Carillion’s last finance chief revealed accounting issues, say MPs

5 Mar 18

Board minutes of failed outsourcing contractor Carillion showed that its last chief finance officer became a whistleblower after finding accounting irregularities.

That claim has come from MPs probing the company’s January collapse, who have published a set of Carillion’s board minutes.

Finance director Emma Mercer took up the post in September 2017. A joint letter from the work and pensions and business select committees said they had asked her to confirm what led her to raise these concerns, and what she meant by an earlier reference to “aggressive” trading of contracts.

The committees said the minutes showed that when Mercer raised concerns she was dissatisfied with the response from chief executive Richard Howson, so went to the human resources director.

MPs said: “Mrs Mercer's revelations threw up some serious questions, not least for the company's auditors, KPMG. At stake was whether the 2016 year-end traded position could still be supported.”

Board minutes show that eight contracts had negative accruals of more than £2.5m and that at points in the accounts costs appeared to have been offset by negative accruals which should have been shown under ‘other debtors’.

The minutes stated: “In essence, creditors had been reduced rather than debtors increased, which did not appear to have been flagged up in the normal way and so denied to management.”

At one point the minutes note: “KPMG had a good approach to the audit of contract judgements but clearly in this instance it did not pick up this ‘sloppy accounting’ and it would be necessary to understand what KPMG would itself do differently in future.”

KPMG official Peter Meehan had told Carillion’s board: “He did not believe that there was an intent to deceive, but rather was due to incompetence, negligence or sloppy accounting”, further minutes record.

Work and pensions committee chair Frank Field said: "Emma Mercer took just six weeks to spot and pull the thread that began the entire company unravelling.

“That [she] had to go through whistle blowing procedures to get her concerns about accounting irregularities taken seriously by the Carillion board is extraordinary. So too is that the board's response was to reject an independent review and get KPMG, their pet rubber-stampers, to mark their own homework.”

The committees also published correspondence from Qatari contractor Msheireb, on which they said Carillion directors “appeared to lay significant blame for the company's collapse”.

The MPs said Howson had told them that Msheireb owed Carillion £200m in 2017. 

“Msheireb entirely disputes the statement, instead stating that Mr Howson was misleadingly referring to the value of construction work remaining to be completed plus the value of claims relating to further delays,” the committees said.

Business committee chair Rachel Reeves said: “The Carillion directors litany of excuses for the collapse of the company is fast unravelling.

“While spiralling debt problems and failing contracts signalled the alarm to almost everyone but Carillion's directors and auditors, their former chief executive was jet-setting off to Qatar to chase a pot-of-gold that may never have existed.”

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