Audit Commission admits to £10m Iceland deposits

The Audit Commission, the financial watchdog which monitors local government
and local health spending, has admitted it has £10m tied up in Iceland’s
troubled banks.

The Audit Commission seeks to ensure that £180bn public sector spending each
year provide ‘value for taxpayers’.

It said it deposited £5m in Landsbanki in April this year – and a further £5m
in July in Iceland’s Heritable Bank.

The commission said the deposits were in ‘full compliance’ with their
guidelines ‘on prudent investment’.

The admission is an embarrassment for the body which is supposed ensure
greater efficiency and value for money in the delivery of public services.

The Commission said that it did not expect the investments – which account
for about 4% of its annual turnover – would affect its future operations or
staffing.

However, it has launched an internal review into how the deposit decision was
taken and says it expects the National Audit Office, which audits its finances,
to hold a separate inquiry.

At the time it invested the money, the Audit Commission insisted in a
statement on Thursday, the two banks in question had strong credit ratings.

It released a statement saying: ‘Like other public bodies, the commission is
obliged to maximise returns on its working reserves.’

Local authorities across England and Wales invested £858m in Icelandic banks,
money which is now at risk after the turmoil in the country’s economy and the
banks’ nationalisation.

It emerged on Wednesday that three councils with money in Icelandic banks
potentially face ‘severe’ short-term financial problems.

Ministers have sent a team of financial troubleshooters to the councils to
assess their position and what assistance they may require.