Unlawful State Aid ??????

To:        Cllr Neil Gough, Mr Frank Jordan

             Executive Director of Place and Sustainability

             Cambridgeshire County Council                                                                                                                                                                                               

18^th December 2023

Dear Cllr Gough and Mr Jordan,

Last week I wrote to you because you are both Non-Executive Directors (NEDs) of This Land Ltd.  I asked you several questions about the apparent unlawful state aid Cambridgeshire County Council (CCC) has given to its arm’s length, wholly owned subsidiary company.  My letter made it clear that I was writing to you rather than to the council’s FOI service.  Mostly it is because you are the proper people to answer the questions.  In addition, the Freedom of Information Act makes it clear that FOI requests are just for “what” type questions, not “how” or “why” type questions.  I am looking for reasons and explanations, not just documents.

So I was disappointed to receive an email on Friday from the authority’s FOI section, acknowledging my email, when I never addressed an email to FOI about state aid.  One of you has evidently passed my letter on to that department, against my express request.  I am not acknowledging that email because I did not submit an FOI request on this matter.

Accountability is one of the Nolan Principles that those elected or appointed to public office are expected to abide by.  Accountability is also the first of the core values set out in the Council’s Constitution.  “Accountable” is one of the aspirations that appears along the foot of the Corporate Leadership Team Structure document published on the Council’s website. 

In addition, the government has published guidance on the twelve Principles of Governance for all Public Body NEDs.  That guidance explains that you are bound by the Code of Conduct for Board Members of Public Bodies and the Nolan Principles (again), and that you are to meet the requirements set out in the Treasury’s Managing Public Money publication.  All these documents are easy to find online and download.

Please understand that I am expecting comprehensive answers to my questions from you, not from the FOI department.  With that in mind I am also publishing this letter on my blog site, and I look forward to publishing your response(s) on the same site.

Yours sincerely,

Andrew Rowson 

Cambridgeshire CC and This Land Ltd conceal £9m worth of administrative expenses

This is the second in a series of articles exposing how Cambridgeshire County Council (CCC) finance officers deny local electors their public inspection rights by Andrew Rowson.

A universally recognised accounting convention in published financial statements is that where an item of account has a note reference against it, that note provides additional information about the item elsewhere in the document.  

Where the headline item comprises two or more components or categories, they are all listed in the note to the accounts, with the list adding up to a total figure that reconciles with the original item in the headline accounts.  If several relatively small value categories together constitute a small percentage of the total, it is acceptable to group them together with the category name “Other”.  That way readers of the accounts can easily reconcile the figures and understand what the material components are.

This Land Ltd is Cambridgeshire County Council’s (CCC) wholly owned subsidiary housing company.  Its accounts are published on Companies House and can be found HERE. 

In its published, audited accounts, This Land Ltd complies with the above reporting convention for all headline items of account except one – Administrative expenses.

The extract below from This Land’s most recent audited accounts (financial year 2022/23) discloses Administrative expenses totalling £4.062m and £3.788m for the prior year. 

The corresponding note to the accounts (Note 6) should contain all the admin expenses categories that add up to those totals.

However, Note 6 only discloses a subset of five Admin expenses categories, and does not sum them.    

The arithmetic totals for the above five categories are £2,599,106 and £2,079,692 for 2022/23 and 2021/22 respectively.  

The corresponding undisclosed expenses therefore total £1,462,567 and £1,708,647.  Similar undisclosed expenses have been identified in all seven sets of This Land’s published accounts to date. 

Up to December 2019, the undisclosed categories each year accounted for well over 50% of the total by value.  The latest published accounts are the first where the missing expenses are not higher than the single highest value category – Staff costs.  

Across all seven accounting periods, the undisclosed administrative expenses now total £8.97m, and represent 46% by value of all administrative expenses over all seven accounting periods.  They account for 23.4% of all This Land’s comprehensive losses to date (£38.35m).  

By any measure, the missing amounts are material, and they are of intrinsic public interest, especially for Cambridgeshire taxpayers, especially because of the irregular reporting, and especially because This Land Ltd and its shareholder Cambridgeshire County Council are clearly determined to maintain the cover up of these expenses which should have been disclosed in full in the financial statements.

 Further denial of public inspection rights

A previous post on this blog (Democracy Denied) focused on the denial of public inspection rights during this summer’s accounts inspection period.  

That article dealt with the £10.9m discrepancy between claimed City Deal grant expenditure for 2022/23 and the corresponding payments disclosed in the published payment datasets.  CCC has shown no intention of removing all suspicion of improper use of City Deal funds by providing the requested accounting records.  

That was not the only instance of the Council withholding information it has a statutory right to provide. 

During the inspection period I also requested a copy of This Land Ltd’s draft accounts for 2022/23, which CCC definitely held in August this year (the final published accounts for 2022/23 only appeared on Companies House at the end of October), and a full breakdown of all This Land’s administrative expenses by category, whether or not they were disclosed in the corresponding note to the draft accounts.

I was denied the draft accounts and the requested expenses information on a number of demonstrably ludicrous grounds, including:

·         ‘that subsidiary companies are not specified as a component of “relevant authorities” for the purposes of Local Audit & Accountability Act (LAAA) inspections (either in the legislation itself or by way of case law)’, and

·         ‘That the company’s administrative expenses do not form part of the Council’s accounting records’ and

·         ‘the administrative expenses of This Land with third party suppliers are not “related to” the accounting records of the Council (for the purposes of the LAAA) and that full disclosure is likely to prejudice This Land’s commercial interests.’

Before addressing each excuse, it is worth setting out what the legislation states.  The relevant section is s26 of the Local Audit & Accountability Act 2014 (LAAA 2014):

The courts have adopted a broad interpretation of what constitutes “other documents relating to those records”. 

The simple fact is that since 2017/18, CCC has produced accounts for the council alone, and within the same statement of accounts it also produces group accounts that consolidate CCC’s accounting records with those of This Land Ltd, as it explains in the narrative report section of the 2022/23 financial statements:

Therefore, the fact that This Land is a subsidiary company is irrelevant, and beside the point.  This Land’s accounting records, (including its administrative expenses), and all books, deeds, contracts etc. relating to those records, form part of CCC’s consolidated accounting records de facto and de jure.

Thus, This Land’s administrative expenses are self-evidently within scope of s26 of the Act.  Local electors and other interested parties clearly do have a statutory right to inspect them and to have copies of them during the annual public inspection period.  

The public interest argument for CCC to produce this important information that its failing housing company and the council are both determined to conceal, is also unassailable.  Conversely, the arguments CCC’s former Chief Finance Officer and its current Head of Finance have employed to deny me the information are bogus, and reflect the officers’ deep-seated aversion to transparency, which they have unfailingly demonstrated every year for the last seven years.  

Finance officers seem ready to clutch at any straw to justify breaching the law of the land in denying the public their inspection rights where they feel there is something to hide.  It is regrettable therefore that after I recently submitted a complaint about this conduct to the Chief Executive Officer, he defended his officers’ conduct, calling it “reasonable and proportionate”.

Cambridgeshire County Council’s routine denial of the public’s inspection rights highlights an apparent loophole in the legislation that this authority has exploited.  Under s28 of LAAA 2014, if an objector to the accounts is aggrieved by a local auditor’s final decision about an objection, or by the auditor’s decision not to consider an objection, a legal route is available that culminates in the objector being allowed to appeal to the court, which can overturn the auditor’s quasi-judicial decision.  

There does not seem to be a corresponding legal remedy for the public under LAAA 2014 when they are aggrieved by councils that contrive bogus arguments to evade their statutory obligations under s26 of the same Act to provide the public the information they are entitled to have.  The resulting damage to democracy is grave.  

Regrettably, external auditors cannot compel councils to provide the information interested parties have asked for.  Nor can the Information Commissioner’s Office (ICO) help.  The ICO’s remit does not cover the LAAA 2014. 

Public inspection rights of local authorities’ accounts have been on the statute books in one form or another since 1848.  They are designed to enable local taxpayers scrutinise how their authority spends their money – and to assess the value for money of the services it provides.  

The inspection rights under s26 LAAA 2014 are also an essential prerequisite for local electors to be able to assist external auditors in their statutory duties, by providing the auditor with information he/she might not otherwise be aware of, and by submitting objections to the accounts that the auditor may consider and investigate.  Thus, when council officers prevent the public from inspecting accounting records and related documents etc., an important part of the democratic process and the audit process is removed.  

With ever more councils submitting Section 114 notices and declaring themselves effectively bankrupt, and fraud levels at an all-time high, the last thing Cambridgeshire taxpayers need is the local auditor being denied information that might enable him to do his job better, just because the Council has abused its position by refusing to provide key information to local electors.

Given CCC’s stubborn refusal yet again to comply with s26 of LAAA 2014, I have now written to my Member of Parliament (Lucy Frazer KC, MP - Secretary of State for Culture, Media and Sport) asking her to intervene in this matter, to request that CCC comply (even three months late) with its statutory obligations, and to explain where, if at all,  the legal remedy lies for the public when confronted with obstructive council officers who deny them their inspection rights.  

Readers of this blog will be informed in due course of the Cabinet Minister’s response.

How much state aid has This Land Ltd received?

Cambridgeshire County Council’s (CCC) plan in May 2016 to set up a housing development company revolved around an accounting trick in which the council would borrow substantial sums from the Public Works Loan Board at preferential interest rates and lend it on to its Housing Development Vehicle (HDV) at much higher, “commercial rates”.  

The difference between the two rates it called “revenue income”, which was to be spent on the council’s frontline services, and so relieve the authority of the discipline of finding in-year revenue savings.  This is how the Chief Finance Officer explained the arrangement to Members of CCC’s Assets and Investments Committee on 27^th May 2016:

“The HDV needs to borrow at market rates in order to avoid state aid regulations, but CCC can borrow at far more competitive rates from the Public Works Loan Board and take the margin on the loan in to CCC’s revenue account. CCC will therefore gain approximately 3.0 to 3.5% on everything it lends to the HDV from the point at which the loan is made, not when sales or rents start to be received by the HDV. This will mean that the HDV will be making substantial losses for many years. This is not of concern as this will be within the financial model and long-term business plan of the HDV.”  See Agenda 5 HERE.

The practice of councils borrowing for yield has now been outlawed by central government, precisely because of the risk of irresponsible councils abusing it and getting themselves and their commercial subsidiaries into massive debt.  

CCC’s revenue stream was illusory.  Since This Land has never made any profits, the cash it needed to service its (interest only) loans could only be sourced from additional borrowing by and from CCC, resulting in a vicious debt spiral that has propelled This Land into its current position where it owes CCC £113.8 million while making comprehensive losses totalling £38.35 million in its first seven years of trading.  

That equates to a loss of £724,000 on each of the 53 homes sold up to March 2023. In the most recent year of account, the average sale price per unit was just £247,000, down from £550,000 two years earlier.

Not falling foul of state aid regulations was CCC’s justification for its “making money out of nothing” scheme, as one elected member described the borrowing and lending arrangement.  Instead, the income stream merely created an unpayable debt for This Land, and consequently also for CCC, its sole shareholder.  This Land’s projection of repaying all its debt by March 2029 is pie in the sky.

How well has This Land done at avoiding state aid?  One could argue that each additional loan to allow the company to pay its interest was state aid that might have been denied any other company in a similar position with a hopeless business plan.

In its financial statements to March 2021, This Land at last acknowledged it had not always been able to pay its loan interest on time.  On occasions it had to wait until CCC approved the next tranche of borrowing and lending.  It is unlikely other companies in the real world would have been treated as sympathetically by their lenders without having to pay stiff penalties.

The question of state aid for This Land also arises in CCC’s published Transparency Code supplier payment data.  Two cost centres - “CHIC Start Up” and “This Land” recorded £691,000 worth of payments (incl. VAT) between December 2016 and August 2023. 

The £144,127 for consultancy payments all relates to a report by Avison Young about This Land commissioned by CCC in 2021.  It is therefore bona fide CCC expenditure.

But the £144,662 payments for Professional Fees and Hired Services, and Other Hired Contract Services (£65,473) were made to property management companies like BNP Paribas and CBRE Ltd, and to recruitment companies like Hays Specialist Recruitment.   Were they advising CCC, and were they recruiting for CCC, or did those payments relate to This Land’s own expenditure, for which Cambridgeshire taxpayers were picking up the bill?  These payments look more like the latter.

There can be little doubt however about whose expenditure was behind the single biggest expense type – the £214,915 spent on Advertising/Publicity.  The entire amount was paid to Small Back Room Design Consultants (SBR).  The company’s website shows what it has produced for This Land Ltd – a website, glossy brochures, a range of business cards, and even mugs, tee shirts and shopping bags, all sporting the stylised This Land logo.

This looks like a straight subsidy by CCC to its supposed arm’s length company.  Who authorised those invoices and payments from the county council’s bank account?  Perhaps it was CCC’s former Chief Finance Officer, and the main architect behind This Land – Chris Malyon, who was also a This Land non-executive director for four years, until he resigned in July 2020, because of the “appearance” of a conflict of interest.

The evidence from the payment data shows that a sizeable proportion at least of CCC’s payments coded to the above two cost centres was unlawful state aid to its lossmaking property company.  That is indicative of a lack of effective internal controls and conflicts of interest.  

What the public cannot see is the extent of any further state aid to This Land that has been coded to other cost centres, or removed at source from the published payment data to conceal it from the public – a habit CCC has engaged in for at least the last nine years.  

In the interest of transparency, This Land’s current non-executive directors attached to CCC – Frank Jordan (Executive Director of Place and Sustainability) and Cllr Neil Gough should make a statement explaining to the public the extent of CCC’s unlawful state aid to This Land, and how local taxpayers will be relieved of that burden.

Democracy Denied

By Andrew Rowson – 1^st December 2023

This is the first in a series of articles exposing the obstructionism by Cambridgeshire County Council (CCC) finance officers after local electors asked to inspect and have copies of documents and accounting records relating to the draft annual financial statements.  That public right is enshrined under Section 26 of the Local Audit and Accountability Act 2014 (LAAA 2014).

For the last seven years, two local electors, (one a former County Councillor) have been repeatedly denied our inspection rights at CCC for no good reason, often being lied to, or else we have received information that has been doctored or manipulated in some way.  

Following the same unacceptable treatment during this year’s public inspection period, I wrote to the Chief Executive last month, complaining about the denial of information again this year.  Two weeks ago I received an email from CCC’s Finance department.  Instead of providing the missing information, which had all been requested within the statutory inspection period ending on September 1st, the officer attempted to justify the council’s conduct of withholding the information, using bogus arguments and incorrect facts.  

Since the CEO personally took ownership of my complaint, I conclude that he condones and has approved of his officers’ conduct.  Consequently, I shall shortly be writing to the Council Leader, Cllr Lucy Nethsingha, asking her to instruct the officer body to comply with the legislation and to provide the missing information.

City Deal again.

In a recent article on this website I challenged CCC to issue legal proceedings following its shameful bullying tactics against a local journalist who published an opinion piece about the materially false accounting of government City Deal grants.  The article that offended the authority was republished on this website three months ago.

Since then, I have heard nothing from CCC.  It has clearly decided against putting its money where its mouth is after its earlier theatrical threats against the journalist.  The inescapable conclusion is that the authority’s silence is a tacit, but nonetheless eloquent admission that it deliberately and fraudulently falsified its financial statements for several years, overstating its assets and usable reserves by £218m in the aggregate between 2016/17 and 2019/20, including a £97.8m prior year “correction” to the 2015/16 accounts which had previously correctly accounted for that year’s £20m City Deal grant.  

That being the case, this website will from now on drop the word “alleged” when referring to the uncorrected false statements in CCC’s financial accounts.

The breakdown of the overstatements is shown in the table below.  It was explained in some detail to every elected member in January this year, and has been explained many times to members serving on the council’s Audit & Accounts Committee.  Nobody has challenged the facts, which come from the authority’s audited financial statements.

CCC’s current and previous auditors (EY and BDO), who I have publicly accused of being complicit in the false accounting, have also failed to come forward with any legal challenge.

The last article quoted EY’s contorted explanation from its decision notice in March this year for not correcting the accounting errors in the five financial years before 2020/21, after it had belatedly corrected the same accounting error for the final 2020/21 accounts (see bottom line in the table above).

The false accounting of City Deal grants is related to two of the requests for information in this year’s public documents inspection which the authority refused to provide.

Back in September 2017, when CCC Finance and the then auditor BDO first decided to falsify the accounts, they did so on the false assertion that the government attached no conditions to how the City Deal grants were to be spent.  In fact, conditions have always been attached to the grants, as the authority and its current auditor now concede.

Had there been no conditions, the monies ringfenced for the Greater Cambridge Partnership (GCP)’s specific capital infrastructure projects under City Deal could have been spent on items beyond the ring fence, including relieving pressures on CCC’s own revenue budgets rather than finding in-year savings. 

Therefore, in my inspection request dated 17^th August this year, I asked for the sums spent on City Deal projects during the financial year, the full list of cost centres in CCC’s financial system designated for City Deal projects and, if that list did not fully reconcile with the stated expenditure, the explanation, or reconciliation of where that expenditure had gone.

The point of requesting the full list of City Deal cost centres was to be able to check the total City Deal spending for the financial year against those cost centres from the published Transparency Code spend data.

Twelve days after the request, Finance provided the summary figures below, followed by a list of 64 titles under the heading “Cost centres”.  When they were cross-referenced to the true cost centres in the Transparency Code database, 45 of the 64 (70%) were not cost centres at all – rendering any reconciliation exercise impossible.  The following day (August 30^th), I informed Finance of its error, reiterating that I was looking to reconcile the declared City Deal expenditure total for 2022/23 (£27,846,194) against the payments in the Transparency Code payment data in the corresponding City Deal cost centres.  I also asked for confirmation that the true list of City Deal cost centres only captured bona fide City Deal spend and nothing else.  I never received an answer to that question.

At 1.41pm on Friday 1^st September, the final day of the inspection period, I received an email from Finance containing 32 attachments.  The 32^nd attachment was a revised list of 45 City Deal cost centres, 41 of which matched with cost centres in the Transparency Code data that had recorded payments against them.  The finance officer explained that the earlier list had included “capital project titles rather than capital cost centres”.  It is hard to understand how Finance could have made that mistake accidentally, given the clarity and the context of my repeated requests for cost centre titles.

After matching the revised cost centre list with published payments to those cost centres during 2022/23, the total payments fell short of the £27.8m by £10.9m (39%).  The difference is orders of magnitude higher than can be explained by timing differences between expenditure and payment dates, or by any payments below £500, which are not included in the published payment data.

The significant discrepancy might be explained by the following four factors, or by a combination of them:

• Bona fide City Deal expenditure was incorrectly coded to cost centres other than those provided by Finance as the full list of City Deal cost centres,
  
  
• Bona fide City Deal expenditure was correctly coded to the corresponding cost centres, but a significant proportion of payments were simply removed from the Transparency Code datasets prior to publication.  CCC has a long and disreputable track record for doing this,
  
  
• Substantial expenditure contributing to the £27.85m total above was spent on non-City Deal-related items, and coded to other cost centres - in breach of the government’s grant conditions that CCC has belatedly recognised,
  
  
• Substantial expenditure contributing to the £27.85m was not related to City Deal and was never recorded in CCC’s payments system, but instead was syphoned off from the City Deal pot by means of general ledger journals to support the County Council’s revenue budgets – again in breach of the clear City Deal grant conditions set out in the grant determination documents and other grant agreement documents.
  
  
• By waiting twelve days before providing an initial response, then providing incorrect and useless information, and finally by providing an incomplete response to my request on the very last afternoon of the inspection period,
   
• Finance again employed similar tactics to previous years to deny a local elector his statutory inspection rights.  

Because of the scale of the City Deal discrepancy in 2022/23, and the authority’s previous lie (maintained for four years) that there were no conditions associated with the capital grants, there are reasonable grounds to suspect that a large part of the missing payments may be explained by the fourth factor above.  That suspicion is given added substance by clear references in public committee documents to “internal borrowing” from unspent City Deal grants to spend on items unconnected to City Deal projects. 

As reported in the previous article, further concern comes from the fact that if one takes the opening City Deal balance above (£87.3m), and compares that with the known grant receipts dating back to 2015/16, and the disclosed payments to cost centre descriptions prefixed with “City Deal” or “GCP”, the City Deal expenditure not showing in the Transparency Code payment data rises to around £47m up to March 2023.  

Instead of explaining these anomalies, which might yet have an innocent explanation, CCC has set itself on a course of explaining nothing, covering everything up, and attempting to discredit the people who ask legitimate questions about how these government grants have been, and are being spent.

Questions about the governance and transparency of City Deal grants are not frivolous, and local electors are entitled to seek assurances that their money is being properly managed in a transparent fashion.  The fact remains that there is a yawning £47m hole in the transparency of how City Deal grants have been spent (£10.9m in 2022/23 alone).  

This authority’s endless ducking and diving to avoid providing the information properly requested under s26 of LAAA 2014 is a reprehensible denial of the public’s inspection rights, and does nothing to quell the many concerns about how City Deal grants have been managed and spent.  The Chief Executive Officer’s role in defending the indefensible conduct of his officers is an outrage.

A second request during the inspection period was for the signed City Deal grant funding agreement, complete with terms and conditions, as set out in the Treasury’s “Managing Public Money” document, and also in the Cabinet Office’s Guidance for General Grants.  

I was repeatedly denied that document as well.  Instead, Finance officers pointed to a government press release which contained a short document for public consumption which was not signed and did not contain any of the detail or terms and conditions specified by the Treasury and the Cabinet Office. That document was certainly not the grant funding agreement for the potential payment of £500 million worth of government grants over fifteen years.

Echoes of the GCGP LEP

Cambridgeshire County Council has been in a similar position before.  In 2017, North East Cambridgeshire MP Stephen Barclay raised concerns about the transparency and governance of the former Greater Cambridge/ Greater Peterborough Local Enterprise Partnership (LEP), and the LEP Chairman’s conflicts of interest.  As with City Deal, CCC was also the accountable body for the LEP.  Investigations and critical reports by the National Audit Office and the Public Accounts Committee followed.

In January 2018, CCC’s then CEO – Gillian Beasley, and the LEP Chairman, Mark Reeve were questioned by MPs, who were dissatisfied by and severely critical of their responses about accountability and transparency.  The upshot was that £38m of planned government funding was withheld, and the LEP was scrapped.

In respect of the City Deal reconciliation and the other inspection requests denied by CCC again this year, the authority seems determined to conceal important information from local electors and in so doing, disregard the law.  

Consequently, in addition to writing to the council leader, I am also escalating the matter to my Member of Parliament, Lucy Frazer KC MP, the Culture Secretary.

An Open Letter to Members of Cambridgeshire County Council

From Andrew Rowson, 5^th November 2023

 

Dear Members,

No need to apologise

This letter is a response to an open letter I received from Cambridgeshire County Council’s (CCC) Chief Executive on 26^th October, a copy of which is attached in Appendix 1 below. This letter is being copied widely to other recipients, and will shortly appear on my news website.

Some of you may be aware that in September, the editor of the CambsNews website invited me to submit an opinion piece about being denied my statutory rights under s26 of the Local Audit & Accountability Act 2014 (LAAA 2014) to inspect accounting records at CCC, and about the unresolved issue of CCC’s historical, uncorrected £218 million worth of aggregate accounting errors relating to the central government City Deal grants it received between 2015/16 and 2019/20.  The article, entitled:

“Where has £47 million of Government’s City Deal grant gone?”

was published on Friday September 8^th on the CambsNews website.

The following Monday, CambsNews’ editor received a phone call and an email from CCC’s Head of Communications.  The email contained an ill-informed, five-page response to the opinion piece which the editor immediately shared with me.  In it, the officer asserted that the article made allegations that were:

“serious and in a number of ways defamatory to the Council and its officers.”

The Head of Communications ended her email as follows:

“Happy to discuss any of the points in the attachment further if that is helpful.

In the meantime, I acknowledge that following our conversation just now, you are taking the opinion piece down while you review our points.” [my emphasis]

By the time the editor spoke to me on the Monday evening he had already taken the article down “pending review”.  I told him he should not be concerned since in my opinion the response was full of nonsense that could easily be countered.  The editor said he wished to review the letter with me, and hoped to put the article back up within 24 hours.  I offered to review it with him straight away, but the editor asked me to wait until the following morning.

I phoned the editor at half hour intervals throughout Tuesday 12^th September between 8.30am and 10.30pm to review the Council’s response.  He picked up the phone just once, just after 3.00pm, but told me to call back later.  I have since learned that by that time the “pending review” image on the website had already been replaced by an unreserved apology that had evidently been drafted or directed by CCC’s Communications team.

It seems the council bullied the editor into issuing the pre-prepared apology before he had reviewed the Head of Communications’ letter with me.  So much for that officer’s professional integrity.

In her letter, the Head of Communications expressed concern that the article had been retweeted by “at least two locally prominent and influential twitter accounts”.  She asserted that it had “likely had a wide reach and has already been unfairly damaging - to both the council and a named officer of the council.” 

Perhaps the section that most influenced the editor’s decision to cave in to the council’s bullying was paragraph 2:

“The article does not attempt to make legitimate public policy criticisms of the Council, but instead implies and asserts that the Council has engaged in criminal, unlawful, unethical or otherwise dishonest and unprofessional activities – most seriously alleging that it has engaged in ‘false accounting’.  Unless the article is removed and the council receives a full apology and retraction, it will be seeking legal redress from both Mr Rowson and the CambsNews publishers.”

The simple fact that a council finds an article uncomfortable or damaging to its reputation does not justify bullying a journalist to remove it.  The editor does not speak for me in his apology.  I stand by all my allegations, including those of criminal behaviour and false accounting. They are supported by comprehensive documentary evidence going back six years.  Along with my former County Councillor Mr Mike Mason, I have shared that evidence many times with council members (in particular the Audit & Accounts Committee), council officers and the council’s so-called independent external auditors.  I make this point because the editor’s apology may lead some readers to think that I regret submitting the article, or that I acknowledge the allegations were unfounded or wrong.  That is not the case, which is why I immediately reposted it on another website.  It is now located here.

On September 18^th I wrote to CCC’s Chief Executive, Dr Stephen Moir, expressing disappointment in his officers’ bullying conduct, and demanded an apology.  In a 19-page letter I rebutted every incorrect point in his Head of Communications’ complaint with yet more fully-referenced documentary evidence.  The CEO’s response below does not challenge any of that evidence, does not address the allegations of nine-figure false accounting, or the repeated denial of my public inspection rights (a denial of democracy), or the bullying by his Head of Communications, or the dirty tricks by another officer working in the Communications team that were exposed in a recent edition of Private Eye magazine.  The CEO’s only concern was to defend the officer I had named in the original article.  Dr Moir commented that he considered his officers’ conduct to be “proportionate and entirely appropriate”.  His letter contained no apology, hence this public response.

According to the Head of Communications, the most serious allegation in the article was about the false accounting of City Deal grants.  I wish to comment on this further because it is a serious allegation, and the council’s faux outrage and hypocrisy need to be publicly exposed.

As noted above, for more than five years, Mr Mason and I have repeatedly presented the evidence supporting the false accounting of City Deal grants to the relevant parties – to senior officers, the Audit & Accounts Committee, the external auditors, and all members.  Between the summer of 2021 and September last year I have had a one-to-one meeting with the Deputy Leader (Cllr Meschini), a meeting with Mr Mason and the Chair of the Audit & Accounts Committee (Cllr Wilson), a one-to one meeting with the Council Leader (Cllr Nethsingha), and a one-to-one meeting with the Chief Executive.  City Deal accounting was discussed in detail in all four meetings, and I left the Leader and the Chief Executive with dossiers containing the detailed evidence of the false accounting.   Nobody from the council has provided a single piece of counter evidence to challenge the allegations.  I have also repeatedly and publicly alleged that both auditors were complicit in the false accounting. 

In July 2022 the council and its auditor, Ernst & Young (EY) finally corrected the £160m false accounting treatment of the 2020/21 City Deal grant, but only after the facts were exposed in the press.  The £218m aggregate overstatements of debtors and usable reserves from the identical breach of the CIPFA Code in the council’s five previous annual financial statements remain uncorrected.  Mr Mason still awaits BDO’s response to his formal objection to the 2017/18 accounts on the matter, whilst EY last year declined to insist on its client publishing prior period corrections to the earlier, incorrect accounting treatment so that those items of account would comply with the corrected 2020/21 accounting policy for capital grants, as required by International Accounting Standard 8 (IAS 8).  The dishonest mumbo jumbo below is what EY wrote about prior period adjustments in its whitewash objection decision notice in March this year.  The materiality threshold for each audit is fixed each year by the independent auditor.  The final materiality threshold EY set for its audit of CCC’s 2020/21 accounts was £18.68m.

“Our calculation of planning materiality was based on gross operating expenditure as we view this as the key area for the users of accounts.

Our assessment of whether a prior year error requires adjustment is based on both quantitative and qualitative factors such as, but not limited to, the quantum and nature of financial statement line items impacted, the significance of the impacted metrics to users of the financial statements, the element of subjectivity in determining the appropriate accounting for an item of account, the motivation of management with respect to a particular accounting treatment, the selection and application of appropriate accounting policies.

Overall, as an Audit Firm, we concluded that no PYA was required on a combination of quantitative and qualitative factors.”

As long as those material prior year errors remain uncorrected, the public and other users of the accounts (including lenders, suppliers, and central government) cannot trust a single financial figure CCC publishes.

Mr Mason and I have repeatedly and publicly directed the allegation of false accounting fraud (a criminal offense) at CCC.  So why did the Head of Communications threaten the editor of CambsNews with legal action unless he removed the article and issued a grovelling apology and retraction, whilst Mr Mason and I have never received similar threats?  The answer, I believe, is that it was an empty threat because the authority knows the allegations are true.

An invitation to put up or shut up

In my letter to the Chief Executive nearly seven weeks ago, I gave Dr Moir the website address where the article is now published.  The only difference from the original is that the officer’s name has now been removed.  I have not issued an apology or retraction, and I will not do so.  There is nothing to apologise for.  So, if the council genuinely believes that publishing the allegations online is unfairly damaging to it, and given that the article has doubtless now been read by many more influential people in the last six weeks than the original was in three days, why have I still not heard from the authority or its solicitors?  Again, I believe it is because the authority knows the allegations are true.

Bullying at councils often goes hand in hand with fraud, corruption, and/or dysfunctionality, as events at Croydon Council, Northumberland and West Sussex County Councils - to name but three - have shown.  In recent years, CCC has also had a corrupt and bullying corporate culture, as the Farmgate scandal involving the former Deputy Leader Roger Hickford and former Chief Finance Officer Chris Malyon bear witness.  It appears that this bullying culture is still alive and well. 

It is neither appropriate nor proportionate for holders of public office to bully a local journalist or try to muzzle the free press.  This episode is yet another attempt by CCC to discredit and silence local electors who have raised legitimate concerns about:

·        deliberate, material breaches of the CIPFA Code of Practice that have been aided and abetted by two so-called independent auditors,

·        the authority’s failure to select appropriate accounting policies and apply them consistently,

·        the authority’s systematic denial of statutory rights of access to information designed to allow local electors and other interested parties to properly scrutinise how and where public money has been spent, and whether their local authority has kept “adequate accounting records” under s3, LAAA 2014.

If CCC is confident in its stated position, then to be consistent it should have written to me demanding my full apology and retraction and/or sought legal redress well before now.  One more week should be ample time for it to begin the process.  I look forward to receiving that communication. 

Yours sincerely,

Andrew Rowson

Is The Game Up for "This Land"?

 

The record loss in the year to Dec 2019 was in large part due to that year’s inventory impairment charge of £7.58m to bring the total inventories value (which included a loan interest component) down to the assessed net realisable value of the inventories.  If that impairment charge were removed, the £11.2m comprehensive loss in 2022/23 would have been the highest to date. 

 

In the financial statements, the administrative expense categories are not shown in full, with a total that reconciles with the headline admin expenses in the Profit & Loss account.  This is contrary to how financial statements are normally disclosed.  It means the reader of the accounts has no visibility of what type(s) of admin expenses are included in the undisclosed £8.97m since 2017.  This is a clear fraud risk factor, and it is surprising that the external auditor has not insisted that This Land follow the accounting convention of recording all sub-categories in the notes to the accounts, even if it means including a catch-all “other” category for very small amounts not shown elsewhere.  In every financial period bar 2022/23, the undisclosed admin expenses values were higher than staff costs.

 

 

The Chief Executive Officer’s total remuneration (excl. employer’s NIC contributions) has risen pro-rata by 40% in the last two financial periods (£19% per annum).

 

Where’s our money gone

An open letter to Cambridgeshire County Council’s Chief Executive Officer

Dear Dr Moir,

Democracy denied

Following our recent correspondence, I look forward to receiving the documents and accounting records I requested but was denied during the August public inspection period.  Of the many pieces of information that remain outstanding are the transactions (invoices and any other transactions) that make up the £27,846,194 worth of City Deal grant expenditure in 2022/23 (according to the authority), together with their corresponding unique payment ID references that appear in the Transparency Code spend data.  Armed with that information it should be a straightforward exercise to clear up the mystery of why the “full list” of ring-fenced City Deal cost centres (also according to the authority) only record £16.97m of net payments during the 2022/23 financial year.  The time differences between invoice and payment dates should more or less even out, which leaves a so-far unexplained discrepancy of £10.88m for the year. 

Since the end of the inspection period this reconciliation has become more topical following an article last week by the BBC and the Cambridge News about two GCP projects being paused thanks to spiralling costs and insufficient funds.  Two of the City Deal cost centres: “GCP - Cambridge South East (A1307)”, and “GCP - Travel Hubs” would appear to be connected to those two projects.

Under section 3 of the Local Audit & Accountability Act 2014, councils must keep adequate accounting records, sufficient “to show and explain the relevant authority’s transactions.”  I trust the authority will provide me with those records and the other information I requested during the statutory inspection period, so that I can pass them on to the auditor in good time for him to consider all the points in my objection to the 2022/23 draft financial statements.

Thank you for taking personal responsibility in dealing with this important matter.

Yours sincerely,

Andrew Rowson

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