Feb 2010 02

‘Significant weakness’ in the accuracy of Birmingham’s accounts3

The end of last week gave us a pretty worrying insight into Birmingham City Council’s bookkeeping as the district auditor refused to sign-off the local authority’s 2009/10 accounts citing 'significant weaknesses' in their accuracy.

According to the Birmingham Post, this refusal will cost taxpayers an additional £60k in extra auditing taking the total to £762,875.

Birmingham City Council Paul Dransfield, the Director of Resources at the council, has noted that there is a ‘big learning curve’ for the accounts department, but it seems that this is rather an understatement given the discrepancies listed:

• Buildings and land owned by the council were said to be worth £6.6 billion. The true figure is £5.5 billion.

• The cost of council services was set at £1.23 billion in the accounts. The true figure is £1.66 billion.

• Invoices from suppliers of goods were overpaid by £281,000, with some companies benefitting from being double-counted on an electronic payments system.

So, dramatic overestimating, underestimating and pretty lamentable oversights won’t do much to boost public perceptions or lead us to place much faith in BCC. Would any business that was run on the basis of such erroneous assumptions have survived the recession?

Revelations like this just prompt further questions about how this local authority is being steered. Some may argue that the day-to-day running of the place and provision of services has lately taken a backseat to international aspirations and legacy leaving by prominent local politicians.

There’s nothing wrong with Birmingham vying to be a global player, but like everything else, it’s still vital the basic housekeeping is ship-shape, because though you may be able to dress your rusty engine in the chassis of a sports car, ultimately you’ll still break down.

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  • Hardeep Singh

    As you can tell with the rather muted response from the general media these kind of stories are rarely highlighted. This is one of the reasons why these so called local soviets can get away with it, there’s almost no scrutiny and little in the way of punishment. I guess a sense of shame is also out of the question but when central government does Enron accounts what do you expect of their respective councils?

  • Steve Robson

    Perhaps Fiona and Hardeep should offer to produce a set of Accounts for Brum. I’m sure both know how to produce SORP compliant accounts and to meet all the IFRS requirements. Easy, isn’t it – much easier than blogging and journalism!

  • John Smith

    Steve Robson – producing compliant accounts is what the Council’s finance team should do as a matter of course.
    Your comment implies that it is somehow a difficult task and we should all be grateful that they try.
    I’m sure Fiona and Hardeep would struggle to produce such accounts, as would I. That’s an irrelevant point. I would also struggle to perform a heart bypass operation, but it isn’t an unreasonable thing to ask of a heart surgeon.