Magazine article Public Finance

Audit Watchdog 'Broke Its Own Rules'

Magazine article Public Finance

Audit Watchdog 'Broke Its Own Rules'

Article excerpt

Audit Commission Investment decisions were not made at a senior level and the watchdog broke Its own treasury management rules, a review of its ?10m involvement in the lcelandk crisis has found.

But in an interview with Pub/fc Finance, commission chair Michael O'Higglns declined to rate the watchdog's performance in comparison with that of local authorities, some of which had decided to withdraw from Iceland before the crisis hit in October.

An internal audit review, published on December 18, said the commission had relied on short-term credit ratings, *without considering the longterm negative outlook warnings' on Iceland's banks. Deposits were made on a 'rolling, routine basis without due consideration of a wider range of market Information'.

The watchdog breached its own treasury management policy by depositing ESm with Heritable bank, which was a subsidiary of Landsbanki where another ESm was already held, the internal audit found.

It added: 'The policy» should have required a more senior level of authorisation that was based on supporting documentation to explain the reasons for the recommended deposit being taken, the sum to be invested and the investment term.'

A review of the internal report carried out by KPMG said the watchdog had a 'reasonable. …

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