County Councillor Mark Goldsack Quotes

 

Assets and Procurement Committee – 28 November 2023

Agenda Item 6 – This Land – Publication of Shareholders Agreement

Click here for Source – Timestamp 47.25

Cllr Mark Goldsack

“Thank you Chair.  I really welcome the Shareholder’s Agreement, openness and being able to see this in a public meeting.  And I think it’s a real step in the right direction.  As part of the debate of this section I would encourage everyone involved with This Land to go further, and further disclosure.  There’s a lot of disinformation and misinformation in the public domain about the operation of This Land.  And that affects people’s judgement and people’s perception of the reality of the situation.  I have spoken to the Chair of This Land direct, and asked for better communication out to councils – parish councils, town councils and the like.  But I see this very much as a step in the right direction, and I would encourage all those involved – Tom and Michael etc. to really push for more information out there – factual information that does counter some of the disinformation that circulates out there.  Unfortunately, we live in an era (and I’ve used this phrase many times), but we live in an era of social media.  And on social media, noise wins over fact.  So we have to make sure that fact stands absolutely true out there.  So, thank you for bringing this.  I look forward to more.”

Perhaps Cllr Goldsack could start the ball rolling by providing just two examples of where in the public domain, or social media, anyone at all has circulated disinformation and misinformation about This Land, and in what way that information was incorrect.  Cllr Goldsack has a tenuous relationship with factual information, as evidenced by this item from Private Eye’s Rotten Boroughs column published on 3^rd March 2021, about an earlier meeting of Soham Town Council, which the Councillor attended.

Rotten Boroughs, 3 March 2021

Private Eye’s facts were correct in every particular.  This Land’s inability to make its loan interest payments to CCC on time, and the fact it was forced to sell land purchased with those loans just to stay afloat was acknowledged on page 22 of CCC’s own financial statements for the 2020/21 financial year:

“During 2019-20, This Land undertook a significant review and reset of its business plan necessitated by revised assumptions showing a deteriorating financial position. The company had experienced delays achieving planning permission and was concerned its original plan was unduly optimistic and by the future overage obligations it had to the Council. A revised plan was submitted to the Council’s Commercial and Investment Committee in April 2020, with the Committee agreeing, for the Council’s part, to a number of updates and variations arising from the updated approach. Amongst the revisions was a commercial decision by This Land to dispose of a number of assets: refocusing on those of an optimum size and position for the company. By 31st March 2021, five disposals had been made and further disposals were completed during 2021-22. The sales have progressed in a relatively buoyant housing market, thus allowing the company to maximise returns and select the best timing and circumstances for individual sales. The proceeds from these disposals have put the cash flow of the company into a position where less borrowing has been needed from the Council than previously anticipated during 2020-21.

Other significant revisions within the 2020 business plan included a reduction in the Council’s future entitlement to planning overage uplifts from This Land, an increase in the permitted levels of lending to the company in principle (although detailed approval of draw down requests are required to access this and actual lending is currently below the level authorised in 2017) and adding land promotion as a further area of business activity for the company. Adoption of the revised business plan enabled the Council to advance loan amounts that had previously been on hold and in turn This Land could ensure it was up-to-date with previously delayed interest payments back to the Council.”

How transparent is This Land?

If Councillor Goldsack is keen to show transparency, perhaps he could comment on the following.

This Land’s Shareholder Agreement, which is now published, contains a section on Freedom of Information

In fact, requests for information about This Land do not have to go via the County Council.  Since it is a publicly owned company under Section 6 of the Freedom of Information Act 2000, anyone can address FOI requests directly to This Land Ltd, rendering section 11 of the Shareholder Agreement redundant.

In all seven of This Land’s audited accounts published to date on Companies House, a material proportion of its administrative expenses was omitted from the corresponding note to the accounts.  In total, that lack of transparency comes to £8.98m, 46% of its total administrative expenses over seven years - and the equivalent of 23.4% of This Land’s comprehensive losses so far.  

By any measure, those omissions are material.  The unsystematic way in which a large proportion of This Land’s administrative expenses (but no other item of account) has been omitted from the notes to its own audited and published accounts breaches the disclosure requirements set out in Financial Reporting Standard 102 on financial statements (FRS 102), in particular, sections 2.4-2.7, section 8 and sections 2.10 and 2.11.

The missing categories and their amounts have been repeatedly requested by a local elector under s26 of the Local Audit & Accountability Act during the statutory inspection period of Cambridgeshire County Council’s own draft financial statements.  Each year the request has been denied.  

Since 2017/18, This Land’s accounts have been consolidated with the County Council’s own accounts, to form group accounts.  The group accounts form part of the local auditor’s audit.  Since 2018/19 the authority’s local auditor has been EY.  It follows that the audit extends to This Land Ltd’s own accounting records, and therefore that all This Land’s “books, deeds, contracts, bills, vouchers, receipts and other documents relating to those records”, as well as the accounting records themselves also come within the scope of statutory inspections of the County Council’s draft accounts. 

Perhaps Cllr Goldsack could lead by example in the interests of transparency and the public interest, and insist that Cambridgeshire CC stop denying the public their statutory inspection rights, and instead provide the missing details requested last August, including copies of the supplier invoices or other documents that make up the £1.46m worth of omitted administrative expenses in the notes to This Land’s 2022/23 accounts.  

Unless and until that information is provided, the public has no idea whether the undisclosed expenses were consultancy fees, backhanders, or any other inappropriate payments.  This Land and its auditors’ (RSM UK Audit LLP) refusal to comply with FRC 102, EY’s failure to demonstrate professional scepticism and to investigate or even comment, and the authority’s stubborn refusal to comply with its statutory obligations to the public together create what lawyers call “a plausible suspicion of wrongdoing" in respect of those undisclosed administrative expenses.

Accounting Errors at CCC - Post 10/15 in a series - Ernst & Young Fails to Challenge Accounting Treatment

10 - 2018/19 - Ernst & Young fails to challenge accounting treatment

EY took over from BDO as CCC’s auditor for the 2018/19 audit onwards.  EY did nothing to challenge the City Deal accounting treatment in 2018/19 or 2019/20.  It carried on where BDO left off, issuing unqualified audit opinions on both years’ financial statements.  On page 44 of the 2018/19 audited accounts, CCC wrote in the section on General Accounting Policies and Judgements:

The Council previously judged that the appropriate accounting treatment for the City Deal funding from Central Government to the Greater Cambridge Partnership (GCP) of £20m per year from 2015-16 to 2019-20 was the recognition of the total funding as a grant in 2015-16, along with a debtor for £80m.  This accounting treatment continues to be applied with a further £20m received in 2018-19, reducing the debtor balance to £20m.

The same message, (only with the debtor balance reducing to zero) was included in the 2019/20 accounts.  The £20m overstated debtor balance, the £20m overstated usable reserves balance, and the understated £20m revenue in both years were all above the final materiality thresholds EY set for those audits of £16.1m and £19.58 respectively.   

Yet Mr Hodgson steadfastly chose to say and do nothing.  He had access to CCC’s and BDO’s stated reasons for the change in accounting in 2016/17.  All the relevant documents are in the public domain on CCC’s website.  In addition, EY’s Cambridge office is adjacent to BDO’s office.   

Following EY’s appointment, both audit partners have met regularly to discuss the progress of the outstanding objections.  It is therefore inconceivable that Mr Hodgson was unaware of Mr Mason’s 2018 objection on City Deal accounting, or was unaware that the City Deal accounting treatment breached the CIPFA Code and CCC’s stated accounting policy for income and expenditure recognition.   

He could not have been ignorant of the fact that the 2018/19 financial statements were not free from material misstatements, or that his statements to the contrary in his audit opinions were false.

Between 2019 and 2022 I submitted four objections about CCC’s draft accounts to EY.  Up to October 2022 Mr Hodgson declined to accept or reject any of them on the stated grounds that he could do nothing until BDO had completed its investigations into Mr Mason’s two historical objections.  That conduct breaches the National Audit Office’s Code of Audit Practice that auditors are obliged to comply with under Section 20(5) of the Local Audit and Accountability Act 2014 (LAAA 2014) – see Appendix 2 below.

Thus, by 2022, six formal objections to CCC’s last six annual accounts remained outstanding.  One of the matters in my 2020/21 objection was the accounting treatment for City Deal 2, whereby, as with City Deal 1, all five years’ worth of City Deal 2 grant income were recognised in year one (2020/21) as a single grant.  City Deal 2 was worth £200m over five years, so the incorrect accounting recognised £200m as grant revenue for 2020/21 alone, instead of the correct value of £40m, as set out in the determination documents.   

The result was that in 2020/21, revenue, debtors and usable reserves were all overstated by £160m, over eight times the materiality threshold EY set for its audit of CCC’s 2020/21 accounts.  Those overstatements meant that the draft usable reserves balance of £375,478,000 was overstated by 74% - hardly an immaterial difference.

During the 2021 statutory inspection period under Section 26 of the LAAA 2014, I asked to inspect and have a copy of that year’s City Deal grant determination document, which contained the conditions CCC alleged did not exist.  I already had copies of previous years’ determination documents from a contact at the National Audit Office (NAO).   

CCC’s Head of Finance repeatedly wrote to me asserting that no such document existed.  I mentioned this lack of cooperation from the senior officer in my objection to EY on the 2020/21 financial statements which was submitted on 13^th September 2021.  I sent a copy of the objection to CCC Finance.   

Just three hours later, CCC’s Head of Finance wrote to me enclosing copies of two determination documents covering the 2020/21 financial year.  The grant value in each document was £20 million.  Both documents contained the expected grant conditions that CCC had previously denied existed, but now acknowledges.

In its audit plan for the 2020/21 audit EY presented to the A&A Committee in September 2021 (Agenda Item 8), the auditor made no mention of any audit work to be done on City Deal accounting, despite the scale of the overstatements in the draft financial statements or his knowledge of Mr Mason’s outstanding 2018 objection.   

At that same meeting, Mr Mason submitted a written question about City Deal accounting.  The question and the answer from the Head of Finance can be found online (Timestamp 13.22) and in the minutes (Appendix 1).  The Head of Finance’s response was factually incorrect and misleading on several counts:

·       CCC had not been consistent in its treatment of GCP funding.  In 2015/16 it accounted correctly for that year’s grant, on an accruals basis (see Sections 4 and 5 above),

·       The revenue frontloading accounting treatment does not comply with the CIPFA Code (accruals basis) or with any recognised accounting policy,

·       The Head of Finance misquoted from the CIPFA Code and fabricated content that is not in the Code.  He conspicuously omitted to mention the overriding obligation to account for capital grants on an accruals basis.

·       Adding short and long-term debtors to balance the overstated revenue does nothing to correct or diminish the false accounting. The net result is still £160m overstated revenue, debtors and usable reserves which simply did not exist in that financial year.  Users of the accounts, such as short term lenders and central government had still all been materially misled.

·       In addition to creating long and short term debtors for the non-existent revenue, the resulting “reserves” were taken to the same Capital Grants and Contributions Unapplied Reserve, which on CCC’s own definition is designed for grants already received.

Following that response, the Committee Chairman stated that he would expect City Deal accounting to be looked at by the external auditor as part of its audit work that year.

After that September meeting, I wrote to Private Eye magazine, providing a copy of the draft accounts and other background evidence.  The magazine sought professional opinions, including from a former investigator at the Serious Fraud Office and a former investigator at the Financial Reporting Council.  The resulting articles published on the magazine’s Rotten Boroughs page in November 2021, January 2022, and June 2022 are shown in Appendix 3 below.