You may have missed the FT article this morning about the Audit Commission – guardian of the public purse – leaving £10m in Icelandic banks.
This is one you couldn’t make up. The chief press officer for the watchdog (“We promote value for money for taxpayers”) spent about 10 minutes on the phone yesterday refusing to confirm or deny the rumours flying around Whitehall about the missing millions. We wrote it anyway.
This morning they put this statement out. Bizarrely, they put the money in Iceland in April 2008, long after the warning bells had begun to toll.
The Audit Commission today, Thursday 16 October, confirmed that its exposure to the Icelandic banking collapse is around 4% of its annual turnover. It made two separate deposits. In April 2008 £5 million of its cash balances were placed in Landsbanki Islands and in July £5 million in Heritable Bank. Like other public bodies, the commission is obliged to maximise returns on its working reserves. At the time the deposits were made, the banks had been awarded an F1 credit rating.
Because the deposits were made on a fixed term they are not due to mature until 2009, therefore whether the Commission’s exposure to the Icelandic banks will lead to losses is yet to be determined. It is not expected that the deposits will impact on the Audit Commission’s plans, operations or staffing.
Preliminary investigations indicate that deposits were made in full compliance with the Commission’s guidelines on prudent investment, which are regularly updated. The Audit Commission has launched an internal review into its deposits, the findings of which will be shared with the Commission’s own auditors, the National Audit Office. The Commission expects that the NAO will also wish to conduct its own review.
The Audit Commission is keeping HM Treasury and the Department of Communities and Local Government fully informed.