29.04.19
Auditors find ‘significant weaknesses’ in record-breaking investment deal and slam Surrey council’s £1bn ‘property roulette’
Auditors have slammed a district council in Surrey which undertook the most expensive property investment ever made by a local authority after it found “significant weaknesses” in its financial processes.
KPMG delivered a damning assessment of Spelthorne Borough Council’s purchase of a BP research centre in Sunbury for £385m in September 2016, one of a number of costly property investments in the authority’s £1bn portfolio.
The auditors found that the acquisition of the site was decided by council officers without any public scrutiny, and the decision-making process was conducted via email and was “generally poor and difficult to follow.”
This meant it was “difficult to identify whether all the risks associated with such a large and significant transaction had been fully considered and mitigated,” the auditor said.
KPMG said it found little evidence the council had properly considered legal advice which said the purchase, the largest of its kind by a local authority in England, may be “disproportionate” to the rest of its spending.
Most worryingly, the auditor failed to determine whether the council had considered the financial impact if BP had decided not to renew or change the terms of its 20-year lease of the site.
The council then took four months to publish its decision, leading the auditor to conclude that “we are not satisfied that, in all respects, Spelthorne Borough Council put in place proper arrangements.”
Spelthorne has been the biggest investor in property in local government and since 2016 has borrowed £1bn from the Public Works Loan for the takeover of BP’s business park – as well as the purchases of offices in Reading, Slough and Uxbridge for £285m and a number of other investments.
The authority told the Bureau of Investigative Journalism that the “adverse value for money conclusion does not mean that the auditors are saying the actual transaction does not represent value for money but that in their opinion some aspects of decision-making processes were not conducive to maximising value for money.”
Surrey County Council’s Robert Evans said he was surprised Spelthorne had not done due diligence around the deal, and said the authority seemed to be “playing property roulette with council taxpayer’s money.”
“If the climate is good that might be okay but with Brexit around the corner everything is uncertain and this is foolhardy at best and downright dangerous at worst.”