Mild rebuke for council's Lowood oversight

by EWAN LAMB

Scotland's public spending watchdog has 'ruled' that Scottish Borders Council should have mentioned the small matter of a controversial "£10.2 million" property deal in the authority's 2018/19 annual accounts.

But Audit Scotland, which acts as the external auditor for SBC, has concluded that despite several complaints linked to the purchase of Lowood Estate for housing developments the accounts were not "materially misstated".

The £10.2 million purchase price for the 94-acres of Lowood together with nine properties is quoted in Audit Scotland's 2018/19 annual audit report which will be presented to the council's Audit & Scrutiny Committee next week. That figure differs from the £9.6 million mentioned in council press releases.

As we have previously reported, when fees, charges, the cost of consultants' reports, taxation and interest charges are taken into consideration the deal will set taxpayers back £11 million with infrastructure costs still to come. 

There was widespread surprise when the estate's purchase from two companies based in the Cayman Islands failed to feature in the unaudited accounts' management commentary even though a number of relatively insignificant events and achievements were awarded 'Highlights' status.

According to the Audit Report from Audit Scotland: "During the year the council purchased Lowood estate for £10.2 million as part of its Tweedbank masterplan. This was not referred to in the unaudited accounts. 

"The management commentary in the accounts is intended to provide information on the council’s business during the year, including information about amounts in the financial statements, and should have included reference to the purchase. Management agreed to include comments regarding the purchase of the estate within the management commentary in the audited accounts."

 And later in the document the watchdog has this to say: "There were four objections to the accounts. These related to the council’s purchase of Lowood estate during the year and its measurement and disclosure in the accounts.

"As part of our audit work we confirmed that the estate had been correctly accounted for as an addition in the year and concluded that the accounts were not materially misstated. At the year end the asset is valued in accordance with the accounting policies of the council, which is in compliance with the Code of Practice on Local Authority Accounting in the UK 2018/19.

"As no further contractual commitments have been taken out in connection with the development of this site, there is no requirement to disclose future capital plans in connection with this site. Issues with disclosure of the purchase were corrected for the audited accounts."

The revised set of accounts now features in the Highlights section the following entry: "Lowood estate During 2018/19 the Council took the strategic decision to purchase the Lowood estate for development purposes. The 44-hectare site will provide up to 350 jobs and an estimated Gross Added Value (GVA) of £150million over 30 years.". There is no mention of either purchase price.

A list of key messages from the external auditors includes the following:

"Scottish Borders Council and its group financial statements give a true and fair view and were properly prepared. 

"The audited part of the remuneration report, management commentary and annual governance statement are all consistent with the financial statements and prepared in accordance with relevant regulations and guidance.

"The statement of accounts of the six section 106 charities administered by the council are free from material misstatement.

"The Council has a good track record of delivering services within its budget. Financial management is appropriate and effective with a budget process focussed on the council's priorities.

"We concluded that adequate internal controls were in place for the key financial systems we reviewed.

"The council and its group financial position is sustainable in the foreseeable future although rising demand, increasing costs of services and reductions to central funding will continue to place a strain on the council’s capacity to deliver services at current levels. 

"The council has a good track record of delivering savings in recent years. The size of the future funding gap and a reliance on non-recurring savings means it may struggle to make the required savings in future years.

"There are appropriate governance arrangements in place that support the scrutiny of decisions made by the council. 

"The council demonstrates a commitment to transparency in the way it conducts its business, although it considers business in private where there is a need to consider commercially sensitive information."