City council ‘should have spotted’ Icelandic bank dangers

“A DAMNING report published today says local authorities like Nottingham City Council should have spotted warning signs that Icelandic banks would collapse.

The study by the Audit Commission reports that good council treasury managers saw the risks and took action to decrease deposits.

It goes on to say that other councils missed or underestimated the warnings and – like Nottingham – continued to deposit large sums of cash in the doomed Icelandic institutions.

The city had the second largest amount of cash out of any local authority deposited in Icelandic banks. Its investments – equivalent to 84% of its reserves – amounted to some £41.6m…

Today the Commission’s report details how concerns were first raised about Iceland as early as 2006 and were continually noted through 2007…

The Audit Commission highlighted weaknesses in treasury management policy in affected councils – though not specifically naming Nottingham – claiming they did not lay out how much risk should be taken.

The organisation also highlighted the varying level of qualifications held by officers managing investments – suggesting that booming investment figures were not mirrored by increasing management skills.

Local authorities which had the largest sums at risk tended to have weak governance and scrutiny arrangements, said the report’s authors.”

Follow the link below to read more.


8 Responses to City council ‘should have spotted’ Icelandic bank dangers

  1. A. Regular Reader says:

    The BBC have put a rather different spin on the story!

    Council ‘not negligent’ over £42m

    The Audit Commission has cleared Nottingham City Council of acting negligently over its £42m investment in Icelandic banks.

  2. nottgirl says:

    Thanks for this. I have read and can’t quite believe the spin the BBC have put on it. The only explanation I can think of is that the BBC ‘copies’ a press release issued by Nottingham City Council.

    The Audit Commission clearly criticise local authorities who invested large amounts in the Icelandic banks as having poor governance and scruting arrangements.

    Nottingham City Council says that it did not continue to invest after credit ratings of the Icelandic banks collapsed on September 30. However, seven public sector bodies continued to invest after this date and they were labelled by the Commission as negligent.

    The Audit Commission did not use the words negligent to describe Nottingham City Council’s behaviour, but this is a far cry from saying Nottingham wasn’t negligent.

    Thsi is spin of the worst kind.

  3. Andy says:

    The Audit Commission did apparently draw this distinction between those who did keep on depositing right up to the wire and those who didn’t deposit but on the other hand didn’t take their money out either.

    Personally I can’t really see the difference in the stupidity stakes, surely if you have information telling you its not safe to put any more in its not safe to leave what you’ve got in there already.

    But the AC’s problem is that they themselves had £10m in Icelandic banks when it all went TU so if they didn’t draw that distinction then they would have to admit that they were just as stupid as the organisations they are supposed to be auditing and that will never do.

    So it is spin but on the part of the Audit Commission rather than the BBC and NCC just got a bit lucky from that.

  4. nottgirl says:

    I didn’t realise the Audit Commission had £10 million invested as well!

  5. nottamuntown says:

    Yes, and in the recent BBC Radio 4 programme Councillor Graham Chapman agreed that it had cost the Council £2.3 million in interest income. That might have saved a few jobs. But the spin is what we expect from the City Council these days. Their spin doctor, Stephen Barker, sees himself as a cross between Alistair Campbell and Peter Mandelson – and probably thinks the Thick of It’s spin doctor is a role model. He’s very close to Jane Todd, Jon Collins et al and loves the limelight. The response to the Audit Commission report and the recent review of the Council by the Audit Commission is typical – i.e. they didn’t behave quite as recklessly as the seven worst councils so they were a model of financial probity. And the recent review of Council services was hailed as a vote of confidence in the Council – in fact it kept them on two stars (out of a maximum four) and made the point that “overall performance is not consistent and the rate of improvement when measured against national indicators is below that of similar councils” – strangely not included in Barker’s own press release.

    The justification for not issuing the recent leaked report (“dysfunctional council”) was that things were different now. In fact anyone who works in the Council will tell you that things are exactly the same – a small cabal of councillors still control key officers closely and interfere in day to day workings.

  6. nottamuntown says:

    Sorry – the Radio 4 programme referred to was File on Four – March 17th (still on the iPlayer I think)

  7. Ex Back says:

    This topic is quite trendy on the Internet at the moment. What do you pay attention to when choosing what to write about?

  8. nottgirl says:

    I look at what is being covered by other media and bloggers, alongside what I hear about in gossip as part of my day job. However I don’t normally post on gossip unless I can find evidence to back it up. So for example, I was happy to post on Jon Collin’s promotion to Chairperson of One Nottingham as I knew this was definetly happening, but I haven’t posted on the rumours I hear about his usual control freak behaviour in this new position.

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