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UK councils accused of negligence

The audit commission has accused a number of UK councils of potential negligence in relation to their actions last year regarding council funds paid into a number of Icelandic banks. It has been revealed that nearly £33 million was deposited into the Icelandic banking system between 30 September (the date credit ratings were downgraded) and 7 October when the system finally crashed.

Kent county council came in for particular criticism had been paid in a substantial £8.3 million in early October, apparently oblivious to the fact that current ratings had been downgraded and the risk factors had increased substantially. Overall a massive £954 million was deposited into Icelandic banks by councils and other public bodies in the UK. Even though the UK government completed an agreement with the Icelandic government to repay UK individuals who had deposited funds in the Icelandic banking system, this does not extend to monies invested by local councils and other public bodies.

The situation has opened up a can of worms with regards council and public body finances, controls over which appear to have been very slack. Even though the amount of funding at risk is only 3% of total council cash reserves this is still a substantial amount of money and one which could have been put to better use in trying to refloat the UK economy.

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