Tomorrow, and tomorrow, and tomorrow

 By Andrew Rowson

In September 2022, Cambridgeshire County Council's (CCC) external auditor, EY, published its audit plan for the authority's 2021/22 draft accounts.  Signalled in red on page six was a new and significant risk - the recoverability of all £113.8m of debt from its failing housing company, This Land Ltd.  In its first seven years of trading, the company has lost £38.35m.

This is what EY audit partner Mark Hodgson told members of the Audit & Accounts Committee at that committee meeting, eighteen months ago:

“For your attention primarily there are two new audit risks this year.  A significant risk around the debtor associated with This Land, which links to working capital loans made to your wholly-owned subsidiary.  There has been some significant press coverage of both This Land and other housing-related subsidiaries in the country, and their ability to repay the borrowing to which they have been afforded [sic].  And in light of that we need to review the business model that This Land has via the component auditor, their going concern assumptions and therefore their ability to repay the £113 million that is currently outstanding at 31^st March [2022].  And discuss with management the need for any impairment over that balance because of any recoverability issues.” 

Click here to see the recorded meeting on Youtube: timestamp 54.24

It is rather different to the message the same auditor gave a local elector six months later, in a decision notice to four formal objections to the accounts that concluded after a delay of three and a half years:

“We have not to date identified a level of indebtedness by This Land that would affect our value for money conclusion.  We have carefully reviewed these conclusions again, and we do not see un unlawful item of account or grounds to make a public interest report under the 2014 Act.  We are of the opinion that – from the governance and oversight arrangements in respect of This Land Ltd set out by CCC in its response (as well as the publicly available documents: particularly the Avison Young report and subsequent action and consideration of that report well into 2022) – there is appropriate governance, transparency and oversight of This Land Ltd.”

So, is the auditor comfortable or uncomfortable with This Land’s indebtedness and the likelihood of its ever repaying the £113.8 million?  Apparently, it is still too soon to tell.  Twelve months have passed since EY wrote the comments above.  It is fourteen weeks since EY’s last upbeat assessment to elected members about This Land’s fantastical future cashflow projections, despite the company’s many previous business plans all turning out to be completely wrong.

The end of March 2024 will mark sixteen months beyond the government’s statutory deadline for CCC to publish its final, audited accounts for 2021/22.   It is also four years and seven months since a local elector first drew EY’s attention to This Land’s ballooning debt and cash flow problems.  Since last summer, several of EY's self-imposed deadlines for completing the 2021/22 audit have come and gone.  For some months the recoverability or otherwise of the loans to This Land has been the sole remaining issue holding up the audit completion.  Why is EY taking so long to finish the job?  It couldn’t have anything to do with the May local elections could it?

CCC's Audit & Accounts Committee next meets on 28th March. The agenda and meeting documents should be published on 21st March, and will be found here.