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Valuation errors delay doomed council's audit

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Northampton BC’s auditors have voiced alarm over errors in valuing council property and in contract management, which led them to question its accounts.

An external audit progress report from KPMG to an audit committee meeting last week recalled that it had been unable last September to give assurance that the council’s financial statements presented a true and fair view and had since sought clarification.

KPMG’s report said Northampton had engaged three external valuers for its housing stock, the latest of which had taken the figure from the wrong region for the social housing adjustment factor – a way of calculating the value of occupied homes.

A revised report corrected this, but was supplied to KPMG with pages missing last September.

“We noted pages missing from the draft report and requested a final version,” it said. “We did not receive the final report until 28 March 2018”.

It said the error in using the wrong social housing adjustment factor would likely lead to a “significant audit adjustment”.

KPMG also sought a reconciliation between the draft valuer’s report and the fixed asset register, but none was provided until 12 April “despite multiple requests…that this is crucial to progressing with the audit”.

A separate internal audit report for 2017-18 by PwC found: “There are significant weaknesses or non-compliance in the framework of governance, risk management and control which put the achievement of organisational objectives at risk.”

It said Northampton had “moved some way forward” in implementing a governance action plan but this was “not fully embedded across the organisation”.

PwC rated contract management as a ‘high risk’ service, noting: “There was no contract in place for all but one of the 12 suppliers with whom the council had expenditure of over £75,000 in the period under review.”

Financial statements for 2016-17 had yet to be finally approved, giving “a serious delay, and a strong indication that the accounting controls in the council, particularly over accounting for fixed assets, have not operated as intended”.

Northampton has been approached for comment. The council faces likely abolition as part of an expected unitary reorganisation following unrelated financial problems at Northamptonshire CC.

 

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  • Meanwhile...KPMG's audit work unacceptable, says watchdog - http://www.bbc.co.uk/news/business-44526486

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