Accounting Errors at CCC - Post 8/15 in a series - A&A Committee approves accounts without knowing contents

8 – The A&A Committee approves the accounts 

without knowing their contents

The table below shows relevant information from the three iterations of CCC’s 2016/17 financial statements. 

• Anomaly 1:            

The 2^nd draft, published on 19^th September 2017, was materially different to the first draft that the public was able to inspect up to the statutory deadline of 15^th August.  Yet both versions contained the same certification date (30^th June) by the CFO

• Anomaly 2:         
  

In the 2^nd draft (featuring the £80m prior-period adjustment), the Committee Chair, Cllr Shellens, confirmed (on page 22) that “these accounts were approved by the Council at the meeting of the Audit and Accounts Committee held on 19^th September 2017”.  That did not happen.  The minutes of that meeting (page 6) record the following:

 

“As it was clear that the Accounts could not be signed off at the current meeting, the Chairman sought clarification on whether they would be in a position to be finalised for sign off on the 29th September, the date for which a special reserve meeting had been arranged.” 

 

There is no record of such a meeting taking place on the A&A Committee’s calendar. 

• Anomaly 3:          
  

   The final, audited accounts, (featuring £97.8m worth of prior-period adjustments) were published on 12^th October 2017 and contain the same date as the CFO’s certification date. They were approved by the Vice Chair of the A&A Committee (Cllr Rogers), who claimed that “these accounts were approved by the Council at the meeting of the Audit and Accounts Committee held on 19^th September 2017”.  That statement is also incorrect.  The final version of the accounts with the additional £17.8m adjustment journal was never seen by the whole A&A Committee prior to publication.

How are these anomalies resolved?  The official minutes of that September meeting contain the following:

In other words, although the City Deal accounting issue was still unresolved (BDO had only provided a preliminary response to the issue at the time), the committee was happy to leave it in the hands of the CFO, the Committee Chairman and Vice Chairman to make whatever adjustments they deemed fit, however material, without consulting the rest of the committee.  

In addition the members were happy for the CFO to make additional adjustments to any other misstatements as long as they were not material, also without consulting them.  In the event, the CFO did make an additional material adjustment.  He made the botched correction journal for the £17.8m creditor - which was above BDO’s £16.5m materiality threshold, but on which the members were not consulted.   

Thus the committee in charge of governance appears to have taken a wholly hands-off approach to approving the final accounts which contained £97.8m of false accounting in the prior period adjustments, and a further £60m of misstated revenue, debtors and usable reserves in 2016/17 itself.

After the final £17.8m journal was entered and the final 2016/17 accounts approved and published in October 2017, this is how CCC explained the rationale behind the material corrections:

Did the Council really undertake a review of City Deal accounting?  If there was a review “in response to recommendations made last year”, why did the authority not do it before preparing the draft 2016/17 accounts for public inspection rather than a month after the deadline available to local electors to challenge the 2016/17 accounts?  

It is hard to tell which party – CCC or BDO had the original idea of changing the accounting treatment so radically.  However, it is clear that they both colluded on the matter, and maintained the collusion for six years, with EY joining in from 2018/19 onwards.