Borough council did not see business case for Northampton Town expansion plans until after loan was approved, report reveals

No formal business case was submitted by Northampton Town until after the £10 million loan deal was agreed by the borough council's cabinet, an audit report into the failed loan has revealed.

The report by KPMG, published in full on the council's website on Wednesday evening, has investigated the background leading up to the deal being agreed.

Independent audit of failed £10 million loan to Northampton Town reveals "serious failings" by borough councilIn it, KPMG says there were "worrying gaps" in the council's knowledge before making the deal.

"There was no formal financial business case submitted by NTFC until after the loans were agreed in principle by the Council’s Cabinet on 17 July 2013," the report said.

"This meant there were worrying gaps in the Council’s knowledge at that stage. Whilst capable of being cured by officers at the delegated decision making stage, certain matters – in particular whether the Stadium improvements were actually needed and the financial sustainability of NTFC - would have been, in KPMG’s view, better addressed by Council and the Director of Finance (S151 Officer) prior to the ‘in principle’ decision."

The report went on: "Publicly available information from Companies House would have indicated that there were serious questions about the financial stability of NTFC"

"Thus, NTFC’s average attendance in each of the previous five years was around 4,500 and the capacity of the stadium was 7,500. Yet the Council never questioned whether there was really a need for a stadium that per the loan application seated 10,000 people, i.e. NTFC were asking for an additional 2,500 seats.

"Similarly, at that stage there was, in KPMG’s view, inadequate critical review or challenge about whether there was demand for conference facilities or a hotel and/or the impact that additional provision might have on existing facilities elsewhere, with no clear partner agreements such as an agreed hotel developer for the site.

"Inadequate due diligence was undertaken by the then Director of Finance (S151 Officer). NTFC had received the lowest possible credit rating, had net liabilities of £7.5m and was only able to continue trading because of the assurances provided by the Directors.

"NBC confirmed that the Stadium loan was a key element of the whole deal to redevelop the wider area. From the papers presented to the 17 July 2013 Cabinet meeting however no supporting business case was provided for members with a breakdown of the finances, or justification for the additional seating to be provided."

The report into the process for approving the loans added: "In our view, the council did not ensure that it followed the correct steps to ensure that the loans were lawful and did not represent State Aid."

A spokesman for the borough council said many of the recommendations made by the report have already been addressed and it would consider its full response in a meeting on February 22.