'Unlawful': New report published into missing football club loan scandal

A damning report into Northampton Borough Council's £10.25m missing football club loan has been been published tonight

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By Natalie Bloomer

“Serious failings” and “unlawful” decision making have been identified in a new report into Northampton Borough Council’s handling of a £10.25m loan to Northampton Town Football Club (NTFC).

The loan, given to the club between July 2013 and August 2014, should have been used to redevelop the club’s Sixfields stadium and nearby land, but the work was never completed and the money was not paid back to the council.

Auditors KPMG, who today issued a long awaited public interest report into the financial dealings, have identified “worrying gaps” in the council’s knowledge at the time of making a decision in principle to hand over the money, saying that no financial business case was submitted by the football club until after the decision was made.

The public interest report has been issued to the conservative-ruled council, which is in its last few months before being replaced by West Northants unitary, and will also go to the secretary of state.

A police investigation into the matter is ongoing but an announcement is expected next month about whether people will be charged with any criminal offences.

In the report chief auditor Andrew Cardoza points to a number of unlawful decisions made by the authority in its handling of the loan arrangements.

The auditors highlighted that cabinet papers initially quoted “up to £12m” to be loaned but the council chief executive at the time David Kennedy authorised £13.5m to be handed out with “inadequate due diligence undertaken” as to why the extra money was needed. The council sought legal advice over this at the time and decided that because a specific figure was not quoted in the documents further cabinet approval was not needed. KPMG says they believe this advice was incorrect and the decision made by the council in this regard was “unlawful”.

The report also says council officers entered into the loan agreement without ensuring that all conditions were met. KPMG says in their view the failure to meet those conditions rendered further decisions taken “unlawful”.

The report says:

“We have identified what in our view are serious failings in the council’s arrangements when deciding to and subsequently making the loan to NTFC. The council has accepted in  discussions with us that its arrangements fell short of the required standard in a number of  respects, and it has commissioned a complete review of governance arrangements in order to  address the shortcomings. 

“In conclusion, this whole episode demonstrates poor decision making based on inadequate reports leading to public money being lost, and demonstrates the need for careful thought, structure, independent advice and monitoring in making such decisions on a transaction which was significant and unusual. There was a near complete lack of an approved business case,  appropriate independent advice and documented risk management and proper governance process followed. Documents presented to members for decision making purposes and records of decisions taken by officers were deficient.”

Although the auditors identified issues they view as illegal they have decided that the cost of court action alongside the fact that Northampton Borough Council will cease to exist from April when the county moves to unitary councils, means a public interest report will “suffice by way of bringing issues to the attention of the public and setting out our views on lessons to be learned for NBC.”

Former Conservative MP for Northampton South David Mackintosh was leader of the council at the time the loan was approved. A previous audit by Price Waterhouse Coopers found that the council failed to carry out proper checks before approving the loan.

Leader of the Labour group in Northampton Danielle Stone who raised the objections to the accounts for that period which led to the report said:

“I'm very grateful the report has been released. I think it gives us all the information we wanted. It tells us exactly what happened and what went wrong. It's plain to see there was a lot of mismanagement, there was no overview and scrutiny. Councils need to make sure they have proper due diligence and good governance.”

The report has been published on the Northampton Borough Council website and can be read in full here. Alongside the publication the council said:

“The report contains a series of recommendations for where KPMG feels the council’s processes at that time should have been more prudent and how they might be improved.

“Many of these recommendations have already been addressed as a result of work we undertook following a similar report published by our then internal auditor, PwC, in late 2016. Our current internal auditor, BDO, has since built on that work to ensure our policies and processes are as robust as possible.

“We are in the process of carefully considering the contents of the Public Interest Report and will present a full response at our Council meeting on 22 February.”