Financial regulator sanctions former Thurrock chief finance officer

The Financial Reporting Council has sanctioned Thurrock Council's former chief finance officer (CFO) as part of a settlement that was agreed after he admitted misconduct in relation to his time at the financially beleaguered council.

Under the sanctions, former CFO Simon Clark has been barred from membership in the Association of Chartered Certified Accountants (ACCA) for a recommended period of 5 years, meaning he will no longer be eligible to serve as CFO of a local authority.

The FRC's decision marks the first time that the regulator has imposed sanctions on a local authority CFO or anyone else working in local government finance.

The regulator's investigation centred around a financial strategy adopted in October 2017, which set out an approach for borrowing on a short-term basis, primarily from other local authorities, and using the funds to make longer-term commercial investments.

The council's short-term borrowing and investments eventually exceeded £1 billion, more than six times the council's annual budget, under this strategy, labelled a "debt for yield approach".

A number of the investments ran into difficulties in 2020, and the council reported the investment portfolio lost more than a quarter of its value.

In September 2022, the Secretary of State appointed Commissioners to run the council because of concerns around the "debt for yield" approach and associated governance issues.

Thurrock later issued a section 114 notice in December 2022 in the face of a £470m funding gap.

It said the "grave situation" was partly the result of a solar farm business - which the council had invested in and which owed the Thurrock £650m - going into administration.

Thurrock later received £343 million worth of extraordinary financial support from the Government and has since had to increase its council taxes to handle the debt.

As set out in the Particulars of Fact and Acts of Misconduct, published by the FRC, Clark admitted that his conduct between 2018 and 2022 fell significantly short of the standards reasonably to be expected of a member of the ACCA in relation to the implementation of the "debt for yield" approach, in that he:

• Failed to comply with restrictions on the exercise of delegated authority;
• Failed to comply with the relevant statutory framework;
• Failed to ensure that the council had access to the necessary skills and experience;
• Failed adequately to manage and report on the risks arising; and
• Recklessly provided misleading information to Council members, and therefore to the public.

The sanctions reflect the seriousness of the misconduct and its consequences, but also Clark's personal circumstances and the fact that he has co-operated with the investigation, the FRC said.

Claudia Mortimore, Deputy Executive Counsel, said: "The role of a local authority Chief Financial Officer is integral in ensuring prudent management of public funds.

"Mr Clark held a fiduciary responsibility towards local taxpayers and it was incumbent on him to make sure that the risks arising from Thurrock Council's financial strategy were identified, managed and reported to the council's leadership and members.

"He fell significantly short of the required standards in a number of respects leading to his exclusion from the profession and the imposition of a Severe Reprimand."

Adam Carey