Public Sector - Firms pulled into DoE row over PSA sale
Most of the UK’s top accountancy firms were dragged into a four-year row between the Department of Environment and construction company Tarmac over the privatisation of loss-making Property Services Agency (PSA) Projects.
The DoE was criticised by the National Audit Office for having failed to spell out in the sale contract a detailed statement of the accounting principles underlying the valuation of all assets and liabilities when the PSA was sold.
The failure led to a High Court case and the appointment of an independent assessor before Tarmac, which wanted an extra #23.4m from the department, instead ended up paying #19.9m to the DoE.
Coopers & Lybrand originally advised the department to dispose of PSA Projects as soon as possible after the 1992 General Election, because the alternative of closing it down would have cost between #89m and #114m.
As it was, the sale cost the department around #81m.
KPMG Peat Marwick was taken on in the role of financial advisor in the sale which, after a contest, went to Tarmac with a cash injection of #13.3m and other provisions to limit liabilities for redundancies and pensions.
Ernst & Young took over because KPMG was engaged as Tarmac’s auditors.
Touche Ross entered the scene as the ‘independent expert’, the only firm acceptable to both parties and named by the High Court. And Pannell Kerr Foster assisted the NAO to work out what went wrong.
