£4.135m Apart: Why Folkestone & Hythe Council’s 2025/26 Accounts Won’t Add Up

Folkestone & Hythe District Council’s 2025/26 accounts are not final audited accounts. They are still draft, Grant Thornton’s audit opinion is still to come, and amendments can be made before the accounts are finally approved. That distinction matters enormously: this article is about problems visible in the published draft, not allegations that Grant Thornton has signed off defective 2025/26 accounts.

But “draft” doesn’t mean “first scribble”. These are statutory public accounts produced by a council finance operation, under its Section 151 officer, Alan Mitchell – pictured, and prepared under the CIPFA/LASAAC accounting framework. The external audit process didn’t suddenly appear after publication either: Grant Thornton had already planned its 2025/26 work with the council. So the uncomfortable question isn’t simply whether these problems can now be fixed. It’s how so many got as far as the published accounts in the first place.

Start with £4.135 million. It’s the figure that should make everyone involved stop and look again.

The Group Comprehensive Income and Expenditure Statement — essentially the accounting result for the council together with relevant subsidiaries — reports a £10.246m surplus on the provision of services. Two pages later, the Group Cash Flow Statement starts with £14.381m for “Net surplus or (deficit) on the provision of services”. The difference is £4.135m. A cash-flow statement will naturally make adjustments after its starting figure for non-cash transactions, investments and financing. That isn’t the problem. The problem is that the starting figure itself doesn’t agree with the corresponding Group accounting result.

And the arithmetic gives us a clue as to what may have happened.

The Council-only accounts show a £14.970m surplus. A £589,000 Group service-cost adjustment reduces that to £14.381m — exactly the figure appearing in the Group Cash Flow Statement. But the Group CIES contains a further £4.135m difference in financing and investment income and expenditure, which takes the final Group result down to £10.246m. That doesn’t prove the cause, but it creates a very strong arithmetic inference: the Group Cash Flow starting figure appears to have incorporated one consolidation adjustment while potentially missing another. Grant Thornton should be able to prove or disprove that from the consolidation workings.

Then things become more awkward, because we’ve seen this movie before.

The draft carries forward the 2024/25 comparative Group figures we examined previously: £12.731m in the Group CIES against £2.962m in the comparative Group Cash Flow Statement. That is the same £9.769m discrepancy contained in the final 2024/25 accounts. Yet the 2025/26 draft says there have been “no prior period adjustments identified.” If the old difference has a legitimate accounting reconciliation, it should be shown. If it doesn’t, why has it travelled into another year?

The Group investment figures produce another exact difference. The Group Balance Sheet and Group Note 3 give long-term investments of £13.503m. Group Note 9 gives £14.575m. Difference: £1.072m. What makes that number interesting is that £1.072m is also the Council-only change in fair value of equity investments in companies. Investments in subsidiaries should be eliminated when producing consolidated Group Accounts. That numerical match doesn’t prove the £1.072m has been carried through incorrectly, but it makes a detailed Group reconciliation essential.

Cash doesn’t escape either.

The Group Cash Flow Statement and Group Note 7 both finish with £8.794m of cash and cash equivalents. Group Note 9 instead contains figures which net to £8.525m — £269,000 lower. Intriguingly, £8.525m is exactly the Council-only closing cash figure. Nobody is suggesting £269,000 is missing; the issue is that the Group financial-instrument disclosure appears not to agree with the other Group statements.

Then we reach expected credit loss — accountants’ estimate of money lent out which may not ultimately be recovered. FHDC’s credit-risk note says the allowance concerning loans and loan commitments to Oportunitas Limited and Otterpool Park LLP increased from £278,000 to £2.538m during 2025/26. That is a £2.260m increase. Yet elsewhere the visible long- and short-term loss allowances add up to only £79,000. There may be a perfectly valid explanation because an allowance on an undrawn loan commitment can be treated differently from an allowance against a loan already advanced. But the accounts don’t provide that bridge. The reader is left looking at £2.538m in one place and £79,000 in another, with £2.459m requiring explanation.

Credit risk raises another question which deserves auditor attention.

The draft’s Credit Risk Overview reports £7.359m of service-loan exposure at 31 March 2026. Elsewhere, however, the accounts show £6.267m lent to Oportunitas and £28.343m to Otterpool Park LLP — £34.610m gross between those two alone. There may be a different accounting definition of “exposure” behind that £7.359m figure, perhaps involving measurement or security. If there is, readers need to be told. A table headed “Credit Risk: Overview” shouldn’t leave the public guessing why the headline figure is smaller than one of the individual loans sitting elsewhere in the accounts.

Oportunitas produces one of the strangest examples because the history matters. The 2025/26 long-term debtors note puts its loan at £6.267m, but Note 41 says FHDC has “loans outstanding of £4.7m”. The earlier forensic review correctly treated that as a £1.567m reconciliation question rather than immediately calling it an accounting error.

But we now know something more.

Grant Thornton’s previous audit work recorded that FHDC had initially reduced the Oportunitas debtor to roughly £4.701m after restructuring the loan. Management then decided not to proceed with that restructuring, and a £1.717m material adjustment was made to restore the debtor. Yet £4.7m subsequently remained in a narrative disclosure and has now appeared again in the 2025/26 draft. That doesn’t prove copy-and-paste, but it certainly raises the possibility that an obsolete pre-adjustment figure has survived into another accounting year.

Other problems are smaller in pounds but much easier to understand. Group Stock and Work in Progress totals are printed under the wrong years. A Group Balance Sheet cross-reference sends the reader to Group Note 4, yet the long-term-debtors table the note is supposed to contain isn’t there. A property disclosure says a 31 March 2026 valuation decreased compared with its value at 31 March 2026. The Group Movement in Reserves comparative refers to an opening balance at 31 March 2023 in a section dealing with 2024/25. These aren’t arguments about sophisticated valuation models. They are basic document-control problems.

There’s also an eyebrow-raising procedural statement.

The accounts say the Council must “Approve the Statement of Accounts by 30th June.”  The draft accounts still shows Audit Committee approval as “[TBC]”. Note 44 says the accounts were authorised on 30 June and describes that as the date the Director of Finance signed the Balance Sheet, while the visible certification fields are blank. These matters can be corrected, but they shouldn’t have required outside readers to spot them.

Which brings us back to Alan Mitchell.

As Section 151 officer, Mitchell holds the council’s statutory finance role. The council’s own Statement of Responsibilities says the Chief Finance Officer is responsible for preparation of the accounts under the CIPFA Code, for applying suitable accounting policies consistently, making reasonable and prudent judgements and estimates, keeping proper accounting records and taking reasonable steps concerning fraud and irregularities. That doesn’t mean Mitchell personally types every table or must detect every transposed figure himself. It does mean the accounts are produced beneath a formal chain of professional financial responsibility.

And there is an external professional chain too.

Grant Thornton’s 2025/26 external-audit work was planned in advance with FHDC management. The audit process exists precisely to challenge the accounts, test supporting evidence, examine consolidation and make corrections before an audit opinion is issued. That is why it is important not to overstate what we’ve found: Grant Thornton has not yet issued its 2025/26 audit opinion, and these draft accounts can still change. The forensic review itself makes that distinction explicitly.

That is the council’s opportunity now. It should use it.

FHDC can amend the obvious mistakes. It can publish clear bridges explaining the figures which genuinely differ for technical reasons. Grant Thornton can follow the £4.135m through the consolidation journals, reconcile the £2.538m expected-credit-loss allowance, establish why Group investments are £1.072m apart, resolve the Group cash disclosure and determine exactly what the £4.7m Oportunitas figure represents.

There is some good news in the accounts: the review found that significant parts of the Council-only statements do reconcile. The Council CIES and Cash Flow Statement both use the £14.970m surplus; the HRA figure reconciles through the Expenditure and Funding Analysis; and £17.776m of HRA capital expenditure is matched by £17.776m of financing. This isn’t a claim that everything is broken.

The concern is the pattern elsewhere.

A £4.135m Group mismatch. The old £9.769m Group mismatch carried forward. £1.072m between Group investment disclosures. £269,000 between Group cash disclosures. A £2.538m credit-loss allowance that isn’t transparently reconciled. £4.7m and £6.267m describing Oportunitas lending in different places. Reversed totals, a missing note, wrong dates and stale-looking disclosures.

These are drafts. They can still be fixed before anyone gives them a final external-audit sign-off.

But that cannot be the end of the story. Once they’re fixed, Folkestone and Hythe taxpayers are still entitled to ask how professionally prepared statutory accounts, produced beneath qualified finance and audit structures, reached the public with so much needing to be fixed in the first place.

The Shepway Vox Team

Discernibly Different Dissent