SNP OFFICIALS hid both the fact the party’s auditors resigned and why they resigned from many of its most senior politicians – for six months. They concealed the information from their party’s National Executive Council (NEC), and senior SNP ministers including Humza Yousaf. He was only briefed himself after winning the party’s leadership election.
The revelations mean the SNP auditors Johnson Carmichael resigned in September 2022 while releasing a report stating they disengaged from “clients” following a risk review. That all came after previously identifying in mid-2021 the “greatest potential for fraud” facing the SNP. We also know that at the same time internal SNP documents revealed the party privately knew it had “ad hoc” operating procedures.
What we already knew
On June 3, 2021 the then-First Minister Nicola Sturgeon answered an STV journalist’s question about party finances. In a bored voice 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”.
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 for Think Scotland, but let’s briefly recap. On 26 June, 2020, Johnson Carmichael concluded 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 independent auditors felt was the area of “greatest potential for fraud” before later going on to resign the following year, in September 2022. This expressed opinion represented a view that they either never held previously or as far as I can see never felt a need to publicly disclose in the prior 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 fallen 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 to have “some processes that have developed in an ad hoc way”.
Or put simply, the SNP was privately admitting to itself that internal procedures have been made up on the spot in recent years over the course of 2021. This reinforces the seriousness of the auditors’ warnings about greatest potential for fraud being how revenue is recognised in the accounts.
I said so at the time and I reiterate the point again now: ‘Ad hoc’ is no way to manage financial procedures.
New revelations
But now we learn after all of that occurred Johnson Carmichael subsequently resigned as long-time SNP auditors. Something senior SNP officials kept secret from both never the public and even senior SNP ministers.
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.”
Now for clarity, Johnson Carmichael resigned as SNP auditors in September 2022 not October – and this fact is incredibly important to get right. Not least since Johnston Carmichael issued a report in Sept 2022 stating:
“We have conducted an initial risk review…this has led to disengagement from clients where we perceive there to be a risk of failing to deliver a quality audit.”
In effect the new leader has admitted a small cadre of individuals kept the resignation of the auditors secret and why they resigned secret too. Hidden from the NEC, senior SNP figures, the public and even from the contenders throughout the course of the unusually short leadership race.
That it has been left to Mr Yousaf to make all of these admissions’ public is incredible. Tom Gordon at the Herald put to the new First Minister just how extraordinary all of this is. Here we have a situation where for six months certain figures in the SNP knew the auditors had resigned and apparently concealed this information from the SNP National Executive Council, senior SNP figures including then-cabinet ministers like Humza Yousaf.
To his credit, Mr Yousaf fully acknowledges the extraordinary reality being confessed to, telling Tom Gordon “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?
Further, what is the point of the SNP NEC? Frankly, I struggle to see any purpose in the NEC when existed to simply be a is a talking shop. It is hard to escape the view the SNP NEC’s reason for being has been to deflect attention away from the ‘golden circle’ of individuals who have actually been exercising decision-making authority elsewhere in the party.
Additionally, why has the governing party of Scotland failed to find a new auditor in more than half a year? It had better get its running boots on, the Electoral Commission deadline for submission of accounts is fast approaching.
To my mind, however, the biggest question I would like to have answered is whether or not the “client” Johnson Carmichael ‘disengaged’ from in September 2022 was indeed the SNP? We all really do need to know the ‘why’ behind the SNP losing its long-time auditors. Maybe Humza can help clarify?
Needing a reset
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 revelations. 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-feed of information about previous leadership scandals to occur thereby keeping the story alive. And in the meantime, has decided on a relaunch just less than fortnight into his leadership by re-litigating gender recognition reform. Masterful all of this is not.
Labour spin doctor John McTernan, who was at the heart of First Minister Henry McLeish’s ill-fated administration, 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.
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Photo of Peter Murrell, former Chief Executive of SNP from 1999 until his resignation in March 2023, courtesy of Scottish Parliament/PA.
