SDC are being both patronising and disingenuous regarding our public face access to the accounts which are open to inspection until Friday 12th August. They have refused access to the Purchase Orders, this we believe is utter financial nonsense as do the many accountants we have spoken to as well.
By refusing our Public Face access to the Purchase Orders it raises legitimate and plausible supicion of wrongdoing regarding unauthorised or fraudulent expenditure by SDC.
What is a a Purchase Order (PO)
A PO is basically authorisation to buy something, and when that something is bought, the invoice is matched to it. If there is an invoice without a PO it could be an indication of unauthorised or fraudulent expenditure. And as SDC will not allow our public face to see any PO’s this then raises the plausible suspicion of wrongdoing by SDC, as they will not allow him to match PO’s to invoices.
What does the Local Audit & Accountability Act 2014, which governs inspection rights of SDC’s accounts say:
S26(1)(a) of the Act says: any persons interested may—
inspect the accounting records for the financial year to which the audit relates and all books, deeds, contracts, bills, vouchers, receipts and other documents relating to those records,
An invoice doesn’t need to have been paid for the purchase to show up in the general ledger. All Enterprise Resource Planning systems have slight differences in the way they record an audit trail, but generally speaking, if SDC operates three way matching, when the goods or services are received, the double entry bookkeeping transition is:
Dr inventory/purchases £1,000
Cr Goods received not invoiced (GRNI) £1,000
(the GRNI account is a liability and included in overall creditors)
Then when the invoice is received:
Dr GRNI £1,000
Cr Trade creditors £1,000
Finally, when the invoice is paid:
Dr Trade creditors £1,000
Cr Cash £1,000
At any of the above three stages, there are transactions in the general ledger which therefore form part of SDC’s annual accounts. But even if a purchase order has been recorded in the year but the goods/services haven’t yet been received or recorded by the year end,
We argue that those purchase orders are still included within the list under S26(1)(a) of the Local Audit & Accountibility Act 2014, because the purchase order is an accounting record even if it isn’t visible in the general accounts until the goods/services are received (3 way match) or until the supplier’s invoice is recorded (2 way match). Purchase orders form part of the inspection scope because for example, if purchase orders recorded in a particular year are at odds with budgets, that would be a valid concern for the statutory auditor(Grant Thornton), and thus also for any concerned member of the public, such as our public face.
By SDC denying our public face his inspection rights to see the PO’s, raises plausible suspicions of wrongdoing by SDC. The only way this can be negated is for SDC to release the PO’s. But so far they have not and will not comply with his requests to inspect the PO’s.
Purchase orders are not “cancelled” when the invoice is received. If the invoice amount agrees with the PO by value and number of items, the open amount in the PO is reduced to zero, but the PO record remains in the electronic PO table as part of the audit trail and evidence that the system of controls is working properly.
There are any number of scenarios where auditors (ours is Grant Thornton) would look closely at POs to satisfy themselves that the controls are working. Three simple examples suffice to illustrate this:
1) An invoice is received and paid for a service that should be subject to PO control but where there is no PO.
2) The PO is recorded with a date stamp after the date of the invoice it is matched against.
3) A PO is created with a value of £1,000 and the corresponding invoice with the same PO reference is for £1,500. The invoice is paid because a line is retrospectively added to the PO which adds £500 to its value and thus allows the invoice to be successfully matched to the PO. This gives the superficial appearance of the control working, but in reality it has been fudged.
There is no excuse for denying our public face or the public access to purchase orders during the accounts inspection period because it is a flagrant breach of S26 of the LAAA 2014.
Indeed, attempts by council officers to make inaccurate and misleading statements to justify denying our public face his statutory rights to view the PO’s, only increase suspicions that the purchase order controls at SDC are not working satisfactorily and that something is wrong. The inspection period is designed to provide transparency and give the public confidence that SDC and its officers are spending taxpayers money wisely.
However, all SDC have done, is enable our public face and no doubt others to hold the view that there are plausible suspicions of wrongdoing regarding unauthorised or fraudulent expenditure by SDC as they continue to refuse him his rights to inspect the Purchase Orders.
We call upon SDC to reconsider their position and would ask the Auditor – Grant Thornton to approach the accounts with the Professional Scepticism asthey must by law, because if we Shepwayvox can see failings by SDC regarding their PO’s they should also be apparent to the Auditor.
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So what is SDC’s excuse for this apparently obstructive behaviour?