accounts payable, purchasing and all other money management matters. Corporation of Hamilton vendors should verify the originating authority for the purchase of any product or service, inclusive of legal services, before providing them.”

Mr Fahy was unable to say how long Government would continue to oversee the financial dealings of City Hall, but did say that it would only step aside once satisfied that a number of financial procedures and good governance measures were in place and being observed.

The Minister added that he expected the Corporation’s elected Board to cooperate fully with the measure.

However, last night Deputy Mayor Smith said: “The Minister is the Minister and he is sure he is working within the law. We take a different position and our attorneys are advising us accordingly.”

Ms Brock launched her investigation into the Team Hamilton administration, which was elected in May 2012, in March of this year. She concluded that maladministration had “crept up at every corner in a dazzling, infinite, relentless variety and wilfulness of ways”.

The Ombudsman was critical of the way in which the $300 million waterfront development project was tendered, concluding that the process was flawed, unfair and possibly illegal.

The Corporation has repeatedly been in the news in recent months after councillors, led by Mayor Graeme Outerbridge, approved a number of controversial resolutions.

Financial records leaked to The Royal Gazette showed that councillors had allocated $850,000 for their expenses for this year, compared to just $10,000 set aside the previous year by the former administration.

Ratepayers also footed the $30,000 bill to send four councillors and an interpreter to a conference in Colombia. The administration also came under fire for hiring a New York marketing firm to promote the city overseas at a cost of $5,000 per month.

And in October councillors agreed to pay themselves $375 for each committee meeting they had attended since coming into office 18 months earlier. The payout, totalling around $55,000, was challenged by Government. (See separate story).

Councillors also passed a resolution amending the process by which Corporation cheques can be authorised. Previously cheques had to be signed by a senior councillor and countersigned by one of three senior administrators. New rules voted in by the council decreed that cheques could be cashed if signed by two senior councillors.

The Corporation was criticised for paying out $200,000 to retain the services of a top London law firm to fight a series of legal cases.

The municipality this week outlined a legal challenge to Government’s Municipalities Amendment Act 2013, which requires Corporation leases longer than 21 years — including the controversial waterfront development project — to be approved by MPs.

Mayor Outerbridge and his deputy were in court earlier, unsuccessfully defending charges of contempt after failing to cooperate with the Ombudsman in her investigation, and they also launched an unsuccessful legal challenge to block her final report being published.

The Corporation is also embroiled in a legal tussle with the Bermuda Public Services Union over the union rights of senior administrators.

Yesterday Mayor Outerbridge did not respond to requests for comment, but the Opposition Progressive Labour Party did express concern at the development.

“Today’s decision by the OBA raises serious questions about the viability of the Corporation of Hamilton going forward,” said Acting Opposition leader Derrick Burgess.

“To seize control of the city’s financial administration without benefit of a financial report or audit, throws a shadow over the motivations of the OBA. The ongoing saga between the OBA and the Corporation is benefiting no one and we hope that it will be resolved quickly.”