PracticeAccounting FirmsDeloitte faces £25m damages claim

Deloitte faces £25m damages claim

Deloitte & Touche is facing a £25m damages claim after acting as auditors for the discredited Bilston Community College.

Link: More on the Deloitte/Andersen deal

Touche Ross and Co, later Deloitte and Touche, acted as external auditors for the college between 1993 and 1999, when the college was dissolved.

But the Learning and Skills Council for England says the firm acted negligently, failed to follow guidelines, and misstated the college’s actual position, and failed to warn either the college or the council of the true position.

Losses total more than £25m so far, and the Learning and Skills Council is seeking this amount from the accountancy firm, as well as interest.

The council was set up in 2000 to provide reasonable facilities for education and training for those aged sixteen and older, apart from higher education.

Bilston Community College received funding reflecting returns submitted by the college and by its auditors, and distributed the funding based on audit and statistical reports, management letters, certifications, and investigative reports and related work, according to a High Court writ.

But in 1999 Bilston’s financial position became unsustainable, and the college was dissolved on October 1 1999, the writ says.

The accountants acted in breach of contract and in breach of their duties of care, in asserting that the financial statements and accounts provided a true and fair view of Bilston’s affairs, and of its surplus over expenditure, it is alleged.

The firm also breached duties by asserting that funds administered by the college for specific purposes had been properly used for their intended purposes, and had been applied in accordance with the law, the court will hear.

And the firm failed to ensure that money from the Further Education Funding Council for England – now wound up – had been used in the way in which it should have been, the writ claims.

Deloitte & Touche should not have certified the accuracy of Bilston’s various statistical returns, and requests for funding, and failed to follow guidance from the Further Education Funding Council when acting as external auditors, the writ claims.

The firm negligently certified and misstated the actual position, both about Bilston’s overall financial position and the eligibility and veracity of its funding claims, and failed to warn the FEFC and Bilston of the true position, it is alleged.

Because of this, the FEFC and Bilston have suffered losses of more than £25million, the writ says.

The writ was issued by solicitors Beachcroft Wansbroughs, ref Trevor Blythe.

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