KPMG LLP, the appointed auditors of Corby Borough Council, have issued a public interest report which highlights flaws in the Council’s arrangements for managing significant capital regeneration projects. These are the Cube civic offices, Kingswood estate developments, improvements to the Rockingham Triangle sports complex and the sale of land in the St James area of the town.
The three construction projects involved over £67 million over the last 6 years and whilst all of them involved other organisations the Council has played the major role in managing the projects and bearing related risks. The Council sold the land at St James in 2010 for £3.8 million. During this period the Council has had limited usable revenue reserves over its designated minimum balance of £0.8 million and its external borrowing increased from nil to a high point of £47 million in 2011/12.
The report acknowledges the very real benefits that the regeneration projects have brought to the residents of Corby and the surrounding areas, that external borrowing has since reduced to £36 million and that the Council is starting to take action on the reported weaknesses. However, KPMG found that:
This was compounded because the checks and balances, including the statutory responsibilities of key officers, which should have alerted the Council to the failings, did not operate
The auditors conclude that these have meant that the Council:
The report makes 18 recommendations for the Council to consider covering governance, statutory obligations, Council policy and procedure, financial and project management, use of professional advice and actions of senior officers.
KPMG’s audit director Neil Bellamy said: ‘There is no doubting the very real benefits to Corby residents from the regeneration projects considered in this report. However, these were at the expense of good corporate and financial governance. We found that decision making arrangements were unclear, and that there were significant failings in the design and operation of the Council’s governance arrangements. Together these led to the Council making decisions when it was not fully aware of the financial impact they would have, exposing it to unnecessary and significant financial risk, and which led to a likely breach of its statutory obligations. In our view these placed it in a weaker position from which to address the current financial challenges it faces.
“On top of this it is disappointing that the ‘failsafe’ statutory responsibilities of key senior officers did not operate as they should have done, which would have brought these failings to light sooner.
“It is imperative that the Council learns from the above and that officers and members work together to strengthen governance arrangements and establish and embed a culture and environment where the arrangements operate as they were intended.”
The report will be considered at a meeting of the Council in early July, to be held in public, when the Council will provide a response to the points raised. The Council will confirm the date shortly.
Copies of the report are available from Corby Borough Council or from the Audit Commission website at www.audit-commission.gov.uk/corbypir
Notes to editors:
The duties and powers of auditors appointed by the Audit Commission are set out in the Audit Commission Act 1998 and the Local Government Act 1999 and the Commission's statutory Code of Audit Practice.
Appointed auditors act quite separately from the Commission and are required to exercise their professional judgement independently of both the Commission and the audited body.
Under Section 8 of the Audit Commission Act 1998, the appointed auditors are required to consider whether to issue a report in the public interest, on any significant matter coming to their notice in the course of an audit, to bring it to the notice of the audited body and the public.
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KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
For further information please contact:
Mark Hamilton, Corporate Communications, KPMG
Tel: 020 7694 2687
Emma Murray, Corporate Communications, KPMG
Tel: 020 7694 6506
Nick Rigg, Audit Commission Press Office
Tel: 0303 444 8284