SNP AUDITORS RESIGNED HAVING PREVIOUSLY IDENTIFIED AREAS OF "GREATEST POTENTIAL FOR FRAUD"
Humza Yousaf admits it is "problematic" his party has no auditors. But why was this fact hid from him and the public? Further questions now raised concerning SNP financial management
Humza Yousaf has revealed the SNP hid the fact their auditors had resigned for six months. More amazingly still, he only found out himself after winning the leadership election. The revelations mean the SNP auditors Johnson Carmichael resigned in late 2022, after having previously identified the “greatest potential for fraud” facing the SNP in mid 2021. All while internal SNP documents revealed the party privately knew it had “ad hoc” operating procedures.
What we already knew
On June 3, 2021 then-First Minister Nicola Sturgeon answered an STV journalist’s question about party finances. You could practically hear the boredom in her voice as she explained, she was “not concerned about the party’s finances”. The ‘ring fenced’ independence referendum fund had not gone missing at all you see – the Scottish National Party’s accounts are “independently and fully audited”.
Alas, how was Nicola Sturgeon to know that in just a few months later in the same year those independent auditors felt the need to spell out the areas of “greatest potential for fraud” in SNP accounts. Something the independent auditors of Johnson Carmichael had hitherto never felt the need to include in SNP financial reviews.
I recall writing at the time about this curiosity. On 26 June, 2020, Johnson Carmichael concluded that the SNP’s statement of cash flows represented a “true and fair view of the state of affairs of the Scottish National Party”. Yet fast forward to 26 June 2021 and the self-same auditors were writing “we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following area: revenue and recognition”.
For those who don’t know, revenue and recognition is an accounting term for when revenue is to be recognised.
Revenue recognition means – and not to simplify too much – a company should only record income when it has been earned, not when the related cash is collected. For example, if a gardener asks for £15 for mowing a lawn, the gardener can “recognise” that £15 in his accounts even if he has not collected the £15 immediately after doing the mowing.
This is the area the SNP’s - now resigned - independent auditors felt was the area of “greatest potential for fraud”. A view that they either never held previously or as far as I can see never felt a need to publicly disclose in the 2019/2020 SNP financial review.
Now, at the time the thought had occurred to me that perhaps the auditors were simply being over-cautious since the SNP had by then went under formal investigation by Police Scotland’s fraud squad. Maybe Johnson Carmichael was simply protecting its reputation?
That might have been the conclusion I reached were it not for the Sunday Herald’s reporting at the time exposing contents of leaked SNP internal governance documents. Amazingly, those documents revealed the SNP had been fully aware of the inadequacy of its internal procedures; admitting “some processes that have developed in an ad hoc way”.
Or put simply, the SNP were privately admitting to itself that internal procedures have been made up on the spot in recent years. This rather reinforces the seriousness of the auditors’ warnings about greatest potential for fraud being how revenue is recognised in the accounts.
‘Ad hoc’ is no way to manage financial procedures.
New revelations
But now we know that after all of that occurred Johnson Carmichael subsequently resigned as long-time SNP auditors. Something the SNP never bothered to let the public know about or apparently our new First Minister Humza Yousaf.
According to The Herald’s Tom Gordon “The First Minister said even he didn’t know Johnson Carmichael quit in October last year until he was briefed after winning the SNP leadership contest on March 27.”
Even then, it was left to Mr Yousaf to make this fact known on April 7. Mr Gordon at the Herald put to the new First Minister just how extraordinary all of this is. Here we have a situation where for half a year certain figures in the SNP knew the auditors had resigned and apparently concealed this information from senior SNP figures such as Humza Yousaf.
To his credit, Mr Yousaf fully acknowledges Mr Gordon’s point saying “I don't disagree with the premise of your question. That's clearly why I've asked the NEC [National Executive Council] to do a review of governance and transparency”
It’s hard to avoid the questions arising from all of this, the biggest being how many times have SNP figures used the line that their accounts are audited in response to questions about the ongoing investigation without disclosing they have no auditors? (and without disclosing the absence of auditors even to senior cabinet ministers!)
If Humza Yousaf’s premiership is to avoid the same fate that befell Liz Truss he urgently needs to clean house. The back office operation needs a personnel clear-out, everything that could possibly be made public should be made public. No more drip, drip, drip of fresh revelation. And why is Humza Yousaf allowing himself to be appointed SNP spokesperson regarding all of this? Appoint someone else do undertake that task, pronto.
At the moment the new First Minister is perpetuating the same damaging misjudgements. He continues to allow opponents to define him as Mr Continuity. He is letting a slow drip feeding of information about previous leadership scandal to occur thereby keeping story alive. And in the meantime has decided on a relaunch just less than fortnight into his leadership by pivoting to relitigating gender recognition reform. Masterful all of this is not.
As Labour spin doctor John McTernan observed, “we’re deep into who knew what and when territory”, and the chaos all of this is opening up is damaging governance in Scotland. To quote Susan Dalgety of The Scotsman, “I have my own views about the SNP, but they are the party of government. If the organisation collapses what does that mean for Scottish governance?”
Good question Susan, but I fear our new First Minister hasn’t got the political judgement or authority to proffer up any answers. The chaos continues.
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