28/02/2024

Top Business

Trend About Business

UK accounting watchdog probes accountant at bankrupt Thurrock Council

UK accounting watchdog probes accountant at bankrupt Thurrock Council

Unlock the Editor’s Digest for free

The UK’s accounting watchdog has launched an investigation into the conduct of an accountant regarding the operations and investment activities of bankrupt Thurrock Council.

The Financial Reporting Council said on Wednesday the probe related to the Conservative-led local authority’s activities for the financial years ending March 2018 to March 2022.

The FRC said it was investigating the “conduct of a [FRC] member in relation to compliance with governance, reporting, regulations and professional standards” at Thurrock. It did not name the person.

Thurrock Council in Essex declared effective bankruptcy in December 2022 after racking up debts of £1.3bn and admitting it faced losses of £275mn from its investments, which were mostly in solar power schemes.

In June government inspectors said the scale of losses facing Thurrock as a result of failed investments “undermined its financial viability”.

Since the financial crisis, UK councils have made large investments in commercial ventures, often building significant debt piles to do so, as central government funding cuts forced them to supplement their income.

The risk of such strategies was laid bare when Thurrock revealed huge losses from a string of investments it made into renewable energy projects, having rapidly expanded its borrowing to fund the investment programme.

The council issued a section 114 notice in December 2022, saying it was unable to fulfil its statutory duty to balance the books.

A June report by inspectors sent into Thurrock said many of its services would have to be reduced to the statutory minimum “for the foreseeable future” as a result of its financial difficulties.

It added: “The council will require significant external support, as well as large increases in council tax and the delivery of an extensive savings programme for years to come.”

The investigation will be conducted by the FRC’s executive counsel — the head of its enforcement division — under a 2004 rule book known as the accountancy scheme.

Under this legislation, an individual’s conduct must be shown to have fallen “significantly short of the standards reasonably to be expected” in order for the FRC to hand out penalties.

Thurrock Council did not immediately respond to a request for comment.