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.