“Unlawful decision by town council to open café led to £234k debt: watchdog”

A warning here for all councils.

“A town council did not give due consideration as to what powers it had to open a café, the decision was based on a poorly prepared business plan and, as a result, the decision to open the establishment was unlawful, the Auditor General for Wales has found.

Since opening the café in 2011, Connah’s Quay Town Council went on to incur a cumulative deficit of more than £234,000.

Finding failures in its decision making, the Auditor General’s report made three clear recommendations for the council to:

undertake a full option appraisal for the operation of Quay Café, incorporating a full financial appraisal of each option;

ensure appropriate advice is received prior to making decisions on the provision of new or novel services;

review the services it provides and ensure that it understands the statutory basis on which it provides those services.

The town council now has one month to consider the issues raised within the report and to make a decision on whether to accept these recommendations.

The Auditor General’s report is issued alongside public interest reports for Glynneath Town Council, Maenclochog Community Council and Cynwyd Community Council.

These reports set out significant failures in governance arrangements and inadequacies in financial management and internal control at all four councils.

The Auditor General for Wales, Adrian Crompton, said: “Given the scale of the deficit incurred at Connah’s Quay Town Council, I believe it is important that the public has a full and proper awareness of the events concerning the council. When it opened the café, the council did not have the statutory authority to do so and its decision was not supported by a clear and coherent business plan. As a result the decision was, in my view, unlawful.

“There are lessons to be learnt not just by this council, but by all town and community councils in Wales. The public interest reports issued today serve to highlight the shortcomings at four different town and community councils. Councils need to be innovative in dealing with community issues, but they must at all times display appropriate risk management and operate within their legal framework.”

Crompton added: “All four councils now have an opportunity to demonstrate that the risk of such governance failures recurring is reduced to a minimum. The public need to be assured that town and community councils have proper governance arrangements in place to manage the activities of the council both financially and administratively.”

https://www.localgovernmentlawyer.co.uk/governance/396-governance-news/40854-unlawful-decision-by-town-council-to-open-cafe-led-to-234k-debt-watchdog

EDDC’s external auditor tightens its procedures after Patisserie Valerie scandal

“Grant Thornton announced an independent review and a 7 million pound revamp of its UK accounting operations on Saturday to improve standards after regulators opened an investigation into its audit of café chain Patisserie Valerie that came close to collapse last year.

The accounting firm said the measures were part of its response to recent “scrutiny of its audits of large listed companies”, and wider efforts to prepare the business to compete for audit work from Britain’s top 350 listed companies “should changes in the market present a more level playing field for competition”.

Britain’s accounting watchdog, the Financial Reporting Council, said in November it was investigating Grant Thornton’s audit of Patisserie Valerie for 2015-2017.

Dave Dunckley, chief executive of Grant Thornton in Britain, said the firm would work with clients and the regulator to go further.

“The independent review of our audit practice this autumn will be an important part of our continued efforts to improve,” Dunckley said in a statement.

Britain’s Competition and Markets Authority has proposed sweeping reforms of the UK audit market after questions were raised about accounting standards following the collapse of retailer BHS and construction company Carillion, which took place before Patisserie Valerie’s problems were came to light. …

https://uk.reuters.com/article/uk-britain-accounts-grantthornton/grant-thornton-revamps-uk-audit-after-patisserie-valerie-scandal-idUKKCN1TN0DV?

“Scandal-prone beancounter KPMG fined £40m after staff cheat on ethics exams and get illegal tip-offs about inspections”

Perhaps one of the TiggerTories first scrutiny and audit and governance efforts should be to check on its own auditors, Grant Thornton, who have also had their share of scandals!

https://eastdevonwatch.org/2018/10/14/eddcs-auditors-grant-thornton-in-the-bad-news-spotlight-again/

https://eastdevonwatch.org/2018/08/29/grant-thornton-eddcs-past-and-present-auditor-in-record-fine-as-auditing-scandal-spreads/

“Tainted KPMG has been fined £40million because staff cheated on ethics exams and were given illegal tip-offs about inspections by regulators.

The accountancy firm was hit with the penalty in the US after the Securities and Exchange Commission uncovered a host of bad behaviour. Accountants at the firm shared the answers to internal training exams, the SEC said, including papers meant to grill them on ethics and integrity.

Staff also hacked the websites used to carry out the tests to make the pass score lower, allowing them to get through even if less than 25 per cent of answers were correct.

And senior employees at KPMG obtained confidential lists of audits being inspected by the American Public Company Accounting Oversight Board.

This information allowed them to secretly alter reports so that the firm was less likely to be found to have carried out poor-quality work.

Jay Clayton, SEC chairman, said: ‘KPMG’s ethical failures are simply unacceptable.’

Steven Peikin, of the SEC’s enforcement division, said: ‘The breadth and seriousness of the misconduct at issue here is, frankly, astonishing.

‘This settlement reflects the need to severely punish this sort of wrongdoing while putting in place measures designed to prevent its recurrence.’ “

https://www.thisismoney.co.uk/money/markets/article-7151099/KPMG-fined-40m-staff-cheat-ethics-exams-illegal-tip-offs-inspections.html

Sign up to help REALLY scrutinise EDDC (or any other council’s) spending last financial year

“Today Bureau Local launches an exciting pilot project for a new kind of collaboration – and we need your help!

During a set period each year the public has the right to inspect the accounts and related documents of every local authority in the UK. The power is supposed to make local government, and other public bodies, more accountable. In reality, most people are unaware of their rights and fewer still are making use of them.

This is where you come in!

We are looking for people to take part in a trial crowdsourced local democracy project, where network members sign up to make use of this law to scrutinise the finances of their local authority throughout June (in England, times vary in other parts of the UK).

We hope you will help us find more information about the property consultants advising local councils on their investments. But you will also be able to use the guide we have created to look at and get copies of other documents that interest you too.

We hope the information we obtain will lead to local and national stories. But we also plan to submit our findings to the government, as we have done previously during our ongoing investigation into council finances, and to take what we learn from this pilot and hopefully turn it into a yearly event.

Read our guide to this project

https://docs.google.com/document/d/1RhOWI7FT82xC9Cdgi4an1KZ5rfT78S93NVy69FqVPBQ/mobilebasic

and the law it is based on. Then you can sign up using this spreadsheet:

https://docs.google.com/spreadsheets/d/1Xbbq3rgu1MfF11ckbVa37pJdFN43V5hCbx6EV_8YnIs/htmlview

Once you have done that let our reporter

garethdavies@tbij.com

know and he will add you to the newly created channel on our Slack.

Also, if you would like to take part in this project or would like to know more, we will be holding an open newsroom in the #newsroom channel of our Slack between 1pm and 2pm on Thursday 6 June.”

https://mailchi.mp/tbij/our-latest-story-is-out-we-announce-a-local-democracy-project-and-a-new-open-newsroom-series-last-chance-to-be-our-new-community-organiser?

“English councils warned about use of reserve cash”

Somerset, which oversees funds being spent by our Local Enterprise Partnership, is one of the councils mentioned in this BBC article.

“Some councils in England have been warned they risk running out of cash reserves if recent spending continues.

Analysis by the BBC has identified 11 authorities the Chartered Institute of Public Finance and Accountancy (Cipfa) said would have “fully exhausted” reserves within four years unless they topped them up.

The Local Government Association said councils faced “systemic underfunding”.

The government said councils were responsible for managing their funds.
Councils have faced cuts to their government funding and rising demand for services such as social care, while MPs have warned children’s services are at “breaking point”.

Cash reserves – money held back for specific projects or emergencies, such as flooding – are seen as a measure of financial security.

Between them the 152 major councils in England had £14bn in reserve in March 2018, £500m more than the year before but £400m less than in 2015.

The BBC analysis of government data follows work by Cipfa, which published a “resilience” index of councils, but stopped short of naming those it warned were depleting reserves the fastest.

The warning was based on the latest data available, comparing reserves as of March 2018 with March 2015.

The analysis reveals which 11 of the 152 major English councils have used so much of their reserves since 2015 that Cipfa said they would run out within four years if spending patterns continued.

The research comes ahead of Wednesday’s Panorama, which reveals the failings of the social care system as the population gets older and more people need help with day to day living. …”

https://www.bbc.co.uk/news/uk-england-48280272

Government lacks transparency over local authority governance

“There is a complete lack of transparency over the government’s handling of local authorities with governance issues, MPs have warned.

A damning report from the Public Accounts Committee has called on the government to strengthen audit and governance of the “complex and fast-moving” environment that local authorities find themselves in.

The cross-party group of MPs warned that local authorities are now pursuing shared services and taking on commercial risk, but are simultaneously dealing with a “significant” reduction in resources.

The report noted that while some authorities have robust arrangements, others are under strain and have “audit committees that do not provide sufficient assurance, ineffective internal audit, weak arrangements for the management of risk in local authorities’ commercial investments, and inadequate oversight and scrutiny”.

The Ministry of Housing, Communities & Local Government’s oversight of local authority governance has until now been “reactive and ill-informed”, the report said. However, it noted that the department has now committed to improving its oversight.

MPs said that MHCLG lacks reliable information on key governance risks and relies on weak sources of information, meaning it has “no way of pinpointing at-risk councils”. They also said that the department is not focused on long-term risks to council finances.

“There is a complete lack of transparency over both the department’s informal interventions in local authorities with financial or governance problems and the results of its formal interventions,” the PAC said.

The report claimed that taxpayers have a right to know if there are problems with their councils’ finances. It cited the demise of Northamptonshire County Council, which it said was an ‘open secret’ but only for those in the sector.

PAC chair Meg Hillier said: “On the rare occasions a local authority fails, the impact on local citizens is severe. Residents facing decimated services get no comfort from being told that their council’s dire finances were “an open secret”.

“The government needs to recognise the extra pressure that squeezed budgets and increased commercial risks are having on local government and make sure it is monitoring the risks effectively so that it can be alert to the impact of changes on local government.”

MHCLG has been contacted for a response.”

Appearing before the PAC in March:

https://www.publicfinance.co.uk/news/2019/03/whiteman-local-government-finance-needs-be-more-transparent

CIPFA chief executive Rob Whiteman called for an improvement in local government audit.”

https://www.publicfinance.co.uk/news/2019/05/mhclg-oversight-local-authority-governance-reactive-and-ill-informed

“Carillion’s ‘relationship with auditors too comfortable’ “

“Ninety-three per cent of construction industry suppliers think the relationship between the ill-fated firm and its auditors, KPMG, was “too cosy”, according to a poll of construction industry leaders.

A further 57% of respondents believed that reforming the ‘big four’ audit firms – PwC, KPMG, EY and Deloitte – is a necessary step.

The poll, which surveyed more than 50 senior managers across the construction sector, found that 76% believed the Financial Reporting Council was too timid in its challenging of questionable financial information.

Mark Robinson, chief executive of Scape Group, which carried out the poll, said: “We need to be able to have faith in company accounts and the work auditors are carrying out, especially when public sector contracts and people’s livelihoods are at risk.

“Greater oversight and closer management of auditing practices [is needed] in the search to rebuild trust in the industry, but we also need to make sure we are putting in place sensible reforms that do not put increased cost pressures on an industry that is already contending with the cost of materials and reduced access to labour.”

The report from Scape Group also found that 64% of respondents thought that Carillion’s downfall was owing to debt mismanagement, acquisitions and long payment terms, created by a focus on revenue rather than profit.

The Competition & Markets Authority recently suggested that the ‘big four’ separate their audit work from the rest of their consultancy work. This move, CIPFA said, could have implications for local government.

KPMG and the FRC have been contacted for comment.”

https://www.publicfinance.co.uk/news/2019/05/carillions-relationship-auditors-too-comfortable