Deloitte Report Exposes Manipulation of London Tube Figures

Following a court hearing on Friday, August 24, Transport for London has published a Deloitte & Touche report that criticized the British government's plans for London Underground, according to our sister site, AccountingWEB-UK.

London mayor Ken Livingstone and Transport for London commissioner Bob Kiley have used every possible means at their disposal to avoid being forced to fund improvement's to the capital's underground system by going for a part-privatization.

Messrs. Kiley and Livingstone oppose the government's plans for the tube because the plans would follow the Railtrack model and separate responsibility for operating trains from track maintenance. Having failed in a legal challenge, publicizing the accountant's report has proved to be one of their most successful campaigning tactics.

According to Mr. Kiley, the report, completed in July, exposed manipulation in government figures to make the public sector alternative look more expensive than its preferred public-private partnership option.

"The public’s bargaining power was thrown away in the rush to appoint chosen bidders. Moreover, the Underground applied ‘judgmental adjustments’ when they selected one of the preferred bidders," said Mr. Kiley.

"The big question is why the Underground was so keen to keep this vital information from the public. The answer may lie in the fact that the government has regularly said PPP [Public Private Partnership] contracts will not be awarded unless they demonstrate clear value for money when measured against the public sector alternative. The Deloitte & Touche report suggests that the government’s plan does not pass the test."

The entire Deloitte & Touche report and an executive summary can be viewed as PDF files on the Transport for London Web site. Among the comments the body highlighted are the following:

  • "Neither the 30 year nor the seven-and-a-half year [value for money test] provides a satisfactory basis for establishing value for money;
  • "Highly material adjustments to the [Public Sector Comparator] are judgmental, volatile or statistically simplistic;
  • "Selection of preferred bidders too early in the process could lead to a materially adverse impact on value for money;
  • "The financial advantages of selecting [one of the] preferred bidder[s] depends upon judgmental adjustments;
  • "Public sector bond financing has been largely dismissed."

As well as gaining the Court of Appeal's approval to put the report into the public domain, Transport for London has forwarded a copy to the National Audit Office.

You may like these other stories...

Read more from Larry Perry here and in the Today’s World of Audits archive.In my last article, I presented an overview of one of the first steps in the preplanning phase of an audit engagement: reviewing prior year...
Read more from Larry Perry here and in the Today’s World of Audits archive.AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (SPFs),...
Read more from Larry Perry here and in the Today’s World of Audits archive.AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (SPFs),...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.