Council misled auditor, but will they snitch on them to the appropriate regulator?

On the 22nd March 2021, the external auditor of Folkestone & Hythe District Council’s accounts – Grant Thornton – sent a letter to the Chair of the Council’s Audit & Governance Committee, Cllr Philip Martin. They were asked to respond by March 29th 2021.

The letter asked:

• To comply with International Auditing Standards, we need to establish an understanding of the management processes in place to prevent and detect fraud and to ensure compliance with law and regulation.

On page 2 is Appendix 1: which sets out the Responses from the Committee. On page 3 are the external auditor’s questions and the committee’s responses regarding Law & Regulation.

ISA (UK) 250 (Part A & B) requires the external auditor Grant Thornton to consider the impact of laws and regulations in an audit of the financial statements. The auditor asked the Council the following questions:

Auditor – What arrangements does the Authority have in place to prevent and detect noncompliance with laws and regulations?

Council’s response – All legal officers follow high standards and are trained to identify and deal any issues that may arise. All legal officers regularly attend training courses to ensure that they are up to date with changes in the law.

Auditor – How does management gain assurance that all relevant laws and regulations have been complied with?

Council’s response – During the year various update reports are presented to the Corporate Leadership Team which provide management with confirmation that the laws and regulations have been complied with. Legal provide comments for management and cabinet papers.

Auditor – How is the Committee provided with assurance that all relevant laws and regulations have been complied with?

Council’s response – During the year various update reports are presented to the Audit and Governance Committee and other committees as deemed necessary which provide the relevant committee with confirmation that the laws and regulations have been complied with.

Auditor – Have there been any instances of noncompliance or suspected non-compliance with law and regulation since 1 April 2020?

Council’s response – No.

These responses are misleading and give the impression the Council has complied with its statutory obligations to following the law and regulation.

On March the 13th 2021, nine days before the auditor wrote to the Council, we made it clear the Council where in breach of their statutory obligations and breaching environmental law, as the council had failed to implement and collect monies for environmental permits as per the Environmental Permitting (England and Wales) Regulations 2016 , which came into effect on the 1st Jan 2017.

These Environmental permits are a key component of UK and local business regulation. They are designed to control and regulate activities which have the potential to cause pollution of the environment or harm to human health.

Just five days ago we made it clear the Council were not collecting money for these permits, nor had they kept a public register as per schedule 27 of the Regs. Nor had this Public Register as per s2(f)(i) and (ii) of Schedule 27 been followed.

For clarification s2(f)(i) and (ii) state:

(2) A public register must also contain—

details of—

(i) all fees and charges paid to a regulator within the meaning of regulation 66 pursuant to a scheme under that regulation, and

(ii) the total expenditure of that regulator in exercising its functions under these Regulations.

This and more has the Council failed to comply with regarding the 2016 Regs.

So with the evidence available it would appear the Council in its response to the external auditor Grant Thornton mislead them as the evidence is unequivocal.

According to ISA (UK) 250 Part A makes it clear “Non-compliance with laws and regulations may result in fines, litigation or other consequences for the entity that may have a material effect on the financial statements.”

Part A goes onto say “the auditor is not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations and; the auditor is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether due to fraud or error”

According to ISA (UK) 250 Part B makes it clear  “the circumstances in which the auditor of an entity subject to statutory regulation (a “regulated entity”) is required to report direct to a regulator information which comes to the auditor’s attention in the course of the work undertaken in the auditor’s capacity as auditor of the regulated entity. This may include work undertaken to express an opinion on the entity’s financial statements, other financial information or on other matters specified by legislation or by a regulator.”

As such the Auditor must inform the regulator who controls environmental permitting. Let’s hope they do this and inform the Audit & Governance Committee when they convene on Thursday 27th May at 7pm to discuss Item 4 of the agenda . This states:

Grant Thornton are seeking confirmation from the Committee about how it gains assurance from management and from the S151 Officer (Charlotte Spendley – pictured) on the management processes in place. Their request includes a series of questions on fraud, laws and regulations. The proposed responses are enclosed.

Four years the Council have failed to comply with these regulations. It is high time they comply with them and we hope the external auditor Grant Thornton will follow its statutory duty to snitch on the council to the appropriate regulator.

The Shepway Vox Team

Dissent is NOT a Crime