AUDITORS carrying out an investigation into the running of Dumfries and Galloway Council for the third year running will now be scrutinising three “areas of financial risk”.
Fiona Mitchell-Knight, from council watchdog Audit Scotland, is leading an independent inspection of the local authority’s books and overall operations.
She attended the council’s audit, risk and scrutiny committee on Tuesday and revealed that her team of investigators are looking closely at the potential for managers to override financial control measures, and mistakes in valuations of council property, plant, and equipment.
Auditors are also scrutinising the leasing of assets, such as council-owned buildings, and will be on the lookout for “significant changes in the way these assets are accounted for”.
Speaking at the council’s audit, risk and scrutiny committee, the lead auditor explained that council management members are in a unique position to perpetrate fraud.
She said: “These are the areas where we’re going to pay particular attention as part of our audit this year.
“The first of those risks is the fraud risk by override of management controls. I’d just like to stress that this is a standard risk that we report in all of our public sector audit plans.
“International standards of auditing require all auditors to recognise the fact that no matter how good a controlled environment might be in any organisation there is always the potential for management to override the controls because they’re in a unique position through their access or their skills to do that.
“And so any audit is specifically designed to identify that as a risk and mitigate that risk by carrying out specific procedures – and we lay out what those are.”
Mrs Mitchell-Knight underlined that no fraud had been detected in last year’s audit of the council, and she “expected that to be the case this year”.
Another potential risk/flaw underlined in the report is in relation to the valuation of council property. Dumfries and Galloway Council held £838.7 million worth of property, plant, and equipment at 31 March 2024.
She said: “Due to the scale of property, plant, and equipment owned by the council, the value of that is very significant on the council’s balance sheet.
“The nature of the valuation of those assets whereby they’re only valued in a programme over several years means that there can be a risk in interim years that values have changed, and that isn’t spotted.”
She then confirmed that attention will turn towards council assets that are leased out, with the intention of looking out for significant changes in the accounts.
