Local authorities missed Icelandic bank warning flags

The Audit Commission, which had millions invested in Iceland, has slammed councils for doing likewise.

Last Updated: 31 Aug 2010

Despite coming unstuck last October for having £10m of its own funds tied up in Bjork’s homeland, the Audit Commission is now dressing down seven local authorities for failing to heed the warning signs which apparently eluded the watchdog itself. Pot kettle black anyone?
Perhaps spam filters were on overdrive or perhaps human error was to blame, but the end result was that emails warning of a crucial downgrading in the credit status of Iceland’s banks were ignored, and seven local authorities went ahead and deposited £32.8m between them after 30 September, the day the Krona dropped, for the ratings agencies at least.
To be fair, the vast majority of councils did follow the warnings in April last year and local authority deposits were reduced by half. The commission itself, apparently without a hint of a blush, now assures us it has made changes after an internal review into how its deposit debacle was caused.
Unsurprisingly, this hasn’t stopped some of the named and shamed councils from pointing out that the Audit Commission was far from blameless. Commission bosses were clearly speaking from experience when they called for changes to be made in the council’s treasury management. A good starting point, we assume, would be measures to ensure emails are read in the first place. 
Perhaps if more notice had been taken of the increasingly bad news coming out of Iceland, and rather less weight given to simply following guidelines, the taxpayer would be better off.
As useful as policies and best practice are, they can be overtaken by the speed of events. Let’s hope it finally dawns on government organisations that they might have to exercise a bit of common sense in future.

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