Auditors criticise council for use of emergency powers following £300k law firm loan

Auditors KPMG have criticised Bolton Metropolitan Borough Council over its use of the emergency power procedure under the authority’s constitution, with the auditors saying they were not satisfied the council had made proper arrangements to make informed decisions.

As part of preparations for issuing its external audit report for 2016/17, KPMG reviewed the arrangements to use the emergency power procedure and tested a number of the council’s decisions made under it.

This followed controversy over a £300,000 grant made under emergency powers to Asons Solicitors, which was used to refurbish the law firm’s offices in the town. The Solicitors Regulation Authority subsequently intervened in the practice.

The KPMG review specifically focused on the compliance of decisions with the Constitution and relevant good practice. As part of this work the auditors obtained legal advice on the processes used to make the decisions and the legality of the decisions made.

The external audit report, which was prepared for a meeting of Bolton’s audit committee meeting later this month (19 September) and can be viewed here, said that following the tests KPMG noted the following issues:

• There was no clear rationale documented as to why these decisions should be taken under the emergency powers procedure. “For example, why there is such urgency to the decision that means it has to go through the emergency powers procedure.”
• There was no clear audit trail around the rationale as to whether the decisions made under the emergency power procedure were ‘key decisions’ or ‘other executive decisions’. “To note the emergency powers process differs depending on the type of decision that it is.”
• There was no evidence that relevant opposition members had been informed of the decision, which formed part of the procedure under the council’s Constitution.
• There was no clear audit trail as to why standing orders had been waived in the course of the decision that had been made.

“Although we have identified several issues in relation to the process, we have gained assurance over the legality and appropriateness of the overall decisions made,” KPMG noted.

The auditors said that as a result of their findings they would be qualifying their VFM conclusion on an except for basis for this issue.

However, they also recognised that Bolton had been “proactive in making changes to the process including updating the Constitution and completing training sessions with officers and other staff to raise awareness of the process required throughout the Council”.

In the report KPMG said that in considering the Asons grant payment, they specifically noted some internal control issues related to: considering legality in terms of state aid; due diligence on grant recipients; and monitoring arrangements to ensure grant was used as intended. However, further work did not identify these issues more widely on other grant payments.

It added that in response to this Bolton had proactively rectified weaknesses in the above controls; and pursued Asons, through the provisions in the grant agreement, and recovered the full amount (£300k) that was initially paid.

KPMG concluded that given the response of the council and the fact there had been no financial loss to the public, there was no reason for the auditors to exercise any of their wider powers.

The audit firm was commissioned by Bolton’s Leader, and had also been contacted about the Asons grant payment by both officers of the council and members of the public.