The £9.769m That Doesn’t Add Up in Folkestone & Hythe Council’s Audited Accounts

There’s a figure in Folkestone & Hythe District Council’s 2024/25 audited accounts that should stop any reader cold. The Group Comprehensive Income and Expenditure Statement says the council group recorded a £12.731 million surplus on the provision of services. Two pages later, the Group Cash Flow Statement starts with a £2.962 million deficit for what it calls the group’s “net surplus or (deficit) on the provision of services”. Those two numbers are £9.769 million apart.

That isn’t loose change. And, on the face of the published accounts, there’s no clear explanation showing an ordinary reader how £12.731m becomes minus £2.962m.

Council accounts aren’t company accounts, and that matters. The Comprehensive Income and Expenditure Statement — CIES for short — records income and expenditure using local-government accounting rules. The Cash Flow Statement deals with movements in actual cash, making adjustments for things such as debtors, creditors, depreciation and other non-cash items. But these aren’t hundreds of unrelated numbers thrown into separate tables. Research for Action’s plain-English guide says figures in the main statements should correspond with one another where appropriate and advises readers to compare anything unusual with previous years. Where large movements occur, it says the council should explain them in the notes. Its advice is refreshingly straightforward: “If the council accounts don’t provide a clear explanation, it might be worth asking questions.”

That’s exactly what we’ve done.

The size of the £9.769m difference becomes even harder to ignore when set against Grant Thornton’s own audit thresholds. For 2024/25 it set Group materiality at £2.650m — broadly speaking, the level at which an error could matter to somebody relying on the accounts. Its threshold for something considered “clearly trivial” was £133,000. The £9.769m difference is about 3.7 times Group materiality and almost 74 times the triviality threshold. That calculation doesn’t establish that £9.769m itself is a misstatement; what it establishes is that the difference is far too large to dismiss without a clear reconciliation.

And this isn’t the first year a substantial problem has surfaced.

FHDC’s final 2023/24 accounts valued its net shares in unlisted companies at £753,000. A year later the council admitted: “A material error was identified in the 2023/24 accounts after their publication and approval.” It concerned Oportunitas Limited. According to FHDC, a “formulaic error” involving the discount rate used by its professional advisers meant the investment had been understated by £3.567m. Its correct value was £4.320m. Grant Thornton’s subsequent Audit Findings Report states that the misstatement was material and constituted a prior-period error.

That £3.567m mistake didn’t sit harmlessly in some forgotten footnote. FHDC’s own correction table shows it affected the Movement in Reserves Statement, the CIES, Balance Sheet, Cash Flow Statement and other disclosures. A material valuation error had therefore survived the accounts-production process, internal review, committee approval and external audit before being discovered during the following accounting cycle.

So who was supposed to catch it?

The first responsibility sits firmly with the council. Grant Thornton’s 2023/24 report says the Interim Director of Governance and Finance – Lydia Morrison – was responsible for preparing the accounts under the CIPFA/LASAAC Code, satisfying herself that they gave a true and fair view and maintaining whatever internal controls were necessary to keep the statements free from material misstatement. For 2024/25 the same statutory responsibility rested with the Director of Finance as section 151 officer. That isn’t a decorative title: section 151 is the statutory finance function responsible for the proper administration of a council’s financial affairs.

But external audit exists because a council doesn’t simply get to mark its own homework.

Grant Thornton describes its job as forming and expressing an independent opinion on financial statements prepared by management. The auditing rules require something particularly important here: scepticism. An auditor “shall plan and perform an audit with professional skepticism”, while also requiring sufficient appropriate evidence on which to base the opinion. Grant Thornton itself told FHDC: “As a firm, we are absolutely committed to audit quality and financial reporting in local government.”

Taxpayers paid serious money for that assurance. The 2023/24 accounts disclose £168,000 for that year’s external audit, £140,000 relating to previous audits and £81,000 for certification work — £390,000 altogether. Curiously, the following year’s accounts present the 2023/24 comparative total as £421,000, while Grant Thornton’s later Audit Plan gives the final 2023/24 audit fee as £200,258. For 2024/25, FHDC’s accounts disclose £236,000 in external-auditor costs. Grant Thornton’s Audit Findings Report records a final audit fee of £192,030 excluding VAT, plus £45,060 of non-audit fees. These are disclosed fees and agreed costs rather than proof of exactly when each pound was physically paid, but we’re still talking about substantial sums of public money.

And Grant Thornton knew Oportunitas deserved close attention.

Its 2024/25 Audit Findings Report identifies the valuation of Level 3 financial assets — including FHDC’s equity investment in Oportunitas — as one of the most significant assessed risks of material misstatement. Grant Thornton says it examined the valuation process, considered the competence and objectivity of management’s expert, challenged the disclosure and considered whether its own valuer was necessary. Its reported conclusion was that the work was complete and no issues had been identified in that area. That sits against the uncomfortable background that the previous year’s Oportunitas valuation had already turned out to be wrong by a material £3.567m.

Then there are the 2024/25 numbers that still need explaining. Group Note 7 gives cash and cash equivalents of £5.726m, matching the closing figure in the Group Cash Flow Statement. But the Group financial-instruments disclosure gives £5.492m — £234,000 less. Group Note 3 gives £13.383m in bond, equity and property funds, while another Group financial-instruments table reports £13.192m at fair value — another £191,000 difference. We aren’t suggesting £425,000 has vanished. We’re saying related audited disclosures appear not to reconcile, and the published accounts don’t make the reasons intelligible.

The expected-credit-loss note is stranger still. It says the “total expected credit loss allowance was calculated to be £79k”. Immediately below that, its own reconciliation starts at £199,000, adds a £79,000 “Change in risk” and finishes at £278,000. To the lay reader, £79,000 looks like the movement, not the closing total. There may be a technical explanation. If there is, the note doesn’t explain it clearly.

Then comes Note 45 — the note written specifically to correct the previous year’s material error.

It labels £20.323m as the “Original published balance” for 2023/24 Total Comprehensive Income and Expenditure and £23.890m as the restated balance. Yet the actual final 2023/24 accounts show £23.890m, while the 2024/25 restated comparative shows £20.323m. The two descriptions therefore appear to be back to front. This isn’t some arcane row over accounting philosophy. One published document says one thing; another says the opposite.

That sits awkwardly beside the council’s own management representation to Grant Thornton. The letter says “The financial statements are free of material misstatements, including omissions.” It then says the prior-period adjustments are “accurate and complete”. If the correction table itself has reversed the original and restated figures, those assurances deserve another look.

Then, on 29 January 2026, all this came before FHDC’s Audit and Governance Committee.

The council’s Constitution says that committee must “Review and approve the financial statements, external auditor’s opinion and reports to members” and monitor what management does about external-audit issues. Present among the committee members were Cllrs David Godfrey, chair Liz McShane, Belinda Walker and John Wing; independent member Andy Vanburen was also there, while Cllr Tim Prater – Cabinet Member for Finance attended as an observer. Wing declared at the meeting that he was a director of Oportunitas. Senior finance officers were present along with Grant Thornton partner Paul Dossett. 

These weren’t people wandering into the room without financial expertise. Jonathan Smith is identified by FHDC as Chief Officer, Financial Services and Deputy section 151 officer; his public professional profile lists an ACA qualification from ICAEW. Dossett is described by CIPFA as a CIPFA-qualified accountant with more than 30 years’ experience of local-government and NHS audit, assurance and advisory work. 

The minutes contain a sentence which now looks painfully prescient: “A week isn’t very long to go through this paperwork.”

Then a member asked whether there were lessons from that year’s accounts. According to the official minute, the Chief Officer (Finance) “could not think of any”. He referred instead to IFRS 16 and said the number of findings was reducing. The Director of Finance told members the finance team had been restructured and was now in a better place with greater capacity. Councillor Prater thanked the auditors and finance team. Councillor Godfrey proposed approval, Councillor Walker seconded it, and the committee approved the updated audited Statement of Accounts four votes to nil, with no abstentions.

Nobody in the room ever noticed these figures and the published record contains no challenge to any of them. Nothing on the £9.769m Group difference. Nothing on the £234,000 cash difference. Nothing on the £191,000 investment difference. Nothing on £79k versus £278k. Nothing on the apparently reversed prior-period table. If officers, Grant Thornton or councillors spotted any of those points, the public minutes don’t show it.

That’s particularly striking because Grant Thornton’s own Audit Findings Report told members: “We did not encounter any significant difficulties or identify any significant matters arising during our audit.” Yet elsewhere the same report records a less-than-pristine control history. Trial-balance mapping had proved difficult to trace back to the financial statements and previous audit work had found “material mapping discrepancies”. Manual journal preparers could self-authorise entries, which Grant Thornton said created susceptibility to manipulation and amounted to a control deficiency. Nobody is alleging anybody manipulated the accounts. The point is that known weaknesses should sharpen professional scepticism, not dull it.

Even the audit paperwork throws up questions. The management-representation letter placed with Item 22 says its approval “was minuted” at a committee meeting on 17 December 2025. The official record shows the committee approving it on 29 January 2026. Grant Thornton’s certificate closing the 2023/24 audit, dated 3 December 2025, also says those 2023/24 financial statements were properly prepared under the CIPFA/LASAAC Code 2024/25. These may simply be drafting or document-control errors. But accuracy, checking and version control are supposed to be rather important in an audit.

None of this proves fraud. It doesn’t prove public money is missing. Nor, by itself, does it establish professional negligence or breach of an auditing standard. Audits provide reasonable assurance, not absolute certainty.

But “reasonable assurance” cannot become a magic phrase that makes visible contradictions disappear.

One audited year contained an admitted £3.567m material valuation error, discovered after publication and approval. The next contains a £9.769m apparent mismatch between two primary Group statements, other figures which don’t readily reconcile, a correction table which appears itself to contain an error, and a management letter asserting the prior-period adjustments are accurate and complete. These accounts were prepared by professional finance officers, audited for substantial public fees by Grant Thornton, considered in a room containing qualified finance professionals and finally approved by the specialist committee whose constitutional job is to scrutinise them.

The question is no longer simply which number is right?

It’s how the whole chain — preparation, internal checking, professional external audit and democratic scrutiny — allowed these issues to reach the published accounts without a recorded challenge. And if discrepancies visible simply by putting one published page beside another can survive that process, Folkestone and Hythe’s taxpayers are entitled to ask the question the public record doesn’t show anyone asking on 29 January:

What else are they missing?

The Shepway Vox Team

Dissent is NOT a Crime