05 July 2002
Members of the influential Commons' Treasury select committee this week told Public Finance that they have 'serious concerns' over the public sector's use of independent auditors and consultants in PFI deals, as well as misgivings about off balance sheet accounting under the initiative.
Jim Cousins, one of the committee's accountancy experts, said there will be a 'strong focus' on the PFI in a report on auditing due out later this year.
Sir David Tweedie, chair of the International Accounting Standards Board, who appeared before the committee on July 3, later told PF that members' concerns were justified and that 'sectors such as the NHS' would be affected by his drive for transparency in accounting for leasing and special purpose vehicles. Such arrangements rarely appear on the balance sheets of either the public or private body involved.
News of increased scrutiny of public-private contracts followed the Treasury's revelations that it could refer the 'big four' accounting firms – PricewaterhouseCoopers, Ernst and Young, KPMG and Deloitte & Touche – to the Competition Commission following the collapse of Andersen, Enron's discredited auditor.
Cousins said: 'Standards in accountancy are in crisis. As far as the public sector is concerned, we need to take a strong look at issues such as leasing under PFI, which is widespread yet rarely appears on anyone's balance sheets.'
Cousins had earlier quizzed Lord Sharman, a qualified chartered accountant and author of a report on government auditing, on the potential for 'collusion' between UK governments and the big four auditors.
MPs feared that the close relationships sometimes enjoyed between private firms and their auditors – described last week by the director of the Accountancy Foundation as 'cosy' – had extended to public-private arrangements.
Sharman said that there 'was potential for collusion in any partnership', and agreed that PFI deals should be clear about which services are provided and at what cost to the public purse.
Tweedie told MPs that he would be 'bloody minded' in his drive to bring greater transparency and tighter control to accounting firms across the globe. The European Union has already stated its intention to adopt IASB practices by 2005, but there is fierce opposition from the US.
Treasury and DTI officials, meanwhile, denied accusations that they are dragging their feet over new regulations. They reiterated that a joint review team would publish an interim report on the subject later this month.
PFjul2002
