Derby City Council auditing errors set to cost at least £1m to put right

This post first appeared on Derby Telegraph. Read the original article.

Mistakes made in auditing Derby City Council’s 2015-16 accounts – making them more than 12 months late - are set to cost city residents at least £1 million to rectify.

Failure to correctly value its assets properly led the authority to approve spending £550,000 on external auditors earlier this year to get them right but, since then, it has cost at least £400,000 more for Ernst and Young to oversee the corrections and changes to the support systems for accounting.

The council’s audit and accounts committee is being asked to consider and approve the statement of accounts for the year ended March 31, 2016, at a meeting next Tuesday morning.

Auditor Ernst & Young, which is responsible for approving the accounts, has said in a report going to the meeting that the council did not have a “sustainable medium-term financial plan” in April 2015, was the subject of a whistle-blowing exercise about its valuations and was the object of a public interest report by Grant Thornton in June 2016.

Mark Taylor, interim finance director at Derby City Council, is quizzed by the audit and accounts committee

Mark Taylor, interim finance director at Derby City Council, is quizzed by the audit and accounts committee

This has led Ernst & Young to conclude in the report that: “We are not satisfied that, in all significant respects, Derby City Council put in place proper arrangements to secure, economy, efficiency and effectiveness in its use of resources for the year ended March 31, 2016”.

In turn, this has prompted the Conservatives on the city council to criticise the Labour-led city council saying: “The appointment of consultants, employed to do this work at an additional cost of £1 million, should have been avoidable.”

After the accounts originally failed to be signed off last year, the auditors issued a list of recommendations to the council in June 2017 - a copy of which was also sent to the Government - and the authority was given until the end of September to get them finally signed off.

Also pending are the delayed accounts for 2016-17, which are now expected to be signed off by at the end of December this year.

Councillor Chris Poulter, Conservative deputy leader on the city council, said: “The procedures around the valuation of the council’s assets has been systemically flawed for many years.

"Accounting and assessment rules were changed around four years ago and valuations have been massively over estimated since. As a result, a number of council officers have 'left' the authority, resulting in a lack of skills and capacity.

“We already know that there are outstanding major issues, such as basic accounting procedures and bank reconciliations, which have resulted in the external auditors refusing to endorse the council’s ability to offer value for money.

“The public has lost confidence in the council to manage the city’s finances. Poor decisions will leave Derby with a massive legacy of debt for years and generations to come.”

Members of Derby City Council's audit and accounts committee discussed the action plan

Members of Derby City Council's audit and accounts committee discussed the action plan

At an extraordinary meeting of the audit and account committee in August, Mark Taylor, council interim finance director, said: “Independent experts will be employed for formal valuations at a cost of about £300,000 to support the estates team in the future.”

He also said that a restructure of the finance department was going to take place.

UKIP councillor Alan Graves said: “£1 million is a large amount that the council can ill afford. It is money that shouldn't have been necessary to spend and could have helped in other much more needed budget areas, such as the council's current plan to hand 10 libraries over to the public to run to save in the region of £700,000.”

The audit and accounts committee meeting will take place from 10am in the Joseph Wright Room at Derby Council House.

Ernst & Young was appointed as the council’s auditor on April 1, 2015, and before granting a certificate, it must assess both the financial accounts and state of governance of the council. It told council chief executive Paul Robinson in a letter previously: “This could undermine the council’s ability to effectively demonstrate it has proper arrangements to safeguard and make informed decisions in respect of public funds and assets.”