What's a few £million?

The next meeting of the Audit Committee will be 'signing off' the council's accounts, drafts of which were prepared earlier this year. An entry for Cwm Environmental Ltd caught my eye. This is a subsidiary waste management company of Carmarthenshire Council running as a private concern and registered as such at Company House. Anyway, under the inoccuous heading 'Summary of corrections made to the draft financial statement' (by the Wales Audit office) was this;

"Value [of correction]; £4,639,000
The net assets of Cwm Environmental Ltd disclosed in the draft financial statements were amended from £351,000 to £4,990,000"

(link to report)

Now I am not an accountant but even to me this seems an alarming 'correction'. To explain the significance of the £4.6m difference I did the sensible thing and asked an accountant. A quick glance at the last set of accounts of Cwm Environmental (December 2010) clearly shows the net assets as £4,990,000 and this is the figure that Carmarthenshire's accountants should have used - we can only wonder where the figure of £351,000 came from - perhaps they haven't looked at the accounts of their subsidiary for several years? Who knows.

The other point is, does it matter? Well for a 'correction' of this magnitude to be necessary one wonders how many other 'errors' go unnoticed. And is it material to the Council's income? According to the audit office this amount is under the figure they deem material, ie which could mislead the reader or have an adverse effect; their limits are £5.7m for income/expenditure items and working capital balances and £14.5m for other balances (other issues such as legal requirements or political sensitivity are also considered)

So that's that then, even if, at nearly £5m, it's nearly 8% of the projected council tax reciepts for the forthcoming year. It seems material to me. But what's a few million?

My friend would like to know, and so would I, how on earth such an easily verifiable material error has been overlooked by both Carmarthenshire Council's own finance staff and the Auditors until now??

And another excellent post from Y Cneifiwr; Culling the White Elephants - An Armchair Auditor Writes which includes yesterday's press release from Mr Pickles and the Council code for transparency..in England;  http://www.communities.gov.uk/publications/localgovernment/transparencycode