Northampton BC failed to ensure it took proper decisions when it agreed millions of pounds worth of loans, including one to a football club on which it lost £10.25m, auditors have claimed.
Last December Northampton called in both auditors and the police over alleged irregularities surrounding the loan to Northampton Town Football Club’s previous owners, which allowed the club to use the council’s ability to borrow cheaply to extend its ground and build a hotel, conference centre and housing on adjacent land.
A report by KPMG also raised wider concerns about the scrutiny of borrowing by the council. It said based on its assessment so far, the £10.25m loss meant auditors could not be satisfied that ”external or internal scrutiny provides sufficient assurance that the authority’s current arrangements in relation to loans is adequate”.
The auditor said: “We are unable to state that Northampton Borough Council had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people.”
Northampton advanced the loan on the basis it would be repaid through development of land adjacent to the stadium and revenue from the club and hotel.
But the club passed the money to a specially created development company that subsequently entered administration.
Council leader Mary Markham (Con) said: “I accept the comments in KPMG’s report and welcome the feedback on our processes. The reason I asked for two audit reviews and involved Northamptonshire Police in our investigations is to ensure that we learn the lessons from the failure of the loan to the football club, and to ensure it does not happen again.”
She added: “We will take on board all of the comments and make the improvements necessary.”
KPMG said work on four other loans made by the council to other bodies indicated “there is an insufficiently systematic, robust, and objective due diligence process, and a framework within which decisions can be made or documented”.