External auditor threatens to quit over “unacceptable working environment” at city council

Birmingham City Council's external auditors Grant Thornton have complained of an "unacceptable working environment" at the local authority and have warned they will leave the council "with immediate effect" if it persists.

In a progress report published last month (15 January), the auditors said: "In recent weeks we have become concerned regarding some of the discussions between ourselves and council officers and members".

It added: "In certain instances, we consider that this has created an unacceptable working environment."

The firm stressed that this did not extend to the finance team “where a professional relationship remains”.

Grant Thornton also said it is actively considering whether two threats from an external organisation to raise a complaint with regard to the auditor's work "constitutes an intimidation threat" under the Financial Reporting Council Ethical Standards. It is also considering whether this impacts its objectivity and ability to audit the council.

Councillors discussed the report at an Audit Committee meeting last week (31 January) with Mark Stocks, Head of Public Healthcare at Grant Thornton, in attendance.

Stocks told the committee that the auditor had recommended a "significant increase" in the level of meetings and that the council runs a regular private audit committee to tackle the concerns.

He later added: "Absolutely, people wish to complain about us, then that's their right. It's the context in which they complain and the moment in which they complain in terms of when we're undertaking reviews that could then be seen to undermine the work that we're doing or to try and put us off taking that work. So that's the context that we're concerned about."

Stocks said he was now "content in terms of the procedures" that had been put in place with help from the council's Chief Executive.

But he warned: "The behaviours towards us as auditors and having a constructive relationship with both members and officers has to be there, otherwise I will resign this audit.

"We need to be clear. If that doesn't happen, then we will stop being auditors. Not in a month's time. With immediate effect."

Responding to Stocks, Cllr Paul Tilsey CBE said: "I've known Mark Stocks for a number of years, and I've chaired audit committee meetings with him in the NHS.

"I've chaired other audit committees, and I've never read what I've read on page 16 of his report and the ultimatum he's just given. I've never heard it from an external auditor. I'm totally shocked."

The committee's chair called for a future update on the issue either in a private briefing or a letter from the chief executive.

According to the progress report, Grant Thornton raised concerns with Birmingham's chief executive, and has made similar observations with regard to the working environment for the S151 officer and the finance team.

Following discussions with the chief executive, additional safeguards have been agreed "to ensure an appropriate working environment is maintained", the report said.

"On this basis, we have confirmed that we will continue as the Council's auditor", Grant Thornton added.

Adam Carey