The damning first report into the failed loan Sixfields shows officers were pressured to rush through the deal via a series of emails from “management and politicians”.
PwC’s highly critical account of Northampton Borough Council in the months leading up to July 2013, the time when its cabinet approved a loan of “up to £12 million” to the Cobblers to develop its stadium and build a hotel next door, could have far-reaching implications.
The 32-page audit report, released this morning, has showed that when the Conservative cabinet agreed the loan in principle on July 17, 2013 - the borough had not even produced its own business plan.
The report also shows council officers were under pressure to have a proposition ready for the cabinet to approve on July 17 - and that this time pressure “significantly reduced the council’s ability to challenge and evaluate profession advice in preparing the loan”.
The report says that “numerous email correspondence” makes reference to the “associated time constraints and pressure from management, members of counciland the involved external parties” to progress the loan “as soon as possible.”
PwC also highlighted emails between the then leader of the council, David Mackintosh, and officers at the council.
The report stated: “Email correspondence between the leader and officers highlights the importance of the transaction and the desire to conclude the transaction promptly.
“The political commitment in the Conservative manifesto, along with the July 2013 cabinet decision was considered a commitment to provide loan financing, despite there being limited information available at this time.” Changes were still being made to the loan agreement right up to it being signed, the report says, and officers had expressed their concerns at not having enough time.
PwC, which has trawled through thousands of internal emails as part of its year-long investigation, says “A number of emails reference having insufficient time to resolve all matters.”
Furthermore PwC said it was unclear why there was such pressure on the officers to push the loan through in such a tight window.
“It is evident that the time pressures significantly reduced the council’s ability to challenge and evaluate the professional advice it had obtained,” the PwC report adds.
What is clear from the report is a detailed business cases, due diligence checks and professional advice were not taken until after the Cabinet approval was obtained.
That cabinet did not even approve the right amount.
Conservative cabinet members approved a loan of up to £12 million on July 17, 2013.
The provision of the loan commenced on September 18 on the proviso £7.5 million was used for the development of the stadium.
But two further agreements were signed - one “additional loan facility” of up to £1.5 million and a further £4.5 million to develop a hotel at Sixfields.
It means cabinet only approved a loan of £12 million - even though the eventual amount agreed by officers was £13.5 million.
It was only after this date the football club prepared a business case and the council undertook due diligence checks.
Capita Assest Services were commissioned to carry out an assessment of the council’s agreed loan to Northampton Town - a month after the cabinet had already approved it.
However PwC says there was a clear “disclaimer” which indicates the firm was not instructed to complete any “work on securitisation/collateral”.
The council hired Dun and Bradstreet to carry out credit checks on the Cobblers and County Developments (Northampton) Limited.
These checks identified that the risk of Northampton Town Football Club Ltd’s failure was “high” due to its negative net worth.
There were material uncertainties whether the football club could even continue.
Northampton Town Football Club Ltd’s audited accounts for 2013, 2012 and 2011 were obtained by PwC and show the company made a loss of £221,555.