Northants County Council asks for under investigation company not to be audited

Northamptonshire County Council's auditors raised concerns about under investigation NEA Properties last year but were told by the authority not to audit the company because it was being wound up.

Wednesday, 12th September 2018, 3:12 pm
Updated Wednesday, 12th September 2018, 3:18 pm
The county council offices at One Angel Square in Northampton

An audit update published by KPMG yesterday (SEPT 12) states that NEA Properties had not been audited since 1995.

The company, which was set up by the council 35 years ago, is at the centre of an external investigation after details of its spending came to light following a joint investigation by the BBC and the local democracy reporting service.

This KPMG report sheds more light on the financial dealings of NEA properties and how the company was operated.

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It states: “In May 2017, we once again raised a query with the then Section 151 Officer regarding the accounts of NEA Properties and the fact these had, to our knowledge, not been audited since 1995 (either by ourselves or others).

“This appears to have been based on the historical position that the company met the small company exemption and therefore was not required to have an audit.

“However, we raised the issue with the Section 151 Officer that NEA Properties Limited should be subject to an audit as a subsidiary of a Local Government body, ie Northamptonshire County Council, which does not report itself to Companies House, and also for transparency and accountability reasons.

“We communicated to the authority that should the small company exemption not apply, then the authority would be required to retrospectively have the company’s unaudited accounts audited.

“We asked the authority to confirm whether subsequent to 1995 NEA Properties Ltd continued to be controlled by NCC and what the council’s basis was for the company’s accounts not being audited in light of it not meeting the small company exemption.

“However we were informed that the authority still did not want the company audited as it was being wound up.”

NEA Properties was incorporated in 1983 and used to earn income from renting out some units on the Boughton Green Road in Northampton to the town’s university.

In 2014 it sold the buildings to the university for £880,000 but only £700,00 was returned to the council’s bank account and the rest was spent on other non essential items such as heritage events, books publicising Northamptonshire and a B17 bomber fly past at Grafton Underwood in May 2015.

KPMG also dig deeper into the £80,000 the company spent on a corporate hospitality box at Northampton Saints.

They say the money was paid on July 28, 2015, after a request by Cllr Andre Gonzalez De Savage, who along with then fellow cabinet member Cllr Bill Parker was a co-director of NEA Properties.

Cllr De Savage said the money was a grant to the club and the decision to make the grant was made by then leader Jim Harker along with NEA directors.

However KPMG dispute the grant claim.

The report says: “Due to new information that has come to light, we have received a copy of correspondence from the rugby club to Cllr De Savage following receipt of the £80k.

“This confirms that the money funded (for two years) the private use of a 16 person Executive Box in the new Barwell Stand, hospitality (including meals and drinks) for 10 at the Club’s Directors’ Lounge for two matches, as well as a pitch side advertising board and logo promotion on the programme and website.  

“In our view, this expenditure does not meet the criteria of a grant and should not have been classified and reported as such.

“The expenditure relates purely to the purchase of hospitality and marketing.

“There is currently no evidence regarding the chain of events leading up to the approval of this expenditure, the business case for it, or how the hospitality was utilised by the directors of NEA Properties to meet the objectives of the company or the authority.”

The auditors have not finished looking into NEA Properties.

They have raised further questions and will issue a series of recommendations in the final audit for 2017/18, which is currently being held up due to outstanding information needed from NCC.

Joint story by BBC journalist Matt Precey and Sarah Ward as part of the Local Democracy Reporting Service