Canals quango is slammed over ‘missing’ £51m

Flaw found in valuation of key assets

A £51MILLION flaw has been discovered in the accounts of Scotland’s canals quango by public spending watchdogs.

Audit Scotland has warned it could not be sure there were no ‘material misstatements’ in Scottish Canals’ most recent accounts following concerns over the recording and valuing of assets.

Officials were forced to take the ‘very unusual step’ of issuing an accuracy disclaimer and were unable to sign off the public body’s accounts for 2020-21, a damning new report has revealed.

Equipment used for dredging, lock gates and canal basin widening works was missed from the initial valuations provided to Audit Scotland.

A subsequent valuation – aimed at estimating the cost of replacing these assets in their current condition and existing use – then raised concerns about the accuracy of Scottish Canals’ fixed asset register, as well as other valuation flaws.

Auditor General for Scotland Stephen Boyle warned that he had been put in the ‘very unusual’ position of being forced to ‘disclaim’ his ‘opinion on a public body’s annual report and accounts’.

He said: ‘But that’s what’s happened this year with Scottish Canals’ accounts. The auditor couldn’t obtain enough evidence to give an opinion on the accounts.

‘This relates to flaws in the way Scottish Canals valued and recorded £51million of assets, such as dredging equipinvestment ment and lock gates.’ Mr Boyle said the quango must now ‘revalue its entire canal infrastructure estate’.

He described this as a ‘big piece of work’ but insisted it was necessary to ‘support financial planning’.

The Audit Scotland report also found that the cost and needed to meet Scottish Canals’ target of maintaining and restoring the country’s inland waterways network exceeded the funding and income available, with a maintenance backlog of £70million.

The quango’s financial statements show that it generated income of £18.8million in 2020-21 and incurred revenue expenditure of £22.7million.

Capital grants of £12.6million were the biggest source of income, followed by water and utility sales of £1.4million, while £9.7million of staff costs across 216 full-time equivalent employees was the highest source of operational expenditure.

Scottish Canals blamed the problems on its change in status from a public corporation to a non-departmental public body that required a different methodology to value the canal infrastructure.

A spokesman said: ‘Our external auditors, Grant Thornton, raised new queries over the nature of the capital and revenue expenditure on the unique operational assets in our care and in the way they have been valued since we became a standalone public body in 2012.

‘Subsequently they determined that a disclaimer of opinion on financial statements should be placed on our 2020-21 accounts while additional work is carried out.

‘We are now working with the support of Transport Scotland, Scottish Government and Grant Thornton to resolve this highly complex matter.’

‘Auditor couldn’t obtain evidence’