Accounts show council-owned company made multi-million pound loss
PUBLISHED: 08:33 03 May 2019
A property investment company owned by Uttlesford District Council (UDC) made a £3.3million loss last year, it has emerged.
Accounts filed at Companies House show that Aspire, UDC's property investment subsidiary, made a loss of £3,256,000.
Residents for Uttlesford's Councillor Neil Hargreaves said: “We have uncovered that the UDC leadership tried to hide a £3.3million loss that it made in its property investment subsidiary company. To hide the loss it used a not-fit-for-purpose accounting treatment that is banned in the private sector. The Government now requires councils to use a standard accounting procedure for investments.”
UDC cabinet member for finance, Councillor Simon Howell, told the Reporter that accounting procedures for local authorities and private companies differed, and therefore the loss did not need to be declared in UDC's accounts last year.
Cllr Howell confirmed that Aspire did not make an 'accounting' profit of £1.5million - instead, the district council made a surplus on the loan it gave to the company.
You may also want to watch:
“The accounts of the council were fully prepared in accordance with legislation. Whilst accounting bodies have made attempts to align the local authority accounts with those of the private sector, there remain significant differences,” Cllr Howell said. “We agreed, that for the 2018-19 accounts, we would base the Chesterford Research Park investment at cost, as to use fair value would require all other council assets to be reassessed on a fair value basis and this would take a significant period of time and incur unnecessary cost.”
Cllr Howell said: “The council did not enter into this partnership looking for short-term capital growth. It did so to grow the park and generate annual revenue income, both now and for the next 50 years, to support and enhance the services it offers to residents.
“In addition, with the park being located in the district, our involvement ensures the park continues to flourish and generate more employment for local people, along with generating additional business rates for the community.
“Without the 2017-18 surplus of £1.5million from our investment, the council would not have been able to undertake activities, such as funding four PCSOs, that have benefitted our community over the last 12 months, and will continue to do so in the future.”
Cllr Hargreaves said accounting rules had now changed, which meant any future losses would need to be disclosed.
“Everyone can see that such a policy is not suitable for a major commercial investment, and from this year UK local authority accounting rules have been tightened to ensure disclosure of investment losses,” he said.