External auditor appointment has all the look of an inside job

Croydon Council is to appoint Grant Thornton as its new “external auditor“,  even though the accountancy firm already has such strong links inside the council in various other roles as consultants that it makes the risks of serious conflicts of interest all too obvious.

The choice of Grant Thornton was announced in the latest bulletin produced by Steve O’Connell, the Kenley councillor well-known for having more publicly funded jobs than is probably good for him (and us).

O’Connell gained modest, if unwanted, fame when the Mail exposed him as Britain’s most over-paid local councillor, receiving £115,000 a year of public funds in allowances. He is now the Conservative-run Croydon Council’s cabinet member for “finance and performance management”, an title which surely offers conclusive proof that council leader Mike Fisher, who gave O’Connell the job, has a complete absence of a sense of humour.

O’Connell’s deathly prose said: “The council’s external auditor is due to change in September 2012. As part of the abolition of the Audit Commission they have outsourced their work through a competitive process and the proposal is that Grant Thornton be appointed as the council’s new external auditor. Following this competitive procurement the fees to the council have reduced by 40% per annum over a five year contract with the same specification of work required.”

So according to O’Connell, Croydon will be paying less than two-thirds of the audit bill it used to incur from the Audit Commission.

But external auditors, with the emphasis on “external“, are there for the public’s protection: they are supposed to be independent and ensure that public funds are used properly and are accounted for thoroughly.

Grant Thornton, though, have a long record of multi-million pound dealings with Croydon Council.

It was Grant Thornton that advised Laing’s on the £450 million CCURV, or “Urban Regeneration Vehicle” partnership, that is responsible for the building of the council’s unnecessary and unwanted new Headquarters building.

Grant Thornton was also on the council’s list of approved consultants.

So it is entirely possible that a Grant Thornton external auditor will have to check the finance trail, invoices and payments made to a Grant Thornton consultant. Or to another client of Grant Thornton. Isn’t that just too close for comfort?

The council and Grant Thornton will, of course, assure us all that they will operate to the highest possible ethical standards, and that proper measures will be put in place to ensure that there is not a conflict of interest. But might that have been achieved more readily by appointing an “external” auditor that was not already working inside the council?

The Conservative-led government was today boasting of how it had abolished many quangos, the Audit Commission among them. With a public body such as the Audit Commission, lacking any of the commercial interests of a company such as Grant Thornton, at least you could rely on the organisation’s impartiality.

While Grant Thornton’s appointment has been announced by O’Connell, there is little doubt that the council’s deputy CEO, and head of procurement, Nathan Elvery, and his team led by Sarah Ireland will have been involved in the competitive tendering process that ultimately arrived at the decision to appoint one of the council’s regular consultants as its new external auditors.

The suspicion will long linger that, in delivering 40 per cent cost savings over this external audit, Croydon will be losing out in other ways.

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News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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