An Open Letter to Members of Cambridgeshire County Council

From Andrew Rowson, 5^th November 2023

 

Dear Members,

No need to apologise

This letter is a response to an open letter I received from Cambridgeshire County Council’s (CCC) Chief Executive on 26^th October, a copy of which is attached in Appendix 1 below. This letter is being copied widely to other recipients, and will shortly appear on my news website.

Some of you may be aware that in September, the editor of the CambsNews website invited me to submit an opinion piece about being denied my statutory rights under s26 of the Local Audit & Accountability Act 2014 (LAAA 2014) to inspect accounting records at CCC, and about the unresolved issue of CCC’s historical, uncorrected £218 million worth of aggregate accounting errors relating to the central government City Deal grants it received between 2015/16 and 2019/20.  The article, entitled:

“Where has £47 million of Government’s City Deal grant gone?”

was published on Friday September 8^th on the CambsNews website.

The following Monday, CambsNews’ editor received a phone call and an email from CCC’s Head of Communications.  The email contained an ill-informed, five-page response to the opinion piece which the editor immediately shared with me.  In it, the officer asserted that the article made allegations that were:

“serious and in a number of ways defamatory to the Council and its officers.”

The Head of Communications ended her email as follows:

“Happy to discuss any of the points in the attachment further if that is helpful.

In the meantime, I acknowledge that following our conversation just now, you are taking the opinion piece down while you review our points.” [my emphasis]

By the time the editor spoke to me on the Monday evening he had already taken the article down “pending review”.  I told him he should not be concerned since in my opinion the response was full of nonsense that could easily be countered.  The editor said he wished to review the letter with me, and hoped to put the article back up within 24 hours.  I offered to review it with him straight away, but the editor asked me to wait until the following morning.

I phoned the editor at half hour intervals throughout Tuesday 12^th September between 8.30am and 10.30pm to review the Council’s response.  He picked up the phone just once, just after 3.00pm, but told me to call back later.  I have since learned that by that time the “pending review” image on the website had already been replaced by an unreserved apology that had evidently been drafted or directed by CCC’s Communications team.

It seems the council bullied the editor into issuing the pre-prepared apology before he had reviewed the Head of Communications’ letter with me.  So much for that officer’s professional integrity.

In her letter, the Head of Communications expressed concern that the article had been retweeted by “at least two locally prominent and influential twitter accounts”.  She asserted that it had “likely had a wide reach and has already been unfairly damaging - to both the council and a named officer of the council.” 

Perhaps the section that most influenced the editor’s decision to cave in to the council’s bullying was paragraph 2:

“The article does not attempt to make legitimate public policy criticisms of the Council, but instead implies and asserts that the Council has engaged in criminal, unlawful, unethical or otherwise dishonest and unprofessional activities – most seriously alleging that it has engaged in ‘false accounting’.  Unless the article is removed and the council receives a full apology and retraction, it will be seeking legal redress from both Mr Rowson and the CambsNews publishers.”

The simple fact that a council finds an article uncomfortable or damaging to its reputation does not justify bullying a journalist to remove it.  The editor does not speak for me in his apology.  I stand by all my allegations, including those of criminal behaviour and false accounting. They are supported by comprehensive documentary evidence going back six years.  Along with my former County Councillor Mr Mike Mason, I have shared that evidence many times with council members (in particular the Audit & Accounts Committee), council officers and the council’s so-called independent external auditors.  I make this point because the editor’s apology may lead some readers to think that I regret submitting the article, or that I acknowledge the allegations were unfounded or wrong.  That is not the case, which is why I immediately reposted it on another website.  It is now located here.

On September 18^th I wrote to CCC’s Chief Executive, Dr Stephen Moir, expressing disappointment in his officers’ bullying conduct, and demanded an apology.  In a 19-page letter I rebutted every incorrect point in his Head of Communications’ complaint with yet more fully-referenced documentary evidence.  The CEO’s response below does not challenge any of that evidence, does not address the allegations of nine-figure false accounting, or the repeated denial of my public inspection rights (a denial of democracy), or the bullying by his Head of Communications, or the dirty tricks by another officer working in the Communications team that were exposed in a recent edition of Private Eye magazine.  The CEO’s only concern was to defend the officer I had named in the original article.  Dr Moir commented that he considered his officers’ conduct to be “proportionate and entirely appropriate”.  His letter contained no apology, hence this public response.

According to the Head of Communications, the most serious allegation in the article was about the false accounting of City Deal grants.  I wish to comment on this further because it is a serious allegation, and the council’s faux outrage and hypocrisy need to be publicly exposed.

As noted above, for more than five years, Mr Mason and I have repeatedly presented the evidence supporting the false accounting of City Deal grants to the relevant parties – to senior officers, the Audit & Accounts Committee, the external auditors, and all members.  Between the summer of 2021 and September last year I have had a one-to-one meeting with the Deputy Leader (Cllr Meschini), a meeting with Mr Mason and the Chair of the Audit & Accounts Committee (Cllr Wilson), a one-to one meeting with the Council Leader (Cllr Nethsingha), and a one-to-one meeting with the Chief Executive.  City Deal accounting was discussed in detail in all four meetings, and I left the Leader and the Chief Executive with dossiers containing the detailed evidence of the false accounting.   Nobody from the council has provided a single piece of counter evidence to challenge the allegations.  I have also repeatedly and publicly alleged that both auditors were complicit in the false accounting. 

In July 2022 the council and its auditor, Ernst & Young (EY) finally corrected the £160m false accounting treatment of the 2020/21 City Deal grant, but only after the facts were exposed in the press.  The £218m aggregate overstatements of debtors and usable reserves from the identical breach of the CIPFA Code in the council’s five previous annual financial statements remain uncorrected.  Mr Mason still awaits BDO’s response to his formal objection to the 2017/18 accounts on the matter, whilst EY last year declined to insist on its client publishing prior period corrections to the earlier, incorrect accounting treatment so that those items of account would comply with the corrected 2020/21 accounting policy for capital grants, as required by International Accounting Standard 8 (IAS 8).  The dishonest mumbo jumbo below is what EY wrote about prior period adjustments in its whitewash objection decision notice in March this year.  The materiality threshold for each audit is fixed each year by the independent auditor.  The final materiality threshold EY set for its audit of CCC’s 2020/21 accounts was £18.68m.

“Our calculation of planning materiality was based on gross operating expenditure as we view this as the key area for the users of accounts.

Our assessment of whether a prior year error requires adjustment is based on both quantitative and qualitative factors such as, but not limited to, the quantum and nature of financial statement line items impacted, the significance of the impacted metrics to users of the financial statements, the element of subjectivity in determining the appropriate accounting for an item of account, the motivation of management with respect to a particular accounting treatment, the selection and application of appropriate accounting policies.

Overall, as an Audit Firm, we concluded that no PYA was required on a combination of quantitative and qualitative factors.”

As long as those material prior year errors remain uncorrected, the public and other users of the accounts (including lenders, suppliers, and central government) cannot trust a single financial figure CCC publishes.

Mr Mason and I have repeatedly and publicly directed the allegation of false accounting fraud (a criminal offense) at CCC.  So why did the Head of Communications threaten the editor of CambsNews with legal action unless he removed the article and issued a grovelling apology and retraction, whilst Mr Mason and I have never received similar threats?  The answer, I believe, is that it was an empty threat because the authority knows the allegations are true.

An invitation to put up or shut up

In my letter to the Chief Executive nearly seven weeks ago, I gave Dr Moir the website address where the article is now published.  The only difference from the original is that the officer’s name has now been removed.  I have not issued an apology or retraction, and I will not do so.  There is nothing to apologise for.  So, if the council genuinely believes that publishing the allegations online is unfairly damaging to it, and given that the article has doubtless now been read by many more influential people in the last six weeks than the original was in three days, why have I still not heard from the authority or its solicitors?  Again, I believe it is because the authority knows the allegations are true.

Bullying at councils often goes hand in hand with fraud, corruption, and/or dysfunctionality, as events at Croydon Council, Northumberland and West Sussex County Councils - to name but three - have shown.  In recent years, CCC has also had a corrupt and bullying corporate culture, as the Farmgate scandal involving the former Deputy Leader Roger Hickford and former Chief Finance Officer Chris Malyon bear witness.  It appears that this bullying culture is still alive and well. 

It is neither appropriate nor proportionate for holders of public office to bully a local journalist or try to muzzle the free press.  This episode is yet another attempt by CCC to discredit and silence local electors who have raised legitimate concerns about:

·        deliberate, material breaches of the CIPFA Code of Practice that have been aided and abetted by two so-called independent auditors,

·        the authority’s failure to select appropriate accounting policies and apply them consistently,

·        the authority’s systematic denial of statutory rights of access to information designed to allow local electors and other interested parties to properly scrutinise how and where public money has been spent, and whether their local authority has kept “adequate accounting records” under s3, LAAA 2014.

If CCC is confident in its stated position, then to be consistent it should have written to me demanding my full apology and retraction and/or sought legal redress well before now.  One more week should be ample time for it to begin the process.  I look forward to receiving that communication. 

Yours sincerely,

Andrew Rowson

Is The Game Up for "This Land"?

 

The record loss in the year to Dec 2019 was in large part due to that year’s inventory impairment charge of £7.58m to bring the total inventories value (which included a loan interest component) down to the assessed net realisable value of the inventories.  If that impairment charge were removed, the £11.2m comprehensive loss in 2022/23 would have been the highest to date. 

 

In the financial statements, the administrative expense categories are not shown in full, with a total that reconciles with the headline admin expenses in the Profit & Loss account.  This is contrary to how financial statements are normally disclosed.  It means the reader of the accounts has no visibility of what type(s) of admin expenses are included in the undisclosed £8.97m since 2017.  This is a clear fraud risk factor, and it is surprising that the external auditor has not insisted that This Land follow the accounting convention of recording all sub-categories in the notes to the accounts, even if it means including a catch-all “other” category for very small amounts not shown elsewhere.  In every financial period bar 2022/23, the undisclosed admin expenses values were higher than staff costs.

 

 

The Chief Executive Officer’s total remuneration (excl. employer’s NIC contributions) has risen pro-rata by 40% in the last two financial periods (£19% per annum).

 

Where’s our money gone

An open letter to Cambridgeshire County Council’s Chief Executive Officer

Dear Dr Moir,

Democracy denied

Following our recent correspondence, I look forward to receiving the documents and accounting records I requested but was denied during the August public inspection period.  Of the many pieces of information that remain outstanding are the transactions (invoices and any other transactions) that make up the £27,846,194 worth of City Deal grant expenditure in 2022/23 (according to the authority), together with their corresponding unique payment ID references that appear in the Transparency Code spend data.  Armed with that information it should be a straightforward exercise to clear up the mystery of why the “full list” of ring-fenced City Deal cost centres (also according to the authority) only record £16.97m of net payments during the 2022/23 financial year.  The time differences between invoice and payment dates should more or less even out, which leaves a so-far unexplained discrepancy of £10.88m for the year. 

Since the end of the inspection period this reconciliation has become more topical following an article last week by the BBC and the Cambridge News about two GCP projects being paused thanks to spiralling costs and insufficient funds.  Two of the City Deal cost centres: “GCP - Cambridge South East (A1307)”, and “GCP - Travel Hubs” would appear to be connected to those two projects.

Under section 3 of the Local Audit & Accountability Act 2014, councils must keep adequate accounting records, sufficient “to show and explain the relevant authority’s transactions.”  I trust the authority will provide me with those records and the other information I requested during the statutory inspection period, so that I can pass them on to the auditor in good time for him to consider all the points in my objection to the 2022/23 draft financial statements.

Thank you for taking personal responsibility in dealing with this important matter.

Yours sincerely,

Andrew Rowson

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More Tricks More Stalling

 The following article appeared Private Eye last week:

Where has £47 Million of Government's City Deal Grant Gone?

By Andrew Rowson

September 2023

For nearly six years, Cambridgeshire County Council (CCC) deliberately overstated its debtors and usable reserves in its financial statements by an aggregate amount of £378 million.  Two formal objections to the accounts on the matter in 2018 and 2021 by former County Councillor Mike Mason and me were simply ignored by the auditors (BDO and EY).  It was only after the false accounting was exposed by Private Eye magazine in November 2021 (see Appendix 1) that CCC and EY corrected the 2020/21 “error” of £160m.  But they declined to correct the identical prior year errors totalling £218m on the grounds that they were “not material to the users of the accounts.”

During the statutory accounts inspection period last month, I sought to establish that the £40m City Deal grant for 2022/23 had been properly spent.  I asked CCC’s Head of Finance, Mr......... for a reconciliation of grant income and expenditure during the year, and a list of the cost centres used to ring fence City Deal expenditure from the rest of the council’s business.  City Deal is a Greater Cambridge Partnership programme (GCP).  At the agreed documents inspection meeting on 22^nd August at New Shire Hall,...........denied my request, and asserted, incorrectly, that he did not have to answer any questions about the accounts.  When shown the NAO’s guide to the public’s rights,............ claimed questions could only be put in writing.  Also not true.  My written questions about City Deal were ignored until 29^th August, when I received the set of balances shown in Appendix 2 below, and a list of 65 names of supposed City Deal Cost Centres.

46 of these were not cost centres at all, and it was not until 1.41pm on the final day of the statutory inspection period that Mr ........ sent me a revised “full list” of City Deal cost centres in the last of 32 attachments in one email.

When matched with the council’s published expenditure, those cost centres had only paid out £16.7m in 2022/23 – nearly £11m lower than Mr.......... £27.8m figure for the accounting year.

When the reconciliation is extended back to earlier years (see Appendix 2), it appears that nearly £47m of City Deal government grants earmarked for specific GCP infrastructure projects might have been spent on CCC’s own goods and services not connected with City Deal, possibly breaching the grant conditions that for years CCC and its auditors claimed did not exist.

When I informed Mr ........of my findings, the Head of Finance claimed that he could not answer any more questions because the inspection period was now over.  His action is unlawful because, as established in the case of Moss v RB Kingston in 2021:

“section 26 of the Local Audit & Accountability Act 2014 does not allow a relevant authority to refuse to process an inspection request on grounds of the time it will take to satisfy the request” - see paragraph 83.

Mr........ conduct in previous inspection visits has been equally obstructive and unprofessional.  Getting to the bottom of this matter is important because the public (and presumably the government) need to know whether many millions of pounds of grant money have been correctly spent in a way that complies with the City Deal grant conditions that the authority is well aware of.

About the author

I am a former auditor with Price Waterhouse and have worked in business software applications (ERP) and data mining for nearly thirty years.  In recent years I have specialised in local authority finances. 

 Appendix 1 Private Eye - Rotten Boroughs articles on City Deal

Issue 1560 – 10^th November 2021

Issue 1564 – 5^th January 2022

Issue 1575 – 15^th June 2022

Appendix 2 – City Deal grant reconciliations

This is the set of balances provided by the Head of Finance on 29^th August 2023:

 

The tables below show City Deal grant income and net expenditure matched to the set of revised City Deal cost centres provided by CCC’s Head of Finance.

The two reconciliations below show how nearly £47 million of City Deal grants received by CCC on behalf of the GCP have not been accounted for.  £10.88m is unaccounted for in 2022/23, whilst the opening balance above indicates that around £36m may have been spent in previous years on goods or services unrelated to City Deal projects.

INDEX: Council Leader Covers Up £218m of Accounting "Errors"

July 2023

This is a series of posts in numerical order, click on any link to be taken directly to that post.

Summary of contents:

1 - Executive summary. 2

2 - What is City Deal? 3

3 - How local authorities should account for capital grants 3

4 - 2015/16 – City deal is accounted for correctly. 4

5 - 2016/17 – Correct accounting in the first draft accounts 5

6 - 2016/17 – Material, late changes in the revised draft accounts 6

7 – The additional £17.8m accounting blunder 8

8 – The A&A Committee approves the accounts without knowing their contents 10

9 - November 2017 – the CFO distances himself from his own accounts. 12

10 - 2018/19 – EY fails to challenge accounting treatment 14

11 – The £160m U-turn and £218m cover-up. 16

12 - The evidence for fraudulent false accounting. 19

13 - Cambridgeshire CC’s going concern position. 20

14 - EY’s retrospective objection investigations 23

15 - Conclusion. 24

Cambridgeshire County Council’s leader, Cllr Lucy Nethsingha has declined to explain why the authority failed to correct acknowledged accounting errors totalling £218 million that materially overstated the level of usable reserves in five consecutive years’ audited financial statements, even after the council was forced to make a £160m correction for the identical error in the following year’s accounts (2020/21). 

Accounting Errors at CCC - Post 1/15 in a series - Executive Summary

1 - Executive summary

“At a time when several councils are experiencing financial difficulties following high-risk investments, high quality audit is vital to maintain public trust.”

Dame Meg Hillier, Chair of the House of Commons Public Accounts Committee.

Seventh Annual Report of the Chair of the Committee of Public Accounts 2022-23

-oo0oo-

This lengthy and detailed narrative is an account of how Cambridgeshire County Council (CCC) deliberately and materially misstated its revenue position and embellished its balance sheet and usable reserves by prematurely recognising five years’ worth of central government City Deal grants in the first year of a five-year arrangement (2015/16 – 2019/20).  

In 2020/21 CCC employed the same incorrect accounting treatment in its draft accounts, but it performed a swift U-turn in May 2022 after the accounting treatment was exposed in the national press under the headline “Cooking the books”.  

Having acknowledged the error for the 2020/21 grant, the authority declined to enter prior-period adjustments for the same error in the previous five annual grants which overstated the council’s true debtor balances and usable reserves, and hence its liquidity position by a total of £218m in the aggregate.  The reason CCC gave for not making those prior-year adjustments (in breach of International Accounting Standard 8), was that the errors were “not material to the users of the accounts.”  Ernst & Young (EY), CCC’s current external auditor has failed to challenge its client over its inconsistent accounting treatment.

Two independent auditors - BDO from 2015/16 to 2017/18 and EY from 2019/20 onwards have colluded with CCC in agreeing to the material misstatements and attempting to cover them up.  At the time of writing BDO has still not concluded its investigation into a formal objection in 2018 from a local elector over City Deal accounting.  

Both external auditors at different times have held contradictory opinions on the issue and signed off the financial statements with both the correct and the incorrect accounting treatments, stating them to be true and fair on each occasion.

CCC finance officers and the two audit firms have repeatedly lied to and intentionally misled elected members of the Audit & Accounts Committee (A&A) on this matter.   Finance officers have also lied to the two local electors who first challenged the incorrect accounting treatment in November 2017.  The electors have also been provided with false information and denied documents that finance officers repeatedly claimed did not exist, only for them to be produced at a later date.

The same two electors have been insulted and on one occasion threatened in public meetings by elected members serving on the A&A Committee – (the committee charged with governance) for speaking the truth about the incorrect City Deal accounting treatment.

The historical overstatements of debtors and reserves took place over a period in which the council’s short-term borrowing rose seventy-three-fold from £3.4m in 2015/16 to £248.9m in 2020/21, the year in which the former Chief Finance Officer admitted that the authority was engaging proactively with MHCLG (now DLUHC) to discuss its precarious financial position.

CCC’s failure over five years to correct the material historical misstatements, and the two audit firms’ collusion mean that local taxpayers and other users of CCC’s financial statements (including central government) can have no confidence in the veracity of any financial information published by the authority even after it has been audited by BDO or EY.

The sections below explain what City Deal is and set out the correct accounting treatment for capital grants.  The sections from 4 onwards chronicle how City Deal grants were accounted for at CCC, and how both external audit firms have conducted themselves since 2015/16.