CIPFA disciplines officers for negligence over Icelandic investments
1Four finance managers at two councils have been disciplined by their professional body for financial mismanagement surrounding investments in Icelandic banks in the run up to the 2008 credit crunch.
The disciplinary committee of the Chartered Institute of Public Finance and Accountancy has announced it has taken action has against three officers at North East Lincolnshire Council and one at at Bridgnorth District Council. Three reprimands were issued, while Alan Madin, the former executive director of corporate services, director of finance and section 151 officer at the former, was issued with a 12 month suspension order.
In a statement, CIPFA said: “In reaching its decision the committee took account of the fact that the case involved the investment of significant sums of public money with disregard for the unfolding events and that Mr Madin had an informal and outdated management style that did not enable him to exercise proper control.
“His conduct seriously undermined public confidence in both the profession at large and in him as a professional accountant. He failed in his duty as a section 151 officer, as a senior public official and as a Member of the Institute.”
Madin had failed to apply proper assurance systems and control arrangements or have in place effective arrangements for the identification of and reporting on control failures, the committee said.
In particular, it found that Madin had failed to ensure adequate supervision and support for the council’s treasury manager, Alan Thomas, to act on deterioration in credit ratings of a number of counterparties with whom the council had placed money.
He had also failed to ensure that required approvals for investments were signed by the appropriate staff, and failed to keep himself sufficiently informed of the challenges facing the council’s treasury management between December 2007 to October 2008.
Madin had also failed to make sure that investments did not take place with banks with credit ratings lower than those set out in the council’s annual investment strategy, CIPFA found.
In deciding to impose the 12 month suspension, the committee said it “took account of mitigating factors including Mr Madin’s previous exemplary character, that Mr Madin had made some admissions, that he displayed some remorse for and insight into the events and that the conduct was not dishonest”.
Thomas was issued with a reprimand for his role in the affair, with the committee finding that he also failed to keep himself and line managers informed of the challenges posed by Icelandic investments.
He was also found to have breached the International Federation of Accountants code of ethics for failing to make appropriate use of information that he did have.
A statement by CIPFA said: “Because of poor management control and his own actions Mr Thomas caused public monies to be invested in institutions which were known, widely and publicly, to be in financial difficulty. Although he had limited support and, apparently, insufficient time to read documents sent by the council’s treasury consultants, it was incumbent on him to keep abreast of the developing financial situation.”
The committee said it had taken account of Thomas’ previous exemplary character, that he had made some admissions, that he displayed remorse for and insight into the events and that the conduct was not dishonest.
A reprimand was also issued to Simon Riley, Madin’s deputy, for failing to ensure staff complied with council treasury management policies, and to alert his boss of some matters.
But CIPFA said the committee “took into account that Mr Riley did not have a key role in treasury management and that his practical involvement in treasury management affairs was very much more limited than that of other senior officers”.
Separately, CIPFA issued a reprimand to Steve Ogram, for his role as head of finance and director of finance of Bridgnorth District Council in and around 2008.
CIPFA found Ogram had failed to ensure compliance with the council’s treasury management policy, and systems to ensure decisions were subject to rigorous analysis.
It said that he had failed to make sure that the council’s treasury management practices document was adequately maintained, meaning that the list of permitted investment counterparties was unclear.
In addition, he had permitted the continued use of a confused ratings policy and inadequate checks on the financial standing of counterparties.
[…] we have come to recompense for the people responsible for losing taxpayer money Iceland is an announcement this week from CIPFA (Chartered Institute for Public Finance and Accountancy) that four council officers would be struck […]