Accounting Errors at CCC - Post 15/15 in a series - Conclusion

15 - Conclusion

For six years, two so-called independent audit firms have ridden roughshod over the legislation, breaching the letter and the spirit of the Local Audit and Accountability Act 2014 and the Comptroller and Auditor General’s Code of Audit Practice.   

In September 2017 the BDO audit partner and CCC’s CFO hatched a plan to falsify the authority’s accounts by switching to a wholly incorrect and invalid accounting treatment that had the effect of materially enhancing the council’s apparent level of debtors and usable reserves.  It was deliberate, not accidental.  There is little doubt the false accounting would have continued throughout the City Deal 2 years if it had not been publicly exposed in November 2021.

Members of the Audit & Accounts Committee have shown themselves capable of discarding logic, the CIPFA Code, and the evidence of their own eyes to believe every untruth they have been fed by finance officers and auditors on the matter, even when the official narrative changes substantively from one committee meeting to the next.

After acknowledging the £160m accounting errors in the first City Deal 2 grant last year, neither CCC nor EY has provided any plausible explanation for why they consider the earlier errors totalling £218m not to be material to users of the accounts. given the independent auditors’ own materiality thresholds of less than one tenth of that value.  Earlier this year I put that direct question to CCC Leader, Cllr Nethsingha.  Her response, in a letter of 20^th February was:

“To be clear, there are several misrepresentations in your letter of 14 February 2023 which it is not productive to address by further correspondence with you currently.” 

A follow-up letter also failed to illicit an answer, or an explanation of what the alleged misrepresentations might be. 

It is clear that the entire local government establishment, comprising officers, elected members, auditors and the council leader have closed ranks to cover up the deliberate, material falsification of the council’s true financial position over a five-year period.  Consequently, the public simply cannot trust any of CCC’s published financial figures or rely on the auditors’ audit opinions at a time when CCC too is experiencing financial difficulties following high-risk investments.

Thurrock Council has pursued a similar high-risk investment strategy to CCC, Croydon, Woking, and several others.  Like Thurrock, CCC failed to understand and control those risks.  Several of Essex CC’s findings on Thurrock in its recently published Best Value Inspection Report also apply to Cambridgeshire:

“The Council’s lack of openness and transparency has given rise to a culture of insularity and complacency. Internal challenge has been discouraged, and external criticism and challenge have been routinely dismissed.”

One of the report’s recommendations was this:

“The Secretary of State may wish to commission a review of external audit for local authorities, to consider the role that external audit currently plays in the assurance framework and to make recommendations on how to strengthen the quality of the service and the reporting requirements, particularly in support of an early warning mechanism.”

Any such review may wish to investigate how widespread is the phenomenon of alleged local auditor corruption and collusion to misstate their clients’ financial positions.  Such conduct, in addition to eroding public trust in local audit, has the potential of hiding red flags until it is too late.