Auditor questions whether south London ALMO can pay its way
Accounts warning for Lambeth Living
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Auditors have pinpointed a series of serious flaws in the draft accounts of the troubled landlord Lambeth Living, which manages 34,000 homes in south London.
The arm’s-length management organisation was hit this year by a damning draft Audit Commission report which judged its performance as ‘poor and deteriorating’ (Inside Housing, 12 May).
Lambeth Living needs a two star rating from the watchdog to unlock £251 million of government funding for its housing refurbishment programme. But just two months after the Audit Commission judgement, the ALMO was warned in a letter by accountancy firm PKF that its 2008/09 accounts needed attention, Lambeth Living board papers reveal.
The ALMO had underestimated its VAT bill by £1 million and failed to take account of its £3 million pension liability, the letter states. ‘This has the consequence of moving the company into a net liability position on the balance sheet which affects the “going concern” assumption about the way the account should be prepared,’ it says about the pension liability.
A senior accountant from one major accountancy firm said this raised questions about the organisation’s ability to meet its costs.
‘The whole point of a going concern is that a business can continue to pay its bills as it goes along and has enough resources,’ he said. ‘If your accounts show more liabilities than assets, it raises a question mark about whether you can pay your way.
’Pension liabilities are not payable instantly but they must be accounted for in an organisation’s books.
Lambeth Living has just poached its new director of resources Terry Gallagher, from high-performing Sheffield Homes, a three-star ALMO rated ‘excellent’ by the commission. He will replace Kevin Kelly, Lambeth Living’s interim director of resources at the end of August.
In a July meeting of Lambeth Living’s audit committee, Mr Kelly said that previously there had been too many financial officers working on budgets ‘with no clear overall direction for them to work’.
A Lambeth Living spokesperson said: ‘These were the auditors’ initial findings and all such issues have now been resolved leading to an unqualified opinion on our accounts and no remaining concerns about Lambeth Council as a going concern.’
Timeline of trouble
June 2008
Lambeth Living set up
October
Lambeth Council slashes the ALMO’s budget by £1 million
May 2009
Leaked draft Audit Commission report brands performance as ‘poor and deteriorating’
July 2009
Draft accounts found to have underestimated liabilities by £4 million
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Readers' comments (2)
kass | 28/08/2009 11:16 am
"...A Lambeth Living spokesperson said: ‘These were the auditors’ initial findings and all such issues have now been resolved leading to an unqualified opinion on our accounts and no remaining concerns about Lambeth Council as a going concern.’...
What on earth does this mean ? Could anyone translate please - ?
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peter | 29/08/2009 6:25 am
This is an organisation regardless who is in charge or they have got working for them, will still never find its way out of paper bag!
Kass.... It simply means- miraculously everything financially is OK and that they can operate as business. They have achieved this by reducing their liabilities i.e. increased income (rents), reduced services and staff (more redundancies) !!!!
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